Herbalife Ltd. Announces Record Fourth Quarter 2012 and Record Full Year Results, and Raises 2013 Ea

Herbalife Ltd. Announces Record Fourth Quarter 2012 and Record Full Year Results, and Raises 2013 Earnings Guidance

  • Fourth quarter worldwide volume growth of 18 percent with double-digit increases in each of its six regions compared to the prior year period.

  • Fourth quarter EPS of $1.05 increased 22 percent compared to the prior year.

  • Raising FY'13 EPS guidance to a range of $4.45 to $4.65.

  • Annual sales leader retention of approximately 51.8 percent.

  • Repurchased 4.0 million shares of stock since December 31, 2012.

  • Board of directors approved a $0.30 per share quarterly dividend.

LOS ANGELES--(BUSINESS WIRE)-- Herbalife Ltd. (NYS: HLF) today reported fourth quarter net sales of $1.1 billion, reflecting an increase of 20 percent compared to the same time period in 2011 on volume point growth of 18 percent. Net income for the quarter of $117.8 million, or $1.05 per diluted share, compares to 2011 fourth quarter net income of $105.4 million and EPS of $0.86, respectively.

For the twelve months ended December 31, 2012, the company reported record net sales of $4.1 billion, an 18 percent increase on 20 percent growth in volume compared to 2011. For the same period, the company reported net income of $477.2 million, or $4.05 per diluted share, reflecting an increase of 16 percent and 23 percent, respectively, compared to the 2011 results of $412.6 million and $3.30 per diluted share.


"Herbalife continues to deliver record results in sales and profitability as our independent distributors go deeper into existing markets, developing more and more customers using our 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 year ended December 31, 2012 the company generated cash flow from operations of $567.8 million, an increase of 11 percent compared to 2011; paid dividends of $135.1 million; invested $122.8 million in capital expenditures; and repurchased $527.8 million in common shares outstanding under our share repurchase program.

Fourth Quarter and Fiscal 2012 Regional Key Metrics1,2

Regional Volume Point and Average Active Sales Leader Metrics

Volume Points (Mil)

Average Active Sales Leaders

Region

4Q'12

Yr/Yr % Chg

4Q'12

Yr/Yr % Chg

North America

267.0

15%

68,029

14%

Asia Pacific

304.6

18%

69,553

26%

EMEA

156.6

14%

47,226

14%

Mexico

208.9

13%

61,836

19%

South & Central America

222.5

34%

50,874

28%

China

50.5

17%

12,560

25%

Worldwide Total

1,210.1

18%

300,521

20%

Volume Points (Mil)

Average Active Sales Leaders

Region

FY'12

Yr/Yr % Chg

FY'12

Yr/Yr % Chg

North America

1,157.8

17%

66,054

16%

Asia Pacific

1,197.8

25%

63,255

31%

EMEA

602.5

11%

44,098

14%

Mexico

815.4

16%

57,651

21%

South & Central America

740.4

30%

44,980

29%

China

206.5

34%

11,683

33%

Worldwide Total

4,720.4

20%

277,803

22%

2012 Annual Sales Leader Requalification

By the end of January of each year, sales leaders are required to re-qualify to retain their sales leader status. A record number of sales leaders were retained in 2012. The overall pool of sales leaders needing to re-qualify increased by approximately 21% compared to the prior year and we retained 20% more of them than in the prior year. While size of the group needing to re-qualify increased for the year, our overall retention rate remained fairly constant at 51.8%.

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

2Worldwide 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 2013 Guidance

Guidance for fully diluted 2013 EPS is based on the average daily exchange rates of January 2013, which in aggregate are not materially different from the foreign currency exchange rates assumed in our prior guidance. Our 2013 guidance continues to assume a Venezuelan exchange rate of 10 to 1. The guidance does not include the one-time impact associated with the revaluation of our bolivar denominated monetary assets and monetary liabilities, which includes our bolivar denominated cash, due to the recent devaluation of the Venezuelan bolivar, or any potential one-time impact from a future devaluation or the repatriation of existing cash balances. Guidance for the year also excludes one-time costs of $10 million to $20 million, 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 first quarter fiscal 2013 and fiscal 2013 guidance is provided below.

Three Months Ending

Twelve Months Ending

March 31, 2013

December 31, 2013

Low

High

Low

High

Volume Point Growth vs 2012

11.5%

13.5%

8.5%

10.5%

Net Sales Growth vs 2012

15.0%

17.0%

12.0%

14.0%

Diluted EPS

$1.03

$1.07

$4.45

$4.65

Cap Ex ($ millions)

$20.0

$30.0

$165.0

$185.0

Effective Tax Rate

28.5%

30.5%

27.5%

29.5%

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 March 5, 2013, payable on March 19, 2013.

Share Repurchase Program Update

Subsequent to December 31, 2012, the company has 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.

Fourth Quarter and Fiscal 2012 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 20, 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 90082326). 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 90082326). 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:

• 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.

Condensed Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

Twelve Months Ended

12/31/2012

12/31/2011

12/31/2012

12/31/2011

North America

$

197,052

$

165,737

$

841,243

$

698,631

Mexico

132,070

106,192

496,101

436,930

South and Central America

203,252

155,373

688,799

554,439

EMEA

164,684

151,556

627,801

615,180

Asia Pacific

295,166

247,015

1,139,867

938,590

China

67,096

58,696

278,519

210,767

Worldwide net sales

1,059,320

884,569

4,072,330

3,454,537

Cost of Sales

211,105

170,960

812,583

680,084

Gross Profit

848,215

713,609

3,259,747

2,774,453

Royalty Overrides

355,658

293,109

1,338,633

1,137,560

SGA

332,764

286,151

1,259,667

1,074,623

Operating Income

159,793

134,349

661,447

562,270

Interest Expense - net

2,453

(1,357

)

10,541

2,491

Income before income taxes

157,340

135,706

650,906

559,779

Income Taxes

39,459

30,349

173,716

147,201

Net Income

117,881

105,357

477,190

412,578

Basic Shares

107,444

115,989

112,359

117,540

Diluted Shares

112,230

122,640

117,856

124,846

Basic EPS

$

1.10

$

0.91

$

4.25

$

3.51

Diluted EPS

$

1.05

$

0.86

$

4.05

$

3.30

Dividends declared per share

$

0.30

$

0.20

$

1.20

$

0.73

Herbalife Ltd.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

Dec 31,

Dec 31,

2012

2011

ASSETS

Current Assets:

Cash & cash equivalents

$

333,534

$

258,775

Receivables, net

116,139

89,660

Inventories

339,411

247,696

Prepaid expenses and other current assets

125,425

117,073

Deferred income taxes

49,339

55,615

Total Current Assets

963,848

768,819

Property, plant and equipment, net

242,886

193,703

Deferred compensation plan assets

24,267

20,511

Other assets

48,805

41,125

Deferred financing cost, net

7,462

4,797

Marketing related intangibles and other intangible assets, net

311,186

311,764

Goodwill

105,490

105,490

Total Assets

$

1,703,944

$

1,446,209

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

75,209

$

57,095

Royalty overrides

243,351

197,756

Accrued compensation

95,220

76,435

Accrued expenses

181,523

152,744

Current portion of long term debt

56,302

1,542

Advance sales deposits

49,432

31,702

Income taxes payable

15,854

31,415

Total Current Liabilities

716,891

548,689

Non-current liabilities

Long-term debt, net of current portion

431,305

202,079

Deferred compensation plan liability

29,454

23,702

Deferred income taxes

62,982

72,348

Other non-current liabilities

42,557

39,203

Total Liabilities

1,283,189

886,021

Commitments and Contingencies

Shareholders' equity:

Common shares

107

116

Paid-in capital in excess of par value

303,975

291,950

Accumulated other comprehensive loss

(31,695

)

(37,809

)

Retained earnings

148,368

305,931

Total Shareholders' Equity

420,755

560,188

Total Liabilities and Shareholders' Equity

$

1,703,944

$

1,446,209

Herbalife Ltd.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Twelve Months Ended