Herbalife(HLF) - 2023 Q4 - Annual Report

Financial Performance - Net sales for the year ended December 31, 2023, were $5,062.4 million, a decrease of$ 142.0 million, or 2.7%, compared to 2022[299]. - Net income for the year ended December 31, 2023, was $142.2 million, a decrease of$ 179.1 million, or 55.7%, compared to 2022[300]. - The contribution margin for the Primary Reporting Segment was $1,937.8 million, or 40.9% of net sales, representing a decrease of$ 67.5 million, or 3.4%, compared to 2022[307]. - The Primary Reporting Segment reported net sales of $4,735.0 million for the year ended December 31, 2023, a decrease of$ 78.4 million, or 1.6%, compared to 2022[304]. - Total net sales for the year ended December 31, 2023, were $5,062.4 million, a decrease of$ 142.0 million, or 2.7%, compared to $5,204.4 million in 2022[328]. - Gross profit for the year ended December 31, 2023, was$ 3,871.4 million, with a gross profit margin of 76.5%, down from 77.4% in 2022[330]. Sales and Volume Analysis - The decrease in net sales was primarily driven by a 9.1% decrease in Volume Points and a 1.1% unfavorable impact from foreign currency exchange rates[299]. - The 1.6% decrease in net sales for the Primary Reporting Segment was primarily due to a 9.1% decrease in Volume Points and a 0.9% unfavorable impact from foreign currency exchange rates[304]. - North America net sales decreased by $130.8 million, or 10.4%, to$ 1,131.4 million for the year ended December 31, 2023, primarily due to an 18.8% decrease in Volume Points[311]. - EMEA region net sales decreased by $9.7 million, or 0.9%, to$ 1,068.8 million for the year ended December 31, 2023, with a 9.6% decrease in Volume Points[317]. - China net sales decreased by $63.6 million, or 16.3%, to$ 327.4 million for the year ended December 31, 2023, attributed to a 9.1% decrease in Volume Points[324]. Expense and Cost Management - The company experienced a 36.9% increase in selling, general, and administrative expenses for the year ended December 31, 2023, compared to 2022[292]. - Selling, general, and administrative expenses increased to $1,866.0 million, or 36.9% of net sales, up from 34.8% in 2022, driven by higher labor costs and professional fees[337][338]. - The company is examining its cost structure and assessing potential pricing actions in response to ongoing inflationary pressures[298]. - The company reported a$ 54.2 million pre-tax unfavorable impact from Transformation Program expenses, primarily related to employee retention and separation costs[301]. Regional Sales Performance - Latin America net sales increased by $35.1 million, or 4.5%, to$ 820.9 million for the year ended December 31, 2023, driven by a 10.2% favorable impact of price increases[314]. - Asia Pacific region net sales increased by $27.0 million, or 1.6%, to$ 1,713.9 million for the year ended December 31, 2023, primarily due to an 8.0% favorable impact of price increases[320]. Product Category Performance - Weight Management product category net sales decreased by $102.5 million, or 3.5%, to$ 2,851.7 million for the year ended December 31, 2023[328]. - Energy, Sports, and Fitness product category net sales increased by $9.7 million, or 1.8%, to$ 560.3 million for the year ended December 31, 2023[328]. - Literature, Promotional, and Other category net sales decreased by $13.2 million, or 13.1%, to$ 87.9 million for the year ended December 31, 2023[328]. Cash Flow and Capital Expenditures - Operating cash flow for 2023 was $357.5 million, slightly up from$ 352.5 million in 2022, attributed to favorable changes in operating assets and liabilities[348]. - Capital expenditures for 2023 were $140.1 million, with expectations of$ 145 million to $195 million for 2024, primarily for the Digital Technology Program[349]. Debt and Financing - The company has$ 575.2 million in cash and cash equivalents as of December 31, 2023, supporting general corporate purposes and potential share repurchases[346]. - The 2018 Credit Facility includes a $1.25 billion senior secured credit facility, with various amendments reducing interest rates and extending maturities[352][354]. - As of December 31, 2023, the outstanding amount under the 2018 Credit Facility was$ 886.7 million, with $236.1 million under Term Loan A and$ 650.6 million under Term Loan B[360]. - The weighted-average interest rate for borrowings under the 2018 Credit Facility increased to 7.62% as of December 31, 2023, compared to 4.08% in 2022[360]. - A mandatory prepayment of $66.1 million towards the 2018 Term Loan B is expected in Q1 2024 based on the excess cash flow calculation[359]. Shareholder Returns and Dividends - The company has not declared or paid cash dividends since 2014, with future declarations subject to various factors including financial condition and debt restrictions[374]. - The company authorized a three-year$ 1.5 billion share repurchase program, with approximately $985.5 million remaining as of February 9, 2021[375]. - In 2022, the company repurchased approximately 3.7 million common shares at an aggregate cost of approximately$ 131.8 million, averaging $35.73 per share[376]. Inventory and Goodwill - The company adjusted obsolete and slow-moving inventories downward by$ 24.2 million and $31.5 million as of December 31, 2023 and 2022, respectively[387]. - Goodwill increased to approximately$ 95.4 million as of December 31, 2023, primarily due to foreign currency translation adjustments[391]. - The company had marketing-related intangible assets of approximately $310.0 million as of December 31, 2023, with no impairment recorded during the years ended December 31, 2023 and 2022[391].