Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.2.0.727
Segment Information
 6 Months Ended
Jun. 30, 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 June 30, 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

 

 

Six Months Ended

 

 

 

June 30,

2015

 

 

June 30,

2014

 

 

June 30,

2015

 

 

June 30,

2014

 

 

 

(In millions)

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

224.9

 

 

$

245.0

 

 

$

446.8

 

 

$

487.3

 

Mexico

 

 

129.2

 

 

 

148.6

 

 

 

252.8

 

 

 

291.3

 

South Korea

 

 

77.3

 

 

 

117.9

 

 

 

149.1

 

 

 

216.9

 

Others

 

 

494.2

 

 

 

624.6

 

 

 

1,018.1

 

 

 

1,267.4

 

Total Primary Reporting Segment

 

 

925.6

 

 

 

1,136.1

 

 

 

1,866.8

 

 

 

2,262.9

 

China

 

 

236.7

 

 

 

170.1

 

 

 

400.9

 

 

 

305.9

 

Total Net Sales

 

$

1,162.3

 

 

$

1,306.2

 

 

$

2,267.7

 

 

$

2,568.8

 

 

Contribution Margin(1)(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

88.4

 

 

$

101.9

 

 

$

180.6

 

 

$

205.8

 

Mexico

 

 

53.7

 

 

 

64.1

 

 

 

112.4

 

 

 

125.5

 

South Korea

 

 

43.2

 

 

 

62.9

 

 

 

84.8

 

 

 

118.3

 

Others

 

 

214.5

 

 

 

277.0

 

 

 

441.0

 

 

 

561.7

 

Total Primary Reporting Segment

 

 

399.8

 

 

 

505.9

 

 

 

818.8

 

 

 

1,011.3

 

China

 

 

214.5

 

 

 

152.3

 

 

 

362.5

 

 

 

276.7

 

Total Contribution Margin

 

$

614.3

 

 

$

658.2

 

 

$

1,181.3

 

 

$

1,288.0

 

Selling, general and administrative expenses(2)

 

 

470.5

 

 

 

461.9

 

 

 

901.9

 

 

 

964.0

 

Interest expense, net

 

 

23.7

 

 

 

21.4

 

 

 

45.2

 

 

 

36.4

 

Other expense, net

 

 

—

 

 

 

—

 

 

 

2.3

 

 

 

3.2

 

Income before income taxes

 

 

120.1

 

 

 

174.9

 

 

 

231.9

 

 

 

284.4

 

Income taxes

 

 

37.3

 

 

 

55.4

 

 

 

70.9

 

 

 

90.2

 

Net Income

 

$

82.8

 

 

$

119.5

 

 

$

161.0

 

 

$

194.2

 

 

Net sales by product line:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weight Management

 

$

752.1

 

 

$

843.5

 

 

$

1,456.0

 

 

$

1,651.1

 

Targeted Nutrition

 

 

261.0

 

 

 

286.1

 

 

 

512.9

 

 

 

570.1

 

Energy, Sports and Fitness

 

 

62.6

 

 

 

68.9

 

 

 

122.7

 

 

 

135.6

 

Outer Nutrition

 

 

32.0

 

 

 

47.0

 

 

 

67.4

 

 

 

86.7

 

Literature, promotional and other(3)

 

 

54.6

 

 

 

60.7

 

 

 

108.7

 

 

 

125.3

 

Total Net Sales

 

$

1,162.3

 

 

$

1,306.2

 

 

$

2,267.7

 

 

$

2,568.8

 

 

Net sales by geographic region:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

230.0

 

 

$

250.6

 

 

$

456.7

 

 

$

498.4

 

Mexico

 

 

129.2

 

 

 

148.6

 

 

 

252.8

 

 

 

291.3

 

South and Central America

 

 

133.5

 

 

 

203.3

 

 

 

295.2

 

 

 

448.0

 

EMEA

 

 

193.8

 

 

 

227.3

 

 

 

380.2

 

 

 

438.5

 

Asia Pacific

 

 

239.1

 

 

 

306.3

 

 

 

481.9

 

 

 

586.7

 

China

 

 

236.7

 

 

 

170.1

 

 

 

400.9

 

 

 

305.9

 

Total Net Sales

 

$

1,162.3

 

 

$

1,306.2

 

 

$

2,267.7

 

 

$

2,568.8

 

 

(1)

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

(2)

Service fees to China independent service providers totaling $114.4 million and $80.8 million for the three months ended June 30, 2015 and 2014, respectively, and totaling $193.1 million and $142.5 million for the six months ended June 30, 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.

As of June 30, 2015 and December 31, 2014, total assets for the Company’s Primary Reporting Segment were $2,021.1 million and $2,066.2 million, respectively. Total assets for the China segment were $394.0 million and $308.7 million as of June 30, 2015 and December 31, 2014, respectively. As of June 30, 2015 and December 31, 2014, goodwill allocated to the Company’s reporting units included in the Company’s Primary Reporting Segment was $93.6 million and $98.8 million, respectively. As of June 30, 2015 and December 31, 2014, goodwill allocated to the China segment was $3.4 million for both periods.