Tupperware Brands Corp (TUP) 2012 Q3 法說會逐字稿

Good morning. My name is Cassandra, and I will be your conference operator today. At this time I would like to welcome everyone to the Tupperware Brands Corporation third-quarter 2012 earnings. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session.

(Operator Instructions )

And now I would like to turn the call over to your host, Rick Goings, Chairman and CEO. You may begin.

Yes, thank you and good morning, everyone. I am currently in Chennai, India. It is evening here, and I'm along with Asha Gupta, who is not only our Managing Director of India, but an area Vice President in this part of the world. We're doing a leadership workshop for about 1,000 of her people here in India. Mike Poteshman, our CFO, and Teresa Burchfield, our head of Investor Relations, are back in our Orlando headquarters. Should there be any problem with our phone line, I fall off, Mike will finish it. As a matter of fact, we had a power outage about five minutes ago. As always, some of our discussions will involve the forward look of our business, so you know the drill on forward-looking statements.

We ended the quarter with a 6% sales increase which was right in the middle of our local currency range. Emerging markets, as you can see, they made up 66% of our sales, and they increased 11%, and our established markets decreased 3%. The adjusted EPS for the quarter came in at $0.95 which was $0.03 over the high end of our range. $0.02 of this was from better exchange rates, but the rest was really from better operations and improvements in the value change. Mike will as always will dig into that as we go forward.

I don't need to tell all of you that there is a lot of disruption and turmoil going on in the world, and that really speaks to the strength of our business model and the ability to deliver really strong growth in spite of the externals. I am pleased with this performance this quarter. We had a few items that I will point out which caused some distortion when comparing year over year. I will get into that.

Also talk about a number of the units where we have been working to see improving trends, and we are starting to see the initiatives we have implemented paying off. So I'll again dig into that. Also I will speak to the handful of markets where we still have work to do to get it back on the trend lines in the right direction. Before I dig into those markets, though, let me say that I frankly only had one year in my career of running global portfolios where we hit on all cylinders, so I will keep trying for perfection year after year. We know, because of our business model, that we can achieve still solid top and bottom line growth, and we don't have to hit on all cylinders.

Now let me dig into these business units. First I'll comment on our outstanding performers in the quarter. In the established markets Germany really led the way. It is our largest market in Europe -- continued to deliver strong growth -- up 7% in the quarter. And you've got to remember, too, that's summertime in Germany so things kind of come to a halt in Europe for many. So this was really good. This, by the way, is the fifth quarter of mid to high single digit growth in Germany. Also it is worth noting the Nordics market, that makes up most of the Scandinavian markets plus Finland, were up 13% in the quarter in both of these markets were soft a couple of years ago. We also had quite a number of medium-sized and smaller established markets that were up in the quarter, probably too many to mention, but I will mention a few. Belgium and Spain were both up mid- single digit, and that's kind of shocking to hear of this improved performance in Spain.

I was there this past month, and our organization there is really taking advantage of the high unemployment rate. A lot of challenges on consumer spending, but a larger sales force helps to mitigate that. The Netherlands also was up in the quarter over 30%. Now let me turn to the emerging markets. There we continue to have a number of standouts contributing to our 11% emerging market sales increase. I will start with Europe. Turkey is an emerging market there. We grew 30% in the quarter. Also very pleased with the 13% increase we saw in Russia and our CIS businesses. So, it is good to see, after a couple of challenging years, that that business has had now a number of quarters in positive territory, and I think we've really implemented the right fixes.

Avroy Shlain, our beauty business in southern Africa, also grew in the quarter and was up double digits, 13%. In Asia Pacific, Indonesia, now our largest Tupperware market in the world, grew over 30% in the quarter. And this was on top of they lapped a 50% increase the same quarter last year. India grew 50% in the quarter, and we continue to see strong trends in the underlying performance indicators. Sales force now is over 180,000, but I will dig into that with Asha's help in than a minute before turn it over to Mike. Malaysia and China -- they were also up double digits in the quarter. Turning to the emerging markets in South America, Brazil, 30% up in the quarter, Venezuela, up about 30%.

I must comment though, Venezuela was mostly pricing, and we were sad with this Chavez's re-election, but our business continued to there to hold its own. Tupperware Mexico and our beauty business in Uruguay, Nuvo, both were up double digit in the low teens. Now with the higher anticipated levels of growth of the middle class and many of these emerging markets, I think I've quoted before that we're going to see this 0.5 million middle class even in Asia grow to 1.7 billion in the next eight years. But there's a lot of the same thing happening in Eastern Europe and in South America. We are pretty low on our penetration in most of those markets. And if we keep this strong productivity we believe, as the premium brand, as the middle class grows, we will grow for many years to come. Now I want to take a minute and point out some distortions to our numbers when comparing year over year in our beauty North America segment.

We pointed out last year in the third quarter that we had implemented some very aggressive recruiting campaigns and that Fuller Mexico business, you probably remember, being very critical in some of those initiatives. Anyway, we ended the quarter with a 19% sales force size advantage after coming into the quarter with -- even with prior metrics. By the fourth quarter most of these new recruits, though, had been deleted due to inactivity. In essence, we threw a lot of promotional dollars at it, got low quality recruits, did not have the ability to train the people, and we ended up flushing them in the fourth quarter. You are not going to see us do that again. Anyway, we estimate for year over year comparison purposes, this had a negative 3.5 percentage point impact on the total sales force size for the Company overall when compared with Q3. Ending sales force, comparing it 2012 to 2011. Mike can amplify a little bit more on that. He's got more of the details in front of him.

In conjunction with these recruiting campaigns, we spent very aggressively and estimated at the time in Mexico we spent $7 million to $8 million above our normal level to get those recruits. We made the decision we were not we to do that again, and our approach with our Fuller business is to take advantage of the strengths we have, particularly in fragrance. And it also introduced more premium type products like skin care into the market. So I was just there with Simon, and I think we've got the right kind of initiatives in place. We will continue our focus on recruiting and closing the sales force size gap and also getting an advantage there but at a more normal pace. As a result of this approach, our spending -- incremental spending was about 50% of the level that it was in 2011. So we're we are starting the fourth quarter with this business with a large sales force deficit in Mexico in the Fuller business, and its going to be another challenging comparison. But, as we get into 2013, you will see some normalization.

Moving on, I'm also pleased to report we saw a positive trend in a number of our other businesses. We've been discussing the ongoing implementation of growth strategies in a number of these. Now we are starting to see some returns. Firstly, I with last week at BeautiControl, and it is good to see what is happening there and the progress. We were down just 1% in sales in the quarter after having being down 11% in the second quarter. So, hopefully in the next couple of quarters you will start to see pluses in our -- not only in the top line sales but also on the sales force size. We are still down mid- single digit at the end of the quarter, but our active sales force did improve.

In Europe sales in France are improving. As a matter of fact, we were up 1% in the third quarter after having been down in the second quarter. We did see good activity from that French sales force, but we remain focused on really getting a further sales force size advantage. We also saw a trend improvement in Tupperware South Africa. As you recall, we experienced quite a bit of disruption in the back end of this past year, at the beginning of 2012, with the sales force, after there were knock off and counterfeit products introduced into the markets -- flooded into the markets. I was pleased yesterday our General Counsel sent me a picture of ground confiscated and ground products that were confiscated by the authorities there. And so we weren't going to settle in until we saw that stuff ground-up. We did not want it leaking out back into the marketplace in another channel.

However, for South Africa we were still down slightly in the quarter, but there was a nice improvement over the second quarter where we were down double-digit. Overall while I would not necessarily call these -- all these businesses I just talked about in the victory column. Sequentially we are seeing improvements in the underlying key performance indicators. Anyway, we will continue to report on our progress in the next quarter.

Let me take a few moments to discuss some of the businesses where we still really have some work to do. I have already discussed our Fuller business and what we are doing there, and I feel quite good about this next year in the Fuller business. We are making some changes not only with regard to our products and our focus on new product introduction but importantly in sales force structure, and that should be a real plus. In Tupperware US and Canada we were intentionally this quarter less aggressive than last year with our pricing and our approach and promotions, which along the lower sales force, size resulted in sales down to low teens but a better value chain. So, net net, yes, we could have invested more in promotions and actually literally bought sales, but that is not sustainable.

As a matter of fact, in direct sales, you end up dumbing down your sales force. We were looking for a solid path to sustainable growth. Our two major focuses in the US and Canada are to close the sales force size gap and two, to leverage the power of this really powerful Hispanic sales organization. In Asia-Pacific we continue to leverage on implementing our strategies in Tupperware Australia and Japan. We have seen some improvement in Australia sequentially, and, in Japan, we are starting to see some traction related to the key initiatives to recruit and develop more active sellers and get that product mix back toward Tupperware products. We were using a lot of high-priced third-party products in the past.

Anyway, we believe that the focus we have now been on we should be able to manage our portfolio for growth in sales and profits in the years ahead. We continue to focus in four keys to continue growing our business. And it's number one, innovative products; two, the right kind of dynamic selling the methods, third, a compelling sales force opportunity; and last, real direct selling fundamentals. Now I made a decision earlier today. It's kind of ridiculous for me to be here with the second largest market in the world and one of our most dynamic growing markets not to get a little amplification from our management team on what is going on here. So I would like to ask Asha to kind of expand on what's ahead. We were up here 50% in the quarter. I think we were up 70% this last year, so it's been dynamic.

So, Asha, do you mind kind of shaking down a little bit?

Thank you, Rick. First let me begin by putting India in perspective. And just in terms of population, you talked about it, within the next 10 years, India's middle class is really expected to exceed 500 million, putting us way ahead of China. You remember we opened here in the mid- 90%s. It took us about five years to break even and another five years to grow and develop a strong distribution and sales management organization which is really the leverage to produce dynamic growth. I am kind of pleased to report that the [kegel] in the past five years has actually been about 40%, and the return on sales on our business has been a healthy high 20%s. And of course conditions exist in India that make our products and our business opportunity just perfect.

As much of the population is large and growing. The emerging middle class of 300 million plus that we have currently -- what is really interesting is that they want both the opportunity, and they love the brand. Less than 30% of women in India are currently employed, and that gives us a significant opportunity to focus on providing them the business opportunity. It's actually kind of music to their ears, and we are building up traction with some wonderful campaigns at this point in time. The product itself is at sweet spot where the middle class Indians actually spend their money. So all of these conditions give us the significant confidence that the current growth that we are experiencing is going to continue well into the future.

Asha, thank you very much. Before I let you go, one question I am often asked about our emerging markets, particularly the ones with the largest populations like China, India, Indonesia, Brazil, I am asked regarding these markets just how much more runway of this kind of growth do you think we have left? And why don't you amplify your point of view for India?

If I just have to sum it up in a word, Rick, lots. We have just a lot of headroom at this point to grow, and let me just explain. In the last 16 years or so we've begun in 63 cities. And, even in those cities, we just estimate we have about 10% to 15% real coverage. And the customers need to have access to Tupperware even further. So we have programs in place that get us going in that direction. However, just down the road I see another 40 cities being added to this 63 original cities, not to mention or forget the [Rudel] market which is a completely different piece that we can look at for the future. So, really there is a tremendous opportunity, and just doing a rough backup envelope cancellation, I can see the sales force size expanding say 10% in the coming years -- to 10 times in the next few years.

Wow. We have a 180,000. And that may sound like an incredible number. It is, but when you said their look at Mexico, with just north of 100 million population, and we've got a sales force there north of 0.5 million. I think we're north of 600,000. So to serve this kind of a market, particularly where it has a less developed retail infrastructure, this is clearly going to be her biggest market in the future.

We are doing everything to get there.

Yes. Thank you very much. Mike, let me turn it over to you.

Thanks, Rick. First, I'd like to get some insight on where we varied from our expectations in the third order versus what we said in July. We had several modest subsides versus the high end of our sales outlook. These were in France, Turkey, Nutrimetics, Australia, New Zealand and India. At the same time, we had some downsides versus what we had built into the high end of our outlook at Tupperware Mexico and Venezuela and, more significantly, at Fuller Mexico, Tupperware US, Canada and Brazil. Among the downside units the comparison versus last year were actually very good at Tupperware Mexico, Venezuela and Brazil. The hits were really at Fuller Mexico, where we had a bigger impact than we had foreseen in the high end of our outlook from lapping our third quarter 2011 aggressive recruiting approach, and in the Tupperware US and Canada business, where we knew we had a smaller sales force going in but where we got less out of our programs than we had expected.

Rick mentioned that the way we ran in Fuller Mexico resulted in more profit than last year, even with much lower sales. On the profit side, notwithstanding our sales coming in at the midpoint of our local currency range, we beat the high end of our guidance by $0.03 in dollars and $0.01 in local currency. This reflected the drop-through on better-than-expected sales in Europe, a higher operating margin in Brazil than we had expected if we leveraged our spending, with a partial offset from the lower-than-expected sales by Fuller Mexico. In Brazil, we didn't yet make all of that changes with our sales force we had anticipated in light of some new regulations that country that I mentioned in last quarter's call. The rest of the changes there are now planned for this quarter. Taking the sales and profit results together then, at 11.8%, our pretax profit return on sales in the quarter excluding items was 30 basis points better than the high end of our outlook range in July and 80 basis points better than last year.

Versus last year this is even after overcoming a 50 basis point hit on the ROS comparison from a weaker US dollar and how that impacts our corporate and interest costs as a percentage of sales. Turning to our outlook for the fourth quarter. Our expectation is for 5% to 7% local currency sales growth. Including the first nine months of 2012, this will result in a full-year 2012 local currency sales increase of about 5%. You should recall that, due to our fiscal calendar including a 53rd week in 2011, we are taking an approximate a 1 point hit on the full year comparison. Also, as you saw in our release this morning, we issued preliminary sales guidance for 2013 calling for US dollar and local currency sales growth of 5% to 7%. This is one percentage point lower than our longer term guidance and takes into account what we're seeing in our markets both internally and externally.

Our longer-term three to five your outlook is still to grow local currency sales at 6% to 8% per year from 2014 on. We get there based on our continuing innovation with new products, anticipated growth in our emerging markets from capitalizing on our runway for further penetration and productivity as well as our continued focus on our established markets as we target areas where we were underpenetrated and where we continue to promote our compelling earnings opportunities for women. When we look into this longer-range forecast period, we now perceive local currency sales growth in our emerging market units coming out at about 10% and in our established markets standing out in the low single digits. In the emerging markets the penetration and productivity opportunities we have are significant, but the base we are growing off of has continued to rise. With the established markets we certainly expect them all to grow more than in the low skilled digits year.

But on an outlook basis, we recognize that our history is that we have some puts along with the calls, and that's why we call it at low single digit overall. On Earnings per Share without items our fourth quarter outlook is to come in the range of $1.66 to $1.71, which on our 5% to 7% local currency sales increase, would be an increase of 12% to 16% in local currency and 11% of 14% in dollars including a $0.02 hit on the comparison from foreign exchange. This outlook includes a pretax profit return on sales of 17.3% to 17.6%, which at that the high end would be up 50 basis points from 2011 in dollars and 70 basis points in local currency. For the full year then, the high end of our EPS range is versus our July outlook by $0.08 at the low end and by $0.13 -- sorry $0.08 on the high end and by $0.13 on the low-end to $4.94 to $4.99. This includes a negative year over year foreign exchange impact of $0.36 which is $0.07 better than in our July guidance, plus the $0.01 by which our third-quarter actual EPS exceeded the high end of our range in local currency.

At the high end this would be a 12% increase in EPS in dollars and 22% in local currency, and it includes a 40 basis point improvement in pretax profit return on sales versus last year in dollars and 80 basis points in local currency. I'll mention here one quote-unquote item we expect to have in the fourth quarter which is an approximate $16 million hit from a non-cash charge for a cumulative translation adjustment running through our income statement as a result of our decision to cease operating our small Nutrimetics business in the UK. Other assumptions included in our outlook are that we will have $100 million of open market share repurchases in the fourth quarter which will bring the full year amount of these repurchases to $200 million. You should recall that, along with over $75 million of dividends, this would mean close the $5 per share going to our shareholders in 2012. Our assumption for full-year net interest expense has gone down modestly from about $33 million in July to $32.5 million now. While we now foresee about $62 million in unallocated corporate costs versus $60 million in July.

Our estimate for our tax rate without items remains the same as we indicated in July at about 24%. I would like to also give you a bit of a longer-term insight on our expected tax rate without items to say that we do expect some increase over time as we make more and more money outside of the United States that needs to be repatriated, but we expect our rate to stay within three points to four points from where we are now, and, in 2013, to be about one point higher than 2012. Turning to cash flow, we had a very good quarter as we generated $45 million this year from operating activities net of investing activities in comparison with $20 million last year. Year-to-date we are close to $25 million ahead of 2011. We reduced our full-year outlook for capital spending in our July guidance to $85 million to $90 million and are further reducing it today to $80 million to $85 million. As I noted on the July call, going forward, we expect to operate annually in the $70 million to $80 million range for capital spending.

As for our full-year 2012 cash flow forecast, we are raising our range by $10 million today from July to $210 million to $220 million for the year. Finally, before I turn over to questions, our update on our legend picture is that we now expect our cost of goods sold to include for the full year about $160 million compared with the range of $155 million to $160 million in July. And for our year over year impact resident costs, movement and local currency a positive $1 million which is in line with the outlook we gave in July. The actual impact in the third quarter was in line with our expectations and quite modest at about $0.5 million positive. And looking today at 2013, we see a small negative impact versus 2012 of about $1 million for the full year.

And so with that, Cassandra, we'll turn the call over for questions.

(Operator Instructions )

Jason Gere

Thank you, RBC. Hey guys. I guess two questions. One just a thinking about the long-term 5% to 7% outlook, maybe if you could put into a little bit more context, like which regions you are more comfortable with obviously you are factoring in internal versus external, what challenges have been going on in the business, but as you look out of next year and that five to seven is obviously still a great number, where you are a little bit more comfortable, where you are little bit more cautious, specifically? And then with that I know you are only giving sales right now, but should we assume that you guys can continue to double-digit EPS growth as you've done pretty historically over the last number of years.

Yes, Jason. Good morning to you. Jason I would begin by saying clearly the least resistance in the world from a competitive standpoint and for an opportunity of women looking for an earning opportunity are in the emerging markets of the world. So, so much of the future growth is going to be fueled by where the people are. We only have about 5% of the world's population in Western Europe, only 5% in North America. The good news in both of those markets is there is a high per capita income. The challenging piece is in most of those markets you have 65% plus women involved in the workplace. So we're a somewhat difficult environment to recruit in. But, as we've shown now after 50 years in Germany, I was just at their 50th celebration this last month, you can still have dynamic growth in those markets.

Where we are growing in the established markets are in that white space which are generally the higher density metropolitan markets. And we were able to penetrate those markets by getting products that are for younger working women to be able to translate the party to be much more like a girls' night out. So, it is a much more social environment, and then we had to change also the sales force opportunity, because you get to the cities for younger working women it's kind of Jerry Maguire country -- show me the money. She's not interested in just part-time money. So we've made those changes. So I feel the best about the growth, though, the hard growth levels are going to be in the emerging markets. Again I mentioned, here we are in India, but China, India, Indonesia are 40% of the world's population, stitched together with that fifth largest market in the world which is Brazil and the dynamic growth we have there.

You see what's going on in Turkey. Turkey is going to be before long 100 million population there. So, that's what really gives us the greatest comfort. Long answer but a very important question. And so what you will see is most of the disruption you see right now are in the established markets of the world where they are trying to figure out right now what is the new social contract with governments. And I think you're going to see continued higher growth in these emerging markets. So don't be surprised in the future that you know that the emerging markets are 75% of our business.

Okay. And then within that when you look at South America this quarter, I think it grew in the mid- 20s, it had been growing. Is that purely more of a comparison just as it gets bigger the comparisons get tougher as opposed to Venezuela I know you said was a little bit below your expectation but any type of pick up the for next year?

Well Venezuela is -- was mostly pricing there. So what we try to do is keep our business keep the opportunity alive for the women that really this is important to them there. So Venezuela is not going to be not be that important to us. What's going to be important is Brazil, Mexico, Uruguay there is only 8 million people there. We want to start making some serious money in Argentina, and I think we are making the right moves there to get our business model right. But there is much fewer people. I mean there is one quarter the population in Latin America as there is here in India.

Okay. And then just within the second part of that question, just about the double digit EPS, can you endorse that today and especially it seems like currency is going to be a bit more neutral to next year's number and you seem more positive about some of the challenge businesses out there the leverage you get in the model. Can you go on the record today and say guess, we kind of believe that double-digit EPS a mix digit organic is the right way to think about 2013?

Jason, I will let you hear a yes from both me and Mike. Let me give you the first piece of that. These markets here in Asia-Pacific, even though the per capita income is low, we've got more than $1 billion dollars worth of fully amortized molds. So when we launch in a market here we can give great value products, high-quality, and make wonderful gross margin. So our ROSs in these markets, many of them are considerably north of 20%, and so, where they are growing in these kinds of rates and a high ROS, that's wonderful combination. Mike, why don't you add on to that.

James, I think as you are implying as you know and as we see, when we grow our sales 5% to 7%, there is leverage in our model. We've been able to improve our ROS, and we'll continue to work in that direction. So that's a bump off of the sales growth. And then there's another one from the share repurchases which we are doing $200 million this year, and we'll continue to follow our approach of charging the 1.5 times EBITDA, so as we generate cash beyond what we use for dividends, that's available to buy shares. So when you take all those pluses together you get the kind of results that you're talking about. When we look at the guidance for 2012, we are seeing about 5% up in sales in local currency. Yes, it's got the one point drag from having one less week. But segment profit based on the numbers that we gave you, or the guidance that we talked about, in local currency is up double digits in terms of percentage, and the EPS on the high is in the low 20s. So, we do see that those kinds of dynamics helping us going forward.

Okay. And then as a clarification question and then I will hop off. Just when you gave the guidance on the full-year outlook return on sale, look at Tupperware North America. The first three quarters have been so strong I think you showed some of your discipline by not owing after some of that promotional stuff that is out there. But the full year I think you're saying like 100 basis points so it would show the actual margins decreased in the fourth quarter. So I was just wondering if you could just clarify or provide a little bit more color. Am I looking at it wrong, or what should we expect in that business really in the fourth quarter?

All right, Jason, you are right. If you backed into what we're saying for the ROS in the fourth quarter, we are expecting some investment in that business in the fourth quarter. Some of what we saw in the third quarter was we have variable cost. We did not get as much sales as we were looking for in the US and Canada, and the profit came through because of that -- because some of those are variable. Given where we are with the sales force size, and what we are trying to do. We're as we are always trying to modulate our approach so that we are taking actions that make sense from a business point of view and a cost point of view together, and that's what we've included in the fourth quarter outlook.

Great.

Dara Mohsenian, Morgan Stanley.

Dara, she pronounced your name right. That never happens.

Every once in a while. Rick I was just hoping for more specifics on why you expect the 5% to 7% more sales growth in 2003 and not growth in line with your long-term target. Is a more the external environment, or is it kind of internal issues in terms of having a greater number of puts at this point than you might typically have? And if it is external, is that just kind of depressed growth in developed markets, or is it potentially a slowdown in emerging markets?

It is more of what you just said. The latter piece. It is external, and it's more our established markets out there where we are seeing a lot of disruption. And we keep having to tweak our model, and we have the levers to do that, but it is disruptive. You see what's particularly what has happened in Europe. I like the way we are navigating through it, but I sure would like all of them to hit at one time. The only real -- you are starting to see China, as I said, we had a you know all the years under Deng Xiaoping. The great concern now is they had 10% growth every year there, and now they've taken it below 8% to I think we are at 7.5% I think. We are still growing double digits there, so we've got a lot of runway. It think we can offset that, but clearly, Dara, it's more the issues with regard to externals in our established markets.

Okay. And then can you discuss the turnaround in CIS? It's now been a couple straight quarters with solid growth. Do think that business is sustainable? You turned at this point and what's your level of confidence in the results going forward?

Yes. A couple of things on the CIS. Firstly, the biggest issue that we had in CIS is what I would call sales force architecture. We had very strong 10 years of growth in the CIS, and we expended from 9 distributors to almost 200 distributors. That was too many in too short a period of time and as you got out there to what I would call the outlier distributors, the one that we launched those previous -- the last four years I will call it. They were relatively small and what happened was when there was the devaluation of the ruble all of a sudden they went unprofitable. And what we've learned from that -- actually we learned from it Dara from our Brazilian business that rather -- I use the example within talking to our internal management team of like building a circus tent. It's only as strong how many polls you have on it, and what we have said in those kinds of businesses is we really should not have had almost 200 distributors. We are now below 150, and we did not lose those other 50, most of them we just put them under bigger distributors. We made them team leaders so they did not have the same kind of expense infrastructure, and they can go out and recruit, train and motivate people and not have an expense base.

That was the biggest thing that we turned around in that business. The second piece of it -- big focus the last three years on developing a very strong management team. We grew like a weed for that six or seven years and we really had so many so much high turnover there and that we've settled in, recruited some stronger people, and I think that has calmed the whole business down. You know we had a couple -- we've had sequential improvement a number of quarters, and we've had two plus quarters. I think we are pretty much on the other side of that business there. We've got a great management team and still low-levels the penetration.

Okay. That's helpful. And then Rick, just given that continued evaluation gap in your stock versus peers, I'm wondering if there's any interest in management and the board and potentially accelerating share repurchases in 2013 and adding a bit of leverage above the prior leverage target that you've outlined.

Well we always continue to talk about those kinds of things. We want to -- for right now I feel comfortable with the flexibility that we have of the level of looking at raise the dividend. Take a look at it at the end of every year. We raised it 20% last year, 20% the year before, 17% the previous year. Well take a look at that in the first quarter, and then we will reevaluate what we do with share repurchase. You know with all the turmoil going on in the world, I am a bit conservative as far as keeping our powder dry. But we keep talking about it. It's part of the dialogue, Dara.

Okay. Thanks so much.

Olivia Tong, Bank of America Merrill Lynch.

I want to talk a little bit about margins. First what drove the margin upside this quarter? And then, looking at next year, can you talk about investment levels necessary to turn around some of these underperforming businesses and then with that likely a little bit less fixed cost leverage, the one point trimming of the top line outlook. Can you talk about your thoughts on sticking with that 50 basis points pretax ROS given, potentially need to invest a bit more in some of the underperforming markets and then also a little bit less on the fixed cost leverage?

Sure. Olivia on the ROS in the third quarter really the benefit was on the DS&A line. You so we were down about 100 basis points there. The biggest factor was the decision we made at Fuller Mexico to invest somewhat incrementally from what we have done going back a few years ago but not as much as last year. So that one certainly helped us. Some of the other things we saw some nice leverage in Brazil on the sales, so we did not need to spend as heavily there. We were able to let that profit drop through and still perform very well in the business. We talked a little bit I did about the US and Canada. And we did not get the sales we wanted, but the cost structure there was variable so that was favorable as well. We saw good leverage on the sales and Asia.

As we look out over into next year, there is certainly some markets where our value chain is not where we wanted to be. So we will work on that, and that can be a incremental for us. But, as we look at investment levels, the way we've laid things out in our longer term approach to get 50 basis points per year of ROS, that means that we would need a contribution margin somewhere in the 25% range versus having a model that would often give us somewhere around 40% so that 15 points on the sales increase we are talking about is about a $20 million investment in some way shape or form. And so that's how we tend to look at things.

So, you are still expecting a 50 basis point increase in 2013 as well.

We have not given a specific outlook but that's how we -- when we approach things from a planning point of view, we realize that overall we've got about this 40% contribution margin. And a we look through and make specific decisions on investment and balancing things out so we will be able to be more specific on our next call.

Got it. And then we talked a lot about Mexico and Fuller Mexico and the recruiting upswing in Q3 of last year and the subsequent fallout. What changes have you made to your sales force recruiting practices, and can you talk about some of the learnings that you took from that so that you won't repeat that in another market or in Mexico in the future? And what's been brought to other markets that you've learned from that? Thanks.

The situation in Mexico was what they did -- they did not reduce the price of the sales kit third-quarter last year. What they did was they through just an inordinate amount of promotions if you got a new recruit into the business. Not only the recruiter got something, but the person who was recruited got something. And we brought in 90,000 people in a quarter, and there is no way in the world. Firstly, many of these people came in for the prize, and, secondly, there was no way pf bringing aboard and really training that many people in that period of time. So what it ends up doing is dumbing down the whole sales organization. We made a significant number of changes after that. Firstly, there is a new managing director are running our business there who was very successful running the Tupperware business in Mexico. Previous he was the CFO of the Fuller business so he knows the Fuller business very well. We have been training him 15 years. So management has been moved around on that.

Secondly, we are approving all of their promotions on a much shorter leash. It was about 10 years ago they got into the same kind of a contest with another large direct seller there where basically they got into the discounting game competing with sales force, and it dumbs down the business. So, that was the greatest thing that change. Now, let me tell you what we have done. Firstly, the big focus is we have Fullerettes. We have about 0.5 million Fullerettes down there. We have enhanced her earnings opportunity. Much of that's going to be launched in the fourth quarter that she can in fact come into the business. If she becomes a super seller and sells over a certain level, she will be able to earn a greater commission level.

Next we have enhanced training of the group of what we call the local field sales manager. We have also are working to enhance her overall base salary that will stabilize that organization. All these things have been plugged in, in the last several months. So I like the direction that the business is going. From a product standpoint, more of our focus is going to be on fragrance where consumers tend to be more loyal, and we are launching more skin care products where you get that same level of loyalty. Color cosmetics are usually discounted and very promotional and have lower loyalty levels. So it's not just one thing we did, Olivia, it's sales management, sales force and product initiatives that we have put in place in that market.

Got it. Thanks. Just one last housekeeping question on share repurchase, Mike. Should we expect that the share repurchase will be back half way in 2013 similar to the way it was in 2012?

I think the pattern will be somewhat similar. Yes.

Great. Thank you a bunch.

Bill Chappell, Caris

I just wanted to make sure understood on the share repurchase this year it's a little more back end weighted than if you're looking at the $200 million. Is there any reason behind that why there was greater in the fourth quarter versus third, or is that just timing and cash flow?

It does relate to timing and cash flow, Bill, so in our first-quarter we've normally had a cash outflow from the business, and the fourth quarter has certainly been our strongest cash flow quarter. You are seeing it somewhat in concert with when we generate the cash.

So in line with kind of Dara's question, even with the stock price now, I should not expect a kind of a pick up in the first quarter of next year? It will still kind of that slow going into next year?

Yes. Unless with Rick and the board we would change our approach, that wouldn't happen, right.

Okay. And then just on the one thought on the DS&A and that being down year-over-year. Is that mainly comping the spend you did on the US sales force a year ago and kind of lapping that, or were their other major issues that kind of helped lower that on a year-to-year basis.

There were several issues in there, but the biggest one was really the lapping of what we spent on the Fuller Mexico recruiting push. Yes, that was the biggest factor.

So it's not necessarily -- it's more of a comparison than it is some real cost cutting that we would see going forward.

Well, yes, I would not characterize it as a lot of cost cutting, but what we do get is leverage when we get higher sales. So, in markets like I mentioned Brazil, where we do sales very well, we did that in an environment of leveraging our fixed costs so we see upside from that. We talk about something like 50% of our DS&A costs are fixed in the short term. So if we are able to run -- just keep running our business in a normal way along with what we get on leverage on cost of sales that's where that 40 % contribution margin on average comes from.

Okay. Great. Thanks for the color.

Linda Bolton-Weiser, Caris

Can you give us a little bit more color on Europe. I know, Rick, you talked about France being up slightly after it being down in recent quarters, but I couldn't remember if you said what Germany was in the quarter. And, also, Italy, I think you had made a lot of investment there, and we saw a good growth for a while, but I think Italy might of been down last quarter. So can you comment on Italy? And then Spain I thought was I think you said up 20% last quarter, was that also just a strong or at least up in this quarter? And then on the European profit margin, can you just remind us why it was so low in the third quarter of 2011. Was that investment in Italy? Or was it something else? It couldn't quite remember about that.

Yes. Mike, I'll have you -- I don't have everything in front of me. But firstly, the -- Italy -- in the 2nd half of this -- of last year particularly in the third order their promotional spending was very high, and so we pulled back on that. Let me bring you into this year on it. Germany, Mike I think was 7% this quarter. And so we were up the previous quarter, up the previous quarter, and I think we were almost 10 % up the fourth quarter of this last year, Things are going very well there. It's a combination of the right product, and I think they have done a very effective job with the field sales organization. I would tell you what we've implemented there.

We have distributors, about 150 distributors in Germany. And typically a distributor would have under them about 35 unit managers, and they could not handle many more than that. And then typically in the unit you would have 10 to 20 salespeople. Well, we created a level called team leader about five years ago, and some -- and we've been implemented that across the world. And where it's been particularly effective in Germany, because now you can have -- you don't have to grow the number of distributors. It would be like the case in point when I was answering Dara's question on Russia, I don't have to have more distributors. I can have bigger distributors there by helping her with an infrastructure where she can have two or three team leaders, she might able to handle having 50, 60, 70 unit managers. And what that leads to is much higher levels of penetration in that market. That's what is happening in Germany.

That by the way, is the same kind of thing going on in most of our European markets. France was even quicker with that. France was -- France had a very difficult first half of the year, mostly because of all this malaise in the consumer environment. I think Carrefours was down 15 %. And then we saw consumers come back. We actually lost our big sales force size advantage. We had almost a 15 % sales force size advantage this last year, and it went down to a low single digit. But I think we are that on track again there. You saw strong in our Netherlands business, Belgian was up nicely.

Spain, Mike, would you -- what were we up Spain in this quarter?

Low single digits.

Yes. Portugal was up. So and comment if you will on Italy, Mike. You've got those things in front of you.

Sure. You are right, Linda, we were down in Italy last quarter. We were down again this quarter single digits. So, that's kind of the picture. You also asked about profitability in Europe, and you are remembering, yes, that we did spend in Italy last year in the third quarter. We talked about $2 million to $3 million in incremental spending. We didn't see more incremental spending in Italy this year, but we also did not recapture anything really as we continue to struggle there. And, when we look at the ROS year-over-year in Europe 2012 versus 2011, we spent fairly heavily promotionally and South Africa in light of the situation there. France as well, which was more timing, and then we did see some higher unit product costs given the volume running through our plants and the utilization of our machines.

Okay. Can I just --

You know what I didn't mention either is -- here I've got Germany, France, Belgium, Netherlands, Spain. I did not mention Nordics were -- we were up dramatically in the Nordics, and that includes not only Scandinavian markets but Finland as well. So we really are pleased with what's going on there.

Okay. Great. And then you talk about next year and the growth, you mentioned about the externals, and you said that the major part of the lower growth. But then you say implementation of changes in our challenged market. So I am trying to figure out how I am supposed to interpret that. Is it that in your challenged markets you are implemented things that will not be fully producing results in 2013, and then we will see it in 2014, and that the issue? And does that also mean higher spending behind those initiatives which will make a little bit lower profitability? I guess I'd like to know more about exactly what you say you are doing, and I guess this means Australia, New Zealand, Japan, Beauti, US those markets.

Linda, we really don't see at a slower growth. We were up 5 % in the second quarter and 6% in the third. We are falling at 5% to 7% in the fourth, and what we are really saying is we are not necessarily going to acceleration from that, given the external environment. It is an outlook and it now goes out 15 months from now, so we will see if we can do better. We are always trying to do better. But we certainly don't see a slowdown versus where we are operating. In fact, we are really banding where we are this year with 6% after taking into account for the full year the one point from having one less week.

Okay. And then you mentioned that you exited Nutrimetics in the UK, so I guess it's good to hear that you are evaluating some of the problem businesses. Are there any bigger businesses or any other even small businesses where -- I mean maybe it's that direct selling in beauty doesn't work in the US. And at some point you have to bite the bullet and say maybe BeautiControl is never going to grow. I mean are you thinking that way, or are you not giving any thoughts to that long term?

Linda, we are not thinking that way at all. We have doubled -- we actually tripled the size of BeautiControl and then it was internal misstep's. It's still twice the size the business that we bought in 2000. I think we've figured out where we made those mistakes. Now talking about Nutrimetics, when we made the acquisition of Sara Lee's businesses, we had one primary focus. It was the Fuller business in Mexico. We knew that we wanted to have, back to this point again in Latin America, they spend $22 billion on beauty. We knew many of our management team came out of direct selling beauty. We said we wanted to be able to compete in that.

We got the Sara Lee businesses for the right price and nine multiple off even what we are get in profitability in that Fuller Mexico business, and the way we look at it, we got all these other businesses for nothing. So then we went through the process of pruning. Okay, what do we want to keep of these businesses? First thing we jettisoned was we shut that Brazilian beauty business down because you had both Natura and Avon there. And we folded that into our Tupperware business, and you can see how we have been growing in Brazil and it's kind of our Trojan horse strategy. We still sell beauty there, but it's only 4% of 5% of our sales there, and it's while we are there doing Tupperware. So, we've been evaluating which other ones. Avroy Shlain, gosh, we've gotten that thing nicely turned around going double digits. With that the Nutrimetics in France back on the grow again.

It's taking longer than we wanted with this Nutrimetics in Australia and New Zealand, but I've got to remind you that Sara Lee paid AUD0.25 billion for that business there. We are --bit of business we would have bought on it's own gone off into a developed market and bought a beauty business? Probably not. But when you get it for nothing, you sit there and figure, hey, it's a good business, and we make money with it. And so there isn't anything out there big. These other ones were around the edges, and the reason we waited so long on those is we did not want to take the time. And so now we said focus. They are distracting us.

Okay. Thanks very much.

Frank Camma, Sidoti

Most of my questions were answered, but I had some clarification on the growth specifically from Asia-Pacific. Was that and you called out India. Was that the primary growth driver in the quarter, or were their multiple countries? I think I missed that part.

Oh, multiple. I mean Mike, you go down the list.

Yes, well, Frank, Indonesia is now our largest Tupperware/housewares business in the world, and we grew 30% there. So that was a huge contribution. India that we mentioned up around 50% was also very large. We also have one of our larger businesses in Asia is Malaysia Singapore which has been growing extremely well as well, so, good contribution there. We grew in the other emerging markets as well in China and in Korea. Those are smaller.

Okay. Great. Does it -- it looks like the segment profitability was pretty strong there, too. Is it -- is the product mix obviously a lower price point, but the margins are fairly consistent? Is that a fair statement?

The way that we really see it, Frank, is we sometimes in emerging, they'll sell slightly less highly engineered products in terms of the share of the mix and perhaps get a little less gross margin but have to spend less promotionally. So we don't really see by model, by design, that we should make less in one place than the other. We are just operating extremely well in many of those Asian markets and are really realizing the leverage of the higher sales on the fixed costs.

Frank, too I would add to it that particularly here in India, they have even added another catalog. We have a core product line that will sell that really comes out of basic food storage, and it's within the price range of affordable to most in India. However, this emerging middle class we've come up with an ultimo product line which adds much higher price points and is made out of more highly engineered resins. That you can get products in there that are north of $50 and north of $100, and that helps brand build as it trickles down as well. So they are really segmenting that approach, Frank.

Sure. Great. Thanks. That's really all I had.

Ian Gordon, S&P Capital IQ

First question is on the adjustment to EPS. I'm just trying understand what's going on in the tax line there. It looks like there was a pretty big tax benefit you are accruing that isn't really called out in the footnotes. I wanting to get some clarity there.

You're talking about in the full year outlook, Ian?

No, I'm talking about in the quarter. You had that $2.7 million add back to the pretax charges, but then you also reduced your tax bill by $3 million to get to the adjusted number.

Some of the items do not give a tax benefit, but there was not anything unusual like that in the third quarter this year. Last year we had an impairment charge which did not attract a tax benefit associated with it. So, I guess that must be what you are referring to.

Okay. I can maybe follow up afterward if have more questions. And then on your sort of outlook for the tax rate and the impact of having to repatriate more cash, correct me if I'm wrong, but I think your debt is mostly US denominated, so is there maybe a better way to structure that so you don't have to be repatriate as much tax, and, by the way, get a little bit of a natural hedge from the FX by having your debt denominated overseas?

We actually do borrow some in euro, but really the way we see it, is we are fortunate with our business model that it's a fairly low capital intensity. And so we ultimately do want to bring the cash back to the US. We've been able to do that over time successfully. When we say our tax rate might go up a few points, it is starting from this year's 24%. So, we are pretty pleased with how that all comes together, but ultimately to continue to support the share buyback dividends and all that, he cash need to come back to the US.

Okay. Thank you.

Gregg Hillman, First Wilshire Securities.

Rick, could you talk about number one any new products that have been introduced that you consider to be exciting or significant into the Company at a convention or recently, any new products? And after that maybe you could talk about any impact the Internet you think will your company in going forward. And finally whether in the established markets whether it's easier to recruit young people and whether in the established markets whether you're sales force is aging, so to speak.

On product wise. I can only talk to a limited degree, because what we found out is we need to continue to launch about 25% of our sales every year have to be from new products. We are doing the same kind of thing Apple's doing there, and people run to catch up with us. So the interest -- most interesting new things that we are seeing around the world right now have been food preparation products that have been picked up. High popularity. We basically extended -- we introduced a product some years ago called a Quick Chef that was basically a manual food processor, and we have had a bunch of flanker products come off that same kind of process. And we now have one that basic -- you make smoothie's with. That has been really a success in multiple markets. And this is a product north of $60. So we are starting to see most of the new innovation is out of the core field of food storage.

As a matter of fact, as I joined the Company, the bulk of sales in Tupperware, it was north of 75% were food storage. Now it's less than a third. So, it's new categories and new launches in these categories. Your comment about the Internet, how we are to use the Internet. It's never in any of our markets more than 3% to 5% of our sales. Ours is very much a social networking business where a sales demonstrator contacts her friends, neighbors and relatives. She will hold a party with them, and from that it perpetuates. Always it's like 6 degrees of separation friends, neighbors and relatives. How we have been using the Internet is really to facilitate her business. If somebody doesn't have a connection to a sales person, they can go online and search and find one. If she wants to -- many of our markets she places her orders via the Internet. We are learning in many of our markets also how she can see down line what her salespeople are doing on the Internet, so it enables her to be a more effective sales leader.

And we've just launched in Germany and the US what is called ITUP so when that an individual comes into the business, yes, she goes to training. Training is free. But very much we are taking a stone or a page from the Rosetta Stone here. She can go online, and she can have an interactive training process where each one of these can be 90 minute long. She gets rewarded for reaching certain levels of it, and part of the reason for this and the primary reason for it, Greg, is that one of the best ways we can grow our sales force is just not to enhance recruiting but to reduce -- or enhance retention so we have that back door not so wide open. So I feel good about that. I don't think Internet is not going to be -- it's not a competitive issue with us. I'll tell you how we use it, too, with our whole program called Chain of Confidence. If anybody wants to go online to www.chainofconfidence.com, there is all kinds of interviews of successful Tupperware women. So we are using it market by market that way. Asha, you might comments here on India on how we have used the Internet and fans, and we were just talking about this with an individual yesterday.

Right. Rick, in India we use Facebook a lot, a leveraging social media. So we have the online sort of fan base that has been growing exponentially. I think we are up to about 700,000 in terms of fans. We hope to close the year with a million fans on Facebook. But really it's a platform where they share news about products. They are playing games. They are engaged with us. The videos they are posting. We have a sales force, but what is more interesting is hostesses and just people who are fans of Tupperware they are all being engaged on Facebook. So, I see it as a great support to the core business.

And your last question about in established markets aging of the sales force, actually quite the opposite is happening, and it's taken a long time to get there. Our sales force in our established markets is getting younger and younger, and all you have to do is look at the unemployment levels, not only in the US but also in Europe, and a high number of them are college graduates. So this enables us to not only get younger people but get people who in the past never would've thought about building a career in Tupperware.

Who is the woman who was talking earlier?

Asha Gupta, she is managing director of India, and she is also area Vice President of a number of other markets here in Asia Pacific.

Okay. Thanks. Thanks for your comments, Asha.

By the way, comment on that, Gregg -- so many people -- you know we spend a lot of time talking about our product or selling method and our earning opportunity is we talk about it inside. The most important thing that we think in the power that Tupperware has is our people. All the company ever is, is a collection of people and Asha is a very good example of why search firms really don't care for us that much, because we grow our own. Asha has been in the company 14 years. Started in India after she was with Coca-Cola, got her MBA, joined the company. She was a regional. She managed marketing here.

Then we sent her to Copenhagen, where for the Nordics, she was head of marketing for three years. And then we pulled her back to India to take over the business here in India. She's been the one driving this growth. Now we moved her into an area VP role where she is shepherding a couple of other managing directors and showing them. So it's really a big piece of how we make our formula work.

Great. Thanks, Rick.

There are no further questions. I would like to turn the call back over to Rick.

Everybody, thank you for your time. It is 7.15 here in the evening. I don't know why I was asking Asha, why is this the only place in the world that it's not hours ahead, it's an hour and a half ahead. They had to pick it to be different. Anyway, thank you for your interest, and I'm going to try to do this when we are in markets each time. If I've got the managing director there simultaneous to earnings release just to add a little bit more color to what's going on across the world. Thank you very much for your interest.

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