Tupperware Brands Corp (TUP) 2010 Q4 法說會逐字稿

Good morning. My name is Jackie and I will be your conference Operator today.At this time, I would like to welcome everyone to Tupperware Brands fourth quarter 2010 earnings conference call. All lines have been placed on mute to prevent any background noise.After the speakers' remarks, there will be a question and answer period.(Operator Instructions)As a reminder, ladies and gentlemen, this conference is being recorded today, February 1, 2011.

I would now like to introduce Rick Goings, Chairman and CEO of Tupperware Brands Corporation. You may begin your conference.

Hi, good morning, everybody.I'm here with Mike Poteshman, our CFO, and Nicole Decker, our VP of Investor Relations and Strategy, also a couple smart other people, if you ask us questions I don't have the answer to, they will give it to us.

Some of the discussion this morning, as you know, will involve the future outlook. And you know the drill on that, so I refer you to our forward-looking statements and our filings.

Again, good morning. Our 6% full year local currency sales increase, it was within our target and our longer-term guidance range. While disappointed with the modest decrease in our established markets, which was largely isolated to just a few markets that I'll speak of later, being up 15% in our emerging markets more than made up for it.

So overall, it was a good year. Our profitability continued to improve with an increase in our pre-tax ROS excluding items to 13.7% versus 12.1% this last year. Again, I'm going to do my best not to just read you things you already have, but amplify a little more.

We are a global portfolio, doing business in almost 100 countries, and therefore, there's a healthy mix of both emerging and established markets. And because we are a portfolio, more and more of our management teams are becoming effective at navigating through this complex world. It's tsunamis, volcanic eruptions, massive weather disasters, be they snow, we saw that in France this last month. Floods, we're seeing that in Australia. Even political crisis in Northern Africa. We spend a lot of time learning how to navigate through it because such is the world we live in, and we've got to have progress even when these things occur that weren't in our plan.

When we distill down to what really matters in our business, with regard to just navigating through it, there are really four key elements that our management teams have identified that are critical success drivers in every one of our markets, and they play out a different way based on culture. In essence, this is our formula, and our continued growth therefore is not due to luck. It's really a result of management teams on the ground being really comprehensive in understanding these four components.

They really are innovative product design, and that plays out differently in a Germany or France than it does in India. Entertaining selling situations. Third, offering our sales force a compelling earning and leadership opportunity. And then finally, employing what we call, are direct sales fundamentals. And I do believe our institutional skills in direct selling put us ahead of any other company in our industry.

Behind this formula, though, is an attitude at our corporation that is basically this. Every successful business formula works until it doesn't. With that mindset, what we've tried to create is a culture focused on the constant renewal of our formulas for components.

Essentially, what we really have is a group of multi-local businesses, and at our best, we simply try to create repeater stations around the world, adapting and adopting the formula to local needs. For example, the hottest selling product in India right now are water bottles that sell for about $4. Hottest selling product in France is $140, and it's a very unique food preparation item.

Not much more than a month ago we had all of our top market leaders come together here in the US for three days, and we really focused those days on, know how to grow always. I've got to say, I came away from that meeting with even a heightened sense of confidence in what we'll have ahead.

Now, let me get into the fourth quarter. The Company grew 6% local currency. You already knew that. But it was, again, a tough comp of 10% sales increase in the fourth quarter 2009. Our emerging markets, they were about 55% of sales, but what was also nice was to see they grew this 14% in local currency.

The established markets were down 3% with strong growth by Austria and Tupperware US and Canada, offset by double-digit (sic - see Press Release) increases in Tupperware Australia and single-digit decreases in Japan in BeautiControl. So the decline in the established markets was really isolated to these three markets. We continue to also grow the overall total sales force and we ended the year with a record 2.6 million sellers. And that's up 8% over 2009.

Drilling down, our European established markets were even in local currency. A few countries to talk about, Tupperware Austria, again, very strong growth, 33% higher in sales in the quarter, lapping double-digit growth. Tupperware France continued to grow. And it navigated through strikes, burning cars, record levels of snow, to achieve a 4% sales increase for the quarter. And that may not seem like much, but in the face of tough comps of 33% growth in the fourth quarter 2009, it is terrific progress.

France, by the way, is one of our largest markets in Europe. We've had an outstanding year there, up 19% for the full year. And what I'm most pleased about in France is France has proven that our direct selling fundamentals in established markets can work if they are refreshed. We've been in France for 50 years. We're the largest direct selling company there. And we've transformed the image of our Company from your mother's Tupperware into a prestigious culinary company with premium products, outstanding cookbooks, where we sell the most cookbooks of any company in France, and entertaining party-selling situations.

Turning to Germany, there we were down 5% in local currency. But importantly, in Germany, they have adopted and implemented the initiatives that have been so successful for us in France. So we feel we have the right things in place to strengthen this very large and profitable Tupperware business.

We go into 2011 in Germany also with a sales force size advantage. And I'm pleased to see positive outcomes in the productivity of our sellers there and the promotion of lots of sales force managers in this new level we call team leaders. Overall, the remainder of our European established markets grew modestly. So it was a quarter of growth.

In our Asia-Pacific established markets, we continued, as I've mentioned, to struggle in Tupperware Australia, there with a double-digit decline. Now, this softness is a combination of both externals and internals. Although Australia really didn't experience the same impact of the 2008 global economic downturn as the rest of the world, it nevertheless has low unemployment, but consumer confidence is down and the cost of living is on the rise, as mortgage interest rates continue to increase.

Internally, and this is our issue, we've concluded that in the face of these negative externals, we frankly increased some of our standards for the sales force too much and at the wrong time. And in October, we realigned the qualification levels in our manager opportunity to open the doors and attract more people. I am pleased to say that the manager count did increase in the fourth quarter, and that's the first time all year.

We also saw improvements in recruiting and activity. Now, we still have challenges in Australia and New Zealand, and especially this was exacerbated by the recent flooding in Queensland, where we get about 25% of our sales. But the fundamentals of our business is strong. We've got a great management team, and it's a very large and a very profitable business for us. So I hope we see some progress in 2011.

Turning to other large established markets in Asia-Pacific, Tupperware Japan is in the process of reconfiguring the business model. We've been going down that road for about two years. We did see progress in 2010, and we improved the sales trend with the fourth quarter down only single digit. It's been a long time since we've seen that.

We also reduced the loss we made in this business for 2010 versus last year. Looking at 2011, we're going to be focused on capitalizing on this recent momentum gain that we've seen in the fourth quarter. So I hope to be reporting on progress for Japan for 2011.

Turning to our North American Tupperware businesses, sales in the US-Canada business were up 9% in the quarter. Distilling that down, about half that increase was really due to the strengthening of our business, growth of the sales force. However, the other half was due to a little shift in promotional timing that we mentioned at the end of the third quarter. We did continue to focus on recruiting and we ended the year with a very nice 7% sales force size advantage.

We also have a new development program in place in North America to grow directors in the top leadership levels of our sales force by incentivizing them to not only recruit, but to develop other managers. And the program, looking at the fourth quarter, was quite successful because we saw an increase in the number of managers and directors compared to last year. And that sets the tone for a pretty good 2011.

In BeautiControl, we are still not satisfied with the performance. However, we did see sequential improvement with only a 9% decrease in the fourth quarter. And that feels better because we've had double-digit increases for the rest of the year. To accelerate progress, we have strengthened our management team in some very critical places over the last quarter, as well as launching on the marketing side a new skin care line and enhancing our spa experience. And that basically is the group selling format we use for BeautiControl.

Looking ahead, BeautiControl is now well positioned to make 2011 a year of growth. Now, let's not forget the fact this was our first acquisition, and while we've had some trouble points over the last couple of years, we have doubled the size of BeautiControl since we did this acquisition. So it was worth the trip.

Now, let me turn to our fast-growing emerging markets, where we continue to see strong growth. There, 14% increase in the quarter. Our continued success in emerging markets is really driven by executing our key fundamentals and the leverage that we have. Whereas there's lack of retail infrastructure, there's limited earnings opportunities for women. So we have an advantage with a direct selling model.

Importantly, even though we're selling lower priced items, overall in emerging markets, our model is effective, as they continue to generate a higher return on sales than even our established markets. So the value chain is very strong there. We're still in the early stages of geographic penetration in our emerging markets. And also we have the opportunity to not only expand geographically, but also to increase productivity in these units. So there's a lot of growth ahead for us. If this was a sports game, I would say we're still in the first quarter and there's a lot of room left for growth.

Let me turn to Europe, Africa, and the Middle East and our emerging piece of that portfolio. It was good to see that in spite of the large decline in our Russian and CIS business, the remainder of our emerging markets there still grew in the quarter 2%. That was really led by significant growth in our large businesses of Tupperware South Africa and Turkey. Notably, our Tupperware South African business grew 30% in the quarter. And what a dynamic business that is and management team we have there.

We already have a very large sales force in South Africa and yet they manage to grow it by another incremental 27% higher than last year. They have also done a terrific job in South Africa, successfully leveraging a sub-management opportunity called team leader over the last several years. And importantly, we've moved from really a business that really dealt with servicing the 6 million white South Africans to the nearly 48 million black south Africans. So we're really dealing with the whole market there and spreading the opportunity.

We grew our local currency sales in Turkey, also, by almost 40% in the quarter. I was just with our managing director there about 10 days ago in Istanbul. What a great young management team we have on the ground there.

And we're doing a wonderful job at not only expanding the size of the sales force, but also our method of selling. We're teaching more of our people to sell at parties instead of one on one. This is a fundamental growth strategy for us. So we're very confident about the future growth of the business in Turkey. And remember, 70 million people in that market.

Turning to Russia, I just got off the phone about an hour ago with our European group president, Glenn Drake, who is in Moscow today for a regularly scheduled visit. And I must say, the discussion with him, in spite of him enduring 19% below zero temperatures, he was upbeat. But the real fact that's going on in Russia is that after 10 years of almost unprecedented double-digit growth, we really started to feel the momentum shift in this business. And I mentioned it on previous calls.

And we began to feel it with the devaluation in the currency in late 2008. And that's when the beginning of the credit crisis began and it spread right down to consumers. This led to a compression of consumers' disposable income. The fires this last summer in the most populous and most affluent areas, and the heat wave only exacerbated the decline in our momentum there. The economy hasn't improved and the pressure has made it harder for our sales force to sell, harder to get people to come to parties and harder to get sales force to get active.

But as Glenn reported, we've got a great management team in place there, seasoned and a very upbeat attitude of our distributor sales force. Yet, we're going to have to deal with the economic pressures due to this economy. And now there are new crises with regard to security in Russia. But they're a strong people and we've got a capable management team on the ground.

We didn't see the progress in the fourth quarter that we wanted to see. However, I believe that you'll see some progress as we move forward in 2011. But very difficult comps, though, in the CIS in the first quarter.

Turning now to our fast-growing Asia-Pacific emerging markets, there we were up 28% in local currency. Some real stand outs there. Tupperware Indonesia. By the way, we grew there 39% in the quarter and 40% for the full year. Now, what's remarkable about that is we've been there 19 years and this was a business that in 2009 we doubled it.

So very difficult comps. Again, a great management team on the ground, led by a powerful woman, and they continue to excel in implementing our direct selling strategies and promoting our earnings opportunity to so many women. I spent some time with the Indonesian president, that's the country's president, in Davos last week and I was significantly impressed with his approach to growing the middle class, which is key for us in Indonesia. And remember, this is the fourth largest population in the world and the largest Muslim population.

Malaysia and Singapore also grew in the quarter 33%, was up 24% for the full year. Again, wonderful strategies in place there. And we've changed our Company to, rather than a single brand, to a multi-brand Company. So that allows us to tap into greater purchase power with consumers.

India also had an amazing quarter. I was there during this quarter.An amazing 60% growth in the quarter. And that was overlapping 50% growth for the full year. So they ended the year with about 50% more sellers.

Now we're over 100,000 women who are selling in India. And our management team there has done a great job at expanding not only sales force, but our product offerings, as well.

In China, local currency sales grew 6% over the last year, and this was really reflected a 14-point negative hit from a lower business-to-business sale. And you know, we can't time our business-to-business sales, but we always express them when we have them and when we don't have them, and we view these as opportunities. The core business was solid during the quarter and we maintained our outlet count advantage and closed the quarter with a record number in operation, as well as a record number of preferred customers.

You'll remember, we use these little store fronts there because the typical apartment isn't large enough to hold a Tupperware party. So with more than 3,000 storefront's, it gives us this opportunity for them to get together. We're pleased to return to growth in 2010 in China, and sales were up for the full year 23%.

And I must say about Davos, one of the big changes I saw from going there many years, the most senior current politician in the US who was there was our Secretary of the Treasury. The focus on the world is Asia and the worm has really turned. You've got to remember, China, India, Indonesia represent just under 50% of the world's population. The US is 5% of the world's population.

The companies that really grow are the companies in the future who are most well-positioned for the population growth.And the growth in the middle class will occur, and that's Asia-Pacific.

Turning now to our two businesses in Mexico. And Tupperware there, it grew 9%, although lower business-to-business sales in this market impacted the comparison by 13 points. It would have been north of 20% without that. The 22% growth in the core business was a result of successful expansion of the sales force and activity campaigns.

We ended the quarter with a double-digit sales force size advantage and we have a very strong and strengthening business as we went through the year. Had some hiccups in the middle of the year, but returned to very nice double-digit growth for the remainder of the year. The main focus for 2011 will be to continue this momentum.

At Fuller Mexico in the quarter, we were up 4% versus last year in terms of sales. And we also ended the year with 4% more sellers. This is a very large business and very profitable, north of 20% ROS. And we were pleased to end the year with growth in the fourth quarter. And we continue our focus to improve the productivity of our field managers and work toward getting Fuller into a new cycle of growth. We're working hard on that now.

Finally, let me talk about our businesses in what we call Beauty Other, where we had good overall growth in the quarter, with an increase in 16% in local currency. We had a very strong quarter in Brazil, up almost 40%. These results were driven by a larger and more productive sales force. And we ended the year with 25% more sellers.

And we also continued to reap the benefits from our Tupperware university program that trains managers on recruiting, promoting, and party plan selling. It's part of our direct selling fundamentals.

Our combined Tupperware and beauty businesses in the Philippines also grew in the quarter, up 12%, and so we continued nice momentum there. In spite of Chavez, Tupperware Venezuela also had local currency sales growth of 36%. Mainly that high number is a lot due to pricing, but still underlying growth.And our businesses in Argentina and Paraguay both had double-digit increases.

So overall, I feel we successfully achieved many of our 2010 goals. Our priority is really the sustainability of this enterprise, and that comes from a focus on revenue and profit generation supported by a solid financial structure.

Let me say that longer term, before I turn it over to Mike, that we've got a unique business model here. Most traditional companies, they increase their capacity by building additional manufacturing facilities financed by capital expenditures.Tupperware's sales capacity, however, is driven by its worldwide sales force. And here, we spend a substantial amount of not only time, but resources each year, to build and maintain momentum in these sales forces.

All these expenditures with regard to growth and expansion of our sales force are included in our routine operating costs and therefore, they are not capitalized. Our sales force, however, must constantly be revitalized to not only grow, but to maintain momentum. And as you would expect, natural disasters like floods, snows, economic disturbances, like the devaluation in CIS, they create challenge for us. Not only in actual damage, but also in the damage to momentum. And how we deal with it is we try to make investments to restore momentum.

So our overall worldwide diversity helps us moderate the impact. And at times, our growth rates will be tempered by both these economic and natural events. However, we've got the resources available and the strength in our management team that allows us to mitigate these problems and continue to grow over, under, through these kinds of issues. So it's the reason we can have growth in years like 2008, 2009, and 2010 in spite of all the noise and disruption that's happening around the world. And that gives us confidence, too, in how we'll come out in 2011.

So, Mike, let me turn it over to you and you'll get a little bit more granular, I know.

Okay. Thank you, Rick. As you've heard and seen, we came in at the high end of our sales guidance range for the quarter with plus 6% in local currency. This was on top of a difficult comparison, as we were up 10% in the fourth quarter of 2009. As expected, the comparison with 2009's fourth quarter includes a hit of close to 1 point from less beauty sales in 2010.

Underneath this high end sales performance, we were above what we had expected in Asia-Pacific. Most significantly in India, Indonesia and Malaysia-Singapore. This was balanced by lower than expected sales in Germany in the beauty North America businesses.

While on the high end of our guidance range on sales, we exceeded our EPS guidance on the leverage from the higher sales in Asia-Pacific, while at the same time managing our profitability well in those places where our sales lagged our guidance. We were also about $1 million better in unallocated expenses than we had guided, and benefited by $0.02 from a lower tax rate than we had forecast. All of this brought us in at $1.38 excluding items in the fourth quarter, or $0.07 above the high end of our range, even with the FX impact in our comparison at minus $0.02, being $0.01 worse than included in the guidance.

Turning to our balance sheet and cash flow performance for 2010, we were quite pleased with how things came together for the year. For the full year, we generated $256 million of cash from operating activities net of investing activities, which was a nice $30 million ahead of our GAAP net income, and well above the $250 million high end of our guidance range. The better than expected result came from our higher than expected fourth quarter income, along with more progress than expected in bringing down our inventory balance in the quarter, higher than expected payables based on our payment pattern around the end of the year, and lower than foreseen capital spending. We also beat last year's cash flow performance by $32 million.

In our third quarter call, I highlighted that our inventory days at 161 were 14 days over the prior year, and as of year end, the comparison was much more favorable as we closed with 113 days this year and that was five days below the 118 days with which we closed 2009. In light of our better volume of business in the fourth quarter of this year than last, our trade receivables and our payables were both higher than last year, but the number of days were about the same with receivables, in fact, one day lower.

In the fourth quarter, we repurchased about 700,000 shares for $31 million and closed the year with 62.7 million shares actually outstanding in line with our announced target of having about 62 million shares out. As outlined in our release, in reevaluating our leverage situation, we determined that our current borrowings put us at a manageable leverage level, which at the end of 2010 was at 19% on a net debt total capital basis. And we were at 0.5 times net debt to EBITDA.

Since we did not pay down our debt it generated so much cash in the fourth quarter, we closed the year with $249 million of cash and equivalents on our balance sheet. Of this cash, about $90 million is not readily accessible. As announced in our release, we intend to use the $160 million that we can access to repurchase shares evenly through 2011. We'll add to the $160 million repurchase amount cash that we receive when options are exercised during the year.

At this stage, we would expect to follow the same approach in 2012. And in conjunction with these decisions, our board has raised our share repurchase authorization by $250 million to $600 million. For 2010, $202 million repurchases have been made under this authorization, so we have about $400 million more we can do. The authorization runs through February 1, 2015.

You also saw in our release that we've articulated a more specific approach to dividends, whereby we expect our board to re-evaluate our dividend rate annually in the first quarter of each year beginning in 2012 and would anticipate that the dividend could grow about in line with our earnings per share excluding items.

Before I turn to our guidance, I would like to mention here the about $4 million charge we took in the fourth quarter for the write-off of some of our purchase accounting intangibles. This relates to one of our separate beauty businesses in Southern Africa, Swissgarde, where we've made the decision to stop operating independently. That business has operated in a number of countries in Southern Africa, and in assessing our portfolio, we've concluded that it's not the best use of time and other resources to continue to do that.

As a result, we're going to focus the South African base portion of the Swissgarde business into our other South African beauty business, Avroy Shlain. We'll continue to look at our portfolio of businesses and make these types of adjustments where we think it makes sense. That said, we do not have currently anything of significance on our radar.

Turning now to our guidance, as you saw in our release, we expect our sales to grow in local currency by 5% to 7% in the first quarter, and by 6% to 8% for full year 2011, which is in line with the longer range guidance we've had since 2008. The first quarter range takes into account that the first quarter of 2010 was our strongest year-over-year comparison of plus 11% in local currency. For one thing, we'll still have tough comparisons, particularly with CIS in Tupperware Australia. The up 5% to 7% guidance also reflects that we expect to have less B-to-B sales in 2011 than 2010 and that we had recorded $2.5 million in sales in the first quarter of 2010 in CIS that we ended up reversing in the second quarter.

Going the other way, under our 52, 53 week fiscal year, we'll have a 53rd week in 2011 and that week falls in the first quarter. On a full year basis, the 6% to 8% local currency increase reflects by segment low single-digit increases by Europe and Beauty North America, a high single to low double-digit increase by Asia-Pacific, a mid single digit increase by Tupperware North America, and a mid teen increase by Beauty Other.

In terms of earnings per share, our range without items, $0.81 to $0.86 in the first quarter. This would be up 13% in dollars at the high end of the range and includes an improvement in pre-tax return on sales of 30 basis points, also at the high end of our range. A higher tax rate of 26% versus 25.4% last year, about 1% less shares and a $0.02 FX benefit. Without the FX, our high end local currency increase was 10%.

One thing that will hit our first quarter earnings comparison is the $4.2 million of pre-tax out of period CIS amount that reduced the second quarter of 2010. It should have been recorded in the first quarter last year. Of course, this will turn around for us in the second quarter.

For the full year, we're looking for diluted earnings per share without items of $4.23 to $4.33 versus our $3.72 actual in 2010. This 14% to 16% increase reflects an $0.11 benefit on the comparison from stronger foreign currency, leaving a 10% to 13% increase in local currency. At the high end of our range, this means we're looking for a 70 basis point improvement in pre-tax return on sales without items.

This includes small return on sales improvements by all of our segments, along with leverage on our unallocated corporate costs and net interest expense, both of which are forecast to be about even with 2010, at $57 million for unallocated costs, and $27 million for interest. We'll also have between 2% and 2.5% less average diluted share in light of our planned stock repurchases partially offset by 140 basis points of a higher income tax rate to 26%.

From a longer term point of view, we continue to foresee for 2012 forward the 6% to 8% annual local currency sales growth that we guided to since 2008. This comes from expected low double-digit growth in our emerging market and low single-digit growth in our established market. This is a small shift from previously looking for 12% to 14% growth from the emerging market, reflecting the larger base of business there and our greater penetration in these markets than when we set the 12% to 14% target a few years ago. That said, and as Rick mentioned, we still have a lot of market penetration opportunity in front of us.

In terms of profitability, we continued with our guidance range. We expect our pre-tax profit return on sales excluding items to grow at 50 basis points per year into the mid to high teens. This is versus the 14.4% guidance for 2011 at the high end of our range. On our tax rate, we think we'll see a gradual rise from this year's 26%, given where we will earn our money and what we'll need to do to continue to access it in the United States, or continue to access in the United States as strong cash flows.

We do expect to remain over time in the 20s in terms of our rates. From an EPS point of view, we'll also get a kick from share repurchases. And as we've indicated in 2011, this benefit is forecast to be 2% plus.

Now, a few words on resin. For full year 2010, the year-over-year negative cost of sales impact from resin was $9 million we forecast in October. For 2011, we estimate we will purchase about $130 million of resin for products that we will produce. And based on what we see, forecast a negative year-over-year impact in cost of sales from resin prices of $5 million. This is built into our earnings forecast and comes through mainly in the first half of the year.

On cash flow for 2011, we should see cash from operating activities net of investing activities of $215 million to $225 million. This is about $45 million less than our GAAP net income, reflecting $75 million of capital spending in order to support our growth. This level of spending is about $25 million above depreciation and amortization. Also in the forecast is a modest increase in working capital to support the higher sales levels that we forecast.

We're here about our investments and our business. While we've outlined today our updated plans to return cap to shareholders, I want to be clear that nothing has changed about our commitment to continue to invest in our business, and even increase our investment versus what it has been. We are a growth company.

As I said a moment ago, we're planning to spend $75 million in capital items in 2011, which is $20 million more than we spent in 2010, mainly to support some of our high growth businesses. And this level of spending is also high given our history. We also regularly invest, and will continue to do so, a portion of our average 40% contribution margin from higher sales. Our 2011 guidance includes slightly more of an improvement in our pre-tax return on sales than our longer range outlook of 50 basis points a year, but also implies that a little more than half of our average contribution margin on higher sales will drop through to the bottom line. Our strong and improving return on sales over time also reflects the fact that given the strength of our brands and our direct selling model into productivity improvements in our supply chain, we've been able to overcome cost increases in our value chain.

Again, we'll continue to invest in our businesses, even while passing more of our cashflow to shareholders than in the past. The difference is that in the last several years, we've been giving the cash that we don't need for investment to our shareholders. So in summary, we're pleased with how we performed in 2010 in the fourth quarter and the full year and we're confident that we'll continue to see good growth going forward.

Rick has a few closing remarks and then we'll turn the call over to questions. Rick?

Thank you. I think we'll just turn it over to questions right now and then I'll wrap it up, if I haven't discussed that during the Q&A session. So please.

(Operator Instructions)Your first question comes from the line of Dara Mohsenian with Morgan Stanley.

Good morning, guys. Mike, can you quantify how much the 53rd week is adding to sales and earnings for the full year 2011 and also in Q1?

Ye, in terms of time, when you look at the full year, of course one week on 50 weeks is somewhere around 2%. The week is the week between Christmas and New Year's, so it's not a big week for us. So it's less in that time. As we look at the first quarter, naturally there's more of an impact because it's one week on 13 or 14. So we've built that in for several percentage points and then we've talked about the other things that are helping us and hurting us in the quarter.

Okay. So for the full year, it's normally, because the extra week would be about 2%. For you guys, given the seasonality, is it half that amount? Is it a very minimal contribution? Can you give me some kind of magnitude?

It's less than the 2%, but I think that's as specific as we can get.

Okay. You gave us some detail on the CIS weakness in Q4. It sounds like you expect Q1 will be another difficult quarter with a tough comp. Can you give us more detail on when you expect the CIS trends will get better in the balance of the year and why and some priority on your full year expectations in the region?

Yes. Again, as I said from my prepared remarks, Dara, you really do have to go back to 2008 when the beginning of a slowdown in momentum there occurred. And, again, it was exacerbated by incidents of the fires, heat, et cetera. And this isn't helping, the new security issues there, talking to Glenn today. Now they have installed at all hotels -- they didn't have that a month ago -- the security. So it's going to be harder to get around in Moscow, harder to go. So I don't know what the impact of that is going to be. I will tell you, here's the actions we've taken on both the offensive and defensive side. It's a very large and profitable market for us. We have pretty nice geographic penetration with regard to a base, but a lot of room to fill in and grow from. So on the offensive side, here's what we're going to do. We're going to continue to invest there to ensure that our sales force keeps recruiting, to strengthen our activities programs, to add promotions, to consumers. And by the way, that isn't going to be discounting. It is more gift with purchase, purchase with purchase, those kinds of incentives that don't negatively impact the brand. And we're going to work hard, and I know they are doing this right now, to enhance productivity in the promote-out level. We've got a wonderful Tupperware university program in place there.So those are the things that we're working on.

On the defensive side, importantly, we're working to ensure that the distributor expense base is as lean as it can be, because we want them to be -- that turns into profitability. We're also trying to help the distributors. We have a whole distributor account services department there and in most markets to help teach our distributors how to better manage the credit situation with their sales force. Because that's when you really start to see it, is when the consumer credit tightens up and she tightens up the sales force and it could be a bit of a doom loop. So that's one of the reasons Glenn is there. We're on the offensive with regard to that. Comps obviously really start to get easier starting in the second quarter. So I hope we navigate through it. If there was a race of people that is tough people, it is the people in the CIS. And, Glenn, the most important thing he said to me was that -- he's been there two days -- spirits are very good. There's a whole group of real profitable distributors. We did an analysis by quartile of distributor profitability, and I liked what I saw there. And those are the things that get the business moving in the right direction. Apologize for the long answer.

Okay. And then, Mike, your dividend payout ratio there implied by the guidance in the release, still is well below a lot of your peers in the industry. So can you take us through conceptually why you wouldn't be interested in a higher dividend payout ratio?

It's really a board decision, but what we worked and looked at with our board are the things that you do. We want to have a dividend level that's meaningful in this environment, while at the same time setting it at a level that would work through a cycle. We're very strong cash flow generators, so we're quite confident, obviously, that we'll be able to continue to pay that dividend. Then we look at what's the best way to leverage our cash flows for our constituents above that. Of course, first we invest in the business. And then what we've been looking at, as we said, in the absence of any large acquisition opportunities, is the best way to split things between dividends and share buybacks after that. We've done a good job turning our net income into cash flow over time. I think over the last 10 years, probably every year but 2008 we've been able to do better. So that's how we look at it. That's how the board has looked at it.

Yes, and I would add, Dara, to that, the whole concept is the job with not only the board but management, is sustainability of this enterprise. I don't see a need right now, don't see any acquisition candidates out there, and we've got certainly enough opportunity to grow this business organically. We've raised the dividend almost 20% two years in a row. I'm happy, Mike, we got on this whole time to do it, is at the end of the year and then do it the first quarter. We're going to look at it year to year. The other reason why we didn't do it anymore than it is, is flexibility. You've got more flexibility. If we can grow our dividend at a reasonable rate. But you're allowed much more flexibility with regard to share repurchase. And so as we've talked to many of our biggest shareholders, what they have said they would like to see is a bit of both. And that takes us up to the comfort level that I believe is right for our kind of business and a flexibility level that is appropriate. So it's balance, and I hope we get to continue doing both of these in the year. It's a good high class problem to have.

Okay, thanks so much.

Our next question comes from the line of Linda Bolton-Weiser with Caris & Company.

Hi. Can I just ask a little bit more about the extra week comparison for the first quarter of 2011?It seems like that adds a 8%, 9% to growth, but maybe less than that. So are you saying excluding that effect, the local currency sales are really up 1% to 3% or something like that? Can you just give a little more clarification on that?

Yes, Linda, you're right in terms of time, if you do the math, it comes out to 8%. What we see is the difference of our businesses operating different ways. Some of them are on a monthly cycle, so they will have sales peaks that will be at the end of the month. So whether this 13 or 14 weeks makes much less of a difference. Other of them are on campaign cycles, either two or three weeks, and also it's a matter of how many campaigns close. So that kind of promotional activity, even in our weekly business, moves things around. So we looked at all of that and, like I said, there is a benefit from the extra week coming through in the first quarter. But at the same time, we've had the other ups and downs that we talked about, things like having less B-to-B, some of the head wind in CIS and Australia, and then the markets where we're doing very well, the emerging markets and so on.

Okay, and just on Japan, you've noted improvement. I don't seem to have a number for how much Japan was down in the third quarter. Can you just give us how much the sequential improvement was in Japan?

We're really not going to break out Japan. The only markets we break out are those we have to break out for competitive reasons.

Okay, thanks.

Yes, and what I look at, Linda, on that, is get across the increase in the first quarter was due to a 13th week on that. Mike, you might want to comment on that. If you normalize it, because you're looking at some information that they are not looking at, and I don't want to dilute that.

Right. So there is a variety of things impacting the quarter. There is the extra week, but then we've got the cycles of our businesses. We've got very good trends continuing in most of our emerging markets including the CIS. There is the out of period thing that's impacting us as well, and the B-to-B comparison.

Okay, thanks.

Our next question comes from the line of Olivia Tong with Bank of America-Merrill Lynch.

Hi, thanks. Good morning. Could you provide a little bit more granularity on improvement in operating expense in Q4?And then you also mentioned investments for 2011. Other than CapEx, maybe some color on what incremental (inaudible). Thanks.

Sure. The GS&A improvement, I think you're referring to, in the fourth quarter, about half of that was from leverage on fixed costs from having higher sales. The rest of it mainly was from some promotional cost benefits. On the good news side, we did some things incrementally in the North America units in the fourth quarter of 2009, and that really didn't -- we were able to get what we needed done at a more efficient cost. Also, with some of the markets in Europe where we didn't have as much achievement as we wanted, that also came through in the promotional cost line. So that was the main thing there.

In terms of investment going forward, it's really the kinds of things that we've done in the past. So we looked at incremental brand building activities that we're able to fund partially using some of our contribution margin. It's cases where we're making changes to models and we need to transition units through. There are some places where we are in a ramp-up stage in early stage markets where we might have operating costs ahead of sales volumes. So those are the kinds of investments that we will have in 2011 and it's similar to the types of things we've seen in the last couple years.

Thanks. Is there anything that your clients are doing in Q4 that perhaps will be delayed until 2011? It sounds like most of what you're talking about is the typical every year brand building.

Yes, I don't think we would say there was anything fundamental in the operating costs in that sense. There was less capital spending than we had forecast most recently. In October, we said $65 million.We ended up with $5 million, and some of that had to do with projects that we'll do in 2011. And so that's built into the $75 million outlook for CapEx in 2011.

Got it. And then on the 6% to 8% on the top line, you changed it a little bit over the longer term, but how should we be thinking about the emerging markets with the establishment of the breakout for 2011?

It's in line with what we said for the longer term, as well. So the low double-digit for the emerging markets and low single for the established markets is what we see going into the year.

Got it, thanks so much.

Your next question comes from the line of Doug Lane with Jefferies & Company.

Hi, good morning. Rick, at the third quarter conference call, you were a little bit more optimistic about the progress that was being made in Russia and the CIS in September and October. Was there something that happened later in the quarter that was maybe a surprise in the downside?

No, Doug. It wasn't anything that happened. It was what didn't happen. We expected, because of some of the promotional programs that we've launched through October and November to get a little bit more kick in the business from that. And the sobering piece was the consumer environment there just isn't getting any better.

There's been a lot of talk about that part of the world this year, so I just want to try to get it straight where we are today. Because you had the out-of-period expenses in the June quarter, you had a course of natural disasters in the September quarter, but it sounds like your concern now really is just the overall consumer spending environment in that part of the world. And I know some of your competitors also have disclosed weakness there. Is that really where we are, where it's just that the consumer in that part of the world isn't coming through, it's not so much a company-specific thing anymore?

Yes. The company-specific was a blip and isolated and it's over. No, this is externals going on there. Really, and I would say to the -- I was having a discussion at Davos on this subject, that if we compare to the shift in Russia from a centrally planned economy to a market economy to how they did it in China, albeit some members of congress screaming about human rights, the way the Chinese did it was much more orderly, much more effective, and much more sustainable out there. In Russia basically, they turned over the market in one day from one centrally planned group to the smaller groups out there. But it is a very difficult place to do business. And as a result, you see it happening with their currency. They import so much and this has impacted our business because we're importing. Our products in Russia are more than 20% higher than they are in Western Europe and yet the disposable income is so much less. Now, the good news for us as a direct seller is we don't have a competitor. The more challenging direct sellers will be all those direct sellers who were fighting for the crowded beauty space there. So I would rather be in our product line in the CIS than in beauty.

Okay. So if I'm just trying to get the lay of the land for 2011 for Tupperware, you've got the tough comp in the first quarter and then the comps get much meatier. So are we still looking at returning to plus signs in that market by the second quarter on the easier comparisons?

I've got to turn to Mike on that because I didn't look at the comps. What do you think, Mike?

I think the run rate of the business is normalizing in the last couple quarters when we look at the retail sales. And, yes, likely as we move into the second quarter, if that continues, which we have no reason to expect that it wouldn't, then we should start to see better comparisons. We'll have to see. There is the out-of-period amount which is causing it probably to be positive, which was $4 million on sales.

And we would express that to you if that's where the benefit came. I will tell you, in my conversation with our group president this morning, we're finished with the month of January. They were making progress -- this is the first time I can remember this in about four months -- against the objectives that they set for the month. They are operating at close to those, and we haven't been prior to this. So that was a hopeful sign.

Okay. That's good. And one last thing, Mike, to clarify. Did you take your longer term organic sales forecast in evolving markets down to 12% to 14%, to low double digits? Is that just for this year, or is that your permanent new guideline?

That's how we expressed the longer term for the 6% to 8%, which is really reflecting the larger base of business. And so we'll see how that goes. We were up 15% in that group of markets in 2010 for the full year. Most of them are still doing extremely well. CIS was a drag. Yet we were still up 15%. So we'll see how it goes, but since it's a longer range look, it takes into account the reality of a larger denominator.

Sure, and that's still good growth, but that still enables you to get to that 6% to 8% longer term. I just want to make sure that that wasn't being changed, as well.

Yes, correct. I think probably, I don't remember the exact share, but when we gave that outlook in 2008, started giving it, the emerging markets were probably 45% of the business and now they are 55%. So they're growing at double digits, even low double digits. And then of course we've got the higher ROS right now on those markets, so it's a nice place to be growing.

Yes, okay. Thank you.

Your next question comes from the line of John Faucher with JPMorgan.

Thank you, good morning. Just wanted to see if we could get a little bit of an update on BeautiControl, maybe some additional steps that you can take in terms of really getting that business moving again. Thanks.

Yes, John, the heavy lifting with regard to change in the overall sales force compensation program, they have already done that. Our real focus is try to shift away from bringing in wholesale buyers, but to really get them back on group selling again. So they made nice progress with regard to that on the standards of the business.Additionally, how we strengthened the business was we moved into the BeautiControl business one of our stronger country managing directors, Daisy Chin-Lor, has moved into that business as Head of Sales and Marketing. And Daisy was with me from my former days in the beauty business in Asia-Pacific. Daisy's an American, lots of beauty experience. We've trained her over the last year plus running our Korean business. And she's there now assisting with that management team in sales and marketing. And then thirdly, we've done an effective job at launching a new skin care line. So I think we're going to have -- what I was pleased to see is we were at a run rate of double-digit declines in BeautiControl and we shaved that down to single-digit in Q4. So I would expect this to -- I'm more confident on the year of progress there than I am, for example, in CIS.

Got it, thanks.

Your next question comes from the line of Andrew Sawyer with Goldman Sachs.

Thanks. Mike, I just wondered if you could help a little bit on gross margin in the quarter, a little bit of pressure there. Can you walk through some of the drivers on that?

Sure. We talked about when we gave the guidance in October, the raw materials, and it did come through the way that we thought, so it was about a $3 million hit from that. That's about 45 basis points. We were down 50 overall. In the North American segments, both on the Tupperware and beauty side, we had a bit of a shift towards more promoted items and that included steps that we were taking to move out some inventory, so that hurt us on that line. At the same time, we had a better margin in Asia-Pacific and that was true for most of the year, coming a lot out of Indonesia where we were able to source more through contract manufacturing that we do locally as opposed to sourcing it from outside Indonesia. And that's what our intention is, to source it locally. So those were really the bigger drivers within the GP line.

Okay, thanks. And just a quick one for Rick. Could you talk maybe qualitatively through what's going on in Japan and what's giving you encouragement? Are you seeing better rep productivity, or is it recruiting, or what elements of it are driving the sequential improvement?

Yes, I think both of what you just said there. But what we did is we got away from focusing the business so much on third party sourced products and got it back to a more appropriate line of Tupperware products, and more focused on when we recruit people in the business, they'd be sellers of Tupperware products rather than buyer of third party promotional products that we launch from time to time. So, we took our medicine this year and basically said stop feeding the beast of these kinds of products and let's get back to our core basics. And we're reporting gains against that. So, again, I think this is a market that's going to be in the plus column for 2011. We've only got a month under our belt, but clearly, we have really reduced the level of loss there and started to really see the positive side of growth.

So basing on third party products is basically complete in the core Tupperware line and it's showing modest growth, is that to sum up?

Yes.

Thanks a lot, Rick.

Your next question comes from the line of Jason Gere with RBC Capital Markets.

Good morning. This is actually [Joe Stock] for Jason. Real quickly on North America, if you could give a little bit more detail into what exactly was driving the better (inaudible). I know there was some timing of promotions that you talked about that helped, but maybe some more color there. And also it looks like margins in that business came in better than you guys were hoping, so if you have any additional color there, that would be great.

I'll handle the first and Mike will handle the second piece of that. They have done a good job recruiting, which is why we have the 7% sales force size advantage. And I believe a big piece of that was the enhancement of the leadership opportunity there where you get more people recruiting because they are trying not -- because they are really trying to build a career in the Tupperware business. And so it shows the effectiveness of that approach there. That's simple block and tackle stuff, and I think they have done a good job with regard to that. Mike?

Yes, and Joe, the other thing I would point out on that is when you look at Tupperware North America, that's the US and Canadian business that Rick was referring to, and it's also the Tupperware Mexico business. And we did have some issues in the middle of the year that impacted our recruiting and it came on very strong in the fourth quarter. That's really getting back to the continuation of a good time line there and that comes from, over time, improving the standards of the expectations within the sales force and being able to grow the sales force managers. So that's been looking good for us.

On the profitability in Tupperware North America, we were down. And that goes a little bit back to the last question on GP percentage where we had more of a mix of products sold under promoted activity and so on, and that was to stimulate the sales force and also to help us reduce inventory. And we also had some promotional costs, but not on the GP line, associated with some sales force leadership development, which also comes through in those recruiting numbers. If you were referring to the Beauty North America perhaps, we did have some incremental promotions that we did last year in the fourth quarter, so we did improve our ROS this year in Beauty North American because we didn't have to repeat those in the same way. We were able to still get a lot of good activity out of our sales force. And we also did some reengineering activity in BeautiControl early in 2010 so that continued to come through in the fourth quarter.

I was referring to beauty, sorry if I misspoke. And then finally, also on the first quarter of next year, I appreciate all the different pluses and minuses. Is there any consideration given to an impact from the flooding in Australia in the fourth quarter? And if so, is that factored into your guidance?

It certainly is. We were already struggling with our trends in Australia, although we feel like we've taken a lot of the right actions. We've mentioned the change in one of the standards to become a sales force manager in that business that we put in in October, and so we started to see some traction with that in terms of growing the number of managers, which is good for us because that's associated with recruiting and really impinges to our business. So that's a positive for us as we go into the beginning of the year. But we do have this drag from the flooding in Queensland, and so we've taken both of those into account and still aren't looking for great things in Australia including because of that drag, and that's built into our outlook.

Thank you.

(Operator Instructions)Your next question comes from the line of Gregg Hillman with First Wilshire Securities.

Good morning. Rick, could you please take a guess at what the three larger selling products are in the established markets versus the emerging markets?

Let me take it. Thanks for the book, by the way, Gregg. In the established markets, the hottest selling -- I can give you two of those. One is this gourmet micro steamer that we launched that is about $140. And it's been very well received in Europe. And what that does is it turns a normal microwave oven into the equivalent of a $3,000 micro steaming oven, so that in eight to 10 minutes, she, a busy working woman, can really serve a really wonderful, fresh home cooked meal. The second biggest selling product there is, goodness, what is it called?

Herb Chopper.

The Herb Chopper. It's this wonderful little product that you put herbs, spices in, and you pull it almost like you would the old lawn mowers with a cord and then it automatically chops them up. It's just gone crazy in most all the markets where we have launched it.

In our developing markets of the world, I will tell you we've already moved in India now 4 million 500-milliliter water bottles there. And Mike, I don't know their number two selling product there.Because there are so many different markets, and the difference, why it's difficult to give you for the emerging markets is you've got the difference in culture between -- and their eating styles -- between you go to Korea, and it's kimchi, it's really dominated by rice in Indonesia and China. So anyway, those kinds of things. What's interesting about this, too, somebody, one of the people smarter than me, has handed me a note and said the Ultra Pro, which is a -- we've got a product that handles preparation at multiple heats. You can freeze in it, you can put it in the microwave, and you can also put it in a conventional oven. Very, very high selling. And this is what's really interesting, too. I was talking to somebody about this in Davos. This is one of the keys to our emerging markets out there right now, is that it's the growth of the middle class. And why that matters is in China, India, Indonesia, why these people are driven to buy products like us, ours, or products like Gucci, is that her ability to buy Tupperware says to her peers -- I'm not poor anymore. And so you're going to continue to see us grow in those markets. And shockingly, it will often be with products which are more expensive product than you would think.

And, Rick, one follow-up question. What will it take for India to become the next Indonesia in terms of Tupperware university, et cetera?

I think it's happening right now. What it took was, the one word, I would say, is leverageable scale. You've got to get up to a point that we have X amount of boots on the ground, of people who are making careers out of Tupperware. And we were in Indonesia probably four years before we were in China and now it's getting up to that. But that was Mike's earlier point. We're now starting to lap in Indonesia. Yes, we grew another 40%, but that was after we doubled. But now this year in India, we've grown 40% off of 40% previous years. So I think we're there right now.

Rick, by the way, what's the per capita income, disposable income in India versus Indonesia?

They are very similar. The difference between the two is you've got a larger and a faster growing middle class in India. Arguably, it's the level between 200 million to 300 million people and much less than that in Indonesia. You've got about 60% of the population living on the island of Java, but that other 40% are living in places like Kalimantan which used to be called, to you and me, Borneo. And these are very primitive places.

Okay, thanks very much.

Our next question is a follow-up from the line of Linda Bolton-Weiser with Caris & Company.

Hi. I was just curious. I know Avon has always talked about higher gasoline prices impacting rep selling activity. Your business is a little bit different, but is there any kind of impact similar for you guys in terms of higher gasoline prices?

I think somewhat, Linda. We do hear over time, and I can't say I've heard it from our line leaders real recently, that managers having to drive places can be an issue. And we've organized ourselves through our distributors to do things so that they can go to the party and fulfill once kind of a thing, and that's in recognition that people are going to want to be more conservative on their spending. So I think that we've had enough experience that we found ways to manage it. So it's not something that we've really heard called out as being a major driver in our business.

Yes, Linda, I would add to that. I think what Mike said is spot-on. But here's the other thing. We have two different methods of selling. The primary method of selling is GPS, we call it group presentation selling. In our Tupperware businesses, that's called the party. In our beauty businesses, it's just spa or other. But it is 6 to 8 people that come together. And so therefore in Europe, the average party is about $400.When you're getting to Avon, she's selling, she's giving a brochure outside the US every three weeks, and probably the average net per unit, you need to ask them, but when I was there, it was $4 to $6. That's a real expensive sales call for $4 to $6 versus driving to one place where it is $400 for a party and I make 30% on that. You see the difference in the selling method and the value chain.

Right, yes. Thanks very much.

At this time, there are no further questions. I will turn the call back over to Mr. Rick Goings for any closing remarks.

Yes, two things I did want to say in closing, and I think this is really important. In the US, our money centers, typically New York, Boston, Chicago, San Francisco, usually Americans working there. A couple things I see is, from all our time living and working around the world, is a misunderstanding in Europe of the commitment to the Euro. I was there when Sarkozy gave his presentation last week. Angela Merkel did the same one. Europe is committed to the Euro, and it isn't for simple American economic reasons. More than 100 million Europeans have died in armed conflict in the last 100 years, and as Sarkozy said, as Merkel said it in a different venue, the Euro is about the survival of peace in Europe. And, yes, there's one element of this that's an economic component of it. But they have supported not only Greece, we've seen this with Ireland, Portugal. It's a larger looming question with regard to what's going to happen with Spain. But the more time I spend there, the more I see how committed they are. And I only say that because we have a heavy concentration of the Euro.

The other point I would reiterate again of what I said was, I think the key top line growth driver for us that will give us this comfort of particularly emerging market growth is this expansion of the middle class. And the right sweet spot to be is to be in product categories that that emerging middle class wants, and that's why it's working so well for us.

Last thing I would say, I was very pleased that the board and management here came together with regard to having a little bit more firm idea of what we wanted to do with regard to our financial strategic management, with regard to our uses of cash, cash this year. And I hope that gave you a little bit more comfort of what the road ahead looks like. Thank you for your interest in the Company.

Thank you. This concludes today's conference call. You may now disconnect.