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 27, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-11657
__________________
TUPPERWARE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-4062333
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 2353, Orlando, Florida 32802
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 826-5050
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes___X___ No_______
As of May 5, 1999, 57,618,371 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 27, 1999 and March 28, 1998 ............... 2
Consolidated Balance Sheet
(Unaudited) as of March 27, 1999 and
December 26, 1998................................ 3
Consolidated Statement of Cash Flows
(Unaudited) for the 13 week periods
ended March 27, 1999 and March 28, 1998.......... 5
Notes to Consolidated Financial
Statements (Unaudited)........................... 6
The financial statements of the Registrant included herein have
been prepared, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the
Commission). Although certain information normally included
in financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted,
the Registrant believes that the disclosures are adequate to
make the information presented not misleading. It is suggested
that these consolidated financial statements be read in
conjunction with the financial statements and the notes thereto
included in the Annual Report on Form 10-K of the Registrant for
its fiscal year ended December 26, 1998.
The consolidated financial statements included herein reflect
all adjustments, consisting only of normal recurring items,
which, in the opinion of management, are necessary to present
a fair statement of the results for the interim periods presented.
The results for interim periods are not necessarily indicative of
trends or results to be expected for a full year.
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
13 Weeks Ended
--------------------------
March 27, March 28,
1999 1998
--------- ---------
(In millions, except per share data)
Net sales............................... $ 250.9 $ 268.8
------- -------
Costs and expenses:
Cost of products sold................. 84.1 96.3
Delivery, sales, and
administrative expense.............. 137.7 147.9
Interest expense...................... 5.2 4.5
Interest income....................... (0.5) (0.6)
Other expense, net.................... 1.1 0.3
------- -------
Total costs and expenses........... 227.6 248.4
------- -------
Income before income taxes.............. 23.3 20.4
Provision for income taxes.............. 5.5 5.0
------- -------
Net income.............................. $ 17.8 $ 15.4
======= =======
Net income per common share:
Basic.................................. $ 0.31 $ 0.26
======= =======
Diluted................................ $ 0.31 $ 0.26
======= =======
See Notes to Consolidated Financial Statements (Unaudited).
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
(UNAUDITED)
March 27, December 26,
1999 1998
--------- ------------
(In millions)
Cash and cash equivalents............ $ 24.4 $ 23.0
Accounts receivable.................. 122.4 125.0
Less allowances for
doubtful accounts................ (27.7) (32.7)
-------- --------
94.7 92.3
Inventories.......................... 155.1 157.1
Deferred income tax benefits......... 59.1 55.5
Prepaid expenses and other........... 55.4 57.7
-------- --------
Total current assets............. 388.7 385.6
-------- --------
Deferred income tax benefits......... 82.0 84.7
Property, plant, and equipment....... 938.4 972.9
Less accumulated depreciation...... (685.8) (701.9)
-------- --------
252.6 271.0
Long-term receivables, net of
allowances of $39.9 million at
March 27, 1999, and $41.4
million at December 26, 1998....... 38.6 40.3
Other assets......................... 42.8 41.8
-------- --------
Total assets..................... $ 804.7 $ 823.4
======== ========
See Notes to Consolidated Financial Statements (Unaudited).
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
March 27, December 26,
1999 1998
------------- ------------
(Dollars in millions, except per share amounts)
Accounts payable................... $ 58.1 $ 85.3
Short-term borrowings and current
portion of long-term debt........ 50.3 18.7
Accrued liabilities................ 180.7 186.1
------ ------
Total current liabilities...... 289.1 290.1
------ ------
Long-term debt..................... 294.8 300.1
Accrued postretirement
benefit cost..................... 38.5 38.4
Other liabilities.................. 58.0 59.0
Shareholders' equity:
Preferred stock, $0.01 par value,
200,000,000 shares authorized;
none issued................... - -
Common stock, $0.01 par value,
600,000,000 shares authorized;
62,367,289 shares issued...... 0.6 0.6
Capital surplus.................. 20.1 19.5
Subscription receivable.......... (7.7) (7.7)
Retained earnings................ 462.1 457.2
Treasury stock, 4,751,622 shares
at March 27, 1999, and
4,753,287 shares at
December 27, 1998 at cost (141.9) (142.0)
Unearned portion of restricted
stock issued for future
service (0.9) (1.4)
Accumulated other comprehensive
income........................ (208.0) (190.4)
------ ------
Total shareholders' equity..... 124.3 135.8
------ ------
Total liabilities and
shareholders' equity......... $804.7 $823.4
====== ======
See Notes to Consolidated Financial Statements (Unaudited).
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
13 Weeks Ended
---------------------------
March 27, March 27,
1999 1998
------------- -------------
(In millions)
Cash flows from operating activities:
Net income............................. $ 17.8 $ 15.4
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation....................... 14.7 15.8
Loss on sale of assets............. 0.6 0.4
Foreign exchange loss, net......... 0.1 0.1
Changes in assets and liabilities:
Increase in accounts receivable.... (9.8) (2.3)
(Increase)decrease in inventories.. (7.7) 0.5
Decrease in accounts payable and
accrued liabilities.............. (23.3) (13.5)
Increase (decrease) in income
taxes payable.................... 2.1 (16.2)
Increase in net deferred
income taxes..................... (4.0) (0.4)
Other, net......................... (0.3) (8.3)
------- -------
Net cash used in operating
activities....................... (9.8) (8.5)
------- -------
Cash flows from investing activities:
Capital expenditures................... (7.3) (7.4)
------- -------
Cash flows from financing activities:
Dividend payments to shareholders...... (12.7) (13.4)
Proceeds from exercise of stock options - 0.2
Payments to acquire treasury stock..... - (68.8)
Net increase in short-term debt........ 31.7 89.5
------- -------
Net cash provided by financing
activities...................... 19.0 7.5
------- -------
Effect of exchange rate changes on cash
and cash equivalents................... (0.5) 0.3
------- -------
Net increase (decrease) in cash and
cash equivalents....................... 1.4 (8.1)
Cash and cash equivalents at beginning
of year................................ 23.0 22.1
------- -------
Cash and cash equivalents at end
of period.............................. $ 24.4 $ 14.0
======= =======
See Notes to Consolidated Financial Statements (Unaudited).
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. 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 27, December 26,
1999 1998
----------- -----------
Finished goods.................. $ 70.4 $ 74.5
Work in process................. 35.3 31.7
Raw materials and supplies...... 49.4 50.9
------- -------
Total inventories $ 155.1 $ 157.1
======= =======
Note 3: Net Income Per Common Share
Basic per share information is calculated by dividing net
income by the weighted average number of shares outstanding.
Diluted per share information is calculated by also 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 57.6 million and 60.5
million in the first quarter of 1999 and 1998, respectively.
The only difference in the computation of basic and diluted
earnings per share is the inclusion of 0.2 million in 1999
and 0.5 million shares in 1998 of potential common stock.
Options to purchase 4.4 million and 1.5 million shares of
common stock were outstanding during the first quarter of
1999 and 1998, respectively, but were not included in the
diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares
and, therefore, would be antidilutive. The Company's potential
common stock consists of employee and director stock options and
restricted stock.
Note 4: Other Comprehensive Income
In addition to net income, comprehensive income includes
certain amounts currently recorded directly in equity.
The components of comprehensive income, net of related tax,
for the 13 week periods ended March 27, 1999, and March 28,
1998, were as follows:
13 Weeks Ended
March 27, March 28,
1999 1998
----------- -----------
Net income...................... $ 17.8 $ 15.4
Foreign currency translation
adjustments net of tax of
$3.3 million in 1999, and
$1.0 million in 1998.......... (17.6) 1.4
------- -------
Comprehensive income............ $ 0.2 $ 16.8
======= =======
Accumulated other comprehensive income, net of related tax
at March 27, 1999, and December 26, 1998, was comprised solely
of foreign currency translation adjustments.
Note 5: Accounting for Derivative Instruments and Hedging
Activities
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) 133,
"Accounting for Derivative Instruments and Hedging Activities."
This statement establishes accounting and reporting standards
for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair
value. If certain conditions are met, a derivative may be
specifically designated as a hedge. The accounting for
changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation
of the hedge exposure. Depending on how the hedge is used
and the designation, the gain or loss due to changes in the
fair value is reported either in earnings or in other
comprehensive income. Adoption of the statement, which is
required for the Company's year 2000 financial statements,
will have no significant impact on the accounting treatment
related to the hedging programs the Company has undertaken.
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 27, 1999, compared with the 13 weeks
ended March 28, 1998, and changes in financial condition during
the 13 weeks ended March 27, 1999.
Net Sales and Net Income
Net sales for the first quarter of 1999 decreased $17.9
million, or 7 percent, to $250.9 million from $268.8
million in the first quarter of 1998. Net income in 1999
was $17.8 million, which was a $2.4 million, or 15 percent,
increase from 1998 net income of $15.4 million. Excluding
the impact of foreign exchange on the comparisons, sales
decreased and operating profit increased in all regions.
Unallocated corporate expense increased by $2.4 million to
$7.1 million in 1999, from $4.7 million in 1998, due primarily
to spending on integrated direct access programs. Foreign
exchange did not have a significant net impact on the sales
comparison. Mainly due to stronger European currencies in
1999 compared with 1998, foreign exchange had a $2.2 million,
or 14 percentage point, positive impact on the net income
comparison.
Costs and Expenses
The cost of products sold in relation to sales decreased to
33.5 percent in the first quarter of 1999 from 35.8 percent
in the comparable 1998 period. The decrease was due to higher
margins in the United States and Latin America.
Delivery, sales, and administrative expense decreased $10.6
million in the first quarter of 1999 to $137.3 million from
$147.9 million in the first quarter of 1998 due to the
decrease in sales. The costs as a percentage of sales
decreased to 54.7 percent in 1999 from 55.0 percent in 1998.
The decrease was a result of lower promotional spending, offset
in part by higher operating costs as a percentage of sales
reflecting the fixed nature of a substantial portion of these
expenses.
Net Interest Expense
Net interest expense increased to $4.7 million in 1999
from $3.9 million in 1998. The higher expense reflects
higher average borrowings in 1999, which was a consequence
of the Company's 1998 and 1997 common stock repurchases.
Tax Rate
The effective tax rate for the first quarter of 1999 was
23.5 percent compared with 24.5 percent for the first
quarter and full year 1998. The effective tax rates are
below the U.S. statutory tax rate reflecting the availability
of excess foreign tax credits along with low foreign effective
tax rates.
Regional Results (dollars in millions)
Europe
Positive
Increase Restated foreign Percent of
(decrease) increase exchange total
1999 1998 Dollar Percent (decrease) impact 1999 1998
------ ------ ------ ------- -------- ------ ---- ----
Net sales $143.1 $145.3 $(2.2) (2)% (5)% $ 5.4 57% 54%
Operating
profit 38.5 35.6 2.9 8 1 2.5 110 123
Europe's lower sales, excluding the benefit of more favorable
foreign exchange, were primarily from a shortfall in volume in
Germany. That market had a smaller sales force at the beginning
of 1999, than at the beginning of 1998, but this year-over-year
disadvantage was overcome by the end of the quarter through the
design and implementation of innovative recruiting programs.
Sales improved in France on higher volume, which resulted from
programs that encouraged a greater proportion of the sales
force to hold parties. Sales also improved in Greece and Italy,
but fell in Scandinavia and South Africa.
The improvement in operating profit, even though sales were
lower, was due to a more streamlined cost structure in the
United Kingdom and lower promotional spending. The
favorable foreign exchange comparison on sales and profit
was primarily from the relative strength in 1999 of the
euro versus the U.S. dollar, compared with the strength
of the euro's component currencies in 1998.
Asia Pacific
Positive
Restated foreign Percent of
Increase increase exchange total
1999 1998 Dollar Percent (decrease) impact 1999 1998
------ ------ ------ ------- -------- -------- ---- ----
Net sales $ 44.5 $ 43.9 $ 0.6 2% (4)% $ 2.6 18% 16%
Operating
profit(loss) 0.1 (1.0) 1.1 + + 0.1 0 nm
+ Increase to a profit in 1999 from a loss in 1998.
nm Not meaningful.
Excluding the impact of foreign exchange, Asia Pacific's sales
decreased due to weakness in Japan where the continuing
difficult economic environment has led to lower consumer spending
and where there were fewer sellers. In the Philippines, and
particularly in Korea, sales volume improved as a result of
larger sales forces as strong recruiting trends continued.
In spite of the overall sales decline, operating profit improved
from the higher sales in Korea and the Philippines, smaller
losses in the region's emerging markets, and lower spending on
promotions in Japan. The foreign exchange impact was primarily
from strengthening of the Japanese yen and Korean won.
Latin America
Positive
(negative)
Increase Restated foreign Percent of
(decrease) increase exchange total
1999 1998 Dollar Percent (decrease) impact 1999 1998
------ ------ ------ ------- -------- -------- ---- ----
Net sales $ 31.6 $ 47.1 $(15.5) (33)% (21)% $ (6.9) 12% 18%
Operating
profit
(loss) 0.7 (0.2) 0.9 + + 0.3 2 nm
In Latin America, Mexico's sales increased before the impact
of a weaker peso, but in the other established markets in
the region, sales were lower. The improvement in Mexico
was primarily due to price increases in line with inflation
in the market. The sales shortfalls in the other markets
were due to smaller sales forces resulting mainly from the
1998 decision to significantly reduce the number of
distributors. This action was taken to enhance the outlook
for profitability for those remaining.
The small profit in 1999 compared with the 1998 loss
reflects 1998 efforts to align the cost structure of the
region's businesses with expected sales. The impact of
foreign exchange on the year-over-year comparison reflects
weakness in the Brazilian and Mexican currencies.
United States
Percent of
Increase total
1999 1998 Dollar Percent 1999 1998
------ ------ ------ ------- ---- ----
Net sales $ 31.7 $ 32.5 $(0.8) (3)% 13% 12%
Operating
loss (4.2) (5.4) (1.2) 22 nm nm
In the United States, the sales decrease was from a smaller
sales force reflecting the difficulty of recruiting new
consultants in a full employment environment. Notwithstanding
this challenge, the recruiting trend improved later in the
quarter in response to supplemental promotional programs
implemented. The lower 1999 loss reflects gross margin
improvement from the sale of a more favorable mix of products,
along with lower operating expenses.
Financial Condition
Working capital was $99.6 million as of March 27, 1999, compared
with $95.5 million as of the end of 1998. The major changes were
a decrease in accounts payable, due to a seasonal reduction and
working capital management, and an increase in short-term
borrowings. The Company classifies a portion of its outstanding
borrowings that are due within one year by their terms as non-
current due to its ability and intent that they be outstanding
throughout the succeeding twelve months. Based on the timing of
the Company's cash inflows during the year, as well as the overall
level of short-term borrowings at the end of each period, a lower
amount was classified as current at the end of 1998 than at the
end of the first quarter of 1999.
Net cash used in operating activities in the first quarter of
1999 was $9.8 million, compared with $8.5 million in the 1998
period. The greater use was primarily due to an increase in
inventories versus a small decrease in 1998 and a larger
increase in accounts receivable in 1999 than in 1998, which were
mostly offset by a much smaller increase in net tax assets in
1999 than in 1998. The $7.3 million of cash used in investing
activities was for capital expenditures, primarily for new molds.
As of March 27, 1999, the Company had $300 million available
under its unsecured multicurrency credit facility, which matures
in 2002. The multicurrency credit facility along with $207
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.
Year 2000 Issues
The Company has studied the "Year 2000" issues affecting its
information technology and non-information technology systems
and has prepared and completed its plan to address them. The
issues are not expected to have a material adverse effect on
the Company's operations. Although it believes that its
remediation plan has addressed all of its Year 2000 issues,
the Company has developed a contingency plan for business
critical systems in the event that it has not remediated all
issues. The Company estimates that the cost of addressing
its Year 2000 issues was $5.3 million. These costs did not
have a material effect on the Company's financial position
or results of operations in any one period in part because
they represented the re-deployment of existing information
technology resources, and because they would have been
incurred as part of normal software upgrades and replacements.
The Company formally communicated with significant
suppliers and other third party companies doing business with
the Company to determine the extent to which the Company's
systems and operations are vulnerable to those third parties'
failure to remediate their Year 2000 issues. Based on the
information received from these third parties, the Company is
not aware of any Year 2000 issues of third parties expected to
have a material adverse effect on its operations; however, there
can be no guarantee that the systems of these other companies
will be converted before the turn of the century or that their
failure to do so would not have a material adverse effect on the
Company. Due to the Company's extensive foreign operations, it
is exposed to Year 2000 issues related to the infrastructures
of the countries where these operations are located; however,
the Company is not aware of any specific issues that have not
been addressed through implementation of its plan.
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
1999 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 6, 1999