hlf herbalife dec 2009 presentation

8/14/2019 HLF Herbalife Dec 2009 Presentation

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Herbalife Investors Day

December 2009


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Safe Harbor Statement

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the 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 or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerningproposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions

underlying any of the foregoing. Forward-looking statements may include the words may, will, estimate, intend, continue, believe, expect or anticipate and

any other similar words.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those 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, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission. Important factors that could cause our

actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, among

others, the following:

our relationship with, and our ability to influence the actions of, our distributors;

adverse publicity associated with our products or network marketing organization; uncertainties relating to interpretation and enforcement of recently enacted legislation in China governing direct selling;

our inability to obtain the necessary licenses to expand our direct selling business in China;

adverse changes in the Chinese economy, Chinese legal system or Chinese governmental policies; improper action by our employees or international distributors in violation of applicable law; changing consumer preferences and demands;

loss or departure of any member of our senior management team which could negatively impact our distributor relations and operating results; the competitive nature of our business;

regulatory matters governing our products, including potential governmental or regulatory actions concerning the safety or efficacy of our products, and network marketingprogram including the direct selling market in which we operate;

third party legal challenges to our network marketing program; risks associated with operating internationally, including foreign exchange and devaluation risks;

our dependence on increased penetration of existing markets; contractual limitations on our ability to expand our business;

our reliance on our information technology infrastructure and outside manufacturers; the sufficiency of trademarks and other intellectual property rights;

product concentration; our reliance on our management team;

uncertainties relating to the application of transfer pricing, duties, value added taxes , and other tax regulations, and changes thereto; changes in tax laws, treaties or regulations, or their interpretation;

taxation relating to our distributors;product liability claims;

any collateral impact resulting from the ongoing worldwide financial crisis, including the availability of liquidity to us, our customers and our supplie rs or the willingness of ourcustomers to purchase products in a recessionary economic environment; and

whether we will purchase any of our shares in the open markets or otherwise.

We do not undertake any obligation to update or release any revisions to any forward-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.


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2009 Analyst & Investor Meeting Agenda

Michael Johnson Herbalife, The Growth Story

Chairman & CEO

Rich Goudis Infrastructure Strategy

Chief Operating Officer

Des Walsh Growth Initiative &

President Regional Updates

John DeSimone Distributor Metrics &Chief Financial Officer Financial Update

Executive Topic


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Michael O. Johnson

Chairman and Chief Execut iv e Off icer


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Recent News

Organizational Changes Announced December 16, 2009 Des Walsh President

Rich Goudis Chief Operating Officer

John DeSimone Chief Financial Officer

Guidance Updates

Reiterate FY09 Guidance

$3.19 - $3.22

Reiterate FY10 EPS Guidance $3.50 - $3.65

Based on late September spot FX rates

FY10 Guidance already includes ($0.20) impact from VZ


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Protect Grow th Init iat ives

Invest incrementally in daily consumptionDMOs

Restructured the front-end/back-endprocess to improve alignment withdistributors, reduce layers andstreamline business

Open new markets to expand theHerbalife reach around the globe

Leverage Financial Strength

Remain conservatively capitalized duringcurrent credit crisis while using excesscash to buy-back stock as appropriate

Operational Impro vements

Initiate self-manufacturing Strengthen government relations

Maintain rigorous training and auditing

Guidance

EPS Guidance $3.00 - $3.20

December 2008 Scorecard

Why HLF? Deliver On Expectations


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Why HLF? Misunderstood & Undervalued

The Growth Story Target Mega Trends - Obesity, Anti-aging & Emerging Markets

64% of HLF product line is in weight management

Increase access to our products and business opportunity

Evolution of the Business to Daily Consumption (deeper)

International Expansion (wider)

Under Appreciated Business Model High variable costs, High Margins

Low capital requirements, Strong Free Cash Flow model

Conservatively leveraged balance sheet

Successfully weathered 2009 economic challenges

Disciplined Return of Capital Share repurchases

Dividends


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Why HLF?Growth Today, Tomorrow & the Future

NEW PRODUCTS &NEW PACKAGING

DAILY

CONSUMPTION

MANUFACTURING

& TECHNOLOGY

INTERNATIONAL

EXPANSION

Goal:

Triple the Size

of HLF by

2020 BRAND & IMAGE

LOWER

BARRIERS TO

ACCESS

FOCUS MARKETS

FINANCIALSTRENGTH


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DAILY

CONSUMPTION

MANUFACTURING

& TECHNOLOGY

INTERNATIONAL

EXPANSION

BRAND & IMAGE

LOWER

BARRIERS TO

ACCESS

FOCUS MARKETS

FINANCIALSTRENGTH

Goal:

Triple the Size

of HLF by

2020


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Why HLF?Opportunity for Health & Wealth

Estimates that medical costsassociated with obesity may be ashigh as $147 billion, annually.

June 2009

Of all the developing countries, only inMexico is the rate of increase inbecoming overweight among adultsfaster than in China.


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Why HLF?Leader in Global Nutrition

% of 2008Net Sales:

TopProducts:

63% 21% 4% 6%

Formula 1

Herbal TeaConcentrate

PersonalizedProtein Powder

Aloe Concentrate

Niteworks

Herbalifeline

Best Defense

Liftoff

H3O

Nourifusion

Skin Activator

Daily Nutrition

* Not shown: Literature/Other which 6% of 2008 net sales


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Why HLF?Daily Consumption Drives Key Products

2009

% of Total VPs VPs

51% 1,439m

2003

% of Total VPs VPs

37% 573m

+ 151%

*

* Annualized figures based on 2009 YTD sales.


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Why HLF?Ongoing Product Innovation

Niteworks

2003

2004

Garden 7

Liftoff

Nourifusion

2005

2006

H3O

Kids F1

Best Defense

2007

2008

Active Fiber Complex

Powdered Aloe

Soft Green

Mango Flavored Aloe

F1 Meal Replacement Bar

2009

Endorsed by Dr.Lou Ignarro

1998 NobelLaureate inMedicine


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Why HLF?Ongoing Product Enhancement

Enhanced with Current Science

9 Products Re-launched in the USA

AdvancedJoint Support

AdvancedXtra-Cal

SnackDefense

TotalControl

HerbalTea

Concentrate

TangKuei

Cell-U-Loss SchizandraPlus

RoseGuard

Over 400 SKUs scheduled over the next 3 years


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Why HLF?Globalizing the Product Line1Q 09 2Q 09 3Q 09

F1 Caf Latte /Cookies & Cream (CA,

TW)

Total Control (PM, IS)

Heart Health(MX, HK, HN)

Aloe Powder in CI & COand Aloe Drink in JA)

Skin Activator Line(HR)

Radiant C Line(GT, CY)

Lively Fragrances(BR)

F1 Packettes (RU) Protein Bar (RU)

PersonalizedProtein Powder

(DR)

Mango flavored Herbal AloeConcentrate (US)

Active Fiber

Complex(JM, MX, JA &

KS)

Aloe Powder (CH)

NouriFusion Line (SV)

NouriFusion Whitening Serum(TW)

F1 Packettes (BR, TU)

Herbal Tea Concentrate(MY, TH)

Heart HealthDistribution Drive

(ID, TW)

Aloe Powder in AR & PE and AloeConcentrate in TU

Triple Berry (HK)

Skin Activator Line(SAM & RO)

Nourifusion Line(CS, GT, PM)Herbal Aloe (EC)

F1 Packettes (JM)

Radiant C Face Quencher(SV)

F1 Express MealReplacement Bar

(EMEA)


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Key 2010 New Produc t Launches

Hand Sanitizer RegionallyDevelopedProducts

New Flavors

Ongoing1Q10 Launch Ongoing 3Q10 Launch

Why HLF?Preparing For The Next Decade

SatietyBrain Health


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DAILY

CONSUMPTION

BRAND & IMAGE

LOWER

BARRIERS TO

ACCESS

FINANCIALSTRENGTH

Goal:

Triple the Size

of HLF by

2020

MANUFACTURING

& TECHNOLOGY

INTERNATIONAL

EXPANSION

FOCUS MARKETS


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Why HLF? Evolution of the Business

TRADITIONAL DAILYCONSUMPTION

Monthly Purchasing

Low Penetration

High Turnover

High Customer AcquisitionCosts

Medium to High PricedPurchases Infrequently

Club Models

Weight Loss Challenge

Healthy Breakfast

Daily Purchases

Deeper Penetration Higher Retention

Better Visibility

Small Purchases Regularly

24 Month Conversion

Localize

2003A 2009 Guidance

Volume Points 1.5 billion 2.8 billion

Net Sales $1.2 billion $2.3 billion

Operating Margin 9.2% 12.8% 13.0%

EBITDA $168 million $355 - $360 million

(1)

(1) Provided in the companys November 3, 2009 earnings release.


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Herbalifes business is evolving to be more dai ly purchases

Dai ly touch pointprovides HLF with competitive advantage

Why HLF? Daily Consumption, Our Competitive Advantage

BENEFITS OF DAILY CONSUMPTION

Improves sustainability and penetration

Daily fee expands addressable population

Daily fee improves retail profit for distributors

Efficient model - customers come to distributors

? ?


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Why HLF? Increasing Access to Products

DAILYMONTHLY

PREPAY

~$6$180

Aloe

Tea

Formula 1

Club Model

~ $3$106

Convenience Service

Cost Relationships Community

+1100 calories

*includes: Big Mac, medium fry and medium Coke

280 calories

Aloe

Tea

Formula 1


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0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Why HLF?Daily Consumption Drives Growth

2002 2005 2009 YTD

Volume Points (YTD) 75,748 246,105 371,035Total Distributors 85,672 170,942 253,384Total Supervisors 13,952 33,077 64,438HLF Country Ranking #4 #2 #2

The Mexico Story

Growth in Mexico led by DailyConsumption (Clubs)

Daily Consumption modelproved to be much moreresilient than traditional model

Stable during difficult times (VAT,

growth pains and economy)

Club In flec t ion Po in t 30,000 Clubs

4.9x mo re

Volume Points

3.3x mo re

Volume Points

Volume Points


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1.2

5.1

2.3

9.3

2.9

6.7

1.21.7

0.40.8

0.00.0 0.3

0.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Mexico US Latino Taiwan Korea Brazil India Total

Company

2003 2008

Why HLF? We Are Going DEEPER

Key Cou ntry Per Capita Penetrat ion: 2003 & 2008

Club Inflection Point

HLF VP Ranking in 3Q09

2006

1

2009

10

2008

4

2007

5

2003

2

2006

3

VolumePoints

Globalize

Localize


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Home ClubMexico

Why HLF? Ongoing Localization of Daily Consumption

Shenzhen

Missouri Central Club

Russia

Breakfast Club

MalaysiaCommercial Club

Shenzhen

Sole

Proprietor


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Why HLF? Growth Today, Tomorrow & the Future


DAILY

CONSUMPTION

BRAND & IMAGE

LOWER

BARRIERS TO

ACCESS

FINANCIALSTRENGTH

Goal:

Triple the Size

of HLF by

2020

MANUFACTURING

& TECHNOLOGY

INTERNATIONAL

EXPANSION

FOCUS MARKETS


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Why HLF?Company Sponsorships

LA Galaxy

Indy Racing

Tour of California


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Why HLF?Marketing Co-op Sponsorships

San Martin, Peru

Internazionale FC (Inter), Italy

Jesse Saarinen (Finland Hockey)

Valencia CF, Spain


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Why HLF?Distributor Sponsorships

Peace Jam UK Cycling, Team Herbalife Wheelbase

Subic Bay Triathlon Philippines San Luis FC, Mexico


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Des Walsh

President


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Why HLF? Growth Today, Tomorrow & the Future


DAILY

CONSUMPTION

BRAND & IMAGE

LOWER

BARRIERS TO

ACCESS

FINANCIALSTRENGTH

Goal:

Triple the Size

of HLF by

2020

MANUFACTURING

& TECHNOLOGY

INTERNATIONAL

EXPANSION

FOCUS MARKETS


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Why HLF? Increase Access To Product & BusinessOpportunity

Daily Consumption- Daily fee increases addressable population

- Nutrition Club ~ $3 per day

- Healthy Breakfast ~ $2 per day

Marketing Plan changes provide the following:

Allow distributors the ability to earncommissions sooner

Ability to build a sustainable business

Makes the business opportunity moreaccessible in emerging markets

Portions of the plan were tested in Russia

with success Extended payment plan (test in 2010)

Leverage global technology platform to increaseaccess & improve productivity

China 0.09

Japan 0.37

Brazil 0.86

Italy 1.52

Malaysia 1.57Korea 1.69

USA 2.38

Venezuela 2.62

Mexico 5.12

Taiwan 6.73

Company Average 0.56

Company Average (ex.India & China)

1.07

Deeper

Top 10 Markets 2008 VP/Capita


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50%Discount

(Retail Profit)

$797 mi l l ion1

$1.8 bil l io n1

Improved earnings opportunity

Distributor incentive to recruit

12 month supervisor qualification

Increase in new distributors

Increase in order activity

Higher retention

Why HLF?Modified Marketing Plan in 4Q09

(1) Actual results referenced in Herbalifes 2008 10K, not including China.

73% Distributor Payout Q4 2009 Changes

Benefits

15% RoyaltyOverrides

7% Production Bonus

1% MH Bonus


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Why HLF?Improved Access to the Business

DISTRIBUTOR

Requirement: $49 IBP

Benefit:25% - 42%Discount

SUPERVISOR

Requirement:

$2,800 in 1 month

or

$3,000 over 2 months

DISTRIBUTOR

SUPERVISOR

Requirement:$3,000 over 12

months($250 per month)

Benefits:50% Discount

Royalty Eligibility

USA Example

NEW PLAN CHANGE

NEW PLAN CHANGE

Requirement:

Qualified Producer

Benefit:

40% discount for 12 months

Can earn on down line


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Why HLF? Plan Changes Drive Improvements

0%

10%

20%

30%

40%

50%

2002 2006 2009 2011

200000

225000

250000

275000

300000

325000

350000

1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09

Marketing Plan

Chang e in 2005

???

Marketing Plan

Chang e in 2009

Annual Superv iso r Reten tion New Dis tr ibu to rs (per Quarter)

Marketing plan changes expected to improve

1. New distributor growth

2. Supervisor productivity

3. Supervisor retention


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Why HLF?Increase Access To The Business

3 market test in 2010 (leverage Oracle platform)

Allow new Distributors ability to collect on products before they pay

Limits: Dollars, time and frequency

Limited HLF working capital investment (Up-line does not receive commissions/royalties untilpayment is made

Micro Credit

Stimulate Growth

Emerging Markets

High TurnHigh Interest Cost

Extended Payments

Stimulate Growth

Emerging Markets

New DistributorsLimited Risk/Time

No Interest Cost


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DAILY

CONSUMPTION

BRAND & IMAGE

LOWER

BARRIERS TO

ACCESS

FINANCIALSTRENGTH

Goal:

Triple the Size

of HLF by

2020

MANUFACTURING

& TECHNOLOGY

INTERNATIONAL

EXPANSION

FOCUS MARKETS


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Why HLF?

Go Wider - International ExpansionHerbalife is currently open in 72 markets

2009 2011-20202010

Q3 Q4

New Markets: 6 new countries,estimated

Vietnam

Paraguay

2010 2020

GOAL: open in130+ markets by2020

TotalMarkets: 70 72 130+80


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Why HLF?

2010 Regional Expansion

Global , Seamless Market ing PlanUAE Gulf Markets Africa

Leverages momentum andexisting business in SE Asia(India, Philippines &

Indonesia) Large ex-pat markets

Opportunity for futureleverage in openingadditional Middle Eastern

markets.

Barrier to access has beenlow disposable income

Daily Consumption andlower price point opensmarket

First President Team onAfrican continent emergingin Lesotho


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DAILY

CONSUMPTION

BRAND & IMAGE

LOWER

BARRIERS TO

ACCESS

FINANCIALSTRENGTH

Goal:

Triple the Size

of HLF by

2020

MANUFACTURING

& TECHNOLOGY

INTERNATIONAL

EXPANSION

FOCUS MARKETS


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Regional Updates


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Herbalifes Global Presence

North America

MexicoSouth & Central America

EMEA

China

Asia Pacific


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North America

NORTH AMERICA YTD

Volume 1.4%

Local Currency Growth 4.2%

Active Supervisors 4.3%

New Supervisors (14.1%)

New Distributors (4.9%)


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North America Update

Latino market driving growth, 69% of total NA volume in

Q3 2009 Volume up 7% in 3Q 2009

Largely club driven

Evolving to more Commercial Clubs

General Market shows signs of potential growth

Early stages of adopting daily consumption

Volume declined 5.3% in 3Q 2009

Leaders emerging, four recent President Team members

Acculturating daily consumption through Weight LossChallenges and Commercial Clubs


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Daily Consumption Case Study U.S.A. #1 Market

300,000

350,000

400,000

450,000

500,000

550,000

600,000

650,000

700,000

750,000

800,000

2002

2003

2004

2005

1Q'

06

2Q'

06

3Q'

06

4Q'

06

1Q'

07

2Q'

07

3Q'

07

4Q'

07

1Q'

08

2Q'

08

3Q'

08

4Q'

08

1Q'

09

2Q'

09

3Q'

09

Trailing4Q

Vo

lumePoints

Introduction of Daily

Consumption DMO

Daily Consumption

Inflection Point

2004 Latino Volume Points as % of Total North America 37%

2009 Latino Volume Points as % of Total North America 68%

Volume Points Per Capita

At Inflection Point 1.51

As of FY08 2.38


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Mexico

MEXICO YTD

Volume (14.3%)

Local Currency Growth (12.7%)

Active Supervisors (9.3%)




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Mexico Update

Birthplace of Nutrition Clubs

Currently approximately 30,000 clubs, mostly home basedmodel

New Regional Leadership

Access to Product Improving

Waldos pick-up counter adds almost 300 points of access 80% of Mexican population lives within a 2 hour commute of a

Waldos location

Anniversaried the imposition of a 15% VAT on 65% ofMexican volume

Reformulated product introduced in Q4 2009 Distributor Leadership created an integrated road map to

grow business


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Daily Consumption Case Study Mexico #2 Market

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2000

2001

2002

2003

2004

2005

1Q'

06

2Q'

06

3Q'

06

4Q'

06

1Q'

07

2Q'

07

3Q'

07

4Q'

07

1Q'

08

2Q'

08

3Q'

08

4Q'

08

1Q'

09

2Q'

09

3Q'

09

Trailing4Q

VolumePoints


Consumption DMO

Daily Consumption

Inflection Point

15% VAT Impact

-2.5% 1.2%-8.1%



As of FY08 4.96


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EMEA

EMEA YTD

Volume (8.2%)


Active Supervisors (3.5%)




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EMEA Update

Tale of Two Europes

Eastern Europe

Growing obesity problem

Successful replication of HealthyBreakfast model

Western Europe

Challenging direct selling market

Stabilizing, working towardsuccessful acculturation of dailyconsumption

Success Stories

Russia

Nutrition Clubs, HealthyBreakfast

Turkey

Transitioning to DailyConsumption

Success of sachet

program (single servepackets)


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South & Central America

SOUTH & CENTRAL AMERICA YTD

Volume (8.7%)


Active Supervisors 1.7%




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South & Central America Update

Brazil

Utilizing daily consumption to reach a larger audience

Soft Green personal care line targets market specific need

Extended Payment program test market in 2010

3Q09 local currency sales growth of 16.2% despite new supervisors having

declined 31.9%

Key Metric: Average Active Distributors increased 10.1% in 3Q09


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Daily Consumption Case Study Brazil #3 Market

100,000

110,000

120,000

130,000

140,000

150,000

160,000

170,000

180,000

190,000

2004

2005

1Q'

06

2Q'

06

3Q'

06

4Q'

06

1Q'

07

2Q'

07

3Q'

07

4Q'

07

1Q'

08

2Q'

08

3Q'

08

4Q'

08

1Q'

09

2Q'

09

3Q'

09

Trailing4Q

VolumePoints


Consumption DMO

Daily Consumption

Inflection Point



As of FY08 0.84


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China

CHINA YTD

Volume 1.9%



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China Update

Retail based model with 77 stores

In the midst of the 2-year evolution to daily consumption

Sole proprietorships

Currently about 600 clubs throughout China

Evaluating updates to Chinese business model


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China Entering Phase II

0

50,000

100,000

150,000

1Q

'06

2Q

'06

3Q

'06

4Q

'06

1Q

'07

2Q

'07

3Q

'07

4Q

'07

1Q

'08

2Q

'08

3Q

'08

4Q

'08

1Q

'09

2Q

'09

3Q

'09T

railing4QVolumePoints

Phase I Goals:

License product

Hire management team

Direct selling provincial licensingapproval

Build infrastructure

Phase I Phase

II

Phase II Goals:

Balanced growth

Ongoing direct selling provincial

licensing approvalsIntroduce nutrition clubs, i.e. soleproprietorship


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Asia Pacific

ASIA PACIFIC YTD

Volume 28.6%


Active Supervisors 8.8%New Supervisors 21.2%

New Distributors 30.4%


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Asia Pacific Update

Taiwan, Korea, Malaysia

Strong, unified regional leadership

Premium HOMs, Roadshows, Commercial Nutrition Clubs

India

Testament to the benefits of daily consumption model

Building successful leadership

Training on duplication of Clubs

Vietnam

Unique market opening through distributor-led initiatives

No Instant Supervisors

Mandatory ethics training


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Daily Consumption Case Study Taiwan & Korea

75,000

95,000

115,000

135,000

155,000

175,000

195,000

215,000

2004

2005

1Q'

06

2Q'

06

3Q'

06

4Q'

06

1Q'

07

2Q'

07

3Q'

07

4Q'

07

1Q'

08

2Q'

08

3Q'

08

4Q'

08

1Q'

09

2Q'

09

3Q'

09

Trailing4QVolumePoints


Consumption DMO

Daily Consumption

Inflection Point



As of FY08 6.73

Taiwan

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

2004

2005

1Q'

06

2Q'

06

3Q'

06

4Q'

06

1Q'

07

2Q'

07

3Q'

07

4Q'

07

1Q'

08

2Q'

08

3Q'

08

4Q'

08

1Q'

09

2Q'

09

3Q'

09

Trailing

4QVolumePoint

Korea


Consumption DMO

Daily Consumption

Inflection Point



As of FY08 1.72


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Poster Child for Market Evolution - India

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

32,000

2004

2005

1Q'

06

2Q'

06

3Q'

06

4Q'

06

1Q'

07

2Q'

07

3Q'

07

4Q'

07

1Q'

08

2Q'

08

3Q'

08

4Q'

08

1Q'

09

2Q'

09

3Q'

09

Trailing4Q

VolumePoints


Consumption DMO

Daily Consumption

Inflection Point


At Inflection Point - 0.1

As of FY08 0.2


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Adoption/Acculturation of Daily Consumption

Predominantly Daily Consumption

Largely Traditional

Mexico

US Latino

Brazil

Italy Taiwan

US - General

Russia

China70+

othermarkets


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Rich Goudis

Chief Operat ing Off icer


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NEW PRODUCTS &

NEW PACKAGING

DAILY

CONSUMPTION

BRAND & IMAGE

LOWER

BARRIERS TO

ACCESS

FINANCIALSTRENGTH

Goal:

Triple the Size

of HLF by

2020

MANUFACTURING

& TECHNOLOGY

INTERNATIONAL

EXPANSION

FOCUS MARKETS


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Why HLF?Technology Platform to Support Long Term Growth

t On-line tools

t Mobile Technology

t On-line Training

t Bizworks

t International Expansion

t Mobile Technology

t Extended Payments

t Support Daily Consumption

t Supply Chain Management

t Distributor Analysis

t Self Manufacturing

GrowthInitia

tives

DistributorPro

ductivity

CompanyPro

ductivity

ORACLEOne Worldw ide Enterpr ise System


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Why HLF?Increase Self-Manufacturing

Adhere to all quality requirements on a global basis

Increase Speed to Market

Protect IP of uniquely formulated products

Shrink Licensing lead times

Utilize cash for high ROI return

Reduce Landed Costs of HLF Products Regional manufacturing minimized freight/duties

Start HLF sourcing company for raw materials


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Why HLF?Margin Enhancement Opportunity

% of

Cost

Source

70%Ingredient Costs

Packaging

15% Overhead

10% ContractManufacturing Profit

5% Labor

* Based on 2008 Cost of Sales amount of $458.4m.


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Why HLF?World Class Operations Team

Building an operations group of experienced executives

Goal: build a global manufacturing platform for competitive advantage


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Why HLF?Self Manufacturing Drives ROIC

$20-25m

Goal: up to 80% ver ti cal manufac tur ing

Envision 5 additional regional facilities over5-7 years

$100+ million potential investment

$10-15Capex In

2010

+

Herbalized

$10m purchase ofMicelle Labs in 2009

Original

R i l M f t i I C titi


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Benefits ofRegional Manufacturing

Why HLF?Regional Manufacturing Is CompetitiveAdvantage

1) Lowest landed costs

a) Take advantage of regionaltrade agreements

b) Freight cost savings

c) Labor savings

2) Natural currency hedge

3) Speed to market on newproduct and market-specificproduct development

4) Government and communityrelations

Potential RegionalManufacturing Locations

HLFFacility

% of HLFVolume *

USA 28%

China 4%

Latin America 17%

South America 14%

India 1%

Eastern Europe 17%

Southeast Asia 19%

* Based on 2009 YTD Volume Points.


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Why HLF?Trade Blocks Align With HLF Business


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Why HLF?Margin Enhancement Opportunity

2008 2013-2015

5-7 YEAR PROJECT

100+ bpsMARGIN EXPANSION OVER 3-5 YEARS

Vertical Manufacturin g

Sourc ing Company

$458mCOGS

95% Outsourced 20% Outsourced

$??mCOGS


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John DeSimone

Chief Financial Off icer


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NEW PRODUCTS &

NEW PACKAGING

DAILY

CONSUMPTION

MANUFACTURING

& TECHNOLOGY

INTERNATIONAL

EXPANSIONBRAND & IMAGE

LOWER

BARRIERS TO

ACCESS

FOCUS MARKETS

FINANCIAL

STRENGTH

Goal:

Triple the Size

of HLF by

2020


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Distributor Metrics


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Why HLF?Transparency of Key Metrics

DISTRIBUTOR

SUPERVISOR

With the influence of Daily

Consumption and MarketingPlan changes to our business,

Herbalife will disclose additionalrelevant Distributor metric

beginning in 2010

Daily Consumption promotesslower, but more stable growthfrom Distributor to Supervisor

This will be augmented by therecent changes in the Marketing

Plan


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10.4% 10.9%

-0.7%

-19.5%-17.5% -16.9%

-8.7%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009

9.0%

10.6%

3.7%

-9.1%

-1.4%

-5.9%

5.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009

10.6%

9.7%

4.5%

-0.3%

1.3% 1.6%

4.9%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009

22.7%

15.7%

2.8%

-7.6%-6.2%

-9.1%

4.2%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09

Volume Points

New Sales Leaders Average Act ive Superviso rs

New Distr ibutor s

Current New

Why HLF?Transparency of Key Metrics


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Financial Update

Why HLF? Strong Constant Currency


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Why HLF? Strong Constant CurrencyPerformance in Q3

Source: Herbalife web site, http://www.ir.herbalife.com.

Net Sales - 7.5% * 60bps Marg in Improvement *

21% EPS Growth *

* Note: All f ig ures

adjusted for FX.

$0.89 $0.85

$1.08

$-

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

Q3 2008 Q3 2009 Reported Q3 2009 FX Adjusted

$602.20 $600.20$647.40

$-

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00


14.7%13.0%

15.3%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

http://www.ir.herbalife.com/http://www.ir.herbalife.com/


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2006

(1)

2007 2008 YTD '08 YTD '09Net Income 159.7$ 191.5$ 221.2$ 187.5$ 147.7$

Other 40.3 79.3 51.8 14.1 79.6

Cash Flow from Operations 200.0 270.8 273.0 201.6 227.3

Capital Expenditures (2) (66.9) (49.0) (106.8) (82.8) (42.1)

Free Cash Flow 133.1$ 221.8$ 166.2$ 169.0$ 185.2$

Returned to Investors -$ 407.3$ 189.6$ 132.5$ 70.4$

% of Net Income 212.7% 85.7% 70.7% 47.6%

Total Debt (Due 2012/2013) 185.4$ 365.2$ 351.6$ 372.9$ 326.2$

Total Debt / LTM EBITDA(3) 0.6x 1.0x 0.9x 0.9x 1.0x

Net Debt 31.0$ 175.0$ 200.8$ 223.5$ 110.8$

Net Debt / LTM EBITDA(3)

0.1x 0.5x 0.5x 0.6x 0.3x

(1)Excludes $16.6 million in cash recapitalization expenses

(2)In FY06 - includes $7.5 million in TI allowances that will be amortized over the life of a new facility lease

(3)Excludes certain one-time items

Why HLF? Strong Cash Flow and Balance Sheet

(Dollars in Mil lions)

Why HLF? Industry Leading Return to


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FY'07 FY'08 YTD

Dividends $41.5 $50.7 $36.7

Shares Repurchased $365.8 $138.9 $33.6

Total Returned toShareholders $407.3 $189.6 $70.4

% of Net Income 213% 86% 48%

Peer Group 151% 68% 46%

Why HLF? Industry Leading Return toShareholders

* Peer Group consists of AVP, TUP, NUS and USNA, company filings

Returned approximately $670 mi ll ion to shareholders during the last 3-years


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Why HLF? Industry Leading Financial Metrics

HLF(1)

AVP(2)

TUP(2)

NUS(2)

USNA(2)

Sales Growth (2.5%) to (3%) (3.1%) (2.0%) 4.1% 1.6%

Operating Margin 12.8% - 13.0% P 12.5% 12.8% 11.2% 11.4%

EPS Growth (9.3%) (16.2%) 7.8% 37.3% (0.9%)

Forward P/E 11.4x P 15.2x 14.1x 16.4x 13.3xEPS (CAGR) 15.7% P 8.2% 12.0% 13.6% 15.4%

EBITDA per share $5.63 P $3.28 $5.16 $3.01 $3.83

FCF Yield 13.3% P 3.6% 6.0% 13.2% 5.6%

1 Herbalife sales, margin and EPS growth based on companys guidance provided November 3, 2009. Other metrics based on First Call consensus estimates.2 Peer group based on First Call consensus estimates for 2009 versus 2008 actual results and P/E based on 2010 estimates from Capital IQ vs. the closing stock price on Dec. 11, 2009.

HLF is the least expens ive (P/E, Cash/EBITDA), high est marg in com pany in the peer grou p

HLF EPS 3-year CAGR out perform s the p eers

Wh H F? N b 2009 G id S


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Why HLF? November 2009 Guidance Summary

1 Provided in the companys November 3, 2009 earnings release.

Volume Point Growth in 2009 ref lects econom ic resi l ience of HLF Net Sales & EPS growth returns in 2010 as U.S. dollar weakened throug hou t 2009

Q4 20091

20091

20101

Low High Low High Low High

Volume point growth (decline) 8.5% 9.5% 1.0% 1.5% 5.0% 6.0%

Net sales growth (decline) 15.5% 16.5% (3.0%) (2.5%) 11.0% 13.0%

EPS $0.88 $0.91 $3.19 $3.22 $3.50 $3.65

Capex ($ in mm's) $18.0 $23.0 $60.0 $65.0 $65.0 $75.0

Effective tax rate 30.0% 31.0% 30.5% 31.0% 30.0% 31.0%

Wh HLF? V l Al d i th G id


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Why HLF? Venezuela, Already in the Guidance

Previously communicated 4Q09 events:

One time repatriation of 100m bolivars at an unfavorable rate.

Write down of cash, approximately $30 million

Recording P&L expense for repatriation unclear

Previously communicated 2010 events:

On-going repatriation of excess bolivars at curb rate was a negative $0.20, already included in2010 guidance.

Guidance assumes FX rate of no worse than 6.5 bolivars/$US

Awaiting SEC guidance for potential change in 2010 accounting treatment.

2010

Expect to regularl y

repatri ate Boli vars

Early - 2009

CADVI

Closed

October -

VZ bond

offering, $0

allocation

November -

Announced

decision to

repatriate

excess cash

from VZ

4Q09 -

Write down

of cash

anticipated

Early - 2009

Adjusted

distributor

compensation

to reflect

curb rate

Wh HLF? E l i H d i St t


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Why HLF? Evolving Hedging Strategy

0%

90-100%

T=0 T+18mo

%hedged

Hedge Accounting Eligible Rolling monthly hedges. This results in

a hedge portfolio where due tolayering, a higher percent of exposureis hedged in the near term; lowerpercent farther out.

Currently employed only for Euroexposures.

0%

90-100%T=0 T+18mo

%hedged

Not Eligible for Hedge Accounting Quarterly hedges. Hedge portfolio is

initiated at the beginning of eachcalendar quarter with final maturity atthe end of that calendar quarter.

Currently employed for other major

currency exposures (MXN, TWD, KRW,BRL, JPY, RUB, CNY, THB).

60% hedged on the Euro for 2010 @ 1.461

Wh HLF? A t bilit


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Why HLF? Accountability

Focus On Growth Initiatives Wider & Deeper

Invest incrementally in dailyconsumption

Launch satiety and brain healthproducts

Open new markets to expand theHerbalife reach around the globe

Test extended payment program Leverage Financial Strength

Utilize excess cash prudently

Invest in high ROI programs

Operational Improvements

Leverage self-manufacturing

Utilize technology platform to driveproductivity

Strengthen government relations

Guidance

EPS Guidance $3.50 - $3.65

Volume Guidance 5.0% - 6.0%

2010 Analyst Day Scorecard


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Q&A

hlf herbalife dec 2009 presentation

Documents