April 30, 2012

Herbalife Ltd. Announces Record First Quarter 2012 and Raises 2012 Earnings Guidance

  • First quarter worldwide volume point growth of 24 percent with increases in each of its six regions compared to the prior year period.
  • First quarter EPS of $0.88 increased 24 percent compared to the prior year period adjusted EPS1.
  • Raising FY'12 EPS guidance to a range of $3.58 to $3.74.
  • Board of directors approved a $0.30 per share quarterly dividend.

LOS ANGELES--(BUSINESS WIRE)-- Herbalife Ltd. (NYSE:HLF) today reported first quarter net sales of $964.2 million, a 21 percent increase driven by a 24 percent increase in volume points compared to the prior year period. For the same period, the company reported net income of $108.2 million, or $0.88 per diluted share, reflecting an increase of 22 percent and 24 percent respectively compared to the adjusted first quarter 2011 net income of $88.7 million and $0.71 per diluted share.

"Our business momentum has continued into 2012, with strong sales performance from each of our six regions," said Michael O. Johnson, the company's chairman and CEO. "The financial strength of our business model is once again reflected in our cash flow generation in the quarter."

For the quarter ended March 31, 2012, the company generated cash flow from operations of $120.4 million, an increase of 11 percent compared to the prior year period, paid dividends of $35.2 million, invested $24.9 million in capital expenditures and repurchased $50.0 million in common shares outstanding under our share repurchase program.

First Quarter Regional Key Metrics2,3

Regional Volume Point and Average Active Sales Leader Metrics

Volume Points (Mil)   Average Active Sales Leaders
Region 1Q'12   Yr/Yr % Chg   1Q'12   Yr/Yr % Chg
North America 298.4   23 % 62,532   19 %
Asia Pacific 273.8 38 % 55,706 38 %
EMEA 145.9 6 % 41,332 15 %
Mexico 191.4 16 % 52,674 24 %
South & Central America 164.7 32 % 40,614 31 %
China 40.9   25 %   9,531   31 %
Worldwide Total 1,115.1   24 %   252,321   23 %
 

Updated 2012 Guidance

Guidance for fully diluted 2012 EPS is based on the average daily exchange rates of the first two weeks of April 2012.

Based on current business trends the company's second quarter fiscal 2012 and fiscal 2012 guidance is provided below.

Three Months Ending   Twelve Months Ending

June 30, 2012

 

December 31, 2012

Low High Low High
Volume Point Growth vs 2011 11.5 % 13.5 % 12.0 % 14.0 %
Net Sales Growth vs 2011 9.5 % 11.5 % 12.5 % 14.5 %
Diluted EPS $ 0.91 $ 0.95 $ 3.58 $ 3.74
Cap Ex ($ millions) $ 25.0 $ 30.0 $ 110.0 $ 120.0
Effective Tax Rate 27.0 % 29.0 % 26.5 % 28.5 %
 

Announces Quarterly Dividend

The company reported today that its board of directors has approved a dividend of $0.30 per share to shareholders of record effective May 15, 2012, payable on May 30, 2012.

First Quarter Earnings Conference Call

Herbalife senior management will host an investor conference call to discuss its recent financial results and provide an update on current business trends on Tuesday, May 1, 2012 at 8 a.m. PST (11 a.m. EST).

The dial-in number for this conference call for domestic callers is (877) 317-1296 and (706) 634-5671 for international callers (conference ID 66116502). Live audio of the conference call will be simultaneously webcast in the investor relations section of the company's website at http://ir.herbalife.com.

An audio replay will be available following the completion of the conference call in MP3 format or by dialing (855) 859-2056 for domestic callers or (404) 537-3406 for international callers (conference ID 66116502). The webcast of the teleconference will be archived and available on Herbalife's website.

About Herbalife Ltd.

Herbalife Ltd. (NYSE:HLF) is a global nutrition company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle. Herbalife products are sold in 81 countries through a network of independent distributors. The company supports the Herbalife Family Foundation and its Casa Herbalife program to help bring good nutrition to children. Herbalife's website contains information about Herbalife, including financial and other information for investors at http://ir.Herbalife.com. The company encourages investors to visit its website from time to time, as information is updated and new information is posted.

FORWARD-LOOKING STATEMENTS

This document contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words "may," "will," "estimate," "intend," "continue," "believe," "expect" or "anticipate" and any other similar words.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, among others, the following:

any collateral impact resulting from the ongoing worldwide financial "crisis," including the availability of liquidity to us, our customers and our suppliers or the willingness of our customers to purchase products in a difficult economic environment;

• our relationship with, and our ability to influence the actions of, our distributors;

• improper action by our employees or distributors in violation of applicable law;

• adverse publicity associated with our products or network marketing organization;

• changing consumer preferences and demands;

• our reliance upon, or the loss or departure of any member of, our senior management team which could negatively impact our distributor relations and operating results;

• the competitive nature of our business;

• regulatory matters governing our products, including potential governmental or regulatory actions concerning the safety or efficacy of our products and network marketing program, including the direct selling market in which we operate;

• legal challenges to our network marketing program;

• risks associated with operating internationally and the effect of economic factors, including foreign exchange, inflation, disruptions or conflicts with our third party importers, pricing and currency devaluation risks, especially in countries such as Venezuela;

• uncertainties relating to the application of transfer pricing, duties, value added taxes, and other tax regulations, and changes thereto;

• uncertainties relating to interpretation and enforcement of legislation in China governing direct selling;

• our inability to obtain the necessary licenses to expand our direct selling business in China;

• adverse changes in the Chinese economy, Chinese legal system or Chinese governmental policies;

• our dependence on increased penetration of existing markets;

• contractual limitations on our ability to expand our business;

• our reliance on our information technology infrastructure and outside manufacturers;

• the sufficiency of trademarks and other intellectual property rights;

• product concentration;

• changes in tax laws, treaties or regulations, or their interpretation;

• taxation relating to our distributors;

• product liability claims; and

• whether we will purchase any of our shares in the open markets or otherwise.

We do not undertake any obligation to update or release any revisions to any forward-looking statements or to report any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

1 See Schedule A — "Reconciliation of Non-GAAP Financial Measures" for more detail.

2 Supplemental tables that include additional business metrics can be found at http://www.ir.herbalife.com.

3 Worldwide Average Active Sales Leaders may not equal the sum of the Average Active Sales Leaders in each region due to the calculation being an average of Sales Leaders active in a period, not a summation, and the fact that some sales leaders are active in more than one region but are counted only once in the worldwide amount.

RESULTS OF OPERATIONS:

Herbalife Ltd.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
   
Quarter Ended
  3/31/2012   3/31/2011
 
North America $ 210,710 $ 167,000
Mexico 117,109 103,877
South and Central America 165,470 125,277
EMEA 153,993 153,937
Asia Pacific 259,948 199,303
China   56,945   45,702
Worldwide net sales 964,175 795,096
Cost of Sales   196,144   162,793
Gross Profit 768,031 632,303
Royalty Overrides 317,533 264,377
SGA   296,393   244,526
Operating Income 154,105 123,400
Interest Expense - net   1,373   2,648
Income before income taxes 152,732 120,752
Income Taxes   44,570   32,733
Net Income   108,162   88,019
 
Basic Shares 116,191 118,206
Diluted Shares 122,373 125,625
 
Basic EPS $ 0.93 $ 0.74
Diluted EPS $ 0.88 $ 0.70
 
Dividends declared per share $ 0.30 $ 0.13
 
Herbalife Ltd.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
  Mar 31,  

Dec 31,

2012 2011
 
ASSETS
Current Assets:
Cash & cash equivalents $ 305,861 $ 258,775
Receivables, net 106,647 89,660
Inventories 250,541 247,696
Prepaid expenses and other current assets 127,181 117,073
Deferred income taxes   54,754     55,615  
Total Current Assets 844,984 768,819
 
Property, plant and equipment, net 201,380 193,703
Deferred compensation plan assets 23,063 20,511
Deferred financing cost, net 4,516 4,797
Other assets 41,381 41,125
Marketing related intangibles and other intangible assets, net 311,592 311,764
Goodwill   105,490     105,490  
Total Assets $ 1,532,406   $ 1,446,209  
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 69,591 $ 57,095
Royalty overrides 201,242 197,756
Accrued compensation 58,951 76,435
Accrued expenses 159,818 152,744
Current portion of long term debt 3,733 1,542
Advance sales deposits 41,589 31,702
Income taxes payable   30,912     31,415  
Total Current Liabilities 565,836 548,689
 
Non-current liabilities
Long-term debt, net of current portion 228,055 202,079
Deferred compensation plan liability 27,133 23,702
Deferred income taxes 68,953 72,348
Other non-current liabilities   37,665     39,203  
Total Liabilities 927,642 886,021
 
Commitments and Contingencies
 
Shareholders' equity:
Common shares 117 116
Additional paid in capital 302,310 291,950
Accumulated other comprehensive loss (28,312 ) (37,809 )
Retained earnings   330,649     305,931  
Total Shareholders' Equity   604,764     560,188  
   
Total Liabilities and Shareholders' Equity $ 1,532,406   $ 1,446,209  
 
Herbalife Ltd.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
    Year Ended
  3/31/2012       3/31/2011  
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 108,162 $ 88,019
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 18,590 18,562
Excess tax benefits from share-based payment arrangements (20,675 ) (6,343 )
Share based compensation expenses 7,227 5,604
Amortization of discount and deferred financing costs 286 149
Deferred income taxes (597 ) 470
Unrealized foreign exchange transaction loss (gain) (3,868 ) 1,383
Write-off of deferred financing costs - 914
Other 391 751
Changes in operating assets and liabilities:
Receivables (14,759 ) (20,493 )
Inventories 9,742 4,184
Prepaid expenses and other current assets (4,029 ) (13,582 )
Other assets (905 ) (251 )
Accounts payable 11,496 8,861
Royalty overrides (2,302 ) 7,340
Accrued expenses and accrued compensation (17,373 ) (21,122 )
Advance sales deposits 9,062 20,998
Income taxes 16,489 9,494
Deferred compensation plan liability   3,431     3,030  
NET CASH PROVIDED BY OPERATING ACTIVITIES   120,368     107,968  
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (24,691 ) (28,325 )
Proceeds from sale of property, plant and equipment 15 2
Deferred compensation plan assets   (2,552 )   (197 )
NET CASH USED IN INVESTING ACTIVITIES   (27,228 )   (28,520 )
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (35,172 ) (14,819 )
Borrowings from long-term debt 114,560 289,700
Principal payments on long-term debt (86,402 ) (284,924 )
Deferred financing costs - (5,516 )
Share repurchases (72,942 ) (8,965 )
Excess tax benefits from share-based payment arrangements 20,675 6,343
Proceeds from exercise of stock options and sale of stock under employee stock purchase plan   7,128     1,689  
NET CASH USED IN FINANCING ACTIVITIES   (52,153 )   (16,492 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH   6,099     7,260  
NET CHANGE IN CASH AND CASH EQUIVALENTS 47,086 70,216
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR   258,775     190,550  
CASH AND CASH EQUIVALENTS, END OF YEAR   305,861     260,766  
CASH PAID DURING THE YEAR
Interest paid $ 2,477   $ 2,093  
Income taxes paid $ 29,958   $ 21,874  
 

SUPPLEMENTAL INFORMATION

SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(unaudited), (Dollars in Thousand, Except Per Share Data)

In addition to its reported results, the Company has included in the tables below adjusted results that the Securities and Exchange Commission defines as "non-GAAP financial measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors in analyzing period to period comparisons of the Company's results. However, non-GAAP financial measures should not be considered substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP.

The following is a reconciliation of net income, presented and reported in accordance with U.S. generally accepted accounting principles, to net income adjusted for certain items:
         
   
Three Months Ended
  3/31/2012   3/31/2011
 
Net income, as reported $ 108,162 $ 88,019
Write-off of unamortized deferred financing cost
from debt refinancing (net of $214 tax benefit)   -   700
Net income, as adjusted $ 108,162 $ 88,719
         
 
 
The following is a reconciliation of diluted earnings per share, presented and reported in accordance with U.S. generally accepted accounting principles, to diluted earnings per share adjusted for certain items:
         
 
Three Months Ended
  3/31/2012   3/31/2011
 
Diluted earnings per share, as reported $ 0.88 $ 0.70
Write-off of unamortized deferred financing cost
from debt refinancing   -   0.01
Diluted earnings per share, as adjusted $ 0.88 $ 0.71
 

The following is a reconciliation of total long-term debt to net debt:

  3/31/2012       12/31/2011  
 
Total long-term debt (current and long-term portion) $ 231,788 $ 203,621
Less: Cash and cash equivalents   305,861     258,775  
Net debt $ (74,073 )   $ (55,154 )
 

Herbalife Ltd.
Media Contact:
Barbara Henderson
SVP, Worldwide Corp. Comm.
213.745.0517
or
Investor Contact:
Amy Greene
VP, Investor Relations
213.745.0474

Source: Herbalife Ltd.

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