[February 23, 2017] |
|
Herbalife Reports Record Full Year 2016 Worldwide Volume; Number of Preferred Members in the U.S. Approximately 300,000; Record Worldwide Sales Leader Retention; Announces a New Share Buyback Authorization of $1.5 Billion
Herbalife Ltd. (NYSE: HLF) reports results for the fourth quarter and
full year ended December 31, 2016.
Michael O. Johnson, chairman and CEO of Herbalife, stated, "2016 was a
dynamic and record-breaking year. Our members continue to successfully
build customer-focused businesses, which is evident in our record volume
and retention metrics. In addition, our new share buyback authorization
is a further testament of our commitment to enhance shareholder value."
The company reported record full year 2016 worldwide volume points of
5.6 billion, which represents an increase of approximately 5% compared
to 2015. Reported full year 2016 net sales of $4.5 billion was flat,
while constant currency net sales increased 6%, both compared to 2015.
On a reported basis, full year 2016 net income was $260.0 million, or
$3.02 per diluted share, compared to net income of $339.1 million or
$3.97 per diluted share for 2015.
Adjusted1 earnings for 2016 was $4.85 per diluted share
compared to $4.952 per diluted share for 2015. Due to the
negative impact of currency, full year 2016 reported and adjusted1
net income were each negatively impacted by $82.2 million, and reported
diluted EPS and adjusted1 diluted EPS were each negatively
impacted by $0.95.
For the fourth quarter 2016, the company reported net sales of $1.0
billion and a volume point decline of 1% compared to the prior year
period.
On a reported basis, fourth quarter 2016 net income was $99.4 million,
or $1.16 per diluted share, compared to net income of $84.5 million or
$0.98 per diluted share for the fourth quarter in 2015.
Adjusted1 earnings for the fourth quarter was $1.00 per
diluted share compared to $1.172 per diluted share for the
comparable quarter in 2015. Due to the negative impact of currency,
fourth quarter 2016 reported and adjusted1 net income were
each negatively impacted by $9.5 million, and reported diluted EPS and
adjusted1 diluted EPS were each negatively impacted by $0.11.
In a separate press release this afternoon, the Company announced that
it has reached an agreement in principle to form a joint venture with
China's Tasly Holding Group. The press release can be found here http://ir.Herbalife.com.
Fourth Quarter and Fiscal 2016 Key Metrics3
Regional Volume Point Metrics
|
|
|
|
|
|
|
Volume Points (Mil)
|
|
Volume Points (Mil)
|
Region
|
|
4Q '16
|
|
Yr/Yr % Chg
|
|
FY 2016
|
|
Yr/Yr % Chg
|
North America
|
|
270.5
|
|
1
|
%
|
|
1,248.6
|
|
8
|
%
|
Asia Pacific
|
|
273.2
|
|
1
|
%
|
|
1,076.4
|
|
1
|
%
|
EMEA
|
|
260.0
|
|
5
|
%
|
|
1,049.6
|
|
14
|
%
|
Mexico
|
|
226.7
|
|
7
|
%
|
|
919.8
|
|
9
|
%
|
South & Central America
|
|
163.9
|
|
-16
|
%
|
|
663.0
|
|
-14
|
%
|
China
|
|
136.5
|
|
-11
|
%
|
|
624.7
|
|
7
|
%
|
Worldwide Total
|
|
1,330.8
|
|
-1
|
%
|
|
5,582.1
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
Regional Net Sales and Foreign Exchange ("FX") Impact
|
|
|
|
|
|
|
|
|
Reported Net Sales
|
|
Growth/Decline
|
|
Growth/Decline
|
Region
|
|
4Q '16 (mil)
|
|
including FX
|
|
excluding FX
|
North America
|
|
$
|
202.2
|
|
-1
|
%
|
|
-1
|
%
|
Asia Pacific
|
|
$
|
225.9
|
|
-3
|
%
|
|
-3
|
%
|
EMEA
|
|
$
|
196.6
|
|
2
|
%
|
|
5
|
%
|
Mexico
|
|
$
|
104.8
|
|
-8
|
%
|
|
9
|
%
|
South & Central America
|
|
$
|
120.8
|
|
-11
|
%
|
|
-9
|
%
|
China
|
|
$
|
194.7
|
|
-12
|
%
|
|
-6
|
%
|
Worldwide Total
|
|
$
|
1,045.0
|
|
-5
|
%
|
|
-1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Net Sales
|
|
Growth/Decline
|
|
Growth/Decline
|
Region
|
|
FY 2016 (mil)
|
|
including FX
|
|
excluding FX
|
North America
|
|
$
|
955.7
|
|
9
|
%
|
|
9
|
%
|
Asia Pacific
|
|
$
|
913.0
|
|
-3
|
%
|
|
-1
|
%
|
EMEA
|
|
$
|
815.6
|
|
8
|
%
|
|
14
|
%
|
Mexico
|
|
$
|
446.6
|
|
-7
|
%
|
|
10
|
%
|
South & Central America
|
|
$
|
488.7
|
|
-14
|
%
|
|
-3
|
%
|
China
|
|
$
|
868.8
|
|
3
|
%
|
|
9
|
%
|
Worldwide Total
|
|
$
|
4,488.4
|
|
0
|
%
|
|
6
|
%
|
|
|
|
|
|
|
|
Outlook
John DeSimone, CFO of Herbalife, stated "the company's new $1.45 billion
debt deal and $1.5 billion share repurchase authorization combined with
the strength of our balance sheet, allows us to capitalize on our global
market potential, and gives us the financial flexibility to further
create long-term shareholder value through investments that includes
share repurchase."
With respect to guidance, the company cannot accurately predict the
impact to its share base from any repurchases that may be made under the
new authorization during 2017 and therefore the guidance table below
excludes any impact thereof to EPS. However, the cost of the new debt
deal is predictable and has been included.
|
|
|
|
|
Three Months Ending
|
|
Twelve Months Ending
|
|
March 31, 2017
|
|
December 31, 2017
|
|
Low
|
|
High
|
|
Low
|
|
High
|
Volume Point Growth vs 2016
|
|
(5
|
.0%)
|
|
|
(1
|
.0%)
|
|
|
2
|
.0%
|
|
|
5
|
.0%
|
Net Sales Growth vs 2016
|
|
(9
|
.0%)
|
|
|
(5
|
.0%)
|
|
|
0
|
.3%
|
|
|
3
|
.3%
|
Diluted EPS (a)
|
$
|
0
|
.50
|
|
$
|
0
|
.70
|
|
$
|
2
|
.95
|
|
$
|
3
|
.35
|
Adjusted(b) Diluted EPS
|
$
|
0
|
.75
|
|
$
|
0
|
.95
|
|
$
|
3
|
.65
|
|
$
|
4
|
.05
|
Cap Ex ($ millions)
|
$
|
15
|
.0
|
|
$
|
25
|
.0
|
|
$
|
125
|
.0
|
|
$
|
155
|
.0
|
Effective Tax Rate (a)
|
|
26
|
.8%
|
|
|
28
|
.8%
|
|
|
26
|
.8%
|
|
|
28
|
.8%
|
Currency Adjusted Net Sales Growth vs 2016
|
|
(7
|
.2%)
|
|
|
(3
|
.2%)
|
|
|
3
|
.6%
|
|
|
6
|
.6%
|
Currency Adjusted Diluted EPS
|
$
|
0
|
.85
|
|
$
|
1
|
.05
|
|
$
|
4
|
.20
|
|
$
|
4
|
.60
|
|
|
|
|
|
|
|
|
(a) Excludes any ongoing tax effects from the exercise of
equity awards that could impact our tax rate beginning fiscal year
2017 due to a recently issued stock compensation accounting standard.
|
(b) Adjusted diluted EPS, for the purposes of 2017
guidance, excludes the impact of expenses relating to challenges
to the company's business model, the impact of non-cash interest
costs associated with the company's convertible notes, FTC
settlement implementation and expenses related to regulatory
inquiries. See Schedule A - "Reconciliation of Non-GAAP Financial
Measures" for a detailed reconciliation of adjusted net income to
net income calculated in accordance with GAAP and a reconciliation
of adjusted diluted EPS to diluted EPS calculated in accordance
with GAAP and a discussion of why we believe these non-GAAP
measures are useful.
|
|
Forward guidance is based on the average daily exchange rates of the
first three weeks of January.
Adjusted1 diluted EPS guidance for the first quarter 2017
includes a projected currency headwind of approximately $0.10 per
diluted share versus the first quarter of 2016.
Full year 2017 adjusted1 diluted EPS guidance includes a
projected currency headwind of approximately $0.50 per diluted share,
compared to 2016, which is higher than the $0.15 headwind included in
the guidance the company provided on its third quarter earnings call.
The Herbalife Investor Relations website contains a significant amount
of financial and other information about the company 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.
Fourth Quarter and Full Year 2016 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 23, 2017, 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 50583540). 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
50583540). 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 nutrition, weight-management,
energy and fitness and personal 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 $4.5 billion in 2016. To learn more, visit Herbalife.com
or IAmHerbalife.com.
The company also encourages investors to visit its investor relations
website at http://ir.herbalife.com
as financial and other information is updated and new information is
posted.
FORWARD-LOOKING STATEMENTS
This earnings 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, the following:
-
our relationship with, and our ability to influence the actions of,
our Members;
-
improper action by our employees or Members 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;
-
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;
-
the consent order entered into with the FTC, the effects thereof and
any failure to comply therewith;
-
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 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;
-
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;
-
our reliance upon, or the loss or departure of any member of, our
senior management team which could negatively impact our Member
relations and operating results;
-
U.S. and foreign laws and regulations applicable to our international
operations;
-
uncertainties relating to the United Kingdom's vote to exit from the
European Union;
-
restrictions imposed by covenants in our credit facility;
-
uncertainties relating to the application of transfer pricing, duties,
value added taxes, and other tax regulations, and changes thereto;
-
changes in tax laws, treaties or regulations, or their interpretation;
-
taxation relating to our Members;
-
product liability claims;
-
our incorporation under the laws of the Cayman Islands;
-
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 millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
Twelve Months Ended
|
|
12/31/2016
|
|
12/31/2015
|
|
12/31/2016
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
North America
|
$
|
202.2
|
|
|
$
|
203.4
|
|
|
$
|
955.7
|
|
|
$
|
879.5
|
|
Mexico
|
|
104.8
|
|
|
|
113.7
|
|
|
|
446.6
|
|
|
|
479.9
|
|
South and Central America
|
|
120.8
|
|
|
|
136.4
|
|
|
|
488.7
|
|
|
|
569.7
|
|
EMEA
|
|
196.6
|
|
|
|
192.4
|
|
|
|
815.6
|
|
|
|
755.1
|
|
Asia Pacific
|
|
225.9
|
|
|
|
232.1
|
|
|
|
913.0
|
|
|
|
938.6
|
|
China
|
|
194.7
|
|
|
|
220.4
|
|
|
|
868.8
|
|
|
|
846.2
|
|
Worldwide Net Sales
|
|
1,045.0
|
|
|
|
1,098.4
|
|
|
|
4,488.4
|
|
|
|
4,469.0
|
|
Cost of Sales (1)
|
|
196.1
|
|
|
|
204.4
|
|
|
|
854.6
|
|
|
|
856.0
|
|
Gross Profit
|
|
848.9
|
|
|
|
894.0
|
|
|
|
3,633.8
|
|
|
|
3,613.0
|
|
Royalty Overrides
|
|
303.7
|
|
|
|
305.0
|
|
|
|
1,272.6
|
|
|
|
1,251.4
|
|
Selling, General and Administrative Expenses (2)
|
|
421.7
|
|
|
|
449.5
|
|
|
|
1,966.9
|
|
|
|
1,784.5
|
|
Other Operating Income (3)
|
|
(34.7
|
)
|
|
|
(3.1
|
)
|
|
|
(63.8
|
)
|
|
|
(6.5
|
)
|
Operating Income
|
|
158.2
|
|
|
|
142.6
|
|
|
|
458.1
|
|
|
|
583.6
|
|
Interest Expense, net
|
|
23.3
|
|
|
|
25.6
|
|
|
|
93.4
|
|
|
|
94.9
|
|
Other Expense, net (4)
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.3
|
|
Income Before Income Taxes
|
|
134.9
|
|
|
|
117.0
|
|
|
|
364.7
|
|
|
|
486.4
|
|
Income Taxes
|
|
35.5
|
|
|
|
32.5
|
|
|
|
104.7
|
|
|
|
147.3
|
|
Net Income
|
$
|
99.4
|
|
|
$
|
84.5
|
|
|
$
|
260.0
|
|
|
$
|
339.1
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
83.2
|
|
|
|
82.7
|
|
|
|
83.0
|
|
|
|
82.6
|
|
Diluted
|
|
86.0
|
|
|
|
85.8
|
|
|
|
86.1
|
|
|
|
85.3
|
|
|
|
|
|
|
|
|
|
Earnings Per Share:
|
|
|
|
|
|
|
|
Basic
|
$
|
1.19
|
|
|
$
|
1.02
|
|
|
$
|
3.13
|
|
|
$
|
4.11
|
|
Diluted
|
$
|
1.16
|
|
|
$
|
0.98
|
|
|
$
|
3.02
|
|
|
$
|
3.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Cost of Sales includes $0.1 million and $2.0
million of inventory write downs related to Venezuela for the
three and twelve months ended December 31, 2015, respectively.
|
(2) Selling, General and Administrative Expenses
includes $203 million related to regulatory settlements for the
twelve months ended December 31, 2016 and $32.9 million pre-tax
unfavorable impact related to the remeasurement of Venezuela
Bolivar-denominated assets and liabilities at the SIMADI rate for
the twelve months ended December 31, 2015.
|
(3) Other Operating Income relates to certain China
grant income and the KPMG arbitration award.
|
(4) Other Expense, net relates to the impairment of
investments in Bolivar-denominated bonds for the twelve months
ended December 31, 2015.
|
|
|
Herbalife Ltd. and Subsidiaries
|
Condensed Consolidated Balance Sheets
|
(In millions)
|
(Unaudited)
|
|
|
|
Dec 31,
|
|
Dec 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current Assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
844.0
|
|
|
$
|
889.8
|
|
Receivables, net
|
|
|
70.3
|
|
|
|
69.9
|
|
Inventories
|
|
|
371.3
|
|
|
|
332.0
|
|
Prepaid expenses and other current assets
|
|
|
176.9
|
|
|
|
161.1
|
|
Deferred income tax assets
|
|
|
-
|
|
|
|
113.5
|
|
Total Current Assets
|
|
|
1,462.5
|
|
|
|
1,566.3
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
378.0
|
|
|
|
339.2
|
|
Deferred compensation plan assets
|
|
|
30.6
|
|
|
|
29.3
|
|
Other assets
|
|
|
294.3
|
|
|
|
141.1
|
|
Marketing related intangibles and other intangible assets, net
|
|
|
310.1
|
|
|
|
310.2
|
|
Goodwill
|
|
|
89.9
|
|
|
|
91.8
|
|
Total Assets
|
|
$
|
2,565,4
|
|
|
$
|
2,477.9
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
|
|
|
Current Liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
66.0
|
|
|
$
|
71.1
|
|
Royalty overrides
|
|
|
261.2
|
|
|
|
249.9
|
|
Accrued compensation
|
|
|
125.8
|
|
|
|
128.8
|
|
Accrued expenses
|
|
|
236.9
|
|
|
|
228.7
|
|
Current portion of long-term debt
|
|
|
9.5
|
|
|
|
229.5
|
|
Advance sales deposits
|
|
|
50.1
|
|
|
|
63.8
|
|
Income taxes payable
|
|
|
42.0
|
|
|
|
52.6
|
|
Total Current Liabilities
|
|
|
791.5
|
|
|
|
1,024.4
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
1,438.4
|
|
|
|
1,392.5
|
|
Deferred compensation plan liability
|
|
|
50.0
|
|
|
|
43.6
|
|
Deferred income tax liabilities
|
|
|
15.3
|
|
|
|
0.4
|
|
Other non-current liabilities
|
|
|
73.9
|
|
|
|
70.5
|
|
Total Liabilities
|
|
|
2,369.1
|
|
|
|
2,531.4
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
Shareholders' equity (deficit):
|
|
|
|
|
Common shares
|
|
|
0.1
|
|
|
|
0.1
|
|
Paid-in capital in excess of par value
|
|
|
467.6
|
|
|
|
438.2
|
|
Accumulated other comprehensive loss
|
|
|
(205.1
|
)
|
|
|
(165.5
|
)
|
Accumulated deficit
|
|
|
(66.3
|
)
|
|
|
(326.3
|
)
|
Total Shareholders' Equity (Deficit)
|
|
|
196.3
|
|
|
|
(53.5
|
)
|
|
|
|
|
|
Total Liabilities and Shareholders' Equity (Deficit)
|
|
$
|
2,565.4
|
|
|
$
|
2,477.9
|
|
|
|
|
|
|
|
Herbalife Ltd. and Subsidiaries
|
Condensed Consolidated Statements of Cash Flows
|
(In millions)
|
(Unaudited)
|
|
|
|
|
|
Twelve Months Ended
|
|
|
12/31/2016
|
|
12/31/2015
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
Net income
|
|
$
|
260.0
|
|
|
$
|
339.1
|
|
Adjustments to reconcile net income to net cash provided by
|
|
|
|
|
operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
|
98.3
|
|
|
|
98.0
|
|
Excess tax benefits from share-based payment arrangements
|
|
|
(0.4
|
)
|
|
|
(4.1
|
)
|
Share-based compensation expenses
|
|
|
40.2
|
|
|
|
44.9
|
|
Non-cash interest expense
|
|
|
55.7
|
|
|
|
56.2
|
|
Deferred income taxes
|
|
|
(36.4
|
)
|
|
|
(38.2
|
)
|
Inventory write-downs
|
|
|
15.8
|
|
|
|
25.3
|
|
Foreign exchange transaction gain
|
|
|
(0.7
|
)
|
|
|
(6.3
|
)
|
Foreign exchange loss and other charges relating to Venezuela
|
|
|
4.5
|
|
|
|
37.2
|
|
Other
|
|
|
(11.8
|
)
|
|
|
6.5
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
Receivables
|
|
|
-
|
|
|
|
(6.2
|
)
|
Inventories
|
|
|
(71.6
|
)
|
|
|
(30.5
|
)
|
Prepaid expenses and other current assets
|
|
|
21.1
|
|
|
|
4.4
|
|
Other assets
|
|
|
(26.3
|
)
|
|
|
(21.3
|
)
|
Accounts payable
|
|
|
(1.3
|
)
|
|
|
6.0
|
|
Royalty overrides
|
|
|
20.9
|
|
|
|
21.6
|
|
Accrued expenses and accrued compensation
|
|
|
22.9
|
|
|
|
71.1
|
|
Advance sales deposits
|
|
|
(11.1
|
)
|
|
|
2.3
|
|
Income taxes
|
|
|
(15.5
|
)
|
|
|
21.8
|
|
Deferred compensation plan liability
|
|
|
3.0
|
|
|
|
0.9
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
367.3
|
|
|
|
628.7
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(143.4
|
)
|
|
|
(79.0
|
)
|
Other
|
|
|
2.1
|
|
|
|
5.6
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(141.3
|
)
|
|
|
(73.4
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
Borrowings from senior secured credit facility and other debt
|
|
|
200.0
|
|
|
|
-
|
|
Principal payments on senior secured credit facility and other debt
|
|
|
(438.8
|
)
|
|
|
(227.6
|
)
|
Issuance costs relating to long-term debt
|
|
|
-
|
|
|
|
(6.2
|
)
|
Share repurchases
|
|
|
(13.2
|
)
|
|
|
(16.6
|
)
|
Excess tax benefits from share-based payment arrangements
|
|
|
0.4
|
|
|
|
4.1
|
|
Other
|
|
|
(0.7
|
)
|
|
|
(3.7
|
)
|
NET CASH USED IN FINANCING ACTIVITIES
|
|
|
(252.3
|
)
|
|
|
(250.0
|
)
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
|
(19.5
|
)
|
|
|
(60.9
|
)
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
(45.8
|
)
|
|
|
244.4
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
|
|
889.8
|
|
|
|
645.4
|
|
CASH AND CASH EQUIVALENTS, END OF YEAR
|
|
$
|
844.0
|
|
|
$
|
889.8
|
|
|
|
|
|
|
CASH PAID DURING THE YEAR
|
|
|
|
|
Interest paid
|
|
$
|
45.4
|
|
|
$
|
50.5
|
|
Income taxes paid
|
|
$
|
162.9
|
|
|
$
|
168.4
|
|
|
|
|
|
|
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 period comparative assessment of the company's operating
performance relative to its performance based on reported or forecasted
results under GAAP, while isolating the effects of some items that vary
from period to period without any correlation to core operating
performance and eliminate certain charges that management believes do
not reflect the company's operations and underlying operational
performance. The company's definition of adjusted net income and
adjusted diluted earnings per share may not be comparable to similarly
titled measures of other companies because other companies may not
calculate them in the same manner as the company does and should not be
viewed in isolation from nor as alternatives to net income or diluted
EPS calculated in accordance with GAAP.
|
The following is a reconciliation of net income, 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
|
|
|
12/31/2016
|
|
12/31/2015
|
|
12/31/2016
|
|
12/31/2015
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Net (loss) income, as reported
|
|
$
|
99.4
|
|
|
$
|
84.5
|
|
|
$
|
260.0
|
|
|
$
|
339.1
|
|
Remeasurement, impairment losses and other charges relating to
Venezuela (1)(2)
|
|
|
-
|
|
|
|
4.3
|
|
|
|
-
|
|
|
|
42.5
|
|
Expenses incurred responding to attacks on the company's business
model (1) (2)
|
|
|
1.4
|
|
|
|
3.7
|
|
|
|
12.1
|
|
|
|
18.7
|
|
Expenses related to Regulatory inquiries (1) (2)
|
|
|
2.4
|
|
|
|
4.7
|
|
|
|
16.3
|
|
|
|
21.5
|
|
Expenses incurred for the recovery of re-audit expenses (1) (2)
|
|
|
0.1
|
|
|
|
0.8
|
|
|
|
3.6
|
|
|
|
2.0
|
|
Foreign exchange loss (gain) from Euro/USD exposure on intercompany
balances (1) (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7.4
|
)
|
Non-cash interest expense and amortization of non-cash issuance costs
(1) (2) (3)
|
|
|
11.5
|
|
|
|
10.3
|
|
|
|
45.1
|
|
|
|
42.2
|
|
Regulatory settlements (1) (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
203.0
|
|
|
|
-
|
|
China grant income (1) (2) (4)
|
|
|
(5.1
|
)
|
|
|
(3.1
|
)
|
|
|
(34.2
|
)
|
|
|
(6.5
|
)
|
FTC Consent Order implementation (1) (2) (5)
|
|
|
5.4
|
|
|
|
-
|
|
|
|
10.7
|
|
|
|
-
|
|
Recovery of defective manufacturing equipment previously impaired (1)
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3.1
|
)
|
Arbitration award related to the re-audit (1) (2)
|
|
|
(29.7
|
)
|
|
|
-
|
|
|
|
(29.7
|
)
|
|
|
-
|
|
Legal reserve for the Bostick case (1) (2)
|
|
|
-
|
|
|
|
(1.9
|
)
|
|
|
-
|
|
|
|
(1.9
|
)
|
Income tax adjustments for above items (1) (2)
|
|
|
0.5
|
|
|
|
(3.0
|
)
|
|
|
(69.4
|
)
|
|
|
(24.9
|
)
|
Net income, as adjusted (4)(6)
|
|
$
|
85.9
|
|
|
$
|
100.2
|
|
|
$
|
417.4
|
|
|
$
|
422.3
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
12/31/2016
|
|
12/31/2015
|
|
12/31/2016
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share, as reported
|
|
$
|
1.16
|
|
|
$
|
0.98
|
|
|
$
|
3.02
|
|
|
$
|
3.97
|
|
Remeasurement, impairment losses and other charges relating to
Venezuela (1)(2)
|
|
|
-
|
|
|
|
0.05
|
|
|
|
-
|
|
|
|
0.50
|
|
Expenses incurred responding to attacks on the company's business
model (1) (2)
|
|
|
0.02
|
|
|
|
0.04
|
|
|
|
0.14
|
|
|
|
0.22
|
|
Expenses related to Regulatory inquiries (1) (2)
|
|
|
0.03
|
|
|
|
0.05
|
|
|
|
0.19
|
|
|
|
0.25
|
|
Expenses incurred for the recovery of re-audit expenses (1) (2)
|
|
|
-
|
|
|
|
0.01
|
|
|
|
0.04
|
|
|
|
0.02
|
|
Foreign exchange loss (gain) from Euro/USD exposure on intercompany
balances (1) (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.09
|
)
|
Non-cash interest expense and amortization of non-cash issuance costs
(1) (2) (3)
|
|
|
0.13
|
|
|
|
0.12
|
|
|
|
0.52
|
|
|
|
0.49
|
|
Regulatory settlements (1) (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
2.36
|
|
|
|
-
|
|
China grant income (1) (2) (4)
|
|
|
(0.06
|
)
|
|
|
(0.04
|
)
|
|
|
(0.40
|
)
|
|
|
(0.08
|
)
|
FTC Consent Order implementation (1) (2) (5)
|
|
|
0.06
|
|
|
|
-
|
|
|
|
0.12
|
|
|
|
-
|
|
Recovery of defective manufacturing equipment previously impaired (1)
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.04
|
)
|
Arbitration award related to the re-audit (1) (2)
|
|
|
(0.35
|
)
|
|
|
-
|
|
|
|
(0.34
|
)
|
|
|
-
|
|
Legal reserve for the Bostick case (1) (2)
|
|
|
-
|
|
|
|
(0.02
|
)
|
|
|
-
|
|
|
|
(0.02
|
)
|
Income tax adjustments for above items (1) (2)
|
|
|
0.01
|
|
|
|
(0.04
|
)
|
|
|
(0.80
|
)
|
|
|
(0.29
|
)
|
Diluted earnings per share, as adjusted (4)(6)
|
|
$
|
1.00
|
|
|
$
|
1.17
|
|
|
$
|
4.85
|
|
|
$
|
4.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Based on interim income tax reporting rules, these
expenses are not considered discrete items. As a result, the
company's full year effective tax rate is impacted by these items.
When applying the full year effective tax rate to year-to-date
income, the company's year-to-date tax provision recorded with
respect to these non-GAAP adjustments is different from the
forecasted full-year tax provision impact of these items. As a
consequence, adjustments to the year-to-date and quarterly tax
impacts will be recorded as the adjusted full year effective tax
rate is applied to income in subsequent periods.
|
|
|
|
|
|
|
|
|
|
(2) Excludes tax (benefit)/expense as follows:
|
|
|
Three Months Ended
|
|
Twelve Months Ended
|
|
|
12/31/2016
|
|
12/31/2015
|
|
12/31/2016
|
|
12/31/2015
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Remeasurement, impairment losses and other charges relating to
Venezuela
|
|
|
-
|
|
|
|
(1.8
|
)
|
|
|
-
|
|
|
|
(14.9
|
)
|
Expenses incurred responding to attacks on the company's business
model
|
|
|
(0.1
|
)
|
|
|
(0.4
|
)
|
|
|
(3.0
|
)
|
|
|
(4.9
|
)
|
Expenses related to Regulatory inquiries
|
|
|
(0.2
|
)
|
|
|
(0.8
|
)
|
|
|
(5.5
|
)
|
|
|
(7.3
|
)
|
Expenses incurred for the recovery of re-audit expenses
|
|
|
-
|
|
|
|
(0.2
|
)
|
|
|
(1.0
|
)
|
|
|
(0.7
|
)
|
Foreign exchange loss (gain) from Euro/USD exposure on intercompany
balances
|
|
|
-
|
|
|
|
(0.5
|
)
|
|
|
-
|
|
|
|
(0.8
|
)
|
Non-cash interest expense and amortization of non-cash issuance costs
|
|
|
(1.8
|
)
|
|
|
(0.9
|
)
|
|
|
-
|
|
|
|
-
|
|
Regulatory settlements
|
|
|
(1.3
|
)
|
|
|
-
|
|
|
|
(70.0
|
)
|
|
|
-
|
|
China grant income
|
|
|
1.4
|
|
|
|
0.9
|
|
|
|
9.8
|
|
|
|
1.9
|
|
FTC Consent Order Implementation
|
|
|
(1.4
|
)
|
|
|
-
|
|
|
|
(3.6
|
)
|
|
|
-
|
|
Recovery of defective manufacturing equipment previously impaired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.1
|
|
Arbitration award related to the re-audit
|
|
|
3.9
|
|
|
|
-
|
|
|
|
3.9
|
|
|
|
-
|
|
Legal reserve for the Bostick case
|
|
|
-
|
|
|
|
0.7
|
|
|
|
-
|
|
|
|
0.7
|
|
Total income tax adjustments
|
|
$
|
0.5
|
|
|
$
|
(3.0
|
)
|
|
$
|
(69.4
|
)
|
|
$
|
(24.9
|
)
|
|
|
|
|
|
|
|
|
|
(3) Relates to non-cash expense on our convertible notes
and prepaid forward share repurchase contract.
|
(4) Prior year amounts have been updated for comparative
purposes to adjust for China grant income recognized in 2015.
|
(5) Includes $1.7 million of product discounts related to
preferred member conversions.
|
(6) Amounts may not total due to rounding.
|
|
|
The following is a reconciliation of diluted earnings per share
guidance, presented in accordance with U.S. generally accepted
accounting principles, to adjusted diluted earnings per share
guidance for certain items.
|
|
|
|
|
|
|
|
|
Three Months Ending
|
|
Twelve Months Ending
|
|
|
March 31, 2017
|
|
December 31, 2017
|
|
|
|
|
|
Diluted EPS Guidance (1)
|
|
$0.50 - $0.70
|
|
$2.95 - $3.35
|
Expenses incurred responding to attacks on the company's business
model (2)
|
|
0.02
|
|
0.06
|
Non-cash interest expense and amortization of non-cash issuance costs
(3)
|
|
0.13
|
|
0.50
|
FTC Consent Order Implementation (4) (5)
|
|
0.08
|
|
0.12
|
Expenses related to Regulatory inquiries (6)
|
|
0.03
|
|
0.06
|
Income tax adjustments for above items (7)
|
|
(0.02)
|
|
(0.06)
|
Adjusted Diluted EPS Guidance (8)
|
|
$0.75 - $0.95
|
|
$3.65 - $4.05
|
|
|
(1) Excludes the potential ongoing tax effects from the
exercise of equity awards that will impact our tax rate beginning
fiscal year 2017 due to a recently issued Stock Compensation
accounting standard.
|
(2) Excludes tax impact of $0.4 million and $1.5 million
for the three months ending March 31, 2017 and the twelve months
ending December 31, 2017, respectively.
|
(3) Relates to non-cash expense on our convertible notes
and prepaid forward share repurchase contract.
|
(4) Excludes tax impact of $2.0 million and $3.0 million
for the three months ending March 31, 2017 and the twelve months
ending December 31, 2017, respectively.
|
(5) Includes $3.0 million of product discounts related to
preferred member conversions.
|
(6) Excludes tax impact of $0.8 million and $1.5 million
for the three months ending March 31, 2017 and the twelve months
ending December 31, 2017, respectively.
|
(7) Aggregates the individual tax impacts of each item
as described in greater detail in footnotes 2, 4 and 6 above.
|
(8) Amounts may not total due to rounding.
|
|
-----------------------------
1 Adjusted net income and adjusted diluted EPS are both
non-GAAP measures and, for the purposes of reported results, exclude the
impact of charges relating to Venezuela, expenses relating to challenges
to the company's business model, regulatory inquiries, expenses related
to the recovery of re-audit expenses, foreign exchange impact from
EUR/USD exposure, the impact of non-cash interest costs associated with
the company's convertible notes, regulatory settlements, China grant
income, FTC settlement implementation, recovery of defective
manufacturing equipment, arbitration award related to the re-audit and
reserves related to the Bostick case. Adjusted diluted EPS, for the
purposes of 2017 guidance, excludes the impact of expenses relating to
challenges to the company's business model, the impact of non-cash
interest costs associated with the company's convertible notes, FTC
settlement implementation and expenses related to regulatory inquiries.
See Schedule A - "Reconciliation of Non-GAAP Financial Measures" for a
detailed reconciliation of adjusted net income to net income calculated
in accordance with GAAP and a reconciliation of adjusted diluted EPS to
diluted EPS calculated in accordance with GAAP and a discussion of why
we believe these non-GAAP measures are useful.
2 Prior year amounts have been updated for comparative
purposes to adjust for China grant income recognized in 2015. See
Schedule A - "Reconciliation of Non-GAAP Financial Measures" for a
detailed reconciliation of adjusted net income to net income calculated
in accordance with GAAP and a reconciliation of adjusted diluted EPS to
diluted EPS calculated in accordance with GAAP and a discussion of why
we believe these non-GAAP measures are useful.
3 Supplemental tables that include Average Active Sales
Leader and additional business metrics can be found at http://www.ir.herbalife.com.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170223006641/en/
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