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Feb 26, 2008

Herbalife Ltd. Announces Record Fourth-Quarter and Full Year Results

Herbalife Ltd. Announces Record Fourth-Quarter and Full Year Results

Full Year 2007 Net Sales Increase 13.8 Percent to $2.1 Billion

LOS ANGELES--(BUSINESS WIRE)--Feb. 26, 2008--Herbalife Ltd. (NYSE: HLF) today reported fourth quarter net sales of $578.1 million, an increase of 18.6 percent compared to the same period of 2006. This record performance was attributable to double-digit growth in several of the company's top countries; the U.S. up 22.1 percent, Taiwan up 18.9 percent, Italy up 21.9 percent and China up 145.8 percent compared to the same period in 2006, coupled with the favorable impact from currency fluctuations. The company's Chairman and Chief Executive Officer Michael O. Johnson, said, "We are pleased to report our 16th consecutive quarter of double-digit growth and record net sales reflecting the strong performance of our independent distributor organization. Our margins and record bottom line performance reflects the strong top line growth coupled with our initiatives to continually leverage our infrastructure to improve profitability."

During the fourth quarter 2007, total Sales Leaders(1) increased 16.0 percent to 473,846 and new Sales Leaders increased 10.4 percent to 56,739 versus the fourth quarter of 2006. The company's President's Team membership increased 11.8 percent to 1,105 members and the company's prestigious Chairman Club increased to 32 members. Greg Probert, the company's president and chief operating officer, said, "The growth rate of new Sales Leaders in the fourth quarter was the highest of the year, reflecting the tremendous momentum in our distributor organization."

Financial Performance

For the quarter ended December 31, 2007, the company reported net income of $53.8 million, or $0.77 per diluted share, compared to $41.7 million, or $0.56 per diluted share in the fourth quarter of 2006. The increase in net income was primarily attributable to double-digit net sales growth and expansion in operating profit margins. Excluding the impact of realignment for growth costs and certain other items(2), fourth quarter 2007 net income increased 24 percent to $55.1 million or $0.79 per diluted share, compared to $0.59 per diluted share in the fourth quarter of 2006. The company's share repurchase program had an accretive impact on diluted earnings per share.

During the fourth quarter, the company repurchased 3.9 million shares of its common stock through open market transactions at an average price of $41.56 for an aggregate cost of $161.8 million. Since this share repurchase program was authorized in April 2007, through early January 2008, the company has repurchased 9.5 million shares at an aggregate cost of $383.5 million, which is 85 percent of the $450 million authorization, and 13 percent of its outstanding common stock. The company used excess cash along with debt to fund the repurchase.

During the fourth quarter, the company invested $17.0 million in capital expenditures, primarily related to enhancements to its management information systems and additional infrastructure investments to improve distributor service levels in high growth markets.

For the year ended December 31, 2007, the company reported net sales of $2.15 billion, an increase of 13.8 percent compared to $1.89 billion in 2006. For the year ended December 31, 2007, the company reported net income of $191.5 million, or $2.63 per diluted share, compared to $143.1 million, or $1.92 per diluted share in 2006. Excluding the impact of expenses related to the company's realignment for growth initiative and other items(2), fiscal year 2007 net income increased 28.0 percent to $196.7 million, or $2.71 per diluted share, compared to $2.06 per diluted share in 2006.

(1) See Schedule titled "Total Sales Leaders by Region" for more detail

(2) See Schedule A - "Reconciliation of Non-GAAP Financial Measures" for more detail

Fourth Quarter 2007 Business Highlights

The company supported the development and training of its distributors during the fourth quarter by hosting multiple events including over 7,000 distributors at the North America Herbalife University and Latino Development Weekend and over 6,000 distributors at the northeast Brazil Extravaganza.

In late 2007, the company realigned its regional structure from seven to five regions. The North America, Mexico & Central America, and EMEA regions remain essentially unchanged. The South America region now includes Brazil, and the former Southeast Asia, North Asia and Greater China regions have been combined into an Asia Pacific region.

"We continue to align company resources to better support our distributors and their daily methods of operation," said Greg Probert. "This updated regional structure allows us to better support the geographic reach of the distributor leadership and enhance sales, marketing and product synergies within the regions."

Regional Performance

Europe, Middle East and Africa region, the company's largest region, reported net sales of $144.7 million in the fourth quarter of 2007, an increase of 7.9 percent versus the same period of 2006. However, excluding the benefit of currency fluctuations, net sales decreased 3.5 percent. The EMEA region realized net sales growth in several of its top markets during the fourth quarter of 2007, including France up 34.3 percent; Spain up 26.0 percent; Italy up 21.9 percent; and Russia up 14.7 percent, in each case compared to the fourth quarter of 2006. These net sales gains were partially offset by declines in other markets including Germany down 19.2 percent, and the Netherlands down 17.8 percent versus the comparable period of 2006. Total Sales Leaders in the region, as of December 31, 2007, decreased 5.6 percent versus December 31, 2006 to 89,821.

The Asia Pacific region reported net sales of $126.7 million in the fourth quarter of 2007, up 25.8 percent versus the same period of 2006. Excluding currency fluctuations, net sales increased 19.6 percent. The increase is attributable to net sales growth in China up 145.8 percent; South Korea up 26.7 percent; and Taiwan up 18.9 percent. Total Sales Leaders as of December 31, 2007 increased 22.5 percent versus December 31, 2006 to 111,250. This includes China sales employees, which increased 188.2% to 22,291.

The North America region reported net sales of $109.6 million in the fourth quarter of 2007, up 20.4 percent versus the same period of 2006, driven by growth in the US of 22.1 percent versus fourth quarter 2006. Excluding currency fluctuations, net sales increased 19.8 percent. Total Sales Leaders in the region, as of December 31, 2007, increased 19.9 percent versus December 31, 2006 to 89,282.

The South America region reported net sales of $99.3 million in the fourth quarter of 2007, up 50.9 percent versus the same period of 2006. Excluding currency fluctuations, net sales increased 39.7 percent. The growth in the region was primarily attributable to double and triple digit growth in key markets including Venezuela up 349.0 percent, Bolivia, up 147.0 percent, and Argentina, up 38.3 percent, coupled with growth in Peru, which opened in December 2006. This was offset by declines in Brazil, down 2.6 percent. Total Sales Leaders in the region, as of December 31, 2007, increased 26.1 percent versus December 31, 2006 to 91,052.

The Mexico and Central America region reported net sales of $97.8 million in the fourth quarter of 2007, up 2.1 percent versus the same period of 2006. Excluding currency fluctuations, net sales for the region increased 1.5 percent. Mexico, the largest market in the region, had a sales decline of 1.4 percent. Total Sales Leaders in the region, as of December 31, 2007, increased 22.1 percent as compared to the same period in 2006 to 92,441.

First Quarter 2008 and Full Year 2008 Guidance

Based on its current business trends, the company is raising its full year 2008 diluted earnings per share guidance to be in a range of $3.25 to $3.30. The company is providing guidance for the first quarter of 2008 in the range of $0.77 to $0.79 for diluted earnings per share. Additionally, first quarter investment in capital expenditures is expected in the range of $25 million - $30 million.

Fourth Quarter Earnings Conference Call

Herbalife's fourth quarter earnings conference call will be conducted on Wednesday, February 27, 2008 at 8 a.m. PST (11 a.m. EST). The dial-in number for this conference call for domestic callers is (866) 219-5268. 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 1109438. The webcast of the teleconference will be archived and available on Herbalife's Web site.

About Herbalife Ltd.

Herbalife is a global network marketing company that sells weight-management, nutritional supplements and personal care products intended to support a healthy lifestyle. Herbalife products are sold in 65 countries through a network of more than 1.7 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 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 and similar tax regulations;

  • taxation relating to our distributors;

  • product liability claims; 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        Twelve Months Ended
                       ----------------------- -----------------------
                        12/31/2006  12/31/2007  12/31/2006  12/31/2007
                       ----------- ----------- ----------- -----------

North America          $    91,031 $   109,556 $   357,571 $   438,689
Mexico & Central
 America                    95,787      97,828     376,891     384,626
South America               65,816      99,305     224,089     300,145
EMEA                       134,055     144,688     548,178     567,712
Asia Pacific               100,696     126,720     378,805     454,667
                       ----------- ----------- ----------- -----------
   Worldwide Net Sales     487,385     578,097   1,885,534   2,145,839
Cost of Sales               99,173     113,851     380,338     438,382
                       ----------- ----------- ----------- -----------
     Gross Profit          388,212     464,246   1,505,196   1,707,457
Royalty Overrides          173,938     204,845     675,245     760,110
SGA                        151,010     173,742     573,005     634,190
                       ----------- ----------- ----------- -----------
     Operating Income       63,264      85,659     256,946     313,157
Interest Expense - net       2,702       3,354      39,541      10,573
                       ----------- ----------- ----------- -----------
Income before Income
 Taxes                      60,562      82,305     217,405     302,584
Income Taxes                18,912      28,472      74,266     111,133
                       ----------- ----------- ----------- -----------
Net Income                  41,650      53,833     143,139     191,451
                       =========== =========== =========== ===========

Basic Shares                71,463      67,219      70,814      69,497
Diluted Shares              74,997      70,042      74,509      72,714

Basic EPS              $      0.58 $      0.80 $      2.02 $      2.75
                       =========== =========== =========== ===========
Diluted EPS            $      0.56 $      0.77 $      1.92 $      2.63
                       =========== =========== =========== ===========

                            Herbalife Ltd.
                     Consolidated Balance Sheets
                            (In thousands)

                                                Dec. 31,    Dec. 31,
                                                  2006        2007
                                               ----------- -----------
ASSETS
Current Assets:
   Cash & cash equivalents                     $  154,323  $  187,407
   Inventory, net                                 146,036     128,648
   Other current assets                           155,348     171,041
                                               ----------- -----------
      Total Current Assets                        455,707     487,096

Property and equipment, net                       105,266     121,027
Other Assets                                       30,931      37,583
Goodwill                                          113,221     111,477
Intangible assets, net                            311,808     310,060

                                               ----------- -----------
      Total Assets                             $1,016,933  $1,067,243
                                               =========== ===========


LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                39,990      35,377
   Royalty Overrides                              116,896     127,227
   Accrued expenses                               149,575     168,150
   Current portion of long term debt                5,599       4,661
   Income taxes payable                                 -      28,604
   Other current liabilities                       11,432      11,599
                                               ----------- -----------
      Total Current Liabilities                   323,492     375,618

Long-term debt, net of current portion            179,839     360,491
Other long-term liabilities                       159,712     148,890
                                               ----------- -----------
      Total Liabilities                           663,043     884,999


Shareholders' equity:
   Common shares                                      143         129
   Additional paid in capital                     132,755     160,872
   Accumulated other comprehensive loss              (782)     (3,947)
   Retained earnings                              221,774      25,190

                                               ----------- -----------
      Total Shareholders' Equity                  353,890     182,244

                                               ----------- -----------
      Total Liabilities and Shareholders'
       Equity                                  $1,016,933  $1,067,243
                                               =========== ===========

                            Herbalife Ltd.
                    Total Sales Leaders by Region
                             (Unaudited)

                                          12/31/2006 12/31/2007 % chg
----------------------------------------- ---------- ---------- ------

EMEA                                          95,144     89,821  -5.6%
North America                                 74,482     89,282  19.9%
Mexico and Central America                    75,688     92,441  22.1%
South America                                 72,200     91,052  26.1%
Asia Pacific (excluding China)                83,094     88,959   7.1%
----------------------------------------- ---------- ---------- ------
    Sub-total Supervisors                    400,608    451,555  12.7%

China Sales Employees                          7,735     22,291 188.2%
----------------------------------------- ---------- ---------- ------

Worldwide Sales Leaders                      408,343    473,846  16.0%
========================================= ========== ========== ======

Note: We refer to supervisors who qualified in 64 countries under our traditional marketing plan plus China sales employees collectively as 'Sales Leaders'.


                            Herbalife Ltd.
                       Volume Points by Region
                             (Unaudited)

                   Three Months Ended          Twelve Months Ended
Region         12/31/2006 12/31/2007 % chg 12/31/2006 12/31/2007 % chg
-------------- ---------- ---------- ----- ---------- ---------- -----

EMEA              132,207    127,611 -3.5%    558,911    529,744 -5.2%
North America     141,822    170,395 20.1%    551,389    680,900 23.5%
Mexico and
 Central
 America          148,637    152,154  2.4%    616,256    611,200 -0.8%
South America      85,008    124,740 46.7%    300,775    397,902 32.3%
Asia Pacific      109,690    124,507 13.5%    407,041    468,388 15.1%
-------------- ---------- ---------- ----- ---------- ---------- -----

Worldwide         617,364    699,407 13.3%  2,434,372  2,688,134 10.4%
============== ========== ========== ===== ========== ========== =====

SUPPLEMENTAL INFORMATION

SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)

4Q 2006 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 Ending
                                             -------------------------
                                              12/31/2006   12/31/2007
                                             ------------ ------------

Net income, as reported                      $    41,650  $    53,832

  Adjustment to income tax accrual                (2,200)
  Expenses associated with realignment for
   growth initiative                               4,869        2,768
  Tax benefit resulting from international
   tax settlements                                     -       (1,470)

                                             -------------------------
Net income, as adjusted                      $    44,319  $    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 Ending
                                             -------------------------
                                              12/31/2006   12/31/2007
                                             ------------ ------------

Diluted earnings per share, as reported      $      0.56  $      0.77

  Adjustment to income tax accrual                 (0.03)
  Expenses associated with realignment for
   growth initiative                                0.06         0.04
  Tax benefit resulting from international
   tax settlements                                              (0.02)

                                             -------------------------
Diluted earnings per share, as adjusted      $      0.59  $      0.79
                                             =========================
Note: Amounts may not total due to rounding.

SUPPLEMENTAL INFORMATION

SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)

YTD 2006 vs. YTD 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:

                                                        YTD
                                             -------------------------
                                              12/31/2006   12/31/2007
                                             ------------ ------------

Net income, as reported                      $   143,139  $   191,451

  Tax benefit resulting from international
   tax audit settlement                           (3,693)      (2,079)
  Tax benefits on refinancing transactions        (2,680)
  Recapitalization expenses associated with
   July 2006 debt restructuring                   14,274
  Adjustment to income tax accrual                (2,200)
  Expenses associated with the realignment
   for growth initiative                           4,869        3,757
  Increase in tax reserves                                      3,565

                                             -------------------------
Net income, as adjusted                      $   153,709  $   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:

                                                        YTD
                                             -------------------------
                                              12/31/2006   12/31/2007
                                             ------------ ------------

Diluted earnings per share, as reported      $      1.92  $      2.63

  Tax benefit resulting from international
   tax audit settlement                            (0.05)       (0.03)
  Tax benefits on refinancing transactions         (0.04)
  Recapitalization expenses associated with
   July 2006 debt restructuring                     0.19
  Adjustment to income tax accrual                 (0.03)
  Expenses associated with the realignment
   for growth initiative                            0.06         0.05
  Increase in tax reserves                                       0.05

                                             -------------------------
Diluted earnings per share, as adjusted      $      2.06  $      2.71
                                             =========================
Note: Amounts may not total due to rounding.

SCHEDULE B: FINANCIAL GUIDANCE

2008 Guidance

For the Three Months ending March 31, 2008 and Twelve Months Ending
 December 31, 2008

                             Three Months Ending  Twelve Months Ending
                                March 31, 2008     December 31, 2008
                             -------------------- --------------------
                                Low       High       Low       High
                             ---------- --------- ---------- ---------

Net sales growth vs. 2007           12%       14%         9%       11%
EPS (1) (2)                     $ 0.77    $ 0.79    $  3.25     $3.30
Cap Ex ($ mm's)                 $ 25MM    $ 30MM    $  85MM     $95MM


(1) Excludes the impact of expenses expected to be incurred in 2008
 relating to the company's realignment for growth initiative.

(2) Excludes any accretion/dilution impact should the company elect to
 repurchase the remaining $67 million of its $450MM share repurchase
 program



CONTACT:
Herbalife Ltd.
Media Contact:
Barbara Henderson, SVP, Worldwide Corp. Comm.
310-410-9600 ext. 32736
or
Investor Contact:
Erin Gehan, Sr. Director Investor Relations
310-410-9600 ext. 32862



SOURCE: Herbalife Ltd.