Tupperware Brands Corporation (NYSE: TUP) Q4 2020 earnings call dated Mar. 10, 2021
Corporate Participants:
Jane Garrard — Vice President of Investor Relations
Miguel Fernandez — President and Chief Executive Officer
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Analysts:
Linda Bolton-Weiser — DA Davidson — Analyst
Steve O’Hara — Sidoti & Company — Analyst
Wendy Nicholson — Citibank — Analyst
Presentation:
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Tupperware Brands Corporation Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] After the speakers’ presentation, there will be a question-and-answer session [Operator Instructions].
Now I’d like to hand the conference over to your speaker today, Jane Garrard, Vice President of Investor Relations. Please go ahead.
Jane Garrard — Vice President of Investor Relations
Welcome to Tupperware Brands fourth quarter 2020 earnings conference call. With me on today’s call are Miguel Fernandez, our President and CEO; and Sandra Harris, our Chief Financial and Operations Officer.
Earlier this morning, we issued a press release announcing our financial results for the fourth quarter ended December 26, 2020. The press release is available on our Company website on our Investor Relations page. We will begin with our Safe Harbor statement. During the course of today’s call, we will make forward-looking statements that are subject to risks and uncertainties as described in our press release and in our SEC filings. You should listen to today’s call in the context of that information.
We will also discuss some of our results for the quarter on a non-GAAP basis. Reconciliations between GAAP and adjusted measures can also be found in our press release. Any reference to sales in this discussion today is referring to local currency sales, which compares results between periods as if current period foreign exchange rates had been the exchange rate in the prior period. You can access the release and our forward-looking statement language through the Investor Relations section of the company website where you can also access a webcast replay of this call later today.
I will now turn the call over to Miguel for his remarks.
Miguel Fernandez — President and Chief Executive Officer
Thank you, Jane. And good morning, everyone. In 2020, we started down a path to modernize the company. Let me summarize key wins for us in 2020. We rightsized our business with gross cost savings in excess of $190 million. We’ve revamped our leadership team and reorganized the company. We strengthened our balance sheet, improved cash flow and restructured and refinanced our debt. We initiated a new growth strategy to unlock the power and consumer acceptance of our brand. We started executing on our new Define Purpose to Nurture a Better Future Every Day, putting our environmentally friendly reusable message front and center.
As a result of this performance, we have now achieved two quarters of improving performance on our way to turn around the company. With sales growth of 20% in the last two quarters, we believe we’ve changed the negative trends of prior years. COVID-19 was an unexpected disruption that we all had to deal with in 2020. On the negative side, we estimate a negative topline impact of about $62 million due to forced closures and other restrictions.
But on the positive front, for us, we saw new consumer trend emerge around the world. In 2020, more people have been staying home due to the pandemic, which led to more cooking at home, more time in the kitchen, and more of an awareness to prepare food, minimize food waste and decrease their use of products made with single use materials.
Tupperware products were a solution to these consumer needs. To overcome the restrictions related to the global pandemic, our sales force accelerated their adoption of digital tools and methods. As a result, they were able to modernize, how they reach and service their customers, and how they demonstrate our innovative products.
A key strategic shift for us in 2020 was that our sales force realized that geography was not longer a hindering factor in growing their business. By utilizing social media platforms and digital tools, they’ve been able to reach beyond their physical neighborhood and leverage the expansive reach of their online social network. While it is still early in the transition to embracing digital selling tools and methods, we’re confident we can build upon the success gained in 2020 and accelerate widespread adoption in 2021. We believe a more digitally equipped sales force will enable greater engagement and increased productivity as we move forward with our other growth initiatives.
Let me highlight a few of our key markets. In the US and Canada markets, sales increased 83% in the fourth quarter. Because of service improvements during the quarter, the Company’s backlog dropped $21 million. This backlog attributed 47% of sales growth, leaving a sales increase of 36% without it. The US and Canada sales force continue to embrace detailed demonstration tools for more efficient productive selling situations. And they are currently testing our new digital online party tool.
Our product innovation continues to appeal to our consumer needs, for preparing healthy food and efficiently reduce energy waste. We featured two products in the fourth quarter including a two-speed hand mixture which can mix material without the use of electricity and the enhanced fertilizer which fertilizes vegetables quickly and easily.
Tupperware Mexico contributed sales growth of 8% in the fourth quarter. Mexico grew 9% in average active sales force. We had increased use of mobile apps and a program targeted promotions. During the quarter, products contributing strongly to sales in quarter two on-the-go products, two new water bottles and a on-the-go coffee cup demonstrating that our brand has permission to sell products outside just ethnic food storage.
In Brazil, sales increased 58%, which was achieved through a coordinated use of data, merchandising, products and communication. The top featured products in Brazil were similar to Mexico, in the on-the-go category, including new water bottles and lunch kits. The entertaining category contributed strongly to sales in the fourth quarter as well. And lastly, a key market for us, China declined 11%. A contributing factor was a decrease of 608 studios to end the year at around 5,700. We believe China could be a key growth driver for us as we plan to expand into new product categories and channels. We are happy to welcome our new President of China, Vietnam, Ken Yeung who joins us from PepsiCo. Prior to his time at PepsiCo, he led number of businesses at JD.com and spent 10 years with Walmart before that.
We believe Ken’s experience will help us expand our retail studio presence in China, accelerate new product innovation and increased focus on our transformational e-commerce strategy. As we move into 2021, we will accelerate our consumer-centric focus in everything we do. With this in mind, we recently announced internally that where we are realigning our resources against priorities that will help us drive our future.
To expand the availability of our products around the world and reach consumers where they choose to purchase, we have organized our commercial efforts into two streams, the traditional direct selling business and the new omnichannel business expansion. Patricio Cuesta, our Worldwide Commercial President, who has over 16 years of experience running directionally markets and regions will lead our direct selling business and will continue to focus on improving the core. This includes, increased use of data analytics to help us make better decisions, pushing our digital transformation to create a seamless experience for our sales force to become more efficient and productive, and expansion into new products and categories giving our sales force and opportunity to excite, existing customers and attract new ones. With these efforts, we believe we can create a more sustainable and profitable business.
Hector Lezama, President in commercial business expansion will lead our omnichannel strategy. He brings deep international experience in developing various business models that support and complement our direct selling model. I’m confident in the ability of our new leadership team to execute on our priorities.
Our focus in 2021 will be to expand the skillset in the company to be more data driven and explore new channels of distribution, avoiding a potential conflict with our current direct selling channel by introducing Tupperware sub brands and/or penetrating into different product categories where we know the consumer give us permission to enter. We believe the execution of these priorities will create meaningful value for our shareholders for years to come.
Now let me turn the call over to Sandra Harris, our CFO and COO for a review of our financial statements.
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Thanks, Miguel. Our turnaround plan accelerated as we moved through 2020 and is now well underway. In 2020, we established a firm financial foundation by rightsizing the cost structure, refinancing the 2021 debt obligations, improving liquidity, centralizing the finance and accounting organization, and strengthening our control environment.
Our fourth quarter sales improved 20% compared with last year. The majority of our markets posted improved sales in the quarter. North America increased 50%, South America increased 55%, and Europe increased 8%. Asia declined in the quarter, down 5%. China was a major contributor. In the last three months we have established new leadership in strategically important markets in Asia that we believe will drive future growth.
The year started with weak sales trends from 2019 carrying into the first quarter coupled with the more significant impacts of COVID-19, resulting in sales declines in the high-teens for the first quarter and a second quarter with high single-digit sales declines.
In the second half, the pivot in the business was evident, with growth of 20% in both the third and fourth quarters finishing the year 3% higher than 2019. If you exclude the net negative impact of COVID-19, revenues would have exceeded the prior year by 7%. We believe this performance is evidence to the actions of our turnaround plan are beginning to take hold. And with two months completed in the first quarter of 2021, we are seeing continued strong revenue growth in the low to mid-teens compared to our easiest comps in 2020.
Turning now to profit, gross margins in the quarter improved 500 basis points to 68.2%. 240 basis points were attributable to favorable manufacturing costs reflecting efficiencies due to higher volumes. 220 basis points are reflective of our turnaround plan cost savings and 40 basis points were from lower resin cost.
SG&A as a percentage of sales was 54.1% in the quarter, reflecting an improvement of 520 basis points year-over-year, reflecting the benefits from our rightsizing cost savings. This improvement is even more significant considering an increase in our bonus accrual, due to progressively improved performance and higher distribution expenses primarily in the US and Canada related to small package surcharges, small order sizes and increased demand.
Adjusted segment profit of $106 million or 21.7% of sales improved 1,090 basis points versus prior year of 10.8%. Three of our regions, all achieved operating returns in excess of 25%, while North America representing 31% of our revenues in the quarter ended the quarter at a 10% return on sales, but delivering $15.4 million of profit versus a loss last year. The shift in country mix to lower margin regions can impact the overall company adjusted segment margins. Overall for the quarter, adjusted income before taxes improved over 189% to $68.1 million.
Before I discuss EPS, let me take a few minutes to address the abnormally high tax rate, 72.9% effective rate for the quarter. As we noted during the Q3 call, we expected our fourth quarter tax rate would be unusually high due to the timing of certain non-operating events associated with the sale of non-core assets and early retirement of debt.
In the third quarter, our tax rate was lower due to the benefit from GILTI credits and foreign tax credits used to offset the tax liability related to the gain on the debt extinguishment. The full-year effective tax rate of 47% improved significantly from the 88% in 2019. In 2020, our operating tax rate for the year was also 47%. As part of our turnaround plan, we have started the implementation of a five-year tax strategy that we expect will result in an overall effective tax rate for 2021 in the mid-30% range and even lower in 2022. You can expect some volatility in the ongoing operating tax rate within the quarters based on the timing of various non-core asset sales and country mix.
Now to EPS, for the quarter GAAP diluted EPS of $0.41 compared to a loss of $1.47 in 2019. The improvement is reflective of the benefits from the turnaround plan cost savings, profitable growth in the quarter and a gain on sale of non-core assets, partially offset by higher unallocated and operational expenses and taxes.
Operationally, adjusted EPS was $0.14 versus a $0.69 loss last year. While we achieved our planned turnaround cost savings in the quarter, the quarter included $0.13 of incremental annual incentive plan accruals due to exceeding the original operating plan. Additionally pandemic-related FedEx surcharges of $0.07, $0.03 for additional inventory reserves in Mexico and $0.11 related to the absence of China government grant normally received in the fourth quarter, negatively impacted the EPS.
We do expect that the grant will be received in the first quarter of 2021 albeit at a lower amount. Additionally, as mentioned, the quarter was heavily impacted by an unusually high tax rate. We indicated last quarter that at a sales level of $475 million, we would expect EPS in the range of a $1 to $1.20 and an operating tax rate of 28%. We reassert that this is a normalized adjusted EPS for those assumptions.
The items discussed above affected the quarter by $17 million or $0.34. If the current quarter’s results were adjusted for these items and at an operating tax rate of 28%, the EPS would have been higher by another $0.68 delivering a $1.16 versus the $0.14 adjusted EPS. Based on the timing of our tax strategy work we anticipate, we can achieve the assumed tax rate of 28% in 2022.
Before we discuss the strength of our balance sheet, net income for 2020 was almost $100 million better than the prior year as we delivered $192 million of our $180 million planned turnaround cost savings goal. As a reminder, 75% of these cost savings are expected to annualize in 2021, as some of the savings were pandemic-related and will be required to be reinvested to support 2021 sales growth.
Let me now address improvements in liquidity and our efforts associated with strengthening our capital structure and reducing our debt. Free cash flow was $89 million in the quarter and $198 million year-to-date, representing a $137 million improvement over last year. Improved profitability and working capital were major contributors. We achieved an inventory turnover days improvement of 18 and the DSO improved to 21 from 24 in 2019. Additionally, the year included $59.4 million in proceeds from sale of non-core assets, partially offset by capital expenditures of $27.9 million.
We do expect capital spending to return to normalized levels of $60 million to $70 million in 2021, as we look to accelerate product innovation and we therefore believe you can expect a 2021 free cash flow similar to 2020. In December, we successfully retired the remainder of our $600 million 4.75% senior notes with two $275 million term loans and cash on hand.
At the end of the quarter, our debt balance was $702 million versus $875 million last year, and we ended 2020 with a debt-to-EBITDA ratio of 2.99 versus 3.61 last year and well below our covenant requirement of 4.5. As part of our turnaround plan, we are committed to exiting and divesting non-core assets. Already in 2021, we completed the sale of Avroy Shlain beauty business on February 26 for approximately $34 million and we closed on the sale of a plant in France for $9.4 million with the receipt of proceeds spread through the third quarter of 2021.
We will use the proceeds to eliminate debt, further strengthening our balance sheet. On February 12, we filed an 8-K regarding our ongoing plans to divest of excess non-core land in Orlando. We continue to work with the O’Connor Group, or others on divesting the remaining Orlando real estate valued at approximately $40 million. We believe that the results reported today provide proof that our initial efforts to turnaround the company are working. We’re showing growth to our core business, rightsizing the company and strengthening our balance sheet to support future growth. As a result, we believe we are creating a stronger, more competitive company for the future.
I will now turn the call back to Miguel for another update.
Miguel Fernandez — President and Chief Executive Officer
Thanks, Sandra. Today, we also announced the appointment of three new Board members effective March 15. We are excited to add these new three members whose strength and experiences we believe will improve our ability to successfully execute our three-year growth strategy.
I will now turn the call back over to Q&A.
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from the line of Linda Bolton-Weiser from DA Davidson. You may now ask your question.
Linda Bolton-Weiser — DA Davidson — Analyst
Hi, how are you? Congratulations on a strong quarter. I guess my first question has to do with topline growth, which was very strong in the quarter and it did exceed our expectations. However, it did slow a bit from the third quarter and it looks like, mainly Europe was the area where the growth actually slowed. Can you talk about whether that was pandemic closures or any particular market in Europe? And also Asia was a little was kind of worse in the third quarter as well. So, was that something other than China in Asia? Thank you.
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Hi, Linda. Thanks. Yes, this is Sandra. So for Europe, the difference between Q3 and Q4 was predominantly related to B2B business. In Q3, we had almost $11 million of B2B that did not happen in Q4. And so that’s the largest difference in Europe. If you actually look at the core business, the growth was relatively the same and the profitability also improved in Europe.
And then for APAC and maybe I’ll let Miguel expand upon what we’re doing there. Yes, China had an impact, but we still do have some continued challenges in other parts of Asia, specifically in Indonesia, and in both locations, we’ve made strategic choices on leadership. So I’ll turn it over to Miguel, to talk about what we’re doing in Asia.
Miguel Fernandez — President and Chief Executive Officer
Yes. Hi, Linda. So as Sandra was saying, we are facing challenges in various markets in APAC. We recently announced leadership changes pretty much in the biggest markets in APAC. I think there were four of them or five of them. The other big market in APAC that got impacted by COVID was Philippines because as you know we have mainly a retail type of model. And those are the ones that got hit greatly by COVID.
But other than that, we are consistent with our strategy of and the one that we’ve been talking about and the one, that we have conscious that we know that are working, which need to have the right players, so we can execute properly in those countries.
Linda Bolton-Weiser — DA Davidson — Analyst
Okay, thank you. And then can you just talk about, I mean you’ve talked about kind of going a little bit more to a good-better-best pricing strategy to capture more consumers. Are you implementing that kind of starting out in 2021, and if so, would that be expected to impact gross margin in 2021? You had very good gross margin performance here in the fourth quarter. So kind of, what can we expect along in that line in 2021?
Miguel Fernandez — President and Chief Executive Officer
So we already started with some pilots around the world. And we have seen a lot of positive momentum and positive response. Obviously, in some cases, the gross margin gets a little bit lower, but we’ve been able to offset it even more with the higher volume. So one important factor is that the sales force ends up making a lot more money even with the same amount of efforts, which was key for us.
And with achieving these new price points, we’re actually becoming more relevant because our products are getting to hands of more consumers in every single experiment or pilot that we did around the world. So this is something that got us very exciting and we’re going to continue to do. And obviously we’re learning through the path but very excited with the path that we’ve run so far.
Linda Bolton-Weiser — DA Davidson — Analyst
Okay, thank you. And then, you’ve done really great on the cost reduction in 2020. And your margins have come around very nicely, really across the board. Are there additional actions that you’re looking at, I mean, you’ve talked about being able to maintain margins kind of going forward, but are there additional actions that you’re kind of looking at longer-term. And are you looking at more like ongoing productivity or maybe another cost reduction program or what’s kind of the thought there? Thank you.
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yes. So, Linda. We talked about is that 75% of the cost savings would carry into 2021 and annualize. The other 25% were largely related to the furlough programs and other reductions in travel and incentive trips and things of that nature that will start to come back on as we start to see some relief from COVID. So we did assume that 25% of that would come back into the businesses cost for 2021.
The other thing that I think we’ve reiterated is that we do need to invest in the business. And so our intentions are that we are carrying forward that cost savings and the future investment that we’re making in the business and we do need to make investments in our continued digital strategies. That’s really what contributed to the growth in the quarter. And quite frankly the last half of this year, we have investments that we want to make to continue offering great products that excite consumers and we’ll also be working through other investments that are focused on this new business expansion that we’re working on.
With that said, we are very committed to continuing our efforts. We realized that the SG&A percent is still very high. And so we’re continuing to focus on leveraging throughout the business where we can. We have a global business services initiative, that we’ve been working on, as we started to separate the back-end functions from the front-end functions, and we’re starting to stand those up in three different geographies around the world and we do expect that we’ll be able to scale the organization at a more efficient and effective cost and leverage cost across the board.
We also know that we had challenges this year in supply chain. So we’re committed to the extent we can, the whole world is being impacted by the FedEx surcharges. And so those types of things, we can’t necessarily affect, but what we can do is to become more efficient and effective within our distribution footprint, within our manufacturing footprint, and we’ll continue to look for opportunities to optimize in that way.
The other thing, and I’ll see if Miguel wants to expand on it further, but we’re also looking at segmenting our customer set, right? And offering different promotional cadences between what a preferred buyer is versus a business builder. And that will also have an impact on our margins as we offer different promotions to the different segments of our business.
So Miguel, do you want to expand on that?
Miguel Fernandez — President and Chief Executive Officer
Yes, everything is based out of our segmentation strategy. With the use of data, we are understanding who’s here for the business and who’s here for the product. And with that knowledge, we’ve been able to segment promotions, which obviously the return of those investments is way higher. So you can argue that a good way to lowering SG&A just by increasing the topline and being more — a lot more sophisticated in the promotion strategy that we are carrying around the company. And that’s, again that’s one of the things that I’ve been getting a lot of traction, and we see a lot of promising results in the initial efforts that we’ve done around the markets.
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
And then Linda, one final comment, historically, we’ve noted that our B2B businesses are more profitable. And as we move toward more business expansion in our business, we do anticipate that in general, those would deliver higher margins.
Linda Bolton-Weiser — DA Davidson — Analyst
Great, thank you. And then finally, do you have an outlook for your plastic resin cost in 2021?
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yeah, we are seeing some slight increases in resin cost. We anticipate that we can offset those through other cost savings throughout the supply chain and/or through pricing in specific markets. They’re relatively small single digit increases, but we are seeing some increases on that one.
Linda Bolton-Weiser — DA Davidson — Analyst
Okay, thank you very much.
Operator
Your next question comes from the line of Steve O’Hara with Sidoti & Company. Your line is open.
Steve O’Hara — Sidoti & Company — Analyst
Good morning, thanks for taking the questions. I was hoping just in terms of the free cash flow outlook for next year, is that just — I just want to make sure I understand what you’re including in that, it’s kind of operating cash flow and then any disposals on property and so forth, less capex — that what the calculation is?
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yes, Steve. Free cash flow is our operating cash flow, net of investing. So it include all the cash flows coming from operations. And then, as I noted in the commentary, we do expect to return to a more normal capital expenditure levels. So we spent roughly $28 million this year and we intend to go back to somewhere around $60 million to $70 million in 2021. But yes, we still do believe that through our continued work on working capital and also through the growth of the company and the operating cash flow improvement that we can deliver roughly around where we ended this year that $200 million range.
Steve O’Hara — Sidoti & Company — Analyst
Okay. And then just on the outlook for divestitures, things like that. I mean what are you baking in next year for that, or for this year, I guess for on that line?
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yes, I’ll reaffirm our commitment. I mean we want to focus on our core business. So we made the announcement that we successfully divested in 2021 of Avroy Shlain. We continue to look at all of our non-core assets, even our real estate, which will continue to make efforts on. We have learned that obviously, it’s unpredictable as to when transactions can close, especially in a COVID world.
There’s a whole lot of administrative work that delays timelines around those. And so at this juncture, it’s still part of our strategy and our goal, that we haven’t necessarily predicted the timing around the remaining sale of the land here in Orlando nor future divestitures.
Steve O’Hara — Sidoti & Company — Analyst
Okay, yeah, that’s fair. And then, just wanted to jump back to the unallocated expenses. I think you laid out kind of what was in there but could you just remind me — I just need to ask, it looks like $30.3 million and that’s up obviously up almost 3 times from last year, and I’m just kind of curious what’s in there exactly and I mean is that — what’s the way to think about unallocated going forward?
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yes, so one of the largest components, year-over-year of that is that obviously, based on the performance this year, we are able to pay out our annual incentive program, which is something that hasn’t been done in over two years for Tupperware. So the performance became evident during the second half and we had to modify quickly our reserves, which is why there was a $0.13 impact on EPS in the fourth quarter of this year versus last year for that annual incentive plan.
So that’s probably the biggest increase. We have made investments in — more in the unallocated area, as we separated the back-end from the front end. So you heard the announcement of the commercial leaders like Patricio and Hector. And so we are building centers of excellence around digital and other items that would fall in unallocated. But over time that cost will come back out of the markets as we work on a more standardized approach for that. So those are really the two biggest components I think in unallocated.
And yeah, we hope and anticipate that our annual incentive plan continues. And obviously, on a go forward basis that would be built into our 2021 numbers as we develop that, it was just something that was not expected as we entered into this year and so was a delta.
Steve O’Hara — Sidoti & Company — Analyst
Okay. Okay. Yes, I mean I guess does it make sense to think about that line as of a percent of sales or segment profit there, I mean $32 million in ’19 [Technical Issues]. I mean is something kind of the difference maybe the better way to think about it in terms of — if results improve in 2021, you get more performance-based comp and things like that and growth initiatives, is that maybe not as high as this year because of the step-up or the accrual was behind?
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yeah, I mean, I can tell you that traditionally obviously we recorded the unallocated with the Tupperware method. I would tell you that my focus is more on the SG&A, since the majority of that unallocated sits in our SG&A number. So the fact that this year, we continue to improve our SG&A for the quarter, last year was at 59.3%, we dropped to 54.1%. And then, and for the full year, we’ve also had improvement from 55.6% to 54.5%.
So again, we’ve acknowledged before that being in that 50% range is not where we’d like to be. So we’ll continue to make efforts on that and unallocated is a part of that. And so we’re balancing that now on a global basis versus where in the past year that unallocated was largely what was considered worldwide. But we’re looking at it from a holistic global perspective of continuing to optimize our cost.
Steve O’Hara — Sidoti & Company — Analyst
Okay. And I mean, you said 50% range, isn’t where you want to be. I mean is there — what’s kind of the long-term thinking around where that would get to, everything’s up as you hoped and the — I don’t know, if your peers are — the range peers are in, but I mean is there a way to think about that longer-term what level that SG&A could get to?
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yes. And I think, I may have said in the past, Steve, but I mean over a 3 to 5-year period, we anticipate that we get into the 40%s. That’s where we would like to be. And not hanging on the 50%s, but we are going to reinvest in the business. And so we’re trying to balance that as we reinvest and make those digital investments, the investments we’re making in the segmentation work. And so we would like to be in the 40%’s over our strategic long-term plan period, but we’re going to balance that, so that we can continue to grow this business on the topline.
Steve O’Hara — Sidoti & Company — Analyst
Okay, great. And then maybe just last on the — I think last quarter you guys noted some supply chain issues, but I didn’t hear — I mean it sounds like you guys fulfilled the backlog in North America, and that was a boost. So is something happening kind of intra-quarter that relieved those issues or there’s still supply chain issues going forward maybe the less —
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yes. We’re excited that we were able to make significant progress on our backlog. And again, the backlog, which created by basically three reasons. I mean, one, the increase in demand was outside of what we have been able to forecast and that’s really positive. The other thing is that just within our distribution network the change in the business model and also to meet the backlog and this is what caused the increase in distribution expense is that we are shipping whenever it became available. So since the demand created product shortages, we were shipping more packages as soon as we can get them to ensure that we continue to delight our sales force.
And so that’s something that added to it. And then the other piece of the backlog is just investing in new leadership and new talent in the supply chain that understand what consumers want and how we need to improve everyday in our distribution centers, on the efficiencies of how we pick pack and ship and so that new leadership came on board early in the fourth quarter and you saw the results the $21 million in the backlog got shipped in the fourth quarter. And so, we continue to see those efficiencies and improvements happening as we invested in that new leadership.
Steve O’Hara — Sidoti & Company — Analyst
Okay, all right, great, thanks for the time.
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Thanks, Steve.
Operator
Your next question comes from the line of Wendy Nicholson with Citibank. You may now ask your question.
Wendy Nicholson — Citibank — Analyst
Hi, good morning. First two questions, just housekeeping. Sandra, did you offer sort of a target tax rate for 2021?
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yes, I did. It was — we’re going to be in the mid 30%s is what we’re predicting for 2021.
Wendy Nicholson — Citibank — Analyst
Got it. Perfect. Sorry about that. And then just regarding the dividend, I know you suspended that, which made sense, but obviously you’ve made huge progress on debt pay down. Any plans to reinstate the dividend?
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yes. Our priority right now, Wendy. We have. Obviously, we’re excited about the turnaround plan. As part of the turnaround plan, our goal was to rightsize this business and also start to grow the topline. So our first priority is reinvesting in the business and so we will do that with the sale of the non-core assets, we’re committed to paying down our debt even further. So we’ve made tremendous progress on our overall debt, obviously improving our leverage ratio every day, but we’d like to become a much healthier company from that perspective. And so we’ve committed and also the term loans obviously have a higher interest burden on them.
So as we sell the non-core assets, our focus there is to start to pay down the debt. And then hopefully we will renegotiate that to a healthier level at the right point in time. Once we do those two, then we are absolutely open to looking at concept of share buybacks or dividends. But it would be in that way.
Wendy Nicholson — Citibank — Analyst
Fair enough. Okay, thanks. And then Miguel, for you maybe, sort of bigger picture strategic question. Just thinking about the benefit, the business clearly saw during COVID and some of the things that you’re working on in terms of new products, and all of that good stuff, just as we think kind of high level about a revenue outlook for 2021, I know you don’t want to give too much in the way of guidance at this point, but is there any reason we shouldn’t think of kind of close to $2 billion as a reasonable topline forecast for 2021?
Just taking the puts and takes of some tough comps in some markets all that kind of good stuff but high level. Are we still running in that kind of $480 million, $490 million in sales per quarter in your mind?
Miguel Fernandez — President and Chief Executive Officer
So, Wendy, you’re not going to like my answer, but because you know that we don’t — we’re not giving guidance, but what I can tell you is that the things that we implemented the ones that you know, investing in detail and making sure that there is adoption there. We’re — as Sandra said we’re investing in that. We’re investing in new products, we’re investing in the brand, we’re investing in the data. And all those things are getting traction.
So we are very confident and feel really good about all the things that we are inputting into the system. Obviously for the last part of the year, we have a difficult comps, but overall for a big strategic point of view, we are on course. We are exactly where we want to be probably even a little bit ahead of where we expected to be at the very beginning. So we are very excited about the future and I guess that’s it.
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yes, and Wendy, just to reiterate what I said is that for the first two months, we are seeing the low to mid teens. And the first quarter, but that is our easiest comp of the year. And so as we go throughout the year, we would expect that those comps get much more difficult, but that’s what we’re tracking at the structure.
Wendy Nicholson — Citibank — Analyst
And can you — And again, I don’t mean to push, but just in terms of maybe in the US, where there are some parts of the country that are really kind of back to normal for the most part, people have gone back to work, people are back in school, etc, etc. Can you talk about or do you have any visibility into those areas or those regions, are your sales still running up that strongly? I’m just, I think bottom line what we’re all worried about or thinking about is, as people go back to their normal day job is — are they going to leave their part-time job selling Tupperware. So that’s kind of what we’re all thinking about?
Miguel Fernandez — President and Chief Executive Officer
So let me just — let me tell you something, hopefully it helps. One of the key reasons why we experienced this great growth during last year was obviously the difference in consumer behavior, but also the adoption of detailed tools from our sales force. And as you’ve saying before, this is like the horse and the car. Once people start trying the car they saw that it was safer and went faster, they never went back to the horse. So it’s the same with a lot of segments of our sales force, they’re using new tools, they’re falling love with the new tools and they realize that they are more productive and efficient.
So there is no reason why they would go back to the old way of doing business. And that’s why we keep on investing and saying about the digital world because that’s, that actually improved the whole Tupperware proposition into any market not only the US because with lesser for you can actually earn more from the sales point of view.
Wendy Nicholson — Citibank — Analyst
Fair enough. That’s hugely helpful. Thank you so much.
Operator
And we have a follow-up question from Steve O’Hara with Sidoti & Company. Your line is open.
Steve O’Hara — Sidoti & Company — Analyst
Yes, thanks for taking the follow-up. I’d come back to free cash flow forecast for 2021. I’m just curious, I’m not sure. Does your guidance include some level of disposals or does that guidance for free cash flow only include the capex?
Cassandra E. Harris — Chief Financial Officer and Chief Operating Officer
Yes. So I’ll just say it again. On the divestiture side of any of our businesses at this point we have not predicted the timeline associated with that, we’re still focused on it. We’re not necessarily including any type of proceeds from continued divestitures. Other than the ones that we talked about, I mean obviously Avroy Shlain fell into 2021. So we provided that number around $34 million of proceeds.
And then we did have the sale of the French manufacturing site in February and it was roughly around $9 million, but that cash proceeds will come over the course of three quarters, which is what we agreed to with the potential buyer. So we closed the deal at just the $9 million over three quarters.
Steve O’Hara — Sidoti & Company — Analyst
Okay, great, thank you very much.
Operator
All right. That concludes the Q&A session of today’s call. I’ll hand the call back over to Miguel Fernandez for final remarks.
Miguel Fernandez — President and Chief Executive Officer
Thank you. I’m pleased that we finished 2020 stronger than initially expected. I feel confident that we are now entering to the foundational page of our turnaround plan, where we can begin executing our vision for the company. We expect to build a consumer-centric company, one that is stronger, more resilient with the right processes, technologies and mindsets in place to expand our iconic brand into the future. Thank you very much for your time today.
Operator
[Operator Closing Remarks]