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Press release from Business Wire

INSERTING and REPLACING Herbalife Ltd. Announces Record Third Quarter 2011 Results and Raises 2011 Earnings Guidance

<ul> <li class='bwlistitemmargb'> <b>Third quarter net sales increased 30.0 percent on volume growth of 23.4 percent compared to the prior year period.</b> </li> <li class='bwlistitemmargb'> <b>Third quarter fully diluted EPS of $0.87 increased 45.0 percent compared to the $0.60 adjusted fully diluted EPS</b><sup><b>1</b></sup><b> from prior year period.</b> </li> <li class='bwlistitemmargb'> <b>Initial FY'12 EPS guidance in a range of $3.25 to $3.45.</b> </li> <li class='bwlistitemmargb'> <b>Repurchased 2.8 million shares for $150 million during the third quarter.</b> </li> </ul>

Monday, October 31, 2011

INSERTING and REPLACING Herbalife Ltd. Announces Record Third Quarter 2011 Results and Raises 2011 Earnings Guidance17:41 EDT Monday, October 31, 2011 LOS ANGELES (Business Wire) -- Insert after footnote 4 of Regional Volume Point and Average Sales Leader Metrics table: Updated 2011 Guidance Given the recent volatility in foreign currency exchange rates for many of the company's key markets, guidance provided is reflective of the average exchange rates for the first four weeks of October. The negative EPS impact included in the guidance as a result of the change in foreign exchange rates since June 30, 2011 is approximately $0.10 - $0.12 per quarter. Based on current business trends and foreign currency rates, the company's fourth quarter, fiscal 2011 and fiscal 2012 guidance is provided below. Insert after table for Updated 2011 Guidance the header Updated 2012 Guidance. The corrected release reads: HERBALIFE LTD. ANNOUNCES RECORD THIRD QUARTER 2011 RESULTS AND RAISES 2011 EARNINGS GUIDANCEThird quarter net sales increased 30.0 percent on volume growth of 23.4 percent compared to the prior year period.Third quarter fully diluted EPS of $0.87 increased 45.0 percent compared to the $0.60 adjusted fully diluted EPS1 from prior year period.Initial FY'12 EPS guidance in a range of $3.25 to $3.45.Repurchased 2.8 million shares for $150 million during the third quarter. Herbalife Ltd. (NYSE: HLF) today reported that third quarter net sales increased 30.0 percent and local currency net sales increased 24.1 percent compared to the same time period in 2010. Net income for the quarter of $108.0 million, or $0.87 per diluted share compares to 2010 third quarter adjusted net income and adjusted EPS of $75.7 million and $0.60, respectively. “Our business has never been stronger,” said Michael O. Johnson, the company's chairman and CEO. “In the third quarter Herbalife saw the highest volume point growth rate of the past five years as we eclipsed the one-billion volume point mark for the first time in the company's history.“ For the quarter ended September 30, 2011, the company generated cash flow from operations of $143.0 million, an increase of 42.3 percent compared to the third quarter 2010, paid dividends of $23.5 million, invested $16.9 million in capital expenditures and repurchased $150.0 million in common shares outstanding related to our share repurchase program. 1 See Schedule A – “Reconciliation of Non-GAAP Financial Measures” for more detail. Third Quarter 2011 Regional Key Metrics 2,3,4Regional Volume Point and Average Active Sales Leader Metrics                     Volume Points (Mil)   Average Active Sales LeadersRegion   3Q'11   Yr/Yr % Chg   3Q'11   Yr/Yr % Chg North America 252.9   12.2 % 58,897   15.3 % Asia Pacific 261.2 36.2 % 51,644 38.5 % EMEA 132.4 15.8 % 39,227 16.7 % Mexico 180.6 23.5 % 49,772 25.9 % South & Central America 149.7 39.5 % 35,993 21.8 % China   40.3   2.3 %   9,533   26.3 % Worldwide Total   1017.1   23.4%   236,191   23.6%               Volume Points (Mil)Average Active Sales Leaders 3Q'11   Yr/Yr % Chg   3Q'11   Yr/Yr % Chg Emerging Markets 544.5 26.9 % 134,467 26.4 % Established Markets   472.6   19.5 %   109,339   19.3 % Worldwide Total   1017.1   23.4%   236,191   23.6%2 “Emerging markets” are defined herein as those countries that the World Bank categorized as having “low” or “medium” GDP per capita, while “Established markets” are defined as those countries categorized by the World Bank as having “high” GDP per capita. 3 Supplemental tables that include additional business metrics can be found at http://www.ir.herbalife.com 4 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. Updated 2011 Guidance Given the recent volatility in foreign currency exchange rates for many of the company's key markets, guidance provided is reflective of the average exchange rates for the first four weeks of October. The negative EPS impact included in the guidance as a result of the change in foreign exchange rates since June 30, 2011 is approximately $0.10 - $0.12 per quarter. Based on current business trends and foreign currency rates, the company's fourth quarter, fiscal 2011 and fiscal 2012 guidance is provided below.       Three Months Ending Twelve Months Ending December 31, 2011 December 31, 2011 Low   HighLow   High Volume Point Growth vs 2010 17.0%19.0%19.7%20.2% Net Sales Growth vs 2010 13.0%15.0%24.5%25.0% Diluted EPS $0.68$0.72$3.14$3.18 Cap Ex ($ millions) $25.0$30.0$85.0$90.0 Effective Tax Rate 28.2%29.2%27.3%28.3%2012 Guidance   Twelve Months Ending December 31, 2012 Low   High Volume Point Growth vs 2011 8.0%10.0% Net Sales Growth vs 2011 8.0%10.0% Diluted EPS $3.25$3.45 Cap Ex ($ millions) $105.0$115.0 Effective Tax Rate 27.0%29.0%Announces Quarterly Dividend The company reported today that its board of directors has approved a dividend of $0.20 per share to shareholders of record effective November 14, 2011 payable on November 28, 2011. Third Quarter Earnings Conference Call Herbalife Ltd. (NYSE:HLF) senior management will host an investor conference call to discuss its recent financial results and provide an update on current business trends on Tuesday, November 1, 2011 at 8 a.m. PDT (11 a.m. EDT). The dial-in number for this conference call for domestic callers is (877) 317-1296 and (706) 634-5671 for international callers (conference ID 15135181). Live audio of the conference call will be simultaneously webcast in the investor relations section of the company's website at http://ir.herbalife.com. An audio replay will be available following the completion of the conference call in MP3 format or by dialing(855) 859-2056 for domestic callers or (404) 537-3406 for international callers (conference ID 15135181). The webcast of the teleconference will be archived and available on Herbalife's website. About Herbalife Ltd. Herbalife Ltd. (NYSE:HLF) is a global network marketing company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle. Herbalife products are sold in 78 countries through a network of approximately 2.5 million 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 http://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 STATEMENTSThis document contains “forward-looking statements” within the meaning ofSection 27A of the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended. All statements other thanstatements of historical fact are “forward-looking statements” for purposes offederal and state securities laws, including any projections of earnings,revenue or other financial items; any statements of the plans, strategies andobjectives of management for future operations; any statements concerningproposed new services or developments; any statements regarding future economicconditions or performance; any statements of belief; and any statements ofassumptions underlying any of the foregoing. Forward-looking statements mayinclude the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,”“expect” or “anticipate” and any other similar words.Although we believe that the expectations reflected in any of ourforward-looking statements are reasonable, actual results could differmaterially from those projected or assumed in any of our forward-lookingstatements. Our future financial condition and results of operations, as wellas any forward-looking statements, are subject to change and to inherent risksand uncertainties, such as those disclosed or incorporated by reference in ourfilings with the Securities and Exchange Commission. Important factors thatcould cause our actual results, performance and achievements, or industryresults to differ materially from estimates or projections contained in ourforward-looking statements include, among others, the following:• any collateral impact resulting from the ongoing worldwide financial “crisis,” 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; • 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; and • whether we will purchase any of our shares in the open markets or otherwise. We do not undertake any obligation to update or release anyrevisions to any forward-looking statement or to report any events orcircumstances after the date hereof or to reflect the occurrence ofunanticipated events, except as required by law.   Herbalife Ltd. Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited)                 Quarter Ended Nine Months Ended 9/30/2011   9/30/2010 (3)9/30/2011   9/30/2010 (3)   North America $ 180,735 $ 155,532 $ 532,894 $ 473,228 Mexico 112,979 83,498 330,738 236,265 South and Central America 143,659 95,030 399,066 269,156 EMEA 147,670 121,221 463,624 387,598 Asia Pacific 255,169 181,555 691,575 494,418 China   55,006   51,595   152,071   135,205 Worldwide net sales 895,218 688,431 2,569,968 1,995,870 Cost of Sales   175,308   133,265   509,124   410,298 (1) Gross Profit 719,910 555,166 2,060,844 1,585,572 Royalty Overrides 290,842 224,061 844,451 656,160 SGA   277,721   230,150   788,472   648,143 (1) Operating Income 151,347 100,955 427,921 281,269 Interest Expense - net   345   2,192   3,848   6,291 Income before income taxes 151,002 98,763 424,073 274,978 Income Taxes   42,980   19,879   116,852   62,048 (1) Net Income   108,022   78,884   307,221   212,930   Basic Shares (2) 116,975 118,442 118,059 119,286 Diluted Shares (2) 124,275 125,613 125,889 126,216   Basic EPS (2) $ 0.92 $ 0.67 $ 2.60 $ 1.79 Diluted EPS (2) $ 0.87 $ 0.63 $ 2.44 $ 1.69   Dividends declared per share $ 0.20 $ 0.13 $ 0.53 $ 0.33                     (1) Includes impact of items related to adoption of highly-inflationary accounting in Venezuela that are further discussed in Schedule A – "Reconciliation of Non-GAAP Financial Measures”. (2) All share count and per share amounts have been adjusted to reflect the two-for-one stock split. (3) During the second quarter of 2011, the Company changed its method of accounting for share-based compensation tax benefits. Prior periods have been adjusted to reflect this change. See Note 2 of the quarterly report on Form 10-Q for the quarter ended September 30, 2011.   Herbalife Ltd. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)     Sep 30,   Dec 31, 20112010 (1)   ASSETS Current Assets: Cash & cash equivalents $ 261,521 $ 190,550 Receivables, net 112,475 85,612 Inventories 222,501 182,467 Prepaid expenses and other current assets 93,715 93,963 Deferred income taxes   43,662     42,994   Total Current Assets 733,874 595,586   Property and equipment, net 182,772 177,427 Deferred compensation plan assets 19,063 18,536 Deferred financing cost, net 5,091 998 Other assets 29,833 25,880 Marketing related intangibles and other and other intangible assets, net 311,935 310,894 Goodwill   105,488     102,899   Total Assets $ 1,388,056   $ 1,232,220       LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 61,857 $ 43,784 Royalty Overrides 190,697 162,141 Accrued compensation 69,646 69,376 Accrued expenses 145,150 141,867 Current portion of long term debt 1,762 3,120 Advance sales deposits 60,129 35,145 Income taxes payable   21,304     15,383   Total Current Liabilities 550,545 470,816   Non-current liabilities Long-term debt, net of current portion 220,298 175,046 Deferred compensation 22,290 20,167 Deferred income taxes 55,844 55,572 Other non-current liabilities   22,600     23,407   Total Liabilities 871,577 745,008   Contingencies   Shareholders' equity: Common shares 116 118 Additional paid in capital 280,515 248,693 Accumulated other comprehensive loss (36,012 ) (27,285 ) Retained earnings   271,860     265,686   Total Shareholders' Equity   516,479     487,212       Total Liabilities and Shareholders' Equity $ 1,388,056   $ 1,232,220               (1) During the second quarter of 2011, the Company changed its method of accounting for share-based compensation tax benefits. Prior periods have been adjusted to reflect this change. See Note 2 of the quarterly report on Form 10-Q for the quarter ended September 30, 2011.           Herbalife Ltd. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)     Nine Months Ended 9/30/2011   9/30/2010 (1) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 307,221 $ 212,930 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 54,440 51,755 Excess tax benefits from share-based payment arrangements (24,030 ) (6,572 ) Share-based compensation expenses 17,244 16,870 Amortization of discount and deferred financing costs 721 374 Deferred income taxes (7,000 ) (16,989 ) Unrealized foreign exchange transaction loss (gain) 8,324 (7,536 ) Write-off of deferred financing costs 914 — Foreign exchange loss from adoption of highly inflationary accounting in Venezuela — 15,131 Other 1,383 2,911 Changes in operating assets and liabilities: Receivables (31,834 ) (13,965 ) Inventories (51,649 ) (32,921 ) Prepaid expenses and other current assets (3,733 ) 5,744 Other assets (4,742 ) (2,328 ) Accounts payable 19,484 12,852 Royalty overrides 33,851 3,601 Accrued expenses and accrued compensation 7,579 11,622 Advance sales deposits 27,416 32,399 Income taxes payable 35,914 (16,955 ) Deferred compensation plan liability   2,123     2,198   NET CASH PROVIDED BY OPERATING ACTIVITIES   393,626     271,121   CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property (61,514 ) (42,199 ) Proceeds from sale of property 213 64 Deferred compensation plan assets   (527 )   (371 ) NET CASH USED IN INVESTING ACTIVITIES   (61,828 )   (42,506 ) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (62,177 ) (38,934 ) Borrowings from long-term debt 791,700 338,000 Principal payments on long-term debt (747,896 ) (379,465 ) Deferred financing costs (5,728 ) — Share repurchases (268,795 ) (106,163 ) Excess tax benefits from share-based payment arrangements 24,030 6,572 Proceeds from exercise of stock options and sale of stock under employee stock purchase plan   15,947     11,521   NET CASH USED IN FINANCING ACTIVITIES   (252,919 )   (168,469 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH   (7,908 )   (17,457 ) NET CHANGE IN CASH AND CASH EQUIVALENTS 70,971 42,689 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   190,550     150,801   CASH AND CASH EQUIVALENTS, END OF PERIOD   261,521     193,490   CASH PAID DURING THE PERIOD Interest paid $ 6,457   $ 7,195   Income taxes paid $ 88,079   $ 84,120               (1) During the second quarter of 2011, the Company changed its method of accounting for share-based compensation tax benefits. Prior periods have been adjusted to reflect this change. See Note 2 of the quarterly report on Form 10-Q for the quarter ended September 30, 2011. SUPPLEMENTAL INFORMATIONSCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(unaudited), (Dollars in Thousand, Except Per Share Data)In addition to its reported results, the Company has included in the tables below adjusted results that the Securities and Exchange Commission defines as “non-GAAP financial measures.”Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investor in analyzing period to period comparisons of the Company's results. The following is a reconciliation of net income and diluted earnings per share, presented and reported in accordance with U.S. generally accepted accounting principles, to net income adjusted for certain items:                   Herbalife Ltd. Supplemental Schedule Non-GAAP Financial Measures (In thousands, except per share amount) (Unaudited)                 Quarter Ended 9/30/2011 Reported     Adjusted (GAAP)Adjustment(Non-GAAP) Net Sales 895,218 895,218 Cost of Sales   175,308     175,308 Gross Profit 719,910 - 719,910 Royalty Overrides 290,842 290,842 SGA   277,721     277,721 Operating Income 151,347 - 151,347 Interest Expense - net   345     345 Income before income taxes 151,002 - 151,002 Income Taxes   42,980     42,980 Net Income   108,022   -     108,022   Diluted EPS $ 0.87 $ -   $ 0.87                                               Herbalife Ltd. Supplemental Schedule Non-GAAP Financial Measures (In thousands, except per share amount) (Unaudited)               Quarter Ended 9/30/2010 Reported Adjusting Adjusted (GAAP) (2)Items   (Non-GAAP) Net Sales $ 688,431 $ 688,431 Cost of Sales   133,265     133,265 Gross Profit 555,166 - 555,166 Royalty Overrides 224,061 224,061 SGA   230,150     230,150 Operating Income 100,955 - 100,955 Interest Expense - net   2,192     2,192 Income before income taxes 98,763 - 98,763 Income Taxes   19,879   3,228   (3)   23,107 Net Income $ 78,884   (3,228 ) $ 75,656   Diluted EPS (1) $ 0.63 $ (0.03 ) $ 0.60                       (1) Diluted EPS has been adjusted to reflect the two-for-one stock split. (2) During the second quarter of 2011, the Company changed its method of accounting for share-based compensation tax benefits. Prior periods have been adjusted to reflect this change. See Note 2 of the quarterly report on Form 10-Q for the quarter ended September 30, 2011. (3) Tax benefit from an international tax audit settlement.   Herbalife Ltd. Supplemental Schedule Non-GAAP Financial Measures (In thousands, except per share amount) (Unaudited)             Nine Months Ended 9/30/2011       Reported(GAAP)Adjustment Adjusted(Non-GAAP) Net Sales 2,569,968 2,569,968 Cost of Sales   509,124     509,124 Gross Profit 2,060,844 - 2,060,844 Royalty Overrides 844,451 844,451 SGA   788,472     788,472 Operating Income 427,921 - 427,921 Interest Expense - net   3,848   (914 ) (1)   2,934 Income before income taxes 424,073 914 424,987 Income Taxes   116,852   214   (1)   117,066 Net Income   307,221   700     307,921   Diluted EPS $ 2.44 $ 0.01   $ 2.45                   (1) Write-off of unamortized deferred financing costs resulting from the debt refinancing arrangement in March 2011.                   Herbalife Ltd. Supplemental Schedule Non-GAAP Financial Measures (In thousands, except per share amount) (Unaudited)             Nine Months Ended 9/30/2010 Reported Adjusting Adjusted (GAAP) (5)Items(Non-GAAP) Net Sales $ 1,995,870 $ 1,995,870 Cost of Sales   410,298 $ (12,715 ) (1)   397,583 Gross Profit 1,585,572 12,715 1,598,287 Royalty Overrides 656,160 656,160 SGA   648,143   (11,390 ) (2)   636,753 Operating Income 281,269 24,105 305,374 Interest Expense - net   6,291     6,291 Income before income taxes 274,978 24,105 299,083 Income Taxes   62,048   17,680   (3)   79,728 Net Income $ 212,930 $ 6,425   $ 219,355   Diluted EPS (4) $ 1.69 $ 0.05   $ 1.74                 (1) Incremental U.S. dollar costs of 2009 imports in Venezuela which were recorded at the unfavorable parallel market exchange rate and were not devalued based on 2010 exchange rates but rather recorded at their historical dollar costs as products were sold (2) Includes $15,131 foreign exchange loss related to remeasurement of Venezuela's monetary assets and liabilities resulting from adoption of highly inflationary accounting and $3,741 foreign exchange gain resulting from receipt of U.S. dollar approved by CADIVI at the official exchange rate relating to 2009 product importations which were previously registered with CADIVI (3) Includes $14,452 favorable income taxes related to Venezuela becoming highly inflationary economy and $3,228 tax benefit from an international income tax audit settlement. (4) Diluted EPS has been adjusted to reflect the two-for-one stock split. (5) During the second quarter of 2011, the Company changed its method of accounting for share-based compensation tax benefits. Prior periods have been adjusted to reflect this change. See Note 2 of the quarterly report on Form 10-Q for the quarter ended September 30, 2011.         The following is a reconciliation of total long-term debt to net debt:     9/30/2011 12/31/2010   Total long-term debt (current and long-term portion) $ 222,060 $ 178,166 Less: Cash and cash equivalents   261,521     190,550   Net debt   $ (39,461 )   $ (12,384 ) Herbalife Ltd.Media Contact:Barbara HendersonSVP, Worldwide Corp. Comm.213.745.0517Investor Contact:Amy GreeneVP, Investor Relations213.745.0474