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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | 12. Income Taxes The components of income before income taxes were as follows:
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
|  | (in millions) |
Domestic |  | $ | (167.7 | ) |  | $ | (94.1 | ) |  | $ | (72.0 | )
Foreign |  |  | 337.1 |  |  |  | 297.1 |  |  |  | 496.8 |
Total |  | $ | 169.4 |  |  | $ | 203.0 |  |  | $ | 424.8 |
Income taxes were as follows:
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
|  | (in millions) |
Current: |  |  |  |  |  |  |  |  |
Foreign |  | $ | 90.3 |  |  | $ | 80.8 |  |  | $ | 100.1 |
Federal |  |  | 49.4 |  |  |  | 21.3 |  |  |  | 26.3 |
State |  |  | 5.0 |  |  |  | (0.2 | ) |  |  | 7.0 |
|  |  | 144.7 |  |  |  | 101.9 |  |  |  | 133.4 |
Deferred: |  |  |  |  |  |  |  |  |
Foreign |  |  | (165.9 | ) |  |  | (1.7 | ) |  |  | (2.0 | )
Federal |  |  | (57.0 | ) |  |  | (34.6 | ) |  |  | (25.1 | )
State |  |  | (6.7 | ) |  |  | (4.8 | ) |  |  | (2.8 | )
|  |  | (229.6 | ) |  |  | (41.1 | ) |  |  | (29.9 | )
|  | $ | (84.9 | ) |  | $ | 60.8 |  |  | $ | 103.5 |
The Company recorded an income tax benefit of $84.9 million, and expenses of $60.8 million and $103.5 million for the years ended December 31, 2024, 2023, and 2022, respectively. The income tax benefit for the year ended December 31, 2024 included the tax impacts of changes the Company initiated to its corporate entity structure during the fourth quarter of 2024, including intra-entity transfers of intellectual property to one of its European subsidiaries. This reorganization resulted in the Company recognizing a step-up in tax basis on the fair value of the intellectual property and recording an associated deferred income tax asset of $177.6 million, partially offset by a valuation allowance of $61.3 million for amounts not more-likely-than-not to be realized. In addition, as a result of this reorganization, the Company released valuation allowances related to net operating losses in certain of its European subsidiaries that the Company now expects to be able to utilize resulting in a benefit of $49.5 million, partially offset by a deferred tax charge of $18.5 million. The applicable statutory income tax rate in the Cayman Islands was zero for Herbalife Ltd. for the years being reported. For purposes of the reconciliation between the provision for income taxes at the statutory rate and the provision for income taxes at the effective tax rate, the 21% U.S. tax rate (the tax rate at which the majority of the Company’s operations are taxed) is applied for the years ended December 31, 2024, 2023, and 2022 as follows:
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
|  | (in millions) |
Tax expense at United States statutory rate |  | $ | 35.6 |  |  | $ | 42.6 |  |  | $ | 89.2 |
Increase (decrease) in tax resulting from: |  |  |  |  |  |  |  |  |
Differences between U.S. and foreign tax rates on foreign income, including withholding taxes |  |  | 30.2 |  |  |  | 90.3 |  |  |  | (21.5 | )
U.S. tax expense (benefit) on foreign income, net of foreign tax credits |  |  | (12.0 | ) |  |  | 1.1 |  |  |  | (4.7 | )
Intra-entity transfers of intellectual property |  |  | (177.6 | ) |  |  | — |  |  |  | — |
Deferred tax charge |  |  | 18.5 |  |  |  | (7.4 | ) |  |  | — |
Increase (decrease) in valuation allowances |  |  | 28.8 |  |  |  | (61.0 | ) |  |  | 24.7 |
State taxes, net of federal benefit |  |  | (2.2 | ) |  |  | (5.6 | ) |  |  | 3.9 |
Unrecognized tax (benefits) expenses |  |  | (13.8 | ) |  |  | (6.1 | ) |  |  | 7.5 |
Excess tax expense (benefits) on equity awards |  |  | 6.5 |  |  |  | 5.2 |  |  |  | 0.6 |
U.S. research and development tax credit |  |  | (4.9 | ) |  |  | (4.4 | ) |  |  | (2.4 | )
Expenses not deductible for tax |  |  | 6.3 |  |  |  | 3.2 |  |  |  | 4.0 |
Other |  |  | (0.3 | ) |  |  | 2.9 |  |  |  | 2.2 |
Total |  | $ | (84.9 | ) |  | $ | 60.8 |  |  | $ | 103.5 |
The significant categories of temporary differences that gave rise to deferred income tax assets and liabilities were as follows:
|  | December 31, |
|  | 2024 |  |  | 2023 |
|  | (in millions) |
Deferred income tax assets: |  |  |  |  |  |
Accruals not currently deductible |  | $ | 86.2 |  |  | $ | 77.1 |
Tax loss and credit carryforwards of certain foreign subsidiaries |  |  | 225.6 |  |  |  | 216.7 |
Tax loss and domestic tax credit carryforwards |  |  | 161.6 |  |  |  | 174.3 |
Intellectual property |  |  | 177.6 |  |  |  | — |
Deferred compensation plan |  |  | 27.8 |  |  |  | 32.6 |
Deferred interest expense |  |  | 77.6 |  |  |  | 48.9 |
Inventory reserve |  |  | 5.9 |  |  |  | 7.1 |
Operating lease liabilities |  |  | 42.2 |  |  |  | 41.0 |
Depreciation and amortization |  |  | 77.0 |  |  |  | 56.7 |
Other |  |  | 24.5 |  |  |  | 8.9 |
Gross deferred income tax assets |  |  | 906.0 |  |  |  | 663.3 |
Less: valuation allowance |  |  | (404.2 | ) |  |  | (375.5 | )
Total deferred income tax assets |  | $ | 501.8 |  |  | $ | 287.8 |
Deferred income tax liabilities: |  |  |  |  |  |
Intangible assets |  | $ | 71.9 |  |  | $ | 72.7 |
Unremitted foreign earnings |  |  | 11.7 |  |  |  | 18.7 |
Operating lease assets |  |  | 37.3 |  |  |  | 35.8 |
Other |  |  | — |  |  |  | 2.4 |
Total deferred income tax liabilities |  |  | 120.9 |  |  |  | 129.6 |
Total net deferred income tax assets |  | $ | 380.9 |  |  | $ | 158.2 |
Tax loss and credit carryforwards of certain foreign subsidiaries for 2024 and 2023 were $225.6 million and $216.7 million, respectively. If unused, tax loss and credit carryforwards of certain foreign subsidiaries of $211.6 million will expire between 2025 and 2041 and $14.0 million can be carried forward indefinitely. U.S. foreign tax credit carryforwards for 2024 and 2023 were $156.0 million and $168.1 million, respectively, which are included in Domestic tax credit carryforwards in the table above. If unused, U.S. foreign tax credit carryforwards will expire between 2025 and 2034. U.S. research and development tax credit carryforwards for 2024 and 2023 were $5.3 million and $7.3 million, respectively. If unused, U.S. research and development tax credit carryforwards begin expiring in 2043. The deferred interest expense can be carried forward inde finitely. U.S. state tax loss and credit carryforwards for 2024 were $1.8 million. If unused, certain U.S. state tax loss carryforwards will expire between 2038 and 2043, w hile the remaining can be carried forward indefinitely. The Company recognizes valuation allowances on deferred income tax assets reported if, based on the weight of the evidence, it is more likely than not that some or all of the deferred income tax assets will not be realized. As of December 31, 2024 and 2023, the Company held valuation allowances against net deferred income tax assets of certain subsidiaries, primarily related to tax loss carryforwards and U.S. foreign tax credits, in the amount of $404.2 million and $375.5 million, respectively. The net increase in the Company’s valuation allowance during 2024 of $28.7 million was primarily attributable to the reorganization, as described further above resulting in the Company recognizing a step-up in tax basis on the fair value of the intellectual property and recording an associated deferred income tax asset as disclosed above, partially offset by a valuation allowance increase of $61.3 million for amounts not more-likely-than-not to be realized. Also, as a result of this reorganization described above, the Company released and had a decrease of approximately $49.5 million in valuation allowances related to net operating losses in certain of its European subsidiaries that the Company now expects to be able to utilize. Separately, the Company recorded increases in valuation allowances to offset deferred income tax assets generated in certain of its European and Chinese subsidiaries in the amount of $29.1 million, offset by the utilization of U.S. foreign tax credits of $12.1 million, previously valued. The net decrease in the Company’s valuation allowance during 2023 of $61.1 million was primarily attributable to the decrease in foreign deferred interest expense and tax loss carryforwards and the related valuation allowance. As of December 31, 2024, Herbalife Ltd. had approximately $3.1 billion of permanently reinvested unremitted earnings relating to its operating subsidiaries. Since Herbalife Ltd.’s unremitted earnings have been permanently reinvested, deferred taxes were not provided on these unremitted earnings. Further, it is not practicable to determine the amount of unrecognized deferred taxes with respect to these unremitted earnings. If the Company were to remit these unremitted earnings, it would be subject to income tax on these remittances. Deferred taxes have been accrued for earnings that are not considered indefinitely reinvested. The deferred income tax liabilities on the unremitted foreign earnings as of December 31, 2024 and 2023 were $11.7 million and $18.7 million, respectively. As of December 31, 2024, the total amount of unrecognized tax benefits, including related interest and penalties was $51.3 million. If the total amount of unrecognized tax benefits was recognize d, $36.5 mill ion of unrecognized tax benefits, $10.1 million of interest, and $1.3 million of penalties would impact the effective tax rate. As of December 31, 2023, the total amount of unrecognized tax benefits, including related interest and penalties was $67.4 million. If the total amount of unrecognized tax benefits was recognized, $45.6 million of unrecognized tax benefits, $16.0 million of interest, and $2.3 million of penalties would impact the effective tax rate. The Company accounts for the interest and penalties generated by tax contingencies as a component of income tax expense. During the year ended December 31, 2024, the Company recorded a decrease in interest and penalty expense related to uncertain tax positions of $5.3 million and $0.8 million, respectively. During the year ended December 31, 2023, the Company recorded a decrease in interest and penalty expense related to uncertain tax positions of $4.2 million and $1.0 million, respectively. During the year ended December 31, 2022, the Company recorded an increase in interest and penalty expense related to uncertain tax positions of $6.1 million and $0.1 million, respectively. As of December 31, 2024, the total amount of interest and penalties related to unrecognized tax benefits recognized in the consolidated balance sheet was $10.1 million and $1.3 million, respectively. As of December 31, 2023, the total amount of interest and penalties related to unrecognized tax benefits recognized in the consolidated balance sheet was $16.0 million and $2.3 million, respectively. As of December 31, 2022, the total amount of interest and penalties related to unrecognized tax benefits recognized in the consolidated balance sheet was $19.7 million and $3.1 million, respectively. The following changes occurred in the amount of unrecognized tax benefits during the years ended December 31, 2024, 2023, and 2022:
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
|  | (in millions) |
Beginning balance of unrecognized tax benefits |  | $ | 49.1 |  |  | $ | 49.7 |  |  | $ | 54.1 |
Additions for current year tax positions |  |  | 6.8 |  |  |  | 9.7 |  |  |  | 8.8 |
Additions for prior year tax positions |  |  | 4.3 |  |  |  | 1.0 |  |  |  | 2.2 |
Reductions for prior year tax positions |  |  | (14.6 | ) |  |  | (6.6 | ) |  |  | (3.7 | )
Reductions for audit settlements |  |  | (0.3 | ) |  |  | (0.2 | ) |  |  | (1.8 | )
Reductions for the expiration of statutes of limitations |  |  | (4.1 | ) |  |  | (4.4 | ) |  |  | (6.2 | )
Changes due to foreign currency translation adjustments |  |  | (1.3 | ) |  |  | (0.1 | ) |  |  | (3.7 | )
Ending balance of unrecognized tax benefits (excluding interest and penalties) |  |  | 39.9 |  |  |  | 49.1 |  |  |  | 49.7 |
Interest and penalties associated with unrecognized tax benefits |  |  | 11.4 |  |  |  | 18.3 |  |  |  | 22.8 |
Ending balance of unrecognized tax benefits (including interest and penalties) |  | $ | 51.3 |  |  | $ | 67.4 |  |  | $ | 72.5 |
The amount of income taxes the Company pays is subject to ongoing audits by taxing jurisdictions around the world. The Company’s estimate of the potential outcome of any uncertain tax position is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. The Company believes that it has adequately provided for these matters. However, the Company’s future results may include favorable or unfavorable adjustments to its estimates in the period the audits are resolved, which may impact the Company’s effective tax rate. As of December 31, 2024, the Company’s tax filings are generally subject to examination in major tax jurisdictions for years ending on or after December 31, 2013. The Company believes that it is reasonably possible that the amount of unrecognized tax benefits could decrease by up to approximately $7.3 million within the next twelve months. Of this possible decrease, $6.4 million would be due to the expiration of statute of limitations in various jurisdictions. The remaining possible decrease of $0.9 million would be due to settlement of audits or resolution of administrative or judicial proceedings.

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