HELEN OF TROY LTDHELE
HELEN OF TROY LTD Income Taxes Disclosure
Note 18 - Income Taxes
We reorganized the Company in Bermuda in 1994 and many of our foreign subsidiaries are not directly or indirectly owned by a U.S. parent. As such, a significant portion of our foreign income is not subject to U.S. taxation on a permanent basis under current law. Additionally, our intangible assets are primarily owned by foreign affiliates, resulting in proportionally higher earnings in jurisdictions with statutory tax rates lower than the U.S. Taxable income in each jurisdiction, whether U.S. or foreign, is determined by the subsidiary’s operating results as well as applicable transfer pricing and tax regulations.
In July 2025, a reconciliation bill, commonly referred to as the One Big Beautiful Bill Act, was signed into law. The legislation includes a broad range of U.S. tax reform provisions. There were no discrete effects upon enactment in the second quarter of fiscal 2026 or material impacts on our fiscal 2026 consolidated financial statements. This legislation is not expected to have a material impact on our consolidated financial statements in the foreseeable future.
The Organisation for Economic Co-operation and Development (“OECD”) has introduced a framework to implement a global minimum corporate income tax of 15%, referred to as “Pillar Two.” Certain countries in which we operate have enacted, or are in the process of enacting, domestic legislation aligned with OECD’s Pillar Two “Model Rules.” Pillar Two legislation in effect for our fiscal 2025 and 2026 has been incorporated into our consolidated financial statements. Differences in how Pillar Two rules are implemented and administered across jurisdictions may increase compliance complexity and could impact our future global effective tax rate.
In June 2025, the Group of Seven, comprised of Canada, France, Germany, Italy, Japan, the United Kingdom and the U.S., announced an agreement under which U.S. multinational companies would be excluded from certain elements of the Pillar Two global minimum tax framework in exchange for the U.S. withdrawing planned retaliatory tax measures. In January 2026, the OECD released administrative guidance detailing a side-by-side (“SbS”) package that reflects this agreement and establishes a framework permitting U.S. multinational enterprise groups to coexist with the Pillar Two rules. Under this guidance, U.S. parented groups may qualify for the Side by Side Safe Harbour and the Ultimate Parent Entity Safe Harbour, which can eliminate top-up taxes under the Income Inclusion Rule and the Undertaxed Profits Rule when elected, while leaving Qualified Domestic Minimum Top-up Taxes unaffected.
The SbS package also includes additional administrative guidance, such as a permanent simplified effective tax rate safe harbour, an extension of the transitional country by country reporting safe harbour and a new substance-based tax incentive safe harbour. We do not expect the SbS package to materially affect our Pillar Two related tax positions or liabilities going forward. We will continue to monitor the implications of the OECD guidance and domestic adoption as jurisdictions implement these rules.
In response to Pillar Two, on May 24, 2024, Barbados enacted a domestic corporate income tax rate of 9%, effective for our fiscal 2025 and a domestic minimum top-up tax (“DMTT”) of 15% which was effective beginning with our fiscal 2026. During the first quarter of fiscal 2025, we incorporated the corporate income tax into our estimated annual effective tax rate and revalued our existing deferred tax
liabilities subject to the Barbados legislation, which resulted in a discrete tax charge of $6.0 million. However, as a result of the reorganization of our intangible assets in the fourth quarter of 2025 described below, the Barbados corporate income tax and DMTT did not have a material impact on our consolidated financial statements in fiscal 2026 and is not expected to in the foreseeable future.
Like Barbados, the government of Bermuda enacted a 15% corporate income tax that was effective for us beginning in fiscal 2026. The Bermuda corporate income tax allows for a beginning net operating loss balance related to the five years preceding the effective date. Accordingly, during fiscal 2024, we recorded a deferred tax asset of $9.3 million for the Bermuda net operating losses generated from fiscal 2021 through 2024 with an offsetting valuation allowance of $9.3 million. This Bermuda tax did not have a material impact on our consolidated financial statements in fiscal 2026 and is not expected to in the foreseeable future.
In the fourth quarter of fiscal 2025, we implemented a reorganization involving the transfer of intangible assets previously held by Helen of Troy Limited (Barbados) to our subsidiary in Switzerland. The reorganization resulted in the consolidation of the ownership of intangible assets, supporting streamlined internal licensing and centralized management of the intangible assets. Further, the reorganization resulted in a transitional income tax benefit of $64.6 million from the recognition of deferred tax assets of $74.0 million, partially offset by taxes associated with the transfer. As described below, a full valuation allowance was recorded on these deferred tax assets as of the end of the third quarter of fiscal 2026.
During fiscal 2026 and 2025, we recognized goodwill and other intangible asset impairment charges of $885.9 million and $51.5 million, respectively, which included $602.2 million and $22.5 million, respectively, that will not result in a tax benefit. Tax benefits, net of valuation allowances, of $19.8 million and $3.9 million on the impairment charges were recognized in fiscal 2026 and 2025, respectively.
The downward revisions to our internal forecasts utilized in our impairment testing during fiscal 2026 negatively impacted our assessment of the realizability of net deferred tax assets for our Switzerland subsidiary as of the beginning of the fiscal year and deferred tax assets generated by intangible asset impairments during fiscal 2026. Based on these revisions and in accordance with ASC 740, Income Taxes, we recorded discrete partial valuation allowances during the first and second quarters of fiscal 2026. As fiscal 2026 progressed, impairment-related losses resulted in a cumulative loss position over recent periods, which constituted significant objective negative evidence under ASC 740 and ultimately led to the recording of a full valuation allowance beginning in the third quarter of fiscal 2026. As a result, we recognized a cumulative valuation allowance of $106.6 million during fiscal 2026. We expect to maintain a full valuation allowance on these net deferred tax assets until we have objective factors that demonstrate the likelihood of realizing these deferred tax benefits.
The Company continues to elect to account for U.S. tax on global intangible low-taxed income (“GILTI”) as a period cost and therefore has not recorded deferred taxes related to GILTI on its foreign subsidiaries.
We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested; accordingly, no taxes have been recognized on such earnings. We continue to evaluate our plans for reinvestment or repatriation of unremitted foreign earnings. If we determine that all or a portion of our foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. income taxes. Due to the number of legal entities and jurisdictions involved, our legal entity structure, and the tax laws in the relevant jurisdictions, we believe it is not practicable to estimate the amount of additional taxes which may be payable upon distribution of these undistributed earnings.
Our components of (loss) income before income tax were as follows:
| Fiscal Years Ended Last Day of February, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | 2024 | ||||||||||||||
| U.S. | $ | (341,573) | $ | 19,827 | $ | 68,957 | |||||||||||
| Non-U.S. | (497,265) | 71,837 | 140,085 | ||||||||||||||
| Total | $ | (838,838) | $ | 91,664 | $ | 209,042 | |||||||||||
Our components of income tax expense (benefit) were as follows:
| Fiscal Years Ended Last Day of February, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | 2024 | ||||||||||||||
| Current: | |||||||||||||||||
| U.S. federal | $ | 14,263 | $ | 9,570 | $ | 9,259 | |||||||||||
| State | 3,880 | 5,046 | 2,704 | ||||||||||||||
| Non-U.S. | 3,992 | 29,279 | 15,275 | ||||||||||||||
| 22,135 | 43,895 | 27,238 | |||||||||||||||
| Deferred: | |||||||||||||||||
| U.S. federal | (15,584) | (2,287) | 9,449 | ||||||||||||||
| State | (3,539) | 614 | 3,252 | ||||||||||||||
| Non-U.S. | 57,132 | (74,309) | 509 | ||||||||||||||
| 38,009 | (75,982) | 13,210 | |||||||||||||||
| Total | $ | 60,144 | $ | (32,087) | $ | 40,448 | |||||||||||
Our total income tax expense (benefit) differs from the amounts computed by applying the U.S. statutory tax rate to income (loss) before income taxes. Although we are domiciled in Bermuda and now subject to a 15% corporate income tax rate, the parent entity generates losses and maintains a full valuation allowance against its deferred tax assets. As a result, we use the U.S. federal statutory rate of 21% as the starting point for our rate reconciliation, in accordance with ASC 740, Income Taxes, and the judgment framework outlined therein. This presentation is consistent with our historical practice and is intended to enhance comparability with other publicly traded multinational entities.
We have adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis. Our income tax rate reconciliation for fiscal 2026 was as follows:
| Fiscal Year Ended February 28, 2026 | |||||||||||
| (in thousands) | Percent | ||||||||||
| Tax at U.S. federal statutory tax rate | $ | (176,156) | 21.0 | % | |||||||
| State and local income taxes, net of federal income tax effect (1) | 411 | — | % | ||||||||
| Foreign tax effects: | |||||||||||
| Switzerland | |||||||||||
| Statutory tax rate difference | 47,502 | (5.7) | % | ||||||||
| Cantonal and local taxes (2) | |||||||||||
| Vaud changes in valuation allowances | 42,030 | (5.0) | % | ||||||||
| Vaud asset impairment | 10,124 | (1.2) | % | ||||||||
| Vaud taxes and other | (28,901) | 3.4 | % | ||||||||
| Changes in valuation allowances | 64,603 | (7.7) | % | ||||||||
| Asset impairment | 15,561 | (1.9) | % | ||||||||
| Other | (6,892) | 0.8 | % | ||||||||
| United Kingdom | |||||||||||
| Asset impairment | 26,984 | (3.2) | % | ||||||||
| Other | (5,639) | 0.7 | % | ||||||||
| Other foreign jurisdictions | 2,707 | (0.3) | % | ||||||||
| Effect of cross-border tax laws | 1,437 | (0.2) | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Asset impairment | 63,732 | (7.6) | % | ||||||||
| Other | 4,071 | (0.5) | % | ||||||||
| Changes in unrecognized tax benefits | (2,529) | 0.3 | % | ||||||||
| Other items | 1,099 | (0.1) | % | ||||||||
| Effective income tax rate | $ | 60,144 | (7.2) | % | |||||||
(1)State taxes in Mississippi and Texas made up the majority of the tax effect in this category.
(2)Cantonal taxes in Vaud made up the majority of the tax effect in this category.
Our income tax rate reconciliations for prior periods have not been adjusted and continue to reflect the presentation requirements in effect before the adoption of ASU 2023-09.
| Fiscal Years Ended Last Day of February, | |||||||||||
| 2025 | 2024 | ||||||||||
| Effective income tax rate at the U.S. statutory rate | 21.0 | % | 21.0 | % | |||||||
| Impact of U.S. state income taxes | 5.6 | % | 2.2 | % | |||||||
| Effect of statutory tax rate in Macau | (3.5) | % | (4.0) | % | |||||||
| Effect of statutory tax rate in Barbados | (1.6) | % | (2.4) | % | |||||||
| Effect of statutory tax rate in Switzerland | (0.3) | % | (1.8) | % | |||||||
| Effect of income from other non-U.S. operations subject to varying rates | 2.4 | % | 2.3 | % | |||||||
| Effect of foreign exchange fluctuations | 3.2 | % | (0.3) | % | |||||||
Effect of stock compensation | 2.3 | % | 1.2 | % | |||||||
| Effect of uncertain tax positions | (7.7) | % | 0.4 | % | |||||||
| Effect of non-deductible executive compensation | 1.5 | % | 1.9 | % | |||||||
Effect of intangible asset reorganization | (70.5) | % | — | % | |||||||
Effect of asset impairment | 2.2 | % | — | % | |||||||
Effect of changes in valuation allowance | 2.5 | % | 3.9 | % | |||||||
Effect of base erosion and anti-abuse tax | 0.9 | % | — | % | |||||||
| Effect of changes in tax rates | 6.8 | % | (4.4) | % | |||||||
| Other items | 0.2 | % | (0.7) | % | |||||||
| Effective income tax rate | (35.0) | % | 19.3 | % | |||||||
Each year there are significant transactions or events that are incidental to our core businesses and by a combination of their nature and jurisdiction, can have a disproportionate impact on our reported effective tax rates. Without these transactions or events, the trend in our effective tax rates would follow a more normalized pattern.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows:
| (in thousands) | February 28, 2026 | February 28, 2025 | |||||||||
| Deferred tax assets, gross: | |||||||||||
| Operating loss carryforwards and tax credits | $ | 46,700 | $ | 22,436 | |||||||
| Accounts receivable | 6,650 | 5,976 | |||||||||
| Inventories | 17,264 | 18,373 | |||||||||
| Operating lease liabilities | 13,913 | 10,448 | |||||||||
| Research and development expenditures | 3,901 | 4,911 | |||||||||
| Interest limitation | 15,904 | 13,616 | |||||||||
| Accrued expenses and other | 7,403 | 5,613 | |||||||||
Amortization | 55,705 | 14,033 | |||||||||
| Total gross deferred tax assets | 167,440 | 95,406 | |||||||||
| Valuation allowance | (129,240) | (21,374) | |||||||||
| Deferred tax liabilities: | |||||||||||
| Operating lease assets | (11,446) | (7,844) | |||||||||
| Depreciation | (25,229) | (27,811) | |||||||||
| Total deferred tax assets, net | $ | 1,525 | $ | 38,377 | |||||||
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. We consider the scheduled reversal of deferred tax liabilities, expected future taxable income and tax planning strategies in assessing the ultimate realization of deferred tax assets. If recovery is not likely, we must increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not be recoverable. In fiscal 2026, the $107.9 million increase in our valuation allowance was principally due to deferred tax assets in Switzerland, most of which were generated as part of the intangible asset
reorganization in fiscal 2025 and intangible asset impairment charges recognized in fiscal 2026, that were determined to be non-realizable.
The composition of our operating loss carryforwards and tax credits at the end of fiscal 2026 was as follows:
| February 28, 2026 | ||||||||||||||
| (in thousands) | Tax Year Expiration Date Range | Deferred Tax Assets | Operating Loss Carryforward | |||||||||||
| U.S. state operating loss carryforwards | 2036-2047 | $ | 2,156 | $ | 43,850 | |||||||||
| Non-U.S. operating loss carryforwards with definite carryover periods | 2028-2046 | 24,344 | 183,569 | |||||||||||
| Non-U.S. operating loss carryforwards with indefinite carryover periods | Indefinite | 20,200 | 115,628 | |||||||||||
| Subtotal | 46,700 | $ | 343,047 | |||||||||||
| Less portion of valuation allowance established for operating loss carryforwards | (43,895) | |||||||||||||
| Total operating loss carryforwards, net of valuation allowance | $ | 2,805 | ||||||||||||
Any future amount of deferred tax asset considered realizable could be reduced in the near term if estimates of future taxable income during any carryforward periods are reduced.
During fiscal 2026, 2025 and 2024, changes in the total amount of unrecognized tax benefits (excluding interest and penalties) were as follows:
| Fiscal Years Ended Last Day of February, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | 2024 | ||||||||||||||
| Total unrecognized tax benefits, beginning balance | $ | 605 | $ | 6,824 | $ | 6,018 | |||||||||||
| Tax positions taken during the current period | — | 894 | 806 | ||||||||||||||
| Tax positions taken during the prior period | 184 | — | — | ||||||||||||||
| Lapse in statute of limitations | (605) | — | — | ||||||||||||||
| Settlements | — | (7,113) | — | ||||||||||||||
| Total unrecognized tax benefits, ending balance | 184 | 605 | 6,824 | ||||||||||||||
| Less current unrecognized tax benefits | — | — | — | ||||||||||||||
| Non-current unrecognized tax benefits | $ | 184 | $ | 605 | $ | 6,824 | |||||||||||
During fiscal 2026, the amount of unrecognized tax benefits decreased by $0.4 million primarily due to lapses in statutes of limitations. If we are able to sustain our positions with the relevant taxing authorities, approximately $0.2 million (excluding interest and penalties) of uncertain tax position liabilities as of February 28, 2026 would favorably impact our effective tax rate in future periods.
We classify interest and penalties on uncertain tax positions as income tax expense. At the end of fiscal 2026 and 2025, the liability for tax-related interest and penalties associated with unrecognized tax benefits was $0.1 million and $2.2 million, respectively. Additionally, during fiscal 2026, 2025 and 2024, we recognized tax benefits of $2.1 million, $1.0 million and a de minimis amount of tax expense, respectively, from tax-related interest and penalties in the consolidated statements of (loss) income.
We file income tax returns in the U.S. federal jurisdiction and in various states and foreign jurisdictions. As of February 28, 2026, tax years under examination or still subject to examination by material tax jurisdictions were as follows:
| Jurisdiction | Tax Years Under Examination | Open Tax Years | ||||||||||||||||||
| Barbados | - None - | 2021 | — | 2026 | ||||||||||||||||
| China | 2009-2018 | 2009 | — | 2026 | ||||||||||||||||
| Macao | - None - | 2021 | — | 2026 | ||||||||||||||||
| Switzerland | - None - | 2021 | — | 2026 | ||||||||||||||||
| United Kingdom | - None - | 2025 | — | 2026 | ||||||||||||||||
| U.S. | - None - | 2022 | — | 2026 | ||||||||||||||||
Following the adoption of ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, our cash income taxes paid, net of refunds, were as follows:
| (in thousands) | Fiscal Year Ended February 28, 2026 | ||||
U.S. Federal | $ | 14,817 | |||
Other | 2,648 | ||||
Total U.S. | 17,465 | ||||
Hong Kong | (2,962) | ||||
Macao | 6,152 | ||||
United Kingdom | 2,707 | ||||
Other | 3,163 | ||||
Total Non-U.S. | $ | 9,060 | |||
| Total | $ | 26,525 | |||
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 Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.