false
0001180262
0001180262
2024-04-25
2024-04-25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
April 25, 2024
Herbalife Ltd.
(Exact Name of Registrant as Specified in Charter)
Cayman Islands 1-32381 98-0377871
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
P.O. Box 309
,
Ugland House
Grand Cayman KY1-1104
Cayman Islands
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: c/o
(213)
745-0500
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form
8-K
filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule
14a-12
under the Exchange Act (17 CFR
240.14a-12)
Pre-commencement
communications pursuant to Rule
14d-2(b)
under the Exchange Act (17 CFR
240.14d-2(b))
Pre-commencement
communications pursuant to Rule
13e-4(c)
under the Exchange Act (17 CFR
240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Name of each exchange
Symbol(s) on which registered
Common Shares, par value $0.0005 per share HLF New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 ((s) 230.405 of this
chapter) or Rule
12b-2
of the Securities Exchange Act of 1934 ((s)
240.12b-2
of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
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Item 2.02. Results of Operations and Financial Condition.
On May 1, 2024, Herbalife Ltd. (the "Company") issued a press release
announcing its financial results for its first fiscal quarter ended March 31,
2024. A copy of the press release is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
The information contained in this Item 2.02 and Exhibit 99.1 attached to this
report shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise
subject to the liabilities of that section and shall not be deemed
incorporated by reference into any filing under the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, except as shall be
expressly set forth by specific reference in such a filing.
Item 5.07. Submission of Matters to a Vote of Security Holders.
On April 25, 2024, the Company held its 2024 annual general meeting of
shareholders. The Company's shareholders voted on the four proposals presented
at the meeting, as set forth below.
Proposal 1: Election of Directors.
Ten board nominees for director were elected by a majority of the votes cast
with respect to each nominee to serve until the 2025 annual general meeting of
shareholders of the Company or until their successors are duly elected and
qualified. The voting results are as follows:
For Against Abstain Broker
Non-votes
Michael O. Johnson 66,079,357 582,448 19,226 9,921,498
Richard H. Carmona 65,747,055 915,113 18,863 9,921,498
Celine Del Genes 57,068,905 385,052 9,227,074 9,921,498
Sophie L'Helias 66,183,554 474,934 22,543 9,921,498
Alan W. LeFevre 66,131,815 525,590 23,626 9,921,498
Michael J. Levitt 66,377,766 281,423 21,842 9,921,498
Rodica Macadrai 66,113,949 543,286 23,796 9,921,498
Juan Miguel Mendoza 66,129,687 527,738 23,606 9,921,498
Don Mulligan 56,978,797 474,785 9,227,449 9,921,498
Maria Otero 56,877,207 577,611 9,226,213 9,921,498
Proposal 2: Approve, on an advisory basis, the compensation of the Company's
named executive officers.
The advisory resolution to approve the compensation of the named executive
officers was approved. The voting results are as follows:
For Against Abstain Broker
Non-votes
55,103,969 2,345,635 9,231,427 9,921,498
Proposal 3: Approve an amendment and restatement of the Company's 2023 Stock
Incentive Plan to increase the number of Common Shares available for issuance
under such plan.
The amendment and restatement of the Company's 2023 Stock Incentive Plan to
increase the number of Common Shares available for issuance under such plan
was approved. The voting results are as follows:
For Against Abstain Broker
Non-votes
35,401,164 31,266,178 13,689 9,921,498
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Proposal 4: Ratify, on an advisory basis, the appointment of PricewaterhouseCoop
ers LLP as the Company's independent registered public accounting firm for
fiscal year 2024.
The appointment of PricewaterhouseCoopers LLP as the Company's independent
registered public accounting firm for fiscal year 2024 was ratified. The
voting results are as follows:
For Against Abstain Broker
Non-votes
75,553,956 1,040,485 8,088 0
Item 7.01. Regulation FD Disclosure.
Earnings Call Investor Slides
The Company intends to reference investor slides during the Company's earnings
conference call to discuss its financial results for its first fiscal quarter
ended March 31, 2024. A copy of the presentation can be accessed in the "News
and Events" section on the investor relations section of the Company's website
at http://ir.herbalife.com under the heading "IR Calendar".
The information included in this Item 7.01 shall not be deemed "filed" for
purposes of Section 18 of the Exchange Act or otherwise subject to the
liabilities of that section and shall not be deemed incorporated by reference
into any filing under the Securities Act or the Exchange Act, except as shall
be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
.
99.1 Press Release issued by Herbalife Ltd. on May 1, 2024.
104 Cover Page Interactive Data File - The cover page from the Company's Current Report on Form
8-K
filed on May 1, 2024 is formatted in Inline XBRL (included as Exhibit 101).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Herbalife Ltd.
May 1, 2024 By: /s/ Henry C. Wang
Name: Henry C. Wang
Title: EVP, General Counsel and Corporate Secretary
Exhibit 99.1
Herbalife Reports Year-Over-Year Net Sales Growth
for Second Consecutive Quarter;
Raises Full-Year 2024 Adjusted EBITDA
1
Guidance
LOS ANGELES
, May 1, 2024 - Herbalife Ltd. (NYSE: HLF) today reported financial results
for the first quarter ended March 31, 2024:
Highlights
First Quarter 2024
"We achieved our second consecutive quarter
.
Achieved year-over-year net sales growth of year-over-year net sales growth. We are
on both reported and constant currency basis laserfocused on cost reductions, which drove
2 outperformance of our Adjusted EBITDA
1
guidance."
Net sales of $1.3 billion,
up 1.0% vs. 1Q '23, - Michael Johnson,
in-line Chairman and CEO
with guidance; on constant currencybasis
2
up 2.4%
.
Net income of $24.3 million
.
Adjusted EBITDA
1
of $138.3 million
exceedsguidance; adjusted EBITDA
1
margin up 60 basis points year-over-year
.
Diluted EPS of $0.24
and adjusted diluted EPS
1
of$0.49
.
Announced new restructuringplan to
streamline organizational structure
Annual cost savings of at least
$80 million expected beginning
in 2025, with approximately
$40 million expected in 2024
Recognized
pre-tax
expenses of approximately
$17 million in SG&A
. Rolled out
all-new
distributor
e-commerce
platform, built on Herbalife One, to distributors in UK and Spain
Recent Developments
. Completed $1.6 billion senior secured refinancing on April 12
Outlook
. Second quarter 2024 guidance provided
. Full-year 2024 guidance revised: adjusted EBITDA
1
raised, capitalexpenditures reduced, net sales reaffirmed
Management Commentary
1
Non-GAAP
measure. Refer to Schedule A - "Reconciliation of
Non-GAAP
Financial Measures" for a detailed reconciliation of these measures to the
most directly comparable U.S. GAAP measure for historical periods, as
applicable, and a discussion of why the Company believesthese
non-GAAP
measures are useful and certain information regarding
non-GAAP
guidance.
2
Growth/decline in net sales excluding the effects of foreign exchange is based
on "net sales in localcurrency," a non-GAAP financial measure. Refer to
Schedule A - "Reconciliation of Non-GAAP Financial Measures" for a discussion
of why the Company believes adjusting for the effects of foreign exchange is
useful.
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Herbalife reported first quarter 2024 net sales of $1.3 billion, up 1.0%
year-over-year. On a constant currencybasis
2
, net sales increased 2.4% year-over-year.
First quarter gross profit margin improved to 77.5% comparedto 76.2% in first
quarter 2023. On a year-over-year basis, gross profit margin benefited from
approximately 150 basis points of pricing, approximately 60 basis points of
lower inventory write-downs and approximately 10 basis points each
fromfavorable sales mix and foreign currency, partially offset by
approximately 110 basis points of input cost inflation, primarily related to
increased raw material costs.
Net income was $24.3
million, with net income margin of 1.9%. Net cash provided by operating
activities was $13.8
million. Adjusted EBITDA
1
of $138.3
million includes approximately $4
million of foreign currency headwinds year-over-year, with adjusted EBITDA
1
marginof 10.9%, up 60 basis points year-over-year. Diluted EPS was $0.24, with
adjusted diluted EPS
1
of $0.49, which includes a $0.03 year-over-year foreign currency headwind.
For the three months ended March 31, 2024, capital expenditures and
capitalized SaaS implementation costs were approximately $33 million and $5
million,respectively. The Company expects to incur total capital expenditures
of approximately $120 million to $150 million and total capitalized SaaS
implementation costs of approximately $20 million to $25 million for the full
year of2024.
On March 20, the Company announced a new organizational restructuring plan
designed to bring leadership closer to its markets, streamline the
employeestructure and accelerate productivity ("Restructuring Program"). The
Restructuring Program is expected to deliver annual savings of at least $80
million beginning in 2025, with approximately $40 million expected to be
achieved in2024. The Company expects to incur total program
pre-tax
expenses of at least $60 million related to the program, which are primarily
related to severance costs and will be excluded from adjusted results.The
Company began implementing actions related to the program during the first
quarter and expects a majority of all actions to be completed by the end of
June 2024. For the three months ended March 31, 2024, approximately $17
million of
pre-tax
expenses were recognized in SG&A related to the restructuring. The
Restructuring Program is separate from Herbalife's Transformation Program.
In March, and consistent with its capital allocation priorities, the Company
repaid in full, the outstanding principal and accrued interest on the 2024
ConvertibleNotes at maturity with a combination of $108.6 million in cash and
$91.0 million in borrowings under its revolving credit facility.
On April 12, theCompany completed a $1.6 billion senior secured refinancing,
which included:
. $800 million aggregate principal amount of 12.250% senior secured notes due April 2029
. $400 million senior secured Term Loan B facility due April 2029
. $400 million senior secured revolving credit facility due April 2028 ("Amended Revolving Credit Facility")
Proceeds from the transactions were used to repay all amounts outstanding
under the 2018 Term Loan A, 2018 Term Loan B and 2018 Revolving CreditFacility,
which were scheduled to mature in 2025, redeem $300 million of the $600
million aggregate principal amount of the 7.875% Senior Notes due 2025 ("2025
Senior Notes") at a price of 101.969% of the principal amount plusaccrued and
unpaid interest and pay related fees and expenses.
In addition, the Company separately repurchased approximately $38 million of
the 2025 SeniorNotes in a private transaction at the same redemption price as
the $300 million described above. Following the repurchase, approximately $262
million remains outstanding on the 2025 Senior Notes. Upon completion of the
refinancingtransactions, approximately $170 million was outstanding under the
Amended Revolving Credit Facility as of April 26.
2
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"The business continues to strengthen," said John DeSimone, Chief Financial
Officer. "We are takingswift actions to expand margins, maximize shareholder
value and reduce our total leverage ratio to 3.0x by the end of 2025."
The Company recently rolled outits
all-new
distributor
e-commerce
platform, built on Herbalife One, to its distributors in the UK and Spain. The
distributor platform continues to build upon thefoundational capabilities
launched with the
all-new
Herbalife.com websites and supports personalized commerce websites that enable
distributors to offer a seamless online shopping experience. The newdistributor
sites place a strong emphasis on strengthening the customer-distributor
connection, providing faster order fulfillment and checkout for customers, and
various other feature enhancements. In 2024, development will continue on
offerings toelevate the digital platform capabilities provided to its
distributors and customers.
In March, approximately 4,300 distributor leaders from 80 countries
cametogether in Lisbon, Portugal for Summit 2024, the Company's annual
leadership training and recognition event. During the
five-day
event, several new initiatives were unveiled to help distributorssustainably
grow their businesses, including enhanced leadership development opportunities,
elevated entrepreneurial skills training, and a program to drive increased
recruitment globally. In April, approximately 14,000 attendees gathered
atChina's Extravaganza training event in Chengdu, an increase of approximately
25% over the 2023 event.
"Economic opportunities built around sellingdiversified nutrition and wellness
offerings, including through approximately 67,000 fixed location nutrition
clubs worldwide, differentiates us from others in our industry," said Michael
Johnson.
3
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First Quarter 2024 Key Metrics
Regional Net Sales and Foreign Exchange ("FX") Impact
$ million Reported Growth/Decline Growth/Decline
Net Sales including FX excluding FX
1Q `24 vs. 1Q `23 vs. 1Q `23
1
North America $ 265.8 (10.6) % (10.6) %
Latin America 214.2 4.2 % 2.0 %
EMEA 277.9 3.7 % 6.5 %
Asia Pacific 431.2 4.3 % 6.9 %
China 75.2 11.1 % 16.7 %
Worldwide $ 1,264.3 1.0 % 2.4 %
Regional Volume Point Metrics
Volume Points
in millions 1Q `24 YoY % Chg.
North America 264.2 (16.0) %
Latin America 255.3 (5.9) %
EMEA 298.7 (5.0) %
Asia Pacific 528.4 4.6 %
China 54.8 12.8 %
Worldwide 1,401.4 (3.6) %
Outlook
Second Quarter 2024Guidance
$ million Q2 `24 Guidance Q2 `23 Results
Net Sales 0% to +3% YoY 1,314.0
Adjusted EBITDA 140 - 160 169.6
1
Capital Expenditures 30 - 40 38.3
Full-Year 2024 Guidance - Revised
$ million FY `24 Guidance FY `24 Guidance FY `23 Results
REVISED (as of Mar 20 '24)
Net Sales 0% to +5% YoY Reaffirmed 0% to +5% YoY 5,062.4
Adjusted EBITDA 550 - 590 Raised 540 - 580 570.6
1
Capital Expenditures 120 - 150 Reduced 125 - 175 135.0
4
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Earnings Webcast and Conference Call
Herbalife's senior management team will host a live audio webcast and
conference call to discussits first quarter 2024 financial results and provide
an update on current business trends on Wednesday, May 1, 2024, at 5:30 p.m.
ET (2:30 p.m. PT).
The liveaudio webcast will be available at
https://edge.media-server.com/mmc/p/8s4dwfp6/.
Participants joining via the conference call will need to register to receive
the
dial-in
information and personal PINto access the call, and may do so by visiting the
Investor Relations section of the Company's website at
https://ir.herbalife.com
. Senior management also plans to reference slides during the call, which will
also be available on the Investor Relations section of the Company's website,
where financial and other information is posted from time totime.
A replay of the event will be available following the completion of the live
audio webcast and conference call, and for 12 months thereafter, underthe
Investor Relations section of the Company's website at
https://ir.herbalife.com
.
About Herbalife Ltd.
Herbalife (NYSE: HLF) is apremier health and wellness company, community and
platform that has been changing people's lives with great nutrition products
and a business opportunity for its independent distributors since 1980. The
Company offers science-backed productsto consumers in more than 90 markets
through entrepreneurial distributors who provide
one-on-one
coaching and a supportive community that inspires their customers toembrace a
healthier, more active lifestyle to live their best life.
For more information,visit
https://ir.herbalife.com
.
Media Contact:
Thien Ho
Vice President, Global CorporateCommunications
thienh@herbalife.com
Investor Contact:
Erin Banyas
Vice President, Head of Investor Relations
erinba@herbalife.com
5
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Forward-Looking Statements
This release contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E ofthe
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact are "forward-looking statements" for purposes of
federal and state securities laws, including any projections of earnings,
revenue orother financial items; any statements of the plans, strategies and
objectives of management, including for future operations, capital
expenditures, or share repurchases; any statements concerning proposed new
products, services, or developments; anystatements regarding future economic
conditions or performance; any statements of belief or expectation; and any
statements of assumptions underlying any of the foregoing or other future
events. Forward-looking statements may include, among others,the words "may,"
"will," "estimate," "intend," "continue," "believe," "expect," "anticipate" or
any other similar words.
Although we believe that the expectations reflected in any of our
forward-looking statements are reasonable, actual results or outcomes could
differ materially fromthose 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, many of whichare beyond our control. Important factors that
could cause our actual results, performance and achievements, or industry
results to differ materially from estimates or projections contained in or
implied by our forward-looking statements include thefollowing:
. the potential impacts of current global economic conditions, including inflation,
on us; our Members, customers, and supplychain; and the world economy;
. our ability to attract and retain Members;
. our relationship with, and our ability to influence the actions of, our Members;
. our noncompliance with, or improper action by our employees or Members in
violation of, applicable U.S. and foreign laws,rules, and regulations;
. adverse publicity associated with our Company or the direct-selling industry, including our
ability to comfort themarketplace and regulators regarding our compliance with applicable laws;
. changing consumer preferences and demands and evolving industry standards, including with respect
to climate change,sustainability, and other environmental, social, and governance, or ESG, matters;
. the competitive nature of our business and industry;
. legal and regulatory matters, including regulatory actions concerning, or legal
challenges to, our products or networkmarketing program and product liability claims;
. the Consent Order entered into with the Federal Trade Commission,
or FTC, the effects thereof and any failure to complytherewith;
. risks associated with operating internationally and in China;
. our ability to execute our growth and other strategic initiatives, including implementation
of our restructuringinitiatives, and increased penetration of our existing markets;
. any material disruption to our business caused by natural disasters, other catastrophic events, acts of war or
terrorism,including the war in Ukraine, cybersecurity incidents, pandemics, and/or other acts by third parties;
. our ability to adequately source ingredients, packaging materials,
and other raw materials and manufacture and distributeour products;
. our reliance on our information technology infrastructure;
6
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. noncompliance by us or our Members with any privacy laws, rules, or regulations or any security breach
involving themisappropriation, loss, or other unauthorized use or disclosure of confidential information;
. contractual limitations on our ability to expand or change our direct-selling business model;
. the sufficiency of our trademarks and other intellectual property;
. product concentration;
. our reliance upon, or the loss or departure of any member of, our senior management team;
. restrictions imposed by covenants in the agreements governing our indebtedness;
. risks related to our convertible notes;
. changes in, and uncertainties relating to, the application of transfer pricing, income tax, customs
duties, value addedtaxes, and other tax laws, treaties, and regulations, or their interpretation;
. our incorporation under the laws of the Cayman Islands; and
. share price volatility related to, among other things, speculative trading and certain traders shorting our common shares.
Additional factors and uncertainties that could cause actual results or
outcomes to differ materially from our forward-looking statements are setforth
in the Company's Quarterly Report on Form
10-Q
for the fiscal quarter ended March 31, 2024, filed with the Securities and
Exchange Commission on May 1, 2024, including under the heading"Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
in our Condensed Consolidated Financial Statements and the related Notes
included therein, and Annual Report on Form
10-K
for the fiscal year ended December 31, 2023, filed with the Securities and
Exchange Commission on February 14, 2024, including under the headings "Risk
Factors" and "Management'sDiscussion and Analysis of Financial Condition and
Results of Operations" and in our Consolidated Financial Statements and the
related Notes included therein. In addition, historical, current, and
forward-looking sustainability-relatedstatements may be based on standards for
measuring progress that are still developing, internal controls and processes
that continue to evolve, and assumptions that are subject to change in the
future.
Forward-looking statements made in this release speak only as of the date
hereof. We do not undertake any obligation to update or release any revisions
to anyforward-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.
7
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Results of Operations
Herbalife Ltd. and Subsidiaries
Condensed Consolidated Statements of Income
(inmillions, except per share amounts)
Three Months Ended March 31,
2024 2023
(unaudited)
North America $ 265.8 $ 297.2
Latin America 214.2 205.5
EMEA 277.9 268.1
Asia Pacific 431.2 413.6
China 75.2 67.7
Worldwide Net sales 1,264.3 1,252.1
Cost of sales 285.0 298.6
Gross profit 979.3 953.5
Royalty overrides 415.2 416.0
Selling, general, and administrative expenses 492.2 475.9
Other operating income - (8.9 )
(1)
Operating income 71.9 70.5
Interest expense, net 37.9 39.4
Income before income taxes 34.0 31.1
Income taxes 9.7 1.8
Net income $ 24.3 $ 29.3
Weighted-average shares outstanding:
Basic 99.7 98.5
Diluted 100.7 100.2
Earnings per share:
Basic $ 0.24 $ 0.30
Diluted $ 0.24 $ 0.29
(1) Other operating income for the three months ended March 31, 2023 relates
to certain Chinagovernment grant income.
8
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Herbalife Ltd. and Subsidiaries
Condensed ConsolidatedBalance Sheets
(in millions)
March 31, December 31,
2024 2023
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 398.3 $ 575.2
Receivables, net 87.9 81.2
Inventories 501.9 505.2
Prepaid expenses and other current assets 238.1 237.7
Total Current Assets 1,226.2 1,399.3
Property, plant and equipment, net 510.9 506.5
Operating lease 179.1 185.8
right-of-use
assets
Marketing-related intangibles and other intangible assets, net 313.6 314.0
Goodwill 93.9 95.4
Other assets 323.3 308.4
Total Assets $ 2,647.0 $ 2,809.4
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 89.9 $ 84.0
Royalty overrides 313.3 343.4
Current portion of long-term debt 2.9 309.5
Other current liabilities 538.6 540.7
Total Current Liabilities 944.7 1,277.6
Non-current
liabilities:
Long-term debt, net of current portion 2,405.0 2,252.9
Non-current 163.9 167.6
operating lease liabilities
Other 170.0 171.6
non-current
liabilities
Total Liabilities 3,683.6 3,869.7
Commitments and Contingencies
Shareholders' deficit:
Common shares 0.1 0.1
Paid-in 244.2 233.9
capital in excess of par value
Accumulated other comprehensive loss (242.9 ) (232.0 )
Accumulated deficit (1,038.0 ) (1,062.3 )
Total Shareholders' Deficit (1,036.6 ) (1,060.3 )
Total Liabilities and Shareholders' Deficit $ 2,647.0 $ 2,809.4
9
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Herbalife Ltd. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions)
Three Months Ended March 31,
2024 2023
(unaudited)
Cash flows from operating activities:
Net income $ 24.3 $ 29.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 29.2 27.6
Share-based compensation expenses 11.9 10.8
Non-cash 2.1 1.7
interest expense
Deferred income taxes (12.1) 8.8
Inventory write-downs 4.7 11.5
Foreign exchange transaction loss (gain) (1.4) 3.2
Other 1.3 2.4
Changes in operating assets and liabilities:
Receivables (7.7) (13.8)
Inventories (6.7) 35.8
Prepaid expenses and other current assets (7.6) (35.7)
Accounts payable 1.3 (24.1)
Royalty overrides (27.7) (31.7)
Other current liabilities 8.9 28.9
Other (6.7) (8.5)
Net cash provided by operating activities 13.8 46.2
Cash flows from investing activities:
Purchases of property, plant and equipment (32.9) (30.3)
Other 0.1 0.1
Net cash used in investing activities (32.8) (30.2)
Cash flows from financing activities:
Borrowings from senior secured credit facility and other debt 161.2 71.0
Principal payments on senior secured credit facility and other debt (120.7) (138.4)
Repayment of convertible senior notes (197.0) -
Debt issuance costs - (0.3)
Share repurchases (2.3) (8.7)
Other 0.6 0.4
Net cash used in financing activities (158.2) (76.0)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (5.8) 5.5
Net change in cash, cash equivalents, and restricted cash (183.0) (54.5)
Cash, cash equivalents, and restricted cash, beginning of period 595.5 516.3
Cash, cash equivalents, and restricted cash, end of period $ 412.5 $ 461.8
10
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Supplemental Information
SCHEDULE A: RECONCILIATION OF
NON-GAAP
FINANCIAL MEASURES (unaudited)
Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA
In addition to itsreported results calculated in accordance with U.S. GAAP,
the Company has included in this release adjusted net income, adjusted diluted
EPS and adjusted EBITDA, performance measures that the Securities and Exchange
Commission defines as
"non-GAAP
financial measures." Adjusted net income, adjusted diluted EPS and adjusted
EBITDA exclude the impact of certain unusual or
non-recurring
items such asexpenses related to restructuring initiatives, expenses related
to the digital technology program, gains or losses from extinguishment of debt
and Korea tax settlement, as further detailed in the reconciliations below.
Adjusted EBITDA marginrepresents adjusted EBITDA divided by net sales.
Management believes that such
non-GAAP
performance measures, when read inconjunction with the Company's reported
results, calculated in accordance with U.S. GAAP, can provide useful
supplemental information for investors because they facilitate a period to
period comparative assessment of the Company'soperating performance relative
to its performance based on reported results under U.S. GAAP, while isolating
the effects of some items that vary from period to period without any
correlation to core operating performance and eliminate certaincharges that
management believes do not reflect the Company's operations and underlying
operational performance.
The Company's definitions andcalculations as set forth in the tables below of
adjusted net income, adjusted diluted EPS and adjusted EBITDA may not be
comparable to similarly titled measures used by other companies because other
companies may not calculate them in the samemanner 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 U.S. GAAP.
The Company does not provide a reconciliation of forward-looking adjusted
EBITDA guidance to net income, the comparable U.S. GAAP measure, because, due
to theunpredictable or unknown nature of certain significant items, such as
income tax expenses or benefits, loss contingencies, and any gains or losses
in connection with refinancing transactions, we cannot reconcile this
non-GAAP
projection without unreasonable efforts. We expect the variability of these
items, which are necessary for a presentation of the reconciliation, could
have a significant impact on our reported U.S.GAAP financial results.
Currency Fluctuation
Our international operationshave provided and will continue to provide a
significant portion of our total net sales. As a result, total net sales will
continue to be affected by fluctuations in the U.S. dollar against foreign
currencies. In order to provide a framework forassessing how our underlying
businesses performed excluding the effect of foreign currency fluctuations, in
addition to comparing the percent change in net sales from one period to
another in U.S. dollars, we also compare the percent change in netsales from
one period to another period using "net sales in local currency." Net sales in
local currency is not a measure presented in accordance with U.S. GAAP. Net
sales in local currency removes from net sales in U.S. dollars the impactof
changes in exchange rates between the U.S. dollar and the local currencies of
our foreign subsidiaries, by translating the current period net sales into
U.S. dollars using the same foreign currency exchange rates that were used to
translate thenet sales for the previous comparable period. We believe
presenting net sales in local currency is useful to investors because it
allows a meaningful comparison of net sales of our foreign operations from
period to period. However, net sales inlocal currency should not be considered
in isolation or as an alternative to net sales in U.S. dollar measures that
reflect current period exchange rates, or to other financial measures
calculated and presented in accordance with U.S. GAAP.
11
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The following is a reconciliation of net income to adjusted net income:
Three Months Ended March 31,
$ million 2024 2023
Net income $ 24.3 $ 29.3
Expenses related to Restructuring Program 16.7 -
(1)
(2)
Expenses related to Transformation Program 5.9 27.3
(1)(2)
Digital technology program costs 11.0 3.5
(1)
(2)
Income tax adjustments for above items (8.6 ) (6.2 )
(1)
(2)
Adjusted net income $ 49.3 $ 53.9
The following is a reconciliation of diluted earnings per share to adjusted
diluted earnings per share:
Three Months Ended March 31,
$ per share 2024 2023
Diluted earnings per share $ 0.24 $ 0.29
Expenses related to Restructuring Program 0.17 -
(1)
(2)
Expenses related to Transformation Program 0.06 0.27
(1)
(2)
Digital technology program costs 0.11 0.03
(1)
(2)
Income tax adjustments for above items (0.09 ) (0.06 )
(1)
(2)
Adjusted diluted earnings per share $ 0.49 $ 0.54
(3)
The following is a reconciliation of net income to EBITDA and adjusted EBITDA:
Three Months Ended March 31, Three Months Ended Year Ended
$ million 2024 2023 June 30, 2023 December 31, 2023
Net sales $ 1,264.3 $ 1,252.1 $ 1,314.0 $ 5,062.4
Net income $ 24.3 $ 29.3 $ 59.9 $ 142.2
Interest expense, net 37.9 39.4 38.4 154.4
Income taxes 9.7 1.8 25.1 60.8
Depreciation and amortization 29.2 27.6 29.1 113.3
EBITDA 101.1 98.1 152.5 470.7
Amortization of SaaS implementation costs 3.6 - - 6.0
Expenses related to Restructuring Program 16.7 - - -
(1)(2)
Expenses related to Transformation Program 5.9 27.3 10.1 54.2
(1)(2)
Digital technology program costs 11.0 3.5 7.0 32.1
(1) (2)
Gain on extinguishment of debt - - - (1.0 )
(1) (2)
Korea tax settlement - - - 8.6
(1) (2)
Adjusted EBITDA $ 138.3 $ 128.9 $ 169.6 $ 570.6
Adjusted EBITDA margin 10.9% 10.3% 12.9% 11.3%
12
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(1) Based on interim income tax reporting rules, these expenses are not
considered discrete items.The tax effect of the adjustments between our U.S.
GAAP and
non-GAAP
results takes into account the tax treatment and related tax rate(s) that
apply to each adjustment in the applicable tax jurisdiction(s).
(2) Excludes tax (benefit)/expense as follows:
Three Months Ended March 31,
$ million 2024 2023
Expenses related to Restructuring Program $ (4.5 ) $ -
Expenses related to Transformation Program (2.0 ) (6.0 )
Digital technology program costs (2.1 ) (0.2 )
Total income tax adjustments $ (8.6 ) $ (6.2 )
Three Months Ended March 31,
$ per share 2024 2023
Expenses related to Restructuring Program $ (0.05 ) $ -
Expenses related to Transformation Program (0.02 ) (0.06 )
Digital technology program costs (0.02 ) -
Total income tax adjustments $ (0.09 ) $ (0.06 )
(3) Amounts may not total due to rounding
13
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