HLF Herbalife Ltd

Herbalife Ltd. said it was nearing a resolution to a regulatory investigation into whether the company was operating as a pyramid scheme.

The nutritional-supplement maker said in a statement that it had progressed to an "advance stage" in talks with the Federal Trade Commission and that, while litigation remained a possibility, a settlement would include an estimated payment of $200 million.

Shares, up 44.6% over the past year, rose 12% to $65.32 in after-hours trading. Herbalife's comments about a possible settlement came as the company reported better-than-expected first-quarter results and raised its guidance for the year.

The FTC opened an investigation into Herbalife in 2014 as the company was battling comments from hedge-fund manager William Ackman. Beginning in 2012, Mr. Ackman publicly accused the direct marketer of being a pyramid scheme, the salespeople of which rely more on signing up new recruits than selling product.

Mr. Ackman repeatedly called for a probe by the FTC, and his firm, Pershing Square Capital Management LP, bet about $1 billion that the company's shares would fall.

Founded in 1980, Herbalife, based in the Cayman Islands, sells protein shakes, snacks and other weight-management products along with other dietary and nutritional supplements.

For the first quarter, Herbalife reported a profit of $95.8 million, or $1.12 a share, compared with $78.2 million, or 92 cents a share, a year earlier. Excluding certain items, adjusted profit climbed to $1.36 a share from $1.29 a year earlier.

Sales rose 1.3% to $1.12 billion. Excluding the impact of currency, sales grew 11%.

Analysts surveyed by Thomson Reuters had projected adjusted profit of $1.09 a share on $1.07 billion in revenue.

Sales in North America jumped 9%, offsetting a 21% decline in South and Central America, with troubled Venezuela in particular dragging on results.

Herbalife also raised guidance for the year. It now sees adjusted per-share earnings between $4.40 and $4.75, up from its previous view of $4.05 and $4.50, with sales climbing between 1.5% to 4.5%, above its earlier guidance for sales rising up to 2.5%.

For the second quarter, Herbalife sees adjusted per-share earnings between $1.10 and $1.20 and sales rising up to 3%.

Herbalife said the guidance excludes the effect of any legal settlement.

Analysts, on average, were expecting adjusted per-share earnings of $1.16 in the second quarter and $4.65 for the year, and sales rising 2% in the second quarter and 3% for the year, according to Thomson Reuters.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

May 05, 2016 20:05 ET (00:05 GMT)

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