<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to _______________________
Commission file number 0-15712
HERBALIFE INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Nevada 22-2695420
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1800 Century Park East, Los Angeles, California 90067
----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(310) 410-9600
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the registrant's classes of Common
Stock, as of July 31, 1999 was:
Shares of Class A Common Stock 9,982,300
Shares of Class B Common Stock 18,604,515
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<PAGE> 2
HERBALIFE INTERNATIONAL, INC.
Index to Financial Statements and Exhibits
Filed with the Quarterly Report of the Company on Form 10-Q
For the Quarter Ended June 30, 1999
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements: Page No.
--------
<S> <C>
Consolidated Balance Sheets 2 - 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial 9 - 15
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17 - 18
Signature 19
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HERBALIFE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $112,528,000 $100,721,000
Marketable securities 22,079,000 5,186,000
Receivables 30,028,000 44,471,000
Inventories 76,013,000 88,138,000
Prepaid income taxes 2,601,000 2,931,000
Prepaid expenses and other current assets 15,266,000 14,734,000
Deferred income taxes 18,789,000 21,870,000
------------ ------------
Total current assets 277,304,000 278,051,000
Property, at cost, net of accumulated depreciation and
amortization of $47,601,000 (1999) and $45,792,000 (1998) 39,751,000 37,448,000
Deferred compensation plan assets 25,188,000 18,059,000
Other assets 4,063,000 4,642,000
Deferred income taxes 7,035,000 6,696,000
Goodwill, net of accumulated amortization of
$1,688,000 (1999) and $1,601,000 (1998) 3,200,000 3,287,000
------------ ------------
TOTAL $356,541,000 $348,183,000
============ ============
</TABLE>
See the accompanying notes to consolidated financial statements
2
<PAGE> 4
HERBALIFE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 15,110,000 $ 14,963,000
Royalty overrides 65,666,000 58,389,000
Accrued compensation 19,554,000 18,132,000
Accrued expenses 26,584,000 29,007,000
Dividends payable 4,280,000 4,296,000
Current portion of contracts payable and bank loans 3,465,000 2,639,000
Advance sales deposits 10,909,000 7,919,000
Income taxes payable 4,680,000 22,083,000
------------- -------------
Total current liabilities 150,248,000 157,428,000
NON-CURRENT LIABILITIES:
Contracts payable, net of current portion 1,657,000 2,357,000
Accrued deferred compensation plan liability 22,216,000 17,244,000
Other non-current liabilities and deferred credits 5,054,000 4,748,000
------------- -------------
Total liabilities 179,175,000 181,777,000
------------- -------------
MINORITY INTEREST 1,950,000 2,595,000
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock A, $0.01 par value; 33,333,333 shares
authorized, 9,982,488 (1999) and 9,980,753 (1998) shares
issued and outstanding 100,000 100,000
Common stock B, $0.01 par value; 66,666,667 shares
authorized, 18,605,037 (1999) and 18,603,561 (1998) shares
issued and outstanding 186,000 186,000
Paid-in-capital in excess of par value 54,860,000 54,823,000
Retained earnings 126,285,000 110,941,000
Accumulated other comprehensive loss (6,015,000) (2,239,000)
------------- -------------
Total stockholders' equity 175,416,000 163,811,000
------------- -------------
TOTAL $ 356,541,000 $ 348,183,000
============= =============
</TABLE>
See the accompanying notes to consolidated financial statements
3
<PAGE> 5
HERBALIFE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Retail sales $425,765,000 $398,142,000 $854,563,000 $796,589,000
Less: Distributor allowances on product purchases 199,415,000 188,198,000 401,774,000 376,869,000
------------ ------------ ------------ ------------
Net sales 226,350,000 209,944,000 452,789,000 419,720,000
Cost of sales 57,624,000 53,635,000 116,116,000 108,146,000
Royalty overrides 68,170,000 60,086,000 134,940,000 122,676,000
Marketing, distribution & administrative expenses 80,878,000 71,682,000 163,011,000 140,645,000
Interest income - net 432,000 798,000 837,000 1,675,000
------------ ------------ ------------ ------------
Income before income taxes and minority interest 20,110,000 25,339,000 39,559,000 49,928,000
Income taxes 7,743,000 9,756,000 15,230,000 19,222,000
------------ ------------ ------------ ------------
Income before minority interest 12,367,000 15,583,000 24,329,000 30,706,000
Minority interest 175,000 255,000 424,000 590,000
------------ ------------ ------------ ------------
NET INCOME $ 12,192,000 $ 15,328,000 $ 23,905,000 $ 30,116,000
============ ============ ============ ============
EARNINGS PER SHARE:
Basic $ 0.43 $ 0.53 $ 0.84 $ 1.03
Diluted $ 0.40 $ 0.50 $ 0.79 $ 0.99
CASH DIVIDENDS PER COMMON SHARE $ 0.15 $ 0.15 $ 0.30 $ 0.30
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 28,587,000 28,998,000 28,586,000 29,110,000
Effect of stock options 1,714,000 1,443,000 1,715,000 1,455,000
------------ ------------ ------------ ------------
Diluted 30,301,000 30,441,000 30,301,000 30,565,000
============ ============ ============ ============
</TABLE>
See the accompanying notes to consolidated financial statements
4
<PAGE> 6
HERBALIFE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 23,905,000 $ 30,116,000
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 7,183,000 5,992,000
Deferred income taxes 2,564,000 601,000
Amortization of unearned compensation -- 130,000
Stock Grant -- 88,000
Unrealized foreign exchange loss 2,352,000 1,723,000
Minority interest in earnings 424,000 590,000
Other -- (19,000)
Changes in operating assets and liabilities:
Receivables 12,196,000 5,931,000
Inventories 8,975,000 (22,136,000)
Prepaid expenses and other current assets (1,879,000) (7,395,000)
Other assets 441,000 (999,000)
Accounts payable 1,034,000 7,382,000
Royalty overrides 9,528,000 (8,412,000)
Accrued expenses and accrued compensation 1,996,000 430,000
Advance sales deposits 3,457,000 (3,281,000)
Income taxes payable (16,594,000) 2,835,000
Deferred compensation liability 4,972,000 4,656,000
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 60,554,000 18,232,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property (9,888,000) (4,980,000)
Proceeds from sale of property 49,000 68,000
Net changes in marketable securities (16,902,000) 16,364,000
Deferred compensation plan assets (7,129,000) (9,401,000)
------------- -------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (33,870,000) 2,051,000
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution to minority interests (1,069,000) (505,000)
Dividends paid (8,592,000) (8,853,000)
Additions to loans payable 1,000,000 858,000
Principal payments on loans payable (914,000) (946,000)
Exercise of stock options 37,000 4,589,000
Stock repurchases -- (28,558,000)
Recapitalization costs -- (616,000)
------------- -------------
NET CASH USED IN FINANCING ACTIVITIES (9,538,000) (34,031,000)
------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (5,339,000) (2,870,000)
------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 11,807,000 (16,618,000)
CASH AND CASH EQUIVALENTS AT JANUARY 1 100,721,000 78,913,000
------------- -------------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 112,528,000 $ 62,295,000
============= =============
</TABLE>
See the accompanying notes to consolidated financial statements
5
<PAGE> 7
HERBALIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM FINANCIAL INFORMATION
The unaudited interim financial information of Herbalife International, Inc. and
subsidiaries (the "Company") has been prepared in accordance with Article 10 of
the Securities and Exchange Commission's Regulation S-X. In the opinion of
management, the accompanying interim financial information contains all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the Company's financial statements as of June 30, 1999 and for the six
month periods ended June 30, 1999 and 1998.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities and
will be effective January 1, 2001. The Company has not yet analyzed the impact
of adopting this statement.
RECLASSIFICATIONS
Certain reclassifications were made to prior year statements to conform to
current year presentation.
2. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted
average number of shares outstanding. Diluted earnings per share includes the
dilutive effect of stock options.
3. CONTINGENCIES
The Company's French and Italian subsidiaries have been subject to tax audits by
governmental authorities in those countries, each of whom are proposing that
material value added, withholding, and income taxes are due. The Company and its
tax advisors believe that the Company has substantial defenses and the Company
is vigorously contesting the additional proposed taxes and related charges.
However, the ultimate resolution of these matters is unknown and may take
several years.
On December 16, 1998, Moshe and Dorit Miron, two Israeli distributors of the
Company, filed a lawsuit in the United States District Court for the Northern
District of California, in which the Company is the named defendant (the "Miron
Suit"). Although the Miron Suit is in its early pleading stages and it is
difficult to ascertain what causes of action the plaintiffs are attempting (or
have the right) to allege against the Company, the case appears to be primarily
a claim for breach of contract. In addition, the Miron Suit appears to attempt
to challenge the legality of the company's marketing system. The Company
believes that it has meritorious defenses to the allegations that appear to be
asserted against the Company. Due to the uncertainty inherent in any litigation
and the early stage of this proceeding, however, there can be no assurances that
the Company will obtain a favorable resolution of the Miron Suit or that an
adverse disposition of the case would not have a material adverse effect on the
Company.
Furthermore, the Company is from time to time engaged in routine litigation
incidental to the conduct of its business. The Company regularly reviews all
pending litigation matters in which it is involved and, estimating the impact of
such litigation matters, establishes reserves considered appropriate by
management. The Company's estimates of the impact of these matters may change as
the matters progress and are ultimately resolved.
6
<PAGE> 8
HERBALIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. COMPREHENSIVE INCOME
Comprehensive income is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income $ 12,192,000 $ 15,328,000 $ 23,905,000 $ 30,116,000
Foreign currency translation
adjustment (157,000) (1,703,000) (3,773,000) (2,134,000)
Unrealized gain/(loss) on
marketable securities (2,000) (17,000) (3,000) 75,000
------------ ------------ ------------ ------------
Comprehensive income $ 12,033,000 $ 13,608,000 $ 20,129,000 $ 28,057,000
============ ============ ============ ============
</TABLE>
5. SEGMENT INFORMATION
The Company is a network marketing company that sells a wide range of weight
management products, food and dietary supplements and personal care products
within one industry as defined under SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company's products are manufactured by
third party providers and then sold to independent distributors who sell
Herbalife products to retail consumers or other distributors.
The Company has operations throughout the world (44 countries as of June 30,
1999) and is organized and managed by geographic segments. Information reviewed
by the Company's chief operating decision makers on significant geographic
segments, as defined under SFAS 131, is prepared on the same basis as the
consolidated financial statements and is as follows:
7
<PAGE> 9
HERBALIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FINANCIAL INFORMATION BY GEOGRAPHIC SEGMENT
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
1999 1998 1999 1998
------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
TOTAL RETAIL SALES:
United States(1) ................................ $220.2 $209.0 $415.9 $427.5
Japan ........................................... 100.7 123.4 245.8 251.0
Russia .......................................... 8.2 30.9 19.4 77.0
All others(1) ................................... 214.3 151.9 392.9 293.4
Elimination of intersegment sales(1) ............ (117.6) (117.1) (219.4) (252.3)
------------------- -------------------
TOTAL RETAIL SALES ........................... $425.8 $398.1 $854.6 $796.6
------------------- -------------------
DISTRIBUTOR ALLOWANCES:
United States ................................... $ 87.8 $ 87.7 $162.2 $178.3
Japan ........................................... 48.8 59.7 119.6 121.6
Russia .......................................... 3.8 13.6 9.0 34.7
All others ...................................... 96.1 70.6 178.3 135.7
Elimination of intersegment allowance (U.S.) .... (37.1) (43.5) (67.3) (93.4)
------------------- -------------------
TOTAL DISTRIBUTOR ALLOWANCES ................. $199.4 $188.1 $401.8 $376.9
------------------- -------------------
NET SALES ......................................... $226.4 $210.0 $452.8 $419.7
=================== ===================
OPERATING INCOME:
United States ................................... $ 54.3 $ 51.7 $104.7 $108.4
Japan ........................................... 10.8 16.6 31.5 35.3
Russia .......................................... (0.3) 4.2 (4.0) 13.8
All others ...................................... 13.7 9.7 23.9 17.7
Elimination of intersegment gross profit ........ (44.8) (49.5) (91.2) (107.8)
------------------- -------------------
TOTAL ........................................ $ 33.7 $ 32.7 $ 64.9 $ 67.4
------------------- -------------------
Corporate expenses .............................. (14.0) (8.2) (26.2) (19.2)
Net interest income ............................. 0.4 0.8 0.8 1.7
Income taxes .................................... (7.7) (9.7) (15.2) (19.2)
Minority interest ............................... (0.2) (0.3) (0.4) (0.6)
------------------- -------------------
NET INCOME ........................................ $ 12.2 $ 15.3 $ 23.9 $ 30.1
=================== ===================
NOTES:
(1) Includes intersegment sales of:
United States $113.8 $116.0 $214.6 $248.8
All others 3.8 1.1 4.8 3.5
------------------- -------------------
Total $117.6 $117.1 $219.4 $252.3
=================== ===================
SALES BY PRODUCT LINE
Food & Dietary Supplement $184.1 $175.7 $388.7 $348.9
Weight Management 185.6 156.8 346.9 307.0
Personal Care Products 42.8 45.9 94.7 101.1
Literature/Promotional/Other 13.3 19.7 24.3 39.6
------------------- -------------------
Total Sales $425.8 $398.1 $854.6 $796.6
=================== ===================
</TABLE>
8
<PAGE> 10
HERBALIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Throughout this report, "retail sales" are determined as the gross sales amounts
reflected on the Company's invoices to its distributors. The Company does not
receive the amount reported as "retail sales," and the Company does not monitor
the actual retail prices charged for the Company's products. "Net sales"
represent the actual purchase prices paid to the Company by its distributors,
after giving effect to distributor discounts (referred to as "distributor
allowances"), which total approximately 50% of suggested retail sales prices.
The Company receives its net sales price in cash or through credit card payments
upon receipt of orders from distributors. Importers are utilized by the Company
in some markets and, under certain circumstances, credit terms are extended. The
Company's "gross profit" consists of net sales less (i) "cost of sales,"
consisting of the prices paid by the Company to its manufacturers for products
and costs related to product shipments, foreign duties and tariffs and similar
expenses, and (ii) "royalty overrides," currently consisting of (a) royalties
and bonuses, which total approximately 15% and 6% (up to 7% beginning February
1, 1999), respectively, on the suggested retail sales prices of products earned
by qualifying distributors on sales within their distributor organizations, (b)
the President's Team Bonus payable to certain of the Company's most senior
distributors in the aggregate amount of approximately an additional 1% of
product retail sales, and (c) other one-time incentive cash bonuses to
qualifying distributors. Royalty overrides, as reported in the financial
statements and selected financial data appearing elsewhere herein, are net of a
handling fee (6% of retail sales through January 31, 1999 and 7% beginning
February 1, 1999) charged by the Company to its distributors on purchases of
products from the Company.
The Company's use of "retail sales" in reporting financial and operating data
reflects the fundamental role of "retail sales" in the Company's accounting
systems, internal controls and operations, including the basis upon which
distributor bonuses are paid. The retail sales price of the Company's products
is reflected in distributor invoices as the price charged to distributors
together with, in most cases, a deduction for the corresponding distributor
allowance. The U.S. retail sales is used by the Company to calculate, among
other things, royalty overrides and "volume points" earned by distributors.
Volume points are point values assigned to each of the Company's products that
are equal in all countries and are used as a supervisor qualification criteria.
In addition, management relies upon "retail sales" data reflected in daily sales
reports to monitor results of operations in each of the Company's markets.
The significance of the Company's "net sales" is to reflect, generally, the
prices actually received by the Company after deducting the basic distributor
allowance, but before deducting royalty overrides and bonuses. The ratio of the
Company's "retail sales" to "net sales" is relatively constant because
distributor allowances historically total approximately 50% of suggested retail
sales prices. Accordingly, factors that affect "retail sales" generally have a
corresponding and proportionate effect on "net sales." To the extent the ratio
of "retail sales" to "net sales" varies from period to period, such variances
have resulted principally from sales of the Company's distributor kits and other
educational and promotional materials, for which there are no distributor
allowances. Sales of such items initially decreased and thereafter stabilized as
a percentage of total retail sales since 1991, but such decreases have not had a
material impact on the ratio of the Company's "retail sales" to "net sales" or
on the Company's operating margin.
The Company's results of operations for the periods described below are not
necessarily indicative of results of operations for future periods, which depend
upon numerous factors including the Company's ability in the future to enter new
markets and introduce additional and new products into its markets.
PRODUCT SALES
Retail sales for the three and six months ended June 30, 1999 increased 7.0% and
7.3% to $425.8 million and $854.6 million as compared to sales of $398.1 million
and $796.6 million for the corresponding periods of the prior year.
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
RETAIL SALES BY GEOGRAPHICAL SEGMENTS (DOLLARS IN MILLIONS):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------------- -------------------------------------------------
% Change in % Change in
Local Local
1999 1998 US$ Currency 1999 1998 US$ Currency
------ ------ ------ ---------- ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asia/Pacific Rim $167.3 $154.8 8.1% (4%) $360.7 $306.3 17.8% 6%
Europe 121.9 125.5 (2.9%) 2% 236.2 261.3 (9.6%) (8%)
The Americas 136.6 117.8 16.0% 21% 257.7 229.0 12.5% 18%
------ ------ ------ ------ ------ ------ ------ ------
Total Retail Sales $425.8 $398.1 7.0% 5% $854.6 $796.6 7.3% 5%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
Retail sales within the Asia/Pacific Rim region increased 8.1% and 17.8% or
$12.5 million and $54.4 million for the three and six months ended June 30,
1999, respectively, as compared to the same periods in 1998. The region's sales
growth was primarily due to retail sales increases in Korea of $28.5 million and
$45.8 million and in Hong Kong of $3.4 million and $8.1 million for the three
and six months ended June 30, 1999, respectively. Partially offsetting the
increases was a $22.7 million and $5.2 million decline in retail sales for
Japan, representing a 18.4% and 2.1% decline for the three and six months ended
June 30, 1999 compared to the corresponding periods in the prior year. In local
currency retail sales in Japan decreased 28% and 12% for the three and six
months ended June 30, 1999. The decrease in Japan is primarily a result of a
discouraging consumer and economic environment.
In Europe, retail sales decreased 2.9% and 9.6% or $3.6 million and $25.1
million for the three and six months ended June 30, 1999, respectively, as
compared to the same periods in 1998. The decrease reflects the ongoing
uncertain economic conditions in Russia, where retail sales decreased 73.5% and
74.8% or $22.7 million and $57.6 million, respectively, for the three and six
months ended June 30, 1999. Excluding Russia, retail sales increased 20.1% and
17.6% over the corresponding prior year periods. Retail sales in Italy increased
30.5% and 27.2% or $7.6 million and $12.8 million, respectively, from the prior
year periods, and Germany increased 26.8% and 16.8% or $3.4 million and $4.4
million.
Retail sales in the Americas increased 16.0% and 12.5% or $18.8 million and
$28.7 million for the three and six months ended June 30, 1999, respectively, as
compared to the same periods in 1998. The region's sales growth was primarily
due to retail sales increases in the United States of $13.4 million and $22.5
million and in Mexico of $4.9 million and $8.0 million for the three and six
months ended June 30, 1999, respectively. Partially offsetting the increases was
a $1.2 million and $5.0 million decline in retail sales for Brazil, representing
a 11.7% and 22.5% decline for the three and six months ended June 30, 1999
compared to the corresponding periods in the prior year. In local currency
retail sales in Brazil increased 32% and 19% for the three and six months ended
June 30, 1999.
RETAIL SALES BY PRODUCT SEGMENTS (DOLLARS IN MILLIONS):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------- ---------------------------------
% %
1999 1998 Change 1999 1998 Change
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Food & Dietary Supplements $184.1 $175.7 4.8% $388.7 $348.9 11.4%
Weight Management 185.6 156.8 18.4% 346.9 307.0 13.0%
Personal Care 42.8 45.9 (6.8%) 94.7 101.1 (6.3%)
Literature/ Promotional/ Other 13.3 19.7 (32.5%) 24.3 39.6 (38.6%)
------ ------ ------ ------ ------ ------
Total Retail Sales $425.8 $398.1 7.0% $854.6 $796.6 7.3%
====== ====== ====== ====== ====== ======
</TABLE>
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
For the three and six months ended June 30, 1999, retail sales of food & dietary
supplements increased 4.8% and 11.4%, respectively, as compared to the same
periods in the prior year. Retail sales of weight management products increased
18.4% and 13.0%, respectively, for the three and six months ended June 30, 1999.
The increases in the two product segments were primarily due to the same factors
identified in the geographical segments previously discussed, although the
introduction of new weight management products in Europe during the second
quarter of 1999 resulted in relatively stronger growth for the weight management
product segment. The personal care product segment decreased 6.8% and 6.3%
compared to the same periods in the prior year, mostly due to the significant
decrease in Russian sales, which had a proportionately higher percent of
personal care sales compared to other countries. Prior year numbers for retail
sales by product segment have been reclassified to conform with current year
presentation.
OPERATING INFORMATION:
Gross profit of $100.6 million and $201.7 million for the three and six months
ended June 30, 1999 was $4.4 million, or 4.6%, and $12.8 million, or 6.8% higher
than gross profit of $96.2 million and $188.9 million in the prior year,
respectively. As a percentage of retail sales, gross profit for the three and
six months ended June 30, 1999 as compared to the same period in the prior year
decreased from 24.2% to 23.6% and 23.7% to 23.6%, respectively. The decreases in
gross profit as a percentage of retail sales primarily resulted from a $5.3
million special distributor incentive bonus earned in June of 1999 and costs
associated with a limited time sales promotion in Russia, partially offset by
the effect of lower cost for weight management and nutritional products.
Although the Company's principal suppliers revised its pricing in January of
1998, gross margin did not benefit until inventories at old prices were fully
utilized during the second quarter of 1998.
Marketing, distribution and administrative expenses, as a percentage of retail
sales, were 19.0% and 19.1% for the three and six months ended June 30, 1999 as
compared to 18.0% and 17.7% for the same periods in 1998. These expenses for the
same periods increased 12.8% and 15.9% to $80.9 million and $163.0 million from
$71.7 million and $140.6 million in the prior year. The increase includes the
effect of the Company's continued investment in corporate and operational
support, enhanced product distribution capabilities and Year 2000 conversion
costs. In addition, the three and six months ended June 30, 1999 were negatively
impacted by $2.4 million and $6.3 million foreign exchange losses compared to
losses of $1.1 million and $1.7 million for the same periods in 1998,
respectively. The foreign exchange loss for the three and six months ended June
30, 1999 includes $0.8 million and $3.9 million Yen option premium expenses,
options which were purchased to protect financial results from a potential
weakening of the Japanese Yen.
The Japanese Yen and the Korean Won strengthened against the U.S. Dollar when
compared to the exchange rates in effect for the same period of 1998, resulting
in proportionately higher revenues, expenses, and ultimately income when
translated into the U.S. Dollar reporting currency. The effect of the stronger
Japanese Yen and Korean Won on the Company's net income per diluted share for
the three and six months ended June 30, 1999 was approximately $.10 and $.22.
The effect of foreign currency changes of this nature in countries other than
Japan and Korea was not individually material to the operations of the Company;
however, the effect amounted to a loss of approximately ($.03) and ($.02) per
diluted share for the three and six months ended June 30, 1999.
Income taxes of $7.7 million and $15.2 million for the three and six months
ended June 30, 1999 decreased from $9.8 million and $19.2 million as compared to
the same periods in the prior year. As a percentage of pre-tax income, income
taxes remained unchanged at 38.5% in 1999.
Net income for the three and six months ended June 30, 1999 decreased 20.5% and
20.6% to $12.2 million and $23.9 million as compared to the prior year.
LIQUIDITY AND CAPITAL RESOURCES:
The Company has historically met its working capital and capital expenditure
requirements, including funding for expansion of operations, through net cash
provided by operating activities. For the six months ended June 30, 1999, net
cash provided by operating activities was $60.6 million, compared to $18.2
million for the same period in 1998. The increase primarily resulted from (i)
reductions in receivable and inventory balances; and (ii) increases in royalty
overrides. The increase was partially offset by reductions in the income tax
payable balance.
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Capital expenditures for the six months ended June 30, 1999 were $9.9 million
compared to $5.0 million for the same period in the prior year. The majority of
the 1999 expenditures resulted from investment in management information systems
and the expansion of office facilities and equipment in the U.S. For 1999, the
Company is planning additional capital expenditures of approximately $12.1
million or a total of approximately $22 million in the continued development of
management information systems and expansion of new and existing facilities. In
connection with its entry into each new market, the Company funds inventory
requirements and typically establishes either a full-service distribution
center, sales office, a fulfillment center or compliance office, or a
combination of the foregoing. While the capital requirements associated with
entry into new markets vary, the Company estimates that up to $9 million will be
required for pre-opening expenses, capital expenditures and other operating cash
flow needs associated with its 1999 new market expansion activities.
Stockholders' equity increased $11.6 million to $175.4 million during the six
months ended June 30, 1999. In the first half of 1999, net income of $23.9
million was offset by dividends declared of $8.6 million and a currency
translation adjustment of $3.8 million. The payment of dividends is determined
by the Board of Directors at its discretion and the amounts of dividends
declared and paid in future quarters will depend, among other factors, on
profitability, as well as other planned uses of the Company's cash resources.
Cash and cash equivalents and marketable securities totaled $134.6 million at
June 30, 1999 compared to $105.9 million at December 31, 1998.
The Company has not been subjected to material price increases by its suppliers
for several years. The Company believes that it has the ability to respond to a
portion or possibly all of any price increases by raising the price of its
products. Purchases by the Company from its suppliers are generally made in U.S.
Dollars, while sales to distributors are generally made in local currencies.
Consequently, strengthening of the U.S. Dollar versus a foreign currency can
have a negative impact on operating margins and can generate transaction losses
on intercompany transactions. The Company from time to time enters into forward
exchange contracts and other hedging arrangements to manage its foreign exchange
risk on intercompany transactions. During 1999, most Asian currencies remained
stable against the U.S. Dollar while most European and South American currencies
decreased in value against the U.S. Dollar. A 30 percent devaluation of the
Brazilian Real during the first quarter of 1999 did not have a material impact
on net income and earnings per share for the quarter and the six months ended
June 30, 1999.
The Company is undertaking projects to address Year 2000 issues. The "Year 2000
issue" is the result of computer programs being written using two digits rather
than four to define the applicable year. If the Company's computer programs with
date-sensitive functions are not Year 2000 compliant, they may fail or make
miscalculations due to interpreting a date including "00" to mean 1900, not
2000. The result may be disruptions to operations, including, among other
things, a temporary inability to process transactions or engage in similar
normal business activities.
The Company has established a project team to identify and address the Company's
Year 2000 risks and issues in an attempt to ensure the integrity and reliability
of the Company's information systems and business processes. The project team
has (i) completed a review of its computer systems worldwide relating to order
processing, distribution, disbursements, and other financial systems and (ii)
developed a comprehensive project plan (the "Plan") as a means for ensuring the
Year 2000 compliance of all information technology ("IT") systems, including
applications, operating systems, mainframe, mid-range and client server
platforms and all non-information technology ("Non-IT") systems, including
embedded applications and equipment, and to seek to ensure that key third
parties are Year 2000 compliant by the end of the year. The Company has
identified high risk applications that are critical to its business, recognizing
the fact that timely compliance of these systems is crucial, and, therefore, has
designed its Plan to address these systems first.
The Company's Plan includes remediating certain existing software and converting
to new software for certain other applications. The Plan is underway and the
Company believes it will be completely in effect by the end of the third quarter
of 1999. Testing and certification of the Company's computer systems and their
applications is scheduled to be completed shortly thereafter. In addition, the
Company has developed contingency plans for both software that has been selected
for remediation and for those applications that will have to be replaced. The
project team has also developed a third contingency plan (applicable to both
remediation and replacement efforts) which involves the development of certain
manual procedures that could be utilized to render the Company's IT and Non-IT
systems Year 2000 compliant. It is expected that the Plan together with the
contingency plans will enable the company to achieve Year 2000 compliance in a
timely fashion.
12
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company has also identified and contacted key third parties to determine the
status of their Year 2000 compliance and any probable impact on the Company. If
key third parties are not Year 2000 compliant and their non-compliance causes a
material disruption to any of their respective businesses, the Company's
business could be materially adversely affected. Disruptions could also include,
among other things, a financial institution's inability to take and transfer
funds; an interruption in delivery of supplies from vendors; a loss of voice and
data connections; a loss of power to the Company's facilities; and other
interruptions to the normal course of the Company's operations, the nature and
extent of which is hard to foresee. The Company will continue to evaluate the
nature of these risks, but at this time is unable to determine the probability
that any such risk will occur, or if it does occur, what the nature, length of
other effects, if any, it may have.
As of June 30, 1999, the Company had incurred approximately $17 million for Year
2000 efforts of which approximately $11 million has been capitalized. Future
costs are estimated to be up to $8 million, which are expected to be funded
through operating cash flows. Such expenditures are expensed or capitalized, as
appropriate. The financial impact of making any required system changes or other
remediation efforts cannot be known precisely at this time, but it is not
expected to be material to the Company's financial position, results of
operations, or cash flows.
Under the current Plan, Year 2000 compliance should not pose significant
operational problems. While the Company believes it will be able to resolve the
Year 2000 issue in a timely manner, if it is unable to complete the installation
of replacement systems and the required changes to existing critical systems, or
if those with whom it conducts business are unsuccessful in implementing timely
solutions, the Year 2000 issue could have a material adverse effect on the
Company's operations and results of operations, including its ability to process
and distribute orders.
On January 1, 1999, eleven of the fifteen member countries of the European Union
adopted a single European Currency -- the euro. The conversion rates between the
existing sovereign currencies ("legacy currencies") and the euro have been
fixed. The euro is traded on currency exchanges and is used in business
transactions. Beginning in January 2002, new euro-denominated bills and coins
will be issued, and legacy currencies will be withdrawn from circulation. The
Company has conducted a review of its information and business systems, and
those of its European affiliates, to address the impact of the euro conversion.
The Company has initially offered both the legacy currencies and the euro to
settle distributor sales and will ultimately offer to process orders in the euro
currency. To prepare for this transition, certain computer systems will require
modifications or replacement. The initial remediation and testing process was
completed in December 1998 and cost approximately $500,000. The Company is still
evaluating subsequent phases to the euro conversion, which may include, among
other things, system modifications to allow payment of distributor royalties in
the euro. The incremental costs associated with these subsequent phases will not
be significant as the system modifications will be incorporated into the
Company's year 2000 efforts. In response to the euro conversion, the Company may
make certain price adjustments to ensure pricing consistency within the European
market.
In January 1996, the Company's Board of Directors approved a one million share
stock repurchase program, which was completed in April 1997. In April 1997, the
Board of Directors adopted an additional $30 million stock repurchase program
which was completed in February 1998. In February 1998 and again in July 1998,
the Board authorized two additional $20 million stock repurchase programs, the
first of which was completed in September 1998. Pursuant to these stock
repurchase programs, the Company expended $7.5 million, $26.0 million and $32.5
million in 1996, 1997 and 1998, respectively. No stock repurchases were made in
the first six months of 1999.
The Company has pledged cash and cash equivalents to secure bank financing for
the benefit of its foreign subsidiaries. As of June 30, 1999, an aggregate of
$3.0 million had been pledged against $3.0 million of commitments for debt
obligations.
At June 30, 1999, the Company had $34.3 million of credit facilities, including
a two year unsecured committed lines of credit totaling $25 million, of which
$11.2 million is securing letter of credits, contingent guarantees and loans.
The majority of these facilities expire in 2000. These facilities are subject to
normal banking terms and conditions and do not materially restrict the Company's
activities. The terms of the $25 million line of credit agreement contain, among
other provisions, requirements for maintaining defined levels of working
capital, net worth and a fixed charge ratio.
For a discussion of certain contingencies that may impact liquidity and capital
resources, see "Note 3, Contingencies," in the Company's consolidated financial
statements included herein.
13
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is exposed to market risks which arise during the normal course of
business from changes in interest rates and foreign currency exchange rates. On
a selected basis, the Company uses derivative financial instruments to manage or
hedge these risks. All hedging transactions are authorized and executed pursuant
to written guidelines and procedures.
See disclosures under Item 7a. "Quantitative and Qualitative Disclosures about
Market Risks" in the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1998. No significant changes have occurred during the first
six months of 1999 other than described below under "Foreign Exchange Risk".
FOREIGN EXCHANGE RISK
The following table provides information about the details of the Company's
option contracts at 6/30/99.
<TABLE>
<CAPTION>
U.S. Dollar Average
Equivalent Strike Original Fair Maturity
Foreign Currency Coverage Price Value Value Date
----------------- -------------- ------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 6,000,000 120 310,200 65,874 07/30/1999
Japanese Yen 6,000,000 120 332,400 141,263 08/31/1999
Japanese Yen 6,000,000 120 332,400 133,496 09/30/1999
Japanese Yen 6,000,000 120 332,400 123,312 10/29/1999
Japanese Yen 6,000,000 120 319,800 93,487 11/30/1999
Japanese Yen 6,000,000 120 324,000 110,163 12/30/1999
Japanese Yen 3,000,000 118 91,740 95,569 01/31/2000
Japanese Yen 3,000,000 118 94,590 97,721 02/29/2000
Japanese Yen 3,000,000 118 96,780 99,409 03/31/2000
----------- ---------- --------
45,000,000 2,234,310 960,294
=========== ========== ========
</TABLE>
The table below describes the forward contracts that were outstanding at
6/30/99.
<TABLE>
<CAPTION>
Forward
Contract Position in Maturity Contract Fair
Foreign Currency Date US Dollars Date Rate Value
----------------------------------- ---------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Buy USD/Sell Argentina Peso 05/24/99 100,000 09/27/99 1.0280 101,814
Buy USD/Sell Argentina Peso 05/24/99 100,000 10/27/99 1.0360 101,998
Buy USD/Sell Argentina Peso 05/24/99 100,000 11/29/99 1.0450 101,984
Buy USD/Sell Argentina Peso 05/24/99 100,000 12/27/99 1.0490 101,475
Buy USD/Sell Brazil Reals 05/24/99 555,864 07/06/99 1.7990 567,645
Buy USD/Sell Thailand Baht 01/28/99 200,000 07/22/99 37.8900 205,861
Buy USD/Sell Thailand Baht 01/28/99 200,000 08/19/99 38.0000 206,725
Buy USD/Sell Thailand Baht 03/11/99 200,000 09/17/99 38.5700 210,001
Buy USD/Sell Thailand Baht 03/11/99 200,000 10/19/99 38.6700 210,641
Buy USD/Sell Thailand Baht 03/11/99 200,000 11/17/99 38.7300 211,013
Buy USD/Sell Thailand Baht 03/11/99 200,000 12/17/99 38.8700 211,823
Buy British Pound/Sell Norwegian Kroner 04/19/99 785,440 04/14/00 12.4341 783,179
Buy British Pound/Sell Finnish Marka 04/19/99 785,542 04/14/00 8.8343 779,591
Buy British Pound/Sell Swedish Kroner 06/25/99 709,816 04/14/00 13.3150 719,051
Buy British Pound/Sell Norwegian Kroner 06/25/99 480,013 04/14/00 12.4700 480,013
Buy British Pound/Sell Danish Kroner 06/25/99 418,121 04/14/00 11.3020 424,003
</TABLE>
14
<PAGE> 16
FORWARD LOOKING STATEMENTS
With the exception of the actual reported financial results and other historical
information, the statements made in the Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this report are
forward looking statements that involve risks and uncertainties that could
affect actual future results. Such risks and uncertainties include, but are not
limited to: the regulatory environment, consumer acceptance of network
marketing, economic conditions in the countries the Company operates, the
presence of possible competitors, adverse publicity and in-region cultural or
demographic factors and other risks indicated in the Company's filings with the
Securities and Exchange Commission, including the Company's filing of a
registration statement on Form S-3 in March 1998 and Form 10-K for the fiscal
year ended December 31, 1998.
15
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See discussion under "Legal Proceedings" in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998 and in footnote
three to the Financial Statements included in Item 1 of this document.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of the Company held on May 20,
1999 in Beverly Hills, California, 9,353,799 shares of the Company's
Class A Common Stock were present either in person or by proxies
solicited by management pursuant to Regulation 14A under the Securities
Exchange Act of 1934.
The Stockholders voted on the following matters:
To elect six directors to serve on the Company's Board of Directors:
<TABLE>
<CAPTION>
Number Number
of Shares of Shares
For Withheld
---------------- ---------------
<S> <C> <C>
Mark Hughes 8,081,821 1,271,978
Christopher Pair 8,081,821 1,271,978
Michael Rosen 8,081,821 1,271,978
Edward J. Hall 8,081,821 1,271,978
Alan Liker 8,081,821 1,271,978
Christopher M. Miner 8,081,821 1,271,978
</TABLE>
To amend and restate the company's Amended and Restated 1991 Stock
Option Plan (the "Option Plan"), (i) to increase the aggregate number of
shares which may be issued upon exercise of all options granted under
the Option Plan by 500,000, (ii) to permit certain limited transfers of
options granted pursuant to the Option Plan, (iii) to increase the
period for exercise of an option following termination of employment
(other than by death or disability) from 30 days to 90 days and (iv) to
increase the aggregate number of stock options a participant under the
Option Plan may be awarded during any single calendar year from
1,500,000 to 2,250,000.
<TABLE>
<CAPTION>
Percent of
Shares Shares Voting
---------------- ---------------
<S> <C> <C>
Votes For 5,773,207 67
Votes Against 2,783,796 33
Votes Abstaining 4,813 --
Broker Non-Votes 791,983 n/a
</TABLE>
ITEM 5. OTHER INFORMATION
None.
16
<PAGE> 18
HERBALIFE INTERNATIONAL, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO./(FOOTNOTE)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation (10)
3.2 Amended and Restated Bylaws (2)
4.1 Form of Class A Common Stock and Class B Common Stock Certificates (12)
10.1 Final Judgment and Permanent Injunction, entered into on October, 1986 by (1)
the parties to that action entitled People of the State of California, et
al., v Herbalife International, Inc. et al., Case No. 92767 in the
Superior Court of the State of California for the County of Santa Cruz
10.2 The Company's 1991 Stock Option Plan, as amended (7), (13)
10.3 The Company's 1992 Executive Incentive Compensation Plan, as amended (2), (7)
10.4 Form of Individual Participation Agreement relating to the Company's (2)
Executive Compensation Plan
10.5 Form of Letter Agreement between the Compensation Committee of the Board (2)
of Directors of the Company and Mark Hughes
10.6 Form of Indemnity Agreement between the Company and certain officers and (2)
directors of the Company
10.7 Trust Agreement among the Company, Citicorp Trust, N.A. and certain (2)
officers and directors of the Company
10.8 Form of Stock Appreciation Rights Agreement between the Company and (2)
certain directors of the Company
10.9 1994 Performance Based Annual Incentive Compensation Plan, as amended and (4), (7), (11)
restated in 1996
10.10 Form of Promissory Note for Advances under the Company's 1994 Performance (5)
Based Annual Incentive Compensation Plan
10.11 Employment Agreement between the Company and Chris Pair dated April 3, 1994 (3)
10.12 The Company's Executive Officer Deferred Compensation Plan, amending and (5)
relating the Deferred Compensation Agreement between the Company and
Michael Rosen
10.13 Office lease agreement between the Company and State Teacher's Retirement (6)
System, dated July 20, 1995
10.14 Form of stock appreciation rights agreements between the Company and (6)
certain directors of the Company
10.15 The Company's Senior Executive Deferred Compensation Plan, effective (6)
January 1, 1996, as amended
10.16 The Company's Management Deferred Compensation Plan, effective January 1, (6)
1996, as amended
10.17 Master Trust Agreement between the company and Imperial Trust Company, (6)
Inc., effective January 1, 1996
10.18 The Company's 401K Plan, as amended (6)
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO./(FOOTNOTE)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.19 Agreement Concerning Share Allocation Plan for Specific Directors of (8)
Herbalife of Japan K.K. dated December 30, 1996.
10.20 Consulting Agreement between David Addis and Herbalife of America, Inc. (8)
dated January 27, 1997.
10.21 Agreement between Herbalife International of America, Inc. and D&F (9)
Industries, Inc. dated September 2, 1997
10.22 Agreement between Herbalife International of America, Inc. and Dynamic (9)
Products, Inc. dated September 2, 1997
10.23 Agreement between Herbalife International of America, Inc. and Raven (9)
Industries, Inc. d/b/a Omni-Pak Industries, dated September 2, 1997
10.24 The Company's Supplemental Executive Retirement Plan (12)
10.25 Credit Agreement between Herbalife International of America, Inc. and (14)
First National Bank of Chicago, dated December 14, 1998
21 List of subsidiaries of the Company (14)
27 Financial Data Schedule (15)
</TABLE>
- ----------
(1) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1987.
(2) Incorporated by reference to the Company's Registration Statement on
Form S-1 (No. 33-66576) declared effective by the Securities and
Exchange Commission on October 8, 1993.
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the three months ended June 30, 1994.
(4) Incorporated by reference to the Company's Definitive Proxy Statement
relating to its 1994 Annual Meeting of Stockholders.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
(7) Incorporated by reference to the Company's Definitive Proxy Statement
relating to its 1996 Annual Meeting of Stockholders.
(8) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
(9) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the three months ended September 30, 1997.
(10) Incorporated by reference to the Company's Registration Statement on
Form 8-K declared effective by the Security and Exchange Commission on
December 12, 1997.
(11) Incorporated by reference to the Company's Definitive Proxy Statement
relating to the Special Shareholder Meeting held on December 11, 1997.
(12) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
(13) Incorporated by reference to the Company's Definitive Proxy Statement
relating to its 1998 Annual Meeting of Shareholders.
(14) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
(15) Filed herewith.
18
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 16, 1999
HERBALIFE INTERNATIONAL, INC.
(Registrant)
By: /s/ TIMOTHY GERRITY
-------------------
Timothy Gerrity
Executive Vice President and
Chief Financial Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 112,528,000
<SECURITIES> 22,079,000
<RECEIVABLES> 30,028,000
<ALLOWANCES> 0
<INVENTORY> 76,013,000
<CURRENT-ASSETS> 277,304,000
<PP&E> 87,352,000
<DEPRECIATION> 47,601,000
<TOTAL-ASSETS> 356,541,000
<CURRENT-LIABILITIES> 150,248,000
<BONDS> 1,657,000
0
0
<COMMON> 286,000
<OTHER-SE> 175,416,000
<TOTAL-LIABILITY-AND-EQUITY> 356,541,000
<SALES> 452,789,000
<TOTAL-REVENUES> 854,563,000
<CGS> 116,116,000
<TOTAL-COSTS> 251,056,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,559,000
<INCOME-TAX> 15,230,000
<INCOME-CONTINUING> 23,905,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,905,000
<EPS-BASIC> 0.84
<EPS-DILUTED> 0.79
</TABLE>
