Herbalife Share Repurchase Likely: Health And Wellness Industry News Roundup

$1.45m loan tees up Herbalife share repurchase; Tieraona Low Dog is Vitamin Shoppe's "chief wellnbeing ambassador"; Supplement OWL accepting label input; and more news in brief.

$1.45m Loan Tees Up Share Repurchase For Herbalife

Nutritional and weight loss supplement direct seller Herbalife Ltd. appears set to launch a share repurchase a week ahead of its Feb. 23 quarterly earnings report with a $1.45bn senior secured credit facility. Pivotal Research Group analyst Timothy Ramey, in a Feb. 14 research note, said the "key takeaway" from Herbalife's same-day announcement is that the firm "will not be sitting on cash."

Ramey said Herbalife should not wait long to use the money as it would have high debt costs from unutilized cash. "We expect Herbalife to move quickly on announcing its plans for share repurchase," he said.

The note also states that the Los Angeles-based firm will have $1.65bn in cash in addition to $150m in a five-year revolving credit that is part of the secured facility, but also increases its interest expense, creating a drag on earnings per share of 44 cents. Repurchasing shares before its 2016 fourth-quarter sales and earnings information is published Feb, 23 would lessen the impact on EPS.

Noting that Herbalife says the cash is for “growth investments and share repurchases within 18 months of the closing date,” Ramey said its share repurchases "optimally" would come before its quarterly statement. Based on available information, he estimated a 65-cent EPS benefit from the debt issuance and share repurchase for 2017 and a $1.00 benefit on an annualized basis. He also noted Herbalife's free cash flow is strong "and will continue to add to the ability to repurchase shares going forward."

Herbalife's share price was up 2.95% for the day to $61.93, and is up 15.95% for the past month after a six-month low of $47.99 in December.

The firm announced that it was seeking the credit facility in January when it also stated that it is being investigated by the Securities and Exchange Commission concerning its anti-corruption compliance in China. (Also see "Herbalife Under SEC Scrutiny On Regulatory Compliance In China" - HBW Insight, 23 Jan, 2017.)

Separately, Herbalife in July 2016 settled with the Federal Trade Commission to end an investigation launched in 2013 linked to allegations that it inflated reported retail sales by its network of independent distributors. It agreed to pay FTC $200m, determine compensation for its independent distributors based on actual end-user sales, make extensive changes in its operations and hire an independent monitor to audit its compensation practices for seven years.

Vitamin Shoppe adds 'chief wellbeing ambassador'

[Vitamin Shoppe Inc.] appoints physician Tieraona Low Dog, an expert in dietary supplements, women's health and integrative, herbal and natural medicines as its "chief wellbeing ambassador" and educator to develop content and tools for its store clerks and consumers to emphasize a holistic healthy lifestyle. The Secaucus, N.J.-based nutritional, health and wellness product manufacturer and retailer on Feb. 14 said Low Dog will produce podcasts, short format videos and events with practical advice, education and hands-on recommendations for improving wellbeing based on traditional practices and science, including stress-reducing exercises, reenergizing with sleep and navigating the landscape of nutritional supplements. For Vitam9in Shoppe's some 6,000 retail staff members, of "Health Enthusiasts," Low Dog's comprehensive training program will enhance their knowledge of lifestyle wellbeing to deepen their relationships with customers. She also will develop a training certification for the highest level of Health Enthusiast, "Wellness Trainers," who will be the ambassadors for lifestyle knowledge and customer inspiration for Vitamin Shoppe. CEO Colin Watts said Low Dog's work starts as the firm shifts its "focus from pills and powders to a broader view of holistic solutions," part of the retail re-invention program he launched in late 2015 after taking the helm. (Also see "Vitamin Shoppe Expects Sales Slump To Pass With Promotion Strategy Change" - HBW Insight, 3 Nov, 2016.)

Supplement OWL open for labels

The Council for Responsible Nutrition's Supplement OWL (Online Wellness Library) is accessible to dietary supplement firms to enter information and have their product labels available before the product registry is made public in April. CRN on Feb. 14 said the website offers step-by-step instructions on participating in tier 1 of the Supplement OWL registry in addition to a “Getting Started” section with upload options to add product labels into the registry: electronic transfer of labels from an existing IT system; conversion of labels already in the National Institutes of Health's Office of Dietary Supplements Label Database; manual data entry; or using a third-party upload service. The trade group says that by entering product labels into the registry, a firm show confidence that its products are compliant with label regulations and is aligned with the self-regulatory initiative driving Supplement OWL to demonstrate a commitment to accountability and transparency. (Also see "'Online Wellness Library' Accepting Product Labels To Test Scalability" - HBW Insight, 1 Nov, 2016.)

NPA, ANH-USA launch FSA/HSA campaign

The Natural Products Association and the Alliance for Natural Health-USA launch a campaign to encourage consumers to ask members of Congress to include dietary supplements in any health savings or flexible spending accounts legislation introduced as part of repealing or replacing the Affordable Care Act. Legislation was introduced in the previous session of Congress to make supplements eligible for purchases with FSA, HSA and similar pre-tax accounts, and legislation to restore direct purchases of OTC drugs with the accounts had been introduced during every session since the ACA struck spending on nonprescription drugs from the accounts. No bills for supplement or OTC drug purchases with the accounts has been filed during current session. (Also see "Direct OTC Purchases With Pre-Tax Savings Accounts Passes House" - Pink Sheet, 7 Jul, 2016.) (Also see "Pre-Tax Savings Purchases Could Be Next Hatch Stamp On Supplements" - HBW Insight, 16 Feb, 2016.)

NPA "is committed to working with Congress and the Trump administration to save costs for patients and taxpayers who choose to supplement their diets and healthy lifestyles,” said NPA CEO Daniel Fabricant in the trade group's Feb. 15 release. Repealing the ACA was a major plank in President Trump's campaign and has been threatened by Republicans since its passage in 2010 by a then-Democrat majority Congress. However, legislative progress on repealing or changing ACA has stalled as members of Congress receive constituents' complaints and as Capitol Hill is riveted by controversies emerging at the White House.

Aker BioMarine adding to its fleet

Norway firmAker BioMarine ASA hires Vard Group AS in a $1bn contract to build a 130-meter krill fishing vessel for use in the Antarctic. The Oslo provider of ingredients for nutraceuticals, aquaculture and animal feed on Feb. 14 said the ship will be equipped with the latest and most advanced eco-friendly technology, include a production facility capable of processing raw krill material in the Antarctic and will be made according to plans and specifications developed in cooperation with fishermen from Aker BioMarine and engineers from VARD. Construction is planned to begin in May and is expected to be complete in late 2018 and the ship will start operating in the Antarctic at the beginning of the 2019 season. The contract has a financing clause, with Aker BioMarine seeking finance through the Norwegian Export Credit Guarantee Agency.