Herbalife will generate free cash flow to repay maturities, CFO says

By Jennifer Lanning Drey

Portland, Ore., Jan. 14 - Herbalife Ltd. will be able to repay its debt maturing in 2012 and 2013 using free cash flow if the company chooses, John DeSimone, chief financial officer of Herbalife, said during a presentation late Wednesday afternoon at the ICR XChange Conference in Dana Point, Calif.

"Our debt is not a necessity, it's a capital structure choice," DeSimone said.

During the presentation, the CFO called the company "very conservatively levered," with a debt-to-EBITDA ratio of 1.0 times at year-end 2009.

Additionally, he highlighted Herbalife's financial model, which he said is characterized by low capital requirements and the majority of its cost structure being variable.

The company looks to reinvest its cash back into the business when it can exceed its hurdle rates and then return any excess cash to shareholders, he said.

Looking forward, the company has aggressive plans for international expansion with a goal of getting into nearly 60 new countries in the next 10 years.

"It's a very aggressive goal. It calls for five or six new country openings a year, but this is not a very capital intensive business, and we have one operating system around the world, which we can leverage to open up these new markets," DeSimone said.

Herbalife plans to expand into six new countries in 2010.

Los Angeles-based Herbalife is a marketing company that sells weight-management, nutritional supplements and personal care products.

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