-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PllOefkhfhcKJKB6cQTDsLlPH9WFrLDVM92KugfbmTLTnAAZLQxFLG2l12ZcIQ+L fRlcH2xexmcyWnzDXJI3og== 0001008654-99-000029.txt : 19990325 0001008654-99-000029.hdr.sgml : 19990325 ACCESSION NUMBER: 0001008654-99-000029 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19981226 FILED AS OF DATE: 19990324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TUPPERWARE CORP CENTRAL INDEX KEY: 0001008654 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 364062333 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11657 FILM NUMBER: 99571565 BUSINESS ADDRESS: STREET 1: 14901 S ORANGE BLOSSOM TRAIL CITY: ORLANDO STATE: FL ZIP: 32802-2353 BUSINESS PHONE: 4078265050 MAIL ADDRESS: STREET 1: P O BOX 2353 CITY: ORLANDO STATE: FL ZIP: 32802 10-K 1 LIVE FILING OF 10-K 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 26, 1998 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from ________to ___________ Commission file number 1-11657 _________________________________________________________________ TUPPERWARE CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-4062333 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 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 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 12, 1999 ($20.0625 per share): $1,137,606,666. As of March 12, 1999, 57,615,242 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 26, 1998 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, 1999 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, OneTouch* canisters, the Rock N'Serve* line, Meals in Minutes* 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 1998 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 Expressions line, the Luxuria line, Ultra Plus* and OvenWorks*, Salad spinner, E-Series* ergonomic knives, Multi Organizer*, water filters, mixers, blenders, flower vases, ComfortClean* Squeegees and BagKeepers. 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 60 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 aggressive 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 method and utilizing 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, as well as continuing to hold their own demonstrations. As of December 26, 1998, the Tupperware distribution system had over 1,800 distributors, over 47,000 managers, and over 940,000 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 15.7 million demonstrations were held in 1998 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 1998, Tupperware began exploring integrated access strategies to allow consumers to obtain Tupperware products. These strategies include infomercials, direct mail, kiosks and the Internet. Tupperware's strategy is to use 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. 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 distribution system, and to provide high-quality, high-value products throughout the world. Employees. Tupperware employs approximately 7,000 people, of whom approximately 1,200 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 the 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 the year 2000. There have been no work stoppages or threatened work stoppages in over four 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 1998, 1997 and 1996, Tupperware incurred expenses of approximately $11.5 million, $12.8 million and $7.2 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 the significant patentable developments. Environmental Laws. Compliance with federal, state and local environmental protection laws has not in the past had, 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, 1999). Positions and Offices Held and Principal Occupations of Employment During Past Five Years Name and Age Office and Experience Brian R. Biggin, age 53 Vice President, Internal Audit since March 1996. Prior thereto, Mr. Biggin served as Director, Computer Systems Audit, for Premark International, Inc. since 1986. Gerald M. Crompton, age 55 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. Lillian D. Garcia, age 42 Vice President, Human Resources since March 1999, after serving in various human resources positions within the Corporation. E.V. Goings, age 53 Chairman and Chief Executive Officer since October 1997, after serving as President and Chief Operating Officer of Tupperware Corporation since 1996. Mr. Goings served as Executive Vice President of Premark International, Inc. and President of Tupperware Worldwide since November 1992. David T. Halversen, age 54 Senior Vice President, Business Development and Communications since May 1997. Prior thereto, he served as Senior Vice President, Planning, Business Development and Financial Relations since November 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 43 Vice President, Financial Relations since March 1996. She served as Director, Investor Relations for Premark International, Inc. from June 1994. Prior thereto, she served as Manager Investor Relations of Premark. Charles H. R. Henry, age 48 Vice President since January 1999. From 1994 to 1998, he served in various executive positions with Tupperware Europe, Africa and Middle East. Alan D. Kennedy, age 68 President, Tupperware Corporation since April 1998. Prior thereto, he was an independent consultant from 1996 to 1998, and from 1989 served as President and CEO of Nature's Sunshine Products. Jennifer M. Moline, age 41 Vice President and Treasurer since February 1998, after serving in various business development and financial management positions within Tupperware. Gaylin L. Olson, age 53 President, Tupperware Latin America since September 1998. He served in various executive positions for Tupperware, including Senior Vice President, Emerging Markets since May 1996 and prior thereto as President, Tupperware U. S. in 1994 and 1995, and as President Tupperware Asia Pacific from 1993. Thomas P. O'Neill, Jr., age 45 Senior Vice President and Chief Financial Officer since March 1997, after serving as Vice President and Chief Financial Officer, Tupperware Europe, Africa and Middle East since April 1994. Prior thereto he served as Vice President and Treasurer of Premark International, Inc. Elizabeth J. Palm, age 46 President, Tupperware U.S. since March 1999, after serving as Senior Vice President, Sales and Marketing, Tupperware North America since August 1998. Prior thereto, she served as Vice President, Sales and Marketing for The Longaberger Co. since 1992. Michael S. Poteshman, age 35 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 48 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 56 Senior Vice President, Tax and Government Affairs since March 1997, after serving as Vice President, Tax 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 62 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 50 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 53 President, Tupperware North America since February 1997. Prior thereto, he served as Executive Vice President and Chief Operating Officer of Nature's Sunshine Products, Inc. since 1994. Prior thereto, Mr. Spears served in various managerial positions with Avon Products, Inc. Jose R. Timmerman, age 50 Senior Vice President, Worldwide Operations, since August 1997, after serving as Vice President Worldwide Operations, since October 1993. Paul B. Van Sickle, age 59 Executive Vice President since March 1997. Prior thereto, he served as Senior Vice President, Finance and Operations since November 1992. Robert W. Williams, age 55 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 located in Orlando, Florida. The Registrant owns and maintains manufacturing plants in Argentina, Belgium, Brazil, France, Greece, Japan, Korea, Mexico, the Philippines, Portugal, South Africa, Spain 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 46 of the Annual Report to Shareholders for the year ended December 26, 1998 is incorporated by reference into this Report. The information set forth in Note 13 ("Rights Agreement") on page 46 of the Annual Report to Shareholders for the year ended December 26, 1998 is incorporated by reference into this Report. As of March 12, 1999, the Registrant had 14,146 shareholders of record. Item 6. Selected Financial Data The information set forth under the caption "Selected Financial Data" on pages 17 and 18 of the Annual Report to Shareholders for the year ended December 26, 1998 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 19 through 27 of the Annual Report to Shareholders for the year ended December 26, 1998 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 pages 25-27, of the Annual Report to Shareholders for the year ended December 26, 1998 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 28 through 46, and on page 47, respectively, of the Annual Report to Shareholders for the year ended December 26, 1998 are incorporated by reference into this Report: Consolidated Statements of Income, Shareholders' Equity and Cash Flows - Years ended December 26, 1998, December 27, 1997 and December 28, 1996. Consolidated Balance Sheet - December 26, 1998 and December 27, 1997; 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 46 of the Annual Report to Shareholders for the year ended December 26, 1998 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, 1999 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 17 of the Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 11, 1999 and the information on pages 14 through 17 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 8 and "Security Ownership of Management" on page 7 of the Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 11, 1999 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 9 of the Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 11, 1999 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 28 through 46 and on page 47, respectively, of the Annual Report to Shareholders for the year ended December 26, 1998 are incorporated by reference into this Report by Item 8 hereof: Consolidated Statements of Income, Shareholders' Equity and Cash Flows - Years ended December 26, 1998, December 27, 1997 and December 28, 1996; Consolidated Balance Sheet - December 26, 1998 and December 27, 1997; 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 15 of this Report; and Schedule II--Valuation and Qualifying Accounts for each of the three years ended December 26, 1998, page 16 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 (Attached as Exhibit 3.2 to Form 10 (No. 1-11657), filed with the Commission on March 4, 1996 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 (Attached to Form 10 (No. 1-11657) as Annex C, filed with the Commission on March 4, 1996, and incorporated herein by reference). 10.2 Tupperware Corporation Directors' Stock Plan as amended November 12, 1998. *10.3 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). *10.4 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). *10.5 Form of Change of Control Agreement (Attached as Exhibit 10.5 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 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. 13 Pages 17 through 47 of the Annual Report to Shareholders of the Registrant for the year ended December 26, 1998. 21 Subsidiaries of Tupperware Corporation as of March 12, 1999. 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 26, 1998, 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 19, 1999 appearing on page 47 of the 1998 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 19, 1999 TUPPERWARE CORPORATION SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 26, 1998 (In millions)
Col. A Col. B. Col. C. Col. D Col E. - -------- ------- -------- ------ Additions --------------------- Balance at Charged Charged Balance Beginning of to Costs & to Other at end of Description of Period Expenses Accounts Deductions Period - ----------- ------------ --------- --------- ---------- ---------- Allowance for doubtful accounts, current and long term: Year ended December 26, 1998 $81.9 $15.0 $(0.5) $(22.3) $77.4 3.3 Year ended December 27, 1997 67.9 27.5 0.8 (12.1) 81.9 (2.2) Year ended December 28, 1996 50.9 20.9 -- (3.7) 67.9 (0.2) Valuation allowance for deferred tax assets: Year ended December 26, 1998 $14.4 $ 9.5 -- -- $23.9 Year ended December 27, 1997 25.8 (11.4) -- -- 14.4 Year ended December 28, 1996 25.9 (0.1) -- -- 25.8 Represents write-offs less recoveries. Foreign currency translation adjustment.
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) Senior Vice President and Chief Thomas P. O'Neill, Jr. Financial Officer (Principal Financial Officer) Vice President and Controller Michael S. Poteshman (Principal Accounting Officer) * Director Rita Bornstein, Ph.D * Director Ruth M. Davis, Ph.D * Director Lloyd C. Elam, M.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 24, 1999 EXHIBIT INDEX Exhibit No. Description 10.2 Tupperware Corporation Directors' Stock Plan as Amended November 12, 1998 10.9 Loan Agreement, Promissory Note and Stock Pledge Agreement dated November 13, 1998, between Tupperware and E. V. Goings 13 Pages 17 through 47 of the Annual Report to Shareholders of the Registrant for the year ended December 26, 1998 21 Subsidiaries of Tupperware Corporation as of March 12, 1999 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 EX-10.2 2 DIRECTOR STOCK PLAN EXHIBIT 10.2 TUPPERWARE CORPORATION DIRECTOR STOCK PLAN (as amended November 12, 1998) Section 1. Purpose The purposes of the Plan are to assist the Company in (1) promoting a greater identity of interests between the Company's non-employee directors and its shareholders, and (2) attracting and retaining directors by affording them an opportunity to share in the future successes of the Company. Section 2. Definitions "Act" shall mean the Securities Exchange Act of 1934, as amended. "Award" shall mean an award of Common Stock as contemplated by Section 7 of this Plan. "Board" shall mean the Board of Directors of the Company. "Change of Control" shall mean the happening of any of the following events: An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 20% or more of either (1) the then outstanding shares of Common Stock (the "Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (1) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (4) any acquisition by any Person pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) of this definition; or A change in the composition of the Board such that the individuals who, as of the Distribution Date of the Plan, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a member of the Board subsequent to such Distribution Date, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or (iii) The approval by the stockholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation ("Corporate Transaction") or, if consummation of such Corporate Transaction is subject, at the time of such approval by stockholders, to the consent of any government or governmental agency, the obtaining of such consent (either explicitly or implicitly by consummation); excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed with respect to the Company prior to the Corporate Transaction and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the board of directors of the corporation resulting from such Corporate Transaction; or (iv) The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. "Change of Control Price" means the higher of (i) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Common Stock paid in such tender or exchange offer or Corporate Transaction; provided, however, that in the case of a Stock Option which was granted within 240 days of the Change of Control, then the Change of Control Price for such Stock Option shall be the Fair Market Value of the Common Stock on the date such Stock Option is exercised or deemed exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Committee. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations thereunder. "Common Stock" shall mean the common stock, $.01 par value, of the Company. "Company" shall mean Tupperware Corporation, a Delaware corporation. "Distribution Date" shall mean the date determined by the Board of Directors of Premark International, Inc., a Delaware corporation ("Premark"), on which shall be effected the distribution on a pro rata basis to the holders of the outstanding shares of common stock of Premark the shares of Common Stock held by Premark on such date. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations thereunder. "Fair Market Value" shall mean, as of any given date, the mean between the highest and lowest reported sales prices of the Common Stock on the New York Stock Exchange Composite Tape, or, if not listed on such exchange, on any other national securities exchange on which the Common Stock is listed or on NASDAQ, adjusted to the next higher five cents if such mean is not divisible by five cents. If there is no regular public trading market for such Common Stock, the Fair Market Value of the Common Stock shall be determined by the Committee in good faith. "Fees" shall mean the annual retainer fee for a Participant in connection with his or her service on the Board for any fiscal year of the Company. "Participant" shall mean each member of the Board who is not an employee of the Company or any subsidiary of the Company. "Plan" shall mean the Tupperware Corporation Director Stock Plan. "Retirement" shall mean the retirement by a Participant from the Board in accordance with the Company's stated policy on Director retirement. "Rules" shall mean the rules promulgated under the Act from time to time and the interpretations issued by Securities and Exchange Commission in respect thereof. "Stock Option" shall mean a non-qualified stock option, which is further defined as any right to Common Stock which does not qualify as an "incentive stock option" as defined under the Code. Section 3. Eligibility Each member of the Board who is not an employee of the Company or any subsidiary of the Company shall be eligible to participate in the Plan. Section 4. Shares Subject to the Plan The maximum number of shares of Common Stock which shall be available for use under the Plan shall be 300,000, subject to adjustment pursuant to Section 17 hereunder. The shares issued under the Plan may be authorized and unissued shares or issued shares heretofore or hereafter acquired and held as treasury shares or shares purchased on the open market. Section 5. Duration of Plan Unless earlier terminated pursuant to Section 11 hereof, this Plan shall automatically terminate on, and no grants, awards or elections may be made after, the date of the tenth anniversary of the approval by stockholders of the Plan pursuant to Section 19 hereof. Section 6. Administration The Plan shall be administered by the Board or any committee thereof so designated by the Board (the "Committee"), which shall have full authority to construe and interpret the Plan, to establish, amend and rescind rules and regulations relating to the Plan, and to take all such actions and make all such determinations in connection with the Plan as it may deem necessary or desirable. Notwithstanding any other provision of the Plan, neither the Board nor the Committee shall be authorized to exercise any discretion with respect to the selection of Participants to receive Awards or Stock Options under the Plan or concerning the amount, timing or vesting of such Awards or Stock Options under the Plan, and no amendment or termination of the Plan shall adversely affect the interest of any Director in Awards or Stock Options previously granted to the Director without that Director's express written consent. Section 7. Initial Awards Each Participant shall receive a one-time grant of one thousand (1,000) shares of Common Stock, upon serving his or her initial three months as a member of the Board. Section 8. Stock in Lieu of Retainer Each Participant who, in any year of the Plan, delivers to the Company written notice of an irrevocable election concerning the Fees to be earned in the next fiscal year of the Company, may receive in lieu of cash an amount of shares of Common Stock equal in value to all or any portion of the Fees (but only increments of 25% or a multiple thereof, and in no event to exceed 100% of the Fees) as so designated by the Participant in such written notice, which amount shall be determined by dividing the Fees payable in each fiscal quarter of the Company by the Fair Market Value of a share of Common Stock on the last business day of such fiscal quarter (but if such date is not a day on which the New York Stock Exchange is open, then on the next preceding day on which the New York Stock Exchange is open), except that only whole numbers of shares shall be obtainable pursuant to this Section, and any remainder Fees which otherwise would have purchased a fractional share shall be paid in cash. Any such written notice pursuant to this Section 8 shall remain in effect for subsequent Plan years unless such Participant delivers a written notice setting forth a different election with respect to Fees which shall be applied to future Plan years until further written notice is received by the Company pursuant to this Section 8. Section 9. Stock Options (a) Each Participant who, in any year of the Plan, delivers to the Company an irrevocable election concerning the Fees to be earned in the next fiscal year of the Company, may receive in lieu of all or any portion of the cash Fees (but only increments of 25% or a multiple thereof) as so designated by the Participant, a Stock Option for an amount of shares of Common Stock in each fiscal year of the Company as follows: Percent of Annual Number of Shares Retainer Forgone Subject to Option 100% 2,000 75% 1,500 50% 1,000 25% 500 The exercise price of such shares shall be determined as follows Fair Market Value Of a Share - 100% of Fee = Exercise Price Of Common Stock 2,000 Per Share Fair Market Value Of a Share - 75% of Fee = Exercise Price Of Common Stock 1,500 Per Share Fair Market Value Of a Share - 50% of Fee = Exercise Price Of Common Stock 1,000 Per Share Fair Market Value Of a Share - 25% of Fee = Exercise Price Of Common Stock 500 Per Share In no event, however, shall the exercise price be less than 50% of the Fair Market Value of a share of Common Stock on the date of the grant. In the event that the effect of the foregoing sentence is to limit the reduction of the exercise price, any portion of the Fees which are so prevented from reducing the exercise price shall be paid to the affected Participant, in cash or Common Stock (as elected by a Participant) in an equitable fashion over the remainder of the year in which the Fees are earned, as if an election to receive a Stock Option pursuant to this Section 9 (a) has not been made. (b) The date of grant of a Stock Option pursuant to this Section 9 shall be the date of the annual meeting of stockholders of the Company, provided that such meeting occurs at least six (6) months and one day after the Participant's election to receive a Stock Option in lieu of cash Fees; otherwise, the date of grant shall be six (6) months and one day after the Participant's election to receive a Stock Option in lieu of cash Fees. If such day would not be a day on which the New York Stock Exchange is open, then on the next succeeding day on which the New York Stock Exchange is open. (c) A Stock Option granted pursuant to this Section 9 shall vest and be exercisable on the last day of the fiscal year in which the Stock Option is granted. In the event that a Participant is not a member of the Board on the last day of the fiscal year in which the Stock Option is granted, except in the case of a Participant's Retirement or termination for cause, such Participant's Stock Option which has not become vested and exercisable as of such time shall (i) be reduced to an amount of shares of Common Stock which reflects the amount of Fees earned as of the date of termination from service on the Board which amount shall be determined by multiplying the number of shares of Common Stock subject to the Stock Option as determined pursuant to Section 9(a), above, by a fraction, the numerator of which shall be the number of days of the fiscal year of the Company in which the Stock Option is granted that the Participant was a member of the Board and the denominator of which shall be 365, provided, that any Stock Option for a fractional share of Common Stock shall be rounded up to the nearest whole number of shares, and (ii) shall continue to vest. The term of exercisability for a Stock Option granted under this Section 9 shall be ten (10) years. (d) The remaining terms and conditions of each such Stock Option shall be as set forth in this Plan and in the form of Stock Option Agreement used in connection with this Plan. Section 10. Transferability Rights, grants and Awards under the Plan may not be assigned, transferred, pledged or hypothecated, and shall not be subject to execution, attachment or similar process. Notwithstanding the foregoing, any such right, grant or award constituting a "derivative security" under the Rules shall not be transferable by a Participant other than by will or by operation of applicable laws of descent and distribution or pursuant to a domestic relations order or qualified domestic relations order as such terms are defined by the Code or ERISA. Section 11. Amendment The Board may from time to time make such amendments to the Plan as it may deem proper and in the best interest of the Company without further approval of the Company's stockholders, provided that to the extent required to qualify transactions under the Plan for exemption under Rule 16b-3 promulgated under the Act ("Rule 16b-3") no amendment to the Plan shall be adopted without further approval by the holders of at least a majority of the shares of Common Stock present, or represented, and entitled to vote at a meeting held for such purpose, and provided further, that if and to the extent required for the Plan to comply with Rule 16b-3, no amendment to the Plan shall be made more than once in any six- month period that would change the amount, price or timing of the grants of Awards or Stock Options hereunder other than to comport with changes in the Code, ERISA, or the regulations thereunder. Section 12. Termination The Plan may be terminated at any time by the Board or by the approval by the holders of at least a majority of the shares of Common Stock present, or represented, and entitled to vote at a meeting held for such purpose. Section 13. Withholding Taxes No later than the date as of which an amount first becomes includible in the gross income of the Participant for Federal income tax purposes with respect to any Award under the Plan or with respect to any exercise of any Stock Option granted under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the company regarding the payment of, any Federal, state, local or foreign taxes of any kind required by law to be withheld. Such withholding obligations may be settled with Common Stock, including Common Stock that is part of the Award or that is received upon the exercise of the Stock Option that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional upon such payment or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. The Company may establish such procedures as it deems appropriate, including the making of irrevocable elections or the timing of the use of Common Stock, for the settlement of its withholding obligations. Section 14. Effect of Change of Control Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control, any Stock Options outstanding and not then exercisable and vested as of the date such Change of Control is determined to have occurred, shall become fully exercisable and vested to the full extent of the original grant. During the 60-day period from and after a Change of Control (the "Exercise Period"), a Participant who holds an Award or a Stock Option shall have the right, in lieu (in the case of a Stock Option) of the payment of the exercise price for the shares of Common Stock being purchased under the Stock Option, by giving notice to the Company, to elect (within the Exercise Period) to surrender all or part of an Award or a Stock Option to the company and to receive cash, within 30 days of such notice, in an amount equal to (a) in the case of a Stock Option, the amount by which the Change of Control Price per share of Common Stock on the date of such election shall exceed the exercise price per share of Common Stock under the Stock Option (the "Spread") multiplied by the number of shares of Common Stock granted under the Stock Option as to which the right granted under this Section shall have been exercised, or (b) in the case of an Award, an amount equal to the Change of Control Price multiplied by the number of shares of Common Stock granted pursuant to such Award as to which the right granted under this Section shall have been exercised; provided, however, that if the Change of Control is within six (6) months of the date of grant of a particular Award or Stock Option held by a Participant no such election shall be made by such Participant with respect to such Award or Stock Option prior to six (6) months from the date of grant. If the end of such 60-day period from and after a Change of Control is within six (6) months from the date of grant of a Stock Option or the date of an Award, such Stock Option or Award shall be cancelled in exchange for a cash payment to the Participant, effected on the day which is six (6) months and one day after the date of grant of such Stock Option or Award, as the case may be, equal to (a) in the case of a Stock Option, the Spread multiplied by the number of shares of Common Stock granted under the Stock Option, or (b) in the case of an Award, the Change of Control Price multiplied by the number of shares of Common Stock comprising an outstanding Award. Section 15. Death, Disability, Termination or Retirement of Participant (a) Death While A Director. Notwithstanding any other provision of the Plan to the contrary, in the event of the death of a Participant while a member of the Board, any Stock Options outstanding as of the date of death and not then exercisable shall become immediately exercisable, and all outstanding Stock Options held by such Participant shall remain exercisable by the person to whom the Stock Option is transferred by will or by the laws of descent and distribution for a period of the lesser of (i) the remaining term of the Stock Option or (ii) three (3) years after the date of death. (b) Disability, Retirement or Other Termination. Except as otherwise provided by the Plan, in the event of a Participant's termination of membership on the Board as a result of the Participant's disability or Retirement or for another reason other than cause, any Stock Options outstanding as of the date of such termination and not then exercisable shall (i) be adjusted in amount to reflect the proportion of Fees earned in the final year of such Participant's service in such year (in accordance with the operation of Sections 8 and 9 of this Plan and in consideration of such Participant's elections for such year), and (ii) become exercisable on the last day of the Company's then- current fiscal year. All outstanding Stock Options held by such Participant shall remain exercisable for the full period contemplated by the terms of such Stock Options. In the event of the death of a Participant subsequent to termination of membership from the Board as a result of circumstances described in this Section 15(b), any Stock Options outstanding as of the date of death and not then exercisable shall become immediately exercisable, and all outstanding Stock Options held by such Participant shall remain exercisable by the person to whom the Stock Option is transferred by will or by the laws of descent and distribution for a period of the lesser of (i) the remaining term of the Stock Option, or (ii) three (3) years after the date of death. Section 16. Effect of Termination for Cause If a Participant incurs a termination of membership on the Board, for cause, such Participant's Stock Options which are not then exercisable shall be automatically cancelled immediately. Unless otherwise determined by the Board, for purposes of the Plan "cause" shall mean (i) the conviction of the Participant for commission of a felony under Federal law or the law in the state in which such action occurred, or (ii) dishonesty in the course of fulfilling the Participant's duties as a director. Section 17. Adjustments Upon Changes in Capitalization In the event of any change in corporate capitalization, such as a stock split or a corporate transaction, such as any merger, consolidation, separation, including a spin off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code) or any partial or complete liquidation of the company, the Committee or Board may make such substitution or adjustments in the aggregate number and class of shares reserved for issuance under the Plan, in the number, kind and option price of shares subject to outstanding Stock Options, in the number and kind of shares subject to other outstanding Awards granted under the Plan and/or such other equitable substitution or adjustments as it may determine to be appropriate in its sole discretion; provided, however, that the number of shares subject to any Award shall always be a whole number. Section 18. Regulatory Matters The Plan is intended to be construed so that participation in the Plan will be exempt from Section 16(b) of the Act, pursuant to Rule 16b-3 as promulgated thereunder, as may be further amended or interpreted by the Securities and Exchange Commission. In the event that any provision of the Plan shall be deemed not to be in compliance with the Rules in order to enjoy the exemption from the Act, such provision shall be deemed of no force or effect and the remaining provisions of the Plan shall remain in effect. Section 19. Effectiveness of Plan The Plan shall become effective as of the Distribution Date. Section 20. Governing Law To the extent not preempted by Federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware. EX-10.9 3 LOAN AGREEMENT, PROMISSORY NOTE, STOCK PLEDGE EXHIBIT 10.9 PROMISSORY NOTE $7,650,000.00 November 30, 1998 FOR VALUE RECEIVED, E. V. GOINGS (the "Maker") promises to pay to the order of TUPPERWARE CORPORATION, a Delaware corporation (which together with any successor, assignee or endorsee is hereinafter referred to as the "Holder"), at 14901 South Orange Blossom Trail, Orlando, Florida 32837, or at such other place as the Holder may designate in writing, in lawful money of the United States of America, the principal sum of Seven Million, Six Hundred and Fifty Thousand and No/100 Dollars ($7,650,000.00), as described below and in accordance with the following terms and provisions: 1. Non-Interest Bearing. No interest shall be payable on the outstanding principal balance of this Note. 2. Security and Purpose of Loan. The Maker's payment and performance of all the terms and conditions of this Note are secured by a stock pledge agreement of even date herewith executed by the Maker and the Holder (the "Pledge Agreement"). The loan evidenced by this Note is made to assist the Maker in the purchase of 400,000 shares of the common stock (the "Stock") of Tupperware Corporation and for no other purpose. 3. Principal Payments. Payments against the principal of this Note will be made in amounts equal to ten percent (10%) of the gross amount of each annual bonus award payment payable by the Holder to the Maker, and shall be made by payroll deduction. Any such amounts paid by the Maker shall be refunded by the Holder in the event that the Maker surrenders or forfeits the Stock as contemplated by this Note, together with interest thereon from the time of payment by payroll deduction at the prime rate in effect at Chase Manhattan Bank at the time of refund. The entire remaining outstanding principal balance will be due and payable on November 12, 2006. At such date, the Maker shall have the option of repaying such outstanding balance (a) in cash, (b) by tendering an amount of the common stock of Tupperware Corporation equal in value to the outstanding balance if the per share price of such common stock then equals or exceeds $19.125 (adjusted for any stock splits or reverse splits), or (c) by tendering any remaining amount of the Stock subject to the lien of the Pledge Agreement if the per share price of the common stock of Tupperware Corporation is then less than $19.125 (adjusted for any stock splits or reverse splits). 4. Prepayment. This Note may be prepaid in whole or in part at any time on or after November 12, 2002, without penalty. In addition, partial prepayments of principal will be made by the Maker in accordance with Section 3 of this Note. 5. Accelerated Maturity: The entire outstanding principal balance of this Note will become immediately due and payable without notice on (1) the date of any voluntary or involuntary termination of the Maker's employment with the Holder, subject to subsection (b) below, and subject to subsections (c) and (d) below respectively, in the case of (i) death of the Maker, or (ii) the total disability of the Maker; or (2) the date on which a Change of Control occurs, as that term is defined by that certain Change of Control Employment Agreement between the Maker and the Holder dated May 31, 1996, or any successor agreement; In the event of a voluntary or involuntary termination of the Maker's employment as contemplated in clause 5 (a) above prior to November 12, 2002 (or a termination for "cause" at any time), all right, title and ownership to the Collateral shall transfer to the Holder in full satisfaction of the principal amount of this Note, and the Maker shall not be entitled to receive from the Holder any amount representing an excess in the value of the Collateral over the then-outstanding balance of the loan amount under this Note. For purposes of this Note, "cause" shall mean an act of dishonesty, a conviction of a felony, a willful and deliberate failure of the Maker to perform his duties to the Holder, or any other events as determined by the Compensation and Directors Committee of the Board of Directors of the Holder. In the event of a voluntary or involuntary termination of the Maker's employment as contemplated by clause 5(a) above on or after November 12, 2002 (except for a termination for "cause"), the Maker shall, at his option, pay the then-outstanding principal amount of the Note in cash or surrender all his right, title and ownership in and to the Stock in full satisfaction of the Note. In the event of the death of the Maker, provided the debt evidenced by this Note is assumed in writing by all heirs, beneficiaries and other persons or entities succeeding to the Maker's ownership interest in all or any portion of the "Collateral" (as defined in the Pledge Agreement) within ninety (90) days after the Maker's death, then the entire outstanding balance of this Note will become due and payable without notice on the earlier of (i) November 12, 2006, or (ii) the first anniversary of the Maker's death. Upon the debt evidenced by the Note becoming due and payable pursuant to this subsection, the then-obligor under the Note shall have the same repayment obligations as if the Note was payable on November 12, 2006 pursuant to Section 3 of this Note. In the event of involuntary termination of the Maker's employment with the Holder as a consequence of the Maker's total disability, then the entire outstanding balance of this Note will become due and payable without notice on the earlier of (i) November 12, 2006, or (ii) the third anniversary of the date of termination for reasons of total disability. Upon the debt evidenced by the Note becoming due and payable pursuant to this subsection, the Maker under the Note shall have the same repayment obligations as if the Note was payable on November 12, 2006 pursuant to Section 3 of this Note. In the event of a Change of Control as defined in clause 5(a)(2) above, all then-outstanding indebtedness of the Maker under this Note shall be deemed forgiven and the lien upon the Stock then subject to the Pledge Agreement shall be deemed automatically released. 6. Late Charge. The Maker will pay to the Holder a late charge equal to five percent (5%) of any amount due under this Note but not received by the Holder within fifteen (15) days after the due date. The Maker agrees that the late charge will be collected not as a penalty, but as compensation to the Holder for the costs of collecting the late payment. This provision will not be construed to extend the due date for any amount required to be paid under this Note. The Holder will have no obligation to accept any late payment not accompanied by the required late charge. 7. Waiver; Extensions. Presentment, demand, notice of dishonor and all other exemptions provided the Maker are waived. No delay, failure or omission by the Holder in exercising any of its rights hereunder or at law or in equity (including, without limitation, the right of acceleration) will be construed as a novation of this Note or will operate as a waiver or prevent the subsequent exercise of any or all of such rights. Acceptance by the Holder of any sum payable under this Note, whether before, on or after the due date of such payment, will not be a waiver of the Holder's right to require prompt payment when due of all other sums payable under this Note or to exercise any of the Holder's rights, powers or remedies under this Note. No extension of the time for any payment under this Note will operate to release, discharge, modify or otherwise affect the liability of the Maker unless the Holder agrees in writing. 8. Collection Costs, Documentary Stamp Tax and Other Expenses. The Maker will pay all costs, fees and expenses (including court costs and attorneys' fees) incurred by the Holder in collecting or attempting to collect any amount that becomes due under this Note or in seeking legal advice with respect to a default under this Note. In addition, the Maker will pay all costs and expenses arising out of the execution and delivery of this Note, including but not limited to all documentary stamp taxes and other taxes that may be charged or imposed by local, state or federal governments. 9. Governing Law. This Agreement is governed by Florida Law. 10. Notices. All notices, requests, demands and other communications with respect to this Note will be in writing and will be delivered by hand, sent prepaid by air courier or sent by the United States mail, certified, postage prepaid, return receipt requested, at the addresses designated below: If to Holder: Tupperware Corporation Attn: Senior Vice President, Human Resources 14901 South Orange Blossom Trail Orlando, Florida 32837 If to Maker: E. V. Goings 5163 Fairway Oaks Drive Windermere, Florida 34786 Any notice, request, demand or other communication delivered or sent in such manner will be deemed given or made when actually received by the intended recipient. Rejection or other refusal to accept, or the inability to deliver because of a changed address of which no notice was given, will be deemed to be receipt of the notice, request, demand or other communication sent. The Maker or the Holder may change its address by notifying the other party of the new address in any manner permitted by this section. 11. Amendments Only in Writing. This Note or any provision hereof may be waived, changed, modified or discharged only by an agreement in writing signed by the Maker and the Holder. 12. Time of Essence. TIME IS OF THE ESSENCE with respect to the performance by the Maker of each of its obligations hereunder. 13. Authorization for Payroll Deduction. The Maker authorizes the Holder to deduct amounts due under this Note from payroll installments payable by the Holder to the Maker. The Maker agrees that all mandatory payments due under this Note will be made by way of payroll deduction for so long as the Maker remains on the Holder's active payroll, and that no additional authorization, consent or notice will be required for the Holder to commence or continue payroll deduction for these purposes. 14. Right of Set-Off. The Maker expressly agrees that, if a default or accelerated maturity occurs pursuant to this Note, the Holder has a right of set-off to satisfy the debt evidenced by this Note. The right of set-off will entitle the Holder (a) to withhold any payments owing from the Holder to the Maker, including but not limited to, salary and bonus payments, pension and retirement benefits, and expense reimbursements, and (b) to draw upon any account maintained by the Holder or its agent for the benefit of the Maker or in the Maker's name. The Holder will provide written notice to the Maker prior to exercising this right of set-off. IN WITNESS WHEREOF, the Maker has executed this Note in the County of Osceola. _______________________________ Name: E. V. Goings COUNTY OF OSCEOLA STATE OF FLORIDA This instrument was executed before me and in my presence this 30th day of NOVEMBER, 1998, in Osceola County, Florida, by E. V. Goings. ________________________________ Notary Public My Commission Expires:____________ STOCK PLEDGE AGREEMENT THIS STOCK PLEDGE AGREEMENT dated as of November 30, 1998, (the "Agreement"), by and between E. V. Goings (the "Pledgor), Susan Goings (the "Pledgor's Spouse") and Tupperware Corporation, a Delaware corporation (the "Secured Party"), recites and provides: RECITALS The Pledgor has executed and delivered a promissory note of even date herewith (the "Note") made by the Pledgor payable to the order of the Secured Party in the principal amount of $7,650,000.00. The Pledgor has agreed to pledge and deliver to the Secured Party as security for the payment of the indebtedness evidenced by the Note, 400,000 shares of common stock of Tupperware Corporation, a Delaware corporation, in accordance with the terms and conditions set forth in this Agreement. The Pledgor's Spouse has agreed to join in the execution of this Agreement to release all marital property rights, if any, in and to the "Collateral" (defined below). PLEDGE AGREEMENT NOW, THEREFORE, the parties to this Agreement agree as follows: 1. Pledge of Collateral. The Pledgor hereby assigns and delivers to the Secured Party, with appropriate stock powers and endorsements in blank or other appropriate instruments of assignment, a certificate or certificates for 400,000 shares of common stock of Tupperware Corporation. (Such securities, and any replacements or substitutions thereof, and all accessions thereto, are referred to in this document as the "Collateral"). All of the Collateral will be held by the Secured Party subject to the terms and conditions of this Agreement. 2. Certificates. The Pledgor agrees to deliver promptly to the Secured Party, with stock powers or endorsements in blank or other appropriate instruments of assignment, all certificates (if any) representing stock splits or rights to purchase or subscribe for additional stock, or other rights, accessions or increments with respect to any securities constituting a portion of the Collateral. Such certificates (if any) will be held by the Secured Party subject to the terms and conditions of this Agreement. 3. Secured Indebtedness. This pledge of the Collateral secures all indebtedness of the Pledgor to the Secured Party evidenced by the Note, including any attorney's fees and other expenses incurred in the collection of the Note. 4. Satisfaction of Indebtedness. Upon payment of the entire indebtedness of the Pledgor to the Secured Party evidenced by the Note, this Agreement will terminate and any remaining Collateral will be returned and delivered by the Secured Party to the Pledgor. 5. Reduction of Collateral. On any date subsequent to November 12, 2002, the Pledgor shall be entitled to reduce the amount of the Collateral subject to this Agreement, conditioned on a pro rata payment of the indebtedness evidenced by the Note. In the event the Pledgor elects to reduce the Collateral, the Pledgor will notify the Secured Party and simultaneously pay to the Secured Party an amount (the "Paydown") equal to the principal then outstanding under the Note times a fraction, the numerator of which equals the number of shares of common stock by which the Collateral is to be reduced and the denominator of which equals the number of shares of common stock comprising the Collateral prior to reduction. Any mandatory prepayment amounts paid by the Pledgor to the Secured Party pursuant to Section 3 of the Note, and not included in the calculation of any earlier Paydown, shall be credited towards the Paydown. The secured Party will apply the Paydown against the indebtedness evidenced by the Note and release to the Pledgor the number of shares of common stock by which the Collateral is to be reduced. Except as permitted by this Agreement, the Collateral may not be reduced or otherwise released prior to the full and final payment of all indebtedness evidenced by the Note. 6. Pledgor's Representation. The Pledgor represents, warrants and covenants that he is the lawful owner of all of the Collateral, free and clear of all liens or claims of any sort whatsoever, other than the lien established by this Agreement, and that he will maintain the Collateral free of all such liens or claims until all indebtedness evidenced by the Note is fully and finally paid. 7. Further Assurances. The Pledgor covenants and agrees to execute and deliver or cause to be executed and delivered, and to do or make or cause to be done or made, upon the request of the Secured Party, any and all agreements, instruments, acts or things, supplemental, confirmatory or otherwise, as may reasonably be required by the Secured Party for the purpose of, or in connection with, perfecting and completing the pledge of the Collateral in accordance with the terms and conditions of this Agreement. 8. Dividends and Voting Rights. So long as there exists no event of default under this Agreement or under the Note, subject to the provisions of paragraphs 2 and 9 hereof, the Pledgor will have and enjoy all rights attaching to the Collateral, including the right to receive all dividends and the right to exercise any and all voting rights. 9. Default and Remedies. In the event of any default by the Pledgor in the payment of any sum under this Agreement or any indebtedness of the Pledgor evidenced by the Note, which default continues for a period of five (5) days, or any other default under the Note or under this Agreement which continues for a period of fifteen (15) days after written notice given by the Secured Party to the Pledgor in accordance with the provisions of the Note, all right, title and ownership in and to the Collateral will transfer ipso facto to the Secured Party, at its option. The transfer of the Collateral to the Secured Party will include all rights attaching to the Collateral, including the right to receive all dividends and the right to exercise any and all voting rights. Such transfer and delivery of the Collateral will be accepted by the Secured Party in full satisfaction of the outstanding indebtedness evidenced by the Note. 10. Expenses. The Pledgor will pay any and all expenses related to the execution of this Agreement and pledge of the Collateral, including any taxes or assessments imposed by local, state or federal governments. The Pledgor will also pay all costs of collection and enforcement of this Agreement and the Note (including reasonable attorneys' fees) in the event of default or failure of the Pledgor to fulfill any term, covenant or condition under this Agreement or the Note. Any other expenses incurred in connection with this Agreement or the pledge of the Collateral hereunder will be borne by the Secured Party and will not be charged against or paid from the Collateral. 11. Binding Agreement; Governing Law. This Pledge Agreement will bind the parties hereto and their respective heirs, personal representatives, successors and assigns. This Agreement will be governed by Florida Law. 12. Joinder of Pledgor's Spouse. The Pledgor's Spouse joins in the execution of this Agreement to evidence her consent to the pledge of the Collateral by the Pledgor, and to release any and all marital rights that may exist in and to the Collateral. IN WITNESS WHEREOF, the Pledgor, the Pledgor's Spouse and the Secured Party have executed or caused this Pledge Agreement to be executed in their names as of the date first above written. PLEDGOR PLEDGOR'S SPOUSE _______________________ ____________________________ Name: E. V. GOINGS Name: SUSAN GOINGS SECURED PARTY TUPPERWARE CORPORATION By:_____________________ Title: ___________________ COUNTY OF _____________ STATE OF _______________ This instrument was executed before me and in my presence this 30th day of November, 1998, in Osceola County, Florida. ______________________________ Notary Public My Commission Expires:__________ November 30, 1998 Mr. E. V. Goings Chairman & Chief Executive Officer Tupperware Corporation 14901 South Orange Blossom Trail Orlando, Florida 32837 Dear Mr. Goings: This letter agreement is to memorialize an arrangement between you and Tupperware Corporation (the "Corporation") in which the Corporation agrees to advance funds to you to enable your purchase of 400,000 shares of the common stock (the "Stock") of the Corporation. The intent of this transaction is to serve as an incentive for your retention as Chairman and Chief Executive Officer of the Corporation and to increase the operating results of the Corporation, as well as increasing an identity of your interests with those of the Corporation's shareholders. In connection with this transaction, you will execute and deliver the promissory note and the stock pledge agreement in the form of Exhibits A and B, respectively, attached hereto and forming a part of this agreement. The Corporation shall pay the cost of any brokerage fees incurred in acquiring the stock. The amount of the loan set forth in Exhibit A shall be $7,650,000. The Corporation shall provide you with a gross-up at your marginal Federal income tax rate for (a) imputed income from the actual cost of acquiring the stock which exceeds $7,650,000, (b) imputed income from the brokerage fees for the acquisition of the Stock, and (c) deemed interested on the amount of the loan, if required to offset any taxable income to you. In the event of a Change of Control of the Corporation or any successor entity to the Corporation, as defined in the Change of Control Employment Agreement between you and the Corporation dated May 31, 1996, or any successor agreement, the Corporation shall provide a gross-up to you for any excise tax imposed by Section 4999 of the Internal Revenue Code, or any successor provisions. All other terms and conditions will be as set forth in the aforementioned promissory note and stock pledge agreement. Mr. E. V. Goings November 30, 1998 Page Two If the foregoing accurately sets forth the terms and conditions of the transaction, and intentions of the Board of Directors of the Corporation with respect thereto, please indicate your acceptance by signing in the space provided below for the purpose and returning a fully executed letter agreement to me. TUPPERWARE CORPORATION By:________________________ Carol A. Kiryluk Senior Vice President Human Resources Accepted and Agreed To This 30th day of November, 1998. By:________________________ E. V. Goings EX-13 4 SELECTED PAGES FROM ANNUAL REPORT TO SHAREHOLDERS Selected Financial Data
1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- (Dollars in millions, except per share amounts) Operating results Net sales: Europe $ 518.7 $ 546.6 $ 581.7 $ 595.1 $ 540.1 Asia Pacific 211.5 279.0 338.0 355.1 329.3 Latin America 186.8 247.2 268.5 200.6 176.4 United States 165.8 156.5 181.1 208.6 228.8 -------- ------- -------- -------- -------- Total net sales $1,082.8 $1,229.3 $1,369.3 $1,359.4 $1,274.6 ======== ======== ======== ======== ======== Operating profit (loss): Europe $ 123.9 $ 144.6 $ 153.0 156.8 125.0 Asia Pacific 20.2 37.2 61.0 59.4 46.3 Latin America (16.4) (5.7) 43.3 19.4 15.7 United States 4.0 (29.5) 10.4 10.3 16.0 -------- -------- -------- -------- -------- Total operating profit 131.7 146.6 267.7 245.9 203.0 -------- -------- -------- -------- -------- Unallocated expenses (17.5) (18.0) (16.1) (22.9) (12.0) Costs associated with becoming an independent company -- -- (9.1) -- -- Interest (expense) Income (22.7) (17.8) (8.0) 1.9 0.2 -------- -------- -------- -------- -------- Income before income taxes and cumulative effect of accounting changes 91.5 110.8 234.5 224.9 191.2 Provision for income taxes 22.4 28.8 59.8 53.5 42.0 -------- -------- -------- -------- -------- Income before cumulative effect of accounting changes $ 69.1 $ 82.0 $ 174.7 $ 171.4 $ 149.2 ======== ======== ======= ======== ======== Net income (pre-1997 pro forma) $ 69.1 $ 82.0 $ 170.4 $ 161.1 ======== ======== ======= ======== Earnings per common share (pre-1997 pro forma):, Basic $ 1.19 $ 1.34 $ 2.75 $ 2.60 ======== ======== ======= ======== Diluted $ 1.18 $ 1.32 $ 2.71 $ 2.57 ======== ======== ======= ======== Selected Financial Data 1993 1992 -------- -------- (Dollars in millions) Operating results Net sales: Europe $ 505.1 $ 490.7 Asia Pacific 286.9 268.3 Latin America 154.4 138.7 United States 225.4 207.1 -------- -------- Total net sales $1,171.8 $1,104.8 ======== ======== Operating profit (loss): Europe 110.3 $ 92.4 Asia Pacific 40.3 32.9 Latin America 15.7 5.9 United States 12.5 (139.6) -------- -------- Total operating profit (loss) 178.8 (8.4) -------- -------- Unallocated expenses (17.8) (24.1) Costs associated with becoming an independent company -- -- Interest (expense) income, net (12.6) (9.3) -------- -------- Income (loss) before income taxes and cumulative effect of accounting changes 148.4 (41.8) Provision for income taxes 30.5 1.9 -------- -------- Income (loss) before cumulative effect of accounting changes $ 117.9 $ (43.7) ======== ======== Includes a $42.4 million fourth quarter pretax charge ($31.3 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. Includes a $136.7 million pretax charge ($111.4 million after tax) primarily related to consolidation of manufacturing capacity and restructuring the U.S. distribution system. Pro forma net income is based on historical net income adjusted for pro forma interest expense related to the increase in borrowings incurred in connection with the distribution of the Company's equity to Premark International, Inc.'s. shareholders in May 1996. See also Note 1 to the consolidated financial statements. Information is not applicable prior to 1995. For all periods prior to the Distribution, the number of shares used was the 62.0 million (basic) and 62.8 million (diluted) shares as of the date of the Distribution.
Selected Financial Data
1998 1997 1996 1995 1994 ------ ------ ------ ------ ------ (Dollars in millions, except per share amounts) Profitability ratios Operating profit as a percent of sales: Europe 23.9% 26.5% 26.3% 26.3% 23.1% Asia Pacific 9.5 13.3 18.0 16.7 14.1 Latin America nm nm 16.1 9.7 8.9 United States 2.4 nm 5.7 4.9 7.0 Total operating profit 12.2 11.9 19.5 18.1 15.9 Return on average equity 47.5 30.5 65.0 Return on average invested capital, 17.6 17.1 32.6 Financial Condition Working capital $ 95.5 $103.3 $156.2 $88.1 $72.9 Property, plant, and equipment, net 271.0 293.0 331.0 317.7 310.2 Total assets 823.4 847.2 978.5 944.0 882.6 Short-term borrowings and current portion of long-term debt 18.7 - 25.3 83.8 58.3 Long-term debt 300.1 236.7 215.3 0.4 0.5 Shareholders' equity 135.8 214.2 305.5 415.6 395.1 Current ratio 1.33 1.34 1.43 1.20 1.18 Long-term debt- to-equity 221.0% 110.5% 70.5% Total debt- to-capital 70.1% 52.5% 44.1% Other Data Net cash provided by operating activities $118.1 $161.8 $150.5 $179.2 $142.7 Capital expenditures 46.2 67.5 96.0 69.3 72.9 Depreciation 64.0 66.1 65.3 61.3 55.7 Common Stock Data Dividends declared per share $ 0.88 $0.88 $0.44 Dividend payout ratio 74.6% 66.7% 32.5% Average common shares outstanding (thousands): Basic 58,235 61,334 62,016 Diluted 58,736 61,827 62,806 Year-end book value per share $ 2.36 $ 3.51 $ 4.90 Year-end price/ earnings ratio 13.6 20.7 20.1 Year-end market/ book ratio 6.8 7.8 11.1 Year-end shareholders (thousands) 15.6 20.5 21.6 Selected Financial Data 1993 1992 ------ ------ (Dollars in millions, except per share amounts) Profitability ratios Operating profit as a percent of sales: Europe 21.8% 18.8% Asia Pacific 14.1 12.3 Latin America 10.2 4.3 United States 5.6 nm Total operating Profit 15.3 nm Return on average equity, Return on average invested capital, Financial Condition Working capital $(49.6) $(11.3) Property, plant, and equipment, net 277.2 250.8 Total assets 785.1 661.1 Short-term borrowings and current portion of long-term debt 139.9 19.3 Long-term debt 45.6 153.3 Shareholders' equity 163.3 68.2 Current ratio 0.90 0.97 Long-term debt- to-equity Total debt- to-capital Other Data Net cash provided by operating activities $150.3 $152.0 Capital expenditures 85.6 80.0 Depreciation 44.7 50.1 Common Stock Data Dividends declared per share Dividend payout ratio Average common shares outstanding (thousands): Basic Diluted Year-end book value per share Year-end price/ earnings ratio Year-end market/ book ratio Year-end shareholders (thousands) Due to the change in the Company's capital structure in connection with the Distribution, this information is not applicable or not meaningful for the omitted periods. Returns on average equity and invested capital are calculated using net income or pro forma net income and the monthly balances of equity and invested capital beginning at the date of the Distribution. Invested capital equals equity plus debt. Includes $105.0 million of the $150.0 million of 8.375 percent notes that were called at par on February 1, 1994. The Company initiated regular quarterly dividends of $0.22 per share beginning in the third quarter of 1996. The dividend payout ratio is dividends declared per share divided by diluted earnings per share. 1996 assumes four quarterly dividend declarations. nm - Not meaningful.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion of the results of operations for 1998 compared with 1997, and of 1997 compared with 1996, and changes in financial condition during 1998. This information should be read in conjunction with the consolidated financial information provided on pages 28 to 46 of this Annual Report. The Distribution On May 31, 1996, Tupperware Corporation (Tupperware, the Company) became an independent company through the distribution by Premark International, Inc. (Premark) to its shareholders of the equity of the Company (the Distribution). The Distribution was effected through a 1-for-1 distribution of stock, which was tax free to Premark's shareholders pursuant to a ruling received from the Internal Revenue Service. Results of Operations Net Sales and Net Income 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. In 1997, sales decreased 10 percent to $1.2 billion compared with 1996 sales of $1.4 billion, reflecting a modest increase from operations in Europe and decreases in the other areas of the world. Foreign exchange had a $105.2 million, or 7 percentage point, negative impact on the 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 fourth quarter 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. If year-end 1998 exchange rates were to be in effect throughout 1999, then the 1999 foreign exchange impact on the comparison with 1998 will be favorable. Net income decreased 52 percent to $82.0 million in 1997 from pro forma 1996 net income of $170.4 million, including the impact of the 1997 charge. Excluding the impact of the charge, net income decreased 34 percent to $113.3 million. Europe had a strong improvement in operating profit before the impact of foreign exchange, but the other three areas had significantly lower results and foreign exchange had a negative impact of $20.9 million, or 7 percentage points, on the comparison. Unallocated corporate expenses decreased to $17.5 million in 1998 from $18.0 million, which included $4.2 million of the 1997 charge. This provision 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. Unallocated corporate expenses increased $1.9 million in 1997 compared with 1996, primarily reflecting the amount recorded as part of the 1997 charge, which was offset by lower provisions for annual executive incentive payments. Additionally, during 1996, the Company incurred $9.1 million of pretax costs associated with becoming an independent company. In 1998 and 1997, respectively, 85 percent and 87 percent of sales, and 97 percent and 100 percent of the Company's operating profit were generated by international operations. Costs and Expenses The cost of products sold in relation to sales was 37.5 percent, 38.6 percent, and 35.6 percent in 1998, 1997, and 1996, respectively. 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. The higher ratio in 1997 compared with 1996 reflects lower manufacturing capacity utilization, along with the inventory obsolescence provision recorded in the United States in the fourth quarter. Delivery, sales, and administrative expense as a percentage of sales was 51.9 percent, 50.5 percent, and 45.8 percent in 1998, 1997, and 1996, respectively. Expenses in 1998 and 1997 decreased, but not to as great an extent as sales. The ratio rose in 1997 compared with 1996 in large part due to the bad debt provision recorded in Brazil in the fourth quarter. Tax Rate The effective tax rate for 1998, 1997, and 1996, was 24.5 percent, 26.0 percent, and 25.5 percent, respectively. The 1998 rate decreased from the 1997 rate as the benefit of a much lower foreign effective rate was only partially offset by the absence of a reduction in a valuation allowance against federal deferred tax assets. The 1997 rate did not change significantly from the 1996 rate as the impact of a higher foreign effective tax rate and the absence of the 1996 benefit of a capital loss carryforward was largely offset by the impact of lower pretax income and the generation of a higher level of foreign tax credits. Net Interest The Company had $22.7 million of net interest expense in 1998, compared with $17.8 million in 1997, and $8.0 million in 1996. 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. Until immediately before the Distribution, the Company was capitalized primarily through Premark's net investment. No interest was charged to the Company for this funding, which was the reason for the significantly lower net interest expense in 1996. Regional Results 1998 vs. 1997
Increase Negative Percent (decrease) Restated foreign of total --------------- increase exchange ---------- 1998 1997 Dollar Percent (decrease) impact 1998 1997 ------- ------- ------- ------- ---------- -------- ---- ---- (Dollars in millions) 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 - 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) (10.7) - - (0.2) nm nm United States 4.0 (29.5) 33.5 nm nm - 3 nm -------- -------- ------- ------- --- --- $ 131.7 $ 146.6 $ (14.9) (10)% (2)% $ (12.3) nm nm ======== ======== ======= ======= === === 1998 actual compared with 1997 translated at 1998 exchange rates. 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.
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. The German market is the Company's largest with sales of $241.2 million in 1998 and $260.8 million in 1997. Foreign exchange had a $3.3 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 a slightly lower gross margin percentage and slightly higher operating expenses, although 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. 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 do 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. This action was taken to strengthen the remaining distributors to provide a base for future growth. Progress has been made in Brazil with programs to better train the sales force in the fundamentals of the group demonstration, but this process is taking longer in Argentina than had been expected. 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 over the past three years, as of the beginning of 1999, Mexico will no longer be 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 is continuing to address the gap in the size of the sales force, which began to narrow in the second half of the year, with new initiatives in sales force compensation and by updating the demonstration. 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. Regional Results 1997 vs. 1996
Negative Percent of Decrease Restated foreign total --------------- increase exchange ---------- 1997 1996 Dollar Percent (decrease) impact 1997 1996 ------- -------- ------- ------- ---------- -------- ---- ---- (Dollars in millions) Sales Europe $ 546.6 $ 581.7 $ (35.1) (6)% 7% $ (68.8) 44% 42% Asia Pacific 279.0 338.0 (59.0) (18) (8) (35.6) 23 25 Latin America 247.2 268.5 (21.3) (8) (8) (0.8) 20 20 United States 156.5 181.1 (24.6) (14) (14) - 13 13 ------- -------- ------- ------- --- --- $1,229.3 $1,369.3 $(140.0) (10)% (3)% $(105.2) 100% 100% ======== ======== ======= ======= === === Operating Profit (Loss) Europe $ 144.6 $ 153.0 $ (8.4) (6)% 8% $ (19.3) 99% 57% Asia Pacific 37.2 61.0 (23.8) (39) (28) (9.2) 25 23 Latin America (5.7) 43.3 (49.0) nm nm (0.2) nm 16 United States (29.5) 10.4 (39.9) nm nm - nm 4 -------- -------- ------- ------ --- --- $ 146.6 $ 267.7 $(121.1) (45)% (39)% $(28.7) nm 100% ======== ======== ======= ====== === === 1997 actual compared with 1996 translated at 1997 exchange rates. 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.
Europe The 1997 sales improvement before the impact of foreign exchange was attributable to higher volume in Germany and Italy, along with the sale of a better mix of product in South Africa. Partially offsetting these factors were decreases in the United Kingdom and France due to lower volume. In Germany, higher volume resulted from successful recruiting programs that led to a larger sales force, as 1997 sales rose to $260.8 million compared with 1996 sales of $239.9 million translated at 1997 exchange rates. For 1996, reported German sales were $275.4 million. Italy's sales force also increased due to better recruiting results. In the United Kingdom, the reduced volume reflected the inability to recruit a dynamic sales organization, while the shortfall in France resulted from the difficult consumer market and recruiting environment given the country's social welfare system, which can encourage people to stay out of the work force. The 1997 operating profit increase before the impact of foreign exchange reflected the net improvement in sales volume along with more efficient promotional spending, which were partially offset by other higher operating expenses throughout the area. The negative impact of foreign exchange on both sales and operating profit related to currencies throughout the region. Asia Pacific Excluding the negative impact of foreign exchange, which was due to the dollar's strength against currencies throughout the region, sales decreased primarily due to lower volume in Japan and the Philippines. In both countries, the number of demonstrations fell, reflecting smaller sales forces. Operating profit fell more significantly due to higher per unit manufacturing costs, in addition to the lower sales volume, which was only partially offset by a volume-related decline in promotional spending. Latin America The 1997 results reflected significant sales decreases due to lower volume in Brazil and Argentina, which were partially offset by higher volume in Mexico. The decreases in Brazil and Argentina were due to significantly lower sales force productivity and activity levels, which reflected the need for additional training of distributors and the sales forces in direct selling fundamentals and by refocusing on group demonstration versus one-on-one selling. In Mexico, the number of sellers increased substantially. The operating profit decrease resulted from the impact of the net sales decline, along with $22.2 million of the fourth quarter charge, which was primarily for bad debt reserves in Brazil. The higher reserve position became necessary in the fourth quarter due to sales and past due receivables levels and due to a decision to significantly reduce the number of distributors. This action was taken after promotional programs and programs to refocus on party plan direct selling fundamentals were not as effective as expected, and as a result of the negative general economic conditions in the Brazilian market. United States The 1997 U.S. sales decline resulted from implementation of higher sales force standards in the latter half of 1996. The new standards led to a smaller active sales force compared with 1996, although fourth quarter sales exceeded those of 1996 as a result of an improvement in sales force productivity. New programs, including a two-tiered vehicle program, were implemented to increase recruiting and activity. Excluding the $16.0 million of the fourth quarter charge that relates to the United States, the operating loss was $13.5 million, or $23.9 million worse than 1996, reflecting the lower sales volume and higher per unit manufacturing costs due to lower production volume. These factors were only partially offset by a reduction in operating expenses that reflected the effort to improve profitability. The fourth quarter charge was primarily for inventory obsolescence, due to a decision to undertake a rationalization of the product line after exhausting opportunities to reduce inventories through normal channels. Also having an impact was a decision to change the focus of the demonstration more toward education rather than selling product at a discount. Financial Condition Liquidity and Capital Resources Working capital decreased to $95.5 million as of December 26, 1998, compared with $103.3 million as of December 27, 1997, and $156.2 million as of December 28, 1996. The current ratio was 1.3 to 1 at the end of 1998 and 1997, and 1.4 to 1 at the end of 1996. In 1998, working capital decreased from a lower level of net inventories 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 1997 decrease in working capital resulted primarily from a lower level of inventories reflecting the Company's reduction initiative. Other significant factors contributing to the decrease were a lower cash balance resulting from efforts to reduce overseas deposits, and a reduction in accounts receivable reflecting lower sales and higher reserves for doubtful accounts. Partially offsetting these factors were lower accounts payable and accrual balances, due to lower levels of production, employee incentives earned, and promotional awards earned by the sales forces. Also, the classification of only a portion of current borrowings as long-term in 1996 versus the classification of all such borrowings as long-term in 1997, offset a portion of the 1997 decrease in working capital. In addition, working capital decreased from the impact of a stronger U.S. dollar versus foreign currencies at the end of 1997 compared with the end of 1996. The Company had significant allowances for uncollectible trade accounts receivable at the end of both 1998 and 1997. These amounts were determined based on the Company's best estimate of the amounts that will ultimately be collected based on available information that includes historical collection patterns and the profitability of distributors. The net decrease in the allowances in 1998 compared with 1997 reflects the write-off of certain accounts for which it was determined that no further collection efforts were warranted. The Company has a $300 million unsecured multicurrency credit facility that matures on August 8, 2002. The total debt-to-capital ratio at the end of 1998 was 70.1 percent compared with 52.5 percent at the end of 1997. As of December 26, 1998, the Company had $220.0 million available under the multicurrency credit facility. The multicurrency credit facility, along with $216.9 million of 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. 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. Operating Activities Cash provided by operating activities was $118.1 million in 1998, compared with $161.8 million in 1997, and $150.5 million in 1996. 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. In 1997, the benefit of improved working capital management was only partially offset by the decrease in net income. Investing Activities For 1998, 1997, and 1996, respectively, capital expenditures totaled $46.2 million, $67.5 million, and $96.0 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. The higher 1996 expenditures, compared with 1997, primarily related to the increase of manufacturing capacity in Latin America and higher spending on molds. Capital expenditures are expected to be between $50 million and $60 million in 1999. In 1998, the Company sold its Halls, Tennessee distribution center for $10.6 million in notes receivable. The notes are due in 1999 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 Quarterly dividends were initiated in August 1996 at $0.22 per share. During 1998, 1997, and 1996, the Company declared dividends of $0.88, $0.88, and $0.44 per share of common stock. Share Repurchases In November 1996, the Company announced it would repurchase up to 5 million shares of its common stock, with volume and timing to depend on market conditions. In 1998 and 1997, respectively, the Company repurchased 3.5 million and 1.5 million shares in the open market, completing the program, for a total cost of $150.2 million, or an average of $30 per share. New Accounting Standards In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation of the hedge exposure. Depending on how the hedge is used and the designation, the gain or loss due to changes in the fair value is reported either in earnings or in other comprehensive income. Adoption of the statement, which is required for the Company's year 2000 financial statements, will have no significant impact on the accounting treatment related to the hedging programs the Company has undertaken. The American Institute of Certified Public Accountants adopted Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" in March 1998. The SOP provides that software development costs, including external direct costs, internal payroll and related costs, and interest costs be capitalized and amortized over their useful lives. The financial statement impact of adopting the SOP was not material. In June 1997, the FASB adopted two standards, SFAS Nos. 130 and 131, "Reporting Comprehensive Income" and "Disclosures about Segments of an Enterprise and Related Information," respectively. Both of these new standards relate to the display of financial information rather than impacting the computation of net income or earnings per share, and both are effective for the Company beginning in 1998. SFAS 130 requires that companies display "comprehensive income," which in addition to the current definition of net income includes certain amounts recorded directly in equity. For the Company the only such item is foreign currency translation adjustments. The new standard has been adopted by adding a column, which shows comprehensive income, to the statement of changes in shareholders' equity. SFAS 131 mandates the management approach to identifying business segments. Under the management approach, segments are defined as the organizational units that have been established for internal performance evaluation purposes. In adopting this standard, the Company has defined the four regions in which it operates to be its business segments. Since this information was already displayed as geographic information in the Company's prior years' financial statements, and the information included in management's discussion and analysis of results of operations was also organized in this manner, adoption of this standard did not have a significant impact on the Company's financial statements. Year 2000 Issues The Company has studied the "Year 2000" issues affecting its information technology and non-information technology systems and has prepared and implemented a plan to address them. The issues are not expected to have a material adverse effect on the Company's operations. Although it believes that its remediation plan has addressed all of its Year 2000 issues, the Company has developed a contingency plan for business critical systems in the event that it has not remediated all issues. The Company estimates that the cost of addressing its Year 2000 issues was $5.3 million. These costs 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. The Company has initiated formal communications with significant suppliers and other third party companies doing business with the Company to determine the extent to which the Company's systems and operations are vulnerable to those third parties' failure to remediate their Year 2000 issues. Based on the information received from these third parties, the Company is not aware of any Year 2000 issues of third parties expected to have a material adverse effect on its operations; however, there can be no guarantee that the systems of these other companies will be converted before the turn of the century or that their failure to do so would not have a material adverse effect on the Company. Due to the Company's extensive foreign operations, it is exposed to Year 2000 issues related to the infrastructures of the countries where these operations are located; however, the Company is not aware of any specific issues that have not been addressed through implementation of its plan. 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. The Company has studied the euro implementation issues affecting its operations and has formed a task force to address them from both a business and systems point of view. Plans have been implemented to deal with both types of issues. 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 and is not expected to be material. Impact of Inflation Inflation as measured by consumer price indices 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. Following is a listing of the Company outstanding derivative financial instruments as of December 26, 1998, and December 27, 1997:
Forward Contracts 1998 1997 ---------------------- ------------------------- Weighted Weighted average average contract contract rate of rate of (Dollars in millions) Buy Sell exchange Buy Sell exchange ------ ------ --------- ------ ------ --------- Belgian francs with U.S. dollars $ 82.0 33.8132 $ 31.6 36.5482 French francs with U.S. dollars 36.0 5.4611 31.9 5.9278 Swiss francs with U.S. dollars 20.8 1.3254 10.9 1.4343 Portuguese escudos with U.S. dollars 17.9 167.9783 7.6 180.6614 Philippine pesos with U.S. dollars 12.7 39.4400 8.1 40.2700 Austrian shillings with U.S. dollars 8.7 11.6527 7.2 12.4690 Italian lira with U.S. dollars 7.2 1,635.250 7.5 1,741.340 Netherlands guilders with U.S. dollars 6.6 1.8462 5.7 1.9948 Australian dollars with U.S. dollars 6.1 1.6054 British pounds with U.S. dollars 13.5 0.6044 Belgian francs for U.S. dollars $ 29.8 36.0269 $ 41.0 35.1055 German marks for U.S. dollars 19.1 1.6565 Swiss francs for U.S. dollars 18.4 1.3620 7.2 1.3849 French francs for U.S. dollars 16.3 5.9456 19.2 5.7896 Spanish pesetas for U.S. dollars 13.7 140.3850 10.9 150.0700 Japanese yen for U.S. dollars 10.1 116.6352 Portuguese escudos for U.S. dollars 7.5 181.2634 8.9 175.4878 Hong Kong dollars for U.S. dollars 5.5 7.7551 Argentine pesos for U.S. dollars 20.6 1.0090 Other currencies 7.2 9.5 various 14.3 7.5 various ------ ------ ------ ------ Total $205.2 $129.9 $138.3 $115.3 ====== ====== ====== ======
Cross-Currency Interest Rate Swaps (Dollars in millions) 1998 ----------------------------- Weighted average Amount at contract rate of Currency owed inception exchange - ------------- --------- ---------------- Belgian francs $ 44.2 33.9250 French francs 27.2 5.5075 Japanese yen 14.2 141.3300 Portuguese escudos 11.9 168.3600 Swiss francs 11.1 1.3539 Netherlands guilders 5.4 1.8550 ------ Total $114.0 ====== The Company had no cross-currency interest rate swaps at the end of 1997.
The Company's derivative financial instruments at December 26, 1998, and December 27, 1997, consisted solely of the financial instruments summarized above. All of the contracts mature within 12 months with the exception of the Japanese yen cross- currency interest rate swap, which matures in July, 2000. 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 28, 1998, include 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. The Company began instead to hedge these net investment positions with the cross-currency interest rate swaps shown above, and as a consequence it entered into offsetting forward contracts to buy an equivalent amount of local currencies. All other forward contracts are hedging cross-currency intercompany loans that are not permanent in nature or firm purchase commitments. As of the end of fiscal 1998, under the cross- currency interest rate swaps, the Company was to receive interest at a weighted average rate of 5.0 percent and was obligated to pay interest at a weighted average rate of 3.0 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. TUPPERWARE CORPORATION CONSOLIDATED STATEMENT OF INCOME
Year Ended ------------------------------------ Dec. 26, Dec. 27, Dec. 28, 1998 1997 1996 --------- -------- -------- (In millions, except per share amounts) Net sales $1,082.8 $1,229.3 $1,369.3 -------- -------- -------- Costs and expenses: Cost of products sold 406.3 473.9 487.3 Delivery, sales, and administrative expense 562.3 620.7 627.2 Interest expense 24.8 24.1 13.2 Interest income (2.1) (6.3) (5.2) Costs associated with becoming an independent company -- -- 9.1 Other expense, net -- 6.1 3.2 -------- -------- -------- Total costs and expenses 991.3 1,118.5 1,134.8 -------- -------- -------- Income before income taxes 91.5 110.8 234.5 Provision for income taxes 22.4 28.8 59.8 -------- -------- -------- Net income $ 69.1 $ 82.0 $ 174.7 ======== ======== ======== Net income per common share (1996 pro forma and unaudited): Basic $ 1.19 $ 1.34 $ 2.75 ======== ======== ======== Diluted $ 1.18 $ 1.32 $ 2.71 ======== ======== ======== See Notes to the Consolidated Financial Statements.
TUPPERWARE CORPORATION CONSOLIDATED BALANCE SHEET
Dec. 26, Dec. 27, 1998 1997 -------- -------- (Dollars in millions, except per share amounts) Assets Cash and cash equivalents $ 23.0 $ 22.1 Accounts receivable, less allowances of $32.7 in 1998 and $40.4 in 1997 92.3 97.0 Inventories 157.1 184.2 Deferred income tax benefits 55.5 44.4 Prepaid expenses and other 57.7 55.4 ------- ------ Total current assets 385.6 403.1 ------- ------ Deferred income tax benefits 84.7 82.7 Property, plant, and equipment, net 271.0 293.0 Long-term receivables, net of allowances of $41.4 in 1998 and $39.3 in 1997 40.3 36.4 Other assets 41.8 32.0 ------- ------- Total assets $ 823.4 $ 847.2 ======= ======= Liabilities and shareholders' equity Accounts payable $ 85.3 $ 75.4 Short-term borrowings and current portion of long-term debt 18.7 -- Accrued liabilities 186.1 224.4 ------- ------- Total current liabilities 290.1 299.8 ------- ------- Long-term debt 300.1 236.7 Accrued post-retirement benefit cost 38.4 38.0 Other liabilities 59.0 58.5 Shareholders' equity: Preferred stock, $0.01 par value, 200,000,000 shares authorized; none issued -- -- Common stock, $0.01 par value, 600,000,000 shares authorized; 62,367,289 shares issued 0.6 0.6 Capital surplus 19.5 19.5 Subscription receivable (7.7) -- Retained earnings 457.2 441.4 Treasury stock, 4,753,287 and 1,400,207 shares at cost in 1998, and 1997, respectively (142.0) (54.0) Unearned portion of restricted stock issued for future service (1.4) (2.4) Accumulated other comprehensive income (190.4) (190.9) ------- ------- Total shareholders' equity 135.8 214.2 ------- ------- Total liabilities and shareholders' equity $ 823.4 $ 847.2 ======= ======= See Notes to the Consolidated Financial Statements.
TUPPERWARE CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Accumulated Net other Investment compre- Compre- Common stock Treasury stock by Capital Retained hensive hensive Shares Dollars Shares Dollars Premark surplus earnings income income ------ ------- ------ ------- ------- ------- -------- -------- ------- (In millions, except per share amounts) December 30, 1995 -- -- -- -- $ 533.5 -- -- $(117.9) Net income 31.6 $ 143.1 $174.7 Other compre- hensive income-foreign currency translation adjustments, net of tax provision of $2.3 million (10.6) (10.6) ------ Comprehensive Income $164.1 ====== Shares issued to Premark 62.1 $ 0.6 (0.6) Net transactions with Premark other than special dividend 31.7 Special dividend to Premark (293.7) $ 8.8 Distribution of equity of the Company to Premark's Shareholders (302.5) 302.5 Cash dividends declared ($0.44 per share) (27.4) Stock issued for incentive plans and related tax benefits 0.3 -- 10.3 ---- ---- ---- ---- ------- ----- ------ ------ ----- December 28, 1996 62.4 0.6 -- -- -- 19.1 418.2 (128.5) Net income 82.0 $ 82.0 Other comprehensive income-foreign currency transla- tion 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) ==== ==== ==== ======= ======= ====== ====== ======= Represents foreign currency translation adjustments. See Notes to the Consolidated Financial Statements.
TUPPERWARE CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended --------------------------------------- Dec. 26, Dec. 27, Dec. 28, 1998 1997 1996 -------- -------- ---------- (In millions) Cash flows from operating activities: Net income $ 69.1 $ 82.0 $ 174.7 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 64.0 66.1 65.3 Loss on sale of assets 3.4 2.7 5.2 Foreign exchange (gain) loss, net (0.6) 1.2 1.3 Changes in assets and liabilities: Decrease (increase) in accounts and notes receivable 2.2 15.5 (14.1) Decrease (increase) in inventories 29.8 44.7 (54.0) (Decrease) increase in accounts payable and accrued liabilities (1.8) (13.6) 2.0 (Decrease) increase in income taxes payable (27.9) 5.1 0.6 Increase in net deferred income taxes (15.1) (33.2) (16.3) Other, net (5.0) (8.7) (14.2) ------ ------- ------- Net cash provided by operating activities 118.1 161.8 150.5 ------ ------- ------- Cash flows from investing activities: Capital expenditures (46.2) (67.5) (96.0) ------ ------- ------- Cash flows from financing activities: Special dividend to Premark -- -- (284.9) Net transactions with Premark other than special dividend -- -- 37.6 Dividend payments to shareholders (51.6) (54.2) (13.7) Payments to acquire treasury stock (93.1) (57.1) -- Proceeds from exercise of stock options 1.4 3.4 6.3 Issuance of subscription receivable (7.7) -- -- Net increase (decrease) in short-term debt 80.9 (14.8) (54.1) Proceeds from issuance of long-term debt -- 15.0 315.5 Repayment of long-term debt -- -- (100.6) ------ ------- ------- Net cash used in financing activities (70.1) (107.7) (93.9) ------ ------- ------- Effect of exchange rate changes on cash and cash equivalents (0.9) (17.5) (4.9) ------ ------ ------- Net increase (decrease) in cash and cash equivalents 0.9 (30.9) (44.3) Cash and cash equivalents at beginning of year 22.1 53.0 97.3 ------ ------ ------- Cash and cash equivalents at end of year $ 23.0 $ 22.1 $ 53.0 ====== ====== ======= See Notes to the Consolidated Financial Statements.
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 (the Company or Tupperware). 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 26, 1998, and December 27, 1997, $6.8 million and $13.5 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 16 percent and 15 percent of total inventories, at December 26, 1998, and December 27, 1997, 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 $13.7 million higher at the end of 1998 and $16.0 million higher at the end of 1997. Internal Use Software Development Costs As of the beginning of 1998, the Company adopted American Institute of Certified Public Accountants Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." In accordance with the provisions of the SOP, the Company capitalizes internal use software development costs as they are incurred and then amortizes such costs over their three-year useful lives beginning when the software is placed in service. The impact of adopting the SOP was not material to the Company's financial statements. 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. 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. 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 $7.2 million, $6.2 million, and $7.3 million in 1998, 1997, and 1996, respectively. Research and development costs totaled $11.5 million, $12.8 million, and $7.2 million, in 1998, 1997, and 1996, 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. 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. The results of the Company's domestic operations were included in Premark International, Inc.'s (Premark) consolidated U.S. federal tax return through May 31, 1996, the date of the Distribution. The provision for income taxes included in these financial statements for the period prior to the Distribution is the Company's allocated share of Premark's domestic income tax expense, representing the expense that the Company would have incurred on a separate return basis, and the actual income tax provisions of its foreign subsidiaries. As part of the plan of Distribution, Tupperware and Premark entered into a tax-sharing agreement. This agreement generally provides that for periods prior to the Distribution, the two companies will retain the liability for any unpaid taxes attributable to their respective operations. Net Income Per Common Share These financial statements include "basic" and "diluted" per share information for all periods presented. Basic per share information is calculated by dividing net income by the weighted average number of shares outstanding. Diluted per share information is calculated by also 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 58.2 million, 61.3 million, and 62.0 million, in 1998, 1997, and 1996, respectively. The only difference in the computation of basic and diluted earnings per share is the inclusion of 0.5 million in 1998 and 0.5 million in 1997 and 0.8 million in 1996, of shares of potential common stock. The Company's potential common stock consists of employee and director stock options and restricted stock. Pro forma unaudited net income per common share is calculated for the period prior to the Distribution as if the Distribution had occurred at the beginning of fiscal 1995. The pro forma amounts assume that the Company used $25.0 million of available cash and $271.9 million of additional borrowings to fund a special dividend payment to Premark of $284.9 million, and $12.0 million for the amount that the Company paid in July 1996 related to the quarterly dividend declared on Premark's common stock on May 1, 1996. Pro forma net income in 1996 is based on the Company's historical net income adjusted for $7.0 million of additional pro forma interest expense, net of $2.7 million of tax benefits, related to the increase in borrowings at an assumed weighted average interest rate of 6.2 percent. Pro forma net income per share includes pro forma net income divided by an assumed average common shares of 62.0 million for basic and 62.8 million for diluted, for the period prior to the Distribution and actual net income per share for the period subsequent to the Distribution. Comprehensive Income In 1998 the Company adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS 130 requires that companies display "comprehensive income," which in addition to net income includes all other changes in shareholders' equity except those resulting from investments by owners and distributions to them. For all years presented, the Company's comprehensive income, which encompasses net income and foreign currency translation adjustments, is displayed in the consolidated statement of shareholders' equity. 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, firm purchase commitments, and certain intercompany 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. 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 26, 1998, and December 27, 1997. The approximate fair value of the Company's $100 million of 7.25 percent notes due in 2006, determined through reference to market yields, was $104.3 million and $105.5 million as of December 26, 1998, and December 27, 1997, respectively. The fair value of the remaining long-term debt approximated its book value at the end of 1998 and 1997. 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. Note 2: Relationship and Transactions with Premark International, Inc. On May 31, 1996, Tupperware became an independent Company through the distribution by Premark to its shareholders of the equity of the Company (the Distribution). The Distribution was effected through a 1-for-1 distribution of stock, which was tax free to Premark's shareholders pursuant to a ruling received from the Internal Revenue Service. Under a Distribution Agreement with Premark dated May 24, 1996, Dart Industries Inc. (Dart), which is now a wholly- owned subsidiary of Tupperware, paid a $284.9 million special dividend (the Dividend Payment) to Premark. Dart funded the Dividend Payment with new bank borrowings and available cash. In addition, the Company paid Premark $12.0 million in July 1996 to fund a portion of the quarterly dividend on Premark's common stock declared in May 1996. Included in the consolidated statement of income is an allocation of general corporate expenses related to services provided for the Company by Premark in the amount of $4.4 million for 1996 through the date of the Distribution. This allocation was based on an estimate of the proportion of corporate expenses related to the Company for the period presented and, in the opinion of management, has been made on a reasonable basis and approximates the incremental costs that would have been incurred had the Company been operating on a stand-alone basis. Prior to the Distribution, there were no material intercompany purchase or sale transactions between Premark and the Company. Under Premark's centralized cash management system, short-term advances from Premark and excess cash sent to Premark were reflected as "Net transactions with Premark" during the period prior to the Distribution. No interest was charged or otherwise allocated by Premark to the Company. Note 3: Inventories (In millions) 1998 1997 ------- ------- Finished goods $ 74.5 $ 86.2 Work in process 31.7 43.3 Raw materials and supplies 50.9 54.7 ------ ------ Total inventories 157.1 $184.2 ====== ====== Note 4: Property, Plant, and Equipment (In millions) 1998 1997 ------- ------- Land $ 12.5 $ 11.8 Buildings and improvements 182.9 172.2 Machinery and equipment 773.6 738.2 Construction in progress 3.9 21.8 ------- ------- Total property, plant, and equipment 972.9 944.0 Less accumulated depreciation (701.9) (651.0) ------- ------- Property, plant, and equipment, net $ 271.0 $ 293.0 ======= ======= In 1998, the Company sold its Halls, Tennessee distribution center for $10.6 million in notes receivable. The notes are due in 1999 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 (In millions) 1998 1997 ------- ------- Compensation and employee benefits $ 51.3 $ 52.7 Advertising and promotion 31.1 36.5 Taxes other than income taxes 22.0 34.2 Income taxes 1.9 27.3 Other 79.8 73.7 ------- ------- Total accrued liabilities $ 186.1 $ 224.4 ======= ======= Note 6: Financing Arrangements Short-term Borrowings (Dollars in millions) 1998 1997 1996 -------- -------- -------- Total short-term borrowings at year-end $ 187.3 $105.0 $123.7 Weighted average interest rate at year-end 4.7% 6.4% 5.3% Average borrowings during the year $ 197.2 $166.2 $186.4 Weighted average interest rate for the year 5.7% 5.5% 5.0% Maximum borrowings during the year $ 240.8 $212.5 $316.6
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 26, 1998, $80.0 million was under the Company's $300 million multicurrency financing facility with a group of banks, and $22.2 million was through outstanding commercial paper. The remaining $85.1 million of short-term borrowings was from several banks, with $31.9 million payable in Swiss francs, $13.1 million in Japanese yen, $10.6 million in German marks, and $10.0 million in Belgian francs. As of December 26, 1998, $168.6 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 1999. Operating Leases Rental expense for operating leases totaled $36.7 million in 1998, $40.5 million in 1997, and $32.8 million in 1996. Approximate minimum rental commitments under noncancelable operating leases in effect at December 26, 1998, were: 1999 - -- $6.7 million; 2000 -- $6.7 million; 2001 -- $3.6 million; 2002 -- $2.1 million; 2003 -- $1.8 million; and after 2003 -- $0.7 million. Long-term Debt (In millions) 1998 1997 -------- -------- 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 classified as non-current 168.6 105.0 Other 1.5 1.7 ------ ------ Total long-term debt $300.1 $236.7 ====== ====== As of December 26, 1998, the Company had $436.9 million of unused lines of credit, including $220.0 million under the $300.0 million unsecured multicurrency facility that was entered into in May 1996 and amended in August 1997. This facility supports the Company's commercial paper borrowing capability and expires in August 2002. Interest paid on total debt in 1998, 1997 and 1996, was $26.2 million, $23.7 million, and $10.8 million, respectively. Derivative Financial Instruments The following is a listing of the Company's outstanding derivative financial instruments as of December 26, 1998, and December 27, 1997:
Forward Contracts 1998 1997 ---------------------- ------------------------- Weighted Weighted average average contract contract rate of rate of (Dollars in millions) Buy Sell exchange Buy Sell exchange ------ ------ --------- ------ ------ -------- Belgian francs with U.S. dollars $ 82.0 33.8132 $ 31.6 36.5482 French francs with U.S. dollars 36.0 5.4611 31.9 5.9278 Swiss francs with U.S. dollars 20.8 1.3254 10.9 1.4343 Portuguese escudos with U.S. dollars 17.9 167.9783 7.6 180.6614 Philippine pesos with U.S. dollars 12.7 39.4400 8.1 40.2700 Austrian shillings with U.S. dollars 8.7 11.6527 7.2 12.4690 Italian lira with U.S. dollars 7.2 1,635.250 7.5 1,741.340 Netherlands guilders with U.S. dollars 6.6 1.8462 5.7 1.9948 Australian dollars with U.S. dollars 6.1 1.6054 British pounds with U.S. dollars 13.5 0.6044 Belgian francs for U.S. dollars $ 29.8 36.0269 $ 41.0 35.1055 German marks for U.S. dollars 19.1 1.6565 Swiss francs for U.S. dollars 18.4 1.3620 7.2 1.3849 French francs for U.S. dollars 16.3 5.9456 19.2 5.7896 Spanish pesetas for U.S. dollars 13.7 140.3850 10.9 150.0700 Japanese yen for U.S. dollars 10.1 116.6352 Portuguese escudos for U.S. dollars 7.5 181.2634 8.9 175.4878 Hong Kong dollars for U.S. dollars 5.5 7.7551 Argentine pesos for U.S. dollars 20.6 1.0090 Other currencies 7.2 9.5 various 14.3 7.5 various ------ ------ ------ ------ Total $205.2 $129.9 $138.3 $115.3 ====== ====== ====== ======
Cross-Currency Interest Rate Swaps (Dollars in millions) 1998 ---------------------------- Weighted average Amount at contract rate of Currency owed inception exchange - ------------- --------- ---------------- Belgian francs $ 44.2 33.9250 French francs 27.2 5.5075 Japanese yen 14.2 141.3300 Portuguese escudos 11.9 168.3600 Swiss francs 11.1 1.3539 Netherlands guilders 5.4 1.8550 ------ Total $114.0 ====== The Company had no cross-currency interest rate swaps at the end of 1997.
The Company's derivative financial instruments at December 26, 1998, and December 27, 1997, consisted solely of the financial instruments summarized above. All of the contracts mature within 12 months with the exception of the Japanese yen cross-currency interest rate swap, which matures in July 2000. 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 28, 1998, include 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. The Company began instead to hedge these net investment positions with the cross-currency interest rate swaps shown above, and as a consequence it entered into offsetting forward contracts to buy an equivalent amount of local currencies. All other forward contracts are hedging cross-currency intercompany loans that are not permanent in nature or firm purchase commitments. As of the end of fiscal 1998, under the cross-currency interest rate swaps, the Company was to receive interest at a weighted average rate of 5.0 percent and to pay interest at a weighted average rate of 3.0 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, at December 26, 1998, the net accrued loss was $7.5 million, and at December 27, 1997, the net accrued gain was $1.6 million. 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 before taxes were as follows: (In millions) 1998 1997 1996 --------- -------- -------- Domestic $ 24.5 $ 59.9 $ 97.8 Foreign 67.0 50.9 136.7 ------ ------ ------ Total $ 91.5 $110.8 $234.5 ====== ====== ======
The provision for income taxes was as follows: (In millions) 1998 1997 1996 --------- -------- -------- Current: Federal $ (2.1) $ (1.3) $ 7.7 Foreign 43.9 55.1 63.3 State 1.4 2.8 3.4 ------ ------ ------ 43.2 56.6 74.4 ------ ------ ------ Deferred: Federal (10.3) (10.5) (6.8) Foreign (9.3) (16.1) (6.6) State (1.2) (1.2) (1.2) ------ ------ ------ (20.8) (27.8) (14.6) ------ ------ ------ Total $ 22.4 $ 28.8 $ 59.8 ====== ====== ======
The differences between the provision for income taxes and income taxes computed using the U.S. federal statutory rate were as follows: (In millions) 1998 1997 1996 --------- -------- -------- Amount computed using statutory rate $ 32.0 $ 38.8 $ 82.1 Increase (reduction) in taxes resulting from: Net benefit from repatriating foreign earnings (22.0) (22.7) (6.8) Foreign income taxes 11.1 21.3 -- Changes in valuation allowance for federal deferred tax assets -- (10.0) (9.9) Benefit of capital loss carryforward -- -- (10.0) Other 1.3 1.4 4.4 ------ ------- ------ $ 22.4 $ 28.8 $ 59.8 ====== ======= ======
In 1998, 1997, and 1996, the Company recognized $0.6 million, $0.3 million, and $3.1 million, respectively, of benefits for deductions associated with the exercise of employee stock options. These benefits were added directly to capital surplus, and are not reflected in the provision for income taxes. Deferred tax assets (liabilities) are composed of the following: (In millions) 1998 1997 ---------- ---------- Depreciation $ (8.9) $(16.8) Deferred costs (0.4) (2.2) Other (3.4) (9.3) ------ ------ Gross deferred tax liabilities (12.7) (28.3) ------ ------ Credit carry forwards 62.2 42.4 Fixed assets basis differences 20.5 24.6 Employee benefits accruals 18.0 19.8 Post-retirement benefits 16.4 15.7 Inventory reserves 16.3 17.8 Bad debt reserves 3.4 6.0 Computer leasing transactions 3.1 3.1 Other accruals 34.5 33.6 ------ ------ Gross deferred tax assets 174.4 163.0 ------ ------ Valuation allowances (23.9) (14.4) ------ ------ Net deferred tax assets $137.8 $120.3 ====== ======
At December 26, 1998, the Company had a domestic capital loss carry forward of $40.7 million and foreign net operating loss carry forwards of $86.7 million. The capital loss carry forward expires in 2001. Of the total net operating loss carry forwards, $59.8 million expire at various dates from 1999 to 2005, while the remainder have unlimited lives. During 1998, the Company recognized net benefits of $6.2 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 26, 1998 and December 27, 1997, the Company had valuation allowances against certain deferred tax assets totaling $23.9 million and $14.4 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 1998, 1997, and 1996, of $65.3 million, $50.5 million, and $76.5 million, respectively. For the period prior to the Distribution when the Company's domestic operations were included in Premark's U.S. tax returns, income tax payments were made only by foreign subsidiaries of the Company. 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. In 1998, the Company adopted SFAS No. 132, "Employers' Disclosures about Pensions and other Post-retirement Benefits." This Statement standardizes the disclosure for pensions and other post-retirement benefits. Prior years' information has been restated to conform with the requirements of the statement. (In millions) U.S. plans Foreign plans ----------------------------- ------------- Pension Post-retirement Pension benefits benefits benefits ------------- --------------- ------------- 1998 1997 1998 1997 1998 1997 ------ ------ ------ ------ ------ ------ Change in benefit obligations: Beginning balance $ 25.7 $ 24.4 $ 38.1 $ 38.4 $ 57.0 $ 64.4 Service cost 1.1 0.9 0.3 0.3 3.0 3.3 Interest cost 1.8 1.8 2.7 2.7 2.9 3.0 Actuarial loss (gain) 2.6 1.1 2.5 (1.3) - (3.9) Benefits paid (1.3) (2.5) (2.6) (2.0) (4.6) (1.9) Impact of exchange rates -- -- -- -- 5.8 (7.9) ------ ------ ------ ------ ------ ------ Ending balance 29.9 25.7 41.0 38.1 64.1 57.0 ------ ------ ------ ------ ------ ------ Change in plan assets at fair value: Beginning balance 23.1 21.7 -- -- 23.7 25.2 Actual return on plan assets 3.2 3.9 -- -- 1.2 1.2 Company contributions 0.3 -- 2.6 2.0 4.2 2.3 Plan participant contributions -- -- -- -- 0.2 0.2 Benefits paid (1.3) (2.5) (2.6) (2.0) (4.6) (1.9) Impact of exchange rates -- -- -- -- 2.7 (3.3) ------ ------ ------ ------ ------ ------ Ending balance 25.3 23.1 -- -- 27.4 23.7 ------ ------ ------ ------ ------ ------ Funded status of the plan (4.6) (2.6) (41.0) (38.1) (36.7) (33.3) Unrecognized actuarial (gain) loss -- (1.4) 2.1 (0.2) 1.8 2.3 Unrecognized prior service benefit (0.1) -- (1.8) (2.0) - - Unrecognized net transition (asset) liability (0.2) (0.3) -- -- 2.0 2.4 Impact of exchange rates -- -- -- -- 0.6 (0.4) ------ ------ ------ ------ ------ ------ Accrued benefit cost $ (4.9)$ (4.3)$(40.7)$(40.3) $(32.3)$(29.0) ====== ====== ====== ====== ====== ====== Weighted average assumptions: Discount rate 6.8% 7.3% 6.8% 7.3% 4.7% 5.2% Return on plan assets 9.0 9.0 n/a n/a 5.2 5.3 Salary growth rate 6.0 6.0 n/a n/a 2.6 3.4
Plan assets consist primarily of equity securities and corporate and government bonds. At December 26, 1998, and December 27, 1997, the accumulated benefit obligations of certain pension plans exceeded those plans' assets. For those plans, the accumulated benefit obligations were $70.7 million and $38.8 million, and the fair value of those plans' assets as of December 26, 1998, and December 27, 1997, were $42.5 million and $15.0 million, respectively. (In millions) Pension benefits Post-retirement benefits -------------------- ------------------------ 1998 1997 1996 1998 1997 1996 ------ ------ ------ ------ ------ ------ Components of net periodic benefit cost: Service cost $ 4.1 $ 4.2 $ 5.0 $ 0.3 $ 0.3 $ 0.5 Interest cost 4.7 4.8 5.2 2.7 2.7 2.8 Actual return on plan assets (2.3) (3.1) (3.1) -- -- -- Net amortization and (deferral) (0.3) 0.7 0.8 (0.2) (0.2) (0.1) ------ ------ ------ ------ ------ ------ Net periodic benefit cost $ 6.2 $ 6.6 $ 7.9 $ 2.8 $ 2.8 $ 3.2 ====== ====== ====== ====== ====== ======
The assumed healthcare cost trend rate was 8 percent for the pre-65 plan and 6 percent for the post-65 plan for 1998. The pre-65 plan rate is assumed to decrease by one percentage point per year until an ultimate level of 6 percent is 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: One percentage point Increase Decrease -------- -------- (In millions) Effect on total of service and interest cost components $ 0.3 $ (0.3) Effect on post-retirement benefit obligation 3.6 (2.8) The Company also has several savings, thrift, and profit- sharing plans. Its contributions to these plans are based upon various levels of employee participation. The total cost of these plans was $4.5 million in 1998, $4.9 million in 1997, and $3.5 million in 1996. Note 9: Incentive Compensation Plans 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. Performance Awards Earned performance awards of $9.6 million, $7.5 million, and $19.3 million are included in the consolidated statement of income for 1998, 1997, and 1996, respectively. Stock Awards 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 repurchases of shares. Of the total number of shares available for grant, up to 300,000 may be used for restricted stock awards. As of December 26, 1998, shares available for award under the Incentive Plan totaled 1,978,817, of which 81,844 could be granted in the form of restricted stock. 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. Under the options outstanding as of December 26, 1998, 55,135 shares may be purchased at prices less than $10.00 per share; 2,357,710 shares at prices between $10.01 and $20.00 per share; 1,337,495 shares at prices between $20.01 and $30.00 per share; 614,215 shares at prices between $30.01 and $40.00 per share; and 588,400 shares at prices greater than $40.00 per share. Outstanding options granted in 1997 and earlier, that 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. All outstanding options have exercise periods that are 10 years from the date of grant. Outstanding restricted shares have initial vesting periods ranging from 1 to 5 years. Options outstanding as of December 26, 1998, will expire during the period 1999 through 2008, and have a weighted- average remaining life of 8.0 years. As of December 26, 1998, options to purchase 1,402,105 shares were exercisable. No compensation expense has been reflected in the consolidated statement of income under the Company's accounting policy. As required by SFAS 123, "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/pro forma net income would have been reduced by $3.7 million, $2.5 million, and $1.6 million, to $65.3 million, $79.5 million, and $168.8 million, or $1.11, $1.29, and $2.69 per diluted common share ($1.12, $1.30, and $2.72 per basic common share) in 1998, 1997, and 1996, respectively. The fair value of the stock option grants were estimated using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 3.0 percent for 1998 grants and 2.0 percent for previous grants; expected volatility of 40.0 percent for 1998 grants, 35.0 percent for 1997 grants, and 30.0 percent for previous grants; risk-free interest rates of 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. 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 26, 1998, were 300,000 and 220,169, respectively. As of December 26, 1998, options to purchase 69,258 shares were exercisable. Stock option and restricted stock activity for the Incentive Plan and the Director Plan is summarized below: Average Shares subject option price Stock options to option per share - ----------------------------- -------------- ------------ Balance at December 28, 1996 2,437,143 $ 28.91 Options granted 1,090,000 25.24 Options canceled (96,748) 36.98 Options exercised (83,525) 15.91 --------- Balance at December 27, 1997 3,346,870 27.81 Options granted 1,975,402 19.43 Options canceled (174,646) 32.84 Options exercised (125,413) 11.65 --------- Balance at December 26, 1998 5,022,213 24.75 =========
Shares Shares available Restricted stock outstanding for issuance - ---------------------------- ------------- ------------ Balance at December 28, 1996 148,311 151,689 Shares awarded 20,329 (20,329) Shares canceled (3,244) 3,244 Shares vested (38,055) -- ------- ------- Balance at December 27, 1997 127,341 134,604 Shares awarded 59,760 (59,760) Shares canceled (7,000) 7,000 Shares vested (29,728) -- ------- ------- Balance at December 26, 1998 150,373 81,844 ======= =======
Note 10: Segment Information The Company operates worldwide in one line of business: the manufacture and distribution, through independent direct sales forces, of plastic food storage and serving containers, microwave cookware, and educational toys. Its operations are organized into the four geographic segments included in the following table. (In millions) 1998 1997 1996 --------- -------- -------- Net sales: Europe $ 518.7 $ 546.6 $ 581.7 Asia Pacific 211.5 279.0 338.0 Latin America 186.8 247.2 268.5 United States 165.8 156.5 181.1 -------- -------- -------- Total net sales $1,082.8 $1,229.3 $1,369.3 ======== ======== ======== Operating profit(loss): Europe $ 123.9 $ 144.6 $ 153.0 Asia Pacific 20.2 37.2 61.0 Latin America (16.4) (5.7) 43.3 United States 4.0 (29.5) 10.4 ------- -------- -------- Total operating profit 131.7 146.6 267.7 Unallocated expenses (17.5) (18.0) (16.1) Costs associated with becoming an independent company -- -- (9.1) Interest expense, net (22.7) (17.8) (8.0) ------- ------- -------- Income before income taxes $ 91.5 $ 110.8 $ 234.5 ======= ======== ======== Depreciation: Europe $ 25.7 $ 26.5 $ 29.2 Asia Pacific 12.0 14.4 15.9 Latin America 12.5 10.5 7.9 United States 11.7 12.8 10.3 Corporate 2.1 1.9 2.0 ------- -------- -------- Total depreciation $ 64.0 $ 66.1 $ 65.3 ======= ======== ======== Capital expenditures: Europe $ 13.1 $ 15.5 $ 22.7 Asia Pacific 5.6 9.8 20.2 Latin America 13.6 17.0 35.2 United States 9.0 16.4 11.2 Corporate 4.9 8.8 6.7 -------- -------- -------- Total capital $ 46.2 $ 67.5 $ 96.0 Expenditures ======== ======== ======== Identifiable assets: Europe $ 260.7 $ 287.1 $ 315.6 Asia Pacific 148.4 144.9 198.5 Latin America 165.1 170.2 181.1 United States 151.7 157.1 176.3 Corporate 97.5 87.9 107.0 -------- -------- -------- Total identifiable assets $ 823.4 $ 847.2 $ 978.5 ======== ======== ======== Includes a fourth quarter pretax charge totaling $42.4 million ($31.3 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.
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 $241.2 million, $260.8 million, and $275.4 million in 1998, 1997, and 1996, respectively ($257.5 million and $238.4 million in 1997 and 1996, respectively, at 1998 exchange rates). No other foreign country's sales exceeded 10 percent of 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 26, 1998. As of the end of 1998, 1997, and 1996, respectively, long-lived assets in the United States were $110.3 million, $112.5 million, and $100.4 million. As of December 26, 1998, and December 27, 1997, the Company's net investment in international operations was $212.2 million and $210.0 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: 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 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 and environmental liability, and infringement of patents. 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 26, 1998, and December 27, 1997. (In millions, except per share amounts) First Second Third Fourth quarter quarter quarter quarter ------- ------- ------- ------- Year ended December 26, 1998: Net sales $ 268.8 $ 282.9 $ 217.4 $ 313.7 Cost of products 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 Year ended December 27, 1997: Net sales $ 315.3 $ 342.5 $ 251.4 $ 320.1 Cost of products sold 114.0 131.1 95.7 133.1 Net income 24.9 38.0 3.4 15.7 Net income per common share: Basic 0.40 0.62 0.06 0.26 Diluted 0.40 0.61 0.06 0.25 Dividends declared per share 0.22 0.22 0.22 0.22 Composite stock price range: High 54 1/2 40 5/8 38 9/16 28 9/16 Low 33 5/8 29 7/8 26 5/8 22 1/2 Close 33 3/4 37 1/4 27 3/16 27 3/8
The fourth quarter of 1997 includes 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. 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. 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 share- holders' equity and of cash flows present fairly, in all material respects, the financial position of Tupperware Corporation and its subsidiaries at December 26, 1998 and December 27, 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 26, 1998, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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. PricewaterhouseCoopers LLP Orlando, Florida February 19, 1999 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 controls 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. Rick Goings Thomas P. O'Neill, Jr. Chairman Senior Vice President and Chief Executive Officer and Chief Financial Officer EX-21 5 Tupperware Corporation Active Subsidiaries The following subsidiaries are wholly owned by the Registrant or another subsidiary of the Registrant. Subsidiary Location Deerfield Land Corporation Delaware Tupperware Financial Corporation Delaware Dart Industries Inc. Delaware Tupperware Far East, Inc. Delaware Tupperware Polska Sp.zo.o Poland Tupperware Turkey, Inc. Delaware Dart Far East Sdn. Bhd. Malaysia Dart Argentina S.A. Argentina Dart de Venezuela, C.A. Venezuela Tupperware Colombia S.A. Colombia Tupperware de Costa Rica, S.A. Costa Rica Dart do Brasil Industria e Comercio Ltda. Brazil Daypar Participacoes Ltda Brazil Academia Negocios S/C Ltda. Brazil Adota Artigos Domesticos Ltda. Brazil Tupperware Hellas, S.A.I.C. Greece Tupperware Israel Ltd. Israel Tupperware Espana, S.A. Spain Tupperware Belgium N.V. Belgium Tupperware France S.A. France Tupperware Deutschland G.m.b.H. Germany Tupperware, Ltd. Russia Tupperware Del Ecuador Tupperware Cia. Ltda. Ecuador Tupperware Osterreich G.m.b.H. Austria Tupperware Asia Pacific Holdings Limited Mauritius Tupperware China, LLC. Delaware Tupperware (China) Company Limited PRC Dart (Philippines), Inc. Philippines Tupperware Realty Corporation Philippines Dart Industries Hong Kong Limited Hong Kong Tupperware India Private Limited India Tupperware Nederland Properties B.V. Netherlands Tupperware Nederland B.V. Netherlands Tupperware Southern Africa(Proprietary)Limited SouthAfrica Dart Industries (New Zealand) Limited New Zealand Tupperware New Zealand Staff Superannuation Plan New Zealand Tupperware East Africa Limited Kenya Tupperware Italia S.p.A. Italy Dart, S.A. de C.V. Mexico Servicios Especializados de Arrendamiento en Latinoamerica S.A.de C.V Mexico Tupperware (Suisse) S.A. Switzerland Dartco Manufacturing Inc. Delaware Tupperware Lusitana de Artigos Domesticos, Lda. Portugal Tupperware (Portugal) Artigos Domesticos, Lda. Portugal Premiere Products, Inc. Delaware Tupperware Holdings, B.V. Netherlands Tupperware Service G.m.b.H. Germany Tupperware Products, B.V. Netherlands Tupperware Products S.A. Switzerland Tupperware d.o.o. Croatia Premiere Korea Ltd. Korea Premiere Marketing Company Korea Tupperware Products Inc. Delaware Exportadora Lerma, S. A. de C.V. Mexico Tupperware General Services N.V. Belgium Premiere Manufacturing, Inc. Delaware Tupperware U.S., Inc. Delaware Tupperware Distributors, Inc. Delaware Tupperware Factors Inc. Delaware Tupperware Canada Inc. Canada Japan Tupperware Co., Ltd. Japan Tupperware Australia Pty. Ltd. Australia Dart Staff Superannuation Fund Pty Ltd. Australia Importadora Y Distribuidora Importupp Limitada Chile Tupperware Czech Republic, spol. s.r.o. Czech Republic Tupperware Iberica S.A. Spain Tupperware Singapore Pte. Ltd. Singapore Tupperware (Thailand) Limited Thailand Tupperware Uruguay S.A. Uruguay Dart Executive Pension Fund Limited United Kingdom Tupperware Home Parties Corporation Delaware Tupperware U.K. Holdings, Inc. Delaware Tupperware United Kingdom & Ireland Limited United Kingdom Miracle Maid Limited United Kingdom Tupperware Scandinavia A/S Denmark The Tupperware Foundation DelawareTupperware Finance Holding Company,B.V. Netherlands Tupperware Finance Company, B.V. Netherlands Tupperware Export Sales, Ltd. Barbados Tupperware Services, Inc. Delaware Tupperware Philippines, Inc. Philippines EX-23 6 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 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 19, 1999 appearing on page 47 of 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 on the Financial Statement Schedule, which appears on page 15 of this Form 10-K. PricewaterhouseCoopers LLP Orlando, Florida March 22, 1999 EX-24 7 POWER OF ATTORNEY 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 26, 1998, 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 4th day of March, 1999. Rita Bornstein Ruth M. Davis Lloyd C. Elam Clifford J. Grum Betsy D. Holden Joe R. Lee Bob Marbut Angel R. Martinez David R. Parker Robert M. Price Joyce M. Roche EX-27 8 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TUPPERWARE CORPORATION'S 1998 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.
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