| 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. 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 independent
distributors who consume and sell Herbalife products to retail
consumers or other distributors. Revenues reflect sales of products
by the Company to its distributors and are categorized based on
geographic location.
As of June 30, 2013, the Company sold products in 88 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:
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Three Months Ended |
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Six Months Ended |
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June 30,
2013 |
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June 30,
2012 |
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June 30,
2013 |
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June 30,
2012 |
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(In
millions) |
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Net Sales:
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Primary Reporting Segment
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United States
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$ |
241.7 |
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$ |
218.1 |
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$ |
457.9 |
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$ |
422.6 |
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Mexico
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145.6 |
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119.5 |
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278.5 |
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236.6 |
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South Korea
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112.0 |
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112.5 |
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222.0 |
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205.6 |
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Others
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601.9 |
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504.7 |
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1,197.9 |
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997.3 |
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Total Primary Reporting Segment
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1,101.2 |
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954.8 |
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2,156.3 |
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1,862.1 |
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China
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118.0 |
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77.1 |
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186.6 |
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134.0 |
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Total Net Sales
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$ |
1,219.2 |
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$ |
1,031.9 |
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$ |
2,342.9 |
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$ |
1,996.1 |
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Contribution Margin(1)(2):
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Primary Reporting Segment
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United States
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$ |
99.5 |
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$ |
93.6 |
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$ |
194.2 |
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$ |
189.0 |
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Mexico
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64.0 |
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49.0 |
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122.6 |
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92.9 |
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South Korea
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56.4 |
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55.0 |
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111.6 |
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97.0 |
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Others
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266.8 |
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226.1 |
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531.3 |
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444.0 |
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Total Primary Reporting Segment
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486.7 |
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423.7 |
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959.7 |
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822.9 |
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China
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105.8 |
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69.4 |
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166.3 |
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120.6 |
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Total Contribution Margin
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$ |
592.5 |
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$ |
493.1 |
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$ |
1,126.0 |
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$ |
943.5 |
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Selling, general and administrative expenses(2)
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400.1 |
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306.3 |
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764.8 |
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602.7 |
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Interest expense, net
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5.6 |
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3.2 |
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10.9 |
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4.5 |
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Income before income taxes
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186.8 |
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183.6 |
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350.3 |
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336.3 |
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Income taxes
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43.6 |
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51.6 |
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88.3 |
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96.4 |
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Net Income
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$ |
143.2 |
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$ |
132.0 |
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$ |
262.0 |
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$ |
239.9 |
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Net sales by product line:
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Weight Management
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$ |
778.2 |
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$ |
646.8 |
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$ |
1,489.8 |
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$ |
1,248.6 |
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Targeted Nutrition
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277.5 |
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241.0 |
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534.4 |
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465.9 |
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Energy, Sports and Fitness
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65.1 |
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52.5 |
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123.4 |
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100.6 |
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Outer Nutrition
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37.8 |
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37.7 |
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76.0 |
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74.4 |
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Literature, promotional and other(3)
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60.6 |
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53.9 |
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119.3 |
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106.6 |
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Total Net Sales
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$ |
1,219.2 |
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$ |
1,031.9 |
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$ |
2,342.9 |
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$ |
1,996.1 |
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Net sales by geographic region:
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North America
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$ |
247.5 |
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$ |
224.7 |
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$ |
469.0 |
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$ |
435.4 |
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Mexico
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145.6 |
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119.5 |
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278.5 |
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236.6 |
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South and Central America
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222.5 |
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152.5 |
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441.9 |
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318.0 |
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EMEA
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186.4 |
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161.6 |
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355.9 |
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315.6 |
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Asia Pacific
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299.2 |
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296.5 |
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611.0 |
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556.5 |
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China
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118.0 |
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77.1 |
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186.6 |
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134.0 |
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Total Net Sales
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$ |
1,219.2 |
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$ |
1,031.9 |
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$ |
2,342.9 |
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$ |
1,996.1 |
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| (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 the
Original 10-Q for a description of net sales, cost of sales and
royalty overrides. |
| (2) |
Service fees to China independent
service providers totaling $53.2 million and $33.5 million for
the three months ended June 30, 2013 and 2012, respectively,
and totaling $84.7 million and $59.3 million for the six
months ended June 30, 2013 and 2012, 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 June 30, 2013 and December 31, 2012, total assets
for the Company’s Primary Reporting Segment were $2,065.7
million and $1,607.2 million, respectively. Total assets for
the China segment were $188.3 million and $116.9 million as of
June 30, 2013 and December 31, 2012, respectively. As of
June 30, 2013 and December 31, 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 June 30, 2013 and December 31, 2012.
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