UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 25, 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.)
14901 South Orange Blossom Trail, 32837
Orlando, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (407) 826-5050
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $0.01 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. __
Aggregate market value of the Registrant's voting stock held by
non-affiliates, based upon the closing price of said stock on the New
York Stock Exchange-Composite Transaction Listing on March 10, 2000
($16.25 per share): $922,572,381.25.
As of March 10, 2000, 57,666,434 shares of the Common Stock, $0.01 par
value, of the Registrant were outstanding.
Documents Incorporated by Reference:
Portions of the Annual Report to Shareholders for the year ended
December 25, 1999 are incorporated by reference into Parts I, II and IV
of this Report.
Portions of the Proxy Statement relating to the Annual Meeting of
Shareholders to be held May 11, 2000 are incorporated by reference into
Part III of this Report.
PART I
Item 1. Business
(a) General Development of Business
Tupperware Corporation (the "Registrant" or "Tupperware") is a
multinational consumer products company. The Registrant is a Delaware
corporation that was organized on February 8, 1996 in connection with
the corporate reorganization of Premark International, Inc. ("Premark").
In the reorganization, the businesses of the Registrant and certain
other assets and liabilities of Premark and its subsidiaries were
transferred to the Registrant. On May 31, 1996, the Registrant became a
publicly held company through the pro rata distribution by Premark to
its shareholders of all of the outstanding shares of common stock of the
Registrant.
BUSINESS OF TUPPERWARE CORPORATION
Tupperware is a worldwide direct selling consumer products company
engaged in the manufacture and sale of Tupperware products.
Principal Products. Tupperware conducts its business through a single
business segment, manufacturing and marketing a broad line of high-
quality consumer products for the home. The core of Tupperware's product
line consists of food storage containers that preserve freshness through
the well-known Tupperware seals. Tupperware also has an established line
of children's educational toys, serving products and gifts. The line of
products has expanded over the years into kitchen, home storage and
organizing uses with products such as Modular Mates* containers, Fridge
Stackables* containers, One Touch* canisters, the Rock'N Serve* line,
Ultraplus* and OvenWorks* line, Expressions* line, Legacy* Serving line
and TupperMagic* line, and many specialized containers. In recent years,
Tupperware has expanded its offerings in the food preparation and
servicing areas through the addition of a number of products, including
double colanders, tumblers and mugs, mixing and serving bowls, serving
centers, microwaveable cooking and serving products, and kitchen
utensils.
Tupperware continues to introduce new designs and colors in its
product lines, and to extend existing products into new markets around
the world. The development of new products varies in different markets
in order to address differences in cultures, lifestyles, tastes and
needs of the markets. New products introduced in 1999 included a wide
range of products in all four geographic areas, including many using
Disney movie and cartoon characters under a license. Some of the new
products are the Fridgesmart* line, Royal Crest* line, Vitalic*
stainless steel cookware line, Santoku Knives, Healthy Baster, Air
Filter, Sandwich Keepers, and Cake Servers. New product development and
introduction will continue to be an important part of Tupperware's
strategy.
Products sold by Tupperware are primarily produced by Tupperware in
its manufacturing facilities around the world. In some markets,
Tupperware sources certain products from third parties and/or contracts
with local manufacturers to manufacture its products, utilizing high-
quality molds that are generally supplied by Tupperware. Promotional
items provided at product demonstrations include items obtained from
outside sources.
(Words followed by * are Trademarks of the Registrant.)
Markets. Tupperware's business is operated on the basis of four
geographic segments: Europe, Asia Pacific, Latin America, and the United
States. Tupperware has operations in more than 75 countries and its
products are sold in more than 100 foreign countries and in the United
States. For the past five fiscal years, sales in foreign countries
represented, on average, 85% percent of total Tupperware revenues.
Market penetration varies throughout the world. Several "developing"
areas that have low penetration, such as Latin America, Asia and Eastern
(Central) Europe, provide significant growth potential for Tupperware.
Tupperware's strategy continues to include expansion into new markets
throughout the world.
Distribution of Tupperware Products. Tupperware's products are
distributed worldwide primarily through the "direct selling" method of
distribution, in which products are sold to consumers outside
traditional retail store channels. The distributorship system is
intended to facilitate the timely distribution of products to the
consumer, and to establish uniform practices regarding the use of
Tupperware trademarks and the administrative arrangements with
Tupperware, such as order entering and delivering, paying and
recruiting, and training of dealers.
Tupperware products sold under the direct selling method are sold
directly to distributors or dealers throughout the world. Distributors
are granted the right to market Tupperware products using the
demonstration and other non-traditional retail methods and to utilize
the Tupperware trademark. The vast majority of Tupperware's
distributorship system is composed of distributors, managers and dealers
(known in the United States as consultants) who are independent
contractors and not employees of Tupperware. In certain limited
circumstances, Tupperware acquires ownership of distributorships for a
period of time, until an independent distributor can be installed, in
order to maintain market presence.
In addition to the introduction of new products and development of new
geographic markets, a key element of Tupperware's strategy is expanding
its business by enlarging the number of distributors and dealers. Under
the Tupperware system, distributors recruit, train, and motivate a large
sales force to cover the distributor's geographic area. Managers are
developed and promoted by distributors to assist the distributors in
recruiting, training, and motivating dealers, while continuing to hold
their own demonstrations.
As of December 25, 1999, the Tupperware distribution system had over
1,800 distributors, over 51,000 managers, and over 980,000 dealers
worldwide.
Tupperware relies primarily on the "demonstration" method of sales,
which is designed to enable the purchaser to appreciate through
demonstration the features and benefits of Tupperware products.
Demonstrations, which are sometimes referred to as "Tupperware parties,"
are held in homes, offices, social clubs and other locations. In excess
of 14.8 million demonstrations were held in 1999 worldwide. Tupperware
products are also promoted through brochures mailed to persons invited
to attend Tupperware parties and various other types of demonstrations.
Sales of Tupperware products are supported by Tupperware through a
program of sales promotions, sales and training aids and motivational
conferences for the independent sales force. In addition, to support its
sales force, Tupperware utilizes catalogs, television and magazine
advertising, which helps increase its sales levels with hard-to-reach
customers.
In 1999, Tupperware continued exploring integrated access strategies
to allow consumers to obtain Tupperware products other than by attending
a Tupperware party. These strategies include television shopping, direct
mail, kiosks and the Internet. Tupperware's strategy is to use
integrated access strategies in a way that will complement its direct
selling distribution network.
The distribution of products to consumers is primarily the
responsibility of distributors, who often maintain their own inventory
of Tupperware products, the necessary warehouse facilities, and delivery
systems; however, in some situations, Tupperware will perform the
warehousing and selling function paying the distributor a commission for
their sales activity. In certain markets, Tupperware offers distributors
the use of a delivery system of direct product shipment to consumers or
dealers, which is intended to reduce the distributor's investment in
inventory and enable distributors to be more cost-efficient.
Competition. There are two primary competitive factors which affect
Tupperware's business: (i) competition with other "direct sales"
companies for sales personnel and demonstration dates; and (ii)
competition in all the markets for food storage and serving containers,
toys, and gifts in general. Tupperware believes that it holds a
significant market share in each of these markets in many countries.
This has been facilitated by innovative product development and a large,
dedicated worldwide sales force. Tupperware's competitive strategies are
to continue to expand its direct selling and integrated access
distribution systems, and to provide high-quality, high-value products
throughout the world.
Employees. Tupperware employs approximately 6,600 people, of whom
approximately 1,295 are based in the United States. Tupperware's United
States work force is not unionized. In certain countries, Tupperware's
work force is covered by collective arrangements decreed by statute. The
terms of most of these arrangements are determined on an annual basis.
Additionally, approximately 130 Tupperware manufacturing employees in an
Australian mold manufacturing operation are covered by a collective
bargaining agreement, which is negotiated annually, and Philippine
manufacturing employees have negotiated a collective bargaining
agreement which will remain in effect until this year. There have been
no work stoppages or threatened work stoppages by the workforce in over
five years and Tupperware believes its relations with its employees to
be good. The independent consultants, dealers, managers and distributors
engaged in the direct sale of Tupperware products are not employees of
Tupperware.
Research and Development. For fiscal years ended 1999, 1998 and 1997,
Tupperware incurred expenses of approximately $12.3 million, $13.8
million and $12.8 million respectively, on research and development
activities for new products.
Raw Materials. Products manufactured by Tupperware require plastic
resins meeting its specifications. These resins are purchased through
various arrangements with a number of large chemical companies located
throughout Tupperware's markets. As a result, Tupperware has not
experienced difficulties in obtaining adequate supplies and generally
has been successful in mitigating the effects of increases in resin
market prices. Research and development relating to resins used in
Tupperware products is performed by both Tupperware and its suppliers.
Trademarks and Patents. Tupperware considers its trademarks and
patents to be of material importance to its business; however, except
for the Tupperware trademark, Tupperware is not dependent upon any
single patent or trademark, or group of patents or trademarks. The
trademark on the Tupperware name is registered on a country-by-country
basis. The current duration for such registration ranges from seven
years to fifteen years; however, each such registration may be renewed
an unlimited number of times. The patents and trademarks used in
Tupperware's business are registered and maintained on a worldwide
basis, with a variety of durations. Tupperware has followed the practice
of applying for design and utility patents with respect to most of its
significant patentable developments.
Environmental Laws. Compliance with federal, state and local
environmental protection laws has not had in the past, and is not
expected to have in the future, a material effect upon Tupperware's
capital expenditures, liquidity, earnings or competitive position.
Other. Tupperware sales do not vary significantly on a quarterly
basis; however, third quarter sales are generally lower than the other
quarters in any year due to vacations by Tupperware's dealers and their
customers, as well as Tupperware's reduced promotional activities during
such quarter. Sales generally increase in the fourth quarter as it
includes traditional gift giving occasions in many of Tupperware's
markets and as children return to school and households refocus on
activities that include the use of Tupperware's products. There are no
working capital practices or backlog conditions which are material to an
understanding of Tupperware's business. Tupperware's business is not
dependent on a small number of customers, nor is any of its business
subject to renegotiation of profits or termination of contracts or
subcontracts at the election of the United States government.
Executive Officers of the Registrant. Following is a list of the
names and ages of all the Executive Officers of the Registrant,
indicating all positions and offices with the Registrant held by each
such person, and each such person's principal occupations or employment
during the past five years. Each such person has been elected to serve
until the next annual election of officers of the Registrant (expected
to occur on May 11, 2000).
Positions and Offices Held and Principal Occupations of Employment
During Past Five Years
Name and Age Office and Experience
Gerald M. Crompton, age 56 Senior Vice President, Product
Marketing, Worldwide since November
1997, after serving as Vice President,
Product Marketing, Worldwide since
November 1996. Prior thereto, he served
as Vice President, Product Management
for Tupperware Europe, Africa and
Middle East since 1992.
Karel A. De Vydt, age 49 Vice President and Chief Information
Officer since January 1999. Prior
thereto, he served as Director of
Information Technology Worldwide from
April 1997 after being the Director of
Information Technology for Tupperware
Europe, Africa and Middle East.
R. Glenn Drake, age 47 President, Tupperware North America
since January 2000. Prior thereto, he
served as Managing Director,
Tupperware Canada from September 1998
after serving as Area Vice President
of Tupperware North America from July
1995. Prior thereto, he served as
Managing Director, Tupperware Spain
from January 1993.
Lillian D. Garcia, age 43 Senior Vice President, Human Resources
since December 1999. Prior thereto,
she was Vice President Human Resources
since March 1999, after serving in
various human resources positions
within the Corporation.
E.V. Goings, age 54 Chairman and Chief Executive Officer
since October 1997, after serving as
President and Chief Operating Officer
since 1996. Prior thereto, he served as
Executive Vice President of Premark
International, Inc. and President of
Tupperware Worldwide since November
1992. Mr. Goings serves as a Director
of SunTrust Bank, Florida.
David T. Halversen, age 55 Senior Vice President, Business
Development and Communications since
November 1996. Prior thereto, he
served as Senior Vice President,
Planning, Business Development and
Financial Relations since March 1996.
He previously served as Vice President,
Business Development and Planning since
February 1995, after serving in various
planning and strategy positions with
Avon Products, Inc.
Christine J. Hanneman, age 44 Vice President, Financial Relations and
Treasury since January 2000, after
serving as Vice President, Financial
Relations since March 1996. She served
as Director, Investor Relations for
Premark International, Inc. since June
1994.
Charles H. R. Henry, age 49 Vice President, Process Reengineering
since January 1999. From 1994 to 1998,
he served in various executive
positions with Tupperware Europe,
Africa and Middle East.
Alan D. Kennedy, age 69 President, since April 1998. Prior
thereto, he was an independent
consultant, since 1996, and from 1989
to 1996 served as President and CEO of
Nature's Sunshine Products, Inc.
Anne E. Naylor, age 50 Vice President, Internal Audit since
October 1999. Prior thereto, she served
as Executive Director, Business
Analysis and Audit, Cummins Engine
Company from May 1995. Prior thereto,
she served as Controller, North
American Engine Marketing, Cummins
Engine Company since May 1991.
Gaylin L. Olson, age 54 President, Tupperware Latin America
since September 1998. He has served in
various executive positions for
Tupperware, including Senior Vice
President, Emerging Markets since May
1996 and prior thereto as President,
Tupperware Asia Pacific since 1993.
Michael S. Poteshman, age 36 Vice President and Controller since
January 1998, after serving as
Assistant Controller since March 1996.
Prior thereto, he served as Director,
Accounting and Reporting Standards for
Premark International, Inc. since
September 1993.
Thomas M. Roehlk, age 49 Senior Vice President, General Counsel
and Secretary since December 1995.
Prior thereto, he served as Assistant
General Counsel and Assistant Secretary
of Premark International, Inc.
James E. Rose, Jr., age 57 Senior Vice President, Taxes and
Government Affairs since March 1997,
after serving as Vice President, Taxes
and Government Affairs since March
1996. Prior thereto, he served as Vice
President, Taxes and Government Affairs
for Premark International, Inc.
Hans Joachim Schwenzer, age 63 Senior Vice President, Tupperware
Worldwide since May 1996. He also
serves as President, Tupperware
Germany; President, Sales Programs and
Promotions, Tupperware Europe, Africa
and Middle East; and Regional General
Manager, Russia. Prior to assuming
those positions, he served as
President, Tupperware Europe, Africa
and Middle East.
Christian E. Skroeder, age 51 Group President, Tupperware Europe,
Africa and Middle East since April
1998. Prior thereto, he served in
various other executive positions with
Tupperware.
William E. Spears, age 54 Senior Vice President Worldwide since
September 1999. Prior thereto, he
served as President, Tupperware North
America since January 1998. Prior
thereto, he served as President,
Tupperware U.S. since February 1997
after serving as Executive Vice
President and Chief Operating Officer
of Nature's Sunshine Products, Inc.
since 1994.
Jose R. Timmerman, age 51 Senior Vice President, Worldwide
Operations, since August 1997, after
serving as Vice President Worldwide
Operations, since October 1993.
Paul B. Van Sickle, age 60 Executive Vice President and Chief
Financial Officer since September 1999.
Prior thereto, he served as Executive
Vice President since March 1997, after
serving as Senior Vice President,
Finance and Operations since November
1992.
Robert W. Williams, age 56 President, Tupperware Asia Pacific
since April 1995. Prior thereto, he
served in various management positions
in Tupperware Asia Pacific starting in
August 1993.
Item 2. Properties
The principal executive office of the Registrant is owned by the
Registrant and is located in Orlando, Florida. The Registrant owns and
maintains manufacturing plants in Belgium, Brazil, France, Greece,
Japan, Korea, Mexico, the Philippines, Portugal, South Africa, and the
United States, and leases manufacturing facilities in Venezuela and
China. Tupperware conducts a continuing program of new product design
and development at its facilities in Florida, Japan and Belgium. None of
the owned principal properties is subject to any encumbrance material to
the consolidated operations of the Registrant. The Registrant considers
the condition and extent of utilization of its plants, warehouses and
other properties to be good, the capacity of its plants and warehouses
generally to be adequate for its needs, and the nature of the properties
to be suitable for its needs.
Item 3. Legal Proceedings
A number of ordinary course legal and administrative proceedings
against Tupperware are pending. In addition to such proceedings, there
are certain proceedings that involve the discharge of materials into or
otherwise relating to the protection of the environment. Certain of such
proceedings involve federal environmental laws such as the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as well
as state and local laws. Tupperware establishes reserves with respect
to certain of such proceedings. Because of the involvement of other
parties and the uncertainty of potential environmental impacts, the
eventual outcomes of such actions and the cost and timing of
expenditures cannot be estimated with certainty. It is not expected
that the outcome of such proceedings, either individually or in the
aggregate, will have a materially adverse effect upon Tupperware.
As part of the 1986 reorganization involving the formation of
Premark International, Inc., Premark was spun-off by Dart & Kraft, Inc.
and Kraft Foods, Inc. assumed any liabilities arising out of any legal
proceedings in connection with certain divested or discontinued former
businesses of Dart Industries Inc., a subsidiary of Tupperware,
including matters alleging product liability and environmental
liability. The assumption of liabilities by Kraft Foods, Inc. remains
effective subsequent to the distribution of the equity of the Registrant
to Premark shareholders.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The stock price information set forth in Note 12: "Quarterly
Financial Summary (Unaudited)" appearing on page 53 of the Annual Report
to Shareholders for the year ended December 25, 1999, is incorporated by
reference into this Report. The information set forth in Note 13:
"Rights Agreement" on page 53 of the Annual Report to Shareholders for
the year ended December 25, 1999 is incorporated by reference into this
Report. As of March 10, 2000, the Registrant had 12,772 shareholders of
record.
Item 6. Selected Financial Data
The information set forth under the caption "Selected Financial
Data" on pages 23 and 24 of the Annual Report to Shareholders for the
year ended December 25, 1999, is incorporated by reference into this
Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" set forth on pages 25
through 33 of the Annual Report to Shareholders for the year ended
December 25, 1999, is incorporated by reference into this Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information set forth under the caption "Market Risk" on page
31 of the Annual Report to Shareholders for the year ended December 25,
1999, is incorporated by reference into this Report.
Item 8. Financial Statements and Supplementary Data
(a) The following Consolidated Financial Statements of Tupperware
Corporation and Report of Independent Certified Public Accountants set
forth on pages 34 through 53, and on page 54, respectively, of the
Annual Report to Shareholders for the year ended December 25, 1999 are
incorporated by reference into this Report:
Consolidated Statement of Income, Shareholders' Equity and Cash
Flows - Years ended December 25, 1999, December 26, 1998, and December
27, 1997;
Consolidated Balance Sheet - December 25, 1999 and December 26,
1998;
Notes to the Consolidated Financial Statements; and
Report of Independent Certified Public Accountants.
(b) The supplementary data regarding quarterly results of
operations contained in Note 12: "Quarterly Financial Summary
(Unaudited)" of the Notes to the Consolidated Financial Statements of
Tupperware Corporation on page 53 of the Annual Report to Shareholders
for the year ended December 25, 1999, is incorporated by reference into
this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information as to the Directors of the Registrant set forth
under the sub-caption "Board of Directors" appearing under the caption
"Election of Directors" on pages 3 through 5 of the Proxy Statement
relating to the Annual Meeting of Shareholders to be held on May 11,
2000, is incorporated by reference into this Report. The information as
to the Executive Officers of the Registrant is included in Part I hereof
under the caption "Executive Officers of the Registrant" in reliance
upon General Instruction G to Form 10-K and Instruction 3 to Item 401(b)
of Regulation S-K.
Item 11. Executive Compensation
The information set forth under the caption "Compensation of
Directors" on page 15 of the Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 11, 2000, and the information
on pages 11 through 15 of such Proxy Statement relating to executive
officers' compensation is incorporated by reference into this Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under the captions "Security Ownership of
Certain Beneficial Owners" on page 7 and "Security Ownership of
Management" on page 6 of the Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 11, 2000, is incorporated by
reference into this Report.
Item 13. Certain Relationships and Related Transactions
The information set forth under the caption "Indebtedness of
Management" on page 8 of the Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 11, 2000, is incorporated by
reference into this Report.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports On Form
8-K
(a) (1) List of Financial Statements
The following Consolidated Financial Statements of Tupperware
Corporation and Report of Independent Certified Public Accountants set
forth on pages 34 through 53 and on page 54, respectively, of the Annual
Report to Shareholders for the year ended December 25, 1999, are
incorporated by reference into this Report by Item 8 hereof:
Consolidated Statement of Income, Shareholders' Equity and Cash
Flows - Years ended December 25, 1999, December 26, 1998, and December
27, 1997;
Consolidated Balance Sheet - December 25, 1999, and December 26,
1998;
Notes to the Consolidated Financial Statements; and
Report of Independent Certified Public Accountants.
(a) (2) List of Financial Statement Schedules
The following consolidated financial statement schedule (numbered
in accordance with Regulation S-X) of Tupperware Corporation is included
in this Report:
Report of Independent Certified Public Accountants on Financial
Statement Schedule, page 16 of this Report; and
Schedule II-Valuation and Qualifying Accounts for each of the three
years ended December 25, 1999, page 17 of this Report.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable, or the
information called for therein is included elsewhere in the financial
statements or related notes contained or incorporated by reference
herein.
(a) (3) List of Exhibits: (numbered in accordance with Item 601 of
Regulation S-K)
Exhibit
Number Description
*1 Underwriting Agreement (Attached
to Form S-3 (No. 33-12125) Registration
Statement as Exhibit 1 filed with the
Commission on September 16, 1996, and
incorporated herein by reference).
*2 Distribution Agreement by and among Premark
International, Inc., Tupperware Corporation
and Dart Industries Inc. (Attached as Exhibit 2
to Tupperware Corporation's Registration Statement
on Form 10 (No. 1-11657) filed with the Commission
on March 4, 1996, and incorporated herein by
reference).
*3.1 Amended and Restated Certificate of Incorporation
of Tupperware Corporation (Attached as Exhibit 3.1
to Form 10 (No. 1-11657) filed with the Commission
on March 4, 1996, and incorporated herein by
reference).
*3.2 Amended and Restated By-laws of Tupperware
Corporation as amended May 11, 1999.
(Attached as Exhibit 3.2 to Form 10-Q for the
second quarter of 1999 filed with the
Commission on August 9, 1999, and incorporated
herein by reference).
*4.1 Rights Agreement, by and between Tupperware
Corporation and the rights agent named therein
(Attached as Exhibit 4 to Form 10 (No. 1-11657),
filed with the Commission on March 4, 1996, and
incorporated herein by reference).
*4.2 Indenture dated as of October 1, 1996, among
Tupperware Corporation and The First National Bank
of Chicago, as Trustee, (Attached as Exhibit 4(a)
to Tupperware Corporation's Registration Statement
on Form S-3 (No. 33-12125), filed with the
Commission on September 25, 1996, and incorporated
herein by reference).
*4.3 Form of Debt Securities (Attached as Exhibit 4(b)
to Tupperware Corporation's Registration Statement
on Form S-3 (No. 33-12125), filed with the
Commission on September 25, 1996, and incorporated
herein by reference).
*4.4 Form of Warrant Agreement, including form of
Warrant Certificate (Attached as Exhibit 4(a)
to Tupperware Corporation's Registration Statement
on Form S-3 (No. 33-12125) filed with the
Commission on September 25, 1996, and incorporated
herein by reference).
*10.1 Tupperware Corporation 1996 Incentive Plan as
amended August 18, 1999, (Attached as Exhibit 10.12
to Form 10-Q for the third quarter of 1999 filed
with the Commission on November 5, 1999, and
incorporated herein by reference).
*10.2 Tupperware Corporation Directors' Stock Plan as
amended November 12, 1998 (Attached as Exhibit 10.2
to Form 10-K (No. 1-11657) filed with the
Commission on March 24,1999 and incorporated herein
by reference).
*10.3 Form of Change of Control Agreement (Attached as
Exhibit 10.2 to Form 10-Q for the third quarter of
1999 filed with the Commission on November 8, 1999
and incorporated herein by reference).
*10.4 Tax Sharing Agreement between Tupperware
Corporation and Premark International, Inc.
(Attached as Exhibit 10.3 to Form 10 (No. 1-11657),
filed with the Commission on May 22, 1996, and
incorporated herein by reference).
*10.5 Employee Benefits and Compensation Allocation
Agreement between Tupperware Corporation and
Premark International, Inc.(Attached as Exhibit
10.4 to Form 10 (No. 1-11657), filed with the
Commission on March 4, 1996, and incorporated
herein by reference).
*10.6 Credit Agreement dated May 16, 1996,
(Attached as Exhibit 10.8 to the Registrant's
Registration Statement on Form 10 (No. 1-
11657), filed with the Commission on May 22,
1996, as Exhibit 10.8 and incorporated herein
by reference).
*10.7 Form of Franchise Agreement between a
subsidiary of the Registrant and distributors
of Tupperware products in the United States
(Attached as Exhibit 10.10 to the Registrant's
Annual Report on Form 10-K for the year ended
December 28, 1996, filed with the Commission on
March 25, 1997, and incorporated herein by
reference).
*10.8 First Amendment dated August 8, 1997,
to Credit Agreement dated May 16, 1996,
(Attached as Exhibit 10.9 to the Registrant's
Annual Report on Form 10-K for the year ended
December 27, 1997, and filed with the
Commission on March 24, 1998, and incorporated
herein by reference).
*10.9 Loan Agreement, Promissory Note, and
Stock Pledge Agreement dated November 13, 1998,
between Tupperware and E. V. Goings (Attached
as Exhibit 10.9 to Form 10-K (No. 1-11657)
filed with the Commission on March 24, 1999,
and incorporated herein by reference).
13 Pages 23 through 54 of the Annual Report to
Shareholders of the Registrant for the year ended
December 25, 1999.
21 Subsidiaries of Tupperware Corporation as of
March 10, 2000.
23 Manually signed Consent of Independent Certified
Public Accountants to the incorporation of their
report by reference into the prospectus contained
in specified registration statements on Form S-8
and Form S-3.
24 Powers of Attorney
27 Financial Data Schedule
*Document has heretofore been filed with the Commission and is
incorporated by reference and made a part hereof.
The Registrant agrees to furnish, upon request of the Commission, a copy
of all constituent instruments defining the rights of holders of
long-term debt of the Registrant and its consolidated subsidiaries.
(b) Reports on Form 8-K
During the quarter ended December 25, 1999, the Registrant did not
file any reports on Form 8-K.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Tupperware Corporation
Our audits of the consolidated financial statements referred to in
our report dated February 18, 2000 appearing in the 1999 Annual Report
to Shareholders of Tupperware Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report
on Form 10-K) also included an audit of the Financial Statement Schedule
listed in Item 14(a)(2) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects,
the information set forth therein when read in conjunction with the
related consolidated financial statements.
PricewaterhouseCoopers LLP
Orlando, Florida
February 18, 2000
<TABLE>
TUPPERWARE CORPORATION
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 25, 1999
(In millions)
<CAPTION>
Col. A Col. B. Col. C. Col. D. Col E.
- -------- ------- -------- ------- -----
Additions
---------------------
Balance at Charged Charged Balance
Beginning to Costs & to Other at End
Description of Period Expenses Accounts Deductions of
Period
- ----------- ---------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Allowance
for doubtful
accounts,
current and
long term:
Year ended
December 25,
1999 77.4 8.6 0.1 (25.3)<F1> 53.4
(7.4)<F2>
Year ended
December 26,
1998 81.9 15.0 (0.5) (22.3)<F1> 77.4
3.3<F2>
Year ended
December 27,
1997 67.9 27.5 0.8 (12.1)<F1> 81.9
(2.2)<F2>
Valuation
allowance for
deferred tax
assets:
Year ended
December 25,
1999 23.9 6.9 -- -- 30.8
Year ended
December 26,
1998 14.4 9.5 -- -- 23.9
Year ended
December 27,
1997 25.8 (11.4) -- -- 14.4
<FN>
<F1> Represents write-offs less recoveries.
<F2> Foreign currency translation adjustment.
</FN>
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Signature Title
Chairman of the Board of Directors,
E. V. Goings Chief Executive Officer and Director
(Principal Executive Officer)
Executive Vice President and
Chief Financial Officer
Paul B. Van Sickle (Principal Financial Officer)
Vice President and Controller
Michael S. Poteshman (Principal Accounting Officer)
* Director
Rita Bornstein, Ph.D
* Director
Clifford J. Grum
* Director
Betsy D. Holden
* Director
Joe R. Lee
* Director
Bob Marbut
* Director
Angel R. Martinez
* Director
David R. Parker
* Director
Robert M. Price
* Director
Joyce M. Roche
*By
Thomas M. Roehlk
Attorney-in-fact
March 17, 2000
EXHIBIT INDEX
Exhibit No. Description
13 Pages 23 through 54 of the
Annual Report to Shareholders
of the Registrant for the year
ended December 25, 1999
21 Subsidiaries of Tupperware
Corporation as of March 10, 2000
23 Manually signed Consent of
Independent Certified Public
Accountants to the incorporation
of their report by reference into the
prospectus contained in specified
registration statements on Form S-8
and Form S-3
24 Powers of Attorney
27 Financial Data Schedule
<PAGE> 1
Exhibit 13
SELECTED PAGES FROM ANNUAL REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the results of operations for 1999 compared
with 1998, and of 1998 compared with 1997, and changes in financial condition
during 1999. This information should be read in conjunction with the
consolidated financial information provided on pages 34 to 54 of the Annual
Report.
RESULTS OF OPERATIONS
NET SALES AND NET INCOME. Net sales in 1999 of $1.0 billion were 4 percent lower
than 1998 net sales, reflecting decreases from operations in all areas except
Asia Pacific, which had a significant improvement. In addition, foreign exchange
had a negative impact on the comparison of $19.7 million, or 2 percentage
points. Net sales in 1998 of $1.1 billion were 12 percent lower than 1997 net
sales, reflecting decreases from operations in all areas except the United
States, which had a modest improvement. In addition, foreign exchange had a
significant negative impact on the comparison of $63.5 million, or 5 percentage
points.
For 1999, net income increased 14 percent to $79.0 million from $69.1 million in
1998. Included in the 1999 results were $16.1 million ($12.3 million after tax)
of re-engineering costs related to the three-year program announced in July
1999. The re-engineering charge of $15.1 million provides for severance and
other exit costs associated with the decision to close manufacturing plants in
Spain and Argentina, and to restructure manufacturing operations in Japan and
the headquarters for Europe and Asia Pacific. The additional $1.0 million
expense incurred was for internal and external consulting costs to design and
execute the re-engineering actions. The cash portion of the 1999 re-engineering
costs is $12.0 million. 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. The
1999 results included approximately $10.0 million of pretax benefits associated
with re-engineering actions taken, about half of which related to an improved
gross margin percentage. Total one-time costs to be incurred through 2001 in
implementing the program are projected to be between $50 million and $75
million, mainly for severance, information technology expenditures, and plant
closure costs. The annual benefit of the actions when they are fully implemented
is expected to be approximately $40 million to $50 million. Excluding the
re-engineering costs, net income increased to $91.3 million, or 32 percent. All
areas except Europe reported improved earnings. Foreign exchange did not have an
impact on the net income comparison.
Net income of $69.1 million in 1998 was $12.9 million, or 16 percent, lower than
1997 net income of $82.0 million. The 1997 results include a pretax charge
totaling $42.4 million ($31.3 million after tax), primarily for provisions for
bad debts in Brazil, inventory obsolescence in the United States, and to a
lesser extent, corporate downsizing. Only a small portion of the charge involved
cash outlays by the Company. Excluding the 1997 charge, net income decreased
$44.2 million, or 39 percent. As with sales, all areas other than the United
States reported worse results. Foreign exchange had a negative impact of $9.2
million, or 11 percentage points, on the 1998 versus 1997 comparison.
In 1999, unallocated corporate expenses increased to $23.1 million from $17.5
million in 1998. The increase was primarily due to accruals for bonuses, which
programs, and the inclusion of the costs for the re-engineering program.
Unallocated corporate expenses decreased to $17.5 million in 1998 from $18.0
million, which included $4.2 million of the 1997 fourth quarter charge. The 1997
charge was primarily for severance costs associated with corporate downsizing.
The 1998 increase, excluding the charge, reflects the addition of a corporate
president and spending on development of marketing initiatives.
In both 1999 and 1998, 85 percent of sales, and 97 percent of the Company's
operating profit was generated by international operations.
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COSTS AND EXPENSES. The cost of products sold in relation to sales was 35.0
percent, 37.5 percent, and 38.6 percent in 1999, 1998, and 1997, respectively.
All areas reported improved ratios in 1999 primarily due to the sale of a
greater proportion of high-margin products, and lower manufacturing costs.
Europe's cost of products sold improved only slightly due to lower sales volumes
in Germany. The improvement in the ratio in 1998 reflects lower costs from
higher production and sales in the United States, as well as the sale of a
greater proportion of high-margin products, and the absence of the 1997 charge.
Partially offsetting these factors was the impact of lower capacity utilization
in certain plants in Latin America. Delivery, sales, and administrative expense
as a percentage of sales was 51.4 percent, 51.9 percent, and 50.5 percent in
1999, 1998, and 1997, respectively. The decrease in 1999 expenses exceeded the
sales decrease, while the expenses in 1998 decreased from 1997, but not to as
great an extent as sales.
TAX RATE. The effective tax rate for 1999, 1998, and 1997, was 23.5 percent,
24.5 percent, and 26.0 percent, respectively. The 1999 and 1998 rate decreases
are the result of the benefit of much lower foreign effective rates only
partially offset by the absence of a reduction in a valuation allowance against
federal deferred tax assets.
NET INTEREST. The Company had $20.9 million of net interest expense in 1999,
compared with $22.7 million in 1998, and $17.8 million in 1997. The 1999
decrease resulted from carrying a higher proportion of debt offshore, and from
shifting the offshore debt to lower cost countries. The 1998 increase resulted
from a higher level of borrowing to fund the repurchase of 5 million of the
Company's shares in 1997 and the first half of 1998, which was only partially
offset by lower 1998 interest rates on variable-rate borrowing.
REGIONAL RESULTS 1999 VS. 1998
<TABLE>
<CAPTION>
Positive
Increase (negative)
(decrease) Restated(a) foreign Percent of total
----------------- increase exchange ----------------
(Dollars in millions) 1999 1998 Dollar Percent (decrease) impact 1999 1998
- ------------------------------------------ --------- ------- ------- ----------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales
Europe $ 489.1 $ 518.7 $ (29.6) (6)% (1)% $ (23.9) 47% 48%
Asia Pacific 242.3 211.5 30.8 15 4 20.8 23 20
Latin America 154.2 186.8 (32.6) (18) (9) (16.6) 15 17
United States 158.2 165.8 (7.6) (5) (5) na 15 15
--------- --------- ------- ------- --- ---
$ 1,043.8 $ 1,082.8 $ (39.0) (4)% (2)% $ (19.7) 100% 100%
========= ========= ======= = ======= === ===
Operating profit (loss)
Europe $ 110.7 $ 123.9 $ (13.2) (11)% (7)% $ (5.2) 68% 94%
Asia Pacific 35.0 20.2 14.8 73 49 3.3 22 15
Latin America 12.0 (16.4) 28.4 nm nm 1.7 7 nm
United States 4.7 4.0 0.7 17 17 na 3 3
--------- --------- ------- ------- --- ---
$ 162.4 $ 131.7 $ 30.7 23% 23% $ (0.2) 100% nm
========= ========= ======= ======= === ===
</TABLE>
a. 1999 actual compared with 1998 translated at 1999 exchange rates.
nm - Not meaningful.
na - Not applicable.
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EUROPE
The sales decline in Europe was primarily due to lower sales volume in Germany,
which was driven by the impact of new social security tax legislation. The
United Kingdom and Scandinavia also had lower sales volumes. Offsetting these
declines was a significant sales increase in France in addition to improvement
in Italy. The German market had sequential sales improvements in the fourth
quarter, due primarily to recruiting programs that had a positive impact on the
sales force trends. The Company expects the impact of this legislation to have
been mitigated by the end of the first half of 2000. Germany is the Company's
largest market with sales of $209.2 million in 1999 compared with $241.2 million
in 1998. Foreign exchange had a $9.4 million negative impact on the comparison.
The German market also accounts for a substantial portion of Europe's operating
profit. The decrease in the area's operating profit primarily reflected the
lower sales level along with higher operating expense partially offset by a
slightly higher gross margin percentage. Operating expenses in Germany increased
in 1999 due to the reimbursement of a portion of the social security tax, as
well as higher promotion expenses to stimulate sales growth.
ASIA PACIFIC
Asia Pacific led the areas with a 4-percent increase in sales and a 49-percent
increase in operating profit, excluding the favorable impact of exchange rates.
The sales increase was primarily due to improvements in Korea, Australia,
Indonesia, the Philippines, and India, which was driven by an increase in the
total sales force as a result of successful recruiting programs in addition to
the economic recovery in Korea. Partially offsetting this improvement was a
decline in Japan. Economic factors and a less active sales force contributed to
the decline in Japan, although there was improvement in the fourth quarter. The
improvement in the area's operating profit was due to the focus on cost
reduction measures and higher sales volumes in addition to smaller losses in
China and India. Currencies throughout the region strengthened in comparison
with the U.S. dollar.
LATIN AMERICA
In local currency, Latin American sales decreased 9 percent as declines in
Venezuela, Argentina, and Brazil offset improved performance in Mexico. These
declines were due to a smaller sales force resulting mainly from the decision to
significantly reduce the number of distributors in those markets in order to
enhance the opportunity for profitability of those remaining. The improvement in
Mexico was primarily due to price increases. Operating profits improved
significantly to $12.0 million profit versus a $16.4 million operating loss. The
increase was due to cost reductions, a higher gross margin percentage, and lower
promotion expenses. The impact of foreign exchange on the sales comparisons
reflects weakness in the Brazilian real as well as the Mexican peso.
UNITED STATES
The 5-percent sales decrease for the year was primarily the result of a smaller
sales force reflecting the difficulty of recruiting and motivating consultants
in a full employment environment. This factor was somewhat mitigated by further
improvements in sales force productivity and by sales through the integrated
direct access channels (IDA), which is a convergence of our core party plan
business with kiosks, the Internet, television sales, and direct mail, which
will begin later in 2000. In the fourth quarter, IDA, mainly kiosks, accounted
for 7 percent of U.S. sales. The Company expects to continue to develop its IDA
channels. Higher operating profit was primarily driven by improved gross margin
percentages, reflecting a more favorable mix of sales and a modest price
increase. A decrease in operating expenses partially offset by an increase in
promotional spending associated with additional recruiting programs also
contributed to the increase.
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REGIONAL RESULTS 1998 VS. 1997
<TABLE>
<CAPTION>
Increase Negative
(decrease) Restated(a) foreign Percent of total
--------------------- increase exchange ----------------
(Dollars in millions) 1998 1997 Dollar Percent (decrease) impact 1998 1997
- ------------------------------------- --------- -------- ------- ---------- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales
Europe $ 518.7 $ 546.6 $ (27.9) (5)% (3)% $ (11.6) 48% 44%
Asia Pacific 211.5 279.0 (67.5) (24) (8) (49.4) 20 23
Latin America 186.8 247.2 (60.4) (24) (24) (2.5) 17 20
United States 165.8 156.5 9.3 6 6 na 15 13
--------- --------- -------- ------- --- ---
$ 1,082.8 $ 1,229.3 $ (146.5) (12)% (7)% $ (63.5) 100% 100%
========= ========= ======== ======= --- ---
Operating profit (loss)
Europe $ 123.9 $ 144.6 $ (20.7) (14)% (13)% $ (1.8) 94% 99%
Asia Pacific 20.2 37.2 (17.0) (46) (25) (10.3) 15 25
Latin America (16.4) (5.7)(b) (10.7) -- -- (0.2) nm nm
United States 4.0 (29.5)(b) 33.5 nm nm na 3 nm
--------- --------- -------- ------- --- ---
$ 131.7 $ 146.6 $ (14.9) (10)% (2)% $ (12.3) nm nm
========= ========= ======== ======= --- ---
</TABLE>
a. 1998 actual compared with 1997 translated at 1998 exchange rates.
b. Includes charge: $22.2 million in Latin America, primarily for bad debt
expense in Brazil; and $16.0 million in the United States, primarily
for inventory obsolescence.
nm - Not meaningful.
na - Not applicable.
EUROPE
Europe's sales decrease was primarily the result of lower volume in Germany.
Italy and Scandinavia also had lower sales volume, while several of the smaller
markets had increases. During the second half, Germany continued to face the
impact of a smaller active sales force following an ineffective recruiting
promotion in the second quarter; however, the year-over-year gap in the active
sales force decreased through the fourth quarter. German sales were $241.2
million in 1998 and $260.8 million in 1997. Foreign exchange had a $3.3 million
negative impact on the comparison. The decrease in the area's operating profit
primarily reflected the lower sales level along with a slightly lower gross
margin percentage and slightly higher operating expenses. The area's
profitability benefited from improvements in the United Kingdom and France
as spending in these markets was reduced in 1998 while sales were about even
with 1997.
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ASIA PACIFIC
Excluding the negative impact of foreign exchange that related to currencies
throughout the region, the sales decline in Asia Pacific was primarily due to
lower volume in Japan and Korea. Difficult economic conditions seriously
curtailed consumers' purchasing power in the Asian markets. The Philippines had
a strong sales increase resulting from good recruiting results and success in
increasing the activity level of the sales force. The emerging markets of
Indonesia and India had sharply higher sales off of low bases. Throughout the
region, other than in Japan, 1998 sales force recruiting was very strong, which
is a key focus in struggling economies where the Tupperware earnings opportunity
is particularly appealing. The decrease in operating profit was attributable to
the lower sales along with operating expenses running at a higher percentage of
sales in 1998 than in 1997. While the dollar amount of operating expense
decreased, since a portion of these costs does not vary directly with sales
volume, they decreased at a lower rate than sales.
LATIN AMERICA
Latin America's decrease in sales was attributable to significantly lower volume
in Brazil and Argentina, along with the impact of the weakening Mexican peso.
Sales in local currency in Mexico increased modestly for the year. The fall off
in sales in Brazil and Argentina reflected the impact of a much smaller sales
force than in 1997. Early in the year, the number of distributors in these
markets was reduced about 30 percent, which led to the decrease in the sales
force.
The 1998 operating loss versus the $16.5 million operating profit in 1997 before
the charge reflects the impact of the lower sales volume, along with a lower
gross margin from a lower level of production, and the impact of the Mexican
peso devaluation. Through the end of 1998, the Company was accounting for the
operations of Mexico as hyperinflationary. Consequently, the translation of
balance sheet items impacted the income statement. Additionally, local currency
sales were translated at less favorable rates, but the cost of the product sold
was translated at rates in effect when the product was manufactured. Due to the
relatively low inflation rate in Mexico from 1996 to 1998, as of the beginning
of 1999, Mexico was no longer accounted for as hyperinflationary.
UNITED STATES
Sales in 1998 increased in spite of a smaller sales force as volume rose due to
a significant sales force productivity improvement. The Company addressed the
gap in the size of the sales force, which began to narrow in the second half of
the year, with new initiatives in the sales force compensation and by updating
the party. The 1998 operating profit versus the 1997 operating loss of $13.5
million before the charge reflected the impact of the higher sales; improvement
in the gross margin percentage due to less sales discounting and higher plant
capacity utilization; and lower operating expenses resulting from cost
containment efforts.
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES. Working capital decreased to $61.3 million as
of December 25, 1999, compared with $95.5 million as of December 26, 1998, and
$103.3 million as of December 27, 1997. The current ratio was 1.2 to 1 at the
end of 1999, and 1.3 to 1 at the end of 1998 and 1997. In 1999, working capital
decreased from a lower level of net inventories reflecting the Company's
reduction initiatives and the impact of a stronger dollar, and a higher current
portion of long-term debt, partially offset by an increase in accounts
receivable, primarily reflecting higher December 1999 sales in Europe compared
with December 1998.
In 1998, working capital decreased from a lower level of net inventories, again
reflecting the Company's reduction initiatives, as well as provisions for
obsolescence, and a higher accounts payable balance. Also, whereas only a
portion of the Company's borrowings that were current by their terms were
classified as long-term debt as of the end of 1998, due to the Company's ability
and intent to have them outstanding throughout the following year, at the end of
1997 all such borrowings were classified as long-term debt. These factors were
offset primarily due to an increase in deferred tax assets as temporary
differences grew, and lower taxes payable as a result of lower pretax earnings.
The Company has a $300.0 million unsecured multicurrency credit facility that
expires on August 8, 2002, and $280.0 million of foreign uncommitted lines of
credit. As of December 25, 1999, the Company had $260.0 million available under
the multicurrency credit facility and $211.0 million available under the foreign
lines of credit. The multicurrency credit facility, the 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. The total debt-to-capital ratio at the end of 1999 was 66.8
percent compared with 70.1 percent at the end of 1998.
OPERATING ACTIVITIES. Cash provided by operating activities was $113.0 million
in 1999, compared with $118.1 million in 1998, and $161.8 million in 1997. The
1999 decrease in cash flow reflects a smaller decrease in inventories, and an
increase in accounts receivable, partially offset by an increase in net income
and cash taxes in excess of the effective tax rate to a lower extent than in
1998. Cash flow in 1999 reflects the payment of $11.1 million of re-engineering
costs. The 1998 decrease in cash flow reflects lower earnings, a smaller
decrease in working capital, and cash taxes in excess of the effective tax rate
to a larger extent than in 1997.
INVESTING ACTIVITIES. For 1999, 1998, and 1997, respectively, capital
expenditures totaled $40.9 million, $46.2 million, and $67.5 million. The most
significant individual component of capital spending was new molds. The steadily
decreasing level of overall expenditures reflects lower spending on plant and
equipment in light of the Company's sales decreases. Capital expenditures are
expected to be between $45 million and $50 million in 2000.
In 1998, the Company sold its Halls, Tennessee, distribution center for $10.6
million in notes receivable. The notes are due through 2004, with the majority
due under a balloon payment to be received in the final year. There was no
significant income statement impact from the sale.
DIVIDENDS. During 1999, 1998, and 1997, the Company paid dividends of $0.88 per
share of common stock totaling $50.7 million, $51.6 million, and $54.2 million,
respectively.
SUBSCRIPTION RECEIVABLE. On November 30, 1998, the Company made a non-recourse,
non-interest bearing loan of $7.7 million (the loan) to its chairman and chief
executive officer (chairman), the proceeds of which were used by the chairman to
buy in the open market 400,000 shares of the Company's common stock (the
shares). The shares are pledged to secure the repayment of the loan. The loan
has been recorded as a subscription receivable and is due November 12, 2006,
with voluntary prepayments permitted subsequent to November 12, 2002. Ten
percent of any annual cash bonus award will be applied against the balance of
the loan. As the loan is reduced by voluntary payments after November 12, 2002,
the lien against the shares will be reduced. The subscription receivable will be
reduced as payments are received.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SHARE REPURCHASES. In 1998 and 1997, respectively, the Company repurchased 3.5
million and 1.5 million shares in the open market, completing its share
repurchase program announced in 1996, for a cost of $150.2 million, or an
average of $30 per share.
YEAR 2000 ISSUES
The Company studied the "Year 2000" issues affecting its information technology
systems, its non-information technology systems, and its issues with third-party
companies and other significant suppliers, and implemented a plan to address
them. Year 2000 issues have not had a material adverse effect on the Company's
operations. The cost of addressing its Year 2000 issues was approximately $5.3
million. These costs have not had a material effect on the Company's financial
position or results of operations in any one period in part because they
represent the re-deployment of existing information technology resources, and
because they would have been incurred as part of normal software upgrades and
replacements.
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. Although the Company
believes that it successfully avoided any significant disruption from the Year
2000 issue, it will continue to monitor all critical systems for the appearance
of delayed complications or disruptions, problems relating to the leap year, and
problems encountered through suppliers, customers, and other third parties with
whom the Company deals.
EURO IMPLEMENTATION
On January 1, 1999, several European countries that are members of the European
Monetary Union replaced their respective currencies with one common currency --
the euro. To date there has been no significant impact from the adoption of the
euro, and none is expected. The incremental cost to the Company of addressing
the euro conversion has not been material.
IMPACT OF INFLATION
Inflation as measured by consumer price indexes has continued at a low level in
most of the countries in which the Company operates.
MARKET RISK
One of the Company's market risks is its exposure to the impact of interest rate
changes. The Company has elected to manage this risk through the maturity
structure of its borrowings. Under its present policy, the Company has set a
target of having approximately half of its borrowings with extended terms.
A significant portion of the Company's sales and profits comes from its
international operations. Although these operations are geographically
dispersed, which partially mitigates the risks associated with operating in
particular countries, the Company is subject to the usual risks associated with
international operations. These risks include local political and economic
environments, and relations between foreign and U.S. governments.
Another economic risk of the Company, which is associated with its operating
internationally, is the exposure to fluctuations in foreign currency exchange
rates on the earnings, cash flows, and financial position of the Company's
international operations. The Company is not able to project in any meaningful
way the possible effect of these fluctuations on translated amounts or future
earnings. This is due to the Company's constantly changing exposure to various
currencies, the fact that all foreign currencies do not react in the same manner
in relation to the U.S. dollar, and the large number of currencies involved,
although the Company's most significant exposure is to the euro.
Although this currency risk is partially mitigated by the natural hedge arising
from the Company's local manufacturing in many markets, a strengthening U.S.
dollar generally has a negative impact on the Company. In response to this fact,
the Company uses financial instruments, such as cross-currency interest rate
swaps and forward contracts, to hedge its exposure to certain foreign exchange
risks associated with a portion of its investment in international operations.
In addition to hedging against the balance sheet impact of changes in exchange
rates, the hedge of investments in international operations also has the effect
of hedging a portion of the cash flows from those operations. The Company also
hedges with these instruments certain other exposures to various currencies
arising from non-permanent intercompany loans and firm purchase commitments.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Following is a listing of the Company's outstanding derivative financial
instruments as of December 25, 1999, and December 26, 1998:
<TABLE>
<CAPTION>
FORWARD CONTRACTS 1999 1998
- ----------------- ------------------------------- ---------------------------------
Weighted Weighted
average average
contract contract
rate of rate of
(Dollars in millions) Buy Sell exchange Buy Sell exchange
- ----------------------------------------------------- ------ --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Euro with U.S. dollars $ 70.2 $ 1.0340 $ $
German marks with U.S. dollars 24.4 1.9333
Swiss francs with U.S. dollars 21.1 1.5677 20.8 1.3254
Japanese yen with U.S. dollars 19.2 101.3265
Mexican pesos with U.S. dollars 17.5 9.5463
Philippine pesos with U.S. dollars 13.6 40.9280 12.7 39.4400
Australian dollars with U.S. dollars 12.7 0.6457 6.1 0.6229
Singapore dollars with U.S. dollars 4.8 1.6688
Canadian dollars with U.S. dollars 3.9 1.4718
Greek drachma with U.S. dollars 3.1 324.9300
Austrian shillings with U.S. dollars 0.1 13.5885 8.7 11.6527
Belgian francs with U.S. dollars 82.0 33.8132
French francs with U.S. dollars 36.0 5.4611
Portuguese escudos with U.S. dollars 17.9 167.9783
Italian lira with U.S. dollars 7.2 1,635.2500
Netherlands guilders with U.S. dollars 6.6 1.8462
Mexican pesos for U.S. dollars 21.3 10.3200
Swiss francs for U.S. dollars 19.3 1.5631 18.4 1.3620
Japanese yen for U.S. dollars 17.5 101.8794 10.1 116.6352
Euro for U.S. dollars 4.6 1.0470
German marks for U.S. dollars 4.2 1.9368 19.1 1.6565
Belgian francs for U.S. dollars 29.8 36.0269
French francs for U.S. dollars 16.3 5.9456
Spanish pesetas for U.S. dollars 13.7 140.3850
Portuguese escudos for U.S. dollars 7.5 181.2634
Hong Kong dollars for U.S. dollars 5.5 7.7551
Other currencies 16.1 7.6 various 7.2 9.5 various
-------- ------ ------- -------
$ 206.7 $ 74.5 $ 205.2 $ 129.9
======== ====== ======= =======
</TABLE>
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
CROSS-CURRENCY INTEREST RATE SWAPS 1999 1998
- ---------------------------------- --------------------------- -------------------------
(Dollars in millions) Weighted Weighted
average average
Amount at contract rate Amount at contract rate
Currency owed inception of exchange inception of exchange
- ----------------------------------------------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Euro $ 65.5 1.0650 $
Japanese yen 14.2 141.3300 14.2 141.3300
Swiss francs 10.0 1.5000 11.1 1.3539
Belgian francs 44.2 33.9250
French francs 27.2 5.5075
Portuguese escudos 11.9 168.3600
Netherlands guilders 5.4 1.8550
------ -------
Total $ 89.7 $ 114.0
====== =======
</TABLE>
The Company's derivative financial instruments at December 25, 1999, and
December 26, 1998, consisted solely of the financial instruments summarized
above. All of the contracts mature within 12 months. Related to the forward
contracts, the "buy" amounts represent the U.S. dollar equivalent of commitments
to purchase foreign currencies and the "sell" amounts represent the U.S. dollar
equivalent of commitments to sell foreign currencies, all translated at the
year-end market exchange rates for the U.S. dollar. The Company's open forward
contracts as of December 26, 1998, included approximately $60 million of
contracts to sell foreign currencies, which were initially entered into to hedge
a portion of the Company's foreign net investments. All forward contracts open
as of the end of 1999 are hedging cross-currency intercompany loans that are not
permanent in nature or firm purchase commitments. As of the end of fiscal 1999,
under the cross currency interest rate swaps, the Company was to receive
interest at a weighted average rate of 5.9 percent and was obligated to pay
interest at a weighted average rate of 2.4 percent.
FORWARD-LOOKING STATEMENTS
Statements contained in this report that are not based on historical facts are
forward-looking statements involving risks and uncertainties, including sales
force recruiting and activity levels, success of new products and promotional
programs, economic and market conditions generally and foreign exchange risk in
particular, and other risks detailed in the Company's Securities and Exchange
Commission filings. These risks and uncertainties may cause actual results to
differ materially from those projected in forward-looking statements.
<PAGE> 10
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION> Year Ended
--------------------------------------------
(In millions, except per share amounts) Dec. 25, 1999 Dec. 26, 1998 Dec. 27, 1997
- ------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C> <C>
Net sales $ 1,043.8 $ 1,082.8 $ 1,229.3
------------- ------------- -------------
Costs and expenses:
Cost of products sold 365.1 406.3 473.9
Delivery, sales, and administrative expense 536.8 562.3 620.7
Interest expense 23.0 24.8 24.1
Interest income (2.1) (2.1) (6.3)
Re-engineering charge 15.1 -- --
Other expense, net 2.6 -- 6.1
------------- ------------- -------------
Total costs and expenses 940.5 991.3 1,118.5
------------- ------------- -------------
Income before income taxes 103.3 91.5 110.8
Provision for income taxes 24.3 22.4 28.8
------------- ------------- -------------
Net income $ 79.0 $ 69.1 $ 82.0
============= ============= =============
Net income per common share:
Basic $ 1.37 $ 1.19 $ 1.34
============= ============= =============
Diluted $ 1.37 $ 1.18 $ 1.32
============= ============= =============
</TABLE>
See Notes to the Consolidated Financial Statements.
<PAGE> 11
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts) Dec. 25, 1999 Dec. 26, 1998
- ---------------------------------------------------------------------------------------------------------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 24.4 $ 23.0
Accounts receivable, less allowances of $22.5 million in 1999 and $32.7 million in 1998 114.4 92.3
Inventories 136.7 157.1
Deferred income tax benefits 48.5 55.5
Prepaid expenses and other 46.5 57.7
------------- -------------
Total current assets 370.5 385.6
------------- -------------
Deferred income tax benefits 107.9 84.7
Property, plant, and equipment, net 242.9 271.0
Long-term receivables, net of allowances of $28.0 million in 1999 and $41.4 million in 1998 34.2 40.3
Other assets 40.6 41.8
------------- -------------
Total assets $ 796.1 $ 823.4
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 87.8 $ 85.3
Short-term borrowings and current portion of long-term debt 43.9 18.7
Accrued liabilities 177.5 186.1
------------- -------------
Total current liabilities 309.2 290.1
============= =============
Long-term debt 248.5 300.1
Accrued post-retirement benefit cost 37.0 38.4
Other liabilities 56.1 59.0
Commitments and contingencies (Note 11)
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
Paid-in capital 20.3 19.5
Subscription receivable (7.7) (7.7)
Retained earnings 484.0 457.2
Treasury stock, 4,701,740 and 4,753,287 shares at cost in 1999, and 1998, respectively (140.2) (142.0)
Unearned portion of restricted stock issued for future service (0.6) (1.4)
Accumulated other comprehensive loss (211.1) (190.4)
------------- -------------
Total shareholders' equity 145.3 135.8
============= =============
Total liabilities and shareholders' equity $ 796.1 $ 823.4
============= =============
</TABLE>
See Notes to the Consolidated Financial Statements.
<PAGE> 12
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
other
compre-
(In millions, except per share amounts) Common stock Treasury stock hensive Compre-
- --------------------------------------- ------------------- ------------------- Paid-in Retained income hensive
Shares Dollars Shares Dollars capital earnings (loss) (a) income
------ ------- ------ ------- ------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 28, 1996 62.4 $ 0.6 -- $ -- $ 19.1 $418.2 $(128.5)
Net income 82.0 $ 82.0
Other comprehensive loss:
foreign currency translation
adjustments, net of tax
provision of $5.0 million (62.4) (62.4)
------
Comprehensive income $ 19.6
======
Distribution of equity of the
Company to Premark's
shareholders (2.7)
Cash dividends declared
($0.88 per share) (53.9)
Purchase of treasury stock 1.5 (57.6)
Stock issued for incentive
plans and related tax benefits (0.1) 3.6 0.4 (2.2)
------ ------ ------ ------ ------ ----- ------
December 27, 1997 62.4 0.6 1.4 (54.0) 19.5 441.4 (190.9)
Net income 69.1 $ 69.1
Other comprehensive income:
foreign currency translation
adjustments, net of tax
benefit of $3.7 million 0.5 0.5
------
Comprehensive income $ 69.6
======
Cash dividends declared
($0.88 per share) (50.9)
Purchase of treasury stock 3.5 (93.1)
Stock issued for incentive
plans and related tax benefits (0.1) 5.1 (2.4)
------ ------ ------ ------- ------ ------ -------
December 26, 1998 62.4 0.6 4.8 (142.0) 19.5 457.2 (190.4)
====== ====== ====== ======= ====== ====== =======
</TABLE>
(continued on following page)
a. Represents foreign currency translation adjustments.
See Notes to the Consolidated Financial Statements.
<PAGE> 13
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
Accumulated
other
compre-
(In millions, except per share amounts) Common stock Treasury stock hensive Compre-
- ----------------------------------------------------------- ------------------ Paid-in Retained income hensive
Shares Dollars Shares Dollars capital earnings (loss) (a) income
------ ------- ------ ------- ------- -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income 79.0 $ 79.0
Other comprehensive loss:
foreign currency translation
adjustments, net of tax
provision of $4.2 million (20.7) (20.7)
------- ------
Comprehensive income $ 58.3
======
Cash dividends declared
($0.88 per share) (50.7)
Stock issued for incentive
plans and related tax benefits (0.1) 1.8 0.8 (1.5)
------ ------ ------ ------- ------ ------ -------
December 25, 1999 62.4 $ 0.6 4.7 $(140.2) $ 20.3 $484.0 $(211.1)
====== ====== ====== ======= ====== ====== =======
</TABLE>
a. Represents foreign currency translation adjustments.
See Notes to the Consolidated Financial Statements.
<PAGE> 14
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------
(In millions) Dec. 25, 1999 Dec. 26, 1998 Dec. 27, 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 79.0 $ 69.1 $ 82.0
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 55.6 64.0 66.1
Loss on sale of assets 3.3 3.4 2.7
Foreign exchange loss (gain), net 0.1 (0.6) 1.2
Non-cash impact of re-engineering charge 3.1 -- --
Changes in assets and liabilities:
(Increase) decrease in accounts and notes receivable (30.1) 2.2 15.5
Decrease in inventories 9.1 29.8 44.7
Increase (decrease) in accounts payable and accrued liabilities 6.0 (1.8) (13.6)
Increase (decrease) in income taxes payable 0.6 (27.9) 5.1
Increase in net deferred income taxes (17.7) (15.1) (33.2)
Other, net 4.0 (5.0) (8.7)
------- ------- -------
Net cash provided by operating activities 113.0 118.1 161.8
INVESTING ACTIVITIES:
Capital expenditures (40.9) (46.2) (67.5)
------- ------- -------
FINANCING ACTIVITIES:
Dividend payments to shareholders (50.7) (51.6) (54.2)
Payments to acquire treasury stock -- (93.1) (57.1)
Proceeds from exercise of stock options 0.6 1.4 3.4
Issuance of subscription receivable -- (7.7) --
Net (decrease) increase in short-term debt (23.2) 80.9 (14.8)
Proceeds from issuance of long-term debt -- -- 15.0
------- ------- -------
Net cash used in financing activities (73.3) (70.1) (107.7)
------- ------- -------
Effect of exchange rate changes on cash and cash equivalents 2.6 (0.9) (17.5)
------- ------- -------
Net increase (decrease) in cash and cash equivalents 1.4 0.9 (30.9)
Cash and cash equivalents at beginning of year 23.0 22.1 53.0
------- ------- -------
Cash and cash equivalents at end of year $ 24.4 $ 23.0 $ 22.1
======= ======= =======
</TABLE>
See Notes to the Consolidated Financial Statements.
<PAGE> 15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Tupperware Corporation and all of its subsidiaries (Tupperware, the
Company). All significant intercompany accounts and transactions have been
eliminated. The Company's fiscal year ends on the last Saturday of December.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
As of December 25, 1999, and December 26, 1998, $8.3 million and $6.8 million,
respectively, of the cash and cash equivalents included on the consolidated
balance sheet were held in the form of time deposits or certificates of
deposit.
INVENTORIES. Inventories are valued at the lower of cost or market. Inventory
cost includes cost of raw material, labor, and overhead. Domestic
inventories, approximately 17 percent and 16 percent of total inventories, at
December 25, 1999, and December 26, 1998, respectively, are valued on the
last-in, first-out (LIFO) cost method. The first-in, first-out (FIFO) cost
method is generally used for the remaining inventories. If inventories valued
on the LIFO method had been valued using the FIFO method, they would have been
$11.9 million and $13.7 million higher at the end of 1999 and 1998,
respectively.
INTERNAL USE SOFTWARE DEVELOPMENT COSTS. The Company capitalizes internal use
software development costs as they are incurred and amortizes such costs over
their estimated useful lives of three years beginning when the software is
placed in service.
PROPERTY AND DEPRECIATION. Properties are initially stated at cost.
Depreciation is determined on a straight-line basis over estimated useful
lives. Generally, the estimated useful lives are 10 to 45 years for buildings
and improvements and 3 to 20 years for machinery and equipment. Upon the sale
or retirement of property, plant, and equipment, a gain or loss is recognized.
If the carrying value of an asset, including associated intangibles, exceeds
the sum of estimated undiscounted future cash flows, then an impairment loss is
recognized for the difference between estimated fair value and carrying value.
Expenditures for maintenance and repairs are charged to expense.
REVENUE RECOGNITION. Revenue is recognized when product is shipped.
ADVERTISING AND RESEARCH AND DEVELOPMENT COSTS. Advertising and research and
development costs are charged to expense as incurred. Advertising expense
totaled $8.7 million, $7.2 million, and $6.2 million in 1999, 1998, and 1997,
respectively. Research and development costs totaled $12.3 million, $13.8
million, and $12.8 million, in 1999, 1998, and 1997, respectively.
ACCOUNTING FOR STOCK-BASED COMPENSATION. The Company measures compensation
expense for employee and director stock options as the aggregate difference
between the market and exercise prices of the options on the date that both the
number of shares the grantee is entitled to receive and the purchase price are
known. Compensation expense associated with restricted stock grants is equal to
the market value of the shares on the date of grant and is recorded pro rata
over the required holding period. Pro forma information relating to the fair
value of stock-based compensation is presented in Note 9 to the consolidated
financial statements.
<PAGE> 16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the financial
statement carrying amounts of assets and liabilities and their respective tax
bases. Deferred tax assets also are recognized for credit carryforwards.
Deferred tax assets and liabilities are measured using the rates expected to
apply to taxable income in the years in which the temporary differences are
expected to reverse and the credits are expected to be used. The effect on
deferred tax assets and liabilities of the change in tax rates is recognized in
income in the period that includes the enactment date. An assessment is made as
to whether or not a valuation allowance is required to offset deferred tax
assets. This assessment includes anticipating future income.
NET INCOME PER COMMON SHARE. The financial statements include "basic" and
"diluted" per share information. 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,58.2 million, and 61.3
million, in 1999, 1998, and 1997, respectively. The only difference in the
computation of basic and diluted earnings per share is the inclusion of 0.4
million in 1999 and 0.5 million in 1998 and 1997 of shares of potential common
stock. The Company's potential common stock consists of employee and director
stock options and restricted stock.
DERIVATIVE FINANCIAL INSTRUMENTS. The Company uses derivative financial
instruments, principally cross-currency interest rate swaps and
over-the-counter forward exchange contracts with major international financial
institutions, to offset the effects of exchange rate changes on net investments
in certain foreign subsidiaries, certain firm purchase commitments, and certain
inter-company loan transactions. Gains and losses on instruments designated as
hedges of net investments in a foreign subsidiary or intercompany transactions
that are permanent in nature are accrued as exchange rates change, and are
recognized in shareholders' equity, along with any points on forward exchange
contracts, as foreign currency translation adjustments. The net interest
differential on cross-currency interest rate swaps is included within interest
expense. Gains and losses on contracts designated as hedges of intercompany
transactions that are not permanent in nature are accrued as exchange rates
change and are recognized in income. Gains and losses on contracts designated as
hedges of identifiable foreign currency firm commitments are deferred and
included in the measurement of the related foreign currency transaction.
Contracts hedging non-permanent intercompany transactions and identifiable
foreign currency firm commitments are held to maturity.
In 1999, the Financial Accounting Standards Board (FASB) amended the effective
date for Statement of Financial Accounting Standards (SFAS) 133, "Accounting
for Derivative Instruments and Hedging Activities" to fiscal years beginning
after June 30, 2000. 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 related to the hedging programs the Company has
undertaken.
FOREIGN CURRENCY TRANSLATION. Results of operations for foreign subsidiaries
are translated into U.S. dollars using the average exchange rates during the
year. The assets and liabilities of those subsidiaries, other than those of
operations in highly inflationary countries, are translated into U.S. dollars
using the exchange rates at the balance sheet date. The related translation
adjustments are "Accumulated other comprehensive income." Foreign currency
transaction gains and losses, as well as translation of financial statements of
subsidiaries in highly inflationary countries, are included in income.
SUBSCRIPTION RECEIVABLE. On November 30, 1998, the Company made a non-recourse,
non-interest bearing loan of $7.7 million (the loan) to its chairman and chief
executive officer (chairman), the proceeds of which were used by the chairman
to buy in the open market 400,000 shares of the Company's common stock (the
shares). The shares are pledged to secure the repayment of the loan. The loan
has been recorded as a subscription receivable and is due November 12, 2006,
with voluntary prepayments permitted subsequent to November 12, 2002. Ten
percent of any annual cash bonus award to the chairman will be applied against
the balance of the loan. As the loan is reduced by voluntary payments after
November 12, 2002, the lien against the shares will be reduced. The
subscription receivable will be reduced as payments are received.
<PAGE> 17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2: 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 pretax charge in the second
quarter. In the fourth quarter, the Company also incurred $1.0 million of
internal and external consulting costs associated with designing and executing
the re-engineering projects, which are classified as "Delivery, sales, and
administrative expense." The total cost was $12.3 million after tax.
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):
<TABLE>
<S> <C> <C> <C>
Severance $ 9.0 Europe $ 7.1
Asset write down 3.1 Asia Pacific 4.0
Other 3.0 Latin America 4.0
------- -------
Total $ 15.1 Total $ 15.1
======= =======
</TABLE>
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 December 25, 1999, was as follows (in millions):
<TABLE>
<S> <C>
Balance at December 26, 1998 $ --
Provision 15.1
Cash expenditures:
Severance (9.0)
Other (2.1)
Non-cash write downs (3.1)
-------
Balance at December 25, 1999 $ 0.9
=======
</TABLE>
NOTE 3: INVENTORIES
<TABLE>
<CAPTION>
(In millions) 1999 1998
- --------------------------------------------------------------------------------------------------------- --------
<S> <C> <C>
Finished goods $ 66.0 $ 74.5
Work in process 27.9 31.7
Raw materials and supplies 42.8 50.9
-------- --------
Total inventories $ 136.7 $ 157.1
======== ========
</TABLE>
<PAGE> 18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: PROPERTY, PLANT, AND EQUIPMENT
<TABLE>
<CAPTION>
(In millions) 1999 1998
- -------------------------------------------------------------- --------
<S> <C> <C>
Land $ 12.5 $ 12.5
Buildings and improvements 173.2 182.9
Machinery and equipment 758.1 773.6
Construction in progress 10.3 3.9
-------- --------
Total property, plant, and equipment 954.1 972.9
Less accumulated depreciation (711.2) (701.9)
-------- --------
Property, plant, and equipment, net $ 242.9 $ 271.0
======== ========
</TABLE>
In 1998, the Company sold its Halls, Tennessee, distribution center for $10.6
million in notes receivable. As of December 25, 1999, the outstanding receivable
notes were $10.3 million. The notes are due through 2004, with the majority due
under a balloon payment to be received in the final year. There was no
significant income statement impact from the sale.
NOTE 5: ACCRUED LIABILITIES
<TABLE>
<CAPTION>
(In millions) 1999 1998
- -------------------------------------------------------------- --------
<S> <C> <C>
Compensation and employee benefits $ 55.1 $ 51.3
Advertising and promotion 33.8 31.1
Taxes other than income taxes 18.3 22.0
Other 70.3 81.7
-------- --------
Total accrued liabilities $ 177.5 $ 186.1
======== ========
</TABLE>
NOTE 6: FINANCING ARRANGEMENTS
DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
(In millions) 1999 1998
- -------------------------------------------------------------- --------
<S> <C> <C>
6.84% Series Notes due 2000 $ 15.0 $ 15.0
7.05% Series Notes due 2003 15.0 15.0
7.25% Notes due 2006 100.0 100.0
Short-term borrowings 161.9 187.3
Other 0.5 1.5
-------- --------
292.4 318.8
Less current portion (43.9) (18.7)
-------- --------
Long-term debt $ 248.5 $ 300.1
======== ========
</TABLE>
<PAGE> 19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(Dollars In millions) 1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Total short-term borrowings at year-end $ 161.9 $ 187.3
Weighted average interest rate at year-end 5.3% 4.7%
Average short-term borrowings during the year $ 217.6 $ 197.2
Weighted average interest rate for the year 4.6% 5.7%
Maximum short-term borrowings during the year $ 258.5 $ 240.8
</TABLE>
The average borrowings and weighted average interest rates were determined
using month-end borrowings and the interest rates applicable to them. Of total
year-end borrowings at December 25, 1999, $40.0 million was under the Company's
$300.0 million multicurrency financing facility (the $300 Million Facility)
with a group of banks, and $52.9 million was through outstanding commercial
paper. The remaining $69.0 million of short-term borrowings was from several
banks, with $27.7 million in German marks, $15.7 million in Japanese yen, $14.5
million in Belgian francs, and $11.1 million in various other currencies. As of
December 25, 1999, $133.0 million of the Company's outstanding borrowings that
were due within one year by their terms were classified as non-current due to
the Company's ability and intent that those borrowings be outstanding
throughout 2000.
As of December 25, 1999, the Company had $471.0 million of unused lines of
credit, including $260.0 million under the $300 Million Facility and $211.0
million available under $280.0 million of foreign uncommitted lines of credit.
The $300 Million Facility supports the Company's commercial paper borrowing
capability and expires on August 8, 2002. Interest paid on total debt in 1999,
1998, and 1997, was $21.6 million, $26.2 million, and $23.7 million,
respectively.
The Company's debt agreements contain covenants that require the Company, among
other things, to maintain liquidity amounts, net worth, and fixed charge
coverage ratios, and limit debt to capital ratios.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Due to their short maturity or their insignificance, the carrying amounts of
cash and cash equivalents, accounts and notes receivable, accounts payable,
accrued liabilities, short-term borrowings, and outstanding forward exchange
contracts approximated their fair values at December 25, 1999, and December 26,
1998. The approximate fair value of the Company's $100.0 million of 7.25 percent
notes due in 2006, determined through reference to market yields, was $92.5
million and $104.3 million as of December 25, 1999, and December 26, 1998,
respectively. The fair value of the remaining long-term debt approximated its
book value at the end of 1999 and 1998.
OPERATING LEASES
Rental expense for operating leases totaled $37.0 million in 1999, $36.7
million in 1998, and $40.5 million in 1997. Approximate minimum rental
commitments under noncancelable operating leases with initial terms of more than
one year, in effect at December 25, 1999, were: 2000 - $6.0 million; 2001 -
$4.0 million; 2002 - $3.3 million; 2003 - $2.5 million; 2004 - $0.6 million;
and after 2004 - $0.2 million.
<PAGE> 20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
Following is a listing of the Company's outstanding derivative financial
instruments as of December 25, 1999, and December 26, 1998:
<TABLE>
<CAPTION>
FORWARD CONTRACTS 1999 1998
- ----------------- ------------------------------- ----------------------------------
Weighted Weighted
average average
contract contract
rate of rate of
(Dollars in millions) Buy Sell exchange Buy Sell exchange
- ---------------------------------------------------------------- -------- --------- ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Euro with U.S. dollars $ 70.2 $ 1.0340 $ $
German marks with U.S. dollars 24.4 1.9333
Swiss francs with U.S. dollars 21.1 1.5677 20.8 1.3254
Japanese yen with U.S. dollars 19.2 101.3265
Mexican pesos with U.S. dollars 17.5 9.5463
Philippine pesos with U.S. dollars 13.6 40.9280 12.7 39.4400
Australian dollars with U.S. dollars 12.7 0.6457 6.1 0.6229
Singapore dollars with U.S. dollars 4.8 1.6688
Canadian dollars with U.S. dollars 3.9 1.4718
Greek drachma with U.S. dollars 3.1 324.9300
Austrian shillings with U.S. dollars 0.1 13.5885 8.7 11.6527
Belgian francs with U.S. dollars 82.0 33.8132
French francs with U.S. dollars 36.0 5.4611
Portuguese escudos with U.S. dollars 17.9 167.9783
Italian lira with U.S. dollars 7.2 1,635.2500
Netherlands guilders with U.S. dollars 6.6 1.8462
Mexican pesos for U.S. dollars 21.3 10.3200
Swiss francs for U.S. dollars 19.3 1.5631 18.4 1.3620
Japanese yen for U.S. dollars 17.5 101.8794 10.1 116.6352
Euro for U.S. dollars 4.6 1.0470
German marks for U.S. dollars 4.2 1.9368 19.1 1.6565
Belgian francs for U.S. dollars 29.8 36.0269
French francs for U.S. dollars 16.3 5.9456
Spanish pesetas for U.S. dollars 13.7 140.3850
Portuguese escudos for U.S. dollars 7.5 181.2634
Hong Kong dollars for U.S. dollars 5.5 7.7551
Other currencies 16.1 7.6 various 7.2 9.5 various
------- -------- ------- -------
$ 206.7 $ 74.5 $ 205.2 $ 129.9
======= ======== ======= =======
</TABLE>
<PAGE> 21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CROSS-CURRENCY INTEREST RATE SWAPS 1999 1998
- ---------------------------------- --------------------------- ---------------------------
(Dollars in millions) Weighted Weighted
average average
Amount at contract rate Amount at contract rate
Currency owed inception of exchange inception of exchange
- ----------------------------------------------------------------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Euro $ 65.6 1.0650 $
Japanese yen 14.2 141.3300 14.2 141.3300
Swiss francs 10.0 1.5000 11.1 1.3539
Belgian francs 44.2 33.9250
French francs 27.2 5.5075
Portuguese escudos 11.9 168.3600
Netherlands guilders 5.4 1.8550
-------- --------
Total $ 89.7 $ 114.0
======== ========
</TABLE>
The Company's derivative financial instruments at December 25, 1999, and
December 26, 1998, consisted solely of the financial instruments summarized
above. All of the contracts mature within 12 months. Related to the forward
contracts, the "buy" amounts represent the U.S. dollar equivalent of
commitments to purchase foreign currencies and the "sell" amounts represent the
U.S. dollar equivalent of commitments to sell foreign currencies, all
translated at the year-end market exchange rates for the U.S. dollar. The
Company's open forward contracts as of December 26, 1998, included
approximately $60 million of contracts to sell foreign currencies, which were
initially entered into to hedge a portion of the Company's foreign net
investments. All forward contracts open as of the end of 1999 are hedging
cross-currency intercompany loans that are not permanent in nature or firm
purchase commitments. As of the end of fiscal 1999, under the cross currency
interest rate swaps, the Company was to receive interest at a weighted average
rate of 5.9 percent and was obligated to pay interest at a weighted average
rate of 2.4 percent.
The Company's theoretical credit risk for each derivative instrument is its
replacement cost, but management believes that the risk of incurring credit
losses is remote and that such losses, if any, would not be material. The
Company also is exposed to market risk on its derivative instruments due to
potential changes in foreign exchange rates; however, such market risk would be
substantially offset by changes in the valuation of the underlying items being
hedged. For all outstanding derivative instruments, the net accrued loss was
$3.3 million and $7.5 million, at December 25, 1999 and December 26, 1998,
respectively. The aggregate impact of all foreign currency transactions was not
material to the Company's income.
NOTE 7: INCOME TAXES
For income tax purposes, the domestic and foreign components of income (loss)
before taxes were as follows:
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997
- ------------------------------------------------------------------------------------------------ -------- --------
<S> <C> <C> <C>
Domestic $ (15.7) $ 24.5 $ 59.9
Foreign 119.0 67.0 50.9
-------- -------- --------
Total $ 103.3 $ 91.5 $ 110.8
======== ======== ========
</TABLE>
<PAGE> 22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------- ----- -----
<S> <C> <C> <C>
Current:
Federal $ 8.7 $(2.1) $(1.3)
Foreign 26.1 43.9 55.1
State 3.5 1.4 2.8
----- ----- -----
38.3 43.2 56.6
===== ===== =====
Deferred:
Federal (15.9) (10.3) (10.5)
Foreign 3.7 (9.3) (16.1)
State (1.8) (1.2) (1.2)
----- ----- -----
(14.0) (20.8) (27.8)
----- ----- -----
Total $24.3 $22.4 $28.8
===== ===== =====
</TABLE>
The differences between the provision for income taxes and income taxes
computed using the U.S. federal statutory rate were as follows:
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------- ----- -----
<S> <C> <C> <C>
Amount computed using statutory rate $36.1 $32.0 $38.8
Increase (reduction) in taxes resulting from:
Net benefit from repatriating foreign earnings (0.3) (22.0) (22.7)
Foreign income taxes (11.5) 11.1 21.3
Changes in valuation allowance for federal deferred tax assets -- -- (10.0)
Other -- 1.3 1.4
----- ----- -----
Total $24.3 $22.4 $28.8
===== ===== =====
</TABLE>
In 1999, 1998, and 1997, the Company recognized $0.2 million, $0.6 million, and
$0.3 million, respectively, of benefits for deductions associated with the
exercise of employee stock options. These benefits were added directly to
paid-in capital, and are not reflected in the provision for income taxes.
Deferred tax assets (liabilities) are composed of the following:
<TABLE>
<CAPTION>
(In millions) 1999 1998
- --------------------------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
Depreciation $ (8.7) $ (8.9)
Deferred costs -- (0.4)
Other (2.9) (3.4)
------ ------
Gross deferred tax liabilities (11.6) (12.7)
------ ------
Credit carry forwards 42.6 62.2
Fixed assets basis differences 60.5 20.5
Employee benefits accruals 21.0 18.0
Post-retirement benefits 15.8 16.4
Inventory reserves 17.3 16.3
Bad debt reserves 3.2 3.4
Computer leasing transactions -- 3.1
Other accruals 33.8 34.5
------ ------
Gross deferred tax assets 194.2 174.4
====== ======
Valuation allowances (30.8) (23.9)
------ ------
Net deferred tax assets $151.8 $137.8
====== ======
</TABLE>
<PAGE> 23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At December 25, 1999, the Company had foreign net operating loss carry forwards
of $113.2 million. Of the total net operating loss carry forwards, $60.7
million expire at various dates from 2000 to 2006, while the remainder have
unlimited lives. During 1999, the Company recognized net benefits of $3.0
million related to foreign net operating loss carry forwards. Repatriation of
foreign earnings would not result in a significant incremental cost to the
Company. At December 25, 1999, and December 26, 1998, the Company had valuation
allowances against certain deferred tax assets totaling $30.8 million and $23.9
million, respectively. These valuation allowances relate to tax assets in
jurisdictions where it is management's best estimate that there is not a
greater than 50 percent probability that the benefit of the assets will be
realized in the associated tax returns. The likelihood of realizing the benefit
of deferred tax assets is assessed on an ongoing basis. Consequently, future
material changes in the valuation allowance are possible. The Company paid
income taxes in 1999, 1998, and 1997, of $47.7 million, $65.3 million, and
$50.5 million, respectively.
NOTE 8: RETIREMENT BENEFIT PLANS
PENSION PLANS. The Company has various pension plans covering substantially all
domestic employees and certain employees in other countries. In addition to
providing pension benefits, the Company provides certain post-retirement
healthcare and life insurance benefits for selected U.S. and Canadian
employees. Most employees and retirees outside the United States are covered by
government healthcare programs. Employees may become eligible for these
benefits if they reach normal retirement age while working for the Company and
satisfy certain years of service requirements. The medical plans are
contributory, with retiree contributions adjusted annually, and contain other
cost-sharing features, such as deductibles and coinsurance. The medical plans
include an allowance for Medicare for post-65 retirees. The Company has the
right to modify or terminate these plans.
The funded status of the plans was as follows:
<TABLE>
<CAPTION>
U.S. plans Foreign plans
---------------------------------------------- --------------------
Pension benefits Post-retirement benefits Pension benefits
----------------- ------------------------ --------------------
(In millions) 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Change in benefit obligations:
Beginning balance $ 29.9 $ 25.7 $ 41.0 $ 38.1 $ 64.1 $ 57.0
Service cost 1.2 1.1 0.4 0.3 2.7 3.0
Interest cost 1.9 1.8 2.6 2.7 2.5 2.9
Actuarial (gain) loss (4.8) 2.6 (4.0) 2.5 (4.4) --
Benefits paid (1.9) (1.3) (3.5) (2.6) (4.8) (4.6)
Impact of exchange rates -- -- -- -- (1.5) 5.8
------- ------- ------- ------- ------- -------
Ending balance 26.3 29.9 36.5 41.0 58.6 64.1
------- ------- ------- ------- ------- -------
Change in plan assets at fair value:
Beginning balance 25.3 23.1 -- -- 27.4 23.7
Actual return on plan assets 3.6 3.2 -- -- 4.9 1.2
Company contributions -- 0.3 3.5 2.8 2.1 4.2
Plan participant contributions -- -- -- -- 0.2 0.2
Benefits paid (1.8) (1.3) (3.5) (2.6) (4.8) (4.6)
Impact of exchange rates -- -- -- -- -- 2.7
------- ------- ------- ------- ------- -------
Ending balance 27.1 25.3 -- -- 29.8 27.4
------- ------- ------- ------- ------- -------
Funded status of the plan 0.8 (4.6) (36.5) (41.0) (28.8) (36.7)
Unrecognized actuarial (gain) loss (6.6) -- (1.9) 2.1 (5.7) 1.8
Unrecognized prior service benefit (0.1) (0.1) (1.7) (1.8) (0.2) --
Unrecognized net transaction (asset) liability (0.1) (0.2) -- -- 1.5 2.0
Impact of exchange rates -- -- -- -- 0.5 0.6
------- ------- ------- ------- ------- -------
Accrued benefit cost $ (6.0) $ (4.9) $ (40.1) $ (40.7) $ (32.7) $ (32.3)
======= ======= ======= ======= ======= =======
Weighted average assumptions:
Discount rate 7.8% 6.8% 7.8% 6.8% 4.5% 4.7%
Return on plan assets 9.0 9.0 n/a n/a 5.3 5.2
Salary growth rate 6.0 6.0 n/a n/a 2.5 2.6
</TABLE>
<PAGE> 24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Plan assets consist primarily of equity securities and corporate and government
bonds. At December 25, 1999, and December 26, 1998, the accumulated benefit
obligations of certain pension plans exceeded those plans' assets. For those
plans, the accumulated benefit obligations were $41.0 million and $70.7
million, and the fair value of those plans' assets as of December 25, 1999, and
December 26, 1998, were $18.2 million and $42.5 million, respectively.
The costs associated with the plans were as follows:
<TABLE>
<CAPTION>
(In millions) Pension benefits Post-retirement benefits
- -------------------------------------------------------------------------------- ------------------------------
1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic benefit cost:
Service cost $ 4.0 $ 4.1 $ 4.2 $ 0.4 $ 0.3 $ 0.3
Interest cost 4.5 4.7 4.8 2.6 2.7 2.7
Actual return on plan assets (5.2) (2.3) (3.1) -- -- --
Net amortization and (deferral) 2.4 (0.3) 0.7 (0.1) (0.2) (0.2)
------ ------ ------ ------ ------ ------
Net periodic benefit cost $ 5.7 $ 6.2 $ 6.6 $ 2.9 $ 2.8 $ 2.8
====== ====== ====== ====== ====== ======
</TABLE>
The assumed healthcare cost trend rate was 7 percent for the pre-65 plan and 6
percent for the post-65 plan for 1999. The pre-65 plan rate is assumed to
decrease by one percentage point in 2000 when an ultimate level of 6 percent
will be reached. For the post-65 plan the rate is assumed to remain at 6
percent. The healthcare cost trend rate assumption has a significant effect on
the amounts reported. A one percentage point change in the assumed healthcare
cost trend rates would have the following effects:
<TABLE>
<CAPTION>
One percentage point
----------------------
(In millions) Increase Decrease
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components $ 0.3 $ (0.2)
Effect on post-retirement benefit obligation 3.3 (2.9)
</TABLE>
The Company also has several savings, thrift, and profit-sharing plans.
Contributions to these plans are based upon various levels of employee
participation. The total cost of these plans was $3.8 million in 1999, $4.5
million in 1998, and $4.9 million in 1997.
NOTE 9: INCENTIVE COMPENSATION PLANS
INCENTIVE PLAN. Certain officers and other key employees of the Company
participate in the Tupperware Corporation 1996 Incentive Plan (the Incentive
Plan). Annual and long-term performance awards and awards of options to
purchase Tupperware shares and of restricted stock are made under the Incentive
Plan. The total number of shares initially available for grant under the
Incentive Plan was 6,100,000; however, that amount was increased to 7,600,000
as a result of Company repurchase of shares in 1997. Of the total number of
shares available for grant, up to 300,000 may be used for restricted stock
awards.
Other than for options on 405,500 shares granted in 1997, for which the
exercise price is 10 percent greater than the grant-date market value of the
shares, all options' exercise prices are equal to the underlying shares'
grant-date market values. Outstanding options granted in 1997 and earlier and
in 1999, which have exercise prices equal to the underlying shares' grant-date
market value and options granted in 1998 on 339,000 shares, have vesting dates
that are three years from the date of grant. The remainder of the options
granted in 1998 vest ratably from the second through fifth anniversaries of the
date of grant. Options that have exercise prices in excess of the grant-date
market price will vest in three equal tranches if the price of the Company's
stock exceeds $32.05, $36.05, and $40.05 per share for 45 of 60 consecutive
trading days over the five-year period beginning on the date of grant.
Outstanding restricted shares have initial vesting periods ranging from 1 to 5
years. All outstanding options have exercise periods that are 10 years from the
date of grant. As of December 25, 1999, shares available for award under the
Incentive Plan totaled 775,899, of which 70,844 could be granted in the form of
restricted stock.
<PAGE> 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTOR PLAN. Under the Tupperware Corporation Director Stock Plan (Director
Plan), non-employee directors may elect to receive their annual retainers in
the form of stock or stock options. Options granted to directors become
exercisable on the last day of the fiscal year in which they are granted, have
a term of 10 years, and have an exercise price that compensates for the
foregone cash retainer. This amount and the value of stock grants on the date
of award have been recognized as an expense by the Company. The number of
shares initially available for grant under the Director Plan and the number of
shares available as of December 25, 1999, were 300,000 and 205,076,
respectively.
Earned performance awards of $9.3 million, $9.6 million, and $7.5 million are
included in the consolidated statement of income for 1999, 1998, and 1997,
respectively.
Stock option and restricted stock activity and information about stock options
for the Incentive Plan and the Director Plan are summarized in the following
tables:
<TABLE>
<CAPTION>
Shares Average
subject to option price
Stock options option per share
- ---------------------------------------------------------------- ------------
<S> <C> <C>
Balance at December 28, 1996 2,437,143 $ 28.91
Granted 1,090,000 25.24
Canceled (96,748) 36.98
Exercised (83,525) 15.91
---------
Balance at December 27, 1997 3,346,870 27.81
Granted 1,975,402 19.43
Canceled (174,646) 32.84
Exercised (125,413) 11.65
---------
Balance at December 26, 1998 5,022,213 24.75
Granted 1,434,650 18.62
Canceled (233,732) 29.78
Exercised (70,805) 11.42
---------
Balance at December 25, 1999 6,152,326 23.28
=========
</TABLE>
<TABLE>
<CAPTION>
Shares
Shares available for
Restricted stock outstanding issuance
- ---------------------------------------------------------------- -------------
<S> <C> <C>
Balance at December 28, 1996 148,311 151,689
Awarded 20,329 (20,329)
Canceled (3,244) 3,244
Vested (38,055) --
-------- -------
Balance at December 27, 1997 127,341 134,604
Awarded 59,760 (59,760)
Canceled (7,000) 7,000
Vested (29,728) --
-------- -------
Balance at December 26, 1998 150,373 81,844
Awarded 11,000 (11,000)
Canceled -- --
Vested (101,711) --
-------- -------
Balance at December 25, 1999 59,662 70,844
======== =======
</TABLE>
<PAGE> 26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
STOCK OPTIONS OUTSTANDING
As of December 25, 1999
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------------------ ------------------------
Average Average Average
remaining exercise exercise
Exercise Price Range Shares life price Shares price
- ----------------------------------------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$ 4.84 48,105 0.9 $ 4.84 48,105 $ 4.84
$ 9.53 -- $ 14.15 437,219 2.7 12.91 437,219 12.91
$ 14.50 -- $ 19.20 3,258,173 9.3 18.97 13,523 16.84
$ 20.00 -- $ 28.57 1,300,892 6.6 25.81 252,642 27.80
$ 30.25 -- $ 42.25 1,107,937 5.7 37.90 1,097,937 37.89
--------- ---------
6,152,326 7.5 23.28 1,849,426 29.59
========= =========
</TABLE>
In addition, the Company granted an option on 150,000 shares in 1999 at the
grant date market price of $18.75 per share under the Tupperware Corporation
2000 Incentive Plan (2000 Plan). This grant is subject to shareholder approval
of the 2000 Plan at the Company's May 2000 annual meeting.
The Company uses the intrinsic value method of accounting for stock-based
compensation. The Company has estimated the fair value of its option grants
beginning with 1995. If these fair value estimates had been used to record
compensation expense in the consolidated statement of income, net income would
have been reduced by $4.5 million, $3.7 million, and $2.5 million, to $74.5
million, $65.3 million, and $79.5 million, or $1.29, $1.11, and $1.29 per
diluted common share ($1.30, $1.12, and $1.30 per basic common share) in 1999,
1998, and 1997, respectively.
The fair value of the stock option grants was estimated using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of 3.5
percent for 1999 grants, 3.0 percent for 1998 grants, and 2.0 percent for
previous grants; expected volatility of 40.0 percent for 1999 and 1998 grants,
35.0 percent for 1997 grants, and 30.0 percent for previous grants; risk-free
interest rates of 5.9 percent for 1999, 4.5 percent for 1998, 5.8 percent for
1997 and 1995, and 6.4 percent for 1996; and expected lives of 5 years for all
grants. Compensation expense associated with restricted stock grants is equal
to the fair market value of the shares on the date of grant and is recognized
ratably over the required holding period. Compensation expense associated with
restricted stock grants was not significant.
<PAGE> 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10: SEGMENT INFORMATION
The Company operates worldwide in one line of business: the manufacture and
distribution, primarily 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.
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997
- ------------------------------------------------------------- ---------- ----------
<S> <C> <C> <C>
Net sales:
Europe $ 489.1 $ 518.7 $ 546.6
Asia Pacific 242.3 211.5 279.0
Latin America 154.2 186.8 247.2
United States 158.2 165.8 156.5
---------- ---------- ----------
Total net sales $ 1,043.8 $ 1,082.8 $ 1,229.3
========== ========== ==========
Operating profit (loss):
Europe $ 110.7 $ 123.9 $ 144.6
Asia Pacific 35.0 20.2 37.2
Latin America 12.0 (16.4) (5.7)(b)
United States 4.7 4.0 (29.5)(b)
---------- ---------- ----------
Total operating profit 162.4 131.7 146.6
Unallocated expenses (23.1)(a) (17.5) (18.0)(b)
Re-engineering charge (15.1)(a) -- --
Interest expense, net (20.9) (22.7) (17.8)
---------- ---------- ----------
Income before income taxes $ 103.3(a) $ 91.5 $ 110.8(b)
---------- ---------- ----------
Depreciation:
Europe $ 22.0 $ 25.7 $ 26.5
Asia Pacific 11.5 12.0 14.4
Latin America 10.0 12.5 10.5
United States 10.3 11.7 12.8
Corporate 1.8 2.1 1.9
---------- ---------- ----------
Total depreciation $ 55.6 $ 64.0 $ 66.1
========== ========== ==========
Capital expenditures:
Europe $ 14.1 $ 13.1 $ 15.5
Asia Pacific 2.6 5.6 9.8
Latin America 11.5 13.6 17.0
United States 11.5 9.0 16.4
Corporate 1.2 4.9 8.8
---------- ---------- ----------
Total capital expenditures $ 40.9 $ 46.2 $ 67.5
========== ========== ==========
Identifiable assets:
Europe $ 237.6 $ 260.7 $ 287.1
Asia Pacific 139.1 148.4 144.9
Latin America 148.7 165.1 170.2
United States 153.4 151.7 157.1
Corporate 117.3 97.5 87.9
---------- ---------- ----------
Total identifiable assets $ 796.1 $ 823.4 $ 847.2
========== ========== ==========
</TABLE>
a. The Company announced a three-year re-engineering program in July 1999. The
re-engineering charge line provides for severance and other exit costs. In
addition, 1999 unallocated expenses include $1.0 million for internal and
external consulting costs incurred in connection with the program. Together,
the after-tax impact of these costs was $12.3 million. See Note 2.
b. Includes a pretax charge totaling $42.4 million ($31.4 million after tax):
$22.2 million in Latin America, primarily for bad debts in Brazil; $16.0
million in the United States, primarily for inventory obsolescence; and $4.2
million in unallocated expenses, primarily for corporate downsizing.
<PAGE> 28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Sales and operating profit in the preceding table are from transactions with
customers. Inter-area transfers of inventory are accounted for at cost. Sales
to a single customer did not exceed 10 percent of total sales. Export sales
were insignificant. Sales to customers in Germany were $209.2 million, $241.2
million, and $260.8 million in 1999, 1998, and 1997, respectively ($231.8
million and $247.0 million in 1998 and 1997, respectively, at 1999 exchange
rates). No other foreign country's sales were material to the Company's total
sales. Unallocated expenses are corporate expenses and other items not directly
related to the operations of any particular geographic segment.
Corporate assets consist of cash and assets maintained for general corporate
purposes. The United States was the only country with long-lived assets greater
than 10 percent of the Company's total assets at December 25, 1999. As of the
end of 1999 and 1998, respectively, long-lived assets in the United States were
$109.0 million and $110.3 million.
As of December 25, 1999, and December 26, 1998, the Company's net investment in
international operations was $223.7 million and $212.2 million, respectively.
The Company is subject to the usual economic risks associated with
international operations; however, these risks are partially mitigated by the
broad geographic dispersion of the Company's operations.
NOTE 11: COMMITMENTS AND CONTINGENCIES
The Company and certain subsidiaries are involved in litigation and various
legal matters that are being defended and handled in the ordinary course of
business. Included among these matters are environmental issues. None of the
Company's contingencies are expected to have a material adverse effect on its
financial position, results of operations, or cash flow.
Kraft Foods, Inc., which was formerly affiliated with Premark International,
Inc. and Tupperware, has assumed any liabilities arising out of any legal
proceedings in connection with certain divested or discontinued businesses. The
liabilities assumed include matters alleging product liability, environmental
liability, and infringement of patents.
<PAGE> 29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
Following is a summary of the unaudited interim results of operations for each
quarter in the years ended December 25, 1999, and December 26, 1998.
<TABLE>
<CAPTION>
First Second Third Fourth
(In millions, except per share amounts) quarter quarter quarter quarter
- ----------------------------------------------------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended December 25, 1999:
Net sales $ 250.9 $ 271.3 $ 211.9 $ 309.7
Cost of product sold 84.1 93.1 79.1 108.8
Net income 17.8 14.3(a) 3.5 43.4(a)
Net income per share:
Basic 0.31 0.25(a) 0.06 0.75(a)
Diluted 0.31 0.25(a) 0.06 0.75(a)
Dividends declared per share 0.22 0.22 0.22 0.22
Composite stock price range:
High 21 7/16 24 1/16 25 1/2 21 1/8
Low 15 1/16 17 19 1/8 16
Close 19 1/16 20 7/16 19 3/4 16 7/8
Year ended December 26, 1998:
Net sales $ 268.8 $ 282.9 $ 217.4 $ 313.7
Cost of product sold 96.3 108.4 90.6 111.0
Net income (loss) 15.4 23.0 (6.5) 37.2
Net income (loss) per share:
Basic 0.26 0.40 (0.11) 0.64
Diluted 0.26 0.39 (0.11) 0.64
Dividends declared per share 0.22 0.22 0.22 0.22
Composite stock price range:
High 28 9/16 29 28 3/4 20
Low 24 1/4 24 13/16 12 7/8 11 7/16
Close 26 9/16 27 1/16 12 7/8 16
</TABLE>
a. Includes pretax re-engineering costs of $15.1 million in the second quarter
and $1.0 million in the fourth quarter (after-tax $11.5 million, and $0.7
million) for the program announced in July 1999. See Note 2.
NOTE 13: RIGHTS AGREEMENT
In 1996, the Company adopted a shareholders' rights plan with a duration of 10
years, under which shareholders received a right to purchase one one-hundredth
of a share of preferred stock for each right owned. The rights are exercisable
if 15 percent of the Company's common stock is acquired or threatened to be
acquired, and the rights are redeemable by the Company if exercisability has
not been triggered. Under certain circumstances, if 50 percent or more of the
Company's consolidated assets or earning power are sold, a right entitles the
holder to buy shares of the Company equal in value to twice the exercise price
of each right. Upon acquisition of the Company by a third party, a holder could
receive the right to purchase stock in the acquirer. The foregoing percentage
thresholds may be reduced to not less than 10 percent.
<PAGE> 30
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Tupperware Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Tupperware
Corporation and its subsidiaries at December 25, 1999 and December 26, 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 25, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of Tupperware Corporation's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Orlando, Florida
February 18, 2000
REPORT OF MANAGEMENT
The management of Tupperware is responsible for the preparation of the
financial statements and other information contained in this Annual Report. The
financial statements were prepared in accordance with generally accepted
accounting principles and include amounts that are based upon management's best
estimate and judgments, as appropriate. PricewaterhouseCoopers LLP has audited
these financial statements and has expressed an independent opinion thereon.
The Company maintains internal control systems, policies, and procedures
designed to provide reasonable assurance that assets are safeguarded, that
transactions are executed in accordance with management's authorization and
properly recorded, and that accounting records may be relied upon for the
preparation of financial information. There are inherent limitations in all
internal control systems based on the fact that the cost of such systems should
not exceed the benefits derived. Management believes that the Company's systems
provide the appropriate balance of costs and benefits. The Company also
maintains an internal auditing function that evaluates and reports on the
adequacy and effectiveness of internal accounting controls, policies, and
procedures. The Audit and Corporate Responsibility Committee of the Board of
Directors is composed entirely of outside directors. The Committee meets
periodically and independently with management, the vice president of internal
audit, and PricewaterhouseCoopers LLP to discuss the Company's internal
accounting controls, auditing, and financial reporting matters. The vice
president of internal audit and PricewaterhouseCoopers LLP have unrestricted
access to the Audit and Corporate Responsibility Committee. Management
recognizes its responsibility for conducting the Company's affairs in a manner
that is responsive to the interests of its shareholders and its employees. This
responsibility is characterized in the Code of Conduct, which provides that the
Company will fully comply with laws, rules, and regulations of every country in
which it operates and will observe the rules of ethical business conduct.
Employees of the Company are expected and directed to manage the business of
the Company accordingly.
/s/ Rick Goings /s/ Paul B. Van Sickle
Rick Goings Paul B. Van Sickle
Chairman and Chief Executive Vice President
Executive Officer and Chief Financial Officer
EXHIBIT 21
TUPPERWARE CORPORATION
Active Subsidiaries
As of January 5, 2000
The following subsidiaries are wholly owned by Tupperware
Corporation or a subsidiary of Tupperware Corporation
(degree of remoteness from the registrant is shown by
indentations).
Tupperware Corporation
Tupperware International Holdings BV
Tupperware, Ltd.
Tupperware Polska Sp. zo. o
Dart Argentina S. A.
Tupperware Israel Ltd.
Tupperware Belgium, N. V.
Tupperware France S. A.
Tupperware Holdings BV
Tupperware Assets Management S. a. r. l.
Tupperware Morocco
UAB "Tupperware"
Tupperware Service GmbH
Tupperware Nederland Properties B.V.
Tupperware Nederland B.V.
Tupperware Deutschland G.m.b.H.
Tupperware Osterreich G.m.b.H.
Tupperware Southern Africa (Proprietary)
Limited
Tupperware Products B.V.
Tupperware (Suisse) S.A.
Tupperware Products S. A.
Tupperware d.o.o.
Tupperware Bulgaria EOOD
Tupperware Eesti OU
SIA Tupperware Latvia
Tupperware Luxembourg S.ar.l.
Tupperware East Africa Limited
Tupperware Italia S.p.A.
Tupperware General Services N.V.
Japan Tupperware Co., Ltd.
Tupperware Trading Ltd.
Tupperware Czech Republic, spol. s.r.o.
Tupperware United Kingdom & Ireland Limited
Tupperware Nordic A/S
Tupperware Holdings, Ltd.
Deerfield Land Corporation
Tupperware Financial Corporation
Dart Industries Inc.
Tupperware International Holdings Corporation
Tupperware Far East, Inc.
Tupperware Turkey, Inc.
Dart Far East Sdn. Bhd.
Dart de Venezuela, C.A
Tupperware Espana, S. A.
Tupperware Colombia S.A.
Dart do Brasil Industria e Comercio Ltda.
Daypar Participacoes Ltda
Academia Negocios S/C Ltda.
Tupperware Hellas, S.A.I.C.
Tupperware Del Ecuador Cia. Ltda.
Dart Industries Hong Kong Limited
Tupperware Asia Pacific Holdings Private Limited
Tupperware India Private Limited
Dart Manufacturing India Pvt. Ltd.
Dart (Philippines), Inc.
Tupperware Realty Corporation
Tupperware Philippines, Inc.
Tupperware China, LLC
Tupperware (China) Company Limited
Dart Industries (New Zealand) Limited
Tupperware New Zealand Staff Superannuation Plan
Dart S. A. de C. V.
Servicos Especializados de Arrendamiento en Latinoamerica S.A. de C.V.
Dartco Manufacturing Inc.
Tupperware Industria Lusitana de Artigos Domesticos, Lda.
Tupperware (Portugal) Artigos Domesticos, Lda.
Premiere Products, Inc.
Tupperware Singapore Pte. Ltd.
Premiere Korea Ltd.
Premiere Marketing Company
Exportadora Lerma, S. A. de C. V.
Premiere Manufacturing, Inc.
Tupperware U.S., Inc.
Tupperware Distributors, Inc.
Tupperware Factors Inc.
Tupperware.com, Inc.
Tupperware Canada Inc.
Tupperware Australia Pty. Ltd
Dart Staff Superannuation Fund Pty Ltd
Importadora Y Distribuidora Importupp Limitada
Tupperware Iberica S.A.
Tupperware (Thailand) Limited
Tupperware Uruguay S.A.
Dart Executive Pension Fund Limited
Dart Pension Fund Limited
Tupperware U.K. Holdings, Inc.
The Tupperware Foundation
Tupperware Products, Inc.
Tupperware de El Salvador, S. A. de C.V.
Tupperware del Peru S.R.L.
Dart Holdings, S. de R. L.
Tupperware Honduras, S. de R. L.
Tupperware de Costa Rica, S. A.
Tupperware de Guatemala, S.A.
Asociacion Nacional de Distribuidores de Productos
Tupperware, A. C.
Tupperware Panama, S. A.
Tupperware Finance Holding Company, B.V.
Tupperware Finance Company, B. V.
Tupperware Holdings Corporation
Tupperware Home Parties Corporation
Tupperware Export Sales, Ltd.
Tupperware Services, Inc.
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference
in the Registration Statement on Form S-8 (No. 33-04871),
the Registration Statement on Form S-8 (No. 33-04869), the
Registration Statement on Form S-8 (No. 33-18331) and the
Prospectus constituting part of the Registration Statement
on Form S-3 (No. 33-12125) of Tupperware Corporation of our
report dated February 18, 2000, relating to the financial
statements which appears in the Annual Report to
Shareholders, which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by
reference of our report dated February 18, 2000, relating to
the Financial Statement Schedule, which appears in this Form
10-K.
PricewaterhouseCoopers LLP
Orlando, Florida
March 17, 2000
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of Tupperware Corporation, a Delaware corporation, (the "Corporation"),
hereby constitutes and appoints Thomas M. Roehlk and Charles L. Dunlap,
true and lawful attorneys-in-fact and agents of the undersigned, with
full power of substitution and resubstitution, for and in the name,
place and stead of the undersigned, in any and all capacities, to sign
the Annual Report on Form 10-K of the Corporation for its fiscal year
ended December 25, 1999, and any and all amendments thereto, and to file
or cause to be filed the same, together with any and all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents
and substitutes, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the
premises as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents and substitutes, may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or
her hand and seal this 14 day of March, 2000.
Rita Bornstein
Clifford J. Grum
Betsy D. Holden
Joe R. Lee
Bob Marbut
Angel R. Martinez
David R. Parker
Robert M. Price
Joyce M. Roche
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM TUPPERWARE CORPORATION'S 1999 FINANCIAL STATEMENTS AS
INCORPORATED BY REFERENCE IN ITS ANNUAL REPORT ON FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> DEC-25-1999
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<SECURITIES> 0
<RECEIVABLES> 136900
<ALLOWANCES> 22500
<INVENTORY> 136700
<CURRENT-ASSETS> 370500
<PP&E> 954100
<DEPRECIATION> 711200
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<COMMON> 600
<OTHER-SE> 144700
<TOTAL-LIABILITY-AND-EQUITY> 796100
<SALES> 1043800
<TOTAL-REVENUES> 1043800
<CGS> 365100
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<OTHER-EXPENSES> 2600
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<INTEREST-EXPENSE> 23000
<INCOME-PRETAX> 103300
<INCOME-TAX> 24300
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