Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of registrant’s common shares outstanding as of ~~October 26, 2017~~April 25, 2023 was ~~87,197,196~~98,920,356.


	September 30, 2017			December 31, 2016				March 31, 2023			December 31, 2022
	(In millions, except share and par value amounts)							(in millions, except share and par value amounts)
ASSETS							ASSETS
CURRENT ASSETS:
Current assets:
Cash and cash equivalents	$	1,636.3		$	844.0			$	454.2		$	508.0
Receivables, net of allowance for doubtful accounts		95.2			70.3				85.1			70.6
Inventories		354.2			371.3				545.1			580.7
Prepaid expenses and other current assets		188.4			176.9				237.8			196.8
Total current assets		2,274.1			1,462.5				1,322.2			1,356.1
Property, at cost, net of accumulated depreciation and amortization		375.1			378.0
Marketing related intangibles and other intangible assets, net		310.1			310.1
Property, plant, and equipment, at cost, net of accumulated depreciation and amortization									479.9			486.3
Operating lease right-of-use assets									202.0			207.1
Marketing-related intangibles and other intangible assets, net									315.2			315.7
Goodwill		95.8			89.9				94.0			93.2
Other assets		367.4			324.9				274.3			273.6
Total assets	$	3,422.5		$	2,565.4			$	2,687.6		$	2,732.0
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
LIABILITIES AND SHAREHOLDERS’ DEFICIT							LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	60.6		$	66.0			$	67.9		$	89.8
Royalty overrides		266.7			261.2				317.4			343.3
Current portion of long-term debt		104.1			9.5				293.7			29.5
Other current liabilities		427.4			454.8				548.2			514.0
Total current liabilities		858.8			791.5				1,227.2			976.6
NON-CURRENT LIABILITIES:
Long-term debt, net of current portion		2,176.6			1,438.4				2,335.4			2,662.5
Non-current operating lease liabilities									186.5			192.4
Other non-current liabilities		168.1			139.2				161.3			166.4
Total liabilities		3,203.5			2,369.1				3,910.4			3,997.9
CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common shares, $0.001 par value; 1.0 billion shares authorized; 89.3 million (2017) and 93.1 million (2016) shares outstanding		0.1			0.1
Commitments and contingencies
Shareholders’ deficit:
Common shares, $0.0005 par value; 2.0 billion shares authorized; 98.7 million (2023) and 97.9 million (2022) shares outstanding									0.1			0.1
Paid-in capital in excess of par value		452.0			467.6				191.3			188.7
Accumulated other comprehensive loss		(174.6	)		(205.1	)			(239.0	)		(250.2	)
Retained earnings (accumulated deficit)		240.7			(66.3	)
Treasury stock, at cost, 4.6 million shares (2017)		(299.2	)		—
Total shareholders’ equity		219.0			196.3
Total liabilities and shareholders’ equity	$	3,422.5		$	2,565.4
Accumulated deficit									(1,175.2	)		(1,204.5	)
Total shareholders’ deficit									(1,222.8	)		(1,265.9	)
Total liabilities and shareholders’ deficit								$	2,687.6		$	2,732.0

See the accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended						Nine Months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			Three Months Ended
	(In millions, except per share amounts)												March 31, 2023			March 31, 2022
Product sales	$	1,029.7		$	1,063.2		$	3,162.8		$	3,253.1
Shipping & handling revenues		55.7			58.8			171.6			190.3
													(in millions, except per share amounts)
Net sales		1,085.4			1,122.0			3,334.4			3,443.4		$	1,252.1		$	1,335.8
Cost of sales		215.4			209.1			638.8			658.5			298.6			307.1
Gross profit		870.0			912.9			2,695.6			2,784.9			953.5			1,028.7
Royalty overrides		310.1			320.3			944.1			968.9			416.0			433.8
Selling, general & administrative expenses		445.2			441.3			1,327.0			1,545.2
Selling, general, and administrative expenses														475.9			454.9
Other operating income		(4.6	)		(0.2	)		(43.5	)		(29.1	)		(8.9	)		(13.1	)
Operating income		119.3			151.5			468.0			299.9			70.5			153.1
Interest expense, net		38.4			22.1			106.5			70.1			39.4			29.7
Income before income taxes		80.9			129.4			361.5			229.8			31.1			123.4
Income taxes		26.4			41.7			84.2			69.2			1.8			25.2
NET INCOME	$	54.5		$	87.7		$	277.3		$	160.6
Net income													$	29.3		$	98.2
Earnings per share:
Basic	$	0.69		$	1.06		$	3.41		$	1.94		$	0.30		$	0.98
Diluted	$	0.66		$	1.01		$	3.26		$	1.87		$	0.29		$	0.96
Weighted average shares outstanding:
Weighted-average shares outstanding:
Basic		79.6			83.1			81.4			83.0			98.5			99.9
Diluted		83.0			86.4			85.0			86.1			100.2			101.7

See the accompanying notes to unaudited condensed consolidated financial statements.

	Nine Months Ended
	September 30, 2017			September 30, 2016			Three Months Ended
	(In millions)						March 31, 2023			March 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
							(in millions)
Cash flows from operating activities:
Net income	$	277.3		$	160.6		$	29.3		$	98.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		73.8			72.6			27.6			29.2
Share-based compensation expenses		32.6			30.3			10.8			12.4
Non-cash interest expense		44.8			42.0			1.7			1.7
Deferred income taxes		(4.1	)		(38.4	)		8.8			5.9
Inventory write-downs		17.7			16.7			11.5			10.9
Foreign exchange transaction loss (gain)		4.0			(1.4	)
Foreign exchange transaction loss								3.2			2.4
Other		(1.1	)		(3.8	)		2.4			(3.8	)
Changes in operating assets and liabilities:
Receivables		(22.5	)		(14.6	)		(13.8	)		(16.7	)
Inventories		29.2			(56.7	)		35.8			(7.9	)
Prepaid expenses and other current assets		(3.6	)		(14.9	)		(35.7	)		(28.8	)
Accounts payable		(8.2	)		17.5			(24.1	)		(2.3	)
Royalty overrides		(6.7	)		14.1			(31.7	)		42.8
Other current liabilities		(45.0	)		24.3			28.9			(22.3	)
Other		16.2			1.6			(8.5	)		8.8
NET CASH PROVIDED BY OPERATING ACTIVITIES		404.4			249.9
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(67.9	)		(111.9	)
Net cash provided by operating activities								46.2			130.5
Cash flows from investing activities:
Purchases of property, plant, and equipment								(30.3	)		(41.3	)
Other		(2.8	)		4.4			0.1			0.1
NET CASH USED IN INVESTING ACTIVITIES		(70.7	)		(107.5	)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from senior secured credit facility, net of discount		1,274.0			—
Net cash used in investing activities								(30.2	)		(41.2	)
Cash flows from financing activities:
Borrowings from senior secured credit facility								71.0			82.0
Principal payments on senior secured credit facility and other debt		(468.2	)		(233.0	)		(138.4	)		(89.3	)
Debt issuance costs		(22.6	)		—			(0.3	)		—
Share repurchases		(346.2	)		(12.5	)		(8.7	)		(116.2	)
Other		1.6			4.2			0.4			1.1
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		438.6			(241.3	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		20.0			(2.6	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		792.3			(101.5	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		844.0			889.8
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,636.3		$	788.3
Net cash used in financing activities								(76.0	)		(122.4	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash								5.5			1.3
Net change in cash, cash equivalents, and restricted cash								(54.5	)		(31.8	)
Cash, cash equivalents, and restricted cash, beginning of period								516.3			610.4
Cash, cash equivalents, and restricted cash, end of period							$	461.8		$	578.6

See the accompanying notes to unaudited condensed consolidated financial statements.

2. Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated interim financial information of the Company has been prepared in accordance with Article 10 of the Securities and Exchange Commission’s, or ~~the~~ SEC, Regulation S-X. Accordingly, as permitted by Article 10 of the SEC’s Regulation S-X, it does not include all of the information required by generally accepted accounting principles in the U.S., or U.S. GAAP, for complete financial statements. The condensed consolidated balance sheet atas of December 31, ~~2016~~2022 was derived from the audited financial statements at that date and does not include all the disclosures required by U.S. GAAP, as permitted by Article 10 of the SEC’s Regulation S-X. The Company’s unaudited condensed consolidated financial statements as of ~~September 30, 2017,~~March 31, 2023 and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022 include Herbalife Ltd. and all of its direct and indirect subsidiaries. In the opinion of management, the accompanying financial information contains all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s unaudited condensed consolidated financial statements as of ~~September 30, 2017,~~March 31, 2023 and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2022, or the ~~2016~~2022 10-K. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 and 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2023.

Recently Adopted Pronouncements

In March ~~2016,~~2022, the Financial Accounting Standards Board ~~or FASB,~~(“FASB”) issued Accounting Standards Update ~~or ASU~~(“ASU”) No. ~~2016-09,~~ ~~Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~. This ASU is intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements, including the income tax effects of share-based payments and accounting for forfeitures. The amendments in this update became effective for the Company’s reporting period beginning January 1, 2017. This guidance requires the Company to recognize excess tax benefits on share-based compensation arrangements in its tax provision, instead of in shareholders’ equity as under the previous guidance. During the three and nine months ended September 30, 2017, the Company recorded $0.6 million and $26.4 million of excess tax benefits in its tax provision, respectively, as described further in Note 8, ~~Income Taxes~~. In addition, these amounts are now required to be classified as an operating activity in the Company’s statement of cash flows rather than a financing activity. The Company has elected to present the cash flow statement using a prospective transition method and prior periods have not been adjusted. In addition, the Company has made an accounting policy election to continue to estimate the number of forfeitures expected to occur. The adoption of this guidance also increased the Company’s number of shares used in its calculation of fully diluted earnings per share due to the reduction in assumed proceeds under the treasury stock method which also impacts how the Company determines its earnings per share calculation. Upon adoption of this guidance on January 1, 2017, the Company also recognized $29.6 million of its unrealized excess tax benefits, described further in Note 12, ~~Income Taxes~~ ~~in the 2016 10-K, as deferred tax assets on its consolidated balance sheet with a corresponding increase to its retained earnings.~~

~~In March 2016, the FASB issued ASU No. 2016-06,~~ 2022-01, Derivatives and Hedging (Topic 815): ~~Contingent Put and Call Options in Debt Instruments~~Fair Value Hedging — Portfolio Layer Method. This ASU clarified the requirements for assessing whether contingent put or call options that can accelerate the payment of principal on debt instruments are clearly and closely related (i.e. an entity is requiredimproves hedge accounting to ~~assess whether~~better portray the economic ~~characteristics and risks~~results of ~~embedded put or call options are clearly and closely related~~an entity’s risk management activities in its financial statements. It expands the current last-of-layer method that permits only one hedged layer to ~~those of their debt hosts only in accordance with the four-step decision sequence of FASB Accounting Standards Codification, or ASC 815,~~ ~~Derivatives and Hedging~~). An entity should no longer assess whether the event that triggers the ability to exercise a put or call option is related to interest rates or credit risk of the entity. In the first quarter of 2017, the Company adopted and applied the standard to its applicable financial instruments. The adoption of this guidance had no financial impact on the Company’s consolidated financial statements.

~~In March 2016, the FASB issued ASU No. 2016-05,~~ ~~Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. This ASU provides guidance clarifying that the novation~~allow multiple hedged layers of a derivative contract (i.e. a change in counterparty) in a hedge accounting relationship does not, in and of itself, require dedesignation of that hedge accounting relationship. If all of the other hedge accounting criteria are met, including the expectation that the hedge will be highly effective when the creditworthiness of the new counterpart to the derivative contract is considered, the hedging relationship will continue uninterrupted. The adoption of this guidance during the first quarter of 2017 had no financial impact on the Company’s consolidated financial statements.

~~New Accounting Pronouncements~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~. The new revenue recognition standard provides a five-step analysis of contracts to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB deferred the effective date of ASU No. 2014-09 for all entities by one year to annual reporting periods beginning after December 15, 2017. The FASB has issued several updates subsequently including implementation guidance on principal versus agent considerations, on how an entity should account for licensing arrangements with customers,single closed portfolio, and to improve guidance on assessing collectability, presentation of sales taxes, noncash consideration, and contract modifications and completed contracts at transition. The amendments in this series of updates shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as ofreflect that expansion, the ~~date of adoption. Early adoption~~last-of-layer method is ~~permitted. The Company continues to assess~~renamed the impact this ASU, and related subsequent updates, will have on its consolidated financial statements. As of September 30, 2017, the Company has not identified any material impact to its consolidated net income relating to this ASU. However, the final impact of this ASU on the Company’s financial statements will not be known until the assessment is complete. The Company expects to update its disclosure in future periods as the analysis is completed.

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~. The updated guidance enhances the reporting model for financial instruments by modifying how entities measure and recognize equity investments and present changes in the fair value of financial liabilities, and by simplifying the disclosure guidance for financial instruments. The amendments in this update are effective for fiscal years beginning after December 15, 2017. The amendments in this update should be applied prospectively. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~.The updated guidance requires lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The amendments also require certain quantitative and qualitative disclosures. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. A modified retrospective approach must be applied for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is evaluating the potential impact of this adoption on its consolidated financial statements, however, increases in both assets and liabilities are expected.

~~In March 2016, the FASB issued ASU No. 2016-04,~~ ~~Liabilities — Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products~~. This ASU requires entities that sell prepaid stored-value products redeemable for goods, services or cash at third-party merchants to recognize breakage (i.e., the value that is ultimately not redeemed by the consumer) in a way that is consistent with how it will be recognized under the new revenue recognition standard. Under current U.S. GAAP, there is diversity in practice in how entities account for breakage that results when a consumer does not redeem the entire product balance. This ASU clarifies that an entity’s liability for prepaid stored-value products within its scope meets the definition of a financial liability.portfolio layer method. The amendments in this update are effective for reporting periods beginning after December 15, ~~2017,~~2022, with early adoption permitted. The adoption of this guidance during the first quarter of 2023 did not have a material impact on the Company's condensed consolidated financial statements.

In September 2022, the FASB issued ASU No. 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. This ASU requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose key terms of the programs and a rollforward of the related obligations. The new standard does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The amendments in this update are effective for reporting periods beginning after December 15, 2022, except for the amendment ~~may be applied using either~~on rollforward information, which is effective for periods beginning after December 15, 2023. The adoption of this guidance during the first quarter of 2023 did not have a ~~modified retrospective approach or a full retrospective approach.~~material impact on the Company's condensed consolidated financial statements.

New Accounting Pronouncements

In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842) - Common Control Arrangements. This ASU addresses issues related to accounting for leases under common control arrangements. The standard will include an amendment to Topic 842 for all entities with leasehold improvements in common control arrangements to amortize leasehold improvements that it owns over the improvements’ useful life to the common control group if certain criteria are met. The amendments in this update are effective for reporting periods beginning after December 15, 2023, with early adoption permitted. The adoption of this guidance will not have a material impact on the Company’s condensed consolidated financial statements.

Revenue Recognition

The Company’s net sales consist of product sales. In ~~June 2016,~~general, the ~~FASB issued ASU No. 2016-13,~~ ~~Financial Instrument — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU changes the impairment model for most financial assets, requiring the use of an expected loss model which requires entities~~Company’s performance obligation is to ~~estimate the lifetime expected credit loss on financial assets measured at amortized cost. Such credit losses will be recorded as an allowance~~transfer its products to ~~offset the amortized cost of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In addition,~~ ~~credit losses relating to available-for-sale debt securities will now be recorded through an allowance for credit losses rather than as a direct write-down to the security.~~ ~~The amendments in this update are effective for reporting periods beginning after December 15, 2019, with early adoption permitted for reporting periods beginning after December 15, 2018.~~its Members. The Company generally recognizes revenue when product is ~~evaluating~~delivered to its Members. For the ~~potential impact~~majority of ~~this adoption on its consolidated financial statements.~~

~~In August 2016,~~China independent service providers and for third-party importers utilized in certain other countries where sales historically have not been material, the ~~FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~. This ASU provides clarification on eight specific cash flow issues regarding presentation and classification in the statement of cash flows with the objective of reducing the existing diversity in practice. The amendments in this update are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. ~~The adoption of this guidance will not have a material impact~~Company recognizes revenue based on the Company’s ~~consolidated financial statements.~~

~~In October 2016, the FASB issued ASU No. 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers~~estimate of ~~Assets Other Than Inventory. This ASU requires that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory~~ when the ~~transfer occurs.~~service provider or third-party importer sells the products because the Company is deemed to be the principal party of these product sales due to the additional selling and operating requirements relating to pricing of products, conducting business with physical locations, and other selling and marketing activities required of the service providers and third-party importers. The ~~amendments~~Company recognizes revenue for certain China independent service providers upon delivery as such Members have pricing discretion and increased fulfillment responsibilities and accordingly were determined to be the Company’s customers for accounting purposes.

The Company’s Members, excluding its China independent service providers, may receive distributor allowances, which are comprised of discounts, rebates, and wholesale commission payments from the Company. Distributor allowances resulting from the Company’s sales of its products to its Members are recorded against net sales because the distributor allowances represent discounts from the suggested retail price.

The Company compensates its sales leader Members with royalty overrides for services rendered relating to the development, retention, and management of their sales organizations. Royalty overrides are payable based on achieved sales volume. Royalty overrides are classified as an operating expense reflecting the services provided to the Company. The Company compensates its China independent service providers and third-party importers utilized in ~~this update do not change U.S. GAAP~~certain other countries for providing marketing, selling, and customer support services. For China and third-party importer sales transactions, as the Company is the principal party for the ~~pre-tax effects~~majority of ~~an intra-entity asset transfer under Topic 810,~~ ~~Consolidation, or~~these product sales as described above, the majority of service fees payable to China independent service providers and the compensation received by third-party importers for ~~an intra-entity transfer~~the services they provide, which represents the discount provided to them, are recorded in selling, general, and administrative expenses within the Company’s condensed consolidated statements of ~~inventory. The amendments in this update~~income. In addition, for those certain China independent service providers who are ~~effective~~deemed to be the Company’s customers for ~~reporting periods beginning after December 15, 2017, with early adoption permitted.~~ accounting purposes as described above, a portion of the service fees payable to these Members will be classified as a reduction of net sales as opposed to the entire service fee being recognized within selling, general, and administrative expenses.

The Company ~~is evaluating the potential impact~~recognizes revenue when it delivers products to its United States Members; distributor allowances, inclusive of ~~this adoption on its consolidated financial statements.~~discounts and wholesale commissions, are recorded as a reduction to net sales; and royalty overrides are classified as an operating expense.

~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires that restricted cash~~Shipping and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. The amendments in this updatehandling services relating to product sales are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~. This ASU simplifies the test for goodwill impairment by removing Step 2 from the goodwill impairment test. Companies will now perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments in this update are effective for goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted for goodwill impairment tests performed after January 1, 2017. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting~~. This ASU provides additional guidance for when a company should apply modification accounting when there is a change in either the terms or conditions of a share-based payment award. Specifically, a company should not apply modification accounting if the fair value, vesting conditions, and classification of the award remains the same immediately before and after the modification. The amendments in this update must be applied on a prospective basis and are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. ~~The adoption of this guidance will not have a material impact~~recognized as fulfillment activities on the Company’s ~~consolidated financial statements.~~performance obligation to transfer products and are therefore recorded within net sales as part of product sales and are not considered as separate revenues. Shipping and handling costs paid by the Company are included in cost of sales.

~~In August 2017, the FASB issued ASU No. 2017-12,~~ ~~Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities~~. This ASU improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and makes certain targeted improvements to simplify the application of existing hedge accounting guidance. The amendments in this update are effective for reporting periods beginning after December 15, 201~~8, with early adoption permitted.~~ The Company presents sales taxes collected from customers on a net basis.

The Company generally receives the net sales price in cash or through credit card payments at the point of sale. Accounts receivable consist principally of credit card receivables arising from the sale of products to the Company’s Members, and its collection risk is ~~evaluating~~reduced due to geographic dispersion. Credit card receivables were $67.0 million and $52.4 million as of March 31, 2023 and December 31, 2022, respectively. Substantially all credit card receivables were current as of March 31, 2023 and December 31, 2022. The Company recorded bad-debt expense related to allowances for the ~~potential impact~~Company’s receivables of ~~this adoption~~zero during both the three months ended March 31, 2023 and 2022. As of March 31, 2023 and December 31, 2022, the Company’s allowance for doubtful accounts was $1.8 million and $2.1 million, respectively. As of March 31, 2023 and December 31, 2022, the majority of the Company’s total outstanding accounts receivable were current.

The Company records advance sales deposits when payment is received but revenue has not yet been recognized. In the majority of the Company’s markets, advance sales deposits are generally recorded to income when the product is delivered to its Members. Additionally, advance sales deposits also include deferred revenues due to the timing of revenue recognition for products sold through China independent service providers. The estimated deferral period for advance sales deposits is generally within one week. During the three months ended March 31, 2023, the Company recognized substantially all of the revenues that were included within advance sales deposits as of December 31, 2022 and any remaining such balance was not material as of March 31, 2023. Advance sales deposits are included in other current liabilities on the Company’s condensed consolidated balance sheets. See Note 14, Detail of Certain Balance Sheet Accounts, for further information.

In general, if a Member returns product to the Company on a timely basis, they may obtain replacement product from the Company for such returned products. In addition, in general the Company maintains a buyback program pursuant to which it will repurchase products sold to a Member who has decided to leave the business. Allowances for product returns, primarily in connection with the Company’s buyback program, are provided at the time the sale is recorded. This accrual is based upon historical return rates for each country and the relevant return pattern, which reflects anticipated returns to be received over a period of up to 12 months following the original sale. Allowances for product returns were $2.0 million and $2.1 million as of March 31, 2023 and December 31, 2022, respectively.

The Company’s products are grouped in five product categories: weight management; targeted nutrition; energy, sports, and fitness; outer nutrition; and literature and promotional items. However, the effect of economic factors on the nature, amount, timing, and uncertainty of revenue recognition and cash flows are similar among all five product categories. The Company defines its ~~consolidated financial statements.~~operating segments through five geographic regions. The effect of economic factors on the nature, amount, timing, and uncertainty of revenue recognition and cash flows are similar among the geographic regions within the Company’s Primary Reporting Segment. See Note 6, Segment Information, for further information on the Company’s reportable segments and the Company’s presentation of disaggregated revenue by reportable segment.

Distributor Compensation – U.S.

In the U.S., distributor compensation, including Royalty overrides, is capped if the Company does not meet an annual requirement as described in the ~~Consent Order~~consent order discussed in more detail in Note 5, Contingencies. On a periodic basis, the Company evaluates if this requirement will be achieved by year end to determine if a cap on distributor compensation will be required, and then determines the appropriate amount of distributor compensation expense, which may vary in each reporting period. As of ~~September 30, 2017,~~March 31, 2023, the Company believes that the cap to distributor compensation will not be applicable for the current year.

Other Operating Income

To encourage local investment and operations, governments in various China provinces conduct grant programs. The Company applied for and received several such grants in China. Government grants are recorded into income when a legal right to the grant exists, there is a reasonable assurance that the grant proceeds will be received, and the substantive conditions under which the grants were provided have been met. ~~During the three and nine months ended September 30, 2017,~~Generally, these substantive conditions are the Company ~~recognized $4.6 million~~maintaining operations and ~~$43.5 million~~paying certain taxes in the relevant province and obtaining government approval by completing an annual application process. The Company believes the continuing obligation with respect to the funds is a general requirement that they are used only for its business in China. The Company recognized government grant income related to its regional headquarters and distribution centers within China ~~as compared to $0.2~~of approximately $8.9 million and ~~$29.1~~$13.1 million ~~for~~during the ~~same periods~~three months ended March 31, 2023 and 2022, respectively, in ~~2016.~~other operating income within its condensed consolidated statements of income. The Company intends to continue applying for government grants in China when programs are available; however, there is no assurance that the Company will receive grants in future periods.

On ~~May 4, 2015,~~August 16, 2018, the Company ~~amended its prior~~entered into a $1.25 billion senior secured credit facility, or the Prior Credit Facility, to extend the maturity date of its revolving credit facility, or the Prior Revolving Credit Facility, by one year to March 9, 2017. Pursuant to this amendment and upon execution, the Company made prepayments of approximately $20.3 million and $50.9 million on its $500 million term loan under the Prior Credit Facility, or the Prior Term Loan, and the Prior Revolving Credit Facility, respectively. Additionally, the Company’s $700 million borrowing capacity on its Prior Revolving Credit Facility was reduced by approximately $235.9 million upon execution of this amendment, and was further reduced by approximately $39.1 million on September 30, 2015. The Prior Term Loan matured on March 9, 2016 and was repaid in full. The total available borrowing capacity under the Prior Revolving Credit Facility was $425.0 million as of December 31, 2016. Prior to March 9, 2016, the interest rates on the Company’s borrowings under the Prior Credit Facility remained effectively unchanged except that the minimum applicable margin was increased by 0.50% and LIBOR was subject to a minimum floor of 0.25%. After March 9, 2016, the applicable interest rates on the Company’s borrowings under the Prior Credit Facility increased by 2.00% such that borrowings under the Prior Credit Facility began bearing interest at either LIBOR plus the applicable margin between 4.00% and 5.00% or the base rate plus the applicable margin between 3.00% and 4.00%, based on the Company’s consolidated leverage ratio. The Company incurred approximately $6.2 million of debt issuance costs in connection with the amendment. These debt issuance costs were recorded on the Company’s condensed consolidated balance sheet and were amortized over the life of the Prior Revolving Credit Facility.

~~On February 15, 2017, the Company entered into a new $1,450.0 million senior secured credit facility, or the~~2018 Credit Facility, consisting of a ~~$1,300.0~~$250.0 million term loan A, or the 2018 Term Loan A, a $750.0 million term loan B, or the 2018 Term Loan B, and a ~~$150~~$250.0 million revolving credit facility, or the 2018 Revolving Credit Facility, with a syndicate of financial institutions as ~~lenders,~~lenders. The 2018 Term Loan B matures upon the earlier of: (i) August 18, 2025, or ~~Lenders. The Revolving~~(ii) December 15, 2023 if the outstanding principal on the 2024 Convertible Notes, as defined below, exceeds $350.0 million and the Company exceeds certain leverage ratios as of that date. As described further below, the outstanding principal on the 2024 Convertible Notes is less than $350.0 million as of March 31, 2023. All obligations under the 2018 Credit Facility ~~matures~~are unconditionally guaranteed by certain direct and indirect wholly-owned subsidiaries of Herbalife Ltd. and secured by the equity interests of certain of Herbalife Ltd.’s subsidiaries and substantially all of the assets of the domestic loan parties. Also on ~~February 15, 2022~~August 16, 2018, the Company issued $400.0 million aggregate principal amount of senior unsecured notes, or the 2026 Notes as described below, and used the proceeds from the 2018 Credit Facility and the 2026 Notes to repay in full the $1,178.1 million outstanding under the Company’s prior senior secured credit facility.

~~The Term Loan~~B was issued to the ~~Lenders~~lenders at a 2%0.25% discount, or ~~$26.0~~$1.9 million. ~~In connection with the Credit Facility, the Company also repaid the $410.0 million outstanding balance on its Prior Revolving Credit Facility.~~ The Company incurred approximately ~~$22.6~~$11.7 million of debt issuance costs in connection with the 2018 Credit Facility. The discount and debt issuance costs ~~and the discount~~ are recorded on the Company’s condensed consolidated balance sheet and are being amortized over the life of the 2018 Credit Facility using the ~~effective~~effective-interest method.

On December 12, 2019, the Company amended the 2018 Credit Facility which, among other things, reduced the interest ~~method.~~rate for borrowings under the 2018 Term Loan B from either the eurocurrency rate plus a margin of 3.25% or the base rate plus a margin of 2.25% to either the eurocurrency rate plus a margin of 2.75% or the base rate plus a margin of 1.75%. The Company incurred approximately $1.2 million of debt issuance costs in connection with the amendment. For accounting purposes, pursuant to FASB ASC Topic 470, Debt, or ASC 470, this transaction was accounted for as a modification of the 2018 Credit Facility. The debt issuance costs were recognized in interest expense, net within the Company’s condensed consolidated statement of income during the fourth quarter of 2019.

On March 19, 2020, the Company amended the 2018 Credit Facility which, among other things, extended the maturity of both the 2018 Term Loan A and 2018 Revolving Credit Facility to the earlier of: (i) March 19, 2025, or (ii) September 15, 2023 if the outstanding principal on the 2024 Convertible Notes, as defined below, exceeds $350.0 million and the Company exceeds certain leverage ratios as of that date (as described further below, the outstanding principal on the 2024 Convertible Notes is less than $350.0 million as of March 31, 2023); increased borrowings under the 2018 Term Loan A from $234.4 million to a total of $264.8 million; increased the total available borrowing capacity under 2018 Revolving Credit Facility from $250.0 million to $282.5 million; and reduced the interest rate for borrowings under both the 2018 Term Loan A and 2018 Revolving Credit Facility from either the eurocurrency rate plus a margin of 3.00% or the base rate plus a margin of 2.00% to either the eurocurrency rate plus a margin of 2.50% or the base rate plus a margin of 1.50%. The Company incurred approximately $1.6 million of debt issuance costs in connection with the amendment. For accounting purposes, pursuant to ASC 470, this transaction was accounted for as a modification of the 2018 Credit Facility. Of the $1.6 million of debt issuance costs, approximately $1.1 million was recorded on the Company’s condensed consolidated balance sheet and is being amortized over the life of the 2018 Credit Facility using the effective-interest method, and approximately $0.5 million was recognized in interest expense, net within the Company’s condensed consolidated statement of income during the first quarter of 2020.

On February 10, 2021, the Company amended the 2018 Credit Facility which, among other things, reduced the interest rate for borrowings under the 2018 Term Loan B from either the eurocurrency rate plus a margin of 2.75% or the base rate plus a margin of 1.75% to either the eurocurrency rate plus a margin of 2.50% or the base rate plus a margin of 1.50%. The Company incurred approximately $1.1 million of debt issuance costs in connection with the amendment. For accounting purposes, pursuant to ASC 470, this transaction was accounted for as a modification of the 2018 Credit Facility. The debt issuance costs were recognized in interest expense, net within the Company’s condensed consolidated statement of income during the first quarter of 2021.

On July 30, 2021, the Company amended the 2018 Credit Facility which, among other things, increased borrowings under the 2018 Term Loan A from $245.0 million to a total of $286.2 million; increased the total available borrowing capacity under the 2018 Revolving Credit Facility from $282.5 million to $330.0 million; reduced the interest rate for borrowings under the 2018 Term Loan A and 2018 Revolving Credit Facility from either the eurocurrency rate plus a margin of 2.50% or the base rate plus a margin of 1.50% to, depending on the Company’s total leverage ratio, either the eurocurrency rate plus a margin of between 1.75% and 2.25% or the base rate plus a margin of between 0.75% and 1.25%; and amended the commitment fee on the undrawn portion of the 2018 Revolving Credit Facility from 0.35% per annum to, depending on the Company’s total leverage ratio, between 0.25% to 0.35% per annum. As a result of the amendment, the applicable margin for the 2018 Term Loan A and 2018 Revolving Credit Facility is currently subject to certain premiums or discounts tied to criteria determined by certain sustainability targets where the applicable margin may increase or decrease up to three basis points. The Company incurred approximately $1.4 million of debt issuance costs in connection with the amendment. For accounting purposes, pursuant to ASC 470, this transaction was accounted for as a modification of the 2018 Credit Facility. Of the $1.4 million of debt issuance costs, approximately $0.8 million was recorded on the Company’s condensed consolidated balance sheet and is being amortized over the life of the 2018 Credit Facility using the effective-interest method, and approximately $0.6 million was recognized in interest expense, net within the Company’s condensed consolidated statement of income during the third quarter of 2021.

Under the 2018 Credit Facility, borrowings under both the 2018 Term Loan A and 2018 Revolving Credit Facility bear interest at, depending on the Company’s total leverage ratio, either the eurocurrency rate plus a margin of between 1.75% and 2.25% or the base rate plus a margin of between 0.75% and 1.25%. As described above, the applicable margin may also be subject to certain premiums or discounts tied to criteria determined by certain sustainability targets. Borrowings under the 2018 Term Loan B bear interest at either the eurocurrency rate plus a margin of ~~5.50%~~2.50% or the base rate plus a margin of 4.50%. Prior to August 15, 2017, borrowings under the Revolving Credit Facility bore interest at the eurocurrency rate plus a margin of 4.75% or the base rate plus a margin of 3.75%. After August 15, 2017, borrowings under the Revolving Credit Facility, depending on Herbalife’s consolidated leverage ratio, bear interest at either the eurocurrency rate plus a margin of either 4.50% or 4.75% or the base rate plus a margin of either 3.50% or 3.75%. The base rate represents the highest of the Federal Funds Rate plus 0.50%, one-month adjusted LIBOR plus 1.00%, and the prime rate set by Credit Suisse, and is subject to a floor of 1.75%1.50%. The eurocurrency rate is based on adjusted LIBOR and is subject to a floor of ~~0.75%~~0.00%. The base rate represents the highest of the Federal Funds Rate plus 0.50%, one-month adjusted LIBOR plus 1.00%, and the prime rate quoted by The Wall Street Journal, and is subject to a floor of 1.00%. The Company is required to pay a commitment fee on the 2018 Revolving Credit Facility of, ~~0.50%~~depending on the Company’s total leverage ratio, between 0.25% to 0.35% per annum on the undrawn portion of the 2018 Revolving Credit Facility. Interest is due at least quarterly on amounts outstanding onunder the 2018 Credit Facility.

The 2018 Credit Facility requires the Company to comply with a leverage ratio. The 2018 Credit Facility also contains affirmative and negative covenants customary for financings of this type, including, among other things, limitations or prohibitions on repurchasing common shares, declaring and paying dividends and other distributions, redeeming and repurchasing certain other indebtedness, loans and investments, additional indebtedness, liens, mergers, asset sales and transactions with affiliates. In addition, the 2018 Credit Facility contains customary events of default and covenants, including covenants that limit or restrict the Company’s ability to incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, pay dividends, repurchase its common shares, merge or consolidate and enter into certain transactions with affiliates. The Company is also required to maintain a minimum balance of $200.0 million of consolidated cash and cash equivalents.default. As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, the Company was in compliance with its debt covenants under the 2018 Credit Facility. During April 2023, the Company amended the 2018 Credit Facility which, among other things, increased the leverage ratio covenant under both the 2018 Term Loan A and 2018 Revolving Credit Facility. In addition, the ~~Prior~~2018 Credit Facility ~~respectively.~~

~~The~~was also amended pursuant to the existing terms of the 2018 Credit Agreement to transition from LIBOR to the alternative benchmark rate, which is now being set as the Secured Overnight Financing Rate, or SOFR, under both the 2018 Term Loan A and 2018 Revolving Credit Facility when LIBOR is expected to be fully discontinued. The Company incurred approximately $1.1 million of debt issuance costs in connection with the amendments. For accounting purposes, pursuant to ASC 470, these transactions are expected to be accounted for as modifications of the 2018 Credit Facility during the second quarter of 2023.

The 2018 Term Loan A and 2018 Term Loan B are payable in consecutive quarterly installments ~~each in an aggregate principal amount of $24.4 million~~ which began on ~~June 30, 2017~~.December 31, 2018. In addition, beginning in 2020, the Company may be required to make mandatory prepayments towards the 2018 Term Loan B based on the Company’s consolidated leverage ratio and annual excess cash flows as defined under the terms of the 2018 Credit Facility. The Company is also permitted to make voluntary prepayments. Amounts outstanding under the 2018 Term Loan A and 2018 Term Loan B may be voluntarily prepaid without premium or penalty, subject to customary breakage fees in connection with the prepayment of a eurocurrency loan. These prepayments, if any, will be applied against remaining quarterly installments owed under the 2018 Term Loan A and 2018 Term Loan B in order of maturity with the remaining principal due upon maturity,. unless directed otherwise by the Company. Based on the 2022 consolidated leverage ratio and excess cash flow calculation, both as defined under the terms of the 2018 Credit Facility, the Company will not be required to make a mandatory prepayment in 2023 toward the 2018 Term Loan B.

~~On September 30, 2017~~As of March 31, 2023 and December 31, ~~2016,~~2022, the ~~weighted average~~weighted-average interest rate for borrowings under the ~~Credit Facility and the Prior~~2018 Credit Facility was ~~6.71%~~6.93% and ~~4.29%~~4.08%, respectively.

During the three months ended March 31, ~~2017,~~2023, the Company borrowed an aggregate amount of $71.0 million under the 2018 Credit Facility, all of which was under the 2018 Revolving Credit Facility, and repaid a total amount of ~~$410.0~~$138.2 million ~~to repay in full amounts outstanding on the Prior Revolving Credit Facility. During both the three months ended June 30, 2017 and September 30, 2017, the Company repaid $24.4 million, respectively,~~ on amounts outstanding under the ~~Term Loan.~~ 2018 Credit Facility, which included $131.0 million of repayments on amounts outstanding under the 2018 Revolving Credit Facility. During the three months ended March 31, ~~2016,~~2022, the Company borrowed an aggregate amount of $82.0 million under the 2018 Credit Facility, all of which was under the 2018 Revolving Credit Facility, and repaid a total amount of ~~$229.7~~$89.2 million ~~to repay in full the Prior Term Loan. The Company did not repay any~~on amounts outstanding under the ~~Prior~~2018 Credit Facility, which included $82.0 million of repayment on amounts outstanding under the Revolving Credit ~~Facility during the three months ended September 30, 2016.~~ Facility. As of ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, the U.S. dollar amount outstanding under the 2018 Credit Facility was $908.4 million and $975.7 million, respectively. Of the $908.4 million outstanding under the 2018 Credit Facility as of March 31, 2023, $252.2 million was outstanding under the 2018 Term Loan A and $656.2 million was ~~$1,251.2 million.~~outstanding under the 2018 Term Loan B. There were no borrowings outstanding onunder the 2018 Revolving Credit Facility as of ~~September 30, 2017.~~ AsMarch 31, 2023. Of the $975.7 million outstanding under the 2018 Credit Facility as of December 31, ~~2016, the U.S. dollar amount~~2022, $257.6 million was outstanding under the ~~Prior~~2018 Term Loan A, $658.1 million was outstanding under the 2018 Term Loan B, and $60.0 million was outstanding under the 2018 Revolving Credit ~~Facility was $410.0 million.~~Facility. There were no outstanding foreign currency borrowings under the 2018 Credit Facility as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016 under the Credit Facility and the Prior Credit Facility, respectively.~~2022.

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 and 2022, the Company recognized ~~$23.9~~$17.1 million and ~~$58.5~~$7.5 million, respectively, of interest expense relating to the ~~Term Loan,~~2018 Credit Facility, which included ~~$1.2~~$0.1 million and ~~$3.0~~$0.1 million, respectively, relating to non-cash interest expense relating to the debt discount and ~~$0.8~~$0.5 million and ~~$2.0~~$0.5 million, respectively, relating to amortization of debt issuance costs.

The fair value of the outstanding borrowings on the 2018 Term Loan isA are determined by utilizing over-the-counter market quotes for similar instruments, which are considered Level 2 inputs as described in Note 12, Fair Value Measurements. As of March 31, 2023 and December 31, 2022, the carrying value of the 2018 Term Loan A was $251.6 million and $257.0 million, respectively, and the fair value was approximately $250.6 million and $250.0 million, respectively. The fair value of the outstanding borrowings under the 2018 Term Loan B are determined by utilizing over-the-counter market quotes, which are considered Level 2 inputs as ~~defined~~described in Note 12, Fair Value Measurements. As of ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, the carrying amount of the 2018 Term Loan B was ~~$1,212.6~~$652.8 million and $654.3 million, respectively, and the fair value was approximately ~~$1,228 million. There were no amounts outstanding on the Revolving Credit Facility as of September 30, 2017.~~$652.1 million and $638.8 million, respectively. The fair value of the outstanding borrowings on the ~~Company’s Prior~~2018 Revolving Credit Facility approximated its carrying value of $60.0 million as of December 31, ~~2016~~2022 due to its variable interest rate which reprices frequently and ~~which~~ represents floating market rates.~~The fair value of the outstanding borrowings on the Prior Revolving Credit Facility was determined by utilizing Level 2 inputs as defined in Note 12,~~ ~~Fair Value Measurements, such as observable market interest rates and yield curves~~.

~~During February 2014,~~In March 2018, the Company ~~initially~~ issued ~~$1 billion~~$550.0 million aggregate principal amount of convertible senior notes, or the 2024 Convertible Notes, in a private offering to qualified institutional buyers, pursuant to Rule 144A under the Securities Act of 1933, as amended. The Company granted an option to the initial purchasers to purchase up to an additional $150 million aggregate principal amount of Convertible Notes which was subsequently exercised in full during February 2014, resulting in a total issuance of $1.15 billion aggregate principal amount of Convertible Notes. The2024 Convertible Notes are senior unsecured obligations which rank effectively subordinate to any of the Company’s existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness. The 2024 Convertible Notes pay interest at a rate of ~~2.00%~~2.625% per annum payable semiannually in arrears on ~~February~~March 15 and ~~August~~September 15 of each year, beginning on ~~August~~September 15, ~~2014. The~~2018. Unless redeemed, repurchased or converted in accordance with their terms prior to such date, the 2024 Convertible Notes mature on ~~August~~March 15, ~~2019, unless earlier repurchased or converted. The Company may not redeem the Convertible Notes prior to their stated maturity date.~~ 2024. Holders of the 2024 Convertible Notes may convert their notes at their option under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending ~~March 31, 2014,~~June 30, 2018, if the last reported sale price of the Company’s common shares for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter exceeds ~~130%~~130% of the conversion price for the 2024 Convertible Notes on each applicable trading day; (ii) during the five business-day period immediately after any five consecutive trading day period, or the measurement period, in which the trading price per ~~$1,000~~$1,000 principal amount of 2024 Convertible Notes for each trading day of that measurement period was less than ~~98%~~98% of the product of the last reported sale price of the Company’s common shares and the conversion rate for the 2024 Convertible Notes for each such day; (iii) if the Company calls the 2024 Convertible Notes for redemption; or ~~(iii)~~(iv) upon the occurrence of specified corporate events. On and after ~~May~~December 15, ~~2019,~~2023, holders may convert their 2024 Convertible Notes at any time, regardless of the foregoing circumstances. In December 2021, the Company made an irrevocable election under the indenture governing the 2024 Convertible Notes to require the principal portion of the 2024 Convertible Notes to be settled in cash and any excess in shares or cash. Upon conversion, the 2024 Convertible Notes will be settled in cash and, if applicable, the Company’s common shares, based on the applicable conversion rate at such time. The 2024 Convertible Notes had an initial conversion rate of ~~11.5908~~16.0056 common shares per ~~$1,000~~$1,000 principal amount of the 2024 Convertible Notes, ~~(which is equal to~~or an initial conversion price of approximately ~~$86.28~~$62.48 per common ~~share).~~share. The conversion rate is subject to adjustment upon the occurrence of certain events and was 16.0467 common shares per $1,000 principal amount of the 2024 Convertible Notes, or a conversion price of approximately $62.32 per common share, as of March 31, 2023.

~~The Company incurred approximately $26.6 million of issuance costs during the first quarter of 2014 relating~~In March 2018, prior to the ~~issuance~~adoption of ASU 2020-06 as described further below, the $550.0 million aggregate principal amount of the Convertible Notes. Of the $26.6 million issuance costs incurred, $21.5 million and $5.1 million were recorded as debt issuance costs and additional paid-in capital, respectively, in proportion to the allocation of the proceeds of the Convertible Notes. The $21.5 million of debt issuance cost recorded on the Company’s condensed consolidated balance sheet is being amortized over the contractual term of the Convertible Notes using the effective interest method.

~~During February 2014, the $1.15 billion proceeds received from the issuance of the~~2024 Convertible Notes were initially allocated between long-term debt, or liability component, and additional ~~paid-in-capital,~~paid-in capital, or equity component, within the Company’s condensed consolidated balance sheet at ~~$930.9~~$410.1 million and ~~$219.1~~$139.9 million, respectively. The liability component was measured using the nonconvertible debt interest rate. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the face value of the 2024 Convertible Notes as a whole. Since the Company must still settle these 2024 Convertible Notes at face value at or prior to maturity, this liability component ~~will be~~was being accreted up to its face value prior to the adoption of ASU 2020-06, resulting in additional non-cash interest expense being recognized within the Company’s condensed consolidated statements of income while the 2024 Convertible Notes remain outstanding. ~~The effective interest~~Prior to the adoption of ASU 2020-06, the effective-interest rate on the 2024 Convertible Notes iswas approximately ~~6.2%~~8.4% per annum. The equity component iswas not to be remeasured as long as it ~~continues~~continued to meet the conditions for equity classification.

The Company incurred approximately $12.9 million of issuance costs during the first quarter of 2018 relating to the issuance of the 2024 Convertible Notes. Of the $12.9 million issuance costs incurred, $9.6 million and $3.3 million were recorded as debt issuance costs and additional paid-in capital, respectively, in proportion to the allocation of the proceeds of the 2024 Convertible Notes prior to the adoption of ASU 2020-06. The $9.6 million of debt issuance costs, which was recorded as an additional debt discount on the Company’s condensed consolidated balance sheet, are being amortized over the contractual term of the 2024 Convertible Notes using the effective-interest method.

As a result of adopting ASU 2020-06, on January 1, 2022, the Company increased long-term debt by approximately $59.1 million, reduced paid-in capital in excess of par value by approximately $136.7 million, and decreased accumulated deficit by approximately $77.6 million within its condensed consolidated balance sheet. In addition, the effective-interest on the 2024 Convertible Notes is approximately 3.1% per annum. See Note 2, Significant Accounting Policies, of the 2022 10-K for further information on the Company’s adoption of ASU 2020-06.

In December 2022, the Company issued $277.5 million aggregate principal amount of new convertible senior notes due 2028, or the 2028 Convertible Notes as described below, and subsequently used the proceeds, to repurchase $287.5 million of its existing 2024 Convertible Notes from a limited number of holders in privately negotiated transactions for an aggregate purchase price of $274.9 million, which included $1.7 million of accrued interest. For accounting purposes, pursuant to ASC 470, Debt, these transactions were accounted for as an extinguishment of 2024 Convertible Notes and an issuance of new 2028 Convertible Notes. As a result, the Company recognized $286.0 million as a reduction to long-term debt representing the carrying value of the repurchased 2024 Convertible Notes. The $12.8 million difference between the cash paid and carrying value of the repurchased 2024 Convertible Notes was recognized as a gain on the extinguishment of debt and is recorded in other (income) expense, net within the Company’s consolidated statement of income during the fourth quarter of 2022. The accounting impact of the new 2028 Convertible Notes is described in further detail below.

As of ~~September 30, 2017,~~March 31, 2023, the remaining outstanding principal on the 2024 Convertible Notes was ~~$1.15 billion,~~$262.5 million, the unamortized debt ~~discount and debt~~ issuance ~~cost was $91.6~~costs were $1.1 million, and the carrying amount was $261.4 million, which was recorded to current portion of long-term debt within the ~~liability component~~Company’s condensed consolidated balance sheet. As of December 31, 2022, the remaining outstanding principal on the 2024 Convertible Notes was ~~$1,058.4~~$262.5 million, the unamortized debt issuance costs were $1.3 million, and the carrying amount was $261.2 million, which was recorded to long-term debt within the Company’s condensed consolidated balance sheet. The fair value of the 2024 Convertible Notes was approximately $249.4 million and $243.3 million as of March 31, 2023 and December 31, 2022, respectively, and was determined by utilizing over-the-counter market quotes, which are considered Level 2 inputs as defined in Note 12, Fair Value Measurements.

During the three months ended March 31, 2023 and 2022, the Company recognized $1.8 million and $4.2 million, respectively, of interest expense relating to the 2024 Convertible Notes, which included $0.3 million and $0.5 million, respectively, relating to amortization of debt issuance costs.

In December 2022, the Company issued $250.0 million aggregate principal amount of convertible senior notes in a private offering to qualified institutional buyers, pursuant to Rule 144A under the Securities Act of 1933, as amended. The Company granted an option to the initial purchasers to purchase up to an additional $37.5 million aggregate principal amount of 2028 Convertible Notes, of which $27.5 million was exercised during December 2022, resulting in a total issuance of $277.5 million aggregate principal amount of 2028 Convertible Notes. The 2028 Convertible Notes are senior unsecured obligations which rank effectively subordinate to any of the Company’s existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness. The 2028 Convertible Notes pay interest at a rate of 4.25% per annum payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023. Unless redeemed, repurchased or converted in accordance with their terms prior to such date, the 2028 Convertible Notes mature on June 15, 2028. Holders of the 2028 Convertible Notes may convert their notes at their option under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending March 31, 2023, if the last reported sale price of the Company’s common shares for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price for the 2028 Convertible Notes on each applicable trading day; (ii) during the five business-day period immediately after any five consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of 2028 Convertible Notes for each trading day of that measurement period was less than 98% of the product of the last reported sale price of the Company’s common shares and the conversion rate for the 2028 Convertible Notes for each such day; (iii) if the Company calls the 2028 Convertible Notes for redemption; or (iv) upon the occurrence of specified corporate events. On and after March 15, 2028, holders may convert their 2028 Convertible Notes at any time, regardless of the foregoing circumstances. Upon conversion, the principal portion of the 2028 Convertible Notes will be settled in cash and to the extent the conversion value exceeds the principal amount, the Company may elect to settle in cash, or a combination of cash and common shares, based on the applicable conversion rate at such time. The 2028 Convertible Notes had an initial conversion rate of 58.8998 common shares per $1,000 principal amount of the 2028 Convertible Notes, or an initial conversion price of approximately $16.98 per common share. The conversion rate is subject to adjustment upon the occurrence of certain events.

The Company incurred approximately $8.5 million of issuance costs during the fourth quarter of 2022 relating to the issuance of the 2028 Convertible Notes. These were recorded as a debt discount on the Company’s consolidated balance sheet ~~as reflected in~~and are being amortized over the ~~table above within this Note.~~ contractual term of the 2028 Convertible Notes using the effective-interest method. The effective-interest rate on the 2028 Convertible Notes is approximately 4.9% per annum.

As of ~~December~~March 31, ~~2016,~~2023, the outstanding principal on the 2028 Convertible Notes was ~~$1.15 billion,~~$277.5 million, the unamortized debt ~~discount and debt~~ issuance costs ~~was $125.2~~were $8.1 million, and the carrying amount ~~of the liability component~~ was ~~$1,024.8~~$269.4 million, which was recorded to long-term debt within the Company’s condensed consolidated balance ~~sheet as reflected in~~sheet. As of December 31, 2022, the ~~table above~~outstanding principal on the 2028 Convertible Notes was $277.5 million, the unamortized debt issuance costs were $8.4 million, and the carrying amount was $269.1 million, which was recorded to long-term debt within ~~this Note.~~ the Company’s condensed consolidated balance sheet. The fair value of the ~~liability component relating to the~~2028 Convertible Notes was approximately ~~$1,064.6~~$332.0 million and ~~$961.3~~$305.4 million as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016, respectively. At~~2022, respectively, and was determined by utilizing over-the-counter market quotes, which are considered Level 2 inputs as defined in Note 12, Fair Value Measurements.

During the three months ended March 31, 2023, the Company recognized $3.3 million, of interest expense relating to the 2028 Convertible Notes, which included $0.3 million, relating to non-cash interest expense relating to amortization of debt issuance costs.

In May 2020, the Company issued $600.0 million aggregate principal amount of senior notes, or the 2025 Notes, in a private offering in the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and outside the United States pursuant to Regulation S under the Securities Act of 1933, as amended. The 2025 Notes are senior unsecured obligations which rank effectively subordinate to any of the Company’s existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness. The 2025 Notes pay interest at a rate of 7.875% per annum payable semiannually in arrears on March 1 and September ~~30, 2017~~1 of each year, beginning on March 1, 2021. The 2025 Notes mature on September 1, 2025.

The 2025 Notes contain customary negative covenants, including, among other things, limitations or prohibitions on restricted payments, incurrence of additional indebtedness, liens, mergers, asset sales and transactions with affiliates. In addition, the 2025 Notes contain customary events of default.

The Company incurred approximately $7.9 million of issuance costs during the second quarter of 2020 relating to the issuance of the 2025 Notes. The $7.9 million of debt issuance costs, which was recorded as a debt discount on the Company’s condensed consolidated balance sheet, are being amortized over the contractual term of the 2025 Notes using the effective-interest method.

As of March 31, 2023, the outstanding principal on the 2025 Notes was $600.0 million, the unamortized debt issuance costs were $4.0 million, and the carrying amount was $596.0 million, which was recorded to long-term debt within the Company’s condensed consolidated balance sheet. As of December 31, ~~2016,~~2022, the ~~Company determined~~outstanding principal on the 2025 Notes was $600.0 million, the unamortized debt issuance costs were $4.4 million, and the carrying amount was $595.6 million, which was recorded to long-term debt within the Company’s condensed consolidated balance sheet. The fair value of the ~~liability component~~2025 Notes was approximately $567.8 million and $534.4 million as of ~~the Convertible Notes using two valuation methods. The Company reviewed~~March 31, 2023 and December 31, 2022, respectively, and was determined by utilizing over-the-counter market data that was available for publicly traded, senior, unsecured nonconvertible corporate bonds issued by companies with similar credit ratings. Assumptions used in the estimate represent what market participants would use in pricing the liability component, including market yieldsquotes and ~~credit standing to develop the straight debt~~ yield ~~estimate. The Company also used a lattice model,~~curves, which included inputs such as stock price, the Convertible Note trading price, volatility and dividend yield to estimate the straight debt yield. The Company combined the results of the two valuation methods to determine the fair value of the liability component of the Convertible Notes. Most of these inputs are ~~primarily~~ considered Level 2 and Level 3 inputs. This valuation approach was similar to the approach the Company used to determine the initial fair value of the liability component of the Convertible Notes on the February 7, 2014 issuance date.inputs as defined in Note 12, Fair Value Measurements.

In conjunction with the issuance of the Convertible Notes, during February 2014, the Company paid approximately $685.8 million to enter into prepaid forward share repurchase transactions, or the Forward Transactions, with certain financial institutions, and paid approximately $123.8 million to enter into capped call transactions with respect to its common shares, or the Capped Call Transactions, with certain financial institutions. See Note 10, ~~Shareholders’ Equity, for additional discussion on the Forward Transactions and Capped Call Transactions entered into in conjunction with the issuance of these Convertible Notes.~~

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 and 2022, the Company recognized ~~$17.2~~$12.2 million and ~~$50.9~~$12.2 million, respectively, of interest expense relating to the ~~Convertible~~2025 Notes, which included ~~$10.4~~$0.4 million and ~~$30.6 million, respectively, relating to non-cash interest expense relating to the debt discount and $1.0 million and $3.0~~$0.3 million, respectively, relating to amortization of debt issuance costs.

In May 2021, the Company issued $600.0 million aggregate principal amount of senior notes, or the 2029 Notes, in a private offering in the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and outside the United States pursuant to Regulation S under the Securities Act of 1933, as amended. The 2029 Notes are senior unsecured obligations which rank effectively subordinate to any of the Company’s existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness. The 2029 Notes pay interest at a rate of 4.875% per annum payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The 2029 Notes mature on June 1, 2029.

During the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2023 and 2022, the Company recognized ~~$16.4~~$7.5 million and ~~$48.7~~$7.5 million, respectively, of interest expense relating to the ~~Convertible~~2029 Notes, which included ~~$9.7~~$0.2 million and ~~$28.7 million, respectively, relating to non-cash interest expense relating to the debt discount and $0.9 million and $2.8~~$0.2 million, respectively, relating to amortization of debt issuance costs.

The Company’s total interest expense was ~~$43.0~~$41.8 million and ~~$24.0~~$31.4 million for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, respectively, and $117.4 million and $74.6 million for the nine months ended September 30, 2017 and 2016,~~2022, respectively, which was recognized within its condensed consolidated statements of income.

Certain vendors and government agencies may require letters of credit or similar guaranteeing arrangements to be issued or executed. As of ~~September 30, 2017,~~March 31, 2023, the Company had ~~$37.9~~$37.9 million of issued but undrawn letters of credit or similar ~~arrangements that were unsecured, which included the Mexico Value Added Tax, or VAT, related surety bonds described in Note 5,~~ ~~Contingencies~~.arrangements.

5. Contingencies

The Company is from time to time engaged in routine litigation. The Company regularly reviews all pending litigation matters in which it is involved and establishes reserves deemed appropriate by management for these litigation matters when a probable loss estimate can be made.

~~These~~16

The matters described in this Note may take several years to resolve. While the Company believes it has meritorious defenses, it cannot be sure of their ultimate resolution. Although the Company may reserve amounts for certain matters that the Company believes represent the most likely outcome of the resolution of these related disputes, if the Company is incorrect in its assessment, the Company may have to record additional expenses, when it becomes probable that an increased potential liability is warranted.

Tax Matters

On May 7, 2010, the Company received an assessment from the Mexican Tax Administration Service in an amount equivalent to approximately $63.1 million, translated at the September 30, 2017 spot rate, for various items, the majority of which was VAT allegedly owed on certain of the Company’s products imported into Mexico during the years 2005 and 2006. This assessment is subject to interest and inflationary adjustments. On July 8, 2010, the Company initiated a formal administrative appeal process. On May 13, 2011, the Mexican Tax Administration Service issued a resolution on the Company’s administrative appeal. The resolution nullified the assessment. Since the Mexican Tax Administration Service can further review the tax audit findings and re-issue some or all of the original assessment, the Company commenced litigation in the Tax Court of Mexico in August 2011 to dispute the assertions made by the Mexican Tax Administration Service in the case. The Company received notification on February 6, 2015 that the Tax Court of Mexico nullified substantially all of the assessment. On March 18, 2015, the Mexican Tax Administration Service filed an appeal against the verdict with the Circuit Court. On August 27, 2015, the Circuit Court remanded the case back to the Tax Court of Mexico to reconsider a portion of the procedural decision that was adverse to the Mexican Tax Administration Service. The Company received notification on March 18, 2016 that the Tax Court of Mexico nullified a portion of the assessment and upheld a portion of the original assessment. On August 25, 2016, the Company filed a further appeal of this decision to the Circuit Court. On April 6, 2017, the Circuit Court issued a verdict with the Company prevailing on some lesser issues and the Tax Administration Service prevailing on the core issue. On May 11, 2017, the Company filed a further appeal to the Supreme Court of Mexico. On June 14, 2017, the Supreme Court of Mexico agreed to hear the appeal. The Company believes that it has meritorious defenses if the assessment is reissued. The Company has not recognized a loss as the Company does not believe a loss is probable.

The Mexican Tax Administration Service commenced audits of the Company’s Mexican subsidiaries for the period from January to September 2007 and on May 10, 2013, the Company received an assessment of approximately $16.2 million, translated at the September 30, 2017 spot rate, related to that period. On July 11, 2013, the Company filed an administrative appeal disputing the assessment. On September 22, 2014, the Mexican Tax Administration Service denied the Company’s administrative appeal. The Company commenced litigation in the Tax Court of Mexico in November 2014 to dispute the assertions made by the Mexican Tax Administration Service in the case. The Company issued a surety bond in the amount of $17.9 million, translated at the September 30, 2017 spot rate, through an insurance company to guarantee payment of the tax assessment as required while the Company pursues an appeal of the assessment. Litigation in this case is currently ongoing. The Company has not recognized a loss as the Company does not believe a loss is probable.

The Mexican Tax Administration Service has delayed processing value-added tax, or VAT, refunds for companies operating in Mexico and the Company believes that the process for its Mexico subsidiary to receive VAT refunds may be delayed. As of ~~September 30, 2017,~~March 31, 2023, the Company had ~~$46.3~~$20.7 million of Mexico ~~VAT related~~VAT-related assets, of which ~~$39.7~~$14.3 million was ~~within non-current other assets and $6.6 million was within~~recognized in prepaid expenses and other current assets onand $6.4 million was recognized in other assets within its condensed consolidated balance sheet. This amount relates to VAT payments made over various periods and the Company believes these amounts are recoverable by refund or they may be applied against certain future tax liabilities. Effective January 1, 2019, a tax reform law changed the rules concerning possible use of VAT assets, specifically providing that, for VAT balances generated after December 31, 2018, those balances could not be offset against taxes other than VAT obligations currently due. The Company has not recognized any losses related to these ~~VAT related~~VAT-related assets as the Company does not believe a loss is probable.

On March 26, 2015, the Office of the President of Mexico issued a decree relating to the application of VAT to nutritional supplements. The Company continues to believe its application of the VAT law in Mexico is correct. At September 30, 2017, the Company has not recognized any losses as the Company, based on its current analysis and guidance from its advisors, does not believe a loss is probable. The Company continues to evaluate and monitor its situation as it develops, including whether it will make any changes to its operations in Mexico.

The Company has not recognized a loss with respect to any of these Mexican matters as the Company, based on its analysis and guidance from its advisors, does not believe a loss is probable. Further, the Company is currently unable to reasonably estimate a possible loss or range of loss that could result from an unfavorable outcome if an assessment was re-issued or any additional assessments were to be issued for these or other periods. The Company believes that it has meritorious defenses if an assessment is re-issued or would have meritorious defenses if any additional assessment is issued.

~~As previously disclosed,~~In addition, the Mexican Tax Administration Service ~~has requested information related to~~is auditing the Company’s ~~2010 year. This information has been provided~~various tax filings for the 2019 year and ~~the Tax Administration Service has now completed~~after completing its ~~income tax audit related to~~initial examination, the ~~2010 year. The~~ Tax Administration Service is now discussing its preliminary findings with the Company. Those findings primarily concern which VAT rate is applicable to certain of the Company’s products. It is possible that the Company could receive ~~a final~~an assessment from the Tax Administration Service after these discussions are completed. The Company believes that it has ~~recognized an appropriate amount of income tax expense with respect to its Mexican operations during the 2010 year. The Company believes that it has~~ meritorious defenses if ~~a formal~~an assessment is issued by the Tax Administration ~~Service.~~Service and does not believe a loss is currently probable. The Company is currently unable to reasonably estimate the amount of loss that may result from an unfavorable outcome if a formal assessment is issued by the Tax Administration Service.

The Company has received a tax ~~assessment in September 2009~~assessments for multiple years from the Federal Revenue Office of Brazil ~~in an amount equivalent to approximately $2.2 million, translated at the September 30, 2017 spot rate,~~ related to withholding/contributions based on payments to the Company’s Members during 2004. On December 28, 2010, the Company appealed this tax assessment to the Administrative Council of Tax Appeals (2nd level administrative appeal). The Company believes it has meritorious defenses and it has not recognized a loss as the Company does not believe a loss is probable. On March 6, 2014, the Company was notified of a similar audit of the 2011 year.Members. In ~~January 2016,~~February 2022, the Company received a mixed verdict related to the 2004 tax assessment ~~for an~~which reduced the exposure to the Company. The aggregate combined amount of all these assessments is equivalent to approximately ~~$5.6~~$11.1 million, translated at the ~~September 30, 2017~~March 31, 2023 spot ~~rate, related to contributions based on payments to the Company’s Members during 2011.~~ rate. The Company ~~filed~~is currently litigating these assessments and has issued a ~~first level administrative appeal against most~~surety bond for certain of ~~the assessment on February 23, 2016, which was subsequently denied.~~ ~~On March 13, 2017, the Company appealed this tax assessment to the Administrative Council of Tax Appeals (2nd level administrative appeal).~~these amounts. The Company has not accrued a loss for the majority of the ~~assessment~~assessments because the Company does not believe a loss is probable. The Company is currently unable to reasonably estimate the amount of the loss that may result from an unfavorable outcome if additional assessments for other periods were to be issued.

The Company’s Brazilian subsidiary pays ICMS-ST taxes on its product purchases, similar to VAT. As of September 30, 2017, the Company had $16.0 million of Brazil ICMS-ST, of which $7.5 million was within non-current other assets and $8.5 million was within prepaid expenses and other current assets on its condensed consolidated balance sheet. The Company believes it will be able to utilize or recover these ICMS-ST credits in the future.

The Company is under examination in several Brazilian states related to ICMS and ICMS-ST taxation. Some of these examinations have resulted in assessments for underpaid tax that the Company has appealed. The State of ~~Sao~~São Paulo has audited the Company for the 2013 and 2014 tax years. During July 2016, for the State of ~~Sao~~São Paulo, the Company received an assessment in the aggregate amount of approximately ~~$50.8~~$31.3 million, translated at the ~~September 30, 2017~~March 31, 2023 spot rate, relating to various ICMS issues for its 2013 tax year. In August 2016, the Company filed a ~~first level~~first-level administrative appeal which was denied in February 2017. The Company filed a further appeal on March 9, 2017. On March 20, 2018, the Court held a hearing and a verdict was issued in June 2019, remanding the case back to the first-level administrative court. During August 2017, for the ~~state~~State of ~~Sao~~São Paulo, the Company received an assessment in the aggregate amount of approximately ~~$18.8~~$11.6 million, translated at the ~~September 30. 2017~~March 31, 2023 spot rate, relating to various ICMS issues for its 2014 tax year. In September 2017, the Company filed a ~~first level~~first-level administrative appeal for the 2014 tax year. The first-level administrative appeal was denied. The Company ~~has not recognized~~filed an appeal at the second-level administrative court in December 2018 and a ~~loss as~~verdict was issued in April 2019, remanding the case back to the first-level administrative court. During July 2022, the Company ~~does not believe~~received an unfavorable decision at the first-level administrative court for both the 2013 and 2014 cases which was subsequently reaffirmed by the second-level administrative court. In August 2022, the Company filed an appeal with the second-level administrative court relating to both the 2013 and 2014 cases. In the first quarter of 2023, the Company received an unfavorable decision relating to both the 2013 and 2014 cases at the second-level administrative court. The Company filed an appeal at the third-level administrative court relating to both the 2013 and 2014 cases. During September 2018, for the State of Rio de Janeiro, the Company received an assessment in the aggregate amount of approximately $6.9 million, translated at the March 31, 2023 spot rate, relating to various ICMS-ST issues for its 2016 and 2017 tax years. On November 8, 2018, the Company filed a ~~loss is probable.~~first-level administrative appeal, which was subsequently denied. On April 5, 2019, the Company appealed this tax assessment to the Administrative Council of Tax Appeals (second-level administrative appeal) and in the first quarter of 2023, received an unfavorable decision. The Company plans to litigate the case at the Judicial level. The Company has also received other ICMS tax assessments in Brazil. During the fourth quarter of 2015, the Company filed appeals with state judicial courts against three of the assessments. The Company had issued surety bonds in the aggregate amount of ~~$13.4~~$11.8 million, translated at the ~~September 30, 2017~~March 31, 2023 spot rate, to guarantee payment of some of the tax assessments as required while the Company pursues the appeals. In addition, the Company has received several ICMS tax assessments in the aggregate amount of ~~$7.2~~$3.5 million, translated at the ~~September 30, 2017~~March 31, 2023 spot rate, from several other Brazilian states where surety bonds have not been issued. Litigation in all these cases is currently ongoing. The Company has not recognized a loss relating to any of these cases, assessments, and matters as the Company does not believe a loss is probable.

The Company has received various tax assessments in multiple ~~states~~jurisdictions in India for multiple years from the Indian VAT and Service Tax authorities in an amount equivalent to approximately ~~$8.1~~$12.5 million, translated at the ~~September 30, 2017~~March 31, 2023 spot rate. These assessments are for underpaid ~~VAT.~~VAT and the ability to claim input Service Tax credits. The Company is litigating these cases at the tax administrative level and the tax tribunal levels as it believes it has meritorious defenses. The Company has not recognized a loss as it does not believe a loss is probable. In addition, the Indian income tax authorities audited the Company’s fiscal years ended March 31, 2017 and 2018 and the Company has received assessments for tax and interest of approximately $17.6 million and $17.2 million for those respective years, translated at the March 31, 2023 spot rate. These assessments are subject to penalty adjustments. The Company is currently litigating these cases. The Company currently believes that it is more likely than not that it will be successful in supporting its positions relating to these assessments. Accordingly, the Company has not accrued any amounts relating to these matters. In addition, the Indian income tax authorities are auditing multiple years and it is uncertain whether additional assessments will be received.

The Korea Customs Service audited the importation activities of Herbalife Korea for the period January 2011 through May 2013. The total assessment for the audit period ~~is $31.2 million translated at the September 30, 2017 spot rate.~~was approximately $25 million. The Company ~~has~~ paid the assessment in order to litigate the case and ~~has~~had previously recognized these payments ~~within~~in other assets onwithin its ~~condensed~~ consolidated balance ~~sheet.~~sheet as of December 31, 2021. The Company lodged a ~~first level~~first-level administrative appeal, which was denied on October 21, 2016. On January 31, 2017, the Company filed a further appeal to the National Tax Tribunal of Korea. In November 2018, the Company received an unfavorable decision from the National Tax Tribunal of Korea. In February 2019, the Company submitted an appeal to the Seoul Administrative Court. On February 17, 2021, the Seoul Administrative Court issued a verdict in favor of the Company. On March 10, 2021, the Korea Customs Service filed an appeal to the High Court against the verdict. In May 2022, the High Court issued a favorable verdict to the Company on narrow technical grounds without addressing the core of the Company's arguments. The Company filed a limited scope appeal to Supreme Court of Korea on the core of the Company's arguments where the Supreme Court declined the Company's appeal but upheld the favorable verdict that was issued by the High Court. Therefore, despite the existing customs assessment being nullified the Korea Customs Service can still issue a new assessment to the Company for the same period. In October 2022, the Korea Customs service refunded the approximately $25 million assessed amount to the Company since the assessment had been nullified by the Courts and the Company has reduced its other assets within its consolidated balance sheet by the same corresponding amount. The Korea Customs Service audited the importation activities of Herbalife Korea for the period May 2013 through December 2013. The total assessment for the audit period is $8.9 million, translated at the March 31, 2023 spot rate. The Company has paid the assessment and has recognized this payment in other assets within its condensed consolidated balance sheet as of March 31, 2023. In March 2023 the Seoul Administrative Court issued a verdict in favor of the Company on narrow technical grounds. In April 2023, the Korea Customs Service filed an appeal to the High Court against the verdict and the case continues to be litigated. The Korea Customs Service audited the importation activities of Herbalife Korea for the period January 2014 through December 2014. The total assessment for the audit period is $13.8 million, translated at the March 31, 2023 spot rate. The Company paid the assessment in September 2020 and has recognized this payment in other assets within its condensed consolidated balance sheet as of March 31, 2023. The Korea Customs Service audited the importation activities of Herbalife Korea for the period January 2015 through December 2017. The total assessment for the audit period is $11.2 million, translated at the March 31, 2023 spot rate. The Company has paid the assessment and has recognized this payment in other assets within its condensed consolidated balance sheet as of March 31, 2023. The Company is currently litigating these two assessments at the Seoul Administrative Court. The Company disagrees with the assertions made in ~~the~~all of these assessments, as well as the calculation methodology used in the assessments. The Company has not recognized a loss as the Company does not believe a loss is probable.

During the course of 2016, the Company received various questions from the Greek Social Security Agency and on December 29, 2016, the Greek Social Security Agency issued ~~an assessment of approximately $2.4 million translated at the September 30, 2017 spot rate,~~assessments with respect to Social Security Contributions on Member earnings for the 2006 year. For Social Security issues, the ~~Statute~~statute of ~~Limitations~~limitations is open for ~~2007~~2012 and later years in Greece. ~~The~~Despite the assessment amount being immaterial, the Company could receive similar assessments covering other years. The Company ~~disputes~~continues to litigate the ~~allegations raised in the assessment and has filed an administrative appeal against the assessment with the Social Security Agency.~~assessment. The Company has not recognized a loss as it does not believe a loss is probable. The Company is currently unable to reasonably estimate the amount of the loss that may result from an unfavorable outcome if additional assessments for other periods were to be issued.

U.S. Federal Trade Commission Consent Order

As previously disclosed, the Company received from the U.S. Federal Trade Commission, or the FTC, a Civil Investigative Demand, or a CID, relating to the FTC’s confidential investigation of whether the Company has complied with federal law in the advertising, marketing, or sale of business opportunities. On July 15, 2016, the Company and the Federal Trade Commission, or the FTC, entered into a proposed Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment, or the Consent Order. The Consent Order was lodged with the U.S. District Court for the Central District of California on July 15, 2016 and became effective on July 25, 2016, or the Effective ~~Date, upon final approval by the Court.~~ Date. The Consent Order resolved the FTC’s multi-year investigation of the Company.

Pursuant to the Consent Order, under which the Company neither admitted nor denied the FTC’s allegations (except as to the Court having jurisdiction over the matter), the Company made, through its ~~wholly owned~~wholly-owned subsidiary Herbalife International of America, Inc., a ~~$200~~$200 million payment to the FTC. Additionally, the Company ~~agreed~~implemented and continues to ~~implement certain new procedures and~~ enhance certain existing procedures in the U.S.~~, most of which the Company had 10 months from the Effective Date to implement.~~ Among other requirements, the Consent Order requires the Company to categorize all existing and future Members in the U.S. as either “preferred members” – who are simply consumers who only wish to purchase products for their own household use, or “distributors” – who are ~~members~~Members who wish to resell some products or build a sales organization. The Company also agreed to compensate distributors on eligible U.S. sales within their downline organization, which include purchases by preferred members, purchases by a distributor for his or her personal consumption within allowable limits and sales of product by a distributor to his or her customers. The Consent Order also imposes restrictions on a distributor’s ability to open Nutrition Clubs in the United States. The Consent Order subjects the Company to certain audits by an independent compliance auditor for a period of seven ~~years;~~years; imposes requirements on the Company regarding compliance certification and record creation and maintenance; and prohibits the Company, its affiliates and its distributors from making misrepresentations and misleading claims regarding, among other things, income and lavish lifestyles. The FTC and the independent compliance auditor have the right to inspect Company records and request additional compliance reports for purposes of conducting audits pursuant to the Consent Order. In September 2016, the Company and the FTC mutually selected Affiliated Monitors, Inc. to serve as the independent compliance auditor. The Company ~~is monitoring~~continues to monitor the impact of the Consent Order and, while the Company currently does not expect the settlement to have a long-term and materially adverse impact on its business and its Member base, the Company’s business and its Member base, particularly in the United States, may be negatively ~~impacted as the Company and the Member base adjust to the changes.~~impacted. If the Company is unable to comply with the Consent Order then this could result in a material and adverse impact to the Company’s results of operations and financial condition.

Other Matters

As a marketer of foods, dietary and nutritional supplements, and other products that are ingested by consumers or applied to their bodies, the Company has been and is currently subjected to various product liability claims. The effects of these claims to date have not been material to the Company. The Company currently maintains product liability insurance with an annual deductible of ~~$15~~$12.5 million.

~~The~~As previously disclosed, the SEC and the Department of Justice, ~~have requested from~~or DOJ, conducted investigations into the Company’s compliance with the Foreign Corrupt Practices Act, or FCPA, in China. Also, as previously disclosed, the Company ~~documents~~conducted its own review and implemented remedial and improvement measures based upon this review, including replacement of certain employees and enhancements of Company policies and procedures in China. The Company cooperated with the SEC and the DOJ and has now reached separate resolutions with each of them.

On August 28, 2020, the SEC accepted the Offer of Settlement and issued an administrative order finding that the Company violated the books and records and internal controls provisions of the FCPA. In addition, on August 28, 2020, the Company and the DOJ separately entered into a court-approved deferred prosecution agreement, or DPA, under which the DOJ deferred criminal prosecution of the Company for a period of three years related to a conspiracy to violate the books and records provisions of the FCPA. Among other ~~information relating~~things, the Company is required to undertake compliance self-reporting obligations for the three-year terms of the agreements with the SEC and the DOJ. If the Company remains in compliance with the DPA during its three-year term, the deferred charge against the Company will be dismissed with prejudice. In addition, the Company paid the SEC and the DOJ aggregate penalties, disgorgement and prejudgment interest of approximately $123 million in September 2020, of which $83 million and $40 million were recognized in selling, general, and administrative expenses within the Company’s consolidated statements of income for the years ended December 31, 2020 and 2019, respectively, related to this matter. Any failure to comply with these agreements, or any resulting further government action, could result in a material and adverse impact to the Company’s ~~anti-corruption compliance in China~~business, financial condition, and ~~the Company is conducting its own review. The Company is cooperating with the government and cannot predict the eventual scope, duration, or outcome of the matter at this time.~~

Since late 2012, a short seller has made and continues to make allegations regarding the Company and its network marketing program. The Company believes these allegations are without merit and is vigorously defending itself against such claims, including proactively reaching out to governmental authorities about what the Company believes is manipulative activity with respect to its securities. Because of these allegations, the Company and others have received and may receive additional regulatory and governmental inquiries. For example, the Company has previously disclosed inquiries from the FTC, SEC and other governmental authorities. In the future, governmental authorities may determine to seek information from the Company and other persons relating to these same or other allegations. If the Company believes any governmental or regulatory inquiry or investigation is or becomes material it will be disclosed individually. Consistent with its policies, the Company has cooperated and will continue to fully cooperate with any governmental or regulatory inquiries or investigations.operating results.

On September 18, 2017, the Company and certain of its subsidiaries and Members were named as defendants in a purported class action lawsuit, titled Rodgers, et al. v Herbalife Ltd., et al. and filed in the U.S. District Court for the Southern District of Florida, which alleges violations of Florida’s Deceptive and Unfair Trade Practices statute and federal Racketeer Influenced and Corrupt Organizations statutes, unjust enrichment, and negligent misrepresentation. On August 23, 2018, the U.S. District Court for the Southern District of Florida issued an order transferring the action to the U.S. District Court for the Central District of California as to four of the putative class plaintiffs and ordering the remaining four plaintiffs to arbitration, thereby terminating the Company defendants from the Florida action. The plaintiffs seek damages in an unspecified amount. While the Company continues to believe the lawsuit is without merit, and without admitting liability or wrongdoing, the Company and the plaintiffs have reached a settlement. Under the principal terms of the settlement, the Company would pay $12.5 million into a fund to be distributed to qualified claimants. As of March 31, 2023, this amount has been adequately reserved for within the Company’s condensed consolidated financial statements. The settlement is subject to the preliminary and final approval of the U.S. District Court for the Central District of California. The preliminary approval hearing took place on October 24, 2022, and the U.S. District Court for the Central District of California granted preliminary approval on April 6, 2023. Per the terms of the agreement, Herbalife deposited $12.5 million into the settlement fund on April 19, 2023.

On January 17, 2022, the Company filed a lawsuit, titled Herbalife International of America, Inc. vs. Eastern Computer Exchange, Inc., against a former technology services vendor in the U.S. District Court for the Central District of California. The Company alleges claims of breach of contract, breach of fiduciary duty, fraudulent concealment, conversion, and declaratory relief related to the defendant’s request for payment for technology services and products that the company never authorized. The defendant asserted numerous counterclaims against the Company. On December 28, 2022, the Court partially granted a motion to dismiss counterclaims, leaving only breach of contract, promissory estoppel, and declaratory relief counterclaims. The Company believes the ~~lawsuit is~~defendant’s counterclaims are without merit and will vigorously defend itself ~~against~~while pursuing relief for its own claims. The Company is currently unable to reasonably estimate the ~~claims in the lawsuit.~~

~~In September 2017, one~~amount of the Company’s warehouses located in Mexico sustained flooding which damaged certain inventory stored within the warehouse. The Company maintains insurance coverage with third party carriers on the affected property. As of September 30, 2017, the Company has recorded a loss ~~for the portion of its inventory balance for which the Company believes~~that may result from an unfavorable outcome and does not believe a loss is probable and estimable and has recognized an equal offsetting receivable for insurance recoveries. The Company continues to assess the remaining warehouse inventory but has not recognized any additional loss as the amount of any additional loss has not been identified and cannot be reasonably estimated. The Company believes this event will not have a material negative impact to its Mexico operations.probable.

6. Segment Information

The Company is a nutrition company that sells a wide range of weight ~~management,~~management; targeted ~~nutrition,~~nutrition; energy, sports, ~~& fitness,~~and fitness; and outer nutrition products. The Company’s products are manufactured by the Company in its Changsha, Hunan, China extraction ~~facility,~~facility; Suzhou, China ~~facility,~~facility; Nanjing, China ~~facility,~~facility; Lake Forest, California ~~facility,~~facility; and Winston-Salem, North Carolina facility, ~~and~~as well as by ~~third party~~third-party providers, and then are sold to Members who consume and sell Herbalife products to retail consumers or other Members. Revenues reflect sales of products by the Company to its Members and are categorized based on geographic location.

~~As of September 30, 2017, the~~The Company ~~sold~~sells products in ~~94 countries~~95 markets throughout the ~~world and~~world. The Company was previously organized ~~into~~ and managed ~~through~~by six geographic regions: North America, Mexico, South &and Central America, EMEA, ~~(Europe, Middle East, and Africa),~~ Asia Pacific, and ~~China~~. China. During the third quarter of 2022, in order to simplify the understanding of the Company's performance and ongoing trends of the business and align with the Company's organizational structure, the Company combined its Mexico geographic region with its South and Central America region, into one geographic region now named Latin America; therefore, the Company currently has five geographic regions. The Company defines its operating segments as those geographical operations. The Company aggregates its operating segments, excluding China, into a reporting segment, or the Primary Reporting Segment, as management believes that the Company’s operating segments have similar operating characteristics and similar ~~long term~~long-term operating performance. In making this determination, management believes that the operating segments are similar in the nature of the products sold, the product acquisition process, the types of customers to whom products are sold, the methods used to distribute the products, the nature of the regulatory environment, and their economic characteristics. China has been identified as a separate reporting segment as it does not meet the criteria for aggregation. The Company reviews its net sales and contribution margin by operating segment, and reviews its assets and capital expenditures on a consolidated basis and not by operating segment. Therefore, net sales and contribution margin are presented by reportable segment and assets and capital expenditures by segment are not presented. Although, the Company reduced its operating segments from six to five during fiscal year 2022, this change did not impact the Company’s two reportable segments and therefore, the historical reportable segment disclosures below did not need to be restated.

~~The operating~~Operating information for the two reportable segments ~~are~~is as follows:


	Three Months Ended
	March 31, 2023			March 31, 2022
	(in millions)
Net sales:
Primary Reporting Segment	$	1,184.4		$	1,230.2
China		67.7			105.6
Total net sales	$	1,252.1		$	1,335.8
Contribution margin(1):
Primary Reporting Segment	$	482.5		$	504.4
China		55.0			90.5
Total contribution margin	$	537.5		$	594.9
Selling, general, and administrative expenses(1)		475.9			454.9
Other operating income		(8.9	)		(13.1	)
Interest expense, net		39.4			29.7
Income before income taxes		31.1			123.4
Income taxes		1.8			25.2
Net income	$	29.3		$	98.2

Three Months Ended

Nine Months Ended

September 30,
2017

September 30,
2016

September 30,
2017

September 30,
2016

(In millions)

Net Sales:

Primary Reporting Segment

$
875.6

$
907.8

$
2,666.4

$
2,769.3

China

209.8

214.2

668.0

674.1

Total Net Sales

$
1,085.4

$
1,122.0

$
3,334.4

$
3,443.4

(1)

Contribution margin consists of net sales less cost of sales and Royalty overrides. For the China segment, contribution margin does not include the portion of service fees to China independent service providers included in selling, general, and administrative expenses, which totaled $33.7 million and $54.2 million for the three months ended March 31, 2023 and 2022, respectively.

Contribution Margin(1):

Primary Reporting Segment

$
375.9

$
398.8

$
1,155.7

$
1,201.5

China(2)

184.0

193.8

595.8

614.5

Total Contribution Margin

559.9

592.6

1,751.5

1,816.0

Selling, general and administrative expenses(2)

445.2

441.3

1,327.0

1,545.2

Other operating income

(4.6
)

(0.2
)

(43.5
)

(29.1
)
Interest expense, net

38.4

22.1

106.5

70.1

Income before income taxes

80.9

129.4

361.5

229.8

Income taxes

26.4

41.7

84.2

69.2

Net income

$
54.5

$
87.7

$
277.3

$
160.6

~~(1)~~

~~Contribution margin consists of net sales less cost of sales and royalty overrides. For the China segment, contribution margin does not include service fees to China independent service providers.~~

~~(2)~~

Service fees to China independent service providers totaling $99.5 million and $100.2 million for the three months ended September 30, 2017 and 2016, respectively, and $316.9 million and $318.4 million for the nine months ended September 30, 2017 and 2016, respectively, are included in selling, general and administrative expenses.

The following table sets forth net sales by geographic area:


	Three Months Ended
	March 31, 2023		March 31, 2022
	(in millions)
Net sales:
United States	$	289.2	$	317.1
India		178.6		152.0
Mexico		127.8		118.4
China		67.7		105.6
Others		588.8		642.7
Total net sales	$	1,252.1	$	1,335.8

The Company has share-based compensation plans, which are more fully described in Note 9, Share-Based Compensation, to the Consolidated Financial Statements included in the ~~2016~~2022 10-K. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, the Company granted ~~stock appreciation rights, or SARs, and~~restricted stock units subject to service conditions and ~~service and performance conditions.~~

~~In the second and third quarters of 2017, the Company granted performance~~ stock ~~unit awards to certain executives, which will vest on December 31, 2019~~appreciation rights, or SARs, subject to ~~their continued employment through that date~~service conditions.

Share-based compensation expense amounted to $10.8 million and ~~the achievement of certain performance conditions. The performance conditions include targets~~$12.4 million for Volume Points, adjusted earnings before interest and taxes, and adjusted earnings per share. These performance stock unit awards can vest at between 0% and 200% of the target award based on the achievement of the performance conditions.

~~For~~ the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, share-based compensation expense amounted to $9.9 million and $9.8 million,~~2022, respectively.~~For the nine months ended September 30, 2017 and 2016, share-based compensation expense amounted to $32.6 million and $30.3 million, respectively.~~ As of ~~September 30, 2017,~~March 31, 2023, the total unrecognized compensation cost related to all non-vested stock awards was ~~$55.5~~$66.6 million and the related weighted-average period over which it is expected to be recognized is approximately ~~1.5~~ 1.7 years.

The following ~~tables summarize~~table summarizes the activity for all SARs under ~~all~~the Company’s share-based compensation plans for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2023:

The weighted-average grant date fair value of SARs granted during the three months ended ~~September 30, 2017 and 2016~~March 31, 2023 was ~~$31.31 and $32.06, respectively.~~ ~~The weighted-average grant date fair value of~~$9.20. There were no SARs granted during the ~~nine~~three months ended ~~September 30, 2017 and 2016 was $28.36 and $29.49, respectively.~~March 31, 2022. The total intrinsic value of SARs exercised during the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was ~~$3.0~~less than $0.1 million and ~~$17.9~~$0.3 million, respectively.

The total vesting date fair value of restricted stock units which vested during the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was ~~$0.1~~$20.0 million and ~~$0.2~~$32.4 million, respectively.~~The total vesting date fair value of stock units which vested during the nine months ended September 30, 2017 and 2016 was $1.9 million and $2.0 million, respectively.~~

9. Derivative Instruments and Hedging Activities

Interest Rate Risk Management

The Company engaged in an interest rate hedging strategy for which the hedged transactions were forecasted interest payments on the Company’s 2018 Credit Facility, which are based on variable rates.

During the first quarter of 2020, the Company entered into various interest rate swap agreements with effective dates ranging between February 2020 and March 2020. These agreements collectively provided for the Company to pay interest at a weighted-average fixed rate of 0.98% on aggregate notional amounts of $100.0 million under the 2018 Credit Facility until their respective expiration dates ranging between February 2022 and March 2023, while receiving interest based on LIBOR on the same notional amounts for the same periods. At inception, these swap agreements were designated as cash flow hedges against the variability in certain LIBOR-based borrowings under the 2018 Credit Facility, effectively fixing the interest rate on such notional amounts at a weighted-average effective rate of, depending on the Company's total leverage ratio, between 2.73% and 3.23%. These hedge relationships qualified as effective under FASB ASC Topic 815, Derivatives and Hedging, or ASC 815, and consequently all changes in the fair value of these interest rate swaps were recorded as a component of accumulated other comprehensive loss within shareholders’ deficit, and were recognized in interest expense, net within the Company’s condensed consolidated statement of income during the period when the hedged item and underlying transaction affected earnings. As of March 31, 2023 and December 31, 2022, the aggregate notional amounts of interest rate swap agreements outstanding were approximately zero and $25.0 million, respectively. The fair values of the interest rate swap agreements were based on third-party bank quotes, and as of December 31, 2022, the Company recorded assets at fair value of $0.3 million relating to these interest rate swap agreements.

Foreign Currency Instruments

The Company designates certain foreign currency derivatives, primarily comprised of foreign currency forward contracts and option contracts, as freestanding derivatives for which hedge accounting does not apply. The changes in the fair market value of these freestanding derivatives are included in selling, general, and administrative expenses inwithin the Company’s condensed consolidated statements of income. The Company primarily uses freestanding foreign currency derivatives to hedge ~~foreign-currency-denominated~~foreign currency-denominated intercompany transactions and to partially mitigate the impact of foreign currency fluctuations. The fair value of the freestanding foreign currency derivatives is based on third-party quotes. The Company’s foreign currency derivative contracts are generally executed on a monthly basis.

The Company designates as ~~cash-flow~~cash flow hedges those foreign currency forward contracts it enters into to hedge forecasted inventory purchases and intercompany management fees that are subject to foreign currency exposures. Forward contracts are used to hedge forecasted inventory purchases over specific months. Changes in the fair value of these forward contracts designated as cash flow hedges, excluding forward points, ~~designated as cash-flow hedges~~ are recorded as a component of accumulated other comprehensive ~~income (loss)~~loss within shareholders’ ~~equity,~~deficit, and are recognized in cost of sales inwithin the Company’s condensed consolidated ~~statements~~statement of income during the period which approximates the time the hedged inventory is sold. The Company also hedges forecasted intercompany management fees over specific months. These contracts allow the Company to sell Euros in exchange for U.S. dollars at specified contract rates. Changes in the fair value of these forward contracts designated as cash flow hedges, excluding forward points, are recorded as a component of accumulated other comprehensive ~~income (loss)~~loss within shareholders’ ~~equity,~~deficit, and are recognized in selling, general, and administrative expenses inwithin the Company’s condensed consolidated ~~statements~~statement of income during the period when the hedged item and underlying transaction affect earnings. The Company has elected to record changes in the fair value of amounts excluded from the assessment of effectiveness currently in earnings.

As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, the aggregate notional amounts of all foreign currency contracts outstanding designated as cash flow hedges were approximately ~~$127.0~~$70.4 million and ~~$90.0~~$70.6 million, respectively. ~~At September 30, 2017,~~As of March 31, 2023, these outstanding contracts were expected to mature over the next fifteen ~~months.~~months. The Company’s derivative financial instruments are recorded on the condensed consolidated balance ~~sheet~~sheets at fair value based on third-party quotes. As of ~~September 30, 2017,~~March 31, 2023, the Company recorded assets at fair value of ~~$0.8~~$0.2 million and liabilities at fair value of ~~$5.5~~$4.7 million relating to all outstanding foreign currency contracts designated as ~~cash-flow~~cash flow hedges. As of December 31, ~~2016,~~2022, the Company recorded assets at fair value of ~~$4.6 million.~~$1.5 million and liabilities at fair value of $3.2 million relating to all outstanding foreign currency contracts designated as cash flow hedges. The Company assesses hedge effectiveness ~~and measures hedge ineffectiveness~~ at least ~~quarterly. During the three and nine months ended September 30, 2017 and 2016, the ineffective portion relating to these hedges was immaterial~~quarterly and the hedges remained effective as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~2022.

As of ~~September 30, 2017~~both March 31, 2023 and December 31, ~~2016,~~2022, the majority of the Company’s outstanding foreign currency forward contracts had maturity dates of less thantwelve months with the majority of freestanding derivatives expiring within one month ~~as of September 30, 2017 and December 31, 2016.~~. As of ~~September 30, 2017,~~March 31, 2023, the Company had aggregate notional amounts of approximately ~~$398.6~~$627.0 million of foreign currency contracts, inclusive of freestanding contracts and contracts designated as cash flow hedges.

The following tables summarize the derivative activity during the three months ended March 31, 2023 and 2022 relating to all the Company’s derivatives.

Gains and Losses on Derivative Instruments

The following table summarizes gains (losses) relating to derivative instruments recorded in other comprehensive income (loss) during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016:~~2022:


	Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)										Amount of (Loss) Gain Recognized in Other Comprehensive Income
	For the Three Months Ended					For the Nine Months Ended					Three Months Ended
	September 30, 2017			September 30, 2016		September 30, 2017			September 30, 2016		March 31, 2023			March 31, 2022
	(In millions)										(in millions)
Derivatives designated as hedging instruments:
Foreign exchange currency contracts relating to inventory and intercompany management fee hedges	$	(0.3	)	$	0.8	$	(10.8	)	$	3.1	$	(4.6	)	$	(2.9	)
Interest rate swaps												—			0.3

As of ~~September 30, 2017,~~March 31, 2023, the estimated amount of existing net losses related to cash flow hedges recorded in accumulated other comprehensive loss that are expected to be reclassified into earnings over the next twelve months was ~~$5.4~~$4.2 million.

The effect of cash flow hedging relationships on the Company’s condensed consolidated statements of income for the three months ended March 31, 2023 and 2022 was as follows:


	Location and Amount of (Loss) Gain Recognized in Income on Cash Flow Hedging Relationships
	Three Months Ended
	March 31, 2023								March 31, 2022
	Cost of sales			Selling, general, and administrative expenses			Interest expense, net		Cost of sales			Selling, general, and administrative expenses		Interest expense, net
	(in millions)
Total amounts presented in the condensed consolidated statements of income	$	298.6		$	475.9		$	39.4	$	307.1		$	454.9	$	29.7

Foreign exchange currency contracts relating to inventory hedges:
Amount of loss reclassified from accumulated other comprehensive loss to income		(2.9	)		—			—		—			—		—
Amount of loss excluded from assessment of effectiveness recognized in income		(1.4	)		—			—		(1.6	)		—		—

Foreign exchange currency contracts relating to intercompany management fee hedges:
Amount of gain (loss) reclassified from accumulated other comprehensive loss to income		—			(0.1	)		—		—			0.2		—
Amount of gain excluded from assessment of effectiveness recognized in income		—			0.1			—		—			—		—

Interest rate swaps:
Amount of gain (loss) reclassified from accumulated other comprehensive loss to income		—			—			0.3		—			—		(0.2	)
Amount of gain excluded from assessment of effectiveness recognized in income		—			—			—		—			—		—

The following table summarizes gains (losses) recorded to income relating to derivative instruments ~~recorded to income~~not designated as hedging instruments during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016:~~2022:

	Location of Gain	Amount of Gain (Loss) Recognized in Income
	(Loss)	For the Three Months Ended					For the Nine Months Ended						Amount of Loss Recognized in Income
	Recognized in Income	September 30, 2017			September 30, 2016		September 30, 2017			September 30, 2016			Three Months Ended
		(In millions)											March 31, 2023			March 31, 2022			Location of Loss Recognized in Income
Derivatives designated as hedging instruments:
Foreign exchange currency contracts relating to inventory hedges and intercompany management fee hedges(1)	Selling, general and administrative expenses	$	(2.6	)	$	—	$	(1.4	)	$	0.1
													(in millions)
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	Selling, general and administrative expenses	$	(0.5	)	$	0.6	$	(7.0	)	$	(2.6	)	$	(3.5	)	$	(0.5	)	Selling, general, and administrative expenses

~~(1)~~

For foreign exchange contracts designated as hedging instruments, the amounts recognized in income primarily represent the amounts excluded from the assessment of hedge effectiveness. There were no material ineffective amounts reported for derivatives designated as hedging instruments.

The following table summarizes gains (losses) relating to derivative instruments reclassified from accumulated other comprehensive loss into income during the three and nine months ended September 30, 2017 and 2016:

Location of Gain
(Loss)
Reclassified
from Accumulated
Other Comprehensive

Amount of Gain (Loss) Reclassified
from Accumulated
Other Comprehensive
Loss into Income

Loss into Income

For the Three Months Ended

For the Nine Months Ended

(Effective Portion)

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

(In millions)

Derivatives designated as hedging instruments:

Foreign exchange currency contracts relating to
inventory hedges

Cost of sales

$
(1.3
)

$
3.2

$
0.3

$
12.9

Foreign exchange currency contracts relating to
intercompany management fee hedges

Selling, general and
administrative expenses

$
(1.5
)

$
(0.2
)

$
(0.6
)

$
(0.8
)

The Company reports its derivatives at fair value as either assets or liabilities within its condensed consolidated balance ~~sheet.~~sheets. See Note 12, Fair Value Measurements, for information on derivative fair values and their condensed consolidated balance ~~sheet~~sheets location as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~2022.

10. Shareholders’ ~~Equity~~Deficit

Changes in shareholders’ deficit for the three months ended March 31, 2023 and 2022 were as follows:

~~Dividends~~


	Three Months Ended March 31, 2023
	Common Shares		Paid-in Capital in Excess of Par Value			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Shareholders’ Deficit
	(in millions)
Balance as of December 31, 2022	$	0.1	$	188.7		$	(250.2	)	$	(1,204.5	)	$	(1,265.9	)
Issuance of 1.3 common shares from exercise of SARs, restricted stock units, employee stock purchase plan, and other		—		0.5									0.5
Additional capital from share-based compensation				10.8									10.8
Repurchases of 0.5 common shares		—		(8.7	)					—			(8.7	)
Net income										29.3			29.3
Foreign currency translation adjustment, net of income taxes of $—							13.2						13.2
Unrealized loss on derivatives, net of income taxes of $—							(2.0	)					(2.0	)
Balance as of March 31, 2023	$	0.1	$	191.3		$	(239.0	)	$	(1,175.2	)	$	(1,222.8	)


	Three Months Ended March 31, 2022
	Common Shares		Treasury Stock			Paid-in Capital in Excess of Par Value			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Shareholders’ Deficit
	(in millions)
Balance as of December 31, 2021	$	0.1	$	(328.9	)	$	318.1		$	(211.8	)	$	(1,169.0	)	$	(1,391.5	)
Issuance of 1.0 common shares from exercise of SARs, restricted stock units, employee stock purchase plan, and other		—					1.1									1.1
Additional capital from share-based compensation							12.4									12.4
Repurchases of 3.0 common shares		—					(21.9	)					(94.3	)		(116.2	)
Net income													98.2			98.2
Foreign currency translation adjustment, net of income taxes of $—										4.4						4.4
Unrealized loss on derivatives, net of income taxes of $—										(2.6	)					(2.6	)
Cumulative effect of accounting change relating to adoption of ASU 2020-06							(136.7	)					77.6			(59.1	)
Balance as of March 31, 2022	$	0.1	$	(328.9	)	$	173.0		$	(210.0	)	$	(1,087.5	)	$	(1,453.3	)

Dividends

The Company has not declared or paid cash dividends since 2014. The declaration of future dividends is subject to the discretion of the Company’s board of directors and will depend upon various factors, including its earnings, financial condition, Herbalife Ltd.’s available distributable reserves under Cayman Islands law, restrictions imposed by the 2018 Credit Facility and the terms of any other indebtedness that may be outstanding, cash requirements, future prospects and other factors deemed relevant by its board of directors.

Share Repurchases

On February ~~21, 2017,~~9, 2021, the Company’s board of directors authorized a new three-year ~~$1.5~~$1.5 billion share repurchase program that will expire on February ~~21, 2020,~~9, 2024, which replaced the Company’s prior share repurchase authorization ~~which~~that was set to expire on ~~June~~October 30, ~~2017 which, as of December 31, 2016,~~2023 and had ~~$232.9~~approximately $7.9 million of remaining authorized ~~capacity.~~capacity when it was replaced. This share repurchase program allows the Company, which includes an indirect ~~wholly owned~~wholly-owned subsidiary of Herbalife Ltd., to repurchase the Company’s common shares at such times and prices as determined by ~~the Company’s~~ management, as market conditions warrant, and to the extent Herbalife Ltd.’s distributable reserves are available under Cayman Islands law. The 2018 Credit Facility permits the Company to repurchase its common shares as long as no default or event of default exists and other conditions, such as specified consolidated leverage ratios, are met.

~~In conjunction with~~ As of March 31, 2023, the issuance of the Convertible Notes during February 2014, the Company paid approximately $685.8 million to enter into Forward Transactions with certain financial institutions, or the Forward Counterparties, pursuant to which the Company purchased approximately 9.9 million common shares, at an average cost of $69.02 per share, for settlement on or around the August 15, 2019 maturity date for the Convertible Notes, subject to the ability of each Forward Counterparty to elect to settle all or a portion of its Forward Transactions early. S~~ee Note 4, Long-Term Debt~~ ~~for further information on the conditions for which Holders of the Convertible Notes may convert their notes prior to the maturity date.~~ The Forward Transactions were generally expected to facilitate privately negotiated derivative transactions between the Forward Counterparties and holders of the Convertible Notes, including swaps, relating to the common shares by which holders of the Convertible Notes establish short positions relating to the common shares and otherwise hedge their investments in the Convertible Notes concurrently with, or shortly after, the pricing of the Convertible Notes. The shares are treated as retired shares for basic and diluted EPS purposes although they remain legally outstanding.

~~As a result of the Forward Transactions,~~remaining authorized capacity under the Company’s ~~total shareholders’ equity within its condensed consolidated balance sheet~~$1.5 billion share repurchase program was ~~reduced by~~ approximately $685.8 million during the first quarter of 2014, with amounts of $653.9 million and $31.9 million being allocated between accumulated deficit and additional paid-in-capital, respectively, within total shareholders’ equity. Also, upon executing the Forward Transactions, the Company recorded, at fair value, $35.8 million in non-cash issuance costs to other assets and a corresponding amount to additional paid-in-capital within its condensed consolidated balance sheet. These non-cash issuance costs will be amortized to interest expense over the contractual term of the Forward Transactions. For both the three and nine months ended September 30, 2017 and 2016, the Company recognized $1.6 million and $4.8 million, respectively, of non-cash interest expense within its condensed consolidated statements of income relating to amortization of these non-cash issuance costs.$985.5 million.

During the three months ended March 31, ~~2017, an indirect wholly owned subsidiary of~~2023, the Company ~~purchased approximately 1.1 million~~did not repurchase any of ~~Herbalife Ltd.’s~~its common shares through ~~open market~~open-market purchases. During the three months ended March 31, 2022, the Company repurchased approximately 2.6 million of its common shares through open-market purchases at an aggregate cost of approximately ~~$60.7~~$101.7 million, or an average cost of ~~$56.10~~$39.32 per share. During the three months ended June 30, 2017, an indirect wholly owned subsidiary of the Company purchased approximately 2.7 million of Herbalife Ltd.’s common shares through open market purchases at an aggregate cost of approximately $179.8 million, or an average cost of $67.06 per share. During the three months ended September 30, 2017, an indirect wholly owned subsidiary of the Company purchased approximately 0.8 million of Herbalife Ltd.’s common shares through open market purchases at an aggregate cost of approximately $58.7 million, or an average cost of $72.38 per share. These 2017 share, ~~repurchases reduced the Company’s total shareholders’ equity~~ and ~~are reflected at cost within the Company’s accompanying condensed consolidated balance sheet. Although~~subsequently retired these shares are owned by an indirect wholly owned subsidiary of the Company, they are reflected as treasury shares under U.S. GAAP and therefore reduce the number of common shares outstanding within the Company’s condensed consolidated financial statements and the weighted-average number of common shares outstanding used in calculating earnings per share. The common shares of Herbalife Ltd. held by the indirect wholly owned subsidiary, however, remain outstanding on the books and records of the Company’s transfer agent and therefore still carry voting and other share rights related to ownership of the Company’s common shares, which may be exercised. So long as it is consistent with applicable laws, such shares will be voted by such subsidiary in the same manner, and to the maximum extent possible in the same proportion, as all other votes cast with respect to any matter properly submitted to a vote of Herbalife Ltd.’s shareholders. As of September 30, 2017, the Company held approximately 4.6 million of treasury shares for U.S. GAAP purposes. The Company did not repurchase any common shares in the open market during the three and nine months ended September 30, 2016. As of September 30, 2017, the remaining authorized capacity under the Company’s $1.5 billion share repurchase program was $1,200.8 million.shares.

The number of shares issued upon vesting or exercise for certain restricted stock units and SARs granted pursuant to the Company’s share-based compensation plans is net of the statutory withholding requirements that the Company pays on behalf of its employees. Although shares withheld are not issued, they are treated as common share repurchases in the Company’s condensed consolidated financial statements, ~~and reduce the Company’s additional paid-in-capital within total shareholders’ equity and are reflected as share repurchases on the Company’s condensed consolidated statements of cash flows~~ as they reduce the number of shares that would have been issued upon vesting. These shares do not count against the authorized capacity under the Company’s share repurchase program described above. During the three months ended March 31, 2023 and 2022, the Company withheld shares on its vested restricted stock units and exercised SARs relating to its share-based compensation plans.

The Company reflects the aggregate purchase price of its common shares repurchased as an increase to shareholders’ deficit. The Company generally allocated the purchase price of the repurchased shares to accumulated deficit, common shares, and additional paid-in capital, with the exception of treasury shares, which are recorded separately on the Company’s condensed consolidated balance sheets.

For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, the Company’s share repurchases, inclusive of transaction costs, were ~~$299.2~~zero and $101.7 million, ~~and none,~~ respectively, under the Company’s share repurchase programs, and ~~$47.0~~$8.7 million and ~~$12.5~~$14.5 million, respectively, due to shares withheld for tax purposes related to the Company’s share-based compensation plans. For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, the Company’s total share repurchases, including shares withheld for tax purposes, were ~~$346.2~~$8.7 million and ~~$12.5~~$116.2 million, respectively, and have been recorded as ~~a reduction~~an increase to shareholders’ ~~equity~~deficit within the Company’s condensed consolidated balance ~~sheet as of September 30, 2017 and within financing activities on its condensed consolidated statement of cash flows for the nine months ended September 30, 2017.~~ sheets.

~~Capped Call Transactions~~

In February 2014, in connection with the issuance of Convertible Notes, the Company paid approximately $123.8 million to enter into Capped Call Transactions with certain financial institutions. The Capped Call Transactions are expected generally to reduce the potential dilution upon conversion of the Convertible Notes in the event that the market price of the common shares is greater than the strike price of the Capped Call Transactions, initially set at $86.28 per common share, with such reduction of potential dilution subject to a cap based on the cap price initially set at $120.79 per common share. The strike price and cap price are subject to certain adjustments under the terms of the Capped Call Transactions. Therefore, as a result of executing the Capped Call Transactions, the Company in effect will only be exposed to potential net dilution once the market price of its common shares exceeds the adjusted cap price. As a result of the Capped Call Transactions, the Company’s additional paid-in capital within shareholders’ equity on its condensed consolidated balance sheet was reduced by $123.8 million during the first quarter of 2014.

Accumulated Other Comprehensive ~~Income (Loss)~~Loss

The following table summarizes changes in accumulated other comprehensive ~~income (loss)~~loss by component during the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016:~~2022:


	Changes in Accumulated Other Comprehensive Loss by Component
	Three Months Ended
	March 31, 2023									March 31, 2022
	Foreign Currency Translation Adjustments			Unrealized Loss on Derivatives			Total			Foreign Currency Translation Adjustments			Unrealized Loss on Derivatives			Total
	(in millions)
Beginning balance	$	(248.2	)	$	(2.0	)	$	(250.2	)	$	(211.6	)	$	(0.2	)	$	(211.8	)
Other comprehensive income (loss) before reclassifications, net of tax		13.2			(4.7	)		8.5			4.4			(2.6	)		1.8
Amounts reclassified from accumulated other comprehensive loss to income, net of tax(1)		—			2.7			2.7			—			—			—
Total other comprehensive income (loss), net of reclassifications		13.2			(2.0	)		11.2			4.4			(2.6	)		1.8
Ending balance	$	(235.0	)	$	(4.0	)	$	(239.0	)	$	(207.2	)	$	(2.8	)	$	(210.0	)

Changes in Accumulated Other Comprehensive

Income (Loss) by Component

Three Months Ended September 30,

2017

2016

Foreign
Currency
Translation
Adjustments

Unrealized
Gain (Loss)
on
Derivatives

Total

Foreign
Currency
Translation
Adjustments

Unrealized
Gain (Loss)
on
Derivatives

Total

(In millions)

Beginning Balance

$
(185.8
)

$
(2.6
)

$
(188.4
)

$
(178.8
)

$
10.3

$
(168.5
)
Other comprehensive income (loss)
   before reclassifications, net of tax

11.3

(0.2
)

11.1

(2.6
)

0.8

(1.8
)
Amounts reclassified from
   accumulated other comprehensive
   income (loss) to income, net of
   tax(1)

—

2.7

2.7

—

(3.0
)

(3.0
)
Total other comprehensive income
   (loss), net of reclassifications

11.3

2.5

13.8

(2.6
)

(2.2
)

(4.8
)
Ending balance

$
(174.5
)

$
(0.1
)

$
(174.6
)

$
(181.4
)

$
8.1

$
(173.3
)

(1)

~~(1)~~

~~See Note 9,~~ ~~Derivative Instruments and Hedging Activities, for information regarding the location in the condensed consolidated statements of income of gains (losses) reclassified from accumulated other comprehensive income (loss) into~~See Note 9, Derivative Instruments and Hedging Activities, for information regarding the location within the condensed consolidated statements of income of gains (losses) reclassified from accumulated other comprehensive loss to income during ~~the three months ended September 30, 2017 and 2016.~~

~~Other comprehensive income (loss) before reclassifications was net of tax benefits of $1.8 million for foreign currency translation adjustment for~~ the three months ended ~~September 30, 2017.~~

~~Other comprehensive income (loss) before reclassifications was net of tax expense of $5.8 million for foreign currency translation adjustment for the three months ended September 30, 2016.~~

~~The following table summarizes changes in accumulated other comprehensive income (loss) during the nine months ended September 30, 2017~~March 31, 2023 and ~~2016:~~2022.

Changes in Accumulated Other Comprehensive

Income (Loss) by Component

Nine Months Ended September 30,

2017

2016

Foreign
Currency
Translation
Adjustments

Unrealized
Gain (Loss)
on
Derivatives

Total

Foreign
Currency
Translation
Adjustments

Unrealized
Gain (Loss)
on
Derivatives

Other

Total

(In millions)

Beginning Balance

$
(215.5
)

$
10.4

$
(205.1
)

$
(183.0
)

$
17.4

$
0.1

$
(165.5
)
Other comprehensive income (loss)
   before reclassifications, net of tax

41.0

(10.8
)

30.2

1.6

3.4

—

5.0

Amounts reclassified from
   accumulated other comprehensive
   income (loss) to income, net of
   tax(1)

—

0.3

0.3

—

(12.7
)

(0.1
)

(12.8
)
Total other comprehensive income
   (loss), net of reclassifications

41.0

(10.5
)

30.5

1.6

(9.3
)

(0.1
)

(7.8
)
Ending balance

$
(174.5
)

$
(0.1
)

$
(174.6
)

$
(181.4
)

$
8.1

$
—

$
(173.3
)

~~Other comprehensive income (loss) before reclassifications was net of tax expense of $3.5 million for foreign currency translation adjustment for the nine months ended September 30, 2017.~~

Other comprehensive income (loss) before reclassifications was net of tax expense of $7.3 million and tax benefits of $0.3 million for foreign currency translation adjustment and unrealized gain (loss) on derivatives, respectively, for the nine months ended September 30, 2016. Amounts reclassified from other comprehensive income (loss) to income were net of tax expense of $0.1 million for other for the nine months ended September 30, 2016.

Basic earnings per share represents net income divided by the ~~weighted average~~weighted-average number of common shares outstanding for the period. Diluted earnings per share represents net income divided by the ~~weighted average~~weighted-average number of common shares outstanding, inclusive of the effect of dilutive securities, such as outstanding SARs, restricted stock units, and ~~stock units.~~convertible notes.

12. Fair Value Measurements

The Company applies the provisions of ~~the~~ FASB ~~Accounting Standards Codification, or~~ ASC Topic 820, Fair ValueMeasurements and Disclosures, or ASC 820, for its financial and non-financial assets and liabilities. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 inputs are unobservable inputs for the asset or liability.

The Company measures certain assets and liabilities at fair value as discussed throughout the notes to its condensed consolidated financial statements. Foreign exchange currency contracts and interest rate swaps are valued using standard calculations and ~~models~~models. Foreign exchange currency contracts are valued primarily based on inputs such as observable forward rates, spot rates, and foreign currency exchange rates at the reporting period ended date. Interest rate swaps were valued primarily based on inputs such as LIBOR and swap yield curves at the reporting period ended date. The Company’s derivative assets and liabilities are measured at fair value and consisted of Level 2 inputs and their amounts are shown below at their gross values ~~at September 30, 2017~~as of March 31, 2023 and December 31, ~~2016:~~2022:


	Significant Other Observable Inputs (Level 2) Fair Value as of March 31, 2023		Significant Other Observable Inputs (Level 2) Fair Value as of December 31, 2022		Balance Sheet Location
	(in millions)
ASSETS:
Derivatives designated as hedging instruments:
Foreign exchange currency contracts relating to inventory and intercompany management fee hedges	$	0.2	$	1.5	Prepaid expenses and other current assets
Interest rate swaps		—		0.3	Prepaid expenses and other current assets
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts		0.4		1.1	Prepaid expenses and other current assets
	$	0.6	$	2.9
LIABILITIES:
Derivatives designated as hedging instruments:
Foreign exchange currency contracts relating to inventory and intercompany management fee hedges	$	4.7	$	3.2	Other current liabilities
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts		5.9		2.8	Other current liabilities
	$	10.6	$	6.0

~~Fair Value Measurements at Reporting Date~~

Derivative Balance
Sheet
Location

Significant Other
Observable
Inputs
(Level 2)
Fair Value at
September 30,
2017

Significant Other
Observable
Inputs
(Level 2)
Fair Value at
December 31,
2016

(in millions)

ASSETS:

Derivatives designated as hedging
   instruments:

Foreign exchange currency contracts relating to
   inventory and intercompany management fee
   hedges

Prepaid expenses and
other current assets

$
0.8

$
4.6

Derivatives not designated as hedging
   instruments:

Foreign exchange currency contracts

Prepaid expenses and
other current assets

$
1.1

$
2.8

$
1.9

$
7.4

LIABILITIES:

Derivatives designated as hedging
   instruments:

Foreign exchange currency contracts relating to
   inventory and intercompany management fee
   hedges

Other current liabilities

$
5.5

$
—

Derivatives not designated as hedging
   instruments:

Foreign exchange currency contracts

Other current liabilities

$
1.1

$
3.5

$
6.6

$
3.5

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are comprised of money market funds and foreign and domestic bank accounts. These cash and cash equivalents are valued based on ~~level~~Level 1 inputs which consist of quoted prices in active markets. To reduce its credit risk, the Company monitors the credit standing of the financial institutions that hold the Company’s cash and cash equivalents.

The Company’s deferred compensation plan assets consist of ~~Company owned~~Company-owned life insurance policies. As these policies are recorded at their cash surrender value, they are not required to be included in the fair value table above. See Note 6, Employee Compensation Plans, to the ~~consolidated financial statements~~Consolidated Financial Statements included in the ~~2016~~2022 10-K for a further description of the Company’s deferred compensation plan assets.

The following tables summarize the offsetting of the fair values of the Company’s derivative assets and derivative liabilities for presentation in the Company’s condensed consolidated balance ~~sheet at September 30, 2017~~sheets as of March 31, 2023 and December 31, ~~2016:~~2022:

	Offsetting of Derivative Assets
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheet			Net Amounts of Assets Presented in the Balance Sheet		Offsetting of Derivative Assets
	(In millions)							Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheet			Net Amounts of Assets Presented in the Balance Sheet
September 30, 2017
								(in millions)
March 31, 2023
Foreign exchange currency contracts	$	1.9	$	(1.6	)	$	0.3	$	0.6	$	(0.6	)	$	—
Total	$	1.9	$	(1.6	)	$	0.3	$	0.6	$	(0.6	)	$	—
December 31, 2016
December 31, 2022
Foreign exchange currency contracts	$	7.4	$	(3.0	)	$	4.4	$	2.6	$	(2.4	)	$	0.2
Interest rate swaps									0.3		—			0.3
Total	$	7.4	$	(3.0	)	$	4.4	$	2.9	$	(2.4	)	$	0.5

The Company offsets all of its derivative assets and derivative liabilities in its condensed consolidated balance ~~sheet~~sheets to the extent it maintains master netting arrangements with related financial institutions. As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, all of the Company’s derivatives were subject to master netting arrangements and no collateralization was required for the Company’s derivative assets and derivative liabilities.

13. Transformation Program

In 2021, the Company initiated a global transformation program to optimize global processes for future growth, or the Transformation Program. The Transformation Program involves the investment in certain new technologies and the realignment of infrastructure and the locations of certain functions to better support distributors and customers. The Company has incurred total pre-tax expenses of approximately $52.3 million through March 31, 2023, of which $27.3 million and $1.6 million were recognized in selling, general, and administrative expenses within its condensed consolidated statements of income during the three months ended March 31, 2023 and 2022, respectively. The Company expects to incur total pre-tax expenses of at least $60.0 million relating to the Transformation Program based on actual expenses incurred to date and expected future expenses. Since the Transformation Program is still ongoing and is expected to be completed in 2024, these estimated amounts are preliminary and based on Management's estimates and actual results could differ from such estimates.

Costs related to the Transformation Program were as follows:


	Three Months Ended
	March 31, 2023		March 31, 2022		Cumulative costs incurred to date as of March 31, 2023
	(in millions)
Professional fees	$	2.1	$	0.9	$	19.0
Retention and separation		25.2		0.7		33.0
Other		—		—		0.3
Total	$	27.3	$	1.6	$	52.3

~~13.~~29

Changes in the liabilities related to the Transformation Program, which were recognized in other current liabilities within the Company’s condensed consolidated balance sheets, were as follows:


	Professional Fees			Retention and Separation			Other		Total
	(in millions)
Balance as of December 31, 2022	$	0.6		$	3.2		$	—	$	3.8
Expenses		2.1			25.2			—		27.3
Cash payments		(0.9	)		(8.2	)		—		(9.1	)
Non-cash items and other		—			—			—		—
Balance as of March 31, 2023	$	1.8		$	20.2		$	—	$	22.0

In October 2017, the Company completed its modified Dutch auction tender offer and then subsequently paid cash to repurchase a total of approximately 6.7 million of its common shares at an aggregate cost of approximately $457.8 million, or $68.00 per share. The Company’s cash and cash equivalents and total shareholders’ equity at September 30, 2017, have been subsequently reduced by $457.8 million during the fourth quarter of 2017, as a result of this Dutch auction tender offer transaction. In connection with the tender offer, the Company also provided a non-transferable contractual contingent value right, or CVR, for each share tendered, allowing participants in the tender offer to receive a contingent cash payment in the event Herbalife is acquired in a going-private transaction (as defined in the CVR Agreement) within two years of the commencement of the tender offer. The initial fair value of the CVR was $7.3 million, which will be recorded as a liability in the fourth quarter with a corresponding decrease to shareholders’ equity. Subsequent changes in the fair value of the CVR liability are then recognized within the Company's consolidated balance sheet with corresponding gains or losses being recognized in non-operating expense (income) within the Company's condensed consolidated statements of income during each reporting period until the CVR expires in August 2019 or is terminated due to a going-private transaction.

The following table presents selected pro forma balance sheet data as if the Dutch auction tender offer transaction had been completed and the 6.7 million shares had been repurchased as of September 30, 2017:

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with other information, including our condensed consolidated financial statements and related notes included in Part I, Item 1, – Financial ~~Information~~Statements, of this Quarterly Report on Form 10-Q, and Part I, Item 1A, Risk Factors, and our consolidated financial statements appearing in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2022, or the ~~2016~~2022 10-K. Unless the context otherwise requires, all references herein to the “Company,” “we,” “us” or “our,” or similar terms, refer to Herbalife Ltd., a Cayman Islands ~~exempt~~exempted company with limited liability, ~~company,~~ and its consolidated subsidiaries.

We are a global nutrition company that sells weight ~~management,~~management; targeted ~~nutrition,~~nutrition; energy, sports, ~~& fitness,~~and fitness; and outer nutrition products to and through independent members, or Members. In China, we sell our products to and through independent service providers ~~sales representatives,~~ and sales ~~officers~~representatives to customers and preferred customers, as well as through Company-operated retail ~~stores~~platforms when necessary. We refer to Members that distribute our products and achieve certain qualification requirements as “sales leaders.”

We ~~pursue our mission of “changing people’s lives” by providing high quality, science-based~~provide high-quality, science-backed products to Members and their customers who seek a healthy lifestyle and we also offer a business opportunity to those Members who seek additional income. We believe enhanced consumer awareness and demand for our products due to global trends such as the ~~global~~ obesity epidemic, ~~has made our quality products more relevant~~increasing interest in a fit and active lifestyle, living healthier, and the rise of entrepreneurship, coupled with the effectiveness of ~~our distribution network, coupled with geographic expansion,~~personalized selling through a direct sales channel, have been the primary reasons for our ~~success throughout our 37-year operating history.~~continued success.

Our products are grouped in four principal categories: weight management; targeted nutrition; energy, sports, &and fitness; and outer nutrition, along with literature, promotional, and ~~promotional~~other items. Our products are often sold through a series of related products and literature designed to simplify weight management and nutrition for consumers and maximize our Members’ cross-selling opportunities.

Industry-wide factors that affect us and our competitors include the global obesity epidemic, the aging of the worldwide population and rising public health care costs, which are driving demand for weight management, nutrition and wellness-related products along with the global increase in under employment and unemployment which can affect the recruitment and retention of Members seeking additional income opportunities.

While we continue to monitor the current global financial environment, including the impacts of the inflation and COVID-19 pandemic, we remain focused on the opportunities and challenges in retailing of our products and enhancing the customer experience, sponsoring and retaining Members, improving Member productivity, further penetrating existing markets, ~~opening new markets,~~ globalizing successful ~~Distributor~~Daily Methods of Operation, or DMOs, such as Nutrition Clubs, Fit Clubs, and Weight Loss Challenges, introducing new products and globalizing existing products, developing niche market segments and further investing in our infrastructure.

Our Company was previously organized and managed by six geographic regions: North America, Mexico, South and Central America, EMEA, Asia Pacific, and China. In order to simplify the understanding of our performance and ongoing trends of the business and align with our organizational structure, in the third quarter of 2022 we combined our Mexico geographic region with our South and Central America region, into one geographic region now named Latin America; therefore, we currently have five geographic regions as opposed to six geographic regions. When applicable, historical information presented in this Management's Discussion and Analysis of Financial Condition and Results of Operations relating to our geographic regions has been reclassified to conform with the current period geographic presentation.

On July 15, 2016, we reached a settlement with the U.S. Federal Trade Commission, or ~~the~~ FTC, and entered into ~~a proposed Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment, or~~ the Consent Order, which resolved the FTC’s multi-year investigation of the Company. ~~The Consent Order became effective on July 25, 2016, or the Effective Date, upon final approval by the U.S. District Court for the Central District of California. Pursuant~~We continue to the Consent Order, we agreed to implement certain new procedures and enhance certain existing procedures in the U.S., most of which we had 10 months from the Effective Date to implement. Among other requirements, the Consent Order required us to categorize all existing and future Members in the U.S. as either “preferred members” - who are simply consumers who only wish to purchase product for their own household use, or “distributors” - who are Members who wish to resell some products or build a sales organization. We also agreed to compensate distributors on eligible U.S. sales within their downline organizations, which include purchases by preferred members, purchases by a distributor for his or her personal consumption within allowable limits and sales of product by a distributor to his or her customers. The Consent Order also requires distributors to meet certain conditions before opening Nutrition Clubs and/or entering into leases for their Herbalife business in the United States. The Consent Order also prohibits the Company from making expressly or by implication, any representation regarding the amount or level of income, including full-time or part-time income, that a participant can reasonably expect to earn in the Company’s network marketing program, unless the representation is non-misleading and the Company possesses competent and reliable evidence sufficient to substantiate that the representation is true.

~~We are monitoring~~monitor the impact of the Consent Order and our ~~Board~~Audit Committee assists our board of ~~Directors has established the Implementation Oversight Committee~~directors in ~~connection with the Consent Order. The committee has met and will meet regularly with management to oversee our~~overseeing continued compliance with ~~the terms of~~ the Consent Order. While we currently do not expect the settlement to have a long-term and materially adverse impact on our business and our Member base, our business and our Member base, particularly in the U.S., may be negatively ~~impacted as we and they adjust to the changes.~~impacted. The terms of the ~~settlement~~Consent Order do not change our going to market through direct selling by independent distributors, and compensating those distributors based upon the product they and their sales organization sell. See Part I, Item 1A, – Risk Factors, of ~~this Quarterly Report on Form 10-Q~~the 2022 10-K for a discussion of risks related to the settlement with the FTC.

Global inflationary pressures, other macroeconomic factors such as foreign exchange rate fluctuations and geopolitical conflicts can also impact our financial condition, results of operations and liquidity. Many regions are seeing significant inflation, which can impact both our cost structures and our pricing. Effective June 2022 we instituted a 10% price increase in most of our geographic markets across all product lines, most remaining markets instituted a similar increase effective during the third quarter of 2022. We continue to examine our cost structure and assess additional potential incremental pricing actions in response to ongoing inflationary pressures.

The war in Ukraine has also impacted our results there as well as in Russia and certain neighboring markets; we do not have any manufacturing operations in Russia and Ukraine and our combined total assets in Russia and Ukraine, which primarily consists of short-term assets, was approximately 1% of our consolidated total assets as of March 31, 2023.

The outbreak and subsequent global spread of the coronavirus disease 2019, or COVID-19, has impacted economic activity worldwide. Measures implemented by public health organizations and governmental bodies have now largely eased across most markets where we operate but have continued intermittently for certain markets and could resume more broadly as conditions evolve. Since the initial onset, our business and operations were affected by the pandemic in manners and degrees that varied by market. The most significant impacts we have seen included supply chain challenges, including increased costs in freight, labor, and certain raw materials, and constrained ability to deliver product to Members and/or have Members pick product up from our access points; restrictions or outright prohibitions on in-person training and promotional meetings and events for Members; and constrained ability of Members to have face-to-face contact with their customers, including at Nutrition Clubs. We and our Members responded to the pandemic and its impacts on our business and theirs by adapting operations and taking measures to mitigate those impacts. The most significant measures, including those that have continued even as pandemic conditions have eased, were adapting product access to the varying market-specific challenges, including shifting to more home product delivery from Member pick-up; shifting to online or phone orders only from in-person ordering; enhancing our training and promotion of technological tools offered to support Members’ online operations; and Members continuing to or increasing the ways they leverage the Internet and social media for customer contact.

Given the unpredictable and fluid nature of these factors, we are unable to predict the extent to which they will adversely impact our business, financial condition, and results of operations, including the impact they may have on our geographic regions and individual markets. See “Summary Financial Results” and “Sales by Geographic Region” for more specific discussion of these and other factors. See Part I, Item 1A, Risk Factors, of the 2022 10-K for a further discussion of risks related to the COVID-19 pandemic.

A key non-financial measure we focus on is Volume Points on a Royalty Basis, or Volume Points, which is essentially our weighted-average measure of product sales volume. Volume Points, which are unaffected by exchange rates or price changes, are used by management as a proxy for sales trends because in general, excluding the impact of price changes, an increase in Volume Points in a particular geographic region or country indicates an increase in our local currency net sales while a decrease in Volume Points in a particular geographic region or country indicates a decrease in our local currency net sales. The criteria we use to determine how and when we recognize Volume Points are not identical to our revenue recognition policies under U.S. GAAP. Unlike net sales, which are generally recognized when the product is delivered and ~~both the title and risk and rewards pass~~when control passes to the Member, as discussed in greater detail in Note 2, Significant Accounting Policies, to the ~~2016 10-K,~~Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q, we recognize Volume Points when a Member pays for the order, which is generally prior to the product being delivered. Further, the periods in which Volume Points are tracked can vary slightly from the fiscal periods for which we report our results under U.S. GAAP. Therefore, there can be timing differences between the product orders for which net sales are recognized and for which Volume Points are recognized within a given period. However, historically these timing differences generally have been immaterial in the context of using changes in Volume Points as a proxy to explain volume-driven changes in net sales.

~~We assign a Volume Point value to a product when it is first introduced into a market and the value is unaffected by subsequent foreign exchange rate and price changes.~~ 32

The specific number of Volume Points assigned to a product, ~~and~~which is generally consistent across all markets, is based on a Volume Point to suggested retail price ratio for similar products. If a product is available in different quantities, the various sizes will have different Volume Point values. In general, once assigned, a Volume Point value is consistent in each region and country and does not change from year to year. ~~The reason Volume Points are used in the manner described above is that we~~We use Volume Points for Member qualification and recognition purposes, as well as a proxy for sales trends, and therefore we ~~attempt to~~generally keep Volume Points for a similar or like product consistent on a global basis. However, because Volume Points are a function of value rather than product type or size, they are not a reliable measure for product mix. As an example, an increase in Volume Points in a specific country or region could mean a significant increase in sales of less expensive products or a marginal increase in sales of more expensive products.


	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended
	2017		2016		% Change			2017		2016		% Change			March 31, 2023		March 31, 2022		% Change
	(Volume Points in millions)														(Volume Points in millions)
North America		261.5		311.6		(16.1	)%		848.2		978.1		(13.3	)%		314.5		403.1		(22.0	)%
Mexico		213.3		234.5		(9.0	)%		667.7		693.1		(3.7	)%
South & Central America		150.2		161.1		(6.8	)%		440.9		499.2		(11.7	)%
Latin America																271.4		319.7		(15.1	)%
EMEA		258.9		252.0		2.7	%		816.7		789.6		3.4	%		314.3		391.7		(19.8	)%
Asia Pacific (excluding China)		278.7		275.9		1.0	%		815.4		803.2		1.5	%
Asia Pacific																505.2		518.5		(2.6	)%
China		147.8		153.2		(3.5	)%		483.7		488.1		(0.9	)%		48.6		66.9		(27.4	)%
Worldwide		1,310.4		1,388.3		(5.6	)%		4,072.6		4,251.3		(4.2	)%		1,454.0		1,699.9		(14.5	)%

Volume Points decreased 14.5% for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023, after having decreased 7.0% for the same period of ~~5.6% and 4.2%, respectively, versus increases reported~~2022. North America’s Volume Point decrease for the 2023 first quarter, after a lesser decrease for the prior year ~~periods, were driven by regional specific factors. The~~period, continues to reflect lower levels of new Members as, we believe, Members work to re-establish pre-pandemic face-to-face approaches for their businesses. Latin America’s greater Volume Point decreases for ~~North America~~2023 versus 2022 are due, we believe, to the cumulative adverse impact of difficult economic conditions including inflationary impacts on Members’ operations as well as political and social instability in certain markets. EMEA’s Volume Point decrease for 2023 after a lesser decrease for 2022 reflects lower levels of new Members as, we believe, Members work to re-establish pre-pandemic face-to-face approaches for their businesses, as well as political and economic uncertainty across much of the region. The Asia Pacific region saw a small year-over-year Volume Point decline versus growth for the ~~three and nine months ended September 30, 2017, following increases~~2022 period. Although the India market, the largest in the region, once again achieved growth, the growth was less than the prior year ~~periods, reflect Member focus on FTC settlement implementation actions including training on new tools~~ and methods for documenting sales, and time spent to then train their sales organizations. The decrease for Mexico for the three and nine months ended September 30, 2017, reflects difficult economic conditionswas offset by declines elsewhere in the ~~market~~region, particularly Indonesia and ~~for the quarter, the adverse impact~~Vietnam, due in part, we believe, to lower levels of ~~the damaging natural disaster in the greater Mexico City area. We continue to see declines in the South & Central America region~~recruiting of new Members as ~~a result of regional and country specific challenges discussed in greater detail in Sales by Geographic Region below, and as many~~ Members transition back to customer-based, sustainable business practices. Lower levels of growth for the EMEA region versus comparable prior year periods are also driven by country specific results, including declines in several countries that have followed several years of growth. Asia Pacific (excluding China) has had mixed results by country within the region, as discussed in greater detail in Sales by Geographic Region below. Thetraditional face-to-face approaches from pandemic-driven virtual methods. China saw continuing significant Volume Point declines in China after growth in comparable year periods is attributable to factors such as Members testing new business methods that did not prove to be as sustainable as traditional methods. Sales volume results are discussed further below in the applicable sections of Sales by Geographic Region. Wedecreases for 2023. This trend reflects, we believe, our ~~competitive strengths and~~Members being challenged to adjust their business ~~strategies, each~~approaches to a confluence of ~~which is discussed in greater detail in Item 1 —~~ ~~Business~~ ~~of the 2016 10-K, will contribute to achieving our long-term objective of sustainable sales growth through retailing, recruiting and retention.~~

~~Number of Sales Leaders and Retention Rates by Geographic Region as of Re-qualification Period~~

Our compensation system requires each sales leader to re-qualify for such status each year, prior to February, in order to maintain their 50% discount on products and be eligible to receive royalty payments. In February of each year, we demote from the rank of sales leader those Members who did not satisfy the re-qualification requirements during the preceding twelve months. The re-qualification requirement does not apply to new sales leaders (i.e. those who became sales leaders subsequent to the January re-qualification of the prior year). Volume Points are the basis for sales leader qualification, as discussed in greater detail in Item 1, Business of the 2016 10-K. Typically, a Member accumulates Volume Points for a given sale at the time the Member pays for the product. However, effective beginning in May 2017, a Member does not receive Volume Point credit for a transaction in the United States until it is documented in compliance with the Consent Order.

For the latest twelve month re-qualification period ending January 2017, approximately 60.9% of our sales leaders, excluding China and Venezuela, re-qualified. This figure excludes sales leaders in the United States who had converted to preferred member prior to the re-qualification period-end, as those individuals were not eligible for requalification; had these individuals been included in the calculation the figure would have been 59.3%. Venezuelan Members were excluded from retention figures for the year ended January 2017 due to revised requalification criteria that are not comparable to prior periods or to other markets and were excluded from 2016 as sales leaders in the market were not required to requalify that year due to product supply limitations. Argentina is excluded from 2016 for comparability purposes; demotion figures for the year are amplified as the qualification requirement had been reinstated after having been waived for 2015.

The table below reflects the number of sales leaders as of the end of February of the year indicated (subsequent to the annual re-qualification date) and sales leader retention rate by year and by region.

Sales leaders generally purchase our products for resale to other Members and retail consumers. The number of sales leaders by geographic region as of the quarterly reporting dates will normally be higher than the number of sales leaders by geographic region as of the re-qualification period because sales leaders who do not re-qualify during the relevant twelve-month period will be removed from the rank of sales leader the following February. Comparisons of sales leader totals on a year-to-year basis are indicators of our recruitment and retention efforts in different geographic regions.

~~Retention Rate for the requalification period ended January 2017 was significantly improved compared to prior year periods. We believe this performance is the result of efforts~~factors, including changes we have made ~~to improve the sustainability~~for our business and external conditions, as well as an adverse impact on first quarter volumes of ~~sales leaders’ businesses such as encouraging Members to obtain experience retailing Herbalife products before becoming~~ a ~~sales leader.~~surge of COVID cases late in 2022.

“~~Retail value”~~ ~~represents the suggested retail price of products we sell~~Net sales” represent product sales to our Members, net of “distributor allowances,” and is the gross sales amount reflected on our invoices. Retail value is a Non-GAAP measure which may not be comparable to similarly-titled measures used by other companies. This is not the price paid to us by our Members. inclusive of any shipping and handling revenues, as described further below.

Our Members purchase product from us at a ~~discount from the suggested retail price. We refer to these discounts as~~ ~~“distributor allowance”,~~ ~~and we refer to retail value less distributor allowances as~~ ~~“product sales”~~.

Total distributor allowances for the three months ended September 30, 2017 and 2016 were 40.7% and 40.5% of retail value, respectively. Total distributor allowances for the nine months ended September 30, 2017 and 2016 were 40.4% and 40.2% of retail value, respectively. ~~Distributor allowances and Marketing Plan payouts generally utilize 90% to 95% of~~ suggested retail price, ~~depending on the product and market,~~less discounts referred to ~~which we apply discounts of up to 50% for~~ as “distributor allowances and payout rates of up to 15% for royalty overrides, up to 7% for production bonuses, and approximately 1% for the Mark Hughes bonus. Distributor allowances as a percentage of retail value may vary by country depending upon regulatory restrictions that limit or otherwise restrict distributor allowances. We also offer reduced distributor allowances with respect to certain products worldwide.allowance.” Each Member’s level of discount is determined by qualification based on their volume of purchases. In cases where a Member has qualified for less than the maximum discount, the remaining discount, which we also refer to as a wholesale commission, is received by their sponsoring Members. ~~Therefore,~~Distributor allowances may also vary by country depending upon regulatory restrictions that limit or otherwise restrict distributor allowances. We also offer reduced distributor allowances with respect to certain products worldwide.

For U.S. GAAP purposes, shipping and handling services relating to product sales are recognized as fulfillment activities on our performance obligation to transfer products and are therefore recorded within net sales as part of product ~~returns~~sales and ~~distributor allowances.~~are not considered as separate revenues.

~~“Net sales”~~ ~~equal~~In certain geographic markets, we have introduced segmentation of our Member base into two categories: “preferred members” – who are simply consumers who wish to purchase product for their own household use, and “distributors” – who are Members who also wish to resell products or build a sales ~~plus~~ “organization. Additionally, in certain markets we are simplifying our pricing by eliminating certain shipping and handling ~~revenues”~~,charges and ~~generally represents what we collect.~~

We do not have visibility into all of the sales from our Members to their customers, but such a figure would differ from our reported “retail value” by factors including (a) the amount of product purchased by our Members for their own personal consumption and (b) prices charged by our Members to their customers other than ourrecovering those costs within suggested retail prices. We discuss retail value because of its fundamental role in our systems, internal controls and operations, and its correlation to Member discounts and Royalty Overrides. In addition, retail value is a component of the financial reports we use to analyze our financial results because, among other things, it can provide additional detail and visibility into our net sales results on a Company-wide and a geographic region and product category basis. Therefore, this non-GAAP measure may be useful to investors because it provides investors with the same information used by management. As this measure is not in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, retail value should not be considered in isolation from, nor as a substitute for, net sales and other consolidated income or cash flow statement data prepared in accordance with U.S. GAAP, or as a measure of profitability or liquidity. A reconciliation of retail value to net sales is presented below under ~~Results of Operations.~~price.

Our international operations have provided and will continue to provide a significant portion of our total net sales. As a result, total net sales will continue to be affected by fluctuations in the U.S. dollar against foreign currencies. In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, in addition to comparing the percent change in net sales from one period to another in U.S. dollars, we also compare the percent change in net sales from one period to another period using “net sales in local ~~currency~~currency.”. Net sales in local currency is not a U.S. GAAP financial measure. Net sales in local currency removes from net sales in U.S. dollars the impact of changes in exchange rates between the U.S. dollar and the local currencies of our foreign subsidiaries, by translating the current period net sales into U.S. dollars using the same foreign currency exchange rates that were used to translate the net sales for the previous comparable period. We believe presenting net sales in local currency is useful to investors because it allows a meaningful comparison of net sales of our foreign operations from period to period. However, net sales in local currency measures should not be considered in isolation or as an alternative to net sales in U.S. dollar measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance with U.S. GAAP.

Our “gross profit” consists of net sales less “cost of sales,” which represents our manufacturing costs, the price we pay to our raw material suppliers and manufacturers of our products as well as shipping and handling costs, including duties, tariffs, and similar expenses.

While certain Members may profit from their activities by reselling our products for amounts greater than the prices they pay us, Members that develop, retain, and manage other Members may earn additional compensation for those activities, which we refer to as “Royalty overrides.” Royalty overrides are ~~our most~~a significant operating expense and consist of:

Royalty overrides are compensation to Members for the development, retention and improved productivity of their sales organizations and are paid to several levels of Members on each sale. Royalty overrides are compensation for services rendered to us and, as such, are recorded as an operating expense.

In China, our independent service providers are compensated for marketing, sales support, and other services instead of the distributor allowances and royalty overrides utilized in our global ~~marketing plan. Service~~Marketing Plan. The majority of service fees to China independent service providers are included in selling, general, and administrative expenses.

Because of local country regulatory constraints, we may be required to modify our Member incentive plans as described above. We also pay reduced royalty overrides with respect to certain products worldwide. Consequently, the total ~~royalty~~Royalty override percentage may vary over ~~time and from the percentages noted above.~~time.

Our “contribution margins” consist of net sales less cost of sales and ~~royalty~~Royalty overrides.

“Selling, general, and administrative expenses” represent our operating expenses, which include labor and benefits, service fees to China independent service providers, sales events, professional fees, travel and entertainment, Member promotions, occupancy costs, communication costs, bank fees, depreciation and amortization, foreign exchange gains and losses, and other miscellaneous operating expenses.

Our “other operating income” consists of government grant income related to China.

Most of our sales to Members outside the United States are made in the respective local currencies. In preparing our financial statements, we translate revenues into U.S. dollars using average exchange rates. Additionally, the majority of our purchases from our suppliers generally are made in U.S. dollars. Consequently, a strengthening of the U.S. dollar versus a foreign currency can have a negative impact on our reported sales and contribution margins and can generate foreign currency losses on intercompany transactions. Foreign currency exchange rates can fluctuate significantly. From time to time, we enter into foreign currency derivatives to partially mitigate our foreign currency exchange risk as discussed in further detail in Part I, Item 3, — Quantitative and Qualitative Disclosures about Market ~~Risk.~~Risk, of this Quarterly Report on Form 10-Q.

Net sales for the three ~~and nine~~ months ended ~~September 30, 2017 were $1,085.4 million and $3,334.4 million, respectively.~~March 31, 2023 was $1,252.1 million. Net sales decreased ~~$36.6~~$83.7 million, or ~~3.3%, and $109.0 million or 3.2%~~6.3%, for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 as compared to the same ~~periods~~period in ~~2016.~~2022. In local currency, net sales decreased ~~4.0% and 2.5%~~2.6% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023, as compared to the same ~~periods~~period in ~~2016.~~2022. The 6.3% decrease in net sales ~~of 3.3%~~ for the three months ended ~~September 30, 2017~~March 31, 2023 was primarily driven by a decrease in sales volume, as indicated by a 5.6% decrease in Volume Points; partially offset by price increases, which increased net sales by approximately 3.3%. The decrease in net sales of 3.2% for the nine months ended September 30, 2017 was primarily driven by a decrease in sales volume, as indicated by a 4.2%14.5% decrease in Volume Points, a 3.7% unfavorable impact of fluctuations in foreign currency exchange rates, and a ~~1.3%~~1.4% unfavorable impact of country ~~mix;~~sales mix, partially offset by a 13.0% favorable impact of price ~~increases, which increased net sales by approximately 2.5%.~~increases.

Net income was $29.3 million, or $0.29 per diluted share, for the three ~~and nine~~ months ended ~~September 30, 2017 was $54.5 million, or $0.66 per diluted share, and $277.3 million, or $3.26 per diluted share, respectively.~~March 31, 2023. Net income decreased ~~$33.2~~$68.9 million, or ~~37.9%~~70.2%, for the three months ended ~~September 30, 2017, and increased $116.7 million, or 72.7% for~~March 31, 2023 as compared to the ~~nine months ended September 30, 2017.~~same period in 2022. The decrease in net income for the three months ended ~~September 30, 2017~~March 31, 2023 was ~~primarily~~mainly due to a lower contribution margin driven by the decrease in net sales, and higher interest expense, partially offset by lower income tax expense. The increase in net income for the nine months ended September 30, 2017 was primarily due to a lower selling, general and administrative expense driven by the $203.0$57.4 million ~~regulatory settlements in 2016, partially offset by a~~ lower contribution margin driven by lower net sales, and $21.0 million higher ~~interest expense.~~selling, general, and administrative expenses; partially offset by $23.4 million lower income taxes.

Net income for the three months ended ~~September 30, 2017~~March 31, 2023 included a $4.6 million favorable impact ($3.1 million post-tax) of government grant income in China; a $11.3 million unfavorable impact of non-cash interest expense related to the Convertible Notes and the Forward Transactions (See Note 4, ~~Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q); a $3.3~~$27.3 million pre-tax unfavorable impact ($~~2.2~~21.3 million post-tax) ~~from~~of Transformation Program expenses, ~~related~~primarily relating to ~~regulatory inquiries;~~employee retention and separation costs; and a ~~$1.1~~$3.5 million pre-tax unfavorable impact ($0.9 million post-tax) related to legal, advisory services and other expenses for our response to allegations and other negative information put forward in the marketplace by a hedge fund manager which started in late 2012 (See ~~Selling, General and Administrative Expenses~~ ~~below for further discussion); and a $3.0 million pre-tax unfavorable impact ($1.9 million post-tax) from expenses related to the implementation of the FTC Consent Order.~~

~~Net income for the nine months ended September 30, 2017 included a $43.5 million favorable impact ($30.8~~3.3 million post-tax) of ~~government grant income in China; a $36.6 million unfavorable impact of non-cash interest expense related~~expenses relating to ~~the Convertible Notes~~our new Digital Technology Program focused on enhancing and ~~the Forward Transactions (See Note 4,~~ ~~Long-Term Debt~~, to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q); a $10.0 million pre-tax unfavorable impact ($6.6 million post-tax) from expenses related to regulatory inquiries; a $4.2 million pre-tax unfavorable impact ($3.2 million post-tax) related to legal, advisory servicesrebuilding our Member facing technology platform and ~~other expenses for our response to allegations and other negative information put forward in the marketplace by a hedge fund manager which started in late 2012 (See~~ ~~Selling, General and Administrative Expenses~~ ~~below for further discussion); and a $16.7 million pre-tax unfavorable impact ($11.1 million post-tax) from expenses related to the implementation of the FTC Consent Order.~~web-based Member tools.

The income tax impact of the expenses discussed above is based on forecasted items affecting our ~~2017~~2023 full year effective tax rate. Adjustments to forecasted items unrelated to these expenses, as well as impacts related to interim reporting, will have an effect on the income tax impact of these items in subsequent periods.

Net income for the three months ended ~~September 30, 2016~~March 31, 2022 included a $2.2 million post-tax favorable impact related to regulatory settlements; $0.2 million pre-tax favorable impact ($0.2 million post-tax) of government grant income in China; a $11.8 million unfavorable impact of non-cash interest expense related to the Convertible Notes and the Forward Transactions (See Note 4, ~~Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q); a $3.8~~$1.7 million pre-tax unfavorable impact ($2.2 million post-tax) from expenses related to regulatory inquiries; a $3.1 million pre-tax unfavorable impact ($2.1 million post-tax) related to legal, advisory services and other expenses for our response to allegations and other negative information put forward in the marketplace by a hedge fund manager which started in late 2012 (See ~~Selling, General and Administrative Expenses~~ below for further discussion); a $0.2 million pre-tax unfavorable impact ($0.2 million post-tax) related to expenses incurred for the recovery of costs associated with the re-audit of our 2010 to 2012 financial statements after the resignation of KPMG as our independent registered public accounting firm; and a $5.3 million pre-tax unfavorable impact ($3.11.4 million post-tax) from expenses related to the ~~implementation of the FTC Consent Order.~~

~~Net income for the nine months ended September 30, 2016 included~~COVID-19 pandemic; and a ~~$203.0~~$1.6 million pre-tax unfavorable impact ($~~134.3 million post-tax) related to regulatory settlements; a $29.1 million pre-tax favorable impact ($20.7~~1.4 million post-tax) of ~~government grant income in China; a $35.4 million unfavorable impact of non-cash interest expense related~~Transformation Program expenses, primarily relating to the Convertible Notes and the Forward Transactions (See Note 4, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q); a $13.9 million pre-tax unfavorable impact ($8.6 million post-tax) from expenses related to regulatory inquiries; a $10.7 million pre-tax unfavorable impact ($7.8 million post-tax) related to legal, advisory services and other expenses for our response to allegations and other negative information put forward in the marketplace by a hedge fund manager which started in late 2012 (See Selling, General and Administrative Expenses below for further discussion); a $3.5 million pre-tax unfavorable impact ($2.5 million post-tax) related to expenses incurred for the recovery of costs associated with the re-audit of our 2010 to 2012 financial statements after the resignation of KPMG as our independent registered public accounting firm; and a $5.3 million pre-tax unfavorable impact ($3.1 million post-tax) from expenses related to the implementation of the FTC Consent Order.professional fees.

Our results of operations for the periods below are not necessarily indicative of results of operations for future periods, which depend upon numerous factors, including our ability to sponsor Members and retain sales leaders, further penetrate existing markets, introduce new products and programs that will help our Members increase their retail efforts and develop niche market segments.

The following table sets forth selected results of our operations expressed as a percentage of net sales for the periods indicated:

Three Months Ended

Nine Months Ended

September 30,
2017

September 30,
2016

September 30,
2017

September 30,
2016

Operations:

Net sales

100.0
%

100.0
%

100.0
%

100.0
%
Cost of sales

19.8

18.6

19.2

19.1

Gross profit

80.2

81.4

80.8

80.9

Royalty overrides(1)

28.6

28.6

28.3

28.1

Selling, general and administrative expenses(1)

41.0

39.3

39.8

44.9

Other operating income

(0.4
)

—

(1.3
)

(0.8
)
Operating income

11.0

13.5

14.0

8.7

Interest expense, net

3.5

2.0

3.2

2.0

Income before income taxes

7.5

11.5

10.8

6.7

Income taxes

2.5

3.7

2.5

2.0

Net income

5.0
%

7.8
%

8.3
%

4.7
%
(1)

The majority of service fees to our independent service providers in China are included in selling, general, and administrative expenses while Member compensation for all other countries is included in Royalty overrides.

We aggregate our operating segments, excluding China, into a reporting segment, or the Primary Reporting Segment. The Primary Reporting Segment includes the North America, ~~Mexico, South & Central~~Latin America, EMEA, and Asia Pacific regions. China has been identified as a separate reporting segment as it does not meet the criteria for aggregation. See Note 6, Segment Information, to the Condensed Consolidated Financial Statements included in Part I, Item 1,Financial Statements, of this Quarterly Report on Form 10-Q for further discussion of our reporting segments. See below for discussions of net sales and contribution margin by our reporting segments.

The Primary Reporting Segment reported net sales of ~~$875.6 million and $2,666.4~~$1,184.4 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023 representing a decrease of ~~$32.2 million, or 3.5%, and a decrease of $102.9~~$45.8 million, or 3.7%, ~~for the three and nine months ended September 30, 2017, respectively,~~ as compared to the same ~~periods~~period in ~~2016.~~2022. In local currency, net sales decreased ~~4.5% and 3.8%~~0.1% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023 as compared to the same ~~periods~~period in ~~2016 for the Primary Reporting Segment.~~2022. The ~~3.5%~~3.7% decrease in net sales for the three months ended ~~September 30, 2017~~March 31, 2023 was primarily due to a decrease in sales volume, as indicated by a 5.9% decrease in Volume Points; partially offset by price increases which increased net sales by approximately 3.0%. The 3.7% decrease in net sales for the nine months ended September 30, 2017 was primarily due to a decrease in sales volume, as indicated by a 4.6%13.9% decrease in Volume Points, and ana 3.6% unfavorable ~~change~~impact of fluctuations in ~~country mix, which reduced net sales by approximately 1.9%;~~foreign currency exchange rates, partially offset by a 13.9% favorable impact of price ~~increases which increased net sales by approximately 2.4%.~~increases.

For a discussion of China’s net sales for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023, see the China section of ~~the~~ Sales by Geographic Region below.

As discussed above under “Presentation,” contribution margin consists of net sales less cost of sales and Royalty overrides.

The Primary Reporting Segment reported contribution margin of ~~$375.9~~$482.5 million, or ~~42.9%~~40.7% of net sales, ~~and $1,155.7 million, or 43.3% of net sales,~~for the three months ended March 31, 2023, representing a decrease of ~~$22.9~~$21.9 million, or ~~5.7%, and a decrease of $45.8 million, or 3.8%~~4.3%, for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023, as compared to the same ~~periods~~period in ~~2016.~~2022. The ~~5.7%~~4.3% decrease in contribution margin for the three months ended ~~September 30, 2017~~March 31, 2023 was primarily the result of a 13.9% unfavorable impact of volume decreases, a 6.9% unfavorable ~~country mix and unfavorable fluctuations in~~impact of foreign currency ~~rates which reduced contribution margin by approximately 5.1%, 2.7%~~fluctuations, a 4.1% unfavorable impact of cost changes related to self-manufacturing and ~~1.8%, respectively,~~sourcing primarily related to increased raw material and manufacturing labor costs and increased allocated overhead costs due to lower production volume, a 1.0% unfavorable impact of higher inventory write-downs, and a 1.0% unfavorable impact of sales mix, partially offset by a 23.2% favorable impact of price ~~increases which increased~~increases.

China reported contribution margin ~~by approximately 4.7%. The 3.8% decrease~~of $55.0 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023, representing a decrease of $35.5 million, or 39.2%, for the three months ended March 31, 2023, as compared to the same period in 2022. The 39.2% decrease in contribution margin for the three months ended March 31, 2023 was primarily the result of a 27.4% unfavorable ~~country~~impact of volume decreases, a 5.3% unfavorable impact of foreign currency fluctuations, a 5.0% unfavorable impact of sales mix, and ~~volume decreases which reduced contribution margin by approximately 5.2%~~a 3.7% unfavorable impact of cost changes related to self-manufacturing and ~~3.9%, respectively,~~sourcing primarily related to increased raw material and manufacturing labor costs and increased allocated overhead costs due to lower production volume, partially offset by ~~price increases which increased contribution margin by approximately 3.7%.~~

China reported contribution margin of $184.0 million and $595.8 million for the three and nine months ended September 30, 2017, respectively, representing a decrease of $9.8 million, or 5.1%, and $18.7 million, or 3.0%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The decrease of 5.1% for the three months ended September 30, 2017 was primarily due to a decline in sales volume and fluctuation in foreign currency rates, which reduced contribution margin by approximately 6.1% and 1.8%, respectively, partially offset by the3.8% favorable impact of price increases ~~which increased contribution margin by approximately 5.0%. The decrease of 3.0% for the nine months ended September 30, 2017 was primarily due to fluctuations in foreign currency rates~~ and ~~volume decreases which reduced contribution margin by approximately 4.0% and 1.0%, respectively, partially offset by the~~a 3.6% favorable impact of ~~price increases which increased contribution margin by approximately 3.1%.~~ lower inventory write-down.

~~The following chart reconciles retail value to net~~Net sales by geographic ~~region:~~region were as follows:

	Three Months Ended September 30,
	2017											2016														Three Months Ended
	Retail Value(1)		Distributor Allowance			Product Sales		Shipping & Handling Revenues		Net Sales		Retail Value(1)		Distributor Allowance			Product Sales		Shipping & Handling Revenues		Net Sales		Change in Net Sales			March 31, 2023		March 31, 2022		% Change
	(In millions)																									(Dollars in millions)
North America	$	331.1	$	(150.7	)	$	180.4	$	19.4	$	199.8	$	399.8	$	(181.5	)	$	218.3	$	22.7	$	241.0		(17.1	)%	$	297.2	$	326.2		(8.9	)%
Mexico		197.1		(89.7	)		107.4		6.9		114.3		193.9		(87.9	)		106.0		6.8		112.8		1.3	%
South & Central America		203.8		(95.0	)		108.8		7.9		116.7		211.2		(98.5	)		112.7		8.3		121.0		(3.6	)%
Latin America																											205.5		201.3		2.1	%
EMEA		368.6		(167.6	)		201.0		12.9		213.9		346.6		(157.6	)		189.0		12.6		201.6		6.1	%		268.1		295.0		(9.1	)%
Asia Pacific		395.3		(171.9	)		223.4		7.5		230.9		392.0		(167.8	)		224.2		7.2		231.4		(0.2	)%		413.6		407.7		1.4	%
China		239.3		(30.6	)		208.7		1.1		209.8		242.8		(29.8	)		213.0		1.2		214.2		(2.1	)%		67.7		105.6		(35.9	)%
Worldwide	$	1,735.2	$	(705.5	)	$	1,029.7	$	55.7	$	1,085.4	$	1,786.3	$	(723.1	)	$	1,063.2	$	58.8	$	1,122.0		(3.3	)%	$	1,252.1	$	1,335.8		(6.3	)%

Nine Months Ended September 30,

2017

2016

Retail
Value(1)

Distributor
Allowance

Product
Sales

Shipping &
Handling
Revenues

Net
Sales

Retail
Value(1)

Distributor
Allowance

Product
Sales

Shipping &
Handling
Revenues

Net
Sales

Change in
Net Sales

(In millions)

North America

$
1,080.9

$
(496.1
)

$
584.8

$
63.2

$
648.0

$
1,246.8

$
(564.1
)

$
682.7

$
70.8

$
753.5

(14.0
)%
Mexico

576.2

(261.7
)

314.5

20.2

334.7

587.0

(265.8
)

321.2

20.6

341.8

(2.1
)%
South & Central America

609.3

(283.8
)

325.5

23.6

349.1

637.3

(295.2
)

342.1

25.8

367.9

(5.1
)%
EMEA

1,117.0

(507.8
)

609.2

39.2

648.4

1,060.5

(480.1
)

580.4

38.6

619.0

4.7
%
Asia Pacific

1,171.1

(506.8
)

664.3

21.9

686.2

1,145.6

(489.3
)

656.3

30.8

687.1

(0.1
)%
China

754.0

(89.5
)

664.5

3.5

668.0

767.3

(96.9
)

670.4

3.7

674.1

(0.9
)%
Worldwide

$
5,308.5

$
(2,145.7
)

$
3,162.8

$
171.6

$
3,334.4

$
5,444.5

$
(2,191.4
)

$
3,253.1

$
190.3

$
3,443.4

(3.2
)%

Changes in net sales are directly associated with the retailing of our products, recruitment of new Members, and retention of sales leaders. Our strategies involve providing quality products, improved DMOs, including daily consumption approaches such as Nutrition Clubs, easier access to product, systemized training and education of Members on our products and methods, leveraging technology to make it easier for our Members to do business, and continued promotion and branding of Herbalife products.

Management’s role, in-country and at the region and corporate level, is to provide Members with a competitive, broad, and ~~broad~~innovative product line, offer leading-edge business tools and technology services, and encourage strong teamwork and Member leadership ~~and offer leading edge business tools and technology services~~ to make doing business with Herbalife simple. We continue to provide our Members with enhanced technology tools for ordering, business performance, and customer retailing to make it easier for them to do business with us and to optimize their customers’ experiences. Management uses the Marketing Plan, which reflects the rules for our global network marketing organization that specify the qualification requirements and general compensation structure for Members, coupled with educational and motivational ~~tools~~programs and promotions to encourage Members to increase retailing, retention, and recruiting, which in turn affect net sales. Such ~~tools~~programs include sales events such as Extravaganzas, Leadership Development Weekends and World Team Schools where large groups of Members ~~gather, thus allowing them to~~ network with other Members, learn retailing, retention, and recruiting techniques from our leading Members, and become more familiar with how to market and sell our products and business opportunities. Accordingly, management believes that these development and motivation programs increase the productivity of the sales leader network. The expenses for such programs are included in selling, general, and administrative expenses. We also use event and non-event product promotions to motivate Members to increase retailing, retention, and recruiting activities. These promotions have prizes ranging from qualifying for events to product prizes and vacations. ~~A program that~~In a number of markets, we have ~~seen success with~~segmented our Member base into “preferred members” and ~~begun~~“distributors” for more targeted and efficient communication and promotions for these two differently motivated types of Members. In certain other markets that have not been segmented, we use Member data to ~~use on a broad basis is the Member Activation Program, under which new~~similarly categorize Members who order a modest number of Volume Points in each of their first three months, earn a prize. Our objective is to improve the quality of sales leaders by encouraging new Members to begin acquiring retail customers before attempting to qualify for ~~sales leader status. The costs of these programs are included in selling, general~~communication and ~~administrative expenses.~~promotion efforts.

DMOs are being generated in many of our markets and are globalized where applicable through the combined efforts of Members and country, regional and corporate management. While we support a number of different DMOs, one of the most popular DMOs is the daily consumption DMO. Under our traditional DMO, a Member typically sells to its customers on ~~a somewhat~~an infrequent basis (e.g., monthly) which provides fewer opportunities for interaction with their customers. Under a daily consumption DMO, a Member interacts with its customers on a more frequent basis, including such activities as weekly weigh-ins, which enables the Member to better educate and advise customers about nutrition and the proper use of the products and helps promote daily usage as well, thereby helping the Member grow his or her business. Specific examples of globalized DMOs include the Nutrition Club concept in Mexico ~~the Healthy Breakfast concept in Russia,~~ and the ~~Internet/Sampling and~~ Weight Loss Challenge in the United States. Management’s strategy is to review the applicability of expanding successful country initiatives throughout a region, and where appropriate, support the globalization of these initiatives.

The factors described above help Members increase their business, which in turn helps drive Volume Point growth in our business, and thus, net sales growth. The discussion below of net sales details some of the specific drivers of changes in our business and causes of sales fluctuations during the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 as compared to the same periods in ~~2016,~~2022, as well as the unique growth or contraction factors specific to certain geographic regions or significant ~~countries~~markets within a region during these periods. Net sales fluctuations, both Company-wide and within a particular geographic region or ~~country,~~market, are primarily the result of changes in volume, changes in prices, ~~and/~~or changes in foreign currency translation rates. The discussion of changes in net sales quantifies the impact of those drivers that are quantifiable such as changes in foreign currency translation rates, and cites the estimated impact of any significant price changes. The remaining drivers, which management believes are the primary drivers of changes in volume, are typically qualitative factors whose impact cannot be quantified. ~~The Company uses~~We use Volume Points as an indication for changes in sales volume.

COVID-19 pandemic conditions may continue to impact our results of operations in future quarters and their comparability to prior periods, both on a consolidated basis and at the regional level. In addition, global inflationary pressures, supply chain challenges and other non-pandemic factors such as geopolitical conflict may impact both our cost structures and our pricing, with potential sales volume impact. However, given the unpredictable, unprecedented, and fluid nature of these factors, we are unable to predict the extent to which they will adversely impact our business, financial condition, and results of operations, including the impact it may have on our regions and individual markets. As described further below, effective June 2022 most of our geographic markets instituted a 10% price increase across all product lines, and certain additional markets instituted this increase effective during the third quarter of 2022 as described below. We continue to examine our cost structure and assess potential incremental pricing actions in response to ongoing inflationary pressures. See below for a more detailed discussion of the pandemic and price change impacts on net sales for the first quarter of 2023 for each geographic region and individual market.

The North America region reported net sales of ~~$199.8 million and $648.0~~$297.2 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively.~~March 31, 2023. Net sales decreased ~~$41.2~~$29.0 million, or ~~17.1%~~8.9%, ~~and $105.5 million, or 14.0%~~ for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023 as compared to the same ~~periods~~period in ~~2016.~~2022. In local currency, net sales decreased ~~17.2% and 14.0%~~8.7% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023, as compared to the same ~~periods~~period in ~~2016.~~2022. The 8.9% decrease in net sales for the three ~~and nine~~ months ended ~~September 30, 2017, as compared~~March 31, 2023 was primarily due to ~~the same periods in 2016, was~~ a ~~result of a net sales~~ decrease in the U.S. of $42.5 million or 18.0%, and $106.4 million, or 14.4%, respectively. The decreases in net sales for the North America region for the three and nine months ended September 30, 2017 were primarily the result of decreases in sales volume, as indicated by ~~decreases~~a 22.0% decrease in Volume ~~Points.~~ Points, partially offset by a 13.6% favorable impact of price increases.

~~As part of our FTC settlement, we have implemented certain new procedures and enhanced certain existing procedures~~Net sales in the ~~United States. We believe North America’s Volume Point decreases~~U.S. were $289.2 million for the three ~~and nine~~ months ended ~~September 30, 2017, versus increases~~March 31, 2023. Net sales decreased $27.9 million, or 8.8%, for the prior year periods, reflect a transitionary impact of Member focus on FTC settlement implementation actions including training on new tools and methods for documenting sales and time spent to then train their sales organizations. Similarthree months ended March 31, 2023 as compared to the ~~transitionary impact that occurred as a result~~same period in 2022.

Sales volumes declined for the 2023 first quarter versus the 2022 period. Emerging from pandemic conditions, we have seen lower levels of ~~Marketing Plan changes made in 2014, we do not expect the FTC settlement to have a long-term material adverse impact on our net sales~~new Members in the ~~North~~region as Members work to re-establish and evolve traditional face-to-face approaches for their businesses, while also maintaining online approaches. Inflationary pressures have also challenged some areas of customer demand. We are supporting Members with increased numbers of in-person events as well as targeted communications and sales incentives. The region implemented a 3.5% price increase during March 2023 and a 10% price increase during June 2022.

Latin America region or on our Member base. However, we believe net sales for the region could continue to be negatively impacted during the remainder of 2017 as we and our Members spend time educating and training, and as our Members implement and adjust to the changes. North

The Latin America ~~has implemented programs to encourage sponsorship and increase Distributor, Preferred Member, and customer activity.~~

~~The Mexico~~ region reported net sales of ~~$114.3 million and $334.7~~$205.5 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively.~~March 31, 2023. Net sales increased ~~$1.5 million, or 1.3%, and decreased $7.1~~$4.2 million, or 2.1%, for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023 as compared to the same ~~periods~~period in ~~2016.~~2022. In local currency, net sales ~~decreased 3.6% and~~ increased ~~1.0%~~0.1% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023, as compared to the same ~~periods~~period in ~~2016.~~2022. The ~~1.3%~~2.1% increase in net sales for the three months ended ~~September 30, 2017~~March 31, 2023 was ~~primarily the result~~due to a 16.1% favorable impact of price increases and a 2.0% favorable ~~fluctuation~~impact of fluctuations in foreign currency exchange rates, ~~which contributed approximately 6.1% and 5.0% to net sales, respectively. These increases were~~ partially offset by a decrease in sales volume, as indicated by a ~~9.0%~~15.1% decrease in Volume Points.

Net sales in Mexico were $127.8 million for the three months ended March 31, 2023. Net sales increased $9.4 million, or 7.9%, for the three months ended March 31, 2023 as compared to the same period in 2022. In local currency, net sales decreased 1.6% for the three months ended March 31, 2023, as compared to the same period in 2022. The ~~2.1%~~fluctuation of foreign currency exchange rates had a favorable impact of $11.3 million on net sales for the three months ended March 31, 2023. A volume decline was seen for the 2023 first quarter versus the prior year period, as well as continued declines in new Members and Sales Leaders. Inflationary conditions have adversely impacted Members’ Nutrition Club operations, which are an important DMO in the market. We are supporting Members with promotions that encourage volume, even at lower levels, for newer Members. The market saw a 5% price increase during January 2023 following a 10% price increase during June 2022.

Other markets across the region also saw volume declines for the 2023 first quarter versus the 2022 period. The region has seen difficult economic conditions as well as market-specific factors including political and social instability. Members are working toward re-establishing traditional face-to-face business operations after operating more virtually during the pandemic. Inflationary pressures across the region have challenged our Members’ operations and customer demand. Prices were increased 10% or more in June 2022 for virtually all markets of the region, in addition to other market-specific price increases during the first quarter of 2023. The sales volume declines in markets other than Mexico was greatest for Chile. Efforts within the region include increasing in-person activities, supporting on a market-by-market basis the Nutrition Club DMO, utilizing segmented promotions and sales incentives, and launching new products.

The EMEA region reported net sales of $268.1 million for the three months ended March 31, 2023. Net sales decreased $26.9 million, or 9.1%, for the three months ended March 31, 2023 as compared to the same period in 2022. In local currency, net sales decreased 2.8% for the three months ended March 31, 2023, as compared to the same period in 2022. The 9.1% decrease in net sales for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 was primarily ~~the result of~~due to a decrease in sales volume, as indicated by a ~~3.7%~~19.8% decrease in Volume Points, and ana 6.4% unfavorable fluctuation in foreign currency exchange rates, which reduced net sales by 3.1%. These reductions to net sales were partially offset by price increases which contributed approximately 5.1% to net sales.

~~We believe Volume Point declines for the quarter and year-to-date after increases for the comparable periods~~impact of 2016 were attributable to a difficult economic environment marked by rising inflation and a weaker peso, as well as the adverse impact late in the quarter of the damaging natural disaster in the greater Mexico City area.

The South and Central America region reported net sales of $116.7 million and $349.1 million for the three and nine months ended September 30, 2017, respectively. Net sales decreased $4.3 million, or 3.6%, and $18.8 million, or 5.1%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales increased 1.5% and decreased 5.1% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. Excluding Venezuela, which saw significant price increases in response to a highly inflationary environment, South and Central America local currency net sales decreased 4.3% and 8.5% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016.

~~The 3.6% decrease in net sales for the three months ended September 30, 2017 was primarily the result of a decline in sales volume, as indicated by a 6.8% decrease in Volume Points and unfavorable~~ fluctuations in foreign currency exchange rates, ~~of 5.0%. These reductions to net sales were~~ partially offset by ~~price increases which contributed approximately 8.7% to net sales. The 5.1% decrease in net sales for the nine months ended September 30, 2017 was primarily the result of~~ a decline in sales volume, as indicated by an 11.7% decrease in Volume Points. This reduction to net sales was partially offset by price increases which contributed approximately 7.8% to net sales. Volume declines have been widespread across the region for both market-specific factors and as Members in many markets continue to transition to customer-based, sustainable business practices. The effect14.3% favorable impact of price increases onand a 2.3% favorable impact of sales mix. The EMEA region has no single market that accounts for a significant portion of our consolidated net sales.

Volumes declined across most EMEA markets for the 2023 first quarter ~~and year-to-date were led by the Venezuela market.~~

In Brazil, the region’s largest market, net sales were $47.3 million and $141.8 million for the three and nine months ended September 30, 2017, respectively. Net sales increased $0.9 million, or 1.9%, and decreased $0.3 million, or 0.2% for the three and nine months ended September 30, 2017, respectively, as compared to the ~~same periods~~2022 period. Emerging from pandemic restrictions, we have seen fewer new distributors and preferred customers joining our business as Members transition back to traditional face-to-face business approaches or work to adopt hybrid approaches. Economic conditions across the region, including inflation, weakened consumer confidence, and foreign exchange rate fluctuations, as well as political uncertainty in ~~2016. In local currency, net sales decreased 0.7% and 10.5%~~certain markets appear to be further hindering business recovery. The volume declines across the EMEA markets for the ~~three and nine months ended September 30, 2017, respectively,~~2023 first quarter as compared to the ~~same periods in 2016. The fluctuation of foreign currency rates had a favorable impact of $1.2 million~~2022 period were led by Russia, Turkey, and ~~$14.7 million, respectively, on net sales~~Spain. Russia volumes for the three and nine months ended September 30, 2017. Marketing Plan changes intended to build more sustainable business for our Members through a focus on daily product consumption and retailing are taking hold following a lengthy transition period. In addition, we have introduced programs in Brazil that2023 first quarter have been ~~successful~~adversely affected by geopolitical conflict in ~~other regions~~the region compared to ~~improve Member activity. We are also increasing~~ the ~~number of product access points and expanding our product offering, including the recent launch of a soy milk product. Changes in ICMS tax legislation, effective April 2016, reduced net~~stronger sales ~~by approximately $4.0 million for~~volume during the first quarter of ~~2017.~~

~~Net sales in Peru~~2022. Turkey volumes were $15.3 million and $46.0 million for the three and nine months ended September 30, 2017, respectively. Net sales decreased $0.8 million, or 5.3%, and $2.2 million, or 4.7%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales decreased 8.0% and 7.6% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The fluctuation of foreign currency rates had a favorable impact of $0.4 million and $1.4 million on net sales for the three and nine months ended September 30, 2017, respectively.

The EMEA region reported net sales of $213.9 million and $648.4 million for the three and nine months ended September 30, 2017, respectively. Net sales increased $12.3 million, or 6.1%, and $29.4 million, or 4.7%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales increased 2.0% and 3.8% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The 6.1% increase in net sales for the three months ended September 30, 2017 was contributed to by an increase in sales volume, as indicatedadversely impacted we believe by a ~~2.7% increase~~deadly earthquake in ~~Volume Points, a favorable fluctuation~~February 2023 that damaged some areas of the country.

Focus areas for Herbalife and our Members in foreign currency exchange rates of 4.1% and price increases which contributed approximately 2.9%. These increases in net sales were partially offset by an unfavorable change in country mix resulting from a lower percentage of our sales volume coming from markets with higher prices, which reduced net sales by 1.3%. The 4.7% increase in net sales for the nine months ended September 30, 2017 was contributed to by an increase in sales volume, as indicated by a 3.4% increase in Volume Points, price increases which contributed approximately 2.0%, and a favorable fluctuation in foreign currency exchange rates which contributed approximately 0.9%. These increases in net sales were partially offset by an unfavorable change in country mix resulting from a lower percentage of our sales volume coming from markets with higher prices, which reduced net sales by 2.1%. Though the region ~~is made up of a large number of~~include branding and promotions, strengthening the Nutrition Club DMO in certain markets, ~~with different characteristics~~improving Member and ~~levels of success, generally we believe volume growth for the region is correlated with programs that have enhanced the quality~~customer technological interfaces, and ~~activity of sales leaders as they continue~~other promotional initiatives to ~~focus on customer-oriented initiatives.~~incentivize sales.

Net sales in Italy were $34.5 million and $105.8 million for the three and nine months ended September 30, 2017, respectively. Net sales increased $0.2 million, or 0.6%, and decreased $0.9 million, or 0.8%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales decreased 4.5% and 0.4% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The fluctuation of foreign currency rates had a favorable impact of $1.7 million net sales for the quarter and an unfavorable impact of $0.4 million for the nine months ended September 30, 2017. Italy has seen a modest decline in new Members and volumes after several years of growth as the Member Activation Program introduced earlier this year is adopted and optimized by Members and sales leaders.38

Net sales in Russia were $29.8 million and $94.5 million for the three and nine months ended September 30, 2017, respectively. Net sales increased $4.7 million, or 18.5%, and $18.3 million, or 24.0%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales increased 8.0% and 6.1% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The fluctuation of foreign currency rates had a favorable impact of $2.6 million and $13.7 million on net sales for the three and nine months ended September 30, 2017, respectively. Product prices in Russia were increased 5% in February 2017 and 5% in March 2016. The market has continued to utilize the Member Activation Program to attract new Members.

Net sales in Spain were $27.0 million and $76.9 million for the three and nine months ended September 30, 2017, respectively. Net sales increased $1.9 million, or 7.7%, and $0.5 million, or 0.7%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales increased 2.2% and 0.8% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The fluctuation of foreign currency rates had a favorable impact of $1.4 million on net sales for the quarter and an unfavorable impact of $0.1 million on net sales for the nine months ended September 30, 2017. Product prices in Spain were increased 2% in July 2017.

The Asia Pacific region, which excludes China, reported net sales of ~~$230.9 million and $686.2~~$413.6 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively.~~March 31, 2023. Net sales ~~decreased $0.5~~increased $5.9 million, or ~~0.2%, and $0.9 million, or 0.1%~~1.4%, for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023 as compared to the same ~~periods~~period in ~~2016.~~2022. In local currency, net sales increased 8.5% for the three months ended March 31, 2023, as compared to the same period in 2022. The 1.4% increase in net sales for the three months ended March 31, 2023 was primarily due to a 12.6% favorable impact of price increases, partially offset by a decrease in sales volume, as indicated by a 2.6% decrease in Volume Points, a 7.1% unfavorable impact of fluctuations in foreign currency exchange rates and a 2.1% unfavorable impact of sales mix.

Net sales in India were $178.6 million for the three months ended March 31, 2023. Net sales increased $26.6 million, or 17.5%, for the three months ended March 31, 2023 as compared to the same period in 2022. In local currency, net sales increased 28.5% for the three months ended March 31, 2023, as compared to the same period in 2022. The fluctuation of foreign currency exchange rates had an unfavorable impact of $16.7 million on net sales for the three months ended March 31, 2023. Sales volumes have increased in India in recent years as we continue to promote our brand, such as through sports sponsorships, expand our product line, increase the number of in-person events, strengthen the Preferred Customer program in the market, and make it easier for our Members to do business, such as by adding and improving product access points and payment methods. The India market implemented a 14% price increase in September 2022.

Net sales in Vietnam were $71.1 million for the three months ended March 31, 2023. Net sales decreased $2.6 million, or 3.5%, for the three months ended March 31, 2023 as compared to the same period in 2022. In local currency, net sales decreased ~~0.5% and 1.1%~~0.1% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023, as compared to the same ~~periods~~period in ~~2016.~~2022. The ~~0.2%~~fluctuation of foreign currency exchange rates had an unfavorable impact of $2.5 million on net sales for the three months ended March 31, 2023. Vietnam saw a sales volume decrease for the 2023 first quarter versus the 2022 period, reflecting we believe the impact of inflationary pressures, combined with a January 2023 increase in the local value added tax rate. The market implemented a 3% price increase in March 2023 and a 10% price increase in July 2022. Further changes to direct-selling regulations in the market are expected to receive government approval in 2023; we continue to assess and monitor these proposed regulations and any impact they may have on our business in Vietnam.

Across most of the region’s other markets sales volume was down for the 2023 first quarter as compared to the 2022 period, most significantly for Indonesia and Malaysia. Emerging from pandemic conditions, we are seeing lower levels of recruiting of new Members for some markets as Members transition back to traditional face-to-face approaches from pandemic-driven virtual methods, and as Members’ Nutrition Club operations recover from pandemic disruption. Our efforts in the region include promotional initiatives to incentivize sales. Contributing to the Indonesia decline was comparison to a 2022 base period that included strong sales volume ahead of an April 1, 2022 price increase.

The China region reported net sales of $67.7 million for the three months ended March 31, 2023. Net sales decreased $37.9 million, or 35.9%, for the three months ended March 31, 2023 as compared to the same period in 2022. In local currency, net sales decreased 30.8% for the three months ended March 31, 2023, as compared to the same period in 2022. The 35.9% decrease in net sales for the three months ended ~~September 30, 2017~~March 31, 2023 was primarily the result of an unfavorable change in country sales mix resulting from a lower percentage of our sales volume coming from markets with higher prices, which reduced net sales by approximately 2.8%. This reduction to net sales was partially offset by price increases which increased net sales by approximately 1.7% and an increase in sales volume as indicated by a 1.0% increase in Volume Points. The 0.1% decrease in net sales for the nine months ended September 30, 2017 was primarily the result of an unfavorable change in country sales mix resulting from a lower percentage of our sales volume coming from markets with higher prices, which decreased net sales by approximately 3.5%. This reduction to net sales was partially offset by an increase in sales volume, as indicated by a 1.5% increase in Volume Points, and fluctuations in foreign currency exchange rates and price increases, which contributed approximately 1.0% and 0.9%, respectively, to net sales. The Volume Points performance for the region has been mixed by country, with continuing increases in Indonesia and India as well as other markets, offset by declines primarily in South Korea and Taiwan.

Net sales in India were $47.7 million and $136.8 million for the three and nine months ended September 30, 2017, respectively. Net sales increased $2.8 million, or 6.2%, and $15.5 million, or 12.7%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales increased 1.9% and 9.5% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The fluctuation of foreign currency rates had a favorable impact of $1.9 million and $4.0 million on net sales for the three and nine months ended September 30, 2017, respectively. In 2016, we introduced the Associate Activation Program which we believe has contributed to higher sales leader activity. Additionally, we began the segmentation of our Members into preferred members and distributors as required by local regulations. India continues to expand its product line and has added product pickup locations for Members.

Net sales in South Korea were $36.1 million and $107.2 million for the three and nine months ended September 30, 2017, respectively. Net sales decreased $8.9 million, or 19.8%, and $35.3 million, or 24.8%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales decreased 18.9% and 26.2% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The fluctuation of foreign currency rates had an unfavorable impact of $0.4 million on net sales for the quarter and a favorable impact of $2.0 million for the nine months ended September 30, 2017. The South Korea market has been impacted by Marketing Plan changes, including certain changes unique to the market. We believe these changes support improved retailing opportunity.

Net sales in Indonesia were $33.8 million and $98.8 million for the three and nine months ended September 30, 2017, respectively. Net sales increased $4.8 million, or 16.6%, and $15.3 million, or 18.3%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales increased 18.3% and 18.4% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The fluctuation of foreign currency rates had an unfavorable impact of $0.5 million and $0.1 million on net sales for the three and nine months ended September 30, 2017, respectively. The Indonesia market has continued to make progress by focusing on a customer-based business and daily consumption through Nutrition Clubs, training activities, and new products. We have increased the number of product access points for the market and expanded a city-by-city training and promotion approach.

Net sales in Taiwan were $26.0 million and $90.5 million for the three and nine months ended September 30, 2017, respectively. Net sales decreased $2.7 million, or 9.4%, and $4.6 million, or 4.9%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales decreased 13.6% and 10.5% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The fluctuation of foreign currency rates had a favorable impact of $1.2 million and $5.3 million on net sales for the three and nine months ended September 30, 2017, respectively. Taiwan sales have declined versus the prior year periods as the market adjusts to and Members optimize programs and training intended to help Members establish customer-based, sustainable business approaches.

Net sales in China were $209.8 million and $668.0 million for the three and nine months ended September 30, 2017, respectively. Net sales decreased $4.4 million, or 2.1%, and $6.1 million, or 0.9%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. In local currency, net sales decreased 2.0% and increased 2.8% for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The 2.1% decrease in net sales for the three months ended September 30, 2017 was primarily the result of a decline in sales volume, as indicated by a 3.5% decrease in Volume Points plus a 2.6% decrease due to a timing difference between the recognition of net sales and Volume Points, partially offset by price increases which contributed approximately 4.6% to net sales. The 0.9% decrease in net sales for the nine months ended September 30, 2017, was primarily the result of a 3.6% unfavorable fluctuation in foreign currency exchange rates, as well as a decrease in sales volume, as indicated by a ~~0.9%~~27.4% decrease in Volume Points, a 4.3% unfavorable impact of sales mix, and a 5.1% unfavorable impact of fluctuations in foreign currency exchange rates partially offset by ~~the~~a 3.3% favorable ~~effects~~impact of price ~~increases effective April 2017, which increased net sales by approximately 2.8%.~~increases.

~~We believe the decrease in sales~~Sales volume declines of recent years for the ~~quarter and year-to-date are attributable to factors such as a reduction~~China market continued in the ~~number~~first quarter of ~~Nutrition Clubs~~2023 versus the 2022 period, a continuing result, we believe, of our Members being challenged to adjust their business approaches to a confluence of factors. These factors include increases we made during 2020 and 2021 to the requirements for sales representatives to be eligible to apply to be an independent service provider. In addition, the frequency and attendance of our and our Members’ in-person training and sales meetings, which are important to the business as ~~Members in some cases consolidated smaller clubs into larger, more commercialized clubs; government limitations on companies conducting commercial meetings ahead of the National Congress this fall,~~they are a central channel for attracting and retaining customers, providing personal and professional development for the year-to-date period, Member overemphasis on social media business methods over more traditional methods. We have introduced the Member Activation Program for new members, expanded our online ordering platform; which allow our Members, and ~~Preferred Customers~~promoting our products, continue to be below pre-pandemic levels. These meeting declines were initially driven by government regulatory constraints and subsequently by the constraints of COVID pandemic conditions. Steps to adjust to these changing conditions have included some Members establishing daily consumption-oriented Nutrition Clubs such as in other regions of the world, however in the near term these efforts have diverted from traditional business approaches. Also, a surge of COVID cases late in 2022 which followed the Chinese government's unwinding of its zero-COVID policy had an adverse effect on our results, we believe, into the beginning of the first quarter of 2023.

Focus areas for China include enhancing our digital capabilities and offerings, such as improving the integration of our technological tools to ~~purchase certain new products from~~make it easier for our Members to do business, returning to face-to-face business approaches, encouraging a ~~wholly owned subsidiary outside~~customer-based approach through DMOs such as weight management challenges, and supporting Members’ establishment of daily consumption-oriented Nutrition Clubs. We have expanded our product line for the China ~~for only personal consumption,~~market and ~~renewed a branding campaign.~~continue to conduct sales promotions in the region.

Three Months Ended September 30,

2017

2016

Retail
Value(2)

Distributor
Allowance

Product
Sales

Shipping &
Handling
Revenues

Net
Sales

Retail
Value(2)

Distributor
Allowance

Product
Sales

Shipping &
Handling
Revenues

Net
Sales

% Change in
Net Sales

(In millions)

Weight Management

$
1,128.7

$
(468.4
)

$
660.3

$
36.2

$
696.5

$
1,156.9

$
(480.3
)

$
676.6

$
38.1

$
714.7

(2.5
)%
Targeted Nutrition

431.5

(179.1
)

252.4

13.8

266.2

432.6

(179.6
)

253.0

14.3

267.3

(0.4
)%
Energy, Sports and Fitness

107.1

(44.5
)

62.6

3.5

66.1

113.5

(47.1
)

66.4

3.7

70.1

(5.7
)%
Outer Nutrition

34.2

(14.2
)

20.0

1.1

21.1

41.0

(17.1
)

23.9

1.3

25.2

(16.3
)%
Literature, Promotional
and Other(1)

33.7

0.7

34.4

1.1

35.5

42.3

1.0

43.3

1.4

44.7

(20.6
)%
Total

$
1,735.2

$
(705.5
)

$
1,029.7

$
55.7

$
1,085.4

$
1,786.3

$
(723.1
)

$
1,063.2

$
58.8

$
1,122.0

(3.3
)%
(1)

Product buybacks and returns in all product categories are included in the Literature, Promotional, and Other category.

Nine Months Ended September 30,

2017

2016

Retail
Value(2)

Distributor
Allowance

Product
Sales

Shipping &
Handling
Revenues

Net
Sales

Retail
Value(2)

Distributor
Allowance

Product
Sales

Shipping &
Handling
Revenues

Net
Sales

% Change in
Net Sales

(In millions)

Weight Management

$
3,465.6

$
(1,430.8
)

$
2,034.8

$
112.0

$
2,146.8

$
3,538.4

$
(1,463.2
)

$
2,075.2

$
123.7

$
2,198.9

(2.4
)%
Targeted Nutrition

1,303.6

(538.2
)

765.4

42.1

807.5

1,300.7

(537.8
)

762.9

45.5

808.4

(0.1
)%
Energy, Sports and Fitness

321.3

(132.7
)

188.6

10.4

199.0

332.5

(137.5
)

195.0

11.6

206.6

(3.7
)%
Outer Nutrition

113.1

(46.7
)

66.4

3.7

70.1

134.9

(55.8
)

79.1

4.7

83.8

(16.3
)%
Literature, Promotional
and Other(1)

104.9

2.7

107.6

3.4

111.0

138.0

2.9

140.9

4.8

145.7

(23.8
)%
Total

$
5,308.5

$
(2,145.7
)

$
3,162.8

$
171.6

$
3,334.4

$
5,444.5

$
(2,191.4
)

$
3,253.1

$
190.3

$
3,443.4

(3.2
)%

Net sales for ~~all~~the majority of product categories decreased for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 as compared to the same ~~periods~~period in ~~2016.~~2022. The ~~trend~~trends and business factors described in the above discussions of the individual geographic regions apply generally to all product categories.

Gross profit was ~~$870.0~~$953.5 million and ~~$2,695.6~~$1,028.7 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023 and 2022, respectively. Gross profit as ~~compared to $912.9 million and $2,784.9 million for the same periods in 2016. As~~ a percentage of net sales ~~gross profit~~was 76.2% and 77.0% for the three months ended ~~September 30, 2017 was 80.2% as compared to 81.4% for the same period in 2016,~~March 31, 2023 and 2022, respectively, or an unfavorable net decrease of ~~122~~86 basis ~~points and for the nine months ended September 30, 2017 was 80.8% as compared to 80.9% for the same period~~points.

The decrease in ~~2016, or an unfavorable net decrease of 4 basis points. The~~ gross profit ~~rate~~as a percentage of net sales for the three months ended ~~September 30, 2017~~March 31, 2023 as compared to the same period in 2022 included unfavorable cost changes related to self-manufacturing and sourcing of 220 basis points primarily related to increased raw material and manufacturing labor costs and increased allocated overhead costs due to lower production volume; the unfavorable impact of foreign currency fluctuations of ~~132~~154 basis ~~points, reduction~~points; unfavorable changes in ~~cost savings through strategic sourcing and self-manufacturing~~sales mix of 4532 basis ~~points,~~points; the unfavorable impact of higher inventory write-downs of 27 basis points; unfavorable other cost changes of 3812 basis points; and unfavorable cost changes of 8 basis points ~~and country mix of 23 basis points,~~relating to increased outbound freight costs due to orders shifting toward home delivery versus Member pick-up; partially offset by the favorable impact of ~~retail~~ price increases of 71367 basis ~~points~~points.

We expect our gross margin to continue to be negatively impacted in 2023 primarily due to increased costs related to raw materials and lower inventory write-downs of 45 basis points. The nine months ended September 30, 2017 included the unfavorable impact of foreign currency fluctuations of 77 basis points, other cost changes of 8 basis points, and country mix of 7 basis points, partially offset by the favorable impact of retail price increases of 50 basis points, cost savings through strategic sourcing and self-manufacturing of 34 basis points, and lower inventory write-downs of 4 basis points. manufacturing labor costs.

Generally, gross profit as a percentage of net sales may vary from period to period due to the impact of foreign currency fluctuations, changes in ~~country~~sales mix, ~~as volume changes among countries with varying margins, retail~~ price increases, cost ~~savings through strategic~~changes related to inflation, self-manufacturing and sourcing, and ~~self-manufacturing, and~~ inventory write-downs.

Royalty overrides were ~~$310.1~~$416.0 million and ~~$944.1~~$433.8 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, as compared to $320.3 million~~March 31, 2023 and ~~$968.9 million for the same periods in 2016.~~2022, respectively. Royalty overrides as a percentage of net sales were ~~28.6%~~33.2% and ~~28.3%~~32.5% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, as compared to 28.6%~~March 31, 2023 and ~~28.1% for the same periods~~2022, respectively.

The increase in 2016. Compensation to our independent service providers in China is included in selling, general and administrative expenses as opposed to royalty overrides where it is included for all other Members. Generally, royalty overrides as a percentage of net sales for the three months ended March 31, 2023 as compared to the same period in 2022 was primarily due to lower net sales in China as a proportion of our total worldwide net sales. The majority of service fees to our independent service providers in China are included in selling, general, and administrative expenses while Member compensation for all other countries is included in Royalty overrides.

Generally, Royalty overrides as a percentage of net sales may vary ~~slightly~~ from period to period due to changes in the mix of products and countries because full royalty overrides are not paid on certain products and in certain countries.

Selling, general, and administrative expenses were ~~$445.2~~$475.9 million and ~~$1,327.0~~$454.9 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, as compared to $441.3 million~~March 31, 2023 and ~~$1,545.2 million for the same periods in 2016.~~2022, respectively. Selling, general, and administrative expenses as a percentage of net sales were ~~41.0%~~38.1% and ~~39.8%~~34.0% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, as compared to 39.3%~~March 31, 2023 and ~~44.9% for the same periods in 2016.~~2022, respectively.

The increase in selling, general, and administrative expenses for the three months ended ~~September 30, 2017~~March 31, 2023 as compared to the same period in 2022 was driven by ~~$7.3~~$23.3 million in higher Member event and promotion costs, and ~~event costs; $4.9~~$20.0 million in higher labor and ~~employee benefit costs; $4.0 million in higher foreign exchange loss; partially offset by $4.8 million in lower professional fees~~benefits costs primarily from ~~lower expenses~~employee retention and separation costs related to allegations raised by a hedge fund manager; $4.5 million in lower travel expenses due to cost control initiatives and $2.2 million in lower advertising and sponsorships. The decrease in selling, general and administrative expenses for the nine months ended September 30, 2017 was driven by the $203.0 million regulatory settlements in 2016; $13.7 million in lower advertising and sponsorships; $9.3 million in lower professional fees primarily from lower expenses related to allegations raised by a hedge fund manager; and $7.7 million in lower travel expenses due to cost control initiatives; partially offset by $14.4 million in higher labor and employee benefit costs and $8.7 million in higher Member promotion and event costs.

In late 2012, a hedge fund manager publicly raised allegations regarding the legality of our network marketing program and announced that the hedge fund manager had taken a significant short position regarding our common shares, leading to intense public scrutiny and significant stock price volatility. We have engaged legal and advisory services firms to assist with responding to the allegations and to perform other related services in connection to these events. For the three months ended September 30, 2017 and 2016, we recorded approximately $1.1 million and $3.2 million, respectively, of expenses related to this matter, which includes approximately $0.6 million and $2.7 million, respectively, of legal, advisory and other professional service fees. For the nine months ended September 30, 2017 and 2016, we recorded approximately $4.2 million and $10.7 million, respectively, of expenses related to this matter, which includes approximately $2.6 million and $8.5 million, respectively, of legal, advisory and other professional service fees. We expect to continue to incur expenses related to this matter over the next several periods and the expenses are expected to vary from period to period.

During the three and nine months ended September 30, 2017, the Company recognized government grant income of approximately $4.6 million and $43.5 million, respectively, as compared to $0.2 million and $29.1 million for the same periods in 2016, respectively, relating to government grant income for China. SeeTransformation Program (See Note 2, ~~Significant Accounting Policies~~13, Transformation Program, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for a further ~~discussion.~~discussion), partially offset by $20.5 million in lower service fees for China independent service providers due to lower sales in China.

The $8.9 million of other operating income for the three months ended March 31, 2023 consisted of $8.9 million of government grant income for China (See Note 2, Significant Accounting Policies, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q). The $13.1 million of other operating income for the three months ended March 31, 2022 consisted of $13.1 million of government grant income for China.

The increase in ~~net~~ interest expense, net for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 as compared to the same period in ~~2016,~~2022 was primarily due to ~~the~~an increase in our weighted-average interest expense due to higher interest rates and increased borrowing amounts relating to our new $1.45 billion senior secured credit facility, which includes a $1.3 billion term loan B, that was entered into on February 15, 2017 as discussed further below in ~~Liquidity and Capital Resources. These increases were partially offset by higher interest income related to proceeds from the $1.3 billion term loan B.~~rate.

Income taxes were ~~an expense of $26.4~~$1.8 million and ~~$84.2~~$25.2 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, as compared to expense of $41.7 million~~March 31, 2023 and ~~$69.2 million for the same periods in 2016.~~2022, respectively. The effective income tax rate was ~~32.6%~~5.8% and ~~23.3%~~20.4% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, as compared to 32.2%~~March 31, 2023 and ~~30.1% for the same periods in 2016.~~2022, respectively. The ~~increase~~decrease in the effective tax rate for the three months ended ~~September 30, 2017,~~March 31, 2023 as compared to the same period in ~~2016,~~2022 was ~~primarily~~ due to ~~the impact~~an increase in tax benefits from discrete events, primarily as a result of a change in unrecognized tax benefits, partially offset by changes in the geographic mix of the Company’s income, offset by an increase in net benefits from discrete events. The decrease in the effective tax rate for the nine months ended September 30, 2017, as compared to the same period in 2016, was primarily due to an increase in net benefits from discrete events. Included in the discrete events for the three and nine months ended September 30, 2017 was the impact of $0.6 million and $26.4 million of excess tax benefits generated during those respective periods, relating to the Company’s application of ASU 2016-09 that was adopted on January 1, 2017.Company's income.

We have historically met our short- and long-term working capital and capital expenditure requirements, including funding for expansion of operations, through net cash flows provided by operating activities. Variations in sales of our products directly affect the availability of funds. There are no material contractual restrictions on our ability to transfer and remit funds among our international affiliated companies. However, there are foreign currency restrictions in certain countries which could reduce our ability to timely obtain U.S. dollars. Even with these restrictions and the impacts of the COVID-19 pandemic and the current inflationary environment, we believe we will have sufficient resources, including cash flow from operating activities and longer-term access to capital markets, to meet debt service obligations in a timely manner and be able to continue to meet our objectives.

Historically, our debt has not resulted from the need to fund our normal operations, but instead has resulted primarily from our share repurchase programs. Since inception in 2007, total share repurchases amounted to approximately ~~$3.4~~$6.5 billion. While a significant net sales decline could potentially affect the availability of funds, many of our largest expenses are variable in nature, which we believe protects our funding in all but a dramatic net sales downturn. Our ~~$1,636.3~~$454.2 million cash and cash equivalents as of March 31, 2023 and our senior secured credit facility, in addition to cash flow from operations, can be used to support general corporate purposes, including any future share repurchases, dividends, and strategic investment opportunities.

We have a cash pooling arrangement with a financial institution for cash management purposes. This cash pooling arrangement allows certain of our participating subsidiaries to withdraw cash from this financial institution based upon our aggregate cash deposits held by subsidiaries who participate in the cash pooling arrangement. We did not owe any amounts to this financial institution under the pooling arrangement as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~2022.

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, we generated ~~$404.4~~$46.2 million of operating cash flow as compared to ~~$249.9~~$130.5 million for the same period in ~~2016.~~2022. The ~~increase~~decrease in our operating cash flow was the result of ~~higher~~$61.6 million of lower net income ~~higher~~excluding non-cash ~~items; partially offset by~~and reconciling items disclosed within our condensed consolidated statement of cash flows, and $22.7 million of unfavorable changes in operating assets and liabilities. The ~~increase in~~$61.6 million of lower net income excluding non-cash and reconciling items was primarily ~~the result of~~driven by lower contribution margin driven by lower net sales (See Summary Financial Results above for further discussion) and higher selling, general, and administrative ~~expenses mainly due to the $203.0~~expenses. The $22.7 million ~~regulatory settlements in 2016, partially offset by lower contribution margin~~ of ~~$64.5 million driven by lower net sales. The increase in non-cash items was primarily the result of an increase in deferred income taxes. The~~ unfavorable ~~change~~changes in operating assets and liabilities was primarily the result of unfavorable changes in accounts ~~payable;~~payable, and royalty ~~overrides; accrued compensation;~~overrides mainly due to the timing of payments of the Mark Hughes bonus as described below, and ~~non-income and income~~others primarily from unfavorable changes in unrecognized tax ~~payables,~~benefits; partially offset by favorable changes in ~~inventories; prepaid expenses~~inventories and other current ~~assets.~~liabilities primarily from favorable changes in accrued compensation. The favorable changes in accrued compensation is primarily from lower employee bonus payments in 2023.

Capital expenditures, including accrued capital expenditures, were $28.0 million and $40.3 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016 were $67.1 million and $111.5 million,~~2022, respectively. The majority of these expenditures during the three months ended March 31, 2023 represented investments in management information systems, including ~~the upgrade of our Oracle enterprise wide systems which went live in August 2017, manufacturing facilities both domestically and internationally, and~~ initiatives to develop ~~web-based~~enhanced Member ~~tools.~~tools which includes our new Digital Technology Program. We expect to continue our investments in these areas and expect to incur total capital expenditures of approximately ~~$88~~$175 million to ~~$108~~$225 million for the full year of ~~2017.~~2023 which includes our new multi-year Digital Technology Program that is focused on enhancing and rebuilding our Member facing technology platform and web-based Member tools to provide enhanced digital capabilities and experiences to our Members. Based on our estimates, and after reallocating future expected expenditures, we expect our future capital expenditures to remain elevated during 2023, 2024, and 2025 as a result of this $400 million Digital Technology Program. The capital expenditures relating to this Digital Technology Program are separate to the Transformation Program described further below.

In March ~~2017, Herbalife~~2023, we hosted ~~its~~our annual global Herbalife ~~Summit~~Honors event ~~in Charlotte, North Carolina~~ where ~~President Team members~~sales leaders from around the world met, ~~and~~ shared best practices, and conducted leadership training, and ~~Herbalife~~our management awarded Members ~~$65.2~~$77.9 million of Mark Hughes bonus payments related to their ~~2016~~2022 performance. In ~~March 2016, Herbalife~~April 2022, our management awarded Members ~~$64.3~~$85.7 million of Mark Hughes bonus payments related to their ~~2015~~2021 performance.

In 2021, we initiated a global transformation program to optimize global processes for future growth, or the Transformation Program. The Transformation Program involves the investment in certain new technologies and the realignment of infrastructure and the locations of certain functions to better support distributors and customers. The Transformation Program is expected to deliver annual savings of at least $70 million with approximately half of these savings being realized in 2023 with the remainder largely being realized in 2024. We also expect to incur total pre-tax expenses of at least $60.0 million to realize these run-rate savings. We have already incurred total pre-tax expenses of approximately $52.3 million through March 31, 2023, of which $27.3 million and $1.6 million were recognized in selling, general, and administrative expenses within our condensed consolidated statements of income during the three months ended March 31, 2023 and 2022, respectively. We expect a total of $20 million to $25 million of related capital expenditures through 2024, primarily relating to technology, to support the Transformation Program. Since the Transformation Program is still ongoing and expected to be completed in 2024, these estimated amounts are preliminary and based on Management’s estimates and actual results could differ from such estimates.

~~In May 2015,~~On August 16, 2018, we ~~amended our prior~~entered into a $1.25 billion senior secured credit facility, or the Prior Credit Facility, and our $700 million borrowing capacity on our prior revolving credit facility, or the Prior Revolving Credit Facility, was reduced by approximately $235.9 million, and was further reduced by approximately $39.1 million on September 30, 2015, bringing the total available borrowing capacity to $425.0 million as of December 31, 2016. The Company repaid in full its $500 million term loan under the Prior Credit Facility, or the Prior Term Loan, on March 9, 2016. ~~On February 15, 2017, we entered into a $1,450.0 million senior secured credit facility, or the~~2018 Credit Facility, consisting of a ~~$1,300.0~~$250.0 million term loan A, or the 2018 Term Loan A, a $750.0 million term loan B, or the 2018 Term Loan B, and a ~~$150~~$250.0 million revolving credit facility, or the 2018 Revolving Credit Facility, with a syndicate of financial institutions as ~~lenders,~~lenders. The 2018 Term Loan B matures upon the earlier of: (i) August 18, 2025, or ~~Lenders.~~(ii) December 15, 2023 if the outstanding principal on the 2024 Convertible Notes, as defined below, exceeds $350.0 million and we exceed certain leverage ratios as of that date. As described further below, the outstanding principal on the 2024 Convertible Notes is less than $350.0 million as of March 31, 2023. All obligations under the 2018 Credit Facility are unconditionally guaranteed by certain direct and indirect wholly-owned subsidiaries of Herbalife Ltd. and secured by the equity interests of certain of Herbalife Ltd.’s subsidiaries and substantially all of the assets of the domestic loan parties. Also on August 16, 2018, we issued $400.0 million aggregate principal amount of senior unsecured notes, or the 2026 Notes as described below, and used the proceeds from the 2018 Credit Facility and the 2026 Notes to repay in full the $1,178.1 million outstanding under our prior senior secured credit facility.

On December 12, 2019, we amended the 2018 Credit Facility which, among other things, reduced the interest rate for borrowings under the 2018 Term Loan B. We incurred approximately $1.2 million of debt issuance costs in connection with the amendment. For accounting purposes, pursuant to the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 470, Debt, or ASC 470, this transaction was accounted for as a modification of the 2018 Credit Facility. The debt issuance costs were recognized in interest expense, net within our condensed consolidated statement of income during the fourth quarter of 2019.

On March 19, 2020, we amended the 2018 Credit Facility which, among other things, extended the maturity of both the 2018 Term Loan A and 2018 Revolving Credit Facility ~~matures~~to the earlier of: (i) March 19, 2025 or (ii) September 15, 2023 if the outstanding principal on ~~February 15, 2022~~the 2024 Convertible Notes, as defined below, exceeds $350.0 million and we exceed certain leverage ratios as of that date (as described further below, the outstanding principal on the 2024 Convertible Notes is less than $350.0 million as of March 31, 2023); increased borrowings under the 2018 Term Loan ~~matures~~A from $234.4 million to a total of $264.8 million; increased the total available borrowing capacity under 2018 Revolving Credit Facility from $250.0 million to $282.5 million; and reduced the interest rate for borrowings under both the 2018 Term Loan A and 2018 Revolving Credit Facility. We incurred approximately $1.6 million of debt issuance costs in connection with the amendment. For accounting purposes, pursuant to ASC 470, this transaction was accounted for as a modification of the 2018 Credit Facility. Of the $1.6 million of debt issuance costs, approximately $1.1 million was recorded on our condensed consolidated balance sheet and is being amortized over the life of the 2018 Credit Facility using the effective-interest method, and approximately $0.5 million was recognized in interest expense, net within our condensed consolidated statement of income during the first quarter of 2020.

On February ~~15,~~10, 2021, we amended the 2018 Credit Facility which, among other things, reduced the interest rate for borrowings under the 2018 Term Loan B. We incurred approximately $1.1 million of debt issuance costs in connection with the amendment. For accounting purposes, pursuant to ASC 470, this transaction was accounted for as a modification of the 2018 Credit Facility. The debt issuance costs were recognized in interest expense, net within our condensed consolidated statement of income during the first quarter of 2021.

During April 2023, we amended the 2018 Credit Facility which, among other things, increased the leverage ratio covenant under both the 2018 Term Loan A and 2018 Revolving Credit Facility. In addition, the 2018 Credit Facility was also amended pursuant to the existing terms of the 2018 Credit Agreement to transition from LIBOR to the alternative benchmark rate, which is now being set as SOFR, under both the 2018 Term Loan A and 2018 Revolving Credit Facility when LIBOR is expected to be fully discontinued. We incurred approximately $1.1 million of debt issuance costs in connection with the amendments. For accounting purposes, pursuant to ASC 470, these transactions are expected to be accounted for as modifications of the 2018 Credit Facility during the second quarter of 2023.

The 2018 Credit Facility requires us to comply with a leverage ratio. The 2018 Credit Facility also contains affirmative and negative covenants customary for financings of this type, including, among other things, limitations or prohibitions on repurchasing common shares, declaring and paying dividends and other distributions, redeeming and repurchasing certain other indebtedness, loans and investments, additional indebtedness, liens, mergers, asset sales and transactions with affiliates. In addition, the 2018 Credit Facility contains customary ~~covenants, including covenants that limit or restrict our ability to incur liens, incur indebtedness, make investments, dispose~~events of assets, make certain restricted payments, pay dividends, repurchase our common shares, merge or consolidate and enter into certain transactions with affiliates. We are also required to maintain a minimum balance of $200.0 million of consolidated cash and cash equivalents.default. As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, we were ~~compliant~~in compliance with our debt covenants under the 2018 Credit ~~Facility and the Prior Credit Facility, respectively.~~Facility.

The 2018 Term Loan isA and 2018 Term Loan B are payable in consecutive quarterly installments ~~each in an aggregate principal amount of $24.4 million,~~ which began on ~~June 30, 2017~~. December 31, 2018. Interest is due at least quarterly on amounts outstanding onunder the 2018 Credit Facility. In addition, beginning in 2020, we may be required to make mandatory prepayments towards the 2018 Term Loan B based on ~~the Company’s~~our consolidated leverage ratio and annual excess cash flows as defined under the terms of the ~~credit agreement.~~2018 Credit Facility. We are also permitted to make voluntary prepayments. Amounts outstanding under the 2018 Term Loan A and 2018 Term Loan B may be voluntarily prepaid without premium or penalty, subject to customary breakage fees in connection with the prepayment of a eurocurrency loan. These prepayments, if any, will be applied against remaining quarterly installments owed under the 2018 Term Loan A and 2018 Term Loan B in order of maturity with the remaining principal due upon ~~maturity.~~ maturity, unless directed otherwise by us. Based on the 2022 consolidated leverage ratio and excess cash flow calculation, both as defined under the terms of the 2018 Credit Facility, we will not be required to make a mandatory prepayment in 2023 toward the 2018 Term Loan B.

During the three months ended March 31, ~~2017,~~2023, we borrowed an aggregate amount of $71.0 million under the 2018 Credit Facility, all of which was under the 2018 Revolving Credit Facility, and repaid a total amount of ~~$410.0~~$138.2 million ~~to repay in full amounts outstanding on the Prior Revolving Credit Facility.~~ ~~During both the three months ended June 30, 2017 and September 30, 2017, the Company repaid $24.4 million, respectively,~~ on amounts outstanding under the ~~Term Loan.~~ 2018 Credit Facility, which included $131.0 million of repayments on amounts outstanding under the 2018 Revolving Credit Facility. During the three months ended March 31, ~~2016,~~2022, we borrowed an aggregate amount of $82.0 million under the 2018 Credit Facility, all of which was under the 2018 Revolving Credit Facility, and repaid a total amount of ~~$229.7~~$89.2 million ~~to repay in full the Prior Term Loan.~~ ~~The Company did not repay any~~on amounts outstanding under the ~~Prior~~2018 Credit Facility, which included $82.0 million of repayments on amounts outstanding under the 2018 Revolving Credit ~~Facility during the three months ended September 30, 2016.~~Facility. As of ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, the U.S. dollar amount outstanding under the 2018 Credit Facility was $908.4 million and $975.7 million, respectively. Of the $908.4 million outstanding under the 2018 Credit Facility as of March 31, 2023, $252.2 million was outstanding under the 2018 Term Loan A and $656.2 million was ~~$1,251.2 million.~~outstanding under the 2018 Term Loan B. There were no ~~amounts~~borrowings outstanding onunder the 2018 Revolving Credit Facility as of ~~September 30, 2017.~~ AsMarch 31, 2023. Of the $975.7 million outstanding under the 2018 Credit Facility as of December 31, ~~2016, the U.S. dollar amount~~2022, $257.6 million was outstanding under the ~~Prior~~2018 Term Loan A, $658.1 million was outstanding under the 2018 Term Loan B, and $60.0 million was outstanding under the 2018 Revolving Credit ~~Facility was $410.0 million.~~Facility. There were no outstanding foreign currency borrowings under the 2018 Credit Facility as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016 under the Credit Facility and the Prior Credit Facility, respectively. On September 30, 2017~~2022. As of March 31, 2023 and December 31, ~~2016,~~2022, the ~~weighted average~~weighted-average interest rate for borrowings under the ~~Credit Facility and the Prior~~2018 Credit Facility was ~~6.71%~~6.93% and ~~4.29%~~4.08%, respectively.

See Note 4, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for a further discussion on ~~our~~the 2018 Credit Facility.

~~During February 2014,~~In March 2018, we issued ~~$1.15 billion~~$550.0 million aggregate principal amount of convertible senior notes due 2024, or the 2024 Convertible Notes. The 2024 Convertible Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness. The 2024 Convertible Notes pay interest at a rate of ~~2.00%~~2.625% per annum payable semiannually in arrears on ~~February~~March 15 and ~~August~~September 15 of each year, beginning on ~~August~~September 15, ~~2014. The~~2018. Unless redeemed, repurchased or converted in accordance with their terms prior to such date, the 2024 Convertible Notes mature on ~~August~~March 15, ~~2019, unless earlier repurchased or converted.~~2024. The primary purpose of the issuance of the 2024 Convertible Notes was to repurchase a portion of the 2019 Convertible Notes.

In December 2021, we made an irrevocable election under the indenture governing the 2024 Convertible Notes to require the principal portion of the 2024 Convertible Notes to be settled in cash and any excess in shares or cash. In December 2022, we issued $277.5 million aggregate principal of new convertible senior notes due 2028 as described below, and subsequently used the proceeds, to repurchase $287.5 million of our existing 2024 Convertible Notes from a limited number of holders in privately negotiated transactions for ~~share repurchase purposes.~~ an aggregate purchase price of $274.9 million, which included $1.7 million of accrued interest. As of March 31, 2023, the remaining outstanding principal on the 2024 Convertible Notes was $262.5 million.

In December 2022, we issued $277.5 million aggregate principal amount of convertible senior notes due 2028, or the 2028 Convertible Notes. The 2028 Convertible Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness. The 2028 Convertible Notes pay interest at a rate of 4.25% per annum payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023. Unless redeemed, repurchased or converted in accordance with their terms prior to such date, the 2028 Convertible Notes mature on June 15, 2028. The primary purpose of the issuance of the 2028 Convertible Notes was to repurchase a portion of the 2024 Convertible Notes. See Note 4, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for a further discussion on our 2028 Convertible Notes.

In May 2020, we issued $600.0 million aggregate principal amount of senior notes due 2025, or the 2025 Notes. The 2025 Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness. The 2025 Notes pay interest at a rate of 7.875% per annum payable semiannually in arrears on March 1 and September 1 of each year, beginning on March 1, 2021. The 2025 Notes mature on September 1, 2025, unless redeemed or repurchased in accordance with their terms prior to such date. The primary purpose of the issuance of the 2025 Notes was for general corporate purposes, including share repurchases and other capital investment projects. See Note 4, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for a further discussion on our 2025 Notes.

In May 2021, we issued $600.0 million aggregate principal amount of senior notes due 2029, or the 2029 Notes. The 2029 Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness. The 2029 Notes pay interest at a rate of 4.875% per annum payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The 2029 Notes mature on June 1, 2029, unless redeemed or repurchased in accordance with their terms prior to such date. The primary purpose of the issuance of the 2029 Notes was to repurchase the 2026 Notes as well as for general corporate purposes, which may include shares repurchases and other capital investment projects. See Note 4, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for a further discussion on our 2029 Notes.

The majority of our foreign subsidiaries designate their local currencies as their functional currencies. ~~At September 30, 2017 and December~~As of March 31, ~~2016,~~2023, the total amount of our foreign subsidiary cash and cash equivalents was ~~$1,303.5~~$391.3 million, ~~and $316.2 million, respectively,~~ of which ~~$786.3~~$53.3 million ~~and $28.2 million, respectively,~~ was ~~invested~~held in U.S. dollars. The increase in our foreign subsidiary U.S. dollar denominated cash and cash equivalents primarily relates to our borrowings from our Credit Facility executed on February 15, 2017. At September 30, 2017 and DecemberAs of March 31, ~~2016,~~2023, the total amount of cash and cash equivalents held by ~~our parent~~Herbalife Ltd. and its U.S. entities, inclusive of U.S. territories, was ~~$332.8 million and $527.8 million, respectively.~~$62.9 million.

For earnings not considered to be indefinitely reinvested deferred taxes have been provided. For earnings considered to be indefinitely reinvested, deferred taxes have not been provided. Should we make a determination to remit the cash and cash equivalents from our foreign subsidiaries that are considered indefinitely reinvested to ~~our U.S. consolidated group~~Herbalife Ltd. for the purpose of repatriation of undistributed earnings, we would need to accrue and pay taxes. As of December 31, ~~2016, our U.S. consolidated group~~2022, Herbalife Ltd. had approximately $131.9 million of permanently reinvested unremitted earnings from certain foreign subsidiaries, and if these monies were ever needed to be remitted, the impact of any tax consequences on our overall liquidity position would not be material. As of December 31, 2016, our parent, Herbalife Ltd., had $2.5$3.0 billion of permanently reinvested unremitted earnings relating to its operating subsidiaries. As of ~~September 30, 2017,~~December 31, 2022, we do not have any plans to repatriate these unremitted earnings to ~~our parent;~~Herbalife Ltd.; therefore, we do not have any liquidity concerns relating to these unremitted earnings and related cash and cash equivalents. See Note 12, Income Taxes, to the Consolidated Financial Statements included in our ~~2016~~2022 10-K for additional discussion on our unremitted earnings.

~~At September 30, 2017~~As of March 31, 2023 and December 31, ~~2016,~~2022, we had no material off-balance sheet ~~arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.~~arrangements.

We have not declared or paid cash dividends since 2014. The declaration of future dividends is subject to the discretion of our board of directors and will depend upon various factors, including our earnings, financial condition, Herbalife Ltd.’s available distributable reserves under Cayman Islands law, restrictions imposed by the 2018 Credit Facility and the terms of any other indebtedness that may be outstanding, cash requirements, future prospects, and other factors deemed relevant by our board of directors.

On February ~~21, 2017,~~9, 2021, our board of directors authorized a new three-year $1.5 billion share repurchase program that will expire on February ~~21, 2020,~~9, 2024, which replaced our prior share repurchase authorization ~~which~~that was set to expire on ~~June~~October 30, ~~2017 which, as of December 31, 2016,~~2023 and had ~~$232.9~~approximately $7.9 million of remaining authorized ~~capacity.~~capacity when it was replaced. This share repurchase program allows us, which includes an indirect ~~wholly~~wholly-owned subsidiary of Herbalife Ltd., to repurchase our common shares at such times and prices as determined by management, as market conditions ~~warrant.~~warrant, and to the extent Herbalife Ltd.’s distributable reserves are available under Cayman Islands law. The 2018 Credit Facility permits us to repurchase our common shares as long as no default or event of default exists and other conditions, such as specified consolidated leverage ratios, are met.

~~In conjunction with~~ As of March 31, 2023, the ~~issuance of the Convertible Notes during February 2014, we paid approximately $685.8 million to enter into prepaid forward~~remaining authorized capacity under our $1.5 billion share repurchase ~~transactions, or~~program was approximately $985.5 million.

During the ~~Forward Transactions, with certain financial institutions, or the Forward Counterparties, pursuant to which~~three months ended March 31, 2023, we ~~purchased approximately 9.9 million~~did not repurchase any of our common shares through open-market purchases. During the three months ended March 31, 2022, we repurchased approximately 2.6 million of our common shares through open-market purchases at an aggregate cost of approximately $101.7 million, or an average cost of ~~$69.02~~$39.32 per share, for settlement on or around the August 15, 2019 maturity date for the Convertible Notes, subject to the ability of each Forward Counterparty to elect to settle all or a portion of its Forward Transactions early. The shares are treated asand subsequently retired ~~shares for basic and diluted EPS purposes although they remain legally outstanding.~~ these shares.

See Note 10, Shareholders’ ~~Equity~~Deficit, to the Condensed Consolidated Financial Statements included in Part I, Item 1, ~~of this Quarterly Report on Form 10-Q, for a further discussion on the Forward Transactions.~~

During the three months ended March 31, 2017, an indirect wholly owned subsidiary of the Company purchased approximately 1.1 million of Herbalife Ltd.’s common shares through open market purchases at an aggregate cost of approximately $60.7 million, or an average cost of $56.10 per share. During the three months ended June 30, 2017, an indirect wholly owned subsidiary of the Company purchased approximately 2.7 million of Herbalife Ltd.’s common shares through open market purchases at an aggregate cost of approximately $179.8 million, or an average cost of $67.06 per share. During the three months ended September 30, 2017, an indirect wholly owned subsidiary of the Company purchased 0.8 million of Herbalife Ltd.’s common shares through open market purchases at an aggregate cost of approximately $58.7 million, or an average cost of $72.38 per share. These 2017 share repurchases reduced the Company’s total shareholders’ equity and are reflected at cost within the Company’s accompanying condensed consolidated balance sheet. Although these shares are owned by the Company’s indirect wholly owned subsidiary, they are reflected as treasury shares under U.S. GAAP and therefore reduce the number of common shares outstanding within our condensed consolidated financial statements and the weighted-average number of common shares outstanding used in calculating our earnings per share. The common shares of Herbalife Ltd. held by the indirect wholly owned subsidiary, however, remain outstanding on the books and records of the Company’s transfer agent and therefore still carry voting and other share rights related to ownership of the Company’s common shares, which may be exercised. So long as it is consistent with applicable laws, such shares will be voted by such subsidiary in the same manner, and to the maximum extent possible in the same proportion, as all other votes cast with respect to any matter properly submitted to a vote of Herbalife Ltd.’s shareholders. We did not repurchase any common shares in the open market during the three and nine months ended September 30, 2016. As of September 30, 2017, the remaining authorized capacity under our $1.5 billion share repurchase program was $1,200.8 million. See Note 10, ~~Shareholders’ Equity~~ ~~and Note 14,~~ ~~Subsequent Events, to the Condensed Consolidated~~ Financial Statements ~~included in Part I, Item 1~~, of this Quarterly Report on Form 10-Q, for a further discussion on our share repurchases.

In February 2014, in connection with the issuance of Convertible Notes, we paid approximately $123.8 million to enter into capped call transactions with respect to our common shares, or the Capped Call Transactions, with certain financial institutions. The Capped Call Transactions are expected generally to reduce the potential dilution upon conversion of the Convertible Notes in the event that the market price of the common shares is greater than the strike price of the Capped Call Transactions, initially set at $86.28 per common share, with such reduction of potential dilution subject to a cap based on the cap price initially set at $120.79 per common share. See Note 10, ~~Shareholders’ Equity, to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for a further discussion of the Capped Call Transactions.~~

As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, we had ~~positive~~ working capital of ~~$1,415.3~~$95.0 million and ~~$671.0~~$379.5 million, respectively, or ~~an increase~~a decrease of ~~$744.3~~$284.5 million. ~~This increase~~The decrease was primarily due to ~~the increase~~a decrease in cash and cash equivalents, ~~partially offset by the increase~~and increases in the current portion of long-term debt primarily ~~related~~relating to ~~the Credit Facility entered into on February 15, 2017.~~our 2024 Convertible Notes, which matures in less than one year; partially offset by an increase in prepaid expenses and other current assets.

We expect that cash and funds provided from operations, available borrowings under the 2018 Credit Facility, and longer-term access to capital markets will provide sufficient working capital to operate our business, to make expected capital expenditures, and to meet foreseeable liquidity requirements ~~including payment of amounts outstanding under the Credit Facility,~~ for the next twelve months and thereafter.

The majority of our purchases from suppliers are generally made in U.S. dollars, while sales to our Members generally are made in local currencies. Consequently, strengthening of the U.S. dollar versus a foreign currency can have a negative impact on net sales and contribution margins and can generate transaction gains or losses on intercompany transactions. For discussion of our foreign exchange contracts and other hedging arrangements, see Part I, Item 3, Quantitative and Qualitative Disclosures about Market Risk, of this Quarterly Report on Form 10-Q — ~~Quantitative and Qualitative Disclosures about Market Risk.~~

See Note 5, Contingencies, to the Condensed Consolidated Financial Statements included in Part I, Item 1, ~~of this Quarterly Report on Form 10-Q, for a further discussion of our contingencies as of September 30, 2017.~~

~~See Note 14,~~ ~~Subsequent Events,~~ ~~to the Condensed Consolidated~~ Financial Statements ~~included in Part I, Item 1~~, of this Quarterly Report on Form 10-Q, for information ~~regarding subsequent events.~~on our contingencies as of March 31, 2023.

U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. We regularly evaluate our estimates and assumptions related to revenue recognition, allowance for product returns, inventory, goodwill and purchased intangible asset valuations, deferred income tax asset valuation allowances, uncertain tax positions, tax contingencies, and other loss contingencies. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses. Actual results could differ from those estimates. We consider the following policies to be most critical in understanding the judgments that are involved in preparing the financial statements and the uncertainties that could impact our operating results, financial condition and cash flows.

We are a nutrition company that sells a wide range of weight ~~management,~~management; targeted ~~nutrition,~~nutrition; energy, sports, ~~& fitness,~~and fitness; and outer nutrition products. Our products are manufactured by us in our Changsha, Hunan, China extraction ~~facility,~~facility; Suzhou, China ~~facility,~~facility; Nanjing, China ~~facility,~~facility; Lake Forest, California ~~facility,~~facility; and ~~in our~~ Winston-Salem, North Carolina ~~facility,~~facility; and by ~~third party~~third-party providers, and then are sold to Members who consume and sell Herbalife products to retail consumers or other Members. As of ~~September 30, 2017,~~March 31, 2023, we sold products in ~~94 countries~~95 markets throughout the world and we are organized and managed by geographic region. We aggregate our operating segments into one reporting segment, except China, as management believes that our operating segments have similar operating characteristics and similar ~~long term~~long-term operating performance. In making this determination, management believes that the operating segments are similar in the nature of the products sold, the product acquisition process, the types of customers to whom products are sold, the methods used to distribute the products, the nature of the regulatory environment, and their economic characteristics.

We generally recognize revenue upon delivery ~~and~~ when ~~both the title and risk and rewards pass~~control passes to the Member or importer, or as products are sold in China to and through independent service providers, sales representatives, and sales officers to customers and preferred customers, as well as through Company-operated retail stores when necessary.Member. Product sales are recognized net of product returns, and discounts referred to as “distributor allowances.” We generally receive the net sales price in cash or through credit card payments at the point of sale. Royalty overrides are generally recorded when revenue is recognized. See Note 2, Significant Accounting Policies, to the Condensed Consolidated Financial Statements included in Part I, Item 1,Financial Statements, of this Quarterly Report on Form 10-Q, for a further discussion of distributor compensation in the U.S.

Allowances for product returns, primarily in connection with our buyback program, are provided at the time the sale is recorded. This accrual is based upon historical return rates for each country and the relevant return pattern, which reflects anticipated returns to be received over a period of up to 12 months following the original sale. Historically, product returns and buybacks have not been significant. Product returns and buybacks were approximately 0.1% of net sales for both the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022.

We adjust our inventories to lower of cost and net realizable value. Additionally we adjust the carrying value of our inventory based on assumptions regarding future demand for our products and market conditions. If future demand and market conditions are less favorable than management’s assumptions, additional inventory write-downs could be required. Likewise, favorable future demand and market conditions could positively impact future operating results if previously written down inventories are sold. We have obsolete and slow moving inventories which have been adjusted downward ~~$33.1~~$32.9 million and ~~$25.5~~$31.5 million to present them at their lower of cost and net realizable value in our condensed consolidated balance sheets as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively.

Goodwill and ~~marketing related~~marketing-related intangible assets not subject to amortization are tested annually for impairment, and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. ~~An impairment loss is recognized to~~

Under the ~~extent that the carrying amount exceeds the asset’s fair value. As discussed below,~~quantitative method for ~~goodwill~~ impairment testing we have the option to perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If we conclude it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then there is no need to perform the two-step impairment test. Currently, we do not use this qualitative assessment option but we could in the future elect to use this option. For our marketing related intangible assets a similar qualitative option is also currently available. However, we currently use a discounted cash flow model, or the income approach, under the relief-from-royalty method to determine the fair value of our marketing related intangible assets in order to confirm there is no impairment required. For our marketing related intangible assets, if we do not use this qualitative assessment option, we could still in the future elect to use this option.

~~In order to estimate the fair value~~ of goodwill, ~~we also primarily use an income approach. The determination of impairment~~which is ~~made~~done at the reporting unit level, ~~and consists of two steps. First,~~ we primarily use an income approach in order to determine the fair value of a reporting unit and compare it to its carrying amount. The determination of the fair value of the reporting units requires us to make significant estimates and assumptions. These estimates and assumptions include estimates of future revenues and expense growth rates, capital expenditures and the depreciation and amortization related to these capital expenditures, discount rates, and other inputs. Due to the inherent uncertainty involved in making these estimates, actual future results could differ. Changes in assumptions regarding future results or other underlying assumptions could have a significant impact on the fair value of the reporting unit. ~~Second, if~~If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting ~~unit’s goodwill~~unit over its fair value. During fiscal year 2022, we performed a quantitative assessment and ~~other intangibles over the implied fair value as~~ determined in Step 2 of the goodwill impairment test. Also, if during Step 1 of a goodwill impairment test we determine we have reporting units with zero or negative carrying amounts, then we perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. During Step 2 of a goodwill impairment test, the implied fair value of goodwill is determined in a similar manner as how the amount of goodwill recognized in a business combination is determined, in accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 805, Business Combinations. We would assign the fair value of aeach reporting unit was significantly greater than its respective carrying value.

Under the quantitative method for impairment testing of our marketing-related intangible assets, we use a discounted cash flow model, or the income approach, under the relief-from-royalty method to ~~all~~determine the fair value of our marketing-related intangible assets in order to confirm there is no impairment required. An impairment loss is recognized to the extent that the carrying amount of the assets exceeds their fair value. During fiscal year 2022, we performed a quantitative assessment of our marketing-related intangible assets and ~~liabilities of~~determined that ~~reporting unit as if the reporting unit had been acquired in a business combination and~~ the fair value of the ~~reporting unit~~assets was ~~the price paid to acquire the reporting unit. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill.~~ significantly greater than their carrying value.

As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, we had goodwill of approximately ~~$95.8~~$94.0 million and ~~$89.9~~$93.2 million, respectively. ~~As of both September 30, 2017 and December 31, 2016, we had marketing related intangible assets of approximately $310 million.~~ The increase in goodwill during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 was due to ~~cumulative~~foreign currency translation adjustments. As of both March 31, 2023 and December 31, 2022, we had marketing-related intangible assets of approximately $310.0 million. No ~~marketing related~~goodwill or marketing-related intangibles ~~or goodwill~~ impairment was recorded during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022.

Contingencies are accounted for in accordance with FASB ASC Topic 450, Contingencies, or ASC 450. ASC 450 requires that we record an estimated loss from a loss contingency when information available prior to issuance of our financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. We also disclose material contingencies when we believe a loss is not probable but reasonably possible as required by ASC 450. Accounting for contingencies such as legal and non-income tax matters requires us to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss. Many of these legal and tax contingencies can take years to be resolved. Generally, as the time period increases over which the uncertainties are resolved, the likelihood of changes to the estimate of the ultimate outcome increases.

The Company evaluates the realizability of its deferred tax assets by assessing the valuation allowance and by adjusting the amount of such allowance, if necessary. Although realization is not assured, we believe it is more likely than not that the net carrying value will be realized. The amount of the carryforwards that is considered realizable, however, could change if estimates of future taxable income are adjusted. In the ordinary course of our business, there are many transactions and calculations where the tax law and ultimate tax determination is uncertain. As part of the process of preparing our condensed consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate prior to the completion and filing of tax returns for such periods. These estimates involve complex issues and require us to make judgments about the likely application of the tax law to our situation, as well as with respect to other matters, such as anticipating the positions that we will take on tax returns prior to us actually preparing the returns and the outcomes of disputes with tax authorities. The ultimate resolution of these issues may take extended periods of time due to examinations by tax authorities and statutes of limitations. In addition, changes in our business, including acquisitions, changes in our international corporate structure, changes in the geographic location of business functions or assets, changes in the geographic mix and amount of income, as well as changes in our agreements with tax authorities, valuation allowances, applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and other matters, and variations in the estimated and actual level of annual pre-tax income can affect the overall effective income tax rate.

We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and by adjusting the amount of such allowance, if necessary. Although realization is not assured, we believe it is more likely than not that the net carrying value will be realized. The amount of the carryforwards that is considered realizable, however, could change if estimates of future taxable income are adjusted. The ability to forecast income over multiple years at a jurisdictional level is subject to uncertainty especially when our assessment of valuation allowances factor in longer term income forecasts. The impact of increasing or decreasing the valuation allowance could be material to our condensed consolidated financial statements. See Note 12, Income Taxes, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of the 2022 10-K for additional information on our net deferred tax assets and valuation allowances.

We account for uncertain tax positions in accordance with FASB ASC Topic 740, Income Taxes, or ASC 740, which provides guidance on the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, we must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

Our policy is to account for global intangible low-taxed income as a period cost if and when incurred.

We account for foreign currency transactions in accordance with FASB ASC Topic 830, Foreign Currency ~~Matters.~~Matters. In a majority of the countries where we operate, the functional currency is the local currency. Our foreign subsidiaries’ asset and liability accounts are translated for condensed consolidated financial reporting purposes into U.S. dollar amounts at period-end exchange rates. Revenue and expense accounts are translated at the average rates during the year. Our foreign ~~exchange~~currency translation adjustments are included in accumulated other comprehensive loss on our accompanying condensed consolidated balance sheets. Foreign currency transaction gains and losses and foreign currency remeasurements are generally included in selling, general, and administrative expenses in the accompanying condensed consolidated statements of income.

See discussion under Note 2, Significant Accounting Policies, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q, for information on new accounting pronouncements.

We are exposed to market risks, which arise during the normal course of business from changes in interest rates and foreign currency exchange rates. On a selected basis, we use derivative financial instruments to manage or hedge certain of these risks. All hedging transactions are authorized and executed pursuant to written guidelines and procedures.

We apply FASB ASC Topic 815, Derivatives and Hedging, or ASC 815, which established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. If the derivative is designated as a fair-value hedge, the changes in the fair value of the derivative and the underlying hedged item are recognized concurrently in earnings. If the derivative is designated as a ~~cash-flow~~cash flow hedge, changes in the fair value of the derivative are recorded in other comprehensive ~~income (loss)~~loss and are recognized in the condensed consolidated statements of income when the hedged item affects earnings. ASC 815 defines the requirements for designation and documentation of hedging relationships as well as ongoing effectiveness assessments in order to use hedge accounting. For a derivative that does not qualify as a hedge, changes in fair value are recognized concurrently in earnings.

A discussion of our primary market risk exposures and derivatives is presented below.

We transact business globally and are subject to risks associated with changes in foreign exchange rates. Our objective is to minimize the impact to earnings and cash flow associated with foreign exchange rate fluctuations. We enter into foreign exchange derivatives in the ordinary course of business primarily to reduce exposure to currency fluctuations attributable to intercompany transactions, translation of local currency ~~revenue,~~earnings, inventory purchases subject to foreign currency exposure, and to partially mitigate the impact of foreign currency rate fluctuations. Due to volatility in foreign exchange markets, our current strategy, in general, is to hedge some of the significant exposures on a short-term basis. We will continue to monitor the foreign exchange markets and evaluate our hedging strategy accordingly. With the exception of our foreign ~~exchange~~currency forward contracts relating to forecasted inventory purchases and intercompany management fees discussed below, all of our foreign exchange contracts are designated as ~~free standing~~freestanding derivatives for which hedge accounting does not apply. The changes in the fair value of the derivatives not qualifying as cash flow hedges are included in selling, general, and administrative expenses inwithin our condensed consolidated statements of income.

The foreign ~~exchange~~currency forward contracts and option contracts designated as ~~free standing~~freestanding derivatives are primarily used to hedge ~~advances between subsidiaries~~foreign currency-denominated intercompany transactions and to partially mitigate the impact of foreign currency fluctuations. The fair value of foreign exchange derivative contracts is based on third-party quotes. Our foreign currency derivative contracts are generally executed on a monthly basis.

We also purchase foreign currency forward contracts in order to hedge forecasted inventory transactions and intercompany management fees that are designated as ~~cash-flow~~cash flow hedges and are subject to foreign currency exposures. We applied the hedge accounting rules as required by ASC 815 for these hedges. These contracts allow us to buy and sell certain currencies at specified contract rates. As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, the aggregate notional amounts of these contracts outstanding were approximately ~~$127.0~~$70.4 million and ~~$90.0~~$70.6 million, respectively. ~~At September 30, 2017,~~As of March 31, 2023, the outstanding contracts were expected to mature over the next fifteen months. Our derivative financial instruments are recorded on the condensed consolidated balance ~~sheet~~sheets at fair value based on quoted market rates. For the forecasted inventory transactions, the forward contracts are used to hedge forecasted inventory transactions over specific months. Changes in the fair value of these forward contracts designated as cash flow hedges, excluding forward points, ~~designated as cash-flow hedges~~ are recorded as a component of accumulated other comprehensive ~~income (loss)~~loss within shareholders’ ~~equity,~~deficit, and are recognized in cost of sales ~~in the~~within our condensed consolidated ~~statements~~statement of income during the period which approximates the time the hedged inventory is sold. We also hedge forecasted intercompany management fees over specific months. Changes in the fair value of these forward contracts designated as cash flow hedges, excluding forward points, are recorded as a component of accumulated other comprehensive ~~income (loss)~~loss within shareholders’ ~~equity,~~deficit, and are recognized in selling, general, and administrative expenses ~~in the~~within our condensed consolidated ~~statements~~statement of income induring the period when the hedged item and underlying transaction ~~affects~~affect earnings. As of ~~September 30, 2017,~~March 31, 2023, we recorded assets at fair value of ~~$0.8~~$0.2 million and liabilities at fair value of ~~$5.5~~$4.7 million relating to all outstanding foreign currency contracts designated as ~~cash-flow~~cash flow hedges. As of December 31, ~~2016,~~2022, we recorded assets at fair value of ~~$4.6~~$1.5 million and liabilities at fair value of $3.2 million relating to all outstanding foreign currency contracts designated as ~~cash-flow~~cash flow hedges. ~~During the three and nine months ended September 30, 2017 and 2016, the ineffective portion relating to these hedges was immaterial and the~~These hedges remained effective as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~2022.

As of ~~September 30, 2017~~both March 31, 2023 and December 31, ~~2016,~~2022, the majority of our outstanding foreign currency forward contracts had maturity dates of less than twelve months with the majority of freestanding derivatives expiring within one ~~month as of September 30, 2017 and December 31, 2016, respectively.~~month.

The following table provides information about the details of ~~our~~all foreign ~~exchange~~currency forward ~~contracts:~~contracts that were outstanding as of March 31, 2023:

Foreign Currency	Average Contract Rate		Notional Amount		Fair Value Gain (Loss)
			(In millions)		(In millions)
At September 30, 2017
Buy Argentine peso sell Euro		20.72	$	0.9	$	—
Buy Chinese yuan sell Euro		7.98		65.0		0.2
Buy Colombian peso sell U.S. dollar		2,943.40		0.7		—
Buy Euro sell Argentine peso		21.13		2.1		—
								Weighted-Average Contract Rate		Notional Amount		Fair Value Gain (Loss)
								(in millions, except weighted-average contract rate)
As of March 31, 2023
Buy British pound sell Euro									0.88	$	7.9	$	—
Buy British pound sell U.S. dollar									1.23		24.7		0.1
Buy Chinese yuan sell U.S. dollar									6.76		67.1		(0.7	)
Buy Danish krone sell U.S. dollar									6.88		0.9		—
Buy Euro sell Australian dollar		1.50		4.6		—			1.62		1.1		—
Buy Euro sell British pound									0.88		21.8		—
Buy Euro sell Chilean peso		749.80		1.4		—			889.35		4.4		(0.1	)
Buy Euro sell Ghanaian cedi		5.45		3.0		(0.1	)
Buy Euro sell Chinese yuan									7.50		1.1		—
Buy Euro sell Hong Kong dollar		9.31		12.6		(0.1	)		8.47		5.1		—
Buy Euro sell Indonesian rupiah		15,955.81		6.6		—			16,560.00		14.5		(0.3	)
Buy Euro sell Japanese yen		133.79		0.6		—			142.65		1.9		—
Buy Euro sell Kazakhstani tenge		413.12		2.0		—			505.10		3.4		—
Buy Euro sell Korean won									1,414.96		1.1		—
Buy Euro sell Malaysian ringgit									4.80		4.5		—
Buy Euro sell Mexican peso		21.96		67.5		0.3			21.58		58.4		(4.0	)
Buy Euro sell Malaysian ringgit		5.02		1.5		—
Buy Euro sell Peruvian sol		3.88		4.4		—
Buy Euro sell Philippine peso		61.10		6.4		(0.1	)
Buy Euro sell Russian ruble		69.60		5.9		(0.1	)
Buy Euro sell Thai baht		39.69		2.0		—
Buy Euro sell Peruvian nuevo sol									4.10		1.7		—
Buy Euro sell Taiwan dollar		36.04		0.6		—			32.76		1.0		—
Buy Euro sell U.S. dollar		1.19		41.1		(0.1	)		1.09		22.2		(0.1	)
Buy Euro sell South African rand		15.73		5.1		0.1
Buy British pound sell Euro		0.88		3.3		—
Buy British pound sell U.S. dollar		1.36		2.8		—
Buy Indonesian rupiah sell Euro		15,898.00		1.0		—
Buy Indonesian rupiah sell U.S. dollar		13,380.50		6.4		(0.1	)
Buy South Korean won sell U.S. dollar		1,131.25		5.2		(0.1	)
Buy Euro sell Vietnamese dong									25,520.00		15.9		—
Buy Hong Kong dollar sell U.S. dollar									7.82		3.8		—
Buy Kazakhstani tenge sell U.S. dollar		345.00		0.9		—			463.25		5.4		—
Buy Korean won sell U.S. dollar									1,299.69		16.9		—
Buy Mexican peso sell Euro		21.33		5.3		(0.1	)		19.75		5.4		—
Buy Malaysian ringgit sell Euro		4.96		1.0		—
Buy Mexican peso sell U.S. dollar									18.69		4.2		0.1
Buy Norwegian krone sell U.S. dollar		7.79		1.3		—			10.48		1.8		—
Buy Peruvian sol sell Euro		3.89		1.1		—
Buy Philippine peso sell Euro		60.18		1.4		—
Buy Polish zloty sell U.S. dollar									4.37		0.9		—
Buy Romanian leu sell U.S. dollar									4.58		1.3		—
Buy Swedish krona sell U.S. dollar		7.98		1.9		—			10.33		0.1		—
Buy Thai baht sell Euro		39.55		1.1		—
Buy Taiwan dollar sell U.S. dollar		29.78		5.9		(0.1	)		30.22		13.3		(0.1	)
Buy U.S. dollar sell Brazilian real									5.32		2.5		(0.1	)
Buy U.S. dollar sell British pound									1.22		54.1		(0.9	)
Buy U.S. dollar sell Chinese yuan									6.86		50.8		(0.2	)
Buy U.S. dollar sell Colombian peso		2,912.50		0.8		—			4,810.97		2.2		—
Buy U.S. dollar sell Euro		1.15		117.6		(4.5	)		1.07		190.8		(3.3	)
Buy U.S. dollar sell British pound		1.34		3.2		—
Buy U.S. dollar sell South African rand		13.19		2.8		0.1
Buy South African rand sell Euro		15.76		1.6		—
Buy U.S. dollar sell Indian rupee									83.16		3.0		—
Buy U.S. dollar sell Mexican peso									18.93		8.1		(0.4	)
Buy U.S. dollar sell Philippine peso									54.41		3.7		—
Total forward contracts			$	398.6	$	(4.7	)			$	627.0	$	(10.0	)

The majority of our foreign subsidiaries designate their local currencies as their functional currencies. See Liquidity and Capital Resources — Cash and ~~cash equivalents~~ Cash Equivalents in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Quarterly Report on Form 10-Q for further discussion of our foreign subsidiary cash and cash equivalents.

As of ~~September 30, 2017,~~March 31, 2023, the aggregate annual maturities of the 2018 Credit Facility were expected to be ~~$24.3~~$21.7 million for the remainder of ~~2017, $97.5~~2023, $36.1 million for ~~2018, $97.5~~2024, and $850.6 million for ~~2019, $97.5 million for 2020, $97.5 million for 2021, $97.5 million for 2022, and $739.4 million for 2023.~~2025. As of ~~September 30, 2017,~~March 31, 2023, the fair ~~value~~values of the 2018 Term Loan ~~was~~A and 2018 Term Loan B were approximately ~~$1,228~~$250.6 million and $652.1 million, respectively, and the carrying ~~value was $1,212.6 million.~~values were $251.6 million and $652.8 million, respectively. There were no outstanding borrowings on the 2018 Revolving Credit Facility as of ~~September 30, 2017.~~March 31, 2023. As of December 31, 2022, the fair values of the 2018 Term Loan A, 2018 Term Loan B, and 2018 Revolving Credit Facility were approximately $250.0 million, $638.8 million, and $60.0 million, respectively, and the carrying values were $257.0 million, $654.3 million, and $60.0 million, respectively. The 2018 Credit Facility bears variable interest rates, and as of March 31, 2023 and December 31, 2022, the weighted-average interest rate for borrowings under the 2018 Credit Facility was 6.93% and 4.08%, respectively.

During the first quarter of 2020, we entered into various interest rate swap agreements with effective dates ranging between February 2020 and March 2020. These agreements collectively provided for us to pay interest at a weighted-average fixed rate of 0.98% on aggregate notional amounts of $100.0 million under the 2018 Credit Facility until their respective expiration dates ranging between February 2022 and March 2023, while receiving interest based on LIBOR on the same notional amounts for the same periods. At inception, these swap agreements were designated as cash flow hedges against the variability in certain LIBOR-based borrowings under the 2018 Credit Facility, effectively fixing the interest rate on such notional amounts at a weighted-average effective rate of, depending on our total leverage ratio, between 2.73% and 3.23%. These hedge relationships qualified as effective under FASB ASC Topic 815, Derivatives and Hedging, or ASC 815, and consequently all changes in the fair value of these interest rate swaps were recorded as a component of accumulated other comprehensive loss within shareholders’ deficit, and were recognized in interest expense, net within our condensed consolidated statement of income during the ~~Prior Credit Facility approximated its carrying value~~period when the hedged item and underlying transaction affected earnings. As of ~~$410.0~~March 31, 2023 and December 31, 2022, the aggregate notional amounts of interest rate swap agreements outstanding were approximately zero and $25.0 million, respectively. The fair values of the interest rate swap agreements were based on third-party bank quotes, and as of December 31, 2016. The Credit Facility bears and the Prior Credit Facility bore variable interest rates, and on September 30, 2017 and December 31, 2016, the weighted average interest rate of the Credit Facility and the Prior Credit Facility was 6.71% and 4.29%, respectively. As of September 30, 2017 the2022, we recorded assets at fair value of ~~the liability component of~~$0.3 million relating to these interest rate swap agreements.

Since our ~~$1.15 billion Convertible Notes was approximately $1,064.6 million and the carrying value was $1,058.4 million.~~ ~~As of December 31, 2016, the fair value of the liability component of our $1.15 billion Convertible Notes was approximately $961.3 million and the carrying value was $1,024.8 million.~~ The Convertible Notes pay interest at a fixed rate of 2.00% per annum payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2014. The Convertible Notes mature on August 15, 2019, unless earlier repurchased or converted. We may not redeem the Convertible Notes prior to their stated maturity date. Since our2018 Credit Facility is based on variable interest rates, ~~and as we have not entered into any interest swap arrangements,~~ if interest rates were to increase or decrease by 1% for the year and our borrowing amounts on our 2018 Credit Facility remained constant, our annual interest expense could increase or decrease by approximately ~~$12.5~~$9.1 million, respectively. The variable interest rates payable under our 2018 Credit Facility continue to be linked to LIBOR as the benchmark for establishing such rates. Recent national, international and other regulatory guidance and reform proposals regarding LIBOR required certain LIBOR tenors to be discontinued or become unavailable by the end of 2021 and are requiring LIBOR to be fully discontinued or become unavailable as a benchmark rate by June 2023. Our 2018 Credit Facility includes mechanics to facilitate the adoption by us and our lenders of an alternative benchmark rate for use in place of LIBOR which may result in interest rates that are higher or lower than those that would have resulted had LIBOR remained in effect.

As of March 31, 2023, the fair value of the 2024 Convertible Notes was approximately $249.4 million and the carrying value was $261.4 million. As of December 31, 2022, the fair value of the 2024 Convertible Notes was approximately $243.3 million and the carrying value was $261.2 million. The 2024 Convertible Notes pay interest at a fixed rate of 2.625% per annum payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2018. Unless redeemed, repurchased or converted in accordance with their terms prior to such date, the 2024 Convertible Notes mature on March 15, 2024.

As of March 31, 2023, the fair value of the 2028 Convertible Notes was approximately $332.0 million and the carrying value was $269.4 million. As of December 31, 2022, the fair value of the 2028 Convertible Notes was approximately $305.4 million, and the carrying value was $269.1 million. The 2028 Convertible Notes pay interest at a fixed rate of 4.25% per annum payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023. Unless redeemed, repurchased or converted in accordance with their terms prior to such date, the 2028 Convertible Notes mature on June 15, 2028.

As of March 31, 2023, the fair value of the 2025 Notes was approximately $567.8 million and the carrying value was $596.0 million. As of December 31, 2022, the fair value of the 2025 Notes was approximately $534.4 million and the carrying value was $595.6 million. The 2025 Notes pay interest at a fixed rate of 7.875% per annum payable semiannually in arrears on March 1 and September 1 of each year, beginning on March 1, 2021. The 2025 Notes mature on September 1, 2025, unless redeemed or repurchased in accordance with their terms prior to such date. The 2025 Notes are recorded at their carrying value and their fair value is used only for disclosure purposes, so an increase or decrease in interest rates would not have any impact to our condensed consolidated financial statements; however, if interest rates were to increase or decrease by 1%, their fair value could decrease by approximately $11.9 million or increase by approximately $12.3 million, respectively.

As of March 31, 2023, the fair value of the 2029 Notes was approximately $459.4 million and the carrying value was $593.8 million. As of December 31, 2022, the fair value of the 2029 Notes was approximately $412.5 million and the carrying value was $593.6 million. The 2029 Notes pay interest at a fixed rate of 4.875% per annum payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The 2029 Notes mature on June 1, 2029, unless redeemed or repurchased in accordance with their terms prior to such date. The 2029 Notes are recorded at their carrying value and their fair value is used only for disclosure purposes, so an increase or decrease in interest rates would not have any impact to our condensed consolidated financial statements; however, if interest rates were to increase or decrease by 1%, their fair value could decrease by approximately $22.3 million or increase by approximately $23.8 million, respectively.

Evaluation of Disclosure Controls and Procedures. Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~September 30, 2017.~~March 31, 2023.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~September 30, 2017~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This ~~document~~Quarterly Report on Form 10-Q 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, including for future ~~operations;~~operations, capital expenditures, or share repurchases; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; any statements of ~~belief;~~belief or expectation; and any statements of assumptions underlying any of the ~~foregoing.~~foregoing or other future events. Forward-looking statements may include, among other, the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” ~~“expect”~~“expect,” “anticipate” 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 or outcomes 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~~many of which are beyond our ~~filings with the Securities and Exchange Commission.~~control. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include ~~among others,~~ the following:

Additional factors and uncertainties that could cause actual results or outcomes to differ materially from our forward-looking statements are set forth in this Quarterly Report on Form 10-Q, including under the heading ~~“Risk Factors,”~~ “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our Condensed Consolidated Financial Statements and the related ~~Notes.~~Notes, and in Part I, Item 1A, Risk Factors, of the 2022 10-K. In addition, historical, current, and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.

Forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date ~~hereof, and forward-looking statements in documents attached that are incorporated by reference speak only as of the date of those documents.~~hereof. 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.

See discussion under Note 5, Contingencies, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

~~Our failure to establish and maintain Member and sales leader relationships for any reason could negatively impact sales of our products and harm our~~business, reputation, prospects, financial condition, operating results, cash flows, liquidity, and ~~operating results.~~

We distribute our products exclusively to and through independent Members, and we depend upon them directly for substantially all of our sales. Our Members, including our sales leaders, may voluntarily terminate their Member agreements with us at any time. To increase our revenue, we must increase theshare price can be affected by a number of factors, whether currently known or the productivity of, our Members. Accordingly, our success depends in significant part upon our ability to recruit, retain and motivate a large base of Members. The loss of a significant number of Members for any reason could negatively impact sales of our products and could impair our ability to attract new Members. In our efforts to attract and retain Members, we compete with other network marketing organizations,unknown, including those described in the weight management, dietary and nutritional supplement and personal care and cosmetic product industries. Our operating results could be harmed if our existing and new business opportunities and products do not generate sufficient interest to retain existing Members and attract new Members.

~~Our Member organization has a high turnover rate, which is a common characteristic found in the direct selling industry. See~~Part I, Item 2, ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~1A, Risk Factors, of ~~this Quarterly Report on Form 10-Q for additional information regarding sales leader retention rates.~~

~~Because we cannot exert~~ the ~~same level~~2022 10-K. When any one or more of influence or control over our independent Members as we could were they our own employees, our Members could fail to comply with applicable law or our Member policies and procedures, which could result in claims against us that could harm our financial condition and operating results.

Our Members are independent contractors and, accordingly, we are not in a position to directly provide the same direction, motivation and oversight as we would if Members were our own employees. As a result, there can be no assurance that our Members will participate in our marketing strategies or plans, accept our introduction of new products, or comply with our Members policies and procedures.

Extensive federal, state and local laws regulate our business, products and network marketing program. Because we have expanded into foreign countries, our policies and procedures for our independent Members differ due to the different legal requirements of each country in which we do business. While we have implemented Member policies and procedures designed to govern Member conduct and to protect the goodwill associated with Herbalife trademarks and tradenames, it can be difficult to enforce these policies and procedures because of the large number of Members and their independent status. Violations by our independent Members of applicable law or of our policies and procedures in dealing with customers could reflect negatively on our products and operations and harm our business reputation. In addition, it is possible that a court could hold us civilly or criminally accountable based on vicarious liability because of the actions of our independent Members.

~~Adverse publicity associated with our products, ingredients or network marketing program, or those of similar companies, could harm our financial condition and operating results.~~

The size of our distribution force and the results of our operations may be significantly affected by the public’s perception of the Company and similar companies. This perception is dependent upon opinions concerning:

Adverse publicity concerning any actual or purported failure of our Company or our Members to comply with applicable laws and regulations regarding product claims and advertising, good manufacturing practices, the regulation of our network marketing program, the registration of our products for sale in our target markets or other aspects of our business, whether or not resulting in enforcement actions or the imposition of penalties, could have an adverse effect on the goodwill of our Company and could negatively affect our ability to attract, motivate and retain Members, which would negatively impact our ability to generate revenue. We cannot ensure that all of our Members will comply with applicable legal requirements relating to the advertising, labeling, licensing or distribution of our products.

In addition, our Members’ and consumers’ perception of the safety and quality of our products and ingredients as well as similar products and ingredients distributed by other companies can be significantly influenced by media attention, publicized scientific research or findings, widespread product liability claims and other publicity concerning our products or ingredients or similar products and ingredients distributed by other companies. Adverse publicity, whether or not accurate or resulting from consumers’ use or misuse of our products, that associates consumption of our products or ingredients, or any similar products or ingredients with illness or other adverse effects, questions the benefits of our or similar products or claims that any such products are ineffective, inappropriately labeled or have inaccurate instructions as to their use, could lead to lawsuits or other legal challenges and could negatively impact our reputation, the market demand for our products, or our general business.

From time to time, we receive inquiries from government agencies and third parties requesting information concerning our products. We fully cooperate with these inquiries including, when requested, by the submission of detailed technical dossiers addressing product composition, manufacturing, process control, quality assurance, and contaminant testing. Further, we periodically respond to requests from regulators for additional information regarding product-specific adverse events. We are confident in the safety of our products when used as directed. However, there can be no assurance that regulators in these or other markets will not take actions that might delay or prevent the introduction of new products, or require the reformulation or the temporary or permanent withdrawal of certain of our existing products from their markets.

Adverse publicity relating to us, our products or our operations, including our network marketing program or the attractiveness or viability of the financial opportunities provided thereby, has had, and could again have, a negative effect on our ability to attract, motivate and retain Members, and it could also affect our share price. In the mid-1980s, our products and marketing program became the subject of regulatory scrutiny in the United States, resulting in large part from claims and representations made about our products by our Members, including impermissible therapeutic claims. The resulting adverse publicity caused a rapid, substantial loss of Members in the United States and a corresponding reduction in sales beginning in 1985. In addition, in late 2012, a hedge fund manager publicly raised allegations regarding the legality of our network marketing program and announced that his fund had taken a significant short position regarding our common shares, leading to intense public scrutiny and governmental inquiries, and significant stock price volatility. We expect that negative publicity will,risks materialize from time to time, ~~continue to negatively impact~~ our business, ~~in particular markets and may adversely affect our share price.~~

Our failure to appropriately respond to changing consumer preferences and demand for new products or product enhancements could significantly harm our Member and customer relationships and product sales and harm ourreputation, prospects, financial condition, ~~and operating results.~~

Our business is subject to changing consumer trends and preferences, especially with respect to weight management products. Our continued success depends in part on our ability to anticipate and respond to these changes, and we may not respond in a timely or commercially appropriate manner to such changes. Furthermore, the nutritional supplement industry is characterized by rapid and frequent changes in demand for products and new product introductions and enhancements. Our failure to accurately predict these trends could negatively impact consumer opinion of our products, which in turn could harm our customer and Member relationships and cause the loss of sales. The success of our new product offerings and enhancements depends upon a number of factors, including our ability to:

If we do not introduce new products or make enhancements to meet the changing needs of our customers in a timely manner, some of our products could be rendered obsolete, which could negatively impact our revenues, financial condition and operating results.

~~Due to the high level of competition in our industry, we might fail to retain our customers and Members, which would harm our financial condition and operating results.~~

The business of marketing weight management and nutrition products is highly competitive and sensitive to the introduction of new products or weight management plans, including various prescription drugs, which may rapidly capture a significant share of the market. These market segments include numerous manufacturers, distributors, marketers, retailers and physicians that actively compete for the business of consumers both in the United States and abroad. In addition, we anticipate that we will be subject to increasing competition in the future from sellers that utilize electronic commerce. Some of these competitors have longer operating histories, significantly greater financial, technical, product development, marketing and sales resources, greater name recognition, larger established customer bases and better-developed distribution channels than we do. Our present or future competitors may be able to develop products that are comparable or superior to those we offer, adapt more quickly than we do to new technologies, evolving industry trends and standards or customer requirements, or devote greater resources to the development, promotion and sale of their products than we do. For example, if our competitors develop other diet or weight management products that prove to be more effective than our products, demand for our products could be reduced. Accordingly, we may not be able to compete effectively in our markets and competition may intensify.

We are also subject to significant competition for the recruitment of Members from other network marketing organizations, including those that market weight management products, dietary and nutritional supplements and personal care products as well as other types of products. We compete for global customers and Members with regard to weight management, nutritional supplement and personal care products. Our competitors include both direct selling companies such as NuSkin Enterprises, Nature’s Sunshine, Alticor/Amway, Melaleuca, Avon Products, Oriflame, Omnilife, Tupperware and Mary Kay, as well as retail establishments such as Weight Watchers, Jenny Craig, General Nutrition Centers, Wal-Mart and retail pharmacies.

In addition, because the industry in which we operate is not particularly capital intensive or otherwise subject to high barriers to entry, it is relatively easy for new competitors to emerge who will compete with us for our Members and customers. In addition, the fact that our Members may easily enter and exit our network marketing program contributes to the level of competition that we face. For example, a Member can enter or exit our network marketing system with relative ease at any time without facing a significant investment or loss of capital because (1) we have a low upfront financial cost to become a Herbalife Member, (2) we do not require any specific amount of time to work as a Member, (3) we do not charge Members for any training that we might require, (4) we do not prohibit a new Member from working with another company, and (5) in substantially all jurisdictions, we maintain a buyback program pursuant to which we will repurchase products sold to a Member who has decided to leave the business. Our ability to remain competitive therefore depends, in significant part, on our success in recruiting and retaining Members through an attractive compensation plan, the maintenance of an attractive product portfolio and other incentives. We cannot ensure that our programs for recruitment and retention of Members will be successful and if they are not, our financial condition and operating results, ~~would be harmed.~~

~~We are affected by extensive laws, governmental regulations, administrative determinations, court decisions~~cash flows, liquidity, and similar constraints both domestically and abroad, and our failure or our Members’ failure to comply with these constraints could lead to the imposition of significant penalties or claims, which could harm our financial condition and operating results.

In both domestic and foreign markets, the formulation, manufacturing, packaging, labeling, distribution, advertising, importation, exportation, licensing, sale and storage of our products are affected by extensive laws, governmental regulations, administrative determinations, court decisions and other similar constraints. Such laws, regulations and other constraints may exist at the federal, state or local levels in the United States and at all levels of government in foreign jurisdictions. Thereshare price can be no assurance that we or our Members are in compliance with all of these regulations. Our failure or our Members’ failure to comply with these regulations or new regulations could disrupt our Members’ sale of our products, or lead to the imposition of significant penalties or claims and could negatively impact our business. In addition, the adoption of new regulations or changes in the interpretations of existing regulations, such as those relating to genetically modified foods, may result in significant compliance costs or discontinuation of product sales and may negatively impact the marketing of our products, resulting in significant loss of sales revenues.

The Consent Order prohibits us from making, or allowing our Members to make, any representation regarding the amount or level of income, including full-time or part-time income, that a participant can reasonably expect to earn in our network marketing program, unless the representation is non-misleading and we possesses competent and reliable evidence sufficient to substantiate that the representation is true. The Consent Order also prohibits us and other persons who act in active concert with us from representing that participation in the network marketing program will result in a lavish lifestyle and from using images or descriptions to represent or imply that participation in the program is likely to result in a lavish lifestyle. In addition, the Consent Order prohibits specified misrepresentations in connection with marketing the program, including misrepresentations regarding any fact material to participation such as the cost to participate or the amount of income likely to be earned. The Consent Order also requires us to clearly and conspicuously disclose all information material to participation in the marketing program, including our refund and buyback policy before the participant pays any money to us.

The FTC revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising, or Guides, which became effective on December 1, 2009. Although the Guides are not binding, they explain how the FTC interprets Section 5 of the FTC Act’s prohibition on unfair or deceptive acts or practices. Consequently, the FTC could bring a Section 5 enforcement action based on practices that are inconsistent with the Guides. Under the revised Guides, advertisements that feature a consumer and convey his or her atypical experience with a product or service are required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides, which allowed advertisers to describe atypical results in a testimonial as long as they included a disclaimer such as “results not typical”, the revised Guides no longer contain such a safe harbor. The revised Guides also add new examples to illustrate the long-standing principle that “material connections” between advertisers and endorsers (such as payments or free products), connections that consumers might not expect, must be disclosed. Herbalife has revised its marketing materials to be compliant with the revised Guides and the Consent Order. However, it is possible that our use, and that of our Members, of testimonials in the advertising and promotion of our products, including but not limited to our weight management products and our income opportunity, will be significantly impacted and therefore might negatively impact our sales.

Governmental regulations in countries where we plan to commence or expand operations may prevent or delay entry into those markets. In addition, our ability to sustain satisfactory levels of sales in our markets is dependent in significant part on our ability to introduce additional products into such markets. However, governmental regulations in our markets, both domestic and international, can delay or prevent the introduction, or require the reformulation or withdrawal, of certain of our products. Any such regulatory action, whether or not it results in a final determination adverse to us, could create negative publicity, with detrimental effects on the motivation and recruitment of Members and, consequently, on sales.

We are subject to rules of the Food and Drug Administration, or FDA, for current good manufacturing practices, or cGMPs, for the manufacture, packing, labeling and holding of dietary supplements and over-the-counter drugs distributed in the United States. Herbalife has implemented a comprehensive quality assurance program that is designed to maintain compliance with the cGMPs for products manufactured by or on behalf of Herbalife for distribution in the United States. However, if Herbalife should be found not to be in compliance with cGMPs for the products we self-manufacture, it could negatively impact our reputation and ability to sell our products even after any such situation had been rectified. Further, if contract manufacturers whose products bear Herbalife labels fail to comply with the cGMPs, this could negatively impact Herbalife’s reputation and ability to sell its products even though Herbalife is not directly liable under the cGMPs for such compliance. In complying with the dietary supplement cGMPs, we have experienced increases in production costs as a result of the necessary increase in testing of raw ingredients, work in process and finished products.

Since late 2012, a hedge fund manager has made and continues to make allegations regarding the Company and its network marketing program. We believe these allegations are without merit and are vigorously defending ourselves against such claims, including proactively reaching out to governmental authorities about what we believe is manipulative activity with respect to our securities. Because of these allegations, we and others have received and may receive additional regulatory and governmental inquiries. For example, we have previously disclosed inquiries from the FTC, SEC and other governmental authorities. In the future, these and other governmental authorities may determine to seek information from us and other persons relating to these same or other allegations. If we believe any governmental or regulatory inquiry or investigation is or becomes material, it will be disclosed individually. Consistent with our policies, we have cooperated and will continue to fully cooperate with any governmental or regulatory inquiries or investigations.

Our network marketing program could be found to be not in compliance with current or newly adopted laws or regulations in one or more markets, which could prevent us from conducting our business in these markets or require us to alter compensation practices under our network marketing program, and harm our financial condition and operating results.

Our network marketing program is subject to a number of federal and state regulations administered by the FTC and various federal and state agencies in the United States as well as regulations on direct selling in foreign markets administered by foreign agencies. We are subject to the risk that, in one or more markets, our network marketing program could be found by federal, state or foreign regulators not to be in compliance with applicable law or regulations or we may be required to alter compensation practices under our network marketing program in order to comply with applicable law or regulations. As previously disclosed, we entered into the Consent Order with the FTC to settle the FTC’s multi-year investigation into our business for compliance with these regulations. Another example is the 1986 permanent injunction entered in California in proceedings initiated by the California Attorney General. There can be no assurances other federal, state attorneys general or foreign regulators will not take similar action.

Regulations applicable to network marketing organizations generally are directed at preventing fraudulent or deceptive schemes, sometimes referred to as “pyramid” or “chain sales” schemes, by ensuring that product sales ultimately are made to consumers and that advancement within an organization is based on sales of the organization’s products rather than investments in the organization or other non-retail sales-related criteria. The regulatory requirements concerning network marketing programs do not include “bright line” rules and are inherently fact-based and, thus, we are subject to the risk that these laws or regulations or the enforcement or interpretation of these laws and regulations by governmental agencies or courts can change. While we believe we are in compliance with these regulations, including those enforced by the FTC and the permanent injunction in California, and are compliant with the Consent Order, there is no assurance any federal, state or foreign courts or agencies or the independent compliance auditor under the Consent Order would agree, including a federal court or the FTC in respect of the Consent Order or a court or the California Attorney General in respect to the permanent injunction.

The ambiguity surrounding these laws can also affect the public perception of the Company. Specifically, in late 2012, a hedge fund manager publicly raised allegations regarding the legality of our network marketing program and announced that his fund had taken a significant short position regarding our common shares, leading to intense public scrutiny and significant stock price volatility. The failure of our network marketing program to comply with current or newly adopted regulations, the Consent Order or California injunction or any allegations or charges to that effect brought by federal, state, or foreign regulators could negatively impact our business in a particular market or in general and may adversely affect our share price.

We are also subject to the risk of private party challenges to the legality of our network marketing program, whether as a result of the Consent Order or otherwise. Some network marketing programs of other companies have been successfully challenged in the past, while other challenges to network marketing programs of other companies have been defeated. Adverse judicial determinations with respect to our network marketing program, or in proceedings not involving us directly but which challenge the legality of network marketing systems, in any other market in which we operate, could negatively impact our business.

~~We are subject to the Consent Order with the FTC, the effects of which, or any failure to comply therewith, could harm our financial condition and operating results.~~

As previously disclosed, on July 15, 2016, we reached a consensual resolution with the FTC regarding its multi-year investigation of our business resulting in the entry into a Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment in the U.S. District Court for the Central District of California. The Consent Order became effective on July 25, 2016 upon final approval by the Court. As part of the Consent Order, we agreed to make a payment of $200 million and to implement certain new procedures and enhance certain existing procedures in the United States. We also agreed to be subject to certain audits by an independent compliance auditor, or the ICA, for a period of seven years; requirements regarding compliance certification and record creation and maintenance; and a prohibition on misrepresentations and misleading claims regarding, among other things, income and lavish lifestyles. The FTC and ICA will also have the right to inspect Company records and request additional compliance reports for purposes of conducting audits pursuant to the Consent Order. In September 2016, we and the FTC mutually selected Affiliated Monitors, Inc. to serve as the ICA. The terms of the Consent Order are described in greater detail in our Current Report on Form 8-K filed on July 15, 2016.

The Consent Order includes a number of restrictions and requirements and therefore creates compliance risks, and while we believe we are fully compliant with the Consent Order, there is no guarantee that we are fully compliant or in the future will continue to be fully compliant with the Consent Order. We do not believe the Consent Order changes our business model as a direct selling company. However, compliance with the Consent Order required us to implement new and enhanced procedures regarding, among other things, tracking retail sales and internal consumption by distributors. We have instituted controls and procedures and developed technology solutions that we believe address these Consent Order requirements, including tools and software used by distributors to, among other things, document their sales and more efficiently track and manage their customer base. However, there can be no assurances that some or all of these controls and procedures and technology solutions will operate as expected. Any failure of these systems to operate as designed could cause us to fail to maintain the records required under, or otherwise violate terms of, the Consent Order. Compliance with the Consent Order will require the cooperation of Members and, while we have updated our training programs and policies to address the Consent Order and expect our Members to cooperate, we do not have the same level of influence or control over our Members as we could were they our own employees. Failure by our Members to comply with the relevant aspects of the Consent Order could be a violation of the Consent Order and impact our ability to comply. While we believe we are compliant with the Consent Order and our board of directors has established the Implementation Oversight Committee, a committee which meets regularly with management to oversee our compliance with the terms of the Consent Order, there can be no assurances that the FTC or ICA would agree now or will agree in the future. In the event we are found to be in violation of the Consent Order, the FTC could, among other things, take corrective actions such as initiating enforcement actions, seeking an injunction or other restrictive orders and imposing civil monetary penalties against us and our officers and directors.

The Consent Order may also impact our business operations, including our net sales and profitability. For example, the Consent Order imposes certain requirements regarding the verification and receipting of sales and there can be no assurances that these or other requirements of the Consent Order, our compliance therewith and the new and enhanced business procedures implemented as a result thereof, will not lead to reduced sales, whether as a result of undocumented sales activity or otherwise. The Consent Order also imposes restrictions on distributors’ ability to open Nutrition Clubs in the United States. Additionally, the new and enhanced procedures described above, and any other actions taken in respect of compliance with the Consent Order, could be costly. These extensive costs or any amounts in excess of our cost estimates could have a material adverse effect on our financial condition and results of operations. Our Members may also disagree with our decision to enter into the Consent Order, whether because they disagree with certain terms thereof, they believe it will negatively impact their personal business or they would not have settled the investigation on any terms. The Consent Order also provides that if the total eligible U.S. sales on which compensation may be paid falls below 80% of the Company’s total U.S. sales for a given year, compensation payable to distributors on eligible U.S. sales will be capped at 41.75% of the Net Rewardable Sales amount as defined in the Consent Order. While we believe we will achieve the required 80% threshold necessary to pay full distributor compensation, this result is subject to the review and audit of the FTC and ICA and they may not agree with our conclusions. Because our business is dependent on our Members, our business operations and net sales could be adversely affected if U.S. distributor compensation is restricted or if any meaningful number of Members are dissatisfied, choose to reduce activity levels or leave our business altogether. Member dissatisfaction may also negatively impact the willingness of new Members to join Herbalife as a distributor. Further, management and the board of directors may be required to focus a substantial amount of time on compliance activities, which could divert their attention from running and growing our business. We may also be required to suspend or defer many or all of our current or anticipated business development, capital deployment and other projects unrelated to compliance with the Consent Order to allow resources to be focused on our compliance efforts, which could cause us to fall short of our guidance or analyst or investor expectations. In addition, while we believe the Consent Order will set a new standard within the industry, our competitors are not required to comply with the Consent Order and may not be subject to similar actions, which could limit our ability to effectively compete for Members, customers and ultimately net sales.

The Consent Order also creates additional third-party risks. Although the Consent Order resolved the FTC’s multi-year investigation into the Company, it does not prevent other third-parties from bringing actions against us, whether in the form of other state, federal or foreign regulatory investigations or proceedings, or private litigation, any of which could lead to, among other things, monetary settlements, fines, penalties or injunctions. ~~Although we neither admitted nor denied the allegations in the FTC’s complaint in agreeing to the terms of the Consent Order (except as to the Court having jurisdiction over the matter),~~ third-parties may use specific statements or other matters addressed in the Consent Order as the basis for their action. The Consent Order or any subsequent legal or regulatory claim may also lead to negative publicity, whether because some view it as a condemnation of the Company or our direct selling business model or because other third parties use it as justification to make unfounded and baseless assertions against us, our business model or our Members. An increase in the number, severity or scope of third-party claims, actions or public assertions may result in substantial costs and harm to our reputation. The Consent Order may also impact third parties willingness to work with us as a company.

The impact of the Consent Order on our business, including the effectiveness of the controls, procedures and technology solutions implemented to comply therewith, and on our business and our member base, could be significant. If our business is adversely impacted, it is uncertain as to whether, or how quickly, we would be able to rebuild, irrespective of market conditions. Our financial condition and results of operations could be harmed if we are not able to comply with the Consent Order, if costs related to compliance exceed our estimates, if it has a negative impact on net sales, or if it leads to further legal, regulatory, or compliance claims, proceedings, or investigations or litigation.

A substantial portion of our business is conducted in foreign markets, exposing us to the risks of trade or foreign exchange restrictions, increased tariffs, foreign currency fluctuations, disruptions or conflicts with our third party importers and similar risks associated with foreign operations.

Approximately 80% of our net sales for the year ended December 31, 2016 were generated outside the United States, exposing our business to risks associated with foreign operations. For example, a foreign government may impose trade or foreign exchange restrictions or increased tariffs, or otherwise limit or restrict our ability to import products into a country, any of which could negatively impact our operations. We are also exposed to risks associated with foreign currency fluctuations. For instance, purchases from suppliers are generally made in U.S. dollars while sales to Members are generally made in local currencies. Accordingly, strengthening of the U.S. dollar versus a foreign currency could have a negative impact on us. Although we engage in transactions to protect against risks associated with foreign currency fluctuations, we cannot be certain any hedging activity will effectively reduce our exchange rate exposure. Additionally, we may be negatively impacted by conflicts with or disruptions caused or faced by our third party importers, as well as conflicts between such importers and local governments or regulating agencies. Our operations in some markets also may be adversely affected by political, economic and social instability in foreign countries. Our operations, both domestically and internationally, could also be affected by laws and regulations related to immigration. For example, current and future tightening of U.S. immigration controls may adversely affect the residence status of non-U.S. employees in our U.S. locations or our ability to hire new non-U.S. employees in such locations and may adversely affect the ability of non-U.S. Members from entering the U.S. As we continue to focus on expanding our existing international operations, these and other risks associated with international operations may increase, which could harm our financial condition and operating results.

Another risk associated with our international operations is the possibility that a foreign government may impose foreign currency remittance restrictions. Due to the possibility of government restrictions on transfers of cash out of the country and control of exchange rates, we may not be able to immediately repatriate cash at the official exchange rate. If this should occur, or if the official exchange rate devalues, it may have a material adverse effect on our business, assets, financial condition, liquidity, results of operations or cash flows. For example, currency restrictions enacted by the Venezuelan government continue to be restrictive and have impacted the ability of our subsidiary in Venezuela, or Herbalife Venezuela, to obtain U.S. dollars in exchange for Venezuelan Bolivars at the official foreign exchange rate. These currency restrictions and current pricing restrictions continue to limit Herbalife Venezuela’s ability to import U.S. dollar denominated raw materials and finished goods which in addition to the Venezuelan Bolivar devaluations has significantly negatively impacted our Venezuelan operations. If we are unsuccessful in implementing any financially and economically viable strategies, including local manufacturing, we may be required to fundamentally change our business model or suspend or cease operations in Venezuela. Also, if the foreign currency and pricing or other restrictions in Venezuela intensify or do not improve and, as a result, impact our ability to control our Venezuelan operations, we may be required to deconsolidate Herbalife Venezuela for U.S. GAAP purposes and would be subject to the risk of further impairments.

Our business in China is subject to general, as well as industry-specific, economic, political and legal developments and risks in China and requires that we utilize a modified version of the business model we use elsewhere in the world.

Our expansion of operations into China and the continued success of our business in China is subject to risks and uncertainties related to general economic, political and legal developments in China, among other things. The Chinese government exercises significant control over the Chinese economy, including but not limited to controlling capital investments, allocating resources, setting monetary policy, controlling foreign exchange and monitoring foreign exchange rates, implementing and overseeing tax regulations, providing preferential treatment to certain industry segments or companies and issuing necessary licenses to conduct business. In addition, we could face additional risks resulting from changes in China’s data privacy and cybersecurity requirements. Accordingly, any adverse change in the Chinese economy, the Chinese legal system or Chinese governmental, economic or other policies could have a material adverse effect on our business in China and our prospects generally.

China has published regulations governing direct selling and prohibiting pyramid promotional schemes, and a number of administrative methods and proclamations have been issued. These regulations require us to use a modified version of the business model we use in other markets. To allow us to operate under these regulations, we have created and introduced a model specifically for China based on our understanding as to how regulators are interpreting and enforcing these regulations, our interpretation of applicable regulations and our understanding of the practices of other international direct selling companies in China.

In China, we have sales representatives who are permitted by the terms of our direct selling licenses to sell away from fixed retail locations in the provinces of Jiangsu, Guangdong, Shandong, Zhejiang, Guizhou, Beijing, Fujian, Sichuan, Hubei, Shanxi, Shanghai, Jiangxi, Liaoning, Jilin, Henan, Chongqing, Hebei, Shaanxi, Tianjin, Heilongjiang, Hunan, Guangxi, Hainan, Anhui, Yunnan, Gansu, Ningxia, and Inner Mongolia. In Xinjiang province where the Company does not have a direct selling license, it has a Company-operated retail store that can directly serve customers and preferred customers. With online orderings throughout China, there has been a declining demand in Company-operated retail stores.

We also engage independent service providers who meet both the requirements to operate their own business under Chinese law as well as the conditions set forth by Herbalife to sell products and provide marketing, sales support and other services to Herbalife customers. In China, our independent service providers are compensated for marketing, sales support, and other services instead of the distributor allowances and royalty overrides utilized in our global marketing plan. The service hours and related fees eligible to be earned by and then paid to independent service providers are based on a number of factors including the sales generated by them and by others to whom they may provide marketing, sales support and other services, the quality of their service and other factors as well as any potential future sales generated from the recently announced and expanded online ordering platform. Total compensation available to our independent service providers in China can generally be comparable to the total compensation available to other sales leaders globally.

These business model features in China are not common to the business model we employ elsewhere in the world, and based on the direct selling licenses we have received and the terms of those which we hope to receive in the future to conduct a direct selling enterprise in China, our business model in China will continue to incorporate some or all of these features. The direct selling regulations require us to apply for various approvals to conduct a direct selling enterprise in China. The process for obtaining the necessary licenses to conduct a direct selling business is protracted and cumbersome and involves multiple layers of Chinese governmental authorities and numerous governmental employees at each layer. While direct selling licenses are centrally issued, such licenses are generally valid only in the jurisdictions within which related approvals have been obtained. Such approvals are generally awarded on local and provincial bases, and the approval process requires involvement with multiple ministries at each level. Our participation and conduct during the approval process is guided not only by distinct Chinese practices and customs, but is also subject to applicable laws of China and the other jurisdictions in which we operate our business, including the U.S., as well as our internal code of ethics. There is always a risk that in attempting to comply with local customs and practices in China during the application process or otherwise, we will fail to comply with requirements applicable to us in China itself or in other jurisdictions, and any such failure to comply with applicable requirements could prevent us from obtaining the direct selling licenses or related local or provincial approvals. Furthermore, we rely on certain key personnel in China to assist us during the approval process, and the loss of any such key personnel could delay or hinder our ability to obtain licenses or related approvals. For all of the above reasons, there can be no assurance that we will obtain additional direct selling licenses, or obtain related approvals to expand into any or all of the localities or provinces in China that are important to our business. Our inability to obtain, retain, or renew any or all of the licenses or related approvals that are required for us to operate in China could negatively impact our business.

Additionally, although certain regulations have been published with respect to obtaining and operating under such approvals and otherwise conducting business in China, other regulations are pending and there continues to be uncertainty regarding the interpretation and enforcement of Chinese regulations. The regulatory environment in China is evolving, and officials in the Chinese government, including at the local and central level, exercise broad discretion in deciding how to interpret, apply, and enforce regulations as they deem appropriate, including to promote social order. Regulators in China may change how they interpret and enforce the direct selling regulations, both current interpretations and enforcement thereof or future iterations. Regulators in China may also modify the regulations. We cannot be certain that our business model will continue to be deemed by national or local Chinese regulatory authorities to be compliant with any such regulations. The Chinese government rigorously monitors the direct selling market in China, and in the past has taken serious action against companies that the government believed were engaging in activities they regarded to be in violation of applicable law, including shutting down their businesses and imposing substantial fines. For example, in August 2017, China’s State Administration for Industry and Commerce, Ministry of Education, Ministry of Public Security and Ministry of Human Resources and Social Security published a notice announcing they are carrying out a three-month campaign ending on November 15, 2017 to investigate pyramid selling activities in order to eliminate activities prohibited under relevant regulations. The campaign seeks to eliminate organizations that use recruitment to lure and mislead people into participating in pyramid schemes. As a result, there can be no guarantee that the Chinese government’s current or future interpretation and application of the existing and new regulations will not negatively impact our business in China, result in regulatory investigations or lead to fines or penalties against us or our Chinese Members. If our business practices are deemed to be in violation of applicable regulations as they are or may be interpreted or enforced, or modified regulations, in particular with respect to the factors used in determining the services a service provider is eligible to perform and service fees they are eligible to earn and to receive, then we could be sanctioned and/or required to change our business model, either of which could have a significant adverse impact on our business in China.

Chinese regulations prevent persons who are not Chinese nationals from engaging in direct selling in China. We cannot guarantee that any of our Members living outside of China or any of our sales representatives or independent service providers in China have not engaged or will not engage in activities that violate our policies in this market, or that violate Chinese law or other applicable law, and therefore result in regulatory action and adverse publicity.

China has also enacted labor contract and social insurance legislation. We have reviewed our employment contracts and contractual relations with employees in China, which include certain of our employed sales personnel, and have transferred those employed sales personnel to independent service providers and have made such other changes as we believe to be necessary or appropriate to bring these contracts and contractual relations into compliance with these laws and their implementing regulations. In addition, we continue to monitor the situation to determine how these laws and regulations will be implemented in practice. There is no guarantee that these laws will not adversely impact us, cause us to change our operating plan for China or otherwise have an adverse impact on our business operations in China.

We may continue to experience growth in China, and there can be no assurances that we will be able to successfully manage expansion of manufacturing operations and a growing and dynamic sales force. If we are unable to effectively scale our supply chain and manufacturing infrastructure to support future growth in China, our operations in China may be adversely impacted.

~~If we fail to further penetrate existing markets, then the growth in sales of our products, along with our operating results, could be negatively impacted.~~

The success of our business is to a large extent contingent on our ability to further penetrate existing markets which is subject to numerous factors, many of which are out of our control. Government regulations in both our domestic and international markets can delay or prevent the introduction, or require the reformulation or withdrawal, of some of our products, which could negatively impact our business, financial condition and results of operations. Also, our ability to increase market penetration in certain countries may be limited by the finite number of persons in a given country inclined to pursue a direct selling business opportunity or consumers willing to purchase Herbalife products. Moreover, our growth will depend upon improved training and other activities that enhance Member retention in our markets. While we have recently experienced significant growth in certain of our markets, we cannot assure you that such growth levels will continue in the immediate or long term future. Furthermore, our efforts to support growth in such international markets could be hampered to the extent that our infrastructure in such markets is deficient when compared to our infrastructure in our more developed markets, such as the U.S. Therefore, we cannot assure you that our general efforts to increase our market penetration and Member retention in existing markets will be successful. If we are unable to further penetrate existing markets, our operating results could suffer.

~~Our business could~~ be materially and adversely ~~affected as a result of natural disasters, other catastrophic events, acts of war or terrorism, or cyber-security incidents and other acts by third parties.~~

We depend on the ability of our business to run smoothly, including the ability of Members to engage in their day-to-day selling and business building activities and the ability of our inventories and products to move reasonably unimpeded around the world. Anyaffected. There have been no material disruption caused by natural disasters, including, but not limited to, fires, floods, hurricanes, volcanoes, and earthquakes; power loss or shortages; environmental disasters; telecommunications or business information systems failures; acts of war or terrorism and other similar disruptions, including those due to cyber-security incidents, ransomware, or other actions by third parties, could adversely affect our ability to conduct business. If such disruptions result in significant cancellations of Member orders, contribute to a general decrease in local, regional or global economic activity, directly impact our marketing, manufacturing, financial or logistics functions, or impair our ability to meet Member demands, our operating results and financial condition could be materially adversely affected. For example, our operations in Mexico were impacted by flooding in September 2017. The severe weather conditions directly affected inventory stored at that facility. Furthermore, our headquarters along with one of our distribution facilities is located in Southern California, an area susceptible to earthquakes. Although the Company believes the events in Mexico will not have a material negative impact to its Mexico operations, we cannot assure you that any future natural disasters, catastrophic events; acts of war or terrorism and other similar disruptions, including those due to cyber-security incidents, ransomware, or other actions by third parties, will not adversely affect our ability to operate our business and our financial condition and results of operations.

~~Our contractual obligation to sell our products only through our Herbalife Member network and to refrain from changing certain aspects of our Marketing Plan may limit our growth.~~

We are a party to an agreement with our Members that provides assurances, to the extent legally permitted, we will not sell Herbalife products worldwide through any distribution channel other than our network of independent Herbalife Members. Thus, we are contractually prohibited from expanding our business by selling Herbalife products through other distribution channels that may be available to our competitors, such as over the Internet, through wholesale sales, by establishing retail stores or through mail order systems. Since this is an open-ended commitment, there can be no assurance that we will be able to take advantage of innovative new distribution channels that are developed in the future.

In addition, this agreement with our Members provides that we will not make any material changes adverse to our Members to certain aspects of our Marketing Plan without the approval described below. For example, our agreement with our Members provides that we may increase, but not decrease, the discount percentages available to our Members for the purchase of products or the applicable royalty override percentages, and production and other bonus percentages available to our Members at various qualification levels within our Member hierarchy. We may not modify the eligibility or qualification criteria for these discounts, royalty overrides and production and other bonuses unless we do so in a manner to make eligibility and/or qualification easier than under the applicable criteria in effect as of the date of the agreement. Our agreement with our Members further provides that we may not vary the criteria for qualification for each Member tier within our Member hierarchy, unless we do so in such a way so as to make qualification easier.

~~Although we reserved the right to make these~~ changes to our ~~Marketing Plan without the consent of our Members~~risk factors disclosed in the event that changes are required by applicable law or are necessary in our reasonable business judgment to account for specific local market or currency conditions to achieve a reasonable profit on operations, we may initiate other changes that are adverse to our Members based on an assessment of what will be best for the Company and its Members. Under the agreement with our Members, these other adverse changes would then be submitted to our Member leadership for a vote. The vote would require the approval of at least 51% of our Members then at the level of President’s Team earning at the production bonus level of 6% who vote, provided that at least 50% of those Members entitled to vote do in fact vote. Therefore, while we believe that this agreement has strengthened our relationship with our existing Members, improved our ability to recruit new Members and generally increased the long-term stability of our business, there can be no assurance that our agreement with our Members will not restrict our ability to adapt our Marketing Plan to the evolving requirements of the markets in which we operate. As a result, our growth may be limited.2022 10-K.

~~We depend on the integrity and reliability of our information technology infrastructure, and any related inadequacies may result in substantial interruptions to our business.~~

Our ability to provide products and services to our Members depends on the performance and availability of our core transactional systems. We operate our global back office transactional systems on an Oracle Enterprise Suite which is supported by a robust hardware and network infrastructure. The Oracle Enterprise Suite is a scalable and stable solution that provides a solid foundation upon which we are building our next generation Member facing Internet toolset. While we continue to invest in our information technology infrastructure, there can be no assurance that there will not be any significant interruptions to such systems or that the systems will be adequate to meet all of our future business needs.

The most important aspect of our information technology infrastructure is the system through which we record and track Member sales, Volume Points, royalty overrides, bonuses and other incentives. We have encountered, and may encounter in the future, errors in our software or our enterprise network, or inadequacies in the software and services supplied by our vendors, although to date none of these errors or inadequacies has had a meaningful adverse impact on our business. Any such errors or inadequacies that we may encounter in the future may result in substantial interruptions to our services and may damage our relationships with, or cause us to lose, our Members if the errors or inadequacies impair our ability to track sales and pay royalty overrides, bonuses and other incentives, which would harm our financial condition and operating results. Any such errors could create compliance risks under the Consent Order or any applicable laws or regulations. Such errors may be expensive or difficult to correct in a timely manner, and we may have little or no control over whether any inadequacies in software or services supplied to us by third parties are corrected, if at all.

Our ability to effectively manage our network of Members, and to ship products, and track royalty and bonus payments on a timely basis, depends significantly on our information systems. The failure of our information systems to operate effectively, or a breach in security of these systems, could adversely impact the promptness and accuracy of our product distribution and transaction processing. We could be required to make significant additional expenditures to remediate any such failure, problem or breach.

Anyone who is able to circumvent our security measures could misappropriate confidential or proprietary information, including that of third parties such as our Members, cause interruption in our operations, damage our computers or otherwise damage our reputation and business. We may need to expend significant resources to protect against security breaches or to address problems caused by such breaches. Any actual security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability under various laws and regulations. In addition, employee error or malfeasance or other errors in the storage, use or transmission of any such information could result in a disclosure to third parties. If this should occur we could incur significant expenses addressing such problems. Since we collect and store Member and vendor information, including credit card information, these risks are heightened.

In addition, the use and handling of this information is regulated by evolving and increasingly demanding laws and regulations. As such, we may be required to upgrade our current information technology infrastructure and systems and incur additional costs.

Since we rely on independent third parties for the manufacture and supply of certain of our products, if these third parties fail to reliably supply products to us at required levels of quality and which are manufactured in compliance with applicable laws, including the dietary supplement and OTC drug cGMPs, then our financial condition and operating results would be harmed.

A significant portion of our products are manufactured at third party contract manufacturers. We cannot assure you that our outside contract manufacturers will continue to reliably supply products to us at the levels of quality, or the quantities, we require, and in compliance with applicable laws, including under the FDA’s cGMP regulations. Additionally, while we are not presently aware of any current liquidity issues with our suppliers, we cannot assure you that they will not experience financial hardship.

For the portion of our product supply that is self-manufactured, we believe we have significantly lowered the product supply risk, as the risk factors of financial health, liquidity, capacity expansion, reliability and product quality are all within our control. However, increases to the volume of products that we self-manufacture in our Winston Salem and Lake Forest facilities and in Nanjing and Suzhou for the support of China raise the concentration risk that a significant interruption of production at any of our facilities due to, for example, natural disasters including earthquakes, hurricanes and floods, technical issues or work stoppages could impede our ability to conduct business. While our business continuity programs contemplate and plan for such events, if we were to experience such an event resulting in the temporary, partial or complete shutdown of one of these manufacturing facilities, we could be required to transfer manufacturing to the surviving facility and/or third-party contract manufacturers if permissible. When permissible, converting or transferring manufacturing to a third-party contract manufacturer could be expensive, time-consuming, result in delays in our production or shipping, reduce our net sales, damage our relationship with Members and damage our reputation in the marketplace, any of which could harm our business, results of operations and financial condition.

Our product supply contracts generally have a three-year term. Except for force majeure events such as natural disasters and other acts of God, and non-performance by Herbalife, our manufacturers generally cannot unilaterally terminate these contracts. These contracts can generally be extended by us at the end of the relevant time period and we have exercised this right in the past. Globally, we have over 50 product suppliers, with Fine Foods (Italy) being a major supplier for meal replacements, protein powders and nutritional supplements. Additionally, we use contract manufacturers in India, Brazil, Korea, Japan, Taiwan, Germany and the Netherlands to support our global business. In the event any of our contract manufacturers were to become unable or unwilling to continue to provide us with products in required volumes and at suitable quality levels, we would be required to identify and obtain acceptable replacement manufacturing sources. There is no assurance that we would be able to obtain alternative manufacturing sources on a timely basis. An extended interruption in the supply of products would result in the loss of sales. In addition, any actual or perceived degradation of product quality as a result of reliance on contract manufacturers may have an adverse effect on sales or result in increased product returns and buybacks.

~~If we fail to protect our trademarks and tradenames, then our ability to compete could be negatively affected, which would harm our financial condition and operating results.~~

The market for our products depends to a significant extent upon the goodwill associated with our trademark and tradenames. We own, or have licenses to use, the material trademark and trade name rights used in connection with the packaging, marketing and distribution of our products in the markets where those products are sold. Therefore, trademark and trade name protection is important to our business. Although most of our trademarks are registered in the United States and in certain foreign countries in which we operate, we may not be successful in asserting trademark or trade name protection. In addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. The loss or infringement of our trademarks or tradenames could impair the goodwill associated with our brands and harm our reputation, which would harm our financial condition and operating results.

Unlike in most of the other markets in which we operate, limited protection of intellectual property is available under Chinese law. Accordingly, we face an increased risk in China that unauthorized parties may attempt to copy or otherwise obtain or use our trademarks, copyrights, product formulations or other intellectual property. Further, because Chinese commercial law is relatively undeveloped, we may have limited legal recourse in the event we encounter significant difficulties with intellectual property theft or infringement. As a result, we cannot assure you that we will be able to adequately protect our product formulations or other intellectual property.

We permit the limited use of our trademarks by our Members to assist them in marketing our products. It is possible that doing so may increase the risk of unauthorized use or misuse of our trademarks in markets where their registration status differs from that asserted by our Members, or they may be used in association with claims or products in a manner not permitted under applicable laws and regulations. Were these to occur it is possible that this could diminish the value of these marks or otherwise impair our further use of these marks.

~~If our Members fail to comply with labeling laws, then our financial condition and operating results would be harmed.~~

Although the physical labeling of our products is not within the control of our Members, our Members must nevertheless advertise our products in compliance with the extensive regulations that exist in certain jurisdictions, such as the United States, which considers product advertising to be labeling for regulatory purposes.

Our products are sold principally as foods, dietary supplements and cosmetics and are subject to rigorous FDA and related legal regimens limiting the types of therapeutic claims that can be made for our products. The treatment or cure of disease, for example, is not a permitted claim for these products. While we train our Members and attempt to monitor our Members’ marketing materials, we cannot ensure that all such materials comply with applicable regulations, including bans on therapeutic claims. If our Members fail to comply with these restrictions, then we and our Members could be subjected to claims, financial penalties, mandatory product recalls or relabeling requirements, which could harm our financial condition and operating results. Although we expect that our responsibility for the actions of our Members in such an instance would be dependent on a determination that we either controlled or condoned a noncompliant advertising practice, there can be no assurance that we could not be held vicariously liable for the actions of our Members.

If our intellectual property is not adequate to provide us with a competitive advantage or to prevent competitors from replicating our products, or if we infringe the intellectual property rights of others, then our financial condition and operating results would be harmed.

Our future success and ability to compete depend upon our ability to timely produce innovative products and product enhancements that motivate our Members and customers, which we attempt to protect under a combination of copyright, trademark and trade secret laws, confidentiality procedures and contractual provisions. However, our products are generally not patented domestically or abroad, and the legal protections afforded by common law and contractual proprietary rights in our products provide only limited protection and may be time-consuming and expensive to enforce and/or maintain. Further, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our proprietary rights or from independently developing non-infringing products that are competitive with, equivalent to and/or superior to our products.

Monitoring infringement and/or misappropriation of intellectual property can be difficult and expensive, and we may not be able to detect every infringement or misappropriation of our proprietary rights. Even if we do detect infringement or misappropriation of our proprietary rights, litigation to enforce these rights could cause us to divert financial and other resources away from our business operations. Further, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States.

Additionally, third parties may claim that products or marks that we have independently developed or which bear certain of our trademarks infringe upon their intellectual property rights and there can be no assurance that one or more of our products or marks will not be found to infringe upon third party intellectual property rights in the future.

Since one of our products constitutes a significant portion of our net sales, significant decreases in consumer demand for this product or our failure to produce a suitable replacement should we cease offering it would harm our financial condition and operating results.

For 2016, 2015 and 2014, our Formula 1 Healthy Meal, our best-selling product line, approximated 30% of our net sales. If consumer demand for this product decreases significantly or we cease offering this product without a suitable replacement, then our financial condition and operating results would be harmed.

~~If we lose the services of members of our senior management team, then our financial condition and operating results could be harmed.~~

We have depended, and will continue to depend, on the continued services of our senior management team as it works closely with the senior Member leadership to create an environment of inspiration, motivation and entrepreneurial business success. Effective June 1, 2017, Richard P. Goudis, our previous Chief Operating Officer, became the Chief Executive Officer of the Company and Michael O. Johnson, our previous Chairman and Chief Executive Officer, became Executive Chairman of the Company, consistent with a succession strategy plan previously approved by our board of directors. Any significant leadership change or senior management transition involves inherent risk and any failure to ensure a smooth transition could hinder our strategic planning, execution and future performance. While we strive to mitigate the negative impact associated with changes to our senior management team, there may be uncertainty among investors, employees, Members and others concerning our future direction and performance. Any disruption in our operations or uncertainty could have a material adverse effect on our business, financial condition or results of operations.

Additionally, although we have entered into employment agreements with certain members of our senior management team, and do not believe that any of them are planning to leave or retire in the near term, we cannot assure you that our senior managers will remain with us. The loss or departure of any member of our senior management team could adversely impact our Member relations and operating results. If any of these executives do not remain with us, our business could suffer. Also, the loss of key personnel, including our regional and country managers, could negatively impact our ability to implement our business strategy, and our continued success will also be dependent on our ability to retain existing, and attract additional, qualified personnel to meet our needs. We currently do not maintain “key person” life insurance with respect to our senior management team.

Our international operations are subject to the laws and regulations of the United States and many foreign countries, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and other similar laws in a number of countries.

We are subject to a variety of laws regarding our international operations, including the U.S. Foreign Corrupt Practices Act, or the FCPA, the U.K. Bribery Act of 2010, or the UK Bribery Act, and regulations issued by U.S. Customs and Border Protection, U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, and various foreign governmental agencies. The FCPA, the UK Bribery Act and similar anti-b ribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business as well as requiring companies to maintain accurate books and records. In recent years there has been a substantial increase in anti-bribery law enforcement activity with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the SEC, increased enforcement activity by non-U.S. regulator s and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with these anti-bribery laws, including the requirements to maintain accurate information and internal controls. We operate in many parts of the world that have experienced governmental corruption to some degree and in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. Notwithstanding our compliance programs, which include annual training and certification requirements, there is no assurance that our internal control policies and procedures will protect us from acts committed by our employees or agents. ~~Additionally, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing~~ ~~or new laws might be administered or interpreted. Alleged or actual violations of any such existing or future laws (either due to our own acts or our~~ ~~inadvertence, or due to the acts or inadvertence of others) may result in criminal or civil sanctions,~~ ~~including contract cancellations or debarment, and loss of reputation, which could have a material adverse effect on our business, financial condition, and results of operations.~~

~~The United Kingdom’s vote to exit from the European Union could adversely impact us.~~

On June 23, 2016, in a referendum vote commonly referred to as “Brexit,” a majority of British voters voted to exit the European Union and, in March 2017, the British government delivered formal notice of the U.K.’s intention to leave the European Union. The British government is currently in negotiations with the European Union to determine the terms of the U.K.’s exit. A withdrawal could potentially disrupt the free movement of goods, services and people between the U.K. and the European Union, undermine bilateral cooperation in key geographic areas and significantly disrupt trade between the U.K. and the European Union or other nations as the U.K. pursues independent trade relations. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which European Union laws to replace or replicate. The effects of Brexit will depend on any agreements the U.K. makes to retain access to European Union or other markets either during a transitional period or more permanently. It is unclear what long-term economic, financial, trade and legal implications the withdrawal of the U.K. from the European Union would have and how such withdrawal would affect our business globally and in the region. In addition, Brexit may lead other European Union member countries to consider referendums regarding their European Union membership. Any of these events, along with any political, economic and regulatory changes that may occur, could cause political and economic uncertainty in Europe and internationally and harm our business and financial results.

The covenants in our existing indebtedness limit our discretion with respect to certain business matters, which could limit our ability to pursue certain strategic objectives and in turn harm our financial condition and operating results.

~~Our credit facility contains financial and operating covenants that restrict our and our subsidiaries’ ability to, among other things:~~

In addition, our credit facility requires us to meet certain financial ratios and financial conditions. Our ability to comply with these covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. Failure to comply with these covenants could result in a default causing all amounts to become due and payable under our credit facility, which is secured by substantially all of our domestic assets, against which the lenders thereunder could proceed to foreclose.

We may use from time to time a certain amount of cash in order to satisfy the obligations relating to our convertible notes. The maturity or conversion of any of our convertible notes may adversely affect our financial condition and operating results, which could adversely affect the amount or timing of future potential share repurchases or the payment of dividends to our shareholders.

In February 2014, we issued convertible senior notes due on August 15, 2019, or the Convertible Notes, in the aggregate principal amount of $1.15 billion. At maturity, we will have to pay the holders of the Convertible Notes the full aggregate principal amount of the Convertible Notes then outstanding.

Holders of our Convertible Notes may convert their notes at their option under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending March 31, 2014, if the last reported sale price of our common shares for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price for the Convertible Notes on each applicable trading day; (ii) during the five business-day period immediately after any five consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of that measurement period was less than 98% of the product of the last reported sale price of our common shares and the conversion rate for the Convertible Notes for each such day; or (iii) upon the occurrence of specified corporate events. On and after May 15, 2019, holders may convert their Convertible Notes at any time, regardless of the foregoing circumstances. The Convertible Notes are net-share settled. If one or more holders elect to convert their Convertible Notes when conversion is permitted, we could be required to make cash payments equal to the par amount of each Convertible Note, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Convertible Notes, because our Convertible Notes are net-share settled, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of our Convertible Notes as a current rather than long-term liability, which could result in a material reduction of our net working capital. The requirement to pay cash upon conversion of the Convertible Notes or any adverse accounting treatment of the Convertible Notes may adversely affect our financial condition and operating results, each of which could in turn adversely impact the amount or timing of future potential share repurchases or the payment of dividends to our shareholders.

~~The conversion of any of the Convertible Notes into common shares could have a dilutive effect that could cause our share price to go down.~~

The Convertible Notes, until May 15, 2019, are convertible into common shares only if specified conditions are met and thereafter convertible at any time, at the option of the holder. We have reserved common shares for issuance upon conversion of the Convertible Notes. Upon conversion, the principal amount is due in cash, and to the extent that the conversion value exceeds the principal amount, the difference is due in common shares. While we have entered into capped call transactions to effectively increase the conversion of the Convertible Notes and lessen the risk of dilution to shareholders upon conversion, if the market price of our common shares, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions, the number of our common shares we receive upon exercise of the capped call transactions will be capped. In that case, there would be dilution in respect of our common shares, because the number of our common shares or amounts of cash that we would owe upon conversion of the Convertible Notes in excess of the principal amount of converted Convertible Notes would exceed the number of common shares that we would be entitled to receive upon exercise of the capped call transactions, which would cause a dilutive effect that could cause our share price to go down. If any or all of the Convertible Notes are converted into common shares, our existing shareholders will experience immediate dilution of voting rights and our common share price may decline. Furthermore, the perception that such dilution could occur may cause the market price of our common shares to decline.

The conversion rate for the Convertible Notes as of February 7, 2014, the date of issuance thereof, was 11.5908 common shares per $1,000 principal amount or a conversion price of approximately $86.28 per common share. Because the conversion rate of the Convertible Notes adjusts upward upon the occurrence of certain events, such as a dividend payment, our existing shareholders may experience more dilution if any or all of the Convertible Notes are converted into common shares after the adjusted conversion rates became effective.

If we do not comply with transfer pricing, customs duties, VAT, and similar regulations, then we may be subjected to additional taxes, duties, interest and penalties in material amounts, which could harm our financial condition and operating results.

As a multinational corporation, operating in many countries including the United States, we are subject to transfer pricing and other tax regulations designed to ensure that our intercompany transactions are consummated at prices that have not been manipulated to produce a desired tax result, that appropriate levels of income are reported as earned by our United States or local entities, and that we are taxed appropriately on such transactions. In addition, our operations are subject to regulations designed to ensure that appropriate levels of customs duties are assessed on the importation of our products. We are currently subject to pending or proposed audits that are at various levels of review, assessment or appeal in a number of jurisdictions involving transfer pricing issues, income taxes, customs duties, value added taxes, withholding taxes, sales and use and other taxes and related interest and penalties in material amounts. In some circumstances, additional taxes, interest and penalties have been assessed and we will be required to pay the assessments or post surety, in order to challenge the assessments.

The imposition of new taxes, even pass-through taxes such as VAT, could have an impact on our perceived product pricing and will likely require that we increase prices in certain jurisdictions and therefore could have a potential negative impact on our business and results of operations. We have reserved in the consolidated financial statements an amount that we believe represents the most likely outcome of the resolution of these disputes, but if we are incorrect in our assessment we may have to pay the full amount asserted which could potentially be material. Ultimate resolution of these matters may take several years, and the outcome is uncertain. If the United States Internal Revenue Service or the taxing authorities of any other jurisdiction were to successfully challenge our transfer pricing practices or our positions regarding the payment of income taxes, customs duties, value added taxes, withholding taxes, sales and use, and other taxes, we could become subject to higher taxes, we may determine it is necessary to raise prices in certain jurisdictions accordingly and our revenue and earnings and our results of operations could be adversely affected.

~~See Note 5,~~ ~~Contingencies, to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q~~ ~~for further information on contingencies relating to VAT and other related matters.~~

~~We could become a “controlled foreign corporation” for U.S. federal income tax purposes.~~

We believe that we are currently not a “controlled foreign corporation” for U.S. federal income tax purposes. However, this conclusion depends upon whether United States persons or entities who own 10% or more of the total combined voting power (10% shareholders”) own in the aggregate more than 50% of (i) the total combined voting power, or (ii) the total value of all our stock. In determining voting power, in addition to voting stock any special voting rights to appoint directors, whether by law, agreement or other arrangement, may also be taken into account. For purposes of applying the voting and value tests, certain constructive ownership rules apply, which attribute ownership among certain family members and certain entities and their owners. These rules may also attribute ownership of our stock to a person or entity that is entitled to acquire our stock pursuant to an option, such as the holders of our Convertible Notes. These constructive ownership rules are very complex and their application to specific circumstances is subject to uncertainty.

If we were to be or become a “controlled foreign corporation,” our 10% shareholders would be subject to special tax treatment. Any shareholders who contemplate owning 10% or more of our outstanding shares (taking into account the impact of any share repurchases we may undertake pursuant to share repurchase programs) are urged to consult with their tax advisors with respect to the special rules applicable to 10% shareholders of controlled foreign corporations.

~~Changes in tax laws, treaties or regulations, or their interpretation could adversely affect us.~~

A change in applicable tax laws, treaties or regulations or their interpretation could result in a higher effective tax rate on our worldwide earnings and such change could be significant to our financial results. The Organisation for Economic Co-operation and Development has released guidance covering various international tax standards as part of its “base erosion and profit shifting” or “BEPS” initiative. The implementation of BEPS by jurisdictions in which we operate could result in changes to tax laws and regulations, including with respect to transfer pricing, that could materially increase our effective tax rate. Additionally, tax legislative proposals intending to eliminate some perceived tax advantages of companies that have legal domiciles outside the U.S. but have certain U.S. connections have repeatedly been introduced in the U.S. Congress. If these proposals are enacted, the result would increase our effective tax rate and could have a material adverse effect on the Company’s financial condition and results of operations. Further, it is expected that extensive U.S. tax legislative proposals will be released. If such proposals are enacted, our effective tax rate could increase or decrease.

~~We may be held responsible for certain taxes or assessments relating to the activities of our Members, which could harm our financial condition and operating results.~~

Our Members are subject to taxation, and in some instances, legislation or governmental agencies impose an obligation on us to collect taxes, such as value added taxes and social contributions, and to maintain appropriate records. In addition, we are subject to the risk in some jurisdictions of being responsible for social security, withholding or other taxes with respect to payments to our Members. In addition, in the event that local laws and regulations or the interpretation of local laws and regulations change to require us to treat our Members as employees, or that our Members are deemed by local regulatory authorities in one or more of the jurisdictions in which we operate to be our employees rather than independent contractors under existing laws and interpretations, we may be held responsible for social contributions, withholding and related taxes in those jurisdictions, plus any related assessments and penalties, which could harm our financial condition and operating results. ~~See Note 5,~~ ~~Contingencies, to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q~~ ~~for a more specific discussion of contingencies related to the activities of our Members.~~

~~We may incur material product liability claims, which could increase our costs and harm our financial condition and operating results.~~

Our ingestible products include vitamins, minerals and botanicals and other ingredients and are classified as foods or dietary supplements and are not subject to pre-market regulatory approval in the United States. Our products could contain contaminated substances, and some of our products contain some ingredients that do not have long histories of human consumption. We rely upon published and unpublished safety information including clinical studies on ingredients used in our products and conduct limited clinical studies on some key products but not all products. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur. As a marketer of dietary and nutritional supplements and other products that are ingested by consumers or applied to their bodies, we have been, and may again be, subjected to various product liability claims, including that the products contain contaminants, the products include inadequate instructions as to their uses, or the products include inadequate warnings concerning side effects and interactions with other substances. It is possible that widespread product liability claims could increase our costs, and adversely affect our revenues and operating income. Moreover, liability claims arising from a serious adverse event may increase our costs through higher insurance premiums and deductibles, and may make it more difficult to secure adequate insurance coverage in the future. In addition, our product liability insurance may fail to cover future product liability claims, thereby requiring us to pay substantial monetary damages and adversely affecting our business. Finally, given the higher level of self-insured retentions that we have accepted under our current product liability insurance policies, which are as high as approximately $15 million, in certain cases we may be subject to the full amount of liability associated with any injuries, which could be substantial.

On February 6, 2004, the FDA banned the sale and use of dietary supplements containing botanical sources of ephedrine alkaloids. A number of jurisdictions have imposed similar bans or restrictions. Until late 2002, we had sold ~~Thermojetics~~^® ~~original green herbal tablets,~~ ~~Thermojetics~~^® ~~green herbal tablets and~~ ~~Thermojetics~~^® gold herbal tablets, all of which contained ephedrine alkaloids. Accordingly, we run the risk of product liability claims related to the ingestion of ephedrine alkaloids contained in those products. We have been in the past, and may be in the future, named as a defendant in product liability lawsuits seeking to link the ingestion of certain of the aforementioned products to subsequent alleged medical problems suffered by plaintiffs. There can be no assurance that we will prevail if we are named as a defendant in the future to product liability lawsuits related to the ingestion of ephedrine alkaloids contained in those products.

~~Holders of our common shares may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.~~

Our corporate affairs are governed by our amended and restated memorandum and articles of association, by the Companies Law (2016 Revision), or the Companies Law, and the common law of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as under statutes or judicial precedent in existence in jurisdictions in the United States. Therefore, shareholders may have more difficulty in protecting their interests in the face of actions by our management or board of directors than would shareholders of a corporation incorporated in a jurisdiction in the United States due to the comparatively less developed nature of Cayman Islands law in this area.

Shareholders of Cayman Islands exempted companies such as Herbalife have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of our shareholders. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

A shareholder can bring a suit personally where its individual rights have been, or are about to be, infringed. Our Cayman Islands counsel, Maples and Calder, is not aware of any reported class action having been brought in a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts, and the Cayman Islands courts have confirmed the availability of such actions. In most cases, we would be the proper plaintiff where an action is brought to redress any loss or damage suffered by us, or based on a breach of duty owed to us, and a claim against, for example, our officers or directors usually may not be brought by a shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle may apply and a shareholder may be permitted to bring a claim derivatively on a company's behalf, where:

Provisions of our articles of association and Cayman Islands corporate law may impede a takeover or make it more difficult for shareholders to change the direction or management of the Company, which could reduce shareholders’ opportunity to influence management of the Company.

Our articles of association permit our board of directors to issue preference shares from time to time, with such rights and preferences as they consider appropriate. Our board of directors could authorize the issuance of preference shares with terms and conditions and under circumstances that could have an effect of discouraging a takeover or other transaction.

In addition, our articles of association contain certain other provisions which could have an effect of discouraging a takeover or other transaction or preventing or making it more difficult for shareholders to change the direction or management of our Company, including the inability of shareholders to act by written consent, a limitation on the ability of shareholders to call special meetings of shareholders and advance notice provisions. As a result, our shareholders may have less input into the management of our Company than they might otherwise have if these provisions were not included in our articles of association.

The Cayman Islands have provisions under the Companies Law to facilitate mergers and consolidations between Cayman Islands companies and non-Cayman Islands companies. These provisions, contained within Part XVI of the Companies Law, are broadly similar to the merger provisions as provided for under Delaware Law.

There are however a number of important differences that could impede a takeover. First, the threshold for approval of the merger plan by shareholders is higher. The threshold is a special resolution of the shareholders (being 66 2/3% of those present in person or by proxy and voting) together with such other authorization, if any, as may be specified in the articles of association.

Additionally, the consent of each holder of a fixed or floating security interest (in essence a documented security interest as opposed to one arising by operation of law) is required to be obtained unless the Grand Court of the Cayman Islands waives such requirement.

The merger provisions contained within Part XVI of the Companies Law do contain shareholder appraisal rights similar to those provided for under Delaware law. Such rights are limited to a merger under Part XVI and do not apply to schemes of arrangement as discussed below.

The Companies Law also contains separate statutory provisions that provide for the merger, reconstruction and amalgamation of companies. These are commonly referred to in the Cayman Islands as “schemes of arrangement.”

The procedural and legal requirements necessary to consummate these transactions are more rigorous and take longer to complete than the procedures typically required to consummate a merger in the United States. Under Cayman Islands law and practice, a scheme of arrangement in relation to a solvent Cayman Islands company must be approved at a shareholders’ meeting by a majority of each class of the company’s shareholders who are present and voting (either in person or by proxy) at such meeting. The shares voted in favor of the scheme of arrangement must also represent at least 75% of the value of each relevant class of the company’s shareholders present and voting at the meeting. The convening of these meetings and the terms of the amalgamation must also be sanctioned by the Grand Court of the Cayman Islands. Although there is no requirement to seek the consent of the creditors of the parties involved in the scheme of arrangement, the Grand Court typically seeks to ensure that the creditors have consented to the transfer of their liabilities to the surviving entity or that the scheme of arrangement does not otherwise materially adversely affect creditors’ interests. Furthermore, the court will only approve a scheme of arrangement if it is satisfied that:

If the scheme of arrangement is approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of U.S. corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

In addition, if an offer by a third party to purchase shares in us has been approved by the holders of at least 90% of our outstanding shares (not including such a third party) pursuant to an offer within a four-month period of making such an offer, the purchaser may, during the two months following expiration of the four-month period, require the holders of the remaining shares to transfer their shares on the same terms on which the purchaser acquired the first 90% of our outstanding shares. An objection can be made to the Grand Court of the Cayman Islands, but this is unlikely to succeed unless there is evidence of fraud, bad faith, collusion or inequitable treatment of the shareholders.

~~There is uncertainty as to shareholders’ ability to enforce certain foreign civil liabilities in the Cayman Islands.~~

We are incorporated as an exempted company with limited liability under the laws of the Cayman Islands. A material portion of our assets are located outside of the United States. As a result, it may be difficult for our shareholders to enforce judgments against us or judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States or any state of the United States.

We have been advised by our Cayman Islands counsel, Maples and Calder, that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will — based on the principle that a judgment by a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given — recognize and enforce a foreign judgment of a court of competent jurisdiction if such judgment is final, for a liquidated sum, not in respect of taxes or a fine or penalty, is not inconsistent with a Cayman Islands judgment in respect of the same matters, and was not obtained in a manner, and is not of a kind, the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. There is doubt, however, as to whether the Grand Court of the Cayman Islands will (1) recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States or any state of the United States, or (2) in original actions brought in the Cayman Islands, impose liabilities predicated upon the civil liability provisions of the federal securities laws of the United States or any state of the United States, on the grounds that such provisions are penal in nature.

~~The Grand Court of the Cayman Islands may stay proceedings if concurrent proceedings are being brought elsewhere.~~

~~Our stock price may be adversely affected by third parties who raise allegations about our Company.~~

Short sellers and others who raise allegations regarding the legality of our business activities, some of whom are positioned to profit if our stock declines, can negatively affect our stock price. In late 2012, a hedge fund manager publicly raised allegations regarding the legality of our network marketing program and announced that his fund had taken a significant short position regarding our common shares, leading to intense public scrutiny and significant stock price volatility. Following this public announcement in December 2012, our stock price dropped significantly. This hedge fund manager continues to make allegations regarding the legality of our network marketing program, our product safety, our accounting practices and other matters. Additionally, from time to time the Company is subject to governmental and regulatory inquiries and inquiries from legislators that may adversely affect our stock price. Our stock price has continued to exhibit heightened volatility and the short interest in our common shares continues to remain high. Short sellers expect to make a profit if our common shares decline in value, and their actions and their public statements may cause further volatility in our share price. While a number of traders have publicly announced that they have taken long positions contrary to the hedge fund shorting our shares, the existence of such a significant short interest position and the related publicity may lead to continued volatility. The volatility of our stock may cause the value of a shareholder’s investment to decline rapidly.

(c) On February ~~21, 2017,~~9, 2021, our board of directors authorized a new three-year $1.5 billion share repurchase program that will expire on February ~~21, 2020,~~9, 2024, which replaced our prior share repurchase authorization ~~which~~that was set to expire on ~~June~~October 30, ~~2017 which, as of December 31, 2016,~~2023 and had ~~$232.9~~approximately $7.9 million of remaining authorized ~~capacity.~~capacity when it was replaced. This share repurchase program allows us, which includes ~~a wholly owned~~an indirect wholly-owned subsidiary of Herbalife Ltd., to repurchase our common shares at such times and prices as determined by ~~our~~ management, as market conditions warrant, and to the extent Herbalife Ltd.’s distributable reserves are available under Cayman Islands law. The 2018 Credit Facility permits us to repurchase our common shares as long as no default or event of default exists and other conditions, such as specified consolidated leverage ratios, are met. As of ~~September 30, 2017,~~March 31, 2023, the remaining authorized capacity under ~~the Company’s~~our $1.5 billion share repurchase program was approximately ~~$1,200.8~~$985.5 million. ~~The following is a summary~~We did not repurchase any of our ~~repurchases of~~ common shares during the three months ended ~~September 30, 2017, all of which were repurchased by our indirect wholly owned subsidiary. For further information on our share repurchases, see Note 10,~~ ~~Shareholders’ Equity, to the Condensed Consolidated Financial Statements~~ ~~included in Part I, Item 1 of this Quarterly Report on Form 10-Q~~:March 31, 2023.


Cayman Islands	98-0377871
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
P.O. Box 309 Ugland House Grand Cayman Cayman Islands	KY1-1104
(Address of principal executive offices)	(Zip code)


Title of each class:	Trading Symbol(s):	Name of each exchange on which registered:
Common Shares, par value $0.0005 per share	HLF	New York Stock Exchange


Large accelerated filer	☒	☒Accelerated filer	~~Accelerated filer~~	☐

Non-accelerated filer	☐	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐

Emerging growth company	☐	☐


		Page No.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Unaudited Condensed Consolidated Balance Sheets	3

Unaudited Condensed Consolidated Statements of Income	4

Unaudited Condensed Consolidated Statements of Comprehensive Income	5

Unaudited Condensed Consolidated Statements of Cash Flows	6

Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.
~~Item 2.~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations	2931
Item 3.
~~Item 3.~~ Quantitative and Qualitative Disclosures About Market Risk	5049
Item 4.	Controls and Procedures	53
~~Item 4. Controls and Procedures~~	53

~~Forward Looking Statements~~	54

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	5556
Item 1A.	Risk Factors	56
Item ~~1A. Risk Factors~~2.	55

~~Item 2.~~ Unregistered Sales of Equity Securities and Use of Proceeds	7456
Item 3.
~~Item 3.~~ Defaults Upon Senior Securities	7456
Item 4.	Mine Safety Disclosures	56
Item ~~4. Mine Safety Disclosures~~5.	Other Information	7456
Item 6.
~~Item 5. Other Information~~Exhibits	74

~~Item 6. Exhibits~~	74

~~Signatures and Certifications~~	7856


	Percentage
2022		103.938	%
2023		101.969	%
2024 and thereafter		100.000	%


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Percentage
2024		102.438	%
2025		101.219	%
2026 and thereafter		100.000	%


	Principal Payments
	(in millions)
2023	$	23.1
2024		300.0
2025		1,451.8
2026		0.1
2027		—
Thereafter		877.5
Total	$	2,652.5

Contribution Margin(1):
Primary Reporting Segment	$	375.9		$	398.8		$	1,155.7		$	1,201.5
China(2)		184.0			193.8			595.8			614.5
Total Contribution Margin		559.9			592.6			1,751.5			1,816.0
Selling, general and administrative expenses(2)		445.2			441.3			1,327.0			1,545.2
Other operating income		(4.6	)		(0.2	)		(43.5	)		(29.1	)
Interest expense, net		38.4			22.1			106.5			70.1
Income before income taxes		80.9			129.4			361.5			229.8
Income taxes		26.4			41.7			84.2			69.2
Net income	$	54.5		$	87.7		$	277.3		$	160.6


	Number of Awards			Weighted-Average Exercise Price Per Award		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value(1)
	(in thousands)						(in millions)
Outstanding as of December 31, 2022(2)		3,074		$	24.21	4.6 years	$	0.3
Granted		217		$	20.17
Exercised		(7	)	$	15.22
Forfeited(3)		(157	)	$	28.58
Outstanding as of March 31, 2023(2)		3,127		$	23.73	4.9 years	$	1.7
Exercisable as of March 31, 2023(4)		2,126		$	27.52	2.6 years	$	0.4
Vested and expected to vest as of March 31, 2023(4)		3,093		$	23.83	4.9 years	$	1.6

SARs	Awards			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value(1)
	(In thousands)						(In millions)
Outstanding at December 31, 2016(2)(3)		11,998		$	41.52	6.0 years	$	148.7
Granted		1,358		$	57.30
Exercised		(2,511	)	$	28.62
Forfeited		(321	)	$	53.67
Outstanding at September 30, 2017(2)(3)		10,524		$	46.26	6.3 years	$	237.4
Exercisable at September 30, 2017(4)		6,308		$	45.61	4.9 years	$	150.6


	Number of Shares			Weighted-Average Grant Date Fair Value Per Share
	(in thousands)
Outstanding and nonvested as of December 31, 2022(1)		4,538		$	33.14
Granted		111		$	20.17
Vested		(994	)	$	39.32
Forfeited		(57	)	$	40.76
Outstanding and nonvested as of March 31, 2023(1)		3,598		$	30.91
Expected to vest as of March 31, 2023(2)		3,050		$	29.48

Incentive Plan and Independent Directors Stock Units	Shares			Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding and nonvested December 31, 2016		26		$	62.35
Granted(1)		154		$	68.84
Vested		(24	)	$	62.42
Forfeited		—			—
Outstanding and nonvested September 30, 2017		156		$	68.77

	Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
	Loss into Income	For the Three Months Ended						For the Nine Months Ended
	(Effective Portion)	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
		(In millions)
Derivatives designated as hedging instruments:
Foreign exchange currency contracts relating to inventory hedges	Cost of sales	$	(1.3	)	$	3.2		$	0.3		$	12.9
Foreign exchange currency contracts relating to intercompany management fee hedges	Selling, general and administrative expenses	$	(1.5	)	$	(0.2	)	$	(0.6	)	$	(0.8	)

	Changes in Accumulated Other Comprehensive
	Income (Loss) by Component
	Three Months Ended September 30,
	2017									2016
	Foreign Currency Translation Adjustments			Unrealized Gain (Loss) on Derivatives			Total			Foreign Currency Translation Adjustments			Unrealized Gain (Loss) on Derivatives			Total
	(In millions)
Beginning Balance	$	(185.8	)	$	(2.6	)	$	(188.4	)	$	(178.8	)	$	10.3		$	(168.5	)
Other comprehensive income (loss) before reclassifications, net of tax		11.3			(0.2	)		11.1			(2.6	)		0.8			(1.8	)
Amounts reclassified from accumulated other comprehensive income (loss) to income, net of tax(1)		—			2.7			2.7			—			(3.0	)		(3.0	)
Total other comprehensive income (loss), net of reclassifications		11.3			2.5			13.8			(2.6	)		(2.2	)		(4.8	)
Ending balance	$	(174.5	)	$	(0.1	)	$	(174.6	)	$	(181.4	)	$	8.1		$	(173.3	)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
	(in millions)
Weighted average shares used in basic computations		79.6		83.1		81.4		83.0
Dilutive effect of exercise of equity grants outstanding		3.4		3.3		3.6		3.1
Weighted average shares used in diluted computations		83.0		86.4		85.0		86.1

	Derivative Balance Sheet Location	Significant Other Observable Inputs (Level 2) Fair Value at September 30, 2017		Significant Other Observable Inputs (Level 2) Fair Value at December 31, 2016
		(in millions)
ASSETS:
Derivatives designated as hedging instruments:
Foreign exchange currency contracts relating to inventory and intercompany management fee hedges	Prepaid expenses and other current assets	$	0.8	$	4.6
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	Prepaid expenses and other current assets	$	1.1	$	2.8
		$	1.9	$	7.4
LIABILITIES:
Derivatives designated as hedging instruments:
Foreign exchange currency contracts relating to inventory and intercompany management fee hedges	Other current liabilities	$	5.5	$	—
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	Other current liabilities	$	1.1	$	3.5
		$	6.6	$	3.5

	Offsetting of Derivative Liabilities
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Balance Sheet			Net Amounts of Liabilities Presented in the Balance Sheet		Offsetting of Derivative Liabilities
	(In millions)							Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Balance Sheet			Net Amounts of Liabilities Presented in the Balance Sheet
September 30, 2017
								(in millions)
March 31, 2023
Foreign exchange currency contracts	$	6.6	$	(1.6	)	$	5.0	$	10.6	$	(0.6	)	$	10.0
Total	$	6.6	$	(1.6	)	$	5.0	$	10.6	$	(0.6	)	$	10.0
December 31, 2016
December 31, 2022
Foreign exchange currency contracts	$	3.5	$	(3.0	)	$	0.5	$	6.0	$	(2.4	)	$	3.6
Total	$	3.5	$	(3.0	)	$	0.5	$	6.0	$	(2.4	)	$	3.6

	September 30, 2017		Adjustments			September 30, 2017
	As Reported					Pro Forma
	(In millions)
ASSETS:
Cash and cash equivalents	$	1,636.3	$	(457.8	)	$	1,178.5
Total assets		3,422.5		(457.8	)		2,964.7

LIABILITIES:
Other non-current liabilities	$	168.1	$	7.3		$	175.4
Total liabilities		3,203.5		7.3			3,210.8
SHAREHOLDERS’ EQUITY (DEFICIT):
Common shares		0.1		(0.0	)		0.1
Paid-in capital in excess of par value		452.0		(40.4	)		411.6
Retained earnings (accumulated deficit)		240.7		(424.7	)		(184.0	)
Total shareholders’ equity (deficit)		219.0		(465.1	)		(246.1	)
Total liabilities and shareholders’ equity (deficit)	$	3,422.5	$	(457.8	)	$	2,964.7

Sales Leaders Statistics (Excluding China)	2017			2016
	(In thousands)
January 1 total sales leaders		572.9			603.3
January & February new sales leaders		26.8			27.7
Demoted sales leaders (did not re-qualify)(1)		(124.0	)		(207.6	)
Sales leaders who converted to preferred members		(38.3	)		—
Other sales leaders (resigned, etc.)		(2.0	)		(3.9	)
End of February total sales leaders(1)		435.4			419.5

Sales Leaders Retention (Excluding China)	2017			2016
	(In thousands)
Sales leaders needed to re-qualify		379.0			450.2
Demoted sales leaders (did not re-qualify)(2)		(148.3	)		(206.4	)
Total re-qualified		230.7			243.8
Retention rate		60.9	%		54.2	%

	Number of Sales Leaders				Sales Leaders Retention Rate
	2017		2016		2017			2016
North America		61,362		79,305		74.8	%		58.3	%
Mexico		74,968		67,294		71.7	%		57.1	%
South & Central America		73,375		77,523		55.2	%		53.0	%
EMEA		101,101		87,500		62.2	%		63.6	%
Asia Pacific (excluding China)		124,555		107,871		49.7	%		43.8	%
Total Sales Leaders		435,361		419,493		60.9	%		54.2	%
China		47,244		41,890
Worldwide Total Sales Leaders		482,605		461,383

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 — July 31		811,393	$	72.38		811,393	$	1,200,818,018
August 1 — August 31	—		—		—		$	1,200,818,018
September 1 — September 30	—		—		—		$	1,200,818,018
		811,393	$	72.38		811,393	$	1,200,818,018


Exhibit Number	Description	Reference
3.1
~~3.1~~	~~Form of~~ Amended and Restated Memorandum and Articles of Association of Herbalife Ltd.	~~(h)~~*
4.1
~~4.1~~	Form of Share Certificate	(c)
4.2
~~4.2~~	Indenture between Herbalife Ltd. and MUFG Union Bank, N.A., as trustee, dated ~~February 7, 2014,~~as of March 23, 2018, governing the ~~2.00%~~2.625% Convertible Senior Notes due ~~2019~~2024	~~(f)~~(i)
4.3
~~4.3~~	Form of Global Note for ~~2.00%~~2.625% Convertible Senior ~~Note~~Notes due ~~2019~~2024 (included as Exhibit A to Exhibit 4.2 hereto)	~~(f)~~(i)
4.4	First Supplemental Indenture, dated as of December 1, 2021, between Herbalife Nutrition Ltd. and U.S. Bank National Association, as successor to MUFG Union Bank, N.A., as trustee	(x)
~~10.1#~~4.5	Indenture among Herbalife Nutrition Ltd., HLF Financing, Inc., the guarantors party thereto and MUFG Union Bank, N.A., as trustee, dated as of May 29, 2020, governing the 7.875% Senior Notes due 2025	(q)
4.6	Form of Global Note for 7.875% Senior Notes due 2025 (included as Exhibit A to Exhibit 4.5 hereto)	(q)
4.7	Indenture among HLF Financing SaRL, LLC, Herbalife International, Inc., the guarantors party thereto and Citibank, N.A., as trustee, dated as of May 20, 2021, governing the 4.875% Senior Notes due 2029	(u)
4.8	Form of Global Note for 4.875% Senior Notes due 2029 (included as Exhibit A to Exhibit 4.7 hereto)	(u)
4.9	Indenture, dated as of December 9, 2022, between Herbalife Nutrition Ltd. and U.S. Bank Trust Company, National Association, as trustee, governing the 4.25% Convertible Senior Notes due 2028	(z)
4.10	Form of Global Note for 4.25% Convertible Senior Notes due 2028 (included as Exhibit A to Exhibit 4.9 hereto).	(z)
10.1#	Form of Second Amendment and Restatement of the Herbalife International of America, Inc.’s Senior Executive Deferred Compensation Plan ~~effective January 1, 1996, as amended~~	~~(a)~~(o)
10.2#
~~10.2#~~	Form of Second Amendment and Restatement of the Herbalife International of America, Inc.’s Management Deferred Compensation Plan ~~effective January 1, 1996, as amended~~	~~(a)~~(o)
10.3#
~~10.3#~~	~~Herbalife International Inc. 401K Profit Sharing Plan and Trust, as amended~~	~~(a)~~

~~10.4~~	Notice to Distributors, dated as of July 18, 2002, regarding Amendment to Agreements of Distributorship, ~~dated as of July 18, 2002~~ between Herbalife International, Inc. and each Herbalife Distributor	(a)
10.4#
~~10.5#~~	Side Letter Agreement dated as of April 3, 2003 by and among WH Holdings (Cayman Islands) Ltd., Michael O. Johnson and the Shareholders listed therein	(a)
10.5#	Herbalife Ltd. Executive Incentive Plan	(e)
10.6	Form of Indemnification Agreement between Herbalife Ltd. and ~~the~~each of its directors and certain ~~officers~~ of ~~Herbalife Ltd.~~its officers	(b)
10.7#
~~10.7#~~	Amended and Restated Herbalife Ltd. 2005 Stock Incentive Plan	~~(h)~~(d)
10.8#	Form of Amendment to Amended and Restated Herbalife Ltd. 2005 Stock Incentive Plan	(e)
~~10.8#~~10.9#	Form of Herbalife Ltd. 2005 Stock Incentive Plan Stock Unit Award Agreement	~~(j)~~(g)
10.10#
~~10.9#~~	Form of Herbalife Ltd. 2005 Stock Incentive Plan Stock Appreciation Right Award Agreement	~~(j)~~(g)
10.11#
~~10.10#~~	~~Form of Herbalife Ltd. 2005 Stock Incentive Plan Stock Appreciation Right Award Agreement applicable to Michael O. Johnson~~	~~(j)~~

~~10.11#~~	~~Form of Herbalife Ltd. 2005 Stock Incentive Plan Stock Appreciation Right Award Agreement applicable to Richard P. Goudis~~	~~(j)~~

~~10.12#~~	~~Form of Herbalife Ltd. 2005 Stock Incentive Plan Stock Appreciation Right Award Agreement applicable to Michael O. Johnson~~	~~(m)~~

~~10.13#~~	~~Form of Herbalife Ltd. 2005 Stock Incentive Plan Stock Appreciation Right Award Agreement applicable to Richard Goudis~~	~~(m)~~

~~10.14#~~	~~Form of Herbalife Ltd. 2005 Stock Incentive Plan Stock Unit Award Agreement~~	~~(m)~~

~~10.15#~~	~~Form of Herbalife Ltd. 2005 Stock Incentive Plan Stock Appreciation Right Award Agreement~~	~~(m)~~

~~10.16#~~	~~Herbalife Ltd. Employee Stock Purchase Plan~~	~~(d)~~

~~10.17#~~	~~Stock Appreciation Right Award Agreement by and between Herbalife Ltd. and Michael O. Johnson, dated March 27, 2008~~	~~(d)~~

~~10.18#~~	~~Stock Appreciation Right Award Agreement by and between Herbalife Ltd. and Michael O. Johnson, dated March 27, 2008~~	~~(d)~~

~~10.19#~~	~~Amendment to Herbalife International Inc. 401K Profit Sharing Plan and Trust~~	~~(g)~~

~~10.20#~~	~~Form of Independent Directors Stock Appreciation Right Award Agreement~~	~~(h)~~

~~10.21#~~	~~Herbalife Ltd. Amended and Restated Independent Directors Deferred Compensation and Stock Unit Plan~~	~~(h)~~

~~10.22#~~	~~Amended and Restated Non-Management Directors Compensation Plan~~	~~(i)~~

~~Exhibit~~ ~~Number~~	~~Description~~	~~Reference~~

~~10.23#~~	~~Form of Herbalife Ltd. 2005 Stock Incentive Plan Non-Employee Directors Stock Appreciation Right Award Agreement~~	~~(i)~~

~~10.24#~~	~~Severance Agreement by and between John DeSimone and Herbalife International of America, Inc., dated as of February 23, 2011~~	~~(j)~~

~~10.25#~~	~~Amended and Restated Severance Agreement, dated as of February 23, 2011, by and between Desmond Walsh and Herbalife International of America, Inc.~~	~~(j)~~

~~10.26~~	Credit Agreement, dated as of March 9, 2011, by and among Herbalife International, Inc., Herbalife Ltd., Herbalife International Luxembourg S.a.R.L., certain subsidiaries of HII as guarantors, the lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer	~~(j)~~

~~10.27~~	First Amendment, dated July 26, 2012, to Credit Agreement, dated as of March 9, 2011, by and among Herbalife International, Inc., Herbalife Ltd., Herbalife International Luxembourg S.a.R.L., certain subsidiaries of HII as guarantors, the lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer	~~(m)~~

~~10.28#~~	~~Amendment to Amended and Restated Herbalife Ltd. 2005 Stock Incentive Plan~~	~~(j)~~

~~10.29~~	Second Amendment, dated February 3, 2014, to Credit Agreement, dated as of March 9, 2011, by and among Herbalife International, Inc. Herbalife Ltd., Herbalife International Luxembourg S.a.R.L., certain subsidiaries of HII as guarantors, the lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer	~~(e)~~

~~10.30~~	~~Form of Forward Share Repurchase Confirmation~~	~~(f)~~

~~10.31~~	~~Form of Base Capped Call Confirmation~~	~~(f)~~

~~10.32~~	~~Form of Additional Capped Call Confirmation~~	~~(f)~~

~~10.33#~~	Form of Herbalife Ltd. 2005 Stock Incentive Plan Performance Condition Stock Appreciation Right Award Agreement	~~(f)~~(l)
10.12#	Herbalife Ltd. Employee Stock Purchase Plan	(j)
~~10.34#~~10.13#	Amended and Restated Herbalife Ltd. 2014 Stock Incentive Plan	~~(j)~~(t)
10.14#	Form of Herbalife Ltd. 2014 Stock Incentive Plan Stock Unit Award Agreement	(w)
~~10.35~~10.15#	~~Confirmation between Merrill Lynch International and~~Form of Herbalife Ltd.~~, dated May 6,~~ 2014 Stock Incentive Plan Stock Unit Award Agreement (Performance-Vesting)	~~(g)~~(w)
10.16#	Form of Herbalife Ltd. 2014 Stock Incentive Plan Lead Director Stock Unit Award Agreement	(w)
~~10.36~~10.17#	~~Third Amendment to Credit Agreement dated as~~Form of ~~May 4, 2015, among~~ Herbalife Ltd.~~, Herbalife International, Inc., Herbalife International Luxembourg S.a.R.L., the guarantors part thereto, the lenders from time to time party thereto, and Bank~~ 2014 Stock Incentive Plan Board of ~~America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer~~Directors Stock Unit Award Agreement	~~(h)~~(w)
10.18#	Form of Herbalife Ltd. 2014 Stock Incentive Plan Stock Appreciation Right Award Agreement	(h)
~~10.37#~~10.19#	Form of Herbalife Ltd. ~~Executive~~2014 Stock Incentive Plan Performance Based Stock Appreciation Right Award Agreement	~~(j)~~(h)
10.20#	Form of Herbalife Ltd. 2014 Stock Incentive Plan Restricted Cash Unit Award Agreement	(h)
~~10.38~~10.21	Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment	~~(k)~~(f)
10.22#
~~10.39~~	~~Second~~ Amended and Restated Support Agreement, dated July 15, 2016, by and among Herbalife Ltd., Carl C. Icahn, Icahn Partners Master Fund LP, Icahn Offshore LP, Icahn Partners LP, Icahn Onshore LP, Beckton Corp., Hopper Investments LLC, Barberry Corp., High River Limited Partnership, Icahn Capital LP, IPH GP LLC, Icahn Enterprises Holdings LP, and Icahn Enterprises GP Inc.	~~(k)~~

~~10.40#~~	~~Amended and Restated Employment Agreement by and between Richard P. Goudis and Herbalife International of America, Inc., dated as of November 1, 2016~~	~~(l)~~

~~10.41#~~	~~Letter Agreement by and between Michael O. Johnson and Herbalife International of America, Inc., dated November 1, 2016~~	~~(l)~~

~~10.42#~~	Herbalife International of America, Inc. Executive Officer Severance Plan	~~(l)~~(y)
10.23
~~10.43~~	Credit Agreement, dated as of ~~February 15, 2017, by and~~August 16, 2018, among HLF Financing ~~S.à r.l., HLF Financing US,~~SaRL, LLC, Herbalife Nutrition Ltd., Herbalife International Luxembourg S.à R.L., Herbalife International, Inc., the several banks and other financial institutions or entities from time to time party thereto ~~Credit Suisse AG, Cayman Islands Branch,~~ as lenders, Jefferies Finance LLC, as administrative agent for the Term ~~Administrative Agent~~Loan B Lenders and ~~Collateral Agent,~~collateral agent, and Coöperatieve Rabobank U.A., New York Branch, as an Issuing Bank and as administrative agent for the ~~Revolver Administrative Agent~~Term Loan A Lenders and the Revolving Credit Lenders	~~(l)~~(k)


10.24#	Employment Agreement, dated as of October 23, 2019, by and among Dr. John Agwunobi, Herbalife International of America, Inc., and Herbalife Nutrition Ltd.	(m)
10.25#	Employment Agreement, dated as of October 23, 2019, by and among John G. DeSimone, Herbalife International of America, Inc., and Herbalife Nutrition Ltd.

~~Exhibit~~ ~~Number~~	~~Description~~	~~Reference~~(m)
10.26#	First Amendment to Credit Agreement, dated as of December 12, 2019, by and among HLF Financing SaRL, LLC, Herbalife Nutrition Ltd., Herbalife International Luxembourg S.à R.L., Herbalife International, Inc., the Company’s subsidiaries party thereto as subsidiary guarantors, the several banks and other financial institutions or entities party thereto as lenders and Jefferies Finance LLC, as administrative agent for the Term Loan B Lenders and collateral agent	(n)
~~10.44#~~10.27	Second Amendment to Credit Agreement, dated as of March 19, 2020, by and among HLF Financing SaRL, LLC, Herbalife Nutrition Ltd., Herbalife International Luxembourg S.à R.L., Herbalife International, Inc., the Company’s subsidiaries party thereto as subsidiary guarantors, the several banks and other financial institutions or entities party thereto as lenders and Coöperatieve Rabobank U.A., New York Branch as administrative agent for the Term Loan A Lenders and Revolving Credit Lenders	(p)
10.28#	Retention Agreement, effective as of April 6, 2020, by and between Mark Schissel and the Company	(w)
10.29	Deferred Prosecution Agreement between Herbalife Nutrition Ltd. and the United States Department of Justice	(r)
10.30	Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order	(r)
10.31	Third Amendment to Credit Agreement, dated as of February 10, 2021, by and among HLF Financing SaRL, LLC, Herbalife Nutrition Ltd., Herbalife International Luxembourg S.à R.L., Herbalife International, Inc., the Company’s subsidiaries party thereto as subsidiary guarantors, the several banks and other financial institutions or entities party thereto as lenders and Jefferies Finance LLC, as administrative agent for the Term Loan B Lenders and collateral agent	(s)
10.32	Fourth Amendment to Credit Agreement, dated as of July 30, 2021, by and among HLF Financing SaRL, LLC, Herbalife Nutrition Ltd., Herbalife International Luxembourg S.à R.L., Herbalife International, Inc., the Company’s subsidiaries party thereto as subsidiary guarantors, the several banks and other financial institutions or entities party thereto as lenders and Coöperatieve Rabobank U.A., New York Branch as administrative agent for the Term Loan A Lenders and Revolving Credit Lenders and Sustainability Coordinator	(v)
10.33#	Separation Agreement and General Release, dated as of October 31, 2022, by and among Dr. John O. Agwunobi and Herbalife International of America, Inc.	(bb)
10.34#	Employment Agreement, dated as of December 22, 2022, by and among Michael O. Johnson, Herbalife International of America, Inc. and Herbalife Nutrition Ltd.	(aa)
10.35#	Herbalife Ltd. 2014 Stock Incentive Plan Stock Unit Award Agreement dated as of December 22, 2022 entered into with Michael O. Johnson	(aa)
10.36#	Herbalife Ltd. 2014 Stock Incentive Plan Stock Appreciation Right Award Agreement ~~(Performance-Vesting)~~dated as of December 22, 2022 entered into with Michael O. Johnson	(aa)
10.37#	Retention Agreement, effective as of April 6, 2020, by and between Frank Lamberti and Herbalife Ltd.	*
10.38	Fifth Amendment to Credit Agreement, USD LIBOR Hardwire Transition Amendment (Revolver and ~~Richard P. Goudis~~Term Loan A), dated as of ~~June 6, 2017~~April 3, 2023, by Coöperatieve Rabobank U.A., New York Branch as Term Loan A Agent and Revolver Administrative Agent	~~(m)~~*
10.39#	Herbalife Ltd. 2023 Stock Incentive Plan	*
~~10.45~~10.40#	Form of Herbalife Ltd. 2023 Stock Incentive Plan Stock Unit Award Agreement	*
10.41#	Form of Herbalife Ltd. 2023 Stock Incentive Plan Lead Director Stock Unit Award Agreement	*
10.42#	Form of Herbalife Ltd. 2023 Stock Incentive Plan Board of Directors Stock Unit Award Agreement	*
10.43#	Form of Herbalife Ltd. 2023 Stock Incentive Plan Stock Appreciation Right Award Agreement	*
10.44	Sixth Amendment to Credit Agreement, dated as of April 28, 2023, by and among HLF Financing SaRL, LLC, Herbalife Ltd., Herbalife International Luxembourg S.à R.L., Herbalife International, Inc., the Company’s subsidiaries party thereto as subsidiary guarantors, the several banks and ~~Carl C. Icahn~~other financial institutions or entities party thereto as lenders and ~~his controlled affiliates, dated August 21, 2017.~~Coöperatieve Rabobank U.A., New York Branch , as administrative agent for the Term Loan A Lenders and Revolving Credit Lenders	~~(n)~~*
10.45	Addendum to the Amendment to the Agreements of Distributorship dated as of April 27, 2023, by Herbalife International, Inc., for the benefit of each Herbalife Distributor	*
~~10.46~~31.1	~~Contingent Value Rights Agreement by and between Herbalife Ltd. and Computershare Trust Company, N.A., as Administrative Agent, dated as of October 11, 2017.~~	~~(o)~~

~~31.1~~	Rule 13a-14(a) Certification of Chief Executive Officer	*
31.2
~~31.2~~	Rule 13a-14(a) Certification of Chief Financial Officer	*
32.1
~~32.1~~	Section 1350 Certification of Chief Executive Officer ~~and~~	**
32.2	Section 1350 Certification of Chief Financial Officer	**


101.INS	Inline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	*
101.SCH
~~101.INS~~	~~XBRL Instance Document~~	*

~~101.SCH~~	Inline XBRL Taxonomy Extension Schema Document	*
101.CAL
~~101.CAL~~	Inline XBRL Taxonomy Extension Calculation Linkbase Document	*
101.DEF
~~101.DEF~~	Inline XBRL Taxonomy Extension Definition Linkbase Document	*
101.LAB
~~101.LAB~~	Inline XBRL Taxonomy Extension Label Linkbase Document	*
101.PRE
~~101.PRE~~	Inline XBRL Taxonomy Extension Presentation Linkbase Document	*


	HERBALIFE LTD.

	By:		/s/ ~~JOHN G. DESIMONE~~ALEXANDER AMEZQUITA
			~~John G. DeSimone~~Alexander Amezquita Chief Financial Officer