Consolidated and Segment Net Sales
The following tables summarize the impact that core business, foreign exchange and acquisitions, as applicable, had on our net sales revenue by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended August 31,
|
(in thousands)
|
Housewares
|
|
Health & Home
|
|
Beauty
|
|
Total
|
Fiscal 2019 sales revenue, net
|
$
|
137,498
|
|
|
$
|
175,783
|
|
|
$
|
80,267
|
|
|
$
|
393,548
|
|
Core business growth (decline)
|
30,837
|
|
|
(15,943
|
)
|
|
7,494
|
|
|
22,388
|
|
Impact of foreign currency
|
(471
|
)
|
|
(1,050
|
)
|
|
(420
|
)
|
|
(1,941
|
)
|
Change in sales revenue, net
|
30,366
|
|
|
(16,993
|
)
|
|
7,074
|
|
|
20,447
|
|
Fiscal 2020 sales revenue, net
|
$
|
167,864
|
|
|
$
|
158,790
|
|
|
$
|
87,341
|
|
|
$
|
413,995
|
|
|
|
|
|
|
|
|
|
Total net sales revenue growth (decline)
|
22.1
|
%
|
|
(9.7
|
)%
|
|
8.8
|
%
|
|
5.2
|
%
|
Core business growth (decline)
|
22.4
|
%
|
|
(9.1
|
)%
|
|
9.3
|
%
|
|
5.7
|
%
|
Impact of foreign currency
|
(0.3
|
)%
|
|
(0.6
|
)%
|
|
(0.5
|
)%
|
|
(0.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended August 31,
|
(in thousands)
|
Housewares
|
|
Health & Home
|
|
Beauty
|
|
Total
|
Fiscal 2019 sales revenue, net
|
$
|
254,801
|
|
|
$
|
339,214
|
|
|
$
|
154,212
|
|
|
$
|
748,227
|
|
Core business growth (decline)
|
58,767
|
|
|
(22,536
|
)
|
|
10,334
|
|
|
46,565
|
|
Impact of foreign currency
|
(762
|
)
|
|
(2,945
|
)
|
|
(755
|
)
|
|
(4,462
|
)
|
Change in sales revenue, net
|
58,005
|
|
|
(25,481
|
)
|
|
9,579
|
|
|
42,103
|
|
Fiscal 2020 sales revenue, net
|
$
|
312,806
|
|
|
$
|
313,733
|
|
|
$
|
163,791
|
|
|
$
|
790,330
|
|
|
|
|
|
|
|
|
|
Total net sales revenue growth (decline)
|
22.8
|
%
|
|
(7.5
|
)%
|
|
6.2
|
%
|
|
5.6
|
%
|
Core business growth (decline)
|
23.1
|
%
|
|
(6.6
|
)%
|
|
6.7
|
%
|
|
6.2
|
%
|
Impact of foreign currency
|
(0.3
|
)%
|
|
(0.9
|
)%
|
|
(0.5
|
)%
|
|
(0.6
|
)%
|
In the above tables, core business refers to our net sales revenue associated with product lines or brands after the first twelve months from the date the product line or brand is acquired, excluding the impact that foreign currency had on reported net sales. Net sales revenue from internally developed brands or product lines is considered core business activity.
Leadership Brand and Other Net Sales
The following tables summarize our Leadership Brand and other net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended August 31,
|
(in thousands)
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
Leadership Brand sales revenue, net
|
$
|
331,183
|
|
|
$
|
319,045
|
|
|
$
|
12,138
|
|
|
3.8
|
%
|
All other sales revenue, net
|
82,812
|
|
|
74,503
|
|
|
8,309
|
|
|
11.2
|
%
|
Total sales revenue, net
|
$
|
413,995
|
|
|
$
|
393,548
|
|
|
$
|
20,447
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended August 31,
|
(in thousands)
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
Leadership Brand sales revenue, net
|
$
|
632,742
|
|
|
$
|
599,804
|
|
|
$
|
32,938
|
|
|
5.5
|
%
|
All other sales revenue, net
|
157,588
|
|
|
148,423
|
|
|
9,165
|
|
|
6.2
|
%
|
Total sales revenue, net
|
$
|
790,330
|
|
|
$
|
748,227
|
|
|
$
|
42,103
|
|
|
5.6
|
%
|
Consolidated Net Sales Revenue
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Consolidated net sales revenue increased $20.4 million, or 5.2%, to $414.0 million for the three months ended August 31, 2019, compared to $393.5 million for the same period last year. The growth was driven by a core business increase of $22.4 million, or 5.7%, primarily reflecting:
|
|
•
|
an increase in brick and mortar sales in our Housewares segment;
|
|
|
•
|
growth in consolidated online sales; and
|
|
|
•
|
an increase in sales in the appliance category in the Beauty segment.
|
These factors were partially offset by:
|
|
•
|
lower sales in our Health & Home segment;
|
|
|
•
|
the unfavorable impact from foreign currency fluctuations of approximately $1.9 million, or 0.5%; and
|
|
|
•
|
a decline in the personal care category within the Beauty segment.
|
Net sales from our Leadership Brands were $331.2 million for the three months ended August 31, 2019, compared to $319.0 million for the same period last year, representing growth of 3.8%.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Consolidated net sales revenue increased $42.1 million, or 5.6%, to $790.3 million for the six months ended August 31, 2019, compared to $748.2 million for the same period last year. The growth was driven by a core business increase of $46.6 million, or 6.2%, primarily reflecting:
|
|
•
|
an increase in brick and mortar sales in our Housewares segment;
|
|
|
•
|
growth in consolidated online sales; and
|
|
|
•
|
an increase in sales in the appliance category in the Beauty segment.
|
These factors were partially offset by:
|
|
•
|
lower domestic sales in our Health & Home segment;
|
|
|
•
|
a decline in consolidated international sales;
|
|
|
•
|
a decline in the personal care category within the Beauty segment; and
|
|
|
•
|
the unfavorable impact from net foreign currency fluctuations of approximately $4.5 million, or 0.6%.
|
Net sales from our Leadership Brands were $632.7 million for the six months ended August 31, 2019, compared to $599.8 million for the same period last year, representing growth of 5.5%.
Segment Net Sales Revenue
Housewares
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Net sales revenue in the Housewares segment increased $30.4 million, or 22.1%, to $167.9 million for the three months ended August 31, 2019, compared to $137.5 million for the same period last year. Growth was driven by a core business increase of $30.8 million, or 22.4%, primarily due to:
|
|
•
|
point of sale growth and incremental distribution with existing domestic brick and mortar customers;
|
|
|
•
|
an increase in online sales;
|
|
|
•
|
an increase in international sales; and
|
|
|
•
|
new product introductions.
|
These factors were partially offset by the unfavorable impact of net foreign currency fluctuations of approximately $0.5 million, or 0.3%.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Net sales revenue in the Housewares segment increased $58.0 million, or 22.8%, to $312.8 million for the six months ended August 31, 2019, compared to $254.8 million for same period last year. Growth was primarily driven by a core business increase of $58.8 million, or 23.1%, due to:
|
|
•
|
point of sale growth and incremental distribution with existing domestic brick and mortar customers;
|
|
|
•
|
an increase in online sales; and
|
|
|
•
|
new product introductions.
|
These factors were partially offset by the unfavorable impact of net foreign currency fluctuations of approximately $0.8 million, or 0.3%.
Health & Home
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Net sales revenue in the Health & Home segment decreased $17.0 million, or 9.7%, to $158.8 million for the three months ended August 31, 2019, compared to $175.8 million for the same period last year. The decline was primarily driven by a core business decline of $15.9 million, or 9.1% due to:
|
|
•
|
lower domestic sales driven by the unfavorable comparative impact from the timing of seasonal shipments, less wildfire activity, and net distribution changes year-over-year; and
|
|
|
•
|
lower international sales.
|
These factors were partially offset by revenue from new product introductions.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Net sales revenue in the Health & Home segment decreased $25.5 million, or 7.5%, to $313.7 million for the six months ended August 31, 2019, compared to $339.2 million for the same period last year. The decline was primarily driven by a core business decline of $22.5 million, or 6.6%, due to:
|
|
•
|
lower domestic sales driven by the unfavorable comparative impacts of a strong cough/cold/flu season, less wildfire activity and net distribution changes year-over-year; and
|
|
|
•
|
lower international sales.
|
These factors were partially offset by revenue from new product introductions.
Beauty
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Net sales revenue in the Beauty segment increased $7.1 million, or 8.8%, to $87.3 million for the three months ended August 31, 2019, compared to $80.3 million for the same period last year. The increase was driven by an increase in core business sales of $7.5 million, or 9.3%, primarily due to:
|
|
•
|
increased demand and new product introductions in the appliance category;
|
|
|
•
|
growth in the online channel; and
|
|
|
•
|
an increase in international sales.
|
These factors were partially offset by a decrease in brick and mortar sales, a decline in the personal care category and the unfavorable impact of net foreign currency fluctuations of approximately $0.4 million, or 0.5%.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Net sales revenue in the Beauty segment increased $9.6 million, or 6.2%, to $163.8 million for the six months ended August 31, 2019, compared to $154.2 million for the same period last year. The growth was driven by a core business increase of $10.3 million, or 6.7%, primarily due to:
|
|
•
|
increased sales from new product introductions in the appliance category;
|
|
|
•
|
growth in the online channel; and
|
|
|
•
|
an increase in international sales.
|
These factors were partially offset by a decline in brick and mortar sales, a decrease in the personal care category and the unfavorable impact of net foreign currency fluctuations of approximately $0.8 million, or 0.5%.
Consolidated Gross Profit Margin
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Consolidated gross profit margin for the three months ended August 31, 2019 increased 3.6 percentage points to 43.0%, compared to 39.4% for the same period last year. The increase in consolidated gross profit margin is primarily due to:
|
|
•
|
a higher mix of Housewares revenue at a higher overall gross profit margin;
|
|
|
•
|
tariff exclusion refunds received for certain duties expensed in the second half of fiscal 2019 and the first quarter of 2020; and
|
|
|
•
|
a lower mix of shipments made on a direct import basis.
|
These factors were partially offset by the net margin dilutive impact from tariffs and related pricing actions, unfavorable foreign currency fluctuations, a lower mix of personal care sales and higher inbound freight expense.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Consolidated gross profit margin for the six months ended August 31, 2019 increased 1.7 percentage points to 42.0%, compared to 40.3% for the same period last year. The increase in consolidated gross profit margin is primarily due to:
|
|
•
|
a higher mix of Housewares sales at a higher overall gross profit margin;
|
|
|
•
|
tariff exclusion refunds received for certain duties expensed in the second half of fiscal 2019 and the first quarter of fiscal 2020; and
|
|
|
•
|
a lower mix of shipments made on a direct import basis.
|
These factors were partially offset by the net margin dilutive impact from tariffs and related pricing actions, a lower mix of personal care sales, unfavorable foreign currency fluctuations and higher inbound freight expense.
Consolidated SG&A
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Consolidated SG&A ratio increased 3.5 percentage points to 29.8% for the three months ended August 31, 2019, compared to 26.3% for the same period last year. The increase in the consolidated SG&A ratio is primarily due to:
|
|
•
|
higher annual incentive and share-based compensation expense related to short- and long-term performance;
|
|
|
•
|
the unfavorable impact of a lower mix of shipments made on a direct import basis;
|
|
|
•
|
higher outbound freight expense;
|
•higher advertising and new product development expense; and
•higher amortization expense.
These factors were partially offset by the impact from tariff related pricing actions taken with retail customers, the impact that higher overall sales had on net operating leverage, and the favorable impact from foreign currency exchange and forward contract settlements.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Consolidated SG&A ratio increased 1.6 percentage points to 29.0% for the six months ended August 31, 2019, compared to 27.4% for the same period last year. The increase in the consolidated SG&A ratio was primarily due to:
|
|
•
|
higher annual incentive and share-based compensation expense related to short- and long-term performance;
|
|
|
•
|
the unfavorable impact of a lower mix of shipments made on a direct import basis;
|
|
|
•
|
higher outbound freight expense;
|
•higher advertising and new product development expense; and
•higher amortization expense.
These factors were partially offset by:
•the impact from tariff related pricing actions taken with retail customers;
•the impact that higher overall sales had on net operating leverage; and
•the favorable impact of foreign currency exchange and forward contract settlements.
Restructuring Charges
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
During the three months ended August 31, 2019, we incurred $0.4 million of pre-tax restructuring charges compared to $0.9 million for the same period last year. The charges related primarily to employee severance and termination benefits and contract termination costs.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
During the six months ended August 31, 2019, we incurred $1.0 million of pre-tax restructuring charges compared to $2.6 million of pre-tax restructuring charges during the same period last year. The charges related primarily to employee severance and termination benefits and contract termination costs.
Operating income, operating margin, adjusted operating income (non-GAAP), and adjusted operating margin (non-GAAP) by segment
In order to provide a better understanding of the comparative impact of certain items on operating income, the tables that follow report the comparative before tax impact of restructuring charges, amortization of intangible assets, and non‐cash share‐based compensation, as applicable, on operating income and operating margin for each segment and in total for the periods covered below. Adjusted operating income and adjusted operating margin may be considered non-GAAP financial measures as contemplated by SEC Regulation G, Rule 100. For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended August 31, 2019
|
(In thousands)
|
Housewares
|
|
Health & Home
|
|
Beauty
|
|
Total
|
Operating income, as reported (GAAP)
|
$
|
35,698
|
|
|
21.3
|
%
|
|
$
|
12,408
|
|
|
7.8
|
%
|
|
$
|
6,414
|
|
|
7.3
|
%
|
|
$
|
54,520
|
|
|
13.2
|
%
|
Restructuring charges
|
2
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
428
|
|
|
0.5
|
%
|
|
430
|
|
|
0.1
|
%
|
Subtotal
|
35,700
|
|
|
21.3
|
%
|
|
12,408
|
|
|
7.8
|
%
|
|
6,842
|
|
|
7.8
|
%
|
|
54,950
|
|
|
13.3
|
%
|
Amortization of intangible assets
|
179
|
|
|
0.1
|
%
|
|
2,798
|
|
|
1.8
|
%
|
|
1,486
|
|
|
1.7
|
%
|
|
4,463
|
|
|
1.1
|
%
|
Non-cash share-based compensation
|
1,769
|
|
|
1.1
|
%
|
|
2,519
|
|
|
1.6
|
%
|
|
2,093
|
|
|
2.4
|
%
|
|
6,381
|
|
|
1.5
|
%
|
Adjusted operating income (non-GAAP)
|
37,648
|
|
|
22.4
|
%
|
|
17,725
|
|
|
11.2
|
%
|
|
10,421
|
|
|
11.9
|
%
|
|
65,794
|
|
|
15.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended August 31, 2018
|
(In thousands)
|
Housewares
|
|
Health & Home
|
|
Beauty
|
|
Total
|
Operating income, as reported (GAAP)
|
$
|
28,329
|
|
|
20.6
|
%
|
|
$
|
13,631
|
|
|
7.8
|
%
|
|
$
|
8,700
|
|
|
10.8
|
%
|
|
$
|
50,660
|
|
|
12.9
|
%
|
Restructuring charges
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
859
|
|
|
1.1
|
%
|
|
859
|
|
|
0.2
|
%
|
Subtotal
|
28,329
|
|
|
20.6
|
%
|
|
13,631
|
|
|
7.8
|
%
|
|
9,559
|
|
|
11.9
|
%
|
|
51,519
|
|
|
13.1
|
%
|
Amortization of intangible assets
|
511
|
|
|
0.4
|
%
|
|
2,704
|
|
|
1.5
|
%
|
|
186
|
|
|
0.2
|
%
|
|
3,401
|
|
|
0.9
|
%
|
Non-cash share-based compensation
|
1,994
|
|
|
1.5
|
%
|
|
2,156
|
|
|
1.2
|
%
|
|
539
|
|
|
0.7
|
%
|
|
4,689
|
|
|
1.2
|
%
|
Adjusted operating income (non-GAAP)
|
30,834
|
|
|
22.4
|
%
|
|
18,491
|
|
|
10.5
|
%
|
|
10,284
|
|
|
12.8
|
%
|
|
59,609
|
|
|
15.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended August 31, 2019
|
(In thousands)
|
Housewares
|
|
Health & Home
|
|
Beauty
|
|
Total
|
Operating income, as reported (GAAP)
|
$
|
66,898
|
|
|
21.4
|
%
|
|
$
|
27,464
|
|
|
8.8
|
%
|
|
$
|
7,365
|
|
|
4.5
|
%
|
|
$
|
101,727
|
|
|
12.9
|
%
|
Restructuring charges
|
90
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
959
|
|
|
0.6
|
%
|
|
1,049
|
|
|
0.1
|
%
|
Subtotal
|
66,988
|
|
|
21.4
|
%
|
|
27,464
|
|
|
8.8
|
%
|
|
8,324
|
|
|
5.1
|
%
|
|
102,776
|
|
|
13.0
|
%
|
Amortization of intangible assets
|
697
|
|
|
0.2
|
%
|
|
5,596
|
|
|
1.8
|
%
|
|
2,046
|
|
|
1.2
|
%
|
|
8,339
|
|
|
1.1
|
%
|
Non-cash share-based compensation
|
4,343
|
|
|
1.4
|
%
|
|
5,893
|
|
|
1.9
|
%
|
|
3,749
|
|
|
2.3
|
%
|
|
13,985
|
|
|
1.8
|
%
|
Adjusted operating income (non-GAAP)
|
$
|
72,028
|
|
|
23.0
|
%
|
|
$
|
38,953
|
|
|
12.4
|
%
|
|
$
|
14,119
|
|
|
8.6
|
%
|
|
$
|
125,100
|
|
|
15.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended August 31, 2018
|
(In thousands)
|
Housewares
|
|
Health & Home
|
|
Beauty
|
|
Total
|
Operating income, as reported (GAAP)
|
$
|
50,512
|
|
|
19.8
|
%
|
|
$
|
33,288
|
|
|
9.8
|
%
|
|
$
|
10,187
|
|
|
6.6
|
%
|
|
$
|
93,987
|
|
|
12.6
|
%
|
Restructuring charges
|
760
|
|
|
0.3
|
%
|
|
358
|
|
|
0.1
|
%
|
|
1,466
|
|
|
1.0
|
%
|
|
2,584
|
|
|
0.3
|
%
|
Subtotal
|
51,272
|
|
|
20.1
|
%
|
|
33,646
|
|
|
9.9
|
%
|
|
11,653
|
|
|
7.6
|
%
|
|
96,571
|
|
|
12.9
|
%
|
Amortization of intangible assets
|
985
|
|
|
0.4
|
%
|
|
5,408
|
|
|
1.6
|
%
|
|
1,129
|
|
|
0.7
|
%
|
|
7,522
|
|
|
1.0
|
%
|
Non-cash share-based compensation
|
3,980
|
|
|
1.6
|
%
|
|
4,482
|
|
|
1.3
|
%
|
|
2,551
|
|
|
1.7
|
%
|
|
11,013
|
|
|
1.5
|
%
|
Adjusted operating income (non-GAAP)
|
$
|
56,237
|
|
|
22.1
|
%
|
|
$
|
43,536
|
|
|
12.8
|
%
|
|
$
|
15,333
|
|
|
9.9
|
%
|
|
$
|
115,106
|
|
|
15.4
|
%
|
Consolidated Operating Income
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Consolidated operating income was $54.5 million, or 13.2% of net sales, compared to $50.7 million, or 12.9% of net sales, for the same period last year. The increase was driven by the following factors:
|
|
•
|
tariff exclusion refunds received for certain duties expensed in the second half of fiscal 2019 and the first quarter of fiscal 2020;
|
|
|
•
|
a higher mix of Housewares sales at a higher overall operating margin;
|
|
|
•
|
the impact of favorable foreign currency exchange contracts and remeasurement on SG&A;
|
|
|
•
|
the favorable impact that higher overall net sales had on operating expense leverage; and
|
|
|
•
|
the net favorable comparative impact of pre-tax restructuring charges of $0.4 million.
|
These factors were partially offset by:
|
|
•
|
higher annual incentive and share-based compensation expense related to short- and long-term performance;
|
|
|
•
|
higher advertising and new product development expense;
|
|
|
•
|
higher amortization expense;
|
|
|
•
|
higher freight and distribution expense; and
|
|
|
•
|
the impact of unfavorable foreign currency fluctuations on net sales and operating margin.
|
Consolidated adjusted operating income increased 10.4% to $65.8 million, or 15.9% of net sales, compared to $59.6 million, or 15.1% of net sales, in the same period last year.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Consolidated operating income was $101.7 million, or 12.9% of net sales, compared to $94.0 million, or 12.6% of net sales, for the same period last year. The increase was driven by the following factors:
|
|
•
|
tariff exclusion refunds received for certain duties expensed in the second half of fiscal 2019 and the first quarter of fiscal 2020;
|
|
|
•
|
a higher mix of Housewares sales at a higher overall operating margin;
|
|
|
•
|
the impact of favorable foreign currency exchange contracts and remeasurement on SG&A;
|
|
|
•
|
the favorable impact that higher overall net sales had on operating expense leverage; and
|
|
|
•
|
the net favorable comparative impact of pre-tax restructuring charges of $1.5 million.
|
These factors were partially offset by:
|
|
•
|
higher annual incentive and share-based compensation expense related to short- and long-term performance;
|
|
|
•
|
higher advertising and new product development expense;
|
|
|
•
|
higher amortization expense;
|
|
|
•
|
higher freight and distribution expense; and
|
|
|
•
|
the impact of unfavorable foreign currency fluctuations on net sales and operating margin.
|
Consolidated adjusted operating income increased 8.7% to $125.1 million, or 15.8% of net sales, compared to $115.1 million, or 15.4% of net sales, for the same period last year.
Housewares
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Housewares operating income was $35.7 million, or 21.3% of segment net sales, compared to $28.3 million, or 20.6% of segment net sales, for the same period last year. The 0.7 percentage point increase in segment operating margin is primarily due to:
|
|
•
|
the margin impact of a more favorable product and channel mix; and
|
|
|
•
|
the impact that higher sales had on operating leverage.
|
These factors were partially offset by:
|
|
•
|
higher annual incentive and share-based compensation expense related to short- and long-term performance;
|
|
|
•
|
higher new product development expense; and
|
|
|
•
|
higher freight and distribution center expense to support increased volume and integration activity.
|
Adjusted operating income increased 22.1% to $37.6 million, or 22.4% of segment net sales, compared to $30.8 million, or 22.4% of segment net sales, in the same period last year.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Housewares operating income was $66.9 million, or 21.4% of segment net sales, for the six months ended August 31, 2019, compared to $50.5 million, or 19.8% of segment net sales, in the same period last year. The 1.6 percentage point increase in segment operating margin is primarily due to:
|
|
•
|
the margin impact of a more favorable product and channel mix;
|
|
|
•
|
the impact that higher sales had on operating leverage; and
|
|
|
•
|
the net favorable comparative impact of pre-tax restructuring charges of $0.7 million.
|
These factors were partially offset by:
|
|
•
|
higher annual incentive and share-based compensation expense related to short- and long-term performance;
|
|
|
•
|
higher advertising and new product development expense; and
|
|
|
•
|
higher freight and distribution center expense to support increased volume and integration activity.
|
Adjusted operating income increased 28.1% to $72.0 million, or 23.0% of segment net sales, compared to $56.2 million, or 22.1% of segment net sales, in the same period last year.
Health & Home
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Health & Home operating income was $12.4 million, or 7.8% of segment net sales, compared to $13.6 million, or 7.8% of segment net sales in the same period last year. Segment operating margin was flat compared to the prior year period primarily due to the following unfavorable impacts:
|
|
•
|
higher media advertising expense;
|
|
|
•
|
unfavorable operating leverage from the decline in sales;
|
|
|
•
|
higher share-based compensation expense;
|
|
|
•
|
the margin impact of a less favorable channel mix; and
|
|
|
•
|
the impact of unfavorable foreign currency exchange fluctuations on net sales and operating margin.
|
These factors were offset by tariff exclusion refunds received for certain duties expensed in the second half of fiscal 2019 and the first quarter of fiscal 2020 and the impact of favorable foreign currency exchange contracts and remeasurement on SG&A.
Adjusted operating income decreased 4.1% to $17.7 million, or 11.2% of segment net sales, compared to $18.5 million, or 10.5% of segment net sales, in the same period last year.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Health & Home operating income was $27.5 million, or 8.8% of segment net sales, compared to $33.3 million, or 9.8% of segment net sales, in the same period last year. The 1.0 percentage point decrease in segment operating margin is primarily due to:
|
|
•
|
the impact of unfavorable foreign currency fluctuations on net sales and operating margin;
|
|
|
•
|
higher media advertising expense;
|
|
|
•
|
unfavorable operating leverage from the decline in sales; and
|
|
|
•
|
the margin impact of a less favorable channel mix.
|
These factors were partially offset by tariff exclusion refunds received for certain duties expensed in the second half of fiscal 2019 and first quarter of fiscal 2020, lower product claim liability expense and the impact of favorable foreign currency contracts and remeasurement on SG&A.
Adjusted operating income decreased 10.5% to $39.0 million, or 12.4% of segment net sales, compared to $43.5 million, or 12.8% of segment net sales, in the same period last year.
Beauty
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Beauty operating income was $6.4 million, or 7.3% of segment net sales, compared to $8.7 million, or 10.8% of segment net sales, in the same period last year. The 3.5 percentage point decrease in segment operating margin is primarily due to:
|
|
•
|
the impact of higher freight expense to meet strong demand in the appliance category;
|
|
|
•
|
higher annual incentive and share-based compensation expense related to short- and long-term performance;
|
|
|
•
|
higher amortization expense;
|
|
|
•
|
the margin impact of a less favorable product and channel mix; and
|
|
|
•
|
the impact of unfavorable foreign currency fluctuations on net sales and operating margin.
|
These factors were partially offset by lower advertising expense and the net favorable comparative impact of pre-tax restructuring charges of $0.4 million.
Adjusted operating income increased 1.3% to $10.4 million, or 11.9% of segment net sales, compared to $10.3 million, or 12.8% of segment net sales, in the same period last year.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Beauty operating income was $7.4 million, or 4.5% of segment net sales, compared to operating income of $10.2 million, or 6.6% of segment net sales, in the same period last year. The 2.1 percentage point decrease in segment operating margin is primarily due to:
|
|
•
|
the impact of higher freight expense to meet strong demand in the appliance category;
|
|
|
•
|
higher annual incentive and share-based compensation expense related to short- and long-term performance;
|
|
|
•
|
the impact of unfavorable foreign currency fluctuations on net sales and operating margin;
|
|
|
•
|
higher amortization expense; and
|
|
|
•
|
the margin impact of a less favorable product and channel mix.
|
These factors were partially offset by lower advertising expense and the net favorable comparative impact of pre-tax restructuring charges of $0.5 million.
Adjusted operating income decreased 7.9% to $14.1 million, or 8.6% of segment net sales, compared to $15.3 million, or 9.9% of segment net sales, in the same period last year.
Interest Expense
Interest expense was $3.2 million for the three months ended August 31, 2019, compared to $2.8 million in the same period last year. Interest expense was $6.5 million for the six months ended August 31, 2019 compared to $5.4 million in the same period last year. The increase in interest expense was primarily due to higher average levels of debt outstanding and higher average interest rates compared to the same periods last year.
Income Tax Expense
The period-over-period comparison of our effective tax rate is impacted by the mix of taxable income in our various tax jurisdictions. Due to our organization in Bermuda and the ownership structure of our foreign subsidiaries, many of which are not owned directly or indirectly by a U.S. parent company, an immaterial amount of our foreign income is subject to U.S. taxation on a permanent basis under current law. Additionally, our intellectual property is largely owned by our foreign subsidiaries, resulting in proportionally higher earnings in jurisdictions with lower statutory tax rates, which decreases our overall effective tax rate.
For the three months ended August 31, 2019, income tax expense as a percentage of income before income tax was 10.3% compared to 8.3% for the same period last year. The year-over-year increase in the effective tax rate is primarily due to shifts in the mix of taxable income in our various tax jurisdictions and increases in certain statutory tax rates.
For the six months ended August 31, 2019, income tax expense as a percentage of income before income tax was 9.0%, which included $0.8 million of tax benefits from share-based compensation settlements, $1.7 million of expense from the remeasurement of deferred taxes due to tax rate changes, and a $2.8 million benefit from the resolution of an uncertain tax position. Income tax expense as a percentage of income before income tax was 7.3% for the same period last year, which included $0.5 million tax benefits from share-based compensation settlements and a $0.8 million benefit from the lapse of the statute of limitations related to an uncertain tax position. The year-over-year increase in the effective tax rate is primarily due to shifts in the mix of taxable income in our various tax jurisdictions and increases in certain statutory tax rates.
During fiscal 2017, we received an assessment from a state tax authority which adjusted taxable income applicable to the particular state resulting from interpretations of certain state income tax provisions applicable to our legal structure. We believe we have accurately reported our taxable income and are vigorously protesting the assessment through administrative processes with the state. We believe it is unlikely that the outcome of these matters will have a material adverse effect on our consolidated financial position, results of operations, or liquidity.
Our Macau subsidiary generates income from the sale of the goods it has sourced and procured. This subsidiary is responsible for the sourcing and procurement of a large portion of the products that we sell. We currently have an indefinite tax holiday in Macau conditioned on the subsidiary meeting certain employment and investment thresholds. The Macau Offshore Law and its supplementary regulations that grant tax incentives to approved offshore institutions will be abolished on January 1, 2021. Existing approved offshore institutions such as ours can continue to operate under the offshore regime until the end of the calendar year 2020. Beginning in calendar year 2021, we believe our Macau subsidiary will become subject to a statutory corporate income tax of approximately 12%. The ultimate impact of this change, if any, on our overall effective tax rate will depend on a variety of factors including our mix of income by jurisdiction, transfer pricing considerations and the specific tax regulations applicable to us when we are no longer under the Macau Offshore regime. It is not practicable for us to determine the potential impact on our financial statements until the tax changes in Macau are fully established and our
transfer pricing analysis is complete. Because our Macau subsidiary is not directly or indirectly owned by a U.S. parent, there is no U.S. tax liability associated with the income generated in Macau.
Income from continuing operations, diluted EPS from continuing operations, adjusted income from continuing operations (non-GAAP), and adjusted diluted EPS from continuing operations (non-GAAP)
In order to provide a better understanding of the impact of certain items on our income and EPS from continuing operations, the analysis that follows reports the comparative after tax impact of restructuring charges, amortization of intangible assets, and non-cash share‐based compensation, as applicable, on income from continuing operations, and diluted EPS from continuing operations for the periods covered below. For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended August 31, 2019
|
|
Income From Continuing Operations
|
|
Diluted EPS From Continuing Operations
|
(in thousands, except per share data)
|
Before Tax
|
|
Tax
|
|
Net of Tax
|
|
Before Tax
|
|
Tax
|
|
Net of Tax
|
As reported (GAAP)
|
$
|
51,393
|
|
|
$
|
5,298
|
|
|
$
|
46,095
|
|
|
$
|
2.04
|
|
|
$
|
0.21
|
|
|
$
|
1.83
|
|
Restructuring charges
|
430
|
|
|
66
|
|
|
364
|
|
|
0.02
|
|
|
—
|
|
|
0.01
|
|
Subtotal
|
51,823
|
|
|
5,364
|
|
|
46,459
|
|
|
2.05
|
|
|
0.21
|
|
|
1.84
|
|
Amortization of intangible assets
|
4,463
|
|
|
248
|
|
|
4,215
|
|
|
0.18
|
|
|
0.01
|
|
|
0.17
|
|
Non-cash share-based compensation
|
6,381
|
|
|
515
|
|
|
5,866
|
|
|
0.25
|
|
|
0.02
|
|
|
0.23
|
|
Adjusted (non-GAAP)
|
$
|
62,667
|
|
|
$
|
6,127
|
|
|
$
|
56,540
|
|
|
$
|
2.48
|
|
|
$
|
0.24
|
|
|
$
|
2.24
|
|
|
Weighted average shares of common stock used in computing diluted EPS
|
25,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended August 31, 2018
|
|
Income From Continuing Operations
|
|
Diluted EPS From Continuing Operations
|
(in thousands, except per share data)
|
Before Tax
|
|
Tax
|
|
Net of Tax
|
|
Before Tax
|
|
Tax
|
|
Net of Tax
|
As reported (GAAP)
|
$
|
47,990
|
|
|
$
|
3,973
|
|
|
$
|
44,017
|
|
|
$
|
1.81
|
|
|
$
|
0.15
|
|
|
$
|
1.66
|
|
Restructuring charges
|
859
|
|
|
41
|
|
|
818
|
|
|
0.03
|
|
|
—
|
|
|
0.03
|
|
Subtotal
|
48,849
|
|
|
4,014
|
|
|
44,835
|
|
|
1.84
|
|
|
0.15
|
|
|
1.69
|
|
Amortization of intangible assets
|
3,402
|
|
|
56
|
|
|
3,346
|
|
|
0.13
|
|
|
—
|
|
|
0.13
|
|
Non-cash share-based compensation
|
4,689
|
|
|
337
|
|
|
4,352
|
|
|
0.18
|
|
|
0.01
|
|
|
0.16
|
|
Adjusted (non-GAAP)
|
$
|
56,940
|
|
|
$
|
4,407
|
|
|
$
|
52,533
|
|
|
$
|
2.14
|
|
|
$
|
0.17
|
|
|
$
|
1.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock used in computing diluted EPS
|
|
26,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended August 31, 2019
|
|
Income From Continuing Operations
|
|
Diluted EPS From Continuing Operations
|
(in thousands, except per share data)
|
Before Tax
|
|
Tax
|
|
Net of Tax
|
|
Before Tax
|
|
Tax
|
|
Net of Tax
|
As reported (GAAP)
|
$
|
95,424
|
|
|
$
|
8,635
|
|
|
$
|
86,789
|
|
|
$
|
3.78
|
|
|
$
|
0.34
|
|
|
$
|
3.44
|
|
Restructuring charges
|
1,049
|
|
|
68
|
|
|
981
|
|
|
0.04
|
|
|
—
|
|
|
0.04
|
|
Subtotal
|
96,473
|
|
|
8,703
|
|
|
87,770
|
|
|
3.82
|
|
|
0.34
|
|
|
3.48
|
|
Amortization of intangible assets
|
8,339
|
|
|
369
|
|
|
7,970
|
|
|
0.33
|
|
|
0.01
|
|
|
0.32
|
|
Non-cash share-based compensation
|
13,985
|
|
|
1,091
|
|
|
12,894
|
|
|
0.55
|
|
|
0.04
|
|
|
0.51
|
|
Adjusted (non-GAAP)
|
$
|
118,797
|
|
|
$
|
10,163
|
|
|
$
|
108,634
|
|
|
$
|
4.71
|
|
|
$
|
0.40
|
|
|
$
|
4.30
|
|
|
Weighted average shares of common stock used in computing diluted EPS
|
25,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended August 31, 2018
|
|
Income From Continuing Operations
|
|
Diluted EPS From Continuing Operations
|
(in thousands, except per share data)
|
Before Tax
|
|
Tax
|
|
Net of Tax
|
|
Before Tax
|
|
Tax
|
|
Net of Tax
|
As reported (GAAP)
|
$
|
88,705
|
|
|
$
|
6,515
|
|
|
$
|
82,190
|
|
|
$
|
3.33
|
|
|
$
|
0.24
|
|
|
$
|
3.09
|
|
Restructuring charges
|
2,584
|
|
|
183
|
|
|
2,401
|
|
|
0.10
|
|
|
0.01
|
|
|
0.09
|
|
Subtotal
|
91,289
|
|
|
6,698
|
|
|
84,591
|
|
|
3.43
|
|
|
0.25
|
|
|
3.18
|
|
Amortization of intangible assets
|
7,522
|
|
|
190
|
|
|
7,332
|
|
|
0.28
|
|
|
0.01
|
|
|
0.28
|
|
Non-cash share-based compensation
|
11,013
|
|
|
606
|
|
|
10,407
|
|
|
0.41
|
|
|
0.02
|
|
|
0.39
|
|
Adjusted (non-GAAP)
|
$
|
109,824
|
|
|
$
|
7,494
|
|
|
$
|
102,330
|
|
|
$
|
4.13
|
|
|
$
|
0.28
|
|
|
$
|
3.85
|
|
|
Weighted average shares of common stock used in computing diluted EPS
|
26,612
|
|
Comparison of Second Quarter Fiscal 2020 to Second Quarter Fiscal 2019
Income from continuing operations was $46.1 million for the three months ended August 31, 2019 compared to $44.0 million for the same period last year. Diluted EPS from continuing operations was $1.83 for the three months ended August 31, 2019 compared to $1.66 for the same period last year. Diluted EPS increased primarily due to higher operating income from our Housewares segment and the impact of lower weighted average diluted shares outstanding compared to the same period last year. This was partially offset by lower operating income from our Health & Home and Beauty segments, higher interest expense and higher income tax expense.
Adjusted income from continuing operations increased $4.0 million, or 7.6%, to $56.5 million for the three months ended August 31, 2019 compared to $52.5 million the same period last year. Adjusted diluted EPS from continuing operations increased 13.1% to $2.24 for the three months ended August 31, 2019 compared to $1.98 for the same period last year.
Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019
Income from continuing operations was $86.8 million for the six months ended August 31, 2019 compared to $82.2 million for the same period last year. Diluted EPS from continuing operations was $3.44 for the six months ended August 31, 2019 compared to $3.09 for the same period last year. Diluted EPS increased primarily due to the impact of higher operating income in our Housewares segment and lower weighted average diluted shares outstanding compared to the same period last year. This was partially offset by lower operating income from our Health & Home and Beauty segments, higher interest expense and higher income tax expense.
Adjusted income from continuing operations increased $6.3 million, or 6.2%, to $108.6 million for the six months ended August 31, 2019 compared to $102.3 million the same period last year. Adjusted diluted EPS from continuing operations increased 11.7% to $4.30 for the six months ended August 31, 2019 compared to $3.85 for the same period last year.
Financial Condition, Liquidity and Capital Resources
Selected measures of our liquidity and capital resources are shown for the periods below :
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|
|
|
|
|
|
|
|
|
Six Months Ended August 31,
|
|
2019
|
|
2018
|
Accounts Receivable Turnover (Days) (1)
|
68.4
|
|
|
65.4
|
|
Inventory Turnover (Times) (1)
|
2.9
|
|
|
3.3
|
|
Working Capital (in thousands)
|
$
|
393,514
|
|
|
$
|
338,360
|
|
Current Ratio
|
2.2:1
|
|
|
2.1:1
|
|
Ending Debt to Ending Equity Ratio
|
27.7
|
%
|
|
28.0
|
%
|
Return on Average Equity (1)
|
17.1
|
%
|
|
14.5
|
%
|
_____________________
|
|
(1)
|
Accounts receivable turnover, inventory turnover and return on average equity computations use 12 month trailing net sales revenue, cost of goods sold or net income components as required by the particular measure. The current and four prior quarters' ending balances of accounts receivable, inventory and equity are used for the purposes of computing the average balance component as required by the particular measure.
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We rely principally on cash flows from operations and borrowings under our credit facility to finance our operations, acquisitions, and capital expenditures. We believe our cash flows from operations and availability under our credit facility are sufficient to meet our working capital and capital expenditure needs.
Operating Activities
Operating activities from continuing operations provided net cash of $38.2 million for the six months ended August 31, 2019 compared to $37.3 million for the same period last year. The increase was primarily driven by an increase in income from continuing operations, higher non-cash expense, the collection of a $10.8 million supplemental payment during the second quarter of fiscal 2020 related to the divestiture of our former Nutritional Supplements segment, and the comparative impact of a $15.0 million dispute settlement payment made in the same period last year. These factors were offset by an increase in cash used for inventory, due in part to additional inventory to meet strong demand in retail appliances, as well as for risk management as we progress with supplier consolidation, complete and optimize a distribution center integration and support increased growth in volume.
Investing Activities
During the six months ended August 31, 2019, we invested in capital and intangible asset expenditures of $8.9 million compared to $13.1 million for the same period last year.
Financing Activities
Financing activities from continuing operations used $24.2 million of cash during the six months ended August 31, 2019, compared to $24.7 million for the same period last year. A reduction in repurchases of common stock was offset by higher net repayments on our line of credit for the first six months of fiscal 2020 compared to the same period last year.
Credit and Other Debt Agreements
Credit Agreement
We have a credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and other lenders that provides for an unsecured total revolving commitment of $1.0 billion as of August 31, 2019. The commitment under the Credit Agreement terminates on December 7, 2021. Borrowings accrue interest under one of two alternative methods (based on a base rate or LIBOR) as described in the Credit Agreement. With each borrowing against our credit line, we can elect the interest rate method based on our funding needs at the time. We also incur loan commitment and letter of credit fees under the Credit Agreement. Outstanding letters of credit reduce the borrowing availability under the Credit Agreement on a dollar-for-dollar basis. As of August 31, 2019, the outstanding revolving loan principal balance was $283.0 million (excluding prepaid financing fees) and the balance of outstanding letters of credit was $9.0 million. As of August 31, 2019, the amount available for borrowings under the Credit Agreement was $708.0 million. Covenants in our debt agreements limit the amount of total indebtedness we can incur. As of August 31, 2019, these covenants effectively limited our ability to incur more than $609.0 million of additional debt from all sources, including our Credit Agreement, or $708.0 million in the event a qualified acquisition is consummated.
Other Debt Agreements
We have an aggregate principal balance of $20.5 million (excluding prepaid financing fees) under a loan agreement with the Mississippi Business Finance Corporation (the “MBFC Loan”) as of August 31, 2019. The borrowings were used to fund construction of our Olive Branch, Mississippi distribution facility. The remaining loan balance is payable as follows: $1.9 million annually on March 1, 2020 through 2022; and 14.8 million on March 1, 2023. Any remaining outstanding principal and interest is due upon maturity on March 1, 2023.
All of our debt is unconditionally guaranteed, on a joint and several basis, by the Company and certain of its subsidiaries. Our debt agreements require the maintenance of certain key financial covenants, defined in the table below. Our debt agreements also contain other customary covenants, including, among other things, covenants restricting or limiting us, except under certain conditions set forth therein, from (1) incurring debt, (2) incurring liens on our properties, (3) making certain types of investments, (4) selling certain assets or making other fundamental changes relating to mergers and consolidations, and (5) repurchasing shares of our common stock and paying dividends. Our debt agreements also contain customary events of default, including failure to pay principal or interest when due, among others. Our debt agreements are cross-defaulted to each other. Upon an event of default under our debt agreements, the holders or lenders may, among other things, accelerate the maturity of any amounts outstanding under our debt agreements. The commitments of the lenders to make loans to us under the Credit Agreement are several and not joint. Accordingly, if any lender fails to make loans to us, our available liquidity could be reduced by an amount up to the aggregate amount of such lender’s commitments under the Credit Agreement.
The table below provides the formulas currently in effect for certain key financial covenants as defined under our debt agreements:
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|
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Applicable Financial Covenant
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Credit Agreement and MBFC Loan
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Interest Coverage Ratio
|
EBIT (1) ÷ Interest Expense (1)
|
Minimum Required: 3.00 to 1.00
|
|
Total Current and Long Term Debt (2) ÷
|
Maximum Leverage Ratio
|
EBITDA (1) + Pro Forma Effect of Acquisitions
|
|
Maximum Currently Allowed: 3.50 to 1.00 (3)
|
Key Definitions:
EBIT: Earnings Before Non-Cash Charges, Interest Expense and Taxes
EBITDA: EBIT + Depreciation and Amortization Expense + Share-based Compensation
Pro Forma Effect of Acquisitions: For any acquisition, pre-acquisition EBITDA of the acquired business is included so that the
EBITDA of the acquired business included in the computation equals its twelve month trailing total.
Notes:
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|
(1)
|
Computed using totals for the latest reported four consecutive fiscal quarters.
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|
|
(2)
|
Computed using the ending balances as of the latest reported fiscal quarter.
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|
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(3)
|
In the event a qualified acquisition is consummated, the maximum leverage ratio is 4.25 to 1.00.
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Contractual Obligations
There have been no material changes from the information provided in our latest annual report on Form 10-K. Additional information regarding contractual obligations can be found in Notes 11 and 12 to the accompanying condensed consolidated financial statements.
Off-Balance Sheet Arrangements
We have no existing activities involving special purpose entities or off-balance sheet financing.
Current and Future Capital Needs
Based on our current financial condition and current operations, we believe that cash flows from operations and available financing sources will continue to provide sufficient capital resources to fund our foreseeable short- and long-term liquidity requirements. We expect our capital needs to stem primarily from the need to purchase sufficient levels of inventory and to carry normal levels of accounts receivable on our balance sheet. In addition, we continue to evaluate acquisition opportunities on a regular basis. We may finance acquisition activity with available cash, the issuance of shares of common stock, additional debt, or other sources of financing, depending upon the size and nature of any such transaction and the status of the capital markets at the time of such acquisition. We may also elect to repurchase additional shares of common stock under our Board authorization, subject to limitations contained in our debt agreements and based upon our assessment of a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities. We may finance share repurchases with available cash, additional debt or other sources of financing. For additional information, see Part II, Item 5., “Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities” in our latest annual report on form 10-K and Part II, Item 2. "Unregistered Sales of Equity Securities and Use of Proceeds" in this report. As of August 31, 2019, the amount of cash and cash equivalents held by our foreign subsidiaries was $19.3 million, of which, an immaterial amount was held in foreign countries where the funds may not be readily convertible into other currencies.
New Accounting Guidance
For information on recently adopted and issued accounting pronouncements, see Note 2 to the accompanying condensed consolidated financial statements.
Information Regarding Forward-Looking Statements
Certain written and oral statements may constitute "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. This includes statements made in this report, in other filings with the Securities and Exchange Commission (the "SEC"), in press releases, and in certain other oral and written presentations. Generally, the words "anticipates", "believes", "expects", "plans", "may", "will", "should", "seeks", "estimates", "project", "predict", "potential", "continue", "intends", and other similar words identify forward-looking statements. All statements that address operating results, events or developments that may occur in the future, including statements related to sales, earnings per share results, and statements expressing general expectations about future operating results, are forward-looking statements and are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and assumptions, but there can be no assurance that we will realize our expectations or that our assumptions will prove correct. Forward-looking statements are subject to risks that could cause them to differ materially from actual results. Accordingly, we caution readers not to place undue reliance on forward-looking statements. We believe that these risks include but are not limited to the risks described in this report and that are otherwise described from time to time in our SEC reports as filed. We undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.
Such risks are not limited to, but may include:
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•
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our ability to deliver products to our customers in a timely manner and according to their fulfillment standards;
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|
|
•
|
the costs of complying with the business demands and requirements of large sophisticated customers;
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|
|
•
|
our relationships with key customers and licensors;
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|
|
•
|
our dependence on the strength of retail economies and vulnerabilities to any prolonged economic downturn;
|
|
|
•
|
our dependence on sales to several large customers and the risks associated with any loss or substantial decline in sales to top customers;
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|
|
•
|
expectations regarding Project Refuel and any other proposed restructuring;
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|
|
•
|
expectations regarding recent and future acquisitions or divestitures, including our ability to realize anticipated cost savings, synergies and other benefits along with our ability to effectively integrate acquired businesses or separate divested businesses;
|
|
|
•
|
circumstances which may contribute to future impairment of goodwill, intangible or other long-lived assets;
|
|
|
•
|
the retention and recruitment of key personnel;
|
|
|
•
|
foreign currency exchange rate fluctuations;
|
|
|
•
|
risks associated with weather conditions, the duration and severity of the cold and flu season and other related factors;
|
|
|
•
|
our dependence on foreign sources of supply and foreign manufacturing, and associated operational risks including, but not limited to, long lead times, consistent local labor availability and capacity, and timely availability of sufficient shipping carrier capacity;
|
|
|
•
|
the impact of changing costs of raw materials, labor and energy on cost of goods sold and certain operating expenses;
|
|
|
•
|
the risks associated with significant tariffs or other restrictions on imports from China or any retaliatory trade measures taken by China;
|
|
|
•
|
the geographic concentration and peak season capacity of certain U.S. distribution facilities increases our exposure to significant shipping disruptions and added shipping and storage costs;
|
|
|
•
|
our projections of product demand, sales and net income are highly subjective in nature and future sales and net income could vary in a material amount from such projections;
|
|
|
•
|
the risks associated with the use of trademarks licensed from and to third parties;
|
|
|
•
|
our ability to develop and introduce a continuing stream of new products to meet changing consumer preferences;
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|
|
•
|
trade barriers, exchange controls, expropriations, and other risks associated with U.S. and foreign operations;
|
|
|
•
|
the risks to our liquidity as a result of changes to capital market conditions and other constraints or events that impose constraints on our cash resources and ability to operate our business;
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|
|
•
|
the costs, complexity and challenges of upgrading and managing our global information systems;
|
|
|
•
|
the risks associated with cybersecurity and information security breaches;
|
|
|
•
|
the risks associated with global legal developments regarding privacy and data security could result in changes to our business practices, penalties, increased cost of operations, or otherwise harm our business;
|
|
|
•
|
the risks associated with product recalls, product liability, other claims, and related litigation against us;
|
|
|
•
|
the risks associated with accounting for tax positions, tax audits and related disputes with taxing authorities;
|
|
|
•
|
the risks of potential changes in laws in the U.S. or abroad, including tax laws, regulations or treaties, employment and health insurance laws and regulations, laws relating to environmental policy, personal data, financial regulation, transportation policy and infrastructure policy along with the costs and complexities of compliance with such laws; and
|
|
|
•
|
our ability to continue to avoid classification as a controlled foreign corporation.
|