Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v2.4.1.9
Segment Information
 3 Months Ended
Mar. 31, 2015
Segment Reporting [Abstract]  
Segment Information

6. 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 March 31, 2015, 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:

 

     Three Months Ended  
     March 31,
2015		      March 31,
2014		  
     (In millions)  

Net Sales:

      

Primary Reporting Segment

      

United States(4)

    $ 221.9       $ 242.3   

Mexico

      123.6         142.7   

South Korea

      71.8         99.0   

Others

      523.9         642.8   
  

 

 

     

 

 

  

Total Primary Reporting Segment

   941.2      1,126.8   

China

   164.2      135.8   
  

 

 

     

 

 

  

Total Net Sales

 $ 1,105.4    $ 1,262.6   
  

 

 

     

 

 

  

Contribution Margin(1)(2):

Primary Reporting Segment

United States(4)

 $ 92.2    $ 103.9   

Mexico

   58.7      61.4   

South Korea

   41.6      55.4   

Others

   226.5      284.5   
  

 

 

     

 

 

  

Total Primary Reporting Segment

   419.0      505.2   

China

   148.0      124.4   
  

 

 

     

 

 

  

Total Contribution Margin

 $ 567.0    $ 629.6   
  

 

 

     

 

 

  

Selling, general and administrative expenses(2)

   431.4      502.1   

Interest expense, net

   21.5      14.9   

Other expense, net

   2.3      3.2   
  

 

 

     

 

 

  

Income before income taxes

   111.8      109.4   

Income taxes

   33.6      34.8   
  

 

 

     

 

 

  

Net Income

 $ 78.2    $ 74.6   
  

 

 

     

 

 

  

Net sales by product line:

Weight Management

 $ 703.9    $ 807.6   

Targeted Nutrition

   251.9      284.0   

Energy, Sports and Fitness

   60.1      66.7   

Outer Nutrition

   35.4      39.7   

Literature, promotional and other(3)

   54.1      64.6   
  

 

 

     

 

 

  

Total Net Sales

 $ 1,105.4    $ 1,262.6   
  

 

 

     

 

 

  

Net sales by geographic region:

North America

 $ 226.7    $ 247.8   

Mexico

   123.6      142.7   

South and Central America

   161.7      244.7   

EMEA

   186.4      211.2   

Asia Pacific

   242.8      280.4   

China

   164.2      135.8   
  

 

 

     

 

 

  

Total Net Sales

 $ 1,105.4    $ 1,262.6   
  

 

 

     

 

 

  

 

(1) Contribution margin consists of net sales less cost of sales and royalty overrides.
(2) Service fees to China independent service providers totaling $78.7 million and $61.6 million for the three months ended March 31, 2015 and 2014, 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 2014 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 $8.3 million and $3.3 million, respectively, while Others net sales and contribution margin have been decreased by the same amounts.

As of March 31, 2015 and December 31, 2014, total assets for the Company’s Primary Reporting Segment were $2,038.8 million and $2,066.2 million, respectively. Total assets for the China segment were $350.1 million and $308.7 million as of March 31, 2015 and December 31, 2014, respectively. As of March 31, 2015 and December 31, 2014, goodwill allocated to the Company’s reporting units included in the Company’s Primary Reporting Segment was $93.1 million and $98.8 million, respectively. As of March 31, 2015 and December 31, 2014, goodwill allocated to the China segment was $3.4 million for both periods.