|
Exhibit 99.1
|
▪
|
Second quarter 2020 reported net sales of $1.3 billion increased 8.6% compared to the second quarter of 2019.
|
▪
|
Excluding the impact of foreign exchange rates, net sales increased 14.1% during the second quarter compared to 2019, excluding the impact from
Venezuela.
|
▪
|
The second quarter 2020 represents the largest quarterly reported net sales result in Company history.
|
▪
|
Second quarter 2020 volume points of 1.7 billion, also a quarterly record for the Company, increased 12.4% compared to the second quarter 2019.
|
▪
|
Second quarter 2020 reported diluted EPS of $0.82 and adjusted1 earnings of
$0.95 per diluted share, compared to $0.54 per diluted share and $0.70 per adjusted2 diluted share, respectively, for the second quarter 2019, which were negatively impacted in 2020
by expenses of approximately $2.3 million, or $0.01 per diluted share, and in second quarter 2019 of $4.0 million, or $0.02 per diluted share, related to the China Growth and Impact Investment Program.
|
▪
|
Given the continuing impact of COVID-19 on our business and
the rapidly evolving landscape in response to these pandemic conditions, we are not providing guidance at this time.
|
|
Volume Points
|
|
Region
|
2Q '20 (mil)
|
Yr/Yr % Chg
|
North America
|
492.4
|
38.5%
|
EMEA
|
406.7
|
20.9%
|
Asia Pacific
|
352.7
|
(5.0%)
|
Mexico
|
213.5
|
(3.7%)
|
China
|
144.7
|
17.7%
|
South and Central America
|
109.1
|
(10.8%)
|
Worldwide Total
|
1,719.1
|
12.4%
|
Region
|
Reported Net Sales
2Q’20 (mil)
|
Growth/Decline
including FX
vs. 2Q‘19
|
Growth/Decline
excluding FX
vs. 2Q ‘19
|
North America
|
$ 386.0
|
38.7%
|
38.8%
|
EMEA
|
$ 300.3
|
14.2%
|
20.9%
|
Asia Pacific
|
$ 284.3
|
(5.1%)
|
(2.1%)
|
Mexico
|
$ 96.4
|
(20.5%)
|
(3.3%)
|
China
|
$ 209.5
|
12.0%
|
16.4%
|
South & Central America (a)
|
$ 70.4
|
(22.7%)
|
*
|
Worldwide Total
|
$ 1,346.9
|
8.6%
|
*
|
South & Central America excl. Venezuela
(a)
|
$ 70.1
|
(22.8%)
|
(9.8%)
|
Worldwide Total excl Venezuela (a)
|
$ 1,346.6
|
8.6%
|
14.1%
|
▪
|
The extent and duration of business disruption and related financial impact from the COVID-19 pandemic cannot be reasonably estimated at this time
but could materially impact our business, financial condition and consolidated results for the third quarter and full year 2020. The Company will periodically reassess its ability to provide guidance as and when we believe the impact of
the pandemic can be reasonably estimated.
|
•
|
the potential impacts of the COVID-19 pandemic on us, our Members, and the world economy (including our
customers and our supply chain);
|
•
|
our relationship with, and our ability to influence the actions of, our Members;
|
•
|
improper action by our employees or Members in violation of applicable law;
|
•
|
adverse publicity associated with our products or network marketing organization, including our ability to
comfort the marketplace and regulators regarding our compliance with applicable laws;
|
•
|
changing consumer preferences and demands;
|
•
|
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 markets in which we operate;
|
•
|
legal challenges to our network marketing program;
|
•
|
the Consent Order entered into with the FTC, the effects thereof and any failure to comply therewith;
|
•
|
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 interpretation and enforcement of legislation in China governing direct selling
and anti-pyramiding;
|
•
|
our inability to obtain or maintain the necessary licenses for our direct selling business in China and
elsewhere;
|
•
|
adverse changes in the Chinese economy;
|
•
|
our dependence on increased penetration of existing markets;
|
•
|
any material disruption to our business caused by natural disasters, other catastrophic events, acts of
war or terrorism, viral outbreaks and other similar epidemics or cybersecurity incidents;
|
•
|
noncompliance by us or our Members with any privacy laws or any security breach by us or a third party
involving the misappropriation, loss, or other unauthorized use or disclosure of confidential information;
|
•
|
contractual limitations on our ability to expand our business;
|
•
|
our reliance on our information technology infrastructure and outside manufacturers;
|
•
|
the sufficiency of our trademarks and other intellectual property rights;
|
•
|
product concentration;
|
•
|
our reliance upon, or the loss or departure of any member of, our senior management team which could
negatively impact our Member relations and operating results;
|
•
|
U.S. and foreign laws and regulations applicable to our operations;
|
•
|
uncertainties relating to the United Kingdom’s exit from the European Union;
|
•
|
restrictions imposed by covenants in our existing indebtedness;
|
•
|
risks related to the convertible notes;
|
•
|
uncertainties relating to the application of transfer pricing, duties, value added taxes, and other tax
regulations, and changes thereto;
|
•
|
changes in tax laws, treaties or regulations, or their interpretation;
|
•
|
taxation relating to our Members;
|
•
|
product liability claims;
|
•
|
our incorporation under the laws of the Cayman Islands;
|
•
|
whether we will purchase any of our shares in the open markets or otherwise; and if so, the prices paid
in connection with such acquisitions; and
|
•
|
share price volatility related to, among other things, speculative trading and certain traders shorting
our common shares.
|
Herbalife Nutrition Ltd. and Subsidiaries
Condensed Consolidated Statements of Income
(In millions, except per share amounts)
|
||||||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
6/30/2020
|
6/30/2019
|
6/30/2020
|
6/30/2019
|
|||||||||||||
(unaudited)
|
||||||||||||||||
North America
|
$
|
386.0
|
$
|
278.3
|
$
|
663.7
|
$
|
534.8
|
||||||||
EMEA
|
300.3
|
262.9
|
559.0
|
514.6
|
||||||||||||
Asia Pacific
|
284.3
|
299.6
|
614.0
|
594.1
|
||||||||||||
Mexico
|
96.4
|
121.2
|
211.3
|
240.5
|
||||||||||||
China
|
209.5
|
187.0
|
399.4
|
337.4
|
||||||||||||
South and Central America
|
70.4
|
91.1
|
161.9
|
190.9
|
||||||||||||
Worldwide Net Sales
|
1,346.9
|
1,240.1
|
2,609.3
|
2,412.3
|
||||||||||||
Cost of Sales
|
272.8
|
243.2
|
518.5
|
484.8
|
||||||||||||
Gross Profit
|
1,074.1
|
996.9
|
2,090.8
|
1,927.5
|
||||||||||||
Royalty Overrides
|
406.9
|
366.8
|
788.1
|
726.3
|
||||||||||||
Selling, General, and Administrative Expenses
|
480.8
|
477.0
|
1,029.8
|
912.4
|
||||||||||||
Other Operating Income (1)
|
(3.3
|
)
|
-
|
(12.4
|
)
|
(27.3
|
)
|
|||||||||
Operating Income
|
189.7
|
153.1
|
285.3
|
316.1
|
||||||||||||
Interest Expense, net
|
28.8
|
36.3
|
53.8
|
72.4
|
||||||||||||
Other Income, net (2)
|
-
|
(5.9
|
)
|
-
|
(14.4
|
)
|
||||||||||
Income Before Income Taxes
|
160.9
|
122.7
|
231.5
|
258.1
|
||||||||||||
Income Taxes (3)
|
45.8
|
46.2
|
70.8
|
85.3
|
||||||||||||
Net Income
|
$
|
115.1
|
$
|
76.5
|
$
|
160.7
|
$
|
172.8
|
||||||||
Weighted-Average Shares Outstanding:
|
||||||||||||||||
Basic
|
137.9
|
137.4
|
137.9
|
137.2
|
||||||||||||
Diluted
|
140.1
|
142.4
|
140.1
|
144.2
|
||||||||||||
Earnings Per Share:
|
||||||||||||||||
Basic
|
$
|
0.84
|
$
|
0.56
|
$
|
1.17
|
$
|
1.26
|
||||||||
Diluted
|
$
|
0.82
|
$
|
0.54
|
$
|
1.15
|
$
|
1.20
|
||||||||
(1) Other Operating Income for the three and six months ended June 30, 2020 relates to certain China government grant
income. Other Operating Income for the six months ended March 31, 2019 relates to certain China government grant income and income related to the finalization of insurance recoveries in connection with the flooding at one of the Company's
warehouses in Mexico during September 2017.
|
||||||||||||||||
(2) Other Income, net for the three and six months ended June 30, 2019 relates to the gain on revaluation of the
Contingent Value Rights (CVR) issued in connection with the October 2017 modified Dutch auction tender offer.
|
||||||||||||||||
(3) Includes the impact of (tax deficiencies) excess tax benefit recognized under ASU 2016-09 from share-based
compensation arrangements of ($1.6) million and $0.4 million for the three months ended June 30, 2020 and 2019, respectively; and ($2.4) million and $2.8 million for the six months ended June 30, 2020 and 2019, respectively.
|
Herbalife Nutrition Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
|
||||||||
June 30,
|
Dec 31,
|
|||||||
2020
|
2019
|
|||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$
|
1,740.0
|
$
|
839.4
|
||||
Receivables, net
|
105.9
|
79.7
|
||||||
Inventories
|
421.8
|
436.2
|
||||||
Prepaid expenses and other current assets
|
140.2
|
132.9
|
||||||
Total Current Assets
|
2,407.9
|
1,488.2
|
||||||
Property, plant and equipment, net
|
366.0
|
371.5
|
||||||
Operating lease right-of-use assets
|
183.4
|
189.5
|
||||||
Marketing-related intangibles and other intangible assets, net
|
310.1
|
310.1
|
||||||
Goodwill
|
86.8
|
91.5
|
||||||
Other assets
|
213.2
|
227.8
|
||||||
Total Assets
|
$
|
3,567.4
|
$
|
2,678.6
|
||||
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$
|
87.2
|
$
|
81.6
|
||||
Royalty overrides
|
309.7
|
294.1
|
||||||
Current portion of long-term debt
|
23.0
|
24.1
|
||||||
Other current liabilities
|
683.1
|
564.6
|
||||||
Total Current Liabilities
|
1,103.0
|
964.4
|
||||||
Non-current liabilities:
|
||||||||
Long-term debt, net of current portion
|
2,404.1
|
1,778.9
|
||||||
Non-current operating lease liabilities
|
168.1
|
169.9
|
||||||
Other non-current liabilities
|
157.0
|
155.4
|
||||||
Total Liabilities
|
3,832.2
|
3,068.6
|
||||||
Commitments and Contingencies
|
||||||||
Shareholders' deficit:
|
||||||||
Common shares
|
0.1
|
0.1
|
||||||
Paid-in capital in excess of par value
|
380.7
|
366.6
|
||||||
Accumulated other comprehensive loss
|
(246.1
|
)
|
(212.5
|
)
|
||||
Accumulated deficit
|
(70.6
|
)
|
(215.3
|
)
|
||||
Treasury stock
|
(328.9
|
)
|
(328.9
|
)
|
||||
Total Shareholders' Deficit
|
(264.8
|
)
|
(390.0
|
)
|
||||
Total Liabilities and Shareholders' Deficit
|
$
|
3,567.4
|
$
|
2,678.6
|
||||
Herbalife Nutrition Ltd. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)
|
||||||||
Six Months Ended
|
||||||||
6/30/2020
|
6/30/2019
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$
|
160.7
|
$
|
172.8
|
||||
Adjustments to reconcile net income to net cash provided by
|
||||||||
operating activities:
|
||||||||
Depreciation and amortization
|
49.9
|
49.0
|
||||||
Share-based compensation expenses
|
22.5
|
20.5
|
||||||
Non-cash interest expense
|
12.8
|
27.6
|
||||||
Deferred income taxes
|
9.7
|
3.9
|
||||||
Inventory write-downs
|
8.1
|
11.7
|
||||||
Foreign exchange transaction loss
|
7.1
|
5.0
|
||||||
Other
|
1.2
|
(11.8
|
)
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Receivables
|
(33.7
|
)
|
(29.0
|
)
|
||||
Inventories
|
(19.4
|
)
|
(50.8
|
)
|
||||
Prepaid expenses and other current assets
|
(18.4
|
)
|
14.6
|
|||||
Accounts payable
|
9.5
|
(0.3
|
)
|
|||||
Royalty overrides
|
29.5
|
(16.6
|
)
|
|||||
Other current liabilities
|
140.3
|
(81.3
|
)
|
|||||
Other
|
5.2
|
(0.5
|
)
|
|||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
385.0
|
114.8
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases of property, plant and equipment
|
(49.6
|
)
|
(51.7
|
)
|
||||
Other
|
0.2
|
-
|
||||||
NET CASH USED IN INVESTING ACTIVITIES
|
(49.4
|
)
|
(51.7
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Borrowings from senior secured credit facility, net of discount
|
30.2
|
-
|
||||||
Principal payments on senior secured credit facility and other debt
|
(10.6
|
)
|
(10.2
|
)
|
||||
Proceeds from senior notes
|
600.0
|
-
|
||||||
Debt issuance costs
|
(6.8
|
)
|
-
|
|||||
Share repurchases
|
(26.0
|
)
|
(9.0
|
)
|
||||
Other
|
1.6
|
1.5
|
||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
588.4
|
(17.7
|
)
|
|||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
(23.4
|
)
|
1.9
|
|||||
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
900.6
|
47.3
|
||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD
|
847.5
|
1,215.0
|
||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD
|
$
|
1,748.1
|
$
|
1,262.3
|
||||
|
|||||||||||||||||
Three Months Ended
|
Six Months Ended
|
||||||||||||||||
6/30/2020
|
6/30/2019
|
6/30/2020
|
6/30/2019
|
||||||||||||||
(in millions)
|
|||||||||||||||||
Net income, as reported
|
$
|
115.1
|
$
|
76.5
|
$
|
160.7
|
$
|
172.8
|
|||||||||
Expenses related to regulatory inquiries and legal accruals (1) (2) (3)
|
0.8
|
17.7
|
85.3
|
32.2
|
|||||||||||||
Non-cash interest expense and amortization of non-cash issuance costs (1) (2) (4)
|
5.5
|
12.0
|
10.7
|
24.3
|
|||||||||||||
China grant income (1) (2)
|
(3.3
|
)
|
-
|
(12.4
|
)
|
(21.3
|
)
|
||||||||||
Contingent Value Rights revaluation (1) (2)
|
-
|
(5.9
|
)
|
-
|
(14.4
|
)
|
|||||||||||
Income related to finalization of insurance recoveries (1) (2) (5)
|
-
|
-
|
-
|
(6.0
|
)
|
||||||||||||
Debt issuance costs related to the senior secured credit facility amendment (1) (2) (6)
|
-
|
-
|
0.5
|
-
|
|||||||||||||
Net expenses related to COVID-19 pandemic (1) (2)
|
6.1
|
-
|
11.9
|
-
|
|||||||||||||
Income tax adjustments for above items (1) (2)
|
9.2
|
(2.1
|
)
|
(6.9
|
)
|
4.0
|
|||||||||||
Net income, as adjusted (7)
|
$
|
133.5
|
$
|
98.2
|
$
|
249.8
|
$
|
191.6
|
|||||||||
Three Months Ended
|
Six Months Ended
|
||||||||||||||||
6/30/2020
|
6/30/2019
|
6/30/2020
|
6/30/2019
|
||||||||||||||
(in millions)
|
|||||||||||||||||
Diluted shares outstanding, as reported
|
140.1
|
142.4
|
140.1
|
144.2
|
|||||||||||||
Impact of capped call transactions
|
-
|
(1.4
|
)
|
-
|
(2.8
|
)
|
|||||||||||
Diluted shares outstanding, as adjusted
|
140.1
|
141.0
|
140.1
|
141.4
|
|||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
6/30/2020
|
6/30/2019
|
6/30/2020
|
6/30/2019
|
|||||||||||||
(per share)
|
||||||||||||||||
Diluted earnings per share, as reported
|
$
|
0.82
|
$
|
0.54
|
$
|
1.15
|
$
|
1.20
|
||||||||
Impact of adjusted shares outstanding
|
-
|
-
|
-
|
0.02
|
||||||||||||
Diluted earnings per share using adjusted diluted shares outstanding
|
$
|
0.82
|
$
|
0.54
|
$
|
1.15
|
$
|
1.22
|
||||||||
Expenses related to regulatory inquiries and legal accruals (1) (2) (3)
|
0.01
|
0.13
|
0.61
|
0.23
|
||||||||||||
Non-cash interest expense and amortization of non-cash issuance costs (1) (2) (4)
|
0.04
|
0.09
|
0.08
|
0.17
|
||||||||||||
China grant income (1) (2)
|
(0.02
|
)
|
-
|
(0.09
|
)
|
(0.15
|
)
|
|||||||||
Contingent Value Rights revaluation (1) (2)
|
-
|
(0.04
|
)
|
-
|
(0.10
|
)
|
||||||||||
Income related to finalization of insurance recoveries (1) (2) (5)
|
-
|
-
|
-
|
(0.04
|
)
|
|||||||||||
Debt issuance costs related to the senior secured credit facility amendment (1) (2) (6)
|
-
|
-
|
-
|
-
|
||||||||||||
Net expenses related to COVID-19 pandemic (1) (2)
|
0.04
|
-
|
0.08
|
-
|
||||||||||||
Income tax adjustments for above items (1) (2)
|
0.07
|
(0.01
|
)
|
(0.05
|
)
|
0.03
|
||||||||||
Adjusted diluted earnings per adjusted share (7)
|
$
|
0.95
|
$
|
0.70
|
$
|
1.78
|
$
|
1.36
|
||||||||
(2) Excludes tax (benefit)/expense as follows:
|
||||||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
6/30/2020
|
6/30/2019
|
6/30/2020
|
6/30/2019
|
|||||||||||||
(in millions)
|
||||||||||||||||
Expenses related to regulatory inquiries and legal accruals
|
8.1
|
$
|
(1.2
|
)
|
(9.0
|
)
|
(4.5
|
)
|
||||||||
Non-cash interest expense and amortization of non-cash issuance costs
|
0.5
|
0.2
|
0.6
|
(0.6
|
)
|
|||||||||||
China grant income
|
1.0
|
(0.2
|
)
|
3.3
|
6.4
|
|||||||||||
Contingent Value Rights revaluation
|
-
|
(0.3
|
)
|
-
|
1.8
|
|||||||||||
Income related to finalization of insurance recoveries
|
-
|
(0.6
|
)
|
-
|
0.9
|
|||||||||||
Debt issuance costs related to the senior secured credit facility amendment
|
-
|
-
|
(0.1
|
)
|
-
|
|||||||||||
Net expenses related to COVID-19 pandemic
|
(0.4
|
)
|
-
|
(1.7
|
)
|
-
|
||||||||||
Total income tax adjustments
|
$
|
9.2
|
$
|
(2.1
|
)
|
$
|
(6.9
|
)
|
$
|
4.0
|
||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
6/30/2020
|
6/30/2019
|
6/30/2020
|
6/30/2019
|
|||||||||||||
(per share)
|
||||||||||||||||
Expenses related to regulatory inquiries and legal accruals
|
0.06
|
(0.01
|
)
|
(0.06
|
)
|
(0.03
|
)
|
|||||||||
Non-cash interest expense and amortization of non-cash issuance costs
|
-
|
-
|
-
|
-
|
||||||||||||
China grant income
|
0.01
|
-
|
0.02
|
0.05
|
||||||||||||
Contingent Value Rights revaluation
|
-
|
-
|
-
|
0.01
|
||||||||||||
Income related to finalization of insurance recoveries
|
-
|
-
|
-
|
0.01
|
||||||||||||
Debt issuance costs related to the senior secured credit facility amendment
|
-
|
-
|
-
|
-
|
||||||||||||
Net expenses related to COVID-19 pandemic
|
-
|
-
|
(0.01
|
)
|
-
|
|||||||||||
Total income tax adjustments (7)
|
$
|
0.07
|
$
|
(0.01
|
)
|
$
|
(0.05
|
)
|
$
|
0.03
|
||||||