Herbalife Stock Ailing After Unsuccessful Buyout Effort.HERBALIFE International Inc. founder Mark Hughes This article is about the Welsh footballer. For other people with the same name, see Mark Hughes (disambiguation). Leslie Mark Hughes OBE (born November 1, 1963 in Ruabon, Wrexham, Wales), nicknamed Sparky is a man with big dreams. He is not only building a 45,000-square-foot house in Benedict Canyon Benedict Canyon can mean:
Yet recently, Hughes bit off more than he could chew, and Herbalife is paying the price. The flamboyant Hughes, 43, last year announced he would take his publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. private by buying back all the outstanding stock he didn't own at $17 a share. That's considerably less than the high of $27 that Herbalife stock was trading for in spring 1998, but more than what it was trading for last week. It closed April 19 at $10.43 a share. Early this month, Hughes was forced to drop the $500 million deal because he wasn't able to garner enough capital in the high-yield financing high-yield financing See junk financing. market. The company later announced it would take a first-quarter charge of between $8.5-million and $10.5 million as a result of the collapsed buyout transaction. This came after the company announced it would settle a class-action lawsuit filed by stockholders challenging the fairness of the $17-a-share tender offer. Since these announcements, Herbalife' s stock price has fallen precipitously, hitting a 52-week low of $9.63 on April 18. Its 52-week high of $16.37 was reached on Jan. 14. Herbalife executives, particularly the normally press-friendly Hughes, have been unusually closed-mouthed since the announcements. Officials did not return calls from the Business Journal. Despite the stock plunge, financial analysts remain generally bullish on the company's future. "They are in a group of companies that is out of favor on Wall Street right now. The valuations are low not only for Herbalife, but for their competitors," said Scott Van Winkle, an analyst with the Boston-based investment bank Adams, Harness & Hill. "At $10 a share, the company is so cheap it's not even funny," said Richard Todaro, portfolio manager at Kennedy Capital Management in St. Louis, which holds $1.2 million Herbalife shares. Todaro strongly recommends Herbalife stock, particularly Class L shares - which yield a $2 annual dividend on a $10 stock price. In one year, they convert to non-voting Class B shares, which have a yield of 7 percent. The main reason analyst like Herbalife is that it continues to increase its sales and net income. "The financials on the company are still pretty solid," Todaro said. Net income for the fourth quarter ended Dec. 31 was $17.5 million (56 cents per diluted share), up from $11.3 million (38 cents) in the year-earlier quarter. For 1999, the company reported net income of $56.9 million ($1.86 per share) compared with $48.5 million ($1.60) in 1998. First-quarter results will not be released until April 28. Last year's revenues were $956.2 million vs. $866.6 million in 1998. Herbalife was started in 1980 by a then twenty-something Hughes, who employed multilevel mul·ti·lev·el adj. Having several levels: a multilevel parking garage. Adj. 1. multilevel - of a building having more than one level marketers to sell his nutritional products through independent distributors. As chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , Hughes owns about 60 percent of the company. With U.S. sales of Herbalife's 171 products flat, the company has branched into the international market to boost sales. Last year, it expanded to India, Iceland, the Slovak Republic and Jamaica. From Jan. 1, 1995, to Dec. 31, 1999, Herbalife expanded to 22 new countries. It is now in 47 countries and plans to branch out to China this year. "The natural growth of this industry is outside of the U.S., particularly in Southeast Asia Southeast Asia, region of Asia (1990 est. pop. 442,500,000), c.1,740,000 sq mi (4,506,600 sq km), bounded roughly by the Indian subcontinent on the west, China on the north, and the Pacific Ocean on the east. and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , where direct sales is much more widely accepted by the public," Van Winkle said. Currently, U.S. sales comprise about one-fourth of total revenues. Asia and the rest of the Pacific Rim Pacific Rim, term used to describe the nations bordering the Pacific Ocean and the island countries situated in it. In the post–World War II era, the Pacific Rim has become an increasingly important and interconnected economic region. make up nearly half of revenues, while Europe and other markets account for the rest. Also as part of its expansion plans, Herbalife continues to add to its existing product lines. In the last two years, it has introduced nine weight-management products, 25 nutritional supplements Nutritional Supplements Definition Nutritional supplements include vitamins, minerals, herbs, meal supplements, sports nutrition products, natural food supplements, and other related products used to boost the nutritional content of the diet. and 37 personal-care items. Some of the nutritional products are geared toward children and seniors. Several analysts said Hughes is finally starting to rebuild his company's credibility among stockholders following his buyout deal's collapse.
Herbalife International Inc.
YEAR (Dec.31) 1999 1998
Revenue (millions) $956.2 $866.6
Cost of Sales (millions) 246.6 230.8
Operating Income (millions) 92.5 78.3
Net Income (millions) 56.9 48.5
Earnings Per Share $1.86 $1.60
SUMMARY Business: Nutritional and beauty products Headquarters: Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. CEO: Mark Hughes Market Cap: $281.2 million Dividend Yield: 4% Total Liabilities: $209.2 million P/E Ratio P/E ratio Current stock price divided by trailing annual earnings per share or expected annual earnings per share. Assume XYZ Co. sells for $25.50 per share and has earned $2.55 per share this year; $25.50 = 10 times $2.55. XYZ stock sells for ten times earnings. : 5.61 Long-Term Debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. : $2.23 million |
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