11. Shareholders’ Deficit

Changes in shareholders’ deficit for the three months ended June 30, 2019 and 2018 were as follows:

Changes in shareholders’ deficit for the six months ended June 30, 2019 and 2018 were as follows:

Dividends

The declaration of future dividends is subject to the discretion of the Company’s board of directors and will depend upon various factors, including its earnings, financial condition, Herbalife Nutrition Ltd.’s available distributable reserves under Cayman Islands law, restrictions imposed by the 2018 Credit Facility and the terms of any other indebtedness that may be outstanding, cash requirements, future prospects and other factors deemed relevant by its board of directors.

Share Repurchases

On October 30, 2018, the Company’s board of directors authorized a new five-year $1.5 billion share repurchase program that will expire on October 30, 2023, which replaced the Company’s prior share repurchase authorization that was set to expire on February 21, 2020 and had approximately $113.3 million of remaining authorized capacity when it was replaced. This share repurchase program allows the Company, which includes an indirect wholly-owned subsidiary of Herbalife Nutrition Ltd., to repurchase the Company’s common shares at such times and prices as determined by management, as market conditions warrant, and to the extent Herbalife Nutrition Ltd.’s distributable reserves are available under Cayman Islands law. The 2018 Credit Facility permits the Company to repurchase its common shares as long as no default or event of default exists and other conditions, such as specified consolidated leverage ratios, are met. As of June 30, 2019, the remaining authorized capacity under the Company’s $1.5 billion share repurchase program was $1.5 billion.

In conjunction with the issuance of the 2019 Convertible Notes during February 2014, the Company paid approximately $685.8 million to enter into Forward Transactions with certain financial institutions, or the Forward Counterparties, pursuant to which the Company purchased approximately 19.9 million common shares, at an average cost of $34.51 per share, for settlement on or around the August 15, 2019 maturity date for the 2019 Convertible Notes, subject to the ability of each Forward Counterparty to elect to settle all or a portion of its Forward Transactions early. The Forward Transactions were generally expected to facilitate privately negotiated derivative transactions between the Forward Counterparties and holders of the 2019 Convertible Notes, including swaps, relating to the common shares by which holders of the 2019 Convertible Notes establish short positions relating to the common shares and otherwise hedge their investments in the 2019 Convertible Notes concurrently with, or shortly after, the pricing of the 2019 Convertible Notes. The approximate 19.9 million common shares effectively repurchased through the Forward Transactions are treated as retired shares for basic and diluted EPS purposes. During the three months ended June 30, 2019, the Forward Counterparties did not deliver any shares to the Company. During the three months ended June 30, 2018, the Forward Counterparties delivered approximately 8.4 million shares to the Company, which were subsequently retired by the Company, and as a result, the Company expensed $3.1 million of unamortized non-cash issuance costs relating to these shares, which is included in the non-cash interest expense amount disclosed below. During the six months ended June 30, 2019 and 2018, the Forward Counterparties delivered approximately 2.0 million and 8.4 million shares, respectively, to the Company, which were subsequently retired by the Company, and as a result, the Company expensed $0.2 million and $3.1 million, respectively, of unamortized non-cash issuance costs relating to these shares, which is included in the non-cash interest expense amounts disclosed below. As of June 30, 2019, approximately 4.0 million shares still remained legally outstanding.

As a result of the Forward Transactions, the Company’s total shareholders’ equity within its condensed consolidated balance sheet was reduced by approximately $685.8 million during the first quarter of 2014, with amounts of $653.9 million and $31.9 million being allocated between accumulated deficit and additional paid-in capital, respectively, within total shareholders’ equity. Also, upon executing the Forward Transactions, the Company recorded, at fair value, $35.8 million in non-cash issuance costs to other assets and a corresponding amount to additional paid-in capital within its condensed consolidated balance sheet. These non-cash issuance costs will be amortized to interest expense over the contractual term of the Forward Transactions. The Company recognized $0.3 million and $4.7 million for the three months ended June 30, 2019 and 2018, respectively, and $1.0 million and $6.3 million for the six months ended June 30, 2019 and 2018, respectively, of non-cash interest expense within its condensed consolidated statements of income relating to amortization of these non-cash issuance costs.

During the three months ended June 30, 2019 and 2018, the Company did not repurchase any of its common shares through open market purchases. During the six months ended June 30, 2019, the Company did not repurchase any of its common shares through open market purchases. During the six months ended June 30, 2018, an indirect wholly-owned subsidiary of the Company purchased 8,400 of Herbalife Nutrition Ltd.’s common shares through open market purchases at an aggregate cost of approximately $0.3 million, or an average cost of $33.90 per share. These share repurchases increased the Company’s total shareholders’ deficit and are reflected at cost within the Company’s accompanying condensed consolidated balance sheets. Although these shares are owned by an indirect wholly-owned subsidiary of the Company and remain legally outstanding, they are reflected as treasury shares under U.S. GAAP and therefore reduce the number of common shares outstanding within the Company’s condensed consolidated financial statements and the weighted-average number of common shares outstanding used in calculating earnings per share. The common shares of Herbalife Nutrition Ltd. held by the indirect wholly-owned subsidiary, however, remain outstanding on the books and records of the Company’s transfer agent and therefore still carry voting and other share rights related to ownership of the Company’s common shares, which may be exercised. So long as it is consistent with applicable laws, such shares will be voted by such subsidiary in the same manner, and to the maximum extent possible in the same proportion, as all other votes cast with respect to any matter properly submitted to a vote of Herbalife Nutrition Ltd.’s shareholders. As of both June 30, 2019 and December 31, 2018, the Company held approximately 10.0 million of treasury shares for U.S. GAAP purposes.

In connection with the Company’s October 2017 modified Dutch auction tender offer, the Company incurred $1.6 million in transaction costs and also provided a non-transferable CVR for each share tendered, allowing participants in the tender offer to receive a contingent cash payment in the event Herbalife is acquired in a going-private transaction (as defined in the CVR Agreement) within two years of the commencement of the tender offer. The initial fair value of the CVR was $7.3 million, which was recorded as a liability in the fourth quarter of 2017 with a corresponding decrease to shareholders’ equity. In determining the initial fair value of the CVR, the Company used a lattice model, which included inputs such as the underlying stock price, strike price, time to expiration, and dividend yield. Subsequent changes in the fair value of the CVR liability, using a similar valuation approach as the initial fair value determination, are recognized within the Company's condensed consolidated balance sheets with corresponding gains or losses being recognized in other (income) expense, net within the Company's condensed consolidated statements of income during each reporting period until the CVR expires in August 2019 or is terminated due to a going-private transaction, which is also incorporated in the valuation of the CVR; this going-private probability input is considered to be a Level 3 input in the fair value hierarchy and any increase or decrease in this input could have significantly impacted the fair value of the CVR as of the reporting date. Any subsequent increase or decrease in this input or other inputs described above in subsequent valuations could significantly impact the fair value of the CVR.

During the three months ended June 30, 2019, the Company recognized a $5.9 million gain in other (income) expense, net within its condensed consolidated statement of income due to the change in the fair value of the CVR, which was primarily driven by a decrease in the market price of the Company’s common shares and a decrease in the probability of a going-private transaction as a result of the shortening term of the CVR before it expires pursuant to its terms. During the three months ended June 30, 2018, the Company recognized a $4.7 million loss in other (income) expense, net within its condensed consolidated statement of income due to the change in the fair value of the CVR, which was primarily driven by an increase in the market price of the Company’s common shares.

During the six months ended June 30, 2019, the Company recognized a $14.4 million gain in other (income) expense, net within its condensed consolidated statement of income due to the change in the fair value of the CVR, which was primarily driven by a decrease in the market price of the Company’s common shares and a decrease in the probability of a going-private transaction as a result of the shortening term of the CVR before it expires pursuant to its terms. During the six months ended June 30, 2018, the Company recognized a $16.0 million loss in other (income) expense, net within its condensed consolidated statement of income due to the change in the fair value of the CVR, which was primarily driven by an increase in the market price of the Company’s common shares.

As of June 30, 2019 and December 31, 2018, the fair value of the CVR was $1.3 million and $15.7 million, respectively.

The number of shares issued upon vesting or exercise for certain restricted stock units and SARs granted pursuant to the Company’s share-based compensation plans is net of the statutory withholding requirements that the Company pays on behalf of its employees. Although shares withheld are not issued, they are treated as common share repurchases in the Company’s condensed consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting. These shares do not count against the authorized capacity under the Company’s share repurchase program described above. During the three and six months ended June 30, 2019 and 2018, the Company withheld shares on its vested restricted stock units and exercised SARs relating to its share-based compensation plans.

The Company reflects the aggregate purchase price of its common shares repurchased as an increase to shareholders’ deficit. The Company allocated the purchase price of the repurchased shares to accumulated deficit, common shares, and additional paid-in capital, with the exception of treasury shares, which are recorded separately on the Company’s condensed consolidated balance sheets.

For the six months ended June 30, 2019 and 2018, the Company’s share repurchases, inclusive of transaction costs, were none and $600.7 million, respectively, under the Company’s share repurchase programs, and $9.0 million and $80.7 million, respectively, due to shares withheld for tax purposes related to the Company’s share-based compensation plans. For the six months ended June 30, 2019 and 2018, the Company’s total share repurchases, including shares withheld for tax purposes, were $9.0 million and $681.4 million, respectively, and have been recorded as an increase to shareholders’ deficit within the Company’s condensed consolidated balance sheets. The Company recorded $685.6 million of total share repurchases within financing activities on its condensed consolidated statement of cash flows for the six months ended June 30, 2018, which includes $4.2 million of share repurchases that were reflected as an increase to shareholders’ deficit within the Company’s condensed consolidated balance sheet as of December 31, 2017 but were subsequently paid during the six months ended June 30, 2018.

Capped Call Transactions

In February 2014, in connection with the issuance of the 2019 Convertible Notes, the Company paid approximately $123.8 million to enter into Capped Call Transactions with certain financial institutions. The Capped Call Transactions are expected generally to reduce the potential dilution upon conversion of the 2019 Convertible Notes in the event that the market price of the common shares is greater than the strike price of the Capped Call Transactions, initially set at $43.14 per common share, with such reduction of potential dilution subject to a cap based on the cap price initially set at $60.39 per common share. The strike price and cap price are subject to certain adjustments under the terms of the Capped Call Transactions. Therefore, as a result of executing the Capped Call Transactions, the Company in effect will only be exposed to potential net dilution once the market price of its common shares exceeds the adjusted cap price. As of June 30, 2019, the weighted-average adjusted cap price was approximately $53.37 per common share. As a result of the Capped Call Transactions, the Company’s additional paid-in capital within shareholders’ equity on its condensed consolidated balance sheet was reduced by $123.8 million during the first quarter of 2014.

During March 2018, in connection with the Company’s repurchase of a portion of the 2019 Convertible Notes, the Company entered into partial settlement agreements with the option counterparties to the Capped Call Transactions to terminate a portion of such existing transactions, in each case, in a notional amount corresponding to the aggregate principal amount of 2019 Convertible Notes that were repurchased. As a result of terminating a portion of the Capped Call Transactions, which were in a favorable position, the Company received $55.9 million in cash and recognized an offsetting increase to additional paid-in capital during 2018.

Temporary Equity

During the fourth quarter of 2018, the last reported sale price of the Company’s common shares exceeded 130% of the conversion price for the 2019 Convertible Notes for at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the quarter. As such, the 2019 Convertible Notes were convertible at the holders’ option during the first quarter of 2019. The Company reclassified the difference between the aggregate principal amount and the carrying value of the 2019 Convertible Notes of approximately $11.3 million from additional paid-in capital to temporary equity on its condensed consolidated balance sheet as of March 31, 2019.

As of June 30, 2019, the 2019 Convertible Notes were not contractually required to be settled until the maturity date of August 15, 2019, and as such, the Company reclassified the temporary equity to additional paid-in capital on its condensed consolidated balance sheet.

Accumulated Other Comprehensive Loss

The following table summarizes changes in accumulated other comprehensive loss by component during the three months ended June 30, 2019 and 2018:

Other comprehensive (loss) income before reclassifications was net of tax benefit of $1.5 million for foreign currency translation adjustments for the three months ended June 30, 2019.

Other comprehensive (loss) income before reclassifications was net of tax benefit of $3.1 million for foreign currency translation adjustments for the three months ended June 30, 2018.

The following table summarizes changes in accumulated other comprehensive loss by component during the six months ended June 30, 2019 and 2018:

Other comprehensive income (loss) before reclassifications was net of tax benefit of $1.0 million for foreign currency translation adjustments for the six months ended June 30, 2019.

Other comprehensive income (loss) before reclassifications was net of tax benefit of $2.0 million for foreign currency translation adjustments for the six months ended June 30, 2018.