Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.23.3
Segment Information
 9 Months Ended
Sep. 30, 2023
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, and fitness; and outer nutrition products. The Company’s products are manufactured by the Company in its Changsha, Hunan, China extraction facility; Suzhou, China facility; Nanjing, China facility; Lake Forest, California facility; and Winston-Salem, North Carolina facility, as well as by third-party providers, 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.

The Company sells products in 95 markets throughout the world. The Company was previously organized and managed by six geographic regions: North America, Mexico, South and Central America, EMEA, Asia Pacific, and China. During the third quarter of 2022, in order to simplify the understanding of the Company's performance and ongoing trends of the business and align with the Company's organizational structure, the Company combined its Mexico geographic region with its South and Central America region, into one geographic region now named Latin America; therefore, the Company currently has five geographic regions. The Company defines its operating segments as those geographical operations. The Company aggregates its operating segments, excluding China, into a 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 and capital expenditures on a consolidated basis and not by operating segment. Therefore, net sales and contribution margin are presented by reportable segment and assets and capital expenditures by segment are not presented. Although, the Company reduced its operating segments from six to five during fiscal year 2022, this change did not impact the Company’s two reportable segments and therefore, the historical reportable segment disclosures below did not need to be restated.

Operating information for the two reportable segments is as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,
2023

 

 

September 30,
2022

 

 

September 30,
2023

 

 

September 30,
2022

 

 

 

(in millions)

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

$

1,191.8

 

 

$

1,184.5

 

 

$

3,602.2

 

 

$

3,703.7

 

China

 

 

89.5

 

 

 

110.6

 

 

 

245.2

 

 

 

319.9

 

Total net sales

 

$

1,281.3

 

 

$

1,295.1

 

 

$

3,847.4

 

 

$

4,023.6

 

Contribution margin(1):

 

 

 

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

$

486.1

 

 

$

500.8

 

 

$

1,476.2

 

 

$

1,539.3

 

China

 

 

75.9

 

 

 

94.8

 

 

 

206.0

 

 

 

275.2

 

Total contribution margin

 

$

562.0

 

 

$

595.6

 

 

$

1,682.2

 

 

$

1,814.5

 

Selling, general, and administrative expenses(1)

 

 

455.3

 

 

 

448.2

 

 

 

1,391.7

 

 

 

1,373.1

 

Other operating income

 

 

—

 

 

 

—

 

 

 

(10.1

)

 

 

(14.9

)

Interest expense, net

 

 

38.5

 

 

 

34.5

 

 

 

116.3

 

 

 

95.9

 

Other income, net

 

 

(1.0

)

 

 

—

 

 

 

(1.0

)

 

 

—

 

Income before income taxes

 

 

69.2

 

 

 

112.9

 

 

 

185.3

 

 

 

360.4

 

Income taxes

 

 

26.4

 

 

 

30.7

 

 

 

53.3

 

 

 

93.5

 

Net income

 

$

42.8

 

 

$

82.2

 

 

$

132.0

 

 

$

266.9

 

 

(1)
Contribution margin consists of net sales less cost of sales and Royalty overrides. For the China segment, contribution margin does not include the portion of service fees to China independent service providers included in selling, general, and administrative expenses, which totaled $45.6 million and $55.3 million for the three months ended September 30, 2023 and 2022, respectively, and $123.8 million and $161.7 million for the nine months ended September 30, 2023 and 2022, respectively.

The following table sets forth net sales by geographic area:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,
2023

 

 

September 30,
2022

 

 

September 30,
2023

 

 

September 30,
2022

 

 

 

(in millions)

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

270.1

 

 

$

308.8

 

 

$

854.6

 

 

$

959.4

 

India

 

 

215.9

 

 

 

192.9

 

 

 

583.9

 

 

 

508.5

 

Mexico

 

 

137.3

 

 

 

114.8

 

 

 

403.6

 

 

 

357.1

 

China

 

 

89.5

 

 

 

110.6

 

 

 

245.2

 

 

 

319.9

 

Others

 

 

568.5

 

 

 

568.0

 

 

 

1,760.1

 

 

 

1,878.7

 

Total net sales

 

$

1,281.3

 

 

$

1,295.1

 

 

$

3,847.4

 

 

$

4,023.6