<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the 13 weeks ended July 1, 2000
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, ORLANDO, FLORIDA 32837
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 826-5050
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
As of August 7, 2000, 57,732,410 shares of the Common Stock, $0.01 par value, of
the Registrant were outstanding.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income (Unaudited)
for the 13 weeks ended July 1, 2000 and
June 26, 1999 .................................................. 2
Consolidated Statements of Income (Unaudited)
for the 27 weeks ended July 1, 2000 and
26 weeks ended June 26, 1999 ................................... 3
Consolidated Balance Sheets (Unaudited) as of
July 1, 2000 and December 25, 1999................................ 4
Consolidated Statements of Cash Flows (Unaudited)
for the 27 weeks ended July 1, 2000 and
26 weeks ended June 26, 1999 ..................................... 6
Notes to Consolidated Financial Statements (Unaudited) ............. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................... 10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..................................... 18
SIGNATURES .................................................................... 19
</TABLE>
The financial statements of the Registrant included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the Commission). Although certain information normally
included in financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted, the Registrant believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these consolidated financial statements are
read in conjunction with the financial statements and the notes thereto included
in the Annual Report on Form 10-K of the Registrant for its fiscal year ended
December 25, 1999.
The consolidated financial statements included herein reflect all adjustments,
consisting only of normal recurring items, which, in the opinion of management,
are necessary to present a fair statement of the results for the interim periods
presented.
The results for interim periods are not necessarily indicative of trends or
results to be expected for a full year.
<PAGE> 3
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
----------------------------
JULY 1, JUNE 26,
2000 1999
------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net sales .............................. $ 272.6 $ 271.3
------- -------
Costs and expenses:
Cost of products sold ............... 93.5 93.1
Delivery, sales, and
administrative expense ............. 137.0 138.9
Interest expense .................... 4.7 5.9
Interest income ..................... (0.4) (0.7)
Re-engineering charge ............... -- 15.1
Other expense, net .................. 0.3 0.3
------- -------
Total costs and expenses ......... 235.1 252.6
======= =======
Income before income taxes ............. 37.5 18.7
Provision for income taxes ............. 8.4 4.4
======= =======
Net income ............................. $ 29.1 $ 14.3
======= =======
Net income per common share:
Basic ............................... $ 0.50 $ 0.25
======= =======
Diluted ............................. $ 0.50 $ 0.25
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements (Unaudited).
2
<PAGE> 4
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
27 WEEKS ENDED 26 WEEKS ENDED
JULY 1, JUNE 26,
2000 1999
-------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net sales .............................. $ 541.2 $ 522.2
-------- --------
Costs and expenses:
Cost of products sold ............... 187.3 177.2
Delivery, sales, and
administrative expense ............. 280.5 276.6
Interest expense .................... 10.7 11.1
Interest income ..................... (0.8) (1.2)
Re-engineering charge ............... -- 15.1
Other expense, net .................. 1.2 1.4
-------- --------
Total costs and expenses ......... 478.9 480.2
======== ========
Income before income taxes ............. 62.3 42.0
Provision for income taxes ............. 14.0 9.9
-------- --------
Net income ............................. $ 48.3 $ 32.1
======== ========
Net income per common share:
Basic ............................... $ 0.83 $ 0.56
======== ========
Diluted ............................. $ 0.83 $ 0.56
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements (Unaudited).
3
<PAGE> 5
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 1, DECEMBER 25,
2000 1999
------- -------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents ...................... $ 25.4 $ 24.4
Accounts receivable ............................ 134.1 136.9
Less allowances for doubtful accounts ....... (21.5) (22.5)
------- -------
112.6 114.4
Inventories .................................... 143.4 136.7
Deferred income tax benefits ................... 48.8 48.5
Prepaid expenses and other assets .............. 41.5 46.5
------- -------
Total current assets ........................ 371.7 370.5
------- -------
Deferred income tax benefits ................... 106.3 107.9
Property, plant, and equipment ................. 942.9 954.1
Less accumulated depreciation ............... (720.2) (711.2)
------- -------
222.7 242.9
Long-term receivables, net of allowances of
$28.5 million at July 1, 2000 and
$28.0 million at December 25, 1999 ........... 32.2 34.2
Other assets ................................... 45.1 40.6
------- -------
Total assets ................................ $ 778.0 $ 796.1
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements (Unaudited).
4
<PAGE> 6
TUPPERWARE CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 1, DECEMBER 25,
2000 1999
------- -------
(DOLLARS IN MILLIONS EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Accounts payable ............................... $ 58.2 $ 87.8
Short-term borrowings and current portion of
long-term debt .............................. 56.0 43.9
Accrued liabilities ............................ 132.3 177.5
------- -------
Total current liabilities ................... 246.5 309.2
Long-term debt ................................. 290.9 248.5
Accrued post-retirement benefit cost ........... 37.2 37.0
Other liabilities .............................. 51.7 56.1
Commitments and contingencies
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 20.3
Subscription receivable ....................... (7.6) (7.7)
Retained earnings ............................. 505.8 484.0
Treasury stock, 4,639,501 shares at
July 1, 2000, and 4,701,740 shares
at December 25, 1999, at cost ............... (138.3) (140.2)
Unearned portion of restricted stock issued
for future service ......................... (0.4) (0.6)
Accumulated other comprehensive income ........ (228.7) (211.1)
------- -------
Total shareholders' equity .................. 151.7 145.3
------- -------
Total liabilities and shareholders' equity .. $ 778.0 $ 796.1
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements (Unaudited).
5
<PAGE> 7
TUPPERWARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
27 WEEKS ENDED 26 WEEKS ENDED
JULY 1, JUNE 26,
2000 1999
------- -------
(IN MILLIONS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .............................................. $ 48.3 $ 32.1
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation ...................................... 28.1 29.8
Loss on sale of assets ............................ 1.3 1.4
Foreign exchange loss, net ........................ 0.1 0.1
Non-cash impact of re-engineering charge .......... -- 3.1
Changes in assets and liabilities:
Increase in accounts receivable ...................... (5.0) (19.1)
Increase in inventories .............................. (14.4) (7.6)
Decrease in accounts payable and accrued liabilities . (43.3) (13.5)
Decrease in income taxes payable ..................... (3.1) (7.2)
Increase in net deferred income taxes ................ (6.2) (14.9)
Other, net ........................................... (8.0) (4.6)
------- -------
Net cash used in operating activities ............. (2.2) (0.4)
------- -------
INVESTING ACTIVITIES:
Capital expenditures ................................. (15.3) (19.7)
------- -------
FINANCING ACTIVITIES:
Dividend payments to shareholders .................... (38.1) (25.4)
Proceeds from exercise of stock options .............. 0.9 --
Net increase in short-term debt ...................... 56.4 44.3
------- -------
Net cash provided by financing activities .......... 19.2 18.9
------- -------
Effect of exchange rate changes on cash and cash
equivalents ........................................... (0.7) 0.1
------- -------
Net increase (decrease) in cash and cash equivalents 1.0 (1.1)
Cash and cash equivalents at beginning of year .......... 24.4 23.0
------- -------
Cash and cash equivalents at end of period .............. $ 25.4 $ 21.9
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements (Unaudited).
6
<PAGE> 8
TUPPERWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and therefore do not include
all notes necessary for a fair presentation of financial position, results of
operations, and cash flows in conformity with generally accepted accounting
principles. In the opinion of management, the unaudited consolidated financial
statements include all adjustments, consisting only of normal recurring items,
necessary for a fair presentation of financial position and results of
operations. The results of operations of any interim period are not necessarily
indicative of the results that may be expected for a full fiscal year.
The Company's fiscal year ends on the last Saturday of December. Fiscal 2000
will consist of 53 weeks compared with 52 weeks in 1999. As a result, in 2000,
the first quarter and the first six months included 14 weeks and 27 weeks,
respectively, compared with 13 weeks and 26 weeks for the same periods in 1999.
NOTE 2: INVENTORIES
Inventories, by component, are summarized as follows (in millions):
<TABLE>
<CAPTION>
JULY 1, DECEMBER 25,
2000 1999
----------------- -----------------
<S> <C> <C>
Finished goods ............................................... $ 69.3 $ 66.0
Work in process .............................................. 28.2 27.9
Raw materials and supplies ................................... 45.9 42.8
----------------- -----------------
Total inventories ......................................... $ 143.4 $ 136.7
================= =================
</TABLE>
NOTE 3: NET INCOME PER COMMON SHARE
Basic per share information is calculated by dividing net income by the weighted
average number of shares outstanding. Diluted per share information is
calculated by also considering the impact of potential common stock on both net
income and the weighted average number of shares outstanding. For the 13 weeks
ended July 1, 2000, and June 26, 1999, the weighted average number of shares
used in the basic earnings per share computations was 57.7 million and 57.5
million, respectively. For the six-month period, the weighted average number of
shares used in the basic earnings per share computations was 57.6 million and
57.5 million for 2000 and 1999, respectively.
7
<PAGE> 9
NOTE 3: NET INCOME PER COMMON SHARE (CONTINUED)
The only difference in the computation of basic and diluted earnings per share
is the inclusion of 0.3 million shares of potential common stock for the quarter
and year-to-date 2000 and 0.4 million shares for the quarter and year-to-date
1999. Options to purchase 3.4 million and 2.4 million shares of common stock in
the second quarter of 2000 and 1999, respectively, and 4.6 million and 3.4
million shares of common stock in the six-month period of 2000 and 1999,
respectively, were outstanding but not included in the computation of diluted
earnings per share because the options' exercise prices were greater than the
average market price of the common shares during the respective period and,
therefore, would have been anti-dilutive if included. The Company's potential
common stock consists of employee and director stock options and restricted
stock.
NOTE 4: OTHER COMPREHENSIVE INCOME
In addition to net income, comprehensive income includes certain amounts
recorded directly in equity. The components of comprehensive income, net of
related income tax effects, for the second quarter and year-to-date periods,
were as follows (in millions):
<TABLE>
<CAPTION>
13 WEEKS ENDED 27 WEEKS 26 WEEKS
------------------------------- ENDED ENDED
JULY 1, JUNE 26, JULY 1, JUNE 26,
2000 1999 2000 1999
--------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Net income $ 29.1 $ 14.3 $ 48.3 $ 32.1
Foreign currency translation
adjustments net of tax
provision of $0.4 and $1.8
million for the second
quarter 2000, and 1999,
respectively, and $2.1
and $5.1 million for
comparable year-to-date
periods (15.0) 3.1 (17.6) (14.5)
--------- ------------ ---------- -----------
Comprehensive income $ 14.1 $ 17.4 $ 30.7 $ 17.6
========= ============ ========== ===========
</TABLE>
Accumulated other comprehensive income is comprised solely of foreign currency
translation adjustments.
8
<PAGE> 10
NOTE 5: RE-ENGINEERING PROGRAM
In 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.
The liability balance as of July 1, 2000, was as follows (in millions):
<TABLE>
<S> <C>
Balance at December 25, 1999 $0.9
Provision --
Cash expenditures (0.9)
----
Balance at July 1, 2000 $ --
====
</TABLE>
NOTE 6: SEGMENT INFORMATION
The Company operates worldwide predominantly in one line of business: the
manufacture and distribution, primarily through independent direct sales forces,
of plastic food storage and serving containers, microwave cookware, oven
cookware, and educational toys. Its operations are organized into the four
geographic segments included in the following table (in millions):
<TABLE>
<CAPTION>
13 WEEKS ENDED
----------------------------- 27 WEEKS ENDED 26 WEEKS ENDED
JULY 1, JUNE 26, JULY 1, JUNE 26,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales:
Europe $103.2 $120.6 $235.7 $263.7
Asia Pacific 69.3 63.3 125.5 107.8
Latin America 51.4 43.0 95.5 74.6
United States 48.7 44.4 84.5 76.1
------ ------ ------ ------
Total net sales $272.6 $271.3 $541.2 $522.2
====== ====== ====== ======
Operating profit (loss):
Europe $ 27.1 $ 30.9 $ 61.9 $ 69.4
Asia Pacific 14.8 8.1 19.1 8.2
Latin America 5.0 4.6 7.4 5.3
United States 3.7 0.9 0.5 (3.3)
------ ------ ------ ------
Total operating profit 50.6 44.5 88.9 79.6
Unallocated expenses (8.8) (5.5) (16.7) (12.6)
Re-engineering charge -- (15.1) -- (15.1)
Interest expense, net (4.3) (5.2) (9.9) (9.9)
------ ------ ------ ------
Income before income taxes $ 37.5 $ 18.7 $ 62.3 $ 42.0
====== ====== ====== ======
</TABLE>
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the results of operations for the 13 weeks and
27 weeks ended July 1, 2000, compared with the 13 weeks and 26 weeks ended June
26, 1999, and changes in financial condition during the 27 weeks ended July 1,
2000.
The Company's fiscal year ends on the last Saturday of December. Fiscal 2000
will consist of 53 weeks compared with 52 weeks in 1999. As a result, in 2000,
the first quarter and the first six months included 14 weeks and 27 weeks,
respectively, compared with 13 weeks and 26 weeks for the same periods in 1999.
NET SALES
Net sales for the second quarter ended July 1, 2000, were $272.6 million, an
increase of $1.3 million, or 0.5 percent, from $271.3 million in 1999. Excluding
a $13.7 million negative impact of foreign exchange, net sales increased 5.8
percent over 1999. Increases in Asia Pacific, Latin America and the United
States offset a slight decline in Europe.
Net sales for the year-to-date period ended July 1, 2000, were $541.2 million,
an increase of $19.0 million, or 3.6 percent, from $522.2 million in 1999.
Excluding a $26.9 million negative impact of foreign exchange, net sales
increased 9.3 percent over 1999. The increase was attributable to improvements
in all four areas, in part due to the extra week in 2000.
Also impacting sales is a modification in the distribution model for three
countries in Latin America. In these countries, sales are now made directly to
the sales force with distributors compensated through commission payments. This
model results in sales being recorded at an amount that includes the margin that
previously went to distributors, although there is no impact to the operating
profit. Excluding the impact of this new model and foreign exchange, net sales
increased 3.8 percent and 7.2 percent for the quarter and year-to-date,
respectively.
RE-ENGINEERING COSTS
In 1999, the Company announced a three-year re-engineering program designed to
improve operating profit return on sales through improved organizational
alignment, a higher gross margin percentage, and reduced operating expenses.
Included in the second quarter and year-to-date 1999 results are costs of $15.1
million ($11.6 million after tax), or $0.20 per share, primarily for severance
costs and asset write-downs associated with plant closures. In 2000, delivery,
sales, and administrative expense includes $2.2 million ($1.7 million after
tax), or $0.03 per share, for the quarter and $4.7 million ($3.6 million after
tax), or $0.07 per share, for the six months, associated with internal and
external consulting costs to design and execute the re-engineering actions.
10
<PAGE> 12
COSTS AND EXPENSES
Cost of products sold as a percentage of sales were 34.3 percent for both the
second quarter of 2000 and 1999. For the six-month period, cost of products sold
increased as a percentage of sales from 33.9 percent in 1999 to 34.6 percent in
2000, primarily due to higher costs in Europe. For the quarter and year-to-date
2000, lower cost percentages in Asia Pacific and Latin America were driven by
price increases in line with inflation, and a favorable product mix in Asia
Pacific. For the quarter, these improvements were partially offset by a slight
cost increase in Europe. Cost savings achieved in both the quarter and six-month
periods through re-engineering efforts were offset by higher raw material prices
and a less favorable mix of sales in Europe and Latin America.
Delivery, sales, and administrative expenses decreased as a percentage of sales
to 50.2 percent for the second quarter 2000 compared with 51.2 percent in 1999.
For the first half of the year, the percentage decreased to 51.8 percent
compared with 53.0 percent in 1999. Contributing to the decrease was lower
promotion and operating expenses as a percent of sales, partially offset by
re-engineering costs and higher distribution expenses. The decrease in operating
expenses were partially due to a second quarter benefit of a use tax incentive
in Asia Pacific. This benefit, which is for this year only, comes from a change
in legal structure in that area and is expected to result in additional benefit
in the second half of 2000.
NET INCOME
Net income for the quarter more than doubled to $29.1 million, or $0.50 per
share, compared with $14.3 million, or $0.25 per share, in 1999. Net income for
the six-month period increased 50.3 percent to $48.3 million, or $0.83 per
share, compared with $32.1 million, or $0.56 per share, in 1999.
For the quarter and year-to-date 2000, foreign exchange had a negative impact on
results of $3.0 million and $6.4 million, respectively. Excluding the
re-engineering costs, net income for the second quarter 2000 increased 18.9
percent to $30.8 million, or $0.53 per share, compared with $25.9 million, or
$0.45 per share in 1999. For the first half of the year, excluding the
re-engineering costs , net income increased 18.8 percent to $51.9 million, or
$0.90 per share, compared with $43.7 million, or $0.76 per share, in 1999.
Excluding the re-engineering costs and the negative impact of foreign exchange,
net income increased 34.2 percent and 39.1 percent in the second quarter and
year-to-date 2000 periods, respectively. The increase for both periods was
driven by improvements in all areas, in part due to benefits of re-engineering
actions taken.
In the second quarter of 2000 and 1999, international operations generated 82
percent and 83 percent of sales, respectively, and 93 percent and 98 percent of
operating profit, respectively. For the year-to-date periods in 2000 and 1999,
international operations generated 84 percent and 85 percent of sales,
respectively, and 99 percent and all of the operating profit, respectively.
11
<PAGE> 13
NET INTEREST EXPENSE
In the second quarter and first six months of 2000, the Company incurred net
interest expense of $4.3 million and $9.9 million, respectively. For the
comparable 1999 periods, the Company incurred net interest expense of $5.2
million and $9.9 million, respectively. For the second quarter of 2000, the
lower net interest expense reflects the placement of a higher proportion of debt
offshore in lower cost countries.
TAX RATE
The effective tax rate for the second quarter and year-to-date 2000 was 22.5
percent compared with 23.5 percent in 1999. The effective tax rates are below
the U.S. statutory rate, reflecting the availability of excess foreign tax
credits along with low foreign effective tax rates.
REGIONAL RESULTS (DOLLARS IN MILLIONS)
EUROPE
<TABLE>
<CAPTION>
Negative
Restated foreign Percent
Decrease Increase exchange of total
2000 1999 Dollar Percent (decrease) impact 2000 1999
---- ---- ------ ------- ---------- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Second Qtr
Net sales $ 103.2 $ 120.6 $ (17.4) (14)% (2)% $ (14.8) 38% 44%
Operating
profit 27.1 30.9 (3.8) (12) -- (4.0) 54 70
Year-to-Date
Net sales $ 235.7 $ 263.7 $ (28.0) (11)% 1% $ (31.0) 43% 50%
Operating
profit 61.9 69.4 (7.5) (11) 2 (8.9) 70 87
</TABLE>
For the second quarter, the sales decrease in Europe, excluding the impact of a
weaker euro, was primarily driven by declines in Switzerland, France, and
Belgium due to smaller active sales forces, slightly offset by improvements in
Italy and Scandinavia. For the first half of the year, sales increased slightly
over 1999 due to increases in Germany, Scandinavia, and South Africa, driven by
a larger sales force and in Germany and South Africa, improved productivity.
Partially offsetting these increases were declines in France, Switzerland and
Belgium, due to smaller active sales forces.
In 1999, Germany, the region's largest market, experienced a decline in sales
due to the impact of legislation that imposes a tax on certain part-time
workers. The Company held meetings in 1999 with the German sales force to
explain the impact of the new legislation, as well as to offer financial
assistance in addressing this issue to members of the sales force who remain
with the Company for a specified period. Sales and profits were up in this
market in
12
<PAGE> 14
REGIONAL RESULTS (DOLLARS IN MILLIONS) (CONTINUED)
the first half of 2000, and the new legislation is not expected to impact the
second half of the year.
Excluding the negative impact of foreign exchange, operating profit was flat for
the second quarter comparison. On a year-to-date basis, in local currency,
operating profit increased due to lower operating expenses at the area office
and lower promotional expenses in Germany.
ASIA PACIFIC
<TABLE>
<CAPTION>
Positive
foreign Percent
Increase Restated exchange of total
2000 1999 Dollar Percent increase impact 2000 1999
---- ---- ------ ------- -------- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Second Qtr
Net sales $ 69.3 $ 63.3 $ 6.0 9% 5% $ 2.7 25% 23%
Operating
profit 14.8 8.1 6.7 82 76 0.3 29 18
Year-to-Date
Net sales $125.5 $107.8 $ 17.7 16% 12% $ 4.5 23% 21%
Operating
profit 19.1 8.2 10.9 + + 0.3 21 10
</TABLE>
+ Increase of more than 100 percent.
The area's net sales increase in the second quarter and on a year-to-date basis
was primarily driven by Japan, Korea and Australia, partially offset by a
decline in the Philippines due to the economic and political environment.
Japan's programs to improve the activity of its sales force were successful, and
sales also improved due to a more favorable mix. For the six-month period, sales
in advance of a first quarter price increase in Korea, which was in line with
inflation, and a more active sales force led to the sales improvement. A
comparable price increase last year was in the third quarter. This factor, along
with the impact of introducing significant new products in Japan in the first
half of the year, is expected to lead to a more modest sales increase in the
second half. For both periods presented, the impact of foreign exchange on the
comparison reflected the strengthening of the Japanese yen.
The significant improvement in operating profit for the quarter and year-to-date
was driven by cost reductions in Japan and Korea, as well as higher gross
profits from a higher gross margin percentage in Korea coupled with higher
volumes. Also contributing to the increase was a second quarter benefit of a use
tax incentive. This benefit, which is for this year only, comes from a change in
legal structure and is expected to result in additional benefit in the second
half of 2000.
13
<PAGE> 15
REGIONAL RESULTS (DOLLARS IN MILLIONS) (CONTINUED)
LATIN AMERICA
<TABLE>
<CAPTION>
Negative
foreign Percent
Increase Restated exchange of total
2000 1999 Dollar Percent increase impact 2000 1999
---- ---- ------ ------- -------- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Second Qtr
Net sales $51.4 $43.0 $ 8.4 20% 25% $(1.6) 19% 16%
Operating
profit 5.0 4.6 0.4 8 16 (0.4) 10 10
Year-to-Date
Net sales $95.5 $74.6 $20.9 28% 29% $(0.4) 18% 14%
Operating
profit 7.4 5.3 2.1 38 38 -- 8 7
</TABLE>
Beginning in the first quarter of 2000, the distribution model for Brazil,
Argentina and Venezuela has been modified. In these markets, sales are now made
directly to the sales force with distributors compensated through commission
payments. Although there is no impact on operating profit, this model results in
sales being recorded at an amount that includes the margin that previously went
to distributors. This change enables distributors to focus less on
administrative tasks and more on recruiting, training and motivating their sales
forces.
Excluding the impact of the change in distribution center model and foreign
exchange, second quarter and year-to-date 2000 net sales increased 12 percent
and 15 percent, respectively, in comparison with 1999 due to increases in Mexico
and Brazil. Mexico's increase was due to higher sales force productivity. In
Brazil, the number of distributors has significantly increased, leading to a
larger sales force and increased sales volumes. The impact of foreign exchange
on the quarter comparison reflected the weakening of the Mexican and Colombian
pesos.
For the second quarter and year-to-date 2000, operating profit increased due to
the higher sales volumes in Mexico and lower operating expenses in both Mexico
and Venezuela. These increases were partially offset by a decline in Argentina
that was driven by lower sales volumes and higher costs. The sales improvement
in Brazil did not have an impact on the operating profit due to lower gross
margins and higher operating expenses.
14
<PAGE> 16
REGIONAL RESULTS (DOLLARS IN MILLIONS) (CONTINUED)
UNITED STATES
<TABLE>
<CAPTION>
Percent
Increase of total
2000 1999 Dollar Percent 2000 1999
---- ---- ------ ------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Second Qtr
Net sales $48.7 $44.4 $ 4.3 9% 18% 17%
Operating
profit 3.7 0.9 2.8 + 7 2
Year-to-Date
Net sales $84.5 $76.1 $ 8.4 11% 16% 15%
Operating
profit (loss) 0.5 (3.3) 3.8 + 1 nm
</TABLE>
+ Increase of more than 100 percent.
nm - Not meaningful
For the second quarter and six-month periods of 2000, sales increased due to a
more productive sales force and from the integrated direct access initiatives,
which are a convergence of the core party plan business with kiosks, the
Internet, and television sales. The area is still experiencing difficulty in
recruiting and motivating consultants in a full employment environment.
For both the quarter and the six-month period, the area had a significant
improvement in operating profit primarily driven by the increase in sales
volume.
15
<PAGE> 17
FINANCIAL CONDITION
Liquidity and Capital Resources. Working capital increased to $125.2 million as
of July 1, 2000, compared with $61.3 million as of the end of 1999. This
increase was primarily driven by lower accounts payable and accrued liabilities
in addition to higher inventories, partially offset by slightly lower accounts
receivable. The lower accounts payable and accrued liabilities balances reflect
a seasonal reduction and timing of payments. With regard to the level of
short-term borrowings, the Company classifies a portion of its outstanding
borrowings that are due within one year by their terms as non-current due to its
ability and intent that they are outstanding throughout the succeeding twelve
months. Based on the timing of the Company's cash inflows during the year, as
well as the overall level of short-term borrowings at the end of each period, a
lower amount was classified as current at the end of 1999 than at the end of the
second quarter of 2000.
As of July 1, 2000, the Company had $107.1 million available under its $300.0
million unsecured multicurrency credit facility, which matures in 2002. The
multicurrency credit facility along with other foreign uncommitted lines of
credit, and cash generated by operating activities, are expected to be adequate
to finance any additional working capital needs and capital expenditures.
Operating Activities. Net cash used in operating activities as of July 1, 2000,
was $2.2 million, compared with $0.4 million in the 1999 period. The difference
between the periods was primarily due to a higher decrease in accounts payable
and accrued liabilities, partially offset by higher net income and a lower
increase in accounts receivable.
Investing Activities. The $15.3 and $19.7 million of cash used in investing
activities for the six-month period of 2000 and 1999, respectively, was for
capital expenditures, primarily new molds.
Financing Activities. Dividends paid to shareholders in 2000 were $38.1 million
and include the payment of the dividend declared in the second quarter 2000.
Dividends paid in 1999 were $25.4 million and represent the fourth quarter 1998
and first quarter 1999 declarations.
NEW PRONOUNCEMENTS
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
recognizes all derivatives as either assets or liabilities in the statement of
financial position and measures 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 impact on the accounting
treatment related to the hedging programs the Company has undertaken.
16
<PAGE> 18
In July 2000, the Emerging Issues Task Force issued EITF 00-10, "Accounting for
Shipping and Handling Revenues and Costs" ("Issue 00-10"), which requires fees
billed to customers associated with shipping and handling to be classified as
revenue effective in the fourth quarter for fiscal years beginning after
December 15, 1999. Although Issue 00-10 has no impact to the Company's net
income, the Company will be required to reclassify shipping and handling fees
billed to customers from Delivery, sales and administrative expense to Net
sales. The Company is currently assessing the amount to be reclassified, and
will adopt the EITF by the end of 2000.
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.
17
<PAGE> 19
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 report on Form 8-K dated
February 28, 1997, as filed with the Securities and Exchange Commission. These
risks and uncertainties may cause actual results to differ materially from those
projected in forward-looking statements.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule for the second quarter of 2000.
(b) Reports on Form 8-K
During the quarter, the Registrant did not file any current reports
on Form 8-K.
18
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TUPPERWARE CORPORATION
By: /s/ Paul B. Van Sickle
--------------------------------
Executive Vice President,
and Chief Financial Officer
By: /s/ Michael S. Poteshman
--------------------------------
Vice President and Controller
Orlando, Florida
August 14, 2000
19
