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Oct 29, 2012

Herbalife Ltd. Announces Record Third Quarter 2012 and Introduces 2013 Earnings Guidance

 

  • Third quarter volume points of 1.2 billion increased 17 percent with double digit increases in each of its six regions compared to the prior year period.
  • Third quarter EPS of $1.04 increased 20 percent compared to the prior year period EPS.
  • Introducing FY'13 EPS guidance in a range of $4.40 to $4.55.
  • Board of directors approved a $0.30 per share quarterly dividend.

LOS ANGELES--(BUSINESS WIRE)-- Herbalife Ltd. (NYSE: HLF) today reported third quarter record net sales of $1.0 billion, a 14 percent increase, driven by a 17 percent increase in volume points compared to the prior year period. The company reported net income of $117.8 million, or $1.04 per diluted share, compared to the third quarter 2011 net income of $108.0 million, or $0.87 per diluted share, reflecting an increase of 9 percent and 20 percent, respectively.

"Our business momentum has continued through the third quarter with double digit volume growth from all six of our geographical regions," said Michael O. Johnson, the company's chairman and CEO. "Our 2013 guidance for double-digit volume and EPS growth illustrates our belief in continued growth driven by the ongoing global expansion of daily consumption and our city by city approach to deepen our penetration in existing markets."

For the quarter ended September 30, 2012, the company generated cash flow from operations of $142.4 million, paid dividends of $32.4 million, and invested $20.0 million in capital expenditures. Also in the third quarter, the company repurchased $181.9 million in common shares outstanding, completing the $427.9 million repurchase agreement announced on May 3, 2012.

Third Quarter Regional Key Metrics1,2

Regional Volume Point and Average Active Sales Leader Metric

           
  Volume Points (Mil)   Average Active Sales Leaders
Region 3Q'12

Yr/Yr % Chg

  3Q'12

Yr/Yr % Chg

North America 287.4 14 %   67,826 15 %
Asia Pacific 305.6 17 %   66,433 29 %
EMEA 145.5 10 %   44,861 14 %
Mexico 211.2 17 %   60,123 21 %
South & Central America 186.0 24 %   46,466 29 %
China 57.1 42 %   12,692 33 %
Worldwide Total 1,192.8 17 %   288,397 22 %

1 Supplemental tables that include additional business metrics can be found at http://www.ir.herbalife.com.

2 Worldwide Average Active Sales Leaders may not equal the sum of the Average Active Sales Leaders in each region due to the calculation being an average of Sales Leaders active in a period, not a summation, and the fact that some sales leaders are active in more than one region but are counted only once in the worldwide amount.

Updated 2012 Guidance

Guidance for fully diluted 2012 EPS is based on the average daily exchange rates of the first two weeks of October 2012.

Based on current business trends the company's fourth quarter fiscal 2012 and fiscal 2012 guidance is provided below.

  Three Months Ending   Twelve Months Ending
 

December 31, 2012

 

December 31, 2012

  Low High   Low High
Volume Point Growth vs 2011 13.0% 15.0%   18.0% 20.0%
Net Sales Growth vs 2011 17.0% 19.0%   16.0% 18.0%
Diluted EPS $0.97 $1.01   $3.99 $4.03
Cap Ex ($ millions) $50.0 $60.0   $110.0 $120.0
Effective Tax Rate 26.0% 28.0%   26.0% 28.0%
           

2013 Guidance

Guidance for 2013 assumes a Venezuelan FX rate of 10:1 compared to prior utilization of a 5.3 bolivars to 1 USD on all ongoing operations but excludes any potential one-time impact from a devaluation or the repatriation of existing cash balances.

  Twelve Months Ending
 

December 31, 2013

 

Low

  High

Volume Point Growth vs 2012

 

8.5

%

   

10.5

%

Net Sales Growth vs 2012

 

10.0

%

   

12.0

%

Diluted EPS

$

4.40

   

$

4.55

 

Cap Ex ($ millions)

$

165.0

   

$

185.0

 

Effective Tax Rate

 

26.5

%

   

28.5

%

               

Announces Quarterly Dividend

The company reported today that its board of directors has approved a dividend of $0.30 per share to shareholders of record on November 14, 2012, payable on November 28, 2012.

Third Quarter Earnings Conference Call

Herbalife senior management will host an investor conference call to discuss its recent financial results and provide an update on current business trends on Tuesday, October 30, 2012 at 8 a.m. PST (11 a.m. EST).

The dial-in number for this conference call for domestic callers is (877) 317-1296 and (706) 634-5671 for international callers (conference ID 33885084). Live audio of the conference call will be simultaneously webcast in the investor relations section of the company's website at http://ir.herbalife.com.

An audio replay will be available following the completion of the conference call in MP3 format or by dialing (855) 859-2056 for domestic callers or (404) 537-3406 for international callers (conference ID 33885084. The webcast of the teleconference will be archived and available on Herbalife's website.

About Herbalife Ltd.

Herbalife Ltd. (NYSE:HLF) is a global nutrition company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle. Herbalife products are sold in 85 countries to and through a network of 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 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.

FORWARD-LOOKING STATEMENTS

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 difficult 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 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 to report any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

RESULTS OF OPERATIONS:

Herbalife Ltd.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
               
  Three Months Ended   Nine Months Ended
    9/30/2012     9/30/2011     9/30/2012     9/30/2011
               
North America $ 208,819   $ 180,735   $ 644,191   $ 532,894
Mexico   127,473     112,979     364,031     330,738
South and Central America   167,493     143,659     485,547     399,066
EMEA   147,490     147,670     463,117     463,624
Asia Pacific   288,205     255,169     844,701     691,575
China   77,407     55,006     211,423     152,071
Worldwide net sales   1,016,887     895,218     3,013,010     2,569,968
Cost of Sales   201,597     175,308     601,478     509,124
Gross Profit   815,290     719,910     2,411,532     2,060,844
Royalty Overrides   330,247     290,842     982,975     844,451
SGA   324,200     277,721     926,903     788,472
Operating Income   160,843     151,347     501,654     427,921
Interest Expense - net   3,546     345     8,088     3,848
Income before income taxes   157,297     151,002     493,566     424,073
Income Taxes   39,518     42,980     134,257     116,852
Net Income   117,779     108,022     359,309     307,221
               
Basic Shares   108,816     116,975     113,838     118,059
Diluted Shares   113,646     124,275     119,376     125,889
               
Basic EPS $ 1.08   $ 0.92   $ 3.16   $ 2.60
Diluted EPS $ 1.04   $ 0.87   $ 3.01   $ 2.44
                       
               
Dividends declared per share $ 0.30   $ 0.20   $ 0.90   $ 0.53
                       

 

Herbalife Ltd.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
  Sep 30,   Dec 31,
  2012   2011
       
ASSETS      
Current Assets:      
Cash & cash equivalents $ 321,722     $ 258,775  
Receivables, net   114,161       89,660  
Inventories   313,581       247,696  
Prepaid expenses and other current assets   124,095       117,073  
Deferred income taxes   51,628       55,615  
Total Current Assets   925,187       768,819  
       
Property, plant and equipment, net   198,562       193,703  
Deferred compensation plan assets   23,977       20,511  
Deferred financing cost, net   8,121       4,797  
Other assets   45,477       41,125  
Marketing related intangibles and other intangible assets, net   311,283       311,764  
Goodwill   105,490       105,490  
Total Assets $ 1,618,097     $ 1,446,209  
       
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current Liabilities:      
Accounts payable $ 80,119     $ 57,095  
Royalty overrides   223,839       197,756  
Accrued compensation   87,493       76,435  
Accrued expenses   169,722       152,744  
Current portion of long term debt   50,384       1,542  
Advance sales deposits   38,890       31,702  
Income taxes payable   13,501       31,415  
Total Current Liabilities   663,948       548,689  
       
Non-current liabilities      
Long-term debt, net of current portion   450,053       202,079  
Deferred compensation plan liability   28,717       23,702  
Deferred income taxes   62,808       72,348  
Other non-current liabilities   41,166       39,203  
Total Liabilities   1,246,692       886,021  
       
Commitments and Contingencies      
       
Shareholders' equity:      
Common shares   108       116  
Additional paid in capital   297,879       291,950  
Accumulated other comprehensive loss   (36,625 )     (37,809 )
Retained earnings   110,043       305,931  
Total Shareholders' Equity   371,405       560,188  
       
Total Liabilities and Shareholders' Equity $ 1,618,097     $ 1,446,209  
               

 

Herbalife Ltd.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
         
    Nine Months Ended
      9/30/2012       9/30/2011  
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income   $ 359,309     $ 307,221  
Adjustments to reconcile net income to net cash provided by        
operating activities:        
Depreciation and amortization     55,402       54,440  
Excess tax benefits from share-based payment arrangements     (28,073 )     (24,030 )
Share based compensation expenses     20,850       17,244  
Amortization of discount and deferred financing costs     1,135       721  
Deferred income taxes     (9,246 )     (7,000 )
Unrealized foreign exchange transaction loss (gain)     (3,529 )     8,324  
Write-off of deferred financing costs     -       914  
Other     172       1,383  
Changes in operating assets and liabilities:        
Receivables     (26,444 )     (31,834 )
Inventories     (58,705 )     (51,649 )
Prepaid expenses and other current assets     (7,977 )     (3,733 )
Other assets     (3,098 )     (4,742 )
Accounts payable     22,674       19,484  
Royalty overrides     22,432       33,851  
Accrued expenses and accrued compensation     20,028       7,579  
Advance sales deposits     7,384       27,416  
Income taxes     22,561       35,914  
Deferred compensation plan liability     5,015       2,123  
NET CASH PROVIDED BY OPERATING ACTIVITIES     399,890       393,626  
CASH FLOWS FROM INVESTING ACTIVITIES        
Purchases of property, plant and equipment     (59,229 )     (61,514 )
Proceeds from sale of property, plant and equipment     243       213  
Deferred compensation plan assets     (3,466 )     (527 )
NET CASH USED IN INVESTING ACTIVITIES     (62,452 )     (61,828 )
CASH FLOWS FROM FINANCING ACTIVITIES        
Dividends paid     (102,687 )     (62,177 )
Borrowings from long-term debt     1,387,557       791,700  
Principal payments on long-term debt     (1,090,748 )     (747,896 )
Deferred financing costs     (4,460 )     (5,728 )
Share repurchases     (506,331 )     (268,795 )
Excess tax benefits from share-based payment arrangements     28,073       24,030  
Proceeds from exercise of stock options and sale of stock under        
employee stock purchase plan     10,819       15,947  
NET CASH USED IN FINANCING ACTIVITIES     (277,777 )     (252,919 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH     3,286       (7,908 )
NET CHANGE IN CASH AND CASH EQUIVALENTS     62,947       70,971  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     258,775       190,550  
CASH AND CASH EQUIVALENTS, END OF PERIOD     321,722       261,521  
CASH PAID DURING THE YEAR        
Interest paid   $ 10,263     $ 6,457  
Income taxes paid   $ 123,063     $ 88,079  
                 

 

SUPPLEMENTAL INFORMATION

SCHEDULE A: 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 investors in analyzing period to period comparisons of the Company's results. However, non-GAAP financial measures should not be considered substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP.

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   Nine Months Ended
      9/30/2012     9/30/2011     9/30/2012     9/30/2011
                 
Net income, as reported   $ 117,779   $ 108,022   $ 359,309   $ 307,221
Write-off of unamortized deferred financing cost                
from debt refinancing (net of $214 tax benefit)     -     -     -     700
Net income, as adjusted   $ 117,779   $ 108,022   $ 359,309   $ 307,921
                 
                 
                 
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   Nine Months Ended
      9/30/2012     9/30/2011     9/30/2012     9/30/2011
                 
Diluted earnings per share, as reported   $ 1.04   $ 0.87   $ 3.01   $ 2.44
Write-off of unamortized deferred financing cost                
from debt refinancing     -     -     -     0.01
Diluted earnings per share, as adjusted   $ 1.04   $ 0.87   $ 3.01   $ 2.45
                         

 

The following is a reconciliation of total long-term debt to net debt:

    9/30/2012     12/31/2011  
       
Total long-term debt (current and long-term portion) $ 500,437   $ 203,621  
Less: Cash and cash equivalents   321,722     258,775  
Net debt $ 178,715   $ (55,154 )

 

Herbalife Ltd.
Media Contact:
Barbara Henderson
SVP, Worldwide Corp. Comm.
213.745.0517
or
Investor Contact:
Amy Greene
VP, Investor Relations
213.745.0474

Source: Herbalife Ltd.

 

 

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