Herbalife Ltd. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases (Tables)

Leases (Tables)

3 Months Ended

Mar. 31, 2019

Summary of Lease Assets and Liabilities Recognized Within Condensed Consolidated Balance Sheets

Leases with an initial term of twelve months or less are not recorded on the Company’s condensed consolidated balance sheets, and the Company does not separate nonlease components from lease components. The Company’s lease assets and liabilities recognized within its condensed consolidated balance sheets were as follows:

	March 31, 2019		Balance Sheet Location
	(in millions)
ASSETS:
Operating lease right-of-use assets	$	172.5	Operating lease right-of-use assets
Finance lease right-of-use assets		0.7	Property, plant, and equipment, at cost, net of accumulated depreciation and amortization(1)
Total lease assets	$	173.2
LIABILITIES:
Current:
Operating lease liabilities	$	35.4	Other current liabilities
Finance lease liabilities		0.4	Current portion of long-term debt
Non-current:
Operating lease liabilities		151.1	Non-current operating lease liabilities
Finance lease liabilities		0.4	Long-term debt, net of current portion
Total lease liabilities	$	187.3

(1)	Finance lease assets are recorded net of accumulated amortization of $1.0 million as of March 31, 2019.

Summary of Lease Cost Recognized Over the Lease Term

Lease cost is recognized on a straight-line basis over the lease term. The components of lease cost are as follows:

	Three Months Ended
	March 31, 2019
	(in millions)
Operating lease cost(1)(2)	$	15.8
Finance lease cost
Amortization of right-of-use assets		0.1
Interest on lease liabilities		—
Net lease cost	$	15.9

(1)

Includes short-term leases and variable lease costs, which are $2.7 million and $0.3 million, respectively. Variable lease costs, which include items such as real estate taxes, common area maintenance, and changes based on an index or rate, are not included in the calculation of the right-of-use assets and are recognized as incurred.

(2)

Amounts include $15.0 million recorded to selling, general, and administrative expenses within the Company’s condensed consolidated statements of income and $0.8 million capitalized as part of the cost of another asset, which includes inventories. During the three months ended March 31, 2018, the Company recognized rental expense of $14.7 million in selling, general, and administrative expenses within the Company’s condensed consolidated statements of income pursuant to FASB ASC Topic 840, Leases.

Summary of Annual Scheduled Lease Payments

As of March 31, 2019, annual scheduled lease payments were as follows:

	Operating Leases(1)		Finance Leases(2)
	(in millions)
2019	$	26.4	$	0.4
2020		38.3		0.4
2021		29.5		—
2022		24.3		—
2023		14.4		—
Thereafter		117.9		—
Total lease payments		250.8		0.8
Less: imputed interest		64.3		—
Present value of lease liabilities	$	186.5	$	0.8

(1)	Operating lease payments exclude $3.9 million of legally binding minimum lease payments for leases signed but not yet commenced.

(2)	Finance lease payments exclude an immaterial amount of legally binding minimum lease payments for leases signed but not yet commenced.

Future Minimum Rental Commitments for Non-Cancelable Operating Leases

As of December 31, 2018, future minimum rental commitments for non-cancelable operating leases were as follows:

	Operating Leases
	(in millions)
2019	$	43.1
2020		36.3
2021		27.4
2022		23.0
2023		12.5
Thereafter		111.4
Total	$	253.7

Summary of Weighted-average Remaining Lease Term and Weighted-average Discount Rate

The weighted-average remaining lease term and weighted-average discount rate used to calculate the present value of lease liabilities are as follows:

	March 31, 2019
Weighted-average remaining lease term:
Operating leases	9.0 years
Finance leases	1.9 years
Weighted-average discount rate:
Operating leases		5.9	%
Finance leases		5.7	%

Summary of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases is as follows:

	Three Months Ended
	March 31, 2019
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	10.2
Operating cash flows for finance leases		—
Financing cash flows for finance leases		0.1
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases		6.1
Finance leases		—