Quarterly report pursuant to Section 13 or 15(d)

Shareholders' Deficit

v3.23.1
Shareholders' Deficit
 3 Months Ended
Mar. 31, 2023
Equity [Abstract]  
Shareholders' Deficit

10. Shareholders’ Deficit

Changes in shareholders’ deficit for the three months ended March 31, 2023 and 2022 were as follows:

 

 

 

Three Months Ended March 31, 2023

 

 

 

Common Shares

 

 

Paid-in Capital in Excess of Par Value

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Total Shareholders’ Deficit

 

 

 

(in millions)

 

Balance as of December 31, 2022

 

$

0.1

 

 

$

188.7

 

 

$

(250.2

)

 

$

(1,204.5

)

 

$

(1,265.9

)

Issuance of 1.3 common shares from exercise of SARs, restricted stock units, employee stock purchase plan, and other

 

 

—

 

 

 

0.5

 

 

 

 

 

 

 

 

 

0.5

 

Additional capital from share-based compensation

 

 

 

 

 

10.8

 

 

 

 

 

 

 

 

 

10.8

 

Repurchases of 0.5 common shares

 

 

—

 

 

 

(8.7

)

 

 

 

 

 

—

 

 

 

(8.7

)

Net income

 

 

 

 

 

 

 

 

 

 

 

29.3

 

 

 

29.3

 

Foreign currency translation adjustment, net of income taxes of $—

 

 

 

 

 

 

 

 

13.2

 

 

 

 

 

 

13.2

 

Unrealized loss on derivatives, net of income taxes of $—

 

 

 

 

 

 

 

 

(2.0

)

 

 

 

 

 

(2.0

)

Balance as of March 31, 2023

 

$

0.1

 

 

$

191.3

 

 

$

(239.0

)

 

$

(1,175.2

)

 

$

(1,222.8

)

 

 

 

Three Months Ended March 31, 2022

 

 

 

Common Shares

 

 

Treasury Stock

 

 

Paid-in Capital in Excess of Par Value

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Total Shareholders’ Deficit

 

 

 

(in millions)

 

Balance as of December 31, 2021

 

$

0.1

 

 

$

(328.9

)

 

$

318.1

 

 

$

(211.8

)

 

$

(1,169.0

)

 

$

(1,391.5

)

Issuance of 1.0 common shares from exercise of SARs, restricted stock units, employee stock purchase plan, and other

 

 

—

 

 

 

 

 

 

1.1

 

 

 

 

 

 

 

 

 

1.1

 

Additional capital from share-based compensation

 

 

 

 

 

 

 

 

12.4

 

 

 

 

 

 

 

 

 

12.4

 

Repurchases of 3.0 common shares

 

 

—

 

 

 

 

 

 

(21.9

)

 

 

 

 

 

(94.3

)

 

 

(116.2

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

98.2

 

 

 

98.2

 

Foreign currency translation adjustment, net of income taxes of $—

 

 

 

 

 

 

 

 

 

 

 

4.4

 

 

 

 

 

 

4.4

 

Unrealized loss on derivatives, net of income taxes of $—

 

 

 

 

 

 

 

 

 

 

 

(2.6

)

 

 

 

 

 

(2.6

)

Cumulative effect of accounting change relating to adoption of ASU 2020-06

 

 

 

 

 

 

 

 

(136.7

)

 

 

 

 

 

77.6

 

 

 

(59.1

)

Balance as of March 31, 2022

 

$

0.1

 

 

$

(328.9

)

 

$

173.0

 

 

$

(210.0

)

 

$

(1,087.5

)

 

$

(1,453.3

)

 

Dividends

The Company has not declared or paid cash dividends since 2014. The declaration of future dividends is subject to the discretion of the Company’s board of directors and will depend upon various factors, including its earnings, financial condition, Herbalife Ltd.’s available distributable reserves under Cayman Islands law, restrictions imposed by the 2018 Credit Facility and the terms of any other indebtedness that may be outstanding, cash requirements, future prospects and other factors deemed relevant by its board of directors.

Share Repurchases

On February 9, 2021, the Company’s board of directors authorized a new three-year $1.5 billion share repurchase program that will expire on February 9, 2024, which replaced the Company’s prior share repurchase authorization that was set to expire on October 30, 2023 and had approximately $7.9 million of remaining authorized capacity when it was replaced. This share repurchase program allows the Company, which includes an indirect wholly-owned subsidiary of Herbalife Ltd., to repurchase the Company’s common shares at such times and prices as determined by management, as market conditions warrant, and to the extent Herbalife Ltd.’s distributable reserves are available under Cayman Islands law. The 2018 Credit Facility permits the Company to repurchase its common shares as long as no default or event of default exists and other conditions, such as specified consolidated leverage ratios, are met. As of March 31, 2023, the remaining authorized capacity under the Company’s $1.5 billion share repurchase program was approximately $985.5 million.

During the three months ended March 31, 2023, the Company did not repurchase any of its common shares through open-market purchases. During the three months ended March 31, 2022, the Company repurchased approximately 2.6 million of its common shares through open-market purchases at an aggregate cost of approximately $101.7 million, or an average cost of $39.32 per share, and subsequently retired these shares.

The number of shares issued upon vesting or exercise for certain restricted stock units and SARs granted pursuant to the Company’s share-based compensation plans is net of the statutory withholding requirements that the Company pays on behalf of its employees. Although shares withheld are not issued, they are treated as common share repurchases in the Company’s condensed consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting. These shares do not count against the authorized capacity under the Company’s share repurchase program described above. During the three months ended March 31, 2023 and 2022, the Company withheld shares on its vested restricted stock units and exercised SARs relating to its share-based compensation plans.

The Company reflects the aggregate purchase price of its common shares repurchased as an increase to shareholders’ deficit. The Company generally allocated the purchase price of the repurchased shares to accumulated deficit, common shares, and additional paid-in capital, with the exception of treasury shares, which are recorded separately on the Company’s condensed consolidated balance sheets.

For the three months ended March 31, 2023 and 2022, the Company’s share repurchases, inclusive of transaction costs, were zero and $101.7 million, respectively, under the Company’s share repurchase programs, and $8.7 million and $14.5 million, respectively, due to shares withheld for tax purposes related to the Company’s share-based compensation plans. For the three months ended March 31, 2023 and 2022, the Company’s total share repurchases, including shares withheld for tax purposes, were $8.7 million and $116.2 million, respectively, and have been recorded as an increase to shareholders’ deficit within the Company’s condensed consolidated balance sheets.

Accumulated Other Comprehensive Loss

The following table summarizes changes in accumulated other comprehensive loss by component during the three months ended March 31, 2023 and 2022:

 

 

 

Changes in Accumulated Other Comprehensive Loss by Component

 

 

 

Three Months Ended

 

 

 

March 31,
2023

 

 

March 31,
2022

 

 

 

Foreign Currency Translation Adjustments

 

 

Unrealized Loss on Derivatives

 

 

Total

 

 

Foreign Currency Translation Adjustments

 

 

Unrealized Loss on Derivatives

 

 

Total

 

 

 

(in millions)

 

Beginning balance

 

$

(248.2

)

 

$

(2.0

)

 

$

(250.2

)

 

$

(211.6

)

 

$

(0.2

)

 

$

(211.8

)

Other comprehensive income (loss) before reclassifications, net of tax

 

 

13.2

 

 

 

(4.7

)

 

 

8.5

 

 

 

4.4

 

 

 

(2.6

)

 

 

1.8

 

Amounts reclassified from accumulated other comprehensive loss to income, net of tax(1)

 

 

—

 

 

 

2.7

 

 

 

2.7

 

 

 

—

 

 

 

—

 

 

 

—

 

Total other comprehensive income (loss), net of reclassifications

 

 

13.2

 

 

 

(2.0

)

 

 

11.2

 

 

 

4.4

 

 

 

(2.6

)

 

 

1.8

 

Ending balance

 

$

(235.0

)

 

$

(4.0

)

 

$

(239.0

)

 

$

(207.2

)

 

$

(2.8

)

 

$

(210.0

)

 

(1)
See Note 9, Derivative Instruments and Hedging Activities, for information regarding the location within the condensed consolidated statements of income of gains (losses) reclassified from accumulated other comprehensive loss to income during the three months ended March 31, 2023 and 2022.