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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the 39 weeks ended September 25, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-11657
TUPPERWARE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-4062333
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 2353, ORLANDO, FLORIDA 32802
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 826-5050
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of November 3, 1999, 57,657,512 shares of the Common Stock, $0.01 par value,
of the Registrant were outstanding.
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TABLE OF CONTENTS
PAGE
NUMBER
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income (Unaudited)
for the 13 week periods ended September 25, 1999
and September 26, 1998 ............................................. 2
Consolidated Statements of Income (Unaudited)
for the 39 week periods ended September 25, 1999
and September 26, 1998 .............................................. 3
Consolidated Balance Sheets (Unaudited) as of
September 25, 1999 and December 26, 1998............................. 4
Consolidated Statements of Cash Flows (Unaudited) for the 39 week
periods ended September 25, 1999
and September 26, 1998 .............................................. 6
Notes to Consolidated Financial Statements (Unaudited) ................ 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................ 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ...................................... 19
SIGNATURES ..................................................................... 20
The financial statements of the Registrant included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the Commission). Although certain information normally
included in financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted, the Registrant believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these consolidated financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Annual Report on Form 10-K of the Registrant for its fiscal
year ended December 26, 1998.
The consolidated financial statements included herein reflect all adjustments,
consisting only of normal recurring items, which, in the opinion of management,
are necessary to present a fair statement of the results for the interim
periods presented.
The results for interim periods are not necessarily indicative of trends or
results to be expected for a full year.
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TUPPERWARE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
13 WEEKS ENDED
---------------------------------------
SEPTEMBER 25, SEPTEMBER 26,
1999 1998
-------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Net sales ............................................. $ 211.9 $ 217.4
---------- ----------
Costs and expenses:
Cost of products sold .............................. 79.1 90.6
Delivery, sales and
administrative expense ............................ 121.7 127.0
Interest expense ................................... 6.0 7.6
Interest income .................................... (0.5) (0.3)
Other expense, net ................................. 1.0 1.1
---------- ----------
Total costs and expenses ........................ 207.3 226.0
---------- ----------
Income (loss) before income taxes ..................... 4.6 (8.6)
Provision for (benefit from) income taxes ............. 1.1 (2.1)
---------- ----------
Net income (loss) ..................................... $ 3.5 $ (6.5)
========== ==========
Net income (loss) per common share:
Basic .............................................. $ 0.06 $ (0.11)
========== ==========
Diluted ............................................ $ 0.06 $ (0.11)
========== ==========
See accompanying Notes to Consolidated Financial Statements (Unaudited).
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TUPPERWARE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
39 WEEKS ENDED
---------------------------------------
SEPTEMBER 25, SEPTEMBER 26,
1999 1998
-------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Net sales ............................................. $ 734.1 $ 769.1
---------- ----------
Costs and expenses:
Cost of products sold .............................. 256.3 295.3
Delivery, sales, and
administrative expense ............................ 398.3 412.1
Interest expense ................................... 17.1 18.2
Interest income .................................... (1.7) (1.7)
Re-engineering charge .............................. 15.1 --
Other expense, net ................................. 2.4 3.0
---------- ----------
Total costs and expenses ......................... 687.5 726.9
---------- ----------
Income before income taxes ............................ 46.6 42.2
Provision for income taxes ............................ 11.0 10.3
---------- ----------
Net income ............................................ $ 35.6 $ 31.9
========== ==========
Net income per common share:
Basic ............................................. $ 0.62 $ 0.54
========== ==========
Diluted ........................................... $ 0.62 $ 0.54
========== ==========
See accompanying Notes to Consolidated Financial Statements (Unaudited).
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TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
SEPTEMBER 25, DECEMBER 26,
1999 1998
-------------- ------------
(IN MILLIONS)
Cash and cash equivalents ............................. $ 29.8 $ 23.0
Accounts receivable ................................... 127.7 125.0
Less allowances for doubtful accounts .............. (26.7) (32.7)
---------- ----------
101.0 92.3
Inventories ........................................... 153.4 157.1
Deferred income tax benefits .......................... 57.4 55.5
Prepaid expenses and other assets ..................... 49.9 57.7
---------- ----------
Total current assets ............................... 391.5 385.6
---------- ----------
Deferred income tax benefits .......................... 93.5 84.7
Property, plant, and equipment ........................ 946.5 972.9
Less accumulated depreciation ...................... (702.4) (701.9)
---------- ----------
244.1 271.0
Long-term receivables, net of allowances of
$34.4 million at September 25, 1999 and
$41.4 million at December 26, 1998 .................. 40.1 40.3
Other assets .......................................... 49.1 41.8
---------- ----------
Total assets ....................................... $ 818.3 $ 823.4
========== ==========
See accompanying Notes to Consolidated Financial Statements (Unaudited).
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TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
SEPTEMBER 25, DECEMBER 26,
1999 1998
------------- ------------
(Dollars in millions except per share amounts)
Accounts payable ...................................... $ 52.5 $ 85.3
Short-term borrowings and current portion of
long-term debt ..................................... 92.1 18.7
Accrued liabilities ................................... 164.3 186.1
---------- ----------
Total current liabilities .......................... 308.9 290.1
Long-term debt ........................................ 296.4 300.1
Accrued post retirement benefit cost .................. 38.3 38.4
Other liabilities ..................................... 59.2 59.0
Shareholders' equity:
Preferred stock, $0.01 par value, 200,000,000
shares authorized; none issued .................... -- --
Common stock, $0.01 par value, 600,000,000
shares authorized; 62,367,289 shares issued ....... 0.6 0.6
Capital surplus ...................................... 20.1 19.5
Subscription receivable .............................. (7.7) (7.7)
Retained earnings .................................... 454.0 457.2
Treasury stock, 4,728,905 shares at
September 25, 1999, and 4,753,287 shares
at December 26, 1998, at cost ...................... (141.2) (142.0)
Unearned portion of restricted stock issued
for future service ................................ (0.5) (1.4)
Accumulated other comprehensive income ............... (209.8) (190.4)
---------- ----------
Total shareholders' equity ......................... 115.5 135.8
---------- ----------
Total liabilities and shareholders' equity ......... $ 818.3 $ 823.4
========== ==========
See accompanying Notes to Consolidated Financial Statements (Unaudited).
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TUPPERWARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
39 WEEKS ENDED
----------------------------------
SEPTEMBER 25, SEPTEMBER 26,
1999 1998
------------- -------------
(IN MILLIONS)
Cash flows from operating activities:
Net income ...................................................... $ 35.6 $ 31.9
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation ................................................. 42.9 47.4
Loss on sale of assets ....................................... 2.0 1.5
Foreign exchange loss (gain), net ............................ 0.1 (0.5)
Non-cash impact of re-engineering charge ..................... 3.1 --
Changes in assets and liabilities:
Increase in accounts receivable .............................. (20.5) (8.0)
(Increase) decrease in inventories ........................... (5.9) 13.1
Decrease in accounts payable and accrued liabilities ......... (31.0) (13.8)
Decrease in income taxes payable ............................. (10.2) (39.3)
Increase in net deferred income taxes ........................ (14.5) (2.4)
Other, net ................................................... (3.3) (8.4)
---------- ----------
Net cash (used in) provided by operating activities ............. (1.7) 21.5
---------- ----------
Cash flows used in investing activities:
Capital expenditures ......................................... (29.1) (28.0)
---------- ----------
Cash flows from financing activities:
Dividend payments to shareholders ............................ (38.1) (39.0)
Proceeds from exercise of stock options ...................... 0.3 1.4
Payments to acquire treasury stock ........................... -- (91.6)
Net increase in short-term debt .............................. 74.3 133.1
---------- ----------
Net cash provided by financing activities ....................... 36.5 3.9
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents ................................................... 1.1 (1.1)
---------- ----------
Net increase (decrease) in cash and cash equivalents ............ 6.8 (3.7)
Cash and cash equivalents at beginning of year .................. 23.0 22.1
---------- ----------
Cash and cash equivalents at end of period ...................... $ 29.8 $ 18.4
========== ==========
See accompanying Notes to Consolidated Financial Statements (Unaudited).
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TUPPERWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and therefore do not include
all footnotes necessary for a fair presentation of financial position, results
of operations, and cash flows in conformity with generally accepted accounting
principles. In the opinion of management, the unaudited consolidated financial
statements include all adjustments, consisting only of normal recurring items,
necessary for a fair presentation of financial position and results of
operations. The results of operations of any interim period are not necessarily
indicative of the results that may be expected for a full fiscal year.
NOTE 2: INVENTORIES
Inventories, by component, are summarized as follows (in millions):
SEPTEMBER 25, DECEMBER 26,
1999 1998
------------- ------------
Finished goods .................................................. $ 72.4 $ 74.5
Work in process ................................................. 34.2 31.7
Raw materials and supplies ...................................... 46.8 50.9
---------- ----------
Total inventories ............................................ $ 153.4 $ 157.1
========== ==========
NOTE 3: NET INCOME PER COMMON SHARE
Basic per share information is calculated by dividing net income by the
weighted average number of shares outstanding. Diluted per share information is
calculated by also considering the impact of potential common stock on both net
income and the weighted average number of shares outstanding. The weighted
average number of shares used in the basic earnings per share computations was
57.5 million for both the 13 and 39 weeks ended September 25, 1999, compared
with 57.6 million and 58.5 million for the 1998 periods.
The only difference in the computation of basic and diluted earnings per share
is the inclusion of 0.4 million and 0.3 million, respectively, for the quarter
and year-to-date period in 1999 and 0.5 million for the quarter and
year-to-date period in 1998 of shares of potential common stock. Options to
purchase 2.4 million and 2.0 million shares of common stock in the third
quarter of 1999 and 1998, respectively, and 3.1 million and 2.0 million shares
of common stock in the nine-month period of 1999 and 1998, respectively, were
outstanding but not
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NOTE 3: NET INCOME PER COMMON SHARE (CONTINUED)
included in the computation of diluted earnings per share because the options'
exercise prices were greater than the average market price of the common shares
during the respective period and, therefore, would have been anti-dilutive if
included. The Company's potential common stock consists of employee and
director stock options and restricted stock.
NOTE 4: OTHER COMPREHENSIVE INCOME
In addition to net income, comprehensive income includes certain amounts
recorded directly in equity. The components of comprehensive income, net of
related income tax effects, for the 13 week and 39 week periods ended September
25, 1999 and September 26, 1998, were as follows (in millions):
13 WEEKS ENDED 39 WEEKS ENDED
------------------------- --------------------------
SEPT. 25, SEPT. 26, SEPT. 25, SEPT. 26,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net income (loss) $ 3.5 $ (6.5) $ 35.6 $ 31.9
Foreign Currency translation adjustments
including tax benefit (provision) of $1.1 and
$(4.0) for the 13 weeks and 39
weeks ended September 25, 1999, respectively,
and $2.0 and $1.3 for the comparable 1998
periods (4.9) 1.8 (19.4) (2.6)
---------- ---------- ---------- ----------
Comprehensive (loss) income $ (1.4) $ (4.7) $ 16.2 $ 29.3
========== ========== ========== ==========
Accumulated other comprehensive income is comprised solely of foreign currency
translation adjustments.
NOTE 5: RE-ENGINEERING PROGRAM
In July 1999, the Company announced a re-engineering program designed to
improve operating profit return on sales over three years through improved
organizational alignment, a higher gross margin percentage, and reduced
operating expenses. In conjunction with implementing the first phase of this
program, the Company recorded a $15.1 million pre-tax charge ($11.6 million
after tax, or $0.20 per basic and diluted common share) in the second quarter
of 1999.
The re-engineering charge falls in the following categories of expenditures and
relates to activities in the Company's geographic segments as indicated below
(in millions):
Severance $ 9.0 Europe $ 7.1
Asset write down 3.1 Asia Pacific 4.0
Other 3.0 Latin America 4.0
------ ------
Total $ 15.1 Total $ 15.1
====== ======
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NOTE 5: RE-ENGINEERING PROGRAM (CONTINUED)
The severance costs relate primarily to the approximately 200 employees whose
positions are being eliminated as a result of the decision to close the Spanish
and Argentine manufacturing plants and to restructure the Japanese
manufacturing operation and the area headquarters in Europe and Asia Pacific.
The asset write downs relate primarily to the plant closures. The expenses
included in the other category are primarily for non-asset write down costs of
exiting facilities and professional fees associated with accomplishing the
re-engineering actions.
The liability balance as of September 25, 1999, was as follows (in millions):
Balance at March 27, 1999 $ --
Provision 15.1
Cash expenditures (9.0)
Non-cash write downs (3.1)
-------
Balance at September 25, 1999 $ 3.0
=======
NOTE 6: SEGMENT INFORMATION
The Company operates worldwide predominantly in one line of business: the
manufacture and distribution, through independent direct sales forces, of
plastic food storage and serving containers, microwave cookware, oven cookware
and educational toys. Its operations are organized into the four geographic
segments included in the following table (in millions):
13 WEEKS ENDED 39 WEEKS ENDED
------------------------------ ------------------------------
SEPT. 25, SEPT. 26, SEPT. 25, SEPT. 26,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net sales:
Europe $ 83.1 $ 90.6 $ 346.8 $ 358.7
Asia Pacific 59.0 48.2 166.8 145.3
Latin America 37.9 43.6 112.5 148.0
United States 31.9 35.0 108.0 117.1
========== ========== ========== ==========
Total net sales $ 211.9 $ 217.4 $ 734.1 $ 769.1
========== ========== ========== ==========
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NOTE 6: SEGMENT INFORMATION (CONTINUED)
13 WEEKS ENDED 39 WEEKS ENDED
------------------------------- -------------------------------
SEPT. 25, SEPT. 26, SEPT. 25, SEPT. 26,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Operating profit (loss):
Europe $ 7.9 $ 8.9 $ 77.3 $ 75.9
Asia Pacific 6.5 2.9 14.7 7.6
Latin America 1.6 (6.7) 6.9 (6.2)
United States (2.4) (1.5) (5.7) (3.2)
---------- ---------- ---------- ----------
Total operating profit 13.6 3.6 93.2 74.1
Unallocated expenses (3.5) (4.9) (16.1) (15.4)
Re-engineering charge -- -- (15.1) --
Interest expense, net (5.5) (7.3) (15.4) (16.5)
========== ========== ========== ==========
Income (loss) before
income taxes $ 4.6 $ (8.6) $ 46.6 $ 42.2
========== ========== ========== ==========
The re-engineering charge recorded in the second quarter of 1999 was made in
conjunction with the Company's re-engineering program announced on July 19,
1999. The charge is for the cost of closing manufacturing plants in Argentina
and Spain, restructuring of the Japanese manufacturing operation and
restructuring actions in the area headquarters for Europe and Asia Pacific (See
Note 5: Re-engineering Program).
NOTE 7: ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge. The accounting for changes in the fair
value of a derivative depends on the intended use of the derivative and the
resulting designation of the hedge exposure. Depending on how the hedge is used
and the designation, the gain or loss due to changes in the fair value is
reported either in earnings or in other comprehensive income. Adoption of the
statement, which is required for the Company's year 2001 financial statements,
will have no impact on the accounting treatment for derivatives the Company
currently has in place nor the hedging programs it has undertaken.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the results of operations for the 13 weeks and
39 weeks ended September 25, 1999, compared with the 13 weeks and 39 weeks
ended September 26, 1998, and changes in financial condition during the 39
weeks ended September 25, 1999.
NET SALES AND NET INCOME
Net sales for the third quarter ended September 25, 1999 were $211.9 million, a
decrease of $5.5 million, or 2.6 percent, from $217.4 million in 1998. Net
income for the third quarter of 1999 increased $10.0 million to $3.5 million,
or $0.06 per share, from a loss of $6.5 million in 1998, or $0.11 per share. A
stronger U.S. dollar in 1999 had a slight negative impact of $0.6 million on
the sales comparison, but no significant impact on the net income comparison
for the quarter.
For the year-to-date period, sales were $734.1 million, which was a decline of
$35.0 million, or 4.6 percent, from $769.1 million in 1998. Net income of $35.6
million for the 1999 period increased $3.7 million, or 12.0 percent, from 1998
net income of $31.9 million. Excluding the 1999 re-engineering charge, net
income compared with 1998 rose $15.3 million, or 48.3 percent, (38.0 percent
excluding a favorable foreign exchange impact). For the nine months, the
negative impact of foreign exchange was $5.3 million, or 1 percentage point, on
the sales comparison and the positive impact on the net income comparison was
$2.3 million, or 10 percentage points.
The 1999 results include a $15.1 million pre-tax charge ($11.6 million after
tax, or $0.20 per share) related to the Company's three-year re-engineering
program announced on July 19, 1999. The charge provides for severance and other
exit costs associated with the decision to close manufacturing plants in Spain
and Argentina, and to restructure manufacturing operations in Japan and the
headquarters for Europe and Asia Pacific. The re-engineering project is
designed to increase operating profit return on sales by improving
organizational alignment, increasing the gross margin percentage, and reducing
operating expenses. Third quarter 1999 results include approximately $4.0
million of pre-tax benefits associated with re-engineering actions taken. Of
the total 1999 charge, approximately $12.0 million is cash related and is
expected to be paid in 1999. Total one-time costs to be incurred in
implementing the program are projected to be between $50 million and $75
million, mainly for severance, information technology expenditures, and plant
closure costs.
For the quarter and nine-month period in 1999, excluding the impact of foreign
exchange, the sales improvements in Asia Pacific were more than offset by
shortfalls in the other three areas. For both the quarter and nine-month period
in 1999, operating profit improved, excluding the impact of foreign exchange,
in all areas other than the United States. Unallocated expenses in the third
quarter of 1999 decreased $1.4 million, but were $0.7 million higher for the
nine-month comparative periods. The quarterly fluctuations were due primarily
to the timing of expenses.
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NET SALES AND NET INCOME (CONTINUED)
For the third quarter, international operations in 1999 and 1998 generated 85
percent and 84 percent, respectively, of sales and all of the operating profit
in both 1999 and 1998. For the nine months, international operations generated
85 percent of sales and all of the operating profit in both 1999 and 1998.
COSTS AND EXPENSES
The cost of products sold as a percentage of sales was 37.3 percent and 34.9
percent for the third quarter and nine months of 1999, respectively, compared
with 41.7 percent and 38.4 percent for the respective 1998 periods. The
improvement reflects re-engineering actions taken, the sale of a better mix of
products, and the need for a lower level of charges for obsolete inventory.
Delivery, sales, and administrative expense as a percentage of sales was 57.4
percent and 54.3 percent of sales in the third quarter and nine-month period of
1999, respectively, compared with 58.4 percent and 53.6 percent in the
respective 1998 periods. The decrease in the third quarter comparison was
primarily driven by a decrease in spending by Latin America. This decrease was
partially offset by an increase in spending for promotions in Europe and the
United States for programs to improve sales force activity and recruiting. For
the nine-month period, expenses fell, but not in proportion to the sales
decrease, reflecting the fact that certain expenses are fixed for a period of
time. This was also a factor in the third quarter comparison.
NET INTEREST EXPENSE
In the third quarter and first nine months of 1999, the Company incurred net
interest expense of $5.5 million and $15.4 million, respectively. For the
comparable 1998 periods, the Company incurred net interest expense of $7.3
million and $16.5 million, respectively. For both the three- and nine-month
period comparisons, the lower net interest expense reflects the placement of a
higher proportion of debt offshore in low cost countries.
TAX RATE
The effective tax rates for the third quarter and first three quarters of 1999
were 23.5 percent compared with 24.5 percent in the comparable 1998 periods and
for all of 1998. The effective tax rates are below the U.S. statutory rate,
reflecting the availability of excess foreign tax credits along with low
foreign effective tax rates.
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REGIONAL RESULTS (DOLLARS IN MILLIONS)
EUROPE
Positive
(negative)
Increase Restated foreign Percent
(decrease) increase exchange of total
1999 1998 Dollar Percent (decrease) impact 1999 1998
---- ---- ------ ------- ---------- ------ ---- ----
Quarter:
Net sales $ 83.1 $ 90.6 $ (7.5) (8)% (2)% $ (5.8) 39% 42%
Operating
profit 7.9 8.9 (1.0) (11) 1 (1.1) 58 +
Nine Months:
Net sales $ 346.8 $ 358.7 $ (11.9) (3)% (2)% $ (5.9) 47% 47%
Operating
profit 77.3 75.9 1.4 2 1 0.4 83 +
+ Increase of more than 100 percent.
The slight decrease in Europe's third quarter sales comparison, excluding the
negative impact of weaker currencies throughout the region, was primarily
driven by decreases in Germany due to the continued impact of the new social
security law and in Scandinavia due to a smaller active sales force. Earlier
this year legislation was enacted in Germany which imposes a tax on certain
part-time workers. The Company has held meetings with the German sales force to
explain the impact of the new legislation, as well as to offer financial
assistance in addressing this issue for a period of time to members of the
sales force who remain with the Company for a specified period. This issue
could have a negative impact on German results in future periods. Partially
offsetting these declines are volume-related increases in France and South
Africa.
For the nine-month comparative periods, before the negative foreign exchange
impact, a volume-related sales increase in France was more than offset by a
decrease in Germany due to the new legislation as explained above, resulting in
a slight decrease in sales.
For both the three- and nine-month periods, the slightly better trends in
operating earnings compared with the sales trends reflect an improved gross
margin and lower operating expenses, which were partially offset by higher
spending on promotions. The improvement in the gross margin reflects
re-engineering actions taken. The primary cause of the negative impact of
foreign exchange on the third quarter and nine-month comparisons was a weaker
euro.
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REGIONAL RESULTS (DOLLARS IN MILLIONS) (continued)
ASIA PACIFIC
Positive
foreign Percent
Increase Restated exchange of total
1999 1998 Dollar Percent Increase impact 1999 1998
---- ---- ------ ------- -------- ------ ---- ----
Quarter:
Net sales $ 59.0 $ 48.2 $ 10.8 22% 5% $ 8.0 28% 22%
Operating
profit 6.5 2.9 3.6 + 81 0.7 48 81
Nine Months:
Net sales $ 166.8 $ 145.3 $ 21.5 15% 4% $ 15.7 23% 19%
Operating
profit 14.7 7.6 7.1 93 53 2.0 16 10
+ Increase of more than 100 percent.
Asia Pacific's three- and nine-month sales increase, excluding the favorable
impact of foreign exchange, was due to higher volume in Korea, Indonesia, and
Australia, partially offset by a decrease in Japan. In Korea and Indonesia, the
active sales force was up significantly reflecting the strong recruiting in
those markets over the last year in which the sales force earnings opportunity
has been particularly attractive. The improvement in Australia was from a more
productive sales force. In Japan, strong recruiting results throughout the year
have not translated into active sellers which caused the shortfall for the
quarter and nine-month period.
The significant improvement in operating profit for the quarter and nine-month
comparisons, excluding the favorable currency impact, was a result of margin
improvements in the majority of the countries in addition to smaller losses in
China and India. The margin improvement reflects re-engineering actions taken.
Currencies throughout the region strengthened in comparison with the U.S.
dollar in both the third quarter and nine-month period.
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REGIONAL RESULTS (DOLLARS IN MILLIONS) (continued)
LATIN AMERICA
Positive
(negative)
Increase Restated foreign Percent
(decrease) increase exchange of total
1999 1998 Dollar Percent (decrease) impact 1999 1998
---- ---- ------ ------- ---------- ------ ---- ----
Quarter:
Net sales $ 37.9 $ 43.6 $ (5.7) (13)% (7)% $ (2.8) 18% 20%
Operating
Profit (loss) 1.6 (6.7) 8.3 + + 0.6 12 nm
Nine Months:
Net sales $112.5 $148.0 $(35.5) (24)% (15)% $(15.1) 15% 19%
Operating
Profit (loss) 6.9 (6.2) 13.1 + + 0.7 7 nm
+ Increase of more than 100 percent.
nm Not meaningful
Latin America's sales decrease for the third quarter 1999, excluding the
negative impact of foreign exchange, was mainly due to decreases in Venezuela
and Argentina offset by an increase in Mexico. The decrease in Venezuela was
due to a smaller sales force resulting mainly from the decision to
significantly reduce the number of distributors in that market. The improvement
in Mexico was primarily due to price increases. Sales for the nine-month
comparative periods also decreased due to the performance of Venezuela and
Argentina, in addition to decreases in Brazil, offset by the improvement in
Mexico. The decreases in Brazil and Argentina were due to prior year reductions
in the number of distributors. The actions taken to reduce the number of
distributors in Brazil, Argentina, and Venezuela are designed to enhance the
opportunity for profitability of those remaining.
The significant improvement in profitability of both periods reflects 1998
efforts to align the cost structure of the region's businesses with expected
sales. The impact of foreign exchange on the comparisons reflects weakness in
the Brazilian real as well as the Mexican peso for the nine-month comparison.
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REGIONAL RESULTS (DOLLARS IN MILLIONS) (continued)
UNITED STATES
Percent
Decrease of total
1999 1998 Dollar Percent 1999 1998
---- ---- ------ ------- ---- ----
Quarter:
Net sales $ 31.9 $ 35.0 $ (3.1) (9)% 15% 16%
Operating
loss (2.4) (1.5) (0.9) (56) nm nm
Nine Months:
Net sales $ 108.0 $ 117.1 $ (9.1) (8)% 15% 15%
Operating
loss (5.7) (3.2) (2.5) (79) nm nm
nm Not meaningful
In the United States, the sales decreases in both periods were from a smaller
sales force reflecting the difficulty of recruiting and motivating consultants
in a full employment environment. This factor was somewhat mitigated by
continuing improved sales force productivity.
Both the three- and nine-month profitability comparisons fell more sharply than
sales, as spending on promotions increased in an attempt to stimulate
recruiting, activity of the sales force and sales. This was partially offset by
improved gross margin percentages reflecting a more favorable mix of sales and
a modest price increase.
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FINANCIAL CONDITION
Working capital was $82.6 million as of September 25, 1999, compared with $95.5
million as of the end of 1998. The major changes were an increase in short-term
borrowings, which was partially offset by lower accounts payable and accrued
liabilities and by higher net accounts receivable. The lower accounts payable
and accrued liabilities balances reflect a seasonal reduction and working
capital management. The higher net receivables balance was the result of higher
sales in Asia Pacific and sales late in the quarter in Europe. With regard to
the level of short-term borrowings, the Company classifies a portion of its
outstanding borrowings that are due within one year by their terms as
non-current due to its ability and intent that they be outstanding throughout
the succeeding twelve months. Based on the timing of the Company's cash inflows
during the year, as well as the overall level of short-term borrowings at the
end of each period, a lower amount was classified as current at the end of 1998
than at the end of the third quarter of 1999.
Net cash used in operating activities for the third quarter of 1999 was $1.7
million, compared with $21.5 million provided by operating activities in the
1998 period. The difference between years was primarily due to an increase in
inventory in 1999 compared with a decrease in 1998, along with a greater
increase in accounts receivable in 1999. The $29.1 million of cash used in
investing activities was for capital expenditures, primarily for new molds.
As of September 25, 1999, the Company had $300 million available under its
unsecured multicurrency credit facility, which matures in 2002. The
multicurrency credit facility along with $190 million of other foreign
uncommitted lines of credit, and cash generated by operating activities, are
expected to be adequate to finance any additional working capital needs and
capital expenditures.
YEAR 2000 ISSUES
The Company has studied the "Year 2000" issues affecting its information
technology and non-information technology systems and has prepared and
completed its plan to address them. The issues are not expected to have a
material adverse effect on the Company's operations. Although it believes that
its remediation plan has addressed all of its Year 2000 issues, the Company has
developed a contingency plan for business critical systems in the event that it
has not remediated all issues. The Company estimates that the cost of
addressing its Year 2000 issues was $5.3 million. These costs did not have a
material effect on the Company's financial position or results of operations in
any one period in part because they represented the re-deployment of existing
information technology resources, and because they would have been incurred as
part of normal software upgrades and replacements.
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YEAR 2000 ISSUES (CONTINUED)
The Company formally communicated with significant suppliers and other third
party companies doing business with the Company to determine the extent to
which the Company's systems and operations are vulnerable to those third
parties' failure to remediate their Year 2000 issues. Based on the information
received from these third parties, the Company is not aware of any Year 2000
issues of third parties expected to have a material adverse effect on its
operations; however, there can be no guarantee that the systems of these other
companies will be converted before the turn of the century or that their
failure to do so would not have a material adverse effect on the Company. Due
to the Company's extensive foreign operations, it is exposed to Year 2000
issues related to the infrastructures of the countries where these operations
are located; however, the Company is not aware of any specific issues that have
not been addressed through implementation of its plan.
FORWARD-LOOKING STATEMENTS
Statements contained in this report that are not based on historical facts are
forward-looking statements involving risks and uncertainties, including sales
force recruiting and activity levels, success of new products and promotional
programs, economic and market conditions generally and foreign exchange risk in
particular, and other risks detailed in the Company's report on Form 8-K dated
February 28, 1997, as filed with the Securities and Exchange Commission. These
risks and uncertainties may cause actual results to differ materially from
those projected in forward-looking statements.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
(10.1) Tupperware Corporation 1996 Incentive Plan as amended
August 18, 1999.
(10.2) Form of Change of Control Agreement.
(27) Financial Data Schedule for the third quarter of 1999.
(b) Reports on Form 8-K
During the quarter, the Registrant did not file any current reports
on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TUPPERWARE CORPORATION
By: /s/ Paul B. Van Sickle
-------------------------------------------
Executive Vice President,
and Chief Financial Officer
By: /s/ Michael S. Poteshman
-------------------------------------------
Vice President and Controller
Orlando, Florida
November 5, 1999
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