News Column

Herbalife Shares Rise on Income Report

July 30, 2013

Herbalife Ltd. continued to flex its financial muscle during the second quarter, with net income rising 8.5 percent to $143.2 million, the company reported Monday.

The profit jump came even though Herbalife spent $15.1 million through June 30 on legal and other fees to defending itself against accusations by hedge-fund activist Bill Ackman.

Herbalife is spending $130 million to buy and renovate the former Dell Inc. plant in Winston-Salem. Officials said they expect to hire 250 full-time employees by year's end and have a workforce of 500 by the time the plant reaches full production in July 2014.

The company listed spending $56 million spent during the second quarter on buying property and equipment for its manufacturing plants.

Diluted earnings were $1.34 a share, up 25 cents from a year ago. The average earnings forecast was $1.17 by analysts surveyed by Zacks Investment Research.

Investors reacted to a boost in Herbalife's full-year earnings guidance by sending the share price to a 52-week high of $66.23 at the start of trading Tuesday. The share price was up $3.42, or 5.6 percent, to $63.99 at 11:30 a.m. Tuesday.

The new full-year guidance is a range of $4.83 to $4.95 a share compared with $4.60 to $4.80 previously.

Also, the company's board of directors declared a quarterly dividend of 30 cents a share, payable Aug. 27 to shareholders registered as of Aug. 13.

Overall sales rose 18.1 percent to $1.22 billion, with North American sales up 10.2 percent to $247.6 million and Asia Pacific sales (not including China) up 1 percent to $299.2 million.

"The second-quarter record results for volume point and net sales were driven by the ongoing engagement of our distributors and consumer demand for our weight loss and nutrition products worldwide," Michael Johnson, Herbalife's chairman and chief executive, said in a statement.

The company reported spending $2.7 million on re-auditing its fiscal 2010-12 financial statements in response to the KPMG LLP insider-training scandal that led the auditor to resign from Herbalife oversight.

Herbalife's financials and its share price have been challenged since December by Ackman, who accuses the company of operating as a Pyramid scheme. Ackman operates Pershing Square Capital Management LP. Herbalife said it believes Ackman's accusations are "inaccurate and misleading."

Ackman has fired several salvos at Herbalife since, each appearing to be carrying less weight with investors compared with Herbalife's strong financial showings. In June, Herbalife said "Bill Ackman's actions are motivated by a reckless $1 billion bet against the company based on knowingly false statements about Herbalife."

On Tuesday, Aikman questioned Herbalife's quarterly results, citing "weak" operating earnings growth of 3 percent and higher promotional and salary expenses. "Is the company 'buying revenue growth at the expense of operating income?' '' Pershing Square asked in its five-page statement.

Herbalife's share price fell to a 52-week low of $24.24 in December.

The stock has rebounded primarily because of the stock-buying support from other hedge-fund activists, primarily Carl Icahn, who holds a 16.5 percent ownership stake, according to Bloomberg News.


(c)2013 Winston-Salem Journal (Winston Salem, N.C.)

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Source: Copyright Winston-Salem Journal (NC) 2013

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