In a conference call with analysts, Herbalife said it is making progress in looking for a new accounting company. The nutritional products firm had to search for a new accounting company after KPMG resigned earlier this month after one of its senior partners was accused of insider trading in Herbalife stock.
The search for a new accounting company started the day after KPMG announced its resignation. Herbalife Chief Financial Officer John DeSimone said the company has been moving fast and its search is near completion.
The new accounting firm will have the difficult task of auditing Herbalife’s financial records. The company operates in 88 countries and has complex financial arrangements with its independent distributors.
The new accounting firm must reaffirm Herbalife’s financial statements for 2010, 2011, and 2012. KPMG withdrew its approval for the said statements because of the allegations of insider-trading against its former senior partner Scott London.
DeSimone said the unaudited financial statements stalled the company’s efforts to finance the repurchase of its shares. He said that the path the company is on is currently blocked by the KPMG issues.
Herbalife reported record first quarter sales as well as better than estimate profit. It earned $1.1 billion in revenue for the first three months of 2013, which is a 17 percent increase compared to the same period last year.
The company had a rough year with its shares hammered last May after hedge fund manager David Einhorn questioned its business model during an analyst call. Then seven months later, Bill Ackman, manager of Pershing Square Capital Management’s hedge fund, accused the company of operating a pyramid scheme. He bet $1 billion that Herbalife’s shares would drop.
Billionaire investor Carl Icahn purchased 15 percent of Herbalife’s shares as an indicator that he believes the company would thrive. The company allowed him to name two directors to the company’s board. Shareholders approved Icahn’s nominees during their annual meeting held last week.