[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements for Q2 2019 show decreases in net sales, net income, and operating cash flow for the period [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$3.08 billion** by June 30, 2019, with liabilities at **$3.61 billion**, resulting in a **-$534.2 million** shareholders' deficit Condensed Consolidated Balance Sheet Highlights (in millions USD) | Balance Sheet Item | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$3,078.6** | **$2,789.8** | | Cash and cash equivalents | $1,254.9 | $1,198.9 | | Inventories | $426.6 | $381.8 | | **Total Liabilities** | **$3,612.8** | **$3,513.2** | | Current portion of long-term debt | $693.7 | $678.9 | | Long-term debt, net | $1,776.2 | $1,774.9 | | **Total Shareholders' Deficit** | **($534.2)** | **($723.4)** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q2 2019 net sales decreased to **$1.24 billion** and net income to **$76.5 million**, with similar trends for the six-month period Income Statement Summary (in millions USD, except per share data) | Metric | Q2 2019 | Q2 2018 | 6 Months 2019 | 6 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,240.1 | $1,285.5 | $2,412.3 | $2,462.4 | | Operating Income | $153.1 | $191.8 | $316.1 | $347.6 | | Net Income | $76.5 | $94.4 | $172.8 | $176.5 | | Diluted EPS | $0.54 | $0.62 | $1.20 | $1.15 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly decreased to **$114.8 million** for the first six months of 2019, while financing cash outflow was substantially lower Cash Flow Summary for Six Months Ended June 30 (in millions USD) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $114.8 | $344.9 | | Net cash used in investing activities | ($51.7) | ($33.0) | | Net cash used in financing activities | ($17.7) | ($722.6) | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, including ASC 842 adoption, long-term debt, legal and tax contingencies, segment performance, and share-based compensation - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, resulting in the recognition of operating lease right-of-use assets of **$176.9 million** and operating lease liabilities of **$189.1 million** on the balance sheet[18](index=18&type=chunk) - The company is involved in numerous tax and legal contingencies globally, including tax audits in Mexico, Brazil, India, and Korea, and is under investigation by the SEC and DOJ regarding FCPA compliance in China. A **$20.0 million** liability was accrued for a likely civil penalty related to an SEC investigation into its China marketing plan disclosures[96](index=96&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - The company's debt is composed of a senior secured credit facility, **2.00%** convertible senior notes due 2019, **2.625%** convertible senior notes due 2024, and **7.250%** senior notes due 2026[57](index=57&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2019 financial results, noting flat worldwide Volume Points, a **3.5%** net sales decrease to **$1.24 billion** due to China's decline and currency impacts - Net sales for Q2 2019 decreased by **3.5%** to **$1.24 billion** compared to Q2 2018, primarily driven by a **34.8%** sales decline in China and unfavorable foreign currency exchange rates[218](index=218&type=chunk)[233](index=233&type=chunk) - The significant sales decrease in China is attributed to the negative impact of the Chinese government's 100-day review of the health products industry, which reduced member activities and sales meetings[262](index=262&type=chunk) Volume Points by Geographic Region - Q2 2019 vs Q2 2018 (in millions) | Region | Q2 2019 | Q2 2018 | % Change | | :--- | :--- | :--- | :--- | | North America | 355.6 | 336.4 | 5.7% | | Mexico | 221.7 | 237.1 | (6.5)% | | South & Central America | 122.3 | 136.3 | (10.3)% | | EMEA | 336.3 | 319.5 | 5.3% | | Asia Pacific | 371.3 | 302.8 | 22.6% | | China | 122.9 | 196.1 | (37.3)% | | **Worldwide** | **1,530.1** | **1,528.2** | **0.1%** | - Net cash from operating activities decreased significantly to **$114.8 million** for the first six months of 2019, down from **$344.9 million** in the prior year period, due to lower net income (excluding non-cash items) and unfavorable changes in working capital[288](index=288&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to foreign currency and interest rate risks, using derivatives for hedging and estimating a **$9.9 million** impact for a **1%** interest rate change - The company uses foreign exchange derivatives, including cash flow hedges and freestanding derivatives, to mitigate risks from currency fluctuations on intercompany transactions and inventory purchases[346](index=346&type=chunk)[348](index=348&type=chunk) - The company is exposed to interest rate risk due to its variable-rate 2018 Credit Facility. A hypothetical **1%** change in interest rates would result in an approximate **$9.9 million** change in annual interest expense[353](index=353&type=chunk) [Item 4. Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report (June 30, 2019)[356](index=356&type=chunk) - No material changes were made to the internal control over financial reporting during the quarter ended June 30, 2019[357](index=357&type=chunk) [PART II. OTHER INFORMATION](index=69&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 6 for details on legal proceedings, including tax disputes and ongoing SEC and DOJ investigations related to FCPA compliance in China - For details on legal proceedings, the report refers to Note 6, Contingencies, in the financial statements[366](index=366&type=chunk) [Item 1A. Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) Outlines significant risks including dependence on independent members, FTC Consent Order compliance, complexities of the China business model, foreign currency exposure, and cybersecurity threats - The company's business is highly dependent on its ability to recruit and retain its network of independent Members, who have a high turnover rate[366](index=366&type=chunk)[367](index=367&type=chunk) - The company is subject to the 2016 Consent Order with the FTC, which imposes significant restrictions and compliance requirements on its U.S. operations. Failure to comply could result in enforcement actions and penalties[396](index=396&type=chunk)[397](index=397&type=chunk) - The business in China operates under a modified model due to specific regulations governing direct selling. There is risk related to the interpretation and enforcement of these laws, as demonstrated by the recent 100-day government review of the health products industry[405](index=405&type=chunk)[406](index=406&type=chunk)[411](index=411&type=chunk) - As a global company with approximately **80%** of sales outside the U.S., Herbalife is exposed to risks from foreign exchange restrictions, tariffs, currency fluctuations, and political instability[402](index=402&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=89&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No common shares were repurchased in Q2 2019, with **$1.5 billion** remaining under the authorized share repurchase program - No common shares were repurchased during the three months ended June 30, 2019[492](index=492&type=chunk) - As of June 30, 2019, the company had **$1.5 billion** remaining under its authorized share repurchase program[492](index=492&type=chunk) [Other Items (3-6)](index=89&type=section&id=Other%20Items%20(3-6)) This section reports no defaults on senior securities or other material information, with Item 4 being not applicable and Item 6 providing an index of exhibits - There were no defaults upon senior securities, and no other material information was reported under Item 5[493](index=493&type=chunk)

Herbalife Nutrition Ltd. (NYSE:HLF) Jefferies 2019 Global Consumer Conference Call June 19, 2019 10:30 AM ET Company Participants John DeSimone - Co-President & Chief Strategic Officer Bosco Chiu - Executive Vice President & Chief Financial Officer Alex Amezquita - Senior Vice President, Finance & Strategic Planning and Investor Relations Conference Call Participants Unidentified Analyst Good morning everyone. I think we'll get started with the next presentation. Sitting alongside me is the senior team from ...

Herbalife Nutrition Ltd. (NYSE:HLF) Q1 2019 Earnings Conference Call May 2, 2019 5:30 PM ET Company Participants Michael Johnson - Chairman and CEO John DeSimone - Co-President and Chief Strategic Officer Dr. John Agwunobi - Co-President and Chief Health and Nutrition Officer Alex Amezquita - SVP of Finance & Strategy and IR Eric Monroe - Director, IR Conference Call Participants Tim Ramey - Pivotal Research Doug Lane - Lane Research Beth Kite - Citi Hale Holden - Barclays Operator Good afternoon and thank ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | |---------------------------------------------------------------------------------------------|-------------------------------------------------------------------------- ...

AbbVie Inc. (NYSE:HLF) Consumer Analyst Group of New York Conference January 21, 2019 5:00 PM ET Company Participants John DeSimone - Co-President & Chief Strategic Officer John Agwunobi - Co-President & Chief Health & Nutrition Officer Conference Call Participants Akshay Jagdale - Jefferies Operator Today, please join me in welcoming Herbalife to the conference. As many of you know, Herbalife is a global nutrition company founded in 1980, today with a market cap of about $9 billion. It sells weight managem ...

Financial Data and Key Metrics Changes - For Q4 2018, reported net sales were $1.2 billion, a 9% increase compared to Q4 2017. Full year 2018 worldwide reported net sales reached $4.9 billion, reflecting a 10% year-over-year increase [11][12] - Volume points for Q4 2018 were approximately 1.5 billion, representing an increase of about 11.8% compared to Q4 2017, marking the largest fourth quarter volume point results in the company's history [12][13] - Reported net income for Q4 was approximately $48.9 million, or $0.34 per diluted share, while adjusted earnings per share (EPS) was $0.63, exceeding guidance [14][15] Business Line Data and Key Metrics Changes - The U.S. business saw a volume increase of 12% compared to Q4 2017, with year-over-year growth in every quarter of 2018 [18] - In China, volume points increased by 4% in Q4, although growth decelerated compared to previous quarters due to tougher comparisons [18] - Mexico recorded a 10% growth in volume points, achieving the largest fourth quarter in its history [19] Market Data and Key Metrics Changes - The Asia Pacific region reported a 30% year-over-year increase in volume points, marking the fourth consecutive quarter of record performance [19] - The EMEA region grew by 11% in Q4, with significant contributions from Spain, Turkey, and South Africa, all exceeding 20% growth [19] - The company set volume point records in four of its six regions: AMEA, APAC, China, and Mexico [12][19] Company Strategy and Development Direction - The company aims to continue its growth trajectory and expand its mission globally, focusing on innovation and technology to enhance distributor productivity and profitability [10][22] - A significant emphasis is placed on product development, with over 230 new products launched in 2018, including a new high-protein iced coffee [23][24] - The company is implementing segmentation strategies to improve visibility and customer experience, with plans to launch in Brazil in Q2 2019 [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong foundation and growth potential, highlighting the dedication of independent distributors and employees [10][11] - The management acknowledged challenges in the Chinese market due to regulatory scrutiny but remains optimistic about long-term growth [42][68] - The company anticipates a challenging Q1 2019 due to the 100-day campaign in China but expects recovery in subsequent quarters [42][68] Other Important Information - The company recorded a non-cash charge of approximately $29.5 million related to U.S. tax reform, impacting net income for Q4 [13][14] - Adjusted effective tax rate for Q4 was 26.4%, lower than expectations due to various factors [16] - The company generated $648 million in cash flow from operations in 2018, a 10% increase from 2017 [17] Q&A Session Summary Question: Concerns about the number of new products launched - Management clarified that the new products are spread globally and include many flavor extensions tailored to local markets [32] Question: Clarification on the 2K qualification program - Management indicated that the program is a test and may not be permanent, pending further evaluation [34] Question: Impact of the 100-day program in China - Management noted that the program has affected Q1 sales but expects recovery in Q2 and beyond [37][42] Question: Insights on India and Brazil's performance - India showed strong growth with 50,000 new preferred members, while Brazil's performance was disappointing but expected to improve with segmentation [48][49] Question: Update on the coffee drink launch - The coffee drink has exceeded expectations, contributing over 2% to total U.S. sales [83] Question: Feedback on digital and technology initiatives - The HN-connect program has seen significant adoption, with 24,000 distributors signed up, indicating positive engagement [88]

Part I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Herbalife Nutrition is a global direct-selling company with a "seed to feed" quality control strategy and a unique business model in China - The company operates a direct selling business model to distribute its nutrition products across **94 countries** as of December 31, 2018[15](index=15&type=chunk)[16](index=16&type=chunk) - The company's best-selling product line, **Formula 1 Nutritional Shake Mix**, consistently represented approximately **30% of net sales** for 2018, 2017, and 2016[17](index=17&type=chunk) - Herbalife's "seed to feed" strategy involves significant investment in traceable ingredients, scientific personnel, product testing, and self-manufacturing, with company-owned facilities producing approximately **60% to 65%** of inner nutrition products sold worldwide[22](index=22&type=chunk)[24](index=24&type=chunk) - As of December 31, 2018, the company had approximately **4.5 million Members**, which includes 0.9 million preferred members and 0.7 million distributors[30](index=30&type=chunk) - The business model in China is distinct from the global model to comply with local regulations, which prohibit multi-level marketing but permit direct selling[50](index=50&type=chunk)[51](index=51&type=chunk) Product Mix as a Percentage of Net Sales (2016-2018) | Product Category | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Weight Management | 63.5% | 64.2% | 63.8% | | Targeted Nutrition | 25.4% | 24.5% | 23.6% | | Energy, Sports, and Fitness | 6.3% | 6.0% | 6.1% | | Outer Nutrition | 1.9% | 2.1% | 2.4% | | Literature, Promotional, and Other | 2.9% | 3.2% | 4.1% | [Item 1A. Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from its dependence on independent Members, compliance with the FTC Consent Order, and the complex regulatory landscape in China - The business is **highly dependent** on its ability to recruit, retain, and motivate a large base of independent Members, who can terminate their agreements at any time[99](index=99&type=chunk)[100](index=100&type=chunk) - The **2016 Consent Order with the FTC** imposes significant compliance risks and costs, and failure to comply could negatively impact business operations in the U.S[127](index=127&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - Operations in China are subject to unique risks due to a modified business model required by Chinese regulations, with uncertainty regarding the interpretation and enforcement of these rules[136](index=136&type=chunk)[138](index=138&type=chunk)[143](index=143&type=chunk) - Approximately **80% of net sales** for the year ended December 31, 2018, were generated outside the U.S, exposing the company to foreign exchange and geopolitical risks[134](index=134&type=chunk) - The company's **Formula 1 product line accounted for approximately 30% of net sales** in 2018, creating a concentration risk[171](index=171&type=chunk) - The SEC and DOJ are conducting an investigation into the company's compliance with the **FCPA in China**, the outcome of which is uncertain[175](index=175&type=chunk)[633](index=633&type=chunk) - Changes in U.S. tax law may classify some non-U.S. subsidiaries as **Controlled Foreign Corporations (CFCs)**, which could have adverse tax consequences for certain U.S. shareholders[191](index=191&type=chunk)[192](index=192&type=chunk) [Item 1B. Unresolved Staff Comments](index=37&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[218](index=218&type=chunk) [Item 2. Properties](index=37&type=section&id=Item%202.%20Properties) The company leases most of its properties but owns a large manufacturing facility in Winston-Salem, North Carolina - The company leases most of its physical properties, including its corporate executive offices and major distribution centers[219](index=219&type=chunk) - The company owns an approximately **800,000 square foot** manufacturing facility in Winston-Salem, North Carolina[220](index=220&type=chunk) - Leased manufacturing facilities are located in Suzhou, Nanjing, and Changsha, China[219](index=219&type=chunk) [Item 3. Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) Details on legal proceedings are referenced in Note 7 of the financial statements - The report refers to Note 7, Contingencies, for details on legal proceedings, including tax disputes, an FCPA investigation, and the FTC Consent Order[221](index=221&type=chunk)[614](index=614&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[221](index=221&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common shares trade on the NYSE, dividends were terminated in 2014, and a new $1.5 billion share repurchase program was authorized in 2018 - The company's common shares are listed on the New York Stock Exchange (NYSE) under the symbol **"HLF"**[223](index=223&type=chunk) - In April 2014, the company **terminated its quarterly cash dividend** to utilize cash for share repurchases instead[228](index=228&type=chunk) - On October 30, 2018, a new five-year, **$1.5 billion share repurchase program** was authorized, with the full amount available as of year-end[230](index=230&type=chunk) - **No common shares were repurchased** during the three months ended December 31, 2018[231](index=231&type=chunk) [Item 6. Selected Financial Data](index=41&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of key historical financial data, showing net sales of $4.89 billion and a shareholders' deficit of $723.4 million for 2018 - The company provides a reconciliation from its non-GAAP measure "Retail value" to the GAAP measure "Net sales," with a 2018 Retail value of **$7.71 billion** reconciling to Net sales of **$4.89 billion**[237](index=237&type=chunk) Selected Financial Data (2014-2018) | (in millions, except per share data) | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $4,891.8 | $4,427.7 | $4,488.4 | $4,469.0 | $4,958.6 | | **Operating income** | $683.1 | $617.1 | $458.1 | $583.6 | $513.5 | | **Net income** | $296.6 | $213.9 | $260.0 | $339.1 | $308.7 | | **Diluted EPS** | $1.98 | $1.29 | $1.51 | $1.99 | $1.70 | | **Total assets** | $2,789.8 | $2,895.1 | $2,565.4 | $2,477.9 | $2,355.0 | | **Total debt** | $2,453.8 | $2,268.1 | $1,447.9 | $1,622.0 | $1,791.8 | | **Total shareholders' (deficit) equity** | $(723.4) | $(334.7) | $196.3 | $(53.5) | $(334.4) | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2018, net sales grew 10.5% to $4.9 billion, driven by strong volume growth, while the company refinanced its debt and continued share repurchases - Net sales for 2018 **increased 10.5% to $4.9 billion**, while net income **increased 38.7% to $296.6 million**, or $1.98 per diluted share[273](index=273&type=chunk)[274](index=274&type=chunk) - The company refinanced its debt in August 2018, entering a new **$1.25 billion senior secured credit facility** and issuing **$400 million in senior notes** due 2026[375](index=375&type=chunk)[384](index=384&type=chunk) - As of December 31, 2018, the company had working capital of **$216.2 million**, a decrease of $737.3 million from 2017, primarily due to changes in cash and current debt[399](index=399&type=chunk) Worldwide Volume Points (2016-2018) | (in millions) | 2018 | 2017 | % Change | 2016 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | **Worldwide** | 5,892.0 | 5,379.4 | 9.5% | 5,582.1 | (3.6)% | [Results of Operations](index=46&type=section&id=Results%20of%20Operations) Net sales in 2018 increased 10.5% to $4.9 billion, driven by volume growth across most regions, leading to a net income increase to $296.6 million - Gross profit as a percentage of net sales **increased to 81.2%** in 2018 from 80.8% in 2017, primarily due to retail price increases[309](index=309&type=chunk) - Selling, general, and administrative (SG&A) expenses **increased to $1,955.2 million** in 2018 from $1,758.6 million in 2017, driven by higher service fees and member promotion costs[312](index=312&type=chunk)[313](index=313&type=chunk) - The effective income tax rate **decreased to 36.1%** in 2018 from 54.6% in 2017, primarily due to a lower net tax expense related to U.S. Tax Reform[320](index=320&type=chunk) Net Sales by Geographic Region (2018 vs. 2017) | Region | 2018 Net Sales (in millions) | 2017 Net Sales (in millions) | % Change | | :--- | :--- | :--- | :--- | | North America | $948.3 | $840.2 | 12.9% | | Mexico | $467.9 | $442.7 | 5.7% | | South & Central America | $437.6 | $474.3 | (7.7)% | | EMEA | $977.0 | $868.7 | 12.5% | | Asia Pacific | $1,053.4 | $915.9 | 15.0% | | China | $1,007.6 | $885.9 | 13.7% | | **Worldwide** | **$4,891.8** | **$4,427.7** | **10.5%** | Net Sales by Product Category (2018 vs. 2017) | Product Category | 2018 Net Sales (in millions) | 2017 Net Sales (in millions) | % Change | | :--- | :--- | :--- | :--- | | Weight Management | $3,105.8 | $2,842.5 | 9.3% | | Targeted Nutrition | $1,243.5 | $1,082.8 | 14.8% | | Energy, Sports, and Fitness | $308.4 | $263.8 | 16.9% | | Outer Nutrition | $91.9 | $93.9 | (2.1)% | | Literature, Promotional, and Other | $142.2 | $144.7 | (1.7)% | [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is sourced from operating cash flow, with debt used for share repurchases, and a significant portion of cash held by foreign subsidiaries - Net cash provided by operating activities **increased to $648.4 million** in 2018 from $590.8 million in 2017[369](index=369&type=chunk) - In August 2018, the company entered into a new **$1.25 billion senior secured credit facility** and issued **$400 million in senior notes** due 2026 to repay its 2017 credit facility[375](index=375&type=chunk)[384](index=384&type=chunk) - As of December 31, 2018, foreign subsidiaries held **$870.3 million** of the company's total **$1.2 billion** in cash and cash equivalents[387](index=387&type=chunk) - During 2018, the company repurchased **11.4 million common shares for approximately $600.3 million** through open-market purchases and a tender offer[394](index=394&type=chunk) Contractual Obligations as of December 31, 2018 | Obligation (in millions) | Total | Due in 2019 | Due 2020-2021 | Due 2022-2023 | Due 2024 & Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Convertible senior notes due 2019 | $688.5 | $688.5 | $— | $— | $— | | Convertible senior notes due 2024 | $629.4 | $14.4 | $28.9 | $28.9 | $557.2 | | Senior notes due 2026 | $632.0 | $29.0 | $58.0 | $58.0 | $487.0 | | Senior secured credit facility | $1,329.9 | $76.7 | $157.9 | $317.3 | $778.0 | | Operating leases | $253.7 | $43.1 | $63.7 | $35.5 | $111.4 | | **Total** | **$3,741.2** | **$1,013.9** | **$348.7** | **$445.0** | **$1,933.6** | [Critical Accounting Policies](index=68&type=section&id=Critical%20Accounting%20Policies) Key accounting policies involve significant judgments in revenue recognition, inventory valuation, impairment testing for goodwill, and accounting for income taxes - Revenue is generally recognized upon delivery when control passes to the Member, net of product returns and distributor allowances[409](index=409&type=chunk) - Allowances for product returns are based on historical rates and are not significant, amounting to approximately **0.1% of product sales** for 2018, 2017, and 2016[410](index=410&type=chunk) - Goodwill and marketing-related intangible assets are tested for impairment annually; a 2018 qualitative assessment indicated **no impairment**[412](index=412&type=chunk)[413](index=413&type=chunk)[414](index=414&type=chunk) - The company evaluates the realizability of deferred tax assets and recognizes tax benefits for uncertain positions only if it is **more likely than not** that the position will be sustained[420](index=420&type=chunk)[421](index=421&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from foreign currency exchange rates and interest rates, which it manages with derivative instruments and by fixing rates on certain debt - The company is exposed to foreign exchange risk and uses short-term derivatives to reduce exposure to currency fluctuations[429](index=429&type=chunk) - The company is exposed to interest rate risk on its variable-rate 2018 Credit Facility, where a hypothetical **1% change in interest rates** would change annual interest expense by approximately **$10.0 million**[436](index=436&type=chunk) - As of December 31, 2018, the aggregate notional amount of outstanding foreign currency contracts designated as cash-flow hedges was approximately **$43.8 million**[432](index=432&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=73&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates by reference the company's consolidated financial statements and the independent auditor's report - The consolidated financial statements, notes, and the report of PricewaterhouseCoopers LLP are incorporated by reference and located in Part IV, Item 15[440](index=440&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=73&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[441](index=441&type=chunk) [Item 9A. Controls and Procedures](index=73&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018 - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2018[442](index=442&type=chunk) - Based on the COSO framework, management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2018[446](index=446&type=chunk) - There were **no material changes** in internal control over financial reporting during the fourth quarter of 2018[448](index=448&type=chunk) [Item 9B. Other Information](index=74&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[448](index=448&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=75&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required for this item is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[450](index=450&type=chunk) [Item 11. Executive Compensation](index=75&type=section&id=Item%2011.%20Executive%20Compensation) Information required for this item is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[451](index=451&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=75&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required for this item is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[452](index=452&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=75&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required for this item is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[453](index=453&type=chunk) [Item 14. Principal Accountant Fees and Services](index=75&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information required for this item is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[454](index=454&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=76&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section contains the company's audited consolidated financial statements, notes, the independent auditor's report, and an index of all filed exhibits [Report of Independent Registered Public Accounting Firm](index=80&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued unqualified opinions on the company's financial statements and internal controls, noting changes in accounting principles - PricewaterhouseCoopers LLP issued an **unqualified opinion**, stating the financial statements present fairly, in all material respects, the financial position of the company[465](index=465&type=chunk) - The firm also opined that the company maintained **effective internal control** over financial reporting as of December 31, 2018[465](index=465&type=chunk) - The report notes a change in accounting principle for **revenue from contracts with customers (ASC 606)** in 2018[466](index=466&type=chunk) [Consolidated Financial Statements](index=82&type=section&id=Consolidated%20Financial%20Statements) The financial statements show total assets of $2.8 billion, a shareholders' deficit of $723.4 million, and net income of $296.6 million for 2018 Consolidated Balance Sheet Highlights (as of Dec 31) | (in millions) | 2018 | 2017 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,198.9 | $1,278.8 | | Total current assets | $1,805.0 | $1,860.3 | | Total assets | $2,789.8 | $2,895.1 | | Total current liabilities | $1,588.8 | $906.8 | | Long-term debt, net | $1,774.9 | $2,165.7 | | Total liabilities | $3,513.2 | $3,229.8 | | Total shareholders' deficit | $(723.4) | $(334.7) | Consolidated Income Statement Highlights (Year Ended Dec 31) | (in millions) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net sales | $4,891.8 | $4,427.7 | $4,488.4 | | Gross profit | $3,972.5 | $3,579.1 | $3,633.8 | | Operating income | $683.1 | $617.1 | $458.1 | | Net income | $296.6 | $213.9 | $260.0 | Consolidated Cash Flow Highlights (Year Ended Dec 31) | (in millions) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $648.4 | $590.8 | $367.3 | | Net cash used in investing activities | $(83.9) | $(95.2) | $(142.4) | | Net cash used in financing activities | $(593.1) | $(85.2) | $(252.3) | [Item 16. Form 10-K Summary](index=131&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no summary for this item - None[721](index=721&type=chunk)