Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.3.0.814
Segment Information
 9 Months Ended
Sep. 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 September 30, 2015, the Company sold products in 93 countries throughout the world and was organized and managed by six geographic regions: North America, Mexico, South & Central America, EMEA (Europe, Middle East, and Africa), Asia Pacific and China. The Company defines its operating segments as those geographical operations. 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 Company reviews its net sales and contribution margin by operating segment, and reviews its assets on a consolidated basis and not by operating segment. Therefore, net sales and contribution margin are presented by reportable segment and assets by segment are not presented. The operating information for the Primary Reporting Segment and China are as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

2015

 

 

September 30,

2014

 

 

September 30,

2015

 

 

September 30,

2014

 

 

 

(In millions)

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

$

878.0

 

 

$

1,074.9

 

 

$

2,744.8

 

 

$

3,337.8

 

China

 

 

224.9

 

 

 

181.3

 

 

 

625.8

 

 

 

487.2

 

Total Net Sales

 

$

1,102.9

 

 

$

1,256.2

 

 

$

3,370.6

 

 

$

3,825.0

 

 

Contribution Margin(1)(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

$

390.5

 

 

$

476.0

 

 

$

1,209.3

 

 

$

1,487.2

 

China

 

 

200.8

 

 

 

161.3

 

 

 

563.3

 

 

 

438.0

 

Total Contribution Margin

 

$

591.3

 

 

$

637.3

 

 

$

1,772.6

 

 

$

1,925.2

 

Selling, general and administrative expenses(2)

 

 

429.7

 

 

 

609.7

 

 

 

1,331.6

 

 

 

1,573.7

 

Interest expense, net

 

 

24.1

 

 

 

19.9

 

 

 

69.3

 

 

 

56.2

 

Other expense, net

 

 

—

 

 

 

9.8

 

 

 

2.3

 

 

 

13.0

 

Income before income taxes

 

 

137.5

 

 

 

(2.1

)

 

 

369.4

 

 

 

282.3

 

Income taxes

 

 

43.9

 

 

 

(13.3

)

 

 

114.8

 

 

 

76.9

 

Net Income

 

$

93.6

 

 

$

11.2

 

 

$

254.6

 

 

$

205.4

 

 

(1)

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

(2)

Service fees to China independent service providers totaling $105.9 million and $86.6 million for the three months ended September 30, 2015 and 2014, respectively, and totaling $299.0 million and $229.1 million for the nine months ended September 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.

The following table sets forth net sales by geographic area:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

2015

 

 

September 30,

2014

 

 

September 30,

2015

 

 

September 30,

2014

 

 

 

(In millions)

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

214.7

 

 

$

218.4

 

 

$

661.5

 

 

$

705.7

 

Mexico

 

 

113.4

 

 

 

143.9

 

 

 

366.2

 

 

 

435.2

 

South Korea

 

 

65.2

 

 

 

121.3

 

 

 

214.3

 

 

 

338.2

 

China

 

 

224.9

 

 

 

181.3

 

 

 

625.8

 

 

 

487.2

 

Others

 

 

484.7

 

 

 

591.3

 

 

 

1,502.8

 

 

 

1,858.7

 

Total Net Sales

 

$

1,102.9

 

 

$

1,256.2

 

 

$

3,370.6

 

 

$

3,825.0