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Executives

Rick Goings – Chairman and CEO

Michael Poteshman – EVP and CFO

Analysts

Olivia Tong – Bank of America Merrill Lynch

Jason Jason Gere – Royal Bank of Canada

Dara Mohsenian – Morgan Stanley

Sofya Tsinis – J. P. Morgan Securities, Inc.

William B. Chappell – SunTrust Robinson Humphrey

Linda Bolton-Weiser – Caris & Company

Gregg Hillman - First Wilshire Securities

Tupperware Brands Corporation (TUP) Q1 2012 Earnings Conference Call April 25, 2012 8:00 AM ET

Operator

Good morning and welcome to Tupperware Corporation’s First Quarter 2012 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.

Rick Goings

Thank you and good morning, everyone. I will refer – our discussion today will involve the outlook of our business. So you know the drill on this, on forward-looking statements. Joining me on the call this morning are Mike Poteshman, our CFO and Teresa Burchfield, our head of IR. They are in our Orlando headquarters. I am in Africa; I am in South Africa with our President Simon Hemus, our Group Presidents and just under 500 of our top people from 27 countries.

Every other year of interest we do a summit somewhere in the world, that’s combination recognition to them but even more than that, it’s to train our top people, both people who are associates of managing directors, even more importantly our independent sales leadership team out there. Additionally, what we try to do is at the same time beyond their training here is to encourage healthy competition. By the way along that same line, we’ve said so often direct sales fundamentals and knowledge are key to success in our business. Each of our four regions of the world, we do this twice a year and just three weeks ago I was with 200 in Indonesia from all of our Asia-Pacific markets and what was so stimulating about that was that the group of young leadership people in their thirties that are coming along in our business. I have never seen it at this level. The level of education, the level of passion, and the season already under their belt in our businesses.

Now, let me get on with the quarter. We understand your time is valuable. So I am going to make some opening statements, trying our best again not to be redundant with what you’ve seen in the release. Michael will do that and I’ll turn it over to questions and we’ve had, and in a point in time where I was somewhere else in the world and communication wasn’t what it should be. So I would ask your patience if I fall off the call. Mike will finish it.

First quarter 2012 was a record for us. We were up 3% on local currency, came in the high end of the guidance range. However, it is important to note when comparing this quarter to last year, the impact of one last week, we try to put together what that impact was and we think it was five percentage points. So it means our first quarter was up, on a plus to a plus about 8%. Included EPS without items was $1.03, which is also a record in Q1, $0.04 above the high end of the range and this really came in from better profitability in our segments along with $0.01 of foreign exchange benefit. Michael will go through those new answers when we does his section.

We did see impressive performance in a number of our markets, in both the portfolio of emerging and in the established. I am going to highlight some of those and in a bit I am also, I want to comment on some of the markets where there were some performance issues. Again, I would remind you that we are a global portfolio of countries and as I mentioned, I am here with 27 of them and there’s only a very short list of our markets where we have any issues. And I got to say that I have only had one year of my business career, we got a portfolio, there were no issues.

Let me begin with our established markets. Just topline a couple of not were these. Germany which you know is a very important market to us, they were up 3% in the quarter and that is really 6% adjusted run rate, and that’s not only – you know it’s in line with the positive trend. We’ve been seeing recently Italy was up 46% which really speaks to our decision to invest in growing that topline. By the way, Italy at Tupperware in more than 40 years has never grown at these kinds of rates.

We also had strong growth in our Nordic businesses which is really eight countries up 17%. Double-digit growth in Portugal which is really encouraging to see in light of their economic difficulties. Worse noting to that none of these businesses that I have just mentioned has seen growth rates like this in recent years, and what it really speaks to is the effectiveness that the continued refreshing of the levers that give a direct selling company like ours competitive advantage. And there’s simply this. Number one, a flow of unique products; we try to put into the barrel 25% of our sales coming from new products every year. Two, entertaining selling methods and relevant selling methods to different consumer groups. Third, a compelling earning opportunity and fourth, I think most important solid direct selling fundamentals.

Now, it’s working in those markets and the good news about the established markets is, there you’ll get a per capita income in the 30,000 to 40,000 year range.

Turning to our emerging markets, India, Indonesia, Brazil each of these big markets had growth rates in the high 30% range and if you just going to account the impact of the extra week that really made the run rate into the 40% range. Also, without taking into account the impact of the extra week, our very nice Turkish business here in Europe was up 17% in the quarter, and by the way that meant they lacked a 32% increase the same period last year. Here in Africa, we’ve got a wonderful business called Avroy 'Shlain, in addition to our Tupperware business, but I have been with the Avroy 'Shlain people that you did business, they were up double-digit in the quarter as well. Also in this portfolio, the emerging markets Malaysia, Singapore up double-digits, China up double-digits. Ditto, Korea. So good news in a lot of markets.

Now, as I said we also had markets where we had performance issues. Our Tupperware business here in South Africa, came up against after an incredible six year run, came up against some challenges in 2011 towards the end of the year with strikes, with counterfeit products coupled with a couple of promotions it really didn’t work very well. These factors along with the slippage in recruiting effectiveness over the past few quarters resulted in a really soft first quarter. To drive the activity and combat the counterfeits, our people have been introduction a lot of new products and that really speaks to the strength of our global marketing where we were able to get into kind of the war chest of what are some things that we can drop in. we’ve also stepped up our focus on recruiting. Real solid management team here in South Africa headed by Allan Dando and I’d met at our headquarters in Johannesburg this past week with them, reviewed all of their initiatives, reviewed all their key people in positions and additionally, this week I got to be with a number of their sales leaders and believe that we are going to see this business return to solid growth as this year continues to unfold. By the way I have got to say real solid profitable business here with a very high and impressive ROS.

In Russia, our business here in the CIS, we saw some improvements in the front end indicators as we’ve kind of I think educated all of you in the past. We had ten solid years of double-digit growth but simply stated we grew our distributor base too wide, from six distributors to almost 200 distributors in the ten year period. You’ll see a line statement never serve it before its time. We grew at too fast and what that meant, if everything stayed fine in their economy, it would have been fine. But when the ruble collapsed and then it was compounded three months later with the massive heat wave and fires, well simply stated many of this smaller fringe less fusion distributors simply couldn’t stay profitable and we had to fold an end to other larger distributorship or close them. Well, we’ve gone a long way to get this thing done and get it right sized. Now we are down to 150 mostly solid profitable distributors. And once we start to lap and close the gap on the sales force size comparison, and it’s getting better quarter by quarter, I think you begin to see this market grow again.

The good news about us in the CIS versus direct sellers in Beauty is it’s a crowded space for beauty direct sellers, they are all there and we don’t have any competition. So that is going to make us coming out this a lot easier.

Just a couple of words about Tupperware Australia. In the last quarter we installed a solid and seasoned managing director in Australia/New-Zealand. It’s still a very profitable market for us and one that as mentioned in the past it was country of the year for four out of six years at one phase over the past decade. But we started to have some problems with the smaller sales force. Worth noting, this managing director who happens to be an Australian has been with us more than 20 years and he has 100% success as an MD with turning around markets. He just came off his third successful turnaround. So Charles Henry is just a world leader and we feel that we are going to see improvement as the year unfolds in Australia.

We also saw some improvement in our Fuller Mexico business in the quarter after adjusting for the extra week our sales comparison. The adjustment was down to a minus four versus a – down 7% in the fourth quarter. We do still see very aggressive promotional activity by Avon in the market, and we know that’s going to hamper our quick return to topline sales growth but we are not going to get involved in heavy discounting, we are brand building there, we generally lead with fragrance and skin care and we have an emerging middle class, that’s what they look to do, just to get the better brands and better products. So I don’t want have a short term victory and a long term loss. We still have a very slight deficit in sales score size. Mike can add to that, I think its 1% or 2% which I believe we can close in this quarter. The faster we can get that closed and that 2% or plus, the quicker we’ll return to topline growth. But we’ve got our spending in line, margins back where they ought to be in that market and I must say to even with not the kind of growth rate at topline, this is a very profitable business for us.

Finally, just a word about beauty control as I go through the markets. We were down 13% in the quarter. That’s 11% under run rate. This is a 3% improvement versus trends in the fourth quarter. Sales force size there continues to be the issue, but I think we are recruiting better regarding the kind of kit and the return to training, but it’s going to take some time. We could put a cheaper kit in, fast track people. But I don’t think there that’s going to be the way to do it. So we are really getting back a solid training program. By the way, we have one of our best managing directors in the world managing that. Somebody who has got a lot of experience in the duty business and experienced with Tupperware. Daisy will do a great job there. She’s been there a year and we already feel the effect. And just last month I met with all of their senior field leaders about 2,000 of them and I have got say the energy is good, starting to see the core KPIs strengthen and those are the things that will lead to this thing growing again.

Now, let me wrap up and turn it to Mike, but before I do let me comment just a little bit more philosophically on our growth story. We are a global portfolio businesses and again established in emerging markets and I want to kind of put the perspective and this is how we in the board, we look at it. If you bifurcate these markets of the world, you find out that only 14% of the world’s total populations run the established markets. That’s Western, Europe, the US, Australia, Japan. Now in every one of these established markets, we believe that there’s lots of run rate for growth left. Firstly the big plus is high per capita income in these markets. For these established markets though, the way we are going to mostly grow is stitching together some niche plays. Firstly, going after un-served segments of the market. Next, new and unique products to current customers and it’s this combination along with more unique selling kinds of message that are going to lead to that growth. I will give an example; in the US we are really focused greatly on the Hispanic population. There are in a ever growing percentage of the country’s population and they are not only enthusiastic about direct selling and our earning opportunity, but really they like to buy this way and they really don’t have as much earning opportunity in other ways. So it’s starting to really happen for us and their growth rates often can be two to three times what we see with Anglos in the US. So you are going to see us niche growing these markets. If I went and established markets like Western Europe and I went through all the proof is that our strategy is working is when you start seeing dynamic growth in Germany, Italy, Nordics where we’ve been 50 years, it starts to say something’s working because the economies aren’t particularly good.

We are seeing kind of a rebirth kind of entrepreneurial spirit as the social contract kind of European socialism is going broke and people are understanding I got to get back to the focuses on 35 hour work weeks now is how do I make enough money, how do I get more control of my life. We are also learning that the efforts to attack these un-served larger urban areas like Paris where we are under penetrated is a great opportunity and the way we’ve been doing it there is focusing on updating the kind of party, making it more a girls night out, updating the kind of product offerings. Products that really appeal to a busy working woman. And it’s really starting to work.

Turning to our emerging markets of the worlds. Clearly they are faster growing. You see that the total population’s simple math if you establish markets of 14%, all the rest are 86% of the world’s population. In these markets, the primary drivers are number one simply stated a huge population. Secondly, a rapidly exploding middle class. Now we mentioned the stats in our release, it’s believed like now that Asia’s middle class is 500 million today and that by 2020, the middle class is going to explode to 1.7 billion. And when you kind of look Maslow’s hierarchy of needs, you start to sit there, kitchen formation, the kind of products that we sell, the desire for western quality brands. I never will forget Robert Polet, a friend of mine who up until two years ago ran Gucci. I asked him how come you are growing 20% in China. And I said with all the counterfeit Gucci there? He said Ricky, you don’t understand, a Chinese woman will not buy a counterfeit Gucci. She wants a real Gucci because it tells her friends I am not poor anymore. That’s why product positioning and branding really matters.

The other thing that’s really going to help us grow and not only in the established markets, but emerging markets is our new product strategy. Again 25% of our sales. One marketing analyst over this last year suggested when looking in our business and he said in some ways you guys are like Apple. They started with at the core the Mac. And then they jumped in to the music business with the I-pod, and the they jumped into telecommunications with the I-phone and then again in another place with the I-pad. And when you put it together Apple, Apple store where you can demonstrate. And I’ll tell you who first showed me how to use an I-pad was one our Group Presidents who was what I call an Apple advocate. We have the same kind of thing happen at our business. We started out basically in food storage products. But then we branched out into swanker categories table top, kitchen prep, cookware, cutlery, cook books, micro steamers. And it’s interesting to note what makes our business work is Tupperware products, Tupperware demonstration, think Apple store and think also Tupperware advocate, hostesses, every 1.5 seconds somewhere in the world, one of our advocates is sponsoring a party for which she doesn’t charge us rent and we’re able to utilize that expense and utilize the expense that normal retailers have spent in advertising to build this incredible sales force. So it really is working and Trish has just got me the number now. In 2011, only 30% of our sales were even in food storage products and another interesting category when I joined the company 98.1% of the products that we sold were made by us, now 40% are outsourced. So we are moving really in the right direction, and the net of all this is simply that Tupperware brands has a lot of growth potential. Established markets have their pluses, mostly with big incomes but emerging markets with their powerful population and growing middle class, there are a place to be as well.

Mike, let me turn it over to you and then we’ll handle Q&A.

Mike Poteshman

Okay. Thanks very much Rick. It has been covered with a 3% local currency sales increase from the quarter. We were at the high end of our external range. Some of the most significant positives in the quarter versus what we included in our forecast were first, in Italy and the Nordics in Europe and here it’s really a continuation of good KPI trends that we’ve seen in our recent quarters. Then in Asia, in Australia, Tupperware Australia and Japan, we didn’t get the growth but we had better comparisons and we have been seeing than we expected and putting into our forecast. And then finally in Brazil. Here we continued to grow at a very fast pace and better than we debate into our outlook.

We did have a few going the other way. We struggled as Rick talked about at Tupperware South Africa and that was particularly early in the quarter and our decrease there was more than in the fourth quarter earned than what we had expected and included in our outlook.

France was also somewhere below what we had forecast although we continue to operate as a business at a very high level. And then at Fuller Mexico, in Beauty Control, we had better comparisons than we did in the fourth quarter. So we had progress there, but still didn’t improve as much as we had included in our forecast.

Looking at the profitability side. Our 23% increase in diluted earnings per share excluding items was $0.04 or 4% over the high end of our range. Most of the upside came from our segments and that was most notably in Asia and Tupperware North America mainly from better gross margin in Asia and more efficient spending by the Tupperware United States and Canada business. And then we also did burn a fifth by $0.01 from foreign exchange versus the outlook we gave on February 1.

We’ve laid out our second quarter and full year outlooks in our release. As a reminder, they are in the full year. The 5% to 7% increase that we are calling for in local currency does include a one point yet on the comparison with 2011 from having the one last week. So it was five points in the quarter, but on a full year basis is the one point. And then on diluted earnings per share without items, we maintained our full year range from February 1 which is $5 to $5.10. Now we were able to do this on the strength of our force and upside versus our guidance in the first quarter. And this was notwithstanding that our FX outlook did get $0.05 worse than where we were in our February 1 guidance. So it went from a minus 22 to a minus 27.

Our EPS range would give us versus 2011, an increase in local currency of 20% to 22%. Underneath this we improved our outlook for our pretax return on sales 10 basis points versus our February outlook. So its 14.3% now and that compares with 13.9% last year. the 40 basis point improvement then they were talking about is after taking a 30 point hit from foreign exchange rates on the comparison. So you can look at it up 70 basis points in local currency.

Within our full year guidance, our outlook for unallocated corporate expense and net interest expense have not changed from February 1, this includes unallocated expenses down slightly from last year and net interest expense still at about $33 million.

Updating our outlook on resident, we currently foresee including in cost of sales this year about $165 million. That $165 million would cost us about $1 million more than what we would have paid in 2011 from price increases in the rising markets. Our previous outlook on February 1was for a positive $5 million comparison. So we were also able to overcome this with being able to maintain our guidance at the $5 to $5.10.

On cash flow while we were below 2011 in the first quarter, we’ve not changed our full year guidance which is still for cash flow from operating activities net of investing activities to be $220 million to $230 million. This is where we were before and it continues to include a forecast of $90 million in capital spending. Just a comment here on where all this cash is going. This is before the $220 million to $230 million as before our dividend which is at $1.44 run rate right now. That’s about $75 million a year and then included in our outlook in the shares that we’ve included is $200 of share repurchases. We all have done $75 million through the first half with the $50 million that we did in the first quarter and $25 million we’ve forecast for the second. If you take that $200 million of share repurchases along with the dividend that comes to close to $5 a share which is a pretty good payout when you take it together on a stock that’s in the $60 to $65 range. So we wanted to make that point clear as well.

And so with that, I’ll turn it back over to Rick.

Rick Goings

Thank you, Michael. And we’ll open it to questions.

Question-And-Answer Session

Operator

At this time (operator instructions). We will pause for just a moment to compile the Q&A roster. Your first question comes from Olivia Tong, with Bank of America.

Olivia Tong – Bank of America Merrill Lynch

Hi, good morning. Thank you. First question is on sales growth. So your expectation by segment with your current press release are either in line or slightly below what you posted on adjusted based in Q1. And I realize that there’s European macro and a couple of weaker markets out there. But just wondering what you are seeing, if there is anything that we are seeing so far in Q2 that makes you feel like those are the current trends going forward.

Mike Poteshman

So, well maybe I can layout some of the specifics first. We did raise what we were looking for in Asia, in South America versus what we said in first quarter of the call on February 1. We are a bit softer in a couple of the other segments in about even in the fifth one. So really when we look at it, we were at a run rate of 8% when you adjust for the week in the first quarter. The full year guidance as it was on February 1 continues to be for 5% to 7% local currency. That does take the one point hit from not having the 53 week. So we really think that given where we are with the sales force in the various segments and how we’ve adjusted things, some up, some down that we are really on track for continuing operating in this – really 68% range which is our long term run rate if you put aside the week.

Rick, you want to comment on some of the specific segment?

Rick Goings

No, I think you’ve covered it.

Operator

Your next question comes from Jason Gere with Royal Bank of Canada.

Jason Jason Gere – Royal Bank of Canada

Okay. Good morning. I guess two questions. One, I was just wondering in your mind and a lot of it could be macro, but you have the strength in emerging markets right now. But what is it going to take to kind of get the established markets back to that one or three evergreen target out there? I was just wondering if you can provide a little color and then I have a follow up question.

Rick Goings

Yeah. I will first comment on that and then Mike if you’d like to jump in. what we first had to do was to get this formula down on what’s – how do you differentiate yourself and have competitive advantage in an established market given the difference and the market environment there. Because in emerging markets, the biggest things going for you is lack of retail infrastructure, lack of earning opportunities specifically for women and this emergence of the middle class. You don’t have those three things. So you have to find other ways to win and how we found to win in that – we had to first – we didn’t get it right early on, it took us about six or seven years to figure out this strategy, that it wasn’t the silver bullet, it was a combination of find the un-served markets in an established market and what’ve generally find out, think of Europe for example, like a pepperoni pizza, that all the metropolitan high density urban areas were absolutely vacant of Tupperware penetration. So then we had we had to get our foot strategies there where’s as okay, why higher penetration and working woman there. She wasn’t so much looking for earning opportunity. So we had to then change the product line, we had to change the earning opportunity and those kinds of markets. And when we got it, France was the first market to really get it right, and they were our established market of the year for three years in row of – I think we had four years of double-digit which stumbled for a quarter or two but there is a lot going on in France.

But I think the first piece of this is get the formula right. We’ll, back to your question about the one to three. We have markets in various levels of implementation of that. France was ahead of Germany. Germany is now just kicking in. Italy is now just kicking in. but you got some other elaborate markets out there. The US still haven’t kicked in like some of these European. Spain hasn’t kicked in. we’ve got to get Australia kicking again at that high. We’ve got to get Japan and – but what the good news on all of those market? All the new things have already been implemented but they are in various phases of downloading them right now.

Mike, would you add anything?

Mike Poteshman

Just a couple of things. We did look at the split by emerging markets and established markets on run rate basis and we saw the established markets up one in the first quarter on a run rate basis, we were down 3% in local currency as we report it. Underneath that, the ones that were doing well and better, in Europe we were up 6% on a run rate basis. That was after being up 5% in the fourth quarter. Really Germany is a big contributor there as we’ve talked about; it’s our largest established market in Europe. So that was good. In Asia-Pacific, we were down 5% in the established market, it’s not a big share of our business in Asia, but much better than the fourth quarter when we were down 17% and there we really saw an improvement in the trend, both Tupperware Japan and Tupperware Australia that were hopeful, really it’s starting to reflect the things we worked on the last few years that we’ve been talking about.

The other ones were more in line with where we were in the fourth quarter. But fortunately again on the run rate basis, we were in the low single digit range, I say fortunately obviously we think we can do better or are ought to be able to do better. But that’s how we see it at the moment.

Jason Jason Gere – Royal Bank of Canada

Okay. And I guess on that point. I mean if you look – I mean does this mean that you need to make some more strategic investments? And if you look at Italy and that 46% I think I was going be quoted, just a couple of quarters after making big investments. I know you were saying that in Fuller Mexico, that you don’t want to kind of play the short term gains, with Avon right now, but I guess, I am just wondering is a bigger piece of kind of getting to that one, three than maybe during some of these more strategic investments. A little bit more than maybe what you previously thought?

Mike Poteshman

I think we do continue to invest, we look at it on a market by market basis, the couple of things that we’ve highlighted over the last year. There have been cases where it not just the only the places we invest, it’s the places where we’ve had an outsize investment. And we’ve highlighted Fuller Mexico and in Italy. We did better in both certainly in the first quarter than we have been doing. In Italy we got this really good growth, but we did have a positive contribution margin. So we were making more money on more sales. Still not quite where we want it so not where we want it. But I think we’ll be more efficient as we go forward. As we look I would say to other markets where there’s particular issues, there’ll be cases where we invest an incremental amount and we just want to do that probably more temporarily and wisely I would say, where we saw some of that in the first quarter.

We still did invest in Italy some contribution margin even though we were positive. We certainly invested in Tupperware South Africa and we think that was the right thing to do and even in South America when we look at the contribution margin, we were down. It was positive but down from where we had been in some other quarters and that reflected that spending in Brazil which really wasn’t because there was any problem, but because we wanted to start the year well and we thought that it made sense to do and I think that it turned out to be a good choice. So I would say we continue to look at it over time market by market.

Jason Jason Gere – Royal Bank of Canada

Okay, great. And then just the second question. I know that was a long first question. Just thinking about the margin progression, if we go back and look at 2010, years prior, you guys had this strategy of getting a lot of SG&A leverage coming through on strong comps and 2011 we did see some of the higher spending in some of those choice markets and I think operating margins were flat. This year you’re talking about 40 basis points. I guess I’m trying to think about how do you think about the DS&A or SG&A type of leverage going forward, especially when your comp expectations really haven’t changed much? You still deliver among the best comps in the peer group, but we haven’t seen as much SG&A. So was wondering if you could just give a little bit of perspective maybe how we think about it for 2012 and then even longer term.

Rick Goings

Mike, let me handle one piece of that first because there’s this continuing discussion of what kind of operating margins, how high can it go with us and the answer is firstly I don’t know, but I have a sense that – because part of that is clearly the SG&A, but we really believe that we targets markets that we ought to be able to make 15% ROS. That’s within a market. But I also believe that pretax operating margins for this company probably won’t go over 15% for any sustained period of time and the reason for that is that if our pricing – we’re too aggressive on pricing, we could lose share in some of these markets and I want to keep the right kind of a balance there. But Mike you might get more granular than that.

Michael Poteshman

Yeah. So Jason, for this year like you said we’re up with our outlook on the high end of a range 40 basis points versus last year. That’s after overcoming this 30 basis point hit on the value chain, a lot of which comes from the dollar denominated corporate costs that we have and the interest expense that we have. As we look out in the future, we talk about 50 basis point improvement per year. You probably heard us say that we think around half when we look at it half of our DS&A or SG&A is fixed in the short term. We do make incremental investments and brand building and things like that. Sometimes we do the deep ends kind of investments that we’ve talked about for Fuller and other places and some of that comes through on the DS&A line. So along the lines of what Rick is saying we certainly look the balance it.

There’s markets that are considerably higher than our average and too many that are lower and a couple even that are in lock. So as we work on those value chains and then leverage the volume, that’s where the 50 basis points here comes from to the extent we’re at or around the high end our sales growth range. Then that soaks up some of that advantage if you will on a basis point perspective. So we did grow much more quickly in the past as we were starting from a lower level, but when we look at the various things that we’re working on and the leverage we can get from the volume, certainly offset by still a good share of investment type spending. That’s how we get down to the – or net out the 50 basis points.

Jason Jason Gere – Royal Bank of Canada

Okay, great. Thanks.

Rick Goings

Just can I add one thing to that? So an interesting thing that kind of relates to this is, this is indirect selling. We’re not only working with the customer, but also how do you get that sales force active and out there? And we know they have the right balance of some high quality yet low net per unit products, generally gets your sales force more active. It gets in a party. We’ll start looking at some of these lower priced products that oh my goodness, everybody at the party buys one of these. So you have to have that competition, that healthy balance of these two things, of the $140 products, but also the $8 and $10 products. For example one of the great unit movers, unit movement is huge indirect selling because it gets her out there. It gets her wanting to share this with a customer. We’re going to introduce this half liter water bottle and a liter water bottle which replaces the PET bottle and it’s guaranteed for life. Mike, I don’t even know what the number is right now. $40 million was the last one I saw, but it’s a product that wowed as it gets through sales force active out there. So that’s why we’re mindful of don’t get those operating margins also too high or you’ll end up paying the price on lower activity in your sales force.

Operator

Your next question comes from Dara Mohsenian with Morgan Stanley.

Dara Mohsenian – Morgan Stanley

Good morning guys.

Rick Goings

Hi Dara.

Dara Mohsenian – Morgan Stanley

So Rick, can you give us an update on any potential impact on your business either in the quarter going forward in Europe from slower macros. And then also the Fuller improvement in the quarter, it sounded like the competitive environment is still tough, so I’m just wondering, is it better execution on your side or are you in fact seeing the competitive environment ease a bit down there?

Rick Goings

Yeah. Dara, I’ll first hit the Mexico situation. I don’t know what – we’ve heard that their gross margins – they’re really investing in gross margin there. But when you do this discounting, you get yourself into the same situation they have in Brazil. Brazil has overtaken the US as their most profitable market and yet they’re – you’re going in to face it this emerging middle class that wants to buy Detura [ph]. So it’s a game you don’t’ want to play. I always have kidded with Mohammed Ali always won because he was float like a butterfly, sting like a bee and the first time he stood in the center flat footed punching it out with Joe Frazer he lost. Our strategy in Mexico, we can’t make any decisions on what they are going to do.

I will tell you what we’re doing. We’re sitting there taking the company that was Fuller and we’re evolving that company into prestige brands. Our most prestigious brand there is Armand Dupree and that started as a fragrance brand. But now we’re making that the marquis brand in skincare as well. So you’re going to see that company evolve to more and more larger Armand Dupree, better, stronger price points led by fragrance and led by skincare so that it’s going to be aspirational to the middle class there and over time, a five year period of time it may be that our company name there is Armand Dupree.

So we’re basically moving up with this middle class. But you don’t do that one step. Some of you might remember Hertz used to have Hertz rent-a-truck, then Penske bought it and it said Hertz-Penske but it was still yellow and then all of a sudden, within three years it was Penske and the trucks weren't even yellow any more. So the play in Mexico is a brand play. In Mexico it’s not just sit there and discount or you’re dead long term. So turning to Europe. I will tell you, I’ve been with a lot of Germans, French and others here this week who are fairly well connected. I feel good about improving macroeconomic environment in Europe, but it’s going to be very tell tale what happens in these French elections because they’re abandoning this social contract that they had in France, in Germany because the government simply couldn’t afford it. We see that lesson in Greece.

I was pleased to see the margins, Sarkozy's margins get to 1% with socialist there because that will show is there public support? Can somebody who wants to balance the budget, can they win? Five years ago you wouldn’t even have election this close. But the biggest thing I’m seeing in Europe now is the realization by people, oh my goodness, I’ve got to do this myself and the younger ones, they want to be entrepreneurs. The younger ones I’m seeing here that we have from France, Germany, they’re hot shots, college educated and the reason they like this is they’re not tied to the clock. They say my goodness gracious, I can build businesses out of this. So there’s going to be a lot of noise the next couple of years in Europe, but I’m more confident that they’re doing the right things than we are in the US.

Dara Mohsenian – Morgan Stanley

Okay, that’s helpful. And then can you give us update on your long term return on sales outlook? You’ve obviously seen pretty healthy expansion over the last few years here. Is there a level where you think that margin expansion starts to moderate a bit or kind of a peak margin level eventually?

Rick Goings

Yeah. I think it’s going to come and Mike you handle B of this. Firstly we have this as to an earlier question too. If we can get a couple of our leaders that either have been not contributing to top line growth, kind of flattish like the Japan or those that have been in a decline like Australia, will we still have the power to get this? We can get those drag markets back. All of a sudden you move the established markets from a 1% to a 3% or 5% because we’re learning. Our biggest Tupperware market in the world has been Germany and many people never thought we could get to that. Very interesting how we’re getting to that. One contributing thing we didn’t talk about today. They learn from our South African business that to put in a sub management level, what we call team leader.

So Germany as I joined the company had 165 distributors and these are these mega distributors and what we’re finding is now they have 150 distributors in Germany, but a huge number of team leaders. Team leader is a fulltime position and somebody could make 35,000 to well in some cases 100,000 a year as a team leader and the team leader still is under a distributor. So for example we have a third the number of distributors and it’s roughly in Brazil that we do than Russia. But they’re huge. Our top distributor in (inaudible) last night $21 million in retail sales per year. That’s $2 million a year in income. So we’re learning. The lever we learned there was combination of product, but a combination too of oh, re-engineer the seven distributor structure under it. So we’re really learning how to do that more. Mike, anything else?

Michael Poteshman

Well, Dara, I guess your question on where we’re going on ROS and I think it comes back to our expectation that we can still see improvements in this 50 basis point range. You’re right that we’ve made a heck of a lot of progress, probably most significantly in South America. We were losing money in that segment five, six, seven years ago and now we’re up into the last year 18% range. So that’s been volume leverage and cleaning up some of the value chains. But that said there’s still Argentina where we even lost money last year. So we ought to be able to obviously do better than that. Rick talked a bit about Asia and he highlighted Japan. That’s a business that operates right now around break even. So even though last year we were at 21% ROS for the whole segment, we ought to obviously we should be able to make money in Japan.

So it’s things like that. Our lowest as you can see ROS segment right now is beauty North America. Last year right around 10% and we invested as we know significantly Fuller Mexico and that should rationalize over time. But we’ve said ROS for this year for the full year should be around even is the update that we gave in the release today. But over time we ought to be able to do better. So clearly we don’t want to overdo and to Rick’s point about having the right mix of product offering and keeping the sales force and the consumers excited about our business. But there’s many places where we can do better. So we need to balance those things over time and still we’ll look to get the 50 basis points per year at this point in time.

Dara Mohsenian – Morgan Stanley

Okay. Thanks.

Operator

Your next question comes from Sofya Tsinis with J. P. Morgan.

Sofya Tsinis – J. P. Morgan Securities, Inc.

Good morning. How are you guys?

Michael Poteshman

Hi Sofya.

Sofya Tsinis – J. P. Morgan Securities, Inc.

My question has to do on beauty North America and you just touched on it a little bit. But I just wanted to dig a little deeper into it. I think last year margins were down 500 basis points. This year you said you’re guiding for them to be roughly flat. Can we ever see that business return to the kind of margins that they had in previous years and what does that mean for beauty control? Do you need to get the business to break even in order to keep those margins or is it all the leverage from Fuller Mexico? Thanks.

Rick Goings

Mike?

Michael Poteshman

We certainly expect our sales to make money at beauty control in all of our units. The team there is focused on the right thing that we need to do to be moving the top line, the sales force KPIs and the top line as well as working on the back end. Clearly we can make money there. We’ve been as high as probably the mid-teens or close to that at beauty control in the past, several years ago. Fuller Mexico has generally operated at a much higher rate than it is now. Over time both those markets should do better from an ROS point of view than they’re doing now and either one of them making progress would obviously help the total.

Sofya Tsinis – J. P. Morgan Securities, Inc.

Do you think they could get back to a 15% margins in that business over the next – understanding that this year it’s not happening, but maybe two, three years?

Michael Poteshman

Over time, yeah.

Sofya Tsinis – J. P. Morgan Securities, Inc.

Okay. And then just to touch on France…

Rick Goings

Yeah, let me add on this thing too. Firstly, with the Mexican business we always had a 22% ROS on it. That’s what traditional levels are and Mike I don’t know what we have in the plan this year but that’s a 20% plus business and I think we ought to be able to – that’s the way that we can make the right kind of investments and a lot of profits going down the strategy I mentioned earlier, the Armand Dupree. Back to beauty control again. That business was doing $50 million, $55 million when we bought it. It’s still twice the size of it, but we had almost up tp triple the size. All of the mistakes at beauty control were self inflicted.

We made a couple of bad management decisions. Good people brought with the wrong strategies or the wrong skill set there and what they really did was allow the business to – from a real selling of skincare highly trained sales force to a bunch of customer representatives again and we lost about four years momentum on this. And I took one of my strongest people, she worked for me in the past. Daisy Chin-Lor who worked in Hong Kong and I had all Asia-Pacific in another life. We brought her into Tupperware. She ran our Korean business. She’s a New York American of Chinese heritage and she is good at beauty. They love her at beauty control and what we said to Daisy; don’t buy closing to recruiting gap by getting less committed people who are more customer representatives. Let’s take a couple of years. Let’s do this thing right. Let’s get it more of skincare treatment products.

As a matter of fact to tell you what‘s really working, they launched a $95 skincare product in January and it had a four time over sell. They were out of stock for six weeks of it. Never could we have done it and it’s a signal they’re going in the right direction. So I think your question is important and I think the bogey of 15% is just around the corner. And I don’t know whether the corner is 2013 or ’14, but I do know we’re heading toward the profit place again and then once you leverage that on sales growth, then you get over 10% pretty quick.

Sofya Tsinis – J. P. Morgan Securities, Inc.

Thanks. And just to follow on France. I think you said that it was up, but slightly below expectations. Can you just quantify that?

Michael Poteshman

No, we weren’t up in France in the quarter. So it was a little bit worse than we thought. They’re – Rick talked about it a bit. The thing that we’ve heard is really that it’s the population is dealing with the election and the uncertainty around that and we’ve seen this reaction in previous generation election cycles, that there’s just less – that uncertainty somehow it disturbs people more than in some other places is what we’ve seen.

Rick Goings

That’s interesting what Mike is saying. The saving rate in France over the last 90 days has gone up to rates that they have not seen since the Nazi occupation. It’s like the market stood still because this really is going to be an epiphany moment. What they’re going to have, what kind of France is ahead. Do they re elect Sarkozy who is trying to build this country? Because you remember companies like us were and many with closed factories in France, 35 hour work weeks, just the rigor to do business in France. He’s’ tried to change all of that, has been fairly aggressive and got unpopular as a result of it. So it’s going to be – tell tale it’s going to be in the next month.

Sofya Tsinis – J. P. Morgan Securities, Inc.

Thanks. That’s it for me.

Operator

Your next question comes from Bill Chappell with SunTrust.

William B. Chappell – SunTrust Robinson Humphrey

Good morning. Just I guess first on the FX kind of guidance for the remainder of the year. Can you maybe just give us some color on delta versus your forecast? I assume it’s mainly Latin America and then just kind of understanding what cushion you have left or what you’ve seen in recent weeks to give you comfort there.

Michael Poteshman

Bill, the way that we do FX is we use of course the actual for anything that’s already happened and then we use the current rate for the forward period. We’re really not questioning it or anything like that. When we look at where we are versus – you’re asking versus the February guidance?

William B. Chappell – SunTrust Robinson Humphrey

Exactly.

Michael Poteshman

Yeah. The Real is down about 7.5% when you look at the two different rates. So that is the biggest impact. The Aussie dollar, Mexican Peso, Indonesian Rupiah, are all down 1.5% to 2% plus percent so that’s really where it comes from mainly.

William B. Chappell – SunTrust Robinson Humphrey

Okay. And then just from a financial standpoint on this. Share repurchase, what you’re saying you’ll do $75 million in the first half and $125 million in the back half. Any reason why it’s a little more back end loaded or just timing of when cash comes in?

Michael Poteshman

We generate a bigger share of our cash as we move through the year and also when we look at where we are today in terms of our leverage ratio. We talk about a target over time of 1.5 times debt to EBITDA as they define it in our credit agreement. We were at that 1.5 as we ended the first quarter, the four quarters ended and so we put that together and that’s why we’re taking the pattern that we are.

William B. Chappell – SunTrust Robinson Humphrey

And then one last one. Rick, just going back to your comments on France since it is a meaningful market. Have the political aspects been a detriment to your business far and I mean do you look at this election as a seminal event for your business going forward? Is that something we should be more concerned about or would it work through just in your business will decouple at some point?

Rick Goings

No. But that’s a really important question. I think I would use as a case in point, Venezuela. In spite of Chavez, we are up such high double – what was it Mike in the quarter?

Michael Poteshman

It’s in the 40% range.

Rick Goings

Yeah and it could – it’s even strong double digits when you take out currency. No. The only issue in France is short term issue. If France goes back to do (inaudible) our business will be fine. But what you’ve had is a momentary freeze by consumers. But the French – well, most western Europeans are very, very resilient. I have yet to see any kind of a political situation that is more than a short term and when I mean short term, month disruption. As a matter of fact I had for lunch yesterday our Tunisians and they took us through the situation there with the beginning of this whole Arab Spring. They had a two week pause during that and all time sales records starting the third week of it. So no, it’s a resilient business model out there. Not the same to retail out there and I think the most important thing on your question thing is, we are not a pull business. This is a push business and it’s driven by number one, the people, the earning opportunity that they have and they want and their connection of who they sell it to, their friends, neighbors and relatives.

William B. Chappell – SunTrust Robinson Humphrey

Great. Thanks for the color.

Operator

Your next question comes from Linda Bolton-Weiser with Caris.

Linda Bolton-Weiser – Caris & Company

Hello. Can you just say again about Russia? I don’t know if I missed the exact number. I assume it was a little less down and also I think you had alluded, Rick, to some early signs of improvement, the early factor there. Can you be more specific about what you’re seeing that is giving you a lot of confidence there? And then Austria, you haven’t mentioned in a while. Used to be a pretty good growth country and I assume it was down because you didn’t mention it. What’s going on there? Thanks.

Rick Goings

Mike, would you comment on both? And guys, I have got to catch a plane so I’m trying to wrestle these questions over to Mike.

Michael Poteshman

Yeah. So Linda, on the CIS, when we look at the sales comparison on our run rate, we were down 7%. That’s the same as we were in the fourth quarter. So we didn’t see a lot of progress there. We did see some good or better comparisons on the front end KPIs in terms of the total sales force size comparison and the actives during the quarter. We made some significant progress there. So that’s why we say we saw some decent improvement there on the front end because that clearly is the precursor to being able to get sales growth. When we look at Austria, yeah. It’s one of our midsized markets in Europe and you’re right, we did have several good years of growth there and it’s been a little choppier lately. In the first quarter we were down just slightly on our run rate basis in sales there, which is actually better than it’s been in some of the recent quarters. So we’re hopeful that the things that we have in place there are going to start to kick in and give us some positive comparisons going forward.

Linda Bolton-Weiser – Caris & Company

Great. Thanks a lot.

Operator

Your next question comes from Gregg Hillman with First Wilshire.

Gregg Hillman - First Wilshire Securities

Yeah. Good morning. I hope Rick is okay. It sounds like he has a cold. But anyways, Mike, just a couple of questions. First of all, could you get into talk about recurrent invested capital by region? If you can give me the actual percentage, what regions ranked highest, like rank the regions around the world in terms of return on invested capital?

Michael Poteshman

Yeah. I don’t have that by segment or honestly I don’t focus on it even by total even that often. But clearly the capital spending and the capital base we have around the world is fairly comparable in the sense that we have plans not only in Europe, but in the other regions as well. So I would think that if we were to do that breakout that we would see it go in line with our segment, profit return on sales. So we were at 21% last year in terms of the segment profit return on sales in Asia. That was our best and then we were in the between 16% and 18% in Europe, Tupperware North America and South America and then the 10% we talked about a little bit beauty North America. So I would expect that the ROIC follows that same pattern. When we look at what we have in terms of capital, we’ve got 500 million plus in terms of shareholders equity and 600 plus in terms of debt. So I’m at $1.2 billion or so capital. Last year we made $270 million as you saw net income in total. So what is that, 23% perhaps? But I’m doing that in my head.

Gregg Hillman - First Wilshire Securities

Okay. That’s really good. And then Mike, moving on to the CapEx, the $90 million you said for this year. Could you talk about elements within that? And also talk about normalizing of CapEx, where it will normalize a couple of years from now.

Michael Poteshman

Yeah. The progression which I’m sure you’ve seen is to having been in the $50 million to $55 million range most years to $75 million, $70 million, $75 million in 2011 and the $90 million forecast for this year. Some of the things that are more unusual this year were expanding our warehouse capability in Indonesia. We’re starting to work on a plant relocation in China. So those are a couple of the bigger items. Where will we see that over time? We’ll have to see. I think if we’re able to continue to get the volume growth we’re seeing I wouldn’t expect that we’d get back down into that $50 million to $55 million range. We’ll see if $90 million is the right number or if it’s something in between.

Gregg Hillman - First Wilshire Securities

Okay. And Mike, could you give me the sales increases for India and Indonesia for the quarter? What the percentage was I guess in local currency?

Michael Poteshman

They were both 38% in local currency.

Gregg Hillman - First Wilshire Securities

They were both exactly that number, 38%?

Michael Poteshman

Yeah, that’s right. Each.

Gregg Hillman - First Wilshire Securities

Okay. And finally I didn't quite catch the acronym, KPI. What does that stand for?

Michael Poteshman

Sorry. Key Performance Indicator. So for us the key non-financial metrics that we look at are the total sales force size comparison at the end of each quarter versus the prior year and then the number of active sellers which is a measurement of how often people order and we look at that on a full quarter by full quarter year-over-year basis.

Gregg Hillman - First Wilshire Securities

So exactly what’s the ratio again or what is KPI one more time? What does it stand for?

Michael Poteshman

It stands for Key Performance Indicator.

Gregg Hillman - First Wilshire Securities

Key Performance, okay. And it’s related to the sales force?

Michael Poteshman

Those are the ones that are most important for us, yeah.

Gregg Hillman - First Wilshire Securities

Okay. Thanks Mike.

Operator

(Operator instructions). You do have a follow up from Linda Bolton-Weiser with Caris.

Linda Bolton-Weiser – Caris & Company

Hi. When you look at your total global active sales force growth, it’s okay, it’s positive. I guess it was 1% in the quarter and if you look back at the four quarters of 2011 it was mostly positive slightly with some declines in some quarters. So you’re getting obviously some very good productivity. Can you explain – is that just pricing or are you actually getting meaningful productivity, sales productivity apart from pricing that’s driving the sales to be higher than the active sales force growth?

Michael Poteshman

There’s some of both, Linda. From a pricing point of view the biggest impact is in South America. This particular quarter something like half of the increase was from pricing and that’s most significantly in Venezuela and in Argentina which are the highest inflation places. The other one that’s got a fairly big gap in this particular quarter is in Europe where you can see the run rate sales were up three, but the active sales force was down five. There are some of the elements. First we don’t have Swiss Guard anymore which was one of the beauty businesses in South Africa that we sold towards the end of last year and that had a 3 point negative impact on the comparison.

So it’s three out of the five points there in Europe, the minus five in Europe. We also did see some good productivity gain in Turkey and so that is – there might be a little bit of pricing in there but that’s because of higher standards for the sales force during awards and things. And then there is also a bit of mix shift in there because we did well in the established markets that have higher average order sizes. So if you look down the page there that’s attached to the press release we were up six on our run rate sales in Europe established markets on three more in active sales force and that was also a bigger share because we were down in run rate sales in the emerging markets in Europe. So those are the biggest factors and what shows through as productivity right now.

Linda Bolton-Weiser – Caris & Company

Thanks. Very helpful.

Operator

(Operator instructions). At this time there are no further questions.

Michael Poteshman

Okay. Well, thank you everybody for your time today and for following our company. We’re pleased with our first quarter and the run rate sales 8% and pleased that we’re able to confirm our full year guidance it’s up in the 20% range in terms of EPS even with the headwinds that we’ve seen versus before with both our FX and resin costs. And so we’ll look to continue to deliver. Thank you very much.

Operator

This does conclude today’s conference call. You may now disconnect.

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