Herbalife Ltd. Announces Record Third Quarter 2011 Results and Raises 2011 Earnings Guidance

LOS ANGELES--(BUSINESS WIRE)--October 31, 2011-- Herbalife Ltd. (NYSE: HLF) today reported that third quarter net sales increased 30.0 percent and local currency net sales increased 24.1 percent compared to the same time period in 2010. Net income for the quarter of $108.0 million, or $0.87 per diluted share compares to 2010 third quarter adjusted net income and adjusted EPS of $75.7 million and $0.60, respectively.

“Our business has never been stronger,” said Michael O. Johnson, the company’s chairman and CEO. “In the third quarter Herbalife saw the highest volume point growth rate of the past five years as we eclipsed the one-billion volume point mark for the first time in the company’s history.“

For the quarter ended September 30, 2011, the company generated cash flow from operations of $143.0 million, an increase of 42.3 percent compared to the third quarter 2010, paid dividends of $23.5 million, invested $16.9 million in capital expenditures and repurchased $150.0 million in common shares outstanding related to our share repurchase program.

¹ See Schedule A – “Reconciliation of Non-GAAP Financial Measures” for more detail.

² “Emerging markets” are defined herein as those countries that the World Bank categorized as having “low” or “medium” GDP per capita, while “Established markets” are defined as those countries categorized by the World Bank as having “high” GDP per capita.

³ Supplemental tables that include additional business metrics can be found at http://www.ir.herbalife.com

⁴ 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.

Given the recent volatility in foreign currency exchange rates for many of the company’s key markets, guidance provided is reflective of the average exchange rates for the first four weeks of October. The negative EPS impact included in the guidance as a result of the change in foreign exchange rates since June 30, 2011 is approximately $0.10 - $0.12 per quarter.

Based on current business trends and foreign currency rates, the company’s fourth quarter, fiscal 2011 and fiscal 2012 guidance is provided below.

The company reported today that its board of directors has approved a dividend of $0.20 per share to shareholders of record effective November 14, 2011 payable on November 28, 2011.

Herbalife Ltd. (NYSE:HLF) senior management will host an investor conference call to discuss its recent financial results and provide an update on current business trends on Tuesday, November 1, 2011 at 8 a.m. PDT (11 a.m. EDT).

The dial-in number for this conference call for domestic callers is (877) 317-1296 and (706) 634-5671 for international callers (conference ID 15135181). 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 15135181). The webcast of the teleconference will be archived and available on Herbalife's website.

Herbalife Ltd. (NYSE:HLF) is a global network marketing company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle. Herbalife products are sold in 78 countries through a network of approximately 2.5 million independent distributors. The company supports the Herbalife Family Foundation and its Casa Herbalife program to help bring good nutrition to children. Herbalife's website contains a significant amount of information about Herbalife, including financial and other information for investors at http://ir.Herbalife.com. The company encourages investors to visit its website from time to time, as information is updated and new information is posted.

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” and any other similar words.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, among others, the following:

• any collateral impact resulting from the ongoing worldwide financial “crisis,” including the availability of liquidity to us, our customers and our suppliers or the willingness of our customers to purchase products in a 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;

• 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;

• 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 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 reliance on our information technology infrastructure and outside manufacturers;

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


Herbalife Ltd.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)

	Quarter Ended				Nine Months Ended
	9/30/2011		9/30/2010 ⁽³⁾		9/30/2011		9/30/2010 ⁽³⁾

North America	$	180,735	$	155,532	$	532,894	$	473,228
Mexico		112,979		83,498		330,738		236,265
South and Central America		143,659		95,030		399,066		269,156
EMEA		147,670		121,221		463,624		387,598
Asia Pacific		255,169		181,555		691,575		494,418
China		55,006		51,595		152,071		135,205
Worldwide net sales		895,218		688,431		2,569,968		1,995,870
Cost of Sales		175,308		133,265		509,124		410,298	⁽¹⁾
Gross Profit		719,910		555,166		2,060,844		1,585,572
Royalty Overrides		290,842		224,061		844,451		656,160
SGA		277,721		230,150		788,472		648,143	⁽¹⁾
Operating Income		151,347		100,955		427,921		281,269
Interest Expense - net		345		2,192		3,848		6,291
Income before income taxes		151,002		98,763		424,073		274,978
Income Taxes		42,980		19,879		116,852		62,048	⁽¹⁾
Net Income		108,022		78,884		307,221		212,930

Basic Shares⁽²⁾		116,975		118,442		118,059		119,286
Diluted Shares⁽²⁾		124,275		125,613		125,889		126,216

Basic EPS ⁽²⁾	$	0.92	$	0.67	$	2.60	$	1.79
Diluted EPS⁽²⁾	$	0.87	$	0.63	$	2.44	$	1.69

Dividends declared per share	$	0.20	$	0.13	$	0.53	$	0.33


⁽¹⁾Includes impact of items related to adoption of highly-inflationary accounting in Venezuela that are further discussed in Schedule A – "Reconciliation of Non-GAAP Financial Measures”.
⁽²⁾All share count and per share amounts have been adjusted to reflect the two-for-one stock split.
⁽³⁾During the second quarter of 2011, the Company changed its method of accounting for share-based compensation tax benefits. Prior periods have been adjusted to reflect this change. See Note 2 of the quarterly report on Form 10-Q for the quarter ended September 30, 2011.

Herbalife Ltd.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

	Sep 30,			Dec 31,
	2011			2010 ⁽¹⁾

ASSETS
Current Assets:
Cash & cash equivalents	$	261,521		$	190,550
Receivables, net		112,475			85,612
Inventories		222,501			182,467
Prepaid expenses and other current assets		93,715			93,963
Deferred income taxes		43,662			42,994
Total Current Assets		733,874			595,586

Property and equipment, net		182,772			177,427
Deferred compensation plan assets		19,063			18,536
Deferred financing cost, net		5,091			998
Other assets		29,833			25,880
Marketing related intangibles and other and other intangible assets, net		311,935			310,894
Goodwill		105,488			102,899
Total Assets	$	1,388,056		$	1,232,220


LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	61,857		$	43,784
Royalty Overrides		190,697			162,141
Accrued compensation		69,646			69,376
Accrued expenses		145,150			141,867
Current portion of long term debt		1,762			3,120
Advance sales deposits		60,129			35,145
Income taxes payable		21,304			15,383
Total Current Liabilities		550,545			470,816

Non-current liabilities
Long-term debt, net of current portion		220,298			175,046
Deferred compensation		22,290			20,167
Deferred income taxes		55,844			55,572
Other non-current liabilities		22,600			23,407
Total Liabilities		871,577			745,008

Contingencies

Shareholders' equity:
Common shares		116			118
Additional paid in capital		280,515			248,693
Accumulated other comprehensive loss		(36,012	)		(27,285	)
Retained earnings		271,860			265,686
Total Shareholders' Equity		516,479			487,212

Total Liabilities and Shareholders' Equity	$	1,388,056		$	1,232,220


⁽¹⁾During the second quarter of 2011, the Company changed its method of accounting for share-based compensation tax benefits. Prior periods have been adjusted to reflect this change. See Note 2 of the quarterly report on Form 10-Q for the quarter ended September 30, 2011.


Herbalife Ltd.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

	Nine Months Ended
	9/30/2011			9/30/2010 ⁽¹⁾
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	307,221		$	212,930
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		54,440			51,755
Excess tax benefits from share-based payment arrangements		(24,030	)		(6,572	)
Share-based compensation expenses		17,244			16,870
Amortization of discount and deferred financing costs		721			374
Deferred income taxes		(7,000	)		(16,989	)
Unrealized foreign exchange transaction loss (gain)		8,324			(7,536	)
Write-off of deferred financing costs		914			—
Foreign exchange loss from adoption of highly inflationary accounting in Venezuela		—			15,131
Other		1,383			2,911
Changes in operating assets and liabilities:
Receivables		(31,834	)		(13,965	)
Inventories		(51,649	)		(32,921	)
Prepaid expenses and other current assets		(3,733	)		5,744
Other assets		(4,742	)		(2,328	)
Accounts payable		19,484			12,852
Royalty overrides		33,851			3,601
Accrued expenses and accrued compensation		7,579			11,622
Advance sales deposits		27,416			32,399
Income taxes payable		35,914			(16,955	)
Deferred compensation plan liability		2,123			2,198
NET CASH PROVIDED BY OPERATING ACTIVITIES		393,626			271,121
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property		(61,514	)		(42,199	)
Proceeds from sale of property		213			64
Deferred compensation plan assets		(527	)		(371	)
NET CASH USED IN INVESTING ACTIVITIES		(61,828	)		(42,506	)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid		(62,177	)		(38,934	)
Borrowings from long-term debt		791,700			338,000
Principal payments on long-term debt		(747,896	)		(379,465	)
Deferred financing costs		(5,728	)		—
Share repurchases		(268,795	)		(106,163	)
Excess tax benefits from share-based payment arrangements		24,030			6,572
Proceeds from exercise of stock options and sale of stock under employee stock purchase plan		15,947			11,521
NET CASH USED IN FINANCING ACTIVITIES		(252,919	)		(168,469	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(7,908	)		(17,457	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		70,971			42,689
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		190,550			150,801
CASH AND CASH EQUIVALENTS, END OF PERIOD		261,521			193,490
CASH PAID DURING THE PERIOD
Interest paid	$	6,457		$	7,195
Income taxes paid	$	88,079		$	84,120


⁽¹⁾During the second quarter of 2011, the Company changed its method of accounting for share-based compensation tax benefits. Prior periods have been adjusted to reflect this change. See Note 2 of the quarterly report on Form 10-Q for the quarter ended September 30, 2011.

In addition to its reported results, the Company has included in the tables below adjusted results that the Securities and Exchange Commission defines as “non-GAAP financial measures.” Management believes that such non-GAAP financial measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investor in analyzing period to period comparisons of the Company’s results.

The following is a reconciliation of net income and diluted earnings per share, presented and reported in accordance with U.S. generally accepted accounting principles, to net income adjusted for certain items:


Herbalife Ltd.
Supplemental Schedule
Non-GAAP Financial Measures
(In thousands, except per share amount)
(Unaudited)

	Quarter Ended 9/30/2011
	Reported						Adjusted
	(GAAP)		Adjustment				(Non-GAAP)
Net Sales		895,218						895,218
Cost of Sales		175,308						175,308
Gross Profit		719,910		-				719,910
Royalty Overrides		290,842						290,842
SGA		277,721						277,721
Operating Income		151,347		-				151,347
Interest Expense - net		345						345
Income before income taxes		151,002		-				151,002
Income Taxes		42,980						42,980
Net Income		108,022		-				108,022

Diluted EPS	$	0.87	$	-			$	0.87







Herbalife Ltd.
Supplemental Schedule
Non-GAAP Financial Measures
(In thousands, except per share amount)
(Unaudited)

	Quarter Ended 9/30/2010
	Reported		Adjusting				Adjusted
	(GAAP)⁽²⁾		Items				(Non-GAAP)
Net Sales	$	688,431					$	688,431
Cost of Sales		133,265						133,265
Gross Profit		555,166		-				555,166
Royalty Overrides		224,061						224,061
SGA		230,150						230,150
Operating Income		100,955		-				100,955
Interest Expense - net		2,192						2,192
Income before income taxes		98,763		-				98,763
Income Taxes		19,879		3,228		⁽³⁾		23,107
Net Income	$	78,884		(3,228	)		$	75,656

Diluted EPS ⁽¹⁾	$	0.63	$	(0.03	)		$	0.60



⁽¹⁾Diluted EPS has been adjusted to reflect the two-for-one stock split.
⁽²⁾During the second quarter of 2011, the Company changed its method of accounting for share-based compensation tax benefits. Prior periods have been adjusted to reflect this change.
See Note 2 of the quarterly report on Form 10-Q for the quarter ended September 30, 2011.
⁽³⁾Tax benefit from an international tax audit settlement.


Herbalife Ltd.
Supplemental Schedule
Non-GAAP Financial Measures
(In thousands, except per share amount)
(Unaudited)

	Nine Months Ended 9/30/2011

	Reported (GAAP)		Adjustment				Adjusted (Non-GAAP)
Net Sales		2,569,968						2,569,968
Cost of Sales		509,124						509,124
Gross Profit		2,060,844		-				2,060,844
Royalty Overrides		844,451						844,451
SGA		788,472						788,472
Operating Income		427,921		-				427,921
Interest Expense - net		3,848		(914	)	⁽¹⁾		2,934
Income before income taxes		424,073		914				424,987
Income Taxes		116,852		214		⁽¹⁾		117,066
Net Income		307,221		700				307,921

Diluted EPS	$	2.44	$	0.01			$	2.45



⁽¹⁾ Write-off of unamortized deferred financing costs resulting from the debt refinancing arrangement in March 2011.



Herbalife Ltd.
Supplemental Schedule
Non-GAAP Financial Measures
(In thousands, except per share amount)
(Unaudited)

	Nine Months Ended 9/30/2010
	Reported		Adjusting				Adjusted
	(GAAP) ⁽⁵⁾		Items				(Non-GAAP)
Net Sales	$	1,995,870					$	1,995,870
Cost of Sales		410,298	$	(12,715	)	⁽¹⁾		397,583
Gross Profit		1,585,572		12,715				1,598,287
Royalty Overrides		656,160						656,160
SGA		648,143		(11,390	)	⁽²⁾		636,753
Operating Income		281,269		24,105				305,374
Interest Expense - net		6,291						6,291
Income before income taxes		274,978		24,105				299,083
Income Taxes		62,048		17,680		⁽³⁾		79,728
Net Income	$	212,930	$	6,425			$	219,355

Diluted EPS ⁽⁴⁾	$	1.69	$	0.05			$	1.74



⁽¹⁾ Incremental U.S. dollar costs of 2009 imports in Venezuela which were recorded at the unfavorable parallel market exchange rate and were not devalued based on 2010 exchange rates but rather recorded at their historical dollar costs as products were sold
⁽²⁾ Includes $15,131 foreign exchange loss related to remeasurement of Venezuela's monetary assets and liabilities resulting from adoption of highly inflationary accounting and $3,741 foreign exchange gain resulting from receipt of U.S. dollar approved by CADIVI at the official exchange rate relating to 2009 product importations which were previously registered with CADIVI
⁽³⁾ Includes $14,452 favorable income taxes related to Venezuela becoming highly inflationary economy and $3,228 tax benefit from an international income tax audit settlement.
⁽⁴⁾Diluted EPS has been adjusted to reflect the two-for-one stock split.
⁽⁵⁾During the second quarter of 2011, the Company changed its method of accounting for share-based compensation tax benefits. Prior periods have been adjusted to reflect this change. See Note 2 of the quarterly report on Form 10-Q for the quarter ended September 30, 2011.

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


	Volume Points (Mil)			Average Active Sales Leaders
Region	3Q'11	Yr/Yr % Chg		3Q'11	Yr/Yr % Chg
North America	252.9	12.2	%	58,897	15.3	%
Asia Pacific	261.2	36.2	%	51,644	38.5	%
EMEA	132.4	15.8	%	39,227	16.7	%
Mexico	180.6	23.5	%	49,772	25.9	%
South & Central America	149.7	39.5	%	35,993	21.8	%
China	40.3	2.3	%	9,533	26.3	%
Worldwide Total	1017.1	23.4	%	236,191	23.6	%

	Volume Points (Mil)			Average Active Sales Leaders
	3Q'11	Yr/Yr % Chg		3Q'11	Yr/Yr % Chg
Emerging Markets	544.5	26.9	%	134,467	26.4	%
Established Markets	472.6	19.5	%	109,339	19.3	%
Worldwide Total	1017.1	23.4	%	236,191	23.6	%


	Twelve Months Ending
	December 31, 2012
	Low			High
Volume Point Growth vs 2011		8.0	%		10.0	%
Net Sales Growth vs 2011		8.0	%		10.0	%
Diluted EPS	$	3.25		$	3.45
Cap Ex ($ millions)	$	105.0		$	115.0
Effective Tax Rate		27.0	%		29.0	%

The following is a reconciliation of total long-term debt to net debt:
	9/30/2011			12/31/2010

Total long-term debt (current and long-term portion)	$	222,060		$	178,166
Less: Cash and cash equivalents		261,521			190,550
Net debt	$	(39,461	)	$	(12,384	)