LOS ANGELES--(BUSINESS WIRE)--Nov. 3, 2008--Herbalife Ltd. (NYSE: HLF) today reported its 19th consecutive quarter of double-digit sales growth with third quarter net sales of $602.2 million, an increase of 13.7 percent compared to the same period of 2007. For the quarter ended September 30, 2008, the company reported net income of $58.1 million, or $0.89 per diluted share, compared to $48.3 million, or $0.67 per diluted share in the third quarter of 2007, reflecting net sales growth increase, stable operating margin, a lower effective tax rate, and accretion from our share repurchase program.
"In these turbulent economic times, we believe we're in a fortunate position - at the intersection of health and wealth," said Chairman and Chief Executive Officer Michael O. Johnson. "We offer a solution for part-time or full-time income as well as healthy nutrition and weight-management in the midst of a global obesity epidemic. We are actively refining our growth and infrastructure plans to address global market changes and it continues to be our goal to improve our financial results each year. Although unprecedented fluctuations of the U.S. dollar versus most major currencies are causing headwinds in the fourth quarter 2008, which may continue throughout 2009, our mid-single digit volume point growth reflects our distributors' tremendous opportunity inherent in challenging economic times and they are focused on expanding their businesses."
Net sales performance in the third quarter was attributable to growth in the company's top ten markets, which were cumulatively up 20.9 percent versus the same period in the prior year. Six of these top markets produced double-digit net sales gains including: the U.S., up 23.4 percent; Brazil, up 47.3 percent; China, up 87.3 percent; Italy, up 27.1 percent; Taiwan, up 20.0 percent; and South Korea, up 30.0 percent. Total net sales growth in the quarter benefited from a 487 basis point favorable impact from currency fluctuations resulting in local year over year sales growth of 8.8 percent.
During the third quarter 2008 we added 52,591 new Sales Leaders (1), which is 0.7 percent lower than the same period in the prior year. However total Sales Leaders (1) increased 10.3 percent to 461,838, which is highlighted by the company's President's Team membership that increased 12.5 percent to 1,164 members and its prestigious Chairman's Club that increased 16.1 percent to 36 members, in each case versus the third quarter of 2007.
The company produced cash flow from operations of $79.7 million during the third quarter of 2008, and invested $32.6 million in capital expenditures, primarily in technology investments to support improvements in distributor services. The company did not repurchase any shares during the quarter reflecting current market volatility and a desire to pay down debt and remain conservatively capitalized. From the inception of the stock repurchase program in April, 2007, the company has repurchased 11.3 million shares at an aggregate cost of $460.0 million, representing approximately 15 percent of the fully diluted share base since the initial authorization.
Richard Goudis, chief financial officer, said, "Our strong balance sheet and cash flow puts us in a unique position to execute against our strategic plan and make the necessary investments to continually enhance the distributor experience, expand into new markets and become more vertical throughout our supply chain without reliance on additional external capital. We generated significant cash flow again this quarter, while maintaining operating margins of 14.7 percent."
(1) See Schedule titled "New Sales Leaders by Region" and "Total Sales Leaders by Region" for more detail
Business Highlights
During the third quarter the company hosted three Extravaganzas and collectively met with over 44,000 distributors. In early October, the company met with over 11,000 North American distributors in Los Angeles. "These events are for training and motivating our independent distributors, cultivating relationships, attracting new sales leaders, and stimulating productivity. "Our message is straightforward; there's never been a better time to introduce someone to Herbalife," said Johnson. "We have an industry-leading compensation plan, healthy nutrition products to help fight the global obesity epidemic, a financially strong company, a global brand and 28 years of success."
During the past several months, two clinical studies using our Formula 1 Nutritional Shake Mix were completed: one at UCLA using the US formula, and one at the University of Ulm, Germany, using our European formula.
The study conducted at UCLA demonstrated that drinking a Formula 1 shake every day is an effective way to manage weight, as part of a healthy active lifestyle; and personalizing your shake with additional Personalized Protein Powder helps promote the loss of body fat. The results of this study were published in The Nutrition Journal, August 2008.
The study conducted at the University of Ulm, Germany, was conducted by Dr. Marion Flechtner-Mors, a member of our Nutrition Advisory Board. The study showed that when counting calories, drinking two Formula 1 shakes as meal replacements is a more effective way to manage weight than a conventional food diet and weight loss achieved with higher protein intake led to improvement of certain health factors that are associated with being overweight.
These results were presented in October 2008 at the annual meeting of The Obesity Society in Phoenix, Arizona, and previously at the European Congress of Obesity in Geneva, Switzerland.