Herbalife in the hot seat, sales still up

Herbalife in the hot seat, sales still up

Company reported second quarter net sales of $1.3 billion, a 7 percent increase compared to the same time period in 2013.

Herbalife Ltd. (NYSE: HLF) reported second quarter net sales of $1.3 billion, reflecting an increase of 7 percent compared to the same time period in 2013 on volume point growth of 5 percent. Adjusted1 net income for the quarter of $141.4 million, or $1.55 per diluted share, compares to 2013 second quarter adjusted net income of $150.7 million, or $1.41 per diluted share. On a reported basis, second quarter 2014 net income of $119.5 million, or $1.31 per diluted share compares to $143.2 million, or $1.34 per diluted share for the same period in 2013.

“Herbalife has once again delivered strong results in sales and profitability while demonstrating our continued ability to enhance our earnings per share,” said Michael Johnson, Herbalife’s chairman and CEO. “Our performance is a testament to the enthusiasm our millions of consumers and members have for our products. Additionally, our independent members are successfully executing numerous growth strategies to further develop customer loyalty and encourage individuals across our network to lead healthier, nutritious lives. Our members are proud to be a part of a solution to global public health issues and we value the integral role they play in Herbalife’s mission.”

For the quarter ended June 30, 2014 the company generated cash flow from operations of $156.9 million; invested $39.6 million in capital expenditures; and repurchased $581.3 million in common shares outstanding under our share repurchase program.

Second quarter 2014 key metrics

Regional volume point and average active sales leader metrics

 

 

 

 

 

 

 

Volume Points (Mil)

 

Average Active Sales Leaders

Region

 

2Q'14

 

Yr/Yr % Chg

 

2Q'14

 

Yr/Yr % Chg

North America

 

335.8

 

(1%)

 

75,772

 

5%

Asia Pacific

 

320.2

 

1%

 

74,916

 

6%

EMEA

 

218.8

 

22%

 

56,692

 

18%

Mexico

 

231.3

 

5%

 

64,656

 

3%

South & Central America

 

206.3

 

(7%)

 

62,172

 

14%

China

 

118.5

 

38%

 

18,703

 

33%

Worldwide Total

 

1,430.9

 

5%

 

340,644

 

9%

               

 

Updated 2014 guidance
Forward guidance excludes the impact of expenses (primarily for legal and advisory services) relating to the company’s response to information put into the marketplace by a short seller, which the company believes to be inaccurate and misleading, expenses related to a FTC inquiry, and the impact of non-cash interest costs associated with the company’s Convertible Notes and the expenses incurred related to the effort to recover costs related to the reaudit that occurred last year. Forward guidance is based on the average daily exchange rates of the first two weeks of July. Included in the guidance is the use of the GAAP rate for Venezuela of 10.6 to 1 for the balance of the year and excludes the potential impact of future devaluation of the Venezuelan bolivar and future repatriation, if any, of existing cash balances in Venezuela.

Based on current business trends the company’s third quarter fiscal 2014 and full year fiscal 2014 guidance is provided below.

 

 

Three Months Ending

 

Twelve Months Ending

   

September 30, 2014

 

December 31, 2014

   

Low

 

High

 

Low

 

High

Volume Point Growth vs 2013

 

5.5%

 

7.5%

 

6.0%

 

8.0%

Net Sales Growth vs 2013

 

9.0%

 

11.0%

 

8.5%

 

10.5%

Diluted EPS as adjusted

 

$1.49

 

$1.53

 

$6.17

 

$6.32

Cap Ex ($ millions)

 

$45.0

 

$55.0

 

$175.0

 

$195.0

Effective Tax Rate

 

27.0%

 

29.0%

 

27.5%

 

29.5%

               

 

Share Repurchase Program update
During the second quarter, the company repurchased 9.8 million shares at an average cost of $59.41. There is currently $232.9 million remaining on the existing $1.5 billion share repurchase authorization.

 

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