Herbalife Reports Third Quarter 2016 Worldwide Volume Growth Of 6%, Beats Both Reported And Adjusted Third Quarter EPS Guidance And Raises Full Year 2016 EPS Guidance

Herbalife Ltd. (NYSE: HLF) reported third quarter 2016 volume growth of 6% and net sales of $1.1 billion, reflecting an increase of 2%, each compared to the prior year period. Third quarter net sales, excluding the impact of currency, grew by 5%. On a reported basis, third quarter 2016 net income was $87.7 million, or $1.01 per diluted share, compared to net income of $93.6 million or $1.09 per diluted share for the third quarter in 2015. Adjusted 1 earnings for the quarter were $1.21 per diluted share compared to $1.26 2 per diluted share for the comparable quarter in 2015. Due to currency fluctuations, third quarter 2016 reported and adjusted 1 net income were each negatively impacted by $17.9 million, and reported diluted EPS and adjusted 1 diluted EPS were each negatively impacted by $0.21.

For the full year 2016, diluted and adjusted 1 diluted EPS guidance is now in a range of $2.77 to $2.97 and $4.65 to $4.85, an increase from the previous ranges of $2.30 to $2.60 and $4.50 to $4.80, respectively.

For the full year 2017, the company is providing initial volume guidance in the range of 2% to 5% growth and initial full year 2017 GAAP diluted and adjusted 1 diluted EPS guidance in the range of $3.95 to $4.35 and $4.60 to $5.00, respectively, which each include a $0.15 headwind due to the expected unfavorable impact of currency fluctuations.

Michael O. Johnson, chairman and CEO of Herbalife, stated, "We delivered another strong quarter with 6% growth in worldwide volume and relentless management of expenses which contributed to our exceeding the high end of third quarter EPS guidance."

In a separate press release this afternoon, the Company announced its CEO transition plan that will go into effect in June of 2017. The press release can be found here http://ir.Herbalife.com.

Third Quarter and 2016 Key Metrics 3,4

Regional Volume Point and Average Active Sales Leader Metrics
Volume Points (Mil)   Average Active Sales Leaders
Region 3Q '16 Yr/Yr % Chg   3Q '16 Yr/Yr % Chg
North America 311.6 9% 81,035 5%
Asia Pacific 275.9 7% 76,315 -1%
EMEA 252.0 15% 84,125 13%
Mexico 234.5 13% 68,380 6%
South & Central America 161.1 -15% 56,025 -8%
China 153.2 2%   31,719 23%
Worldwide Total 1,388.3 6%   383,274 4%
 

Regional Net Sales and Foreign Exchange ("FX") Impact
Region   Reported Net Sales

3Q '16 (mil)
  Growth/Decline

including FX
  Growth/Decline

excluding FX
North America   $ 241.0   10 %   10 %
Asia Pacific $ 231.4 3 % 1 %
EMEA $ 201.6 10 % 15 %
Mexico $ 112.8 -1 % 14 %
South & Central America $ 121.0 -12 % -9 %
China   $ 214.2   -5 %   1 %
Worldwide Total   $ 1,122.0   2 %   5 %
 

Outlook

Based on current business trends the company's fourth quarter 2016 and full year 2017 guidance are as follows:
Three Months Ending   Twelve Months Ending
December 31, 2016 December 31, 2016
Low High Low High
Volume Point Growth vs 2015 (1.5%) 2.5% 4.5% 5.5%
Net Sales Growth vs 2015 (2.5%) 1.5% 1.0% 2.0%
Diluted EPS $0.90 $1.10 $2.77 $2.97
Adjusted (a) Diluted EPS $0.80 $1.00 $4.65 $4.85
Cap Ex ($ millions) $33.0 $43.0 $145.0 $155.0
Effective Tax Rate 25.0% 28.0% 28.0% 30.0%
Adjusted Effective Tax Rate 27.5% 30.5% 28.5% 30.5%
Currency Adjusted (b) Net Sales Growth vs 2015 (0.5%) 3.5% 6.3% 7.3%
Currency Adjusted (b) Diluted EPS $0.92 $1.12 $5.61 $5.81
 
Twelve Months Ending
December 31, 2017
Low High
Volume Point Growth vs 2016 2.0% 5.0%
Net Sales Growth vs 2016 3.5% 6.5%
Diluted EPS (c) $3.95 $4.35
Adjusted (a) Diluted EPS $4.60 $5.00
Cap Ex ($ millions) $130.0 $160.0
Effective Tax Rate (c) 27.5% 29.5%
Currency Adjusted Net Sales Growth vs 2016 3.9% 6.9%
Currency Adjusted Diluted EPS $4.75 $5.15

(a) Adjusted net income and adjusted diluted EPS are both non-GAAP measure and, for the purposes of 2016 results and guidance, exclude the impact of expenses relating to challenges to the company's business model, regulatory inquiries, expenses related to the recovery of re-audit expenses, award amount in connection with the re-audit, the impact of non-cash interest costs associated with the company's convertible notes, regulatory settlements, costs related to the FTC settlement implementation and China grant income. Adjusted diluted EPS, for the purposes of 2017 guidance, excludes the impact of expenses relating to challenges to the company's business model, the impact of non-cash interest costs associated with the company's convertible notes and costs related to the FTC settlement 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. (b) Excludes the impact of Venezuela price increases tied to FX rate movements (c) Excludes any ongoing tax effects from the exercise of equity awards that could impact our tax rate beginning fiscal year 2017 due to a recently issued stock compensation accounting standard.

Forward guidance is based on the average daily exchange rates of the first two weeks of October.

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