Herbalife Beats On Earnings, Ends Dividend To Buy Back Stock, Carl Icahn Happy



Reuters/ Robert Galbraith

Herbalife just reported first quarter earnings and it's a nice beat for the nutritional supplements seller.


The company reported adjusted EPS of $1.50 versus analyst estimates of $1.30.

Revenue for hte first quarter came in at $1.26 billion versus estimates of $1.23 billion

The company also said that it has terminated its dividend and will use cash to repurchase stock.

Billionaire investor Carl Icahn is happy about that.


"Great move by #HLF to suspend dividend & buyback shares. $HLF accelerates return to shareholders. Confirms confidence in the future," Icahn Tweeted.

The stock is flat in after-hours trading.

Herbalife's stock has been at the cross-hairs of a nasty battle between hedge fund billionaires.

Hedge fund manager Bill Ackman, who runs Pershing Square, believes the company operates as a "pyramid scheme" that targets poor people. He has a $1 billion short bet against the company.

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 percent compared to the prior year period.

  • Adjusted EPS1 of $1.50 increased 18 percent as compared to the same period in the prior year. Reported EPS of $0.74 primarily reflects a foreign exchange loss for Venezuela and other items.

  • Raises FY'14 adjusted2 diluted EPS guidance to a range of $6.10 to $6.30.

  • Generated $191 million in operating cash flow in first quarter 2014.

  • Board of Directors takes steps to accelerate cash returns to shareholders - terminates dividend, determines to utilize cash instead to repurchase stock during the second quarter.

Herbalife Ltd. (HLF) today reported first quarter net sales of $1.3 billion, reflecting an increase of 12 percent compared to the same period in 2013 on volume point growth of 9 percent. Adjusted1 net income for the quarter was $151.1 million, or $1.50 per diluted share, as compared to 2013 first quarter adjusted net income of $137.4 million, or $1.27 per diluted share. GAAP net income for the quarter was $74.6 million, or $0.74 per diluted share, compared to $118.9 million, or $1.10 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 $190.6 million, an increase of 39 percent compared to 2013; paid cash dividends of $30.4 million; invested $49.7 million in capital expenditures; and spent $685.8 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 $255 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 $89.3 million before tax and we have normalized this impact out of our adjusted results.