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Aug 6, 2007

Herbalife Ltd. Announces Record Second-Quarter Revenue of $530 Million

Herbalife Ltd. Announces Record Second-Quarter Revenue of $530 Million

Company Repurchased 3.5 Million Shares During Quarter

LOS ANGELES--(BUSINESS WIRE)--Aug. 6, 2007--Herbalife Ltd. (NYSE:HLF) today reported second-quarter net sales of $530.1 million, an increase of 13.8 percent compared to the same period of 2006. This record performance was largely attributable to continued growth in the company's top countries, with the U.S. up 30.7 percent and Mexico up 1.7 percent, versus the second quarter of 2006. The company's Chairman and Chief Executive Officer Michael O. Johnson, said, "We are pleased to report our 14th consecutive quarter of double-digit year-over-year revenue growth and another record quarter for revenue and earnings. All seven of our regions realized net sales growth for the quarter. This performance was driven by the strength of our independent distributors, the success of their daily methods of operations and our products that support them."

During the second quarter 2007, 56,112 distributors qualified as new supervisors, an increase of 4.9 percent versus the second quarter of 2006. Total supervisors of 368,062 increased 18.5 percent versus second quarter 2006 and the company's President's Team membership increased 11.6 percent to 1,031 members. One distributorship attained the prestigious level of Chairman's Club, bringing the total to 31 members.

Financial Performance

For the quarter ended June 30, 2007, the company reported net income of $48.1 million, or $0.65 per diluted share, compared to $36.3 million, or $0.49 per diluted share in the second quarter of 2006. The increase in net income was primarily attributable to strong net sales growth, expansion in operating profit margins and a lower effective tax rate during the period. Excluding the impact of a favorable tax settlement in one of our international markets(1), second quarter 2007 net income was $47.5 million, or $0.64 per diluted share, compared to $0.49 per diluted share in the second quarter of 2006.

The company invested $13.5 million in capital expenditures during the second quarter, primarily related to enhancements to its management information systems and additional infrastructure investments to improve distributor productivity and service levels. Additionally, the company repurchased 3.5 million shares of its common stock at an average price of $39.65 under the recently approved $300 million share repurchase program. The company used excess cash along with debt to fund the repurchase.

For year to date June 30, 2007, the company reported net income of $89.3 million, or $1.20 per diluted share, compared to $75.0 million, or $1.01 per diluted share in the comparable 2006 period. Excluding the impact of favorable tax settlements in international markets in 2006 and 2007(1) as well as 2007 expenses related to the 2006 realignment for growth initiative, year to date 2007 net income increased 30.7 percent to $93.2 million, or $1.25 per diluted share, compared to $0.96 per diluted share in the year to date 2006.

Second Quarter 2007 Business Highlights

Consistent with its distributor strategy, the company continued to support the development and training of its distributors during the second quarter by hosting more than 45,000 distributors globally at numerous local and regional events. Highlights included Active Supervisor School in Mexico, Leadership Development meeting in South America, Spring Spectaculars in the EMEA region and Nutrition Club training in numerous markets.

The company also continued to support distributor business methods by expanding its distribution reach in key markets and expanding the global distribution of its leading products. "We continue to focus our company resources on increasing product availability and services to better support our distributors' daily methods of operations," said Greg Probert, the company's president and chief operating officer.

In June, the company received notification from China's Ministry of Commerce that its direct-selling license was expanded to permit the company to conduct its direct-selling business in the entire Jiangsu province. Located in China's east coast, the Jiangsu province, consisting of 13 cities and 61 counties, has a permanent and transient population of approximately 85 to 90 million people.

The company was also added to the Russell 1000, in June 2007, which tracks the performance of the 1000 U.S. companies with the largest market capitalization. The Russell 1000 accounts for approximately 92 percent of total equities traded on U.S. exchanges.

Regional Performance

The EMEA region reported net sales of $146.0 million in the second quarter, up 0.6 percent versus the same period of 2006. However, excluding currency fluctuations, net sales decreased 5.6 percent. EMEA performance was primarily attributable to net sales growth in several of the region's top markets, including Spain which was up 24.6 percent; Portugal, up 16.0 percent; Italy, up 14.9 percent; and France, up 6.3 percent, in each case compared to the second quarter of 2006. These net sales gains were partially offset by declines in other core markets including Germany and the Netherlands, which were down 29.1 percent and 19.4 percent, respectively, versus the comparable period of 2006. Total supervisors in the region, as of June 30, 2007, decreased 5.3 percent versus the same period in 2006.

The North America region reported net sales of $113.9 million in the second quarter, up 30.3 percent versus the same period of 2006. Excluding currency fluctuations, net sales increased 30.3 percent. Total supervisors in the region, as of June 30, 2007, increased 20.2 percent versus the same period in 2006.

The Mexico and Central America region reported net sales of $97.9 million in the second quarter, up 4.1 percent versus the same period of 2006. Excluding currency fluctuations, net sales increased 1.4 percent. Total supervisors in the region, as of June 30, 2007, increased 41.8 percent as compared to the same period in 2006.

The SAM/SEA region reported net sales of $59.0 million in the second quarter, up 24.2 percent versus the same period of 2006. Excluding currency fluctuations, net sales increased 18.5 percent. The growth in the region was primarily attributable to double and triple digit growth in the region's top three markets - Venezuela 320.1 percent, Thailand 38.1 percent and Argentina 20.9 percent. Total supervisors in the region, as of June 30, 2007, increased 42.9 percent versus the same period in 2006.

The Greater China region reported net sales of $47.0 million in the second quarter, up 69.7 percent versus the same period of 2006. Excluding currency fluctuations, net sales increased 70.3 percent. The increase was primarily attributable to sales growth in China and Taiwan, up 187.9 percent, and 43.1 percent, respectively. Total supervisors in the region, as of June 30, 2007, increased 41.1 percent versus the same period in 2006. Herbalife currently operates 47 stores and 37 service centers in 28 provinces in China.

The North Asia region reported net sales of $34.0 million in the second quarter, up 2.4 percent versus the same period of 2006. Excluding currency fluctuations, net sales increased 4.2 percent. This performance reflects an 18.8 percent net sales increase in South Korea, partially offset by a 10.1 percent decline in net sales in Japan. Total supervisors in the region, as of June 30, 2007, decreased 0.4 percent versus the same period in 2006.

The Brazil region reported net sales of $32.3 million in the second quarter, up 4.2 percent versus the same period of 2006. Excluding currency fluctuations, net sales decreased 5.2 percent. Total supervisors, as of June 30, 2007, decreased 0.6 percent versus the same period in 2006.

Third Quarter and Full Year 2007 Guidance

Based on its current business trends, the company is raising its full year 2007 diluted earnings per share guidance to a range of $2.56 to $2.61. Additionally, the company is providing guidance for the third quarter of 2007 in the range of $0.59 to $0.64 for diluted earnings per share. The full year 2007 diluted earnings per share estimates exclude severance expenses associated with the company's realignment for growth initiative along with the increase in tax reserves reported in the first quarter 2007 financial results and the favorable international tax settlement reported this quarter.

Quarterly Dividend

The Board of Directors approved a quarterly cash dividend of $0.20 payable to shareholders of record effective August 31, 2007, payable September 14, 2007.

Second Quarter Earnings Conference Call

Herbalife's second quarter earnings conference call will be conducted on Tuesday, August 7, 2007 at 8 a.m. PDT (11 a.m. EDT). The conference call numbers are (866) 219-5268 for domestic calls and (703) 639-1120 for calls made from outside the United States. Additionally, the conference call will be webcasted. The link to the webcast is on 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 1.6 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;

  • risk of 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;

  • risk of 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 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

  • there can be no assurance that we will purchase any of our shares in the open market or otherwise.

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

RESULTS OF OPERATIONS:

                            Herbalife Ltd.
                  Consolidated Statements of Income
                (In thousands, except per share data)

                               Quarter Ended       Six Months Ended
                           --------------------- ---------------------
                            6/30/2006  6/30/2007  6/30/2006  6/30/2007
                           ---------- ---------- ---------- ----------

North America              $   87,360 $  113,885    174,489    218,437
Mexico & Central America       93,983     97,858    178,023    193,754
Brazil                         31,028     32,263     66,500     65,557
SAMSEA                         47,480     59,012     90,900    114,775
EMEA                          145,224    146,038    286,688    289,236
Greater China                  27,706     47,058     56,275     87,742
North Asia                     33,206     33,986     68,900     68,698
                           ---------- ---------- ---------- ----------
Worldwide net sales           465,987    530,100    921,775  1,038,199
Cost of Sales                  92,640    111,361    184,006    218,644
                           ---------- ---------- ---------- ----------
Gross Profit                  373,347    418,739    737,769    819,555
Royalty Overrides             167,351    188,509    332,649    368,769
SGA                           140,881    152,157    275,925    301,585
                           ---------- ---------- ---------- ----------
Operating Income               65,115     78,073    129,195    149,201
Interest Expense - net          4,955      2,274     10,970      4,478
                           ---------- ---------- ---------- ----------
Income before income taxes     60,160     75,799    118,225    144,723
Income Taxes                   23,834     27,690     43,203     55,434
                           ---------- ---------- ---------- ----------
Net Income                     36,326     48,109     75,022     89,289
                           ========== ========== ========== ==========

Basic Shares                   70,647     70,616     70,297     71,180
Diluted Shares                 74,220     73,990     73,954     74,491

Basic EPS                  $     0.51 $     0.68 $     1.07 $     1.25
                           ========== ========== ========== ==========
Diluted EPS                $     0.49 $     0.65 $     1.01 $     1.20
                           ========== ========== ========== ==========
                            Herbalife Ltd.
                     Consolidated Balance Sheets
                            (In thousands)

                                                Dec. 31,    June 30,
                                                  2006        2007
                                               ----------- -----------
ASSETS
Current Assets:
   Cash & cash equivalents                     $  154,323  $  147,044
   Inventory, net                                 146,036     125,450
   Other current assets                           155,348     179,906
                                               ----------- -----------
      Total Current Assets                        455,707     452,400

Property and equipment, net                       105,266     112,773
Other Assets                                       30,931      31,952
Goodwill                                          113,221     110,866
Intangible assets, net                            311,808     310,259

                                               ----------- -----------
      Total Assets                             $1,016,933  $1,018,250
                                               =========== ===========


LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                39,990      35,494
   Royalty Overrides                              116,896     112,166
   Accrued expenses                               149,575     173,274
   Current portion of long term debt                5,599      65,018
   Other current liabilities                       11,432      11,182
                                               ----------- -----------
      Total Current Liabilities                   323,492     397,134

Long-term debt, net of current portion            179,839     150,808
Other long-term liabilities                       159,712     164,011
                                               ----------- -----------
      Total Liabilities                           663,043     711,953


Shareholders' equity:
   Common shares                                      143         137
   Additional paid in capital                     132,755     144,447
   Accumulated other comprehensive loss              (782)       (117)
   Retained earnings                              221,774     161,830

                                               ----------- -----------
      Total Shareholders' Equity                  353,890     306,297

                                               ----------- -----------
      Total Liabilities and Shareholders'
       Equity                                  $1,016,933  $1,018,250
                                               =========== ===========
                            Herbalife Ltd.
                     Total Supervisors by Region

Region                                        2Q/2006  2Q/2007  % Chg
--------------------------------------------- -------- -------- ------

EMEA                                            80,157   75,884    -5%
Mexico and Central America                      53,107   75,302    42%
North America                                   57,545   69,195    20%
SAM/SEA                                         42,340   60,507    43%
Greater China                                   24,349   34,358    41%
Brazil                                          34,266   34,066    -1%
North Asia                                      18,819   18,750     0%
                                              -------- -------- ------
   Worldwide                                   310,583  368,062    19%
                                              ======== ======== ======
                            Herbalife Ltd.
                       Volume Points by Region
                            (in thousands)

Region                                     2Q/2006  2Q/2007    % Chg
------------------------------------------ -------- -------- ---------

EMEA                                        148,104  136,451     -7.8%
Mexico and Central America                  160,767  155,143     -3.5%
North America                               133,178  175,216     31.5%
SAM/SEA                                      60,815   83,091     36.7%
Greater China                                33,633   53,906     60.4%
Brazil                                       40,578   37,353     -7.9%
North Asia                                   29,145   29,857      2.4%
                                           -------- -------- ---------
   Worldwide                                606,220  671,017     10.7%
                                           ======== ======== =========
SUPPLEMENTAL INFORMATION
----------------------------------------------------------------------
SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
NORMALIZED 2Q 2006 vs. 2Q 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
                                                ----------------------
                                                 6/30/2006  6/30/2007
                                                ---------- -----------

Net income, as reported                         $   36,326 $   48,109
  Tax benefit resulting from an international
   income tax audit settlement                           -       (609)

                                                ----------------------
Net income, as adjusted                         $   36,326 $   47,500
                                                ======================

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
                                                ----------------------
                                                 6/30/2006  6/30/2007
                                                ---------- -----------

Diluted earnings per share, as reported         $     0.49 $     0.65
  Tax benefit resulting from an international
   income tax audit settlement                           -      (0.01)

                                                ----------------------
Diluted earnings per share, as adjusted         $     0.49 $     0.64
                                                ======================
Note: Amounts may not total due to rounding.
SUPPLEMENTAL INFORMATION
----------------------------------------------------------------------
SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
NORMALIZED 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
                                               -----------------------
                                                6/30/2006   6/30/2007
                                               ----------- -----------

Net income, as reported                        $   75,022  $   89,289
  Tax benefit resulting from an international
   income tax audit settlement                     (3,693)       (609)
  Expenses associated with the realignment for
   growth initiative                                    -         989
  Increase in tax reserves                              -       3,565

                                               -----------------------
Net income, as adjusted                        $   71,329  $   93,234
                                               =======================

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
                                               -----------------------
                                                6/30/2006   6/30/2007
                                               ----------- -----------

Diluted earnings per share, as reported        $     1.01  $     1.20
  Tax benefit resulting from an international
   income tax audit settlement                      (0.05)      (0.01)
  Expenses associated with the realignment for
   growth initiative                                    -        0.01
  Increase in tax reserves                              -        0.05

                                               -----------------------
Diluted earnings per share, as adjusted        $     0.96  $     1.25
                                               =======================
Note: Amounts may not total due to rounding.
SCHEDULE B: FINANCIAL GUIDANCE

2007 Guidance
--------------------------------------

For the Three Months ending September 30, 2007 and Twelve Months
 Ending December 31, 2007

                                       Three Months    Twelve Months
                                           Ending          Ending
                                      September 30,    December 31,
                                            2007            2007
                                      --------------- ----------------
                                        Low    High     Low     High
                                      ------- ------- ------- --------

Net sales growth vs. 2006                8.0%   10.0%    9.0%   11.0%
Effective tax rate (1)                  36.0%   36.5%   36.0%   36.5%
EPS (2)                               $ 0.59  $ 0.64  $ 2.56  $ 2.61
Cap Ex ($ mm's)                       $ 10.0  $ 12.0  $ 43.0  $ 45.0


(1) Excludes the increase in tax reserves which was reported in the
 first quarter 2007 financial results and tax benefit resulting from
 an international income tax audit settlement.
(2) Excludes the impact of expenses expected to be incurred in 2007
 relating to the company's alignment for growth initiative and the
 increase in tax reserves, which was reported in the first quarter
 2007 financial result as well as the increase in tax reserves which
 was reported in the second quarter 2007 financial result. Includes
 accretion related to the company's recent repurchase of 3.5 million
 shares in our repurchase program.

CONTACT: 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.