Selected Financial Data
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS AT ACTUAL EXCHANGE RATES
Net sales(a):
Europe $ 400.4 $ 424.1 $ 489.1 $ 518.7 $ 546.6
Asia Pacific 213.4 242.0 242.3 211.5 279.0
Latin America 201.3 193.0 154.2 186.8 247.2
United States 234.6 201.8 178.2 186.9 176.7
BeautiControl(b) 64.7 12.2 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $ 1,114.4 $ 1,073.1 $ 1,063.8 $ 1,103.9 $ 1,249.5
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss):
Europe $ 74.8 $ 94.1 $ 110.7 $ 123.9 $ 144.6
Asia Pacific 28.5 44.8 35.0 20.2 37.2
Latin America 17.2(c) 8.0(c) 12.0 (16.4) (5.7)(d)
United States 31.1 15.6 4.7 4.0 (29.5)(d)
BeautiControl(b) 0.5 0.1 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating profit 152.1(c) 162.6(c) 162.4 131.7 146.6(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Unallocated expenses (23.4)(c) (27.9)(c) (23.1)(c) (17.5) (18.0)(d)
Re-engineering and impairment charges (24.8)(c) (12.5)(c) (15.1)(c) -- --
Interest expense, net (21.7) (21.1) (20.9) (22.7) (17.8)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 82.2(c) 101.1(c) 103.3(c) 91.5 110.8(d)
Provision for income taxes 20.7 26.2 24.3 22.4 28.8
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 61.5(c) $ 74.9(c) $ 79.0(c) $ 69.1 $ 82.0(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings per common share:
Basic $ 1.06(c) $ 1.30(c) $ 1.37(c) $ 1.19 $ 1.34(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted $ 1.04(c) $ 1.29(c) $ 1.37(c) $ 1.18 $ 1.32(d)
- ------------------------------------------------------------------------------------------------------------------------------------
See footnote explanations on page 19.
18 > SELECTED FINANCIAL DATA
Selected Financial Data (continued)
(DOLLARS IN MILLIONS) 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS AT 2001 EXCHANGE RATES
Net sales(a,e):
Europe $ 400.4 $ 410.1 $ 407.0 $ 412.5 $ 425.1
Asia Pacific 213.4 215.2 213.2 205.2 225.6
Latin America 201.3 185.2 151.2 168.0 243.8
United States 234.6 201.8 178.2 186.9 176.7
BeautiControl(b) 64.7 12.2 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $ 1,114.4 $ 1,024.5 $ 949.6 $ 972.6 $ 1,071.2
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss)(e):
Europe $ 74.8 $ 89.2 $ 89.2 $ 94.6 $ 108.8
Asia Pacific 28.5 39.5 27.9 17.6 25.6
Latin America 17.2(c) 10.3(c) 12.7 (10.8) (4.8)(d)
United States 31.1 15.6 4.7 4.0 (29.5)(d)
BeautiControl(b) 0.5 0.1 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating profit $ 152.1(c) $ 154.7(c) $ 134.5 $ 105.4 $ 100.1(d)
- ------------------------------------------------------------------------------------------------------------------------------------
a. In October 2000, the Emerging Issues Task Force issued EITF 00-10,
"ACCOUNTING FOR SHIPPING AND HANDLING REVENUES AND COST", which
requires fees billed to customers associated with shipping and handling
to be classified as revenue. Accordingly, Tupperware Corporation
(Tupperware, the Company) has reclassified the revenue related to
shipping and handling fees billed to customers from delivery expense to
net sales for all historical periods presented.
b. In October 2000, the Company purchased all of the outstanding shares of
BeautiControl, Inc. (BeautiControl), and its results of operations have
been included since the date of acquisition.
c. In 1999, the Company announced a re-engineering program. The
re-engineering and impairment charges line provides for severance and
other exit costs. In addition, unallocated expenses include $3.2
million, $7.9 million and $1.0 million for internal and external
consulting costs incurred in connection with the program in 2001, 2000
and 1999, respectively. In 2001, $7.7 million was recorded as a
reduction to Latin America operating profit primarily related to the
write-down of inventory and reserves for receivables as a result of the
restructuring of Brazilian sales and manufacturing operations. In 2000,
$6.3 million was recorded as a reduction to Latin America operating
profit related to the write-down of inventory and reserves for
receivables related to changes in distributor models. Total after-tax
impact of these costs was $32.5 million, $24.2 million and $12.3
million in 2001, 2000 and 1999, respectively. See Note 3 to the
consolidated financial statements.
d. Includes a $42.4 million pretax charge ($31.3 million after tax): $22.2
million in Latin America, primarily for bad debts in Brazil; $16.0
million in the United States, primarily for inventory obsolescence; and
$4.2 million in unallocated expenses, primarily for corporate
downsizing.
e. Amounts translated using 2001 exchange rates to exclude the foreign
exchange impact on sales and operating profit trends.
f. Returns on average equity and invested capital are calculated using net
income and the monthly balances of equity and invested capital.
Invested capital equals equity plus debt.
g. The dividend payout ratio is dividends declared per share divided by
diluted earnings per share.
nm- Not meaningful.
TUPPERWARE CORPORATION > 19
Selected Financial Data (continued)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 2001 2000 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
PROFITABILITY RATIOS
Operating profit as a percent of sales (actual exchange rates):
Europe 18.7% 22.2% 22.6% 23.9% 26.5%
Asia Pacific 13.4 18.5 14.4 9.5 13.3
Latin America 8.5 4.1 7.8 nm nm
United States 13.2 7.8 2.6 2.1 nm
BeautiControl(b) 0.8 1.1 -- -- --
Total operating profit 13.7 15.2 15.3 11.9 11.7
Return on average equity(f) 50.2 52.6 60.5 47.5 30.5
Return on average invested capital(f) 14.1 17.8 19.5 17.6 17.1
FINANCIAL CONDITION
Working capital $ 13.8 $ 96.6 $ 61.3 $ 95.5 $ 103.3
Property, plant and equipment, net 228.5 233.1 242.9 271.0 293.0
Total assets 845.7 849.4 796.1 823.4 847.2
Short-term borrowings and current portion of long-term debt 91.6 26.9 43.9 18.7 --
Long-term debt 276.1 358.1 248.5 300.1 236.7
Shareholders' equity 126.6 123.9 145.3 135.8 214.2
Current ratio 1.04 1.35 1.20 1.33 1.34
Long-term debt-to-equity 218.1% 289.0% 171.0% 221.0% 110.5%
Total debt-to-capital 74.4% 75.6% 66.8% 70.1% 52.5%
OTHER DATA
Net cash provided by operating activities $ 108.8 $ 86.1 $ 113.0 $ 118.1 $ 161.8
Capital expenditures 54.8 46.3 40.9 46.2 67.5
Depreciation and amortization 49.9 52.1 55.6 64.0 66.1
COMMON STOCK DATA
Dividends declared per share $ 0.88 $ 0.88 $ 0.88 $ 0.88 $ 0.88
Dividend payout ratio(g) 84.6% 68.2% 64.2% 74.6% 66.7%
Average common shares outstanding (thousands):
Basic 57,957 57,692 57,519 58,235 61,334
Diluted 58,884 57,974 57,870 58,736 61,827
Year-end book value per share $ 2.18 $ 2.14 $ 2.52 $ 2.36 $ 3.51
Year-end price / earnings ratio 18.7 15.8 12.3 13.6 20.7
Year-end market / book ratio 8.9 9.5 6.7 6.8 7.8
Year-end shareholders (thousands) 11.7 12.7 14.1 15.6 20.5
- -----------------------------------------------------------------------------------------------------------------------------------
See footnote explanations on page 19.
20 > SELECTED FINANCIAL DATA
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is a discussion of the results of operations for 2001 compared
with 2000 and 2000 compared with 1999, and changes in financial condition
during 2001. The Company's fiscal year ends on the last Saturday of December.
Fiscal 2001 consisted of 52 weeks compared with 53 weeks in 2000. This
information should be read in conjunction with the consolidated financial
information provided on pages 41-73 of this Annual Report.
RESULTS OF OPERATIONS
Net Sales and Net Income. Net sales in 2001 were $1,114.4 million, an increase
of $41.3 million, or 4 percent, from $1,073.1 million in 2000. Excluding a
$48.8 million negative impact of foreign exchange, net sales increased 9
percent over 2000. In local currency, the United States and Latin America had
strong improvements while Europe and Asia Pacific declined slightly. Included
in the 2001 sales are full year results of BeautiControl, Inc. (BeautiControl),
which was acquired in October 2000. Excluding sales of BeautiControl, sales in
local currency increased 4 percent in 2001. Also impacting sales was a
modification in the distribution model for the United States. Under this model,
sales are made directly to the sales force with distributors compensated
through commission payments. This model results in sales being recorded at a
higher amount that includes the margin that previously was realized by
distributors, although there is no significant impact on operating profit. At
the end of 2001, 25 percent of United States distributors were fully on the new
business model that is being phased in through 2003. Excluding the impact of
this new model, BeautiControl sales and the impact of foreign exchange, net
sales increased 3 percent over 2000.
In 2001, net income decreased 14 percent to $61.5 million from $74.9 million in
2000. Included in the 2001 and 2000 results were $35.7 million ($32.5 million
after tax) and $26.7 million ($24.2 million after tax), respectively, of
re-engineering costs related to the program announced in 1999. Included in
these costs in 2001 was a re-engineering and impairment charge of $24.8 million
that provided for severance and other exit costs primarily related to the
decision to begin operating Brazil under an importing distributor model, as
well as a corporate office restructuring. The remaining $10.9 million was
included in operating expenses and is described below. The change in Brazil is
expected to improve Company and distributor value chains while retaining a
structure for growth. This change will result in Brazil selling at a lower
price to the importing distributor, but will not directly materially impact
operating profit as the reduced sales value will be offset by a corresponding
decrease in commission payments. Re-engineering costs incurred in 2000 are
discussed below. Foreign exchange had a $6.5 million negative impact on the
comparison. Excluding re-engineering costs in 2001 and 2000, and the impact of
foreign exchange, net income increased 2 percent, with substantial improvements
in the United States and Latin America and a small contribution by
BeautiControl largely offset by declines in Europe and Asia Pacific.
TUPPERWARE CORPORATION > 21
Tupperware(R) Impressions Tumbler [PHOTO]
Net sales in 2000 were $1,073.1 million, an increase of $9.3 million, or 1
percent, from $1,063.8 million in 1999. Excluding a $72.8 million negative
impact of foreign exchange, net sales increased 8 percent over 1999. In local
currency, all areas reported improved sales. BeautiControl sales were included
subsequent to its October 2000 acquisition. Also impacting sales was a
modification in the distribution model for three countries in Latin America. In
these countries, sales were made directly to the sales force with distributors
compensated through commission payments. This model resulted in sales being
recorded at an amount that included the margin that previously was realized by
the distributors, although there was no impact on operating profit. Excluding
the impact of this new model, BeautiControl sales and the impact of foreign
exchange, net sales increased 5 percent over 1999.
In 2000, net income decreased 5 percent to $74.9 million from $79.0 million in
1999. Included in the 2000 and 1999 results were $26.7 million ($24.2 million
after tax) and $16.1 million ($12.3 million after tax), respectively, of
re-engineering costs. The 2000 re-engineering costs included a re-engineering
and impairment charge of $12.5 million providing for severance and other exit
costs. In addition, $14.2 million was included in operating expenses and is
described below. The 1999 re-engineering costs included a re-engineering and
impairment charge of $15.1 million in addition to $1.0 million in operating
expenses described below for internal and external consulting costs. Foreign
exchange had a $14.2 million negative impact on the comparison. Excluding the
re-engineering costs in both years and the impact of foreign exchange, net
income increased 30 percent, with improvements coming from all areas.
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. Through the end of 2001, $79
million of costs had been incurred since the inception of the program.
Remaining costs under the program are expected to be incurred through the first
half of 2002, and net of gains on the sale of facilities closed as part of the
program, net costs are projected to be $65 million, mainly for severance,
information technology expenditures and plant closure costs. The annualized
benefit of the actions taken through the end of 2001 was estimated to be $42
million, and when the program is fully implemented, is expected to be up to $50
million.
In 2001, unallocated corporate expenses decreased to $23.4 million from $27.9
million in 2000. The decrease was due to a reduction in costs related to the
re-engineering program for internal and external consulting costs, which
totaled $3.2 million in 2001 and $7.9 million in 2000, as well as the reduction
of expense for incentive payments. In 2000, unallocated corporate expenses
increased to $27.9 million from $23.1 million in 1999. The increase was due to
the inclusion of $7.9 million in costs for the re-engineering program versus
only $1.0 million of such costs in 1999.
22 > MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of
Financial Condition and Results of Operations
In 2001, 73 percent of sales and 79 percent of the Company's operating profit
was generated by international operations. In 2000, 80 percent of sales and 90
percent of the Company's operating profit was generated by international
operations.
Costs and Expenses. Cost of products sold in relation to sales was 33.6
percent, 33.3 percent and 34.3 percent, in 2001, 2000 and 1999, respectively.
The United States reported an improved margin in 2001 primarily due to improved
volume and lower manufacturing costs. An unfavorable product mix variance
partially offset these gains. The other Tupperware regions, especially Europe
and Asia Pacific, had decreased margins due to an unfavorable mix of products
sold and product discounting in several markets in those regions to counter the
impact of difficult economic environments that included the impact of September
11th. In Latin America, the margin was impacted by write-downs of inventory in
connection with changes in the distributor models of $3.3 million in 2001 and
$2.6 million in 2000. Excluding these write-downs in both years, the Latin
American margin was flat. All areas reported improved margins in 2000 primarily
due to the sale of a greater proportion of high-margin products and lower
manufacturing costs. The lower manufacturing costs were a result of the savings
generated from the re-engineering efforts, and were partially offset by higher
raw material prices, re-engineering costs and the impact of a weaker euro.
Delivery, sales and administrative expense as a percentage of sales was 54.8
percent, 53.9 percent and 52.3 percent, in 2001, 2000 and 1999, respectively.
In 2001, a decrease in re-engineering consulting costs and incentive payments
was offset by the inclusion of BeautiControl for the full year. Also included
in delivery, sales and administrative expenses were $4.4 million and $3.7
million in 2001 and 2000, respectively, primarily related to reserves against
receivables related to changes in the distribution model for certain countries.
The increase in cost in 2000 was due to higher operating expenses following the
implementation of the new distribution center model in Latin America, as well
as higher internal and external consulting costs for re-engineering.
TUPPERWARE CORPORATION > 23
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Re-engineering Costs. The re-engineering costs described above were
included in the following income statement captions (in millions, except per
share amounts):
2001 2000 1999
- ------------------------------------------------------------------------------------------
Re-engineering and
impairment charges $ 24.8 $ 12.5 $ 15.1
Cost of products sold 3.3 2.6 --
Delivery, sales and
administrative expense 7.6 11.6 1.0
- ------------------------------------------------------------------------------------------
Total pretax re-engineering costs $ 35.7 $ 26.7 $ 16.1
- ------------------------------------------------------------------------------------------
Total after-tax re-engineering costs $ 32.5 $ 24.2 $ 12.3
- ------------------------------------------------------------------------------------------
Per diluted share
re-engineering costs $ 0.56 $ 0.42 $ 0.21
- ------------------------------------------------------------------------------------------
Tax Rate. The effective tax rates for 2001, 2000 and 1999, were 25.2 percent,
25.9 percent and 23.5 percent, respectively. The 2001 and 2000 rates reflect
the absence of a benefit on a portion of the re-engineering costs. Excluding
this impact, the effective tax rate was 20.3 percent in 2001 and 22.5 percent
in 2000. The decrease from 2001 to 2000 excluding the impact of
re-engineering costs reflected the successful resolution of certain outstanding
issues and a lower international rate. The 2000 effective rate decrease was the
result of the benefit of much lower foreign effective rates.
Net Interest. The Company incurred $21.7 million of net interest expense in
2001 compared with $21.1 million in 2000 and $20.9 million in 1999. The 2001
and 2000 increases resulted from higher borrowing levels due to the acquisition
of BeautiControl and the repurchase of common shares in the fourth quarter of
2000, partially offset by lower interest from carrying a higher proportion of
debt offshore, and also from shifting the offshore debt to lower cost
countries.
24 > MANAGEMENT'S DISCUSSION AND ANALYSIS
Tupperware(R) Impressions Pitcher [PHOTO]
REGIONAL RESULTS 2001 VS. 2000
(DECREASE)
INCREASE PERCENT OF TOTAL
- ------------------------------------------------------------------------------------------------------------------------
(NEGATIVE)
POSITIVE
RESTATED(A) FOREIGN
(DECREASE) EXCHANGE
(DOLLARS IN MILLIONS) 2001 2000 DOLLAR PERCENT INCREASE IMPACT 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Sales
Europe $ 400.4 $ 424.1 $(23.7) (6)% (2)% $(14.0) 36% 39%
Asia Pacific 213.4 242.0 (28.6) (12) (1) (26.7) 19 23
Latin America 201.3 193.0 8.3 4 9 (8.1) 18 18
United States 234.6 201.8 32.8 16 16 na 21 19
BeautiControl(b) 64.7 12.2 52.5 nm nm na 6 1
- ------------------------------------------------------------------------------------------------------------------------
$1,114.4 $1,073.1 $ 41.3 4% 9% $(48.8) 100% 100%
- ------------------------------------------------------------------------------------------------------------------------
Operating profit
Europe $ 74.8 $ 94.1 $(19.3) (20)% (16)% $(4.8) 49% 58%
Asia Pacific 28.5 44.8 (16.3) (36) (26) (6.0) 19 27
Latin America 17.2(c) 8.0(c) 9.2 nm 67 2.3 11 5
United States 31.1 15.6 15.5 98 98 na 21 10
BeautiControl(b) 0.5 0.1 0.4 nm nm na -- --
- ------------------------------------------------------------------------------------------------------------------------
$ 152.1 $ 162.6 $(10.5) (6)% (1)% $(8.5) 100% 100%
- ------------------------------------------------------------------------------------------------------------------------
a. 2001 actual compared with 2000 translated at 2001 exchange rates.
b. BeautiControl was acquired in October 2000. See Note 2 to the
consolidated financial statements.
c. Includes $7.7 million and $6.3 million in 2001 and 2000, respectively,
of costs primarily for the write-down of inventory and reserves
against receivables related to changes in distributor models.
nm - Not meaningful.
na - Not applicable.
TUPPERWARE CORPORATION > 25
Nailogics(R) Nail Color [PHOTO]
EUROPE
Sales decreased slightly and operating profit decreased 16 percent in local
currency. Germany and France were both down modestly for the year due to less
active and productive sales forces. In 2001, sales in Germany, the region's
largest market, were $170.4 million versus $179.1 million in 2000 translated at
2001 actual exchange rates. The events of September 11th had a negative impact
on already sluggish economies and necessitated investment of gross margin and
promotional spending in order to keep the sales force engaged and to protect
market share. This investment had a negative impact on profitability for the
year but led to a 5-percent increase in fourth quarter sales, in part
reflecting incremental distributor orders in anticipation of January 2002
promotional programs, implementation of the euro currency and the expectation
of inclement weather in some countries. This investment also allowed the
segment to close the year with a 5-percent increase in total sales force. The
drop in operating profit was also largely due to decreases in Germany, which
also accounts for a substantial portion of Europe's operating profit, and
France as a result of the increased margin and promotional investments.
Additional investments are expected for the first half of 2002 in response to
the economic climate. These declines were partially offset by improvement in
both Spain and the United Kingdom due largely to cost savings as a result of
re-engineering actions taken previously.
During 2001, a roll-out of the integrated direct access (IDA) channels, which
are a convergence of the core party plan business with retail access points,
Internet sales and television shopping, began in Europe. The roll-out in Europe
is based on the very successful growth model of these channels in the United
States; including the benefit of party and recruiting leads for the core direct
selling business. During the fourth quarter of 2001, the Company had
approximately 100 retail access points open in Europe.
ASIA PACIFIC
Asia Pacific sales declined slightly in local currency. Most of the middle and
emerging markets had increases, with record sales in Malaysia/Singapore,
Australia, Indonesia, India and China that were offset by reductions in Japan
and Korea. The decreases in Japan and Korea were caused by the weak economies
in both of those markets and new product programs that did not inspire the
sales force and consumers to the same extent as prior years. Operating profit
was down substantially in local currency due to the absence of a $4.7 million
use tax abatement in 2000, which resulted from a change in legal structure, and
investments of gross margin and promotional spending made in Japan and Korea to
grow the sales force and to maintain activity in light of the environment.
Overall, the segment finished the year with a nearly 30-percent increase in
total sales force. The negative foreign currency impact on both sales and
operating profit was due to a weakening of most of the region's currencies, but
primarily the Japanese yen and Korean won.
26 > MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Like Europe, the roll-out of IDA began in Asia Pacific during 2001 based upon
the successful United States model. Over 300 retail access points were open in
Asia Pacific markets during the fourth quarter of 2001. Due to differences in
local customs and retail infrastructure in different markets, in addition to
malls, the sites were in professional offices, independent store fronts,
schools and other locations.
LATIN AMERICA
Latin America's sales increased 9 percent and operating profit increased
substantially in local currency, excluding re-engineering costs. The sales
increase was from Mexico and the rest of the Northern Cone as well as Canada.
In Mexico, good recruiting and a large sales force drove the increase, along
with growth through a multi-catalog, multi-category strategy. In Canada, the
growth came from both the core party plan business as well as from sales
through IDA channels, following the model used in the United States.
Performance in the Southern Cone was weak, reflecting the economies there. The
significant profit increase reflected the higher sales along with improved cost
structures in many markets reflecting the results of re-engineering actions
previously taken. During 2001, the Company decided to convert the Brazilian
market to an importer distributor model similar to the other Latin American
markets except Mexico. Operating profit included $7.7 million of costs related
to this change, primarily from an increase in the allowance for uncollectible
accounts and a write-down of inventory. This change is expected to improve
Company and distributor value chains while retaining a structure for growth and
is being completed in the first quarter of 2002. The foreign currency impacts
on both sales and operating profit were due primarily to a strengthening of the
Mexican peso and weakening of the Brazilian real.
The current economic uncertainty in Argentina is not expected to materially
impact the Company. This business was converted to importer status as part of
the re-engineering program in 2000, and this structure significantly mitigates
the Company's exposure in this market.
UNITED STATES
Sales increased 16 percent. This increase came from both the core party plan
business, where the total sales force was up more than 30 percent for most of
the year, as well as from sales through the IDA channels. Sales from these
channels were up 23 percent and represented 7 percent of total sales. Retail
access points accounted for the majority of IDA sales but Internet sales
contributed the largest amount of the increase. The retail access points began
with mall kiosks and were expanded, in the fourth quarter, to include product
display areas in all 62 SuperTarget stores as well as 25 Kroger and Fry's
grocery stores in Ohio, Kentucky and Arizona. The 16-percent sales increase,
along with an improved cost structure, including lower accounts receivable and
inventory reserves due to the improved business, led to the 98-percent increase
in operating profit.
TUPPERWARE CORPORATION > 27
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The U.S. sales increase also reflected a change in the business model to sell
directly to the sales force and compensate the distributor with a commission on
the sale. This results in a higher company sales price that is offset by higher
operating expenses with no significant profit impact. The model change does not
impact sales prices to end consumers. This change added 2 percentage points to
the United States sales increase for 2001. As of the end of the year, 25
percent of the United States distributors were on the new business model that
is being phased in through 2003. The model change, along with the improvement
in the business, resulted in the reduction of the allowance for doubtful
accounts due to reduced exposure to bad debts. In addition, inventory reserves
decreased due to the Company's ability to reduce inventory levels by selling
previously excess quantities.
BEAUTICONTROL
In October 2000, the Company completed the acquisition of BeautiControl, a
party plan direct seller that markets premium cosmetics and skin care products
through a highly trained independent sales force. On a stand alone basis,
comparing full year 2001 with full year 2000, North American sales increased 4
percent. In mid year, a significant leadership building promotional program was
implemented to grow the number of new sales force directors, the top sales
force level in the BeautiControl system. This program resulted in a significant
increase in the sales force size. The small operating profit in 2001 reflected
the promotional investment and the amortization of goodwill. The promotional
investment is expected to continue through 2002, but the goodwill amortization
will cease (see note 1 to the consolidated financial statements).
BeautiControl launched operations in Mexico in mid June and in the Philippines
in the fourth quarter of 2001. Sales in these markets were not significant, and
they generated small losses.
28 > MANAGEMENT'S DISCUSSION AND ANALYSIS
On The Dot Timer [PHOTO]
REGIONAL RESULTS 2000 VS. 1999
(DECREASE)
INCREASE PERCENT OF TOTAL
- -----------------------------------------------------------------------------------------------------------------------
NEGATIVE
RESTATED(A) FOREIGN
INCREASE EXCHANGE
(DOLLARS IN MILLIONS) 2000 1999 DOLLAR PERCENT (DECREASE) IMPACT 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Sales
Europe $ 424.1 $ 489.1 $(65.0) (13)% 1% $(68.2) 39% 46%
Asia Pacific 242.0 242.3 (0.3) -- 1 (2.9) 23 23
Latin America 193.0 154.2 38.8 25 27 (1.7) 18 14
United States 201.8 178.2 23.6 13 13 na 19 17
BeautiControl(b) 12.2 -- 12.2 na na na 1 na
- -----------------------------------------------------------------------------------------------------------------------
$1,073.1 $1,063.8 $ 9.3 1% 8% $(72.8) 100% 100%
- -----------------------------------------------------------------------------------------------------------------------
Operating Profit
Europe $ 94.1 $ 110.7 $(16.6) (15)% 1% $(17.3) 58% 68%
Asia Pacific 44.8 35.0 9.8 28 35 (1.7) 27 22
Latin America 8.0(c) 12.0 (4.0) (33) (32) (0.2) 5 7
United States 15.6 4.7 10.9 nm nm na 10 3
BeautiControl(b) 0.1 -- 0.1 na na na -- na
- -----------------------------------------------------------------------------------------------------------------------
$ 162.6 $ 162.4 $ 0.2 --% 14% $(19.2) 100% 100%
- -----------------------------------------------------------------------------------------------------------------------
a. 2000 actual compared with 1999 translated at 2000 exchange rates.
b. BeautiControl was acquired in October 2000. See Note 2 to the
consolidated financial statements.
c. Includes $6.3 million of costs associated with the write-down of
inventory and reserve for receivables related to adopting an importing
distributor model for certain countries.
nm - Not meaningful.
na - Not applicable.
TUPPERWARE CORPORATION > 29
Skinlogics(R) Cleansing Lotion [PHOTO]
EUROPE
Excluding the impact of weaker currencies, the sales increase in 2000 was due
to increases in Germany and the Nordics, driven by larger sales forces and
improved productivity. Also contributing to the sales increase was the growth
in the emerging Russian market. These increases were partially offset by
declines in Switzerland, Belgium and Greece due to smaller active sales forces.
In 1999, Germany experienced a decline in sales due to the impact of
legislation that imposes a tax on certain part-time workers. The Company held
meetings in 1999 with the German sales force to explain the impact of the new
legislation, as well as to offer financial assistance in addressing this issue
to members of the sales force who remain with the Company for a specified
period. As a result of these actions, and effective recruiting programs,
Germany's sales were $184.8 million in 2000, an increase of 3 percent in local
currency. In 1999, restated for the negative foreign exchange impact of $30.3
million, sales were $178.9 million. In local currency, operating profit
improved slightly over 1999 due to improvements in Germany and the Nordics,
partially offset by declines in Switzerland, Spain and the United Kingdom. The
increase was the result of the higher sales levels, as well as a slightly
higher gross margin percentage, partially offset by higher operating expenses.
ASIA PACIFIC
Japan was the main contributor to the sales increase in 2000, in addition to
improvements in Australia, Thailand and India. These increases were driven by
promotional programs, as well as larger, more productive sales forces.
Offsetting these improvements was a decline in the Philippines, due to the
economic and political situation that continued throughout 2000. The
significant improvement in operating profit was driven by higher gross margins,
primarily due to an increase in Japan, as well as the focus on cost reductions.
Also contributing to the segment's increase was a benefit of a use tax
incentive of $4.7 million, which resulted from a change in legal structure. A
weaker Philippine peso and Australian dollar were primarily responsible for the
negative impact of foreign exchange on the sales and operating profit
comparisons.
LATIN AMERICA
Beginning in the first quarter of 2000, the distribution model for Brazil,
Argentina and Venezuela was modified. In these markets, sales were made
directly to the sales force with distributors compensated through commission
payments. Although there was no impact on operating profit, this model resulted
in sales being recorded at an amount that included the margin that previously
was realized by the distributors. This change was designed to increase
distributor profitability and enable them to focus less on administrative tasks
and more on recruiting, training and motivating their sales forces. Excluding
the impact of the change in the distribution center model and foreign exchange,
net sales increased 14 percent due to increases in Mexico
30 > MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of
Financial Condition and Results of Operations
and Brazil. Mexico's increase was due to strong promotional programs and higher
sales force productivity. In Brazil, the number of distributors significantly
increased, leading to a larger sales force and increased sales volume. The
impact of foreign exchange on the sales comparison reflected the weakening of
Central American currencies.
In the fourth quarter of 2000, the Company made the decision to begin operating
the Latin America businesses, other than Mexico and Brazil, under an importing
distributor model. This change improved the Company and distributor value
chains while retaining a structure for growth. The decrease in operating profit
in 2000 was due to approximately $6.3 million in operating expenses in Brazil
incurred to implement the new distribution center model. The costs were for the
write-down of inventory and reserves against accounts receivable. A decline in
Argentina due to lower sales volumes and higher costs also contributed to the
segment's decrease in operating profit.
UNITED STATES
The 13-percent sales increase for the year was attributable to a more
productive sales force and the IDA initiatives. The IDA initiatives contributed
approximately 26 percent of the sales increase, and represented 6 percent of
total sales. Despite difficulty in recruiting and motivating consultants in a
full employment environment, the total sales force grew 10 percent over 1999,
reflecting the success of recruiting initiatives and benefits of the IDA
channels. Operating profit more than tripled in 2000 primarily driven by the
increase in sales volume and the related increase in gross profit. Gross margin
percentages increased slightly over 1999, and operating expenses decreased as a
percent of sales.
BEAUTICONTROL
On a stand alone basis, comparing all of October through December 2000 with the
same 1999 periods, BeautiControl's sales were 10 percent higher and profit was
up substantially. Subsequent to the acquisition, the Company announced the
closure of BeautiControl's Taiwan and Hong Kong subsidiaries and discontinued
the Eventus nutritional product line.
FINANCIAL CONDITION
Liquidity and Capital Resources. Working capital decreased to $13.8 million as
of December 29, 2001, compared with $96.6 million as of December 30, 2000 and
$61.3 million as of December 25, 1999. The current ratio was 1.0 to 1 at the
end of 2001 compared with 1.4 to 1 at the end of 2000 and 1.2 to 1 at the end
of 1999. In 2001, working capital decreased from a higher level of current
debt. Also contributing to the decrease were lower cash and inventory balances
and a higher accounts payable balance. These impacts were partially offset by
an increase in receivables. The higher sales reflected increased December
orders in Europe in preparation for a significant promotional period in January
of 2002, anticipation of the implementation of the euro currency and the
expectation of inclement weather in some countries.
TUPPERWARE CORPORATION > 31
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The decrease in inventory reflected the impact of the late year sales,
improvement in inventory management and the impact of a stronger U.S. dollar.
As of the end of 2000, the Company classified a portion of its outstanding
borrowings that were due within one year by their terms as non-current due to
its ability and intent that they be outstanding throughout the succeeding 12
months. The Company's revolving line of credit, which expires on August 8,
2002, provided the committed ability to refinance. As of the end of 2001, all
outstanding borrowings due within one year by their terms were classified as
current.
In 2000, working capital increased from a higher level of net inventories and
cash, as well as lower accrued liabilities and current portion of long-term
debt. The increase in inventory reflected higher sales levels and a modest
increase in raw material inventory in light of higher prices. The level of
short-term borrowings reflected the Company's classification of a portion of
its outstanding borrowings that are due within one year by their terms as
non-current. 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 higher amount was classified as current at the end of 1999 than at
the end of 2000.
The Company has a $300.0 million unsecured multicurrency credit facility that
expires on August 8, 2002, and as of December 29, 2001, $187.1 million of
foreign uncommitted lines of credit. As of December 29, 2001, the Company had
$229.2 million available under the multicurrency credit facility and $166.7
million available under the foreign uncommitted lines of credit. The Company
expects to negotiate a new committed credit facility in the first half of 2002.
On July 26, 2001, the Company closed a $150 million private placement of debt
with a 10-year bullet maturity and an interest rate of 7.91 percent. The
multicurrency credit facility along with the expected replacement facility, the
foreign uncommitted lines of credit and cash generated by operating activities
are expected to be adequate to finance working capital needs and capital
expenditures.
The Company's major markets for its products are France, Germany, Mexico,
Japan, Korea and the United States. A significant downturn in the economies of
these markets would adversely impact the Company's ability to generate
operating cash flows. Operating cash flows would also be adversely impacted by
significant difficulties in the recruitment, retention and activity of the
Company's independent sales force, the success of new products and promotional
programs.
The Company sells commercial paper under both domestic and euro programs to
satisfy most of its short-term financing needs. These programs are backed by
the Company's multicurrency credit facility. Its current credit rating for
commercial paper is A2/P2, which puts the Company in a market for the sale of
commercial paper that is less active than those corresponding to higher credit
ratings. Additionally, a downgrade of this rating would effectively
32 > MANAGEMENT'S DISCUSSION AND ANALYSIS
Tuppercare(TM) Baby Bottle [PHOTO]
eliminate the Company's ability to sell commercial paper. The Company has no
reason to expect a downgrade, but in the event one did occur, the Company would
be able to draw on the committed revolving line of credit and replacement
facility and possibly the foreign uncommitted lines of credit; however, in the
event the Company is not able to negotiate a new credit facility, it would not
be able sell commercial paper after the August 2002 expiration of its current
facility.
The total debt-to-capital ratio at the end of 2001 was 74.4 percent compared
with 75.6 percent at the end of 2000. The decrease primarily reflected the
impact of reduced borrowings at the end of 2001 compared with the end of 2000.
Equity did not change significantly as net income was offset by dividends to
shareholders and the impact of a generally stronger U.S. dollar and the
resulting increase in other comprehensive loss.
The following summarizes the Company's contractual obligations at December 29,
2001, and the effect such obligations are expected to have on its liquidity and
cash flow in future periods.
CONTRACTUAL OBLIGATIONS TOTAL LESS THAN 1 YEAR 1 - 3 YEARS 4 - 5 YEARS OVER 5 YEARS
- -------------------------------------------------------------------------------------------------------------------------
Commercial paper borrowings $ 70.8 $ 70.8 $ -- $ -- $ --
Other short-term borrowings 20.4 20.4 -- -- --
Long-term debt 272.6 0.4 17.2 0.3 254.7
Non-cancelable operating lease obligations 23.2 14.3 8.6 0.3 --
- -------------------------------------------------------------------------------------------------------------------------
Total contractual cash obligations $387.0 $105.9 $25.8 $0.6 $254.7
- -------------------------------------------------------------------------------------------------------------------------
Operating Activities. Cash provided by operating activities was $108.8 million
in 2001, compared with $86.1 million in 2000 and $113.0 million in 1999. The
2001 increase reflected an increase in accounts payable and a decrease in
inventories versus an increase in 2000. These impacts were partially offset by
decreased net income and a larger increase in accounts receivable. The 2000
decrease in cash flow reflected a decrease in accrued liabilities versus an
increase in 1999, as well as an increase in net inventories in 2000 versus a
decrease in 1999. This impact was partially offset by a smaller increase in
accounts receivable. Cash flow reflected the payment of $10.8 million, $11.4
million and $11.1 million of re-engineering costs in 2001, 2000 and 1999,
respectively.
TUPPERWARE CORPORATION > 33
Keep 'N Heat(TM) Container [PHOTO]
Investing Activities. For 2001, 2000 and 1999, respectively, capital
expenditures totaled $54.8 million, $46.3 million and $40.9 million. The most
significant individual component of capital spending was new molds. The
increase in capital spending in 2001 was due to the development of a European
data center and a shared service center. The increase in capital spending in
2000 was due to the purchase of an operating software system, partially offset
by a lower level of spending on plant and equipment in light of the Company's
sales levels. Capital expenditures are expected to be between $45 million and
$50 million in 2002.
In October 2000, the Company completed the acquisition of BeautiControl,
purchasing all of the 7,231,448 common shares, for a purchase price of $7 per
share. The total purchase price, net of cash acquired, was $56.3 million and
included the shares acquired, settlement of in-the-money stock options as well
as transaction costs.
Dividends. During 2001, 2000 and 1999, the Company declared dividends of $0.88
per share of common stock totaling $51.1 million, $50.9 million and $50.7
million, respectively.
Subscriptions Receivable. In October 2000, a subsidiary of the Company adopted
a Management Stock Purchase Plan (the MSPP), which provides for eligible
executives to purchase Company stock using full recourse loans provided by the
subsidiary. Under the MSPP, in 2000, the subsidiary issued full recourse loans
for $13.6 million to 33 senior executives to purchase 847,000 shares. During
2001, under the MSPP, nine senior executives purchased 74,500 shares of common
shares from treasury stock using loans from the subsidiary. Total loan value
for this group was $1.7 million. Also, during 2001, two participants left the
Company and sold, at the current market price, 21,000 shares to the Company to
satisfy loans totaling $0.3 million.
In 1998, the Company made a non-recourse, non-interest bearing loan of $7.7
million (the loan) to its chairman and chief executive officer (chairman), the
proceeds of which were used by the chairman to buy in the open market 400,000
shares of the Company's common stock (the shares). The shares are pledged to
secure the repayment of the loan. The loan has been recorded as a subscription
receivable and is due November 12, 2006, with voluntary prepayments permitted
commencing on November 12, 2002. Ten percent of any annual cash bonus awards
are being applied against the balance of the loan. As the loan is reduced by
voluntary payments after November 12, 2002, the lien against the shares will be
reduced. The subscription receivable is being reduced as payments are received.
As of December 29, 2001 and December 30, 2000, the loan balance was $7.5
million and $7.6 million, respectively.
Share Repurchases. In conjunction with the MSPP, in order to minimize the
increase in the number of shares outstanding, the Company repurchased in the
open market in the fourth quarter of 2000, 800,000 shares of common stock for
$14.4 million, or an average of $18 per share.
34 > MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of
Financial Condition and Results of Operations
CRITICAL ACCOUNTING POLICIES
The Company believes the following are its most critical accounting policies in
that they are most important to the portrayal of the Company's financial
condition and results and require management's most difficult, subjective or
complex judgments.
Revenue Recognition. The Company records revenue when goods are shipped to
customers and the risks and rewards of ownership have passed to the customer
who, in most cases, is one of the Company's independent distributors. When
revenue is recorded, estimates of returns are made and recorded as a reduction
of revenue. Discounts earned based on promotional programs in place, volume of
purchases or other factors are also estimated at the time of revenue
recognition and recorded as a reduction of that revenue.
Allowance for Doubtful Accounts. The Company regularly monitors and assesses
its risk of not collecting amounts owed to it by its customers. This evaluation
is based upon an analysis of amounts currently and past due along with relevant
history and facts particular to the customer. It also considers product and
other assets of the customer that could be recovered to satisfy debts. Based
upon the results of this analysis, the Company records an allowance for
uncollectible accounts for this risk. This analysis requires the Company to
make significant estimates, and changes in facts and circumstances could result
in material changes in the allowance for doubtful accounts.
Inventory valuation. The Company writes down its inventory for estimated
obsolescence or unmarketable inventory equal to the difference between the cost
of the inventory and the estimated market value based upon assumptions about
future demand. If actual demand is less than projected by management,
additional inventory write-downs may be required.
Income Taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the financial
statement carrying amounts of assets and liabilities and their respective tax
bases. Deferred tax assets also are recognized for credit carryforwards.
Deferred tax assets and liabilities are measured using the enacted rates
applicable to taxable income in the years in which the temporary differences
are expected to reverse and the credits are expected to be used. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. An assessment is made as
to whether or not a valuation allowance is required to offset deferred tax
assets. This assessment includes anticipating future taxable income and the
Company's tax planning strategies and is made on an ongoing basis.
Consequently, future material changes in the valuation allowance are possible.
TUPPERWARE CORPORATION > 35
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Promotional and Other Accruals. The Company frequently makes promotional offers
to its independent sales force to encourage them to meet specific goals or
targets for sales levels, party attendance, recruiting or other business
critical activities. The awards offered are in the form of cash, product
awards, special prizes or trips. The cost of these awards are recorded during
the period over which the sales force qualifies for the award. These accruals
require estimates as to the cost of the awards based upon estimates of
achievement and actual cost to be incurred. During the qualification period,
actual results are monitored and changes to the original estimates that are
necessary are made when known. Like the promotional accruals, other accruals
are recorded at the time when the liability is probable and the amount is
reasonably estimable. Adjustments to amounts previously accrued are made when
changes in the facts and circumstances that generated the accrual occur.
EURO IMPLEMENTATION
On January 1, 1999, several European countries that are members of the European
Monetary Union replaced their respective currencies with one common
currency--the euro. To date there has been no significant impact from the
adoption of the euro, and none is expected. The incremental cost to the Company
of addressing the euro conversion has not been material.
IMPACT OF INFLATION
Inflation as measured by consumer price indices has continued at a low level in
most of the countries in which the Company operates.
MARKET RISK
One of the Company's market risks is its exposure to the impact of interest
rate changes. The Company has elected to manage this risk through the maturity
structure of its borrowings, interest rate swaps and the currencies in which it
borrows. Under its present policy, the Company has set a target of having
approximately half of its borrowings with extended terms.
A significant portion of the Company's sales and profits comes from its
international operations. Although these operations are geographically
dispersed, which partially mitigates the risks associated with operating in
particular countries, the Company is subject to the usual risks associated with
international operations. These risks include local political and economic
environments, and relations between foreign and U.S. governments.
Another economic risk of the Company, which is associated with its operating
internationally, is exposure to fluctuations in foreign currency exchange rates
on earnings, cash flows and financial position of the Company's international
operations. The Company is not able to project in any meaningful way the
possible effect of these fluctuations on translated amounts or future earnings.
This is due to the Company's constantly changing exposure to various
currencies, the fact that all foreign currencies do not react in the
36 > MANAGEMENT'S DISCUSSION AND ANALYSIS
Spin `N Save(TM) Salad Spinner [PHOTO]
same manner in relation to the U.S. dollar and the large number of currencies
involved, although the Company's most significant exposure is to the euro.
Although this currency risk is partially mitigated by the natural hedge arising
from the Company's local manufacturing in many markets, a strengthening U.S.
dollar generally has a negative impact on the Company. In response to this
fact, the Company uses financial instruments, such as forward contracts, to
hedge its exposure to certain foreign exchange risks associated with a portion
of its investment in international operations. In addition to hedging against
the balance sheet impact of changes in exchange rates, the hedge of investments
in international operations also has the effect of hedging a portion of the
cash flows from those operations. The Company also hedges with these
instruments certain other exposures to various currencies arising from
non-permanent intercompany loans and firm purchase commitments. Further,
beginning in the first quarter of 2002, the Company plans to initiate a
strategy to hedge the annual translation impact of foreign exchange
fluctuations between the U.S. dollar and the euro, Japanese yen, Korean won and
Mexican peso. This hedging program will not eliminate the impact of changes in
exchange rates on the year-over-year comparison of net income, but is expected
to make the impact more predictable. The transaction costs associated with this
program are not expected to be significant.
NEW PRONOUNCEMENTS
The Company adopted the provisions of Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (SFAS) 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, and SFAS 138 ACCOUNTING FOR
CERTAIN DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES as of the
beginning of its 2001 fiscal year. These statements establish 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 hedged exposure. Depending on how the hedge is
used and the designation, the gain or loss due to changes in fair value is
reported either in earnings or in other comprehensive loss. Adoption of the
statements had no significant impact on the accounting treatment and financial
results related to the hedging programs the Company has undertaken.
TUPPERWARE CORPORATION > 37
Following is a listing of the Company's outstanding derivative financial
instruments as of December 29, 2001 and December 30, 2000 (in millions):
FORWARD CONTRACTS 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
CONTRACT RATE OF CONTRACT RATE OF
(DOLLARS IN MILLIONS) BUY SELL EXCHANGE BUY SELL EXCHANGE
- ---------------------------------------------------------------------------------------------------------------------------------
Euro with U.S. dollars $ 36.5 0.8945 $ 90.2 0.9091
Japanese yen with U.S. dollars 8.5 129.3753 49.2 109.0744
Mexican pesos with U.S. dollars 35.0 9.7443 33.9 9.8267
Australian dollars with U.S. dollars 20.2 0.5077 13.3 0.5559
Philippine pesos with U.S. dollars 2.2 53.1646 9.5 51.8567
Swiss francs with U.S. dollars 40.7 1.6313 8.3 1.6488
Singapore dollars with U.S. dollars 5.4 1.8362 4.6 1.7139
Greek drachma with U.S. dollars -- -- 4.4 370.5800
Danish krona with U.S. dollars 3.3 8.3055 3.2 8.1195
Canadian dollars with U.S. dollars -- -- 1.4 1.5086
Hong Kong dollars with U.S. dollars 1.7 7.7970 -- --
South Korean won with U.S. dollars 13.3 1,321.5447 -- --
Euro for U.S. dollars $ 68.6 0.8971 $ 40.0 0.9103
Brazilian reals for U.S. dollars 2.8 2.5150 -- --
Swiss francs for U.S. dollars 3.2 1.6541 11.8 1.6508
Mexican pesos for U.S. dollars 13.0 9.3197 9.7 9.8156
Japanese yen for U.S. dollars 56.2 120.4819 8.0 107.0402
British pounds for U.S. dollars 6.4 1.4415 4.5 1.4763
South Korean won for U.S. dollars -- -- 1.5 1,130.5000
Philippine pesos for U.S. dollars 2.0 52.3560 1.2 51.8500
Australian dollars for U.S. dollars 2.3 0.5123 -- --
Other currencies 4.1 7.9 Various 4.2 4.4 Various
- ---------------------------------------------------------------------------------------------------------------------------------
$170.9 $ 162.4 $222.2 $ 81.1
- ---------------------------------------------------------------------------------------------------------------------------------
38 > MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of
Financial Condition and Results of Operations
With the exception of an interest rate swap agreement, the Company's derivative
financial instruments at December 29, 2001 and December 30, 2000, consisted
solely of the financial instruments summarized above and mature within 12
months. Related to the forward contracts, the "buy" amounts represent the U.S.
dollar equivalent of commitments to purchase foreign currencies and the "sell"
amounts represent the U.S. dollar equivalent of commitments to sell foreign
currencies, all translated at the year-end market exchange rates for the U.S.
dollar. All forward contracts are hedging cross-currency intercompany loans
that are not permanent in nature or firm purchase commitments.
At December 29, 2001, the Company had an interest rate swap in place with a
notional amount of $75.0 million that terminates on July 15, 2011 and converts
half of the Company's $150.0 million notes due in 2011 from fixed to floating
rate debt. The Company pays a variable rate of LIBOR plus 1.97 percent and
receives a fixed rate payment of 7.91 percent at dates consistent with interest
payment dates of the notes. In the fourth quarter of 2001, the Company
terminated a swap related to the other $75.0 million of these notes and
realized a net gain of $5.4 million, which has been capitalized as part of the
debt and is being amortized as a reduction of interest expense over the
remaining life of the related debt.
In July 2001, FASB issued SFAS 142, GOODWILL AND OTHER INTANGIBLE ASSETS, which
superseded Accounting Principles Board Opinion No. 17, INTANGIBLE ASSETS. This
statement addresses how goodwill and other intangible assets should be
accounted for after they have been initially recognized in the financial
statements. Beginning with fiscal year 2002, the Company will no longer
amortize its goodwill, but will evaluate it for impairment at least annually
including a transition assessment upon the adoption of the statement. The
Company is evaluating the impact of adopting this statement.
FASB also issued, in August 2001, SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS. This statement, which is effective for fiscal
years beginning after December 15, 2001, addresses financial accounting and
reporting for the impairment of long-lived assets, excluding goodwill and
intangible assets, to be held and used or disposed of. The Company does not
expect the implementation of this standard to have a significant effect on its
results of operations or financial condition.
In February 2002, the Emerging Issues Task Force issued EITF 01-9, ACCOUNTING
FOR CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER (INCLUDING A RESELLER OF THE
VENDOR'S PRODUCTS). The pronouncement requires that cash consideration,
including sales incentives, given by a vendor to a customer be presumed to be a
reduction of the selling prices of the vendor's products or services and,
therefore, characterized as a reduction of revenue when recognized in the
vendor's income statement. The Company is currently evaluating the impact of
EITF 01-9. While it will not result in any impact to the Company's net income,
it may require a reclassification of amounts currently recorded in delivery,
sales and administrative expense to net sales. The Company will adopt EITF 01-9
in the first quarter of 2002.
TUPPERWARE CORPORATION > 39
Perfect Kitchen(TM) Pressure Cooker [PHOTO]
FORWARD-LOOKING STATEMENTS
Certain written and oral statements made or incorporated by reference from time
to time by the Company or its representatives in this report, other reports,
filings with the Securities and Exchange Commission, press releases,
conferences or otherwise are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Investors should also be
aware that while the Company does, from time to time, communicate with
securities analysts, it is against the Company's policy to disclose to them any
material non-public information or other confidential commercial information.
Accordingly, it should not be assumed that the Company agrees with any
statement or report issued by any analyst irrespective of the content of the
confirming financial forecasts or projections issued by others.
Statements contained in this report that are not based on historical facts are
forward-looking statements. Risks and uncertainties may cause actual results to
differ materially from those projected in forward-looking statements. The risks
and uncertainties include successful recruitment, retention and activity levels
of the Company's independent sales force; success of new products and
promotional programs; economic and political conditions generally and foreign
exchange risk in particular; disruptions with the integrated direct access
strategies; integration of BeautiControl; and other risks detailed in the
Company's report on Form 8-K dated April 10, 2001, as filed with the Securities
and Exchange Commission.
40 > MANAGEMENT'S DISCUSSION AND ANALYSIS
Consolidated Statements of Income
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED
- ---------------------------------------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) DEC. 29, 2001 DEC. 30, 2000 DEC. 25, 1999
- ---------------------------------------------------------------------------------------------------------------
Net sales $ 1,114.4 $ 1,073.1 $ 1,063.8
- ---------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of products sold 374.0 358.4 365.1
Delivery, sales and administrative expense 610.4 578.4 556.8
Interest expense 24.6 22.9 23.0
Interest income (2.9) (1.9) (2.1)
Re-engineering and impairment charges 24.8 12.5 15.1
Other expense, net 1.3 1.7 2.6
- ---------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,032.2 972.0 960.5
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes 82.2 101.1 103.3
Provision for income taxes 20.7 26.2 24.3
- ---------------------------------------------------------------------------------------------------------------
Net income $ 61.5 $ 74.9 $ 79.0
- ---------------------------------------------------------------------------------------------------------------
Net income per common share:
Basic $ 1.06 $ 1.30 $ 1.37
- ---------------------------------------------------------------------------------------------------------------
Diluted $ 1.04 $ 1.29 $ 1.37
- ---------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
TUPPERWARE CORPORATION > 41
Consolidated Balance Sheets
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS) DEC. 29, 2001 DEC. 30, 2000
- -------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 18.4 $ 32.6
Accounts receivable, less allowances of $31.5
million in 2001 and $27.7 million in 2000 133.3 112.5
Inventories 132.2 144.1
Deferred income tax benefits, net 43.8 47.1
Prepaid expenses and other 38.4 36.1
- -------------------------------------------------------------------------------------------------
Total current assets 366.1 372.4
- -------------------------------------------------------------------------------------------------
Deferred income tax benefits, net 133.6 123.2
Property, plant and equipment, net 228.5 233.1
Long-term receivables, net of allowances of $13.2
million in 2001 and $28.4 million in 2000 31.3 31.2
Goodwill, net of accumulated amortization of $1.6 million
in 2001 and $0.2 million in 2000 56.2 57.7
Other assets, net 30.0 31.8
- -------------------------------------------------------------------------------------------------
Total assets $845.7 $849.4
- -------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
42 > CONSOLIDATED BALANCE SHEETS
E-series(TM) Cheese Knife [PHOTO]
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) DEC. 29, 2001 DEC. 30, 2000
- ---------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 96.5 $ 88.6
Short-term borrowings and current portion of long-term debt 91.6 26.9
Accrued liabilities 164.2 160.3
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 352.3 275.8
- ---------------------------------------------------------------------------------------------------------
Long-term debt 276.1 358.1
Accrued post-retirement benefit cost 36.4 37.4
Other liabilities 54.3 54.2
Commitments and contingencies (Note 13)
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
Paid-in capital 22.0 21.7
Subscriptions receivable (22.5) (21.2)
Retained earnings 501.0 493.7
Treasury stock, 4,232,710 and 4,483,151 shares in 2001
and 2000, respectively, at cost (117.1) (125.5)
Unearned portion of restricted stock issued for future service (0.2) (0.4)
Accumulated other comprehensive loss (257.2) (245.0)
- ---------------------------------------------------------------------------------------------------------
Total shareholders' equity 126.6 123.9
- ---------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $845.7 $849.4
- ---------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
TUPPERWARE CORPORATION > 43
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
COMMON STOCK TREASURY STOCK
- -------------------------------------------------------------------------------------------------------------------- PAID-IN
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) SHARES DOLLARS SHARES DOLLARS CAPITAL
- -----------------------------------------------------------------------------------------------------------------------------------
December 26, 1998 62.4 $0.6 4.8 $(142.0) $19.5
Net income
Other comprehensive income:
Foreign currency translation adjustments
Net equity hedge gain, net of tax
provision of $4.2 million
Comprehensive income
Cash dividends declared ($0.88 per share)
Earned restricted stock, net
Stock issued for incentive plans and
related tax benefits (0.1) 1.8 0.8
- ---------------------------------------------------------------------------------------------------------------------------------
December 25, 1999 62.4 0.6 4.7 (140.2) 20.3
Net income
Other comprehensive income:
Foreign currency translation adjustments
Net equity hedge gain, net of tax
provision of $3.3 million
Comprehensive income
Cash dividends declared ($0.88 per share)
Acquisition of BeautiControl, Inc. 1.0
Stock issued under Management
Stock Purchase Plan (0.8) 25.5
Purchase of treasury stock 0.8 (14.4)
Payment of subscription receivable
Earned restricted stock, net
Stock issued for incentive plans and
related tax benefits (0.2) 3.6 0.4
- ---------------------------------------------------------------------------------------------------------------------------------
December 30, 2000 62.4 0.6 4.5 (125.5) 21.7
Net income
Other comprehensive income:
Foreign currency translation adjustments
Net equity hedge gain, net of tax
provision of $2.3 million
Comprehensive income
Cash dividends declared ($0.88 per share)
Stock issued under Management Stock Purchase Plan 1.5
Payments of subscriptions receivable
Earned restricted stock, net
Stock issued for incentive plans and
related tax benefits (0.3) 6.9 0.3
- ---------------------------------------------------------------------------------------------------------------------------------
December 29, 2001 62.4 $0.6 4.2 $(117.1) $22.0
- ---------------------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
44 > CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY AND
COMPREHENSIVE INCOME (CONT'D)
UNEARNED
POTION OF
RESTRICTED ACCUMULATED
SUBSCRIP- STOCK OTHER TOTAL
TIONS RETAINED ISSUED FOR COMPREHENSIVE SHAREHOLDERS' COMPREHENSIVE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) RECEIVABLE EARNINGS FUTURE SERVICE LOSS EQUITY INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
December 26, 1998 $ (7.7) $457.2 $(1.4) $(190.4) $ 135.8
Net income 79.0 79.0 $ 79.0
Other comprehensive income:
Foreign currency translation adjustments (27.4) (27.4) (27.4)
Net equity hedge gain, net of tax
provision of $4.2 million 6.7 6.7 6.7
-------
Comprehensive income $ 58.3
-------
Cash dividends declared ($0.88 per share) (50.7) (50.7)
Earned restricted stock, net 0.8 0.8
Stock issued for incentive plans and
related tax benefits (1.5) 1.1
- ------------------------------------------------------------------------------------------------------------------
December 25, 1999 (7.7) 484.0 (0.6) (211.1) 145.3
Net income 74.9 74.9 $ 74.9
Other comprehensive income:
Foreign currency translation adjustments (39.1) (39.1) (39.1)
Net equity hedge gain, net of tax
provision of $3.3 million 5.2 5.2 5.2
-------
Comprehensive income $ 41.0
-------
Cash dividends declared ($0.88 per share) (50.9) (50.9)
Acquisition of BeautiControl, Inc. 1.0
Stock issued under Management
Stock Purchase Plan (13.6) (11.8) 0.1
Purchase of treasury stock (14.4)
Payment of subscription receivable 0.1 0.1
Earned restricted stock, net 0.2 0.2
Stock issued for incentive plans and
related tax benefits (2.5) 1.5
- ------------------------------------------------------------------------------------------------------------------
December 30, 2000 (21.2) 493.7 (0.4) (245.0) 123.9
Net income 61.5 61.5 $ 61.5
Other comprehensive income:
Foreign currency translation adjustments (15.7) (15.7) (15.7)
Net equity hedge gain, net of tax
provision of $2.3 million 3.5 3.5 3.5
-------
Comprehensive income $ 49.3
-------
Cash dividends declared ($0.88 per share) (51.1) (51.1)
Stock issued under Management Stock Purchase Plan (1.7) (0.3) (0.5)
Payments of subscriptions receivable 0.4 0.4
Earned restricted stock, net 0.2 0.2
Stock issued for incentive plans and
related tax benefits (2.8) 4.4
- ------------------------------------------------------------------------------------------------------------------
December 29, 2001 $(22.5) $501.0 $(0.2) $(257.2) $ 126.6
- ------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
TUPPERWARE CORPORATION > 45
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED
- ----------------------------------------------------------------------------------------------------------------------
(IN MILLIONS) DEC. 29, 2001 DEC. 30, 2000 DEC. 25, 1999
- ----------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 61.5 $ 74.9 $ 79.0
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 49.9 52.1 55.6
Loss on sale of assets 0.9 3.3 3.3
Foreign exchange loss, net -- 0.3 0.1
Non-cash impact of re-engineering and impairment costs 16.1 13.2 3.1
Changes in assets and liabilities:
Increase in accounts and notes receivable (31.1) (9.3) (30.1)
Decrease (increase) in inventories 4.5 (17.9) 9.1
Increase (decrease) in accounts payable and accrued liabilities 10.5 (21.2) 6.0
Increase in income taxes payable 7.8 2.7 0.6
Increase in net deferred income taxes (12.3) (13.8) (17.7)
Other, net 1.0 1.8 4.0
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 108.8 86.1 113.0
INVESTING ACTIVITIES
Capital expenditures (54.8) (46.3) (40.9)
Purchase of BeautiControl, Inc., net of cash acquired -- (56.3) --
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (54.8) (102.6) (40.9)
FINANCING ACTIVITIES
Dividend payments to shareholders (51.0) (50.8) (50.7)
Payments to acquire treasury stock -- (14.4) --
Payment of long-term debt -- (15.0) --
Proceeds from private placement debt issuance 148.8 -- --
Proceeds from exercise of stock options 3.7 1.0 0.6
Proceeds from payments of subscriptions receivable 0.4 0.1 --
Net (decrease) increase in short-term debt (168.8) 105.5 (23.2)
- ----------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (66.9) 26.4 (73.3)
- ----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (1.3) (1.7) 2.6
- ----------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (14.2) 8.2 1.4
Cash and cash equivalents at beginning of year 32.6 24.4 23.0
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 18.4 $ 32.6 $ 24.4
- ----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE
Treasury shares sold for notes receivable $ 1.7 $ 13.6 $ --
- ----------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
Notes to the Consolidated Financial Statements
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include the
accounts of Tupperware Corporation and all of its subsidiaries (Tupperware, the
Company). All significant intercompany accounts and transactions have been
eliminated. The Company's fiscal year ends on the last Saturday of December.
Fiscal years 2001 and 1999 consisted of 52 weeks compared with 53 weeks in
2000.
Use of Estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Cash and Cash Equivalents. The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
As of December 29, 2001 and December 30, 2000, $10.0 million and $16.5 million,
respectively, of the cash and cash equivalents included on the consolidated
balance sheets were held in the form of time deposits or certificates of
deposit.
Allowance for Doubtful Accounts. The Company regularly monitors and assesses
its risk of not collecting amounts owed to it by its customers. This evaluation
is based upon an analysis of amounts currently and past due along with relevant
history and facts particular to the customer. It also considers assets of the
customer that could be recovered to satisfy amounts owed. Based upon the
results of this analysis, the Company records an allowance for uncollectible
accounts for this risk. This analysis requires the Company to make significant
estimates and as such, changes in facts and circumstances could result in
material changes in the allowance for doubtful accounts.
Inventories. Inventories are valued at the lower of cost or market. Inventory
cost includes cost of raw material, labor and overhead. Domestic Tupperware
inventories, approximately 17 percent of consolidated inventories at both
December 29, 2001 and December 30, 2000, are valued on the last-in, first-out
(LIFO) cost method. The first-in, first-out (FIFO) cost method is generally
used for the remaining inventories. If inventories valued on the LIFO method
had been valued using the FIFO method, they would have been $11.2 million and
$13.1 million higher at the end of 2001 and 2000, respectively. The Company
writes down its inventory for estimated obsolescence or unmarketable inventory
equal to the difference between the cost of the inventory and the estimated
market value based upon assumptions about future demand. If actual demand is
less than projected by management, additional inventory write-downs may be
required.
TUPPERWARE CORPORATION > 47
Notes to the Consolidated Financial Statements
Internal Use Software Development Costs. The Company capitalizes internal use
software development costs as they are incurred and amortizes such costs over
their estimated useful lives of three to five years beginning when the software
is placed in service. These costs are included in property, plant and
equipment. Net unamortized costs included in property, plant and equipment were
$7.3 million and $6.8 million at December 29, 2001 and December 30, 2000,
respectively.
Property, Plant and Equipment. Properties are initially stated at cost.
Depreciation is determined on a straight-line basis over the estimated useful
lives of the assets. Generally, the estimated useful lives are 10 to 45 years
for buildings and improvements and 3 to 20 years for machinery and equipment.
Upon the sale or retirement of property, plant and equipment, a gain or loss is
recognized. Expenditures for maintenance and repairs are charged to expense.
In August 2001, The Financial Accounting Standards Board (the Board) issued
Statement of Financial Accounting Standards (SFAS) No. 144, ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. This statement, which is effective
for fiscal year 2002, addresses financial accounting and reporting for the
impairment of long-lived assets, excluding goodwill and indefinite-lived
intangible assets, to be held and used or disposed of. The Company does not
expect the implementation of this standard to have a significant effect on its
results of operations or financial condition.
Goodwill. Goodwill represents the excess of cost over the fair value of net
assets acquired and is being amortized over 40 years using the straight-line
method.
In July 2001, the Board issued SFAS No. 142, GOODWILL AND OTHER INTANGIBLE
ASSETS, which superseded Accounting Principles Board Opinion No. 17, INTANGIBLE
ASSETS. This statement addresses how goodwill and other intangible assets
should be accounted for after they have been initially recognized in the
financial statements. Beginning with fiscal year 2002, the Company will no
longer amortize its goodwill, but will evaluate it for impairment at least
annually, including a transition assessment upon the adoption of this
statement. The Company is evaluating the impact of adopting this statement.
Promotional and Other Accruals. The Company frequently makes promotional offers
to its independent sales force to encourage them to fulfill specific goals or
targets for sales levels, party attendance, recruiting or other business
critical functions. The awards offered are in the form of cash, product awards,
special prizes or trips. The costs of these awards are recorded during the
period over which the sales force qualifies for the award. These accruals
require estimates as to the cost of the awards based upon estimates of
achievement and actual cost to be incurred. During the qualification period,
actual results are monitored and changes to the original estimates that are
necessary are made when known. Like the promotional accruals, other accruals
are recorded at the time when the liability is probable and the amount is
reasonably estimable. Adjustments to amounts previously accrued are made when
changes in the facts and circumstances that generated the accrual occur.
48 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Skinlogics(R) Moisturizer [PHOTO]
Revenue Recognition. Revenue is recognized when goods are shipped to customers
and the risks and rewards of ownership have passed to the customer who, in most
cases, is one of the Company's independent distributors. When revenue is
recorded, estimates of returns are made and recorded as a reduction of revenue.
Discounts earned based on promotional programs in place, volume of purchases or
other factors are also estimated at the time of revenue recognition and
recorded as a reduction of that revenue.
In February 2002, the Emerging Issues Task Force issued EITF 01-9, ACCOUNTING
FOR CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER (INCLUDING A RESELLER OF THE
VENDOR'S PRODUCTS). The pronouncement requires that cash consideration,
including sales incentives, given by a vendor to a customer be presumed to be a
reduction of the selling prices of the vendor's products or services and,
therefore, characterized as a reduction of revenue when recognized in the
vendor's income statement. The Company is currently evaluating the impact of
EITF 01-9. While it will not result in any impact to the Company's net income,
it may require a reclassification of amounts currently recorded in delivery,
sales and administrative expense to net sales. The Company will adopt EITF 01-9
in the first quarter of 2002.
Shipping and Handling Costs. Fees billed to customers associated with shipping
and handling are classified as revenue, and related costs are classified as
delivery, sales and administrative expenses. Costs associated with shipping and
handling activities are comprised of outbound freight and associated labor
costs, and were $69.6 million, $70.0 million and $69.0 million in 2001, 2000
and 1999, respectively.
Advertising and Research and Development Costs. Advertising and research and
development costs are charged to expense as incurred. Advertising expense
totaled $5.9 million, $5.9 million and $8.7 million in 2001, 2000 and 1999,
respectively. Research and development costs totaled $13.2 million, $12.8
million and $12.3 million, in 2001, 2000 and 1999, respectively.
Accounting for Stock-Based Compensation. The Company measures compensation
expense for employee and director stock options as the aggregate difference
between the market value of its common stock and exercise prices of the options
on the date that both the number of shares the grantee is entitled to receive
and the exercise price are known. Compensation expense associated with
restricted stock grants is equal to the market value of the shares on the date
of grant and is recorded pro rata over the required holding period. Pro forma
information relating to the fair value of stock-based compensation is presented
in Note 11 to the consolidated financial statements.
Income Taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the financial
statement carrying amounts of assets and liabilities and their respective tax
bases. Deferred tax assets also are recognized for credit carry forwards.
Deferred tax assets and liabilities are measured using the enacted rates
applicable to taxable income in the years in which the temporary differences
are expected to reverse and the credits are expected to be used. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. An
TUPPERWARE CORPORATION > 49
Baking Essentials Pastry Wheel [PHOTO]
assessment is made as to whether or not a valuation allowance is required to
offset deferred tax assets. This assessment includes anticipating future
taxable income and the Company's tax planning strategies and is made on an
ongoing basis. Consequently, future material changes in the valuation allowance
are possible.
Net Income Per Common Share. The financial statements include "basic" and
"diluted" per share information. Basic per share information is calculated by
dividing net income by the weighted average number of common shares
outstanding. Diluted per share information is calculated by also considering
the impact of potential common stock on both net income available to common
shareholders and the weighted average number of shares outstanding. The
weighted average number of shares used in the basic earnings per share
computations were 58.0 million, 57.7 million and 57.5 million in 2001, 2000 and
1999, respectively. The only difference in the computation of basic and diluted
earnings per share is the inclusion of potential common stock of 0.9 million in
2001, 0.3 million in 2000 and 0.4 million in 1999. Options to purchase 4.3
million, 7.1 million and 2.4 million shares of common stock in 2001, 2000 and
1999, respectively, were outstanding but not 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
periods 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.
Derivative Financial Instruments. The Company uses derivative financial
instruments, principally over-the-counter forward exchange contracts and local
currency options with major international financial institutions, to offset the
effects of exchange rate changes on net investments in certain foreign
subsidiaries, forecasted purchase commitments and certain intercompany loan
transactions. Gains and losses on instruments designated as hedges of net
investments in a foreign subsidiary or intercompany transactions that are
permanent in nature are accrued as exchange rates change, and are recognized in
shareholders' equity, along with any points on forward exchange contracts, as
foreign currency translation adjustments. The net interest differential on
interest rate swaps is included in interest expense. Gains and losses on
contracts designated as hedges of intercompany transactions that are not
permanent in nature are accrued as exchange rates change and are recognized in
income. Gains and losses on contracts designated as hedges of identifiable
foreign currency firm commitments are deferred and included in the measurement
of the related foreign currency transaction. Contracts hedging non-permanent
intercompany transactions and identifiable foreign currency firm commitments
are held to maturity. See Note 7 to the consolidated financial statements.
Effective December 31, 2000, the Company adopted SFAS 133, ACCOUNTING
FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES and SFAS 138, ACCOUNTING
FOR CERTAIN DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES. These
50 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
statements establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. They require that an entity recognize
all derivative instruments 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 fair value of a derivative accounted for as a hedge
depends on the intended use of the derivative and the resulting designation of
the hedged exposure. Depending on how the hedge is used and the designation,
the gain or loss due to changes in fair value is reported either in earnings or
in other comprehensive loss. The adoption of these statements had no
significant impact on the accounting treatment and financial results related to
the hedging programs of the Company and did not result in a cumulative effect
adjustment.
Foreign Currency Translation. Results of operations of foreign subsidiaries are
translated into U.S. dollars using the average exchange rates during the year.
The assets and liabilities of those subsidiaries, other than those of
operations in highly inflationary countries, are translated into U.S. dollars
using exchange rates at the balance sheet date. The related translation
adjustments are included in "Accumulated other comprehensive loss." Foreign
currency transaction gains and losses, as well as translation of financial
statements of subsidiaries in highly inflationary countries, are included in
income.
NOTE 2: ACQUISITION
In October 2000, the Company completed the acquisition of BeautiControl, Inc.
(BeautiControl), by purchasing all of the 7,231,448 common shares outstanding
for a purchase price of $7 per share. BeautiControl is a party plan direct
seller that markets premium cosmetics and skin care products through a highly
trained independent sales force in North America and, beginning in 2001, in
Mexico and the Philippines. The total purchase price, net of cash acquired, was
$56.3 million and included shares acquired, settlement of in-the-money stock
options and other transaction costs. The Company also assumed $5.6 million of
debt. The acquisition has been accounted for under the purchase method of
accounting, and the results of operations of BeautiControl have been included
in the consolidated financial statements since October 18, 2000. The total cost
of the acquisition was allocated to the tangible and intangible assets acquired
and liabilities assumed based on their respective fair values. In connection
with the acquisition plan, the Company closed BeautiControl's Taiwan and Hong
Kong subsidiaries, discontinued its Eventus nutritional supplement product
line and capitalized an associated $5.0 million of costs as part of the
acquisition cost. Goodwill recorded in connection with the transaction was
$55.0 million and is being amortized over 40 years using the straight-line
method. As a result of the adoption of SFAS No. 142, goodwill amortization will
cease as of the end of fiscal 2001. On a pro forma basis, if the acquisition
had occurred January 1, 1999, the results of BeautiControl would not have had a
material impact on consolidated results in 1999 or 2000.
TUPPERWARE CORPORATION > 51
Notes to the Consolidated Financial Statements
NOTE 3: RE-ENGINEERING PROGRAM
In 1999, the Company announced a re-engineering program designed to improve
operating profit return on sales through improved organizational alignment, a
higher gross margin percentage and reduced operating expenses. Pretax costs
incurred by category are as follows (in millions):
2001 2000 1999
- ---------------------------------------------------------------------------
Severance $ 6.6 $ 3.1 $ 9.0
Asset impairments 14.4 7.6 3.1
Other 3.8 1.8 3.0
- ---------------------------------------------------------------------------
Total re-engineering and
impairment charges $24.8 $12.5 $15.1
- ---------------------------------------------------------------------------
Severance costs relate to approximately 220, 115 and 200 employees whose
positions were eliminated in 2001, 2000 and 1999, respectively. Actions taken
to eliminate these positions resulted from the decisions to change distributor
models in Latin America in 2001 and 2000 as well as a downsizing of the
corporate office and restructuring Brazilian manufacturing and distribution
operations in 2001; closing the Argentine distribution center in 2000; and
closing the Spanish and Argentine manufacturing operations in 1999.
Additionally, in 1999, the Japanese manufacturing operation and the regional
headquarters in Europe and Asia Pacific were restructured.
The asset impairments were the result of a decision to reduce the number of
data centers and systems, primarily in Europe, as well as the Latin American
distribution model conversion and plant and distribution center closures noted
above. Expenses included in the other category are primarily for non-asset
impairment costs of exiting facilities and professional fees associated with
accomplishing the re-engineering actions.
The Company also incurred costs in connection with the re-engineering program
that are included in costs of products sold and delivery, sales and
administrative expense. Amounts included in cost of products sold, $3.3 million
and $2.6 million in 2001 and 2000, respectively, relate to inventory
write-downs in Latin America as a result of the conversion to the importer
model. This conversion also resulted in increases in accounts receivable
allowances for uncollectible accounts in several Latin American markets
totaling $3.7 million in both 2001 and 2000, which were recorded in delivery,
sales and administrative expense. Also included in this caption were costs
totaling $3.9 million, $7.9 million and $1.0 million in 2001, 2000 and 1999,
respectively, relating to internal and external consulting costs associated
with designing and executing the re-engineering projects and other cost savings
initiatives. Remaining costs are expected to be incurred through the first half
of 2002.
As part of the restructuring of Brazilian operations in 2001, the Company
recorded a $3.2 million valuation allowance for certain deferred tax assets for
which realization was no longer more likely than not.
52 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TupperWave(TM) Stack Cooker [PHOTO]
The liability balance, included in accrued liabilities, related to
re-engineering and impairment charges as of December 29, 2001 and December 30,
2000 was as follows (in millions):
2001 2000
- ----------------------------------------------------------------
Beginning balance $ 2.3 $ 0.9
Provision 24.8 12.5
Cash expenditures:
Severance (3.8) (3.0)
Other (2.0) (0.5)
Non-cash asset impairments (14.4) (7.6)
- ----------------------------------------------------------------
Ending balance $ 6.9 $ 2.3
- ----------------------------------------------------------------
NOTE 4: INVENTORIES
(IN MILLIONS) 2001 2000
- --------------------------------------------------------------
Finished goods $ 65.7 $ 70.4
Work in process 21.7 25.5
Raw materials and supplies 44.8 48.2
- --------------------------------------------------------------
Total inventories $132.2 $144.1
- --------------------------------------------------------------
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
(IN MILLIONS) 2001 2000
- ---------------------------------------------------------------------------
Land $ 19.1 $ 19.9
Buildings and improvements 165.0 169.8
Machinery and equipment 735.7 739.4
Capitalized software 12.2 6.8
Construction in progress 16.7 13.0
- ---------------------------------------------------------------------------
Total property, plant and equipment 948.7 948.9
Less accumulated depreciation (720.2) (715.8)
- ---------------------------------------------------------------------------
Property, plant and equipment, net $228.5 $233.1
- ---------------------------------------------------------------------------
NOTE 6: ACCRUED LIABILITIES
(IN MILLIONS) 2001 2000
- ---------------------------------------------------------------------------
Compensation and employee benefits $ 43.8 $ 51.3
Advertising and promotion 18.9 18.9
Taxes other than income taxes 16.1 17.8
Other 85.4 72.3
- ---------------------------------------------------------------------------
Total accrued liabilities $164.2 $160.3
- ---------------------------------------------------------------------------
TUPPERWARE CORPORATION > 53
Melamine Dishware [PHOTO]
NOTE 7: FINANCING ARRANGEMENTS
DEBT
Debt consists of the following:
(IN MILLIONS) 2001 2000
- -----------------------------------------------------------------
7.05% Series Notes due 2003 $ 15.0 $ 15.0
7.25% Notes due 2006 100.0 100.0
8.33% Mortgage Note due 2009 5.3 5.6
7.91% Notes due 2011 153.9 --
Short-term borrowings 91.2 264.0
Other 2.3 0.4
- -----------------------------------------------------------------
367.7 385.0
Less current portion (91.6) (26.9)
- -----------------------------------------------------------------
Long-term debt $276.1 $358.1
- -----------------------------------------------------------------
(DOLLARS IN MILLIONS) 2001 2000
- -----------------------------------------------------------------------------------
Total short-term borrowings at year-end $ 91.2 $264.0
Weighted average interest rate at year-end 3.2% 5.8%
Average short-term borrowings during the year $223.6 $242.3
Weighted average interest rate for the year 4.4% 5.9%
Maximum short-term borrowings during the year $320.5 $300.3
- -----------------------------------------------------------------------------------
The average borrowings and weighted average interest rates were determined
using month-end borrowings and the interest rates applicable to them. Of total
short-term year-end borrowings at December 29, 2001, $70.8 million consisted of
outstanding commercial paper. The remaining $20.4 million of short-term
borrowings was loaned by several banks, with $13.5 million in euros and $6.9
million in various other currencies. As of December 30, 2000, $237.1 million of
the Company's outstanding borrowings that were due within one year by their
terms were classified as non-current due to the Company's ability and intent
that those borrowings be outstanding through 2001.
The mortgage note is a 10-year note amortized over a 22-year period with
monthly payments of principal and interest of $47,988. The note
is collateralized by certain real estate, and a balloon payment of $4.4 million
is due to be paid June 1, 2009.
Debt agreements require the Company to meet certain financial covenants.
54 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
As of December 29, 2001, the Company had $395.9 million of unused lines of
credit, including $229.2 million under the Company's $300.0 million
multicurrency financing facility (the $300 Million Facility) and $166.7 million
available under the $187.1 million foreign uncommitted lines of credit. The
$300 Million Facility supports the Company's commercial paper borrowing
capability and expires on August 8, 2002. The Company expects to negotiate a
new committed credit facility in the first half of 2002. Interest paid on total
debt in 2001, 2000 and 1999, was $19.5 million, $24.2 million and $21.6
million, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Due to their short maturities or their insignificance, the carrying amounts of
cash and cash equivalents, accounts and notes receivable, accounts payable,
accrued liabilities and short-term borrowings approximated their fair values at
December 29, 2001 and December 30, 2000. The approximate fair value of the
Company's $100 million of 7.25 percent notes due in 2006, determined through
reference to market yields, was $102.1 million and $97.1 million as of December
29, 2001 and December 30, 2000, respectively. The fair value of the Company's
$150 million of 7.91% notes due in 2011, determined through reference to market
yields, was $153.1 million as of December 29, 2001. The fair value of the
remaining long-term debt approximated its book value at the end of 2001 and
2000.
TUPPERWARE CORPORATION > 55
Notes to the Consolidated Financial Statements
DERIVATIVE FINANCIAL INSTRUMENTS
Following is a listing of the Company's outstanding derivative financial
instruments as of December 29, 2001 and December 30, 2000:
FORWARD CONTRACTS 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
CONTRACT RATE CONTRACT RATE
(DOLLARS IN MILLIONS) BUY SELL OF EXCHANGE BUY SELL OF EXCHANGE
- ----------------------------------------------------------------------------------------------------------------------------------
Euro with U.S. dollars $ 36.5 0.8945 $ 90.2 0.9091
Japanese yen with U.S. dollars 8.5 129.3753 49.2 109.0744
Mexican pesos with U.S. dollars 35.0 9.7443 33.9 9.8267
Australian dollars with U.S. dollars 20.2 0.5077 13.3 0.5559
Philippine pesos with U.S. dollars 2.2 53.1646 9.5 51.8567
Swiss francs with U.S. dollars 40.7 1.6313 8.3 1.6488
Singapore dollars with U.S. dollars 5.4 1.8362 4.6 1.7139
Greek drachma with U.S. dollars -- -- 4.4 370.5800
Danish krona with U.S. dollars 3.3 8.3055 3.2 8.1195
Canadian dollars with U.S. dollars -- -- 1.4 1.5086
Hong Kong dollars with U.S. dollars 1.7 7.7970 -- --
South Korean won with U.S. dollars 13.3 1,321.5447 -- --
Euro for U.S. dollars $ 68.6 0.8971 $ 40.0 0.9103
Brazilian reals for U.S. dollars 2.8 2.5150 -- --
Swiss francs for U.S. dollars 3.2 1.6541 11.8 1.6508
Mexican pesos for U.S. dollars 13.0 9.3197 9.7 9.8156
Japanese yen for U.S. dollars 56.2 120.4819 8.0 107.0402
British pounds for U.S. dollars 6.4 1.4415 4.5 1.4763
South Korean won for U.S. dollars -- -- 1.5 1,130.5000
Philippine pesos for U.S. dollars 2.0 52.3560 1.2 51.8500
Australian dollars for U.S. dollars 2.3 0.5123 -- --
Other currencies 4.1 7.9 Various 4.2 4.4 Various
- ---------------------------------------------------------------------------------------------------------------------------------
$170.9 $ 162.4 $222.2 $ 81.1
- ---------------------------------------------------------------------------------------------------------------------------------
56 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Tupperware(R) Impressions Classic Bowl [PHOTO]
The Company markets its products in over 100 countries and is exposed to
fluctuations in foreign currency exchange rates on the earnings, cash flows and
financial position of its international operations. Although this currency risk
is partially mitigated by the natural hedge arising from the Company's local
manufacturing in many markets, a strengthening U.S. dollar generally has a
negative impact on the Company. In response to this fact, the Company uses
financial instruments to hedge its exposure and manage the foreign exchange
impact to its financial statements. At its inception, a derivative financial
instrument is designated as a fair value, cash flow or net equity hedge.
Fair value hedges are entered into with financial instruments such as forward
contracts with the objective of controlling exposure to certain foreign
exchange risks primarily associated with accounts receivable, accounts payable
and non-permanent intercompany transactions. In assessing hedge effectiveness,
the Company excludes forward points. The Company also enters into interest rate
swaps to convert fixed-rate long-term debt to floating-rate debt and records
the impact as a component of interest expense. The Company's intent is to
maintain approximately half of its debt with floating interest rates. At
December 29, 2001, the Company had an interest rate swap in place with a
notional amount of $75.0 million that terminates on July 15, 2011 and converts
half of the Company's $150.0 million notes due in 2011 from fixed to floating
rate debt. The Company pays a variable rate of LIBOR plus 1.97 percent and
receives a fixed-rate payment of 7.91 percent on dates consistent with interest
payment dates on the notes. In the fourth quarter of 2001, the Company
terminated a swap related to the other $75.0 million of these notes and
realized a net gain of $5.4 million, which has been capitalized as part of the
debt and is being amortized as a reduction of interest expense over the
remaining life of the related debt. The hedging relationships the Company has
entered into have been highly effective, and the ineffective net gains
recognized in other expense for the years 2001, 2000 and 1999 were immaterial.
The Company also uses derivative financial instruments to hedge foreign
currency exposures resulting from firm purchase commitments or anticipated
transactions, and classifies these as cash flow hedges. The Company generally
enters into cash flow hedge contracts for periods ranging from three to six
months. The effective portion of the gain or loss on the hedging instrument is
recorded in other comprehensive loss, and is reclassified into earnings as the
transactions being hedged are recorded. The ineffective portion of the gain or
loss on the hedging instrument is recorded in other expense. As of December 29,
2001 and for the years 2001, 2000 and 1999, the amounts recorded in other
comprehensive loss and other expense were not material.
In addition to fair value and cash flow hedges, the Company uses financial
instruments such as forward contracts to hedge a portion of its net equity
investment in international operations, and classifies these as net equity
hedges. For the years 2001, 2000 and 1999, the Company recorded net gains
associated with these hedges of $5.8 million, $8.5 million and $10.9 million,
respectively, in other comprehensive loss. Due to the permanent
TUPPERWARE CORPORATION > 57
Quick Shake(R) Container [PHOTO]
nature of the investments, the Company does not anticipate reclassifying any
portion of this amount to the income statement in the next 12 months.
The Company's derivative financial instruments at December 29, 2001 and
December 30, 2000 consisted solely of the financial instruments summarized
above. All of the contracts, with the exception of the interest rate swap,
mature within 12 months. Related to the forward contracts, the "buy" amounts
represent the U.S. dollar equivalent of commitments to purchase foreign
currencies and the "sell" amounts represent the U.S. dollar equivalent of
commitments to sell foreign currencies, all translated at the year-end market
exchange rates for the U.S. dollar. All forward contracts are hedging
cross-currency intercompany loans that are not permanent in nature or firm
purchase commitments.
The Company's theoretical credit risk for each derivative instrument is its
replacement cost, but management believes that the risk of incurring credit
losses is remote and that such losses, if any, would not be material. The
Company also is exposed to market risk on its derivative instruments due to
potential changes in foreign exchange rates; however, such market risk would be
substantially offset by changes in the valuation of the underlying items being
hedged. For all outstanding derivative instruments, the net accrued loss was
$6.3 million and $0.8 million, at December 29, 2001 and December 30, 2000,
respectively, and was recorded in accrued liabilities. The aggregate impact of
all foreign currency transactions was not material to the Company's income.
NOTE 8: SUBSCRIPTIONS RECEIVABLE
In October 2000, a subsidiary of the Company adopted a Management Stock
Purchase Plan (the MSPP), which provides for eligible executives to purchase
Company stock using full recourse loans provided by the subsidiary. Under the
MSPP, in 2000, the Company loaned approximately $13.6 million to 33 senior
executives to purchase 847,000 common shares from treasury stock. The annual
interest rate is 5.96 percent, and all dividends, while the loans are
outstanding, will be applied toward interest due. During 2001, nine senior
executives purchased 74,500 shares of common shares from treasury stock. Total
loan value for this group is $1.7 million and the loans have interest rates of
5.21 percent to 5.96 percent. During 2001, two participants left the Company
and sold, at the current market price, 21,000 shares to the Company to satisfy
loans totaling $0.3 million. Under the terms of the MSPP, if the Company's
stock price per share is below the market issue price at the principal
repayment dates, the Company will make cash bonus payments, up to 25 percent of
the outstanding principal on the loan then due. For each share purchased, an
option on two shares was granted under the 2000 Incentive Plan. See Note 11 --
Incentive Compensation Plans. The loans have been recorded as subscriptions
receivable, and are secured by the shares purchased. Principal amounts are due
as follows: $3.3 million in 2005, $3.8 million in 2006, $0.4 million in 2007,
$6.7 million in 2008 and $0.8 million in 2009.
58 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
On November 30, 1998, the Company made a non-recourse, non-interest bearing
loan of $7.7 million (the loan) to its chairman and chief executive officer
(chairman), the proceeds of which were used by the chairman to buy in the open
market 400,000 shares of the Company's common stock (the shares) at an average
price of $19.12 per share. The shares are pledged to secure the repayment of
the loan. The loan has been recorded as a subscription receivable and is due
November 12, 2006, with voluntary prepayments permitted commencing November 12,
2002. Ten percent of any annual cash bonus award to the chairman is being
applied against the balance of the loan. As the loan is reduced by voluntary
payments after November 12, 2002, the lien against the shares will be reduced.
The subscription receivable is reduced as payments are received. In late 2000,
the loan and related agreements were assigned to a subsidiary of the Company.
The outstanding loan balance was $7.5 million and $7.6 million at December 29,
2001 and December 30, 2000, respectively.
NOTE 9: INCOME TAXES
For income tax purposes, the domestic and foreign components of income (loss)
before taxes were as follows:
(IN MILLIONS) 2001 2000 1999
- -------------------------------------------------------------
Domestic $37.6 $ 39.0 $(15.7)
Foreign 44.6 62.1 119.0
- -------------------------------------------------------------
Total $82.2 $101.1 $103.3
- -------------------------------------------------------------
The provision for income taxes was as follows:
(IN MILLIONS) 2001 2000 1999
- ---------------------------------------------------------------
Current:
Federal $13.6 $10.8 $ 8.7
Foreign 13.2 25.4 26.1
State 1.9 3.6 3.5
- ---------------------------------------------------------------
28.7 39.8 38.3
- ---------------------------------------------------------------
Deferred:
Federal (4.4) (13.5) (15.9)
Foreign (3.1) 0.8 3.7
State (0.5) (0.9) (1.8)
- ---------------------------------------------------------------
(8.0) (13.6) (14.0)
- ---------------------------------------------------------------
Total $20.7 $26.2 $24.3
- ---------------------------------------------------------------
TUPPERWARE CORPORATION > 59
Notes to the Consolidated Financial Statements
The differences between the provision for income taxes and income taxes
computed using the U.S. federal statutory rate were as follows:
(IN MILLIONS) 2001 2000 1999
- -------------------------------------------------------------------------------------
Amount computed using
statutory rate $28.8 $35.4 $36.1
Increase (reduction) in taxes
resulting from:
Net benefit from repatriating
foreign earnings (10.1) (13.2) (0.3)
Foreign income taxes (14.1) (1.3) (18.4)
Change in valuation allowance
for deferred tax assets 8.3 1.0 6.9
Re-engineering costs with
no associated tax benefit 5.7 4.8 --
Other 2.1 (0.5) --
- -------------------------------------------------------------------------------------
Total $20.7 $26.2 $24.3
- -------------------------------------------------------------------------------------
In 2001, 2000 and 1999, the Company recognized $0.3 million, $0.4 million and
$0.2 million, respectively, of benefits for deductions associated with the
exercise of employee stock options. These benefits were added directly to
paid-in capital, and are not reflected in the provision for income taxes.
Deferred tax assets (liabilities) are composed of the following:
(IN MILLIONS) 2001 2000
- ---------------------------------------------------------------------------------
Depreciation $ (3.2) $ (9.3)
Other (1.8) (2.6)
- ---------------------------------------------------------------------------------
Gross deferred tax liabilities (5.0) (11.9)
- ---------------------------------------------------------------------------------
Credit and net operating loss carry forwards 62.0 50.7
Fixed assets basis differences 55.5 57.2
Employee benefits accruals 12.8 13.7
Post-retirement benefits 15.9 15.9
Inventory reserves 14.4 16.8
Bad debt reserves 10.2 10.7
Other accruals 44.9 44.3
- ---------------------------------------------------------------------------------
Gross deferred tax assets 215.7 209.3
- ---------------------------------------------------------------------------------
Valuation allowances (40.1) (31.8)
- ---------------------------------------------------------------------------------
Net deferred tax assets $170.6 $165.6
- ---------------------------------------------------------------------------------
60 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Freezer Mates(R) Fresh & Pure Ice Tray [PHOTO]
At December 29, 2001, the Company had a domestic net operating loss carry
forward of $0.4 million, which expires in 2018, and foreign net operating loss
carry forwards of $148.1 million. Of the total net operating loss carry
forwards, $81.8 million expire at various dates from 2002 to 2011, while the
remainder have unlimited lives. During 2001, the Company recognized net
benefits of $7.8 million related to foreign net operating loss carry forwards.
Repatriation of foreign earnings would not result in a significant incremental
cost to the Company. At December 29, 2001, the Company had foreign tax credit
carry forwards of $8.2 million, which expire in 2005 and 2006. At December 29,
2001 and December 30, 2000, the Company had valuation allowances against
certain deferred tax assets totaling $40.1 million and $31.8 million,
respectively. These valuation allowances relate to tax assets in jurisdictions
where it is management's best estimate that there is not a greater than 50
percent probability that the benefit of the assets will be realized in the
associated tax returns. The likelihood of realizing the benefit of deferred tax
assets is assessed on an ongoing basis. Consequently, future material changes
in the valuation allowance are possible. The Company paid income taxes in 2001,
2000 and 1999 of $26.7 million, $35.5 million and $47.7 million, respectively.
NOTE 10: RETIREMENT BENEFIT PLANS
Pension Plans. The Company has various defined benefit pension plans covering
substantially all domestic employees, except those employed by BeautiControl,
and certain employees in other countries. In addition to providing pension
benefits, the Company provides certain post-retirement healthcare and life
insurance benefits for selected U.S. and Canadian employees. Most employees and
retirees outside the United States are covered by government healthcare
programs. Employees may become eligible for these benefits if they reach normal
retirement age while working for the Company and satisfy certain years of
service requirements. The medical plans are contributory, with retiree
contributions adjusted annually, and contain other cost-sharing features, such
as deductibles and coinsurance. The medical plans include an allowance for
Medicare for post-65 retirees. The Company has the right to modify or terminate
these plans.
TUPPERWARE CORPORATION > 61
The funded status of the plans was as follows:
U.S. PLANS FOREIGN PLANS
- -----------------------------------------------------------------------------------------------------------------------------
PENSION BENEFITS POST-RETIREMENT BENEFITS PENSION BENEFITS
- -----------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS) 2001 2000 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------
Change in benefit obligations:
Beginning balance $30.9 $26.3 $ 39.3 $ 36.5 $ 53.6 $ 58.6
Service cost 1.2 1.2 0.4 0.4 2.2 2.4
Interest cost 2.2 2.2 3.2 2.8 2.5 2.5
Actuarial (gain) loss (0.7) 3.4 6.5 2.7 5.9 2.7
Benefits paid (1.5) (2.2) (3.8) (3.1) (4.6) (6.9)
Special termination benefits 1.3 -- -- -- -- --
Impact of exchange rates -- -- -- -- (4.7) (5.7)
- -----------------------------------------------------------------------------------------------------------------------------
Ending balance 33.4 30.9 45.6 39.3 54.9 53.6
- -----------------------------------------------------------------------------------------------------------------------------
Change in plan assets at fair value:
Beginning balance 26.2 27.1 -- -- 24.8 29.8
Actual return on plan assets (1.3) 0.2 -- -- 0.4 2.1
Company contributions 2.6 1.1 3.8 3.1 2.7 2.3
Plan participant contributions -- -- -- -- 0.2 0.2
Benefits paid (1.5) (2.2) (3.8) (3.1) (4.6) (6.9)
Impact of exchange rates -- -- -- -- (2.0) (2.7)
- -----------------------------------------------------------------------------------------------------------------------------
Ending balance 26.0 26.2 -- -- 21.5 24.8
- -----------------------------------------------------------------------------------------------------------------------------
Funded status of the plan (7.4) (4.7) (45.6) (39.3) (33.4) (28.8)
Unrecognized actuarial loss (gain) 1.7 (1.3) 7.3 1.0 (3.8) (2.1)
Unrecognized prior service benefit (0.1) (0.1) (1.4) (1.5) 0.2 --
Unrecognized net transaction (asset) liability -- -- -- -- 0.5 0.9
Impact of exchange rates -- -- -- -- (0.1) (0.1)
- -----------------------------------------------------------------------------------------------------------------------------
Accrued benefit cost $(5.8) $(6.1) $(39.7) $(39.8) $(36.6) $(30.1)
- -----------------------------------------------------------------------------------------------------------------------------
Weighted average assumptions:
Discount rate 7.3% 7.5% 7.3% 7.5% 4.6% 4.7%
Return on plan assets 9.0 9.0 n/a n/a 5.1 5.2
Salary growth rate 4.5 4.5 n/a n/a 2.8 2.3
- -----------------------------------------------------------------------------------------------------------------------------
62 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
Plan assets consist primarily of equity securities and corporate and government
bonds. At December 29, 2001 and December 30, 2000, the accumulated benefit
obligations of certain pension plans exceeded those plans' assets. For those
plans, the accumulated benefit obligations were $64.6 million and $65.7
million, and the fair value of those plans' assets were $39.3 million and $41.3
million as of December 29, 2001 and December 30, 2000, respectively.
During 2001, the Company implemented a corporate office restructuring that
included a voluntary early retirement program. In this program, employees that
met age and years of service requirements and elected to participate in the
program were able to receive pension benefits commensurate with being five
years older than their actual age and having five additional years of service
than they actually had. The impact of this program on the pension obligation is
shown previously.
The costs associated with the plans were as follows:
(IN MILLIONS) PENSION BENEFITS POST-RETIREMENT BENEFITS
- ----------------------------------------------------------------------------------------------------------------------------------
2001 2000 1999 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Components of net periodic benefit cost:
Service cost $3.4 $3.4 $4.0 $0.4 $0.4 $0.4
Interest cost 4.7 4.7 4.5 3.2 2.8 2.6
Actual return on plan assets (2.1) (1.2) (5.2) 0.1 -- --
Net amortization and (deferral) (1.4) (2.2) 2.4 (0.1) (0.1) (0.1)
- ----------------------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $4.6 $4.7 $5.7 $3.6 $3.1 $2.9
- ----------------------------------------------------------------------------------------------------------------------------------
The assumed healthcare cost trend rate was 8.0 percent and is projected to
decrease to 5.0 percent in 2004 where it is expected to remain thereafter. The
healthcare cost trend rate assumption has a significant effect on the amounts
reported. A one-percentage point change in the assumed healthcare cost trend
rates would have the following effects:
TUPPERWARE CORPORATION > 63
Forget-Me-Not(TM) Refrigerator Container [PHOTO]
(IN MILLIONS) ONE PERCENTAGE POINT
- ------------------------------------------------------------------------------------
INCREASE DECREASE
- ------------------------------------------------------------------------------------
Effect on total of service and
interest cost components $0.3 $(0.3)
Effect on post-retirement benefit obligation 4.0 (3.5)
- ------------------------------------------------------------------------------------
The Company also has several savings, thrift and profit-sharing plans. Its
contributions to these plans are based upon various levels of employee
participation. The total cost of these plans was $5.0 million in 2001, $4.5
million in 2000 and $3.8 million in 1999.
NOTE 11: INCENTIVE COMPENSATION PLANS
Incentive Plans. Certain officers and other key employees of the Company
participate in the Tupperware Corporation 2000 and 1996 Incentive Plans (the
Incentive Plans). Annual performance awards and awards of options to purchase
Tupperware shares and of restricted stock are made under the Incentive Plans.
For the 2000 Incentive Plan, the total number of shares available for grant was
4,000,000, of which 200,000 shares may be used for restricted stock awards. For
the 1996 Incentive Plan, the total number of shares available for grant was
7,600,000 of which 300,000 shares may be used for restricted stock awards. As
of December 29, 2001, shares available for award under the Incentive Plans
totaled 84,726, all of which could be granted in the form of restricted stock.
For options granted in 2001 and 2000, respectively, approximately 0.1 million
and 1.7 million shares under options were granted in conjunction with the MSPP.
See Note 8-- Subscriptions Receivable.
Other than the 157,118 options exchanged for certain BeautiControl options, all
options' exercise prices are equal to the underlying shares' grant-date market
values. Outstanding options granted in 2001, 2000 and 1999, other than those
options granted under the MSPP and options on 34,400 shares granted in 2000,
which vest in two years, have vesting dates that are three years from the date
of grant. Options granted under the MSPP vest seven years after date of the
grant; however, vesting may be accelerated beginning three years after the
grant date if certain stock appreciation goals are attained. Outstanding
restricted shares have initial vesting periods ranging from 1 to 4 years. All
outstanding options have exercise periods that are 10 years from the date of
grant.
Director Plan. Under the Tupperware Corporation Director Stock Plan (Director
Plan), non-employee directors may elect to receive their annual retainers in
the form of stock or stock options. Options granted to directors become
exercisable on the last day of the fiscal year in which they are granted, have
a term of 10 years and have an exercise price that compensates for the foregone
cash retainer. This amount and the intrinsic value of stock grants on the date
of award have been recognized as an expense by the Company in the year granted.
The number of shares initially available for grant under the Director Plan and
the number of shares available as of December 29, 2001, were 300,000 and
180,640, respectively.
64 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
Earned cash performance awards of $4.7 million, $12.8 million and $9.3 million
were included in the consolidated statement of income for 2001, 2000 and 1999,
respectively.
Stock option and restricted stock activity and information about stock options
for the Incentive Plans and the Director Plan are summarized in the following
tables:
SHARES SUBJECT AVERAGE OPTION
STOCK OPTIONS TO OPTION PRICE PER SHARE
- ---------------------------------------------------------------------------
Balance at December 26, 1998 5,022,213 $24.75
Granted 1,434,650 18.62
Canceled (233,732) 29.78
Exercised (70,805) 11.42
- ----------------------------------------------------
Balance at December 25, 1999 6,152,326 23.28
Granted 3,818,968 17.11
Canceled (485,262) 22.64
Exercised (115,707) 9.86
- ----------------------------------------------------
Balance at December 30, 2000 9,370,325 20.95
Granted 1,583,900 20.88
Canceled (215,933) 25.47
Exercised (235,634) 15.49
- ----------------------------------------------------
Balance at December 29, 2001 10,502,658 20.92
- ---------------------------------------------------------------------------
SHARES SHARES AVAILABLE
RESTRICTED STOCK OUTSTANDING FOR ISSUANCE
- -----------------------------------------------------------------------------------------------
Balance at December 26, 1998 150,373 81,844
Awarded 11,000 (11,000)
Canceled -- --
Vested (101,711) --
- -----------------------------------------------------------------------------------------------
Balance at December 25, 1999 59,662 70,844
Increase in shares available due to adoption of
2000 Incentive Plan 200,000
Shares transferred to stock option pool (23,151)
Awarded 15,000 (15,000)
Canceled (6,000) 6,000
Vested (3,662) --
- -----------------------------------------------------------------------------------------------
Balance at December 30, 2000 65,000 238,693
Shares transferred from stock option pool 48,257
Shares transferred to stock option pool (199,224)
Awarded 3,000 (3,000)
Vested (44,000) --
- -----------------------------------------------------------------------------------------------
Balance at December 29, 2001 24,000 84,726
- -----------------------------------------------------------------------------------------------
TUPPERWARE CORPORATION > 65
Notes to the Consolidated Financial Statements
Stock Options Outstanding
AS OF DECEMBER 29, 2001 OUTSTANDING EXERCISABLE
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE
EXERCISE PRICE RANGE SHARES REMAINING LIFE EXERCISE PRICE SHARES EXERCISE PRICE
- --------------------------------------------------------------------------------------------------------------------------
$8.40 - $12.08 53,850 7.9 $9.75 52,850 $9.72
$12.85 - $15.94 2,111,499 7.3 15.45 377,249 13.28
$18.56 - $25.55 6,801,691 7.9 19.74 1,498,091 21.02
$26.70 - $34.28 1,039,143 1.9 30.21 708,643 31.85
$39.18 - $42.25 496,475 3.8 42.18 496,475 42.18
- ------------------------------------------- -------------
10,502,658 7.0 20.92 3,133,308 25.70
- --------------------------------------------------------------------------------------------------------------------------
The Company uses the intrinsic value method of accounting for stock-based
compensation. The Company has estimated the fair value of its option grants.
The weighted average fair value of 2001 grants was $6.26. If these fair value
estimates had been used to record compensation expense in the consolidated
statements of income, net income would have been reduced by $6.6 million, $5.6
million and $4.5 million, to $54.9 million, $69.3 million and $74.5 million, or
$0.93, $1.19 and $1.29 per diluted common share ($0.95, $1.20 and $1.30 per
basic common share) in 2001, 2000 and 1999, respectively.
The fair value of the stock option grants was estimated using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of 3.5
percent for 2001, 2000 and 1999 grants; expected volatility of 40 percent for
all grants; risk-free interest rates of 4.2 percent for 2001 grants and 5.9
percent for 2000 and 1999 grants; and expected lives of 5 years for all grants.
Compensation expense associated with restricted stock grants is equal to the
fair market value of the shares on the date of grant and is recognized ratably
over the required holding period. Compensation expense associated with
restricted stock grants was not significant.
NOTE 12: SEGMENT INFORMATION
The Company manufactures and distributes products primarily through independent
direct sales forces: (1) plastic food storage and serving containers, microwave
cookware and educational toys marketed under the Tupperware brand worldwide,
and organized into four geographic segments, and (2) premium cosmetics and skin
care products marketed under the BeautiControl brand.
66 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FridgeSmart(TM) Container [PHOTO]
(IN MILLIONS) 2001 2000 1999
- -----------------------------------------------------------------------------------------------------
Net sales:
Europe $ 400.4 $ 424.1 $ 489.1
Asia Pacific 213.4 242.0 242.3
Latin America 201.3 193.0 154.2
United States 234.6 201.8 178.2
BeautiControl(b) 64.7 12.2 --
- -----------------------------------------------------------------------------------------------------
Total net sales $1,114.4 $1,073.1 $1,063.8
- -----------------------------------------------------------------------------------------------------
Operating profit:
Europe $ 74.8 $ 94.1 $ 110.7
Asia Pacific 28.5 44.8 35.0
Latin America 17.2(a) 8.0(a) 12.0
United States 31.1 15.6 4.7
BeautiControl(b) 0.5 0.1 --
- -----------------------------------------------------------------------------------------------------
Total operating profit 152.1 162.6 162.4
Unallocated expenses (23.4)(a) (27.9)(a) (23.1)(a)
Re-engineering and impairment charges (24.8)(a) (12.5)(a) (15.1)(a)
Interest expense, net (21.7) (21.1) (20.9)
- -----------------------------------------------------------------------------------------------------
Income before income taxes $ 82.2 $ 101.1 $ 103.3
- -----------------------------------------------------------------------------------------------------
See footnote explanations on page 68.
TUPPERWARE CORPORATION > 67
(IN MILLIONS) 2001 2000 1999
- --------------------------------------------------------------------------------------------
Depreciation and amortization:
Europe $ 16.0 $ 17.0 $ 22.0
Asia Pacific 8.5 10.6 11.5
Latin America 9.1 9.9 10.0
United States 10.9 11.6 10.3
BeautiControl(b) 2.7 0.2 --
Corporate 2.7 2.8 1.8
- --------------------------------------------------------------------------------------------
Total depreciation and amortization $ 49.9 $ 52.1 $ 55.6
- --------------------------------------------------------------------------------------------
Capital expenditures:
Europe $ 16.5 $ 16.4 $ 14.1
Asia Pacific 7.7 7.2 2.6
Latin America 7.2 7.3 11.5
United States 13.5 6.5 11.5
BeautiControl(b) 1.4 -- --
Corporate 8.5 8.9 1.2
- --------------------------------------------------------------------------------------------
Total capital expenditures $ 54.8 $ 46.3 $ 40.9
- --------------------------------------------------------------------------------------------
Identifiable assets:
Europe $233.5 $228.1 $237.6
Asia Pacific 116.2 128.2 139.1
Latin America 121.6 130.8 148.7
United States 152.6 141.7 153.4
BeautiControl(b) 82.3 79.1 --
Corporate 139.5 141.5 117.3
- --------------------------------------------------------------------------------------------
Total identifiable assets $845.7 $849.4 $796.1
- --------------------------------------------------------------------------------------------
a. The Company announced a re-engineering program in 1999. The
re-engineering and impairment charges line provides for severance and
other exit costs. In addition, unallocated expenses include $3.2
million, $7.9 million and $1.0 million for 2001, 2000 and 1999,
respectively, for internal and external consulting costs incurred in
connection with the program. Additionally, in 2001 and 2000,
respectively, $7.7 million and $6.3 million was recorded in Latin
America's operating profit related primarily to the write-down of
inventory and reserves against receivables related to changes in the
distributor models in certain countries. See Note 3 to the financial
statements.
b. BeautiControl was acquired in October 2000. See Note 2 to the
consolidated financial statements.
68 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
Sales and operating profit in the preceding table are from transactions with
customers. Inter-segment transfers of inventory are accounted for at cost.
Except for the segregation of the BeautiControl segment, sales generated by
product line are not captured in the financial statements and disclosure of
the information is impractical. Sales to a single customer did not exceed 10
percent of total sales in any segment. Export sales were insignificant. Sales
to customers in Germany were $170.4 million, $184.8 million and $209.2 million
in 2001, 2000 and 1999, respectively ($179.1 million and $173.5 million in 2000
and 1999, respectively, at 2001 exchange rates). No other foreign country's
sales were material to the Company's total sales. Unallocated expenses are
corporate expenses and other items not directly related to the operations of
any particular segment.
Corporate assets consist of cash and assets maintained for general corporate
purposes. The United States was the only country with long-lived assets greater
than 10 percent of the Company's total assets at December 29, 2001. As of the
end of 2001, 2000 and 1999, respectively, long-lived assets in the United
States were $106.0 million, $99.3 million and $109.0 million.
As of December 29, 2001 and December 30, 2000, the Company's net investment in
international operations was $30.4 million and $190.8 million, respectively.
The Company is subject to the usual economic risks associated with
international operations; however, these risks are partially mitigated by the
broad geographic dispersion of the Company's operations.
NOTE 13: COMMITMENTS AND CONTINGENCIES
The Company and certain subsidiaries are involved in litigation and various
legal matters that are being defended and handled in the ordinary course of
business. Included among these matters are environmental issues. None of the
Company's contingencies are expected to have a material adverse effect on its
financial position, results of operations or cash flow.
Kraft Foods, Inc., which was formerly affiliated with Premark International,
Inc., the Company's former parent, and Tupperware, has assumed any liabilities
arising out of certain divested or discontinued businesses. The liabilities
assumed include matters alleging product liability, environmental liability
and infringement of patents.
Operating leases. Rental expense for operating leases totaled $36.1 million in
2001, $35.0 million in 2000 and $37.0 million in 1999. Approximate minimum
rental commitments under noncancelable operating leases in effect at December
29, 2001, were: 2002 -- $14.3 million; 2003 -- $6.3 million; 2004 -- $2.0
million; 2005 -- $0.3 million and after 2005 -- $0.3 million.
TUPPERWARE CORPORATION > 69
NOTE 14: QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
Following is a summary of the unaudited interim results of operations for each
quarter in the years ended December 29, 2001 and December 30, 2000.
(IN MILLIONS,
EXCEPT PER SHARE AMOUNTS) FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
- ---------------------------------------------------------------------------------------------------------------
Year ended December 29, 2001:
Net sales $263.7 $285.4 $238.6 $326.7
Cost of products sold 88.1 94.0 82.0(a) 109.9(a)
Net income (loss) 17.9(a) 27.7(a) (12.6)(a) 28.5(a,b)
Net income (loss) per share:
Basic 0.31(a) 0.48(a) (0.21)(a) 0.48(a)
Diluted 0.30(a) 0.47(a) (0.21)(a) 0.48(a)
Dividends declared per share 0.22 0.22 0.22 0.22
Composite stock price range:
High 26.00 24.95 24.98 22.80
Low 19.25 19.20 19.09 17.70
Close 23.86 23.43 19.94 19.44
Year ended December 30, 2000:
Net sales $273.1(c) $278.4(c) $225.1(c) $296.5
Cost of products sold 93.8 93.5 74.8 96.3(d)
Net income 19.2(d) 29.1(d) 4.7(d) 21.9(d)
Net income per share:
Basic 0.33(d) 0.50(d) 0.09(d) 0.38(d)
Diluted 0.33(d) 0.50(d) 0.08(d) 0.38(d)
Dividends declared per share 0.22 0.22 0.22 0.22
Composite stock price range:
High 19.00 24.50 23.13 20.62
Low 14.56 15.50 17.19 15.50
Close 15.81 22.02 18.00 20.44
- ---------------------------------------------------------------------------------------------------------------
a. Includes pretax re-engineering costs of $1.6 million ($1.3 million
after tax), $2.2 million ($1.7 million after tax), $22.0 million
($19.8 million after tax) and $9.9 million($9.7 million after tax) in
the first, second, third and fourth quarters, respectively. See Note 3
to the consolidated financial statements.
b. Reflects a reduction of the effective tax rate in the fourth quarter
due to the successful resolution of certain outstanding issues.
c. In October 2000, the Emerging Issues Task Force issued EITF 00-10
ACCOUNTING FOR SHIPPING AND HANDLING REVENUES AND COSTS, which
requires fees billed to customers associated with shipping and
handling to be classified as revenue. Accordingly, the Company
reclassified the revenue related to the shipping and handling fees
billed to customers, which was previously recorded as a reduction of
delivery expense, to net sales. For 2000, $4.5 million, $5.8 million
and $4.9 million were reclassified in the first, second and third
quarters, respectively.
d. Includes pretax re-engineering costs of $2.5 million ($1.9 million
after tax), $2.1 million ($1.7 million after tax), $1.8 million ($1.3
million after tax) and $20.3 million($19.3 million after tax) in the
first, second, third and fourth quarters, respectively. See Note 3 to
the consolidated financial statements.
70 > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Tupperware(R) Impressions Tumbler [PHOTO]
NOTE 15: RIGHTS AGREEMENT
In 1996, the Company adopted a shareholders' rights plan with a duration of 10
years, under which shareholders received a right to purchase one one-hundredth
of a share of preferred stock for each right owned. The preferred shares are
cumulative and are superior to common shares with regard to dividends. Each
share is entitled to 100 votes on all matters submitted to the shareholders for
a vote. The rights are exercisable if 15 percent of the Company's common stock
is acquired or threatened to be acquired, and the rights are redeemable by the
Company if exercisability has not been triggered. Under certain circumstances,
if 50 percent or more of the Company's consolidated assets or earning power are
sold, a right entitles the holder to buy shares of the Company equal in value
to twice the exercise price of each right. Upon acquisition of the Company by a
third party, a holder could receive the right to purchase stock in the
acquirer. The foregoing percentage thresholds may be reduced to not less than
10 percent.
TUPPERWARE CORPORATION > 71
Report of Independent Certified Public Accountants
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF TUPPERWARE CORPORATION:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders' equity and comprehensive
income and of cash flows present fairly, in all material respects, the financial
position of Tupperware Corporation and its subsidiaries at December 29, 2001 and
December 30, 2000, and the results of their operations and their cash flows for
each of the three years in the period ended December 29, 2001, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of Tupperware Corporation's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion.
/s/PricewaterhouseCoopers LLP
- -------------------------------------------
PricewaterhouseCoopers LLP
Orlando, Florida
February 14, 2002
72 > REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Report of Management
The management of Tupperware is responsible for the preparation of the
financial statements and other information contained in this Annual Report. The
financial statements were prepared in accordance with accounting principles
generally accepted in the United States of America and include amounts that are
based upon management's best estimate and judgments, as appropriate.
PricewaterhouseCoopers LLP has audited these financial statements and has
expressed an independent opinion thereon.
The Company maintains internal control systems, policies and procedures
designed to provide reasonable assurance that assets are safeguarded, that
transactions are executed in accordance with management's authorization and
properly recorded, and that accounting records may be relied upon for the
preparation of financial information. There are inherent limitations in all
internal controls systems based on the fact that the cost of such systems
should not exceed the benefits derived. Management believes that the Company's
systems provide the appropriate balance of costs and benefits. The Company also
maintains an internal auditing function that evaluates and reports on the
adequacy and effectiveness of internal accounting controls, policies and
procedures.
The Audit and Corporate Responsibility Committee of the Board of Directors is
composed entirely of outside directors. The Committee meets periodically and
independently with management, the vice president of internal audit and
PricewaterhouseCoopers LLP to discuss the Company's internal accounting
controls, auditing and financial reporting matters. The vice president of
internal audit and PricewaterhouseCoopers LLP have unrestricted access to the
Audit and Corporate Responsibility Committee.
Management recognizes its responsibility for conducting the Company's affairs
in a manner that is responsive to the interests of its shareholders and its
employees. This responsibility is characterized in the Code of Conduct, which
provides that the Company will fully comply with laws, rules and regulations of
every country in which it operates and will observe the rules of ethical
business conduct. Employees of the Company are expected and directed to manage
the business of the Company accordingly.
/s/ Rick Goings /s/ Pradeep Mathur
- ------------------------------------ ----------------------------------
RICK GOINGS PRADEEP MATHUR
CHAIRMAN AND CHIEF EXECUTIVE OFFICER SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
TUPPERWARE CORPORATION > 73