Herbalife Nutrition Ltd. (NYSE: HLF) today reported financial
results for the third quarter ended September 30, 2018:
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“Our strong sales and earnings performance during the third
quarter demonstrate the global consumer demand for our nutrition
products,” said Rich Goudis, CEO of Herbalife Nutrition.
QUARTER HIGHLIGHTS
- Reported net sales of $1.2 billion
increased 15% compared to third quarter 2017.
- Volume points of 1.5 billion, increased
15% compared to the prior year period, above the guidance range of
8.5%– 12.5%. This was the largest year over year volume point
percentage growth in a single quarter since 2012.
- Reported diluted EPS of $0.49 and
adjusted1 earnings of $0.74 per adjusted2 diluted share, compared
to $0.33 and $0.41, respectively, for the third quarter last year,
which were negatively impacted by expenses of approximately $4.4
million or $0.02 per share related to the China Growth and Impact
Investment Program.
- Updating FY 2018 volume point and net
sales guidance range to 8.6% - 9.6% growth and 9.9% - 10.9% growth,
respectively, as well as reported and adjusted1 diluted EPS
guidance to $1.99 - $2.09 and $2.74 – $2.84, respectively.
- Initiating FY 2019 net sales guidance
in a range of 2.8% - 6.8% growth, which includes an approximate 220
bps currency headwind.
- Company announces board approval of a
new five year $1.5 billion share repurchase program.
Third Quarter 2018 Key Metrics3
Regional Volume Point Metrics
_____________________
1 Adjusted diluted EPS is a non-GAAP measure and, for the
purpose of guidance, excludes the impact of: non-cash interest
expense associated with the Company’s convertible notes, expenses
related to regulatory inquiries, China grant income, contingent
value rights revaluation, loss on extinguishment of convertible
debt, loss on extinguishment of the Company’s 2017 senior secured
credit facility, and Venezuela currency devaluation. Adjusted
diluted EPS, for the purpose of reported results, excludes the
impact of the foregoing as well as expenses relating to challenges
to the Company’s business model, and expenses relating to FTC
Consent Order implementation. 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.2 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
third quarter of 2018.3 Supplemental tables that include Average
Active Sales Leader and additional business metrics can be found at
http://ir.Herbalife.com.
Volume Points Region
3Q '18 (mil)
Yr/Yr % Chg Asia Pacific 346.5 24.3 %
North America 309.3 18.3 % EMEA 303.1 17.1 % Mexico 233.0 9.2 %
China 176.8 19.6 % South & Central America 138.2 (8.0 %)
Worldwide Total (a)
1,506.9 15.0 %
(a) During 2018, the Company adjusted volume point values for
certain products in Mexico, 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
14.3%.
Regional Net Sales and Foreign Exchange (“FX”) Impact
Region
Reported Net Sales3Q’18 (mil)
Growth/Decline
including FX
vs. 3Q ‘17
Growth/Decline
excluding FX
vs. 3Q ‘17
Asia Pacific $ 274.3 18.8 % 23.3 % North America $ 240.0 20.1 %
20.2 % EMEA $ 235.9 10.3 % 16.9 % Mexico $ 121.2 6.0 % 12.8 % China
$ 266.5 27.0 % 29.3 % South & Central America (a) $ 104.9 (10.1
%) 640.0 %
Worldwide Total
$ 1,242.8 14.5 % 87.8 %
South & Central America excl. Venezuela (a) $ 101.1 (12.1 %)
(0.4 %)
Worldwide Total excl. Venezuela
(a)
$ 1,239.0 14.3 % 19.0 %
(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.
Outlook
Following is the Company’s fourth quarter 2018, full year 2018
and full year 2019 guidance based on current business trends:
Three Months Ending
Twelve Months Ending
December 31, 2018
December 31, 2018
Low
High
Low
High
Volume Point Growth vs 2017 (a) 8.0 % 12.0 % 8.6 % 9.6 % Net Sales
Growth vs 2017 (b) 6.5 % 10.5 % 9.9 % 10.9 % Diluted EPS (b) (c) $
0.35 $ 0.45 $ 1.99 $ 2.09 Adjusted Diluted EPS (b) (c) (d) $ 0.50 $
0.60 $ 2.74 $ 2.84 Cap Ex ($ millions) $ 30.0 $ 40.0 $ 85.0 $ 95.0
Effective Tax Rate (b) (c) 40.0 % 50.0 % 31.2 % 33.2 % Adjusted
Effective Tax Rate (b) (c) (d) 30.0 % 40.0 % 25.2 % 27.2 %
Twelve Months Ending
December 31, 2019
Low
High
Volume Point Growth vs 2018 (a) 4.0 % 8.0 % Net Sales Growth vs
2018 (b) 2.8 % 6.8 % Diluted EPS (b) (c) $ 2.34 $ 2.74 Adjusted
Diluted EPS (b) (c) (d) $ 2.70 $ 3.10 Cap Ex ($ millions) $ 135.0 $
175.0 Effective Tax Rate (b) (c) 27.5 % 31.5 % Adjusted Effective
Tax Rate (b) (c) (d) 27.0 % 31.0 % Net Sales Growth vs. 2018
(Currency Adjusted) (b) (e) 5.0 % 9.0 % Adjusted Diluted EPS
(Currency Adjusted) (b) (c) (d) (e) $ 2.95 $ 3.35
(a) We are 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 updated stock compensation
accounting standard, any future contingent value rights
revaluation, benefits from future potential China grant income, any
future potential dilution from the Company’s convertible notes due
in 2019 and 2024, as well as any impact of the China Growth and
Impact Investment Program.(d) Adjusted1 diluted EPS and adjusted
effective tax rate excludes the impact of: non-cash interest
expense associated with the Company’s convertible notes, expenses
related to regulatory inquiries, China grant income, contingent
value rights revaluation, loss on extinguishment of convertible
debt, loss on extinguishment of the Company’s 2017 senior secured
credit facility and Venezuela currency devaluation, 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 believe 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 full year net sales and
diluted EPS guidance and adjusted for items such as hedging
gains/losses and Venezuela to be directly comparable to 2018
values. See Schedule A – “Reconciliation of Non-GAAP Financial
Measures” for a detailed reconciliation of currency adjusted
diluted EPS to diluted EPS calculated in accordance with GAAP and a
discussion of why the Company believes this non-GAAP measure is
useful.
- With respect to guidance, the Company
cannot accurately predict the impact to its share base from any
future share repurchases in 2018 and 2019, and are therefore
excluded from the guidance tables above.
- Guidance is based on the average daily
exchange rates during the first two weeks of October 2018.
- Adjusted1 diluted EPS guidance for the
fourth quarter 2018 includes a projected currency headwind of
approximately $0.08 per diluted share versus the fourth quarter of
2017.
- Full year 2018 adjusted1 diluted EPS
guidance includes a projected currency headwind of approximately
$0.07 per diluted share, compared to approximately neutral in the
full year 2018 guidance provided on August 1, 2018.
- Full year 2019 adjusted1 diluted EPS
guidance includes a projected currency headwind of $0.25 compared
to 2018.
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 30, 2018,
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: 4484316). 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: 4484316). The webcast of the teleconference will be
archived and available on Herbalife Nutrition's website.
About Herbalife Nutrition Ltd.
Herbalife Nutrition is a global nutrition company whose purpose
is to make the world healthier and happier. The Company has been on
a mission for nutrition - changing people's lives with great
nutrition products and programs - since 1980. Together with our
Herbalife Nutrition independent distributors, we are committed to
providing solutions to the worldwide problems/trends of poor
nutrition and obesity, an aging population, skyrocketing public
healthcare costs and a rise in entrepreneurs of all ages. Herbalife
Nutrition offers high-quality, science-backed products, most of
which are produced in Company-operated facilities, one-on-one
coaching with an Herbalife Nutrition independent distributor, and a
supportive community approach that inspires customers to embrace a
healthier, more active lifestyle.
Herbalife Nutrition’s targeted nutrition, weight-management,
energy and fitness and personal care products are available
exclusively to and through its independent distributors in more
than 90 countries. Through its corporate social responsibility
efforts, Herbalife Nutrition supports the Herbalife Nutrition
Foundation (HNF) and its Casa Herbalife programs to help bring good
nutrition to children in need. Herbalife Nutrition is also proud to
sponsor more than 190 world-class athletes, teams and events around
the globe.
Herbalife Nutrition has approximately 8,300 employees worldwide,
and its shares are traded on the New York Stock Exchange (NYSE:
HLF) with net sales of approximately $4.4 billion in 2017. To learn
more, visit Herbalife.com or IAmHerbalife.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 the necessary
licenses to expand our direct selling business in China;
- 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 cyber-security incidents;
- 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 international operations;
- uncertainties relating to the United
Kingdom’s vote to exit from the European Union;
- restrictions imposed by covenants in
our credit facility;
- 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
9/30/2018
9/30/2017
9/30/2018
9/30/2017
North America $ 240.0 $ 199.8 $ 733.7 $ 648.0 EMEA 235.9
213.9 744.1 648.4 Asia Pacific 274.3 230.9 772.9 686.2 Mexico 121.2
114.3 353.4 334.7 China 266.5 209.8 765.5 668.0 South and Central
America 104.9 116.7 335.6
349.1 Worldwide Net Sales 1,242.8 1,085.4 3,705.2
3,334.4 Cost of Sales 218.1 215.4
693.4 638.8 Gross Profit 1,024.7 870.0
3,011.8 2,695.6 Royalty Overrides 344.0 310.1 1,031.1 944.1
Selling, General and Administrative Expenses 499.4 445.2 1,469.7
1,327.0 Other Operating Income (1) (6.0 ) (4.6 )
(23.9 ) (43.5 ) Operating Income 187.3 119.3 534.9
468.0 Interest Expense, net 39.9 38.4 124.1 106.5 Other Expense,
net (2) 30.9 - 60.0
- Income Before Income Taxes 116.5 80.9 350.8 361.5
Income Taxes (3) 45.3 26.4 103.1
84.2 Net Income $ 71.2 $ 54.5 $
247.7 $ 277.3 Weighted-Average Shares
Outstanding: Basic 136.2 159.1 141.3 162.7 Diluted 145.6 165.9
150.8 170.1 Earnings Per Share: Basic $ 0.52 $ 0.34
$ 1.75 $ 1.70 Diluted $ 0.49 $ 0.33
$ 1.64 $ 1.63
(1) Other Operating Income relates to certain China government
grant income.(2) Other Expense for the three months ended September
30, 2018 relates to the $35.4 million loss on extinguishment of the
Company's 2017 senior secured credit facility and the $4.6 million
gain on revaluation of the Contingent Value Rights (CVR) issued in
connection with the October 2017 modified Dutch auction tender
offer. Other Expense for the nine months ended September 30, 2018
relates to the $13.1 million loss on the extinguishment of a
portion of the 2.0% convertible senior notes due 2019 repurchased
in March 2018; the $35.4 million loss on extinguishment of the
Company's 2017 senior secured credit facility 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 $19.3 million and $0.6
million for the three months ended September 30, 2018 and 2017,
respectively; and $49.6 million and $26.4 million for the nine
months ended September 30, 2018 and 2017, respectively.
Herbalife Nutrition Ltd. and Subsidiaries Condensed
Consolidated Balance Sheets (In millions) (Unaudited) Sep 30,
Dec 31,
2018
2017
ASSETS Current Assets: Cash and cash equivalents $ 1,110.5 $
1,278.8 Receivables, net 99.4 93.3 Inventories 347.5 341.2 Prepaid
expenses and other current assets 199.1 147.0 Total Current Assets
1,756.5 1,860.3 Property, plant and equipment, net 352.2
377.5 Marketing-related intangibles and other intangible assets,
net 310.1 310.1 Goodwill 93.6 96.9 Other assets 222.4 250.3 Total
Assets $ 2,734.8 $ 2,895.1 LIABILITIES AND
SHAREHOLDERS' DEFICIT Current Liabilities: Accounts payable $ 83.6
$ 67.8 Royalty overrides 275.9 277.7 Current portion of long-term
debt 672.2 102.4 Other current liabilities 514.3 458.9 Total
Current Liabilities 1,546.0 906.8 Non-current liabilities
Long-term debt, net of current portion 1,774.4 2,165.7 Other
non-current liabilities 175.5 157.3 Total Liabilities 3,495.9
3,229.8 Commitments and Contingencies Shareholders'
deficit: Common shares 0.1 0.1 Paid-in capital in excess of par
value 346.8 407.3 Accumulated other comprehensive loss (203.9)
(165.4) Accumulated deficit (575.2) (248.1) Treasury stock (328.9)
(328.6) Total Shareholders' Deficit (761.1) (334.7)
Total Liabilities and Shareholders' Deficit $ 2,734.8 $ 2,895.1
Herbalife Nutrition Ltd. and
Subsidiaries
Condensed Consolidated Statements of Cash Flows (In millions)
(Unaudited) Nine Months Ended
9/30/2018
9/30/2017
CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 247.7 $ 277.3
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 76.0 73.8
Share-based compensation expenses 31.8 32.6 Non-cash interest
expense 49.4 44.8 Deferred income taxes 6.0 (4.1 ) Inventory
write-downs 13.9 17.7 Foreign exchange transaction loss 10.4 4.0
Loss on extinguishment of debt 48.5 0.0 Other 11.3 (1.1 ) Changes
in operating assets and liabilities: Receivables (25.9 ) (22.5 )
Inventories (40.5 ) 29.2 Prepaid expenses and other current assets
(52.2 ) (3.6 ) Accounts payable 25.2 (8.2 ) Royalty overrides 14.2
(6.7 ) Other current liabilities 82.3 (45.0 ) Other 11.6
16.2 NET CASH PROVIDED BY OPERATING ACTIVITIES
509.7 404.4 CASH FLOWS FROM
INVESTING ACTIVITIES: Purchases of property, plant and equipment
(55.7 ) (67.9 ) Other - 0.3 NET CASH
USED IN INVESTING ACTIVITIES (55.7 ) (67.6 )
CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings from senior
secured credit facility, net of discount 998.1 1,274.0 Principal
payments on senior secured credit facility and other debt (1,231.7
) (468.2 ) Proceeds from convertible senior notes 550.0 -
Repurchase of convertible senior notes (582.5 ) - Proceeds from
senior notes 400.0 - Debt issuance costs (26.8 ) (22.6 ) Share
repurchases (740.6 ) (346.2 ) Proceeds from settlement of capped
call transactions 55.9 - Other 2.4 1.6
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (575.2 )
438.6 EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH
EQUIVALENTS, AND RESTRICTED CASH (48.0 ) 20.6
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH (169.2 )
796.0 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF
PERIOD 1,295.5 856.9 CASH, CASH
EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD $ 1,126.3 $
1,652.9
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 9/30/2018 9/30/2017
9/30/2018 9/30/2017 (in million) Net income,
as reported $ 71.2 $ 54.5 $ 247.7 $ 277.3 Expenses incurred
responding to attacks on the Company's business model (1) (2) - 1.1
- 4.2 Expenses related to regulatory inquiries (1) (2) 1.8 3.3 6.1
10.0 Non-cash interest expense and amortization of non-cash
issuance costs (1) (2) (3) 12.6 12.0 40.7 35.4 China grant income
(1) (2) (6.0 ) (4.6 ) (23.9 ) (43.5 ) FTC Consent Order
implementation (1) (2) (4) - 3.0 - 16.7 Contingent Value Rights
revaluation (1) (2) (4.6 ) - 11.4 - 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
-
Venezuela devaluation (1) (2) - - 4.7 - Income tax adjustments for
above items (1) (2) (4.8 ) (1.6 ) (3.5 )
3.9 Net income, as adjusted $ 105.6 $ 67.7
$ 331.7 $ 304.0
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 9/30/2018 9/30/2017 9/30/2018 9/30/2017
(in millions) Diluted shares outstanding, as reported 145.6
165.9 150.8 170.1 Impact of capped call transactions (3.4 ) - (2.7
) - Diluted shares outstanding, as adjusted 142.2 165.9
148.1 170.1
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 9/30/2018 9/30/2017
9/30/2018 9/30/2017
(per share)
Diluted earnings per share, as reported $ 0.49 $ 0.33 $ 1.64
$ 1.63 Impact of adjusted shares outstanding 0.01
- 0.03 - Diluted earnings
per share using adjusted diluted shares outstanding $ 0.50 $ 0.33 $
1.67 $ 1.63 Expenses incurred responding to attacks on the
Company's business model (1) (2) - 0.01 - 0.02 Expenses related to
regulatory inquiries (1) (2) 0.01 0.02 0.04 0.06 Non-cash interest
expense and amortization of non-cash issuance costs (1) (2) (3)
0.09 0.07 0.27 0.21 China grant income (1) (2) (0.04 ) (0.03 )
(0.16 ) (0.26 ) FTC Consent Order implementation (1) (2) (4) - 0.02
- 0.10 Contingent Value Rights revaluation (1) (2) (0.03 ) - 0.08 -
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 - Venezuela devaluation (1) (2) - - 0.03 - Income
tax adjustments for above items (1) (2) (0.03 ) (0.01
) (0.02 ) 0.02 Diluted earnings per share, as
adjusted (6) $ 0.74 $ 0.41 $ 2.24 $ 1.79
(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 9/30/2018 9/30/2017
9/30/2018 9/30/2017 (in millions)
Expenses incurred responding to attacks on the Company's business
model $ - $ (0.2 ) $ - $ (1.0 ) Expenses related to regulatory
inquiries (1.4 ) (1.1 ) (1.0 ) (3.4 ) Non-cash interest expense and
amortization of non-cash issuance costs (0.3 ) (0.7 ) 0.8 1.2 China
grant income 1.6 1.5 7.7 12.7 FTC Consent Order implementation -
(1.1 ) - (5.6 ) Contingent Value Rights revaluation 3.5 - 0.7 -
Loss on extinguishment of convertible debt 0.9
-
(1.2 ) - Loss on extinguishment of 2017 senior secured credit
facility (9.2 )
-
(9.2 ) - Venezuela devaluation 0.1 -
(1.3 ) - Total income tax adjustments $ (4.8 )
$ (1.6 ) $ (3.5 ) $ 3.9 Three Months Ended
Nine Months Ended 9/30/2018 9/30/2017
9/30/2018 9/30/2017 (per share)
Expenses incurred responding to attacks on the Company's business
model $ - $ - $ - $ (0.01 ) Expenses related to regulatory
inquiries (0.01 ) (0.01 ) (0.01 ) (0.02 ) Non-cash interest expense
and amortization of non-cash issuance costs - - 0.01 0.01 China
grant income 0.01 0.01 0.05 0.07 FTC Consent Order Implementation -
(0.01 ) - (0.03 ) Contingent Value Rights revaluation 0.02 - - -
Loss on extinguishment of convertible debt 0.01 - (0.01 ) - Loss on
extinguishment of 2017 senior secured credit facility (0.06 ) -
(0.06 ) - Venezuela devaluation - -
(0.01 ) - Total income tax adjustments (6) $
(0.03 ) $ (0.01 ) $ (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) Includes $3.0 million of product discounts related to
preferred member conversions for the nine months ended September
30, 2017.(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, 2018 December 31, 2018
Diluted EPS Guidance (1) $0.35 - $0.45 $1.99 - $2.09 Non-cash
interest expense and amortization of non-cash issuance costs (2)
0.08 0.35 Expenses related to regulatory inquiries (3) 0.03 0.07
China Grant Income (4) - (0.16) Contingent value rights revaluation
(5) 0.03 0.11 Loss on extinguishment of convertible debt (6) - 0.09
Loss on extinguishment of 2017 senior secured credit facility (7) -
0.24 Venezuela devaluation (8) - 0.03 Impact of adjusted shares
outstanding 0.01 0.04 Income tax adjustments for above items (9)
(0.01) (0.03) Adjusted Diluted EPS Guidance (10) $0.50 - $0.60
$2.74 - $2.84
(1) Excludes the potential ongoing tax effects from the exercise
of equity awards that will impact our tax rate beginning fiscal
year 2017 due to a recently issued Stock Compensation accounting
standard.(2) Relates to non-cash expense on our convertible notes
and prepaid forward share repurchase contract. Excludes tax impact
of $0.8 million for the three months ending December 31, 2018.(3)
Excludes tax impact of $1.4 million and $2.3 million for the three
months ending December 31, 2018 and the twelve months ending
December 31, 2018, respectively.(4) Excludes tax impact of $0.8
million and $6.9 million for the three months ending December 31,
2018 and the twelve months ending December 31, 2018,
respectively.(5) Excludes tax impact of $0.6 million for the three
months ending December 31, 2018.(6) Excludes tax impact of $1.2
million for the three months ending December 31, 2018.(7) Excludes
tax impact of $1.4 million and $7.8 million for the three months
ending December 31, 2018 and the twelve months ending December 31,
2018, respectively.(8) Excludes tax impact of $0.2 million and $1.0
million for the three months ending December 31, 2018 and the
twelve months ending December 31, 2018, respectively.(9) Aggregates
the individual tax impacts of each item as described in greater
detail in footnotes 3 through 8 above.(10) 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, 2019 Diluted
EPS Guidance (1) $2.34 - $2.74 Non-cash interest expense and
amortization of non-cash issuance costs (2) 0.28 Impact of adjusted
shares outstanding 0.06 Expenses related to regulatory inquiries
(3) 0.03 Income tax adjustments for above items (0.01) Adjusted
diluted EPS guidance (4) $2.70 - $3.10 Constant currency
translation excluding Venezuela $0.18
Impact of period currency movement offsets
(currency hedging, etc.)
$0.07 Adjusted diluted EPS guidance (currency adjusted) $2.95 -
$3.35
(1) Excludes the potential ongoing tax effects from the exercise
of equity awards that will impact our tax rate beginning fiscal
year 2017 due to a recently issued Stock Compensation accounting
standard.(2) Relates to non-cash expense on our convertible notes
and prepaid forward share repurchase contract.(3) Excludes tax
impact of $1.5 million for the twelve months ending December 31,
2019.(4) Amounts may not total due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181030005988/en/
Herbalife Nutrition Ltd.Media Contact:Jennifer ButlerVP, Media
Relations213.745.0420orInvestor Contact:Eric MonroeDirector,
Investor Relations213.745.0449
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