[May 04, 2017] |
|
Herbalife Exceeds First Quarter 2017 Reported and Adjusted EPS Guidance
Herbalife Ltd. (NYSE: HLF) reports results for the first quarter ended
March 31, 2017.
"We've made a solid start to 2017 exceeding our EPS guidance," said
Michael O. Johnson, Chairman and CEO, Herbalife. "As we transition this
June to our new CEO Rich Goudis and my role as Executive Chairman, we
are more resolute than ever in making a profound and lasting effect on
the nutritional habits of the world and offering people an opportunity
to earn in the process."
"Healthy living is a growing aspiration for more and more
consumers worldwide and we are well positioned to capitalize on this
trend. We offer a powerful person-to-person alternative to traditional
retail, where consumers give our distributors permission to help them
with our extensive range of nutrition products."
For the first quarter 2017, the company reported net sales of $1.1
billion and volume point growth of 1% compared to the prior year period.
China sales and volume significantly exceeded expectations primarily due
to the impact on timing of sales and volume resulted from a price
increase announced in March 2017, effective April 1st, 2017, that we
believe shifted member purchases into the first quarter that would
likely have been made in the second quarter of this year. The expected
negative impact to second quarter sales and volume is included in
current guidance.
On a reported basis, first quarter net income was $85.2 million, or
$0.98 per diluted share, compared to net income of $95.8 million, or
$1.12 per diluted share, for the first quarter of 2016.
Adjusted1 earnings for the first quarter was $1.24 per
diluted share compared to $1.352 per diluted share for the
first quarter of 2016.
Due to currency fluctuations, first quarter 2017 reported and adjusted1
net income were each negatively impacted by $9.0 million, or $0.10 per
reported diluted EPS and adjusted1 diluted EPS.
For the full year 2017, the company is raising its previously issued
reported and adjusted diluted EPS guidance to a range of $3.25 to $3.65
and $4.05 to $4.45, respectively; up from the previous ranges of $2.95
to $3.35 and $3.65 to $4.05 respectively.
|
First Quarter 2017 Key Metrics3
|
Regional Volume Point Metrics
|
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|
|
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|
Volume Points (Mil)
|
Region
|
|
|
|
1Q '17
|
|
|
|
Yr/Yr % Chg
|
North America
|
|
|
|
302.6
|
|
|
|
-5
|
%
|
Asia Pacific
|
|
|
|
260.8
|
|
|
|
5
|
%
|
EMEA
|
|
|
|
274.2
|
|
|
|
5
|
%
|
Mexico
|
|
|
|
225.4
|
|
|
|
4
|
%
|
South & Central America
|
|
|
|
153.3
|
|
|
|
-14
|
%
|
China
|
|
|
|
182.0
|
|
|
|
17
|
%
|
Worldwide Total
|
|
|
|
1,398.3
|
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Regional Net Sales and Foreign Exchange ("FX") Impact
|
|
|
|
|
|
Reported Net Sales
|
|
|
|
Growth/Decline
|
|
|
|
Growth/Decline
|
Region
|
|
|
|
1Q '17 (mil)
|
|
|
|
including FX
|
|
|
|
excluding FX
|
North America
|
|
|
|
$
|
229.8
|
|
|
|
-7
|
%
|
|
|
|
-7
|
%
|
Asia Pacific
|
|
|
|
$
|
219.7
|
|
|
|
-1
|
%
|
|
|
|
-2
|
%
|
EMEA
|
|
|
|
$
|
209.8
|
|
|
|
6
|
%
|
|
|
|
6
|
%
|
Mexico
|
|
|
|
$
|
104.8
|
|
|
|
-4
|
%
|
|
|
|
8
|
%
|
South & Central America
|
|
|
|
$
|
122.4
|
|
|
|
-4
|
%
|
|
|
|
-8
|
%
|
China
|
|
|
|
$
|
215.6
|
|
|
|
-1
|
%
|
|
|
|
5
|
%
|
Worldwide Total
|
|
|
|
$
|
1,102.1
|
|
|
|
-2
|
%
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outlook
Based on current business trends the company's second quarter 2017 and
full year 2017 guidance is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending
|
|
|
|
Twelve Months Ending
|
|
|
|
|
June 30, 2017
|
|
|
|
December 31, 2017
|
|
|
|
|
Low
|
|
|
|
High
|
|
|
|
Low
|
|
|
|
High
|
Volume Point Growth vs 2016
|
|
|
|
(5.0%)
|
|
|
|
(1.0%)
|
|
|
|
2.0%
|
|
|
|
5.0%
|
Net Sales Growth vs 2016
|
|
|
|
(4.5%)
|
|
|
|
(0.5%)
|
|
|
|
3.0%
|
|
|
|
6.0%
|
Diluted EPS (a)
|
|
|
|
$0.65
|
|
|
|
$0.85
|
|
|
|
$3.25
|
|
|
|
$3.65
|
Adjusted(b) Diluted EPS
|
|
|
|
$0.85
|
|
|
|
$1.05
|
|
|
|
$4.05
|
|
|
|
$4.45
|
Cap Ex ($ millions)
|
|
|
|
$40.0
|
|
|
|
$50.0
|
|
|
|
$125.0
|
|
|
|
$155.0
|
Effective Tax Rate (a)
|
|
|
|
29.0%
|
|
|
|
31.0%
|
|
|
|
27.5%
|
|
|
|
29.5%
|
Adjusted Effective Tax Rate (a)
|
|
|
|
26.0%
|
|
|
|
28.0%
|
|
|
|
25.0%
|
|
|
|
27.0%
|
Currency Adjusted Net Sales Growth vs 2016
|
|
|
|
(4.0%)
|
|
|
|
0.0%
|
|
|
|
3.6%
|
|
|
|
6.6%
|
Currency Adjusted Diluted EPS
|
|
|
|
$0.88
|
|
|
|
$1.08
|
|
|
|
$4.25
|
|
|
|
$4.65
|
|
|
|
|
|
|
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(a) Excludes any future potential ongoing tax effects
from the exercise of equity awards that could impact the company's
tax rate beginning fiscal year 2017 due to a recently issued stock
compensation accounting standard.
|
(b) Adjusted diluted EPS and adjusted effective tax
rate, 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, FTC settlement implementation and
expenses related to regulatory inquiries. 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.
|
|
With respect to guidance, the company cannot accurately predict the
impact to its share base from any future repurchases in 2017 that may be
made under its share repurchase program and therefore the guidance table
above excludes any impact thereof to EPS.
Forward guidance is based on the average daily exchange rates during the
first two weeks of April.
Adjusted1 diluted EPS guidance for the second quarter 2017
includes a projected currency headwind of approximately $0.03 per
diluted share versus the second quarter of 2016.
Full year 2017 adjusted1 diluted EPS guidance includes a
projected currency headwind of approximately $0.20 per diluted share,
compared to 2016, which is less than the approximately $0.50 headwind
included in the guidance the company provided a quarter ago.
First Quarter 2017 Earnings Conference Call
Herbalife senior management will host an investor conference call to
discuss its recent financial results and provide an update on current
business trends on Thursday, May 4, 2017, 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 97879694). 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
97879694). The webcast of the teleconference will be archived and
available on Herbalife's website.
About Herbalife Ltd.
Herbalife is a global nutrition company that has been changing people's
lives with great products since 1980. Our nutrition, weight-management,
energy and fitness and personal care products are available
exclusively to and through dedicated Herbalife Independent Members in
more than 90 countries. We are committed to fighting the worldwide
problems of poor nutrition and obesity by offering high-quality
products, one-on-one coaching with an Herbalife Member and a community
that inspires customers to live a healthy, active life.
We support the Herbalife Family Foundation (HFF) and its Casa
Herbalife programs to help bring good nutrition to children in need. We
also sponsor more than 190 world-class athletes, teams and events around
the globe, including Cristiano Ronaldo, the LA Galaxy and champions in
many other sports.
The company has over 8,000 employees worldwide, and its shares are
traded on the New York Stock Exchange (NYSE: HLF) with net sales of
approximately $4.5 billion in 2016. To learn more, visit Herbalife.com
or IAmHerbalife.com.
The Herbalife Investor Relations website at http://ir.herbalife.com
contains a significant amount of financial and other information about
the company. The company encourages investors to visit its website from
time to time, as information is updated and new information is posted.
__________________
|
|
1 Adjusted net income and adjusted diluted EPS are both
non-GAAP measures and exclude 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,
expenses relating to FTC settlement implementation, recovery of
re-audit expenses, China grant income and expenses related to
regulatory inquiries. 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 Prior year amounts have been updated for comparative
purposes to adjust for China grant income recognized in Q1 2016.
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.
|
3 Supplemental tables that include Average Active Sales
Leader and additional business metrics can be found at http://www.ir.herbalife.com.
|
|
|
FORWARD-LOOKING STATEMENTS
This earnings 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 market 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;
-
contractual limitations on our ability to expand our business;
-
our reliance on our information technology infrastructure and outside
manufacturers;
-
the sufficiency of 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;
-
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 Ltd. and Subsidiaries
|
Condensed Consolidated Statements of Income
|
(In millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
3/31/2017
|
|
|
|
3/31/2016
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
|
$
|
229.8
|
|
|
|
$
|
246.0
|
|
Mexico
|
|
|
|
|
104.8
|
|
|
|
|
109.7
|
|
South and Central America
|
|
|
|
|
122.4
|
|
|
|
|
127.0
|
|
EMEA
|
|
|
|
|
209.8
|
|
|
|
|
198.4
|
|
Asia Pacific
|
|
|
|
|
219.7
|
|
|
|
|
221.1
|
|
China
|
|
|
|
|
215.6
|
|
|
|
|
217.4
|
|
Worldwide Net Sales
|
|
|
|
|
1,102.1
|
|
|
|
|
1,119.6
|
|
Cost of Sales
|
|
|
|
|
204.6
|
|
|
|
|
213.1
|
|
Gross Profit
|
|
|
|
|
897.5
|
|
|
|
|
906.5
|
|
Royalty Overrides
|
|
|
|
|
315.1
|
|
|
|
|
311.9
|
|
Selling, General and Administrative Expenses
|
|
|
|
|
438.6
|
|
|
|
|
427.1
|
|
Other Operating Income (1)
|
|
|
|
|
0.0
|
|
|
|
|
(0.8
|
)
|
Operating Income
|
|
|
|
|
143.8
|
|
|
|
|
168.3
|
|
Interest Expense, net
|
|
|
|
|
30.2
|
|
|
|
|
24.9
|
|
Income Before Income Taxes
|
|
|
|
|
113.6
|
|
|
|
|
143.4
|
|
Income Taxes
|
|
|
|
|
28.4
|
|
|
|
|
47.6
|
|
Net Income
|
|
|
|
$
|
85.2
|
|
|
|
$
|
95.8
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
83.1
|
|
|
|
|
82.8
|
|
Diluted
|
|
|
|
|
86.7
|
|
|
|
|
85.6
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
1.03
|
|
|
|
$
|
1.16
|
|
Diluted
|
|
|
|
$
|
0.98
|
|
|
|
$
|
1.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Other Operating Income relates to certain China
grant income.
|
|
|
Herbalife Ltd. and Subsidiaries
|
Condensed Consolidated Balance Sheets
|
(In millions)
|
(Unaudited)
|
|
|
|
|
|
Mar 31,
|
|
|
|
Dec 31,
|
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
1,782.9
|
|
|
|
|
$
|
844.0
|
|
Receivables, net
|
|
|
|
|
100.2
|
|
|
|
|
|
70.3
|
|
Inventories
|
|
|
|
|
375.0
|
|
|
|
|
|
371.3
|
|
Prepaid expenses and other current assets
|
|
|
|
|
151.4
|
|
|
|
|
|
176.9
|
|
Total Current Assets
|
|
|
|
|
2,409.5
|
|
|
|
|
|
1,462.5
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
373.3
|
|
|
|
|
|
378.0
|
|
Marketing related intangibles and other intangible assets, net
|
|
|
|
|
310.1
|
|
|
|
|
|
310.1
|
|
Goodwill
|
|
|
|
|
93.5
|
|
|
|
|
|
89.9
|
|
Other assets
|
|
|
|
|
373.9
|
|
|
|
|
|
324.9
|
|
Total Assets
|
|
|
|
$
|
3,560.3
|
|
|
|
|
$
|
2,565.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
80.7
|
|
|
|
|
$
|
66.0
|
|
Royalty overrides
|
|
|
|
|
249.1
|
|
|
|
|
|
261.2
|
|
Current portion of long-term debt
|
|
|
|
|
103.6
|
|
|
|
|
|
9.5
|
|
Other current liabilities
|
|
|
|
|
507.2
|
|
|
|
|
|
454.8
|
|
Total Current Liabilities
|
|
|
|
|
940.6
|
|
|
|
|
|
791.5
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
|
|
2,199.2
|
|
|
|
|
|
1,438.4
|
|
Other non-current liabilities
|
|
|
|
|
153.1
|
|
|
|
|
|
139.2
|
|
Total Liabilities
|
|
|
|
|
3,292.9
|
|
|
|
|
|
2,369.1
|
|
|
|
|
|
|
|
|
|
|
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
|
|
0.1
|
|
|
|
|
|
0.1
|
|
Paid-in capital in excess of par value
|
|
|
|
|
469.2
|
|
|
|
|
|
467.6
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(189.6
|
)
|
|
|
|
|
(205.1
|
)
|
Retained earnings (accumulated deficit)
|
|
|
|
|
48.4
|
|
|
|
|
|
(66.3
|
)
|
Treasury stock
|
|
|
|
|
(60.7
|
)
|
|
|
|
|
-
|
|
Total Shareholders' Equity
|
|
|
|
|
267.4
|
|
|
|
|
|
196.3
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders' Equity
|
|
|
|
$
|
3,560.3
|
|
|
|
|
$
|
2,565.4
|
|
|
|
|
|
|
|
|
|
|
|
Herbalife Ltd. and Subsidiaries
|
Condensed Consolidated Statements of Cash Flows
|
(In millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
3/31/2017
|
|
|
|
3/31/2016
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
85.2
|
|
|
|
|
$
|
95.8
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
24.5
|
|
|
|
|
|
23.9
|
|
Share-based compensation expenses
|
|
|
|
|
11.3
|
|
|
|
|
|
9.8
|
|
Non-cash interest expense
|
|
|
|
|
14.4
|
|
|
|
|
|
15.6
|
|
Deferred income taxes
|
|
|
|
|
(3.2
|
)
|
|
|
|
|
(3.2
|
)
|
Inventory write-downs
|
|
|
|
|
4.6
|
|
|
|
|
|
7.3
|
|
Foreign exchange transaction gain
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
(0.7
|
)
|
Other
|
|
|
|
|
(1.0
|
)
|
|
|
|
|
1.1
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
|
|
(27.9
|
)
|
|
|
|
|
(17.3
|
)
|
Inventories
|
|
|
|
|
7.3
|
|
|
|
|
|
(2.6
|
)
|
Prepaid expenses and other current assets
|
|
|
|
|
25.1
|
|
|
|
|
|
5.4
|
|
Accounts payable
|
|
|
|
|
5.0
|
|
|
|
|
|
2.8
|
|
Royalty overrides
|
|
|
|
|
(18.8
|
)
|
|
|
|
|
(10.4
|
)
|
Other current liabilities
|
|
|
|
|
44.6
|
|
|
|
|
|
8.3
|
|
Other
|
|
|
|
|
4.8
|
|
|
|
|
|
5.3
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
|
|
175.5
|
|
|
|
|
|
141.1
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
|
|
(24.5
|
)
|
|
|
|
|
(29.7
|
)
|
Other
|
|
|
|
|
(1.2
|
)
|
|
|
|
|
4.1
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
|
|
(25.7
|
)
|
|
|
|
|
(25.6
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Borrowings from senior secured credit facility, net of discount
|
|
|
|
|
1,274.0
|
|
|
|
|
|
-
|
|
Principal payments on senior secured credit facility and other debt
|
|
|
|
|
(413.4
|
)
|
|
|
|
|
(229.7
|
)
|
Debt issuance costs
|
|
|
|
|
(22.6
|
)
|
|
|
|
|
-
|
|
Share repurchases
|
|
|
|
|
(58.1
|
)
|
|
|
|
|
(2.3
|
)
|
Other
|
|
|
|
|
0.6
|
|
|
|
|
|
(1.7
|
)
|
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
|
|
780.5
|
|
|
|
|
|
(233.7
|
)
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
|
|
|
8.6
|
|
|
|
|
|
2.6
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
|
|
938.9
|
|
|
|
|
|
(115.6
|
)
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
|
|
844.0
|
|
|
|
|
|
889.8
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
|
|
$
|
1,782.9
|
|
|
|
|
$
|
774.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 of 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 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
|
|
|
|
|
3/31/2017
|
|
|
|
3/31/2016
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Net (loss) income, as reported
|
|
|
|
$
|
85.2
|
|
|
|
|
$
|
95.8
|
|
Expenses incurred responding to attacks on the company's business
model (1) (2)
|
|
|
|
|
1.5
|
|
|
|
|
|
2.9
|
|
Expenses related to Regulatory inquiries (1) (2)
|
|
|
|
|
3.8
|
|
|
|
|
|
7.6
|
|
Expenses incurred for the recovery of re-audit expenses (1) (2)
|
|
|
|
|
-
|
|
|
|
|
|
1.4
|
|
Non-cash interest expense and amortization of non-cash issuance costs
(1) (2) (3)
|
|
|
|
|
11.7
|
|
|
|
|
|
11.0
|
|
China grant income (1) (2) (4)
|
|
|
|
|
-
|
|
|
|
|
|
(0.8
|
)
|
FTC Consent Order implementation (1) (2) (5)
|
|
|
|
|
8.5
|
|
|
|
|
|
-
|
|
Income tax adjustments for above items (1) (2)
|
|
|
|
|
(3.5
|
)
|
|
|
|
|
(2.5
|
)
|
Net income, as adjusted (4)(6)
|
|
|
|
$
|
107.1
|
|
|
|
|
$
|
115.5
|
|
|
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
|
|
|
|
|
3/31/2017
|
|
|
|
3/31/2016
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share, as reported
|
|
|
|
$
|
0.98
|
|
|
|
|
$
|
1.12
|
|
Expenses incurred responding to attacks on the company's business
model (1) (2)
|
|
|
|
|
0.02
|
|
|
|
|
|
0.03
|
|
Expenses related to Regulatory inquiries (1) (2)
|
|
|
|
|
0.04
|
|
|
|
|
|
0.09
|
|
Expenses incurred for the recovery of re-audit expenses (1) (2)
|
|
|
|
|
-
|
|
|
|
|
|
0.02
|
|
Non-cash interest expense and amortization of non-cash issuance costs
(1) (2) (3)
|
|
|
|
|
0.13
|
|
|
|
|
|
0.13
|
|
China grant income (1) (2) (4)
|
|
|
|
|
-
|
|
|
|
|
|
(0.01
|
)
|
FTC Consent Order implementation (1) (2) (5)
|
|
|
|
|
0.10
|
|
|
|
|
|
-
|
|
Income tax adjustments for above items (1) (2)
|
|
|
|
|
(0.04
|
)
|
|
|
|
|
(0.03
|
)
|
Diluted earnings per share, as adjusted (4)(6)
|
|
|
|
$
|
1.24
|
|
|
|
|
$
|
1.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
|
|
|
3/31/2017
|
|
|
|
3/31/2016
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Expenses incurred responding to attacks on the company's business
model
|
|
|
|
|
-
|
|
|
|
|
|
(0.01
|
)
|
Expenses related to Regulatory inquiries
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
(0.03
|
)
|
Expenses incurred for the recovery of re-audit expenses
|
|
|
|
|
-
|
|
|
|
|
|
(0.01
|
)
|
Non-cash interest expense and amortization of non-cash issuance costs
|
|
|
|
|
0.01
|
|
|
|
|
|
0.01
|
|
China grant income
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
FTC Consent Order Implementation
|
|
|
|
|
(0.03
|
)
|
|
|
|
|
-
|
|
Total income tax adjustments (6)
|
|
|
|
$
|
(0.04
|
)
|
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
(3) Relates to non-cash expense on our convertible notes
and prepaid forward share repurchase contract.
|
(4) Prior year amounts have been updated for comparative
purposes to adjust for China grant income recognized in 2016.
|
(5) Includes $3.0 million of product discounts related to
preferred member conversions.
|
(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
|
|
|
|
|
June 30, 2017
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
Diluted EPS Guidance (1)
|
|
|
|
$0.65 - $0.85
|
|
|
|
$3.25 - $3.65
|
Expenses incurred responding to attacks on the company's business
model (2)
|
|
|
|
0.02
|
|
|
|
0.08
|
Non-cash interest expense and amortization of non-cash issuance costs
(3)
|
|
|
|
0.14
|
|
|
|
0.55
|
FTC Consent Order Implementation (4) (5)
|
|
|
|
0.04
|
|
|
|
0.12
|
Expenses related to Regulatory inquiries (6)
|
|
|
|
0.03
|
|
|
|
0.11
|
Income tax adjustments for above items (7)
|
|
|
|
(0.02)
|
|
|
|
(0.06)
|
Adjusted Diluted EPS Guidance (8)
|
|
|
|
$0.85 - $1.05
|
|
|
|
$4.05 - $4.45
|
|
|
|
|
|
|
|
|
|
(1) Excludes future potential 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.
|
(2) Excludes tax impact of $0.5 million and $2.0
million for the three months ending June 30, 2017 and the twelve
months ending December 31, 2017, respectively.
|
(3) Relates to non-cash expense on our convertible
notes and prepaid forward share repurchase contract.
|
(4) Excludes tax impact of $1.0 million and $3.0
million for the three months ending June 30, 2017 and the twelve
months ending December 31, 2017, respectively.
|
(5) Includes $3.0 million of product discounts related
to preferred member conversions for the twelve months ending
December 31, 2017.
|
(6) Excludes tax impact of $0.8 million and $2.8
million for the three months ending June 30, 2017 and the twelve
months ending December 31, 2017, respectively.
|
(7) Aggregates the individual tax impacts of each item as
described in greater detail in footnotes 2, 4 and 6 above.
|
(8) Amounts may not total due to rounding.
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170504006562/en/
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