Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v2.4.0.8
Segment Information
 6 Months Ended
Jun. 30, 2014
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, energy, sports & fitness products 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, Lake Forest, California facility, and in its Winston-Salem, North Carolina 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 June 30, 2014, 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:

     Three Months Ended      Six Months Ended  
     June 30,
2014		      June 30,
2013		      June 30,
2014		      June 30,
2013		  
     (In millions)  

Net Sales:

            

Primary Reporting Segment

            

United States

    $ 245.0       $ 241.7       $ 487.3       $ 457.9   

Mexico

      148.6         145.6         291.3         278.5   

South Korea

      117.9         112.0         216.9         222.0   

Others

      624.6         601.9         1,267.4         1,197.9   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Primary Reporting Segment

      1,136.1         1,101.2         2,262.9         2,156.3   

China

      170.1         118.0         305.9         186.6   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 1,306.2       $ 1,219.2       $ 2,568.8       $ 2,342.9   
  

 

 

     

 

 

     

 

 

     

 

 

  

Contribution Margin(1)(2):

            

Primary Reporting Segment

            

United States

    $ 101.9       $ 99.5       $ 205.8       $ 194.2   

Mexico

      64.1         64.0         125.5         122.6   

South Korea

      62.9         56.4         118.3         111.6   

Others

      277.0         266.8         561.7         531.3   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Primary Reporting Segment

      505.9         486.7         1,011.3         959.7   

China

      152.3         105.8         276.7         166.3   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Contribution Margin

    $ 658.2       $ 592.5       $ 1,288.0       $ 1,126.0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Selling, general and administrative expenses(2)

      461.9         400.1         964.0         764.8   

Interest expense, net

      21.4         5.6         36.4         10.9   

Other expense, net

      —           —           3.2         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Income before income taxes

      174.9         186.8         284.4         350.3   

Income taxes

      55.4         43.6         90.2         88.3   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net Income

    $ 119.5       $ 143.2       $ 194.2       $ 262.0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net sales by product line:

            

Weight Management

      843.5       $ 778.2       $ 1,651.1       $ 1,489.8   

Targeted Nutrition

      286.1         277.5         570.1         534.4   

Energy, Sports and Fitness

      68.9         65.1         135.6         123.4   

Outer Nutrition

      47.0         37.8         86.7         76.0   

Literature, promotional and other(3)

      60.7         60.6         125.3         119.3   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 1,306.2       $ 1,219.2       $ 2,568.8       $ 2,342.9   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net sales by geographic region:

            

North America

      250.6       $ 247.5       $ 498.4       $ 469.0   

Mexico

      148.6         145.6         291.3         278.5   

South and Central America

      203.3         222.5         448.0         441.9   

EMEA

      227.3         186.4         438.5         355.9   

Asia Pacific

      306.3         299.2         586.7         611.0   

China

      170.1         118.0         305.9         186.6   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 1,306.2       $ 1,219.2       $ 2,568.8       $ 2,342.9   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(1) Contribution margin consists of net sales less cost of sales and royalty overrides.
(2) Service fees to China independent service providers totaling $80.8 million and $53.2 million for the three months ended June 30, 2014 and 2013, respectively, and totaling $142.5 million and $84.7 million for the six months ended June 30, 2014 and 2013, 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 June 30, 2014 and December 31, 2013, total assets for the Company’s Primary Reporting Segment were $2,158.1 million and $2,253.7 million, respectively. Total assets for the China segment were $277.6 million and $220.0 million as of June 30, 2014 and December 31, 2013, respectively. As of both June 30, 2014 and December 31, 2013, goodwill allocated to the Company’s reporting units included in the Company’s Primary Reporting Segment was $102.4 million. Goodwill allocated to the China segment was $3.1 million as of both June 30, 2014 and December 31, 2013.