Herbalife Nutrition Ltd. (NYSE: HLF) today reported financial
results for the third quarter ended September 30, 2019.
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the full release here:
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Third Quarter 2019 Earnings Infographic
(Graphic: Business Wire)
“The momentum we’ve built in our business throughout 2019
continued in the third quarter with record-breaking volume point
results. We believe this momentum will continue long into the
future with the appointment of John Agwunobi as our CEO and John
DeSimone as President, effective March of next year. We are
confident Dr. Agwunobi’s unique background and John DeSimone’s
extraordinary knowledge of our business will create an outstanding
team and take Herbalife Nutrition to new heights,” said Michael
Johnson, Chairman and CEO of Herbalife Nutrition.
QUARTER HIGHLIGHTS
- Reported net sales of $1.2 billion increased 0.1% compared to
the third quarter 2018. Excluding China, net sales increased 6.1%
compared to the prior year period.
- Volume points of 1.5 billion increased 2.3% compared to the
third quarter 2018, representing the largest quarterly volume point
result in Company history. Excluding China, volume points increased
5.2% compared to the prior year period.1
- Third quarter reported diluted EPS of $0.58 and adjusted2
earnings of $0.73 per diluted share, both of which were negatively
impacted by expenses of approximately $5.8 million or $0.03 per
diluted share, related to the China Growth and Impact Investment
Program.
- Updating FY 2019 volume point guidance to a range of 2.1% -
3.4% growth, net sales guidance to a range of (1.2%) – 0.1%, as
well as reported and adjusted2, 3 diluted EPS guidance to a range
of $2.20 - $2.40 and $2.56 – $2.76, respectively.
- Initiating FY 2020 volume point and net sales guidance range of
1.0% - 7.0% and 1.0% - 7.0% growth, respectively, which includes an
approximate 250 bps currency headwind.
- In a separate press release this afternoon, the Company
announced its CEO transition plan that goes into effect March
2020.
______________________________ 1 Excluding adjustments to volume
point values in 2018, the year over year change would have been an
increase of 2.1% and an increase of 5.0% excluding China. See
Regional Volume Point Metrics below.
2 Adjusted diluted EPS is a non-GAAP measure and excludes the
impact of: non-cash interest expense and amortization of non-cash
issuance costs associated with the Company’s convertible notes,
China grant income, impacts relating to contingent value rights
revaluation, impact related to finalization of insurance
recoveries, expenses related to regulatory inquiries and legal
accrual, and Mexico VAT Assessment. 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 See Schedule A - “Reconciliation of Non-GAAP Financial
Measures” for a reconciliation of adjusted diluted share count to
reported diluted share count and a discussion of why the share
count has been adjusted for purposes of calculating adjusted
diluted EPS for the year to date periods of 2018 and 2019, and full
year 2019 guidance.
Third Quarter 2019 Key
Metrics4
Regional Volume Point
Metrics
Volume Points
Region
3Q '19 (mil)
Yr/Yr % Chg
Asia Pacific
406.6
17.3%
North America
330.8
7.0%
EMEA
315.2
4.0%
Mexico
216.4
(7.1%)
China
142.4
(19.5%)
South and Central America
130.1
(5.9%)
Worldwide Total (a)
1,541.5
2.3%
Worldwide Total excl.
China (a)
1,399.1
5.2%
(a) During 2018, the Company adjusted volume point values for
certain products in North America and South & Central America.
Excluding these adjustments, the worldwide total year over year
change in volume points would have been an increase of 2.1% for the
third quarter and an increase of 5.0% for the third quarter
excluding China. Adjustments to Volume Points during 2019 were not
material.
Regional Net Sales and Foreign Exchange
(“FX”) Impact
Region
Reported Net Sales 3Q’19
(mil)
Growth/Decline including FX
vs. 3Q ‘18
Growth/Decline excluding FX
vs. 3Q ‘18
Asia Pacific
$
324.5
18.3
%
18.6
%
North America
$
257.1
7.1
%
7.2
%
EMEA
$
242.3
2.7
%
6.4
%
Mexico
$
116.5
(3.9
%)
(1.5
%)
China
$
208.7
(21.7
%)
(19.3
%)
South & Central America (a)
$
95.4
(9.1
%)
*
Worldwide Total
$
1,244.5
0.1
%
*
Worldwide Total excl. China
$
1,035.8
6.1
%
*
South & Central America excl.
Venezuela (a)
$
95.0
(6.1
%)
(1.0
%)
Worldwide Total excl Venezuela
(a)
$
1,244.1
0.4
%
2.4
%
Worldwide Total excl. China and
Venezuela (a)
$
1,035.4
6.5
%
8.3
%
(a) Venezuela was impacted by significant price increases and
erosion in foreign currency exchange rates. Venezuela represents
less than 1% of the Company’s consolidated net sales. See Schedule
A – “Reconciliation of Non-GAAP Financial Measures” for a
discussion of why we believe adjusting for Venezuela is useful.
* Figure not meaningful due to significant foreign currency
fluctuations in Venezuela and the price increases implemented as a
result thereof that, when considered in isolation, have a
disproportionately large impact on the Company’s South and Central
American region and consolidated results. Amounts were 1,180.1%,
102.1% and 135.2% for South & Central America, Worldwide Total
and Worldwide Total excluding China, respectively.
______________________________ 4 Supplemental tables that
include Average Active Sales Leader and additional business metrics
can be found at http://ir.Herbalife.com.
Outlook
Following is the Company’s fourth quarter 2019, full year 2019
and full year 2020 guidance based on current business trends:
Three Months Ending
Twelve Months Ending
December 31, 2019
December 31, 2019
Low
High
Low
High
Volume Point Growth vs 2018 (a)
0.1%
5.6%
2.1%
3.4%
Net Sales Growth vs 2018 (b)
(0.9%)
4.6%
(1.2%)
0.1%
Diluted EPS (b) (c)
$0.41
$0.61
$2.20
$2.40
Adjusted Diluted EPS (b) (c) (d)
$0.48
$0.68
$2.56
$2.76
Cap Ex ($ millions)
$29.0
$39.0
$105.0
$115.0
Effective Tax Rate (b) (c)
27.0%
41.0%
30.6%
33.6%
Adjusted Effective Tax Rate (b) (c)
(d)
23.0%
37.0%
27.0%
30.0%
Net Sales Growth vs. 2018 (Currency
Adjusted) (b) (e)
0.5%
6.0%
2.1%
3.4%
Adjusted Diluted EPS (Currency Adjusted)
(b) (c) (d) (e)
$0.52
$0.72
$2.89
$3.09
Twelve Months Ending
December 31, 2020
Low
High
Volume Point Growth vs 2019 (a)
1.0%
7.0%
Net Sales Growth vs 2019 (b)
1.0%
7.0%
Diluted EPS (b) (c)
$2.35
$2.85
Adjusted Diluted EPS (b) (c) (d)
$2.55
$3.05
Cap Ex ($ millions)
$130.0
$170.0
Effective Tax Rate (b) (c)
27.0%
32.0%
Adjusted Effective Tax Rate (b) (c)
(d)
26.0%
31.0%
Net Sales Growth vs. 2019 (Currency
Adjusted) (b) (f)
3.5%
9.5%
Adjusted Diluted EPS (Currency Adjusted)
(b) (c) (d) (f)
$2.70
$3.20
(a) The Company is evaluating our current approach to assigning
and maintaining volume point values for certain products or
markets. Guidance excludes any future potential impact of volume
point adjustments, which may have an impact on the use of volume
points as a proxy for sales trends in future periods.
(b) Excludes any future potential Venezuela currency
devaluations and associated pricing and inflationary
consequences.
(c) Excludes the following items that cannot be accurately
predicted: any future potential ongoing tax effects from the
exercise of equity awards that could impact the Company's tax rate
due to the stock compensation accounting standard, benefits from
future potential China grant income, any future potential dilution
from the Company’s convertible notes due in 2024, as well as any
impact of the China Growth and Impact Investment Program.
(d) Adjusted diluted EPS and adjusted effective tax rate
excludes the impact of: non-cash interest expense and amortization
of non-cash issuance costs associated with the Company’s
convertible notes, China grant income, impacts relating to
contingent value rights revaluation, impact related to finalization
of insurance recoveries, expenses related to regulatory inquiries
and legal accrual, and Mexico VAT Assessment, as detailed in
Schedule A. See Schedule A – “Reconciliation of Non-GAAP Financial
Measures” for a detailed reconciliation of adjusted diluted EPS to
diluted EPS calculated in accordance with GAAP and a discussion of
why the Company believes these non-GAAP measures are useful.
(e) Currency adjusted net sales and adjusted diluted EPS
represent projections translated into US dollars at currency rates
equal to the average rates used to translate 2018 fourth quarter
and full year net sales and diluted EPS and adjusted for items such
as hedging gains/losses and Venezuela to be directly comparable to
2018 values.
(f) Currency adjusted net sales and adjusted diluted EPS
represent projections translated into US dollars at currency rates
equal to the average rates used to translate 2019 full year net
sales and diluted EPS and adjusted for items such as hedging
gains/losses and Venezuela to be directly comparable to 2019
values.
- With respect to guidance, the Company cannot accurately predict
the impact to its share base from any share repurchases in 2019 or
2020. Accordingly, any impact thereof is excluded from the guidance
tables above.
- Guidance is based on the average daily exchange rates during
the first two weeks of October 2019.
- Adjusted2 diluted EPS guidance for the fourth quarter 2019
includes a projected currency headwind of approximately $0.04 per
diluted share versus the fourth quarter of 2018.
- Full year 2019 adjusted2 diluted EPS guidance includes a
projected currency headwind of approximately $0.33 per diluted
share, $0.06 unfavorable compared to the impact included in the
full year 2019 guidance provided on August 1, 2019.
- Full year 2020 adjusted2 diluted EPS guidance includes a
projected currency headwind of $0.15 compared to 2019.
Earnings Conference Call
Herbalife Nutrition senior management will host an investor
conference call to discuss its recent financial results and provide
an update on current business trends on Tuesday, October 29, 2019,
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: 2178226). 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: 2178226). The webcast of the teleconference will be
archived and available on Herbalife Nutrition's website.
About Herbalife Nutrition
Ltd.
Herbalife Nutrition is a global company that has been changing
people's lives with great nutrition products and a proven business
opportunity for its independent distributors since 1980. The
Company offers high-quality, science-backed products, sold in over
90 countries by entrepreneurial distributors who provide one-on-one
coaching and a supportive community that inspires their customers
to embrace a healthier, more active lifestyle. Through the
Company’s global campaign to eradicate hunger, Herbalife Nutrition
is also committed to bringing nutrition and education to
communities around the world.
For more information, please visit
IAmHerbalifeNutrition.com.
Herbalife Nutrition also encourages investors to visit its
investor relations website at ir.herbalife.com as financial and
other information is updated and new information is posted.
Forward-Looking
Statements
This 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 markets 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 and
anti-pyramiding;
- our inability to obtain or maintain the necessary licenses for
our direct selling business in China and elsewhere;
- adverse changes in the Chinese economy;
- our dependence on increased penetration of existing
markets;
- any material disruption to our business caused by natural
disasters, other catastrophic events, acts of war or terrorism, or
cybersecurity incidents;
- noncompliance by us or our Members with any privacy laws or any
security breach by us or a third party involving the
misappropriation, loss, or other unauthorized use or disclosure of
confidential information;
- contractual limitations on our ability to expand our
business;
- our reliance on our information technology infrastructure and
outside manufacturers;
- the sufficiency of our 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
operations;
- uncertainties relating to the United Kingdom’s vote to exit
from the European Union;
- restrictions imposed by covenants in our existing
indebtedness;
- risks related to the convertible notes;
- 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 Nutrition Ltd. and
Subsidiaries
Condensed Consolidated Statements
of Income
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended
Nine Months Ended
9/30/2019
9/30/2018
9/30/2019
9/30/2018
North America
$
257.1
$
240.0
$
791.9
$
733.7
EMEA
242.3
235.9
756.9
744.1
Asia Pacific
324.5
274.3
918.6
772.9
Mexico
116.5
121.2
357.0
353.4
China
208.7
266.5
546.1
765.5
South and Central America
95.4
104.9
286.3
335.6
Worldwide Net Sales
1,244.5
1,242.8
3,656.8
3,705.2
Cost of Sales
243.4
218.1
728.2
693.4
Gross Profit
1,001.1
1,024.7
2,928.6
3,011.8
Royalty Overrides
363.8
344.0
1,090.1
1,031.1
Selling, General, and Administrative Expenses
500.1
499.4
1,412.5
1,469.7
Other Operating Income (1)
(6.4
)
(6.0
)
(33.7
)
(23.9
)
Operating Income
143.6
187.3
459.7
534.9
Interest Expense, net
31.6
39.9
104.0
124.1
Other Expense (Income), net (2)
(1.3
)
30.9
(15.7
)
60.0
Income Before Income Taxes
113.3
116.5
371.4
350.8
Income Taxes (3)
31.8
45.3
117.1
103.1
Net Income
$
81.5
$
71.2
$
254.3
$
247.7
Weighted-Average Shares Outstanding: Basic
137.4
136.2
137.3
141.3
Diluted
140.0
145.6
142.3
150.8
Earnings Per Share: Basic
$
0.59
$
0.52
$
1.85
$
1.75
Diluted
$
0.58
$
0.49
$
1.79
$
1.64
(1) Other Operating Income for the
three months ended September 30, 2019 and September 30, 2018
relates to certain China government grant income. Other operating
income for the nine months ended September 30, 2019 relates to
certain China government grant income and income related to the
finalization of insurance recoveries in connection with the
flooding at one of the Company's warehouses in Mexico during
September 2017. Other Operating Income for the nine months ended
September 30, 2018 relates to certain China government grant
income.
(2) Other Expense (Income), net for
the three months ended September 30, 2019 relates to the gain on
revaluation of the Contingent Value Rights (CVR) issued in
connection with the October 2017 modified Dutch auction tender
offer. Other Expense (Income), net for the three months ended
September 30, 2018 relates to the $35.4 million loss on
extinguishment of the 2017 senior secured credit facility,
partially offset by a gain on revaluation of the CVR. Other Expense
(Income), net for the nine months ended September 30, 2019 relates
to the gain on revaluation of the CVR. Other Expense (Income), net
for the nine months ended September 30, 2018 relates to the $35.4
million loss on extinguishment of the 2017 senior secured credit
facility; the $13.1 million loss on the extinguishment of a portion
of the 2.0% convertible senior notes due 2019 repurchased in March
2018; and the $11.4 million loss on revaluation of the CVR.
(3) Includes the impact of excess
tax benefit recognized under ASU 2016-09 of $0.2 million and $19.3
million for the three months ended September 30, 2019 and 2018,
respectively; and $3.0 million and $49.6 million for the nine
months ended September 30, 2019 and 2018, respectively.
Herbalife Nutrition Ltd. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(In millions)
(Unaudited)
Sep 30,
Dec 31,
2019
2018
ASSETS Current Assets: Cash and cash equivalents
$
715.2
$
1,198.9
Receivables, net
100.4
70.5
Inventories
420.1
381.8
Prepaid expenses and other current assets
153.6
153.8
Total Current Assets
1,389.3
1,805.0
Property, plant and equipment, net
360.6
360.0
Operating lease right-of-use assets
181.9
-
Marketing-related intangibles and other intangible assets, net
310.1
310.1
Goodwill
89.3
92.9
Other assets
214.4
221.8
Total Assets
$
2,545.6
$
2,789.8
LIABILITIES AND SHAREHOLDERS' DEFICIT Current
Liabilities: Accounts payable
$
75.8
$
81.1
Royalty overrides
283.9
281.4
Current portion of long-term debt
24.5
678.9
Other current liabilities
536.4
547.4
Total Current Liabilities
920.6
1,588.8
Non-current liabilities: Long-term debt, net of current
portion
1,779.3
1,774.9
Non-current operating lease liabilities
165.4
-
Other non-current liabilities
147.8
149.5
Total Liabilities
3,013.1
3,513.2
Commitments and Contingencies Shareholders' deficit:
Common shares
0.1
0.1
Paid-in capital in excess of par value
363.7
341.5
Accumulated other comprehensive loss
(230.4
)
(209.8
)
Accumulated deficit
(272.0
)
(526.3
)
Treasury stock
(328.9
)
(328.9
)
Total Shareholders' Deficit
(467.5
)
(723.4
)
Total Liabilities and Shareholders' Deficit
$
2,545.6
$
2,789.8
Herbalife Nutrition Ltd. and
Subsidiaries
Condensed Consolidated Statements
of Cash Flows
(In millions)
(Unaudited)
Nine Months Ended
9/30/2019
9/30/2018
CASH FLOWS FROM OPERATING ACTIVITIES: Net income
$
254.3
$
247.7
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
73.4
76.0
Share-based compensation expenses
29.7
31.8
Non-cash interest expense
37.5
49.4
Deferred income taxes
8.0
6.0
Inventory write-downs
17.9
13.9
Foreign exchange transaction loss
4.0
10.4
Loss on extinguishment of debt
-
48.5
Other
(10.4
)
11.3
Changes in operating assets and liabilities: Receivables
(35.7
)
(25.9
)
Inventories
(63.5
)
(40.5
)
Prepaid expenses and other current assets
2.7
(52.2
)
Accounts payable
(2.9
)
25.2
Royalty overrides
5.9
14.2
Other current liabilities
(18.0
)
82.3
Other
(2.0
)
11.6
NET CASH PROVIDED BY OPERATING ACTIVITIES
300.9
509.7
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property,
plant and equipment
(79.5
)
(55.7
)
NET CASH USED IN INVESTING ACTIVITIES
(79.5
)
(55.7
)
CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings from senior
secured credit facility, net of discount
-
998.1
Principal payments on senior secured credit facility and other debt
(17.4
)
(1,231.7
)
Proceeds from convertible senior notes
-
550.0
Repayment of convertible senior notes
(675.0
)
(582.5
)
Proceeds from senior notes
-
400.0
Debt issuance costs
-
(26.8
)
Share repurchases
(9.9
)
(740.6
)
Proceeds from settlement of capped call transactions
-
55.9
Other
2.5
2.4
NET CASH USED IN FINANCING ACTIVITIES
(699.8
)
(575.2
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH
(13.4
)
(48.0
)
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
(491.8
)
(169.2
)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD
1,215.0
1,295.5
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD
$
723.2
$
1,126.3
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 used by 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 impact of foreign currency fluctuations in Venezuela and the
price increases the Company implements as a result of the highly
inflationary economy in that market can each, when considered in
isolation, have a disproportionately large impact to the Company’s
consolidated results despite the offsetting nature of these drivers
and that net sales in Venezuela, which represent less than 1% of
the Company’s consolidated net sales, are not material to our
consolidated results. Therefore, in certain instances, the Company
believes it is helpful to provide additional information with
respect to these factors as reported and excluding the impact of
Venezuela to illustrate the disproportionate nature of Venezuela’s
individual pricing and foreign exchange impact to the Company’s
consolidated results. However, excluding the impact of Venezuela
from these measures is not in accordance with U.S. GAAP and should
not be considered in isolation or as an alternative to the
presentation and discussion thereof calculated in accordance with
U.S. 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
Nine Months Ended
9/30/2019
9/30/2018
9/30/2019
9/30/2018
(in millions)
Net income, as reported
$
81.5
$
71.2
$
254.3
$
247.7
Expenses related to regulatory inquiries and legal accrual (1) (2)
1.9
1.8
34.1
6.1
Non-cash interest expense and amortization of non-cash issuance
costs (1) (2) (3)
8.7
12.6
33.0
40.7
China grant income (1) (2)
(6.4
)
(6.0
)
(27.7
)
(23.9
)
Contingent Value Rights revaluation (1) (2)
(1.3
)
(4.6
)
(15.7
)
11.4
Income related to finalization of insurance recoveries (1) (2) (4)
-
-
(6.0
)
-
Loss on extinguishment of convertible debt (1) (2) (5)
-
-
-
13.1
Loss on extinguishment of 2017 senior secured credit facility (1)
(2)
-
35.4
-
35.4
Mexico VAT assessment (1) (2)
19.0
-
19.0
-
Venezuela devaluation (1) (2)
-
-
-
4.7
Income tax adjustments for above items (1) (2)
(1.4
)
(4.8
)
2.6
(3.5
)
Net income, as adjusted (6)
$
102.1
$
105.6
$
293.7
$
331.7
The following table is a reconciliation of diluted shares
outstanding, as presented and reported in accordance with GAAP, to
adjusted diluted shares outstanding, adjusted to include the impact
of outstanding capped call transactions. The Company's outstanding
capped call transactions are anti dilutive and not included in GAAP
earnings per share but are expected to mitigate the dilutive effect
of the Company's convertible notes due 2019, if the trading price
of the Company's stock exceeds the conversion price, up to a
certain level. Therefore, the Company has adjusted the diluted
shares outstanding to include the impact of the capped calls, based
on the average share price for the period that the capped calls are
anti-dilutive.
Three Months Ended Nine Months Ended 9/30/2019 9/30/2018
9/30/2019 9/30/2018 (in millions) Diluted shares
outstanding, as reported
140.0
145.6
142.3
150.8
Impact of capped call transactions
-
(3.4)
(1.3)
(2.7)
Diluted shares outstanding, as adjusted
140.0
142.2
141.0
148.1
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 Nine Months Ended 9/30/2019 9/30/2018
9/30/2019 9/30/2018 (per share) Diluted earnings per share,
as reported
$
0.58
$
0.49
$
1.79
$
1.64
Impact of adjusted shares outstanding
-
0.01
0.01
0.03
Diluted earnings per share using adjusted diluted shares
outstanding
$
0.58
$
0.50
$
1.80
$
1.67
Expenses related to regulatory inquiries and legal accrual
(1) (2)
0.01
0.01
0.24
0.04
Non-cash interest expense and amortization of non-cash issuance
costs (1) (2) (3)
0.06
0.09
0.23
0.27
China grant income (1) (2)
(0.05
)
(0.04
)
(0.20
)
(0.16
)
Contingent Value Rights revaluation (1) (2)
(0.01
)
(0.03
)
(0.11
)
0.08
Income related to finalization of insurance recoveries (1) (2) (4)
-
-
(0.04
)
-
Loss on extinguishment of convertible debt (1) (2) (5)
-
-
-
0.09
Loss on extinguishment of 2017 senior secured credit facility (1)
(2)
-
0.25
-
0.24
Mexico VAT assessment (1) (2)
0.14
-
0.13
-
Venezuela devaluation (1) (2)
-
-
-
0.03
Income tax adjustments for above items (1) (2)
(0.01
)
(0.03
)
0.02
(0.02
)
Diluted earnings per share, as adjusted (6)
$
0.73
$
0.74
$
2.08
$
2.24
(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. Additionally, adjustments to items unrelated to
these non-GAAP adjustments may have an effect on the income tax
impact of these non-GAAP adjustments in subsequent periods. The
Company plans to update the income tax impact of these items in
subsequent interim reporting periods.
(2) Excludes tax (benefit)/expense as follows:
Three Months Ended
Nine Months Ended
9/30/2019
9/30/2018
9/30/2019
9/30/2018
(in millions)
Expenses related to regulatory inquiries and legal accrual
1.3
$
(1.4
)
(3.2
)
(1.0
)
Non-cash interest expense and amortization of non-cash issuance
costs
(0.7
)
(0.3
)
(1.3
)
0.8
China grant income
1.7
1.6
8.1
7.7
Contingent Value Rights revaluation
(0.5
)
3.5
1.3
0.7
Income related to finalization of insurance recoveries
(0.4
)
-
0.5
-
Loss on extinguishment of convertible debt
-
0.9
-
(1.2
)
Loss on extinguishment of 2017 senior secured credit facility
-
(9.2
)
-
(9.2
)
Mexico VAT assessment
(2.8
)
-
(2.8
)
-
Venezuela devaluation
-
0.1
-
(1.3
)
Total income tax adjustments
$
(1.4
)
$
(4.8
)
$
2.6
$
(3.5
)
Three Months Ended
Nine Months Ended
9/30/2019
9/30/2018
9/30/2019
9/30/2018
(per share)
Expenses related to regulatory inquiries and legal accrual
0.01
(0.01
)
(0.02
)
(0.01
)
Non-cash interest expense and amortization of non-cash issuance
costs
(0.01
)
-
(0.01
)
0.01
China grant income
0.01
0.01
0.06
0.05
Contingent Value Rights revaluation
-
0.02
0.01
-
Income related to finalization of insurance recoveries
-
-
-
-
Loss on extinguishment of convertible debt
-
0.01
-
(0.01
)
Loss on extinguishment of 2017 senior secured credit facility
-
(0.06
)
-
(0.06
)
Mexico VAT assessment
(0.02
)
-
(0.02
)
-
Venezuela devaluation
-
-
-
(0.01
)
Total income tax adjustments (6)
$
(0.01
)
$
(0.03
)
$
0.02
$
(0.02
)
(3) Relates to non-cash expense on the Company's 2.00%
convertible senior notes due 2019 and the related prepaid forward
share repurchase contracts and the 2.625% convertible senior notes
due 2024.
(4) Relates to the finalization of insurance recoveries in
connection with the flooding at one of the Company's warehouses in
Mexico during September 2017, which damaged certain of the
Company's inventory stored within the warehouse.
(5) Relates to the loss on the extinguishment of a portion of
the 2.00% convertible senior notes due 2019 repurchased in March
2018.
(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
December 31, 2019
December 31, 2019
Diluted EPS Guidance
$0.41 - $0.61
$2.20 - $2.40
Non-cash interest expense and amortization of non-cash issuance
costs (1)
0.04
0.27
China Grant Income (2)
0.00
(0.20)
Contingent Value Rights revaluation (3)
0.00
(0.11)
Income related to finalization of insurance recoveries (4)
0.00
(0.04)
Impact of adjusted shares outstanding
0.00
0.02
Expenses related to regulatory inquiries (5)
0.02
0.26
Mexico VAT Assessment (6)
0.00
0.13
Income tax adjustments for above items (7)
0.01
0.03
Adjusted diluted EPS guidance (8)
$0.48 - $0.68
$2.56 - $2.76
(1) Relates to non-cash expense on our convertible notes and
prepaid forward share repurchase contract. Excludes tax impact of
$1.1 million for the three months ending December 31, 2019.
(2) Excludes tax impact of $0.1 million and $8.0 million for the
three months and twelve months ending December 31, 2019,
respectively.
(3) Excludes tax impact of $1.1 million for the three months
ending December 31, 2019.
(4) Excludes tax impact of $0.4 million and $0.04 million for
the three months and twelve months ending December 31, 2019,
respectively
(5) Excludes tax impact of $1.5 million and $1.6 million for the
three months and twelve months ending December 31, 2019,
respectively.
(6) Excludes tax impact of $0.9 million and $1.8 million for the
three months and twelve months ending December 31, 2019,
respectively.
(7) Aggregates the individual tax impacts of each item as
described in greater detail in footnotes 2 through 6 above.
(8) 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.
Twelve Months Ending
December 31, 2020
Diluted EPS Guidance
$2.35 - $2.85
Non-cash interest expense and amortization of non-cash issuance
costs (1)
0.16
Expenses related to regulatory inquiries (2)
0.06
Income tax adjustments for above items
(0.02)
Adjusted diluted EPS guidance
$2.55 - $3.05
(1) Relates to non-cash expense on our convertible notes.
(2) Excludes tax impact of $2.5 million for the twelve months
ending December 31, 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191029006012/en/
Media Contact: Jennifer Butler VP, Media Relations
213.745.0420
Investor Contact: Eric Monroe Director, Investor Relations
213.745.0449
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