Tupperware Brands Corporation
Q1 2018 Earnings Call Transcript

Published: 25 Apr 2018

[Operator:]

Hi. Good morning. My name is Joshua, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Tupperware Brands Corporation First Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Thank you. I would like to turn the call over to Rick Goings, Chairman and CEO. You may begin your conference.

[E. V. (Rick) Goings:]

Thanks, Joshua. Good morning, everyone. I'm in Orlando with Tricia Stitzel our President and CEO elect. Mike Poteshman our CFO and James Hunt the Head of IR, along with our prepared remarks it's on slide 2. We have prepared these usual slides including standard message with regard to forward-looking statements. I know most of you have already seen the release and in a moment I'm going to turn it over to Tricia and Mike to get into not only the details of the quarter, our outlook, but also handle the bulk of questions and answers. As announced in February, Tricia takes over as CEO actually in just about two weeks. So this is going to be my last time participating in our earnings call as CEO. I do want to give you a brief overview of the quarter and I have got some words with regard to perspective of where this company is, that I think we're fitting at this time. As you've seen in the first quarter it was a disappointment, down 2% in dollars, while local currency sales decreased 6%, which was below the low-end of our January guidance range of 3 points. Through our releases we have shared with you the challenges we have continued to face in Continental Europe as well as Brazil, India and Indonesia; Tricia and Mike will get more into those. There were though bright spots in our portfolio, most significantly in China, U.S., Canada but also Russia, CIS, Malaysia, Singapore as well in our Tupperware and beauty businesses in South Africa and in Mexico. Our adjusted EPS in Q1 was $0.91 that was below the low end of our January guidance range by $0.10 including a $0.06 hit from taxes which is still – seems to be a bouncing ball. We've just went through the new tax regs (02

[Patricia A. Stitzel:]

Thank you, Rick. Thank you for your confidence and I agree with you about the strength of our team and the strength of our model, which gives us a great foundation for growth going forward. Now, in Q1 overall, emerging markets accounted for 70% of the sales growing 1% year-over-year on top of what was our most difficult comparison. So these markets were up 9% in the first quarter of 2017. The established markets, however, were down 19%, and this was primarily in light of the issues that we've noted in Europe and also the exit from Beauticontrol last year. Our total sales force ended March at 3.1 million and that's even year-over-year, after adjusting for the closure of Beauticontrol and combining the NaturCare and Tupperware businesses in Japan. Active sellers were down 4% also excluding the impacts of Beauticontrol in Japan. So as Rick said, this was a disappointing start for us in which we faced a wide variety of challenges in Q1, both external such as strikes, severe weather, economic pressures and internal factors, which related to our execution and planning. So, let me take you around the world and provide some detail on how these factors influenced our results. I'll begin first in Europe. As you know, we announced in Q4, the closure of the French manufacturing facility due to overcapacity, which had lasted for several years. And we knew going in that closing a facility in France would be a difficult thing to do. We planned a comprehensive communication plan with our country leaders and our distributors. And although we planned many different scenarios, in the end, we underestimated the impact of a few key factors, which ultimately disrupted service to the sales force. This began in December in Germany and it carried over into January and February for Continental Europe, and the most sizable impacts were of course in January, but also France and Italy. Now, it's really important to understand that January is one of our largest sales months of the year in most of our established markets in Europe. We even call these weeks big weeks as we promote them to the sales force and to our consumers. So, in Germany and France, the disruption in December negatively impacted the crucial dating period of parties for January, and fewer parties in January had the spillover effect into February. And then adding to that, the pace of production and mold availability in December meant that our promotional offers critical to the big weeks' promotional period, needed to be changed at the last minute; that caused additional confusion and frustration in the sales force. So, all these factors converging, we experienced this wave of negative sentiment on social media across Europe. So, in retrospect, we could have managed some of these factors better with regard to execution and timing. Now, as we mentioned on the January call, we have successfully negotiated a shutdown agreement and the plant is now closed. We believe that the operations would normalize pretty quickly and interactions with the sales force would rebound, but the lack of sales force engagement and momentum along with the social media distraction carried deeper into Q1 than we had imagined. So, closing the French facility was the most significant action within our revitalization program in 2018 and it's now behind us. Service has returned to more normal levels and we are now working to restore the confidence in the momentum with the sales force, and this is going to happen through a focus on our core business fundamentals including enhanced contact and communication. I was just in both France and Germany last week and I have to say I found both teams there more positive about the engagement of the sales force. I also personally met with the French distributors and here I was very proud to see their loyalty, their resilience, they are working with us on this, and they are determined to build the sales force size for improved result in the second quarter. And what we've seen these last weeks of March, have already started to see some better activation and engagement in both Germany and France. So let me turn to Brazil where we were up 2% in the quarter and this was up against a plus 24% in Q1 of 2017. And here too we faced the external pressures stemming from a customs strike. Now the customs strike is not something new to us, it has been an ongoing issue for some time, but it quickly escalated in Q1 when they actually reduced the number of days they were working. And this restricted our ability to move molds in or out of Brazil according to our planning cycle. And then these delays caused production slowdowns and then we couldn't fill the orders. So, due to an inability to sell certain products due to the strike, we therefore emphasized other items and as a result had some big oversells on those products and that impacted our order fulfillment. Now, this also include a third-party locally sourced item that ultimately did not meet our quality standards. And this item alone impacted the fulfillment of about 25% of all the orders. So as you might expect when we don't fill orders on a timely basis, the sales force doesn't deliver the orders and they don't place new ones. So, I was also just in Brazil working with the management team there on responses to these issues. First of all, we have put in place a new process for product planning which allows more time for molds to go in and out. And we will also consider the use of duplicate molds, where it's appropriate and also stronger merchandising to cut down on the number of SKUs that need to be produced, which will give us more capacity. We are also exploring external alternatives within the Brazilian system that might lead to more expedited custom clearance. But as with most things in Brazil, even if we're successful, this might take several months to obtain. We're also going to work to improve our forecasting methods, because huge over-sales leave us little time to respond and this will include communicating with some key sales force leaders in advance to review the product plans and gain insight on the reaction. So, it helps us to gain our planning and capacity issues in a proactive way. Now the economic situation in Brazil is improving slightly, but it is still not a good consumer spending environment. There is also still a large percentage of the population with credit restrictions and that limits our ability to add them to the sales force. This week however, we will begin accepting credit cards for a portion of those people that have the restrictions, which is expected to positively impact our ability to convert the lead sin a productive sales force addition without increasing our credit risk. So, we really feel we have a lot of runway left in Brazil. And when we look at the number of sellers that we have per household, we can see there's a long way for us to go. That said, we're up against another tough comparison in Q2, where in 2017 we're up 23% and that was before we began feeling the full impact of this consumer spending slowdown. However, this is one of our most experienced and our best management teams in Brazil. We have a lot of confidence in their ability to adapt and deliver on the results. I'd also like to highlight our businesses in Mexico both Tupperware and House of Fuller. We're really pleased with the developments in these businesses. And both show the power of the strategies, we have been implementing over the past couple of years. Tupperware Mexico was up 6% in the quarter and you may remember that they've been a pilot market for us for several initiatives related to our global growth strategy and we see the power of these things coming together to produce a more systematic approach to executing on our fundamentals. They really put this whole package together leveraging a consistent contact platform, which includes social media and it all starts with inspirational leadership, consistent recruiting, onboarding the new sellers, activating and having a strong sales force manager, earning opportunity and that's really the fuel for our business. They continue to execute very well on these initiatives and it shows the power when all these things come together and this is exactly what we plan to replicate in other countries. Fuller has also been a positive story for us with our strategy coming together here as well as it has been in process for some time. They were up 7% in Q1 and we now have a solid and experienced management team there, who have been staying the course and building on the work that we started a couple of years ago with the rebranding, updating the merchandising and the product proposition to add energy to every campaign and boost the sales force morale. We're also revamping the field manager opportunity. Now, it's likely too early to claim victory, but we're really encouraged with this trend. Now in Asia, India and Indonesia continue to be trouble spots for us. We're not getting the traction that we expected. And as a result in March, we changed the leader in Indonesia. We put in (21

[Michael S. Poteshman:]

Thanks, Tricia. As Rick and Tricia has spoken to, we were down 6% versus last year in sales in local currency for the quarter. And as highlighted in our April 9 update on first quarter guidance, this was 3 points below the line of the January guidance that came largely from the customer service issues related to the French facility and in Brazil, together with results in Indonesia being below expectations. Versus last year, the big contributors were the large increase in China, more than offset by the performance in France, Germany, and Italy that included the service issues, lower sales in Indonesia and the wind down of Beauticontrol that together with the impact of merging the Tupperware and NaturCare units in Japan hit the year-over-year comparison by 2 points. On volume versus price impacts, overall volume and mix was down 8% while price was up 2%. We would estimate that about 6 of the 8 point decrease from volume related to the customer service issues and the Beauticontrol wind down and unit merger in Japan, net of about a 1 point benefit from changes due to the new revenue recognition rules related to the timing of recording sales and classifying amounts. The overall sales force size comparison stood at minus 2% at the end of March. Without the drag from not having Beauticontrol and standalone NaturCare, the comparison was even with last year. The 5 point sequential decline in the fourth quarter most significantly reflected more difficult criteria to be added to the sales force in CIS in the South African units. This was worth 3 of the 5 points and notwithstanding the change, all 3 units had good active seller and local currency sales increases in the quarter. Also a drag sequentially from the fourth quarter, each a fraction of a point on the whole company comparison, where the lack of traction from initiatives in Indonesia, the NaturCare fold-in to Tupperware Japan and a lower total seller count in Brazil reflecting knock on effects from the customer service issues and the consumer spending and credit environment as we've been seeing for the last year. Active sellers for the whole company were down 8% in the quarter, half of which was from the actions taken on Beauticontrol and NaturCare. Slide 6 shows diluted earnings per share without items that, at $0.91, was toward the high end of the updated outlook range from April 9, but $0.10 below the low end of the range from January. Of the $0.10, $0.06 was from a higher tax rate, having to do with the GILTI tax that we spoke of in our April 9 release, with the rest coming from lower-than-expected sales, partially offset by lower-than-forecast unallocated corporate expenses, mainly due to a lower amount for management incentives, but also some lower spending and a slightly more favorable impact from foreign exchange. As shown on slide 7, this brought pre-tax return on sales excluding items to 12.5% for the quarter equal to 2017 in dollars and 40 basis points worse in local currency. This was 20 basis points below the low end of the external range with the hit primarily from Europe on the drop through on much lower sales. Most of the benefits from the revitalization program that was announced last July relate to actions in Europe. Some benefits of this program came through in the first quarter with more expected over the rest of the year. Gross margin as a percentage of sales was 67.0%, 1 point lower than last year's quarter. This primarily reflected an unfavorable mix of products sold and increased sales incentives mainly in Brazil and China and higher manufacturing cost in Europe as we work through the transition there. There was also a small impact from higher resin costs. This was partially offset by a favorable mix impact from relatively higher sales in certain units with higher than average gross margins. DS&A as a percentage of sales was 53.3% in the first quarter of 2018 compared with 53.7% in 2017. The comparison reflected more efficient promotional spending, primarily in Brazil, Fuller Mexico and Indonesia together with lower marketing costs in several of the units. There was also a positive impact from the translation effect of changes in foreign currency exchange rates. This was partially offset by higher distribution costs in Europe and Tupperware North America, higher bad debt expense in France and Germany and increased sales force commissions in a couple of the units. On slide 8, you can see the cash flow from operating activities net of investing activities for the quarter was an outflow of $51 million. This was $17 million worse than last year's first quarter. We received $5 million of proceeds from selling a building made excess by the revitalization plan, but had close to $10 million of cash reengineering payments in the quarter. The rest of the decrease came from the timing of the payout of payables and accruals. On the revitalization program, our expectations haven't changed for the full year where we foresee (32

[Operator:]

Yes. And your first question comes from the line of Frank Camma from the company of Sidoti. Your line is now open. You may ask your questions.

[Frank Camma:]

(39

[Michael S. Poteshman:]

We were down 10% Frank, and it is important to remember or see that we were down 39% in the second quarter.

[Frank Camma:]

Right.

[Michael S. Poteshman:]

And then in the higher teens in the third and fourth.

[Frank Camma:]

Sure.

[Michael S. Poteshman:]

Last year.

[Frank Camma:]

Okay. And the second part of that question is more qualitative. So I know you changed out the management. The prior management team, could you just tell us like how long was that executive there, and were they really the driver of that multi-year success? I'm just trying to figure out how that particular market from a management standpoint went off track given its size?

[Patricia A. Stitzel:]

Okay. Thanks, Frank. So the previous leader had been there for 20 some years, I guess. So quite a long time, and she was really the architect of scaling up that business. And so, and it's a strong team there that led that business to success. And many of them are still there. And of course, they continue to have those same skills. I think the business just moved into a new season and frankly I think that the management team they're having lived for so long with the same leadership in the field and so forth wasn't pushing as hard as we needed to make some of the changes that are sometimes difficult. And so, the execution was a bit slow and loose and although we believe that the strategies are the right one and we've seen good success from what we're piloting there, we thought that it need a stronger hand at the helm in order to execute on these things. And so, we're working on a few key things there to improve our leadership pipeline. And we've implemented this new business leader level which is a non-stocking model and it has more locations less administration. We've seen a lot of interest from our sales force from this. And this would be a breakaway from the traditional distributor, which gives us new sprouts of leadership and that's what gives us a lot of confidence there. And so, we need to scale this. Of course it will take some time. But we really feel that this can really strengthen us for the future there. A couple of other things we're doing in Indonesia. First of all we simplified the unit manager program. Early days to that, but we're still assessing the effectiveness. But again, working through that and we think that's going to bring some growth as well in sparking new unit managers which I've talked about is important in Brazil and Mexico that gives us that engine. And then finally with the product line, we have newness there in the product line and we want to do more with printed items. So, we're ramping up our capacity to do print. Again, we've seen such success with that in Brazil, in Mexico and we really think that can inject some newness in short term things in both late Q2 most likely and early Q3.

[Frank Camma:]

Okay, great. Moving on to China because I do agree I think that's a huge market. Can you just give us the update on how many outlets do you have today, what's the long-term goal, those metrics?

[Michael S. Poteshman:]

Sure, Frank. We are close to the first quarter at around 6,400 which is a 14% advantage. As we moved through last year, we continued to improve that advantage. We were at around, I think it was 2% at the end of the first quarter of 2017 and the advantage is improved sequentially since then. We've talked about ultimately having the capacity for 20,000 outlets, so we'll see how that goes and that was based on the number of households and how we needed to service them.

[Frank Camma:]

Great. My last question just, staying on China, it seems like China and it's not surprising, is that – as a market where you sort of have the best utilization or engagement of social media if you will with the WeChat and other things you're doing there. Is that a fair statement and can you take those things you learned there and apply them to other markets?

[Patricia A. Stitzel:]

Absolutely. I mean, we're learning a lot from China and how they're using social media not only to enhance communication among the members and to educate them, but also to drive them to the outlet. And when you drive them to the outlet, you create this sense of community that really has this nice effect on building relationships and keeps them coming back. So, we're learning a lot from that. You'll see – I'll comment on the digital side is that, we have hired in now someone who is leading our digital efforts and really aligning them more globally to pick up on all these things and share them across market. It's been fairly siloed in terms of, each market is doing something, but we want to be able to better leverage these things. And also to look at automating marketing for our sales force as well, so that they're able to more easily share with their consumers, the programs that are out there, the demonstrations, the videos, doing more of this online gaming kind of engagement thing, so we have a lot of plans with regard to digital as well in all markets.

[Frank Camma:]

Great. Thank you. That's helpful.

[Operator:]

Your next question comes from the line of Dara Mohsenian of Morgan Stanley company. Your line is now open. You may now ask your question.

[Dara W. Mohsenian:]

Hey. Good morning, guys.

[E. V. (Rick) Goings:]

Hey, Dara.

[Dara W. Mohsenian:]

And, Rick, congrats on what's been a long and lustrous career. I'm willing to bet you are the record holder for most miles traveled out of anyone during your tenure as CEO, and congrats again and please keep in touch. And then back to the business, your guidance implies a large acceleration in the core sales trends in the remainder of the year versus the decline we saw in Q1, and I get there were some specific executional issues, many of which were resolved in Q1, but often what we've seen in the past with the direct selling model is that when there are supply chain or product hiccups the weakness can linger even post the resolution as it impacts sales force morale and subsequently the forward result, so can you give us a bit more detail on what gives you confidence in the acceleration? What you're seeing so far in Q2, and maybe what's the risk level that some of this weakness lingers longer than you'd expect in some of these markets? Thanks.

[Patricia A. Stitzel:]

Sure. So I think, the biggest disruption to Q1 was what we saw in Europe, and clearly now with that behind us, you're right about sales force engagement, so it's not a light switch that you turn on and off and it immediately gets going again. But as we said in – as we set this guidance, we were also looking to what's going on over there and that's why I wanted to be there and actually be with the distributors to get a sense of that. So it's gaining momentum, I would say, although it hasn't been completely fixed, but we're seeing better attitudes. And as I said with the French distributors on our side, I think that was a really powerful sign to me that they also have made a commitment to us for recruiting in the second quarter so in the very near-term. And so they'll carry through on that. I think with regard to service, the other one that I highlighted was also Brazil. And this customs strike is a challenge for us although we do have some ways to work around it. What we had been doing was working really, really well, and we were managing to that. And then Q1 with the tightening there, we have to readjust. And so we're in the process of doing that now. We'll have to see how that flows through in Brazil, because we don't see the customs strike really loosening up there. So we're going to have to take a different approach, so those would be the two places with Europe behind us in terms of supply issues then also Brazil. Then, Mike anything to add?

[Michael S. Poteshman:]

Yeah. There are – so, yeah, we base the guidance on the assumption – again that the services issues in Europe are largely behind us, but not necessarily completely. There's also relatively modest – to the overall company, but some B2B sales included in the forecast – business-to-business sales in the second quarter, so well integrated B2B, in the sense it's working with our core model, so that gives a little bit of a lift versus last year. And then, as we move through the year, the comparisons from an operating point of view in places like India, Indonesia, where we haven't necessarily completely turned the corner, but the comparisons do get significantly easier, I just was mentioning when – on Frank's question that we were down 39% in Indonesia in the second quarter last year versus 10% in the first quarter of last year. So, those are some of the elements. And then, the Beauticontrol comparison hit, if you will, goes out starting in the fourth quarter, because we wound that business down during the third quarter and had some incremental sales there than we had been trending. So, the comparison in the fourth quarter is certainly easier than in the third quarter.

[Dara W. Mohsenian:]

Okay. Thanks. That's helpful.

[Operator:]

Your next question comes from the line of Beth Kite of Citibank company. Your line is now open. You may now ask your question.

[Beth N. Kite:]

Terrific. Good morning, everyone. Quickly, if we could begin with the restructuring program and just the concept that quite a bit of the savings from this year will flow through to the bottom line, but I think that will be reinvested. So, where would you like to spend those dollars? Where could, in what regions or sort of what aspects of your business do you think you could reinvest to get better top line growth?

[Michael S. Poteshman:]

Yeah. The thought on what's going to come through on the savings side hasn't changed. So, from the full program once it's fully implemented, we've set on an annual basis $35 million and about two-thirds of it this year, which after investments comes through in mid-teen dollar amounts, it's dropping to the bottom line. The investments are somewhat diversified, but it goes to things that Tricia was talking about where we change compensation plans in places like India and Indonesia and other places and then also where we have more significant model changes, the same sorts of things in terms of bridging type elements. And then there are there are tactical places where we invest as well, where we have sales for shortfalls and of course you hope you get the benefit near in, but you don't necessarily always get it in. So, we invest sometimes incrementally in those kind of things. So, those are some of the examples of kind of the operating type investments that we're referring to.

[Patricia A. Stitzel:]

So that's -

[Beth N. Kite:]

Perfect – oops!

[Patricia A. Stitzel:]

The way I would kind of sum it up is, in the overall strategy we're looking to really ensure that we provide better access for our consumers. We want to enhance engagement and we really want to focus on the engagement of not only our existing sales force, but the sales force, who may have left us and be able to really connect with them. And then, there's even people that can't find us today. So, people that can't find us how do they connect with us and then be able to better support her in her business and make it easier for her to do businesses is really what we're looking to. And as Mike said that's really diversified across the world.

[Beth N. Kite:]

Across geographies. Okay perfect. I have a question if we can go back quickly to China. Definitely their 24%, I believe it was, sales growth is terrific, but I did find it somewhat interesting that the outlet count growth was quite strong relative to a number of quarters now. And yet the sales growth was slower, if you will, albeit still great but of any quarter of 2017. So, are you concerned like that big pop of part of outlets actually didn't lead to greater sales growth in China in the quarter?

[Michael S. Poteshman:]

Well, I guess that I would point to we continue to see productivity in the sense we were up, it's the ending count not the average, but 14% in outlets at the end of the first quarter and sales were up to 24%. So, we continue to get a lot of – you can call it same-store increase, but there are sales that come outside the stores through in a sense through the digital initiatives and we also have roadshows where we demonstrate, I'd say, we, the outlet owners demonstrate things like the water filter outside of the outlets and venues that we organize and sell in that way. And the other thing that we didn't mention in the script is we use this member model, which are consumers, the outlet owners and we've been able to add to the number of consumers at a much greater rate. So, we're adding a lot of members per outlet. Now, they only come out of the count if they self-select to come out, so they're only going to be so active over time and everybody realizes that, but that's an illustration or part of the leverage that we get from the digital model that we're able to add all these members through the digital games and so on that Tricia mentioned and that is where these marketing efforts go towards and that would give us confidence that we're going to continue to be able to grow productivity, because we're addressing a lot more people per outlet and there isn't really a reason why that shouldn't continue. I'm not saying it's going to be geometric forever, but I mean we should be able to continue to add members.

[Patricia A. Stitzel:]

Right. And that's – I even commented on the consistent pace of growth that we have there, because we think this is important. We don't want to just explode the number of outlets. We want to make sure that each one of them has the right productivity and the right earning opportunity and so we're very consistent about and methodical about how we do that.

[Beth N. Kite:]

Very well and if I could close with just a quick one on the buybacks. Can you give us any sense, that $200 million. is that – I know it's not in your guidance, if I heard correctly, but is that maybe more heavily weighted sort of sooner rather than later? Is it sort of a 2018 goal or is that something that's kind of a multi-year use of that $200 million?

[Michael S. Poteshman:]

The intention that we talked about is to buy over the next several months.

[Beth N. Kite:]

Okay, perfect. And thank you so much and Rick congratulations. All my best and we'll look forward to working with you as your Executive Chairman role; but congratulations on a wonderful run as CEO.

[E. V. (Rick) Goings:]

Thank you very much.

[Operator:]

Your next question comes from the line of Olivia Tong from the company of Bank of America Merrill Lynch. Your line is now open. You may now ask your question.

[Olivia Tong:]

Thanks. And I want to extend my congratulations to Rick as well. It's been a pleasure working with you and we certainly wish you the best.

[E. V. (Rick) Goings:]

Thank you, Olivia.

[Olivia Tong:]

If I could maybe follow up just a little bit on the outlook; you've got obviously Q1 behind you. Can you talk about some of the things that saw later in the quarter and perhaps in the first few weeks of April that give you confidence in the turnaround that you're anticipating as the year progress? You talked about Europe, the plant's now closed, management changes in Indonesia. What about some of the other markets like India, other changes that you're making for example in Brazil to stabilize sales? Are you running more promotion? Is there anything incremental that you're adding to the year to fast forward those changes?

[Patricia A. Stitzel:]

Okay. Hi, Olivia. I'll give you a few comments on some of the countries we haven't yet mentioned. So India; India continues to be a bit of a challenge for us with the restrictions that we have around recruiting. What we've done in India to enhance the opportunity for the managers, because when that real earning opportunity kicks in, is when we can keep them. We implemented a new compensation plan there, which requires a more disciplined approach from the manager. So, it was pretty loose who could be a manager, how to keep their title and so we're tightening that up. And we're doing that based on the experience that we had in Russia and Turkey where we're seeing good results there. So we're tightening that approach up. And through the course of the first quarter, we saw that we were maybe expecting a bit too much in terms of quick behavior change. So, we built in a bridge program that would help them to lead to these consistent new behaviors. And so, we're working through that. I think we have experience in doing these new compensation plans and it's important that you stay the course on these things. And I mean it's early, but based on that, we've seen a decent take-up in the bridge program and them at least engaging with that. So, too soon to claim victory over that, but we do think that this new program in India will yield some results. In Brazil, in addition to what I talked about with the supply chain, I also mentioned the credit restrictions have caused us a real issue in terms of converting leads into actual recruits. And I was just talking with some of the distributors there. They say half of the people have these credit restrictions which makes this hard for them to turn them into recruits. And so, by having now the access to accept credit cards, we give people a new path in which to place an order. So we've never accepted credit cards there before. And so, if they do have a credit restriction, they give us a credit card, we can take that now and then it's not an increased credit risk for our distributors either. So, this will give them the ability to turn these leads into recruits. And we still have a very good ability to create leads in Brazil. We've talked over time about the D-Day approach (59

[Olivia Tong:]

Got it. Thanks. That's very helpful. I guess just following up on a couple of questions around the outlook. First on the revitalization program, it looks like you raised the cash charges related to that for 2018. Is that just a pull forward of activity or is there an expectation embedded in that that cost and perhaps benefits could actually be higher than previously expected?

[Michael S. Poteshman:]

Maybe we have to take another look at that, Olivia. We had said $70 million in cash spending this year and that continues to be the expectation for this year.

[Olivia Tong:]

Oh, okay. Because I thought in the – in today's release, you said $22 million in Q1 and then another $61 million over 2018.

[Michael S. Poteshman:]

Yeah the $22 million is program to date. So, it includes the cash that went out the back half of last year.

[Olivia Tong:]

Oh, okay. I understand. Okay, perfect. And then just a clarification on the earnings outlook, the $1.14 to $1.19 for Q2 EPS, that includes just the land sale that you've already executed, the one that you executed in Q1 that you expect to close in Q2, right? It doesn't include any potential additional sales for the full year outlook of $4.62 to $4.67 only includes what you've already executed, right?

[Michael S. Poteshman:]

The one transaction happened in the first quarter, the $5 million and so that's in those numbers.

[Olivia Tong:]

Yes.

[Michael S. Poteshman:]

And then yes, in the second quarter, not in the non-GAAP, so the $1.14 to $1.19, but in the GAAP number it's got the assumptions around the transaction in the second quarter but not beyond that (01

[Olivia Tong:]

Got it. Okay. Thank you.

[Michael S. Poteshman:]

Welcome.

[Operator:]

Your next question comes from the line of Doug Lane coming from the company of Lane Research. Your line is now open. You may now ask your question.

[Douglas M. Lane:]

Hi. Good morning, everybody. Thanks for taking the question. Can we talk about the comparisons here? Mike, you mentioned the Beauticontrol comparison is clean as of the fourth quarter. We've been adjusting a couple of things for a while now between the timing of the calendar and now you mentioned Japan. When do the comparisons really get fully clean going forward?

[Michael S. Poteshman:]

Well in terms of the unit comparison being in others (01

[Douglas M. Lane:]

And the calendar vagaries are behind us now right?

[Michael S. Poteshman:]

Yeah I mean it's the nature of our fiscal calendar as that comes through every six or seven years as we close on the last Saturday of December, but it's behind us for the next few years. That's right.

[Douglas M. Lane:]

Okay. That's what I was looking for. Also you mentioned there's been a pretty big difference between cash taxes and book taxes in the last two or three years. I think something like $0.80 a share which is pretty substantial. So looking at what's going on with your tax rate, should we look at it like the impact is that now your book taxes are going to close the gap with your cash taxes or do you think your cash taxes actually will go up as well?

[Michael S. Poteshman:]

Well, what we're expecting longer-term I was talking about 2019 and forward is that we enter this year 2018 with an expectation for 27% without items. And then we had a bump up because we had the GILTI situation. And what we're trying to say is that in 2019 in and forward, we think based on how things will settle down and statutory changes that we would make putting aside GILTI that we would be able to come down off of that 27%, and that over time as well that the cash rate will come towards the book rate, not necessarily in the mid-20s but better than it's been historically.

[Douglas M. Lane:]

Oh, okay. That's helpful. And then just switching gears, the emerging markets up 1% organically is obviously below trend. I mean, I don't know what you've been saying for trend, in my mind, it's been more high single digits. But when – I mean just stepping back and looking at the emerging markets in their entirety, when do you think Tupperware will be back to more of a trend line kind of growth? Would it be quarters? Do you think 2019, 2020. I mean, just from where you stand, where you see that returning to the trend line?

[Michael S. Poteshman:]

Yeah. We clearly have businesses in different places. China is the best performer and their portfolio is certainly also of scale, real large scale. We've done well consistently in the South African businesses, in the Mexican businesses; CIS has started to perform better. Clearly, India and Indonesia have been a big drag, particularly Indonesia being the larger one. And we do expect the strategies that we have in place. We've also got the management change in Indonesia to pay off. Obviously, we haven't built in a huge improvement this year, given the specific guidance we've given. But those things should start to work. And then in Brazil, also of course very important for us, there's some comparison hits in there that should result, but we need to fairly get these service issues and how we're going to operate in light of the customs strike working, but we have paths that we think will improve that. And then, we would hope to start doing better. I don't know that we project that we're going to return to the 20% plus growth. But market by market, where it's not happening like it should, we certainly have paths and reasons while we think things are going to improve.

[Douglas M. Lane:]

Yeah. I mean, the CIS number was impressive. If Brazil is just sort of a blip as you mentioned given the external factors, Mexico looks like it's doing well. And frankly, India and Indonesia at this point are much smaller than they used to be. So I don't – why wouldn't we see an acceleration in an emerging markets growth rate as soon as two or three or four quarters out?

[Michael S. Poteshman:]

Oh! Yeah. We certainly don't consider 1% to be the destination. Absolutely.

[Douglas M. Lane:]

Okay. Thank you.

[Operator:]

There are no further questions at this time. Mr. Rick Goings, please continue with your conference.

[E. V. (Rick) Goings:]

Thank you very much and thank you all for your time today, couple, final comments. I'm going to move into this role of the Executive Chairman and they've made me an office over on the side of the building here. (01

[Patricia A. Stitzel:]

Thank you.

[Operator:]

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