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 26, 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 August 6, 1999, 57,622,668 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 26, 1999 and June 27, 1998............. 2
Consolidated Statement of Income
(Unaudited) for the 26 week periods ended
June 26, 1999 and June 27, 1998............. 3
Consolidated Balance Sheet
(Unaudited) as of June 26, 1999 and
December 26, 1998........................... 4
Consolidated Statement of Cash Flows
(Unaudited) for the 26 week periods
ended June 26, 1999 and June 27, 1998....... 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 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.
- 1 -
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
13 Weeks Ended
-----------------------
June 26, June 27,
1999 1998
--------- ---------
(In millions, except per share amounts)
Net sales....................... $ 271.3 $ 282.9
------- -------
Costs and expenses:
Cost of products sold......... 93.1 108.4
Delivery, sales, and
administrative expense...... 138.9 137.2
Interest expense.............. 5.9 6.1
Interest income............... (0.7) (0.8)
Re-engineering charge......... 15.1 --
Other expense, net............ 0.3 1.6
------- -------
Total costs and expenses... 252.6 252.5
------- -------
Income before income taxes...... 18.7 30.4
Provision for income taxes...... 4.4 7.4
------- -------
Net income...................... $ 14.3 $ 23.0
======= =======
Net income per common share:
Basic......................... $ 0.25 $ 0.40
======= =======
Diluted....................... $ 0.25 $ 0.39
======= =======
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 2 -
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
26 Weeks Ended
-----------------------
June 26, June 27,
1999 1998
-------- --------
(In millions, except per share amounts)
Net sales....................... $ 522.2 $ 551.7
------- -------
Costs and expenses:
Cost of products sold......... 177.2 204.7
Delivery, sales, and
administrative expense...... 276.6 285.1
Interest expense.............. 11.1 10.6
Interest income............... (1.2) (1.4)
Re-engineering charge......... 15.1 --
Other expense, net............ 1.4 1.9
------- -------
Total costs and expenses... 480.2 500.9
------- -------
Income before income taxes...... 42.0 50.8
Provision for income taxes...... 9.9 12.4
------- -------
Net income...................... $ 32.1 $ 38.4
======= =======
Net income per common share:
Basic......................... $ 0.56 $ 0.65
======= =======
Diluted....................... $ 0.56 $ 0.65
======= =======
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 3 -
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
(Unaudited)
June 26, December 26,
1999 1998
-------- ------------
(In millions)
Cash and cash equivalents......... $ 21.9 $ 23.0
Accounts receivable............... 128.2 125.0
Less allowances for
doubtful accounts............. (26.3) (32.7)
------- -------
101.9 92.3
Inventories....................... 155.3 157.1
Deferred income tax benefits...... 60.2 55.5
Prepaid expenses and other........ 55.2 57.7
------- -------
Total current assets.......... 394.5 385.6
------- -------
Deferred income tax benefits...... 91.5 84.7
Property, plant, and equipment.... 919.0 972.9
Less accumulated depreciation... (675.9) (701.9)
------- -------
243.1 271.0
Long-term receivables, net of
allowances of $37.1 million at
June 26, 1999 and $41.4 million
at December 26, 1998............ 37.8 40.3
Other assets...................... 46.7 41.8
------- -------
Total assets.................. $ 813.6 $ 823.4
======= =======
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 4 -
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited)
June 26, December 26,
1999 1998
-------- ------------
(Dollars in millions, except per share amounts)
Accounts payable................. $ 60.2 $ 85.3
Short-term borrowings and current
portion of long-term debt...... 84.4 18.7
Accrued liabilities.............. 172.4 186.1
-------- --------
Total current liabilities.... 317.0 290.1
-------- --------
Long-term debt................... 270.9 300.1
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.............. 463.5 457.2
Treasury stock, 4,745,122 shares
at June 26, 1999, and
4,753,287 shares at
December 26, 1998, at cost.. (141.8) (142.0)
Unearned portion of restricted
stock issued for future
service..................... (0.6) (1.4)
Accumulated other comprehensive
income...................... (204.9) (190.4)
-------- --------
Total shareholders' equity... 129.2 135.8
-------- --------
Total liabilities and
shareholders' equity........ $ 813.6 $ 823.4
======== ========
See accompanying Notes to Consolidated Financial Statements
(Unaudited).
- 5 -
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
26 Weeks Ended
-----------------------
June 26, June 27,
1999 1998
-------- --------
(In millions)
Cash flows from operating activities:
Net income........................... $ 32.1 $ 38.4
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation..................... 29.8 30.9
Loss on sale of assets........... 1.4 0.7
Foreign exchange
loss (gain), net................ 0.1 (0.2)
Non-cash impact of re-
engineering charge.............. 3.1 --
Changes in assets and liabilities:
Increase in accounts receivable.. (19.1) (7.8)
(Increase) decrease in
inventory...................... (7.6) 7.2
Decrease in accounts payable
and accrued liabilities........ (13.5) (14.9)
Decrease in income
taxes payable.................. (7.2) (22.5)
Increase in net deferred
income taxes................... (14.9) (1.4)
Other, net....................... (4.6) (1.0)
------- -------
Net cash (used in) provided by
operating activities........... (0.4) 29.4
------- -------
Cash flows from investing activities:
Capital expenditures................. (19.7) (17.7)
------- -------
Cash flows from financing activities:
Dividend payments to shareholders.... (25.4) (26.3)
Proceeds from exercise of
stock options...................... -- 1.3
Payments to acquire treasury stock..... -- (89.3)
Net increase in short-term debt...... 44.3 96.9
------- -------
Net cash provided by (used in)
financing activities............... 18.9 (17.4)
------- -------
Effect of exchange rate changes on
cash and cash equivalents............ 0.1 0.5
------- -------
Net decrease in cash and
cash equivalents..................... (1.1) (5.2)
Cash and cash equivalents at
beginning of year.................... 23.0 22.1
------- -------
Cash and cash equivalents at
end of period........................ $ 21.9 $ 16.9
======= =======
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. 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 26, December 26,
1999 1998
-------- ------------
Finished goods................. $ 74.1 $ 74.5
Work in process................ 33.0 31.7
Raw materials and supplies..... 48.2 50.9
------- -------
Total inventories $ 155.3 $ 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 considering 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 57.5 million for both the 13 and 26 weeks ended June 26, 1999,
compared with 57.9 million and 58.9 million for the respective 1998
periods.
The only difference in the computation of basic and diluted earnings
per share is the inclusion of 0.4 million for the quarter and year-
to-date period in 1999 and 0.6 million for the quarter and year-to-
date period in 1998 of shares of potential common stock. Options
to purchase 2.4 million and 2.0 million shares of common stock in
the second quarter of 1999 and 1998, respectively, and 3.4 million
and 2.0 million shares of common stock in the first half of 1999
and 1998, respectively, were outstanding but not included in the
computation of diluted earnings per share because the options'
exercise prices were greater than the average market price of the
common shares during the respective period and, therefore, would
have been anti-dilutive if included. The Company's potential
common stock consists of employee and director stock options and
restricted stock.
Note 4: Other Comprehensive Income
In addition to net income, comprehensive income includes certain
amounts recorded directly in equity. The components of
comprehensive income, net of related tax, for the 13 week and
26 week periods ended June 26, 1999 and June 27, 1998, were as
follows:
13 Weeks Ended 26 Weeks Ended
------------------ ------------------
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
-------- -------- -------- --------
Net income............. $ 14.3 $ 23.0 $ 32.1 $ 38.4
Foreign currency
translation adjustments
including tax (provisions)
benefit of $(1.8) and
$(5.1) for the 13 weeks and
26 weeks ended June 26,
1999, respectively, and
$0.3 and $(0.7) for the
comparable 1998
periods.............. 3.1 (5.8) (14.5) (4.4)
------ ------ ------ ------
Comprehensive income... $ 17.4 $ 17.2 $ 17.6 $ 34.0
====== ====== ====== ======
Accumulated other comprehensive income is comprised solely of
foreign currency translation adjustments.
Note 5: Re-engineering Program
In July 1999, the Company announced a re-engineering program
designed to improve operating profit return on sales over three
years through improved organizational alignment, a higher gross
margin percentage, and reduced operating expenses. In conjunction
with implementing the first phase of this program, the Company
recorded a $15.1 million pre-tax charge ($11.6 million after tax,
or $0.20 per basic and diluted common share) in the second
quarter of 1999.
The re-engineering charge falls in the following categories of
expenditures and relates to activities in the Company's geographic
segments as indicated below (in millions):
Severance $ 9.0 Europe $ 7.1
Asset write downs 3.1 Asia Pacific 4.0
Other 3.0 Latin America 4.0
----- -----
Total $15.1 Total $15.1
===== =====
The severance costs relate primarily to the approximately 200
employees whose positions are being eliminated as a result of
the decision to close the Spanish and Argentine manufacturing
plants and to restructure the Japanese manufacturing operation
and the area headquarters in Europe and Asia Pacific. The asset
write downs relate primarily to the plant closures. The expenses
included in the other category are primarily for non-asset write
down costs of exiting facilities and professional fees associated
with accomplishing the re-engineering actions.
The liability balance as of June 26, 1999, was as follows
(in millions):
Balance at March 27, 1999 $ -
Provision 15.1
Cash expenditures (1.6)
Non-cash write downs (3.1)
------
Balance at June 26, 1999 $ 10.4
======
Note 6: Segment Information
The Company operates worldwide in one line of business: the
manufacture and distribution, through independent direct sales
forces, of plastic food storage and serving containers, microwave
cookware, and educational toys. Its operations are organized into
the four geographic segments included in the following table.
13 Weeks Ended 26 Weeks Ended
------------------ ------------------
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
-------- -------- -------- --------
(In millions)
Net sales:
Europe $120.6 $122.8 $263.7 $268.1
Asia Pacific 63.3 53.2 107.8 97.1
Latin America 43.0 57.3 74.6 104.4
United States 44.4 49.6 76.1 82.1
------ ------ ------ ------
Total net sales $271.3 $282.9 $522.2 $551.7
====== ====== ====== ======
Operating profit (loss):
Europe $ 30.9 $ 31.4 $ 69.4 $ 67.0
Asia Pacific 8.1 5.7 8.2 4.7
Latin America 4.6 0.7 5.3 0.5
United States 0.9 3.7 (3.3) (1.7)
------ ------ ------ ------
Total operating profit 44.5 41.5 79.6 70.5
Unallocated expenses (5.5) (5.8) (12.6) (10.5)
Re-engineering charge (15.1) -- (15.1) --
Interest expense, net (5.2) (5.3) (9.9) (9.2)
------ ------ ------ ------
Income before
income taxes $ 18.7 $ 30.4 $ 42.0 $ 50.8
====== ====== ====== ======
The re-engineering charge recorded in the second quarter of 1999
was made in conjunction with the Company's re-engineering program
announced on July 19, 1999. The charge is for the cost of closing
manufacturing plants in Argentina and Spain, restructuring of the
Japanese manufacturing function and restructuring actions in the
area headquarters for Europe and Asia Pacific.
Note 7: 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 2001 financial
statements, will have no significant impact on the accounting
treatment or the results of 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 and 26 weeks ended June 26, 1999, compared with the
13 weeks and 26 weeks ended June 27, 1998, and changes in financial
condition during the 26 weeks ended June 26, 1999.
Net Sales and Net Income
Net sales for the second quarter ended June 26, 1999, were $271.3
million, a decrease of $11.6 million, or 4.1 percent, from $282.9
million in 1998. Net income for the second quarter of 1999
decreased $8.7 million, or 37.5 percent, to $14.3 million, or
$0.25 per share, from 1998 net income of $23.0 million, or $0.39
per share. A stronger U.S. dollar in 1999 had a negative impact
of $5.8 million, or 2 percentage points, on the sales comparison,
but no significant net impact on the net income comparison for the
quarter.
The 1999 results include a $15.1 million pretax charge ($11.6
million after tax, or $0.20 per share) related to the Company's
three-year re-engineering program announced on July 19, 1999.
The charge provides for severance and other exit costs associated
with the decision to close manufacturing plants in Spain and
Argengina, and to restructure manufacturing operations in Japan
and the headquarters for Europe and Asia Pacific. Excluding
the charge, 1999 net income rose $2.9 million, or 12.8 percent,
compared with 1998. The re-engineering project is designed to
increase operating profit return on sales by improving
organizational alignment, increasing the gross margin percentage,
and reducing operating expenses. Of the total 1999 charge,
approximately $12.0 million is cash related and is expected to
be paid in 1999. Total one-time costs to be incurred in
implementing the program are projected to be between $50 million
and $75 million, mainly for severance, information technology
expenditures, and plant closure costs.
For the year-to-date period, sales were $522.2 million, which was
a decline of $29.5 million, or 5.3 percent, from $551.7 million
in 1998. Net income of $32.1 million for the 26 weeks ended June 26,
1999, decreased $6.3 million, or 16.3 percent, from 1998 net
income of $38.4 million. Excluding the 1999 re-engineering
charge, net income compared with 1998 rose $5.3 million, or 13.8
percent, (7.7 percent excluding a favorable foreign exchange impact).
For the first half, the negative impact of foreign exchange on the
sales comparison was $4.7 million, or 1 percentage point, and
the positive impact on the net income comparison was $2.2 million,
or 5 percentage points.
For the quarter, excluding the impact of foreign exchange, sales
improvements in Asia Pacific and in Europe were more than offset
by shortfalls in Latin America and the United States. For the
first six months of 1999, sales in Asia Pacific improved, but
were lower than 1998 in the other three areas. For both the
quarter and first half of 1999, operating profit improved,
excluding the impact of foreign exchange, in all areas other
than the United States. Unallocated expenses in the second
quarter of 1999 were about even with the second quarter of 1998,
but were higher than 1998 by $2.1 million for the first half.
This increase was due primarily to spending for the Company's
integrated direct access initiatives. For the second quarter,
international operations generated in 1999 and 1998, 83 percent
and 82 percent, respectively, of sales and 98 percent and 91
percent, respectively, of operating profit. For the first
half, international operations generated 85 percent of sales
and all of operating profit in both 1999 and 1998.
Costs and Expenses
The cost of goods sold as a percentage of sales was 34.3 percent
and 33.9 percent for the second quarter and first half of 1999,
respectively, compared with 38.3 percent and 37.1 percent for the
respective 1998 periods. All areas improved with the main
contributions coming from less discounting and the sale of a
better mix of products in the United States, and from a streamlined
cost structure in Latin America.
Delivery, sales, and administrative expense as a percentage of sales
was 51.2 percent and 53.0 percent of sales in the second quarter and
first half of 1999, respectively, compared with 48.5 percent and
51.7 percent in the respective 1998 periods. The main factor in
the higher second quarter comparison was higher promotion expense
in Europe and the United States, as programs were put in place to
improve sales force activity and recruiting. For the first half,
expenses fell, but not in proportion to the sales decrease,
reflecting the fact that certain expenses are fixed for a period
of time. This also was a factor in the second quarter comparison.
Net Interest Expense
In the second quarter and first six months of 1999, the Company
incurred net interest expense of $5.2 million and $9.9 million,
respectively. For the comparable 1998 periods, the Company
incurred net interest expense of $5.3 million and $9.2 million.
In the quarter, the benefit of lower foreign interest rates was
mostly offset through the impact of a greater proportion of
borrowings being made domestically. For the year-to-date period,
the impact on net interest expense of a higher level of outstanding
borrowings more than offset the benefit of lower foreign rates.
Tax Rate
The effective tax rate for the second quarter and first half of
1999 was 23.5 percent compared with 24.5 percent in the comparable
1998 periods and for all of 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
(negative)
Increase Restated foreign Percent
(decrease) increase exchange of total
1999 1998 Dollar Percent (decrease) impact 1999 1998
------ ------ ------ ------- -------- -------- ---- ----
Quarter:
Net sales $120.6 $122.8 $ (2.2) (2)% 3% $ (5.5) 44% 43%
Operating
profit 30.9 31.4 (0.5) (1) 2 (1.0) 70 75
First Half:
Net sales $263.7 $268.1 $ (4.4) (2)% (2)% $ (0.1) 50% 48%
Operating
profit 69.4 67.0 2.4 4 1 1.5 87 94
The increase in Europe's second quarter sales, before the impact of
weaker currencies throughout the region, primarily reflected a volume
related increase in France and the sale of a better mix of products
in Italy, which were greater than the impact of lower volume in
Germany. In France, programs to increase the activity of the
sales force have been successful, and in Italy the productivity of
the sales force improved. In Germany, the decrease in sales
reflected a smaller active sales force, which was a result of
concerns surrounding new social security legislation that was
enacted earlier this year. This legislation imposes a tax on
certain part-time workers. The Company has held meetings with the
German sales force to explain the impact of the new legislation,
as well as to offer financial assistance in addressing this issue
for a period of time to members of the sales force who remain
with the Company for a specified period. This issue could have
a negative impact on German results in future periods. The main
factor in the slight first-half decline in sales, before the
negative foreign exchange impact, was a volume-related decrease
in Germany that was more than offset by a volume-related increase
in France, which were due to the same factors as for the second
quarter.
For both the three- and six-month periods, the slightly better
trends in operating earnings compared with the sales trends
reflect an improved gross margin and lower operating expenses,
which were partially offset by higher spending on promotions. The
primary cause of the negative impact of foreign exchange on the
second quarter and first half comparisons was a weaker euro.
Asia Pacific
Positive
foreign Percent
Increase Restated exchange of total
1999 1998 Dollar Percent increase impact 1999 1998
------ ------ ------ ------- -------- -------- ---- ----
Quarter:
Net sales $ 63.3 $ 53.2 $ 10.1 19% 9% $ 5.1 23% 19%
Operating
profit 8.1 5.7 2.4 42 17 1.2 18 14
First Half:
Net sales $107.8 $ 97.1 $ 10.7 11% 3% $ 7.7 21% 18%
Operating
profit 8.2 4.7 3.5 74 37 1.3 10 7
Asia Pacific's second quarter sales increase was from higher volume
in Korea, Japan, Indonesia, and Australia. Similar factors led to
the increase in the first half, except that Japan's six-month sales
volume was lower than in 1998. In Korea and Indonesia, the active
sales force was up significantly reflecting the strong recruiting
in those markets over the last year in which the earnings
opportunity has been particularly attractive. The improvement in
Australia in both periods, and in Japan for the second quarter,
was from a more productive sales force. The shortfall in Japan
for the six-month period reflects a lower active sales force since
the benefit of strong first quarter recruiting did not translate
into active sellers until the second quarter. In terms of operating
profit, the second quarter and first half improvements reflect
the sales volume fluctuations, along with smaller losses in China
and India. Currencies throughout the region strengthened in
comparison with the U.S. dollar in both the second quarter and
first half.
Latin America
Positive
(negative)
Increase Restated foreign Percent
(decrease) increase exchange of total
1999 1998 Dollar Percent (decrease) impact 1999 1998
------ ------ ------ ------- -------- -------- ---- ----
Quarter:
Net sales $ 43.0 $ 57.3 $(14.3) (25)% (17)% $(5.4) 16% 20%
Operating
profit 4.6 0.7 3.9 + + (0.2) 10 2
First Half:
Net sales $ 74.6 $104.4 $(29.8) (29)% (19)% $(12.3) 14% 19%
Operating
profit 5.3 0.5 4.8 + + 0.1 7 1
+ Increase of more than 100 percent.
In Latin America, second quarter and first half sales increased in
Mexico, before the impact of a weaker peso, but sales were lower
in the other established markets in the region. 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 opportunity for profitability
of those remaining. The significant improvement in profitability
of both periods 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 comparisons reflects
weakness in the Mexican and Brazilian currencies.
United States
Percent of
Decrease total
1999 1998 Dollar Percent 1999 1998
------- ------- ------ ------- ---- ----
Quarter:
Net sales $ 44.4 $ 49.6 $ (5.2) (10)% 17% 18%
Operating
profit 0.9 3.7 (2.8) (76) 2 9
First Half:
Net sales $ 76.1 $ 82.1 $ (6.0) (7)% 15% 15%
Operating
loss (3.3) (1.7) (1.6) - nm nm
- - Decrease of more than 100 percent.
nm Not meaningful.
In the United States, the sales decreases in both periods were from
a smaller sales force reflecting the difficulty of recruiting and
motivating consultants in a full employment environment. This
factor was somewhat mitigated by continuing improved sales force
productivity. Second quarter profitability fell more sharply than
sales, and the first-half loss widened as spending on promotions
increased in an attempt to stimulate recruiting, activity of the
sales force, and sales. This was partially mitigated by improved
gross margin percentages reflecting a more favorable mix of sales.
Financial Condition
Working capital was $77.5 million as of June 26, 1999, compared
with $95.5 million as of the end of 1998. The major changes were
an increase in short-term borrowings, which was partially offset
by lower accounts payable and accrued liabilities and by higher
net accounts receivable. The lower accounts payable and accrued
liabilities balances reflect a seasonal reduction and working
capital management. The higher net receivables balance was the
result of higher sales in Asia Pacific and sales late in the
quarter in Europe. With regard to the level of 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 second quarter of 1999. The overall increase
in debt from the end of 1998 was less than the increase in the
portion classified as short term.
Net cash used in operating activities in the first half of 1999
was $0.4 million, compared with $29.4 million provided by operating
activities in the 1998 period. The difference between years was
primarily due to an increase in inventory in 1999 compared with a
decrease in 1998, along with a greater increase in accounts
receivable in 1999. The $19.7 million of cash used in investing
activities was for capital expenditures, primarily for new molds.
As of June 26, 1999, the Company had $300 million available under
its unsecured multicurrency credit facility, which matures in 2002.
The multicurrency credit facility along with $197 million of
other 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.
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 4. Submission of Matters to a Vote of Security Holders
The 1999 annual meeting of shareholders of the Registrant
occurred on May 11, 1999. The following matters were voted upon
at the meeting: the election as a director of the Registrant of
each of Clifford J. Grum, Betsy D. Holden, and Angel R. Martinez,
and the ratification of the appointment of PricewaterhouseCoopers
LLP as independent auditors of the Registrant.
The results of the voting were as follows:
Votes Against/ Broker
Matter Voted Votes For Withheld* Abstained Non-Votes
- ---------------- ----------- ------------- --------- ---------
Election of
Clifford J. Grum 50,241,637 385,350 N/A 0
Election of
Betsy D. Holden 50,231,657 395,330 N/A 0
Election of
Angel R. Martinez 50,185,359 441,628 N/A 0
Approval of
Pricewaterhouse-
Coopers LLP 50,425,666 74,012 N/A 0
*Numbers shown for Director elections are votes withheld. For
the other matter voted upon, numbers shown are votes against.
In addition to the directors elected at the meeting, the directors
of the Registrant whose terms of office continued after the meeting
were: Rita Bornstein, E.V. Goings, Joe E. Lee, Bob Marbut, David R.
Parker, Robert M. Price and Joyce M. Roche. As of May 11, 1999,
Ruth M. Davis and Lloyd C. Elam retired from the Board of Directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
(3.2) Amended and Restated By-laws of Tupperware
Corporation.
(27) Financial Data Schedule for the second quarter
of 1999.
(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
August 9, 1999