Herbalife Ltd. Sales Up 13% To $1.1 Billion

Herbalife Q1 - 2013


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.


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.


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
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  
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  
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.

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