Herbalife Ltd. Announces Record First Quarter 2013 and Raises 2013 Earnings Guidance

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Herbalife Ltd. Announces Record First Quarter 2013 and Raises 2013 Earnings Guidance

  • First quarter worldwide volume growth of 13 percent compared to the prior year period.
  • First quarter adjusted1EPS of $1.27 increased 44 percent compared to the prior year.
  • Raising FY'13 adjusted EPS guidance to a range of $4.60 to $4.80.
  • Board of directors approved a $0.30 per share quarterly dividend.

LOS ANGELES--(BUSINESS WIRE)-- Herbalife Ltd. (NYS: HLF) today reported first quarter net sales of $1.1 billion, reflecting an increase of 17 percent compared to the same time period in 2012 on volume point growth of 13 percent. Adjusted1 net income for the quarter of $137.4 million, or $1.27 per diluted share, compares to 2012 first quarter net income of $108.2 million and EPS of $0.88, respectively. On a reported basis, first quarter 2013 EPS of $1.10 increased 25 percent compared to the $0.88 reported in the comparable quarter last year.

"We continue to deliver record results in sales and profitability as our independent distributors successfully execute numerous growth strategies that enable deeper market penetration, developing customers using our weight management and targeted nutrition products every day," said Michael O. Johnson, Herbalife's chairman and CEO. "Obesity and poor nutrition are global public health problems. Our distributors are proud to be part of the solution."


For the quarter ended March 31, 2013 the company generated cash flow from operations of $137.6 million, an increase of 14 percent compared to 2012; paid dividends of $30.9 million; invested $24.9 million in capital expenditures; and repurchased $162.4 million in common shares outstanding under our share repurchase program.

  

1

See Schedule A - "Reconciliation of Non-GAAP Financial Measures" for more detail.
 

First Quarter 2013 Key Metrics2,3

Regional Volume Point and Average Active Sales Leader Metrics

  Volume Points (Mil)  Average Active Sales Leaders
Region  1Q'13  Yr/Yr % Chg  1Q'13  Yr/Yr % Chg
North America309.0  4%68,352  9%
Asia Pacific320.017%68,69023%
EMEA161.311%46,09412%
Mexico206.38%60,21614%
South & Central America219.833%52,04928%
China  47.6  16%  11,864  24%
Worldwide Total  1,264.0  13%  296,916  18%
 

Updated 2013 Guidance

Guidance for fully diluted 2013 EPS is based on the average daily exchange rates of the first two weeks of April 2013. Our 2013 guidance continues to assume a Venezuelan exchange rate of 10 to 1 and excludes any potential impact from a future devaluation of the bolivar or the repatriation of existing cash balances in Venezuela. Guidance for the year also excludes $9.5 million of expenses recognized in the first quarter, mostly legal and advisory services, relating to the Company's response to information put into the marketplace by a short seller which information the Company believes to be inaccurate and misleading.

Based on current business trends the company's second quarter fiscal 2013 and full year fiscal 2013 guidance is provided below.

  Three Months Ending  Twelve Months Ending
June 30, 2013

December 31, 2013

Low  HighLow  High
Volume Point Growth vs 20127.0%9.0%9.0%11.0%
Net Sales Growth vs 201211.0%13.0%13.0%15.0%
Diluted EPS as adjusted$1.14$1.18$4.60$4.80
Cap Ex ($ millions)$20.0$30.0$165.0$185.0
Effective Tax Rate26.0%28.0%25.5%27.5%

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

3 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.

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 May 14, 2013, payable on May 28, 2013.

Share Repurchase Program Update

During the first quarter, the company repurchased 4.0 million shares at an average cost of $40.61. There is currently $787.6 million remaining on the existing $1 billion share repurchase authorization.

First Quarter 2013 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, April 30, 2013 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 27830198). 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 27830198). 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 over 80 countries through and to 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 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 STATEMENTS

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:

  • the resignation of our former independent registered public accounting firm, its withdrawal of its audit reports with respect to certain of our historical financial statements, and any difficulties we encounter engaging a successor accounting firm;
  • any collateral impact resulting from the ongoing worldwide financial environment 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, including our ability to comfort the marketplace and regulators regarding our compliance with applicable laws;
  • 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;
  • whether we will purchase any of our shares in the open markets or otherwise; and
  • share price volatility related to, among other things, speculative trading and certain traders shorting our common shares.

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 thousands, except per share amounts)

(Unaudited and Unreviewed) (1)
      
Three Months Ended
3/31/2013  3/31/2012
 
North America$221,473$210,710
Mexico132,889117,109
South and Central America219,515165,470
EMEA169,585153,993
Asia Pacific311,747259,948
China 68,438 56,945
Worldwide net sales1,123,647964,175
Cost of Sales 225,977 196,144
Gross Profit897,670768,031
Royalty Overrides364,029317,533
SGA 364,720 296,393
Operating Income168,921154,105
Interest Expense - net 5,373 1,373
Income before income taxes163,548152,732
Income Taxes 44,692 44,570
Net Income 118,856 108,162
 
Basic Shares104,121116,191
Diluted Shares108,068122,373
 
Basic EPS$1.14$0.93
Diluted EPS$1.10$0.88
 
Dividends declared per share$0.30$0.30
 

(1) As a result of the resignation of KPMG, the unaudited interim financial information presented has not been reviewed by an outside independent accounting firm. See Note 2 of the quarterly report on Form 10-Q for the quarter ended March 31, 2013.

Herbalife Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited and Unreviewed) (1)
 
  Mar 31,  Dec 31,
20132012
 
ASSETS
Current Assets:
Cash & cash equivalents$722,474$333,534
Receivables, net112,041116,139
Inventories334,412339,411
Prepaid expenses and other current assets126,465125,425
Deferred income taxes 50,622  49,339 
Total Current Assets1,346,014963,848
 
Property, plant and equipment, net246,682242,886
Deferred compensation plan assets25,07424,267
Other assets48,14148,805
Deferred financing cost, net6,8097,462
Marketing related intangibles and other intangible assets, net311,090311,186
Goodwill 105,490  105,490 
Total Assets$2,089,300 $1,703,944 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable$79,109$75,209
Royalty overrides221,814243,351
Accrued compensation66,71995,220
Accrued expenses195,466181,523
Current portion of long term debt62,80756,302
Advance sales deposits44,68449,432
Income taxes payable 26,272  15,854 
Total Current Liabilities696,871716,891
 
Non-current liabilities
Long-term debt, net of current portion912,517431,305
Deferred compensation plan liability32,52929,454
Deferred income taxes59,88862,982
Other non-current liabilities 44,550  42,557 
Total Liabilities1,746,3551,283,189
 
Contingencies
 
Shareholders' equity:
Common shares103107
Paid-in capital in excess of par value299,391303,975
Accumulated other comprehensive loss(41,711)(31,695)
Retained earnings 85,162  148,368 
Total Shareholders' Equity 342,945  420,755 
  
Total Liabilities and Shareholders' Equity$2,089,300 $1,703,944 

 

(1) As a result of the resignation of KPMG, the unaudited interim financial information presented has not been reviewed by an outside independent accounting firm. See Note 2 of the quarterly report on Form 10-Q for the quarter ended March 31, 2013.

 
Herbalife Ltd. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited and Unreviewed)(1)
 
 
  

Three Months Ended

3/31/2013  3/31/2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$118,856$108,162
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization20,96418,590
Excess tax benefits from share-based payment arrangements(447)(20,675)
Share based compensation expenses<
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