Tupperware Brands Corporation
Q1 2009 Earnings Call Transcript

Published: 22 Apr 2009

[Operator:]

Good day everyone and welcome to the Tupperware Brands Corporation first quarter 2009 earnings conference call. At this time for opening remarks and introductions, I’d like to turn the call over to Mr. Rick Goings; please go ahead sir.

[Rick Goings:]

Thank you everyone for being on this call and good morning to you. With me on the line are Michael Poteshman, our Chief Financial Officer, and Teresa Burchfield, our VP of Investor Relations. You know the drill on forward-looking statements so we’ll be discussing some forecasts here so I refer you to our company’s position on forward-looking statements in our filings and yesterday’s release. I’m talking to you from, I’m in Hong Kong. It’s a little after nine at night here and so if we have just a kind of [shell to beach], that if we have some kind of a technical communication problem Michael and I are aligned with what we were going to talk about today and he’ll pick it up and I’ll try to rejoin it. I am, interesting enough to have been here with all of our managing directors for our markets in Asia Pacific and one of the things we’ve been doing so much this last four years, is staying very close to our markets and making sure our management teams not only have the training and the understanding of the levers at their disposal in the direct sales company, but they also feel empowered and that’s why I think we, here in Asia Pacific they were up 13% in the first quarter. So they’re doing a great job. I’ll also, and I’m going to be turning it over to Michael in a moment and then he’ll make some amplifying comments on not only the first quarter but also he’ll speak to the second quarter and full year. We were pleased that the quarter ended on a positive note with sales up 1%, again I’m trying not to be redundant with what you already read. It was a bit lower then our 3% to 5% increase that we indicated in early February but we did see improvements as we went through the quarter. There really, and I’ve never seen this in business myself, that there were really two distinct parts to this quarter; January where it seemed like not only in our business but in many businesses that consumers just stood still and the world was frozen. A lot of that was driven by politics in the US as the world waited to see what was going to happen with the Obama Administration, with Wall Street, the banking industry, yada, yada, yada, you know it as well as I do, AIG and what the government was going to do. But we saw the same kind of things happen in January in Russia, saw it happen throughout out western European markets and by the way, from talking to other CEOs that the World Economic Forum in late January in Davos, I heard the same kind of things. Then there was the rest of the quarter, thank goodness. My mother always used to say, “You don’t drown when you fall in the water, you drown if you stay there”. But we saw momentum come back to our business then. We saw as consumers start to spend some of the money they’ve been saving and while the sales comparison in February and March were better then January, and they were above in those two months last year, they weren’t strong enough to really offset this tough January that we had. By the way, you’re going to see that for the full year we’ve said guidance in the top end stays the same but for the bottom end, we have shaved off one point there because we quite frankly, we don’t want to get over confident and don’t know if we’ll get all that back from what we lost in January. Before I get into details of the quarter though and our forecast, let me comment on what I’ve been seeing as I’ve been traveling. Again I’m out here in Asia Pacific, I’ll be in our market in India later in the week, but during the quarter I’ve been to Germany, France, Italy, Russia, Poland, Switzerland, Austria, and two times to our big businesses that we have in Mexico. The reason I bring this up is I’ve really been seeing what our people are doing first hand. And while our year over year comps for the first quarter were very difficult, we do really start to see traction coming back into our business. Its interesting, I was at Capital Research last week and one of the things we were talking about, very bright group of people out there, but we were really talking on this subject on that with regard to this earnings release season, most don’t expect many CEOs are going to be reporting out year over year increases. Those are going to be very rare. I was pleased that we were in that category that did, even though it was modest. But I believe that really you’re going to see three things, three categories from CEOs in these industries out there. I would call one kind of the group of companies that are what I would call the black that really there, its bleak and black and I would put into that category at the very dark side of it, companies like GM where it’s a question of when are they going to pull the plug and go through reorganization. Most are going to be in the gray category and have some visibility into their business but are still uncertain of the outlet really due to the negative influence and momentum in business and markets. And then there’s this group, probably the most positive, but that I would still characterize as yellow to green and those are the businesses that have a little bit more visibility and while nobody is certain what’s ahead, they still believe there is going to be some progress. These companies while not overly optimistic that it will be a great year compared to the previous year, they do think they’ve got the right kind of business models, that they’ll navigate through it and have sales and earnings growth. I believe very strongly that we’re in that third category, that yellow to green and I’m seeing as I’m out in the markets and the primary reason for that is not only again I said about our culture, we’ve got a group that are out there, they know what to do and they’re empowered to do it. But also because of our business model and we have levers within our control which can help mitigate some of the negative external trends. We all know that with unemployment at near record high levels, that’s enabled us in this countercyclical way to recruit more people. I think what’s also worth noting is and we’re beginning to see in many markets, there’s not only the recruiting of more people, but better people. People are coming into the unemployment market that are better educated, have had success in their life and people who normally would not have looked at direct sales. And we know from past cycles of this, often we use this as a time to really build our ranks with people who never would have considered our industry or our company, but once they get involved they have success, they enjoy the nature of the business, they have a pleasing experience and pleasing results, they stay in the business. So we’re counting on that. We’ve also seen our sales force, we kept our advantage of 7% versus last year, and we think we need a 7% advantage to get our 2% to 5% sales increase and kind of the discount between those two is I think what we’re expecting to be the negative impact of consumer, compression of consumer spending. At any rate, we like what we’re beginning to see there. However bringing recruits in is only part of the solution. The other things we’re focusing on is really finding a way to get consumers to spend their money with us and here’s where I would say we have first-mover advantage and we’re not waiting for them to come into a store. We get to go out to see them and for most of our sales force the people they serve are their friends, neighbors, and relatives, so there’s a relationship there. So what we’re working on though is as we get these additional recruits, how do we convert them quicker with regard to from being just an interested recruit to a trained individual, to put them into a selling situation that is for them, brings them a pleasing experience and pleasing results. In some of our Beauty business we’re doing this with the spa party. They can come for an hour of relaxation and then we sell them skin care. In our Tupperware business, I’m very pleased to see a lot of our MDs are becoming very innovative. I was last month in Germany and they launched a party called [rume forte]. [Rume forte] basically would be translated into [rume] is food that is lying around, [forte] would be, its like leftovers. What I saw them do is package this and research shows that in Germany about 30% of the food that Germans buy, they throw away because there’s a little of this, a little of that. Well they’ve created this [rume forte] party for women to take advantage of leftovers and there’s a [rume forte] menu for breakfast on different omelets, I don’t know about you, but getting an omelet I usually see they have the trays open and I usually say, “well put everything in it.” It makes it interesting, but what they’ve learned how to do is make interesting breakfast dishes. Also they’ve come up with great evening casserole meals and what they use as the centerpiece of all this, is a food processor that Tupperware makes and its one of our hottest selling product which is called Quick Chef, and so she’s able to make a nutritional meal while saving money. As a matter of fact, how they’re selling it there is that with the money you save in three months, you pay for all the Tupperware products that you bought. So its good to see our markets are turning this way. Seeing also a number of our markets are, particularly in the US, you’re starting to see that people taking their lunch to work is up about 40% so we’re focusing more on those products where he or she prepares it at home, brings it to work. Additionally I would say through marketing and promotional incentive we’re really trying to help our sales force and consumers focus on products at lower price points, products that have features and benefits which are differentiated and [demonstratable]. And that appeals to consumer buying habits in this kind of an environment. So I’m seeing very positive steps. Another key to our business model right now is the earning opportunity that we provide and one of the things we wanted to make sure we didn’t do is to bolster our recruiter and start dropping a kit price that is let’s say a $200 kit, and really includes all the things that you would need to do parties and to demonstrate product. You’ll see a lot of direct sellers make the mistake of doing a discounted kit. Like, tough times they’ll do a $25 to $50 kit and we generally call them paper kits and you end up then only having customer sales representatives, not [really] sellers out there. So you’ll have a larger sales force but the productivity goes through the floor. With the kind of kits we’re now moving and starting people with, we back them up with the right kind of training and what we’re really starting to see is in the markets that are doing it best are really holding their party average. By the way I was with the Australian managing director late this afternoon and Rose has managed our market there for about eight years, in Europe our average party size is about $400. The average Australian party is over $700 now and it has to do with the training that people do. Now, as I’m going through all of this, that’s not to say that we’re going to be, or have been immune from the economic environment in 2009 but I think we’ve got enough levers that we’re going to navigate through it and while it might not be a great year, I’m counting on a lot of progress. Hey, one of the best signs is when the management team at headquarters and I’m seeing it in a number of markets, put the allocation aside for bonuses this year. Our management team throughout most all of our markets are still planning on getting a bonus this year so they’re not sitting on their hands and giving up on the year. Let me drill down a little bit more though, I’ll put it into category first established markets. Established markets primarily because of January, were hit a little bit harder in the quarter. They were down 7% and I can isolate that to a number of markets; Germany was down about 12%, and there were high single-digit decreases in our Tupperware US business and our BeautiControl business. I’ll talk a little more about it. Emerging markets though continued to play a key role during this quarter. By the way in the first quarter emerging markets were about half our sales and they grew still at 10%. So that was only 1% off what we saw in Q4. Let me though again, drill down a little more on the established markets. I mentioned they were down 7% but there was some good news within that, (a) there were a number of markets who really did well during the quarter with increases; Greece, Austria, Spain, Australia. Those markets saw year over year increases and they were driven by a larger sales force. While we continued to struggle in Germany which was down 12%, I must say that we were up year over year in the month of March and on a positive note, for the first time in almost a year, we’ve seen the size of the German sales force end at the end of the first quarter same as last year and we’ve been operating with a deficit of up to nearly 10% in Germany and we were down to actually at the end of 2008 4% still in Germany. So it shows me that our people are making the right kinds of changes. By the way also in Germany I was so pleased to see that they are proactively implementing many of the approaches that have worked so well in our French business. We’re the largest direct seller in France and France was elected by our, Simon Hemus, Michael, and our senior management team, as established market of the year for this last year with sales increases. And France is a business where direct selling is tough. We’re the largest direct seller there, very profitable and we’ve been there 45 years. So I say that don’t cross off our established markets. We certainly haven’t given up on them. In North America both Tupperware and our Beauty business were down, although single-digit and for different reasons. Our Tupperware business the sales force size is up high single-digit. They lost so much in January though, they were unable to plow back and get it all back in February and March, but we did see improving trends in that business. The challenges really came from low productivity and low activity levels. BeautiControl is a different story. We’ve been filling you in on changes we’ve been making there. We installed a new President, one of our real hotshots the beginning of the year and the sales force was down 10% at the end of the quarter. But I was with them in February and I’ve seen recruiting pick up, and by the way importantly back to the point I made earlier, they have not dropped the kit price to a cheap kit and by the way, if I was doing a, this was a medical school and you were an intern and we were doing grand rounds, the thing I would comment about grand rounds, last year in BeautiControl, too many months they sold a $99 kit which didn’t get quality people in, and by quality I mean people who are interested in building a career. Albert [Bauch], our managing director, even though there’s a need to close the size of the sales force, that he stayed with a complete kit and so recruiting is the focus and focus on ensuring that we get those people trained so that we don’t have a wholesale buying club there. And by the way, that’s one of the ways that we could show short-term results but I’ll tell you, within a year we’d be paying the price for it. It takes you three or four years to plow your way back to having real sellers. Let me turn to Asia Pacific in our established markets, we’re back on track in Australia, New Zealand. We have a sales force size advantage and we saw an increase in local currency. Both of our Japanese businesses by the way, are in different places. One, our NaturCare business is struggling with the size of its sales force, however, and we haven’t seen any progress there. The good news for us is its not that big a business. Tupperware however, as we went through the quarter we saw improvement in activity and productivity levels and I have a lot of confidence in that Japanese business going forward. Let me turn to our emerging markets before I get into turning it over to Michael, in Europe, emerging markets, the segment was still up 185 in local currency and that’s everything there, that includes Europe, Africa, The Middle East, and we use the World Bank definition of per capita GDP to really decipher what’s an emerging market. We were up in the fourth quarter 17% so we actually had strengthening in this first quarter. Russia, strong double-digit sales. We’re really getting a [inaudible] business in Turkey and our businesses in [sub-Sahara] Africa, both Tupperware and the Beauty businesses, very strong double-digit increases driven by the size of our sale force there. I do want to [shell the beach] on one thing though, as we ended the quarter we saw some alarming signals in Russia with regard to consumer behavior. We do have a large and active sales force there but I think we’re being pragmatic that we’ve got great leadership there. If she’s in Siberia holding two parties a week, we can motivate her to hold three parties a week. But we expect in Russia that the going is going to get a little bit tougher there and so, and by the way we’ve been spoiled by a bad month in Russia is a 30% sale increase and so I think we may have some sober times ahead but I’m still expecting nice increases. The emerging markets of Asia Pacific, they are also performing well. By the way, emerging markets over here were up 31% in local currency and by the way that’s right in line with what we did in Q4 which was 32%. Indonesian business, amazing, largest Muslim population in the world. We have a woman who is President of this business. I went and did a retreat for them early this last year and its amazing what’s happening with this leadership team. We were up Q1 over 100% in Indonesia and by the way, it’s the fifth largest population in the world so we’re going to be concentrating efforts there in the fall and really doing a lot of getting, as Michael and I were just talking prior to the call, getting closer to the markets and I’m going to be probably doing four or five cities there where we take this through. Malaysia, Singapore, India, Korean markets were also all up and all of them up more then 30%. China was down partially due to a timing of shipments around the Chinese New Year but we’re seeing some consumer confidence issues there. We have kind done a hold on opening new outlets there for the time being. We’re right around 2,700. The productivity of the outlets by the way, I’m pleased to report is in line with prior year and the number of home service calls, that’s how we do direct sales there, because they really don’t have apartments big enough to hold parties, that’s working well. But anyway even with these challenges in China we continue to see strong growth going forward and I’ll tell you, I’ve been in Hong Kong here two days and you wouldn’t know there’s any economic crisis going on in the world given what’s happening here with tourism and stores. Turning to the North America segment of our Mexico business, its strong performance, it was up high single-digit. It is still an emerging market. We were able to drive sales by taking advantage of a larger sales force and driving activity. So, and we did a retreat in the first quarter in Guadalajara, and we’ve got a terrific sales force down there. I’m happy to see us mitigating some of the impact of the unemployment and some of the [inaudible] in the Maquiladoras area. And our Beauty segment, Fuller Mexico, our largest business, sales were down in the quarter. We put some plans in place. Simon and I were there twice in the quarter. We’ve got a terrific management team down throughout all the levels there and we were pleased to see improvement in the size of the sales force in the quarter, which was down slightly at the end of 2008. I’m pleased also to report that at the end of the first quarter we crossed back over that half a million sales force size mark and we’re a couple of percent higher then we were last year at the end of March. Our challenge is really going to be getting them active but we are certain to see some of signs of light. We have a category we call Beauty Other, I don’t know why we call it that, Michael we need to work on a new name, but we saw strong performance from quite a few of those units. Brazil, Venezuela, and our Fuller business in Argentina and you will recall we combined our Tupperware and Beauty businesses in Brazil at the end of last year. By the way we’re starting to see some of the benefits of that and as I mentioned the rationale behind that is, we looked like we were going to need to invest in another $10 million this year and we basically looked at each other and said, what’s the point in this kind of an environment, the halo effect of having Tupperware as the core brand and doing it the same way we’ve been doing it with our Mexican business and have her sell both. So anyway, we’re seeing benefits and that will save us $10 million. Overall in our emerging markets we’re continuing to see the strong momentum and its really driven by the power of our earning opportunity and I think together its, if put three things together it would be, its early days in these markets. We have very, very strong momentum and women particularly are looking for an earning opportunity out there. By the way all this kind of ties together, when I was doing investor relations meeting last week, there are a number of points that I’ve really been saying and I think there are five things that really make us a particularly strong business model and gives us confidence we’ll reach this 2% to 5%. First I would sit there and say it really has to do with the culture. We have a highly trained, dedicated group of people out there who are empowered. We have spent a lot of time and resources. They have read the books, seen the movie, and been there to as far as understanding the levers that drive their business and how to adapt it and adopt it. And I might also say what we’re really proud of is their dedication and commitment to this company. It is rare anybody leaves and joins someone else who’s with us because I think we offer them not only a great career path, great compensation, but a great feeling of empowerment out there so they get to run their own deals. Secondly, we’re the beneficiaries of the category of products that we’re selling. These are products that are particularly well suited for these kind of economic times. Clearly I think everybody understands why Beauty is, but the Tupperware product, we’ve [steered it that] no woman wakes up any morning and says in her first hour, “Geez, I’ve got to have some Tupperware.” If she does she needs some psychotherapy. But there are some who are fanatics like that but we know that because of our product category, she can save money. It can save money not only with the [rume forte] kind of idea, bringing lunch to work, but also batch cooking and she knows she doesn’t have to replace our products. One of the people on our Board, Al Martinez which runs Deckers which includes that great brand Uggs, is we feel the people that are going to be really most vulnerable are the ones that don’t have quality brands. They can’t sell the features and benefits and we’re finding that with consumers. If I’m going to invest hard-earned dollars now particularly when there’s compression of consumer spending, I want it on a product that lasts. So I think secondly we’re beneficiaries of that product category. Third, we’ve got this adaptable business model that allows us to have firstly this first-mover advantage to go to consumers because she’s not going out into the store and that we can adapt it promotionally to what’s happening in individual market. Fourth thing I would say is our value chain and that is that we throw up a lot of cash, we have high margins, we still average about 65% gross margins and by the way, we’re in a very good place with regard to new product introductions and I say that with regard to the value chain. We don’t talk about it a lot but we have about a billion dollars in today’s market value of fully amortized [molds] that because they’re fully amortized, they’re not on our balance sheet and we initiated a program a month a half ago called Mining for Magic where how many different shapes can you make. So to take this 50 years worth of incredible molds that we have and we make them ourselves in our facility in Australia and adapt and adopt those. That’s going to save us a great deal with regard to CapEx and at the same time we’re going to be able to utilize great newness out there. So the whole value chain is good. And last I would say, this whole portfolio, we’re pretty much everywhere you want to be. Half our business is now emerging markets. Again its early days. But the other half are established markets and by established, we don’t use the term mature because that says, hey, the old saying, when you’re green you grow, when you’re ripe you rot, hey, we’re established markets. We’re still supposed to grow in those markets and I will tell you markets like France, the reason we’re growing is because we never really did penetrate the big urban markets of France, Nice, Paris, Lyon, we normally did parties in the smaller villages of France. So now that we have a way for a busy working women who mostly migrate to the urban areas, its like opening up France all over again for us. Anyway, I think we’re well positioned. What I’d like to do, its difficult to forecast really what’s ahead, a lot of uncertainty. We do have confidence though in the flexibility of this model and the strength of these management teams, that we’re still going to make progress. Michael, let me turn it over to you. I have talked enough.

[Michael Poteshman:]

Thanks Rick, you’ve had a chance to go through our earnings release so I’ll first just highlight a couple of things in looking at our first quarter results versus the outlook we gave in February. On the sales side our 1% local currency increase was two points lower then the bottom of our guidance range and primarily reflected lower then expected results in some of our established market businesses and mainly toward the beginning of the quarter as Rick talked about. In contrast on the earnings side, we were able to come in $0.06 above the high end of our EPS guidance excluding items. This came $0.01 from a smaller then forecasted FX hit. Operationally there was a benefit from higher then expected sales in Asia Pacific and most significantly in the Beauty segments from an improved value chain in Venezuela, including pricing in line with the significant inflation there and also our decision not to convert into parallel exchange rates the segment profit we generated. We’re working in Venezuela on [avenue] to be able to access our cash at the official rate that may or may not work going forward. Further although our sales are not yet where we want them to be at BeautiControl, we did better then we had forecasted and are also realizing the benefit of some value chain improvements. Going the other way, we had a hit versus our forecast of a couple of cents each from lower sales in Europe and higher then forecast unallocated corporate expenses mainly related to incentive programs. In terms of our balance sheet and cash flow, we had better results in the first quarter of last year with both receivables and inventory. Payables and accruals on the other hand were more of an outflow this year largely reflecting a higher amount due at the beginning of 2009 then 2008. This included higher incentive payouts in this year’s quarter. Overall our cash flow from operating activities and out of investing activities improved year over year by about $20 million. We think we’re set up to have a good year for cash flow and are raising our outlook today from the $105 million to $115 million range that we indicated in February to $120 million to $130 million. This comes from our raised earnings guidance and a reduction in expected capital spending. Those of you who follow us know that we’ve previously indicated that we target a leverage ratio in the range of 1.5x to 2x debt to EBITDA. We closed the first quarter at just over 2x. In light of the more difficult and expensive credit environment compared with when we set our 1.5x to 2x range, we have now decided to bring in the high end of the target to 1.75x. We currently think this more conservative posture makes sense and expect to be able to reach this goal in the fourth quarter of this year. We indicated in our 10-K that based on our outlook at the time of our filing toward the end of February we foresaw under our fixed charge coverage ratio covenant $16 million and $13 million of EBITDA cushion in the third and fourth quarters of this year. Holding all else equal, our EBITDA could fall by those amounts versus our forecast before we’d have a covenant problem. We are pleased to be able to indicate that based on the high end of our current forecast our EBITDA cushion for the third quarter is now up in the mid $20 million range and for the fourth quarter of this year is now over $30 million. This reflects the better earnings per share outlook coming from improved local currency net income along with better foreign exchange rates, the decision we have made to scale back our current year capital spending by about $10 million versus our previous guidance of $50 million to $55 million, and to limit our [reengineer] expense this year to about $4 million pretax versus our previous guidance of $10 million. We’ve laid out our covenant calculation as of the end of the first quarter on our website and in our 10-K full year 2008 if any of you are interested in seeing more details on how they work.

[Rick Goings:]

Let me jump in on one thing there just for what its worth because I’ve had this conversation with some of our shareholders and I just want to I guess signal to you that how committed we are to our dividend but more importantly that Michael as early as six months ago, before any of the market meltdown, I guess this was back in the summer, he has always worked on this what I would call the positive assumption of the negative results. What are the worst case scenarios? What if all FX just went so sideways? What if this happened, what if that happened? And he came up with a scenario then that if we had to go change what is our interest rate right now, its 5% and change right now, but that we could go, if we had to refinance today some of our debt, what it would cost incrementally and we saw that in the same period what might through 2011, it cost us [inaudible] plus?

[Michael Poteshman:]

Yes, in that range, right.

[Rick Goings:]

Yes, and we said hey, this is ridiculous, we’re never going to have that happen and you’re talking to somebody here who I don’t even believe in having a mortgage on your house. So we took this very seriously and what are the actions you’ve got to take to make sure we have a cushion so wide that you could drive a truck through it. And that’s why we took those actions. I just, I think its helpful. We look at our shareholders and our business partners, for you to understand fundamentally how we are about this, but philosophically. Michael, I’ll turn it back to you.

[Michael Poteshman:]

Okay, thanks, turning now to our outlook and first for the current quarter, we foresee a local currency sales increase of 2% to 4% which along with the negative impact from currency fluctuations of 16% brings the reported guidance range to a 12% to 14% decrease. Our outlook for diluted earnings per share is to make $0.62 to $0.67 on a GAAP basis. This includes a net positive $0.05 from items impacting comparability such that our EPS range excluding items is $0.57 to $0.62. This is versus $0.56 earned in the second quarter of 2008 on a GAAP basis and $0.75 excluding items. The comparison reflects a negative $0.22 impact from foreign exchange. In other words we expect to grow our diluted EPS excluding items in a constant currency by $0.04 to $0.09. In line with this we expect profit from our segments excluding items and in local currency to increase by 3% to 10% with improvement by all of our segments except Tupperware North America. We continue to foresee a tax rate excluding items of 22% in the 2009 quarter versus a tax rate of 21% in the prior year. Looking at the full year, for sales we’re looking for a local currency growth of 2% to 5%. At the high end of the range there is no change versus our February guidance while the low end is down one percentage point reflecting our first quarter results. Based on current exchange rates we would take a 13 percentage hit on the year over year comparison from weaker currencies bringing the reported sales guidance range in dollars to an 8% to 11% decrease. The local currency increase includes high single-digit growth in our emerging market businesses and our established market businesses at about even to slightly down compared to 2008. On a segment by segment basis, we foresee a low to mid single-digit local currency increase in Europe, high single to low double-digit increases in Asia Pacific and Beauty Other, even to slightly higher sales in Tupperware North America, and even to down mid single-digit in Beauty North America. Our diluted earnings per share guidance range is $2.16 to $2.26. There is no net impact of unusual items on the full year forecast. Excluding items the comparison includes an increase in local currency net income of 3% to 8% which is up from 1% to 6% in the previous forecast and a negative impact from foreign exchange of $0.59 based on the April 21 rates. We expect profits on the segments to increase a few percentage points more then the sales increase with returns on sales in Asia Pacific and Beauty North America about in line with 2008 and Europe and Tupperware North America segment down one or two percentage points and [inaudible] by the Beauty Other segment in the 7% range versus less then a half a percent in 2008. The Beauty Other segment profit assumption includes the cost of converting some Venezuela [inaudible] that the parallel rate in the second half of the year. As a reminder based on the fact that the majority of our segment profit is generated internationally, our business is sensitive to foreign exchange. Based on our numbers on a full year basis for every 1% that all currencies move in the same direction against the US dollar, the impact on earnings per share is almost $0.03. We expect our unallocated corporate expenses to be about $50 million in 2009 versus $43 million to $45 million in the previous guidance and net interest expense is expected to be about $30 million versus $37 million in 2008. The higher unallocated expenses are most significantly from higher incentive costs and the interest forecast reflects our borrowing level and what we had as an expense in the first quarter. Putting this all together would indicate a pretax return on sales excluding items in 2009 of 9% to a bit higher. This is versus 9.6% in 2008 as reported. However the same local currency sales in 2008 would have reduced the pretax ROS of 8.4% at this year’s forecast exchange rates. Our GAAP tax rate was 20% in 2008 and our rate excluding items was about 18%. Our current expectation is for our 2009 rate to be about 22% on both [bases]. This is no change from our February guidance. We have included in our full year outlook 63 million shares under the assumption that a rise in share price will lead to more diluted shares then we had in the first quarter. As Rick mentioned while we realize there could be heightened volatility in our businesses and therefore our numbers, given the external environment we think it is important to give the visibility that we can given our trends and future prospects, so we’ve continued to provide this guidance. And with that we’re going to turn the call over for questions.

[Operator:]

(Operator Instructions) Your first question comes from the line of Doug Lane - Jefferies & Co.

[Doug Lane:]

Can you talk on two things, the biggest upside to profitability versus what I was looking for is on gross margin, if you could drill down that a little bit, and what the resin outlook is going into the second quarter and the balance of the year. And then a broader strategy question on Beauty Other, big improvement in profitability but what’s the strategy on top line and profitability for the remainder of the year.

[Rick Goings:]

Let me comment while we have everybody on the line here though, I do want to reiterate if we have a quarter where we believe we’re going to miss our numbers, we will prerelease and I say that because in this very uncertain time, I think that’s going to be helpful to a lot of people. Once we know what the trend or pattern is, we will let you guys know. That has nothing to do with the question you asked but I just wanted to reiterate that.

[Michael Poteshman:]

On the gross margin question we were up as you’re noting a little bit more then a point in the first quarter and that really reflected some things on the procurement side including resin. It also reflected our reporting more line sales versus promotionally promoted products and that helped in the quarter. As we look at the full year, I think that will probably tone down to some extent. I think we’ll continue to see this mid 60% to 65% or so margin that we are now. In terms of the resin impact itself, we talked about in the last call that we were seeing year over year about a $20 million benefit in local currency although a good part of that was going away in US dollar terms. As things have continued to evolve and the oil and gas prices and in the resin market, that number has gone up to a little bit over $30 million in local currency. We’re still taking a bit hit against that in US dollars. So that’s all been included in the forecast that we’re talking about.

[Doug Lane:]

And then Beauty Other.

[Rick Goings:]

Yes, the second piece of that is our strategy really has been as we’ve said it in the past, we’re really focused on that’s Latin America mostly, and that is using our presence and the base and the brand Tupperware in those large markets, Brazil is fourth largest population in the world, to leverage that halo effect of the Tupperware brand to really go against [Naturo] and Avon in those markets. We’ve had very, very strong double-digit growth there. The same strategy by the way, I happen to believe that in the next five years, the greatest market opportunity for us is to grow Beauty Other in Latin America and the nutrimetics business, the big Australia and New Zealand. Reason for that starting off with Latin America is Latin’s continue to utilize direct sales as their preferred method of buying beauty products, still over half of all beauty products are purchased that way and she continues to look for an earning opportunity and so those are two currents that play in our favor. I would add to that the competitive landscape there, [Naturo] hasn’t, they’ve done an incredible job in Brazil, but they have stalled every time, they’ve been trying 20 years to really get a decent sized business going in Mexico, and so they’ve been unsuccessful exporting their business model outside of it, which leave last man standing with Avon there. And Avon sales force has been so large there that it has gone so far in two directions; down scale that then you know beauty products are generally sold, their [aspirational] products. So we think they’re vulnerable. We think they’re vulnerable too because what gets their average order strong is they’re selling what we call stuff; shoes, women’s wear for the house, furniture, etc. And we think that puts us in a position that they can be vulnerable so we’re really going to be focusing [break in audio].

[Michael Poteshman:]

Rick?

[Operator:]

Your next question comes from the line of John Faucher – JPMorgan

[John Faucher:]

Is Rick there or did we lose him?

[Michael Poteshman:]

It sounds like we might have lost him.

[John Faucher:]

Well I’ll just go ahead and ask my question anyway, in terms of looking at the commentary, sort of sequentially it sounds like things in some of the emerging markets, in the commentary guidance it sounded like a little bit more cautious in terms of looking at China somewhat but also Russia specifically. Coke yesterday reported volumes down 18% in Russia so I guess I’m wondering the local currency revenue guidance is for sequential acceleration but the commentary didn’t seem to indicate where that acceleration was going to come from, so can you provide us a little bit more comfort looking at the fact that it was a little bit weaker then expected this quarter, what’s going to be the big delta especially since some of the commentary seemed a little more negative.

[Michael Poteshman:]

I think when you look at our split with half of our business in the emerging market economies and half in the established markets, we were up 10% in local currency in the emerging markets in the first quarter and our guidance last time and still today is to be up high single-digits for the year and so while Rick did mention that we were seeing some consumer spending headwind in Russia as we entered, in the first quarter and as we entered the second quarter, we’re thinking overall that for the year we’ll still be in that high single-digit range. Some of that has to do with having this larger sales force now in the Fuller Mexico business which is of course is very important for us. The place where we were below our first quarter guidance was in the established markets where we were at a minus 7% whereas for the year we’re calling to be even to down slightly and so that’s really the area where we expect to see more improvement versus where we were in the first quarter obviously. And so we highlighted that the places where we had been down in our larger businesses were Germany and the two US businesses, BeautiControl and Tupperware US, and that’s where we’re looking to see things that improve in particular as we go forward. In Germany as well we were, we had a better sales force number going into the second quarter then we did going into the beginning of the year coming from minus 4% to being even entering the second quarter. The US business certainly did better in February and March then it did in January and then at BeautiControl we started to see some better movement in the KPI. So those are really the main things that we’re looking at.

[Rick Goings:]

Michael, I’m back on but there’s bad signals here and I’m checking out and you know as well as I do how to answer these okay, so rather then disrupt the call, I’ll turn it over to you guys there.

[Michael Poteshman:]

Okay, thanks.

[Operator:]

Your next question comes from the line of Gregg Hillman – First Wilshire Securities Management

[Gregg Hillman:]

At the end of Q3, there was a section in the press release on long-term guidance, you increased it from 5% to 7% to 8%, and to 6% to 8% in local currency, and I was wondering if you expect a return, whether that’s still in effect and whether you expect a return to that area and furthermore, Simon said he would be disappointed if you didn’t do better then that, if you remember.

[Michael Poteshman:]

Right, yes, I think that that expectation is still in tact. Its built on a 12% to 14% increase in local currency in the emerging market businesses, 15 to 2% in the established market businesses. We haven’t given specific multi year guidance, so we haven’t given 2010 guidance. But we do expect ultimately that our businesses in a more reasonable consumer spending environment should be operating in that kind of a range. Of course over time as, if we’re operating under those kinds of growth rates that emerging markets will make more and more of the total and be able to contribute if there is that fast growth so, yes, we would say that is still our longer-term expectation. We’ll have to see as we get closer into 2010 whether, what guidance we’ll give for 2010 in particular.

[Gregg Hillman:]

And then just the size of some of the emerging markets, particularly in the Asia, China, are so big and then you’re starting from such a small base, with multi levels you tend to get some momentum, acceleration in those situations, so I was just wondering if you could do better then that in the emerging markets basically then what your guidance was at some point.

[Michael Poteshman:]

Well obviously its always our goal to do as well as we can and we have seen some very fast growth particularly in the Asian markets that you’re referring to being up 31% in local currency in the first quarter. It was another quarter of very good performance. And Rick talked about some of the markets that were really leading that; Indonesia, Korea, Malaysia, Singapore, India. So its possible but when we look at the balance and when you say growing from a small base, half of our business is in emerging market economies so certainly some will, we would look to continue to grow more then that 12% to 14%. But some not. Fuller Mexico is our largest business and probably won’t return to that kind of growth rate. We’ll go for it but probably that won’t happen.

[Operator:]

Your next question is a follow-up from the line of Doug Lane - Jefferies & Co.

[Doug Lane:]

I also wanted to ask about the North America Beauty businesses and try to get my arms around each of the concepts and the challenges with BeautiControl and the challenge with Fuller in Mexico, you know, just stepping back, I would have figured that Beauty businesses would have been the better performing businesses in this kind of an economic downturn and yet really your emerging markets durables business is really driving the show here. So, it’s a little counterintuitive so I need more color on the beauty businesses would be helpful.

[Michael Poteshman:]

Sure, looking at Fuller Mexico we were a little bit short on the sales force comparison at the back of last year and so really as you know in order for us to grow over time when you have a larger sales force we put a big emphasis on that. In the first quarter we invested some in terms of value chain in order to get that done and we were happy to be over the 500,000 mark again and 2% higher going into the second quarter. The other things that we’re working on in that business are to get back to a better productivity out of that sales force and that would come through in terms of the number of units per order in terms of what we’re looking to drive. And so we’re aiming our promotional efforts in trying to do that. One of the ways more intermediate term that we’re looking to drive the size of the sales force and its productivity is by having a lower turnover among our field sales managers who are really the people who do the recruiting, 3,000 plus people, and we have seen a high turnover rate there. That’s been true ever since actually we really acquired that business and before but we do think that with training and the way that we run our programs that there are ways that we can do better on that so we’re focusing on that and that will probably be more of an intermediate term kind of a project. Looking at the BeautiControl business under the new leadership we have there, we’ve looked to reemphasize the party plan, not that we weren’t on the party plan before, but to talk more to it, we’ve had the spa party in place. We’ve also started talking to more of a quick facial kind of a party and we think that that can give our sales force members more, another thing to talk about. And then we’re looking as Rick was also saying, to recruit more on towards the earning opportunity and not too much on the product and its always a balance there, but we think that we can make a bit more [hay] by migrating back a little bit more towards going for the earning opportunity and bringing sellers into the business. We’ve seen that start to turn up in some of our KPIs. We look at things like the percentage of new sales force members who are actually ordering with the kit of products, so beyond the kit, and we’ve seen that percentage grow dramatically as we’ve worked under this new kind of format. So that’s one of the upsides in the KPIs that I was referring to before.

[Doug Lane:]

Why do you think BeautiControl which had been growing so nicely for many years suddenly stop growing.

[Michael Poteshman:]

You know we’re always operating against the external environment we find so this goes back even a couple of years when we saw the trend line flatten out there and I think we took a lot of the right steps to get a larger group of sales force leaders, the directors and that was through the Mustang program and so on that we started after we acquired that business in 2000. I think that paid off well for us over a number of years. The spa party went in and I think we’re just, we need to stick with our fundamentals on the one hand and work a little bit as to what’s going to be the next [pass] and I think that that’s what [Albert Foss] and the team are really focused on now and again, I think we’re starting to see some of the KPIs move in the right direction and we’ll have to really watch that closely to see if it continues to come together in the right way.

[Doug Lane:]

In Mexico, Avon has talked about increasing their media advertising there, do you think that’s impacting your business.

[Michael Poteshman:]

There’s no denying that Avon has had better results the last couple of quarters. What we’re focused on is the kind of go-to that we have with the sales force. We do have a weekly spot on TV that’s really aimed at the sales force and that seems to work well for us over time and we’ll continue to do that. We’ve emphasized our investment, call it more grassroots with the sales force and the sales force leaders and we think that that will pay off for us. It has started to pay off through the higher sales force and we’ll look to also track the productivity going forward.

[Doug Lane:]

Good, that makes sense, and just lastly on Germany, a lot of these direct sellers are struggling in Germany, is there something structurally inherent in that market that’s working against direct sellers. Other then just economic and consumer spending and all that, is there something legally or structurally in Germany that’s working against direct sellers or is it really just consumer spending patterns.

[Michael Poteshman:]

We think that there’s a, continues to be a great opportunity for our business in Germany. We have seen over time, Rick has talked about the impact of the east and west Germany coming together and what that’s put in but also taken out of the economy over time, that’s probably in that backdrop. A few years ago they did change some of the social laws there about how some of the unemployment insurance works and what you can and can’t do. That’s probably had some impact over time on the sales force but I think as we look at things today we’re very optimistic on what we can do to grow our leadership levels there, the managers, what we can do to help them make more money and how that will flow through our whole system. So I think that there are, if you look at Western Europe versus some of the emerging markets more of those kinds of things in the backdrop, but we still see things, [waiting] to do things very well. We use a lot of times Australia as our model where after a number of years of not doing so well in the 90’s that that business has really been reignited by focusing on the earning opportunity, having a, as we call it a career earning replacement opportunity for the managers and obviously the distributors in that market which has gone extremely well and moving the conversation a bit more away from promotional product sales and things like that. That’s really what we are looking to do.

[Doug Lane:]

And just to clarify, you ended the quarter with a 25 sales force advantage in Fuller Mexico and about even in Germany.

[Michael Poteshman:]

That’s right.

[Operator:]

Your final question comes from the line of Mimi Noel - Sidoti & Company

[Mimi Noel:]

I’m not sure you elaborated in the call so far and in the comments made in the press release about savings from procurement as well as the backend of the business, if you don’t mind, could you elaborate on those.

[Michael Poteshman:]

Sure, what we look at on the procurement and is one of the things driving the margin in the first quarter is there are a lot of pressures out there on other companies that are our suppliers and we really look to make sure that we’re getting the best price. How do we do that? Over the last couple of years we’ve done some reverse auctions that would have paid off very well for us on some of the things that go into gross margin and also on some things like shipping costs that would be in [DS&A]. So that’s helped us. We’ve looked to really make sure that we’re refining our approach in the right way so that we’re still driving the frontend of the business but so that we’re getting the right mix of sales and the right bang for our spending on our promotional programs so that can come through in kind of the realized pricing and so on and so that’s also in there. When we look at the big improvement in, on a segment by segment basis and profit in the first quarter in local currency, a lot of it came from Beauty Other. Rick talked about how we had combined the businesses in Brazil and I think we did that very efficiently so that we’re able to really work to capitalize on our beauty brands through our “Tupperware sales force”. We’re just starting to do that. But we also were able to kind of bring that together without keeping hardly any of the costs that we had incurred back last year. We’re also in that segment, running our Venezuelan business I would say even more completely in kind of local currency so last year we were still buying some things outside of the country, or more things outside of the country then we are now, and that was costing a lot because you had to pay with this very devalued Venezuelan currency. So we’re able to avoid some of that now. So that’s really what we’ve been doing so far.

[Operator:]

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

[Michael Poteshman:]

Okay, thank you again. We certainly appreciate your time today. We’re pleased that we were able to hold our own in a very difficult quarter with coming in with positive local currency sales growth and also pleased with what we’ve been able to accomplish with our value chain. So we’re going to continue to work that, try to continue to show improvements versus last year in our cash flow, and look forward to talking to you all going forward. Thank you.