Herbalife Ltd. Sales Up 13% To $1.1 Billion

 

Herbalife Ltd. (NYSE: HLF) today reported first quarter net sales of $1.1 billion, reflecting an increase of 17 percent compared to the same time period in 2012 on volume point growth of 13 percent.

Adjusted¹ net income for the quarter of $137.4 million, or $1.27 per diluted share, compares to 2012 first quarter net income of $108.2 million and EPS of $0.88, respectively. On a reported basis, first quarter 2013 EPS of $1.10 increased 25 percent compared to the $0.88 reported in the comparable quarter last year.

We continue to deliver record results in sales and profitability as our independent distributors successfully execute numerous growth strategies that enable deeper market penetration, developing customers using our weight management and targeted nutrition products every day, said Michael O. Johnson, Herbalife's chairman and CEO.

Obesity and poor nutrition are global public health problems. Our distributors are proud to be part of the solution.

For the quarter ended March 31, 2013 the company generated cash flow from operations of $137.6 million, an increase of 14 percent compared to 2012; paid dividends of $30.9 million; invested $24.9 million in capital expenditures; and repurchased $162.4 million in common shares outstanding under our share repurchase program.

First Quarter 2013 Key Metrics

Regional Volume Point and Average Active Sales Leader Metrics

			Volume Points (Mil)							Average Active Sales Leaders
Region			1Q'13			Yr/Yr % Chg				1Q'13			Yr/Yr % Chg
North America			309.0			4	%			68,352			9	%
Asia Pacific			320.0			17	%			68,690			23	%
EMEA			161.3			11	%			46,094			12	%
Mexico			206.3			8	%			60,216			14	%
South & Central America			219.8			33	%			52,049			28	%
China			47.6			16	%			11,864			24	%
Worldwide Total			1,264.0			13	%			296,916			18	%

Updated 2013 Guidance

Guidance for fully diluted 2013 EPS is based on the average daily exchange rates of the first two weeks of April 2013. Our 2013 guidance continues to assume a Venezuelan exchange rate of 10 to 1 and excludes any potential impact from a future devaluation of the bolivar or the repatriation of existing cash balances in Venezuela. Guidance for the year also excludes $9.5 million of expenses recognized in the first quarter, mostly legal and advisory services, relating to the Company's response to information put into the marketplace by a short seller which information the Company believes to be inaccurate and misleading.

Based on current business trends the company's second quarter fiscal 2013 and full year fiscal 2013 guidance is provided below.

			Three Months Ending										Twelve Months Ending
			June 30, 2013										December 31, 2013
			Low					High					Low					High
Volume Point Growth vs 2012				7.0	%				9.0	%				9.0	%				11.0	%
Net Sales Growth vs 2012				11.0	%				13.0	%				13.0	%				15.0	%
Diluted EPS as adjusted			$	1.14				$	1.18				$	4.60				$	4.80
Cap Ex ($ millions)			$	20.0				$	30.0				$	165.0				$	185.0
Effective Tax Rate				26.0	%				28.0	%				25.5	%				27.5	%

² Supplemental tables that include additional business metrics can be found at https://www.ir.herbalife.com.

³ Worldwide Average Active Sales Leaders may not equal the sum of the Average Active Sales Leaders in each region due to the calculation being an average of Sales Leaders active in a period, not a summation, and the fact that some sales leaders are active in more than one region but are counted only once in the worldwide amount.

Announces Quarterly Dividend

The company reported today that its board of directors has approved a dividend of $0.30 per share to shareholders of record May 14, 2013, payable on May 28, 2013.

Share Repurchase Program Update

During the first quarter, the company repurchased 4.0 million shares at an average cost of $40.61. There is currently $787.6 million remaining on the existing $1 billion share repurchase authorization.

About Herbalife Ltd.

Herbalife Ltd. (NYSE:HLF) is a global nutrition company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle. Herbalife products are sold in over 80 countries through and to a network of independent distributors. The company supports the Herbalife Family Foundation and its Casa Herbalife program to help bring good nutrition to children. Herbalife's website contains a significant amount of information about Herbalife, including financial and other information for investors at https://ir.Herbalife.com. The company encourages investors to visit its website from time to time, as information is updated and new information is posted.

FORWARD-LOOKING STATEMENTS

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, among others, the following:

• the resignation of our former independent registered public accounting firm, its withdrawal of its audit reports with respect to certain of our historical financial statements, and any difficulties we encounter engaging a successor accounting firm;
• any collateral impact resulting from the ongoing worldwide financial environment including the availability of liquidity to us, our customers and our suppliers or the willingness of our customers to purchase products in a difficult economic environment;
• our relationship with, and our ability to influence the actions of, our distributors;
• improper action by our employees or distributors in violation of applicable law;
• adverse publicity associated with our products or network marketing organization, including our ability to comfort the marketplace and regulators regarding our compliance with applicable laws;
• changing consumer preferences and demands;
• our reliance upon, or the loss or departure of any member of, our senior management team which could negatively impact our distributor relations and operating results;
• the competitive nature of our business;
• regulatory matters governing our products, including potential governmental or regulatory actions concerning the safety or efficacy of our products and network marketing program, including the direct selling market in which we operate;
• legal challenges to our network marketing program;
• risks associated with operating internationally and the effect of economic factors, including foreign exchange, inflation, disruptions or conflicts with our third party importers, pricing and currency devaluation risks, especially in countries such as Venezuela;
• uncertainties relating to the application of transfer pricing, duties, value added taxes, and other tax regulations, and changes thereto;
• uncertainties relating to interpretation and enforcement of legislation in China governing direct selling;
• our inability to obtain the necessary licenses to expand our direct selling business in China;
• adverse changes in the Chinese economy, Chinese legal system or Chinese governmental policies;
• our dependence on increased penetration of existing markets;
• contractual limitations on our ability to expand our business;
• our reliance on our information technology infrastructure and outside manufacturers;
• the sufficiency of trademarks and other intellectual property rights;
• product concentration;
• changes in tax laws, treaties or regulations, or their interpretation;
• taxation relating to our distributors;
• product liability claims;
• whether we will purchase any of our shares in the open markets or otherwise; and
• share price volatility related to, among other things, speculative trading and certain traders shorting our common shares.

We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

RESULTS OF OPERATIONS:

Herbalife Ltd. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited and Unreviewed) (1)
			Three Months Ended
			3/31/2013				3/31/2012
North America			$	221,473			$	210,710
Mexico				132,889				117,109
South and Central America				219,515				165,470
EMEA				169,585				153,993
Asia Pacific				311,747				259,948
China				68,438				56,945
Worldwide net sales				1,123,647				964,175
Cost of Sales				225,977				196,144
Gross Profit				897,670				768,031
Royalty Overrides				364,029				317,533
SGA				364,720				296,393
Operating Income				168,921				154,105
Interest Expense – net				5,373				1,373
Income before income taxes				163,548				152,732
Income Taxes				44,692				44,570
Net Income				118,856				108,162
Basic Shares				104,121				116,191
Diluted Shares				108,068				122,373
Basic EPS			$	1.14			$	0.93
Diluted EPS			$	1.10			$	0.88
Dividends declared per share			$	0.30			$	0.30

⁽¹⁾ As a result of the resignation of KPMG, the unaudited interim financial information presented has not been reviewed by an outside independent accounting firm. See Note 2 of the quarterly report on Form 10-Q for the quarter ended March 31, 2013.

Herbalife Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited and Unreviewed) (1)
			Mar 31,					Dec 31,
			2013					2012
ASSETS
Current Assets:
Cash & cash equivalents			$	722,474				$	333,534
Receivables, net				112,041					116,139
Inventories				334,412					339,411
Prepaid expenses and other current assets				126,465					125,425
Deferred income taxes				50,622					49,339
Total Current Assets				1,346,014					963,848
Property, plant and equipment, net				246,682					242,886
Deferred compensation plan assets				25,074					24,267
Other assets				48,141					48,805
Deferred financing cost, net				6,809					7,462
Marketing related intangibles and other intangible assets, net				311,090					311,186
Goodwill				105,490					105,490
Total Assets			$	2,089,300				$	1,703,944
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable			$	79,109				$	75,209
Royalty overrides				221,814					243,351
Accrued compensation				66,719					95,220
Accrued expenses				195,466					181,523
Current portion of long term debt				62,807					56,302
Advance sales deposits				44,684					49,432
Income taxes payable				26,272					15,854
Total Current Liabilities				696,871					716,891
Non-current liabilities
Long-term debt, net of current portion				912,517					431,305
Deferred compensation plan liability				32,529					29,454
Deferred income taxes				59,888					62,982
Other non-current liabilities				44,550					42,557
Total Liabilities				1,746,355					1,283,189
Contingencies
Shareholders' equity:
Common shares				103					107
Paid-in capital in excess of par value				299,391					303,975
Accumulated other comprehensive loss				(41,711	)				(31,695	)
Retained earnings				85,162					148,368
Total Shareholders' Equity				342,945					420,755
Total Liabilities and Shareholders' Equity			$	2,089,300				$	1,703,944

⁽¹⁾ As a result of the resignation of KPMG, the unaudited interim financial information presented has not been reviewed by an outside independent accounting firm. See Note 2 of the quarterly report on Form 10-Q for the quarter ended March 31, 2013.