Annual report pursuant to Section 13 and 15(d)

Segment Information

v3.3.1.900
Segment Information
 12 Months Ended
Dec. 31, 2015
Segment Reporting [Abstract]  
Segment Information

10. Segment Information

The Company is a nutrition company that sells a wide range of weight management, targeted nutrition, energy, sports & fitness, and outer nutrition products. The Company’s products are manufactured by third party providers and by the Company in its Changsha, Hunan, China extraction facility, Suzhou, China facility, Lake Forest, California facility, and Winston-Salem, North Carolina facility, and then are sold to Members who consume and sell Herbalife products to retail consumers or other Members. Revenues reflect sales of products by the Company to its Members and are categorized based on geographic location.

As of December 31, 2015, the Company sold products in 93 countries throughout the world and was organized and managed by six geographic regions: North America, Mexico, South & Central America, EMEA (Europe, Middle East, and Africa), Asia Pacific and China. The Company defines its operating segments as those geographical operations. The Company aggregates its operating segments, excluding China, into a reporting segment, or the Primary Reporting Segment, as management believes that the Company’s operating segments have similar operating characteristics and similar long term operating performance. In making this determination, management believes that the operating segments are similar in the nature of the products sold, the product acquisition process, the types of customers to whom products are sold, the methods used to distribute the products, the nature of the regulatory environment, and their economic characteristics. China has been identified as a separate reporting segment as it does not meet the criteria for aggregation. The Company reviews its net sales and contribution margin by operating segment, and reviews its assets and capital expenditures on a consolidated basis and not by operating segment. Therefore, net sales and contribution margin are presented by reportable segment and assets and capital expenditures by segment are not presented. The operating information for the two reportable segments, and sales by product line are as follows:

 

 

 

Year Ended December 31,

 

 

 

2015

 

 

2014

 

 

2013

 

 

 

(In millions)

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

$

3,622.8

 

 

$

4,294.3

 

 

$

4,353.7

 

China

 

 

846.2

 

 

 

664.3

 

 

 

471.6

 

Total Net Sales

 

$

4,469.0

 

 

$

4,958.6

 

 

$

4,825.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution Margin(1):

 

 

 

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

$

1,598.8

 

 

$

1,908.0

 

 

$

1,941.7

 

China(2)

 

 

762.8

 

 

 

596.6

 

 

 

422.7

 

Total Contribution Margin

 

$

2,361.6

 

 

$

2,504.6

 

 

$

2,364.4

 

Selling, general and administrative expense (2)

 

 

1,778.0

 

 

 

1,991.1

 

 

 

1,629.1

 

Interest expense

 

 

100.5

 

 

 

91.7

 

 

 

26.6

 

Interest income

 

 

5.6

 

 

 

12.5

 

 

 

8.0

 

Other expense, net

 

 

2.3

 

 

 

13.0

 

 

 

—

 

Income before income taxes

 

 

486.4

 

 

 

421.3

 

 

 

716.7

 

Income taxes

 

 

147.3

 

 

 

112.6

 

 

 

189.2

 

Net Income

 

$

339.1

 

 

$

308.7

 

 

$

527.5

 

 

 

 

Year Ended December 31,

 

 

 

2015

 

 

2014

 

 

2013

 

 

 

(In millions)

 

Net sales by product line:

 

 

 

 

 

 

 

 

 

 

 

 

Weight Management

 

$

2,862.8

 

 

$

3,177.0

 

 

$

3,063.7

 

Targeted Nutrition

 

 

1,015.4

 

 

 

1,108.5

 

 

 

1,109.9

 

Energy, Sports & Fitness

 

 

250.9

 

 

 

260.6

 

 

 

254.5

 

Outer Nutrition

 

 

133.0

 

 

 

178.9

 

 

 

157.2

 

Literature, Promotional and Other(3)

 

 

206.9

 

 

 

233.6

 

 

 

240.0

 

Total Net Sales

 

$

4,469.0

 

 

$

4,958.6

 

 

$

4,825.3

 

Net sales by geographic area:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

860.0

 

 

$

905.1

 

 

$

886.9

 

Mexico

 

 

479.9

 

 

 

567.9

 

 

 

562.4

 

South Korea

 

 

266.9

 

 

 

416.0

 

 

 

433.7

 

China

 

 

846.2

 

 

 

664.3

 

 

 

471.6

 

Others

 

 

2,016.0

 

 

 

2,405.3

 

 

 

2,470.7

 

Total Net Sales

 

$

4,469.0

 

 

$

4,958.6

 

 

$

4,825.3

 

 

(1)

Contribution margin consists of net sales less cost of sales and royalty overrides.

(2)

Service fees to China independent service providers totaling $403.5 million, $312.7 million, and $215.6 million for the years ended December 31, 2015, 2014, and 2013, respectively, are included in selling, general and administrative expenses while Member compensation for all other countries is included in contribution margin.

(3)

Product buybacks and returns in all product categories are included in the literature, promotional and other category.

As of December 31, 2015 and 2014, goodwill allocated to the Company’s reporting units included in the Company’s Primary Reporting Segment was $88.5 million and $98.8 million, respectively. Goodwill allocated to the China segment was $3.3 million and $3.4 million as of December 31, 2015 and 2014, respectively.

The following table sets forth property, plant and equipment and deferred tax assets by geographic area:

 

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

2013

 

 

 

(In millions)

 

Property, Plant and Equipment, net:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

264.2

 

 

$

289.8

 

 

$

236.0

 

Foreign

 

 

75.0

 

 

 

76.9

 

 

 

82.9

 

Total Property, Plant and Equipment, net

 

$

339.2

 

 

$

366.7

 

 

$

318.9

 

Deferred Tax Assets:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

188.5

 

 

$

154.3

 

 

$

69.1

 

Foreign

 

 

63.9

 

 

 

63.6

 

 

 

58.7

 

Total Deferred Tax Assets

 

$

252.4

 

 

$

217.9

 

 

$

127.8

 

The majority of the Company’s foreign subsidiaries designate their local currencies as their functional currency. As of December 31, 2015 and 2014, the total amount of cash held by foreign subsidiaries reported in the Company’s consolidated balance sheet was $310.5 million and $440.8 million, respectively, of which $19.1 million and $8.3 million, respectively, was maintained or invested in U.S. dollars. At December 31, 2015 and 2014, the total amount of cash and cash equivalents held by the Company’s parent and its U.S. entities was $579.3 million and $204.6 million, respectively.