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 13 weeks ended March 28, 1998
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 May 8, 1998, 62,367,289 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
March 28, 1998 and March 29, 1997..............
Consolidated Balance Sheet
(Unaudited) as of March 28, 1998 and
December 27, 1997..............................
Consolidated Statement of Cash Flows
(Unaudited) for the 13 week periods
ended March 28, 1998 and March 29, 1997........
Notes to Consolidated Financial
Statements (Unaudited).........................
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 27, 1997.
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.
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
13 Weeks Ended
--------------------------
March 28, March 29,
1998 1997
------------ ------------
(In millions, except per share data)
Net sales............................... $ 268.8 $ 315.3
-------- --------
Costs and expenses:
Cost of products sold................. 96.3 114.0
Delivery, sales, and
administrative expense.............. 147.9 160.5
Interest expense...................... 4.5 4.7
Interest income....................... (0.6) (0.8)
Other expense, net.................... 0.3 2.8
-------- --------
Total costs and expenses........... 248.4 281.2
-------- --------
Income before income taxes.............. 20.4 34.1
Provision for income taxes.............. 5.0 9.2
-------- --------
Net income.............................. $ 15.4 $ 24.9
======== ========
Net income per common share:
Basic.................................. $ 0.26 $ 0.40
======== ========
Diluted................................ $ 0.26 $ 0.40
======== ========
See Notes to Consolidated Financial Statements.
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
(UNAUDITED)
March 28, December 27,
1998 1997
--------- ----------
(In millions)
Cash and cash equivalents............ $ 14.0 $ 22.1
Accounts receivable.................. 131.8 137.4
Less allowances for
doubtful accounts................ (37.6) (40.4)
--------- ---------
94.2 97.0
Inventories.......................... 182.6 184.2
Deferred income tax benefits......... 44.4 44.4
Prepaid expenses and other........... 62.1 55.4
--------- ---------
Total current assets............. 397.3 403.1
--------- ---------
Deferred income tax benefits......... 77.3 82.7
Property, plant, and equipment....... 947.1 944.0
Less accumulated depreciation...... (662.1) (651.0)
--------- ---------
285.0 293.0
Long-term receivables, net of
allowances of $42.0 million at
March 28, 1998, and $39.3
million at December 27, 1997....... 41.1 36.4
Other assets ....................... 31.6 32.0
--------- ---------
Total assets..................... $ 832.3 $ 847.2
========= =========
See Notes to Consolidated Financial Statements.
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
March 28, December 27,
1998 1997
------------- ------------
(Dollars in millions, except per share amounts)
Accounts payable................... $ 60.6 $ 75.4
Short-term borrowings and current
portion of long-term debt........ 57.4 -
Accrued liabilities................ 202.7 224.4
------- -------
Total current liabilities...... 320.7 299.8
------- -------
Long-term debt..................... 266.8 236.7
Accrued postretirement
benefit cost..................... 38.3 38.0
Other liabilities.................. 56.5 58.5
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.................. 19.5 19.5
Retained earnings................ 443.6 441.4
Treasury stock, 3,949,081 shares
at March 28, 1998, and
1,402,207 shares at
December 27, 1997, at cost.... (122.3) (54.0)
Unearned portion of restricted
stock issued for future
service (1.9) (2.4)
Accumulated other comprehensive
income........................ (189.5) (190.9)
------- -------
Total shareholders' equity..... 150.0 214.2
------- -------
Total liabilities and
shareholders' equity......... $832.3 $847.2
======= =======
See Notes to Consolidated Financial Statements.
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
13 Weeks Ended
---------------------------
March 28, March 29,
1998 1997
------------- -------------
(In millions)
Cash flows from operating activities:
Net income............................. $ 15.4 $ 24.9
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation....................... 15.8 16.3
Loss on sale of assets............. 0.4 -
Foreign exhange loss, net.......... 0.1 0.3
Changes in assets and liabilities:
Increase in accounts and notes
receivable....................... (2.3) (8.4)
Decrease (increase) in inventories. 0.5 (1.5)
Decrease in accounts payable and
accrued liabilities.............. (13.5) (31.8)
(Decrease) increase in income
taxes payable.................... (16.2) 3.7
Increase in net deferred
income taxes..................... (0.4) (3.8)
Other, net......................... (8.3) (1.7)
-------- --------
Net cash used in operating
activities....................... (8.5) (2.0)
-------- --------
Cash flows from investing activities:
Capital expenditures................... (7.4) (10.4)
-------- --------
Cash flows from financing activities:
Dividend payments to shareholders...... (13.4) (13.7)
Proceeds from exercise of
stock options........................ 0.2 1.6
Payments to acquire treasury stock..... (68.8) (34.6)
Net increase in short-term debt........ 89.5 52.9
-------- --------
Net cash provided by financing
activities...................... 7.5 6.2
-------- --------
Effect of exchange rate changes on cash
and cash equivalents................... 0.3 (3.3)
-------- --------
Net decrease in cash and
cash equivalents....................... (8.1) (9.5)
Cash and cash equivalents at beginning
of year................................ 22.1 53.0
-------- --------
Cash and cash equivalents at end
of period.............................. $ 14.0 $ 43.5
======== ========
See Notes to Consolidated Financial Statements.
[TEXT]
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 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):
March 28, December 27,
1998 1997
----------- -----------
Finished goods.................. $ 84.7 $ 86.2
Work in process................. 41.2 43.3
Raw materials and supplies...... 56.7 54.7
-------- --------
Total inventories $ 182.6 $ 184.2
======== ========
Note 3: Net Income Per Common Share
In the fourth quarter of 1997, the Company adopted Statement of
Financial Accounting Standards No. 128. "Earnings Per Share."
Accordingly, these financial statements include "basic" and
"diluted" per share informaiton for the periods presented.
Basic per share information is calculated by dividing net
income by the weighted average number of shares outstanding.
Diluted per share information is calculated by also consider-
ing the impact of potential common stock on both net income
and the weighted average number of shares outstanding.
The weighted average number of shares used in the basic
earnings per share computations were 60.5 million and 61.9
million in the first quarter of 1998 and 1997, respectively.
The only difference in the computation of basic and diluted
earnings per share is the inclusion of 0.5 million in 1998
and 0.7 million in 1997 of shares of potential common stock.
Options to purchase 1.5 million and 0.7 million shares of
common stock were outstanding during the first quarter of
1998 and 1997, respectively, 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 and, therefore, would have been
antidilutive if included. The Company's potential common
stock consists of employee and director stock options and
restricted stock. Per share information pertaining to 1997
has been restated to conform with the current year's
presentation.
Note 4: Other Comprehensive Income
During the quarter ended March 28, 1998, the Company adopted
SFAS No. 130, "Reporting Comprehensive Income." SFAS 130
requires the Company to display "comprehensive income" which,
in addition to net income, includes certain amounts recorded
directly in equity.
The components of comprehensive income, net of related tax,
for the 13 week periods ended March 28, 1998, and March 29,
1997, were as follows:
13 Weeks Ended
March 28, March 29,
1998 1997
----------- -----------
Net income...................... $ 15.4 $ 24.9
Foreign currency translation
adjustments including tax
provisions of $1.0 million
in 1998, and $3.0 million
in 1997....................... 1.4 (14.0)
-------- --------
Comprehensive income............ $ 16.8 $ 10.9
======== ========
Accumulated other comprehensive income is comprised solely
of foreign currency translation adjustments.
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 ended March 28, 1998, compared with the 13 weeks
ended March 29, 1997, and changes in financial condition during
the 13 weeks ended March 28, 1998.
Net Sales and Net Income
Net sales for the first quarter of 1998 decreased $46.5
million, or 14.8 percent, to $268.8 million from $315.3
million in the first quarter of 1997. Net income in 1998 was
$15.4 million, which was a $9.5 million or 38.1 percent
decrease from 1997 net income of $24.9 million. Improvement
in operations in Europe and the United States was offset by
weak performance in Latin America and Asia Pacific. In
addition, the impact of unfavorable foreign exchange accounted
for about one-half of the decline in net income. Foreign
exchange had a $28.5 million or 9 percentage point negative
impact on the sales comparison and a $5.2 million or 16
percentage point negative impact on the net income comparison.
Costs and Expenses
The cost of products sold in relation to sales decreased to
35.8 percent in the first quarter of 1998 from 36.1 percent
in the comparable 1997 period. The decrease was due to higher
margins in Europe and in the United States partly offset by
higher costs elsewhere due to lower volume.
Delivery, sales, and administrative expense decreased $12.6
million in the first quarter of 1998 to $147.9 million
from $160.5 million in the first quarter of 1997 due to the
decrease in sales. The costs as a percentage of sales
increased to 55.0 percent in 1998 from 50.9 percent in 1997
reflecting the fixed nature of a substantial portion of
these expenses.
Net Interest Expense
In the first quarter of both 1998 and 1997, the Company
incurred net interest expense of $3.9 million. Gross interest
expense of $4.5 million incurred in the first quarter of 1998
was slightly lower than the comparable period due to lower
average debt balances. Interest income of $0.6 million was
slightly lower for the comparable period in 1997 due to
lower cash balances.
Tax Rate
The effective tax rate for the first quarter of 1998 was
24.5 percent compared with 27.0 percent for 1997. For the year
ended December 27, 1997, the effective tax rate was 26.0
percent. The effective tax rates are significantly below the
U.S. statutory tax rate reflecting, in 1997, the availability
of excess foreign tax credits and the reduction of certain
valuation allowances against deferred tax assets. In 1998,
the rate continues to reflect excess foreign tax credits
along with low foreign effective tax rates.
Year 2000 Issues
The Company has studied the "Year 2000" issues affecting its
operations and has prepared a plan to address them. That
plan is now being implemented and the issues are not
expected to have a material adverse effect on the Company's
operations. However, if such modifications and conversions
are not made, or are not completed in a timely manner, the
Year 2000 issues could have a material adverse impact on the
Company. The cost of addressing Year 2000 issues has not
been material to the Company to date and is not expected to
be in future periods.
The Company has initiated formal communications with
significant suppliers and other third party companies doing
business with the Company to determine the extent to which
the Company's systems and operations are vulnerable to those
third parties' failure to remediate their Year 2000 problems.
There can be no guarantee, however, that the systems of these
other companies will be converted before the turn of the
century or that their failure to do so would not have a
material adverse effect on the Company.
Euro Implementation
On January 1, 1999, several European countries that are
members of the European Monetary Union plan to replace their
respective currencies with one common currency - the euro.
The Company has studied the "euro" implementation issues
affecting its operations and has formed a task force to
address them from both a business and systems point of view.
Plans are in place to deal with both types of issues and are
being carried out in time for the January 1, 1999,
implementation. The incremental cost to the Company of
addressing the euro conversion is not expected to be material.
Regional Results (dollars in millions)
Europe
Negative
foreign Percent of
Decrease Restated exchange total
1998 1997 Dollar Percent increase impact 1998 1997
------ ------ ------ ------- -------- ------ ---- ----
Net sales $145.3 $154.9 $(9.6) (6)% 3% $(14.1) 54% 49%
Segment
profit 35.6 38.5 (2.9) (7) 5 (4.5) 123 90
The increase in sales in Europe before the impact of foreign
exchange was due to improvement in volume in Germany and
Austria due to more sellers as well as increases in the newer
markets of Hungary, Israel, Turkey and the Balkans. Only
partially offsetting these improvements were lower sales in France
due to fewer active sellers and in Scandinavia where productivity
has declined. The improvement in segment profit reflects the
net improvement in sales volume, along with improved gross margin
through sales of higher margin products and from favorable
manufacturing costs. The negative impact of foreign exchange on
the comparisons was from the dollar's strength against currencies
throughout the region.
Asia Pacific
Negative
foreign Percent of
Decrease Restated exchange total
1998 1997 Dollar Percent decrease impact 1998 1997
------ ------ ------ ------- -------- -------- ---- ----
Net sales $ 43.9 $ 65.6 $(21.7) (33)% (15)% $(14.0) 16% 21%
Segment
(loss) profit (1.0) 2.5 (3.5) (140) - (2.5) nm 6
Asia Pacific sales decreased as the harsh economic environment
caused consumer demand for items other than staples to be down
significantly, particularly in Japan and Korea. Partially
offsetting the decrease was an increase in sales in local
currency in the Philippines due to increased activity and
productivity as the sales force responded well to a promo-
tional program and new product launch during the quarter.
The lower segment profit followed from the decreased
sales volume along with a lower gross margin percentage
due to lower production, as well as an increase in costs
associated with the market entry into India. The negative
impact of foreign exchange on the comparisons for the region
was primarily from Korea and the Philippines.
The Chinese government has banned direct selling in that
country. This directive was communicated to the Company in
April 1998, and consequently the Company is not currently
selling in China. The Company is continuing to address the
situation and is considering its alternatives. The Company
does not have a significant investment recorded on its
balance sheet for its operations in China and the ban will
not have a material adverse effect on the Company or its
operations.
Latin America
Negative
foreign Percent of
Decrease Restated exchange total
1998 1997 Dollar Percent decrease impact 1998 1997
------ ------ ------ ------- -------- -------- ---- ----
Net sales $ 47.1 $ 63.2 $(16.1) (25)% (25)% $ (0.4) 18% 20%
Segment
(loss)
profit (0.2) 9.6 (9.8) (102) (102) (0.1) nm 22
First quarter results reflect significant sales decreases
due to lower volume in Brazil and Argentina. The decreases
in Brazil and Argentina were due to significantly lower
sales force productivity and activity levels, which are
being addressed through training of distributors and the
sales forces in direct selling fundamentals. In addition,
a number of distributorships in Brazil and Argentina have
been consolidated to enhance the continuing distributors'
profitability allowing them to better focus on sales growth.
In Mexico, sales increased slightly in local currency.
The Latin American segment profit decrease resulted from
the impact of the net sales decline in Brazil and Argentina,
along with a lower gross margin percentage due to higher
per unit manufacturing costs reflecting a lower level of
production.
United States
Percent of
Increase total
1998 1997 Dollar Percent 1998 1997
------ ------ ------ ------- ---- ----
Net sales $ 32.5 $ 31.6 $ 0.9 3% 12% 10%
Segment
loss (5.4) (7.8) 2.4 31 nm nm
First quarter sales in the United States increased 3 percent
in spite of a smaller sales force as productivity improved.
The increase in productivity was due to programs implemented
to enhance recruiting and promoting compensation and a two-
tiered vehicle program introduced in the second quarter of
1997. Also contributing to the sales increase was increased
emphasis on training. The decrease in the segment loss in
1998 reflected the impact of increased sales and cost
reduction efforts undertaken in 1997 to improve profitability.
Financial Condition
Working capital was $76.6 million as of March 28, 1998,
compared with $103.3 million as of the end of 1997. The
decrease primarily relates to higher current borrowings due
to share repurchases and a decrease in the cash balance,
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, as well as its planned uses of cash, no amount
was classified as current at the end of 1997. The decrease
in accounts payable and accrued liabilities reflects the
seasonal reduction of accounts payable along with lower
accruals for promotions.
Net cash used in operating activities in the first quarter of
1998 was $8.5 million, compared with $2.0 million in the 1997
period. The greater use was primarily due to lower net
income partially offset by a lower level of inventory. The
$7.4 million of cash used in investing activities was for
capital expenditures, primarily for new molds.
As of March 28, 1998, the Company had $300 million available
under its unsecured multicurrency credit facility, which
matures on August 8, 2002. The multicurrency credit facility,
along with $213 million of foreign unused lines of credit and
cash generated by operating activities, are expected to be
adequate to finance any additional working capital needs and
capital expenditures.
During the first quarter of 1998, the Company repurchased
approximately 2.6 million shares of its common stock at an
average cost of approximately $27 per share. Through the end
of the quarter, a total of 4.0 million shares of a 5 million
share repurchase authorization have been repurchased under
the program at an average cost of $31 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)
(27) A Financial Data Schedule for the first quarter of
1998 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 P. O'Neill, Jr.
-------------------------
Senior Vice President
and Chief Financial
Officer
By: Michael S. Poteshman
-------------------------
Vice President
and Controller
Orlando, Florida
May 11, 1998