Full Press Release Details
| Media Contact: | Investor Contact: | |||
| Jennifer Butler | Alan Quan | |||
| VP, Media Relations | VP, Investor Relations | |||
| 213.745.0420 | 213.745.0541 |
HERBALIFE REPORTS THIRD QUARTER 2016 WORLDWIDE VOLUME GROWTH OF 6%, BEATS BOTH REPORTED AND ADJUSTED THIRD QUARTER EPS GUIDANCE AND
RAISES FULL YEAR 2016 EPS GUIDANCE
Adjusted net income and adjusted diluted EPS are both non-GAAP measure and, for the purposes of 2016 results and guidance, exclude the impact of expenses relating to challenges to the company s business model, regulatory inquiries, expenses
related to the recovery of re-audit expenses, award amount in connection with the re-audit, the impact of non-cash interest costs associated with the company s convertible notes, regulatory settlements, costs related to the FTC settlement
implementation and China grant income. Adjusted diluted EPS, for the purposes of 2017 guidance, excludes the impact of expenses relating to challenges to the company s business model, the impact of non-cash interest costs associated with the
company s convertible notes and costs related to the FTC settlement implementation. See Schedule A Reconciliation of Non-GAAP Financial Measures for a detailed reconciliation of adjusted net income to net income calculated in
accordance with GAAP and a reconciliation of adjusted diluted EPS to diluted EPS calculated in accordance with GAAP and a discussion of why we believe these non-GAAP measures are useful.
LOS ANGELES, November 1, 2016 Herbalife Ltd. (NYSE: HLF) reported third quarter 2016 volume growth of 6% and
net sales of $1.1 billion, reflecting an increase of 2%, each compared to the prior year period. Third quarter net sales, excluding the impact of currency, grew by 5%. On a reported basis, third quarter 2016 net income was $87.7 million, or $1.01
per diluted share, compared to net income of $93.6 million or $1.09 per diluted share for the third quarter in 2015. Adjusted1 earnings for the quarter were $1.21 per diluted share compared to
$1.262 per diluted share for the comparable quarter in 2015. Due to currency fluctuations, third quarter 2016 reported and adjusted1 net income
were each negatively impacted by $17.9 million, and reported diluted EPS and adjusted1 diluted EPS were each negatively impacted by $0.21.
For the full year 2016, diluted and adjusted1 diluted EPS guidance is now in a range of $2.77 to $2.97 and $4.65 to
$4.85, an increase from the previous ranges of $2.30 to $2.60 and $4.50 to $4.80, respectively.
For the full year 2017, the company is providing initial volume
guidance in the range of 2% to 5% growth and initial full year 2017 GAAP diluted and adjusted1 diluted EPS guidance in the range of $3.95 to $4.35 and $4.60 to $5.00, respectively, which each
include a $0.15 headwind due to the expected unfavorable impact of currency fluctuations.
Michael O. Johnson, chairman and CEO of Herbalife, stated, We
delivered another strong quarter with 6% growth in worldwide volume and relentless management of expenses which contributed to our exceeding the high end of third quarter EPS guidance.
In a separate press release this afternoon, the Company announced its CEO transition plan that will go into effect in June of 2017. The press release can be found here
Prior year amounts have been updated for comparative purposes to adjust for China grant income recognized in 2015. See Schedule A Reconciliation of Non-GAAP Financial Measures for a detailed reconciliation of adjusted net
income to net income calculated in accordance with GAAP and a reconciliation of adjusted diluted EPS to diluted EPS calculated in accordance with GAAP and a discussion of why we believe these non-GAAP measures are useful.
Regional Volume Point and Average Active Sales Leader Metrics
| Volume Points (Mil) | Average Active Sales Leaders | |||||||
| Region | 3Q 16 | Yr/Yr % Chg | 3Q 16 | Yr/Yr % Chg | ||||
| North America | 311.6 | 9% | 81,035 | 5% | ||||
| Asia Pacific | 275.9 | 7% | 76,315 | -1% | ||||
| EMEA | 252.0 | 15% | 84,125 | 13% | ||||
| Mexico | 234.5 | 13% | 68,380 | 6% | ||||
| South & Central America | 161.1 | -15% | 56,025 | -8% | ||||
| China | 153.2 | 2% | 31,719 | 23% | ||||
| Worldwide Total | 1,388.3 | 6% | 383,274 | 4% |
Regional Net Sales and Foreign Exchange ( FX ) Impact
| Region | Reported Net Sales 3Q 16 (mil) | Growth/Decline including FX | Growth/Decline excluding FX | |||||||||
| North America | $ | 241.0 | 10% | 10% | ||||||||
| Asia Pacific | $ | 231.4 | 3% | 1% | ||||||||
| EMEA | $ | 201.6 | 10% | 15% | ||||||||
| Mexico | $ | 112.8 | -1% | 14% | ||||||||
| South & Central America | $ | 121.0 | -12% | -9% | ||||||||
| China | $ | 214.2 | -5% | 1% | ||||||||
| Worldwide Total | $ | 1,122.0 | 2% | 5% |
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 are active in more than one region but are counted only once in the worldwide amount.
business trends the company s fourth quarter 2016 and full year 2017 guidance are as follows:
| Three Months Ending December 31, 2016 | Twelve Months Ending December 31, 2016 | |||||||
| Low | High | Low | High | |||||
| Volume Point Growth vs 2015 | (1.5%) | 2.5% | 4.5% | 5.5% | ||||
| Net Sales Growth vs 2015 | (2.5%) | 1.5% | 1.0% | 2.0% | ||||
| Diluted EPS | $0.90 | $1.10 | $2.77 | $2.97 | ||||
| Adjusted (a) Diluted EPS | $0.80 | $1.00 | $4.65 | $4.85 | ||||
| Cap Ex ($ millions) | $33.0 | $43.0 | $145.0 | $155.0 | ||||
| Effective Tax Rate | 25.0% | 28.0% | 28.0% | 30.0% | ||||
| Adjusted Effective Tax Rate | 27.5% | 30.5% | 28.5% | 30.5% | ||||
| Currency Adjusted (b) Net Sales Growth vs 2015 | (0.5%) | 3.5% | 6.3% | 7.3% | ||||
| Currency Adjusted (b) Diluted EPS | $0.92 | $1.12 | $5.61 | $5.81 | ||||
| Twelve Months Ending December 31, 2017 | ||||||||
| Low | High | |||||||
| Volume Point Growth vs 2016 | 2.0% | 5.0% | ||||||
| Net Sales Growth vs 2016 | 3.5% | 6.5% | ||||||
| Diluted EPS (c) | $3.95 | $4.35 | ||||||
| Adjusted (a) Diluted EPS | $4.60 | $5.00 | ||||||
| Cap Ex ($ millions) | $130.0 | $160.0 | ||||||
| Effective Tax Rate (c) | 27.5% | 29.5% | ||||||
| Currency Adjusted Net Sales Growth vs 2016 | 3.9% | 6.9% | ||||||
| Currency Adjusted Diluted EPS | $4.75 | $5.15 |
(a) Adjusted net income and adjusted diluted EPS are both non-GAAP measure and, for
the purposes of 2016 results and guidance, exclude the impact of expenses relating to challenges to the company s business model, regulatory inquiries, expenses related to the recovery of re-audit expenses, award amount in connection with the
re-audit, the impact of non-cash interest costs associated with the company s convertible notes, regulatory settlements, costs related to the FTC settlement implementation and China grant income. Adjusted diluted EPS, for the purposes of 2017
guidance, excludes the impact of expenses relating to challenges to the company s business model, the impact of non-cash interest costs associated with the company s convertible notes and costs related to the FTC settlement
implementation. See Schedule A Reconciliation of Non-GAAP Financial Measures for a detailed reconciliation of adjusted net income to net income calculated in accordance with GAAP and a reconciliation of adjusted diluted EPS
to diluted EPS calculated in accordance with GAAP and a discussion of why we believe these non-GAAP measures are useful.
(b) Excludes the impact of Venezuela price increases tied to FX rate movements
(c) Excludes any ongoing tax effects from the exercise of equity awards that could impact our tax rate beginning
fiscal year 2017 due to a recently issued stock compensation accounting standard.
Forward guidance is based on the average daily exchange rates of the first two
Adjusted1 diluted EPS guidance for the fourth quarter 2016 includes a projected currency
headwind of approximately $0.12 per diluted share versus the fourth quarter of 2015.
Full year 2016 adjusted1 diluted EPS guidance includes a projected
currency headwind of approximately $0.96 per diluted share, compared to 2015, which is $0.06 higher than the headwind included in the guidance the company provided a quarter ago.
Full year 2017 adjusted1 diluted EPS guidance includes a projected currency headwind of approximately $0.15 per
diluted share, compared to 2016.
The Herbalife Investor Relations website contains a significant amount of financial and other information about the company 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.
Third Quarter 2016 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 Tuesday, November 1, 2016, at 2:30 p.m. PT (5:30 p.m. ET).
The dial-in number for this conference call for domestic callers is (877) 317-1296, and (706) 634-5671 for international callers (conference ID 82701587). 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 82701587). The webcast of the teleconference will be archived and available on Herbalife s website.
Herbalife is a global nutrition company that has been changing people s lives with great products since 1980. Our nutrition, weight-management,
energy and fitness and personal care products are available exclusively to and through dedicated Herbalife Independent Members in more than 90 countries. We are committed to fighting the worldwide problems of poor nutrition and obesity by
offering high-quality products, one-on-one coaching with an Herbalife Member and a community that inspires customers to live a healthy, active life.
the Herbalife Family Foundation (HFF) and its Casa Herbalife programs to help bring good nutrition to children in need. We also sponsor more than 190 world-class athletes, teams and events around the globe,
including Cristiano Ronaldo, the LA Galaxy and champions in many other sports.
The company has over 8,000 employees worldwide, and its shares are
traded on the New York Stock Exchange (NYSE: HLF) with net sales of $4.5 billion in 2015. To learn more, visit Herbalife.com or IAmHerbalife.com.
FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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:
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
millions, except per share amounts)
| Three Months Ended | Nine Months Ended | |||||||||||||
| 9/30/2016 | 9/30/2015 | 9/30/2016 | 9/30/2015 | |||||||||||
| North America | $ 241.0 | $ 219.4 | $ 753.5 | $ 676.1 | ||||||||||
| Mexico | 112.8 | 113.4 | 341.8 | 366.2 | ||||||||||
| South and Central America | 121.0 | 138.1 | 367.9 | 433.3 | ||||||||||
| EMEA | 201.6 | 182.5 | 619.0 | 562.7 | ||||||||||
| Asia Pacific | 231.4 | 224.6 | 687.1 | 706.5 | ||||||||||
| China | 214.2 | 224.9 | 674.1 | 625.8 | ||||||||||
| Worldwide Net Sales | 1,122.0 | 1,102.9 | 3,443.4 | 3,370.6 | ||||||||||
| Cost of Sales (1) | 209.1 | 206.9 | 658.5 | 651.6 | ||||||||||
| Gross Profit | 912.9 | 896.0 | 2,784.9 | 2,719.0 | ||||||||||
| Royalty Overrides | 320.3 | 304.7 | 968.9 | 946.4 | ||||||||||
| Selling, General and Administrative Expenses (2) | 441.3 | 433.1 | 1,545.2 | 1,335.0 | ||||||||||
| Other Operating Income (3) | (0.2) | (3.4) | (29.1) | (3.4) | ||||||||||
| Operating Income | 151.5 | 161.6 | 299.9 | 441.0 | ||||||||||
| Interest Expense, net | 22.1 | 24.1 | 70.1 | 69.3 | ||||||||||
| Other Expense, net (4) | - | - | - | 2.3 | ||||||||||
| Income Before Income Taxes | 129.4 | 137.5 | 229.8 | 369.4 | ||||||||||
| Income Taxes | 41.7 | 43.9 | 69.2 | 114.8 | ||||||||||
| Net Income | $ 87.7 | $ 93.6 | $ 160.6 | $ 254.6 | ||||||||||
| Weighted Average Shares Outstanding: | ||||||||||||||
| Basic | 83.1 | 82.6 | 83.0 | 82.5 | ||||||||||
| Diluted | 86.4 | 85.7 | 86.1 | 85.1 | ||||||||||
| Earnings Per Share: | ||||||||||||||
| Basic | $ 1.06 | $ 1.13 | $ 1.94 | $ 3.09 | ||||||||||
| Diluted | $ 1.01 | $ 1.09 | $ 1.87 | $ 2.99 |
(1) Cost of Sales includes $0.2 million and $1.9 million of inventory write downs related to Venezuela for the three and nine months ended September 30, 2015, respectively.
(2) Selling, General and Administrative Expenses includes $203 million related to regulatory
settlements for the nine months ended September 30, 2016 and $32.9 million pre-tax unfavorable impact related to the remeasurement of Venezuela Bolivar-denominated assets and liabilities at the SIMADI rate for the nine months ended September 30,
(3) Other Operating Income relates to certain China grant income.
(4) Other Expense, net relates to the impairment of investments in Bolivar-denominated bonds for
the nine months ended September 30, 2015.
Herbalife Ltd. and Subsidiaries
Condensed Consolidated
| Sep 30, 2016 | Dec 31, 2015 | |||||||||||
| ASSETS | ||||||||||||
| Current Assets: | ||||||||||||
| Cash & cash equivalents | $ | 788.3 | $ | 889.8 | ||||||||
| Receivables, net | 87.9 | 69.9 | ||||||||||
| Inventories | 371.7 | 332.0 | ||||||||||
| Prepaid expenses and other current assets | 198.0 | 161.1 | ||||||||||
| Deferred income tax assets | 113.5 | 113.5 | ||||||||||
| Total Current Assets | 1,559.4 | 1,566.3 | ||||||||||
| Property, net | 376.2 | 339.2 | ||||||||||
| Deferred compensation plan assets | 30.2 | 29.3 | ||||||||||
| Other assets | 162.2 | 141.1 | ||||||||||
| Marketing related intangibles and other intangible assets, net | 310.1 | 310.2 | ||||||||||
| Goodwill | 94.5 | 91.8 | ||||||||||
| Total Assets | $ | 2,532.6 | $ | 2,477.9 | ||||||||
| LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) | ||||||||||||
| Current Liabilities: | ||||||||||||
| Accounts payable | $ | 86.4 | $ | 71.1 | ||||||||
| Royalty overrides | 261.5 | 249.9 | ||||||||||
| Accrued compensation | 126.9 | 128.8 | ||||||||||
| Accrued expenses | 239.3 | 228.7 | ||||||||||
| Current portion of long-term debt | 425.3 | 229.5 | ||||||||||
| Advance sales deposits | 85.0 | 63.8 | ||||||||||
| Income taxes payable | 38.9 | 52.6 | ||||||||||
| Total Current Liabilities | 1,263.3 | 1,024.4 | ||||||||||
| Non-current liabilities | ||||||||||||
| Long-term debt, net of current portion | 1,017.6 | 1,392.5 | ||||||||||
| Deferred compensation plan liability | 48.9 | 43.6 | ||||||||||
| Deferred income tax liabilities | 2.6 | 0.4 | ||||||||||
| Other non-current liabilities | 76.5 | 70.5 | ||||||||||
| Total Liabilities | 2,408.9 | 2,531.4 | ||||||||||
| Contingencies | ||||||||||||
| Shareholders equity (deficit): | ||||||||||||
| Common shares | 0.1 | 0.1 | ||||||||||
| Paid-in capital in excess of par value | 462.6 | 438.2 | ||||||||||
| Accumulated other comprehensive loss | (173.3) | (165.5) | ||||||||||
| Accumulated deficit | (165.7) | (326.3) | ||||||||||
| Total Shareholders Equity (Deficit) | 123.7 | (53.5) | ||||||||||
| Total Liabilities and Shareholders Equity (Deficit) | $ | 2,532.6 | $ | 2,477.9 |
Herbalife Ltd. and Subsidiaries
Condensed Consolidated
Statements of Cash Flows
| Nine Months Ended | ||||||||||||
| 9/30/2016 | 9/30/2015 | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net income | $ | 160.6 | $ | 254.6 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 72.6 | 72.6 | ||||||||||
| Excess tax benefits from share-based payment arrangements | (5.1) | (1.5) | ||||||||||
| Share-based compensation expenses | 30.3 | 34.2 | ||||||||||
| Non-cash interest expense | 42.0 | 39.8 | ||||||||||
| Deferred income taxes | (38.4) | (1.5) | ||||||||||
| Inventory write-downs | 16.7 | 22.3 | ||||||||||
| Foreign exchange transaction gain | (1.4) | (11.9) | ||||||||||
| Foreign exchange loss and other charges relating to Venezuela | 4.4 | 37.2 | ||||||||||
| Other | (8.2) | 8.9 | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Receivables | (14.6) | (25.1) | ||||||||||
| Inventories | (56.7) | (3.2) | ||||||||||
| Prepaid expenses and other current assets | 7.0 | 0.4 | ||||||||||
| Other assets | (1.9) | (16.8) | ||||||||||
| Accounts payable | 17.5 | 18.3 | ||||||||||
| Royalty overrides | 14.1 | 5.6 | ||||||||||
| Accrued expenses and accrued compensation | 11.9 | 61.7 | ||||||||||
| Advance sales deposits | 21.2 | 23.3 | ||||||||||
| Income taxes | (24.8) | (26.6) | ||||||||||
| Deferred compensation plan liability | 2.7 | 0.9 | ||||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 249.9 | 493.2 | ||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Purchases of property, plant and equipment | (111.9) | (57.5) | ||||||||||
| Other | 4.4 | 6.2 | ||||||||||
| NET CASH USED IN INVESTING ACTIVITIES | (107.5) | (51.3) | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Principal payments on senior secured credit facility and other debt | (233.0) | (202.6) | ||||||||||
| Issuance costs relating to long-term debt | - | (6.2) | ||||||||||
| Share repurchases | (12.5) | (10.7) | ||||||||||
| Excess tax benefits from share-based payment arrangements | 5.1 | 1.5 | ||||||||||
| Other | (0.9) | 0.1 | ||||||||||
| NET CASH USED IN FINANCING ACTIVITIES | (241.3) | (217.9) | ||||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | (2.6) | (56.2) | ||||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (101.5) | 167.8 | ||||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 889.8 | 645.4 | ||||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 788.3 | $ | 813.2 |
SUPPLEMENTAL INFORMATION
SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
unreviewed), (All tables provide Dollars in millions, Except per Share Data)
In addition to its reported results and guidance calculated in accordance with GAAP,
the company has included in this release adjusted net income and adjusted diluted EPS, performance measures 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 or forecasted results, in each case calculated in accordance with GAAP, can provide useful supplemental information for investors because they facilitate a period to
period comparative assessment of the company s operating performance relative to its performance based on reported or forecasted results under GAAP, while isolating the effects of some items that vary from period to period without any
correlation to core operating performance and eliminate certain charges that management believes do not reflect the company s operations and underlying operational performance. The company s definition of adjusted net income and
adjusted diluted earnings per share may not be comparable to similarly titled measures of other companies because other companies may not calculate them in the same manner as the company does and should not be viewed in isolation from nor as
alternatives to net income or diluted EPS calculated in accordance with GAAP.
The following is a reconciliation of net income, presented and reported in