Annual report pursuant to Section 13 and 15(d)

Segment Information

v2.4.0.6
Segment Information
 12 Months Ended
Dec. 31, 2012
Segment Information

10.    Segment Information

The Company is a nutrition company that sells a wide range of weight management products, nutritional supplements and personal care products within one industry segment as defined under FASB ASC Topic 280, Segment Reporting. The Company’s products are manufactured by third party providers and by the Company in its Suzhou, China facility and in its Lake Forest, California facility, and then are sold to independent distributors who both consume and sell Herbalife products to retail consumers or other distributors. Revenues reflect sales of products by the Company to its distributors and are categorized based on geographic location.

 

As of December 31, 2012, the Company sold products in 88 countries throughout the world and was organized and managed by geographic regions. 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, and the nature of the regulatory environment. China has been identified as a separate reporting segment as it does not meet the criteria for aggregation. The operating information for the Primary Reporting Segment and China, and sales by product line are as follows:

     Year Ended December 31,  
     2012      2011      2010  
     (In millions)  

Net Sales:

         

Primary Reporting Segment:

         

United States

    $ 816.9       $ 676.9       $ 595.4   

Mexico

      496.1         436.9         334.0   

South Korea

      421.4         343.5         208.9   

Others

      2,059.4         1,786.4         1,411.5   
  

 

 

     

 

 

     

 

 

  

Total Primary Reporting Segment

      3,793.8         3,243.7         2,549.8   

China

      278.5         210.8         184.4   
  

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 4,072.3       $ 3,454.5       $ 2,734.2   
  

 

 

     

 

 

     

 

 

  

Contribution Margin(1):

         

Primary Reporting Segment:

         

United States

    $ 359.5       $ 286.3       $ 257.0   

Mexico

      205.6         191.1         131.7   

South Korea

      199.4         163.1         103.0   

Others

      906.5         810.0         618.5   
  

 

 

     

 

 

     

 

 

  

Total Primary Reporting Segment

      1,671.0         1,450.5         1,110.2   

China(2)

      250.1         186.4         165.0   
  

 

 

     

 

 

     

 

 

  

Total Contribution Margin

    $ 1,921.1       $ 1,636.9       $ 1,275.2   

Selling, general and administrative expense (2)

      1,259.7         1,074.6         887.7   

Interest expense

      16.7         9.9         9.7   

Interest income

      6.2         7.4         2.3   
  

 

 

     

 

 

     

 

 

  

Income before income taxes

      650.9         559.8         380.1   

Income taxes

      173.7         147.2         80.9   
  

 

 

     

 

 

     

 

 

  

Net Income

    $ 477.2       $ 412.6       $ 299.2   
  

 

 

     

 

 

     

 

 

  

 

     Year Ended December 31,  
         2012              2011              2010      
     (In millions)  

Capital Expenditures:

         

United States

    $ 81.6       $ 60.4       $ 51.0   

Mexico

      2.8         3.5         2.5   

South Korea

      4.1         2.1         0.4   

China

      15.4         6.6         3.1   

Others

      18.9         18.3         11.1   
  

 

 

     

 

 

     

 

 

  

Total Capital Expenditures

    $ 122.8       $ 90.9       $ 68.1   
  

 

 

     

 

 

     

 

 

  

 

     Year Ended December 31,  
     2012      2011      2010  
     (In millions)  

Net sales by product line:

         

Weight Management

    $ 2,554.9       $ 2,158.7       $ 1,698.9   

Targeted Nutrition

      944.8         789.6         629.2   

Energy, Sports & Fitness

      209.4         169.8         121.3   

Outer Nutrition

      146.3         147.8         127.5   

Literature, Promotional and Other(3)

      216.9         188.6         157.3   
  

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 4,072.3       $ 3,454.5       $ 2,734.2   
  

 

 

     

 

 

     

 

 

  

Net sales by geographic region:

         

North America

    $ 841.2       $ 698.6       $ 614.1   

Mexico

      496.1         436.9         334.0   

South & Central America

      688.8         554.4         390.4   

EMEA

      627.8         615.2         527.8   

Asia Pacific

      1,139.9         938.6         683.5   

China

      278.5         210.8         184.4   
  

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 4,072.3       $ 3,454.5       $ 2,734.2   
  

 

 

     

 

 

     

 

 

  

 

 

(1) Contribution margin consists of net sales less cost of sales and royalty overrides. See Part II, Item 7 —Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K for a description of net sales, cost of sales and royalty overrides.

 

(2) Compensation to China sales employees and service fees to China independent service providers totaling $123.5 million, $96.8 million, and $87.3 million for the years ended December 31, 2012, 2011, and 2010, respectively, are included in selling, general and administrative expenses while distributor compensation for all other countries is included in contribution margin.

 

(3) Product buybacks and returns in all product categories are included in the literature, promotional and other category.

As of December 31, 2012 and 2011, total assets for the Company’s Primary Reporting Segment were $1,587.0 million and $1,357.4 million, respectively. Total assets for the China segment were $116.9 million and $88.8 million as of December 31, 2012 and 2011, respectively.

As of December 31, 2012 and 2011, goodwill allocated to the Company’s reporting units included in the Company’s Primary Reporting Segment was $102.4 million for both periods. Goodwill allocated to the China segment was $3.1 million as of December 31, 2012 and 2011.

As of December 31, 2012, the net property, plant and equipment located in the U.S. and in all foreign countries was $170.9 million and $71.9 million, respectively. As of December 31, 2011, the net property, plant and equipment located in the U.S. and in all foreign countries was $144.2 million and $49.5 million, respectively.

As of December 31, 2012, the deferred tax assets related to the U.S. and all foreign countries was $68.4 million and $51.4 million, respectively. As of December 31, 2011, the deferred tax assets related to the U.S. and all foreign countries was $65.4 million and $46.8 million, respectively.

The majority of the Company’s foreign subsidiaries designate their local currencies as their functional currency. As of December 31, 2012 and 2011, the total amount of cash held by foreign subsidiaries reported in the Company’s consolidated balance sheet was $321.3 million and $246.0 million, respectively, of which $6.9 million and $9.2 million, respectively, was maintained or invested in U.S. dollars.