Quarterly report pursuant to Section 13 or 15(d)

Shareholders' Deficit

v3.21.2
Shareholders' Deficit
9 Months Ended
Sep. 30, 2021
Equity [Abstract]  
Shareholders' Deficit

10. Shareholders’ Deficit

Changes in shareholders’ deficit for the three months ended September 30, 2021 and 2020 were as follows:

 

 

 

Three Months Ended September 30, 2021

 

 

 

Common Shares

 

 

Treasury Stock

 

 

Paid-in Capital in Excess of Par Value

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Total Shareholders' Deficit

 

 

 

(in millions)

 

Balance as of June 30, 2021

 

$

0.1

 

 

$

(328.9

)

 

$

306.1

 

 

$

(192.3

)

 

$

(1,076.2

)

 

$

(1,291.2

)

Issuance of 0.1 common shares from exercise of SARs, restricted stock units, employee stock purchase plan, and other

 

 

 

 

 

 

 

 

1.2

 

 

 

 

 

 

 

 

 

1.2

 

Additional capital from share-based compensation

 

 

 

 

 

 

 

 

14.4

 

 

 

 

 

 

 

 

 

14.4

 

Repurchases of 3.5 common shares

 

 

 

 

 

 

 

 

(9.6

)

 

 

 

 

 

(153.1

)

 

 

(162.7

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

117.4

 

 

 

117.4

 

Foreign currency translation adjustment, net of income taxes of $(0.6)

 

 

 

 

 

 

 

 

 

 

 

(14.5

)

 

 

 

 

 

(14.5

)

Unrealized gain on derivatives, net of income taxes of $—

 

 

 

 

 

 

 

 

 

 

 

2.0

 

 

 

 

 

 

2.0

 

Balance as of September 30, 2021

 

$

0.1

 

 

$

(328.9

)

 

$

312.1

 

 

$

(204.8

)

 

$

(1,111.9

)

 

$

(1,333.4

)

 

 

 

Three Months Ended September 30, 2020

 

 

 

Common Shares

 

 

Treasury Stock

 

 

Paid-in Capital in Excess of Par Value

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Total Shareholders' Deficit

 

 

 

(in millions)

 

Balance as of June 30, 2020

 

$

0.1

 

 

$

(328.9

)

 

$

380.7

 

 

$

(246.1

)

 

$

(70.6

)

 

$

(264.8

)

Issuance of 0.8 common shares from exercise of SARs, restricted stock units, employee stock purchase plan, and other

 

 

 

 

 

 

 

 

1.1

 

 

 

 

 

 

 

 

 

1.1

 

Additional capital from share-based compensation

 

 

 

 

 

 

 

 

15.4

 

 

 

 

 

 

 

 

 

15.4

 

Repurchases of 16.8 common shares

 

 

 

 

 

 

 

 

(61.4

)

 

 

 

 

 

(757.7

)

 

 

(819.1

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

138.1

 

 

 

138.1

 

Foreign currency translation adjustment, net of income taxes of $0.7

 

 

 

 

 

 

 

 

 

 

 

19.5

 

 

 

 

 

 

19.5

 

Unrealized loss on derivatives, net of income taxes of $(0.1)

 

 

 

 

 

 

 

 

 

 

 

(3.1

)

 

 

 

 

 

(3.1

)

Balance as of September 30, 2020

 

$

0.1

 

 

$

(328.9

)

 

$

335.8

 

 

$

(229.7

)

 

$

(690.2

)

 

$

(912.9

)

 

Changes in shareholders’ deficit for the nine months ended September 30, 2021 and 2020 were as follows:

 

 

 

Nine Months Ended September 30, 2021

 

 

 

Common Shares

 

 

Treasury Stock

 

 

Paid-in Capital in Excess of Par Value

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Total Shareholders' Deficit

 

 

 

(in millions)

 

Balance as of December 31, 2020

 

$

0.1

 

 

$

(328.9

)

 

$

342.3

 

 

$

(182.2

)

 

$

(687.4

)

 

$

(856.1

)

Issuance of 1.6 common shares from exercise of SARs, restricted stock units, employee stock purchase plan, and other

 

 

 

 

 

 

 

 

3.2

 

 

 

 

 

 

 

 

 

3.2

 

Additional capital from share-based compensation

 

 

 

 

 

 

 

 

42.3

 

 

 

 

 

 

 

 

 

42.3

 

Repurchases of 18.8 common shares

 

 

 

 

 

 

 

 

(75.7

)

 

 

 

 

 

(833.5

)

 

 

(909.2

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

409.0

 

 

 

409.0

 

Foreign currency translation adjustment, net of income taxes of $0.9

 

 

 

 

 

 

 

 

 

 

 

(25.8

)

 

 

 

 

 

(25.8

)

Unrealized gain on derivatives, net of income taxes of $—

 

 

 

 

 

 

 

 

 

 

 

3.2

 

 

 

 

 

 

3.2

 

Balance as of September 30, 2021

 

$

0.1

 

 

$

(328.9

)

 

$

312.1

 

 

$

(204.8

)

 

$

(1,111.9

)

 

$

(1,333.4

)

 

 

 

Nine Months Ended September 30, 2020

 

 

 

Common Shares

 

 

Treasury Stock

 

 

Paid-in Capital in Excess of Par Value

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Total Shareholders' Deficit

 

 

 

(in millions)

 

Balance as of December 31, 2019

 

$

0.1

 

 

$

(328.9

)

 

$

366.6

 

 

$

(212.5

)

 

$

(215.3

)

 

$

(390.0

)

Issuance of 1.5 common shares from exercise of SARs, restricted stock units, employee stock purchase plan, and other

 

 

 

 

 

 

 

 

2.7

 

 

 

 

 

 

 

 

 

2.7

 

Additional capital from share-based compensation

 

 

 

 

 

 

 

 

37.9

 

 

 

 

 

 

 

 

 

37.9

 

Repurchases of 17.4 common shares

 

 

 

 

 

 

 

 

(71.4

)

 

 

 

 

 

(773.7

)

 

 

(845.1

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

298.8

 

 

 

298.8

 

Foreign currency translation adjustment, net of income taxes of $(4.1)

 

 

 

 

 

 

 

 

 

 

 

(20.4

)

 

 

 

 

 

(20.4

)

Unrealized gain on derivatives, net of income taxes of $(0.4)

 

 

 

 

 

 

 

 

 

 

 

3.2

 

 

 

 

 

 

3.2

 

Balance as of September 30, 2020

 

$

0.1

 

 

$

(328.9

)

 

$

335.8

 

 

$

(229.7

)

 

$

(690.2

)

 

$

(912.9

)

 

Dividends

The Company has not declared or paid cash dividends since 2014. 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 February 9, 2021, the Company’s board of directors authorized a new three-year $1.5 billion share repurchase program that will expire on February 9, 2024, which replaced the Company’s prior share repurchase authorization that was set to expire on October 30, 2023 and had approximately $7.9 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 September 30, 2021, the remaining authorized capacity under the Company’s $1.5 billion share repurchase program was approximately $1.2 billion.

During January 2021, the Company repurchased from Mr. Carl C. Icahn and certain of his affiliates an aggregate of approximately 12.5 million common shares of the Company at an aggregate cost of approximately $600.0 million, or $48.05 per share, and subsequently retired these shares. In addition, during the nine months ended September 30, 2021, the Company repurchased approximately 5.7 million of its common shares through open-market purchases at an aggregate cost of approximately $281.1 million, or an average cost of $49.27 per share, and subsequently retired these shares. In total, during the nine months ended September 30, 2021, the Company repurchased approximately 18.2 million of its common shares at an aggregate cost of approximately $881.1 million, or an average cost of $48.43 per share. In August 2020, the Company completed its modified Dutch auction tender offer and then subsequently paid cash to repurchase and retire a total of approximately 15.4 million of its common shares at an aggregate cost of approximately $750.0 million, or $48.75 per share. In addition, during the nine months ended September 30, 2020, the Company repurchased approximately 1.4 million of its common shares through open-market purchases at an aggregate cost of approximately $67.1 million, or an average cost of $46.44 per share, and subsequently retired these shares. In total, during the nine months ended September 30, 2020, the Company repurchased approximately 16.8 million of its common shares at an aggregate cost of approximately $817.1 million, or an average cost of $48.55 per share.

As of both September 30, 2021 and December 31, 2020, the Company held approximately 10.0 million of treasury shares for U.S. GAAP purposes. These treasury shares increased the Company’s 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.

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 nine months ended September 30, 2021 and 2020, 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 generally 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 nine months ended September 30, 2021 and 2020, the Company’s share repurchases, inclusive of transaction costs, were $881.1 million and $818.5 million, respectively, under the Company’s share repurchase programs, and $28.1 million and $26.6 million, respectively, due to shares withheld for tax purposes related to the Company’s share-based compensation plans. For the nine months ended September 30, 2021 and 2020, the Company’s total share repurchases, including shares withheld for tax purposes, were $909.2 million and $845.1 million, respectively, and have been recorded as an increase to shareholders’ deficit within the Company’s condensed consolidated balance sheets. The Company recorded $844.2 million of total share repurchases within financing activities on its condensed consolidated statement of cash flows for the nine months ended September 30, 2020, which excludes $0.9 million of fees related to share repurchases for which payment was made subsequent to the quarter end and therefore reflected as a liability within the Company’s condensed consolidated balance sheet as of September 30, 2020.

Accumulated Other Comprehensive Loss

The following table summarizes changes in accumulated other comprehensive loss by component during the three months ended September 30, 2021 and 2020:

 

 

 

Changes in Accumulated Other Comprehensive Loss by Component

 

 

 

Three Months Ended

 

 

 

September 30,
2021

 

 

September 30,
2020

 

 

 

Foreign Currency Translation Adjustments

 

 

Unrealized (Loss) Gain on Derivatives

 

 

Total

 

 

Foreign Currency Translation Adjustments

 

 

Unrealized Gain (Loss) on Derivatives

 

 

Total

 

 

 

(in millions)

 

Beginning balance

 

$

(189.7

)

 

$

(2.6

)

 

$

(192.3

)

 

$

(251.5

)

 

$

5.4

 

 

$

(246.1

)

Other comprehensive (loss) income before reclassifications, net of tax

 

 

(14.5

)

 

 

0.9

 

 

 

(13.6

)

 

 

19.5

 

 

 

0.6

 

 

 

20.1

 

Amounts reclassified from accumulated other comprehensive loss to income, net of tax(1)

 

 

 

 

 

1.1

 

 

 

1.1

 

 

 

 

 

 

(3.7

)

 

 

(3.7

)

Total other comprehensive (loss) income, net of reclassifications

 

 

(14.5

)

 

 

2.0

 

 

 

(12.5

)

 

 

19.5

 

 

 

(3.1

)

 

 

16.4

 

Ending balance

 

$

(204.2

)

 

$

(0.6

)

 

$

(204.8

)

 

$

(232.0

)

 

$

2.3

 

 

$

(229.7

)

 

(1) See Note 9, Derivative Instruments and Hedging Activities, for information regarding the location in the condensed consolidated statements of income of gains (losses) reclassified from accumulated other comprehensive loss into income during the three months ended September 30, 2021 and 2020.

Other comprehensive loss before reclassifications was net of tax benefit of $0.6 million for foreign currency translation adjustments for the three months ended September 30, 2021.

Other comprehensive loss before reclassifications was net of tax expense of $0.7 million for foreign currency translation adjustments for the three months ended September 30, 2020. Amounts reclassified from accumulated other comprehensive loss to income was net of tax benefit of $0.1 million for unrealized gain (loss) on derivatives for the three months ended September 30, 2020.

The following table summarizes changes in accumulated other comprehensive loss by component during the nine months ended September 30, 2021 and 2020:

 

 

 

Changes in Accumulated Other Comprehensive Loss by Component

 

 

 

Nine Months Ended

 

 

 

September 30,
2021

 

 

September 30,
2020

 

 

 

Foreign Currency Translation Adjustments

 

 

Unrealized (Loss) Gain on Derivatives

 

 

Total

 

 

Foreign Currency Translation Adjustments

 

 

Unrealized (Loss) Gain on Derivatives

 

 

Total

 

 

 

(in millions)

 

Beginning balance

 

$

(178.4

)

 

$

(3.8

)

 

$

(182.2

)

 

$

(211.6

)

 

$

(0.9

)

 

$

(212.5

)

Other comprehensive (loss) income before reclassifications, net of tax

 

 

(25.8

)

 

 

0.7

 

 

 

(25.1

)

 

 

(20.4

)

 

 

5.7

 

 

 

(14.7

)

Amounts reclassified from accumulated other comprehensive loss to income, net of tax(1)

 

 

 

 

 

2.5

 

 

 

2.5

 

 

 

 

 

 

(2.5

)

 

 

(2.5

)

Total other comprehensive (loss) income, net of reclassifications

 

 

(25.8

)

 

 

3.2

 

 

 

(22.6

)

 

 

(20.4

)

 

 

3.2

 

 

 

(17.2

)

Ending balance

 

$

(204.2

)

 

$

(0.6

)

 

$

(204.8

)

 

$

(232.0

)

 

$

2.3

 

 

$

(229.7

)

 

(1) See Note 9, Derivative Instruments and Hedging Activities, for information regarding the location in the condensed consolidated statements of income of gains (losses) reclassified from accumulated other comprehensive loss into income during the nine months ended September 30, 2021 and 2020.

Other comprehensive loss before reclassifications was net of tax expense of $0.9 million for foreign currency translation adjustments for the nine months ended September 30, 2021.

Other comprehensive loss before reclassifications was net of tax benefit of $4.1 million and $0.5 million for foreign currency translation adjustments and unrealized gain (loss) on derivatives, respectively, for the nine months ended September 30, 2020. Amounts reclassified from accumulated other comprehensive loss to income was net of tax expense of $0.1 million for unrealized gain (loss) on derivatives for the nine months ended September 30, 2020.