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Restructuring Plan | 6 Months Ended
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Aug. 31, 2023
Restructuring and Related Activities [Abstract] |
Restructuring Plan | Note 8 - Restructuring Plan During the second quarter of fiscal 2023, we focused on developing Project Pegasus, a global restructuring plan intended to expand operating margins through initiatives designed to improve efficiency and reduce costs. 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 our previous Health & Wellness and Beauty operating segments being combined into a single reportable segment, which is referred to herein 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 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 our initiative focused on streamlining and simplifying the organization, we made further changes to the structure of our organization, during the fourth quarter of fiscal 2023, 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 these role reductions were completed by March 1, 2023. 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. During the second quarter of fiscal 2024, we announced plans to geographically consolidate the U.S. Beauty business, currently located in El Paso, Texas, and Irvine, California, and co-locate it with our Wellness business in the Boston, Massachusetts area. This geographical consolidation and relocation is the next step in our initiative to streamline and simplify the organization and it is expected to be completed during fiscal 2025. We expect these changes will enable a greater opportunity to capture synergies and enhance collaboration and innovation within the Beauty & Wellness segment. We have updated our expectations regarding Project Pegasus charges. We now estimate lower total one-time pre-tax restructuring charges of approximately $60 million to $65 million over the duration of the plan. We now expect these charges to be completed during fiscal 2025. We previously had estimated total pre-tax restructuring charges of approximately $85 million to $95 million, which was initially expected to be substantially completed by the end of fiscal 2024. In addition, we now have the following expectations regarding Project Pegasus charges: •Pre-tax restructuring charges to be comprised of approximately $22 million to $25 million of severance and employee related costs, $30 million of professional fees, $5 million of contract termination costs, and $3 million to $5 million of other exit and disposal costs. •All of our operating segments and shared services will be impacted by the plan and pre-tax restructuring charges include approximately $17 million to $19 million in Home & Outdoor and $43 million to $46 million in Beauty & Wellness. •Pre-tax restructuring charges represent primarily cash expenditures, which are expected to be substantially paid by the end of fiscal 2025. We continue to have the following expectations regarding Project Pegasus savings: •Targeted annualized pre-tax operating profit improvements of approximately $75 million to $85 million, which we expect to substantially 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. During the three and six month periods ended August 31, 2023, we incurred $3.6 million and $11.0 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the condensed consolidated statement of income. We recognized $4.8 million of pre-tax restructuring costs during both the three and six month periods ended August 31, 2022 in connection with Project Pegasus. The following tables summarize restructuring charges recorded as a result of Project Pegasus for the periods presented:
| Three Months Ended August 31, 2023
(in thousands) | Home & Outdoor |  |  |  |  |  | Beauty & Wellness |  | Total
Severance and employee related costs | $ | 87 |  |  |  |  |  |  | $ | 501 |  |  | $ | 588 |
Professional fees | 1,182 |  |  |  |  |  |  | 1,719 |  |  | 2,901 |
Contract termination | — |  |  |  |  |  |  | 108 |  |  | 108 |
Other | 2 |  |  |  |  |  |  | 18 |  |  | 20 |
Total restructuring charges | $ | 1,271 |  |  |  |  |  |  | $ | 2,346 |  |  | $ | 3,617 |
| Three Months Ended August 31, 2022
(in thousands) | Home & Outdoor |  |  |  |  |  | Beauty & Wellness |  | Total
Severance and employee related costs | $ | 472 |  |  |  |  |  |  | $ | 2,369 |  |  | $ | 2,841 |
Professional fees | — |  |  |  |  |  |  | 128 |  |  | 128 |
Contract termination | — |  |  |  |  |  |  | 1,500 |  |  | 1,500 |
Other | — |  |  |  |  |  |  | 307 |  |  | 307 |
Total restructuring charges | $ | 472 |  |  |  |  |  |  | $ | 4,304 |  |  | $ | 4,776 |
| Six Months Ended August 31, 2023 |  | Total Incurred Since Inception
(in thousands) | Home & Outdoor |  |  |  |  | Beauty & Wellness |  | Total |
Severance and employee related costs | $ | 571 |  |  |  |  |  | $ | 909 |  |  | $ | 1,480 |  |  | $ | 10,933 |
Professional fees | 3,451 |  |  |  |  |  | 5,076 |  |  | 8,527 |  |  | 25,276 |
Contract termination | — |  |  |  |  |  | 796 |  |  | 796 |  |  | 1,331 |
Other | 39 |  |  |  |  |  | 130 |  |  | 169 |  |  | 794 |
Total restructuring charges | $ | 4,061 |  |  |  |  |  | $ | 6,911 |  |  | $ | 10,972 |  |  | $ | 38,334 |
| Six Months Ended August 31, 2022 |  |
(in thousands) | Home & Outdoor |  |  |  |  | Beauty & Wellness |  | Total |
Severance and employee related costs | $ | 472 |  |  |  |  |  | $ | 2,371 |  |  | $ | 2,843 |  |  |
Professional fees | — |  |  |  |  |  | 128 |  |  | 128 |  |  |
Contract termination | — |  |  |  |  |  | 1,500 |  |  | 1,500 |  |  |
Other | — |  |  |  |  |  | 307 |  |  | 307 |  |  |
Total restructuring charges | $ | 472 |  |  |  |  |  | $ | 4,306 |  |  | $ | 4,778 |  |  |
The tables below present 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, 2023 |  | Charges |  | Payments |  | Balance at August 31, 2023
Severance and employee related costs | $ | 3,173 |  |  | $ | 1,480 |  |  | $ | (3,422) |  |  | $ | 1,231 |
Professional fees | 3,201 |  |  | 8,527 |  |  | (10,635) |  |  | 1,093 |
Contract termination | 160 |  |  | 796 |  |  | (956) |  |  | — |
Other | 34 |  |  | 169 |  |  | (203) |  |  | — |
Total | $ | 6,568 |  |  | $ | 10,972 |  |  | $ | (15,216) |  |  | $ | 2,324 |
(in thousands) | Balance at February 28, 2022 |  | Charges |  | Payments |  | Balance at August 31, 2022
Severance and employee related costs | $ | — |  |  | $ | 2,843 |  |  | $ | (802) |  |  | $ | 2,041 |
Professional fees | — |  |  | 128 |  |  | (128) |  |  | — |
Contract termination | — |  |  | 1,500 |  |  | — |  |  | 1,500 |
Other | — |  |  | 307 |  |  | (307) |  |  | — |
Total | $ | — |  |  | $ | 4,778 |  |  | $ | (1,237) |  |  | $ | 3,541 |

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (b)(2) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482017/420-10-50-1 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482017/420-10-50-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//420/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482017/420-10-50-1 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 5.P.4(e)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479823/420-10-S99-2 + Details
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