UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the 26 weeks ended June 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-11657
__________________
TUPPERWARE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-4062333
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 2353, Orlando, Florida 32802
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 826-5050
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes___X___ No_______
As of August 6, 1997, 61,246,246 shares of the Common Stock,
$0.01 par value, of the Registrant were outstanding.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
a) Financial Statements of Registrant
Page
Index Number
Consolidated Statement of Income
(Unaudited) for the 13 week periods ended
June 28, 1997 and June 29, 1996................ 2
Consolidated Statement of Income
(Unaudited) for the 26 week periods ended
June 28, 1997 and June 29, 1996................ 3
Consolidated Balance Sheet
(Unaudited) as of June 28, 1997 and
December 28, 1996.............................. 4
Consolidated Statement of Cash Flows
(Unaudited) for the 26 week periods
ended June 28, 1997 and June 29, 1996.......... 6
Notes to Consolidated Financial
Statements (Unaudited)......................... 7
The financial statements of the Registrant included herein have
been prepared, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the
Commission). Although certain information normally included in
financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted,
the Registrant believes that the disclosures are adequate to
make the information presented not misleading. It is suggested
that these consolidated financial statements be read in
conjunction with the financial statements and the notes thereto
included in the Annual Report on Form 10-K of the Registrant for
its fiscal year ended December 28, 1996.
The consolidated financial statements included herein reflect
all adjustments, consisting only of normal recurring items,
which, in the opinion of management, are necessary to present a
fair statement of the results for the interim periods
presented.
The results for interim periods are not necessarily indicative
of trends or results to be expected for a full year.
- 1 -
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
13 Weeks Ended
--------------------------
June 28, June 29,
1997 1996
------------ ------------
(In millions, except per share amounts)
Net sales............................... $ 342.5 $ 379.0
-------- --------
Costs and expenses:
Cost of products sold................. 131.1 134.4
Delivery, sales, and
administrative expense.............. 154.5 170.0
Interest expense...................... 5.4 1.5
Interest income....................... (0.9) (0.5)
Costs associated with becoming
an independent company.............. - 2.6
Other expense, net.................... 1.5 2.2
-------- --------
Total costs and expenses........... 291.6 310.2
-------- --------
Income before income taxes.............. 50.9 68.8
Provision for income taxes.............. 12.9 18.2
-------- --------
Net income.............................. $ 38.0 $ 50.6
======== ========
Net income (1996 pro forma) per common
and common equivalent share............ $ 0.61 $ 0.77
======== ========
Average number of common and
common equivalent shares
outstanding............................ 62.1 63.1
======== ========
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 2 -
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
26 Weeks Ended
--------------------------
June 28, June 29,
1997 1996
------------ ------------
(In millions, except per share amounts)
Net sales............................... $ 657.8 $ 708.0
-------- --------
Costs and expenses:
Cost of products sold................. 245.1 254.7
Delivery, sales, and
administrative expense.............. 315.0 336.3
Interest expense...................... 10.1 2.5
Interest income....................... (1.7) (1.9)
Costs associated with becoming
an independent company.............. - 2.6
Other expense, net.................... 4.3 1.7
-------- --------
Total costs and expenses........... 572.8 595.9
-------- --------
Income before income taxes.............. 85.0 112.1
Provision for income taxes.............. 22.1 29.9
-------- --------
Net income.............................. $ 62.9 $ 82.2
======== ========
Net income (1996 pro forma) per common
and common equivalent share............ $ 1.01 $ 1.23
======== ========
Average number of common and
common equivalent shares
outstanding............................ 62.6 63.1
======== ========
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 3 -
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
(UNAUDITED)
June 28, December 28,
1997 1996
--------- ----------
(In millions)
Cash and cash equivalents............ $ 56.5 $ 53.0
Accounts receivable.................. 154.9 147.2
Less allowances for
doubtful accounts................ (27.5) (25.9)
--------- ---------
127.4 121.3
Inventories.......................... 224.2 252.8
Deferred income tax benefits......... 27.8 35.1
Prepaid expenses and other assets.... 59.3 61.0
--------- ---------
Total current assets............. 495.2 523.2
--------- ---------
Deferred income tax benefits......... 70.9 56.4
Property, plant, and equipment....... 966.4 974.2
Less accumulated depreciation...... (654.2) (643.2)
--------- ---------
312.2 331.0
Long-term receivables, net of
allowances of $39.1 million at
June 28, 1997 and $40.2
million at December 28, 1996....... 51.1 46.6
Other assets ....................... 20.3 21.3
--------- ---------
Total assets..................... $ 949.7 $ 978.5
========= =========
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 4 -
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
June 28, December 28,
1997 1996
------------- ------------
(Dollars in millions, except per share amounts)
Accounts payable................... $ 71.1 $ 95.6
Short-term borrowings and current
portion of long-term debt........ 16.7 25.3
Accrued liabilities................ 230.3 246.1
-------- --------
Total current liabilities...... 318.1 367.0
-------- --------
Long-term debt..................... 256.7 215.3
Accrued postretirement
benefit cost..................... 37.4 36.9
Other liabilities.................. 52.8 53.8
Shareholders' equity:
Preferred stock, $0.01 par value,
200,000,000 shares authorized;
none issued................... - -
Common stock, $0.01 par value,
600,000,000 shares authorized;
62,367,289 shares issued...... 0.6 0.6
Capital surplus.................. 19.1 19.1
Retained earnings................ 452.4 418.2
Treasury stock, 963,747 shares
at cost....................... (39.9) -
Unearned portion of restricted
stock issued for future
service (3.4) (3.9)
Cumulative foreign currency
adjustments................... (144.1) (128.5)
-------- --------
Total shareholders' equity..... 284.7 305.5
-------- --------
Total liabilities and
shareholders' equity......... $ 949.7 $ 978.5
======== ========
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 5 -
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
26 Weeks Ended
---------------------------
June 28, June 29,
1997 1996
------------- -------------
(In millions)
Cash flows from operating activities:
Net income............................. $ 62.9 $ 82.2
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation....................... 32.7 31.4
Loss on sale of assets............. 1.3 1.8
Foreign exhange loss, net.......... 0.6 0.9
Changes in assets and liabilities:
Increase in accounts receivable.... (13.7) (36.6)
Decrease (increase) in inventory... 20.1 (17.8)
(Decrease) increase in accounts
payable and accrued liabilities.. (24.3) 15.8
Increase in income taxes payable... 0.9 7.0
Increase in net deferred
income taxes..................... (7.1) (5.0)
Other, net......................... (5.3) (21.7)
-------- --------
Net cash provided by operating
activities...................... 68.1 58.0
-------- --------
Cash flows from investing activities:
Capital expenditures................... (28.6) (39.9)
-------- --------
Cash flows from financing activities:
Special dividend to Premark............ - (284.9)
Net transactions with Premark
other than special dividend.......... - 55.4
Dividend payments to shareholders...... (27.3) -
Proceeds from exercise of
stock options........................ 3.4 -
Payments to acquire treasury stock..... (42.8) -
Net increase in short-term debt........ 19.3 105.3
Proceeds from issuance of
long-term debt....................... 15.0 201.8
Repayment of long-term debt............ - (100.3)
-------- --------
Net cash used in financing
activities...................... (32.4) (22.7)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents................... (3.6) 1.5
-------- --------
Net increase (decrease) in cash and
cash equivalents....................... 3.5 (3.1)
Cash and cash equivalents at beginning
of year................................ 53.0 97.3
-------- --------
Cash and cash equivalents at end
of period.............................. $ 56.5 $ 94.2
======== ========
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 6 -
TUPPERWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all footnotes necessary for a fair
presentation of financial position, results of operations, and changes
in financial position in conformity with generally accepted accounting
principles. Certain prior year amounts have been reclassified to conform
with the current year's presentation. In the opinion of management,
the unaudited consolidated financial statements include all adjustments,
consisting only of normal recurring items, necessary for a fair presentation
of financial position and results of operations. The results of operations
of any interim period are not necessarily indicative of the results that may
be expected for a full fiscal year.
Note 2: Inventories
Inventories, by component, are summarized as follows (in millions):
June 28, December 28,
1997 1996
----------- -----------
Finished goods.................. $ 102.7 $ 127.5
Work in process................. 48.6 49.0
Raw materials and supplies...... 72.9 76.3
-------- --------
Total inventories $ 224.2 $ 252.8
======== ========
Note 3: Distribution of Tupperware
On November 1, 1995, Premark International, Inc.'s (Premark) board of
directors authorized Premark management to proceed with a plan to
establish the Tupperware business (Tupperware, the Company) as an
independent company through a stock distribution to Premark's
shareholders (the Distribution). The Distribution was effected
on May 31, 1996, through a 1-for-1 distribution of stock, which was
tax free to Premark's shareholders pursuant to a ruling received from
the Internal Revenue Service. As part of this transaction, on May 24, 1996,
Dart Industries Inc. (Dart), a wholly-owned subsidiary of the Company,
paid a $284.9 million special dividend to Premark (the Dividend Payment).
The Dividend Payment was funded through available cash and a portion of the
$268.0 million that was borrowed under the Company's $300 million
multicurrency credit agreement that was entered into on May 17, 1996.
Pro forma net income per common and common equivalent share for the 1996
periods is calculated as if the Distribution had occurred at the beginning
of fiscal 1996 and assumes that Tupperware used $25.0 million of available
cash and $271.9 million of additional borrowings to fund both the Dividend
Payment of $284.9 million and $12.0 million for the amount that Tupperware
paid in July 1996 related to the quarterly dividend declared on Premark's
common stock on May 1, 1996. Pro forma net income is based on the Company's
historical net income for the 13- and 26-week periods ended June 29, 1996.
Historical net income for the 13 weeks ended June 29, 1996 is adjusted for
$2.8 million of additional interest expense, net of $1.1 million of tax
benefits, for the two month period prior to the Distribution in the second
quarter of 1996, related to the increase in borrowings at an assumed
interest rate of 6.2 percent. For the 26-week period ended June 29, 1996,
the comparable adjustments are $7.0 million for interest expense and $2.7
million for the related tax benefit, for the five-month period prior to
the Distribution. Pro forma net income per share includes pro forma net
income divided by an assumed 63.1 million weighted average common and
common equivalent shares.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is a discussion of the results of operations for the 13
weeks and 26 weeks ended June 28, 1997, compared with the 13 weeks and
26 weeks ended June 29, 1996, and changes in financial condition during
the 26 weeks ended June 28, 1997.
The Distribution
As described in Note 3 to the consolidated financial statements, Tupperware
was established as an independent company in May 1996.
Net Sales and Net Income
Net sales for the second quarter ended June 28, 1997 were $342.5 million, a
decrease of 9.6 percent from $379.0 million in 1996. Net income for the
second quarter of 1997 decreased by $10.9 million, or 22.3 percent, to $38.0
million or $0.61 per share from 1996 pro forma net income of $48.9 million or
$0.77 per share. A stronger U.S. dollar in 1997 had a negative impact of
$21.0 million or 5 percentage points on the sales comparison, and a $4.3
million or 8 percentage point negative impact on the net income comparison
for the quarter.
For the year-to-date period, sales were $657.8 million, which was a decline
of $50.2 million or 7.1 percent from $708.0 million in 1996. Net income of
$62.9 million for the 26 weeks ended June 28, 1997 decreased by $15.0 million
or 19.3 percent from 1996 pro forma net income of $77.9 million. For the
first half, the negative impact of foreign exchange was $41.7 million or
6 percentage points on the sales comparison and $7.1 million or 8 percentage
points on the comparison of 1997 net income with 1996 pro forma net income.
Net income prior to the pro forma adjustments was $50.6 million and $82.2
million, respectively, for the 13-week and 26-week periods ending June 29,
1996.
For both the 13- and 26-week periods, before the negative impact of foreign
exchange, sales and operating profit in Europe and Latin America increased
while sales and operating profit in the United States and Asia Pacific
decreased. Unallocated corporate expenses of $3.0 million and $7.8 million
for the 13 and 26 weeks ended June 28, 1997, respectively, were $3.5
million and $2.6 million less than the comparable 1996 periods, primarily
reflecting lower provisions for annual executive incentive payments. The
second quarter and first half of 1996 included $2.6 million ($1.6 million
or $0.03 per share after tax) of costs associated with becoming an
independent company. International operations contributed 87 percent and
88 percent of second quarter and first half 1997 sales, respectively,
compared with 84 percent and 85 percent, respectively, for the 1996
periods. In 1997, international operations generated all of the
Company's operating profit in both the second quarter and year-to-date
period. In 1996, 89 percent and 95 percent of operating profit,
respectively, were earned by international operations in the second quarter
and first half.
Costs and Expenses
The cost of products sold in relation to sales increased to 38.3 percent
in the second quarter of 1997 from 35.5 percent in 1996. For the six-month
periods, the percentage increased to 37.3 in 1997 from 36.0 in 1996. The
primary reason for the increases was lower production volumes due to the
lower sales level and in connection with the effort to reduce inventories.
Delivery, sales, and administrative expense as a percentage of sales for the
quarterly and year-to-date periods was 45.1 percent and 47.9 percent,
respectively, in 1997 and 44.9 percent and 47.5 percent, respectively,
in 1996. The slight increases in both the quarterly and year-to-date
periods reflect the lower sales volume in the United States and Asia
Pacific.
Net Interest Expense
In the second quarter and first six months of 1997, the Company incurred net
interest expense of $4.5 million and $8.4 million, respectively. For the
comparable 1996 periods, the Company incurred net interest expense of $1.0
million and $0.6 million, respectively. In connection with the Distribution,
Dart paid Premark a special dividend of $284.9 million on May 24, 1996. The
Company incurred a significant amount of incremental borrowings in order to
fund the majority of the special dividend, which led to the higher net
interest expense in the 1997 periods.
Tax Rate
The effective tax rates for the second quarter and first half of 1997 were
25.3 percent and 26.0 percent, respectively, compared with 26.5 percent
and 26.7 percent, respectively, for 1996. For the year ended December 28,
1996, the effective tax rate was 25.5 percent. The effective tax rates are
significantly below the U.S. statutory tax rate reflecting the availability
of excess foreign tax credits and the reduction of certain valuation
allowances against deferred tax assets where it is now management's best
estimate that there is a greater than 50 percent probability that the benefit
of the assets will be realized in the associated tax returns.
Regional Results (dollars in millions)
Europe
Foreign
Increase exchange Percent of
(Decrease) impact total
1997 1996 Dollar Percent Dollar pp 1997 1996
------ ------ ------ ------- ------- ---- ---- ----
Quarter:
Net sales $144.8 $155.1 $(10.3) (7%) $(14.8) (10) 42% 41%
Operating
profit 37.4 40.3 (2.9) (7) (4.3) (11) 64 51
First Half:
Net sales $299.7 $301.9 $ (2.2) (1%) $(29.9) (11) 46% 43%
Operating
profit 75.9 70.5 5.4 8 (7.2) (12) 75 56
Sales increased in both the quarter and first half before the effect of
foreign exchange. The most significant increases were in Germany and
Italy, although several smaller markets contributed to the improvement.
Offsetting the higher local currency sales in these markets were
lower sales in France and the United Kingdom in both reporting periods.
The improvement in Germany was attributable to increased volume from a
larger number of sellers and a higher activity rate for both the quarter
and year-to-date period. The first quarter of 1996 was negatively affected
by weak economic conditions and low sales during an important promotional
period. Italy's sales improvement was also from higher volume resulting
from a larger sales force. The weak sales in France and the United Kingdom
continue to reflect smaller active sales forces.
The local currency improvements in both periods' operating profit reflect
the improved sales volume, along with more efficient promotional spending
in Germany. Foreign exchange had a negative impact on the sales and profit
comparisons due to the dollar's strength against the currencies throughout
the region.
Asia Pacific
Foreign
exchange Percent of
Decrease impact total
1997 1996 Dollar Percent Dollar pp 1997 1996
------ ------ ------ ------- ------- ---- ---- ----
Quarter:
Net sales $ 75.5 $ 93.5 $(18.0) (19)% $ (6.0) (5) 22% 25%
Operating
profit 10.4 19.3 (8.9) (46) (1.5) (4) 18 24
First Half:
Net sales $141.1 $169.7 $(28.6) (17)% $(11.6) (6) 21% 24%
Operating
profit 12.9 28.6 (15.7) (55) (2.4) (4) 13 23
The decreases in Asia Pacific sales were from lower volume in Japan and the
Philippines, due to fewer active sellers. The lower operating profit
followed from the decreased sales volume along with a lower gross margin
due to lower production, as well as an increase in costs associated with
the new markets of China and India. Operating expenses did not decrease in
line with the decrease in sales, also contributing to the lower profits.
The negative impact of foreign exchange on the comparisons for the region
was primarily from Japan and Korea.
Latin America
Foreign
exchange Percent of
Increase impact total
1997 1996 Dollar Percent Dollar pp 1997 1996
------ ------ ------ ------- ------- ---- ---- ----
Quarter:
Net sales $ 76.4 $ 70.9 $ 5.5 8% $(0.2) - 22% 18%
Operating
profit 12.8 10.8 2.0 18 - (1) 22 14
First Half:
Net sales $139.6 $133.1 $ 6.5 5% $(0.2) - 21% 18%
Operating
profit 22.4 20.0 2.4 12 (0.1) - 22 16
In Latin America, the quarterly and year-to-date increases in sales primarily
reflect higher volume in Mexico, partially offset by lower volume in Brazil
and Argentina. In Mexico, the improvement was from a larger number of active
sellers, reflecting recruiting and activity incentives. In Brazil and
Argentina, the sales forces increased, but productivity and activity levels
fell. The lower productivity and activity has resulted from the fast pace of
expansion of the businesses over the past few years. Training programs
focusing on the interaction between distributors and their sales forces are
underway to address these issues. The increases in operating profit for
the quarter and first half reflect the higher sales, and for the year-to-date
period, a slight improvement in gross margin from less product outsourcing
in Mexico.
United States
Percent of
Decrease total
1997 1996 Dollar Percent 1997 1996
------ ------ ------ ------- ---- ----
Quarter:
Net sales $ 45.8 $ 59.5 $(13.7) (23)% 14% 16%
Operating
(loss)
profit (2.2) 8.5 (10.7) (126) n/a 11
First Half:
Net sales $ 77.4 $103.3 $(25.9) (25)% 12% 15%
Operating
(loss)
profit (10.0) 6.6 (16.6) (252) n/a 5
The lower U.S. sales reflect the impact of implementing higher sales force
standards in the latter half of 1996. The new standards led to a smaller
sales force, along with lower productivity compared with the 1996 periods.
New programs, including a two-tiered vehicle program, have recently been
implemented to increase recruiting and activity. The increase in the
operating losses in 1997 reflects the impact of lower sales, along with
higher manufacturing costs per unit due to the lower volume. Additionally,
promotional expenses increased because of the new programs; however,
operating expenses were lower in both 1997 periods than in 1996, reflecting
the effort to reduce the operating losses.
Financial Condition
Working capital was $177.1 million as of June 28, 1997, compared with
$156.2 million as of the end of 1996. The increase primarily relates to
a reduction in accounts payable and accruals that was only partially
offset by a reduction in inventories, reflecting the Company's effort to
bring its inventories down to a more appropriate level.
Net cash provided by operating activities in the first half of 1997 was
$68.1 million, compared with $58.0 million in the first half of 1996. The
improvement primarily reflects the 1997 reduction in inventories versus an
increase in 1996 and a significantly lower increase in accounts receivable
reflecting sales trends and collection efforts. Partially offsetting these
factors were lower net income and the decrease in accounts payable and accruals
resulting primarily from lower annual executive incentive compensation, the
timing of payments, and lower sales. The $28.6 million of cash used in
investing activities was for capital expenditures, primarily for new molds.
As of June 28, 1997, the Company had $300 million available under its
multicurrency credit facility. This facility along along with $183 million
of foreign uncommitted lines of credit and cash generated by operating
activities, are expected to be adequate to finance any additional working
capital needs and capital expenditures.
In the first quarter of 1997, the company began making share repurchases
under its program announced in 1996. During the first half, the Company
repurchased approximately 1.0 million shares of its common stock at an
average cost of approximately $41 per share.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
(11) A statement of computation of per share earnings
is filed as an exhibit to this report.
(27) A Financial Data Schedule for the second quarter of
1997 is filed as an exhibit to this report.
(b) Reports on Form 8-K
During the quarter, the Registrant filed one current
report on Form 8-K on May 28, 1997, to file the form of a
distribution agreement and forms of notes in relation to
the Medium-Term Notes, Series A of the Registrant issued
in connection with its Registration Statement on Form S-3
(No. 333-12125)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
TUPPERWARE CORPORATION
By: Thomas M. Roehlk
-------------------------
Senior Vice President,
General Counsel and
Secretary
By: Thomas P. O'Neill, Jr.
-------------------------
Senior Vice President
and Chief Financial
Officer
Orlando, Florida
August 7, 1997