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. Business Wire LOS ANGELES -- February 19, 2013 Herbalife Ltd. (NYSE: 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 Metrics^1,2 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 ashort 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.(NYSE:HLF) is a global nutrition company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle.Herbalifeproducts are sold in over 80 countries through and to a network of independent distributors. The company supports theHerbalife Family Foundationand its Casa Herbalife program to help bring good nutrition to children.Herbalife'swebsite contains a significant amount of information aboutHerbalife, including financial and other information for investors athttp://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 203,252 155,373 688,799 554,439 America 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 1,059,320 884,569 4,072,330 3,454,537 sales 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 - 2,453 (1,357 ) 10,541 2,491 net Income before 157,340 135,706 650,906 559,779 income taxes 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 $ 0.30 $ 0.20 $ 1.20 $ 0.73 per share 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 311,186 311,764 intangible assets, net 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 12/31/2012 12/31/2011 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 477,190 $ 412,578 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 74,384 71,853 Excess tax benefits from share-based payment (29,684 ) (27,450 ) arrangements Share based compensation expenses 27,906 24,133 Amortization of discount and deferred 1,797 1,007 financing costs Deferred income taxes (9,050 ) (12,984 ) Unrealized foreign exchange transaction loss 2,121 9,403 (gain) Write-off of deferred financing costs - 914 Other 532 2,206 Changes in operating assets and liabilities: Receivables (28,186 ) (9,687 ) Inventories (82,177 ) (84,880 ) Prepaid expenses and other current assets 249 3,229 Other assets (5,288 ) (13,864 ) Accounts payable 17,034 15,427 Royalty overrides 41,868 44,041 Accrued expenses and accrued compensation 39,440 28,749 Advance sales deposits 17,790 (1,538 ) Income taxes 16,106 42,659 Deferred compensation plan liability 5,752 3,535 NET CASH PROVIDED BY OPERATING ACTIVITIES 567,784 509,331 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment (121,524 ) (90,408 ) Proceeds from sale of property, plant and 280 297 equipment Deferred compensation plan assets (3,756 ) (1,975 ) NET CASH USED IN INVESTING ACTIVITIES (125,000 ) (92,086 ) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (135,091 ) (85,489 ) Borrowings from long-term debt 1,430,560 914,200 Principal payments on long-term debt (1,146,580 ) (888,865 ) Deferred financing costs (4,460 ) (5,718 ) Share repurchases (556,727 ) (321,639 ) Excess tax benefits from share-based payment 29,684 27,450 arrangements Proceeds from exercise of stock options and sale of stock under employee stock purchase plan 11,373 22,262 NET CASH USED IN FINANCING ACTIVITIES (371,241 ) (337,799 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH 3,216 (11,221 ) NET CHANGE IN CASH AND CASH EQUIVALENTS 74,759 68,225 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 258,775 190,550 CASH AND CASH EQUIVALENTS, END OF YEAR 333,534 258,775 CASH PAID DURING THE YEAR Interest paid $ 14,268 $ 8,800 Income taxes paid $ 169,725 $ 118,906 SUPPLEMENTAL INFORMATION SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited), (Dollars in Thousand, Except Per Share Data) In addition to its reported results, the Company has included in the tables below adjusted results 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 results, can provide useful supplemental information for investor in analyzing period to period comparisons of the Company’s results. The following is a reconciliation of net income and diluted earnings per share, presented and reported in accordance with U.S. generally accepted accounting principles, to net income adjusted for certain items: Three Months Ended Twelve Months Ended 12/31/2012 12/31/2011 12/31/2012 12/31/2011 Net income, as reported $ 117,881 $ 105,357 $ 477,190 $ 412,578 Write-off of unamortized deferred financing cost from debt refinancing (net - - - 700 of $214 tax benefit) Net income, as adjusted $ 117,881 $ 105,357 $ 477,190 $ 413,278 The following is a reconciliation of diluted earnings per share, presented and reported in accordance with U.S. generally accepted accounting principles, to diluted earnings per share adjusted for certain items: Three Months Ended Twelve Months Ended 12/31/2012 12/31/2011 12/31/2012 12/31/2011 Diluted earnings per $ 1.05 $ 0.86 $ 4.05 $ 3.30 share, as reported Write-off of unamortized deferred financing cost from debt refinancing - - - 0.01 Diluted earnings per $ 1.05 $ 0.86 $ 4.05 $ 3.31 share, as adjusted The following is a reconciliation of total long-term debt to net debt: 12/31/2012 12/31/2011 Total long-term debt (current and long-term $ 487,607 $ 203,621 portion) Less: Cash and cash equivalents 333,534 258,775 Net debt $ 154,073 $ (55,154 ) Contact: Media Contact: Barbara Henderson SVP, Worldwide Corp. Comm. 213.745.0517 or Investor Contact: Amy Greene VP, Investor Relations 213.745.0474
Herbalife Ltd. Announces Record Fourth Quarter 2012 and Record Full Year Results, and Raises 2013 Earnings Guidance
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