Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v2.3.0.15
Segment Information
 9 Months Ended
Sep. 30, 2011
Segment Information [Abstract]  
Segment Information
7. Segment Information
The Company is a network marketing company that sells a wide range of weight management products, nutritional supplements and personal care products within one industry segment as defined under the 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 are then 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 September 30, 2011, the Company sold products in 78 countries throughout the world and is 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     Nine Months Ended  
    September 30,     September 30,     September 30,     September 30,  
    2011     2010     2011     2010  
    (In millions)  
Net Sales:
                               
Primary Reporting Segment
                               
United States
  $ 175.1     $ 150.6     $ 516.7     $ 458.9  
Mexico
    112.9       83.5       330.7       236.3  
Others
    552.2       402.7       1,570.5       1,165.5  
 
                       
Total Primary Reporting Segment
    840.2       636.8       2,417.9       1,860.7  
China
    55.0       51.6       152.1       135.2  
 
                       
Total Net Sales
  $ 895.2     $ 688.4     $ 2,570.0     $ 1,995.9  
 
                       
                                 
Contribution Margin(1)(2):
                               
Primary Reporting Segment
                               
United States
  $ 79.2     $ 64.9     $ 225.3     $ 196.0  
Mexico
    48.1       36.4       139.5       93.5  
Others
    252.5       183.9       717.0       517.4  
 
                       
Total Primary Reporting Segment
    379.8       285.2       1,081.8       806.9  
China
    49.2       46.0       134.6       122.5  
 
                       
Total Contribution Margin
  $ 429.0     $ 331.2     $ 1,216.4     $ 929.4  
 
                       
Selling, general and administrative expenses
    277.7       230.2       788.5       648.1  
Interest expense, net
    0.3       2.2       3.8       6.3  
 
                       
Income before income taxes
    151.0       98.8       424.1       275.0  
Income taxes
    43.0       19.9       116.9       62.1  
 
                       
Net Income
  $ 108.0     $ 78.9     $ 307.2     $ 212.9  
 
                       
                                 
Net sales by product line:
                               
Weight Management
  $ 560.1     $ 428.1     $ 1,611.0     $ 1,245.8  
Targeted Nutrition
    205.3       160.4       582.8       458.9  
Energy, Sports and Fitness
    45.7       31.9       124.6       87.8  
Outer Nutrition
    35.4       30.2       109.0       92.2  
Literature, promotional and other(3)
    48.7       37.8       142.6       111.2  
 
                       
Total Net Sales
  $ 895.2     $ 688.4     $ 2,570.0     $ 1,995.9  
 
                       
                                 
Net sales by geographic region:
                               
North America
  $ 180.7     $ 155.5     $ 532.9     $ 473.2  
Mexico
    112.9       83.5       330.7       236.3  
South and Central America
    143.7       95.0       399.1       269.2  
EMEA
    147.7       121.2       463.6       387.6  
Asia Pacific
    255.2       181.6       691.6       494.4  
China
    55.0       51.6       152.1       135.2  
 
                       
Total Net Sales
  $ 895.2     $ 688.4     $ 2,570.0     $ 1,995.9  
 
                       
 
     
(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 $25.2 million and $24.0 million for the three months ended September 30, 2011 and 2010, respectively, and $70.7 million and $64.4 million for the nine months ended September 30, 2011 and 2010, respectively, is 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 September 30, 2011 and December 31, 2010, total assets for the Company’s Primary Reporting Segment were $1,305.9 million and $1,162.1 million, respectively. As of September 30, 2011 and December 31, 2010, total assets for the China segment were $82.2 million and $70.1 million, respectively.