Herbalife Ltd. (HLF) recently halted plans for a debt offering
that would have raised cash for stock buybacks after auditor KPMG
LLP resigned earlier this month, Chief Financial Officer John
DeSimone said Tuesday.
The nutritional supplements company was in the process of
"putting together a meaningful new debt arrangement that if done
would be used to buy back stock," Mr. DeSimone said on Herbalife's
quarterly earnings call.
Those plans were put on hold after KPMG abruptly resigned as the
company's auditor earlier in April following revelations that one
of the accounting firm's former partners had divulged confidential
information about his clients to a friend who used it to trade. The
resignation left Herbalife without audited financial
statements.
"We were going down that path, and that path has now been
blocked," Mr. DeSimone said, adding that Herbalife is reviewing
other options with banks.
He said the company "is committed to returning money to
shareholders" and still thinks buybacks are a good way to return
cash to shareholders over the long run.
Shareholders had been hoping the company would accelerate its
share buybacks to fend off an assault by hedge fund manager William
Ackman, who accused the company of being a pyramid scheme and made
a big bet that the stock would fall.
Herbalife has vigorously rebutted the allegations and has
attracted support from other hedge fund managers including Carl
Icahn, now the company's top shareholder, according to FactSet.
Late Monday, Herbalife said its first-quarter profit rose 9.9%
to $118.9 million amid a double-digit rise in sales. It spent
$162.4 million on buybacks during the quarter.
Herbalife Chief Executive Michael Johnson said the company is
working quickly to replace KPMG "with another top accounting
firm."
Write to Serena Ng at serena.ng@dowjones.com
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