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

LOS ANGELES--(BUSINESS WIRE)--October 29, 2012--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.


	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.

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.

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	%

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.

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.

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.

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 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.

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

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

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

	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%

		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	)