Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v2.4.0.6
Segment Information
 3 Months Ended
Mar. 31, 2012
Segment Information [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 within one industry segment as defined under the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or 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 sell Herbalife products to retail consumers or other distributors. Revenues reflect sales of products by the Company to distributors and are categorized based on geographic location.

As of March 31, 2012, the Company sold products in 81 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  
    March 31,
2012 		    March 31,
2011 		 
    (In millions)  

Net Sales:

                

Primary Reporting Segment

                

United States

   $ 204.5     $ 162.2  

Mexico

     117.1       103.9  

South Korea

     93.1       62.1  

Others

     492.6       421.2  
   

 

 

    

 

 

  

Total Primary Reporting Segment

     907.3       749.4  

China

     56.9       45.7  
   

 

 

    

 

 

  

Total Net Sales

   $ 964.2     $ 795.1  
   

 

 

    

 

 

  

Contribution Margin(1)(2):

                

Primary Reporting Segment

                

United States

   $ 95.4     $ 68.4  

Mexico

     43.9       40.4  

South Korea

     42.0       27.2  

Others

     218.1       191.6  
   

 

 

    

 

 

  

Total Primary Reporting Segment

     399.4       327.6  

China

     51.2       40.3  
   

 

 

    

 

 

  

Total Contribution Margin

   $ 450.6     $ 367.9  
   

 

 

    

 

 

  

Selling, general and administrative expenses(2)

     296.4       244.5  

Interest expense, net

     1.4       2.6  
   

 

 

    

 

 

  

Income before income taxes

     152.8       120.8  

Income taxes

     44.6       32.8  
   

 

 

    

 

 

  

Net Income

   $ 108.2     $ 88.0  
   

 

 

    

 

 

  

Net sales by product line:

                

Weight Management

   $ 601.8     $ 498.6  

Targeted Nutrition

     224.9       180.2  

Energy, Sports and Fitness

     48.1       35.5  

Outer Nutrition

     36.7       36.6  

Literature, promotional and other(3)

     52.7       44.2  
   

 

 

    

 

 

  

Total Net Sales

   $ 964.2     $ 795.1  
   

 

 

    

 

 

  

Net sales by geographic region:

                

North America

   $ 210.7     $ 167.0  

Mexico

     117.1       103.9  

South and Central America

     165.5       125.3  

EMEA

     154.0       153.9  

Asia Pacific

     260.0       199.3  

China

     56.9       45.7  
   

 

 

    

 

 

  

Total Net Sales

   $ 964.2     $ 795.1  
   

 

 

    

 

 

  

 

(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 this Quarterly Report on Form 10-Q 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 $25.8 million and $21.8 million for the three months ended March 31, 2012 and 2011, 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 March 31, 2012 and December 31, 2011, total assets for the Company’s Primary Reporting Segment were $1,435.8 million and $1,357.4 million, respectively. Total assets for the China segment were $96.6 million and $88.8 million as of March 31, 2012 and December 31, 2011, respectively.