Herbalife Ltd. Announces Record First Quarter 2011 Results and Raises FY'11 Guidance
-- First quarter net sales growth of 28.5 percent on volume growth of 21.5 percent. -- First quarter adjusted1EPS of $1.43 increased 45.9 percent compared to the $0.98 adjusted1EPS from prior year period. -- Raises FY'11 EPS guidance to a range of $5.54 to $5.78. -- Shareholders approve 2 for 1 stock split with a record date May 10, 2011. -- Board of directors approved a post stock-split quarterly dividend of $0.20 per share.
LOS ANGELES--(BUSINESS WIRE)-- Herbalife Ltd. (NYSE:HLF) today reported that first quarter net sales increased 28.5 percent and local currency net sales increased 24.7 percent compared to the same time period in 2010. Adjusted1 net income for the quarter of $88.3 million, or $1.43 per diluted share compares to 2010 first quarter adjusted net income and EPS of $61.5 million and $0.98, respectively. On a reported basis, first quarter 2011 EPS of $1.41 increased 70 percent compared to the $0.83 reported in the comparable quarter last year.
"Our ongoing efforts to globalize daily consumption-based distributor methods of operation (DMOs) continued to provide strong growth to both the top and bottom line growth in the first quarter," said Michael O. Johnson, the company's chairman and CEO. "The company's strategic focus to provide solutions for two large mega trends, the global obesity epidemic and the desire for people to earn more income, continues to provide a large platform for us to succeed. The company will continue to invest to support our growth with such initiatives as the Seed to Feed verticalization strategy."
For the quarter ended March 31, 2011, the company generated cash flow from operations of $107.5 million, an increase of 23.0 percent compared to the first quarter 2010, paid dividends of $14.8 million and invested $28.3 million in capital expenditures.
_______________________ 1 See Schedule B - "Reconciliation of Non-GAAP Financial Measures" for more detail.
First Quarter 2011 Regional Key Metrics2,3
Regional Volume Point and Average Active Sales Leader Metrics
Volume Points (Mil) Average Active Sales Leaders Region 1Q'11 Yr/Yr % Chg 1Q'11 Yr/Yr % Chg North America 243.0 10.4 % 52,549 14.7 % Asia Pacific 198.7 30.6 % 40,510 27.0 % EMEA 138.0 15.5 % 35,960 12.2 % Mexico 164.5 32.4 % 42,480 23.2 % South & Central America 125.1 23.7 % 30,970 13.8 % China 32.8 28.1 % 7,272 36.7 % Worldwide Total 902.1 21.5 % 205,036 20.8 % Volume Points (Mil) Average Active Sales Leaders 1Q'11 Yr/Yr % Chg 1Q'11 Yr/Yr % Chg Emerging Markets 475.2 29.1 % 113,176 25.8 % Established Markets 426.9 14.0 % 95,392 16.2 % Worldwide Total 902.1 21.5 % 205,036 20.8 %
_______________________ "Emerging markets" are defined herein as those countries that the World Bank 2 categorized as having "low" or "medium" GDP per capita, while "Established markets" are defined as those countries categorized by the World Bank as having "high" GDP per capita. 3 Supplemental tables that include additional business metrics can be found at http://www.ir.herbalife.com
Updated 2011 Guidance
Based on current business trends and foreign currency rates, the company's second quarter and fiscal 2011 guidance is provided below.
Second Quarter - The company's second quarter 2011 diluted, pre-split earnings per share guidance range is $1.42 to $1.48 on volume point growth of 10.0 percent to 12.0 percent and net sales growth of 19.0 percent to 21.0 percent compared to the same period in 2010, respectively, and an effective tax rate range of 28.3 percent to 29.3 percent. The company's second quarter 2011 capital expenditures are expected to be in the range of $18.0 million to $23.0 million.
Fiscal 2011 - The company's fiscal 2011 diluted, pre-split earnings per share guidance range is $5.54 to $5.78 on volume point growth of 12.0 percent to 14.0 percent and net sales growth of 18.0 percent to 20.0 percent compared to the same period in 2010, respectively, and an effective tax rate range of 28.0 percent to 29.0 percent. The company's fiscal 2011 capital expenditures are expected to be in the range of $80.0 million to $90.0 million.
Shareholders Approved Stock Split
As reported, the two-for-one stock split previously approved by the Herbalife board of directors was approved by the shareholders on April 28, 2011. The stock split will go into effect by the subdivision of each outstanding Common Share of a par value of $0.002 each into two Common Shares of a par value of $0.001 each and a proportional amendment of the authorized share capital. The record date for the stock split will be May 10, 2011. Each shareholder of record as of the close of business on the record date will receive one additional Common Share for every share held. The new shares will be distributed on or about May 17, 2011.
Announces Quarterly Dividend
The company reported today that its board of directors has approved a post-stock split dividend of $0.20 per share to shareholders of record effective May 24, 2011 payable on June 7, 2011.
First Quarter Earnings Conference Call
Herbalife's 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 3, 2011 at 8 a.m. PDT (11 a.m. EDT).
The dial-in number for this conference call for domestic callers is (877) 317-1296 and (706) 634-5671 for international callers (conference ID 57487434). 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 (800) 642-1687 for domestic callers or (706) 645-9291 for international callers (conference ID 57487434). The webcast of the teleconference will be archived and available on Herbalife's website.
About Herbalife Ltd.
Herbalife Ltd. (NYSE:HLF) is a global network marketing company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle. Herbalife products are sold in 75 countries through a network of approximately 2.3 million 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 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.
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 recessionary 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 recently enacted 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 report any events or circumstances after the date hereof or to reflect the occurrences of unanticipated events, except as required by law.
RESULTS OF OPERATIONS:
Herbalife Ltd. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) Quarter Ended 3/31/2011 3/31/2010 North America $ 167,000 $ 151,259 Mexico 103,877 71,849 South and Central America 125,277 91,330 EMEA 153,937 130,824 Asia Pacific 199,303 141,013 China 45,702 32,358 Worldwide net sales 795,096 618,633 Cost of Sales 162,793 140,472 1 Gross Profit 632,303 478,161 Royalty Overrides 264,377 207,319 SGA 244,526 206,883 1 Operating Income 123,400 63,959 Interest Expense - net 2,648 1,953 Income before income taxes 120,752 62,006 Income Taxes 33,184 10,135 1 Net Income 87,568 51,871 Basic Shares 59,103 60,160 Diluted Shares 61,908 62,672 Basic EPS $ 1.48 $ 0.86 Diluted EPS $ 1.41 $ 0.83 Dividends declared per share $ 0.25 $ 0.20
Includes impact of items related to adoption of highly-inflationary 1 accounting in Venezuela that are further discussed in Schedule B - "Reconciliation of Non-GAAP Financial Measures"
Herbalife Ltd. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) Mar 31, Dec 31, 2011 2010 ASSETS Current Assets: Cash & cash equivalents $ 260,766 $ 190,550 Receivables, net 107,893 85,612 Inventories 184,321 182,467 Prepaid expenses and other current assets 110,400 93,963 Deferred income taxes 42,355 42,994 Total Current Assets 705,735 595,586 Property and equipment, net 187,733 177,427 Deferred compensation plan assets 18,732 18,536 Deferred financing cost, net 5,451 998 Other assets 26,639 25,880 Marketing related intangibles and other and 310,815 310,894 other intangible assets, net Goodwill 102,899 102,899 Total Assets $ 1,358,004 $ 1,232,220 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 53,725 $ 43,784 Royalty Overrides 173,076 162,141 Accrued compensation 52,540 69,376 Accrued expenses 138,523 141,867 Current portion of long term debt 1,753 3,120 Advance sales deposits 56,928 35,145 Income taxes payable 18,340 15,383 Total Current Liabilities 494,885 470,816 Non-current liabilities Long-term debt, net of current portion 181,188 175,046 Deferred compensation 23,197 20,167 Deferred income taxes 55,220 55,572 Other non-current liabilities 23,216 23,407 Total Liabilities 777,706 745,008 Contingencies Shareholders' equity: Common shares 119 118 Additional paid in capital 262,617 257,375 Accumulated other comprehensive loss (12,074 ) (27,285 ) Retained earnings 329,636 257,004 Total Shareholders' Equity 580,298 487,212 Total Liabilities and Shareholders' Equity $ 1,358,004 $ 1,232,220
Herbalife Ltd. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Quarter Ended 3/31/2011 3/31/2010 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 87,568 $ 51,871 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,562 17,262 (Excess) Deficiency in tax benefits from (6,794 ) (2,606 ) share-based payment arrangements Share-based compensation expenses 5,604 5,295 Amortization of discount and deferred financing 149 124 costs Deferred income taxes 921 (13,671 ) Unrealized foreign exchange transaction (gain) 1,383 (2,608 ) loss Write-off of deferred financing costs 914 -- Foreign exchange loss from adoption of highly -- 15,131 inflationary accounting in Venezuela Other 751 1,078 Changes in operating assets and liabilities: Receivables (20,493 ) (12,048 ) Inventories 4,184 474 Prepaid expenses and other current assets (13,582 ) (4,357 ) Other assets (251 ) (71 ) Accounts payable 8,861 19,311 Royalty overrides 7,340 (7,081 ) Accrued expenses and accrued compensation (21,122 ) (14,022 ) Advance sales deposits 20,998 26,741 Income taxes payable 9,494 5,566 Deferred compensation plan liability 3,030 1,044 NET CASH PROVIDED BY OPERATING ACTIVITIES 107,517 87,433 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property (28,325 ) (11,623 ) Proceeds from sale of property 2 3 Deferred compensation plan assets (197 ) (79 ) NET CASH USED IN INVESTING ACTIVITIES (28,520 ) (11,699 ) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (14,819 ) (12,065 ) Borrowings from long-term debt 289,700 102,000 Principal payments on long-term debt (284,924 ) (104,951 ) Deferred financing costs (5,516 ) -- Share repurchases (8,965 ) (28,010 ) Excess (Deficiency in) tax benefits from 6,794 2,606 share-based payment arrangements Proceeds from exercise of stock options and sale 1,689 1,888 of stock under employee stock purchase plan NET CASH USED IN FINANCING ACTIVITIES (16,041 ) (38,532 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH 7,260 (22,732 ) NET CHANGE IN CASH AND CASH EQUIVALENTS 70,216 14,470 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 190,550 150,801 CASH AND CASH EQUIVALENTS, END OF PERIOD 260,766 165,271 CASH PAID DURING THE PERIOD Interest paid $ 2,093 $ 2,691 Income taxes paid, net $ 21,874 $ 13,430
Schedule A: Financial Guidance
For the Three Months Ending June 30, 2011 and Twelve Months Ending December 31, 2011
Three Months Ending Twelve Months Ending June 30, 2011 December 31, 2011 Low High Low High Volume point growth vs 10.0 % 12.0 % 12.0 % 14.0 % 2010 Net sales growth vs 2010 19.0 % 21.0 % 18.0 % 20.0 % EPS - Pre Stock Split $ 1.42 $ 1.48 $ 5.54 $ 5.78 EPS - Post Stock Split $ 0.71 $ 0.74 $ 2.77 $ 2.89 Cap Ex ($ millions) $ 18.0 $ 23.0 $ 80.0 $ 90.0 Effective Tax Rate 28.3 % 29.3 % 28.0 % 29.0 %
SCHEDULE B: 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 investor in analyzing period to period comparisons of the Company's results.
The following is a reconciliation of net income and diluted earnings per share, presented and reported in accordance with U.S. generally accepted accounting principles, to net income adjusted for certain items:
Herbalife Ltd. Supplemental Schedule Non-GAAP Financial Measures (In thousands, except per share data) (Unaudited) Quarter Ended 3/31/2011 Reported Adjusted (GAAP) Adjustment (Non-GAAP) Net Sales 795,096 795,096 Cost of Sales 162,793 162,793 Gross Profit 632,303 - 632,303 Royalty Overrides 264,377 264,377 SGA 244,526 244,526 Operating Income 123,400 - 123,400 Interest Expense - net 2,648 (914 ) 1 1,734 Income before income taxes 120,752 914 121,666 Income Taxes 33,184 214 1 33,398 Net Income 87,568 700 88,268 Diluted EPS $ 1.41 $ 0.01 $ 1.43 2
1 Write-off of unamortized deferred financing costs resulting from the debt refinancing arrangement in March 2011. 2 Amounts may not total due to rounding.
Herbalife Ltd. Supplemental Schedule Non-GAAP Financial Measures (In thousands, except per share data) (Unaudited) Quarter Ended 3/31/2010 Reported Venezuela Adjusted (GAAP) Items (Non-GAAP) Net Sales 618,633 618,633 Cost of Sales 140,472 (12,715 ) 1 127,757 Gross Profit 478,161 12,715 490,876 Royalty Overrides 207,319 207,319 SGA 206,883 (11,390 ) 2 195,493 Operating Income 63,959 24,105 88,064 Interest Expense - net 1,953 1,953 Income before income taxes 62,006 24,105 86,111 Income Taxes 10,135 14,452 3 24,587 Net Income 51,871 9,653 61,524 Diluted EPS $ 0.83 $ 0.15 $ 0.98
Incremental U.S. dollar costs of 2009 imports which were recorded at the 1 unfavorable parallel market exchange rate and were not devalued based on 2010 exchange rates but rather recorded at their historical dollar costs as products were sold Includes $15,131 foreign exchange loss related to remeasurement of Venezuela's monetary assets and liabilities resulting from adoption of 2 highly inflationary accounting and $3,741 foreign exchange gain resulting from receipt of U.S. dollar approved by CADIVI at the official exchange rate relating to 2009 product importations which were previously registered with CADIVI 3 Favorable income taxes related to Venezuela becoming highly inflationary economy
The following is a reconciliation of total long-term debt to net debt:
3/31/2011 12/31/2010 Total long-term debt (current and long-term $ 182,941 $ 178,166 portion) Less: Cash and cash equivalents 260,766 190,550 Net debt $ (77,825 ) $ (12,384 )
Source: Herbalife Ltd.
Released May 2, 2011 • 4:10pm EDT