Quarterly report pursuant to Section 13 or 15(d)

Segment Information

 v2.3.0.11
Segment Information
 6 Months Ended
Jun. 30, 2011
Segment Information [Abstract]  
Segment Information
7. Segment Information
The Company is a network marketing company that sells a wide range of weight management products, nutritional supplements and personal care products within one industry segment as defined under the FASB Accounting Standards Codification, or ASC Topic 280, Segment Reporting. The Company’s products are manufactured by third party providers and by the Company in its Suzhou, China facility and in its manufacturing facility located in Lake Forest, California, and are then sold to independent distributors who sell Herbalife products to retail consumers or other distributors. Revenues reflect sales of products by the Company to distributors and are categorized based on the distributors’ geographic location.
As of June 30, 2011, the Company sold products in 75 countries throughout the world and is organized and managed by geographic regions. The Company aggregates its operating segments, excluding China, into one reporting segment, or the Primary Reporting Segment, as management believes that the Company’s operating segments have similar operating characteristics and similar long term operating performance. In making this determination, management believes that the operating segments are similar in the nature of the products sold, the product acquisition process, the types of customers to whom products are sold, the methods used to distribute the products, and the nature of the regulatory environment. China has been identified as a separate reporting segment as it does not meet the criteria for aggregation. The operating information for the Primary Reporting Segment and China, and sales by product line are as follows:
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,     June 30,     June 30,  
    2011     2010     2011     2010  
    (In millions)  
Net Sales:
                               
Primary Reporting Segment
                               
United States
  $ 179.4     $ 161.6     $ 341.6     $ 308.3  
Mexico
    113.9       80.9       217.8       152.7  
Others
    535.0       395.1       1,018.3       762.8  
 
                       
Total Primary Reporting Segment
    828.3       637.6       1,577.7       1,223.8  
China
    51.4       51.2       97.1       83.6  
 
                       
Total Net Sales
  $ 879.7     $ 688.8     $ 1,674.8     $ 1,307.4  
 
                       
                                 
Contribution Margin(1)(2)(3):
                               
Primary Reporting Segment
                               
United States
  $ 77.7     $ 66.0     $ 146.1     $ 131.1  
Mexico
    51.0       32.2       91.4       57.1  
Others
    245.6       182.4       464.5       333.6  
 
                       
Total Primary Reporting Segment
    374.3       280.6       702.0       521.8  
China
    45.1       46.8       85.4       76.5  
 
                       
Total Contribution Margin
  $ 419.4     $ 327.4     $ 787.4     $ 598.3  
 
                       
Selling, general and administrative expenses
    266.2       211.1       510.8       418.0  
Interest expense, net
    0.9       2.1       3.5       4.1  
 
                       
Income before income taxes
    152.3       114.2       273.1       176.2  
Income taxes
    41.1       32.0       73.9       42.2  
 
                       
Net Income
  $ 111.2     $ 82.2     $ 199.2     $ 134.0  
 
                       
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,     June 30,     June 30,  
    2011     2010     2011     2010  
    (In millions)  
Net sales by product line:
                               
Weight Management
  $ 552.3     $ 430.5     $ 1,050.9     $ 817.7  
Targeted Nutrition
    197.3       159.8       377.5       298.4  
Energy, Sports and Fitness
    43.4       30.1       78.9       55.9  
Outer Nutrition
    37.0       31.0       73.6       62.0  
Literature, promotional and other(4)
    49.7       37.4       93.9       73.4  
 
                       
Total Net Sales
  $ 879.7     $ 688.8     $ 1,674.8     $ 1,307.4  
 
                       
                                 
Net sales by geographic region:
                               
North America
  $ 185.2     $ 166.4     $ 352.2     $ 317.7  
Mexico
    113.9       80.9       217.8       152.7  
South and Central America
    130.1       82.8       255.4       174.1  
EMEA
    162.0       135.6       315.9       266.4  
Asia Pacific
    237.1       171.9       436.4       312.9  
China
    51.4       51.2       97.1       83.6  
 
                       
Total Net Sales
  $ 879.7     $ 688.8     $ 1,674.8     $ 1,307.4  
 
                       
 
     
(1)  
Contribution margin consists of net sales less cost of sales and royalty overrides. See Part I, Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q for a description of net sales, cost of sales and royalty overrides.
 
(2)  
In the third quarter of 2010, the Company changed its method of allocation for certain costs to its business segments. Historical information presented has been reclassified to conform to the current presentation. This change had no effect on the Company’s consolidated statements of income.
 
(3)  
Compensation to China sales employees and service fees to China licensed business providers totaling $23.7 million and $24.3 million for the three months ended June 30, 2011 and 2010, respectively, and $45.5 million and $40.5 million for the six months ended June 30, 2011 and 2010, respectively, is included in selling, general and administrative expenses while distributor compensation for all other countries is included in contribution margin.
     
(4)  
Product buybacks and returns in all product categories are included in the literature, promotional and other category.
As of June 30, 2011 and December 31, 2010, total assets for the Company’s Primary Reporting Segment were $1,322.9 million and $1,162.1 million, respectively. As of June 30, 2011 and December 31, 2010, total assets for the China segment were $76.7 million and $70.1 million, respectively.