Tupperware Brands Corp (TUP) 2007 Q2 法說會逐字稿

Good day, everyone, and welcome to the Tupperware Brands Corporation second quarter 2007 earnings conference call.

This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Rick Goings, Chairman and CEO. Please go ahead, sir.

Yes, thank you, and good morning, everyone. With me this morning are Mike Poteshman, our CFO, and Jane Garrard, by the way, this is Jane Garrard, our VP Investor Relations, her last meeting. We want to thank her for her contribution. We are moving her on in the organization to head up Tupperware Brands Global Internal Audit functions, so nice job, Jane. We have appreciated it.

Thank you.

She will be succeeded in Investor Relations by [Theresa Birchfield]. Theresa's also here this morning, and Theresa was most recently the Chief Financial Officer for BeautiControl North America. So all future communication should be directed to Theresa. Taking Theresa's place will be our Corporate Controller and Chief Accounting Officer, Tim Kulhanek. Tim will be going to BeautiControl North America as their Chief Financial Officer. You'll see later today an 8-K filing. As always, some of the discussions, you know the drill, future outlooks, so I'll refer to you to the Company's position.

We were pleased to finish the second quarter ahead of expectation. Our prior guidance was to be up 3 to 5% in local currency and we were happy to come in plus 8%. I think it's important we comment it's local currency because that's the way we really manage our business. We had local currency sales growth in all of our segments. The Tupperware product segments were up 9%, while the beauty segments were up 8%. The Tupperware emerging markets for -- that is our Tupperware products, China, India, Indonesia, Turkey, Russia and Poland, continue to contribute strongly as well and they were up 32% in the second quarter. We also had double-digit percentage growth in quite a number of our core Tupperware markets, including Japan, the U.S., Mexico, Australia, and South Africa as well.

A comment on how we talk about emerging markets and segments. As you know, we report geographic segments as what they each have done in the quarter, and since the acquisition of the beauty businesses, we've also reported it by the mix for product category, a certain percentage Tupperware, a certain percentage beauty. We're going to continue to do this, but beginning with our third quarter release, we're also going to bifurcate our businesses for discussion purposes only, by market type by either emerging or developed markets. You know, in our current definition, we really only talk about Tupperware products emerging markets and we've only highlighted six of them. Going forward, we're going to include our beauty emerging markets, and a more complete group of the Tupperware emerging markets.

And by the way, we've gotten a lot of feedback from shareholders and analysts in the past, particularly on a recent trip from Europe, that this would be helpful for them to have a more comprehensive discussion and would be useful for their investment analysis. For your reference, we're generally going to be using the World Bank definition for emerging markets, which really classifies emerging markets based on the average annual GNP per capita.

Back to the business, again, our raising of our full year 2007 and our long-range earnings guidance is a confirmation of the progress we are making with our strategy, really to shift this company from being the Tupperware Company, or Corporation to a portfolio of direct selling brands. We know we still have hurdles ahead. There's always going to be pluses and minuses, but we believe that this portfolio will provide the opportunity for more sales and profit increases, as well as more to consistency.

Now, I want to take a moment, drill down in some of our markets and then I'm going to turn it over to Mike. Let me turn first to Europe. We were pleased that we had a 2% sales increase in Europe, and this was led by Russia and South Africa, and this was also accomplished even with 5 million in less business to business sales this year than we had last year, and primarily that was in Germany. The three key Tupperware products emerging markets in this segment, Russia, Turkey, and Poland, delivered sales growth of 35%, so there's no slowing of the sales growth trends in these important markets. Regarding our important market in Europe-Germany, although sales and profits were a bit below last year, we did make important progress closing the GAAP in the average active sales force size. You'll remember that in the first quarter it was down 17%, but by the end of the second quarter, they have narrowed it to down only 4%.

Drilling down in Germany, we are also pleased to see that the macroeconomic environment continues to improve, and I think the key indicators there are the unemployment rates are declining, the government is really starting to work with labor unions to enhance job creation, and we saw the worm turn in the second quarter on that, the unemployment rate, and also, we've seen for two quarters the consumer confidence ratings levels going up. Now, clearly these trends will help our business, but I think it's important to understand it is going to take time. We're usually a leading -- when there's -- we're counter cyclical, when there's growing unemployment, but I think we lag this industry direct selling once the economy improves. But it is good to see that it is improving. We're not sitting on our hands while we wait, by the way, we're continuing with actions to improve our business there.

It's our belief that the closing of the sales force gap, along with the actions we're taking, should produce a modest decline in sales and a stronger ROS, as we move in Germany into the second half of the year. By the way, specifically the actions in Germany we're taking, shorter term, there's specific promotions that are really targeted against recruiting and activity, and also a better new product program coming from things we design and also products that we are sourcing. Longer-term, we believe we're strengthening the sales force structure. We've added a level of management there and it's gaining traction.

Anyway, back to all of Europe, when you put it all together, we expect full year sales and profits to be flat to up slightly now in light of the first half trends, which is a modest improvement from the guidance we gave you in April.

Let me turn to Asia-Pacific next. There we had double-digit sales growth again this quarter and a strong ROS of 17%. That was up a couple percentage points versus last year and it was good to see. The key Tupperware products emerging markets in Asia really are China, India, Indonesia. They were up 29% in local currency during the quarter, which builds off the 21% increase that we saw in Q1. China, very strong, led the way, and we finished the quarter in China with now nearly 2,500 outlet's, and we have growing confidence in the business model we are utilizing in China and it's a highly profitable market for us. Productivity, by the way, is improving in each of these outlets. The mature markets of Japan, I just got back from a week with our management team there in Japan, also contributed strongly, and when we add Australia to it, strong double-digit sales growth and it was from really higher sales force activity.

Turning to other areas of Asia-Pacific, last year we began the conversion to a U.S. multi-tier system in Singapore. That's going well, but now our larger market of Malaysia, we're doing the same thing. We're incurring a little bit of disruption. We expected it, but we believe though, the strategy is right and we're getting traction with it and it's going to help us remain competitive in that market.

At any rate, rounding out my comments on the Tupperware segments, let me turn to North America and this includes, really, the three countries in North America, U.S., Canada and Mexico. In the U.S. we had double-digit growth for the third consecutive quarter. It's another great sign, is the year-over-year growth in the size of the average active sales force. By the way, this is the first time in five years, so it shows the strategy is correct. We still have hurdles ahead in the U.S., but as one of the top five most respected household brand names, there's a lot of room for growth in Tupperware here. The size of the total sales force is now approaching the cross-over point, with strong recruiting. The U.S. also is profitable, and now we expect full year profit in this market after a couple of years of investments.

Mexico also was up nicely 20% in local currency, and this included 3 million from a business to business more than we had last year. But by the way, they were still up double digit without that. Wrapping up these Tupperware division segments, we were pleased to see our emerging markets continue to grow. We also saw strong growth in several of our more mature core markets leading to high single-digit growth in this part of our business and a 15% return on sales from the Tupperware segments.

Let me turn to the beauty businesses. We also delivered sales growth, as I said earlier, in this part of the business with an increase of 8% in local currency sales. As was the case last quarter, the real star performer continues to be our big Fuller Cosmeticals business in Mexico. It's the largest of Tupperware Brands Corporation businesses now. Sales growth there was in the mid teens and we experienced also a strong return on sales of over 20%. Fuller Cosmeticals now has more than 450,000 sales force members, and it's solidifying our number two position in Mexico, with regard to cosmetics, fragrance and toiletry direct selling. Our BeautiControl business delivered a small increase in sales in the quarter, still has a very strong sales force advantage, but had a strong 12% sales return. The total active sales force there at BeautiControl, continues to grow and we're gaining some ground on productivity as well.

Specifically at BeautiControl, we're focused on getting that sales force, which it's an advantage, our size there, getting a more active early on, and this process leads to more productivity and more retention. It also helps us get more people into a leadership development program. Heading off there tomorrow with Simon Hemus, and we have a record number of attendees at BeautiControl celebration of, I think just approaching 6,000. So future looks good for BeautiControl.

Regarding our other beauty segments, I want to point out that a key area focus will be in the future here, as said before, South America. Remember that in South America, 55% of all beauty purchases are made via direct selling, and the typical Latin American spends more on beauty than an American. We were pleased to see that in Central and South America we grew strongly in sales with a healthy ROS as well. We also had sales growth in Fuller Argentina, and Brazil, although profit didn't follow, as we continue, and it's our intent there, to invest in those markets to expand the sales force, to really take advantage of the growing beauty market there and really to take share from others in direct selling.

Turning to our Nutra Medics beauty business in Australia there, we've made progress this year in re-establishing this business from what had become mostly a wholesale buyer base back to a party plan direct selling company and I've been pleased with the progress. We did better in the first quarter than in the second. The second was a little bit soft, but it's still early days of the implementation to get it back to a selling business and not a wholesale buying business. And when I look to them for the full year, the hope is to be up slightly in sales for 2007. So, overall for beauty, we're pleased with the quarter. Our strategy is in place and we're making progress with its execution. Remember, it's only been 18 months since we really closed this deal, so we're not declaring victory. We're declaring progress.

On another point, one of the initiatives that has been very important to us, particularly because we're, you know, we're a U.S.-based traded on Wall Street company, is to contemporize the image of Tupperware Brands corporation. In the quarter we received significant media exposure throughout this country and in other markets of the world from our new spokeswoman, BrooKe Shields, as she announced her support for Tupperware Brands Chain of Confidence initiative. And this basically is an initiative that really celebrates the bonds that women share and the confidence derived from one helping another. In addition to appearances on our behalf on The View, the Today Show, Ms. Shields also hosted her own Tupperware party in Beverly Hills with proceeds benefiting the Boys and Girls Clubs of America Smart Girls program. More than 100 attended. Many celebrities, USA Today, OK, covered the party with the celebrity guests, so it's really helping us getting a lot more exposure in how we are perceived as a contemporary company.

Anyway, wrapping this up, based on the execution of our strategic growth initiative, reflected in our positive results over the past few quarters, we are pleased to be able to raise our return on sales targets for 2008 forward from the 8 to 9% in the past and now we believe 9 to 10%, in addition to raising our full year 2007 sales and earnings per share outlooks.

And now I'm pleased to turn it over to Mike Poteshman, who will get a little more granular.

Okay. Thank you, Rick. I'll start by outlining how our second quarter actual results came out versus the outlook we gave in April. Sales came in at $492 million, up 8% in local currency above our outlook range of 3 to 5%. Earnings per share at $0.58 after adjustments was above our range as well, which was at $0.45 to $0.50. The upside in sales and profit came primarily from Tupperware Asia-Pacific, North America segment and from Beauty North America. Our better than expected tax rate accounted for $0.02 of the upside. Versus last year, earnings per share for the quarter after adjustments was up $0.09 or 18%, with $0.04 coming from positive foreign exchange. The $0.05 increase in constant currency came primarily from the sales and related profit increases by Tupperware Asia-Pacific and North America, along with $0.01 from a better tax rate.

Turning now to the balance sheet. We made additional progress on reducing debt, bringing it down $35 million in the quarter to 622 million. This resulted in a debt to total capital ratio of 56%, a significant improvement versus 61% at the end of the first quarter this year and 68% at the end of last year's second quarter. In addition to the significant debt reduction we've been able to achieve since our acquisition of the fairly direct selling beauty businesses, our equity has also increased significantly from 336 million at the end of 2005 to 480 million at the end of June this year.

In looking at our leverage, we focus on our debt to EBITDA ratio, which for the four quarters ending in June stood at 2.7 times, as we computed under our credit agreement. In order to get to what we believe is an appropriate position in terms of flexibility, we're targeting this ratio at 1.5 to 2 times, which implies a debt level in the $400 million range and based on assumed growth in equity, would result in a debt to total capital ratio below 40%.

Related to capital allocation, we announced in May that our Board had approved a stock repurchase of up to $150 million over five years, which is to use proceeds from stock option exercises. We plan to begin repurchases this quarter, including using proceeds from exercises in the first half of this year. Also related to our shares, we want you to be aware that a number of our officers have options expiring shortly, and in the coming weeks, you'll likely see an unusual amount of options exercised due to the upcoming expirations and also as people look to balance their personal investment portfolios.

Looking at cash flow for the quarter, cash flow from operating activities improve $9 million versus last year to 56 million, and cash capital spending was 6 million lower than last year at $9 million, although we've also added $9 million in fixed assets this year to a capital lease related to our new Belgium facility. For the full year 2007 we now see cash flow from operating activities net of investing activities to be 100 to $110 million, up $10 million at the high end of the range from our April outlook. We see capital spending for the year at 65 to $70 million, including about 50 million from the Belgian capital lease.

Regarding the full year 2007 sales and profit outlook, we now expect overall sales to increase by 6 to 7% in local currency, versus our previous guidance of 3 to 5%. We've also raised our GAAP EPS guidance range to $1.85 to $1.90 versus the previous high end of the range of $1.74. The EPS range excluding items is raised from $2 to $2.05, including expectation of pretax income rising 29 to 32%, including a 10 percentage point benefit from stronger currencies. This compares with a previous high end of $1.89 in April.

Versus our April guidance, this reflects the $0.08 second quarter upside versus our previous guidance, lower interest expense of about $0.05 and stronger foreign currency accounting for $0.04. This outlook includes $0.05 to $0.06 of assumed dilution coming from the impact of a higher share price and outstanding stock options, versus the $0.05 expectation we noted in April. At the segment level for Europe, we expect local currency sales and profit to be flat to up slightly, this is versus the April expectation of sales and profit, about flat for the year.

For both Tupperware Asia-Pacific and North America, we're raising our local currency sales guidance from high single-digit percentage increases to low double-digit increases. We now see Asia-Pacific's return on sales increasing 1 to 2 percentage points versus 16% in 2006, versus up slightly in April. In Tupperware North America, our outlook is now for a 6 to 7% return on sales in 2007 versus the 4 to 5% return on sales we had previously foreseen. These changes reflect a good second quarter result in trends. In line with the April outlook, we continue to expect sales in both of the beauty segments to be up about 7% in local currency. We continue to foresee a small decrease in our ROS in Beauty North America and now expect a slightly smaller loss than last year in the beauty other segment versus about breakeven in our April guidance.

As for the other elements of our forecast, we now expect our unallocated costs to be in the 37 to $38 million range, up from 35 to $37 million, due primarily to higher costs under incentive programs. We now expect net interest expense to be about $40 million, which is a reduction from the $44 million we set in April in light of our reduced debt and what we currently perceive for rates based on the market and the location of our debt. And we still expect our full year tax rate to be in the low 20% range versus 9% on a GAAP basis in 2006 and 12% on the basis that we still have good and certain items. We continue to foresee pretax land and insurance gains totaling about $10 million for the year, intangible asset amortization remains at [$13.3] million, and re-engineering costs at about $10 million.

For the third quarter, we foresee a 5 to 7% local currency sales increase with EPS excluding adjustments of $0.19 to $0.24 versus $0.20 last year. This includes pretax profit more than doubling, even without the foreign exchange benefit and a more normal tax rate this year in the low 20% range versus a benefit from income taxes last year of about $5 million. There is $0.01 of assumed dilution from higher shares.

The forecast includes a benefit on the comparison with 2006 of $0.04 to $0.06 from stronger foreign currency versus the U.S. dollar, along with lower interest expense. In the third quarter, we expect $0.05 from land gains and $0.06 of expense from intangible asset amortization and re-engineering. Not included in our full year guidance are pretax gains from the sale of our former Belgian manufacturing facility, which is being replaced by our new center of excellence of about $11 million, and from an Orlando land sale about $7.5 million, which are under contract and are expected to close late in 2007 or early in 2008.

And with that, I'll now turn the call over for Q&A.

Thank you. (OPERATOR INSTRUCTIONS) We'll take our first question from Budd Bugatch with Raymond James.

Good morning, Mike, good morning, Rick. Congratulations on the quarter.

Thanks, Budd.

I would like to see if I totally understand the difference between the guidance in the second quarter and the guidance at the end of the first quarter. I think there's about a net of the improvement in currency in the second quarter, about 12, a little bit more than $12 million of additional sales from currency. Is that correct, Mike? For the third and fourth quarter?

For the third and fourth quarter?

Yes, incorporated into the new guidance, because you're up now -- you were up I think 60 million now and 46 million at the end of the first quarter, so a difference of 14 million and then you had -- I think you beat your guidance in this quarter by about 1.6 million, if I remember right.

Your numbers sound about right, but we'll have to go back to the math to confirm that precisely.

I'm just trying to make sure I understand the sales, I think the sales guidance has been up by $40 million overall and if the local currency side of that's up around 12, then you've got, you've got the delta in terms of local currency improvement. Is that the way to think about that? Right way to think about it?

I think that's the right way to think about it. We can dig through the numbers and make sure that we're answering your question right.

And then I'm trying to figure out what the flow-through of the currency and the local currency impacts are to operating profits. Just make sure I understand how that flows.

Okay. Well, we said from FX point of view in April that we saw $0.13 to $0.15, and now we're saying that we see $0.17 to $0.19, so $0.04, in terms of the number of shares we have, it's about $2.5 million on the net income.

Okay. So 2.5 million delta, and right now the delta in that income from your guidance in April to the guidance now is about 10 million total. So then the operating side of that 7.5 million, is that right to the GAAP number?

Yes, I think we're -- yes.

Okay. All right, all right. Let me just try and work through that. Okay. The second question I had is, is, can you tell us on the share count what you're assuming for share count for third and fourth quarter? Because you've got that dilution issue.

Yes. We're -- we're selling about just under 63 million I think in the fourth quarter and maybe just a tad lower than that in the fourth quarter.

You were 62.9 in the second, right? Fully diluted shares.

That's right.

So really no change?

Yes, I mean we're balancing. We're where going to start our share buyback and then we're -- we built in an assumption for the pricing. You're right that it's netting out, it looks like to be about the same.

Okay, and then my last question, I'll let others answer -- ask questions, too, how do we think about land gains going forward, again? Can you update us on maybe the overall land program and what the extension of that is now? And I know how hard that is to do.

Sure. We've said that we see 125 million of proceeds from the Orlando land sales under the whole program through 2009, and to date through the second quarter, we had received 57 million, so the rest is yet to come. The amount that we've assumed and included in our forecast for this year was all in the second half numbers.

So that means about, I guess about probably 50 to 60 million in the next two years, in '08 and '09?

Right. In proceeds, and there's not too much cost associated with that.

Yes, Budd, too, on most all the land right now, next time you're over here, it would be worth if Tom took you out because what you would see is the anchors are in in all these locations. Zoning's already done, so -- and every new contract that comes in comes in at a higher cost per acre. So we have a very high level of confidence in reaching those kinds of numbers. As you've noticed, we continue to raise the number of what we expect to get from land gain sales.

Okay, and should we back end load that as your forecast for '08 and '09 as well?

Well, we've talked about this one contract that we have, it's like $7.5 million pretax gain associated with it that we think will close at the end of this year, beginning of next and that's not in our guidance because we're not sure what year it's going to be. And then we've got always a bunch of things in the pipeline and it's a matter of getting them closed and so on. So I'm not sure what to say right now about how to slow that in '08 and '09.

Okay, and I guess also if we're thinking about long-term, how do we think about re-engineering costs and some of the other exclusionary costs going forward? We know -- I think the K's give us what the amortization looks like and that, that rolls off in the next couple years, right?

Yes, it should be somewhere in the 9 million range in '08 and then it goes down further from there, it's 13.3 million this year and then on re-engineering, I think we'll still continue to have some, we'll have to see exactly how it comes out, but we're -- the Company has been in business for 50 or 60 years and we need to evolve over time and continue to do some of those sorts of things.

I, I think it's important for just knowing our attitude with regard to that going forward, but we, we've got 17 factories. We would just as soon have a target of -- actually we do have a target of 5 to 7. It may take us about 7 years to get to that level, but we are going to do this, we're going to evolve to that. It's not our expectation to announce any massive re-engineering program with significant write-offs. We are being very opportunistic about that shifting machines to lower cost countries and letting retirements occur in those high cost markets, so we don't have to take the charges.

This program started at the, right around the turn of the decade, if I remember right, and today how much of it is Beauty and how much of it's, is Tupperware, is vintage Tupperware?

You mean of the factories?

Yes, of the --

We've got three of the Beauty factories now. We added three more.

Yes, there's three Beauty facilities, one in New Zealand, one in Mexico from the Sara Lee side and then the BeautiControl factory in Dallas.

So those aren't -- but of the expenses you've identified as re-engineering, are any of those in Beauty, or is it mostly all Tupperware?

Part of this year's number in the first quarter had to do with moving out of the BeautiControl facilities, but it's not -- that's not the main thrust of what we would have going forward for sure.

Okay, and just making sure I understand, on the analytical side of the adjustments next year, if you get the land sales like you plan and amortization rolls off, and as I think Rick as said, you're going to be very programmatic on the re-engineering costs, then we should have an analytical deduction next year from whatever your GAAP number is to, to get to an adjusted number, is that a fair expectation?

Yes, that, that could certainly happen. The other thing that we just mentioned here, again, we said it in April as well, is we've got this 11 million pretax gain under a contract to sell our former Belgian facility, which is not part of the Orlando land sales, obviously, and that would be another item that analytically, we would not -- we would [include] analytically.

GAAP, but not the analytical number.

Right.

Okay. Thank you very much. Congratulations, again on the great quarter.

Thanks, Budd.

Moving on to our next question from Mimi Noel from Sidoti and Company.

Hi. I just have one question for Mike. That [96%] target that you all have set for yourselves, should I just think about that for 2008? Because moving beyond that in considering what your debt objectives are, it would seem like you could move beyond that fairly readily.

Yes, the 9 to 10%, what we're saying you should think about in the intermediate term from 2008 forward, we'll see how it goes. We've been successful, obviously, recently and we've been able to raise it just now from 8 to 9 to 9 to 10, so we'll see how that goes going forward, but that's meant to be more than one year expectation.

I see. Perhaps moving to year two or three, assuming that you have the cash flow that you've been able to maintain, even in challenging environments for you, it would not be unreasonable to assume that you could move beyond the 10%?

Well, we talked about looking to reduce debt over time to that 1.5 to 2 times EBITDA range, which would be 200 million or so less than we have today.

Right.

So that's obviously carrying a lot of interest and that would be our average interest rate is a bit over 6.

Okay.

We'll see how that goes.

Okay. I won't hold you to anything. And the only other thing I wanted to mention was to say congratulations to Jane and thank you for all your help.

Thank you, Mimi.

And that's it.

Okay, thank you.

We'll take our next question from Greg Hillman from First Wilshire Securities Management.

Yes, good morning. Yes, I had a question -- well, basically if you could go a little bit deeper on Fuller Mexico's and what's causing the improvement there? But also, Germany, what was causing the improvement there? In particular about Germany, could you talk about the distributor count and any new products that are introduced recently?

Yes, let me do Germany first and then I'll comment, Greg, on Fuller. Firstly, we've commented in the past, we had in the mid 160s number of distributors, fluctuate between 162 and 164. They basically control territories within Germany and, and there are no open distributorship areas in Germany. One of our great opportunities in Germany is to increase penetration within markets so, Greg, for example -- excuse me?

Go ahead.

So for example, if you've got [Stutgardt] and you're the distributor there, what we have included is a new level of management within the distributorship, call it team leader. We piloted this in Italy, and then really it's been the key to success in our southern Africa businesses, and that is like a sub distributorship and so it's an individual who can make in the 40 to 50,000 Euro income area, so basically what you get is a higher level of full-time sales management in the market. That's been very well received. It's only been launched, what, Mike, seven months ago? It was last quarter.

Right.

And it's ahead of our expectation with regard to the number of team leaders. That's one of the things we're doing in Germany. The other things we're doing in Germany aren't flashy. They are fundamentals, and really it's three fold. Number one, exciting and differentiated products. And there's some launches this fall that I can't get ahead of what the sales organization knows right now by disclosing it on this call, but they have done a very good job at rethinking what makes a blockbuster product, what causes a product that gets our sales force out, wanting to date parties and wanting to get people to attend.

Second focus is stronger promotions, and those promotions are aimed in a couple areas. Number one, on sales force activity. Number two, to get consumers to attend parties and number three, on recruiting. They have strengthened all of those in Germany.

Then the third thing that we've done in Germany is continued dynamic and passionate sales management. They have taken all our regionals, put them through an advanced training program and all distributors over the past nine months have been through a refresher training course on new tools and techniques. So I think it's a lot of block and tackling at Germany. So I feel good about -- we've got a, Martin Eckert and the management team, we have a very strong management team.

Backing all that up, Greg, are these three macroeconomics that really -- Angela Merkel, the new Federal Chancellor, is just dynamic. She has restoring confidence, consumer confidence levels are going up. Unemployment levels have now gone below 11%, and that's the first time in four years there, and job creation, particularly, those last two things had to go together. She's taken on the [metal gashelve] shops that where you had 24-hour work weeks, it's been moved to 34 with no additional pay. So I think the future for businesses in Germany looks a lot better than it did even 12 months ago.

Let me turn to the Fuller business. Simply stated, what I think that the, we've got a great management team down there. We've gone to 450,000 in the sales force. They really have done a great job, firstly on the recruiting side of the business, training and development, which is why the sales force continues to grow. They have also done a wonderful job on the merchandising side of the business, led by fragrance and we lead with fragrance. It's an 80% gross margin category. Third thing they have done is dynamic promotions, everything from how they do targeted advertising, which is very low cost, to the sponsorship of the Miss Mexico all throughout the year, to the use of celebrities on product launches. So it isn't just one thing they are doing. Simon Hemus and I go down there every month and review their quarterly plans and we like what we're seeing, very strong management team as well.

Rick, by the way, about Mexico, when is the next convention down there?

Oh, goodness. The next big convention actually isn't there. It's -- the next big convention is in New Orleans. And it's, I think it's October, November.

Okay, and then on the last conference call you talked about, people in Mexico sponsoring people in the United States. When is that going to launch?

That's middle of next year. That process -- you have so many Americans who are of Mexican heritage. They know our Fuller Cosmeticals brand and so we're really going to target the Southwest U.S. for the launch of that and it will be, it will be to bring that, the brands that we will not come across, that company will not be called Fuller in the U.S., it will be called [Ammand Duprey] which is really our premium brand down there, but we're very excited about it and I just saw an update on it. We think it's going to lead to substantial penetration. By the way, on BeautiControl, people ask us, well, wait, isn't that smack into really, really fighting BeautiControl, and, no, BeautiControl sells $10 lipsticks. Our Fuller business sells $3 lipsticks. It competes at a different market segment.

Okay. Thank you.

Thank you, Greg.

Thank you. We'll move on to our next question from John Emerick from Iron Works Capital. Mr. Emerick, your line is open.

James, next?

And there are no further questions in the queue at this time, Mr. Goings.

Okay. Everybody, thank you very much for your time and support. Again, we certainly aren't declaring victory, but it was a great quarter. We are declaring progress, and we see more traction as this company starts to really evolve to this portfolio of direct selling companies, and I hope what we can give you then is not only a more dynamic top and bottom line, but a lot more consistency and a lot more visibility going forward. So the, the transition is well on its way and before, before long, I think what you're going to be seeing is we're mostly a beauty company, but with a very strong Tupperware business as well that has a high ROS. So anyway, thanks for the time again today.

And that does conclude today's presentation. We thank you for joining. Have a wonderful day.