Tupperware Brands report Q4 net earnings of US$89.7M, compared to year-ago earnings of US$74.5M, as net sales rise 1% to US$717M
January 29, 2014
– -- Fourth quarter sales up 1% in U.S. dollars and 5% local currency+ versus last year.
-- GAAP diluted E.P.S. $1.74, versus $1.34 last year. Adjusted*, diluted E.P.S. $1.81, up 12% in local currency.
-- Full year cash flow before investing activities $263 million, up 13% versus last year.
-- Share repurchases of $75 million / 832 thousand shares.
-- Board of Directors declares a 10% higher quarterly dividend of 68 cents per share, $2.72 annual run rate.
Tupperware Brands Corporation today announced record fourth quarter and full year 2013 operating results.
Rick Goings, Chairman and CEO, commented, "We continued to deliver steady top line growth in the quarter. Focusing on our sales force remains our top priority, as increasing its size is key to delivering consistent growth in our business. We had a meaningful sequential increase in total sellers in the quarter, closing the year with 2.9 million worldwide, a 4% increase over the end of 2012. Worldwide, our local management teams have the expertise to drive strategic initiatives in their business units in order to motivate our sales force, and we achieved a sequential improvement as well in the active seller comparison in the quarter. Even with challenging environmental conditions and macro-economic factors in several of our emerging markets, as a group, these markets delivered solid sales growth in local currency, being up 12% over last year. An integral part of our "And" story, our established markets, while down in total, improved sequentially versus the prior quarter, and several of these markets reported growth as key strategies caught hold."
Goings continued, "As we look to 2014, we remain focused on providing a good return to our investors, while continuing to invest at appropriate levels in our business units. Along these lines we're pleased to announce that based on the strength of our results and management teams around the world, and confidence in our continued growth, our Board approved today a 10% increase in our quarterly dividend. We will also continue with our share repurchase program, and anticipate $185 million worth of open-market share repurchases in 2014."
Fourth Quarter Executive Summary
Fourth quarter 2013 net sales were $717 million. Emerging markets**, accounting for 63% of sales, achieved a 12% increase in local currency, driven by large populations, greater penetration and emerging middle classes. Established markets were down 5% in local currency, a 3 percentage point improvement over the third quarter.
GAAP net income of $89.7 million versus $74.5 million in the prior year, which included $13.2 million pretax more of expense "items", was up 21% in dollars and 29% in local currency.
Adjusted diluted E.P.S. of $1.81 included 9 cents of negative impact versus 2012 from changes in foreign exchange rates, which was 3 cents worse than assumed in October's guidance.
Full year cash flow from operating activities net of investing activities was $263 million, $29 million over 2012 and $13 million over the high end of October's guidance range.
In the fourth quarter, the Company returned $107 million to shareholders through a dividend payout of $32 million and the repurchase of 832 thousand shares for $75 million. Since 2007, 20 million shares have been repurchased for $1.2 billion, with $0.8 billion left under an authorization that runs until February 2017.
Total sales force of 2.9 million was up 4% versus prior year at the end of the quarter, a 4 percentage point improvement over third quarter, with improvement in most markets.
Fourth Quarter Business Highlights
Europe: Continued strong results in Turkey, and Tupperware South Africa's and France's return to growth, offset by impact of low activity primarily in other established markets and CIS
Segment sales, down 1% versus last year reported and down 2% in local currency.
Emerging markets were up 2% in local currency. Primarily driven by Turkey, up 24%, and Tupperware South Africa, up 28%, largely offset by the CIS, down 31%.
Established markets were down 4% in local currency, a 7 percentage point improvement over the third quarter. France's local currency sales were up 2%, reflecting an increase in sales force size and activity. This was largely offset by Germany, which was down 14%, the result of a less active and productive sales force. Successful recruiting resulted in Germany ending the quarter with a 5% sales force advantage.
Asia Pacific: Indonesia, China and Malaysia/Singapore sales up double digit
Sales for the segment up 1% reported and 12% in local currency, driven by the emerging markets up 17% in local currency, led by China up over 20%, Indonesia, up 33% and Malaysia Singapore up 17%. In line with prior quarter, India was only up slightly versus historical double digit increases. Continued focus on mitigating macroeconomic factors in India, as well as focusing top end sales force leaders on recruiting, training and activating sales force members.
Established markets in the segment were down 3% in local currency, as they continued to execute strategies to stabilize and improve sales force and sales force leadership levels.
Active sales force up 5%. The 7 percentage point difference between the sales and active seller comparisons was primarily related to productivity improvement in Indonesia related to higher sales force standards and China due to product mix, as well as from a mix shift toward units with higher average order size.
Tupperware North America: Tupperware Mexico up 14%, including 8-point benefit from higher B2B sales
Segment sales, up 4% reported and in local currency. Tupperware Mexico sales up 14%, reflected a larger and more productive sales force, as well as higher B2B sales, which had a 4 percentage point benefit on the sales comparison for the whole segment.
Tupperware United States and Canada sales were down 3% in local currency. The focus continued on building and strengthening the sales force structure and leadership levels resulting in a higher ending sales force size versus prior quarter.
Beauty North America: Continued focus on executing and leveraging recently implemented programs
Sales for the segment were down 14% reported and 13% in local currency. In line with third quarter, Fuller Mexico sales were down 11% in local currency. Continued focus on stabilizing and growing sales manager level and total sales force size. Sales force size and activity comparisons were slightly better than third quarter, but sales force productivity was down.
BeautiControl sales were down 23%. Sales force size improved through the quarter, but still down high single digit. Through engagement of the top end of the sales force, there is a continuing focus on developing a larger and more active sales force and executing on the programs in place.
South America: Continued good recruiting resulted in 18% sales force increase
Sales up 17% reported and 28% in local currency, primarily as a result of continued growth in Brazil which was up 19% in local currency driven by a larger sales force size. Venezuela was up 54% primarily reflecting higher prices due to inflation.
Active sales force up 5%. The 23 point difference between the sales and active seller comparisons primarily reflected the ongoing strategies to increase average order size in Argentina and inflation related price increases, along with higher sales volume in Brazil.
2014 Outlook (Unaudited)
Full year 2014
Net interest expense is expected to be around $40 million.
Tax rate excluding items is expected to be 25.0%, excluding items and 24.9% on a U.S. GAAP basis.
Reflects $185 million and first quarter reflects $10 million in open market share repurchases.
Diluted earnings per share guidance assumes no change in the current 6.3 bolivar to dollar rate for Venezuela. If the rate had worsened to 63 bolivars to the dollar as of the beginning of 2014, there would have been an estimated $40 million negative pretax impact on 2014 earnings related to amounts on the year end 2013 balance sheet, and an additional $25 million negative pretax impact versus 2013 from translating operating activity at the worse rate. The estimated impact of such a devaluation on 2014 sales is estimated at $100 million.
For the full year, sales in local currency are expected to be even to up a couple percent in Europe, up high-single to low-double digit in Asia Pacific, up mid-single digit in the Tupperware North America segment, down mid-single digit in Beauty North America and to be up about 20% percent in the South America segment.
Pre-tax return on sales without items for the full year, versus 2013, is expected to increase modestly in all segments, except in Beauty North America where a decrease is expected
associated with negative volume leverage.
Uses of Cash
The Company's Board of Directors declared today the Company's regular quarterly dividend. The dividend declared was 68 cents per share, up 10% from the previous quarter. It is payable on April 4, 2014 to shareholders of record as of March 19, 2014. This increase in dividend is in line with maintaining a targeted payout ratio of approximately 50% of trailing diluted earnings per share without items.
* See Non-GAAP Financial Measures Reconciliation Schedules.
** The Company classifies Established Market Units as those operating in Western Europe (including Scandinavia), the United States, Canada, Australia and Japan and its remaining units as Emerging Market Units.
+ Local currency changes are measured by comparing current year results with those of the prior year translated at the current year's foreign exchange rates.
Fourth Quarter Earnings Conference Call
Tupperware Brands will conduct a conference call and simultaneous webcast presentation including slides today, Wednesday, January 29, 2014, at 8:30 am Eastern time. The conference call and slides will be webcast and accessible, along with a copy of this news release, on www.tupperwarebrands.com.
Tupperware Brands Corporation is a portfolio of global direct selling companies, selling innovative, premium products across multiple brands and categories through an independent sales force of 2.9 million. Product brands and categories include design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand and beauty and personal care products for consumers through the Armand Dupree, Avroy Shlain, BeautiControl, Fuller Cosmetics, NaturCare, Nutrimetics, and Nuvo brands.
The Company's stock is listed on the New York Stock Exchange (NYSE: TUP). Statements contained in this release, which are not historical fact and use predictive words such as "outlook", "expects" or "target" are forward-looking statements. These statements involve risks and uncertainties that include recruiting and activity of the Company's independent sales forces, the success of new product introductions and promotional programs, governmental approvals of materials for use in food containers and beauty and personal care products, changes in the fair value of previously acquired businesses and trade names, the success of buyers in obtaining financing or attracting tenants for commercial and residential developments, the effects of economic and political conditions generally and foreign exchange risk in particular and other risks detailed in the Company's periodic reports as filed in accordance with the Securities Exchange Act of 1934.
The Company updates each month the impact of changes in foreign exchange rates versus the prior year, posting it on; http://ir.tupperwarebrands.com/foreign-exchange-impact.cfm. Other than updating for changes in foreign currency exchange rates, the Company does not intend to update forward-looking information, except through its quarterly earnings releases, unless it expects diluted earnings per share for the current quarter, excluding items impacting comparability and the impact of changes in foreign exchange rates, to be significantly below its previous guidance.