UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the 39 weeks ended September 27, 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 November 6, 1997, 61,012,106 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
September 27, 1997 and September 28, 1996...... 2
Consolidated Statement of Income
(Unaudited) for the 39 week periods ended
September 27, 1997 and September 28, 1996...... 3
Consolidated Balance Sheet
(Unaudited) as of September 27, 1997 and
December 28, 1996.............................. 4
Consolidated Statement of Cash Flows
(Unaudited) for the 39 week periods ended
September 27, 1997 and September 28, 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. 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
--------------------------
September 27, September 28,
1997 1996
------------ ------------
(In millions, except per share amounts)
Net sales............................... $ 251.4 $ 290.6
-------- --------
Costs and expenses:
Cost of products sold................. 95.7 104.6
Delivery, sales, and
administrative expense.............. 143.8 154.9
Interest expense...................... 5.7 4.7
Interest income....................... (0.8) (0.8)
Costs associated with becoming
an independent company.............. - 3.2
Other expense (income), net........... 2.4 (0.3)
-------- --------
Total costs and expenses........... 246.8 266.3
-------- --------
Income before income taxes.............. 4.6 24.3
Provision for income taxes.............. 1.2 6.2
-------- --------
Net income.............................. $ 3.4 $ 18.1
======== ========
Net income per common and common
equivalent share........................ $ 0.06 $ 0.29
======== ========
Average number of common and common
equivalent shares outstanding.......... 61.7 63.1
======== ========
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 2 -
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
39 Weeks Ended
--------------------------
September 27, September 28,
1997 1996
------------ ------------
(In millions, except per share amounts)
Net sales............................... $ 909.2 $ 998.6
-------- --------
Costs and expenses:
Cost of products sold................. 340.8 359.3
Delivery, sales, and
administrative expense.............. 458.8 491.2
Interest expense...................... 15.8 7.2
Interest income....................... (2.5) (2.7)
Costs associated with becoming
an independent company.............. - 5.8
Other expense, net.................... 6.7 1.4
-------- --------
Total costs and expenses........... 819.6 862.2
-------- --------
Income before income taxes.............. 89.6 136.4
Provision for income taxes.............. 23.3 36.1
-------- --------
Net income ............................. $ 66.3 $ 100.3
======== ========
Net income (1996 pro forma) per common
and common equivalent share............ $ 1.07 $ 1.52
======== ========
Average number of common and
common equivalent shares
outstanding............................ 62.3 63.2
======== ========
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 3 -
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
(UNAUDITED)
September 27, December 28,
1997 1996
------------- ------------
(In millions)
Cash and cash equivalents............ $ 38.7 $ 53.0
Accounts receivable.................. 147.6 147.2
Less allowances for
doubtful accounts................ (27.9) (25.9)
--------- ---------
119.7 121.3
Inventories.......................... 215.1 252.8
Deferred income tax benefits......... 29.6 35.1
Prepaid expenses and other assets.... 56.6 61.0
--------- ---------
Total current assets............. 459.7 523.2
--------- ---------
Deferred income tax benefits......... 70.6 56.4
Property, plant, and equipment....... 959.3 974.2
Less accumulated depreciation...... (653.0) (643.2)
--------- ---------
306.3 331.0
Long-term receivables, net of
allowances of $39.7 million at
September 27, 1997 and $38.0
million at December 28, 1996....... 42.4 33.5
Other assets......................... 29.8 34.4
--------- ---------
Total assets..................... $ 908.8 $ 978.5
========= =========
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 4 -
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
September 27, December 28,
1997 1996
------------- ------------
(Dollars in millions, except per share amounts)
Accounts payable................... $ 72.6 $ 95.6
Short-term borrowings and current
portion of long-term debt........ 68.7 25.3
Accrued liabilities................ 201.6 246.1
-------- --------
Total current liabilities...... 342.9 367.0
-------- --------
Long-term debt..................... 230.3 215.3
Accrued postretirement
benefit cost..................... 37.9 36.9
Other liabilities.................. 54.2 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................ 442.2 418.2
Treasury stock, 1,335,183 shares
at cost....................... (52.6) -
Unearned portion of restricted
stock issued for future
service....................... (2.8) (3.9)
Cumulative foreign currency
adjustments................... (163.0) (128.5)
-------- --------
Total shareholders' equity..... 243.5 305.5
-------- --------
Total liabilities and
shareholders' equity......... $ 908.8 $ 978.5
======== ========
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 5 -
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
39 Weeks Ended
---------------------------
September 27, September 28,
1997 1996
------------- -------------
(In millions)
Cash flows from operating activities:
Net income............................. $ 66.3 $100.3
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation....................... 49.3 48.8
Loss on sale of assets............. 1.5 2.1
Foreign exchange loss, net......... 0.9 1.0
Changes in assets and liabilities:
Increase in accounts receivable.... (9.4) (24.8)
Decrease (increase) in inventory... 20.7 (51.4)
Decrease in accounts payable
and accrued liabilities.......... (24.2) (4.0)
Decrease in income taxes payable... (15.3) (12.1)
Increase in net deferred
income taxes..................... (10.0) (5.5)
Other, net......................... (6.4) (15.0)
-------- --------
Net cash provided by operating
activities...................... 73.4 39.4
-------- --------
Cash flows from investing activities:
Capital expenditures................... (48.2) (64.3)
-------- --------
Cash flows from financing activities:
Special dividend to Premark............ - (284.9)
Net transactions with Premark
other than special dividend.......... - 43.4
Dividend payments to shareholders...... (40.8) -
Proceeds from exercise of
stock options........................ 3.4 0.8
Payments to acquire treasury stock..... (55.7) -
Net increase in short-term debt........ 46.6 130.4
Proceeds from issuance of
long-term debt....................... 15.0 201.8
Repayment of long-term debt............ - (100.3)
-------- --------
Net cash used in financing
activities...................... (31.5) (8.8)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents................... (8.0) (3.1)
-------- --------
Net decrease in cash and
cash equivalents....................... (14.3) (36.8)
Cash and cash equivalents at beginning
of year................................ 53.0 97.3
-------- --------
Cash and cash equivalents at end
of period.............................. $ 38.7 $ 60.5
======== ========
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):
September 27, December 28,
1997 1996
------------ ------------
Finished goods.................. $ 98.8 $ 127.5
Work in process................. 49.0 49.0
Raw materials and supplies...... 67.3 76.3
-------- --------
Total inventories $ 215.1 $ 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 16, 1996.
Pro forma net income per common and common equivalent share for the 1996
year-to-date period 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 39 week period ended September 28,
1996.
Historical net income for the 39 weeks ended September 28, 1996 is
adjusted for $7.0 million of additional interest expense, net of $2.7
million of tax benefits, for the five-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. 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 39 weeks ended September 27, 1997, compared with the 13 weeks
and 39 weeks ended September 28, 1996, and changes in financial condition
during the 39 weeks ended September 27, 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 third quarter ended September 27, 1997 were $251.4
million, a decrease of 13.5 percent from $290.6 million in 1996. Net
income for the third quarter of 1997 decreased by $14.7 million, or
80.8 percent, to $3.4 million or $0.06 per share from 1996 net income
of $18.1 million or $0.29 per share. A stronger U.S. dollar in 1997
had a negative impact of $25.3 million or 8 percentage points on the
sales comparison, and a $2.9 million or 4 percentage point negative
impact on the net income comparison for the quarter.
For the year-to-date period, sales were $909.2 million, which was a
decline of $89.4 million or 9.0 percent from $998.6 million in 1996.
Net income of $66.3 million for the 39 weeks ended September 27, 1997
decreased by $29.7 million or 30.9 percent from 1996 pro forma net
income of $96.0 million. For the nine months, the negative impact
of foreign exchange was $67.0 million or 7 percentage points on the
sales comparison and $10.0 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 $100.3 million for
the 39-week period ending September 28, 1996.
For both the 13- and 39-week periods, before the negative impact of
foreign exchange, sales and operating results increased in Europe
and decreased in Latin America and the United States. Sales in
Asia Pacific increased slightly for the quarter, but decreased for
the nine months, and operating profit in the area decreased for
both the quarter and the year-to-date period. The third quarter
and first nine months of 1996 included $3.2 million and $5.8 million
($1.9 million or $0.03 per share and $3.5 million or $0.06 per share
after tax), respectively, of costs associated with becoming an
independent company. International operations contributed 87 percent
and 88 percent of third quarter and first nine months 1997 sales,
respectively, compared with 88 percent and 86 percent, respectively,
for the 1996 periods. In the third quarters of both 1997 and 1996,
international operations generated all of the Company's operating
profit and 100 and 99 percent of its operating profit in
the respective 1997 and 1996 year-to-date periods.
Costs and Expenses
The cost of products sold in relation to sales increased to 38.1
percent and 37.5 percent in the third quarter and first three
quarters of 1997, respectively, from 36.0 percent in both 1996
periods. The increases primarily resulted from higher unit
manufacturing costs in the United States and Asia Pacific,
reflecting reduced sales levels and the Company's inventory
reduction plan. Delivery, sales, and administrative expense as
a percentage of sales for the quarterly and year-to-date periods
was 57.2 percent and 50.5 percent, respectively, in 1997 and
53.3 percent and 49.2 percent, respectively, in 1996. Although
expenses were lower in both 1997 periods compared with 1996, they
did not decrease as significantly as sales since many of the costs
are fixed for a period of time.
Net Interest Expense
In the third quarter and first three quarters of 1997, the Company
incurred net interest expense of $4.9 million and $13.3 million,
respectively. For the comparable 1996 periods, the Company
incurred net interest expense of $3.9 million and $4.5 million,
respectively. The higher net expense in the third quarter of 1997,
primarily reflects the higher interest on the Company's fixed rate
debt, which was issued after the third quarter of 1996, compared
with the interest rate on the commercial paper the new borrowings
replaced. 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 interest expense in 1997 in the year-to-date period.
Tax Rate
The effective tax rates for both the third quarter and first three
quarters of 1997 were 26.0 percent compared with 25.6 percent
and 26.5 percent, respectively, for the 1996 periods. 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 $ 97.2 $112.1 $(14.9) (13)% $(17.4) (16) 39% 39%
Operating
profit 12.8 14.9 (2.1) (15) (2.5) (18) 98 44
Year to Date:
Net sales $396.9 $414.0 $(17.1) (4)% $(47.3) (12) 44% 41%
Operating
profit 88.7 85.4 3.3 4 (9.7) (13) 78 54
The slight sales and operating profit increase in the quarter before the effect
of foreign exchange reflects modest sales increases in several markets offset
by continued weakness in the United Kingdom and, with regard to profit, lower
promotional spending in Germany. For the year-to-date period, before the
unfavorable impact of foreign exchange, the increases primarily reflect volume
improvement in Germany, Italy, and Greece, along with sales of a more favorable
mix of products in South Africa. These factors were partially offset by
continued weakness in the United Kingdom and France. The volume fluctuations
reflect the size of the active sales forces. The operating profit improvement
followed from the higher sales as well as from reduced promotional spending in
Germany. In Germany, the first quarter of 1996 was negatively affected by
weak economic conditions and low sales during an important promotional period.
Foreign exchange had a negative impact on the sales and profit comparisons
due to the dollar's strength against currencies throughout the region.
Asia Pacific
Foreign
exchange Percent of
Decrease impact total
1997 1996 Dollar Percent Dollar pp 1997 1996
------ ------ ------ ------- ------- ---- ---- ----
Quarter:
Net sales $ 69.1 $ 75.4 $ (6.3) (8)% $ (7.8) (10) 27% 26%
Operating
profit 8.8 11.9 (3.1) (26) (1.3) (10) 67 36
Year to Date:
Net sales $210.2 $245.1 $(34.9) (14)% $(19.4) (7) 23% 25%
Operating
profit 21.7 40.5 (18.8) (46) (3.7) (5) 19 25
The increase in sales for the quarter, before the impact of foreign exchange,
reflects the sale of new products in the Philippines and higher volume from
improved productivity in Korea. The decrease in operating profit resulted from
the impact of lower production to reduce inventories and higher spending on
the new market entries in India and China, which more than offset the benefit
from the higher sales volume. For the year-to-date period, the lower sales
were from lower volume in Japan and the Philippines, due to fewer active
sellers. The lower operating profit resulted from the decreased sales volume
along with a lower gross margin due to lower production levels and increased
costs associated with the new markets of China and India, which was only
partially offset by a reduction in promotional spending. The negative
impact of foreign exchange for both periods was due to the dollar's
strength against currencies throughout the region.
Latin America
Foreign
exchange Percent of
Decrease impact total
1997 1996 Dollar Percent Dollar pp 1997 1996
------ ------ ------ ------- ------- ---- ---- ----
Quarter:
Net sales $ 53.2 $ 68.2 $(15.0) (22)% $(0.2) - 21% 22%
Operating
(loss)
profit (2.6) 11.0 (13.6) (123) - - nm 33
Year to Date:
Net sales $192.8 $201.3 (8.5) (4)% $(0.4) - 21% 20%
Operating
profit 19.8 31.0 (11.2) (36) (0.1) - 17 20
The sales decreases for both the quarter and nine-month period reflect
lower sales volumes in Brazil and Argentina, which were partially offset
by higher volume in Mexico in the year-to-date period. The lower volumes
in Brazil and Argentina are the result of significantly lower sales force
productivity and activity levels, which are being addressed through
training of distributors and the sales forces on direct selling
fundamentals and by refocusing on party plan versus one-on-one selling.
The third quarter operating loss and the lower operating profit for the
nine months are the result of the lower sales volume and higher
promotional costs in Brazil and promotional and operating costs
in Mexico.
United States
Percent of
Decrease total
1997 1996 Dollar Percent 1997 1996
------ ------ ------ ------- ---- ----
Quarter:
Net sales $ 31.9 $ 34.9 $ (3.0) (8)% 13% 12%
Operating
loss (6.0) (4.4) (1.6) (36) nm nm
Year to Date:
Net sales $109.3 $138.2 $(28.9) (21)% 12% 14%
Operating
(loss)
profit (16.0) 2.2 (18.2) (823) nm 1
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 smaller
active sales forces compared with the 1996 periods. New programs,
including a two-tiered vehicle program, have been implemented to
increase recruiting and activity. The increase in the operating
losses in 1997 reflect the impact of lower sales, along with higher
manufacturing costs per unit due to the lower production volume.
Additionally, promotional expenses increased because of the new vehicle
program; 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 $116.8 million as of September 27, 1997, compared
with $156.2 million as of the end of 1996. The decrease primarily
relates to an increase in short-term borrowings and a decrease in
inventories, which was partially offset by a decrease in accounts
payable and accrued liabilities. The Company classifies a portion
of its outstanding borrowings that are due within one year by their
terms as non-current due to its ability and intent that they be
outstanding throughout the succeeding twelve months. Based on
the timing of the Company's cash inflows during the year, the amount
classified as short-term was relatively higher at the end of the
third quarter of 1997 compared with the end of 1996.
Net cash provided by operating activities in the first nine months
of 1997 was $73.4 million, compared with $39.4 million in the 1996
period. The improvement primarily reflects the 1997 reduction in
inventories versus an increase in 1996, as a result of the Company's
inventory reduction initiative, and a significantly lower increase
in accounts receivable reflecting sales trends and collection efforts.
Partially offsetting these factors were lower net income and a 1997
decrease in accounts payable and accrued liabilities versus an
increase in 1996, resulting primarily from lower annual executive
incentive compensation, the timing of payments, and lower sales.
The $48.2 million of cash used in investing activities was for
capital expenditures, the most significant portion being for new molds.
On May 28, 1997, a subsidiary of the Company sold to the public
$15.0 million of 6.84 percent fixed rate notes, which mature on
June 2, 2000 (Notes). The proceeds of the Notes were used
to refinance a portion of the Company's outstanding commercial
paper borrowings. On August 8, 1997, the Company amended its
$300 million unsecured multicurrency credit facility to extend
its maturity date from May 16, 2001 to August 8, 2002. As of
September 27, 1997, the Company had $300 million available
under the multicurrency credit facility. The multicurrency credit
facility along with $231 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 three quarters, the Company repurchased approximately
1.4 million shares of its common stock at an average cost of
approximately $40 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 third quarter of
1997 is filed as an exhibit to this report.
(b) Reports on Form 8-K
During the quarter, the Registrant did not file any current
reports on Form 8-K.
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
November 6, 1997