July 28, 2014

Herbalife Ltd. Announces Second Quarter 2014 Results and Raises 2014 Earnings Guidance

  • Second quarter worldwide volume growth of 5 percent compared to the prior year period.
  • Adjusted1 EPS of $1.55 increased 10 percent compared to the prior year. Reported EPS of $1.31 primarily reflects the impact of the non-cash costs associated with the convert and other items.
  • Raising FY'14 adjusted diluted EPS guidance to a range of $6.17 to $6.32.
  • Repurchased $581 million or 9.8 million shares during the quarter.

LOS ANGELES--(BUSINESS WIRE)-- Herbalife Ltd. (NYSE: HLF) today reported second quarter net sales of $1.3 billion, reflecting an increase of 7 percent compared to the same time period in 2013 on volume point growth of 5 percent. Adjusted1 net income for the quarter of $141.4 million, or $1.55 per diluted share, compares to 2013 second quarter adjusted net income of $150.7 million, or $1.41 per diluted share. On a reported basis, second quarter 2014 net income of $119.5 million, or $1.31 per diluted share compares to $143.2 million, or $1.34 per diluted share for the same period in 2013.

"Herbalife has once again delivered strong results in sales and profitability while demonstrating our continued ability to enhance our earnings per share," said Michael Johnson, Herbalife's chairman and CEO. "Our performance is a testament to the enthusiasm our millions of consumers and members have for our products. Additionally, our independent members are successfully executing numerous growth strategies to further develop customer loyalty and encourage individuals across our network to lead healthier, nutritious lives. Our members are proud to be a part of a solution to global public health issues and we value the integral role they play in Herbalife's mission."

For the quarter ended June 30, 2014 the company generated cash flow from operations of $156.9 million; invested $39.6 million in capital expenditures; and repurchased $581.3 million in common shares outstanding under our share repurchase program.

Second Quarter 2014 Key Metrics2,3

Regional Volume Point and Average Active Sales Leader Metrics

  Volume Points (Mil)   Average Active Sales Leaders
Region   2Q'14   Yr/Yr % Chg   2Q'14   Yr/Yr % Chg
North America 335.8   (1%) 75,772   5%
Asia Pacific 320.2 1% 74,916 6%
EMEA 218.8 22% 56,692 18%
Mexico 231.3 5% 64,656 3%
South & Central America 206.3 (7%) 62,172 14%
China   118.5   38%   18,703   33%
Worldwide Total   1,430.9   5%   340,644   9%

Updated 2014 Guidance

Forward guidance excludes the impact of expenses (primarily for legal and advisory services) relating to the company's response to information put into the marketplace by a short seller, which the company believes to be inaccurate and misleading, expenses related to a FTC inquiry, and the impact of non-cash interest costs associated with the company's Convertible Notes and the expenses incurred related to the effort to recover costs related to the reaudit that occurred last year. Forward guidance is based on the average daily exchange rates of the first two weeks of July. Included in the guidance is the use of the GAAP rate for Venezuela of 10.6 to 1 for the balance of the year and excludes the potential impact of future devaluation of the Venezuelan bolivar and future repatriation, if any, of existing cash balances in Venezuela.

Based on current business trends the company's third quarter fiscal 2014 and full year fiscal 2014 guidance is provided below.

  Three Months Ending   Twelve Months Ending

September 30, 2014

December 31, 2014







Volume Point Growth vs 2013 5.5% 7.5% 6.0% 8.0%
Net Sales Growth vs 2013 9.0% 11.0% 8.5% 10.5%
Diluted EPS as adjusted $1.49 $1.53 $6.17 $6.32
Cap Ex ($ millions) $45.0 $55.0 $175.0 $195.0
Effective Tax Rate 27.0% 29.0% 27.5% 29.5%

Share Repurchase Program Update

During the second quarter, the company repurchased 9.8 million shares at an average cost of $59.41. There is currently $232.9 million remaining on the existing $1.5 billion share repurchase authorization.

Second Quarter 2014 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, July 29, 2014 at 8 a.m. PT (11 a.m. ET).

The dial-in number for this conference call for domestic callers is (877) 317-1296 and (706) 634-5671 for international callers (conference ID 66932104). 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 66932104). 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 more than 90 countries through and to a network of independent members. The company supports the Herbalife Family Foundation and its Casa Herbalife program to help bring good nutrition to children. Herbalife's website contains a significant amount of 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.

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.


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:

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

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

• adverse publicity associated with our products or network marketing organization, including our ability to comfort the marketplace and regulators regarding our compliance with applicable laws;

• 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 Member 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;

• uncertainties relating to the interpretation, enforcement or amendment of legislation in India 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 Members;

• product liability claims;

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

• share price volatility related to, among other things, speculative trading and certain traders shorting our common shares.

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


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Copyright 2015 Herbalife Ltd.

Herbalife Ltd. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended Six Months Ended







North America $ 250,601 $ 247,564 $ 498,461 $ 469,037
Mexico 148,658 145,638 291,321 278,527
South and Central America 203,352 222,362 447,974 441,877
EMEA 227,254 186,286 438,506 355,871
Asia Pacific 306,307 299,240 586,687 610,986
China   170,028   118,149   305,900   186,588
Worldwide net sales 1,306,200 1,219,239 2,568,849 2,342,886
Cost of Sales   257,221   247,224   508,386   473,201
Gross Profit 1,048,979 972,015 2,060,463 1,869,685
Royalty Overrides 390,774 379,551 772,593 743,580
Selling, General and Administrative Expenses (1)   461,917   400,107   963,979   764,827
Operating Income 196,288 192,357 323,891 361,278
Interest Expense, net 21,406 5,559 36,367 10,932
Other Expense, net (1)   -   -   3,161   -
Income before income taxes 174,882 186,798 284,363 350,346
Income Taxes   55,350   43,636   90,203   88,311
Net Income   119,532   143,162   194,160   262,035