Annual report pursuant to Section 13 and 15(d)

Segment Information

v2.4.0.8
Segment Information
 12 Months Ended
Dec. 31, 2013
Segment Reporting [Abstract]  
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. 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 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.

 

As of December 31, 2013, the Company sold products in 91 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,  
     2013      2012      2011  
     (In millions)  

Net Sales:

         

Primary Reporting Segment:

         

United States

    $ 881.0       $ 816.9       $ 676.9   

Mexico

      562.4         496.1         436.9   

South Korea

      433.7         421.4         343.5   

Others

      2,476.6         2,059.4         1,786.4   
  

 

 

     

 

 

     

 

 

  

Total Primary Reporting Segment

      4,353.7         3,793.8         3,243.7   

China

      471.6         278.5         210.8   
  

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 4,825.3       $ 4,072.3       $ 3,454.5   
  

 

 

     

 

 

     

 

 

  

Contribution Margin(1):

         

Primary Reporting Segment:

         

United States

    $ 365.2       $ 359.5       $ 286.3   

Mexico

      251.7         205.6         191.1   

South Korea

      214.3         199.4         163.1   

Others

      1,110.5         906.5         810.0   
  

 

 

     

 

 

     

 

 

  

Total Primary Reporting Segment

      1,941.7         1,671.0         1,450.5   

China(2)

      422.7         250.1         186.4   
  

 

 

     

 

 

     

 

 

  

Total Contribution Margin

    $ 2,364.4       $ 1,921.1       $ 1,636.9   

Selling, general and administrative expense (2)

      1,629.1         1,259.7         1,074.6   

Interest expense

      26.6         16.7         9.9   

Interest income

      8.0         6.2         7.4   
  

 

 

     

 

 

     

 

 

  

Income before income taxes

      716.7         650.9         559.8   

Income taxes

      189.2         186.9         144.8   
  

 

 

     

 

 

     

 

 

  

Net Income

    $ 527.5       $ 464.0       $ 415.0   
  

 

 

     

 

 

     

 

 

  

 

     Year Ended December 31,  
     2013      2012      2011  
     (In millions)  

Capital Expenditures:

         

United States

    $ 121.3       $ 81.6       $ 60.4   

Mexico

      2.4         2.8         3.5   

South Korea

      1.8         4.1         2.1   

China

      12.6         15.4         6.6   

Others

      24.4         18.9         18.3   
  

 

 

     

 

 

     

 

 

  

Total Capital Expenditures

    $ 162.5       $ 122.8       $ 90.9   
  

 

 

     

 

 

     

 

 

  

 

     Year Ended December 31,  
     2013      2012      2011  
     (In millions)  

Net sales by product line:

         

Weight Management

    $ 3,063.7       $ 2,554.9       $ 2,158.7   

Targeted Nutrition

      1,109.9         944.8         789.6   

Energy, Sports & Fitness

      254.5         209.4         169.8   

Outer Nutrition

      157.2         146.3         147.8   

Literature, Promotional and Other(3)

      240.0         216.9         188.6   
  

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 4,825.3       $ 4,072.3       $ 3,454.5   
  

 

 

     

 

 

     

 

 

  

Net sales by geographic region:

         

North America

    $ 908.0       $ 841.2       $ 698.6   

Mexico

      562.4         496.1         436.9   

South & Central America

      973.5         688.8         554.4   

EMEA

      735.2         627.8         615.2   

Asia Pacific

      1,174.6         1,139.9         938.6   

China

      471.6         278.5         210.8   
  

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 4,825.3       $ 4,072.3       $ 3,454.5   
  

 

 

     

 

 

     

 

 

  

 

 

(1) Contribution margin consists of net sales less cost of sales and royalty overrides.

 

(2) Compensation to China sales employees and service fees to China independent service providers totaling $215.6 million, $123.5 million, and $96.8 million for the years ended December 31, 2013, 2012, and 2011, respectively, are included in selling, general and administrative expenses while Member 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, 2013 and 2012, total assets for the Company’s Primary Reporting Segment were $2,253.7 million and $1,607.2 million, respectively. Total assets for the China segment were $220.0 million and $116.9 million as of December 31, 2013 and 2012, respectively.

As of December 31, 2013 and 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 December 31, 2013 and 2012.

As of December 31, 2013, the net property, plant and equipment located in the U.S. and in all foreign countries was $236.0 million and $82.9 million, respectively. 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, 2013, the deferred tax assets related to the U.S. and all foreign countries was $69.1 million and $58.7 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.

The majority of the Company’s foreign subsidiaries designate their local currencies as their functional currency. As of December 31, 2013 and 2012, the total amount of cash held by foreign subsidiaries reported in the Company’s consolidated balance sheet was $567.4 million and $321.3 million, respectively, of which $6.8 million and $6.9 million, respectively, was maintained or invested in U.S. dollars. At December 31, 2013 and 2012, the total amount of cash and cash equivalents held by U.S. entities was $405.6 million and $12.2 million, respectively.