Tupperware Brands Corporation
Q3 2011 Earnings Call Transcript

Published: 26 Oct 2011

[Operator:]

Good morning and welcome to Tupperware Corporation Third Quarter 2011 Earnings Conference Call. I would now like to turn the call over to Rick Goings, Chairman and CEO of Tupperware Brands. Mr. Goings, please go ahead.

[Rick Goings:]

Thank you, (Dorisa). Good morning everyone. I am here with Mike Poteshman and Nicky Decker. As always, you know the drill on forward-looking statements, so I’d refer you to our company’s position in our filings. The third quarter was another good quarter for us. Sales were up in all of our segments and a 10% overall increase in local currency. Our emerging markets grew 19% and continued to play an important role in our portfolio. And in this quarter, not surprisingly, we are about 63% of sales in the quarter. I think we all have to remember many Western Europeans tend to go on vacation during this time. We see it each and every year. So, we typically see the contribution from emerging markets go up little higher this quarter. Our established markets as a whole were down slightly, but I’ll get a little bit more granular on that in just a moment. Being a global portfolio that derives almost 90% of our sales and even more of our profit outside the U.S., that means that changes in foreign exchange having meaningful impact on us. I will also remind you that when we did a regression analysis for the decade of the nine days, 90 through the year 2000, it was basically neutral and when we did it for the first decade of this new millennium, it was $0.05 negative, so it does. We have enough of a natural market basket. For the third quarter, we included an $0.08 benefit versus last year in our July outlook, but all of our key profit currencies really weakened against the dollar in the last months of the quarter and this meant that we lost $0.04 of this benefit. I am particularly proud of how our management teams around the world were able to adjust and we were able to come in with an adjusted earnings per share of $0.83 even with this negative which was just $0.01 below the high end of our range and an impressive 30% higher than last year. Also as you saw in our release, we did an incremental $100 million more in share repurchase in the quarter than we had planned. Actually we did this, we took the opportunistic action in light of the drop in the stock price, our confidence in our ability to grow the company, and our low leverage profile versus the target we have set 1.5 times debt to EBITDA. All-in-all, we spent $196 million on share repurchase in the quarter and we bought in 3.2 million shares. Also worth noting, our Board made a decision today to double our share repurchase authorization to $1.2 billion and that will give us the opportunity in support of buyback program for quite sometime. Now, turning to local currency sales performances let me start with our European segment. Our emerging markets in Europe grew 2% in the quarter with mid-teen growth in our South African beauty businesses and good growth in a number of our smaller units. This was partially offset by an 8% decrease in Russia, which by the way, was a significant improvement in trends as a matter of fact we are starting to see progress and we are also starting to lapse an easier comparisons. Talking about Russia, now we saw improvement there in our recruiting and productivity KPIs during the quarter. And going forward, we expect this trend line to continue to improve as we work on further strengthening our distributions and closing the gap in our sales for size which stood at about 22% down at the end of September. Our European established markets grew 4% in the quarter and I am pleased to report a 9% increase in Germany and I believe it’s been almost a decade since we saw that. It is our largest Tupperware market worldwide and it’s strictly reinforcing things to us about this movement is this performance highlights, the big steps and the effectiveness of the established market strategies. It’s taken longer to implement them in Germany, but they’re really getting traction. It’s a very important market for us and it’s great to see them yielding these results. Heading south to our business in Italy, it’s a market where we really never brought it up to its full potential for its large market as it is, and is healthy as the direct selling environment is. We’ve invested heavily in that business this year and it’s good to see sales pop over 30% in the quarter, we’ve never seen that in Italy. We moved a new Managing Director, Michael Challis, into that market who has had great successes in other markets, and he is really bringing new energy to the business. Anyway that said we’ll be moderating our level of investment in Italy going forward. Turning to France, there we were down in the quarter, but most of this was due to promotional timing. Our sales force advantage has slipped a bit, but the underlying business there is very, very solid and we expect to return to nice growth in the fourth quarter. I want to turn to Asia-Pacific briefly, there we had another good quarter. Our emerging markets in the Pacific Rim which accounted for 70% of the sales and that segment were up almost 30%. Indonesia, which is our largest market in Asia-Pacific, and by the way the fourth largest population in the world, it grew 47% and ended the quarter with 20% more sellers than last year. So you can see we’re not only growing there in sales force size or number of doors, but in really their productivity as well and that’s also a very positive precursor for the future. I was just in India and it’s great to see our business there. We now have 130,000 in our sales force, an incredible 68% growth in the quarter. Sales force is up 50% versus last year. Both of these markets, India and Indonesia have just done a great job at embracing and executing our core fundamental mission and really there focus is changing women’s lives through the opportunities we offer. As a matter of fact, News Week magazine is calling it the Tupperware Effect and it basically means, our business model microfinance’s a women, provides her free training, a coach at no cost to her, and through this help and earning money she tastes success and that success leads to confidence and then increases the impact she has and influence not only her family but the community. So it’s really starting to work there. Number of other markets that are emerging markets in Asia also had strong double digit sales growth in the quarter and the lists goes on; Malaysia, Singapore up 20%, China up 22% and Korea up 12%. Our Asia-Pacific established markets really is mostly only Japan and Australia, they were down 10% in the quarter. Sales in Tupperware Japan were down 5% in the quarter. We’ve been telling you about the changes we’re making to our business model there including the focus on building more sellers who are selling Tupperware products and raising the standards and we’re making very good progress there. We’ve got in that business back to break-even again the first time in a couple of years and we’re establishing the standards really to take the more casual obvious out of the business which were hurting productivity. Our Tupperware Australia business had another difficult quarter, but it’s firming up some, there was real pressure throughout Australia, New Zealand in consumer spending. We were to not only close the gap on the sales force size but modify the compensation structure to make our business in these kinds of times, even more attractive and to grow more managers and field sales leaders. By the way Australia celebrates its 50 anniversary, its Tupperware business there and I think they are focused on the right kinds of things to guide us back in the faster growth. It is a very profitable business for us. Our total sales first come to Asia Pacific established markets it showed a 31% decline in the quarter and I want to dig down on that, that really is just a planned adjustment that we made, we’re just talking about in our Japanese business to reflect the increased standards, in other words we purged ranks at the Japanese sales force lists of the individual who actually were not active sellers and it’s the right thing to do. Turning to our Tupperware North American segment this includes our businesses in the U.S., Canada, and Mexico. We grew sales mid single digit and had a nice improvement in our return and sales. Our Tupperware Mexico business and I’m headed there to morning there we grew 12% in the quarter and we’re very pleased with our progress. We had double digit advantages in both the total sales force size, the end of the quarter and the number of active sellers and it sets up nicely for what’s going to happen in the quarters to come. Our Tupperware U.S. and Canada business was down slightly for the quarter. Although we had 6% more active sellers in close with an 11% total sales force size advantage. We did see difficulty in the consumer spending environment particularly with some of our Hispanic sales force and we’re working in the fourth quarter to overcome these tough externals through a combination of promotional plans and product mix. But this quarter we want to success as we would have liked and we were looking forward to make an improvement on that in the fourth quarter. Moving to Beauty North America and our Fuller businesses they grew 6% sales after being down last quarter indirect selling as you all know the size of the sales force is the leading indicator of sales growth. And in order to tackle that short-term issue we were facing particularly with our Fuller business, we made an investment to close the gap in the sales force size. And a lot of recruiting in the quarter and it was effective as a result we ended September with a sales force size advantage of 19%. And many of these almost like a pig going through a python happened in the last month of the third quarter. Given the timing of recruiting, our large active total sellers not a high at the end of the quarter if we wouldn’t have been it, came in at 7%. So it was just above our sales increase. Now the key question to us every time we take incremental action as can our field sales management team of deserve these new recruits and ensure they’re productive. Well, here we believe and as part of the reason I’m going there that is unlikely we’re going to be able to convert all of them to being sellers and its meaning we don’t expect because we have a 19% sales force size of advantage we’re going to carry that into a 19% sales increase for Fuller in the fourth quarter. We knew it at the time we made this investment we knew it’s going to be a expensive. But if you do regression analysis of our company since we went public, always the first job one to our face have a sales force size advantage. I’m going down there and one of the reasons is I want to revaluate what we did with that recruiting program and find out how we could have been just as effective for less money. And by the way in the fourth quarter we won’t be investing at these same levels. BeautiControl was down mid-teen in the quarter and I was out there a few weeks ago. The team there is focused on three things. It’s a very simple story and I believe an effective story expand the sales force increase contact with the sales force, which leads to thirdly, raise activity levels. Dave started his focus also on areas across the country where we had strength, we call it strength on strength because since the U.S. sale is so large it makes sense to leverage focus on areas where we have a strong presence and to look to build of that. What’s ahead for BeautiControl, I hope we have a year of progresses next year, Daisy Chin-Lor, our Managing Director there is seasoned in the beauty business and is the Managing Director. Morale is very good. Product lineup look solid. Now, we’re going to close the gap in our sales force disadvantage, which now is less than a double-digit, I think we have 9%. So while BeautiControl has had its problem the last couple of years, it’s still twice the size business, it was when we made that acquisition. Finally, let me turn to South America, there we grew 50% in the quarter. We feel this is important to point out that including that there is a high level of inflation in these markets. So, we’ve always want to breakout what’s the impact of growth from volume and the impact from pricing and here I’m pleased to say 70% of our increase came from higher volume and only 30% was from higher pricing. The overall growth was led by strong performance in Brazil. There we were up an incredible 74% and this came from good growth in the sales force KPIs. There is a battle going on in Brazil with the two big beauty companies there and we are pleased to say we own our space in the Tupperware category. There we ended the quarter with 34% advantage in the sales force size and had 50% more active sellers in the quarter. So, the combined price increases and productivity improvement led to this 74% increase. The sales team there and the whole leadership team is good as it gets and one of the most interesting things about the future of Brazil just like for the story of Indonesia, China, and India it’s a story of rising and growing middle-class and it’s a matter of fact, Brazil which is the fifth largest population in the world is expected to add $35 million more people to its middle-class in the next seven years. This is going to be big driver for growth and then what brands like ours. Our other markets in the region are Venezuela, Argentina, Uruguay all also had double-digit increases in the quarter. So overall, I am pleased with the results in the third quarter. We posted double-digit sales growth came in the high end of our earnings guidance even with the worsening effects. Now we are always going to have challenges in a form of problem, we have we call in problem children (five) market. And we spend a lot of time working on getting those markets changed and we know that when we start to get improvement of those, there’ll be some other issues that pop up elsewhere it’s the nature of our portfolio. I know from travelling around the world, I get a lot of questions about what I see in the global environment and how it’s feeling, feel like things are getting tougher out there. My short answer would be in a way yes, but it’s more of than not getting more difficult its changing in certain markets of the world. Who would have predicted the changes we have seen since this era of Spring started, but giving just more anecdotal impact on that. We’ve better businesses – a small business in Egypt, but we’ve been there for years. We operate under a slightly modified model to the rest of our European businesses. Yet the sales force at the end of the September was up 11% from last year and sales year-to-date in Egypt were up 29% in local currency. It’s an extreme example, but I just want to give you the feeling of it’s the strength of our business model. We had our top managers from Venezuela here two weeks ago and it is the same story, it’s a strong business model. There is going to be a lot of turmoil in the world. We believe in the years ahead, but the companies that had the right business model can grow even during that and they can grow double-digit, sometimes anecdotally I’d like to think of it like a range or over from my years living and working in New York City and living in Connecticut. I would see Range Rovers had two jobs mostly you’d see in shopping malls in Greenwich, Connecticut or delivering kids at Greenwich Country Day. But always there was the ability to switch that thing into another gear, and it could ford a river or climb a mountain. Our businesses were kind of that way and we spend a lot of time teaching our Managing Directors that when conditions in Europe market changed – reacted those changes and know how to grow. Looking ahead, we believe even in spite of what’s going on in the world. We’re saying we’re guidance of 6% to 8% top-line. Next year, Mike and I were just talking about it. We’ll take a one point hit for not having 53 weeks. But we think we’ve got touch control panels at our disposed of that management is skilled and up to adopt to whatever is going on now. Before I turn it over to Mike, let me mentioned that at the end of the last several years, we get together with our management teams a lot. I’m out there twice a year with every Managing Director, (Simons) on the phone with every month through monthly performance reviews and then we try to bring them in the last quarter of the year to do kind of a know how to grow session where we’re bringing in for three day, share best practices, lessons learned, there are the ones who generally are the featured speakers and get ourselves ready for how we can attack this next year. At any way prior to this year’s meeting, which is going to be in Miami, we decided that on November 10th, they have an Analyst Day in Miami where we would invite those of you who have an interest to here not only for us, but some of our top Managing Directors and here about the strategies they are implementing their markets. We believe that the real strength of our company certainly is in our brand, but more importantly it’s in the leadership teams that we are developing all over the world. So, anyway if you’d like to attention, please contact Nicky and even if we can’t make it in Miami will be webcasting that meeting. Also going forward, I think we’ve already most of you know this we decided to have Nicky who has been also running our strategy department really devote her fulltime to that as we don’t use outside strategy consultants, we don’t hear you bring in 37 years old, who don’t know your business, they quite do a cramp course that were three months mark it up and give it back to you. We recruit those same kinds of people may work in our strategy department. And then as they learn our business we send them up to work in our different business unit so, Nicky is going to be heading up that department so, we call Teresa Burchfield back from her duty as CFO of our European operations and should be taking over Investor Relations that she led in the past. Anyway, enough from me, Nicky let’s turn it over to you.

[Nicky Decker:]

Thanks, Rick. Looking first that our third quarter results versus our sales guidance, the main upside reflected in our 10% increase that exceeded our plus 7% to 9% range. We’re in Brazil where we had foreseen very healthy growth, but even better than we thought we would with the 74% increase with outline and it for the Mexico. Given the down sales, we had a full in the second quarter, it turned out we were conservative in our assumptions of what we will be able to do in the third quarter and plus 6% of sales we achieved with ahead of what we would assume. With the sales force side advantage, we expected good trend to continue. On diluted earnings per share without items versus the $0.84 high-end of our July guidance. We had more profit that we had forecast in our Asia-Pacific, Tupperware North America and South America segment that less than we have thought in Europe and Beauty North America. In South America, we benefited from the higher than expected sales in Brazil and in Asia and Tupperware North America, we had better than expected leverage from our value chains, including some benefits in the non-income tax (indiscernible). Our lower than expected profit in the Beauty North America and Europe segments reflected to heavy promotional investments to build our sales forces and sales in Italy and particularly at Fuller Mexico. It’s already highlighted by Rick. We expect to moderate our spending as move forward. Rick talked about the $0.04 hit from approximate third quarter versus our July guidance. Also in our numbers was a $0.02 benefit from the $100 million of opportunistic share repurchases we added in the quarter beyond what we would included in our outlook and we benefited by closed to $0.03 from a lower than foreseen income tax rate. Versus our model 40% contribution margins from higher sales volume we were about $40 million short on profit in the third quarter. Closed to $5 million of this was attributable to higher resin cost. Other meaningful components with the elevated promotional spending we’ve highlighted, brand building cost and higher cost in Venezuela versus the effects related benefits there last year. As well as some of our sales increases from higher sales prices and we wouldn’t expect the 40% contribution margin on this element. A few works now on the $36 million of non-cash charges we took on our purchase accounting intangibles. This related to our Nutrimetics businesses and reflected that well we made some progress with the strategy that we put in place. We have not gotten the sales and profit growth as quickly as we would have liked or as we had previously forecasted. In particular, we saw deviation in the third quarter nearly some of which we think is related to the market externals. The charges and the factors around them do not have any significant impact on our fourth quarter 2011 guidance. As well, our longer range local currency annual sales growth expectation remains at the 6% to 8% per year that we have been talking about and our return on sales outlook excluding items remain at a 50 basis points per year of improvement up to the mid to high teen. Turning now to the balance sheet and cash flow, our results in third quarter were pretty good, but with cash flow, we are still behind 2010 on a year-to-date basis. This year for the first nine months we generated $47 million of cash flow from operating activities net of investing activities which was $31 million below last year. We were $40 million behind 2010 in the first half of the year, so we closed part of the gap in the third quarter. Our shortfall versus 2010 notwithstanding our $23 million increase in GAAP net income excluding the non-cash impairment charges continued to reflect the timing of distributions for our payables and accruals including income taxes. As we have said before this afternoon with our year-over-year starting point for payables and accruals and our fiscal calendar in light of the extra week this year that pushed our third quarter closing 2011 after the end of September. Other more significant factors included higher receivables in light of higher sales and higher capital spending in last year in line with this year’s full year expectation of $75 million. Also in last year’s third quarter, we had about $5 million in proceeds from the sale of an excess facility in Australia. Finally, beginning in June we have had about $5 million of payments related to the swaps that were impaired when we did our debt in June. We have another $14 million of payments for these swaps to go over the next 12 months. Also, so you know in connection with an upcoming exchange offer to make the notes we sold in June public, we’ll be revising our latest 10-K and 10-Q to add information on our subsidiary that guarantees the notes. So, don’t be surprised when you see this. We aren’t changing any information already in the documents just adding this new information. Looking at share repurchases, as Rick outlined, we repurchased 3.2 million shares in the third quarter for $196 million or $61.98 per share. This included $96 million that we spent evenly over the quarter as planned and a $100 million of opportunistic repurchases in the first half of August that were beyond what was included in our July guidance. We planned to repurchase $90 million worth of shares in the fourth quarter, which is what was already included when we gave our guidance in July. Rick also highlighted our Board has moved today to double our share repurchase authorization to $1.2 billion. We have repurchased through the end of our third quarter $538 million under this authorization. So, the increase should support our ongoing program for the next two years. Looking at our sales and profit outlook for the fourth quarter, we foresee a local currency sales increase in the 7% to 9% range. Given current exchange rates, we would take a hit from currency of 2 points on our comparison which brings our dollar range to up 5% to 7% in sales. Obviously, exchange rates continue to be volatile. The rates we have used in our outlook were as of Monday. In terms of diluted earnings per share without items, for the fourth quarter, we foresee coming in in the range of $1.49 to $1.54. This will be up 11% to 15% in local currency, 7% to 11% in dollars including a negative impact on the year-over-year comparison from $0.08 to $0.05. At the high end of our range, this would give us a pre-tax return on sales of 17.5% which compares with 18.1% in last year’s fourth quarter, 30 basis points of the decrease affects the impact of exchange rates on the comparison with the remainder coming from Europe, North America unallocated corporate costs and interest. The earnings per share included $0.13 benefit from lower diluted shares in last year. For the full year, we are raising and narrowing our local currency sales increase range from up 7% to 9% when we gave guidance to July to up 9% to 10% now. The full year impact of currency rates on the comparison is now positive 3%, so our increased range in dollars is up 12% to 13%. In local currency, this includes a low to mid single-digit increase in Europe, a mid-teen increase in Asia, a mid single-digit increase in Tupperware North America, a slight decrease in Beauty North America, and a mid 40% increase in South America. The outlooks for Asia, Beauty North America, and South America have improved versus July, while the outlooks for Europe and Tupperware North America are marginally worse. Our full year segment profit return on sales expectations are provided 0.5 point decrease in Europe which is 18.6% last year, a one percentage point plus improvement in Asia-Pacific from 19.4%, a slight improvement in Tupperware North America from 15.9% last year, down about 3.5 points from last years 14.9% at Beauty North America, and an improvement of about four points from 13.4% in 2010 in South America. This is an improvement versus where we were in July for Tupperware North America, no change in Asia and South America and worse in Europe in Beauty North America. As with our July guidance, I now hear that our outlook assumed the exchange rate in Venezuela will remain at the 5.3 bolivar to the dollar we've been using since June 2010. If for example, as of the beginning of October that rate had gone back to the worse level we saw last year. We estimate that to hit with to our fourth quarter forecast would be about $7 million in pretax profit. In terms of other elements of our outlook, we continue to foresee $27 million to $28 million in net interest expense for the full year. We now foresee our full year tax rate excluding items at 24.7% versus 25.1% in our July guidance. And we have a forecast for unallocated corporate expenses of about $60 million versus $58 million in July. On resin cost, our outlook in July was that we have about $170 million go to cost of sales this year and that we’d be taking a hit of approximately $70 million from higher resin cost. This outlook improved $1 million since July, so now it’s $16 million full year negative impact and around $160 million of resin cost going through cost of sale. This includes a negative $4 million impact on the fourth quarter comparison with 2010. The current resin purchase would have stayed at fence in 2012, we estimate because of positive impact of $11 million in cost of sales in 2012 versus 2011. Putting this all together then we foresee a 14.1% pretax profit return on sales at the high end of our full year public range which compares with 13.7% last year and 14.4% when we gave guidance in July. The worse foreign exchange rate in July account for the 30 basis point decrease, this gives us a diluted earnings per share range of that items of $4.45 to $4.50, the high-end of our range at $0.10 below where we were in July and the low end $0.05 below. The $0.10 decrease at the high-end includes a $0.17 hit from exchange rate. On current rates we have a full year benefit versus 2010, a $0.15 compared with a $0.32 benefit included in July guidance. This is partially offset by $0.08 more of a benefit from our shares in connection with our opportunistic repurchase in August, that wasn’t in the July guidance. And there is a $0.01 upside coming from the third quarter when we beat the high-end of our guidance for factors other than foreign exchange and share. The full year guidance now assumes it will have 61.3 million diluted shares or 4.2% less than 2010, where as the July guidance assume we have 63.4 million shares or 2.2% less. On full year 2011 cash flow, our estimate is now to have cash flow from operating activities net of investment activities of $200 million to $210 million. This is down $15 million from our July guidance reflecting the impact of the worse exchange rates. I’d also like to point out that if exchange rates would have stayed the same as now all the way through 2012, they’d have a negative 3% to 4% impact on our sales comparison and a negative $0.26 impact year-over-year, on our EPS comparison. Looking at the current season once we generate much of our profit to euro, Mexican peso, Brazilian real, Indonesian rupiah, Malaysian ringgit, and South African rand in comparing rates now versus after rates in 2011 to-date. There are evaluations ranging from 2% to 16% with a simple average of about 7.5%. Going the other way, then the effect based on the number of diluted shares we expect to have at the end of 2011, we estimate this would give us a $0.25 year-over-year benefit in 2012 versus 2011, if we were to make the same amount of net income next year and before considering the benefit 2012 repurchases. And so with that we’re going to open the call for questions.

[Operator:]

(Operator Instructions) And your first question is from Dara Mohsenian of Morgan Stanley.

[Dara Mohsenian:]

Good morning.

[Rick Goings:]

Good morning Dara.

[Dara Mohsenian:]

So Mike you comment on this somewhat but I was hoping to get more granularity on the margin weakness and DNA, it look like you really had to invest a lot to turn around the organic sales growth and what I am wondering is, is that investment more of a permanent step up given the competitive dynamics or is that incremental spending specially more related to Q3 to turn around the sales force trends and now that that’s occurred and paid off. We should see less year-over-year margin compression going forward.

[Rick Goings:]

Sure Dara. We saw probably 7 million or 8 million of incremental investment in the third quarter in the Beauty North America segment. And certainly for the reasons that I talked about, we think that that was the right move although perhaps over done in some ways. Certainly, as we also said we expect given the situation to invest some in the fourth quarter and probably going forward. But not nearly at the same level and when we did our guidance for instance for the fourth quarter, we didn’t assume a great IOS in Beauty North America in the fourth quarter. But not the same kind of year–over–year hit that we saw in the third quarter. So that’s really where we are.

[Nicky Decker:]

Yeah going forward we did particularly I would pull out our Fuller Mexico business where most of that activity occurred. I personally believe this wasn’t a discount what they did was the to get the sales force up they lower the barriers what they had to come in to be considered a new sales force number. And I think they made probably half the level they should have which meant they were just a gosh of new recruits which I don’t believe we can convert all of them to productive Fuller access we call them down there so we could have spent it half that level and going to more effective job brining them the board. But that’s why I’m going to monitor really to look at what Q4 plan. And the plan for the fourth quarter is to get back down to traditional levels. But that we close the gap.

[Dara Mohsenian:]

Okay. it as you look after next year understanding will be bit more additional investment in Q4. But do you think you are leading the year at the right profit level on an annual basis or do you think there is investment next year?

[Rick Goings:]

At this point I don’t think more investment is going to be required.

[Dara Mohsenian:]

Okay. And then we’ve talked about the sales force productivity in Mexico here in DD&A. But you did see a big pickup in active sales force trends in other regions. Can you just discuss the quality of brining in and your expectations for sales force productivity going forward because it looks like in terms of your Q4 guidance you really not assuming much productivity on top of few pricing and the active sales force advantage coming out of Q3.

[Rick Goings:]

Sure Dara, I think the biggest out layers and kind of said it is still Beauty North America. So with that 90% advantage with Fuller our Mexico we were up at the end of the quarter 15% overall much less than active sales force. And we’ll see how we can do with recruiting or converting all those people or what percentage we can. But I mentioned in the script, remarks that we were assuming the same kind of trend the sales comparison into the fourth quarter is what we were seeing the third quarter at Fuller. So that’s one element when if you are asking about the trend in the active sales force comparison where we were down in the second quarter, another big element again our big element was that we were down in Fuller Mexico where as we were up in the third quarter. So that provided a lot of help.

[Dara Mohsenian:]

Okay. But the outside of Mexico and outside of NA Beauty are you comfortable, you’re still seeing the same level of sales force productivity in the recruit you bring in.

[Rick Goings:]

Yeah I think we are in many places we continue to improve we were up 15% of local currency sales in our Asia segment and nine and active and they had to do the biggest outlier productivity in Indonesia on higher standards from training from brand building and then also better productivity new outlets in China. So I think overall the productivity is pretty good we did talk about less productivity in Tupperware U.S. and Canada that we saw in the third quarter, in light of the consumer spending environment so we’ll have to see how that goes.

[Nicky Decker:]

Dara you’re getting on an important area of brand building out there around the world. We stayed very cost through our group presidents and the managing directors in markets on the quality of the sales force that they bring in, what we don’t want is any big aberrations where all of sudden flood gates come in, low quality recruits come into the business because it pollutes the KPIs and the standards within the sales organization. And it’s actually counter productive going forward particularly in these markets we have a growing middle class people tend to sell to their same levels of economic level and lower. And if you drop this is the problem with some beauty companies in Brazil, if you drop the level of the sales force down from a C or D below that level and the middle class is becoming Cs and Ds, you have no sales force to sell to where the money is going to be and that’s way as I have been reviewing into visits to these markets. I am very impressed in India with the level of training that’s going on. So that not only she comes in to the business, she gets a real kit, she gets real training, and she gets a manager to who stays in contact with her. And so this thing just doesn’t happen. We just got to stay on it. I’ve noticed Mike what we are now over $2.7 million in the size of the sales force and there has been shift in the quality there. As a matter of fact, the only out wire there was they lowered the gates too much in Mexico this last time and that won’t happen again.

[Dara Mohsenian:]

Okay. And then Rick you sort of gave a soft conformation that work sales next year would be in line with your long-term trend if you stripped up the 53rd week. I just want to get some more explicit commentary on that. Are you still comfortable that you can do next year your underlying sales growth trend versus your long-term guidance even with the weaker macro situation, is that correct?

[Rick Goings:]

Yeah. I think what we are going have to do there is in some of the markets there, this is where I chose that Range Rover analogy. We are going to have to shift the lever in some of our markets, where we’ve now got a nice sales for size advantage to $2.7 million. We are going to throw some of the money we had to spend on recruiting there to activity building in some of these markets. So, top line, yes, I have a confidence in it. I mean, if you would ask me at the beginning of this year, I would have talked more, yeah, 6% to 8% moving more toward 8%. Now, they are going to say somewhere in the middle of that, because there is a lot of disruption going on. But we are building all of our plans and our plans with regard to our operations side of the business to still operating in that range this next year. And that as you know it trickles down and influences our cash flow and influences what we are going to do with regard to dividend and share repurchase. So, it all falls out of that first thing, which is size of the sales force.

[Dara Mohsenian:]

Okay, thanks guys.

[Operator:]

Your next question is from (indiscernible) of Jefferies & Company.

[Unidentified Analyst:]

Thanks, good morning or good night. Question coming back to the promotional spend here, we talked a bit in the prepared comments about for obviously and then you alluded to Europe as well. Just wondering if we could get a little bit detail on maybe what markets might have been driving that and maybe how incremental that spend might have been in the quarter?

[Nicky Decker:]

The biggest element (indiscernible) was in Italy and it was more in the couple of million dollar range there.

[Unidentified Analyst:]

And that would be – sounds like that would be stepping down pretty much right here in the fourth quarter as well.

[Nicky Decker:]

We should be much more in line there as well. Rick mentioned that we were up over 30% in sales. So, it certainly worked, but we want to have the right balance there as well.

[Unidentified Analyst:]

That makes sense. If we come back to four, I think when you guys talked in the second quarter call, the sales force trend, it sort of decelerated throughout the quarter and I think you guys caught that really quickly and reacted very, very quickly. Is there any President there for that kind of heavy promotional spend to really recalibrate a market quickly like you did there? And kind of the reason that I ask is I can appreciate the implication of having a sales force size advantage that may not translate into true active sellers. But just wondering if this is a situation you have been through maybe not in the market as impactful as for Mexico, but anywhere else that you might have some history to draw from here?

[Rick Goings:]

It is the competitive dynamics. Two things are coming into play in Mexico, not only the competitive dynamics of a very strong presence of a beauty direct sales company who has really put a lot of focus on that market. They are also in Brazil, but there is an £800 (indiscernible) in Brazil and they have a very high time competing against them so. I don’t know what’s going on internally there, but it appears to be they’ve made a decision to really through a lot of resources and talent at the Mexico business. So, we felt that they paid a lot of attention. They’ve improved their trends there and one of the dynamics that you find happening in many Latin American markets, the more casual sellers be at a Tupperware or our competitive sellers often if you get away from the high density metropolitan markets. She will carry more than one direct sellers booked if he ask her about a Tupperware products, she carries Tupperware you can ask her about a competitive product and she may have that just think turn the clock back 120 years ago, the old (wagon jobber) in the U.S. and this is driven by a rather primitive retail infrastructure when you get away from it. So, there is competitive dynamics going there and obviously what we saw in the second quarter they get very effective with regard to their recruiting and activity I don’t know what they offers where the competition there. But what we felt was our sales force size advantage swift and job number one for us there is get it back again quickly. You can’t get it – you can’t closed the sales gap by going out there in a low per capita GDP market and all of a sudden getting the higher gas spend in average order. We got to do it by getting more doors over there and so that’s why we did. Now externally, I’ll tell you what’s going on in Mexico we’re up to 42,000, just the number of people that have been killed in the (narco wars) since the Calderon government has taken on that battle and how that’s changed the dynamics of how people 6 o’clock as the witching hour in Mexico and in most places, they’re off the street. So, you’re finding the way of how or when we’re seeing is changing too. I must say the two things that really help our business down there. There are limited earning opportunities for woman and not much of a retail infrastructure. So, we continue to feel very good about Mexico and in the future and it appears they are starting to get a handle on some of the violence.

[Unidentified Analyst:]

Okay, very good. Question just on repurchase and I don’t, I don’t necessarily expected to (indiscernible) the 2012 phasing, but at the current kind of $90 million at quarter run rate and the stock being sort of where is that, I mean is it stand the reason that would be a phase that you might be able to continue next year at least have the appetite to continue next year.

[Nicky Decker:]

Fair, that would probably heavy for one thing we as you might recall we ended the year with $160 million of available cash that we started to buy at a rate of $40 million per quarter and then we bump that up starting in the second quarter to $90 million. So, now we’re using our cash that we generated the volume incrementally so, we wouldn’t have that $160 million for one thing.

[Rick Goings:]

Yeah, the uses of cash as you know the traditional most people will do out there most companies will do they either do acquisitions. We really don’t have any out there that really that with of interest and we have enough details that we can grow organically and by the way you will know we took the impairment charge of that NutraMedix business which is a good business down there and it’s gotten better the years we’ve owned it. But we got that kind of a gift with purchase, we are focused was to get this fuller business in Mexico and we did that acquisition for the right price and so we picked up some other businesses in the process, we’ve jettisoned some smaller elements of the adamant cleaning up the other so, the one use of cash with regard to acquisitions we must take that off the table. So, the other two are share repurchase and raised the dividend and you’ve seen the year before last, I think we did increased to 17%, Mike was around 20% last year and we made the decision from a timing standpoint that the board will look at it at in January of each year and we would decide uses of cash what we are going to do with regard to dividend and then we think what we do with regard to share repurchase share repurchase. So, I think we’re in a better position to look forward when we talk in a couple of months.

[Unidentified Analyst:]

Sounds good, thank you.

[Operator:]

The next question is from Linda Bolton Weiser of Caris.

[Linda Bolton Weiser:]

Hi, how are you doing?

[Rick Goings:]

Good morning, Linda.

[Linda Bolton Weiser:]

Hi. So, Mike you speak so fast and then I’ll catch everything you say, but do had said something about the share count in 2012 being now lower because you are increasing share repurchase. Can you say again how much of that increase in share repurchase and was actually share count offsets the $0.26 effects impact in 2012.

[Mike Poteshman:]

Linda, before he answers, I want to say I have never said any speak so fast, what I have said to him over the years is you go so deep that my eyes gloss over. It is nice to hear fast and deep might go for.

[Rick Goings:]

Linda, what we were saying is based on the shares we brought back in 2011 so far and what we’ve included in our outlook for the rest of the year. That would give us a $0.25 benefit next year because we bought in during the year, we’ll get the whole year benefit. So, it’s not layering on right now an estimate of how much incrementally we buy next year, we just with what we buy in this year that would already give us a $0.25 benefit next year at the same level of income.

[Linda Bolton Weiser:]

Okay, great. And then again you mentioned I’ll try the terms of things affecting cash flow this year and I didn’t quite catch the bottom-line of that. Are you projecting for either 2011 operating cash flow will be down or up year-over-year versus 2010.

[Rick Goings:]

The 200 and 210 range that we gave is lower, last year we did $254 million I believe. And so that’s…

[Linda Bolton Weiser:]

Okay.

[Rick Goings:]

Higher capital lending we’ve got it timing element on the tables and accruals mentioned the sale of the Australian facility of $5 million, we don’t have this year so, those elements.

[Linda Bolton Weiser:]

So, when you mentioned is there some timing issues on the tablets that would seemingly reverse next year resulting in a favorable comparison next year is that a right way to think about that.

[Rick Goings:]

Well, what we have to see is what is really saying is that the starting point in 2010 was relatively high double balance and we paid those out and you really comparing that with 2009 and what we paid out in 2010 for 2009. And then the other element that we mentioned was because of the 53rd week for instance in the third quarter or quarter ended on October 1st. So that impacts the timing or the payments are happening when they happen, but that movement a week also impacted it. So, we probably will see some benefit in 2012 in light of all the effort probably not the whole amount.

[Linda Bolton Weiser:]

Okay. And just can you that used against real specific numbers for a lot of markets and may be you said it, but I miss it, but Rick I was mean by some of the growth rates. Can you give like Indonesia, India and Germany in the quarter?

[Rick Goings:]

Sure, we said Indonesia was up 47, India was up 68, and Germany was up 9 in local currency.

[Linda Bolton Weiser:]

And then just the decline in France, which is uncharacteristic is that’s been growing pretty well. Can you just give a little more color on why you are so confident and it will be up in the fourth quarter?

[Rick Goings:]

Yeah, what we have a sales force side advantage is not as largest it was. But we did see in the third quarter, but on the front end of the quarter and the backend of the quarter with the timing of promotional pushes in particular weeks, is that had a negative impact on the third quarter.

[Unidentified Company Speaker:]

And the third quarter Linda it’s not a particular just remember France goes on holiday in the summer. So, it’s not a particularly big quarter for us.

[Linda Bolton Weiser:]

Okay. And just I know I could probably figure this out, but can you just say the lower tax rate in both the third quarter and through the fourth quarter I guess how to benefit the annual guidance of 2011 because of lower tax rate versus before on an EPS basis.

[Unidentified Company Speaker:]

$0.02.

[Linda Bolton Weiser:]

$0.02.

[Unidentified Company Speaker:]

Yeah.

[Linda Bolton Weiser:]

Okay. That’s it for now, thank you very much.

[Rick Goings:]

Thank you.

[Operator:]

Your next question is from Jason Gere of RBC Capital Markets.

[Jason Gere:]

Okay, good morning.

[Rick Goings:]

Hi Jason.

[Jason Gere:]

Hey, I guess the question on kind of TSA leverage that were always a custom to seeing with some comp. So, I was wondering if you could kind of break out between the investments that you stepped up in some of those key markets versus just an overhead reduction or leverage that we get with the comps, especially that was 10% this quarter and then I just kind of add on to that afterwards?

[Rick Goings:]

Well, our DS&A as a percentage of sales was about the same, was up 0.1 points year-over-year. We talked about $7 million or $8 million of incremental expenses Fuller and a couple of million in Italy, so that would be $600 million of sales, about 150 basis points. And so the other elements that were helping us were the volume leverage that we see on the 10% higher sales, so that would have been a big element there. We also saw bit of a mix shift away from our U.S. based business, where we sell directly to the sales force as opposed to distributors and we have got some commission costs in those businesses that go through the promotional line and less of a share that helps that ratio.

[Jason Gere:]

Okay. So, when we think about the fourth quarter and I guess I am just trying to breakdown the 149 or 154, should we see kind of a little bit more of that leverage coming back, I mean, obviously it sounds like that you got the leverage you wanted, but you just had some incremental expenses, some of those expenses again decelerate in the fourth quarter? I guess, trying to think about how that plays out fourth quarter and how you are thinking about heading into next year as well, especially if you are still kind of endorsing, I guess a 5% to 7% organic sales number which should provide you over that leverage?

[Rick Goings:]

Well, for the fourth quarter, we were saying that we are seeing a fairly normal contribution margins in some of the segments, in Asia, in South America where I was saying we would still see somewhat of an impact on our less within Europe just as not as much we saw in the third quarter and then also based on our outlook we included a little bit more in unallocated expense and interest. So, when you look at pre-tax overall, that’s why we are showing the lower percentage in our guidance.

[Jason Gere:]

Okay. And then just turning to 2012, I know you’ve kind of given a lot of the pieces, but I guess Rick at the end of the day and even the commentary that was in the press release about the growth ahead, one, I guess when you think about the 5% to 7% developed markets have gone from like last quarter it was low single-digit positive this quarter, low single-digit negative. How are you thinking about 2012 we are going to see the continued strength in emerging markets and then should we see flattish kind of developed markets? And then secondly, I think expectations out there are calling for still kind of 10% to 15% earnings growth, I know currency is going to work against you, but you have come from with those expectations that are out there?

[Rick Goings:]

Well, the first thing with regard to the emerging markets, it’s I have every reason to believe that this will continue at least at the double-digit level in our emerging markets. Some will be high double-digit in there, but the blended rate we have said before a slow double-digit at least and I believe you are going to see our established markets, because of what’s happening with sales force size up modestly 1%, 2%, 3% and where we will start to get positive there is when we fix some of these problem children on it, because the drags have been Japan, Australia, New Zealand, Beauty Control, and Nutrimetics we started to get those positive trends on those, then you can start to see a mid single-digit growth from those. Very important point Jason, I was trying to explain this to our Managing Directors in Europe a couple of weeks back bifurcate the world into emerging markets, established markets, pluses in mind this is on each. Established markets in the world the big pluses, hyper capita income, the Luxembourg leased the pack $40,000 a year, but most Western Europe is up near those kinds of level. Positives for us were very low penetration and high density in the big cities, Paris, Bordeaux, Lyon, Marseille, Nice, that’s where we are getting the growth. Those are much more educated women and working women and she is selling our higher price products there. So, a big plus for us. We have lots of room to grow there, that’s why we are attacking Italy. Now, the drag in those markets are, we got high penetration in lot of those rural areas that’s where we’ve been for 50 years. Now I shifted to the emerging markets of the world, the big plus number one population, number two incredible growing middle class it is interesting the middle class of India right now is estimated to be 350 million. So it would make its middle class the fifth largest population in the world and it’s predicted to be 550 million by 2025. So there are lots of people, the bad news is most are poor but there is this growing middle class. So when somebody looks at our portfolio often people say, yeah they are emerging markets story no, no, no, no we are in end and we’re not in war because we make a lot of money in our establish markets have a lot of opportunity to grow will the doubt is be as great, no. But the margins are great they can afford these higher price product so we’re going to be a business that operates with our models I’ll be different in each of these kinds of market, surf with long explanation but it’s a old story.

[Linda Bolton Weiser:]

And then I’m thinking about with the sales I guess the second part of the question was just the sales next year will probably be not again that’s low single digit, should we anticipate another year and you guys have done a terrific job exceeding that 50 basis points of pre–tax margin per year. But sounds like gross margin will turn more positive special with resin costs I think like 11 million positive contribution in mix and DS&A sounds like you’ll continue to get some leverage there. So, should we think of next year is good organic sales but even another strong operating performance as soon as under performing businesses start to get more profitable.

[Rick Goings:]

Firstly, I would tell you with regard to foreign exchange. Foreign exchange patterns have been absolutely volatile and they can change over six weeks. So we’re planning right now in this range 6% to 8% top line and I don’t know what’s going to happen with foreign exchange. Things can change very quickly, again as I said, when we take this decade from 2000 to 2010 it was $0.05 negative. We have this market basket of all these different currencies out there and I’ve seen shift in Mexico between a 11 to the U.S. dollar and 15 years. So it just a bouncing ball there. What we’ve gotten, our guys are very good at managing within that foreign exchange and so that the only thing at the end of the day we need to deal with is exchange rates because we’ll learn our factory wage rates in Mexico paid in pesos we try to then source as tough as we can in local currency, so that we can mitigate the negative impact of that. So, our global portfolio really gives us a macro hedge. So, I’m not coming down on our estimates of this next year given what I’ve seen. The first thing to look at is what’s the size of our sales force, are we growing that.

[Linda Bolton Weiser:]

Okay great. Thank you.

[Operator:]

Next question is from Sofya Tsinis of JPMorgan.

[Sofya Tsinis:]

Good morning and thanks for taking my question. Do you elaborate about this quarter to buyback stock and previously you’ve given the new target 1.5 times. Do you knew view that as ceiling and do you think the potential the whether to take leverage than higher over time. Thanks.

[Rick Goings:]

Well, that certainly the what we are continued to operate and we were 1.4 time for the fourth quarter end of the third quarter. And through question could we go higher with our credit rating and so on we could but that’s just not what we say we’re going to do. So I don’t think people should expect that.

[Sofya Tsinis:]

Okay. And just another question in terms of the market that you’re required to for investment, can you just walk us through those. So, you have good better model the DSA line. Thanks.

[Rick Goings:]

You’ve said that we need additional investment.

[Sofya Tsinis:]

Yes.

[Rick Goings:]

Yeah. I mean, I think that that tends to be fairly situational. So we saw the situation in Fuller Mexico where we had a gap in the recruiting in the second quarter and we reacted to even close that by the end of the second quarter and then built on that in the third quarter. Yes we feel like we could have done it more efficiently what were we do it in other places that way in the future, so I don’t know that we would predict per se needing to do that. If you look at our problem, “children” markets we make some investments there much more modest and well we’re not doing, well that’s where we look at it. But I don’t think we would predict anything like that per se. When we think about the 50 basis point per year target that we talked about, that contemplates we start with our very good return business overall. We talked about the 40% contribution margin before investment and then we do make a lot of investments. Many of those are more offensive in the sense that we’re doing the brand building and so on that’s meant to make good business even better. But then in other cases we have the kind of issues where we have to invest. So for this year, the high-end of our guidance is the 14.1% pretax ROS last year we were 13.7, so we’re only getting 40 basis points, but we’re kind of close to our (indiscernible).

[Sofya Tsinis:]

Okay. Thanks.

[Operator:]

The next question is from Mark Schwartz of SunTrust.

[Mark Schwartz:]

Hi good morning everyone.

[Rick Goings:]

Hi Mike.

[Mark Schwartz:]

Yeah, just wandering to touch on something that was pretty interesting, your commentary regarding this kind of the softness that you’re seeing in the Hispanic market, I believe you are referring to the Tupperware US business in particular. Could you kind of give us some more color on that? Is than an area that you’d be looking to invest more in 2012?

[Rick Goings:]

Well, in the US Hispanic, we have there is a really area that we’re strongest their is actually the Midwest Chicago, Ontario and the south west including California. The issue there is we think some of our offers were of. The day Hispanics tend to in our business in US purchase at lower price points and be much more incentive driven. And doing reflection of the third quarter performance, they thought the offers, management thought the offers were offered them and they were adjusting for the fourth quarter. So that tends to be situational and temporary. But it’s a very vibrant piece of our business there. So interesting, the two strongest components of our North America businesses are the Hispanic in the US and the French Canadians in France. There are pockets there, they just have operated on different double digit growth trends and we’re used to seeing that. There is still growing, but we didn’t get that kind of growth in the third quarter from them. So (indiscernible) you cannot go for them, just like with our Beauty businesses there are not interested in the same kind of products. So we have to be more important for us to have segmented marketing and segmenting say, those approaches and sometimes we are better than other.

[Mark Schwartz:]

Okay, great thanks for the color. And then moving on to the, I believe the European emerging markets business you pointed out Russia improving sequentially and South Africa as well. Could you, it looks like overall that the sales growth there actually decelerated. Could you kind of point out some of the negatives that you saw this year?

[Rick Goings:]

Yeah, Mike. Once you first take them through the, I was just in South African and comment on some of the issues there.

[Mike Poteshman:]

Yeah, the Beauty business in South African had a very good quarter. We where flatter into the Tupperware South Africa business, we mentioned in the second quarter that we had shipped a couple of million dollars of sales ahead of a potential strike that actually did happened since being result. So that hurt the comparison a bit. We had a couple of good months in Turkey, but in the middle of the quarter we were softer and that impacted the comparison in this particular quarter. So those are some of the bigger emerging markets in Europe.

[Mark Schwartz:]

Okay, great. Thanks a lot.

[Operator:]

The next question from John San Marco of Janney Capital Markets.

[John San Marco:]

Thank you good morning.

[Rick Goings:]

Good morning.

[John San Marco:]

What specifically did you spent that incremental 8 and$2 million in Italy that you intend to moderate? And I guess when you see promotions does that mean paying distributors more on a percentage basis or lowering product prices or how did that shake out?

[Rick Goings:]

The biggest element was in the fuller business was really the price that we are offering the initial order – in order to attract somebody and then the price that you get for recruiting somebody in the level that we said of the sales which you need to get that price. And so what we look at when we are making that decision is, it was going on externally with others, what we done in the past, obviously what we think it’s going drive. The action of the recruiting and so the biggest element was the price, the cost of the price that we were offering and the level of sales that we ask for that. And then we have other programs in both those markets Italy and in Fuller Mexico having do that activation and so on.

[John San Marco:]

Okay. And if you give me already details this but would you expect those expenses to step function down where in the fourth quarter or to moderate mean that the decline. So over couple of years I should think about that?

[Rick Goings:]

We’ll, what we meant by moderation is what we built in to our fourth quarter outlook was not a huge contribution margin in either Europe, or Beauty North America, we are getting more normal contribution margins from the other three segments. So that reflected that we thought we have some investment going on but not at the same level.

[John San Marco:]

Okay. I guess you’ve been longer term because the tone I sort of picked up on the call was that. Two years from now there may actually be some unwinding of those investments and negative investments if you will. And I guess, if I interpreted that right why is the approach to trying and figure our ways to shrink that investment level, incentive redirecting it towards investments that are successfully driving higher quality recruits.

[Rick Goings:]

So, I think in essence it is that I mean we are always looking how we’re designing the particular promotional pushes and our longer term program in order to be is effective as possible on our spending and we’ll continue to do that. I mean we made a lot of progress, lot of places and that’s an element that’s taking our pretax IRS from 5% or so in 2003, 14% at the high end now, there is other elements in margin, gross margin as well. But right, I mean we want a leverage our promotional spending and at times that means we’re spending too much, and we need to spend less in other times that means we need spend better.

[John San Marco:]

Okay, that’s helpful. And then just one last clarification, can you explain like purging the ranks, I think you mentioned it specifically with regards to the Japanese market. Why that’s the right thing to do there and where you are in that process and then I guess lastly whether that’s process you can emulate into other problem trial market.

[Rick Goings:]

Okay. What that’s really reflecting is our decision process around how long somebody stays on list when they haven’t ordered and in many cases that’s run by our independent distributors making that decision in other cases its more firmly layered. And in the case of Tupperware Japan in the bigger changes you made in the model there to go back more towards aiming it selling group of people oppose to the more passive group that would also be ordering lot for the own use. We raised the standards of what you need to do to be in the sales force and to get the different levels and awards and so on. And that the different levels and words so on. And that (indiscernible) disconnect with the people that were on, many of the people who on the list seller. Just want active any more were going active and so we basic took them after was. And that sense its sometimes can be more helpful everything to both important but sometimes to be more helpful look at the active sellers compares measure of how many people are turning in order each ordering cycle during the quarter. So whether will be other places were distributors were hold on the sellers for long period of time and you can start see different relationship. Yeah, I mean it can happen that’s element we manage.

[John San Marco:]

Okay. Thanks for taking my question.

[Rick Goings:]

Welcome.

[Operator:]

And our last question comes from Olivia Tong of Bank of America/Merrill Lynch.

[Olivia Tong:]

Good morning, thanks. Most of my question been answer but just a few follow up first maybe you could talk a little bit about the impact of prospects that effects add on margin this quarter and sort of watch your thinking about in Q4 based on where we are sitting today?

[Rick Goings:]

Sure. So the way that we intend to see that come through is some of our cost our dollars, a lot of corporate costs obviously are interest costs and so when we get effects impacting the sales line. But not impacting the cost and that can obviously will come through the percentage. So in the third quarter we had last year we had an actual pretax order is 10.4%, but it would have been different if the rates that were unaffected at the time, so that came through probably 20 or 30 basis points of an impact versus what it would have been at the rates to stay the same. So, it’s that kind of dynamic and we a lot of times see movement in that kind of the range. So, I think I also mentioned that’s what caused our 14.4% high end pre-tax ROS and guidance in July turning net-net into 14.1% now. It was that large move in FX caused that to be the mass outcome.

[Olivia Tong:]

Great, thanks. And then just one more question on Mexico, you mentioned given the sales force move that you made, you may have lowered the gate a little. So, should we expect a greater falloff in the sales force and potentially a decline in the next few quarters, it’s because the number of people that came in perhaps (indiscernible), there is a quality issue there?

[Rick Goings:]

No, I think the – I think what to expect is sales increase is more inline with what you saw in the third quarter. That even though we had 19% sales force size advantage, we are already a month into this next quarter, don’t expect 19%, you expect something much more in that same range as you saw in the third quarter. And what we do is we would just purge that extra – that incremental group that one is high at quality and then those return back to the normal 5% to 7% increases that you have been seeing in that Fuller business going forward.

[Olivia Tong:]

Thanks so much.

[Operator:]

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

[Rick Goings:]

Thank you very much and thanks for your interest. And by the way, I really would encourage those of you who can to come to Miami because you will see this incredible group of management that we are bringing along the business and also we are going to show you some of the shifts in products. There has been – I was talking several months ago with some of our Managing Directors about this. You would have looked back 20 years ago at Tupperware, we basically we are trying to pull away from being commoditized in this market to products that were being sold at Wal-Mart and getting into new and different categories. So, we threw a lot of our time, investment, and research dollars into differentiating our products and as they would say in the military going getting elevation on there, where you basically have advantage. There has been some dramatic ships in what Tupperware sells today and we will show you that and not to – we have used the Apple example far before the recent Steve’s passing, but our product line today, they started basically with the computer and you think here Tupperware burping bowl and then they moved the way and moved into consumer products. That’s what’s happened here. If you start to look at our product line as a hub and spokes, we started moving from commoditized plastic good storage into kitchen tools and gadgets. We started going into food preparation items and will give you an idea of what’s happened there, because we have taken now hottest selling product around the world this last year was an Herb Chopper at $60 and we are talking about it was a hot seller and not only higher per capita GDP markets, but Europe as well. Over the last several years, this quick shift which is the food processor. We weren’t even end these kinds of products in the past, but they have changed women’s lifestyles. For example, she is a busy working women in Germany, but she also uses it in India, because 50% of homes there don’t have electricity. So, it’s been adapted. In France, 20 years ago, it was a $10 Tupperware product was our hottest selling today, it’s a €100 micro steamer for a women who works is in her 30s and lives in Paris. Product line has changed and that has therefore changed the way we sell. A party today is much more a gross net out, so higher tech life-changing product with a different kind of selling situation. We are going to take some time in Miami and show you how that works and it should give you feeling, because what that enable us to do is get a higher quality recruit who comes in not to make thin money, but to make serious income. That’s why as I just saw in India, we have six women in our India organization that make over $0.5 million a year, it’s a very serious opportunity. Anyway, thank you and we will talk to those of you who are going to be with us in Miami.

[Operator:]

Thank you. And this concludes today’s conference call. You may now disconnect.