Herbalife Ltd. (HLF) filed Quarterly Report for the period ended 2009-09-30.
Herbalife is a global network marketing company offering a range of science-based weight management products nutritional supplements and personal care products intended to support weight loss and a healthy lifestyle. Herbalife Ltd. has a market cap of $2.08 billion; its shares were traded at around $33.65 with a P/E ratio of 11.07 and P/S ratio of 0.88. The dividend yield of Herbalife Ltd. stocks is 2.38%.
Highlight of Business Operations:
Royalty overrides are generally earned based on retail sales and provide potential earnings to distributors of up to 23% of retail sales or approximately 33% of our net sales. Royalty overrides together with distributor allowances of up to 50% represent the potential earnings to distributors of up to approximately 73% of retail sales. The compensation to distributors is generally for the development, retention and improved productivity of their distributor sales organizations and is paid to several levels of distributors on each sale. Due to restrictions on direct selling in China, our full-time employed sales representatives in China are compensated with wages, bonuses and benefits instead of the distributor allowances and royalty overrides utilized in our traditional marketing program used in our other five regions. Because of local country regulatory constraints, we may be required to modify our typical distributor incentive plans as described above. Consequently, the total distributor discount percentage may vary over time. We also offer reduced distributor allowances and pay reduced royalty overrides with respect to certain products worldwide.
Net sales for the three and nine months ended September 30, 2009 was $600.2 million and $1,693.7 million, respectively. Net sales decreased $2.0 million, or 0.3%, and $152.6 million, or 8.3%, for the three and nine months ended September 30, 2009, respectively, as compared to the same periods in 2008. The decrease was primarily due to the unfavorable impact of currency fluctuations of $47.2 million and $192.4 million for the three and nine months ended September 30, 2009, respectively. In local currency, net sales for the three and nine months ended September 30, 2009 increased 7.5% and 2.2%, respectively, as compared to the same periods in 2008. For the three months ended September 30, 2009, net sales in some of our top countries including South Korea, Taiwan, Venezuela, U.S. and China increased 60.3%, 27.6%, 38.1%, 4.5% and 10.4%, respectively, as compared to the same period in 2008, while Mexico and Japan, decreased 25.5% and 8.9%, respectively, as compared to the same period in 2008. For the nine months ended September 30, 2009, net sales in Mexico, Japan, Venezuela and Brazil declined 32.7%, 25.9%, 8.4% and 2.8%, respectively, while net sales in Taiwan, South Korea, U.S., Malaysia and China increased 25.8%, 31.3%, 4.7%, 29.5% and 8.0%, respectively. In Mexico, the negative impact of the Value Added Tax, or VAT, that has been levied by the Mexican government on the import and resale of certain nutrition products, which we began collecting from our distributors during the third quarter of 2008 contributed to the decline in net sales and distributor and sales leader recruiting. In Japan, lower net sales were mainly due to decline in distributor recruiting. In Venezuela, price increases to address inflation and changes in non-resident distributor compensation to address currency controls imposed by the Venezuelan government contributed to the decline in net sales and new sales leaders for the period. The increase in net sales in other top markets was mainly due to successful conversions to daily consumption business models, branding activities and increased distributor recruiting.
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