LOS ANGELES, Feb 26, 2008 (BUSINESS WIRE) -- Herbalife Ltd. (HLF) today reported fourth quarter net sales of $578.1 million, an increase of 18.6 percent compared to the same period of 2006. This record performance was attributable to double-digit growth in several of the company's top countries; the U.S. up 22.1 percent, Taiwan up 18.9 percent, Italy up 21.9 percent and China up 145.8 percent compared to the same period in 2006, coupled with the favorable impact from currency fluctuations. The company's Chairman and Chief Executive Officer Michael O. Johnson, said, "We are pleased to report our 16th consecutive quarter of double-digit growth and record net sales reflecting the strong performance of our independent distributor organization. Our margins and record bottom line performance reflects the strong top line growth coupled with our initiatives to continually leverage our infrastructure to improve profitability."
During the fourth quarter 2007, total Sales Leaders(1) increased 16.0 percent to 473,846 and new Sales Leaders increased 10.4 percent to 56,739 versus the fourth quarter of 2006. The company's President's Team membership increased 11.8 percent to 1,105 members and the company's prestigious Chairman Club increased to 32 members. Greg Probert, the company's president and chief operating officer, said, "The growth rate of new Sales Leaders in the fourth quarter was the highest of the year, reflecting the tremendous momentum in our distributor organization."
For the quarter ended December 31, 2007, the company reported net income of $53.8 million, or $0.77 per diluted share, compared to $41.7 million, or $0.56 per diluted share in the fourth quarter of 2006. The increase in net income was primarily attributable to double-digit net sales growth and expansion in operating profit margins. Excluding the impact of realignment for growth costs and certain other items(2), fourth quarter 2007 net income increased 24 percent to $55.1 million or $0.79 per diluted share, compared to $0.59 per diluted share in the fourth quarter of 2006. The company's share repurchase program had an accretive impact on diluted earnings per share.
During the fourth quarter, the company repurchased 3.9 million shares of its common stock through open market transactions at an average price of $41.56 for an aggregate cost of $161.8 million. Since this share repurchase program was authorized in April 2007, through early January 2008, the company has repurchased 9.5 million shares at an aggregate cost of $383.5 million, which is 85 percent of the $450 million authorization, and 13 percent of its outstanding common stock. The company used excess cash along with debt to fund the repurchase.
During the fourth quarter, the company invested $17.0 million in capital expenditures, primarily related to enhancements to its management information systems and additional infrastructure investments to improve distributor service levels in high growth markets.
For the year ended December 31, 2007, the company reported net sales of $2.15 billion, an increase of 13.8 percent compared to $1.89 billion in 2006. For the year ended December 31, 2007, the company reported net income of $191.5 million, or $2.63 per diluted share, compared to $143.1 million, or $1.92 per diluted share in 2006. Excluding the impact of expenses related to the company's realignment for growth initiative and other items(2), fiscal year 2007 net income increased 28.0 percent to $196.7 million, or $2.71 per diluted share, compared to $2.06 per diluted share in 2006.
(1) See Schedule titled "Total Sales Leaders by Region" for more detail
(2) See Schedule A - "Reconciliation of Non-GAAP Financial Measures" for more detail
Fourth Quarter 2007 Business Highlights
The company supported the development and training of its distributors during the fourth quarter by hosting multiple events including over 7,000 distributors at the North America Herbalife University and Latino Development Weekend and over 6,000 distributors at the northeast Brazil Extravaganza.
In late 2007, the company realigned its regional structure from seven to five regions. The North America, Mexico & Central America, and EMEA regions remain essentially unchanged. The South America region now includes Brazil, and the former Southeast Asia, North Asia and Greater China regions have been combined into an Asia Pacific region.
"We continue to align company resources to better support our distributors and their daily methods of operation," said Greg Probert. "This updated regional structure allows us to better support the geographic reach of the distributor leadership and enhance sales, marketing and product synergies within the regions."
Europe, Middle East and Africa region, the company's largest region, reported net sales of $144.7 million in the fourth quarter of 2007, an increase of 7.9 percent versus the same period of 2006. However, excluding the benefit of currency fluctuations, net sales decreased 3.5 percent. The EMEA region realized net sales growth in several of its top markets during the fourth quarter of 2007, including France up 34.3 percent; Spain up 26.0 percent; Italy up 21.9 percent; and Russia up 14.7 percent, in each case compared to the fourth quarter of 2006. These net sales gains were partially offset by declines in other markets including Germany down 19.2 percent, and the Netherlands down 17.8 percent versus the comparable period of 2006. Total Sales Leaders in the region, as of December 31, 2007, decreased 5.6 percent versus December 31, 2006 to 89,821.
The Asia Pacific region reported net sales of $126.7 million in the fourth quarter of 2007, up 25.8 percent versus the same period of 2006. Excluding currency fluctuations, net sales increased 19.6 percent. The increase is attributable to net sales growth in China up 145.8 percent; South Korea up 26.7 percent; and Taiwan up 18.9 percent. Total Sales Leaders as of December 31, 2007 increased 22.5 percent versus December 31, 2006 to 111,250. This includes China sales employees, which increased 188.2% to 22,291.
The North America region reported net sales of $109.6 million in the fourth quarter of 2007, up 20.4 percent versus the same period of 2006, driven by growth in the US of 22.1 percent versus fourth quarter 2006. Excluding currency fluctuations, net sales increased 19.8 percent. Total Sales Leaders in the region, as of December 31, 2007, increased 19.9 percent versus December 31, 2006 to 89,282.
The South America region reported net sales of $99.3 million in the fourth quarter of 2007, up 50.9 percent versus the same period of 2006. Excluding currency fluctuations, net sales increased 39.7 percent. The growth in the region was primarily attributable to double and triple digit growth in key markets including Venezuela up 349.0 percent, Bolivia, up 147.0 percent, and Argentina, up 38.3 percent, coupled with growth in Peru, which opened in December 2006. This was offset by declines in Brazil, down 2.6 percent. Total Sales Leaders in the region, as of December 31, 2007, increased 26.1 percent versus December 31, 2006 to 91,052.
The Mexico and Central America region reported net sales of $97.8 million in the fourth quarter of 2007, up 2.1 percent versus the same period of 2006. Excluding currency fluctuations, net sales for the region increased 1.5 percent. Mexico, the largest market in the region, had a sales decline of 1.4 percent. Total Sales Leaders in the region, as of December 31, 2007, increased 22.1 percent as compared to the same period in 2006 to 92,441.
First Quarter 2008 and Full Year 2008 Guidance
Based on its current business trends, the company is raising its full year 2008 diluted earnings per share guidance to be in a range of $3.25 to $3.30. The company is providing guidance for the first quarter of 2008 in the range of $0.77 to $0.79 for diluted earnings per share. Additionally, first quarter investment in capital expenditures is expected in the range of $25 million - $30 million.
About Herbalife Ltd.
Herbalife Ltd. ( www.herbalife.com) is a global network marketing company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle. Herbalife products are sold in 65 countries through a network of 1.7 million independent distributors. The company supports the Herbalife Family Foundation ( http://www.herbalifefamily.org/) and its Casa Herbalife program to bring good nutrition to children. Please visit Herbalife Investor Relations at http://ir.herbalife.com for additional financial information.
Disclosure Regarding Forward-Looking Statements
Except for historical information contained herein, the matters set forth in this press release are "forward-looking statements." All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words, "may," "will," "estimate," "intend," "continue," "believe," "expect," or "anticipate" and any other similar words.