Restructuring Plan

9 Months Ended

Nov. 30, 2022

Restructuring and Related Activities [Abstract]

Note 8 - Restructuring Plan

During the second quarter of fiscal 2023, we focused on developing a global restructuring plan intended to expand operating margins through initiatives designed to improve efficiency and reduce costs (referred to as “Project Pegasus”). Project Pegasus includes initiatives to further optimize our brand portfolio, streamline and simplify the organization, accelerate cost of goods savings projects, enhance the efficiency of our supply chain network, optimize our indirect spending, and improve our cash flow and working capital, as well as other activities. We anticipate these initiatives will create operating efficiencies, as well as provide a platform to fund future growth investments.

During the fourth quarter of fiscal 2023, we made changes to the structure of our organization in connection with Project Pegasus that resulted in the Health & Wellness and Beauty operating segments being combined into a single reportable segment, which will be referred to as “Beauty & Wellness.” In connection with these organizational structure changes, corresponding changes were made to how our business is managed, how results are reported internally and to how our CEO, our chief operating decision maker, assesses performance and allocates resources. We believe that these changes better align internal resources and external go to market activities in order to create a more efficient and effective organizational structure. There were no changes to the products or brands included within our Home & Outdoor reportable segment as part of these organizational changes.

As part of the Project Pegasus initiative focused on streamlining and simplifying the organization, we are announcing plans to further change the structure of our organization, which include the creation of a North America Regional Market Organization (“RMO”) responsible for sales and go to market strategies for all categories and channels in the U.S. and Canada, and further centralization of certain functions under shared services, particularly in operations and finance to better support our business segments and RMOs. This new structure, inclusive of the organizational structure changes described above resulting in the reportable segment change, will reduce the size of our global workforce by approximately 10%. The majority of the role reductions are expected to be completed by March 1, 2023. Nearly all of the remaining role reductions are expected to be completed before the end of fiscal year 2024. We believe that these changes better focus business segment resources on brand development, consumer-centric innovation and marketing, the RMOs on sales and go to market strategies, and shared services on their respective areas of expertise while also creating a more efficient and effective organizational structure.

Consistent with the second quarter of fiscal 2023, we continue to have the following expectations regarding Project Pegasus:

•Targeted annualized pre-tax operating profit improvements of approximately $75 million to $85 million, which we expect to begin in fiscal 2024 and be substantially achieved by the end of fiscal 2026.

•Estimated cadence of the recognition of the savings will be approximately 25% in fiscal 2024, approximately 50% in fiscal 2025 and approximately 25% in fiscal 2026.

•Total profit improvements to be realized approximately 60% through reduced cost of goods sold and 40% through lower SG&A.

•Total one-time pre-tax restructuring charges of approximately $85 million to $95 million over the duration of the plan, which is expected to be completed during fiscal 2025 and will primarily be comprised of severance and employee related costs, professional fees, contract termination costs, and other exit and disposal costs.

•All of our operating segments and shared services will be impacted by the plan.

During the three and nine month periods ended November 30, 2022, we incurred $10.5 million and $15.2 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which are recorded as “Restructuring charges” in the condensed consolidated statements of income. We recognized an

insignificant amount and $0.4 million, respectively, of pre-tax restructuring costs during the three and nine month periods ended November 30, 2021, under a prior restructuring plan referred to as Project Refuel, which was completed during the fourth quarter of fiscal 2022.

The following tables summarize restructuring charges recorded as a result of Project Pegasus for the periods presented:


	Three Months Ended November 30, 2022
(in thousands)	Home & Outdoor		Health & Wellness		Beauty		Total
Severance and employee related costs	$	426	$	305	$	444	$	1,175
Professional fees	4,663		2,584		1,927		9,174
Contract termination	—		—		—		—
Other	1		4		109		114
Total restructuring charges	$	5,090	$	2,893	$	2,480	$	10,463


	Nine Months Ended November 30, 2022								Total Incurred Since Inception
(in thousands)	Home & Outdoor		Health & Wellness		Beauty		Total
Severance and employee related costs	$	898	$	2,231	$	889	$	4,018	$	4,018
Professional fees	4,663		2,712		1,927		9,302		9,302
Contract termination	—		1,500		—		1,500		1,500
Other	1		4		416		421		421
Total restructuring charges	$	5,562	$	6,447	$	3,232	$	15,241	$	15,241

The table below presents a rollforward of our accruals related to Project Pegasus, which are included in accounts payable and accrued expenses and other current liabilities:


(in thousands)	Balance at February 28, 2022		Charges		Payments		Balance at November 30, 2022
Severance and employee related costs	$	—	$	4,018	$	2,805	$	1,213
Professional fees	—		9,302		2,196		7,106
Contract termination	—		1,500		—		1,500
Other	—		421		414		7
Total	$	—	$	15,241	$	5,415	$	9,826