Annual report pursuant to Section 13 and 15(d)

Segment Information

v2.4.1.9
Segment Information
 12 Months Ended
Dec. 31, 2014
Segment Reporting [Abstract]  
Segment Information

10.    Segment Information

The Company is a nutrition company that sells a wide range of weight management, targeted nutrition, energy, sports & fitness, and outer nutrition products. The Company’s products are manufactured by third party providers and by the Company in its Changsha, Hunan, China extraction facility, Suzhou, China facility, Lake Forest, California facility, and in its Winston-Salem, North Carolina facility, and then are sold to Members who consume and sell Herbalife products to retail consumers or other Members. Revenues reflect sales of products by the Company to its Members and are categorized based on geographic location.

As of December 31, 2014, the Company sold products in 91 countries throughout the world and was 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, the nature of the regulatory environment, and their economic characteristics. 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:

 

     Year Ended December 31,  
     2014      2013      2012  
     (In millions)  

Net Sales:

         

Primary Reporting Segment:

         

United States(4)

    $ 905.1       $ 886.9       $ 816.9   

Mexico

      567.9         562.4         496.1   

South Korea

      416.0         433.7         421.4   

Others(4)

      2,405.3         2,470.7         2,059.4   
  

 

 

     

 

 

     

 

 

  

Total Primary Reporting Segment

      4,294.3         4,353.7         3,793.8   

China

      664.3         471.6         278.5   
  

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 4,958.6       $ 4,825.3       $ 4,072.3   
  

 

 

     

 

 

     

 

 

  

Contribution Margin(1):

         

Primary Reporting Segment:

         

United States(4)

    $ 373.1       $ 367.9       $ 359.5   

Mexico

      251.7         251.7         205.6   

South Korea

      227.6         214.3         199.4   

Others(4)

      1,055.6         1,107.8         906.5   
  

 

 

     

 

 

     

 

 

  

Total Primary Reporting Segment

      1,908.0         1,941.7         1,671.0   

China(2)

      596.6         422.7         250.1   
  

 

 

     

 

 

     

 

 

  

Total Contribution Margin

    $ 2,504.6       $ 2,364.4       $ 1,921.1   

Selling, general and administrative expense (2)

      1,991.1         1,629.1         1,259.7   

Interest expense

      91.7         26.6         16.7   

Interest income

      12.5         8.0         6.2   

Other expense, net

      13.0         —         —   
  

 

 

     

 

 

     

 

 

  

Income before income taxes

      421.3         716.7         650.9   

Income taxes

      112.6         189.2         186.9   
  

 

 

     

 

 

     

 

 

  

Net Income

    $ 308.7       $ 527.5       $ 464.0   
  

 

 

     

 

 

     

 

 

  
     Year Ended December 31,  
     2014      2013      2012  
     (In millions)  

Capital Expenditures:

         

United States

    $ 119.7       $ 121.3       $ 81.6   

Mexico

      3.8         2.4         2.8   

South Korea

      0.2         1.8         4.1   

China

      13.0         12.6         15.4   

Others

      20.0         24.4         18.9   
  

 

 

     

 

 

     

 

 

  

Total Capital Expenditures

    $ 156.7       $ 162.5       $ 122.8   
  

 

 

     

 

 

     

 

 

  
     Year Ended December 31,  
     2014      2013      2012  
     (In millions)  

Net sales by product line:

         

Weight Management

    $ 3,177.0       $ 3,063.7       $ 2,554.9   

Targeted Nutrition

      1,108.5         1,109.9         944.8   

Energy, Sports & Fitness

      260.6         254.5         209.4   

Outer Nutrition

      178.9         157.2         146.3   

Literature, Promotional and Other(3)

      233.6         240.0         216.9   
  

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 4,958.6       $ 4,825.3       $ 4,072.3   
  

 

 

     

 

 

     

 

 

  

Net sales by geographic region:

         

North America

    $ 926.8       $ 908.0       $ 841.2   

Mexico

      567.9         562.4         496.1   

South & Central America

      826.4         973.5         688.8   

EMEA

      843.1         735.2         627.8   

Asia Pacific

      1,130.1         1,174.6         1,139.9   

China

      664.3         471.6         278.5   
  

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 4,958.6       $ 4,825.3       $ 4,072.3   
  

 

 

     

 

 

     

 

 

  

 

(1) Contribution margin consists of net sales less cost of sales and royalty overrides.

 

(2) Service fees to China independent service providers totaling $312.7 million, $215.6 million, and $123.5 million for the years ended December 31, 2014, 2013, and 2012, respectively, are included in selling, general and administrative expenses while Member compensation for all other countries is included in contribution margin.

 

(3) Product buybacks and returns in all product categories are included in the literature, promotional and other category.

 

(4) Net sales and contribution margin for 2013 within the Primary Reporting Segment information have been revised to correct a misclassification. As a result, United States net sales and contribution margin have been increased by $6.0 million and $2.7 million, respectively, while Others net sales and contribution margin have been decreased by the same amounts.

As of December 31, 2014 and 2013, total assets for the Company’s Primary Reporting Segment were $2,066.2 million and $2,253.7 million, respectively. Total assets for the China segment were $308.7 million and $220.0 million as of December 31, 2014 and 2013, respectively.

As of December 31, 2014 and 2013, goodwill allocated to the Company’s reporting units included in the Company’s Primary Reporting Segment was $98.8 million and $102.4 million, respectively. Goodwill allocated to the China segment was $3.4 million and $3.1 million as of December 31, 2014 and 2013, respectively.

As of December 31, 2014, the net property, plant and equipment located in the U.S. and in all foreign countries was $289.8 million and $76.9 million, respectively. As of December 31, 2013, the net property, plant and equipment located in the U.S. and in all foreign countries was $236.0 million and $82.9 million, respectively.

As of December 31, 2014, the deferred tax assets related to the U.S. and all foreign countries was $154.3 million and $63.6 million, respectively. As of December 31, 2013, the deferred tax assets related to the U.S. and all foreign countries was $69.1 million and $58.7 million, respectively.

The majority of the Company’s foreign subsidiaries designate their local currencies as their functional currency. As of December 31, 2014 and 2013, the total amount of cash held by foreign subsidiaries reported in the Company’s consolidated balance sheet was $440.8 million and $567.4 million, respectively, of which $8.3 million and $6.8 million, respectively, was maintained or invested in U.S. dollars. At December 31, 2014 and 2013, the total amount of cash and cash equivalents held by the Company’s parent and its U.S. entities was $204.6 million and $405.6 million, respectively.