Herbalife(HLF) - 2024 Q4 - Annual Report

Financial Performance - Net sales for the year ended December 31, 2024, were $4,993.1 million, a decrease of$ 69.3 million, or 1.4%, compared to 2023[287] - Net income for the year ended December 31, 2024, was $254.3 million, or$ 2.50 per diluted share, an increase of $112.1 million, or 78.8%, compared to 2023[288] - The Primary Reporting Segment reported net sales of$ 4,695.5 million for the year ended December 31, 2024, a decrease of $39.5 million, or 0.8%, compared to 2023[292] - Contribution margin for the Primary Reporting Segment was$ 2,004.3 million, or 42.7% of net sales, for the year ended December 31, 2024, an increase of $66.5 million, or 3.4%, compared to 2023[295] - The decrease in net sales for 2024 was primarily driven by a 4.0% decrease in Volume Points and a 2.6% unfavorable impact from foreign currency exchange rates[287] - In local currency, net sales increased by 1.2% for the year ended December 31, 2024, compared to the same period in 2023[287] - The company experienced a 5.3% favorable impact from price increases, partially offsetting the decrease in sales volume[287] Regional Performance - Net sales in North America were$ 1,054.4 million for the year ended December 31, 2024, a decrease of $77.0 million, or 6.8%, compared to the same period in 2023[298] - Latin America reported net sales of$ 832.5 million for the year ended December 31, 2024, an increase of $11.6 million, or 1.4%, compared to 2023[301] - EMEA region net sales were$ 1,084.8 million for the year ended December 31, 2024, an increase of $16.0 million, or 1.5%, compared to 2023[306] - Asia Pacific region, excluding China, reported net sales of$ 1,723.8 million for the year ended December 31, 2024, an increase of $9.9 million, or 0.6%, compared to 2023[309] - The China region reported net sales of$ 297.6 million for the year ended December 31, 2024, a decrease of $29.8 million, or 9.1%, compared to 2023[313] Cost and Expense Management - The company continues to assess its cost structure and potential pricing actions in response to ongoing inflationary pressures[286] - Selling, general, and administrative expenses rose to$ 1,875.4 million in 2024, representing 37.6% of net sales, compared to 36.9% in 2023[321] - The Transformation Program is expected to deliver annual savings of approximately $110 million, with$ 110 million realized in 2024[334] - The Restructuring Program is projected to yield annual savings of at least $80 million starting in 2025, with$ 50 million already realized in 2024[335] Cash Flow and Capital Expenditures - Operating cash flow for 2024 was $285.4 million, down from$ 357.5 million in 2023, primarily due to lower net income and unfavorable changes in operating assets and liabilities[331] - Capital expenditures for 2024 were $112.2 million, down from$ 140.1 million in 2023, with a focus on management information systems and the $400 million Digital Technology Program[332] - As of December 31, 2024, the company had$ 415.3 million in cash and cash equivalents, supporting general corporate purposes and potential strategic investments[330] Debt and Financing - The company entered into the 2024 Credit Facility, which includes a $400.0 million Term Loan B Facility and a$ 400.0 million revolving credit facility[339] - The company repaid $1,917.9 million in total debt during the year ended December 31, 2024, including$ 831.2 million under the 2024 Credit Facility[346] - As of December 31, 2024, the outstanding principal on the 2029 Secured Notes was $800.0 million, with an interest rate of 12.250% per annum[348] - The company recognized a loss on extinguishment of approximately$ 2.5 million related to the repayment of the 2018 Credit Facility[341] - The 2024 Revolving Credit Facility requires a maximum total leverage ratio of 4.50:1.00 through December 31, 2024, stepping down to 4.00:1.00 by September 30, 2025[344] Tax and Accounting - The effective income tax rate for 2024 was (50.1)%, influenced by corporate entity structure changes and a deferred income tax asset of $177.6 million recognized during the year[328] - The company is required to estimate income taxes in each jurisdiction prior to filing tax returns, which involves complex judgments and may take extended periods for resolution[379] - The realizability of deferred income tax assets is assessed by adjusting the valuation allowance, which could materially impact consolidated financial statements[380] - Tax benefits from uncertain tax positions are recognized only if it is more likely than not that the position will be sustained upon examination by taxing authorities[381] Shareholder Returns and Dividends - The company has not declared or paid cash dividends since 2014, with future declarations subject to board discretion and various factors[361] - The share repurchase program authorized in February 2021 had approximately$ 985.5 million of remaining capacity prior to expiration on February 9, 2024[362] Miscellaneous - Product returns and buybacks were approximately 0.1% of net sales for both years ended December 31, 2024 and 2023[372] - Goodwill decreased from approximately $95.4 million in 2023 to$ 87.7 million in 2024 due to foreign currency translation adjustments[377] - The company expects sufficient working capital from operations and available borrowings to meet liquidity requirements for the next twelve months[365] - Foreign subsidiaries' asset and liability accounts are translated into U.S. dollars at period-end exchange rates for consolidated financial reporting[383]