Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v2.4.0.8
Segment Information
 9 Months Ended
Sep. 30, 2013
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 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 September 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:

 

     Three Months Ended      Nine Months Ended  
     September 30,
2013		      September 30,
2012		      September 30,
2013		      September 30,
2012		  
     (In millions)  

Net Sales:

            

Primary Reporting Segment

            

United States

    $ 223.6       $ 202.9       $ 681.5       $ 625.5   

Mexico

      141.2         127.5         419.8         364.0   

South Korea

      111.5         109.3         333.5         314.9   

Others

      600.5         499.8         1,798.3         1,497.2   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Primary Reporting Segment

      1,076.8         939.5         3,233.1         2,801.6   

China

      136.7         77.4         323.3         211.4   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 1,213.5       $ 1,016.9       $ 3,556.4       $ 3,013.0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Contribution Margin(1)(2):

            

Primary Reporting Segment

            

United States

    $ 90.7       $ 91.0       $ 284.9       $ 280.0   

Mexico

      65.1         54.9         187.7         147.8   

South Korea

      57.8         53.9         169.4         150.9   

Others

      265.7         215.5         797.2         659.6   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Primary Reporting Segment

      479.3         415.3         1,439.2         1,238.3   

China

      122.6         69.7         288.9         190.3   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Contribution Margin

    $ 601.9       $ 485.0       $ 1,728.1       $ 1,428.6   
  

 

 

     

 

 

     

 

 

     

 

 

  

Selling, general and administrative expenses(2)

      409.7         324.2         1,174.6         926.9   

Interest expense, net

      4.7         3.5         15.7         8.1   
  

 

 

     

 

 

     

 

 

     

 

 

  

Income before income taxes

      187.5         157.3         537.8         493.6   

Income taxes

      45.5         45.4         133.8         141.8   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net Income

    $ 142.0       $ 111.9       $ 404.0       $ 351.8   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net sales by product line:

            

Weight Management

    $ 772.9       $ 635.9       $ 2,262.7       $ 1,884.5   

Targeted Nutrition

      280.7         237.4         815.1         703.3   

Energy, Sports and Fitness

      65.5         54.8         188.9         155.4   

Outer Nutrition

      36.4         34.2         112.4         108.6   

Literature, promotional and other(3)

      58.0         54.6         177.3         161.2   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 1,213.5       $ 1,016.9       $ 3,556.4       $ 3,013.0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net sales by geographic region:

            

North America

    $ 228.7       $ 208.8       $ 697.6       $ 644.2   

Mexico

      141.2         127.5         419.8         364.0   

South and Central America

      241.2         167.5         683.1         485.6   

EMEA

      181.7         147.5         537.6         463.1   

Asia Pacific

      284.0         288.2         895.0         844.7   

China

      136.7         77.4         323.3         211.4   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Net Sales

    $ 1,213.5       $ 1,016.9       $ 3,556.4       $ 3,013.0   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(1) Contribution margin consists of net sales less cost of sales and royalty overrides.
(2) Service fees to China independent service providers totaling $61.0 million and $34.4 million for the three months ended September 30, 2013 and 2012, respectively, and totaling $145.7 million and $93.7 million for the nine months ended September 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 September 30, 2013 and December 31, 2012, total assets for the Company’s Primary Reporting Segment were $2,145.6 million and $1,607.2 million, respectively. Total assets for the China segment were $197.8 million and $116.9 million as of September 30, 2013 and December 31, 2012, respectively. As of September 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 September 30, 2013 and December 31, 2012.