Herbalife Ltd. Announces Record Third Quarter 2012 and Introduces 2013 Earnings Guidance

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Herbalife Ltd. Announces Record Third Quarter 2012 and Introduces 2013 Earnings Guidance

  • Third quarter volume points of 1.2 billion increased 17 percent with double digit increases in each of its six regions compared to the prior year period.
  • Third quarter EPS of $1.04 increased 20 percent compared to the prior year period EPS.
  • Introducing FY'13 EPS guidance in a range of $4.40 to $4.55.
  • Board of directors approved a $0.30 per share quarterly dividend.

LOS ANGELES--(BUSINESS WIRE)-- Herbalife Ltd. (NYS: HLF) today reported third quarter record net sales of $1.0 billion, a 14 percent increase, driven by a 17 percent increase in volume points compared to the prior year period. The company reported net income of $117.8 million, or $1.04 per diluted share, compared to the third quarter 2011 net income of $108.0 million, or $0.87 per diluted share, reflecting an increase of 9 percent and 20 percent, respectively.

"Our business momentum has continued through the third quarter with double digit volume growth from all six of our geographical regions," said Michael O. Johnson, the company's chairman and CEO. "Our 2013 guidance for double-digit volume and EPS growth illustrates our belief in continued growth driven by the ongoing global expansion of daily consumption and our city by city approach to deepen our penetration in existing markets."


For the quarter ended September 30, 2012, the company generated cash flow from operations of $142.4 million, paid dividends of $32.4 million, and invested $20.0 million in capital expenditures. Also in the third quarter, the company repurchased $181.9 million in common shares outstanding, completing the $427.9 million repurchase agreement announced on May 3, 2012.

Third Quarter Regional Key Metrics1,2

Regional Volume Point and Average Active Sales Leader Metric

      
Volume Points (Mil) Average Active Sales Leaders
Region3Q'12

Yr/Yr % Chg

 3Q'12

Yr/Yr % Chg

North America287.414%67,82615%
Asia Pacific305.617%66,43329%
EMEA145.510%44,86114%
Mexico211.217%60,12321%
South & Central America186.024%46,46629%
China57.142% 12,69233%
Worldwide Total1,192.817% 288,39722%

1 Supplemental tables that include additional business metrics can be found at http://www.ir.herbalife.com.

2 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 2012 Guidance

Guidance for fully diluted 2012 EPS is based on the average daily exchange rates of the first two weeks of October 2012.

Based on current business trends the company's fourth quarter fiscal 2012 and fiscal 2012 guidance is provided below.

Three Months Ending Twelve Months Ending

December 31, 2012

December 31, 2012

LowHighLowHigh
Volume Point Growth vs 201113.0%15.0%18.0%20.0%
Net Sales Growth vs 201117.0%19.0%16.0%18.0%
Diluted EPS$0.97$1.01$3.99$4.03
Cap Ex ($ millions)$50.0$60.0$110.0$120.0
Effective Tax Rate26.0%28.0%26.0%28.0%
 

2013 Guidance

Guidance for 2013 assumes a Venezuelan FX rate of 10:1 compared to prior utilization of a 5.3 bolivars to 1 USD on all ongoing operations but excludes any potential one-time impact from a devaluation or the repatriation of existing cash balances.

Twelve Months Ending

December 31, 2013

Low

 High

Volume Point Growth vs 2012

8.5

%

 

10.5

%

Net Sales Growth vs 2012

10.0

%

12.0

%

Diluted EPS

$

4.40

$

4.55

Cap Ex ($ millions)

$

165.0

$

185.0

Effective Tax Rate

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 on November 14, 2012, payable on November 28, 2012.

Third Quarter 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, October 30, 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 33885084). 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 33885084. The webcast of the teleconference will be archived and available on Herbalife's website.

About Herbalife Ltd.

Herbalife Ltd. (NYS: 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 85 countries to and through 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 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 STATEMENTS

This 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)
       
Three Months EndedNine Months Ended
 9/30/2012  9/30/2011 9/30/2012  9/30/2011
 
North America$208,819$180,735$644,191$532,894
Mexico127,473112,979364,031330,738
South and Central America167,493143,659485,547399,066
EMEA147,490147,670463,117463,624
Asia Pacific288,205255,169844,701691,575
China 77,407 55,006 211,423 152,071
Worldwide net sales1,016,887895,2183,013,0102,569,968
Cost of Sales 201,597 175,308 601,478 509,124
Gross Profit815,290719,9102,411,5322,060,844
Royalty Overrides330,247290,842982,975844,451
SGA 324,200 277,721 926,903 788,472
Operating Income160,843151,347501,654427,921
Interest Expense - net 3,546 345 8,088 3,848
Income before income taxes157,297151,002493,566424,073
Income Taxes 39,518 42,980 134,257 116,852
Net Income 117,779 108,022 359,309 307,221
 
Basic Shares108,816116,975113,838118,059
Diluted Shares113,646124,275119,376125,889
 
Basic EPS$1.08$0.92$3.16$2.60
Diluted EPS$1.04$0.87$3.01$2.44
 
 
Dividends declared per share$0.30$0.20$0.90$0.53
 

Herbalife Ltd.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
Sep 30, Dec 31,
20122011
 
ASSETS
Current Assets:
Cash & cash equivalents$321,722$258,775
Receivables, net114,16189,660
Inventories313,581247,696
Prepaid expenses and other current assets124,095117,073
Deferred income taxes 51,628  55,615 
Total Current Assets925,187768,819
 
Property, plant and equipment, net198,562193,703
Deferred compensation plan assets23,97720,511
Deferred financing cost, net8,1214,797
Other assets45,47741,125
Marketing related intangibles and other intangible assets, net311,283311,764
Goodwill 105,490  105,490 
Total Assets$1,618,097 $1,446,209 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable$80,119$57,095
Royalty overrides223,839197,756
Accrued compensation87,49376,435
Accrued expenses169,722152,744
Current portion of long term debt50,3841,542
Advance sales deposits38,89031,702
Income taxes payable 13,501  31,415 
Total Current Liabilities663,948548,689
 
Non-current liabilities
Long-term debt, net of current portion450,053202,079
Deferred compensation plan liability28,71723,702
Deferred income taxes62,80872,348
Other non-current liabilities 41,166  39,203 
Total Liabilities1,246,692886,021
 
Commitments and Contingencies
 
Shareholders' equity:
Common shares108116
Additional paid in capital297,879291,950
Accumulated other comprehensive loss(36,625)(37,809)
Retained earnings 110,043  305,931 
Total Shareholders' Equity 371,405  560,188 
  
Total Liabilities and Shareholders' Equity$1,618,097 $1,446,209 
 

Herbalife Ltd.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
    
Nine Months Ended
 9/30/2012   9/30/2011 
Read Full Story

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