Tupperware Brands Corp (TUP) 2011 Q4 法說會逐字稿

Good morning and welcome to Tupperware Corporation's fourth-quarter 2011 earnings conference call. I would now like to turn the call over to Rick Goings, Chairman and CEO of Tupperware Brands. Mr. Goings, please go ahead.

Thank you very much and good morning everyone. I am with Mike Poteshman and Teresa Burchfield. As all of you know some of our discussions will involve future outlook of the business. You know the drill. So I refer you to our position on forward-looking statements. By the way, we know every earnings season puts significant time pressures on many of you, so we are working to try to simplify how we do ours. And key to doing this is we believe -- don't be repetitious. So we are going to eliminate everything we put in the release. We're not going to talk about now.

Therefore what we are going to try to do is give you brief comments from me, Mike, and then open it to Q&A at that time. If this works, let us know. And at the same, if it doesn't let us know what is more satisfying for you. We were generally pleased with the overall business performance for this past year as the top line growth in our pretax ROS excluding items -- it did meet our objectives and showed nice improvement over the previous year in a difficult global environment.

We saw in this situation a number of pluses and a number of minuses for the fourth quarter. We were in our revenue range with sales up 7%, local currency, and our $1.50 of diluted EPS without items was just under the high end of our $1.49 to $1.54 range and after considering the FX, rates got 3% worse on us after we gave our guidance. This came, by the way, and was driven by impressive performance in many of our markets. These gains importantly more than offset the weakness in a handful of other markets.

Let me go through some of the pluses, the notables with strong gains. First I've got to say Tupperware India with an incredible 66% sales increase in the quarter and worth noting, that is the pace they have been on for the full year. Tupperware Indonesia was up 47% and China was up 24% in the quarter. So really in the PAC Rim, these three markets set the tone. Let's not forget the relative populations of these three countries. China is number one, population wise. India is number two. And Indonesia is number four.

I think it is interesting, Archimedes said in the second century BC, give me a lever long enough and a fulcrum on which to place it and I will move the world. Well, for us in the Pacific Rim, the fulcrum for us is the business opportunity that our Company offers and the power of our brand. The lever is really the size of the populations and more importantly, the growing middle class in China, India, and Indonesia. These three countries account for more than 40% of the world's 7 billion population. So we have got a lot of runway left there. Also worth noting, we had double-digit increases in Malaysia, Singapore, and in Korea. So Asia Pacific was terrific.

A couple of other markets with notable increases in the quarter were Tupperware Brazil. This country by the way is the fifth-largest population in the world. Here we came in with a 61% sales increase and, very much like India, that's been kind of our run-rate in that area for the entire year. Tupperware Venezuela up 41%, some of it pricing but some of it real growth. And even Tupperware Mexico had strong results coming in up 16%.

Germany's 10% growth, and I've got it -- it's notable because it's been years since we had a double-digit increase in our Germany and it really showed that they are applying and being very effective with the same kind of contemporarization techniques that we utilized in France. So they're on the grow. Strong gains also in Turkey, where we were up 33%, and Italy, where we grew 30%. Very encouraging. There were a number of our smaller markets also in this portfolio that recorded nice gains including their central Mediterranean countries which is really the Balkans; the Arab markets were amazingly up strong double-digit. And we are having the best year we have ever had in the history of Avroy Shlain in South Africa.

The overall positive performance in these countries with solid growth was the growth of the sales force backed by heightened focus on training. In light of this, I am pointing out now that we have included in the first attachment to our release some details behind some unusual fluctuation in sales force performance indicators versus 2010 really to give you a better understanding. And by the way, we have rather solid formulas in most of the established markets of the world for how we classify total sales force and active sales force, as well as standards for how we purge the inactives. However, a number of our businesses particularly in emerging markets utilize a different kind of a rhythm and we are prepared in Q&A to talk about that but we gave you the notes.

The notables in the sales gains that I talked about of all those markets were partially offset by a handful of markets. And let me cover those. Namely, Tupperware South Africa, Tupperware Australia, Russia, the CIS, and Japan, also a couple of our beauty businesses. And by the way, just as the top performer countries of the world were driven by sales force size largely, the absence of a sales force size advantage was the primary cause behind those that were laggards in the quarter. Let me comment on each of these.

Tupperware South Africa, which has just been a wonderful star performer for half a decade, had a tough quarter that started at the beginning of the year and by the way, the Christmas season is summer holiday season. There were many disruptions in that market starting with strikes, counterfeit products, and a number of promotions that really failed to deliver. So we came out of the gate with not a lot of momentum. However we have got a strong management team there and I believe in the year ahead we will be back to growth. However, probably a bit more modest than we have seen over the past couple of years.

In Tupperware Australia, there we have been dealing with some difficult externals as well as some issues internally. And, simply stated, it's been two years now that we have been unable to get a sales force size advantage. Now we have made some changes to get this recruiting machine moving, but it's taking longer than we expected. But we've got a solid management team and distributor organization in place and frankly, while it's still 11 more months to go, I'm hoping we will see some positive gains this year. In Tupperware Russia, CIS, while still down 7%, we continue to make improvements in this market and also to recognize sequential improvement. Again a wonderful combination of a terrific management team, a solid distributor organization, and yet, we are still dealing with some difficult externals. Most of this started, by the way, with the devaluation of the ruble more than two years ago. But hope to get the traction back again.

And finally, on these markets, let me turn to Tupperware Japan. You all know what happened this year. In spite of tsunami's and earthquakes, we did well sequentially throughout the year. However fourth quarter was a disappointment. It was a combination of not only productivity but also sales activity.

Now, let me also comment on two of our beauty businesses that didn't have a very good quarter, BeautiControl and Fuller. There was weakness in each but each was for a different reason. In BeautiControl, we were down 16% in sales. We have a strong focus there on really training and moving forward. This should help us with our productivity and activity. We were pleased to see the sales force size deficit move and improve to only down 5%. But as all of you know, we can't get a sales increase until we close the gap.

Just over the last two weeks we got 200 of their senior leaders here in headquarters and we are seeing dynamic people with a [Daisy, Chin, Laura], wonderful management team who are committed to getting BeautiControl back on the grow again. Promotions look good. New product line looks good. So early days, but I hope we see an improvement there.

Now, Fuller Mexico. It was down 7% in the quarter and let me comment on why. Firstly, there were externals and internals. Externally one of our key competitors out there -- I don't know how else to say this. We saw crazy promotions going on in discounting and I must say that about five years ago this same thing happened and we responded with the same kind of promotions and we learned, it basically dumbed down our business. So this time, we didn't respond to some of these promotions and because we know we probably share about 50% of the sales force with another direct sales company at any given time, two brochures, that probably impacted us.

However, you also remember us talking about, that in the third quarter, we launched an expensive recruiting promotion and we flooded the business with actually 90,000 new people and I commented on the third quarter call that I thought it was unlikely we could convert them to productive sellers. We said we were going to do our best. We did purge them during the quarter and now we have got a better group to work with. And I hope we can see a modest top line sales growth in the quarter. In fact, we are two campaigns into January and that is -- these are two-week campaigns and so that is most of January -- and it appears our momentum is going in the right direction now. I will be down there in two weeks and know more.

Anyway that is a quick thumbnail of the pluses and minuses. The portfolio has changed dramatically in the last decade. Back in 2000 we were pretty much a one trick pony with Europe and Germany defining performance. Europe is still very important to us in doing well and it offers many opportunities. Yet the fruits of our incremental investments in these emerging markets are really paying off, as well as the relaunches in Brazil and South Africa. So these were solid incremental strategic investments that we are seeing benefit today.

Also, our global portfolio includes a mix of many markets which mitigates, quite effectively, the effects of earthquakes, tsunamis, as well as political and economic disruptions. It's also a natural market basket hedge for shifts in foreign exchange rates. Matter of fact, we just did a regression analysis over the last five years and it's close to flat. Let me briefly comment on how we are ensuring our approach going forward will continue to drive growth. There are, as many of you know, four basic components to our business model that are adaptable to the various markets and [call through] conditions. These four components exist whether we are talking about Boston, Brazil or Borneo.

We are essentially a multi-local business just like Starbucks or McDonalds with repeater stations across the globe. And we simply adapt our business to the culture. For example, McDonald's doesn't sell beef in India and yet they are the biggest fast food franchise. Same concept for us. Now the four components are the product, the selling method, the sales force opportunity and four, our direct selling fundamentals. Think of these as dials in a control panel you can adjust. Let me comment on each.

Regarding product, we always strive no matter what market to have new products represent 25% of our sales. New products do this -- they ensure we always have something to bring to existing customers and a reason to call on them. And then there is the new [flanker] categories like the $140 MicroGourmet that helps us get to new consumer groups like busy working women in Paris. It's this combination that really drives growth from a product standpoint. The selling methods is our second piece and it's really used in every market based on what works best there. Every 1.5 seconds now, a party or a spa is starting somewhere in the world and it is the ultimate social network because it is her friends. Here we strive to keep it entertaining, informative, and up-to-date with current trends which will come back again and again and even host a party.

Component three, our sales force opportunity. Very interesting because there is no retail store rent or advertising expense in our value chain, nor should there be with a direct-sales company, we are able to redeploy about 50% of every retail sales dollar to the sales force in the form of earnings and promotional awards. And when you consider that in many markets there are limited career opportunities for women, this truly is a sweet spot and back to that Archimedes lever, a huge lever. Final component, and a key component, of our model is ever-improving set of direct-selling fundamentals. It is training, it is recognition, it is motivation.

All of these are delivered through a weekly meeting that occurs in every single market. These sessions ensure our 2.7 sales force members have leadership guidance and direction. And it enables us, next Monday, if we need to make a promotional shift, we get to do it everywhere. We don't have to wait for catalogs, advertising, for changes. Now let me turn it over to Mike and he will cover some numbers and then I will come back. Mike, please.

Thank you, Rick. Looking first at our fourth quarter results versus our guidance in October. On the sales line we did significantly better than we had thought we would in Brazil. There we had included a 40% increase in the outlook we gave in October but ended up coming in at plus 61%, as Rick highlighted. Going the other way, we had included in our forecast that Fuller Mexico would grow by the same 6% that we achieved in the third quarter, but we ended up coming in with minus 7%. Taking these two more significant factors together with what went on in the rest of our market, we landed at the low end of our plus 7% to 9% local currency range for the quarter.

In terms of profitability, we were $0.08 worse at the segment level as the benefit of the upside in sales in Brazil and the management of expenses in Asia that we were able to get were more than offset by higher than expected spending by Fuller Mexico and Italy. We did pick up $0.07 from lower-than-anticipated unallocated corporate expenses, interest expense and a lower tax rate, and we did take a $0.03 hit from FX rates that Rick also talked about. All of this netted out to minus $0.04 versus $1.54 for high end of our range as actual diluted EPS without items was a record $1.50 in the fourth quarter.

We laid out our first quarter and full-year overall and segment level forecast in our release. Here I will note that our outlook for a full-year local currency sales increase of 5% to 7% reflects a 1 percentage point negative impact from having one less week in fiscal year 2012 than in 2011. It otherwise equals our longer-term guidance for annual local currency growth of 6% to 8%. The 30 basis point increase forecast for full-year pretax return on sales of 14.2% includes a 20 basis point negative impact from foreign exchange on our value chain and otherwise is in line with our longer-term guidance for 50 basis point annual improvement in the return on sales up to the mid-to high teens. It has been the case for some time our outlook assumes no change in the foreign exchange rate for Venezuela.

Now just a couple more details on our outlook that are not included in our release. We have included an unallocated corporate expense for 2012 as being slightly below the 2011 level and interest expense of about $33 million. On resin, we currently see including in cost of sales in 2012, approximately $155 million which is forecast to cost $5 million less than it would have 2011. The effective income tax rate is expected to be about 25%. Further, cash flow from operating activities net of investing activities is forecasted to be $220 million to $230 million for the full year and that includes $90 million of capital spending. And with that I am going to turn the call back over to Rick.

Okay. Just a couple comments. Thanks Mike, very much. Before we turn to Q&A let me just make a couple additional points on how we are ensuring our performance, that we are now achieving, that it continues. I've got to say personally the biggest internal component which is at the core of the success of Tupperware Brands is our ability to attract, develop and retain the best leaders in direct selling. After all, the institutional skills in this industry are what separate us from our competitors in the industry and I've got to say, as such, senior management and my most important responsibility is the leadership and development and succession planning of these people.

It's the reason I'm out there. I'm just back from Davos this weekend but I am out to Europe again and why I'm out about 70% of the time. Next week I will be with our group president in Europe, Glenn Drake and all of this managing directors. And for four days we will sit there and take apart the business and ensure how we are going to make the numbers quarter by quarter this year and how we are going to develop the best leaders in the future. So that is why we don't -- rarely have you ever seen us recruit anybody, senior person, from outside the industry because the industry specifics are just too difficult to learn later in life. Even our CFO, and I'm kidding Mike here, knows how to do a Tupperware party. It's what drives our business leadership and understanding our business.

Finally, a word about externals. I just returned from Davos. It is interesting -- two takeaways. I don't go over there to do business. I go over there really to be involved in the business of the world. From talking to a number of heads of state in Europe in sessions I was in. It is clear to me, Europe is committed to everything they can do to keep Euroland together. Will it work? I don't know.

But I've never seen such a commitment there by countries and cultures that are so different. And here is simply what they understand. Without scale they can't be a trading force against China. They've got to work together. They also believe that economic interdependence contributes to peace. It is going to take some time and I think is going to be chaotic in the process, but they are committed.

Next, very interesting, the other major theme that came out of Davos this year is the need in this world to evolve to some new kind of an economic model. As this gap in wealth distribution is growing it is believed by some that unrest with the disinfected could turn into more of the Arab Spring-type events. This time directed at the economic diversity here. The problem as many of us discussed is, what model do you go to. We know the pure communist model in Cuba results in nobody having anything.

The European socialist model is not an option because one by one, the governments have been going broke. Finally, it's been really agreed there that kind of a new form of capitalism must emerge, one that is a bit more socially responsible and compassionate and yet still rewards merit and achievement. By the way, that puts Tupperware Brands in a very good place because even in these markets of China, India, Indonesia, she can start with a kit. There is no ceiling on how far she can go in the organization. At any rate, now we will turn it over to your questions.

(Operator Instructions) Dara Mohsenian, Morgan Stanley.

Good morning. So Rick, Beauty North America was weak in the quarter both from a top line and profit perspective, but it looks like in your guidance you are assuming an improvement in trends in 2012 relative to what we've seen recently. What gives you the confidence that the trends will improve and what is your level of visibility for 2012? And then specifically is the competitive environment improved at all in terms of the promotion you are seeing in Mexico?

Hi Dara. I will know more about what the competitors are doing when I am down there in two weeks in Mexico, but these were crazy kind of investments and I was so proud of our management team down there. When we asked, are you going to respond, they said absolutely not. We are not going to make these kinds of discounts. Frankly, we will see what happens and we will let you know and update you there. What I do believe is, our guys have gotten back to stop looking out there and know what your own game is and play your game.

The thing with our Fuller business there is they have got a sales force size advantage. There has been a very strong focus on productivity improvement. That stuff was all launched early in the year and I think the only misstep we had was this over-the-top recruiting in Q3 that actually was a distraction for us. Now turning to the Beauty -- and by the way, January is done for us pretty much at Fuller. And I said these were two solid campaigns in January so it was a an absolute momentum shift and we sometimes say, as the morning goes so goes the day. It really set the tone for what will happen, because the better campaigns you have it usually leads to better morale and better recruiting out there. So I will put that aside.

Do I think we can get gains in Fuller this year? Yes. But I would sign up right now for low to mid-single-digit top line. We have got a very good value chain. It's a very profitable business. Second piece of that is our BeautiControl business and I am very comfortable. It's been the long and windy road getting back. But I feel good about our business there going forward. We've got to get some expense out of it because it's still double the size of when we bought the business but with business like that you ought to be able to make 10% to 15% our ROS on it and still scale.

Okay. So it sounds like it is more improvement in January then much clarity in the competitive environment to sum it up quickly.

Yes.

Okay. And then, obviously you had a large dividend increase here and the payout ratios going up. Do you think you are now at the right payout ratio or is it reasonable to expect the dividend increases at a greater rate than EPS growth over time as you look forward over the next few years?

Firstly, obviously the combination of things that go into that there are confidence with regard to the performance of the business and what cash it throws off. But the other piece is our evaluation of what we think our needs are going to be. And investment-wise, I think we have got a good handle on both of those and so I don't see any incremental need for any big bump in our capital that would inhibit us from keeping along the same path. Mike, why don't you comment.

Exactly and that's how we set the payout ratio target, the targets that we have talked about before. We have said that we think we are likely to be in the 30% to 35% range. That's of trailing EPS without items. We were at 32% when we set the dividend increase last year. We are off to a 32% now. Our earnings per share without items went up in 2011 by 20% which is the same increase in the quarterly dividend that the Board declared today. So it is really executing on what we said last year.

Okay. That's helpful. And then did you give a resin impact in the quarter, Mike?

The resin impact for the quarter was about $4 million negative which is what we had guided to in October.

Okay. And just given gross margins were up nicely year-over-year, can you give me a sense of what drove that, and more importantly, a forecast as you look out to 2012 with the resin impact being more benign. Should we expect significant gross margin expansion to continue or were there some individual items in the quarter that the strong gross margin performance won't continue.

Right. There were several things that were benefits for us in the quarter. We didn't do a lot of B to B in the quarter but we did have a better margin than in the past on what we did do. We saw some benefit from shifting production to some of our lower-cost plants. One example of that is in Japan or product for Japan being made now more in Korea. We had some lower input costs as we resolved some VAT issues, some less obsolescence.

So there was a combination of factors that did offset, like you said the higher resin costs, that $4 million. We also were able to improve our mix in some of our areas. So some of those things will continue, some of them were more one-time. As we start to look out next year, we said that we put the resin year-over-year benefit would be $5 million. That starts to really come through in the second and third quarters of 2012. When we look at the first quarter as we balance what is underneath our outlook, we are expecting the GP to be a little bit better and probably the DS&Ato be a little bit worse for that ratio to probably rise a little bit as well.

Okay. And DS&A was up a lot year-over-year in the quarter and a lot worse than we expected. Is that mainly Mexico or have you guys seen the competitive environment for talent increase around the world?

It was really mainly the two factors of the two places that we also saw in the third quarter, so not only Fuller Mexico but Tupperware Italy we invested significantly mostly on the DS&A line. In the third quarter that investment incremental spending was probably in the $10 million or $11 million range, if you look at both of those units together. It was lower than that in the fourth quarter, maybe $8 million or $9 million, still higher than we had planned for because we said we were going to still spend but at a reduced level. We did reduce it but not quite as much as we thought we would. That probably, net accounted for the 170 basis points or so that we were worse, quarter over quarter. There were a lot of other things, pluses and minuses but if you slice like that, it really was the name of the game.

Okay, thank you.

Dara, a sidebar thing on that with regard to these investments and particularly countries like Italy. We have never had double-digit increases in Italy and it's a great direct-selling market. So we have made, Glenn and his management team over there, a real concerted effort starting this last year. We are really going to attack these markets where we have under-penetrated, and that includes not only Italy, but I was just over there, this whole Eastern corridor of Eastern European countries, starting with Poland where we put new management in and even down through Romania, Bulgaria, and throughout the Balkans. The brand is highly respected there, more than 100 million people in that Eastern corridor and it's like new business for us there. So there will be a little investment over there but gross margins are very strong there and I think we are past it in Italy right now, Mike. We've got a 30% increase?

That's right. We definitely benefited on the top line and we think we have ourselves better organized as we go into 2012 to be able to continue to drive those KPIs on the front end as the total sales force, the active sales force. And we've also got a very nice lift in productivity in that market. But we think we can do it in a more moderated -- on a cost structure that makes more sense that we can get a -- the right kind of contribution margin as we continue to grow.

Thanks guys.

Olivia Tong, Bank of America Merrill Lynch.

Good morning thanks. Wanted to talk a little bit more on DSN&A and if you could talk about your expectations going into next year. And following on that, perhaps maybe the profit expectations by region so that we can understand sort of where you're thinking this spending is going. And are there other areas of investment or other regions/countries that perhaps need a little bit of a boost to accelerate the growth or stem declines? Thanks.

Sure Olivia. You saw in our release, I'm sure, that we said we thought we would improve our ROS in each of the segments slightly next year. And that is what we think. As we look at the investment side, clearly the bigger impact of those investments was in the second half of 2011. As opposed to the first half. As we moderate what we are doing and are able to grow our business that with the level investment that we want to have, we will see that start to flow-through. So we weren't looking as we started the year for any major bump one way or the other on a segment by segment basis. Because yes we are investing in some markets, in others we're getting a very nice contribution margin as we grow the sales as we are really able to lever our fixed cost.

We think we are going to see a normal kind of growth in ROS for next year, overall. We really called it at 50 basis points in local currency, although we are taking somewhat of a hit from FX on the value chain and that is why it comes out to 30 basis points on a net basis in our outlook.

Got it. Thank you. Are there other markets where you think that they potentially need a boost? And following on that, how long do you go in Mexico and Fuller Beauty not responding to some of the competitive dynamics that are going on there? And then within BeautiControl, for quite a while now you've talked about how you expect this to get better. And despite that, things have continued to look pretty sluggish there. Is there a need to do something of little bit more drastic within BeautiControl in order to get that business turned around? Thank you.

Hi Olivia, Rick. Firstly with regard to -- there are three parts to that question. Are there other markets out there where -- we've got enough in our normal value chain that we can invest and we don't see the need right now. We have seen markets like Italy where Tupperware has had a presence over 50 years and we just never got that momentum going. It's been very effective, and it wasn't just resources. We put in a dynamic new leader to the business, one that has led a number of other markets well.

Then we said okay, dial this up a bit. I think we dialed it up a little bit too much with regard to some of the investment. But boy, Michael got that thing moving again and now there is a whole different attitude in Italy and we have got 18% normally in our value chain for promotions. So there's enough there already. I would say that is pretty much the same in all of our markets of the world. So you never say never but I can't see any right now.

Second piece, Mexico. Frankly, we are going to play our own game in Mexico. We dominate in the whole fragrance business there with regard to our Fuller business there. We are now taking some of our sub-brands, Avroy Shlain, which is our upper-tier sub-brands. It is our kind of the Lancome of the Fuller brand down there. And we are building this brand up. What that is leading us to is riding the wave of growing middle class. That is some of the same kind of thing you really see that, that's what's happened to Natura in Brazil. They are getting more upscale brands.

So we're not going to follow that and do more dramatic discount. We make north of 20% our ROS in Mexico, so I would even tell you we would be willing to lose a little on the sales growth to keep a solid business in place and not dumb down our brand. Because you end up paying for it. You may have a year or two good but then you -- in an aspirational product category like a beauty brand, you can see the problem that is going on in the wars in Brazil right now. And in beauty you dumb down your brand, growing middle class doesn't want it. So I think we are going to stay with our game in Brazil but -- excuse me in Mexico. We will know as we continue to move forward. I am staying close to it and Simon is as well.

Thirdly, BeautiControl taking way longer than it should have. Why I feel different going into this year is we have a leader there who I worked with back in a former life who we brought aboard here. She ran, Daisy ran our Korean business, but she came out of beauty. And she has been so well thought of there and she is a pistol. The mood has changed at BeautiControl. And I think she has begun to attack the problems. And by the way, many of the problems in BeautiControl were self-imposed there. So I'm going to be very disappointed if we don't have an increase this year.

Thanks very much.

Mike Swartz, SunTrust.

Good morning. I guess my first question is touching on the Asia Pacific business and wondered what would be the established side of that. It looks like the sales trends really deteriorated there in the fourth quarter. Was there anything that happened, kind of one time in nature, and could you maybe point out some of the weaker countries? I'm guessing it's the Australia, Japan but any color would be appreciated.

Let me comment on one piece, and then Mike will pick up on it. Firstly, put it in perspective, there is only 21 million people in that Australia, New Zealand. And so we are a big direct seller there. That market there was, for four out of six years, it was our country of the year. So we have a big and profitable business there.

Very interesting, the economic crisis in the world that most of the world saw in 2008 -- it was delayed by about a year there and particularly in the minerals -- so much of the economy is based on that in Western Australia where truck drivers were making $150,000 a year. That fell apart in 2009 and 2010. And so that's been a wind in our face there. So Australia, New Zealand is -- we are all over it and we have made the changes. But the other owned piece of that is the Japanese business and you know what happened in Japan this past year. But before that we had issues, but they were problems I believe of our own making. Mike would you pick up on that?

Absolutely. So we made a strategic choice in Japan over the last couple years really to emphasize houseware products, yet still include some third-party source products as we have in the past. But instead of being in a more diverse category mix it's more, closer to home. We are also working on and being successful at building more of a selling culture there and we did that through how we set the standards for our sales force, what you need to do to qualify under promotional plans and triple rewards, things like that. We're starting to see some benefits of that but that is a slow build kind of a thing. So I wouldn't say that there is a one-off there as much as we are executing on a transformation that is still in the fairly early stages.

Australia, I think is just as Rick mentioned, it was a tough quarter there both because of the externals and waiting for some of the things that we are doing to really kick in. There, it is things like lowering the barriers for the sales force to come and we've got a very highly trained sales force and leadership sales force, leadership group in that market. We are used to asking for several parties being up as people come into the business and the introductory kit price reflects that, it's a high-cost kit. So we're looking at all of those things to make the barriers for entry lower. And at the same time at finding ways to build more of these first-line sales leaders, the people who recruit other people because that is really the key driver for our business. So again, not one-time items but things that are multi-quarter build to them.

Great. I mean touching on the subject. Should we start to see that APAC established business turn as we move through 2012 or is that more of a 2013, '14 story?

Well I don't know that we would expect to see this kind of a high team double-digit decrease in sales. Certainly we would hope to see some moderation in that. But we will have to see exactly when we are reporting positives again.

I will tell you from an inside standpoint their profit plans are for sales increases in Japan and Australia and New Zealand. We will see if they can deliver.

Okay great, thanks for the color.

Sofya Tsinis, JPMorgan.

Good morning. Can you guys update us on the efforts that you're seeking to improve the business in Russia and whether you expect it to be up at some point this year? Thanks.

Yes. The first thing I would tell you is, Sofya, as I mentioned earlier, we really started to see that slow, it will be two years this March when you saw the devaluation of the ruble against the euro. What that shook out for us is, we had grown over 10 years from 6 distributors to 196. What it put at risk was those fringe distributors, about 50 of them, who were smaller and had an expense base that required sales increase for them to keep it at that level. And it just took the wind out of their sales. And so what we have made the steps of doing is reconfiguring that distributor organization. Now we are down to about 160 traditional distributors who are bigger and better distributors than they were but you lose some sales force in the process. We had almost 100,000 sales force. Mike, I think we're in the 70s now there.

Right.

But I would say Sofya, also it's the track we went down in Germany, too. We had 167 at one point, distributors in Germany and Mike, I think we are down to what, 150 now?

Yes.

But they are bigger profitable ones and following the same kind of a track we did and able to manage a bigger, more productive sales force. So I think that management team in Russia is -- we've got a terrific leader in Russia. The management team is strong. The core distributor organization have been through a lot and they are powerful. And I think the worst is over there. Sequentially, we have had improvement quarter by quarter by quarter. The first thing to look for is when we have an incremental sales force size advantage, that ought to be the precursor of the next quarter of sales increase.

Okay, thanks, Rick. And final question. In terms of share repurchases, I saw your guidance for Q1, but can talk about your outlook for the full year in terms of repurchases and how the pace of that will shake out for the year? Thanks.

Kind of like the dividend picture and the overall uses of cash approach, we are executing on what we said. We said we would target this 1.5 times EBITDA leverage over time. We were 1.4 for full-year 2011. We talked about the specifics for the first quarter at the 50 million repurchase rate because we had been at 90 million, as you know in the second third and fourth quarter last year. But that was also using the cash that we have on hand at the beginning of '11. So this is I guess a more normal pace. If you look at what we included in our outlooks for the number of shares, for the full year it's got 56 million full-year 2012 and that is the diluted shares. And that's versus 61.4 for 2011. So it's a 9% decrease. That builds in the benefit of the repurchases in 2011 that hadn't fully gotten into that number. So we are basically assuming that the 50 million is the starting point and we really just wanted to be specific in this case because of the change from what we were doing in 2011.

Thank you.

(Operator Instructions) Linda Bolton-Weiser, Caris.

Hi. I just had a general question about beauty direct selling in the US market. It seems that Avon is having so many problems and you are having difficulties getting BeautiControl to grow. Is there something about the market or the structure of the market or the competitive nature of the non-direct selling beauty companies that makes it more difficult in the US? And Mary Kay being a private company it's hard to know. But how is Mary Kay doing? Do you have any idea if they are growing well in the US or not?

I don't know what Mary Kay is doing again because they are private, Linda, and good morning. But I will tell you this from friends of mine in the beauty business and the retail side of the beauty, it is a very tough environment. I would compare it -- one of the issues with regard to the beauty business in the US from my former life is the US and the UK tend to be price-value markets, whereas continental Europe is a high-quality market. My former beauty life, we could never sell the same kind of the skin care packaging that was required in France or Switzerland or Germany or even Italy. You could never sell that in the US or the UK because Americans wouldn't -- this is Wal-Mart country here and CVS country. And so it is very, very challenging. It's even very challenging with regard to prestige fragrance.

And then what's happened in the retail environment is color cosmetics was driven always in the past by lip and nail and you've seen what's happened. The nail business has collapsed with the introduction of -- its so cheap to go to one of the Vietnamese spas that have come up all over the country. So there you are left with lipstick. Do you see the point I'm getting at? In a price-value market you have absolutely all kinds of competition and you have the lowest margins and particularly in color. So what you have to do is pick where you can win. And our BeautiControl business, skin care. That's why we've shifted to skin care.

I've got to tell you something really positive anecdotally, but actual. We launched the most expensive BeautiControl has ever sold over the past two months which was $95 and we couldn't keep it in stock. So what we basically said is, we got to differentiate it. The battleground, you don't want to sit there and do it with color cosmetics, only if you got to have representation. We are going to do it with fragrance to the Hispanic market in the US and with skin care. This whole, baby-boom group who is reaching the point of never wanting to grow older, the whole thing of being able to slow the aging process. So you've got to pick where you win in there. I will tell you we are seeing in -- we took the Fuller business and we couldn't use that brand name in the US but our prestige sub-brand was called Armand Dupree and we launched that what Mike, five, four years ago?

Four years, yes

Four years ago. Starting with Hispanics and actually with immigrant Mexican-Americans. They may be immigrant or not but they are living here. And starting in Southern California and Mike where are we -- this is better products now and what is happening with that this year because we don't really report on it?

We've had good growth there. It is close to a $10 million business.

But it's double-digit. It's really starting to cook. So difficult battlefield over here.

Okay. Can I also ask about if the euro were to continue to devalue further in 2012, can you give us some idea as to some levers you might be able to use to offset -- to what extent you might be able to offset like maybe additional share repurchase or do you think the resin would be an offset if that continued to go down as an offset? Can you just give a little color on that?

Linda, we see some impact from FX on our value chain itself. But mainly the that impact is translation. Because we do manufacture and source in Europe, in Euroland countries, we don't tend to see an impact in that sense. Of course it does impact the value of what we earn and the cash flow we generate. We actually right now, starting right towards the end of 2011 have close to $200 million of our debt is denominated in euros right now, so that would also provide somewhat of a hedge in that sense.

Okay. Thanks a lot.

By the way I would say on that, too, Linda, one of the country presidents I spent some time with and have gotten to know over the years, while I can't comment the name, but we had the discussion on Euroland and there were a lot of discussions this last week. As he said to me so accurately, he said Rick when we created Euroland, we built a room with no doors in it. So you couldn't leave. Because I was asking the question, how is it going to unravel once Greece -- if they don't take the fiscal responsibility and discipline. He said, we built no doors leaving. And so therefore you saw the dramatic steps this last week. Has it been implemented no. But the dramatic steps that they are prepared to set up a separate commission to take over and basically take the checkbook away from the Greek government.

So they are trying -- and I've got to say is, this individual said to me, I want you to think about how long it took for you United States to get your act together over here. We've been doing this less than 20 years and he said, what are you guys going to do about California? Are you going to throw them out? So it's helpful to have these discussions because they do understand Spain can't compete against China unless they are part of Euroland. So they are really committed to this. We will see what happens.

Gregg Hillman, First Wilshire Securities.

Good morning. First of all, I believe in the fourth quarter that the percentage of sales in the emerging markets went down, I think it was like 62% in the prior quarter. I was wondering why was that and whether there is Christmas seasonality in the established markets that would cause that to bump up?

Gregg, there is a little seasonality in the sense of the mix between established and emerging markets. If you think about Europe, yes we have a strong fourth quarter. That's because of big promotional pushes early in the quarter. And in contrast in the third quarter in a lot of those markets in Europe, or probably all of them, the vacation period is much more of a thing for than it is in the US and in a lot of emerging markets. So the year-over-year increase -- I don't have it in front of me -- but we picked up I think 4 points, maybe 3, in share between emerging and established markets versus last year. You are right, sequentially we always see a bump in the third quarter towards even more from the emerging markets and that has more to do with the timing of our promotional planning programs every year and vacation.

(multiple speakers)That should reverse in subsequent quarters. That should go back. Emerging markets should go back up as a percentage of overall sales.

We were 58% in Q4. We were up in Q4.

But it was 62% in Q3. I mean emerging markets.

Mike answered that. Europe goes on vacation.

The other question I wanted to ask was, Rick, was about India. Number one, I mean you have kind of really fast growth. Number one, are you able to better manage really rapid growth today as an organization than you were maybe, I don't know, 20 years ago. And then also are there any things happening in India either with social media or mass meetings or whatever that could cause sales to accelerate from where they are at right now?

Firstly, kind of tongue-in-cheek Gregg, because I know you -- 20 years ago we didn't have rapid growth to deal with. So we are dealing -- we have more meetings right now on capacity -- back then it was capacity utilization. Now we're talking about expanding capacity without making much of an incremental investment. And that's why you see today more than 40% of our sales coming from not Tupperware facilities. So we really learned the Apple and the Nike model. And by the way, I call your attention to this smile curve we talk about. That high value added is that by what top of the smile and that is product creation and perfection. Then you try to manufacture or convert it from raw material with as low a cost as possible and often you try to put that in low-cost countries and then you then go back to high value added is the sales, marketing, branding components out there. In those countries of the world where -- like for example Belgium and France where high manufacturing personnel costs, you go in our facilities there and you don't see a lot of people.

So we have tried to keep that really so it works more effectively there. We really are learning how to utilize and expand capacity and that's where we are making the investments.

And on the distributor level, I know that you have a new category, the distributor is like a super manager that's below the distributor. I forget what the terminology you used. But how is that unfolding and what is the number of those people in India now versus a year ago and why does that allow you to grow better?

Why it works -- it's called team leader. And why it works is, distributors in most of those markets --she not only has to be a sales leader but she has to have administrative skills, as well. Team leaders don't have to have a fixed location. She basically is a sales leader almost like satellite off that bigger distributor and we're learning particularly, the great model of that is in Brazil. So you didn't have to have that fixed cost base in there and you also didn't have to teach her the other side of the management skills. All she needed to do was learn how to recruit, train, motivate people. So it's a wonderful combination and a terrific model that we evolved to.

Gregg, the other part of your question is social media. I will tell you what's happening there so effectively -- are the governments and markets like China, India, Indonesia, South Africa -- why they feel so strong about what we are doing is we are teaching women -- or people on the ground there -- we are teaching them really a lot of skills she never had. And it gets down to the whole point that therefore she has confidence and then she has influence. When I was in Indonesia -- we sponsor a weekly program called She Can, which is really about teaching women and showing women confidence and we used women from all walks of life and then there is a huge, even though it's a Muslim country and the largest Muslim country, a one-hour TV special with all of their -- it's like the Oscars here, with their top performers and then they bring forward women in all walks of life that have really overcome situations and are great role models and it's all sponsored by us. So when I'm there for meetings we'll get 5,000 people. I don't speak Bahasa, but we use simultaneous translation and we are doing it all across Indonesia and particularly across India. I'm in Chennai in I think three or four months but we have hit every major city in India. It really does work. Women are thirsty for this kind of opportunity.

Final thing I will say. Four out of the five largest populations in the world and we are in all of them. The president of our business is there, is a woman. And she is not there -- we did not appoint her because she was a woman. We appointed her because she was terrific, she grew with us and she just happens to be a woman, which sure works well.

Okay. And then finally, for the distributor, you said that they have administrative duties and sales duties. Do support them on the administrative side with additional funds or help or something like that to help to keep up? Like in a country like India?

Gregg, that's really built into their value chain so they are making a margin on the sales and then we certainly support them with training and models for the systems and so on, so that it's kind of a plug-and-play. But we are not per se doing it for them.

But we have, in every one of our Company headquarters out there a service call DAS, Distributor Account Services, where we would go into your distributorship and just make sure, give you kind of the consulting guidance that you are doing the right things. Because if all of a sudden -- we have some people out there, many from very humble circumstances that are now running $5 million, $10 million businesses. And to make sure, they don't blow it. (multiple speakers)

If they had a mini-warehouse who pays for it?

They do.

They go out and buy a facility? You don't do it for them. They have to buy --

We show them how to do this.

Okay. Fine. Thanks.

There are no further questions at this time. I would now like to turn the call back over to Mr. Rick Goings for any closing remarks.

It didn't look like we saved you guys much time, but we have made an effort though. And I appreciate really though, the color of the questions and the direction that went in and please if you would give Teresa, Mike or me any feedback on how you would like to do these to be more efficient in the future. Thank you very much.

Thank you for participating in today's conference call. You may now disconnect.