HLF Herbalife Ltd

Herbalife Ltd. on Thursday said it misstated an important member growth metric 28 times over three earnings calls since last year.

According to the company, database scripting errors lead it to misreport the number of active new members, a new metric that it first mentioned on an call with analysts and investors in August.

Herbalife shares, which have fallen 0.2% over the past three months, fell 13% to $49.00 in premarket trading.

Founded in 1980, Herbalife sells protein shakes, snacks and other weight-management products, along with other dietary and nutritional supplements, through a global network of independent distributors.

Herbalife, based in the Cayman Islands, has been locked in a legal battle with billionaire investor William Ackman, who has accused the company of being a pyramid scheme. Herbalife has denied the accusations and, in turn, accused Mr. Ackman and his hedge fund of trying to manipulate Herbalife's stock.

Metrics related to membership growth are closely watched because Herbalife generates much of its sales from members, either directly or when they act as independent distributors to consumers.

Earnings conference calls are how many investors glean more detailed information directly from company executives. The metric was misstated on calls in August, November and last month. Herbalife said the misstated metric wasn't included on any periodic reports filed with the Securities and Exchange Commission, and that the errors had no impact on its financial statements.

The company said it had both understated and overstated the metric's growth due to the error.

For example, on a Feb. 25 call, the company said world-wide active new members' excluding China rose 16.7% in the fourth quarter. On Thursday, the company corrected the increase to 3.2%.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

March 03, 2016 08:15 ET (13:15 GMT)

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