Full Press Release Details
| Media Contact: | Investor Contact: | |
| Jennifer Butler | Eric Monroe | |
| VP, Media Relations | Director, Investor Relations | |
| 213.745.0420 | 213.745.0449 |
HERBALIFE REPORTS FOURTH QUARTER REPORTED NET SALES
GROWTH OF 4.6% AND REITERATES GROWTH PROJECTIONS FOR 2018
LOS ANGELES, February 22, 2018 Herbalife Ltd. (NYSE: HLF) reports results for the fourth
quarter and full year ended December 31, 2017.
After a year of transition, we returned to net sales growth in the fourth quarter as expected,
and we anticipate stronger net sales growth for the full year in 2018, said Rich Goudis, CEO of Herbalife. This growth is due to the determination and hard work of our talented independent distributors and employees around the globe who
are continuously looking for ways to fulfill our purpose to make the world healthier and happier.
The Company reported fourth quarter 2017 volume
points of 1.3 billion, which represents a decline of 1.8%, compared to the prior year period, in line with the pre-announcement issued on January 8, 2018. Reported fourth quarter 2017 net sales
of $1.1 billion increased 4.6%, while constant currency net sales increased 3.4%, both compared to the same period in 2016.
basis, fourth quarter 2017 net loss was $63.4 million, or ($0.87) per diluted share, which includes a provisional charge of $153.3 million, or ($2.01) per adjusted1 diluted share,
related to the Tax Act, compared to fourth quarter 2016 net income of $99.4 million, or $1.16 per diluted share. The provisional charge related to the Tax Act is subject to continued evaluation and adjustment in future periods as additional
information becomes available and further analysis is completed.
Adjusted2 earnings for the fourth
quarter 2017 were $1.29 per adjusted1 diluted share compared to $1.00 per diluted share for the fourth quarter of 2016.
Full year 2017 worldwide volume points of 5.4 billion declined 3.6% compared to full year 2016. Reported full year 2017 net sales of $4.4
billion decreased 1.4%, while constant currency net sales decreased 1.1%, both compared to full year 2016.
On a reported basis, full year 2017 net
income was $213.9 million, or $2.58 per diluted share, compared to net income of $260.0 million, or $3.02 per diluted share for 2016.
Adjusted2 earnings for 2017 were $4.86 per diluted share compared to $4.85 per
diluted share for 2016. Due to the negative impact of currency, full year 2017 reported diluted EPS and adjusted2 diluted EPS were each negatively impacted by $0.23.
Since the approval by the Company s Board of Directors in February 2017 of the share repurchase program, a total of approximately 11.7 million
shares were repurchased, including approximately 400,000 shares repurchased from November 2, 2017 through February 21, 2018.
For the full year 2018, the Company is reiterating its volume point guidance range of 2% to 6% growth as well as
its 2018 reported and adjusted2 diluted EPS guidance of $3.82 to $4.22 and $4.60 to $5.00.
Furthermore, Herbalife announces, consistent with the Company s succession strategy, a new executive organization structure effective May 1, 2018.
The Company s president, Des Walsh, will transition to the new role of executive vice-chairman where his 14 years of experience at the Company will
primarily be used in growing the business and developing and maintaining strong relationships with the Company s distributor leaders around the world.
Concurrently with Mr. Walsh s transition to his new role, two Company veterans will each be promoted to serve as
co-president of the Company, each with separate but complementary responsibilities for leading the Company forward.
John DeSimone, currently chief financial officer, will assume the role of co-president and chief strategic officer
where he will manage the Company s regional leadership, who have responsibility for growing the Company s nutrition business and driving performance in more than 90 countries around the globe. These will be new duties for Mr. DeSimone
who will continue to manage the Company s financial planning and investor relations operations.
Chief health and nutrition officer, Dr. John
Agwunobi, will continue in his role leading the Company s nutrition and fitness training and medical and consumer affairs. As co-president and chief health and nutrition officer, Dr. Agwunobi will
expand his responsibilities to concentrate on enhancing the distributor and customer experience. This new position will work intimately with our distributors and customers, ensuring that the Company is continuously innovating in the areas of
corporate sales, technology, marketing and product development.
As part of this new organization structure, current senior vice president and principal
accounting officer, Bosco Chiu, having served close to 25 years at the Company, will be promoted to executive vice president and chief financial officer. In addition, current acting general counsel Richard Werber will assume the new role of chief
legal officer while current senior vice president, deputy general counsel and chief compliance officer Henry Wang will be promoted to executive vice president and general counsel.
Fourth Quarter and Fiscal 2017 Key Metrics3
Regional Volume Point Metrics
| Volume Points (Mil) | Volume Points (Mil) | |||||||||||||||
| Region | 4Q 17 | Yr/Yr % Chg | FY 17 | Yr/Yr % Chg | ||||||||||||
| North America | 250.8 | -7.3 | % | 1,099.0 | -12.0 | % | ||||||||||
| Asia Pacific | 273.8 | 0.2 | % | 1,089.2 | 1.2 | % | ||||||||||
| EMEA | 271.8 | 4.5 | % | 1,088.5 | 3.7 | % | ||||||||||
| Mexico | 207.7 | -8.4 | % | 875.4 | -4.8 | % | ||||||||||
| South & Central America | 153.0 | -6.6 | % | 593.9 | -10.4 | % | ||||||||||
| China | 149.7 | 9.6 | % | 633.4 | 1.4 | % | ||||||||||
| Worldwide Total | 1,306.8 | -1.8 | % | 5,379.4 | -3.6 | % |
Regional Net Sales and Foreign Exchange ( FX ) Impact
| Region | Reported Net Sales 4Q 17 (mil) | Growth/Decline including FX | Growth/Decline excluding FX | |||||||||
| North America | $ | 192.2 | -4.9 | % | -5.0 | % | ||||||
| Asia Pacific | $ | 229.7 | 1.7 | % | -0.2 | % | ||||||
| EMEA | $ | 220.3 | 12.0 | % | 5.4 | % | ||||||
| Mexico | $ | 108.0 | 3.1 | % | -1.3 | % | ||||||
| South & Central America | $ | 125.2 | 3.5 | % | 17.0 | % | ||||||
| China | $ | 217.9 | 11.9 | % | 8.4 | % | ||||||
| Worldwide Total | $ | 1,093.3 | 4.6 | % | 3.4 | % |
| Region | Reported Net Sales FY 17 (mil) | Growth/Decline including FX | Growth/Decline excluding FX | |||||||||
| North America | $ | 840.2 | -12.1 | % | -12.1 | % | ||||||
| Asia Pacific | $ | 915.9 | 0.3 | % | -0.9 | % | ||||||
| EMEA | $ | 868.7 | 6.5 | % | 4.2 | % | ||||||
| Mexico | $ | 442.7 | -0.9 | % | 0.5 | % | ||||||
| South & Central America | $ | 474.3 | -2.9 | % | 0.4 | % | ||||||
| China | $ | 885.9 | 2.0 | % | 4.0 | % | ||||||
| Worldwide Total | $ | 4,427.7 | -1.4 | % | -1.1 | % |
Based on current business trends the Company s first quarter 2018 and full year 2018 guidance are as follows:
| Three Months Ending | Twelve Months Ending | |||||||||||||||
| March 31, 2018 | December 31, 2018 | |||||||||||||||
| Low | High | Low | High | |||||||||||||
| Volume Point Growth vs 2017 | (7.0 | %) | (3.0 | %) | 2.0 | % | 6.0 | % | ||||||||
| Net Sales Growth vs 2017 | (1.0 | %) | 3.0 | % | 5.5 | % | 9.5 | % | ||||||||
| Diluted EPS (a) | $ | 0.70 | $ | 0.90 | $ | 3.82 | $ | 4.22 | ||||||||
| Adjusted Diluted EPS (a) (b) | $ | 0.90 | $ | 1.10 | $ | 4.60 | $ | 5.00 | ||||||||
| Cap Ex ($ millions) | $ | 30.0 | $ | 40.0 | $ | 115.0 | $ | 155.0 | ||||||||
| Effective Tax Rate (a) | 30.0 | % | 35.0 | % | 30.0 | % | 35.0 | % | ||||||||
| Adjusted Effective Tax Rate (a) (b) | 27.0 | % | 32.0 | % | 27.0 | % | 32.0 | % |
With respect to guidance, the Company has included a $200 million impact to its share base from repurchases under its share repurchase
Any incremental repurchases beyond $200 million that may be made in 2018 cannot be accurately predicted and are therefore excluded
from the guidance table above.
Guidance is based on the average daily exchange rates during the first three weeks of January.
Adjusted2 diluted EPS guidance for the first quarter 2018 includes a projected currency benefit of
approximately $0.10 per diluted share versus the first quarter of 2017.
Full year 2018 adjusted2
diluted EPS guidance includes a projected currency benefit of approximately $0.13 per diluted share, compared to 2017, which is $0.03 favorable compared to the $0.10 tailwind included in the initial full year 2018 guidance the Company provided on
Fourth Quarter 2017 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
Thursday, February 22, 2018, 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 (262) 320-2006 for international callers (conference ID 34074913). 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 34074913).
The webcast of the teleconference will be archived and available on Herbalife s website.
About Herbalife Ltd.
Herbalife is a global nutrition company that has been changing people s lives with great products since 1980. Our weight-management, targeted nutrition,
energy and sports and fitness and outer nutrition 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.
We support 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
approximately $4.4 billion in 2017. To learn more, visit Herbalife.com or IAmHerbalife.com.
The Herbalife Investor Relations website at
http://ir.herbalife.com contains a significant amount of financial and other information about the Company. The Company encourages investors to visit its website from time to time, as information is updated and new information is posted.
FORWARD-LOOKING STATEMENTS
This 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,
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 millions, except per share amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| 12/31/2017 | 12/31/2016 | 12/31/2017 | 12/31/2016 | |||||||||||||
| (Unaudited) | ||||||||||||||||
| North America | $ | 192.2 | $ | 202.2 | $ | 840.2 | $ | 955.7 | ||||||||
| Mexico | 108.0 | 104.8 | 442.7 | 446.6 | ||||||||||||
| South and Central America | 125.2 | 120.8 | 474.3 | 488.7 | ||||||||||||
| EMEA | 220.3 | 196.6 | 868.7 | 815.6 | ||||||||||||
| Asia Pacific | 229.7 | 225.9 | 915.9 | 913.0 | ||||||||||||
| China | 217.9 | 194.7 | 885.9 | 868.8 | ||||||||||||
| Worldwide Net Sales | 1,093.3 | 1,045.0 | 4,427.7 | 4,488.4 | ||||||||||||
| Cost of Sales | 209.8 | 196.1 | 848.6 | 854.6 | ||||||||||||
| Gross Profit | 883.5 | 848.9 | 3,579.1 | 3,633.8 | ||||||||||||
| Royalty Overrides | 310.1 | 303.7 | 1,254.2 | 1,272.6 | ||||||||||||
| Selling, General and Administrative Expenses (1) | 431.6 | 421.7 | 1,758.6 | 1,966.9 | ||||||||||||
| Other Operating Income (2) | (7.3 | ) | (34.7 | ) | (50.8 | ) | (63.8 | ) | ||||||||
| Operating Income | 149.1 | 158.2 | 617.1 | 458.1 | ||||||||||||
| Interest Expense, net | 39.8 | 23.3 | 146.3 | 93.4 | ||||||||||||
| Other (Income) Expense, net (3) | (0.4 | ) | (0.4 | ) | ||||||||||||
| Income Before Income Taxes | 109.7 | 134.9 | 471.2 | 364.7 | ||||||||||||
| Income Taxes (4) | 173.1 | 35.5 | 257.3 | 104.7 | ||||||||||||
| Net (Loss) Income | $ | (63.4 | ) | $ | 99.4 | $ | 213.9 | $ | 260.0 | |||||||
| Weighted Average Shares Outstanding: | ||||||||||||||||
| Basic | 72.9 | 83.2 | 79.2 | 83.0 | ||||||||||||
| Diluted | 72.9 | 86.0 | 82.9 | 86.1 | ||||||||||||
| (Loss) Earnings Per Share: | ||||||||||||||||
| Basic | $ | (0.87 | ) | $ | 1.19 | $ | 2.70 | $ | 3.13 | |||||||
| Diluted | $ | (0.87 | ) | $ | 1.16 | $ | 2.58 | $ | 3.02 |
Herbalife Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets
| Dec 31, | Dec 31, | |||||||
| 2017 | 2016 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 1,278.8 | $ | 844.0 | ||||
| Receivables, net | 93.3 | 70.3 | ||||||
| Inventories | 341.2 | 371.3 | ||||||
| Prepaid expenses and other current assets | 147.0 | 176.9 | ||||||
| Total Current Assets | 1,860.3 | 1,462.5 | ||||||
| Property, plant and equipment, net | 377.5 | 378.0 | ||||||
| Marketing related intangibles and other intangible assets, net | 310.1 | 310.1 | ||||||
| Goodwill | 96.9 | 89.9 | ||||||
| Other assets | 250.3 | 324.9 | ||||||
| Total Assets | $ | 2,895.1 | $ | 2,565.4 | ||||
| LIABILITIES AND SHAREHOLDERS (DEFICIT) EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 67.8 | $ | 66.0 | ||||
| Royalty overrides | 277.7 | 261.2 | ||||||
| Current portion of long-term debt | 102.4 | 9.5 | ||||||
| Other current liabilities | 458.9 | 454.8 | ||||||
| Total Current Liabilities | 906.8 | 791.5 | ||||||
| Non-current liabilities | ||||||||
| Long-term debt, net of current portion | 2,165.7 | 1,438.4 | ||||||
| Other non-current liabilities | 157.3 | 139.2 | ||||||
| Total Liabilities | 3,229.8 | 2,369.1 | ||||||
| Contingencies | ||||||||
| Shareholders equity: | ||||||||
| Common shares | 0.1 | 0.1 | ||||||
| Paid-in capital in excess of par value | 407.3 | 467.6 | ||||||
| Accumulated other comprehensive loss | (165.4 | ) | (205.1 | ) | ||||
| Accumulated deficit | (248.1 | ) | (66.3 | ) | ||||
| Treasury stock | (328.6 | ) | ||||||
| Total Shareholders (Deficit) Equity | (334.7 | ) | 196.3 | |||||
| Total Liabilities and Shareholders (Deficit) Equity | $ | 2,895.1 | $ | 2,565.4 |
Herbalife Ltd. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
| Twelve Months Ended | ||||||||
| 12/31/2017 | 12/31/2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 213.9 | $ | 260.0 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 99.8 | 98.3 | ||||||
| Share-based compensation expenses | 42.1 | 40.2 | ||||||
| Non-cash interest expense | 60.2 | 55.7 | ||||||
| Deferred income taxes | 97.8 | (36.4 | ) | |||||
| Inventory write-downs | 20.7 | 15.8 | ||||||
| Foreign exchange transaction loss | 2.4 | 3.7 | ||||||
| Other | 1.9 | (11.7 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | (22.2 | ) | ||||||
| Inventories | 37.9 | (71.6 | ) | |||||
| Prepaid expenses and other current assets | 38.3 | 0.8 | ||||||
| Accounts payable | (5.0 | ) | (1.3 | ) | ||||
| Royalty overrides | 6.0 | 20.9 | ||||||
| Other current liabilities | (17.1 | ) | 12.4 | |||||
| Other | 14.1 | (19.5 | ) | |||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 590.8 | 367.3 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property, plant and equipment | (95.5 | ) | (143.4 | ) | ||||
| Other | (2.3 | ) | 2.1 | |||||
| NET CASH USED IN INVESTING ACTIVITIES | (97.8 | ) | (141.3 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Borrowings from senior secured credit facility, net of discount | 1,274.0 | 200.0 | ||||||
| Principal payments on senior secured credit facility and other debt | (494.5 | ) | (438.8 | ) | ||||
| Debt issuance costs | (22.6 | ) | ||||||
| Share repurchases | (844.2 | ) | (13.2 | ) | ||||
| Other | 2.1 | (0.3 | ) | |||||
| NET CASH USED IN FINANCING ACTIVITIES | (85.2 | ) | (252.3 | ) | ||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | 27.0 | (19.5 | ) | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 434.8 | (45.8 | ) | |||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 844.0 | 889.8 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 1,278.8 | $ | 844.0 | ||||
| CASH PAID DURING THE YEAR | ||||||||
| Interest paid | $ | 100.7 | $ | 45.4 | ||||
| Income taxes paid | $ | 158.8 | $ | 162.9 |
SUPPLEMENTAL INFORMATION
SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited and 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