HELEN OF TROY LTDHELE
HELEN OF TROY LTD Fair Value Disclosure
Note 14 - Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. These inputs are classified into the following hierarchy:
Level 1:Quoted prices for identical assets or liabilities in active markets;
Level 2:Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable; and
Level 3:Unobservable inputs that reflect the reporting entity’s own assumptions.
When circumstances dictate the transfer of an asset or liability to a different level, we report the transfer at the beginning of the reporting period in which the facts and circumstances resulting in the transfer occurred. There were no transfers between the fair value hierarchy levels during the periods presented.
Recurring Fair Value Measurements
All of our financial assets and liabilities, except for our investments in U.S. Treasury Bills and our contingent consideration liability, are classified as Level 2 because their valuation is dependent on observable inputs and other quoted prices for similar assets or liabilities, or model-derived valuations whose significant value drivers are observable. Our investments in U.S. Treasury Bills are classified as Level 1 because their value is based on quoted prices in active markets for identical assets. Our contingent consideration liability is classified as Level 3 because its valuation is primarily based on a
significant input unobservable in the market, specifically, projected adjusted EBITDA derived from internal forecasts. The following table presents the fair value of our financial assets and liabilities:
Fair Value | |||||||||||
| (in thousands) | February 28, 2026 | February 28, 2025 | |||||||||
| Assets: | |||||||||||
| Cash equivalents (money market accounts) | $ | 4,189 | $ | 3,852 | |||||||
U.S. Treasury Bills | 11,175 | 11,268 | |||||||||
| Interest rate swaps | 381 | 1,065 | |||||||||
| Foreign currency derivatives | 375 | 2,163 | |||||||||
| Total assets | $ | 16,120 | $ | 18,348 | |||||||
| Liabilities: | |||||||||||
| Interest rate swaps | $ | 196 | $ | 221 | |||||||
Contingent consideration | 5,400 | 4,100 | |||||||||
| Foreign currency derivatives | 2,954 | 119 | |||||||||
| Total liabilities | $ | 8,550 | $ | 4,440 | |||||||
All of our financial assets and liabilities, except for our investments in U.S. Treasury Bills, are measured and recorded at fair value on a recurring basis. Our investments in U.S. Treasury Bills are recorded at amortized cost. As of February 28, 2026 and February 28, 2025, the current carrying amounts of our U.S. Treasury Bills were $2.6 million and $2.5 million, respectively, and were included within prepaid expenses and other current assets in our consolidated balance sheets. As of February 28, 2026 and February 28, 2025, the non-current carrying amounts of our U.S. Treasury Bills were $8.5 million and $8.7 million, respectively, and were included within other assets in our consolidated balance sheets.
The carrying amounts of cash and cash equivalents, accounts payable, accrued expenses and other current liabilities and income taxes receivable and payable approximate fair value because of the short maturity of these items. The carrying amounts of receivables approximate fair value due to the effect of the related allowance for credit losses. The carrying amount of our floating rate long-term debt approximates its fair value.
As of both February 28, 2026 and February 28, 2025, gross unrealized gains on our investments in U.S. Treasury Bills were $0.1 million and losses were not material. During fiscal 2026 and 2025, we recognized interest income on these investments of $0.5 million and $0.3 million, respectively, which is included in “Non-operating income, net” in our consolidated statements of (loss) income.
We use foreign currency forward contracts to manage our exposure to changes in foreign currency exchange rates. In addition, we use interest rate swaps to manage our exposure to changes in interest rates. All of our derivative assets and liabilities are recorded at fair value. See Notes 1, 15 and 16 for more information on our derivatives.
In connection with the acquisition of Olive & June in December 2024, we recognized contingent consideration, as a result of the total purchase consideration including contingent cash consideration of up to $15.0 million payable annually in three equal installments subject to Olive & June achieving certain adjusted EBITDA targets during calendar years 2025, 2026 and 2027. If the annual adjusted EBITDA target is not met, no payment is required. This contingent consideration liability is remeasured at fair value each reporting period until the contingency is resolved, with changes in fair value recognized in SG&A. The fair value of the contingent consideration liability was determined using a Monte Carlo simulation model, which utilizes projected adjusted EBITDA and corresponding volatility and discount rates to estimate the probability of the adjusted EBITDA targets being achieved. The projected adjusted EBITDA during the earn-out period was derived from internal forecasts and represents a Level 3 input, and was discounted using an estimated discount rate of 13% as of both February 28, 2026 and February 28, 2025. Adjusted EBITDA volatility was calculated based upon peer companies, and the third quartile
of 41% and 33% was selected as a key input into the Monte Carlo simulation model as of February 28, 2026 and February 28, 2025, respectively. In the simulated scenarios where a payment is earned, the projected contingent payments were discounted using an estimated credit risk discount rate of 6.6% and 6.5% as of February 28, 2026 and February 28, 2025, respectively. Changes in these inputs may result in a significant increase or decrease in the fair value of the contingent consideration liability with a corresponding impact to SG&A.
Level 3 Fair Value Measurements
The following table presents the changes in our Level 3 contingent consideration liability:
| Fiscal Years Ended Last Day of February, | |||||||||||
| (in thousands) | 2026 | 2025 | |||||||||
Balance at beginning of period | $ | 4,100 | $ | — | |||||||
| Acquisition (1) | — | 4,100 | |||||||||
| 1,300 | — | ||||||||||
| Balance at end of period (3) | $ | 5,400 | $ | 4,100 | |||||||
(1)As of the acquisition date, we recorded a liability for the estimated fair value of the contingent consideration of $4.1 million.
(2)Reflects an increase in the estimated fair value of our contingent consideration liability, which was recognized in SG&A during fiscal 2026, all of which related to our contingent consideration liability outstanding as of February 28, 2026.
(3)As of February 28, 2026 and February 28, 2025, the estimated fair value of the contingent consideration liability was $5.4 million and $4.1 million, respectively, of which $5.3 million and $1.8 million was included within accrued expenses and other current liabilities, respectively, and $0.1 million and $2.3 million was included within other liabilities, non-current, respectively, in our consolidated balance sheet.
Non-Recurring Fair Value Measurements
Assets remeasured to fair value on a non-recurring basis during fiscal 2025 and 2026 represent goodwill, indefinite-lived intangible assets and definite-lived intangible assets, which were impaired. We did not remeasure any assets to fair value on a non-recurring basis during fiscal 2024.
The following tables present the remaining carrying value of the assets that were remeasured to fair value on a non-recurring basis:
| Fair Value Measurements | Fiscal 2026 Asset Impairment Charges | ||||||||||||||||||||||||||||
| (in thousands) | February 28, 2026 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
Goodwill | $ | 472,281 | $ | — | $ | — | $ | 472,281 | $ | 706,505 | |||||||||||||||||||
| 264,600 | — | — | 264,600 | 97,000 | |||||||||||||||||||||||||
| 108,250 | — | — | 108,250 | 82,356 | |||||||||||||||||||||||||
| Total | $ | 845,131 | $ | — | $ | — | $ | 845,131 | $ | 885,861 | |||||||||||||||||||
| Fair Value Measurements | Fiscal 2025 Asset Impairment Charges | ||||||||||||||||||||||||||||
| (in thousands) | February 28, 2025 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
Goodwill | $ | 1,182,899 | $ | — | $ | — | $ | 1,182,899 | $ | 38,670 | |||||||||||||||||||
| Definite-lived trade names | 75,335 | — | — | 75,335 | 12,785 | ||||||||||||||||||||||||
| Total | $ | 1,258,234 | $ | — | $ | — | $ | 1,258,234 | $ | 51,455 | |||||||||||||||||||
During fiscal 2026, our impairment testing resulted in impairment charges of $706.5 million, $97.0 million and $82.4 million to reduce the carrying values of our goodwill, indefinite-lived intangible assets and definite-lived intangible assets, respectively, to their estimated fair values of $472.3 million, $264.6 million and $108.3 million, respectively.
During fiscal 2025, our impairment testing resulted in asset impairment charges of 38.7 million and $12.8 million to reduce the Drybar reporting unit goodwill and definite-lived trade name, respectively, to fair values of $134.3 million and $7.0 million, respectively. Refer to Note 7 for additional information on the assets impaired and their remaining carrying values as of February 28, 2026 and February 28, 2025.
We estimate the fair value of our reporting units using an income approach based upon a projected future DCF Model. Under the DCF Model, the fair value of each reporting unit is determined based on the present value of estimated future cash flows, discounted at a risk-adjusted rate of return. We use internal forecasts and strategic long-term plans to estimate future cash flows, including net sales revenue, gross profit margin, and earnings before interest and taxes margins. Other key estimates used in the DCF Model include, but are not limited to, discount rates, statutory tax rates, terminal growth rates, as well as working capital and capital expenditures needs. The discount rates are based on a weighted-average cost of capital utilizing industry market data of our peer group companies. Accordingly, this fair value measurement is classified as Level 3 since it is based primarily upon unobservable inputs that reflect management’s assumptions.
We estimate the fair value of our trade names and trademark licenses using the relief from royalty method income approach which is based upon a DCF Model. The relief-from-royalty method estimates the fair value of a trade name or trademark license by discounting the hypothetical avoided royalty payments to their present value over the economic life of the asset. We estimate the fair value of our customer relationships and list using the distributor method income approach which is based upon a DCF model. The distributor method used financial margin information for distributors within the applicable industry and most representative of the Company to estimate a royalty rate. The determination of fair value using these methods entails a significant number of estimates and assumptions, which require management judgment, and include net sales revenue growth rates, discount rates, royalty rates, residual growth rates (as applicable) and customer attrition rates (as applicable). We use internal forecasts and strategic long-term plans to estimate net sales revenue growth rates and royalty rates. We utilize a constant growth model to determine the residual growth rates which are based upon long-term industry growth expectations and long-term expected inflation. Accordingly, this fair value measurement is classified as Level 3 since it is based primarily upon unobservable inputs that reflect management’s assumptions. The most significant unobservable input (Level 3) used to estimate the fair value of our intangible assets was royalty rates that ranged from 0.6% to 5.5% as of February 28, 2026 and a royalty rate of 1.6% as of February 28, 2025.
For additional information regarding the testing and analysis performed, refer to Note 7 and Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including “Critical Accounting Policies and Estimates” included within this Annual Report.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Apr 23, 2026 | Showing above |
| 2025 | Apr 24, 2025 | |
| 2024 | Apr 24, 2024 | |
| 2023 | Apr 27, 2023 | |
| 2022 | Apr 28, 2022 | |
| 2021 | Apr 29, 2021 | |
| 2020 | Apr 29, 2020 | |
| 2019 | Apr 29, 2019 | |
| 2018 | Apr 30, 2018 | |
| 2017 | May 1, 2017 | |
| 2016 | Apr 29, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.