Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v2.4.0.8
Segment Information
6 Months Ended
Jun. 30, 2013
Segment Reporting [Abstract]  
Segment Information

6. Segment Information

The Company is a nutrition company that sells a wide range of weight management products, nutritional supplements and personal care products. The Company’s products are manufactured by third party providers and by the Company in its Changsha, Hunan, China extraction facility, Suzhou, China facility and in its Lake Forest, California facility, and then are sold to independent distributors who 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 June 30, 2013, 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:

 

     Three Months Ended      Six Months Ended  
     June 30,
2013
     June 30,
2012
     June 30,
2013
     June 30,
2012
 
     (In millions)  

Net Sales:

           

Primary Reporting Segment

           

United States

   $ 241.7       $ 218.1       $ 457.9       $ 422.6   

Mexico

     145.6         119.5         278.5         236.6   

South Korea

     112.0         112.5         222.0         205.6   

Others

     601.9         504.7         1,197.9         997.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Primary Reporting Segment

     1,101.2         954.8         2,156.3         1,862.1   

China

     118.0         77.1         186.6         134.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Net Sales

   $ 1,219.2       $ 1,031.9       $ 2,342.9       $ 1,996.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Contribution Margin(1)(2):

           

Primary Reporting Segment

           

United States

   $ 99.5       $ 93.6       $ 194.2       $ 189.0   

Mexico

     64.0         49.0         122.6         92.9   

South Korea

     56.4         55.0         111.6         97.0   

Others

     266.8         226.1         531.3         444.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Primary Reporting Segment

     486.7         423.7         959.7         822.9   

China

     105.8         69.4         166.3         120.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Contribution Margin

   $ 592.5       $ 493.1       $ 1,126.0       $ 943.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Selling, general and administrative expenses(2)

     400.1         306.3         764.8         602.7   

Interest expense, net

     5.6         3.2         10.9         4.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     186.8         183.6         350.3         336.3   

Income taxes

     43.6         51.6         88.3         96.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

   $ 143.2       $ 132.0       $ 262.0       $ 239.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net sales by product line:

           

Weight Management

   $ 778.2       $ 646.8       $ 1,489.8       $ 1,248.6   

Targeted Nutrition

     277.5         241.0         534.4         465.9   

Energy, Sports and Fitness

     65.1         52.5         123.4         100.6   

Outer Nutrition

     37.8         37.7         76.0         74.4   

Literature, promotional and other(3)

     60.6         53.9         119.3         106.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Net Sales

   $ 1,219.2       $ 1,031.9       $ 2,342.9       $ 1,996.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net sales by geographic region:

           

North America

   $ 247.5       $ 224.7       $ 469.0       $ 435.4   

Mexico

     145.6         119.5         278.5         236.6   

South and Central America

     222.5         152.5         441.9         318.0   

EMEA

     186.4         161.6         355.9         315.6   

Asia Pacific

     299.2         296.5         611.0         556.5   

China

     118.0         77.1         186.6         134.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Net Sales

   $ 1,219.2       $ 1,031.9       $ 2,342.9       $ 1,996.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Contribution margin consists of net sales less cost of sales and royalty overrides. See Part I, Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Original 10-Q for a description of net sales, cost of sales and royalty overrides.
(2) Service fees to China independent service providers totaling $53.2 million and $33.5 million for the three months ended June 30, 2013 and 2012, respectively, and totaling $84.7 million and $59.3 million for the six months ended June 30, 2013 and 2012, 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 June 30, 2013 and December 31, 2012, total assets for the Company’s Primary Reporting Segment were $2,065.7 million and $1,607.2 million, respectively. Total assets for the China segment were $188.3 million and $116.9 million as of June 30, 2013 and December 31, 2012, respectively. As of June 30, 2013 and December 31, 2012, 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 June 30, 2013 and December 31, 2012.