Herbalife just reported first quarter earnings and it’s a nice beat for the nutritional supplements seller.
The company reported adjusted EPS of $US1.50 versus analyst estimates of $US1.30.
Revenue for the first quarter came in at $US1.26 billion versus estimates of $US1.23 billion.
The company said in the release that it has terminated its dividend and will use cash to repurchase stock.
Billionaire investor Carl Icahn is happy about that.
The stock is flat in after-hours trading.
Herbalife’s stock has been at the center of a nasty battle between hedge fund billionaires.
Bill Ackman, who runs Pershing Square, believes the company operates as a “pyramid scheme” that targets poor people. He’s betting $US1 billion that the company will be shut down by regulators.
Icahn disagrees with Ackman, his long-time rival. Icahn owns a massive stake in Herbalife’s stock.
The company is currently under investigation by the Federal Trade Commission.
Here’s an excerpt:
Herbalife Ltd. Announces Record Adjusted First Quarter 2014 Results, and Raises 2014 Adjusted Earnings Guidance
First quarter worldwide volume growth of 9 per cent compared to the prior year period.
Adjusted EPS1of $US1.50 increased 18 per cent as compared to the same period in the prior year. Reported EPS of $US0.74 primarily reflects a foreign exchange loss for Venezuela and other items.
Raises FY’14 adjusted2diluted EPS guidance to a range of $US6.10 to $US6.30.
Generated $US191 million in operating cash flow in first quarter 2014.
Board of Directors takes steps to accelerate cash returns to shareholders — terminates dividend, determines to utilise cash instead to repurchase stock during the second quarter.
Herbalife Ltd. (HLF) today reported first quarter net sales of $US1.3 billion, reflecting an increase of 12 per cent compared to the same period in 2013 on volume point growth of 9 per cent. Adjusted1 net income for the quarter was $US151.1 million, or $US1.50 per diluted share, as compared to 2013 first quarter adjusted net income of $US137.4 million, or $US1.27 per diluted share. GAAP net income for the quarter was $US74.6 million, or $US0.74 per diluted share, compared to $US118.9 million, or $US1.10 per diluted share for the same period in 2013, primarily due to a foreign exchange loss for Venezuela during the quarter ended March 31, 2014.
“We continue to achieve record earnings, strong sales growth and enhanced profitability,” said Michael O. Johnson, Herbalife’s chairman and CEO. “Our performance reflects the demand for our exceptional products, as well as the hard work of our independent members who continue to cultivate and grow their base of satisfied customers worldwide. In addition, we are pleased to raise our expectations for the balance of 2014. This reflects our confidence that Herbalife is well-positioned to continue to grow and play an increasingly important role in improving nutrition and reducing obesity around the world.”
For the quarter ended March 31, 2014 the company generated cash flow from operations of $US190.6 million, an increase of 39 per cent compared to 2013; paid cash dividends of $US30.4 million; invested $US49.7 million in capital expenditures; and spent $US685.8 million for approximately 9.9 million outstanding common shares under our prepaid forward share repurchase agreement. As of April 25, 2014, the company has spent $US255 million during the month of April to repurchase approximately 4.5 million outstanding common shares under our existing repurchase program and pursuant to a Rule 10b5-1 trading plan.
As of March 31, 2014 we moved to the SICAD I rate of 10.7 Venezuelan bolivar per U.S. dollar for US GAAP remeasurement purposes. This change impacted our 2014 Q1 reported results by $US89.3 million before tax and we have normalized this impact out of our adjusted results.
First Quarter and Fiscal 2014 Key Metrics3,4Regional Volume Point and Average Active Sales Leader Metrics
|Volume Points (Mil)||Average Active Sales Leaders|
|Region||1Q’14||Yr/Yr % Chg||1Q’14||Yr/Yr % Chg|
|South & Central America||227.7||4||%||61,862||19||%|
2014 Second Quarter and Full Year Guidance
Forward guidance excludes the impact of expenses (primarily for legal and advisory services) relating to the company’s response to information put into the marketplace by a short seller, which the company believes to be inaccurate and misleading, expenses related to a FTC inquiry, and the impact of non-cash interest costs associated with the company’s Convertible Notes. Forward guidance is based on the average daily exchange rates of the first two weeks of April. Included in the guidance is the use of the GAAP rate for Venezuela of 10.7 to 1 for the balance of the year and excludes the potential impact of future devaluation of the Venezuelan bolivar and future repatriation, if any, of existing cash balances in Venezuela.
|Three Months Ending||Twelve Months Ending|
|June 30, 2014||December 31, 2014|
|Volume Point Growth vs 2013||7.0||%||9.0||%||8.0||%||10.0||%|
|Net Sales Growth vs 2013||10.0||%||12.0||%||10.0||%||12.0||%|
|Diluted EPS as adjusted||$||1.51||$||1.55||$||6.10||$||6.30|
|Cap Ex ($ millions)||$||55.0||$||65.0||$||175.0||$||195.0|
|Effective Tax Rate||28.0||%||30.0||%||28.0||%||30.0||%|
Board of Directors Accelerates Cash Returns to Shareholders
The company’s board of directors also announced today that, as part of its goal to accelerate cash returns to shareholders, it has approved terminating the company’s quarterly cash dividend and instead utilising the cash to repurchase additional shares of the company’s outstanding common stock during the second quarter of 2014.
The company now expects to repurchase a total of $US581 million of its outstanding common stock during the second quarter of 2014 as part of its previously announced $US1.5 billion share repurchase program. The $US581 million is comprised of the approximately $US315 million expected to be purchased in April as part of a 10b5-1 trading plan ($255 million already completed as of Friday, April 25); plus the $US50 million included in previous guidance and $US216 million that otherwise was expected to be returned to shareholders in the form of quarterly cash dividends over the next eight quarters.
Mr. Johnson stated, “Our strong sustained financial performance and the current market valuation of our shares make repurchasing stock the most attractive method of returning capital to shareholders and reflects our continued commitment to creating long-term value for our shareholders.”
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