CORRECTING and REPLACING Herbalife Ltd. Announces Fourth Quarter and Record Full Year 2008 Results
LOS ANGELES--(BUSINESS WIRE)-- First graph, first sentence in "First Quarter 2009 and Full Year 2009 Guidance" section should read: The company's initial first quarter 2009 diluted earnings per share guidance range is $0.58 to $0.62 on volume point decline of five percent to seven percent and a net sales decline of 15 percent to 17 percent compared to the same period in 2008, respectively, and an effective tax rate range of 28 percent to 29 percent. (sted: The company's initial first quarter 2009 diluted earnings per share guidance range is $0.58 to $0.62 on volume point decline of five percent to seven percent and a net sales decline of 15 percent to 17 percent compared to the same period in 2007, respectively, and an effective tax rate range of 28 percent to 29 percent.)
The corrected release reads:
HERBALIFE LTD. ANNOUNCES FOURTH QUARTER AND RECORD FULL YEAR 2008 RESULTS
Herbalife Ltd. (NYSE: HLF) today reported fourth quarter 2008 net sales of $512.9 million, a decrease of 11.3 percent compared to the same period of 2007. Net sales performance in the quarter was negatively impacted by unprecedented currency fluctuations that reduced net sales by 856 basis points resulting in local currency year-over-year sales decline of 2.7 percent. For the quarter ended December 31, 2008, the company reported net income of $33.7 million, or $0.53 per diluted share, compared to $53.8 million, or $0.77 per diluted share in the fourth quarter of 2007, reflecting less contribution margin due to net sales declines, higher selling, general and administration expenses, partially offset by a lower effective tax rate, and accretion from our share repurchase program. Excluding the impact from adjusting items in both periods (1), adjusted net income was $43.4 million, or $0.69 in adjusted diluted earnings per share, reflecting a decrease of 21.3 percent and 12.7 percent, respectively, compared to 2007.
For the year ended December 31, 2008, the company reported record net sales of $2.4 billion, an increase of 9.9 percent compared to the same period of 2007. For the year ended December 31, 2008, the company reported record net income of $221.2 million, or $3.36 per diluted share, compared to $191.5 million, or $2.63 per diluted share in 2007. Excluding the impact from adjusting items in both periods (1), adjusted net income was $232.1 million, or $3.53 in adjusted diluted earnings per share, an increase of 18.0 percent and 30.3 percent, respectively, compared to 2007.
"While 2008 was a record year for many of our financial metrics including net sales, operating profit and earnings per share, due to a combination of factors including the weakening global economy, volatile foreign currency markets and softer volume trends in certain key markets during the fourth quarter, we ended the year on a soft note. While we remain very confident in the long term prospects for our company, we are not satisfied with the recent volume trends and corresponding financial performance," said Chairman and Chief Executive Officer Michael O. Johnson. "In December, we announced a restructuring program that we believe will help improve alignment with, and service to, our distributors, as well as reduce workload in the organization and right-size our cost structure. Our business has the potential to thrive during economic downturns because we offer an opportunity for part-time or full-time income along with an attractively priced product. In addition, our products offer a healthy low-calorie meal along with nutritional supplements and weight-management products in the midst of a global obesity epidemic. Our message to distributors is straightforward; there has never been a better time to introduce someone to Herbalife."
Net sales performance in the fourth quarter was partly attributable to declines in the company's top 10 markets, which were collectively down 8.1 percent versus the same period in the prior year. However excluding the unfavorable currency impact during the quarter, net sales performance for the top 10 markets was flat. In local currency, four of these top markets produced double-digit net sales gains including China, up 48.6 percent; Brazil, up 15.0 percent; Korea, up 33.7 percent; and Taiwan, up 13.4 percent. The United States, the company's top market, posted flat sales growth in the quarter.
During the fourth quarter 2008 we added 45,657 new Sales Leaders (2), which is 19.5 percent lower than the same period in the prior year. However, total Sales Leaders (2) increased 6.6 percent to 505,094 which reflects stronger recruiting earlier in the fiscal year. During the fourth quarter 2008, the company's President's Team membership increased 10.3 percent to 1,184 members versus the fourth quarter of 2007 and our prestigious Chairman's Club membership increased 12.5 percent to 36 members, versus the fourth quarter of 2007. The company also recognized the achievement of its first Brand Ambassador in China, the most senior level in that market.
The company produced cash flow from operations of $273.0 million for the full year 2008, and invested $106.8 million in capital expenditures, primarily in its global roll-out of Oracle along with additional technology investments to support improvements in distributor services as well as facility upgrades and expansions. In addition, the company repurchased 2.4 million shares during the fourth quarter of 2008. From the inception of the stock repurchase program in April 2007, the company has repurchased 13.7 million shares at an aggregate cost of $502.8 million, representing approximately 18 percent of the fully diluted share base since the initial authorization.
1 See Schedule D - "Reconciliation of Non-GAAP Financial Measures" for more detail
2 See Schedule titled "New Sales Leaders by Region" and "Total Sales Leaders by Region" for more detail
Business Highlights
During the fourth quarter the company opened four new markets - Honduras, Nicaragua, Guatemala, and Ecuador. Honduras, Nicaragua, and Guatemala are part of the company's Mexico and Central America region while Ecuador is part of the South America region.
In addition, the company hosted one Extravaganza during the fourth quarter, in Los Angeles, California, which was attended by over 13,000 distributors. To keep our U.S. distributors engaged post-Extravaganza and in the midst of the economic slowdown, the company hosted a "Doctor's Tour" featuring Dr. Luigi Gratton who traveled to 11 cities and met with close to 10,000 distributors. In addition, during January, the company hosted a "Why Herbalife, Why Now" tour featuring our chairman and CEO who traveled to seven cities and met with over 13,000 distributors. In addition our regional management team and distributor leaders have met with thousands more distributors and potential distributors throughout our Europe, Middle East and Africa, Mexico and Central America, South America and Asia Pacific regions. We have also hosted three Extravaganzas so far during the first quarter of 2009 with over 18,000 distributors in attendance.
"Our company is well positioned for continued success during these uncertain times. We have a financially strong company, a pristine balance sheet, a global brand, broad geographic diversification and 29 years of success," concluded Johnson.
Fourth Quarter 2008 Regional Performance
(Decrease)/ (Decrease)/ Total (Decrease)/
Region Net Sales New Sales Sales
(Mil) Increase Leaders Increase Leaders Increase
(Y/Y) (Y/Y) (Y/Y)
EMEA $117.4 (18.9%) 6,025 (21.9%) 80,279 (10.6%)
North $109.3 (0.3%) 9,655 (10.4%) 98,263 10.1%
America
Asia $97.0 (4.5%) 10,229 (0.3%) 90,327 1.5%
Pacific
South $78.8 (20.7%) 8,247 (42.4%) 102,901 13.0%
America
Mexico &
Central $69.9 (28.5%) 4,739 (45.3%) 85,088 (8.0%)
America
China $40.5 61.4% 6,762 34.9% 48,236 116.4%
The Europe, Middle East and Africa (EMEA) region reported net sales of $117.4 million in the fourth quarter of 2008, down 18.9 percent versus the same period of 2007. Unfavorable currency fluctuations negatively impacted EMEA's net sales results by 10.0 percentage points; therefore net sales in local currency decreased 8.9 percent. Top markets within the region that reported year-over-year net sales declines during the fourth quarter of 2008 included Italy, down 6.7 percent; France, down 14.5 percent; Spain, down 48.2 percent; Netherlands, down 6.0 percent; and Germany, down 33.0 percent. As a result of the unfavorable currency fluctuations, Russia was the region's only market that reported double-digit net sales growth during the fourth quarter of 2008, up 17.1 percent as compared to the fourth quarter of 2007. New Sales Leaders in the region of 6,025, during the quarter ended December 31, 2008, decreased 21.9 percent versus the same period last year. Total Sales Leaders in the region, as of December 31, 2008, decreased 10.6 percent to 80,279 versus December 31, 2007.
The North America region reported net sales of $109.3 million in the fourth quarter of 2008, essentially flat versus the same period of 2007. Unfavorable foreign currency fluctuations negatively impacted the region's net sales growth by 0.7 percentage points; therefore net sales in local currency increased 0.4 percent. New Sales Leaders in the region of 9,655, during the quarter ended December 31, 2008, decreased 10.4 percent versus the same period last year. Total Sales Leaders in the region, as of December 31, 2008, increased 10.1 percent to 98,263 versus December 31, 2007.
The Asia Pacific region, which now excludes China, reported net sales of $97.0 million in the fourth quarter of 2008, down 4.5 percent over the same period of 2007. Unfavorable currency fluctuations negatively impacted Asia Pacific's net sales growth by 13.3 percentage points; therefore net sales in local currency increased 8.7 percent. The decrease in this region is attributable to net sales declines in Japan, down 24.1 percent; Australia, down 43.4 percent; Thailand, down 26.5 percent; and Korea, down 8.8 percent, in each case as compared with the same period in 2007. These net sales declines were partially offset by gains in other markets including Taiwan, up 11.7 percent; and Malaysia, up 32.4 percent, in each case as compared with the same period in 2007. New Sales Leaders in the region of 10,229, during the quarter ended December 31, 2008, decreased 0.3 percent versus the same period last year. Total Sales Leaders as of December 31, 2008 increased 1.5 percent to 90,327 versus December 31, 2007.
The South America region reported net sales of $78.8 million in the fourth quarter of 2008, down 20.7 percent versus the same period of 2007. Unfavorable currency fluctuations negatively impacted South America's net sales growth by 10.9 percentage points; therefore net sales in local currency decreased 9.8 percent. The decrease in net sales for the region was attributable to net sales declines in all markets except Colombia, which increased 47.6 percent versus the same period last year. In Brazil, the region's largest market, net sales decreased 9.9 percent versus fourth quarter 2007, but were negatively impacted 25.0 percentage points due to the unfavorable fluctuation in the Brazilian Real. Excluding this unfavorable currency fluctuation, net sales in Brazil increased 15.1 percent during the quarter. We believe the continued positive growth, excluding currency fluctuations, reflect a turnaround for Brazil and provide validation of transforming a market by using the daily consumption model. New Sales Leaders in the region of 8,247, during the quarter ended December 31, 2008, were 42.4 percent lower than the same period last year. Total Sales Leaders in the region, as of December 31, 2008, increased 13.0 percent to 102,901 versus December 31, 2007.
The Mexico and Central America region reported net sales of $69.9 million in the fourth quarter of 2008, down 28.5 percent versus the same period of 2007. Unfavorable currency fluctuations negatively impacted Mexico and Central America's net sales results by 13.4 percentage points; therefore net sales in local currency decreased 15.1 percent. Mexico, the largest market in the region, had a sales decrease of 31.0 percent as compared with the same period in 2007. Excluding currency fluctuations, net sales for Mexico decreased 17.4 percent.
During the third quarter of 2008 the company began collecting a Value Added Tax (VAT) in Mexico that has negatively impacted our financial results. Distributors in Mexico previously paid zero percent VAT on their purchases for most of our products. This effective price increase impacted approximately 58 percent of our volume in the Mexican market adversely affecting sales in Nutrition Clubs, which are retail price-sensitive, and as a result has caused volumes to decline from pre-VAT levels. We are in the process of challenging this assessment on several fronts, however while the products continue to be subject to this VAT, we expect year-over-year volume growth to be constrained.
New Sales Leaders in the Mexico and Central America region of 4,739, during the quarter ended December 31, 2008, were 45.3 percent lower than the same period last year. Total Sales Leaders in the region, as of December 31, 2008, decreased 8.0 percent to 85,088 versus December 31, 2007.
China reported net sales of $40.5 million in the fourth quarter of 2008, up 61.4 percent over the same period of 2007. Favorable foreign currency fluctuations positively impacted China's net sales growth by 12.7 percentage points; therefore net sales in local currency increased 48.6 percent. New Sales Employees in China of 6,762, during the quarter ended December 31, 2008, increased 34.9 percent versus the same period last year. Total Sales Employees, as of December 31, 2008, increased 116.4 percent to 48,236 versus December 31, 2007.
2008 Annual Supervisor Requalification
In February of each year, we remove from the rank of supervisor those individuals who did not satisfy the supervisor qualification requirements during the preceding 12 months. Distributors who meet the supervisor requirements at any time during the year are promoted to supervisor status at that time, including any supervisors who were removed, but who subsequently re-qualified. For the latest twelve month re-qualification period ending January 2009, approximately 40.3 percent of our supervisors re-qualified.
First Quarter 2009 and Full Year 2009 Guidance
The company's initial first quarter 2009 diluted earnings per share guidance range is $0.58 to $0.62 on volume point decline of five percent to seven percent and a net sales decline of 15 percent to 17 percent compared to the same period in 2008, respectively, and an effective tax rate range of 28 percent to 29 percent (3) (4). Our first quarter 2009 capital expenditures are expected to be in the range of $15 to $20 million.
Based on softer than anticipated fourth quarter business trends, coupled with a more cautious 2009 volume outlook, and current foreign currency rates, we are lowering our 2009 EPS guidance range by 10 cents. Our new 2009 diluted earnings per share guidance range is $2.90 to $3.10 on volume point growth of negative one percent to positive one percent and net sales decline of five percent to seven percent compared to 2008, respectively, and an effective tax rate range of 28.0 to 29.0 percent (3) (4). Full year 2009 capital expenditures are expected in the range of $55 million to $60 million.
3 Excludes the impact of expenses expected to be incurred in 2009 relating to the company's December 2008 restructuring.
4 Excludes the impact of an expected first quarter 2009 tax settlement with a foreign government.
Fourth Quarter Earnings Conference Call
Herbalife's senior management team will host an investor conference call to discuss its fourth quarter and full year 2008 financial results and provide an update on current business trends on Wednesday, February 25, 2009 at 8 a.m. PT (11 a.m. ET).
The dial-in number for this conference call for domestic callers is (866) 219-5268 and (703) 639-1120 for international callers. Live audio of the conference call will be simultaneously webcast in the Investor Relations section of the company's Web site at http://ir.herbalife.com.
An audio replay will be available following the completion of the conference call in MP3 format or by dialing (866) 837-8032 (domestic callers) and (703) 925-2474 (international callers) and entering access code 336024. The webcast of the teleconference will be archived and available on Herbalife's Web site.
About Herbalife Ltd.
Herbalife Ltd. 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 70 countries through a network of over 1.9 million independent distributors. The company supports the Herbalife Family Foundation and its Casa Herbalife program to bring good nutrition to children. Please visit Herbalife Investor Relations for additional financial information.
Disclosure Regarding Forward-Looking Statements
Except for historical information contained herein, the matters set forth in this press release are "forward-looking statements." 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:
-- our relationship with, and our ability to influence the actions of, our
distributors;
-- adverse publicity associated with our products or network marketing
organization;
-- 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;
-- improper action by our employees or international distributors in
violation of applicable law;
-- changing consumer preferences and demands;
-- 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;
-- risks associated with operating internationally, including foreign
exchange and devaluation risks;
-- 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;
-- our reliance on our management team;
-- uncertainties relating to the application of transfer pricing, duties,
value added taxes and similar tax regulations;
-- taxation relating to our distributors;
-- product liability claims;
-- 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; and
-- whether we will purchase any of our shares in the open markets or
otherwise.
RESULTS OF OPERATIONS:
Herbalife Ltd.
Consolidated Statements of Income
(In thousands, except per share data)
Quarter Ended Year Ended
12/31/2008 12/31/2007 12/31/2008 12/31/2007
North America $ 109,277 $ 109,556 $ 496,942 $ 438,689
Mexico & Central America 69,952 97,828 375,188 384,626
South America 78,777 99,305 360,569 300,145
EMEA 117,400 144,688 570,703 567,712
Asia Pacific 96,959 101,571 410,789 378,707
China 40,512 25,149 145,022 75,960
Worldwide net sales 512,877 578,097 2,359,213 2,145,839
Cost of Sales 96,061 113,851 458,396 438,382
Gross Profit 416,816 464,246 1,900,817 1,707,457
Royalty Overrides 168,375 204,845 796,718 760,110
SGA 187,573 173,742 771,847 634,190
Operating Income 60,868 85,659 332,252 313,157
Interest Expense - net 2,858 3,354 13,222 10,573
Income before income taxes 58,010 82,305 319,030 302,584
Income Taxes 24,351 28,472 97,840 111,133
Net Income 33,659 53,833 221,190 191,451
Basic Shares 62,707 67,219 63,785 69,497
Diluted Shares 63,187 70,042 65,769 72,714
Basic EPS $ 0.54 $ 0.80 $ 3.47 $ 2.75
Diluted EPS $ 0.53 $ 0.77 $ 3.36 $ 2.63
Herbalife Ltd.
Consolidated Balance Sheets
(In thousands)
Dec 31, Dec 31,
2008 2007
ASSETS
Current Assets:
Cash & cash equivalents $ 150,847 $ 187,407
Receivables 70,002 58,729
Inventory, net 134,392 128,648
Prepaid expenses 89,214 72,193
Deferred income taxes 40,313 40,119
Total Current Assets 484,768 487,096
Property and equipment, net 175,492 121,027
Deferred compensation plan assets 15,754 19,315
Deferred financing cost, net 1,989 2,395
Marketing related intangibles 310,060 310,060
Goodwill 110,677 111,477
Other assets 22,578 15,873
Total Assets $ 1,121,318 $ 1,067,243
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 41,084 $ 35,377
Royalty Overrides 130,369 127,227
Accrued compensation 60,629 54,067
Accrued expenses 104,795 114,083
Current portion of long term debt 15,117 4,661
Advance sales deposits 12,603 11,599
Income taxes payable 37,302 28,604
Total Current Liabilities 401,899 375,618
Non-current liabilities
Long-term debt, net of current portion 336,514 360,491
Deferred compensation 13,979 20,233
Deferred income taxes 103,765 107,584
Other non-current liabilities 23,520 21,073
Total Liabilities 879,587 884,999
Shareholders' equity:
Common shares 123 129
Additional paid in capital 197,715 160,872
Accumulated other comprehensive loss (28,614 ) (3,947 )
Retained earnings 72,507 25,190
Total Shareholders' Equity 241,731 182,244
Total Liabilities and Shareholders' Equity $ 1,121,318 $ 1,067,243
Herbalife Ltd.
Consolidated Statements of Cash Flow
(In Thousands)
Year Ended December 31,
2008 2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 221,190 $ 191,451 $ 143,139
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 48,732 35,115 29,995
Excess tax benefits from share-based (14,602 ) (19,447 ) (20,179 )
payment arrangements
Stock based compensation expenses 17,788 12,904 11,298
Amortization of discount and deferred 481 335 340
financing costs
Deferred income taxes (4,103 ) 3,344 (19,544 )
Unrealized foreign exchange 15,243 (13,009 ) (4,905 )
transaction loss (gain)
Write-off of deferred financing costs - 204 7,116
& unamortized discounts
Other 1,963 1,391 141
Changes in operating assets and
liabilities:
Receivables (18,529 ) (2,381 ) (12,228 )
Inventories (27,572 ) 26,765 (29,943 )
Prepaid expenses and other current (23,966 ) (28,149 ) (737 )
assets
Other assets 1,800 (3,967 ) (3,223 )
Accounts payable 8,922 (7,595 ) (1,886 )
Royalty overrides 13,375 5,751 26,325
Accrued expenses and accrued 12,412 16,577 31,543
compensation
Advance sales deposits 1,917 (501 ) (17 )
Income taxes payable 24,191 49,956 24,192
Deferred compensation plan liability (6,254 ) 2,067 3,020
NET CASH PROVIDED BY OPERATING 272,988 270,811 184,447
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property (88,601 ) (41,942 ) (62,460 )
Proceeds from sale of property 76 260 111
Deferred compensation plan assets 3,561 (1,708 ) (4,459 )
NET CASH USED IN INVESTING ACTIVITIES (84,964 ) (43,390 ) (66,808 )
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (50,700 ) (41,535 ) -
Borrowings from long-term debt 118,000 293,700 215,000
Principal payments on long-term debt (167,481 ) (122,216 ) (134,528 )
Repurchases of 9 1/2% Notes and 11 ¾% - - (165,137 )
Notes
Increase in deferred financing costs (75 ) (871 ) (2,331 )
Share repurchases (138,921 ) (365,783 ) -
Excess tax benefits from share-based 14,602 19,447 20,179
payment arrangements
Exercise of stock options 19,508 13,747 11,773
NET CASH USED IN FINANCING ACTIVITIES (205,067 ) (203,511 ) (55,044 )
EFFECT OF EXCHANGE RATE CHANGES ON (19,517 ) 9,174 3,480
CASH
NET CHANGE IN CASH AND CASH (36,560 ) 33,084 66,075
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING $ 187,407 $ 154,323 $ 88,248
OF PERIOD
CASH AND CASH EQUIVALENTS, END OF $ 150,847 $ 187,407 $ 154,323
PERIOD
CASH PAID DURING THE YEAR
Interest paid $ 17,735 $ 14,799 $ 39,826
Income taxes paid $ 73,939 $ 62,431 $ 64,533
NON CASH ACTIVITIES
Assets acquired under capital leases $ 36,048 $ 7,085 $ 4,410
and other long-term debt
Herbalife Ltd
New Sales Leaders by Region
(Unaudited)
Three Months Ended Twelve Months Ended
12/31/2008 12/31/2007 % chg 12/31/2008 12/31/2007 % chg
Asia Pacific 10,229 10,256 (0.3 %) 40,905 40,174 1.8 %
Mexico and
Central 4,739 8,660 (45.3 %) 27,721 34,093 (18.7 %)
America
EMEA 6,025 7,719 (21.9 %) 27,132 31,831 (14.8 %)
North 9,655 10,774 (10.4 %) 43,517 42,473 2.5 %
America
South 8,247 14,318 (42.4 %) 43,741 46,123 (5.2 %)
America
Sub-total 38,895 51,727 (24.8 %) 183,016 194,694 (6.0 %)
Supervisors
China Sales
Employees 6,762 5,012 34.9 % 26,262 15,365 70.9 %
(1)
Worldwide
Sales 45,657 56,739 (19.5 %) 209,278 210,059 (0.4 %)
Leaders (2)
Herbalife Ltd
Total Sales Leaders by Region
(Unaudited)
12/31/2008 12/31/2007 % chg
Asia Pacific 90,327 88,959 1.5 %
EMEA 80,279 89,821 (10.6 %)
Mexico and Central America 85,088 92,441 (8.0 %)
North America 98,263 89,282 10.1 %
South America 102,901 91,052 13.0 %
Sub-total Supervisors 456,858 451,555 1.2 %
China Sales Employees (1) 48,236 22,291 116.4 %
Worldwide Sales Leaders (2) 505,094 473,846 6.6 %
(1) - China sales employees represent the cumulative total employed
sales force, active and inactive, operating under our China marketing
Note: plan where we sell our products through retail stores. We will begin an
annual re-evaluation process commencing in early 2009. We anticipate a
reduction in this figure following this annual re-evaluation process.
(2) - We refer to supervisors who qualified in 69 countries under our
traditional marketing plan plus China sales employees collectively as
'Sales Leaders'.
Herbalife Ltd
Volume Points by Region
(Unaudited, In Thousands)
Three Month Ended Twelve Month Ended
12/31/2008 12/31/2007 % chg 12/31/2008 12/31/2007 % chg
Asia Pacific 113,147 103,214 9.6 % 438,714 403,975 8.6 %
China 31,578 21,293 48.3 % 115,895 64,413 79.9 %
EMEA 114,791 127,611 (10.0 %) 497,073 529,744 (6.2 %)
Mexico and
Central 120,583 152,154 (20.7 %) 576,611 611,200 (5.7 %)
America
North America 164,248 170,395 (3.6 %) 750,437 680,900 10.2 %
South America 91,429 124,740 (26.7 %) 399,900 397,902 0.5 %
Worldwide 635,776 699,407 (9.1 %) 2,778,630 2,688,134 3.4 %
Volume Points
SUPPLEMENTAL INFORMATION
SCHEDULE A: FINANCIAL GUIDANCE
2009 Guidance
For the Three Months Ending March 31, 2009 and Twelve Months Ending
December 31, 2009
Three Months Ending Twelve Months Ending
March 31, 2009 December 31, 2009
Low High Low High
Volume point growth vs. 2008 (7%) (5%) (1%) 1%
Net sales growth vs. 2008 (17%) (15%) (7%) (5%)
EPS (1) (2) (3) $0.58 $0.62 $2.90 $3.10
Cap Ex ($ mm's) $15.0 $20.0 $55.0 $60.0
Effective Tax Rate (2) 28.0% 29.0% 28.0% 29.0%
(1) Excludes the impact of expenses expected to be incurred in 2009
relating to the company's December 2008 restructuring.
(2) Excludes the impact of an expected first quarter tax settlement with a
foreign government.
Excludes any accretion/dilution impact should the company elect to
(3) repurchase the remaining $97 million of its $600MM share repurchase
program.
SCHEDULE B: NET SALES OF TOP 10 COUNTRIES
(In Millions)
Q4 2008 Q4 2007
Currency FX Currency FX
Reported Benefit Reported Benefit
Adjusted (Loss) Adjusted (Loss)
1 USA $105.0 $105.0 $0.0 1 USA $105.0 $105.0 $0.0
2 Mexico $64.2 $76.9 ($12.7) 2 Mexico $93.0 $92.7 $0.3
3 China $40.5 $37.3 $3.2 3 Brazil $37.9 $31.4 $6.5
4 Brazil $34.1 $43.6 ($9.5) 4 Taiwan $29.9 $29.5 $0.4
5 Taiwan $33.4 $33.9 ($0.5) 5 China $25.1 $23.8 $1.3
6 Italy $23.1 $25.4 ($2.3) 6 Italy $24.8 $22.0 $2.8
7 Korea $15.9 $23.4 ($7.5) 7 Venezuela $21.6 $21.6 $0.0
8 Japan $15.0 $16.4 ($1.4) 8 Japan $19.8 $19.0 $0.8
9 Venezuela $14.1 $14.1 $0.0 9 Korea $17.5 $17.1 $0.4
10 France $10.9 $11.9 ($1.0) 10 Spain $15.4 $13.7 $1.7
Total of $356.2 $387.9 ($31.7) Total of $390.0 $375.8 $14.2
Top 10 Top 10
TOTAL NET $512.9 $562.4 ($49.5) TOTAL NET $578.1 $548.1 $30.0
SALES SALES
Note: Currency adjusted net sales use the prior year foreign currency rates to adjust
current year reported net sales figures.
SCHEDULE C: VOLUME POINTS FOR TOP 10 COUNTRIES
(In Millions)
Q4 2008 Q4 2007
1 USA 158.1 1 USA 164.2
2 Mexico 112.9 2 Mexico 146.6
3 Brazil 44.8 3 Brazil 39.7
4 Taiwan 42.2 4 Taiwan 36.3
5 China 31.6 5 Venezuela 28.8
6 Korea 22.2 6 China 21.3
7 Italy 20.3 7 Italy 19.7
8 Venezuela 12.3 8 Korea 16.2
9 Russia 11.6 9 Argentina 15.8
10 Malaysia 10.6 10 Japan 14.8
Total of Top 10 466.6 Total of Top 10 503.4
TOTAL VOLUME POINTS 635.8 TOTAL VOLUME POINTS 699.4
SCHEDULE D: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
4Q 2008 vs. 4Q 2007
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
12/31/2008 12/31/2007
Net income, as reported $33,659 $53,832
Tax benefit resulting from an international income tax - (1,470)
audit settlement
Restructuring / Expenses associated with realignment for 3,636 2,768
growth initiative
Increase in tax valuation allowance on deferred tax 6,097 -
assets
Net income, as adjusted $43,392 $55,130
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
12/31/2008 12/31/2007
Diluted earnings per share, as reported $0.53 $0.77
Tax benefit resulting from an international income tax - (0.02)
audit settlement
Restructuring / Expenses associated with realignment for 0.06 0.04
growth initiative
Increase in tax valuation allowance on deferred tax 0.10 -
assets
Diluted earnings per share, as adjusted $0.69 $0.79
SCHEDULE D: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - cont.
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
2008 vs. 2007
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:
Twelve Months Ended
12/31/2008 12/31/2007
Net income, as reported $221,190 $191,451
Tax benefit resulting from an international income tax - (2,079)
audit settlement
Restructuring / Expenses associated with realignment for 4,769 3,757
growth initiative
Increase in tax reserves - 3,565
Increase in tax valuation allowance on deferred tax 6,097 -
assets
Net income, as adjusted $232,056 $196,694
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:
Twelve Months Ended
12/31/2008 12/31/2007
Diluted earnings per share, as reported $3.36 $2.63
Tax benefit resulting from an international income tax - (0.03)
audit settlement
Restructuring / Expenses associated with realignment for 0.07 0.05
growth initiative
Increase in tax reserves - 0.05
Increase in tax valuation allowance on deferred tax 0.09 -
assets
Diluted earnings per share, as adjusted $3.53 $2.71
Note: Amounts may not total due to rounding.
Source: Herbalife Ltd.
Released Feb 24, 2009 • 4:05pm EST