Tupperware Brands Corp (TUP) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to today's Tupperware Brands fourth quarter earnings conference call. Brands fourth quarter earnings conference call. As a reminder, today's call is being recorded. I would now like to turn the conference over to your host, Mr. Rick Goings, Chairman and CEO. Please go head, sir.

Yes, thank you for very much. Good morning to everyone. I'm here with Mike Poteshman, our CFO, and Nikki Decker, our Vice President of Investor Relations. I know everybody knows the drill on forward-looking statements. So I won't spend time reading that. I just landed late last night from a week from Davos. By the way, the pluses on that, it really was nice to see a difference in moods of global CEOs which are varied to what they believe the road ahead is going to look like with the exception of bank CEO's. The other thing I'd say was a real negative is I really started to see a shift in power as the US goes to this level of deficit that more and more of the talk of the power shift will be to China. But more about that later. I do believe that positions us well as a global company, not an American company, to have this to be captioned as the what's going on in the rest of the world. Tupperware brands, I am pleased to say, is we are so much different of a company than we were when we spun off in the mid-90s. Back then, one country, Germany represented a significant percentage of our profits and that was a volatile position to be in.

Today our portfolio has a balance contribution from each of the regions, and many markets within those regions, including more than half our earnings from the developing world. So many have asked me, why do you get so much from the developing markets in the world. I just say, "Do the math". One out of every five people in the world is from India and if you take India, China and Indonesia, that's about half the world's population. So, if there is anything Mike and I think we got wrong after we did that Sara Lee acquisition is our failure to understand how much growth in many of our Tupperware markets there could be even in relationship to established markets and compared with beauty which is a crowded space. As I said before, we expect to grow our emerging markets double digit going forward. It is still early days for us there with regard to market penetration. Since we are a global portfolio, we expect some coughs in the future, and for us to do this, kind of top line growth, we don't need to be hitting on all cylinders. We continue to progress. We weren't hit hitting on all cylinders in this past year. But I was certainly pleased with our growth rate last year and for casting improvement also on the return on sales which would be important factor in our growth and profitability in the future.

By the way, simply stated I think our results validate these strategic transformation that we've been working on at this Company for some time. Reaching our 2009 earnings level, we have now achieved many of our objectives. And our focus for the future is to insure that we maintain this momentum and we that we maximize our growth from our international sales forces.

We continue, by the way to see strength as we saw in this fourth quarter for the 10% increase, but we already saw that in the release. I think it speaks to the strength of our business model. And equally important, the strength of our management teams on the ground. I started the week about ten days ago, with our Swiss Management Team and ended it Sunday night with our Austrian Management Team. And I just continue to be impressed with this multi-local businesses, and the strength of our leadership there. All five of our Tupperware brands segments had top line currency growth in the quarter and our emerging markets were 20%, established we are up 1% in local currency. Overall, the total sales force was up 6% as we ended the quarter. And we look to really continue to build off that sales force size advantage in 2010.

Let me make a few highlights regarding our established markets. I am going to first call your attention to France, which was a real stand out; record breaking sales above 33% in the fourth quarter. That was on top of double digit growth we saw the year before, fourth quarter 2008. There again we have a strong management team in place and they are French. And we are making great use of our, not only contemporized product lines and parties themes, but we have made great strides even with regard to contemporizing the sales force structure. We understand that to attract new young, many single working women, where we had to develop products that really suited her life style. She doesn't bake. She pretty much assembles. And what we've also come out with the new products is the company cook books and we are now proud to continue as we lead (inaudible) seller of cook books in the entire country of France. We are also the largest direct selling company in France. And what's amazing about this is this isn't some startup this year. We are going to celebrate our fiftieth anniversary there. France importantly is serving as a template for other established markets, really to show them that despite their size, despite the number of years they have been in operations, there is always wide space for growth. And by the way, at the top of the list of markets we want to replicate that are Germany where we have already implemented some of those programs, the USA and Japan. Worth noting within our established markets also is Tupperware Austria. Again, I was there the other day. There we increased local currency sales 17% in the quarter. Also, the established market of Australia grew 11%. Again, both of these nearly 50 years, we have been there. And I think the big key is the seasoned management team and the power of our brand.

Let me mention our large German business. It was down just slightly in the quarter after being up a little in the third quarter. I am pleased to see though, if this was News Week Magazine I would have one of those arrows pointing up with regard to our feelings for outlook there. We are pleased to see that in the fourth quarter that we did add to our total sales force size in the quarter. And even throughout this month, January we have almost closed the gap with regard to the sales force size deficiency. That's the number one thing for growing our business.

In Germany, again, many of the same initiatives that we implemented in France are at work there. We are probably a year earlier there or --excuse me in France, than we were Germany but they really include raising the standards of the sales force, changing how we reward recruiting, growing the sales force. But it also adds important marketing issues with regard to targeting the product line and parties to the new woman in Germany.

In our established markets, North America, their local currency sales in Tupperware US and Canada were down just 1% though. We, I must say, we stumbled in October with that. So I put this as entirely self inflected with a marketing and promotional program that really didn't provide the results we had planned or matched the most dynamic growing segment of our sales force, the Hispanics. So, we always feel bad when we see a problem, a problem of our own making. Somebody once said to me, you don't drown when you fall in the water, you drown if you stay there. They've got that back on track, however starting the quarter with a down October, and October is a very strong month to set the tone for momentum, it really impacted our sales force size. The good news is there were no big changes we need to make in the US business. A couple of the specific things we are working on this market to bring us better results are really getting that business to much more weekly activity drivers and better contact with the sales force. We've really seen this approach working within segments of our US business. And, particularly, La Bell Providence, the Quebec area of Canada.

Regarding BeautiControl, while still down, I am pleased to announce that last month, we finally launched a new compensation program we have been working on for two years. And as a footnote here, frankly this took so much longer than it should have for us. But finally it's been implemented and what it does, it better focuses the sales force on recruiting and building teams of sellers. It also provides rewards for those to help them develop into leaders, and for those entering leadership levels of the business. Feedback has been good. I think we are on the right track there. We got a solid management team, and frankly, while it is only February, I will be sorely disappointed if we don't see modest sales growth in BeautiControl this year. This is a solid business.

Now, let me turn to emerging markets where we continue to see strong momentum. The emerging markets were up 20% in local,-- in local currency, and they're staying around half sales. This quarter was 51%. In addition to how well we run our businesses, I really believe the success is driven by the power of again, incredible management teams in each of these markets that we spend so much time developing. The strong earning opportunity, and also the advantages our channel of distribution offers and those markets where there's a less developed retail infrastructure. And our emerging markets of Europe, Africa and Middle East we saw another strong double digit growth in markets like Russia, South Africa, Turkey. Our business in South Africa grew the sales force significantly in the quarter. And the productivity also increased as consumers responded to great product offerings. Also, a little extra sunshine, we didn't expect but it is nice to see, our Avroy Schlain business, that we have been working on turning around, we acquired that from Sarah Lee, in South Africa. It also had double digit sales increase in the quarter. So the worm has turned and it's a nice trend change there.

In Russia, our brand building efforts continue to pay off, I am going to be going there this next month. We were awarded by the way, the countries coveted Product of the Year award. You know what's great about seeing in that too is we don't advertise. We just were named in China, as a megabrand. Just named in India as a megabrand, and we don't advertise. So, I say bravo to the public relations that our Russian team are doing.

There in Russia too, we increased our total in average active sales force double digits percentages and we had an increase in our sales force productivity as well. By the way a side bar note, we felt a little blip for about six weeks in the second quarter in Russia. Their not on the Euro and it was in the impact on that with some of the -- in the Baltic as well, some of these currencies. And again, it speaks to the flexibility of our business model, to navigate through surprises in the marketplace, and get it back on track fairly quickly. So, a great year for Russia.

Our Asia Pacific emerging markets were up 27% in local currency, and we had double digit increases, most of these businesses. China was an exception. Importantly though in China, we were able to return to year-over-year advantage in a number of preferred customers that we have there. These are the customers who almost go through membership like a Sam's club here, to our 2,800 outlets. We closed 2009 with about 2,800. We lost about 100 outlets versus 2008. But it was a good learning year for us in China. And most of the issues in China really started the beginning of year as a result of weaker consumer orders from the other parts of the world to China. We are seeing that stabilize though. In Indonesia, what a story. I am leaving next week for both Sorjabia and Jakarta. An incredible woman (inaudible) runs our company there. We have been there 19 years. We are the largest direct sales company there. We were up an astounding 87% in the quarter. And almost double the business in 2009 with a 95% increase in the sales force. Again our management team there has successfully focused on the strategy, and set clear expectations on managers, distributors, and career development. I might say as a side bar there. Indonesia is the largest Muslin population in the world. Our President there is a woman, and there we are beginning to see probably most effectively this thing that some writers are talking about and I heard it at Jabos, called the Tupperware Effect. That when you go in rather than air lift aid into an area, when you go in, you recruit a woman, you micro finance her, you provide her with a mentor, a manager, and then you show her step by step. Provide her the leadership guidance and direction. Then she takes success, she begins to earn money. As she earns money she gets confidence and confidence equals influence. And such has a halo effect with our family and with her children. We even talked about in a number of Jabo sessions. How do we do this in Sub Sahara Africa with many programs to try to rebuild infrastructures or build for the first time. Infrastructures of places but without outside and area lift programs. So there really is something to this Tupperware Effect.

Finally let me highlight the Tupperware business and beauty others. They performed well in the quarter. We had another strong quarter in Brazil, local currency sales up, almost 60% this quarter, mostly due to higher volume. And we have got a lot of room to grow geographically in Brazil as well. We are about a tenth the size of Avon.

Our Tupperware Venezuela business had local currency sales up about 35%. A good increase, but to a large degree driven by you know what's going on with pricing in the market. Mike will comment more in detail with Venezuela and what's going on currency there. But I want to highlight the fact that we took a long time ago proactive action in that market. And what we're really doing, we're managing our business in US dollars there. And we have two things we are focusing on. We want to maintain the integrity and the focus and support to all our employees and our associates there who are trying to make a living in this rapidly declining economy. And at the same time, how we do it and make profits at Tupperware. So, it takes a little more time, but we have learned how to navigate through such complex situations.

Looking over this last decade we believe there's a new and needed change toward risk and leverage. By the way, I heard an incredible presentation from our controllers here I am looking at is Canadian, but the Canadian Prime Minister, they by the way if you follow what's happened this last year, haven't had a single bank failure, had no subprime issues. It is like a different country compared to now below the, the border here. I think it is a living example of there's a different attitude in the world now with regard to risk and leverage. And I want to comment on that with regard to us as a public company. We don't see a fundamental change in the way we are going to manage our Company. We are going to continue to work toward focusing our resources on growth, improved profitability, and cash flow. We also believe that the heavy lifting on contemporizing on business models and products is largely complete. There's always going to be work to do. We continue to try to get 25% of our sales from new products every single year. We continue to try to contemporize the party so it's new and fresh, and it is something people want to go to, and continue the right compensation program. However with regard to risks, we believe now that you've got these baby boomers out there who have had their net worth collapsing, we believe in strong cash flow. We will continue to reduce our debt levels, and to have strong and improving return on sales. You'll note that in 2009 we raised our dividend for the first time since we spun our Company off. Net signals our confident in our ability to throw off those kinds of money. We also accelerated our share repurchase and those of you who we met with, you know that the primary reason for share repurchase is really to mitigate the impact of dilution. We believe that companies like Tupperware Brands with multiple platforms and multiple markets now it is not just Germany, now it is markets around the world. Now it is many different currencies, many different Governments, and we are learning how to really navigate through all of those. And it would blend not only merging but established. One of the things that we are most excited about right now is in our established markets of the world looking to what's happened in Australia and looking what's happening in France. We are getting a lot of our markets where we've been 35, 40, 45 years, having an incredible renewed optimism on we can do that too. I will come back to answer questions. Mike, I'll turn it over to you.

Thank you Rick. First, to give a bit more color to where we exceeded our fourth quarter guidance with our actual results. On the sales line, the two point higher local currency increase at 10% over last year versus 8% at the high end of our guidance come mainly in Europe, in France and South Africa where we had larger sales forces we that activated well with our party theme (inaudible) of France and with our merchandising in both markets. On EPS, the high end of the guidance range (inaudible) was $1.03 with the upside to the $1.22 we actually achieved coming from the contribution margin on the sales upside, along with incremental benefits from better working capital management in Europe, leading to less inventory write offs and bad debt expenses. Also in line with our release a couple of weeks ago on Venezuela we recorded only in the quarter only $3.5 million in foreign exchange costs, and not the $8 million hit we had included in our outlook to convert cash at the parallel rate. This difference contributed $0.05 to the upside versus our guidance. There was a $0.02 offset from a higher than foreseen tax rate, where in a full year basis we came in at 23.5%, versus our previous expectation of 23% for the full year.

Versus last year as outlined in our release and by Rick, we increased sales in local currency in all five of our segments with double digit increases in Europe, Asia Pacific and beauty other bringing us up to 10% in total which together with the 10 point tail wind from better foreign exchange rate versus last year brought us in and up 20% over 2008 in dollars. On fourth quarter earnings per share excluding items we increased by $0.32 over 2008 to $1.22, also with about half of the increase or $0.15 coming from stronger foreign exchange rates. In addition, we improved our segment profit return on sales excluding items in all five of our segments by more than 3.5 points overall to 20.6%. The improvement by our segments led to our almost 4 point improvement in pretax return on sales in the quarter excluding items to 16.7% this year, from 12.8% last year. On this key ratio for the full year, we improved to 12.1% or 2.5 points from 9.6% last year. Our higher tax rate in the quarter at 25% this year excluding items versus 15.5% last year, hurt our year-over-year comparison in the quarter by $0.15. We had a great quarter, and year with our balance sheet and cash flow. Along with our higher net income than 2008, our inflow from hedging this year versus the outflow from last year, our inflow from working capital even with our much higher fourth quarter sales led to our significant improvement in cash flow from operating activities net of investing activities of $224 million this year versus $92 million last year. In terms of what we did with that cash for the full year, we reduced our term loans outstanding by $140 million, paid $55 million of dividends, and repurchased $38 million worth of stocks beyond proceeds received from option exercises. Including repurchases using those proceeds, we bought back $77 million worth of shares in 2009, of which $50.6 million was in the fourth quarter. In line with what we said in our earning release about our Board increasing our repurchasing authorization from $150 million to $350 million and extending this term until early 2015 ,we expect to continue repurchase shares with option proceeds and cash generated by the business to keep our outstanding shares about even over this time frame with the approximately 63 million shares we had outstanding in 2009. At the same time, with our cash flow generation, we are looking to -- continue to reduce our debt to total capital ratio until we get below 30%, which we currently expect to happen in 2011. This would bring our debt to EBITA leverage below one time. Going forward, we'll also look at the possibility of raising our dividend pay out ratio as a percentage of EPS excluding items. Right now on an annual basis we are at 32% in terms of a pay out.

Turning to our outlook in the first quarter as you saw in yesterday's release, we are calling for a local currency sales increase of 8% to 10% which together with the 9% bump in better exchange rate brings the outlook in dollars to an increase over 2009 in the quarter of 17% to 19%. The local currency increase is above our longer term guidance range of plus 6% to 8%. This range reflects our recent trend where we were up 10% in local currency in the fourth quarter of 2009 and 9% in the third. On earnings, our outlook for diluted earnings per share excluding items is for the first quarter of 2010 to come in within the range of $0.55 to $0.60. This compares to $0.45 in the first quarter of 2009 and includes a 13% to 22% increase in local currency in pretax profit, a higher tax rate of 25% this year versus 22% last year, and a number of diluted shares consistent with how we ended 2009, but higher than the first quarter by about 3%. The higher tax rate and the higher number of shares hurts to comparison with 2009 by $0.02 each. Going the other way, better exchange rates have a positive $0.07 impact on the comparison.

For full year, our sales outlook is for a 6% to 8% increase in local currency with a 1% benefit from better exchange rates bringing dollar outlook to up 7% to 9%. It is worth noting here that the FX comparison while giving us a 1% benefit overall is net of a negative 2% impact from using the parallel rate in Venezuela this year for quarter results versus the official rate we used last year. There is no change in guidance we gave last October for the 2010 increase in local currency. This outlook includes local currency increases of 3% to 5% in Europe, and Tupperware North America, 10% to 12% in Asian Pacific and Beauty Other and 5% to 7% in Beauty North America.

Our diluted earnings per share outlook for the full year excluding items is $3.41 to $3.51. At the high end this guidance versus last year, includes an increase in line with the higher local currency sales, along with an improvement in pretax return on sales to 12.9%. Up to close to 1% increase in ROS, about 4/10 of a point is from not having in 2010, the $8.4 million of transactions in foreign exchange we had for Venezuela to convert cash generated by the business (inaudible) translates balance sheet of the parallel rates. This favorable impact on the comparison is offset by negative translation impact by using the parallel rate in 2010 versus the official rate in 2009 to report earnings in Venezuela. The overall benefit in our outlook on the full year 2010 versus 2009 from better foreign exchange rates is $0.05 versus $0.27 positive in our 2010 guidance given in October 2009, and $0.10 of the reduction is from our now using the parallel rate in Venezuela. The remainder primarily reflects the weakening since last October of the Euro versus the US dollar. In comparing our current 2010 guidance range with last October's, you can think about it as having in essence gone up by what we beat the 2009 guidance less weaker foreign currencies leaving aside by Venezuela. We beat our October guidance in 2009 by $0.19, and currency other expense has come down $0.12 while we are raising our 2010 guidance by $0.08 versus by what we said in October. Looking at our returns on sales by segment versus full year 2009, our outlook includes small improvements in Europe and Asia Pacific, decreases of 0.5 to 1 point in both the North American segments reflecting investments to grow and activate the sales forces and an increase of about 3 percentage points in Beauty Other to close to 10% as we benefit from leveraging our higher volume and continuing to work on the value change in several of the businesses. Our outlook is for unallocated corporate expenses of about $50 million for full year 2010 which is about in line with 2009 actual, and for net interest expense of $27 million which is a small reduction given our lower debt balance, but reflecting our less than 1% marginal interest rate. We continue to foresee a 25% income tax rate excluding items (inaudible) versus 23 .5% of 2009 actual. A couple of words now about the flow of our results by quarter, on sales given the relatively slower start we had in 2009 given the externals where we were up in 1% on local currency on sales in the first quarter and 4% in the second, before getting the plus 9% in the third and 10% in the fourth quarter of 2009, we concluded in our outlook relatively stronger growth early in the year. This is reflected in our 8% to 10% local currency sales growth forecast for the first quarter of 2010, versus our full year outlook for a 6% to 8% in local currency. On earnings contract, we had $8.4 million of foreign exchange transaction expense for Venezuela last year, that will not recur in the second half. And our higher full year tax rate in 2010 versus 2009 is hitting us mainly in the first half as of the impact of having more diluted shares as the stock price rose sharply in the back half of 2009. I noted the $0.02 impact each of these is having on our first quarter comparison with last year. And these items are reducing our first quarter EPS growth by close to 10%. I would also like to give you an update on resin. As expected, we had an estimated $7 million benefit in cost of sales from lower prices, in looking at the fourth quarter of 2009 versus 2008. In this class, the full year benefited and at the the previous outlook of $15 million. Our updated guidance for the full year impact of resin prices on the cost of sales comparison for 2010 versus 2009 is negative $7 million versus our previous outlook of negative $4 million. From a quarterly flow perspective we expect to still have a benefit year over year in the first quarter of 2010 and then expect the comparison to be a negative for the remainder of the year. Our 2010 outlook for cash flow from operating activities net of investing activities is that it will generate $200 million to $210 million. And this includes $60 million of capital spending. And now with that, we're going to turn the call over for questions.

Thank you, sir. (Operator Instructions). With we will take our first question from Olivia Tong from Banc of America.

Hi. Good morning thanks. How are you?

Fine. Thank you.

Good. First question on the margin expansion. You mentioned a couple of things with fixed costs, promotional efficiencies, obviously raw materials. That I get, but what are you doing differently in promotions, to get more leverage out of the spend that you are doing?

I will answer part A of that and Mike will get more granular because on it he knows more about it than me. But, from a strategic standpoint, let me tell you what has happened. So much of this investment usually has to be in many of our markets on a promotional investment on average 18% world wide. Remember when when we had to dial up the level in Germany, as a result of ever since the re-unification, we had to spend much more on recruiting, much more then on getting them active and sending them to go out. What we are now starting to see in Germany is a good example of it. We had margin expansion this last year pause we were able to pull back on that promotional spending. And we keep looking at that, in every single market on what do you need to spend it on.

Yes, exactly. Some of these moves we've made in established markets to get better leverage has perfected the pay for performance that we've done in terms of what do you get paid when you recruit somebody, what does that recruit need to do, how do we find the things for our leadership levels and in our sales force. That's something we are working on over time as well. So we mentioned in terms of the comparison in the first quarter, we had the leverage of the resin benefit $7 million in the quarter which is not something that is necessarily (inaudible) in more sales, but it's in the numbers. Last year we had the Brazil continue to operate. That cost us a couple million dollars and that didn't recur. And so as we have straighten out some of these things in the segment that we had lower or less due to the other in the place where we started from the lowest, we are able to get those sorted out and we do see the benefits coming through.

And we always organically target at the country level or the segment level of 15% or less. So you will see markets,like for example our Beauty Control business right now operating below a 10%. But we have are making investment. Their moving in the right direction, that will in fact play out for us because that's our target level as the absolute minimum, in markets. What I'm happy to say is we have many market that is do north of 20%. A great lesson I learned in the 1990's in Germany, though, because we basically have one trick pony, supporting the Company at that time. We let it get too high, in Germany up to the 40% level, and which meant we went reinvesting in Germany. But frankly, we weren't getting it from anywhere else. We learned it the price to pay. So, I see it right now with the discipline in our fuller business, we will not in our fuller business in Mexico let it go over 22%. When it's heading to 23, we find it, where do you invest in it so that they can strengthen and quality, productivity, brand et cetera. So, that's where the delicate balance.

I guess my question is why on margins? Why is 50 basis point improvement year over year at the rate number? You just did 250 basis points. I am assuming you've probably thought that you did the right level investment for this year. Why is it that you continue to invest but still won't promise a margin greater than the 50 basis points at this point?

Yes, Olivia, the high end, the ROS improvement is 800 or 900 basis points. So we are a little bit higher including not having this Venezuela charge. When we look at what we have investing in. It is in some of the markets things are going well. We are fast growing but newer we do some incremental brand building type of investments so that we can get the word out there more about our brand. And get more of a pull through our sales force, as we get to over time then get to a higher price point products. In term of sales, we continue to penetrate there. And so there's some of those kinds of things on the call it the offensive end. And then in places where things aren't going as well as we would like, we have some to better develop the sales force and get them active. And that's why we (inaudible) about for 2010 guidance, that our ROS in the North American segments could be lower, than it was in 2009. That's reflecting things like what we are doing as we put in this new compensation plan, or get the traction of the new compensation plan, Beauty Control. And those types of things.

Got it. And then on Beauty Control, actually, how should we be thinking about this business next year? I know you mentioned you think that you will grow the top line. But sales force actually, decelerated or -- it was an easier comp in the declines accelerated. But it looks like your margins got better. It is a little tough to get your arms around what to expect going forward on that business?

Yes I agree with you, too. But job one, what happened at Beauty Control, they allowed the sales force to become too much low productive hobbiest in the business. So, really they had to put a stick in ground and say hey we are going to have an appropriate sales kit. We do not want to recruit buyer, we want to recruit sellers. And how that starts to then playoff is early on, slower recruiting is better recruiting. And then you start to productivity increases on it. They didn't throw a lot of money in recruiting at programs where not real recruits this last year. Olivia, we'll be disappointed if you don't see top line growth at Beauty Control year, and expansion of our margins there.

Got it. Then if I can switch over to Europe, I would have my commentary correct, I think Mike used a plus 3% to 5% currency sales growth for 2010. That's a deceleration (inaudible) obviously a pretty tough 2009. And France sounds like it is doing well. Emerging markets are clearly performing quite strongly. And then Germany you mentioned the sales force is starting to right size. So why deceleration in 2010 then?

There are two things that I would add. First we have a great, very strong leadership there with Glenn Drake as the group President. And Glenn and I spent a lot of time looking over the horizon, where this going. You cannot count on this level of growth that we are seeing in some of these markets, as they continue to lap on an accelerated basis. And there I talk about the markets, like France, the markets like Russia, turkey, sub Sahara Africa. I mean I don't know if we have tripled our business Mike in the last three years or merely doubled it but those are the kind of things that I think for us managing our business is do you want to see those happen? Do you want to keep supporting it? Fueling those kind of things, yes but you just can't count on those kinds of levels. And that causes you to sober some of your expectations with regard to, those are what I would call hypermarkets. They're just doing great, and there's more room to grow there, but perhaps not at that level.

And Olivia, clearly that growth is lower particularly than in the fourth quarter of October currency which was fantastic. And that's what I would say as well is we have, when you look at the share relatively less the merging market presence in Europe that in some of the other segments. And so, I mean in more time until those are greater share if that happens if that moderates (inaudible) a bit. I think it is also fair to say when you look at your guidance and when we are up 8% to 10%, expect to be up 8% to 10% in the first quarter versus 6% to 8% for the year. Some of that is different coming from Europe and we are, I think higher in the first quarter than we are later in the year. So, we will see how it goes. And to extent we are able to continue on the really fast track and places that have been going well and/or see the kind of turn that we want to have to Germany, then obviously that would come through. If we are able to do that.

We've been working very hard (inaudible) on a number of markets I didn't talk about and they're small but together they all matter. The Netherlands, the Belgiums, Spain, Portugal, Italy. Italy which was a drag and a bleeder in the past. We've been flat line for the last five years in Italy. The Balkins has had it's ups and downs. We're not pleased with our Hungarian business, but while it is now that is starting to turn. And we haven't got as much leverage for the time we have been there in Poland which is a large population, base. So, it's a portfolio, and it is many different countries. And they're multilocal businesses at the end of the day. And what we don't want is our management team establishing objectives that they don't reach. We inculture the beliefs in making our numbers. So, I have a high level of confidence. Let's put it at 80% at the projections we have given for Europe, Africa Middle East. Could they blow by that? Yes, Could they have a market or two, major ones blow up? Yes. And when you put all of that together it brings us at this range we are talking about.

Got it. Thanks bunch. Appreciate it.

We will take your next question from Doug Lane from Jefferies.

Good morning everybody.

Good morning.

Rick, you just got back from Europe and mentioned you called down the currency impact largely due to the weakening of the Euro versus the dollar. What's the mood over there about the Euro and some of the debt issues?

It is interesting, (inaudible) I was with him, and he spoke, and Angela Merkel wasn't there. And, the two major economies over there are Germany, and France. There is more talk about confidence in the Euro than there is the US. I mean I have heard in certain meetings, we know the debockle that is going on in Greece right now because there has been no controls on budget, and I heard that more than -- and I'm A=political. Not Republican or democrat. I'm a European, on this. And more than one meeting, that they're talking about that it is a big mistake to have a President who's never had a budget, you always seem to do better in the US when you've had someone who was a governor before who actually had a budget. So I mean I heard if you -- if you left the rooms I were in for seven day, you would sit there and shirk the dollar.

That's interesting. Getting back to your business, China is a big potential market but it continues to be weak. You said it was down low double digits in the quarter. Can you give us an update there and what you think China can do in 2010.

There I think the first issue for us is a macro issue. There with regard to I mentioned during the first quarter last year, when our group President there mentioned to me he was in Shanghai, and he has never seen a time when the whole Chinese fleet seem to be in the harbor empty at one time. It really had a trickle down effect. And there was fear there and China that keeping those factories running. So, people have a different attitude to debt. You saw a tightening of spending early on. We saw it get better, as the year went on. And we also in the previous year in 2008, we had a lot of distributors, we launched a cook ware line and they really stocked up on it. Well, timing couldn't have been worse for a high price item like cook ware to destock in an environment when consumer were worried about their income. So, it's starting to clear out. Their attitude over there is very steady. And their doing a much more I believe responsible and what I would call stimulus investment in China for the long view. So, I am an investor in China. I would hope one thing to look for us we have to have more outward opening. You cannot have when there's pressure on consumer disposable income, you can't drop 100 outlets in what we have 2,800? And have consumers pulling back on spending and expect to have a sales increase. So, our guys there, so what they're doing is working at opening (inaudible) secondly. Better price or excuse me, product propositions, and then thirdly, much more proactive. When I lived and worked in Hong Kong you used to see in Malaysia and Singapore, the old Singer sewing machine company they would have retail outlets that looked like our outlets in China, but that isn't where the bulk of sales came from. They would typically have 10 to 20 sales people who worked out of those outlets. We haven't been proactive with that in the past, but we are now going in that direction. So I feel very good. I mean, for us to be named a megabrand in China, without advertising, is pretty impressive.

I might add there have been a number of companies in China in direct sales who have made huge investments. I am not going to name names but they have yet to even have to pay taxes there because they haven't recovered their investment. We pay taxes in China because I think our guys went in with a better business model.

OK. Just lastly, in Venezuela, we talked about it a lot from a currency standpoint and I get the mass there, but can you talk about how your operations are being impacted. We talk about blackouts and talking about people who are taking price there. How is global market there going to change from 2010 from 2009?

One of the things, Doug, helpful to us ask because we are a global company and as I look around the table, every one of us we all carry different passports and have lived through this in various markets. We had a meeting on this several weeks ago, the gloom and doom way to look at what happens if you close the country down like this is Cuba. And what you have if you notice there's no foreign investment the former Soviet Union. The late 60s cars, that's what starts to happen, but what happens right before that is the big money flees. Last year there was a mass exodus of wealthy Venezuelans and they're living in Miami right now. They may have at a parallel rate, taken a hair cut of 55, 60%, but if you are wealthy in Venezuela you are still wealthy but you are living in Miami. So what happens is the trickle down effect of this the entrepreneurs stop being entrepreneurs. and start being government workers. What do we sit there and do in this kind of environment? Firstly, you try to source every one of the product. You understand what's going on internally. People still need to eat. They still need an enterprise. We try to find ways so source raw materials in that market. It' happens to be good that they're a petrochemical producer. It is very hard to get new molding machines in because it is hard to get them out then, and they're -- so you almost act like it is the old Berlin where there's a wall around it. And how do I operate in this kind of environment? I'm going to go there in the next couple of month. But you keep putting your emphasis on growing the sales force. It is a tougher environment, but it is the environment she knows. Get her the right kind of products. We will slow down with regard to new product, introduction, be more sensitive to price points there. Mike, would you add anything?

I think when you wrap it all together Doug, we have been running that business in dollars from a mentality point of view in terms of what Rick was saying of how we (inaudible). So we have a good value chain locally and we will look to continue to operate under it. We will see how it goes. It's not a big part of our numbers. In our release we talked about a couple of weeks ago having $60 million sales or $12 million profit, and that was the old exchange rate. That's where something like 65% less now. So it is a nice business for us. Our people there do a great job, and we want to continue to support them and run the business well, but that's how it fits in with the context of the company.

Doug, side bar on that just as a, I get it, that is, a bit of an economic historical tutorial, one of the groups, there were about a dozen, most were heads of state, this discussion. We discussed Venezuela, very clearly, and of the US depression which is what everyone was concerned with depression here but the Germans were worried about going back to the hyper-inflation of it. But the general belief is that in countries go to protectionism, which is what Chavez has done, that took a depression that would have been a three year depression, and localized. It made it a nine year depression, and it shared it with the rest of the world. And there is a sensitivity on heads of states, let's not let this happen anywhere else. Because, see, what you do is what you get in Cuba and Venezuela a market dumb down.

Thank you.

We will take our next question from Dara Mohsenian from Morgan Stanley.

Morning guys.

That's the first time I have ever heard anybody pronounce your name right.

Yes. Every once in a while it happens.

It happens.

Mike, I just want to get more granular on the margin side in the quarter, and you had very strong DS&A leverage. And yet in the Press Release you talked about investing pipe brand building and sales enhancing investments. I want to see if with e can get a break down on what drove the SG&A leverage, how much of was pulling back and how much you put behind the business?

Well, if we look at it by segment we were able to spend more effectively on promotions in Beauty in North America. So that was part of the upside versus last year. There's an effect depending on where we're getting sales growth and so on. If we are selling to the sales force and paying commission directly as opposed to our distributors, than that hits our GS&A line and we have done relatively less growth than our North American business (inaudible) basis. So that shows the numbers as well. I mentioned that we were able to have less bad debt expense in Europe. That's not huge effect in terms of helping the ROS in Europe (inaudible) GS&A line as well. So, that was really, if you look at the couple of points that we were better some of the bigger drivers.

Okay and are those points more sustainable going forward, or was it more isolated to Q4?

I think that the impacts in the numbers are in and of itself, probably sustainable. Not that they would continue to drive year-over-year comparison differences or benefits. I think when we talk overall or longer term about what we would be investing in 2010, that's what we are talking about brand building and some of the fast growing emerging markets where frankly we already have a good ROS but we have talked before about having an average for the whole company contribution margin of 40%, that's if we are running status quo. And that's where we are speaking to incrementally giving some brand building and it is not a 40% drop through in the guidance.

Okay. And then, Rick you increased your share repurchase program but it sounds like it is mainly just designed to offset option creed. So I guess what I am wondering is if you truly believe your long-term guidance frankly your stock would seem like a good investment here. So why not get more aggressive especially with the strong balance sheet?

Get more aggressive with the share repurchase?

Correct.

That's from a number of our big investors. They said, we had rather you give us money and let us pick the stocks.

Okay.

We were 63 million shares. You don't want to get too thinly traded. I would rather us, see us get this debt to total cap down, to a level that most think is ridiculously low, and then have the high class problem of how often do you raise dividends?

Okay. And then last one Rick, the active sales force growth decelerated a bit in the quarter. Can you give us clarity on if you think that will impact forward sales trends and some perspective there.

That's noise really under, in some individual markets. Mike you have looked at that, haven't you, that --

Yes. Dara, We don't think there's a problem. The biggest discrepancy if you want to characterize it like that, is in Beauty other, well into double digits but not on the active sales force. And there's a few things we have talked about before. Some of them we haven't. But in Argentina we raised our minimum order size and we have sales force there, and (inaudible) That kind of prepare you, if that's the right thing to do and it works well for us, in of in itself. We stopped running the Beauty business in Brazil in the fourth quarter of last year, and that business is not performing well. So we weren't getting leverage in terms of sales per active sales force members. So that was an impact there. And when we look at the overall segment, we are seeing more of a shift toward Brazil, and Tupperware Venezuela which have a higher average order size on the Tupperware side of the business opposed to beauty side. So just that mix shift is cause us to have relatively less active sellers. The price increases in Venezuela because the question there. Those are the kind of things those are things that indicate to us that there's any problem with how we are running the business, and what we can expect going forward.

Okay. That's very helpful. Thanks.

We will take our next question from Mimi Noel from Sidoti and Company.

Hi. Thanks. Just two quick questions from me. Rick. generally speaking, I was looking for a little color on the average ticket because as we came out of 2009, a lot of focus is on 2010 and having a more sure macro economic back drop. And there was concern that the sales force size might actually shrink. We saw the opposite in the fourth quarter. And I am wondering if the proper way to think about the sales force size versus the average ticket is more secular and more influenced by what's going on at Tupperware rather than the economic backdrop?

It is true. We have a first a -- one of the reasons that it is hard to give you anything that is substance on a global level, is if you take an average party if Russia, it will be about eight women but the average party is $800 US. If you do the same pert in Belgium, it is $850. And also the kind of products are different. So it is within country, we look at what is the average party size. What's the average unit. I am finding the more effective job that we do on differetiating products, the more we can midegate the impact of what's going on in the macro economic environment. For example, a hot new product in France right now called the Micro steamer it is $150. Well, they have economic challenges in France, but this is a product that is so exciting. So, but our guys there on the ground really pay attention to that.

Okay. Thank you. The last question I had perhaps it is too early to have kicking this one around. But looks like greater emphasis on cracking down on overseas tax breaks. Could that affect you in anyway?

Well first thing, I would say with we are right now a US company, and there was a wonderful presentation by the head of Barclays there that he said, the biggest positive impact in the last five years to the UK economy was the US Congress passing Sarbanes-Oxley. And they wanted to ignite Sabanes-Oxley because it let to so many businesses abandoning the US. I am quite frank with regards to this. Mike, what's our number here in the US with regard to earnings as a percent of all.

We are over 90% outside the US.

Outside the US. So we are not the least bit we are already looked into if this administration was punitive in regards to tax implications. as a company. That's as much as I can say.

That's helpful. Thanks for the candor.

We will move on to our next question from Jason Gere from RBC Capital Market.

Good morning. Just a couple of questions, one clarification. You talk about FX, the $0.05 versus the $0.27 prior, what (inaudible) are you using for the current rates for the Euro right now. . Just wondering if you are using current rates or are you assuming that the

$1.39 at the Euro rate? Yes, just under $1.40 with the current rate, Jason. We don't try to give our perspective on how that's going to move.

Okay. Great. And then just secondly, going on to Beauty North America looking at the reps. And I know the active reps declined but at the same (inaudible)you were more profitable with your margins. I was just wondering if you can you talk about are you being more constrictive with when you look at productivity, are you being more constrictive with the reps at this point. How do you measure that going forward to make sure you get the right productive?

It wasn't too much restrictive but that's right approach. It was a question of established standards so that if somebody came in and wanted to buy a kit. We don't do that, that doesn't mean to increase the kit price, it is, but then you back her up with here is what a good kit is. Here is what training is and the mentoring you get. What you generally get then is more productivity, and the value chain improves.

Okay. And then, I guess just one last question. What is your outlook for the Tupperware (inaudible) margins in 2010, (inaudible) but you did a fantastic 18% in this fourth quarter. So I was wondering what your outlook is going forward?

An outlook, Jason we said we would probably be down a little bit. And it is too early to get our sales force back to growth.

Down versus the fourth quarter or down year-over-year?

Down year-over-year.

Ok, Thank you.

Thank you, Jason.

We will take our next question from John Faucher from JPMorgan.

Good morning. Thank you. Two quick questions, there has been a little volatility and you discussed it today. As we look out over 2010, realizing the years a little back, first half loaded from organic revenue guidance standpoint. How should we view the incremental margins in terms of looking at that coming through? And is there a rule of thumb you have there and secondly a quick question, you have talked about the counter cyclicalty of demand on the core tupperware, in terms of women who are trying to save money on tough economic times. How does that play out going forward, given the fact you guys seem a little more positive in terms of looking at the economy? Thanks.

Mike you can handle the first part.

Sure. We do have a kind of a rule of thumb or an average that we have a contribution margin from our business of about 40%. So that would be, for the next dollar without having to add a lot of capacity or do something else, unusual, when we look at how we have done our 2010 guidance, where we talked about .5 point improvement in pretax ROS, in addition to the benefit not having the Venezuela $8.4 million. That's assuming we would with be investing something in the $25 million range, in terms of, of profitability. When you just do the math based on the numbers we have given. So that is for these offensive types of investments, for brand building, and other initiatives and then also recognizing the places we are not doing well as we would like. We need to invest to get our sale force back where we want it both in term of the total numbers and activation. That's how we think about it over time and that how it looks like in our 2010 guidance.

Great. And then the counter cyclicality.

Yes, John on that again has some bright people who have said the counter cyclicality that we do better when there's higher unemployment, is overblown. We had rather the economies be better because you have to throw so many of your resources when it is a tough economic environment at getting people active, at getting people trained. And it is harder to get people to parties, to your party gifts have to be more incentives to buy. You really can more effectively in your value chain, spend the money better when there's a strengthened economic environment. You will go to more up scale kind of products, and You will go to more up scale kind of products, and it isn't so much push as it is rewarding for them to low go to higher levels of purchases at a party for example. I happen to believe it is for direct selling, it is easier to equate of this 18% promotional dollars whether the promotion works or not during a better economic environment rather than a negative economic environment. Our guys are better at doing that.

Ok. So taking the two questions together. It sounds as though you think actually, the incremental margins theoretically as the economy gets better should move up. The 40% number could move higher over the next couple of years, as you get this little bit of tail wind.

We have clearly have said when it is all said and done if you put it through the press, John, we have said, expect us to grow on our pretax operating margins, year after year after year. And what we say, half a point here. And that's one of the areas it comes from.

Great. Thank you very much: guys .

There's another interesting interesting conversations about, but many of the public accounting firms we just cleared with PWC at the end of a quarter or year quality of earnings, we kind of do a thing at the end of the quarter that would be more quality or energy expelled at the end of a quarter. And what I mean by that is if you end a year or quarter and you just absolutely luck out, that our group President just had to into the business to get it going threw your resources to make numbers. I don't like to run a company that way because then what happens is you've got a depleted sales management team, everybody wants to take a break. I'm out of gas. And then you pay the price, at the beginning of the next time sector for it. One of the things we -- we never talk about it in our earnings release. I have seen this very nice pattern this year, year before et cetera, that more of our (inaudible) are crossing the finish line not having to just do that final kick of everything to get across which means they finished in December, and they have a good January. I am looking at Europe's numbers and -- a great fourth quarter. And yet I saw them pounded by record snows and where there was cancellation rates of 60% on parties, and markets like Germany, excuse me, France which has been such a heavy leader there, and I saw Glenn and the team navigate through January. They had the energy to do it because they weren't wiped out. So, and just more of anecdotal comment but very important to the substance of our business.

Great. Thanks.

We will take our next question from Andrew Sawyer from Goldman Sachs.

Thanks, guys. I had a quick one, with Beauty Control North America, seeming to kind of recover at this point, or you expect it to recover in 2010, you speak about having a portfolio that covers areas, if you had to handicap for 2010 or 2011. Are there areas you are more anxious at the margin and it could be future, future drags on the portfolio?

Andrew I would tell you in this year, as we entered 2010, the number of markets that I was concerned with that I would call red markets out there has shrunk, and there's not -- where we haven't implemented new management teams on the ground. Or there -- differentiated kind of strategies. If I have one market in the world I am sitting there, that I haven't seen it turn yet and I think we are doing the right things, it is Japan. It is hard to make things happen fast in Japan. I don't know what you would add to that, Mike but that would have my list.

I think that's right, and Andrew we always got markets moving in both directions. Lately the last years it has been many more moving in the right direction and we continue to work systemically on the ones that aren't where we would like. And I think we have done better, and better at, at being able to take things across markets where it is working well and help our group leaders really and Rick and Simon teaching R&D about how to do these things where we can really get the confidence. The results we want out of our businesses. So, the ability to keep everyone moving and the ones that aren't where we want them to get these moved across.

We don't use outside, they don't like it but we don't use outside McKenzie, DCG consulting groups here. What we do have is we have an internal consulting team, and we have recruited people, that generally are in those positions for three to four years, then they're promoted up through the business rather than somebody come in who doesn't know our business. Here, the head of our Investor Relations, Nikki Decker was on the team that was her previous assignment. That team will go in to a market and they will work on what do they need to work on. What matters what opportunity. What's really going on, Germany, Nikki was trying nine things they needed to work on. That was last year, they did those implement taxes in March. They also went about the same time into Italy. By the way both of these are very profitable, but we wanted to see them north of 20%, profitable and we wanted top line growing as well. That team the last two weeks has been in the (inaudible) markets where we have good businesses but they with what's happened with the Euro, curb cities up there it really has been sluggish. They're focused on also the Philippines. So we have, oh and they have been focused on Switzerland. So we just don't sit there, hope those things get better. Every one of those markets has a plan, and then, every single month when we do monthly progress we say how are they moving, on their plans. Forgive the long words but it was an important question.

Thanks for the color and thanks for your time.

Thank you.

We will take our next question from Greg Hillman from First Willshire Securities Management.

Hi, good morning. Rick can you talk about Asia Pacific what is the largest country is, for starters, in terms of sales?

Mike, you heard me up there on our largest probably still is Japan, isn't it?

Yes, the three biggest Greg are Australia, Japan and Indonesia now.

Okay. So I think in your 10-K, from last year, Indonesia was not in there, I believe. So that means Indonesia will be one of your top ten markets now in the 10-K when you file it?

It will be on that list, I think.

So if you said Venezuela earlier in the call was $60 million. That means Indonesia must be higher than $60 million.

It was a wonderful (inaudible) If I say you are looking at that, again it would be in Indonesia but here is where these things are coming on so strong. There's such white space, again , our Indonesia business, it is the fourth largest population in the world, and I have never done a meeting and I used to live and work outside of -- but we are moving through all of the islands and it has been wonderful, but what I really was happy to see in Asia Pacific this year, is India, nobody is really cracked India very effectively direct sales wise, so my belief, and to see an India business up close to 40% we really are now starting to get scale and that's what happens, you get to -- I will tell you what happened in Indonesia, the business got to a certain size, we did, 18 months ago, a Chairman summit there, where we filled the place with women and asked her husband to come. It is a Muslim culture, we wanted his support. We had simultaneous translation, it went out for about half a day and recognition. It exploded after that. So I see that in Asia Pacific, I am looking here at China, India, Indonesia, very good business in Korea. That did a good job this last year. But our big fix, and what I was talking to Andrew about is with we have got to get these

That's interesting and you don't have any multilevel type incentive structures in the Asian countries it is all just direct selling -- there's no royalty overrides?

A tiny one in one of our Japanese business there. A nature care business but it isn't generally a multilevel. In business, in Malaysia, we will have multilevel compensation but not a multilevel selling. For example, Amway multilevel selling or Herbal Life et cetera means I recruit people and they become users of the product.

That's your sales force where your customer is your sales force on that. Our Malaysian business has multiple levels of compensation, and there are real customers. The major region is those models multilevel selling models are particularly volatile because you never have a sales force whose really this is their career.

Right. And then, Rick one final question you said you have got a product award was Russia, what product was that for.

The whole line, the whole line. Yes. The same in India, and the same in China.

Okay. So it was a line.

The brand and all the products we sale.

Including your cooking items and storage containers and --

Yes. Yes.

Okay. Thanks very much. And just going back to India. I guess India is still not in the top 10. It wasn't last year? How long will it take India to get up to level?

I need to do the math but we are getting to a very significant base right now, that you to compound who 40% on that, and a couple of years.

Okay thanks very much.

Thank you, Greg.

It appears there are no further questions at this time. I would like to turn the conference back to you for additional or closing remarks.

I will be brief, guys. Again I was asking Nikki across the table here I said why would you tell people to buy today. She said this strong company finances. The top line growth is from all segments right now, the cash flow, the reduced debt levels, and improving ROS. Secondly, willing to grow. We have a lot of white space in these emerging markets and you do (inaudible)-- on 12% to 14% growth. But increasingly, there's such a renewed enthusiasm, about these established markets of the world, and a wonderful competition for them to be the next established market of the world. Third, diversification of sales. No longer can we have one market or one currency -- the year for us. So we are sort of so diversified. And lastly I would say our multiple, I think we are mid teens in a brand that's known everywhere. So, thank you everybody for your time. And again, I guess the last thing I would say is, if there was a difference in our, our trends in January, we are already into through January, and already have visibility through the first couple of weeks of February. And if we felt, if we didn't have a high level of confidence, in the direction we are giving you, in this time for 2010 you would have gotten a different signal. Thank you.

That concludes today's presentation. Thank you for your participation.