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Press release from Business Wire

Herbalife Ltd. Announces Record Fourth Quarter 2011 and Full Year Results, Record Sales Leader Retention and Raises 2012 Earnings Guidance

<ul> <li class='bwlistitemmargb'> <b>Fourth quarter worldwide volume growth of 23 percent with double-digit increases in each of its six regions compared to the prior year period.</b> </li> <li class='bwlistitemmargb'> <b>Fourth quarter EPS of $0.86 increased 25 percent compared to the prior year period.</b> </li> <li class='bwlistitemmargb'> <b>Raising FY'12 EPS guidance to a range of $3.40 to $3.60.</b> </li> <li class='bwlistitemmargb'> <b>Record annual sales leader retention of over 50 percent.</b> </li> <li class='bwlistitemmargb'> <b>Board of directors approved a $0.30 per share quarterly dividend.</b> </li> </ul>

Tuesday, February 21, 2012

Herbalife Ltd. Announces Record Fourth Quarter 2011 and Full Year Results, Record Sales Leader Retention and Raises 2012 Earnings Guidance16:10 EST Tuesday, February 21, 2012 LOS ANGELES (Business Wire) -- Herbalife Ltd. (NYSE: HLF) today reported that fourth quarter net sales increased 20 percent and local currency net sales increased 23 percent compared to the same time period in 2010. Net income for the quarter of $105.4 million, or $0.86 per diluted share compares to 2010 fourth quarter net income of $86.3 million and EPS of $0.69, respectively. For the twelve months ended December 31, 2011, the company reported record net sales of $3.5 billion, a 26 percent increase on 21 percent volume growth compared to 2010. For the same period, the company reported adjusted1 net income of $413.3 million, or $3.31 per diluted share, reflecting an increase of 35 percent and 37 percent respectively compared to the adjusted 2010 results of $305.6 million and $2.42 per diluted share. On a reported basis, EPS of $3.30 increased 39 percent compared to 2010. “The momentum in our business continued throughout 2011 as we set new records in net sales, earnings per share, and free cash flow,” said Michael O. Johnson, the company's chairman and CEO. “Equally important, we continue to set records in many Distributor metrics that are the foundation for continued growth, including activity levels and retention rates of Sales Leaders.“ For the year ended December 31, 2011, the company generated cash flow from operations of $509.3 million, an increase of 31 percent compared to 2010, paid dividends of $85.5 million, invested $90.9 million in capital expenditures and repurchased $298.8 million in common shares outstanding related to our share repurchase program. ____________________________ 1 See Schedule A – “Reconciliation of Non-GAAP Financial Measures” for more detail. Fourth Quarter and Fiscal 2011 Regional Key Metrics2,3,4Regional Volume Point and Average Active Sales Leader Metrics     Volume Points (Mil)   Average Active Sales Leaders   Yr/Yr %   Region   4Q'11   Chg   4Q'11   Yr/Yr % Chg North America 232.1 16 % 59,599 16 % Asia Pacific 257.9 37 % 55,124 39 % EMEA 137.7 10 % 41,618 17 % Mexico 185.4 20 % 52,172 26 % South & Central America 166.0 35 % 39,724 27 % China   43.1   13 %   10,077   28 % Worldwide Total   1,022.2   23%   249,779   24%               Volume Points (Mil)Average Active Sales Leaders Yr/Yr % 4Q'11   Chg   4Q'11   Yr/Yr % Chg Emerging Markets 574.0 26 % 143,997 29 % Established Markets   448.2   20 %   112,792   20 % Worldwide Total   1,022.2   23%   249,779   24%   ____________________________ 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.     Volume Points (Mil)   Average Active Sales Leaders   Yr/Yr %   Region   FY'11   Chg   FY'11   Yr/Yr % Chg North America 987.1 11 % 56,741 15 % Asia Pacific 961.6 33 % 48,195 34 % EMEA 545.0 12 % 38,607 15 % Mexico 704.5 25 % 47,697 25 % South & Central America 569.9 33 % 34,938 21 % China   153.8   7 %   8,814   29 % Worldwide Total   3,921.9   21%   227,308   22%               Volume Points (Mil)Average Active Sales Leaders Yr/Yr % FY'11   Chg   FY'11   Yr/Yr % Chg Emerging Markets 2101.2 26 % 128,976 27 % Established Markets   1820.7   16 %   104,906   18 % Worldwide Total   3,921.9   21%   227,308   22%   2011 Annual Sales Leader Requalification By January of each year, sales leaders are required to re-qualify. In February of each year, we remove from the rank of sales leaders those individuals who did not satisfy the sales leader qualifications during the preceding 12 months. For the latest 12-month re-qualification period ending January 2012, approximately 52 percent of the eligible sales leaders, excluding China, re-qualified, reflecting an improvement from approximately 49 percent in the prior requalification period. Updated 2012 Guidance Guidance for fully diluted 2012 EPS is based on the average daily exchange rates of January 2012, which in aggregate are not materially different from the foreign currency exchange rates assumed in our prior guidance. Based on current business trends the company's first quarter fiscal 2012 and fiscal 2012 guidance is provided below.     Three Months Ending   Twelve Months Ending March 31, 2012 December 31, 2012 Low   HighLow   High Volume Point Growth vs 2011 14.5%16.5%10.0%12.0% Net Sales Growth vs 2011 10.0%12.0%9.0%11.0% Diluted EPS $0.76$0.80$3.40$3.60 Cap Ex ($ millions) $25.0$30.0$110.0$120.0 Effective Tax Rate 26.5%28.5%26.5%28.5%   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 effective March 7, 2012, payable on March 22, 2012. Fourth Quarter and Fiscal 2011 Earnings Conference Call Herbalife senior management will host an investor conference call to discuss its recent financial results and provide an update on current business trends on Wednesday, February 22, 2012 at 8 a.m. PST (11 a.m. EST). The dial-in number for this conference call for domestic callers is 877-317-1296 and 706-634-5671 for international callers (conference ID 41826311). 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 dialing855-859-2056 for domestic callers or 404-537-3406 for international callers (conference ID 41826311). 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 81 countries through a network of approximately 2.7 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 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 any revisions to any forward-looking statements 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. Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited)         Quarter Ended Year Ended 12/31/2011   12/31/2010 (3)12/31/2011   12/31/2010 (3)   North America $ 165,737 $ 140,898 $ 698,631 $ 614,126 Mexico 106,192 97,716 436,930 333,981 South and Central America 155,373 121,277 554,439 390,433 EMEA 151,556 140,146 615,180 527,744 Asia Pacific 247,015 189,081 938,590 683,499 China   58,696     49,238     210,767   184,443   Worldwide net sales 884,569 738,356 3,454,537 2,734,226 Cost of Sales   170,960     148,513     680,084   558,811   (1) Gross Profit 713,609 589,843 2,774,453 2,175,415 Royalty Overrides 293,109 244,088 1,137,560 900,248 SGA   286,151     239,512     1,074,623   887,655   (1) Operating Income 134,349 106,243 562,270 387,512 Interest Expense - net   (1,357 )   1,126     2,491   7,417   Income before income taxes 135,706 105,117 559,779 380,095 Income Taxes   30,349     18,832     147,201   80,880   (1) Net Income   105,357     86,285     412,578   299,215     Basic Shares (2) 115,989 118,164 117,540 119,004 Diluted Shares (2) 122,640 125,958 124,846 126,495   Basic EPS (2) $ 0.91   $ 0.73   $ 3.51 $ 2.51   Diluted EPS (2) $ 0.86   $ 0.69   $ 3.30 $ 2.37     Dividends declared per share $ 0.20   $ 0.12   $ 0.73 $ 0.45       (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 annual report on Form 10-K for the year ended December 31, 2011.     Herbalife Ltd. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)     Dec 31,   Dec 31, 20112010 (1)   ASSETS Current Assets: Cash & cash equivalents $ 258,775 $ 190,550 Receivables, net 89,660 85,612 Inventories 247,696 182,467 Prepaid expenses and other current assets 117,073 93,963 Deferred income taxes   55,615     42,994   Total Current Assets 768,819 595,586   Property, plant and equipment, net 193,703 177,427 Deferred compensation plan assets 20,511 18,536 Deferred financing cost, net 4,797 998 Other assets 41,125 25,880 Marketing related intangibles and other intangible assets, net 311,764 310,894 Goodwill   105,490     102,899   Total Assets $ 1,446,209   $ 1,232,220       LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 57,095 $ 43,784 Royalty Overrides 197,756 162,141 Accrued compensation 76,435 69,376 Accrued expenses 152,744 141,867 Current portion of long term debt 1,542 3,120 Advance sales deposits 31,702 35,145 Income taxes payable   31,415     15,383   Total Current Liabilities 548,689 470,816   Non-current liabilities Long-term debt, net of current portion 202,079 175,046 Deferred compensation plan liability 23,702 20,167 Deferred income taxes 72,348 55,572 Other non-current liabilities   39,203     23,407   Total Liabilities 886,021 745,008   Commitments and Contingencies   Shareholders' equity: Common shares 116 118 Additional paid in capital 291,950 248,693 Accumulated other comprehensive loss (37,809 ) (27,285 ) Retained earnings   305,931     265,686   Total Shareholders' Equity   560,188     487,212       Total Liabilities and Shareholders' Equity $ 1,446,209   $ 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 annual report on Form 10-K for the year ended December 31, 2011.     Herbalife Ltd. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)       Year Ended 12/31/2011   12/31/2010 (1) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 412,578 $ 299,215 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 71,853 68,621 Excess tax benefits from share-based payment arrangements (27,450 ) (7,728 ) Share based compensation expenses 24,133 22,969 Amortization of discount and deferred financing costs 1,007 500 Deferred income taxes (12,984 ) (33,313 ) Unrealized foreign exchange transaction loss (gain) 9,403 (7,142 ) Write-off of deferred financing costs 914 — Foreign exchange loss from adoption of highly inflationary accounting in Venezuela — 15,131 Other 2,206 2,527 Changes in operating assets and liabilities: Receivables (9,687 ) (7,593 ) Inventories (84,880 ) (31,516 ) Prepaid expenses and other current assets 3,229 10,254 Other assets (13,864 ) (3,485 ) Accounts payable 15,427 6,650 Royalty overrides 44,041 15,732 Accrued expenses and accrued compensation 28,749 31,092 Advance sales deposits (1,538 ) 12,439 Income taxes 42,659 (8,807 ) Deferred compensation plan liability   3,535     3,538   NET CASH PROVIDED BY OPERATING ACTIVITIES   509,331     389,084   CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment (90,408 ) (68,125 ) Proceeds from sale of property, plant and equipment 297 115 Deferred compensation plan assets   (1,975 )   (1,126 ) NET CASH USED IN INVESTING ACTIVITIES   (92,086 )   (69,136 ) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (85,489 ) (53,740 ) Borrowings from long-term debt 914,200 427,000 Principal payments on long-term debt (888,865 ) (499,451 ) Deferred financing costs (5,718 ) — Share repurchases (321,639 ) (160,008 ) Excess tax benefits from share-based payment arrangements 27,450 7,728 Proceeds from exercise of stock options and sale of stock under employee stock purchase plan   22,262     15,309   NET CASH USED IN FINANCING ACTIVITIES   (337,799 )   (263,162 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH   (11,221 )   (17,037 ) NET CHANGE IN CASH AND CASH EQUIVALENTS 68,225 39,749 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR   190,550     150,801   CASH AND CASH EQUIVALENTS, END OF YEAR   258,775     190,550   CASH PAID DURING THE YEAR Interest paid $ 8,800   $ 9,295   Income taxes paid $ 118,906   $ 111,497       (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 annual report on Form 10-K for the year ended December 31, 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 12/31/2011 Reported     Adjusted (GAAP)Adjustment(Non-GAAP) Net Sales 884,569 884,569 Cost of Sales   170,960       170,960   Gross Profit 713,609 - 713,609 Royalty Overrides 293,109 293,109 SGA   286,151       286,151   Operating Income 134,349 - 134,349   (1,357 )     (1,357 ) Income before income taxes 135,706 - 135,706 Income Taxes   30,349       30,349   Net Income   105,357     -   105,357     Diluted EPS $ 0.86   $ - $ 0.86         Herbalife Ltd. Supplemental Schedule Non-GAAP Financial Measures (In thousands, except per share amount) (Unaudited)   Quarter Ended 12/31/2010 Reported Adjusted (GAAP) (2)Adjustment(Non-GAAP) Net Sales $ 738,356 $ 738,356 Cost of Sales   148,513       148,513   Gross Profit 589,843 - 589,843 Royalty Overrides 244,088 244,088 SGA   239,512       239,512   Operating Income 106,243 - 106,243 Interest Expense (Income), net   1,126       1,126   Income before income taxes 105,117 - 105,117 Income Taxes   18,832       18,832   Net Income $ 86,285     - $ 86,285     Diluted EPS (1) $ 0.69   $ - $ 0.69       (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 annual report on Form 10-K for the year ended December 31, 2011.     Herbalife Ltd. Supplemental Schedule Non-GAAP Financial Measures (In thousands, except per share amount) (Unaudited)     Year Ended 12/31/2011 Reported     Adjusted (GAAP)Adjustment(Non-GAAP) Net Sales 3,454,537 3,454,537 Cost of Sales   680,084     680,084 Gross Profit 2,774,453 - 2,774,453 Royalty Overrides 1,137,560 1,137,560 SGA   1,074,623     1,074,623 Operating Income 562,270 - 562,270 Interest Expense (Income), net   2,491   (914 ) (1)   1,577 Income before income taxes 559,779 914 560,693 Income Taxes   147,201   214   (1)   147,415 Net Income   412,578   700     413,278   Diluted EPS $ 3.30 $ 0.01   $ 3.31     (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)   Year Ended 12/31/2010 Reported Adjusted (GAAP) (5)Adjustment(Non-GAAP) Net Sales $ 2,734,226 $ 2,734,226 Cost of Sales   558,811 $ (12,715 ) (1)   546,096 Gross Profit 2,175,415 12,715 2,188,130 Royalty Overrides 900,248 900,248 SGA   887,655   (11,390 ) (2)   876,265 Operating Income 387,512 24,105 411,617 Interest Expense (Income), net   7,417     7,417 Income before income taxes 380,095 24,105 404,200 Income Taxes   80,880   17,680   (3)   98,560 Net Income $ 299,215 $ 6,425   $ 305,640   Diluted EPS (4) $ 2.37 $ 0.05   $ 2.42     (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 annual report on Form 10-K for the year ended December 31, 2011.   The following is a reconciliation of total long-term debt to net debt:     12/31/2011   12/31/2010   Total long-term debt (current and long-term portion) $ 203,621 $ 178,166 Less: Cash and cash equivalents   258,775     190,550   Net debt   $ (55,154 )   $ (12,384 )   Herbalife Ltd.Media Contact:Barbara Henderson, 213-745-0517SVP, Worldwide Corp. Comm.orInvestor Contact:Amy Greene, 213-745-0474VP, Investor Relations