-----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, BJx84HPZzbkL2/bReIn9S/YH/f2Z5QyZ1Xi+fBFkv2TDtlrLmfWkIMqSD4xcTx2w 2UPP1aIWSq9KeU3HxrZsAQ== 0001008654-01-500011.txt : 20010329 0001008654-01-500011.hdr.sgml : 20010329 ACCESSION NUMBER: 0001008654-01-500011 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20001230 FILED AS OF DATE: 20010328 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: 1581949 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 f10k00.txt FORM 10K 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 30, 2000 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from ________to ___________ Commission file number 1-11657 ________________________________________________________ TUPPERWARE CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-4062333 (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 14901 South Orange Blossom Trail Orlando, Florida 32837 (Address of principal executive offices) (ZipCode) 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. X ---- 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 20, 2001 ($24.45 per share): $1,374,541,494. As of March 20, 2001, 57,872,738 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 30, 2000 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 17, 2001 are incorporated by reference into Part III of this Report. PART I Item 1. Business (a) General Development of Business Tupperware Corporation ("Registrant"), a $1.1 billion multinational company, is one of the world's leading direct sellers, supplying premium food storage, preparation and serving items to consumers in more than 100 countries through its Tupperware* brand, and premium beauty and skin care products through its BeautiControl* brand primarily in North America. 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. On October 18, 2000 the Registrant acquired 100% of the stock of BeautiControl, Inc. ("BeautiControl"). BUSINESS OF TUPPERWARE CORPORATION Registrant is a worldwide direct selling consumer products company engaged in the manufacture and sale of Tupperware products and BeautiControl cosmetics, and conducts its business through two business lines, Tupperware and BeautiControl. Each business manufactures and markets a broad line of high quality products. The financial information about the Registrant's markets as set forth in Note 12 Segment Information on pages 97 and 98 of the Annual Report to Shareholders for the year ended December 30, 2000 is incorporated by reference into this Report. I. PRINCIPAL PRODUCTS Tupperware. 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 food preparation and serving containers, kitchen gadgets, children's educational toys, microwave products and gifts. The line of Tupperware products has expanded over the years with products such as Modular Mates* containers, Fridge Stackables* containers, One Touch* canisters, the Rock 'N Serve* line, the Ultraplus* line and OvenWorks* line, the Expressions line, the Legacy Serving line, FridgeSmart* containers, the E-Series* knives, Vitalic* cookware, the TupperMagic* line, and many specialized containers. In recent years, Tupperware has expanded its offerings in the food preparation and serving areas through the addition of a number of products, including double colanders, tumblers and mugs, mixing and serving bowls, cake and cheese servers, oven cooking, microwaveable cooking, reheating 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 2000 included a wide range of products in all four geographic areas, including many using Walt Disney Company movie and cartoon characters under a license. Some of the other new products are the FreezeSmart* line, Regalia line, AccessMates* containers, Oceano* bathroom accessories, Forget Me Not* containers, E-Series* steak knives, rice polisher and new licenses for the Pokemon** characters, Barbie*** character and Barnie**** character. 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, many of which are produced utilizing high-quality molds that are generally supplied by Tupperware. Promotional items provided at product demonstrations include items obtained from outside sources. BeautiControl. BeautiControl manufactures and sells skin care products, cosmetics, nail care products, toiletries, fragrances, beauty supplements and related products using the direct sales method. BeautiControl sells its products through independent sales persons called "Consultants" (or "Distributors"), who purchase the products from BeautiControl and then sell them directly to consumers in the home or workplace. Products and image services are provided to clients via an independent sales force primarily in the United States; however, it is expanding into other geographical areas, namely, Latin America. Registrant has decided to discontinue BeautiControl's Taiwan and Hong Kong beauty operations as well as the small Eventus nutritional supplement business that were in operation when BeautiControl was acquired by Registrant. Registrant will concentrate on enhancing the North American beauty business and getting started in Latin America. Registrant anticipates it will start sales in Mexico in the second quarter this year. Registrant plans to convert some current Tupperware managers and set them up as BeautiControl Consultants. Registrant believes this will give a quick start to the BeautiControl line without causing disruption to the Tupperware business. II. MARKETS Tupperware. Tupperware's business is operated on the basis of four geographic markets: Europe (Europe, Africa and the Middle East), Asia Pacific, Latin America, and the United States. Tupperware has operations in more than 80 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, 84 percent of total revenues from the sale of Tupperware products. Market penetration varies throughout the world. Several "developing" areas that have low penetration, such as Latin America, Asia and Eastern (Central) Europe, provide significant growth potential for Tupperware. Tupperware's strategy continues to include expansion into new markets throughout the world. BeautiControl. BeautiControl's products consist of skin care, cosmetics, nail care, toiletries, fragrances, and related products. BeautiControl also has a health and beauty supplements line, Within Beauty*, which includes hair and nail supplements, skin condition supplements and supplements designed for the different stages of a woman's life. III. DISTRIBUTION OF PRODUCTS Tupperware. 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 distributed under the direct selling method are primarily sold directly to Distributors or Dealers throughout the world. Distributors are granted the right to market Tupperware products using the demonstration and other non- traditional retail methods and to utilize the Tupperware trademark. The vast majority of Tupperware's distribution system is composed of Distributors, Managers and Dealers (known in the United States as Consultants) who are independent contractors and not employees of Tupperware. In certain limited circumstances, Tupperware acquires ownership of distributorships for a period of time, until an independent Distributor can be installed, in order to maintain market presence. In addition to the introduction of new products and development of new geographic markets, a key element of Tupperware's strategy is expanding its business by enlarging the number of Distributors and Dealers. Under the Tupperware system, Distributors recruit, train, and motivate a large sales force to cover the Distributor's geographic area. Managers are developed and promoted by Distributors to assist the Distributors in recruiting, training, and motivating Dealers, while continuing to hold their own demonstrations. As of December 30, 2000, the Tupperware distribution system had 1,846 Distributors, 53,914 Managers, and 1,036,651 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 million demonstrations were held in 2000 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 2000, Tupperware accelerated its implementation in the U.S. of its integrated direct access strategies to allow consumers to obtain Tupperware products other than by attending a Tupperware party and to enhance its core party plan business. Tupperware also began introducing these strategies outside the U.S. These strategies include television shopping, mall showcases and the Internet, which for the first time included the option of personal websites for the U.S. sales force. The distribution of products to consumers is primarily the responsibility of Distributors, who often maintain their own inventory of Tupperware products, the necessary warehouse facilities, and delivery systems; however, in some situations, Tupperware will perform the warehousing and selling function paying the Distributor a commission for their sales activity. In certain markets, Tupperware offers Distributors the use of a delivery system of direct product shipment to consumers or Dealers, which is intended to reduce the Distributor's investment in inventory and enable Distributors to be more cost-efficient. BeautiControl. BeautiControl's skin care, cosmetics, and related products are sold through Consultants who are independent contractors, not employees of BeautiControl. As of December 30, 2000, the total Consultant count was 47,384. Consultants may sell BeautiControl products one-on-one, to groups of people or through home demonstrations called Skin Care and Color Parties or Clinics ("Clinics"). Additionally, Consultants are encouraged to market the products through personal consultations and product brochure sales in order to utilize multiple selling opportunities. In order to provide immediate product delivery, Consultants may maintain a small inventory of products. BeautiControl maintains BeautiNet Plus* in the United States, an on-line service provided to Consultants which enables Consultants to place orders and recruit on-line. IV. COMPETITION Tupperware. There are two primary competitive factors which affect Registrant'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 as well as cosmetics. Also, Tupperware has tried to differentiate itself from its competitors through price, quality of products (lifetime warranty on most Tupperware products), and new products. Tupperware believes it holds a significant market share in each of these markets in many countries. BeautiControl. There are many competitors in the cosmetics business and the principal bases of competition generally are marketing, price, quality and newness of products. BeautiControl has attempted to differentiate itself and its products from the industry in general through the use of a number of value-added services and by being technologically at the forefront of the industry. V. EMPLOYEES Registrant employs approximately 7,000 people, of whom approximately 1,500 are based in the United States. Tupperware's work force is not unionized in the United States. In certain countries, its work force is covered by collective arrangements negotiated with the unions or decreed by statute. The terms of most of these arrangements are determined on an annual basis. Additionally, approximately 130 manufacturing employees in an Australian mold manufacturing operation are covered by a collective bargaining agreement, which expires in 2003. Also, approximately 125 manufacturing employees in the Philippine manufacturing operation are covered by a collective bargaining agreement, which runs through 2002; however, annual wage and benefit provisions are negotiated annually. There have been no work stoppages or threatened work stoppages by the workforce in over five years and Registrant believes its relations with its employees to be good. The independent Consultants, Dealers, Managers and Distributors engaged in the direct sale of Tupperware and BeautiControl products generally are not employees of Registrant. VI. RESEARCH AND DEVELOPMENT Registrant incurred expenses of approximately $12.8 million, $12.3 million, and $13.8 million for fiscal years ended 2000, 1999, and 1998, respectively, on research and development activities for new products. VII. RAW MATERIALS Tupperware. 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. BeautiControl. Materials used in BeautiControl's skin care, cosmetic and beauty supplements products consist primarily of readily available ingredients, containers and packaging materials. Such raw materials and components used in goods manufactured and assembled by BeautiControl are available from a number of sources. To date, BeautiControl has been able to secure an adequate supply of raw materials and components for its manufacturing and it endeavors to maintain relationships with backup suppliers in an effort to ensure that no interruptions occur in its operations. VIII. TRADEMARKS AND PATENTS Tupperware. 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 Tupperware* trademark is registered on a country-by-country basis. The current duration for such registration ranges from five years to ten years; however, each such registration may be renewed an unlimited number of times. The patents and trademarks used in Tupperware's business are registered and maintained on a worldwide basis, with a variety of durations. Tupperware has followed the practice of applying for design and utility patents with respect to most of its significant patentable developments. The licensed characters from the licensors referenced under the caption "Principal Products" are becoming an important part of Tupperware's business and those licenses have various durations. BeautiControl. BeautiControl has registered all its trademarks and servicemarks in the United States and has registered or is in the process of registering its principal trademarks and servicemarks in many other countries. BeautiControl has the exclusive direct selling right to distribute the skin condition analysis product, "BeautiControl Skin Sensor", worldwide with the option to renew this exclusive right each year. BeautiControl is licensed to use the following trademarks: "Skinlogics"*****, "Sunlogics"***** and "Nailogics"*****. The Company has a patent on the formulae for its "REGENERATION and REGENERATION5", alpha-hydroxy acid-based, products. The licenses for these products are an important part of BeautiControl's business and these licenses have various durations. (Words followed by * are registered and unregistered Trademarks of the Registrant.) (Words followed by ** are registered Trademarks of Nintendo of America Inc.) (Words followed by *** are registered Trademarks of Mattel, Inc.) (Words followed by **** are registered Trademarks of Lyons Partnership L.P.) (Words followed by ***** are registered Trademarks of Matrix Essentials, Inc.) IX. ENVIRONMENTAL LAWS Compliance with federal, state and local environmental protection laws has not had in the past, and is not expected to have in the future, a material effect upon Registrant's capital expenditures, liquidity, earnings or competitive position. X. 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. BeautiControl. BeautiControl is not subject to any seasonality to any significant extent. General. Generally, there are no working capital practices or backlog conditions which are material to an understanding of Registrant's business. Registrant'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. XI. 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 17, 2001). Positions and Offices Held and Principal Occupations of Employment During Past Five Years
Name and Age Office and Experience Gerald M. Crompton, age 57 Senior Vice President, Product Marketing, Worldwide since November 1997 after serving as Vice President, Marketing, Worldwide since January 1996. Prior thereto, he served as Vice President, Product Development for Tupperware Europe, Africa and Middle East since December 1995. Judy B. Curry, age 38 Vice President and Controller since August 2000. Prior thereto, she served as Vice President and Chief Financial Officer of Tupperware Products S.A. in Fribourg, Switzerland since June 1999 after being the Assistant Controller of Tupperware Worldwide since April 1998 and Director of Financial Reporting and Analysis since January 1995. Karel A. De Vydt, age 50 Vice President and Chief Information Officer since January 1999. Prior thereto, he served as Director of Information Technology Worldwide from August 1997 after being the Director of Information Technology for Tupperware Europe, Africa and Middle East since June 1995. R. Glenn Drake, age 48 President, Tupperware North America since January 2000. Prior thereto, he served as Managing Director, Tupperware Canada from September 1998 after serving as Area Vice President of Tupperware North America from July 1995. Lillian D. Garcia, age 44 Senior Vice President, Human Resources since December 1999. Prior thereto, she was Vice President Human Resources since April 1999 after serving as Vice President, Human Resources, Tuppeware Latin America since October 1998. Prior thereto, she served as Vice President, Human Resources, Tupperware Europe, Africa and Middle East since October 1995. E.V. Goings, age 55 Chairman and Chief Executive Officer since October 1997 after serving as President and Chief Operating Officer since March 1996. Prior thereto, he served as Executive Vice President of Premark International, Inc. and President of Tupperware Worldwide since November 1992. Mr. Goings serves as a Director of SunTrust Bank, Central Florida, N.A., Boys and Girls Clubs of America, and Rollins College. David T. Halversen, age 56 Senior Vice President, Business Development and Communications since November 1996. Prior thereto, he served as Senior Vice President, Planning, Business Development and Financial Relations since March 1996. He previously served as Vice President, Business Development and Planning since February 1995. Richard W. Heath, age 58 Senior Vice President, Beauty and Nutritional Products, since October 2000. Prior thereto, he served as President and Chief Executive Officer of BeautiControl, Inc. since January 1981. Charles H. R. Henry, age 50 Vice President, Process Reengineering since January 1999. Prior thereto, he served as Regional Vice President, Tupperware Europe, Africa and Middle East since February 1996 after serving as Managing Director, Southern Africa since January 1994. Alan D. Kennedy, age 70 President since April 1998. Prior thereto, he was an independent consultant since 1996, and from 1989 to 1996 served as President and Chief Executive Officer of Nature's Sunshine Products, Inc. Steven R. Kroos, age 52 Chosen to become President, Asia Pacific on April 1, 2001 after serving as President Tupperware Japan since January 1,1997. Prior thereto, he served as President Tupperware Korea and Vice President Regional Operations, Korea, Taiwan and China from January 1, 1994 to December 31, 1996. Anne E. Naylor, age 51 Vice President, Internal Audit since October 1999. Prior thereto, she served as Executive Director, Business Analysis and Audit, Cummins Engine Company from May 1995. Gaylin L. Olson, age 55 President, Tupperware Latin America since September 1998 after serving as Senior Vice President, Worldwide since September 1996. Prior thereto he served as President, U.S. from December 1995. Michael S. Poteshman, age 37 Vice President, Investor Relations and Treasurer since August 2000. Prior thereto, he served as 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 50 Senior Vice President, General Counsel and Secretary since December 1995. James E. Rose, Jr., age 58 Senior Vice President, Taxes and Government Affairs since March 1997 after serving as Vice President, Taxes and Government Affairs since March 1996. Prior thereto, he served as Vice President, Taxes and Government Affairs for Premark International, Inc., since January 1986. Hans J. Schwenzer, age 64 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 since 1990. Christian E. Skroeder, age 52 Group President, Tupperware Europe, Africa and Middle East since April 1998. Prior thereto, he served as President, Tupperware Europe, Africa and Middle East since 1995. Jose R. Timmerman, age 52 Senior Vice President, Worldwide Operations since August 1997 after serving as Vice President Worldwide Operations since October 1993. Paul B. Van Sickle, age 61 Executive Vice President and Chief Financial Officer since September 1999. Prior thereto, he served as Executive Vice President since March 1997 after serving as Senior Vice President, Finance and Operations since November 1992. Robert W. Williams, age 57 President, Tupperware Asia Pacific since April 1995. Mr. Williams intends to retire March 31, 2001.
Item 2. Properties The principal executive office of the Registrant is owned by the Registrant and is located in Orlando, Florida. The Registrant owns and maintains Tupperware manufacturing plants in Belgium, Brazil, France, Greece, Japan, Korea, Mexico, the Philippines, Portugal, South Africa, and the United States, and leases manufacturing facilities in India, Venezuela and China. The Registrant owns and maintains the BeautiControl headquarters in Texas and leases its manufacturing facilities in Texas. Registrant conducts a continuing program of new product design and development at its facilities in Florida, Texas, 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 the Registrant 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. The Registrant 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 Registrant. 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 the Registrant, 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 14: "Quarterly Financial Summary (Unaudited)" appearing on page 99 of the Annual Report to Shareholders for the year ended December 30, 2000, is incorporated by reference into this Report. The information set forth in Note 15: "Rights Agreement" on page 100 of the Annual Report to Shareholders for the year ended December 30, 2000 is incorporated by reference into this Report. As of March 20, 2001, the Registrant had 11,532 shareholders of record. Item 6. Selected Financial Data The information set forth under the caption "Selected Financial Data" on pages 58 through 61 of the Annual Report to Shareholders for the year ended December 30, 2000, 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 62 through 75 of the Annual Report to Shareholders for the year ended December 30, 2000, is incorporated by reference into this Report. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The information set forth under the caption "Market Risk" on page 73 of the Annual Report to Shareholders for the year ended December 30, 2000, 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 76 through 100, and on page 101, respectively, of the Annual Report to Shareholders for the year ended December 30, 2000 are incorporated by reference into this Report: Consolidated Statements of Income, Shareholders' Equity and Cash Flows - Years ended December 30, 2000, December 25, 1999, and December 26, 1998; Consolidated Balance Sheets - December 30, 2000, and December 25, 1999; 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 14: "Quarterly Financial Summary (Unaudited)" of the Notes to the Consolidated Financial Statements of Tupperware Corporation on page 99 of the Annual Report to Shareholders for the year ended December 30, 2000, 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 17, 2001, 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 16 of the Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 17, 2001, and the information on pages 9 through 11 of such Proxy Statement relating to executive officers' compensation is incorporated by reference into this Report. Item 12. Security Ownership of Certain Beneficial Owners and Management The information set forth under the captions "Security Ownership of Certain Beneficial Owners" on page 7 and "Security Ownership of Management" on page 6 of the Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 17, 2001, 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 7 and 8 of the Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 17, 2001, 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 76 through 100 and on page 101, respectively, of the Annual Report to Shareholders for the year ended December 30, 2000, are incorporated by reference into this Report by Item 8 hereof: Consolidated Statements of Income, Shareholders' Equity and Cash Flows - Years ended December 30, 2000, December 25, 1999, and December 26, 1998; Consolidated Balance Sheets - December 30, 2000 and December 25, 1999; 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 17of this Report; and Schedule II-Valuation and Qualifying Accounts for each of the three years ended December 30, 2000, page 18 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. 333-12125) Registration Statement as Exhibit 1 filed with the Commission on September 16, 1996, and incorporated herein by reference). *2 Distribution Agreement by and among Premark International, Inc., Tupperware Corporation and Dart Industries Inc. (Attached as Exhibit 2 to Tupperware Corporation's Registration Statement on Form 10 (No. 1-11657) filed with the Commission on March 4, 1996, and incorporated herein by reference). *3.1 Amended and Restated Certificate of Incorporation of Tupperware Corporation (Attached as Exhibit 3.1 to Form 10 (No. 1-11657) filed with the Commission on March 4, 1996, and incorporated herein by reference). *3.2 Amended and Restated By-laws of Tupperware Corporation as amended May 11, 1999 (Attached as Exhibit 3.2 to Form 10-Q for the second quarter of 1999 filed with the Commission on August 9, 1999, and incorporated herein by reference). *4.1 Rights Agreement, by and between Tupperware Corporation and the rights agent named therein (Attached as Exhibit 4 to Form 10 (No. 1-11657), filed with the Commission on March 4, 1996, and incorporated herein by reference). *4.2 Indenture dated as of October 1, 1996, among Tupperware Corporation and The First National Bank of Chicago, as Trustee, (Attached as Exhibit 4(a) to Tupperware Corporation's Registration Statement on Form S-3 (No. 333-12125), 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. 333-12125), 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. 333-12125) filed with the Commission on September 25, 1996, and incorporated herein by reference). 10.1 Tupperware Corporation 1996 Incentive Plan as amended through August 10, 2000. *10.2 Tupperware Corporation Directors' Stock Plan as amended November 12, 1998 (Attached as Exhibit 10.2 to Form 10-K (No. 1-11657) filed with the Commission on March 24, 1999, and incorporated herein by reference). *10.3 Form of Change of Control Agreement (Attached as Exhibit 10.2 to Form 10-Q for the third quarter of 1999 filed with the Commission on November 8, 1999, and incorporated herein by reference). *10.4 Tax Sharing Agreement between Tupperware Corporation and Premark International, Inc. (Attached as Exhibit 10.3 to Form 10 (No. 1-11657), filed with the Commission on May 22, 1996, and incorporated herein by reference). *10.5 Employee Benefits and Compensation Allocation Agreement between Tupperware Corporation and Premark International, Inc. (Attached as Exhibit 10.4 to Form 10 (No. 1-11657), filed with the Commission on March 4, 1996, and incorporated herein by reference). *10.6 Credit Agreement dated May 16, 1996 (Attached as Exhibit 10.8 to the Registrant's Registration Statement on Form 10 (No. 1-11657), filed with the Commission on May 22, 1996 as Exhibit 10.8, and incorporated herein by reference). *10.7 Form of Franchise Agreement between a subsidiary of the Registrant and distributors of Tupperware products in the United States (Attached as Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the year ended December 28, 1996, filed with the Commission on March 25, 1997, and incorporated herein by reference). *10.8 First Amendment dated August 8, 1997 to Credit Agreement dated May 16, 1996 (Attached as Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the year ended December 27, 1997, and filed with the Commission on March 24, 1998, and incorporated herein by reference). *10.9 Loan Agreement, Promissory Note, and Stock Pledge Agreement dated November 13, 1998, between a subsidiary of Tupperware and E.V. Goings (Attached as Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the year ended December 26, 1998 filed with the Commission on March 24, 1999, and incorporated herein by reference). *10.10 Management Stock Purchase Plan (Attached to Form S-8 (No. 333-48650) as Exhibit 4.3 filed with the Commission on October 26, 2000 and incorporated herein by reference). 10.11 Form of Promissory Note between Tupperware and various executives. 10.12 Form of Stock Pledge Agreement between Tupperware and various executives. *10.13 Tupperware Corporation 2000 Incentive Plan as amended through August 10, 2000 (Filed on Form S-8 (No. 333-50012) on November 15, 2000, and incorporated herein by reference.) 13 Pages 58 through 102 of the Annual Report to Shareholders of the Registrant for the year ended December 30, 2000. 21 Subsidiaries of Tupperware Corporation as of March 20, 2001. 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.
*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 30, 2000, 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 20, 2001 appearing in the 2000 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 20, 2001 TUPPERWARE CORPORATION SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 30, 2000 (In millions)
Col. A Col. B Col. C Col. D Col. E ------ ------ ------ ------ ------ Additions --------- Balance Charged Charged Balance at to Costs to at End Beginning and Other Deductions of of Period Expenses Accounts Period --------- -------- -------- ---------- ------- Allowance for doubtful accounts, current and long term: Year ended December 30, $53.4 $13.9 $0.1 $(5.3) $59.7 2000 $(2.4) Year ended December 25, 77.4 8.6 0.1 (25.3) 53.4 1999 (7.4) Year ended December 26, 81.9 15.0 (0.5) (22.3) 77.4 1998 3.3 Valuation allowance for deferred tax assets: Year ended December 30, 30.8 1.0 - - 31.8 2000 Year ended December 25, 23.9 6.9 - - 30.8 1999 Year ended December 26, 14.4 9.5 - - 23.9 1998 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. Tupperware Corporation (Registrant) By / s/ E.V. GOINGS - -------------------------- E.V. Goings Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature Title /s/ E.V. Goings Chairman of the Board of Directors, - ------------------------- Chief Executive Officer and E.V. Goings Director (Principal Executive Officer) /s/ Paul B. Van Sickle Executive Vice President and Chief - ------------------------- Financial Officer Paul B. Van Sickle (Principal Financial Officer) /s/ Judy B. Curry Vice President and Controller - ------------------------- (Principal Accounting Officer) Judy B. Curry * Director Rita Bornstein, Ph.D * Director Clifford J. Grum * Director Betsy D. Holden * Director Joe R. Lee * Director Bob Marbut * Director Angel R. Martinez * Director David R. Parker * Director Robert M. Price * Director Joyce M. Roche * Director M. Anne Szostak *By /s/ Thomas M. Roehlk ---------------------------- Thomas M. Roehlk Attorney-in-fact March 20, 2001 EXHIBIT INDEX Exhibit No. Description 10.1 Tupperware Corporation 1996 Incentive Plan as amended through August 10, 2000 10.11 Form of Promissory Note between Tupperware and various executives. 10.12 Form of Stock Pledge Agreement between Tupperware and various executives. 13 Pages 58 through 102 of the Annual Report to Shareholders of the Registrant for the year ended December 30, 2000 21 Subsidiaries of Tupperware Corporation as of March 20, 2001 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 EX-10.1 2 ex10100.txt 1996 INCENTIVE PLAN AS AMENDED EXHIBIT 10.1 TUPPERWARE CORPORATION 1996 INCENTIVE PLAN (As amended August 18, 1999 and August 10, 2000) Article 1. Establishment, Purpose, and Duration 1.1 Establishment of the Plan. Tupperware Corporation, a Delaware corporation (hereinafter referred to as the ''Company''), hereby establishes an incentive compensation plan to be known as the ''Tupperware Corporation 1996 Incentive Plan'' (hereinafter referred to as the ''Plan''), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, and Performance Awards. The Plan shall become effective as of the Effective Date, and shall remain in effect as provided in Section 1.3 herein. 1.2 Purpose of the Plan. The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of Participants to those of the Company's stockholders, and by providing Participants with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants upon whose judgment, interest, and special efforts the successful conduct of its operations largely is dependent. 1.3 Duration of the Plan. The Plan shall commence on the Effective Date and shall remain in effect, subject to the right of the Board of Directors to terminate, amend or modify the Plan at any time pursuant to Article 14 herein, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan on or after May 1, 2006. Article 2. Definitions Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: (a) ''Award'' means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, or Performance Awards. (b) ''Award Agreement'' means an agreement entered into by each Participant and the Company, setting forth the terms and provisions applicable to Awards granted to Participants under this Plan. (c) ''Beneficial Owner'' shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (d) ''Beneficiary'' means a person who may be designated by a Participant pursuant to Article 10 and to whom any benefit under the Plan is to be paid in case of the Participant's death or physical or mental incapacity, as determined by the Committee, before he or she receives any or all of such benefit. (e) ''Board'' or ''Board of Directors'' means the Board of Directors of the Company. (f) ''Cause'' means (i) conviction of a Participant for committing a felony under federal law or the law of the state in which such action occurred, (ii) dishonesty in the course of fulfilling a Participant's employment duties or (iii) willful and deliberate failure on the part of a Participant to perform his employment duties in any material respect, or such other events as shall be determined by the Committee. The Committee shall have the sole discretion to determine whether ''Cause'' exists, and its determination shall be final. (g) ''Change of Control'' of the Company means: i. An acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding Shares (the ''Outstanding Company Common Stock'') or (2) the combined voting power of the then outstanding Shares 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 ii. A change in the composition of the Board such that the individuals who, as of the effective 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 effective 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 Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person or legal entity 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, and the combined voting power of the then outstanding Shares 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. (h) ''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 (x) in the case of a Stock Option which (A) is held by an optionee who is an officer or director of the Corporation and is subject to Section 16(b) of the Exchange Act and (B) 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 and (y) in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, the Change of Control Price shall be in all cases the Fair Market Value of the Common Stock on the date such Incentive Stock Option or Stock Appreciation Right is 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 Board. (i) ''Code'' means the Internal Revenue Code of 1986, as amended from time to time. (j) ''Commission'' means the Securities and Exchange Commission or any successor agency. (k) ''Committee'' means the committee described in Article 3 or (unless otherwise stated) its designee pursuant to a delegation by the Committee as contemplated by Section 3.3. (l) ''Company'' means Tupperware Corporation, a Delaware corporation, or any successor thereto as provided in Article 16 herein. (m) ''Covered Employee'' has the meaning ascribed thereto in Section 162(m) of the Code and the regulations thereunder. (n) ''Director'' means any individual who is a member of the Board of Directors of the Company. (o) ''Disinterested Person'' means a member of the Board who qualifies as a disinterested person as defined in Rule 16b-3(c)(2), as promulgated by the Commission under the Exchange Act, or any successor definition adopted by the Commission. (p) ''Effective Date'' means May 20, 1996. (q) ''Employee'' means any nonunion employee of the Company or of the Company's Subsidiaries. Directors who are not otherwise employed by the Company shall not be considered Employees under this Plan. (r) ''Exchange Act'' means the Securities Exchange Act of 1934, as amended from time to time, or any successor Act thereto. (s) ''Fair Market Value'' means, except as expressly provided otherwise, 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. 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. (t) ''Freestanding SAR'' means a SAR that is granted independently of any Options pursuant to Section 7.1 herein. (u) ''Incentive Stock Option'' or ''ISO'' means an option to purchase Shares, granted under Article 6 herein, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code. (v) ''Insider'' shall mean an Employee who is, on the relevant date, an officer, director, or ten percent (10%) beneficial owner of the Company, as defined under Section 16 of the Exchange Act. (w) ''Nonqualified Stock Option'' or ''NQSO'' means an option to purchase Shares, granted under Article 6 herein, which is not intended to be an Incentive Stock Option. (x) ''Option'' means an Incentive Stock Option or a Non- qualified Stock Option. (y) ''Option Price'' means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee. (z) ''Participant'' means an Employee of the Company who has been granted an Award under the Plan. (aa) ''Performance Award'' means an Award granted to an Employee, as described in Article 9 herein, including Performance Units and Performance Shares. (ab) ''Performance Goals'' means the performance goals established by the Committee prior to the grant of Performance Awards that are based on the attainment of one or any combination of the following: specified levels of earnings per share from continuing operations, operating income, revenues, return on operating assets, return on equity, stockholder return (measured in terms of stock price appreciation) and/or total stockholder return (measured in terms of stock price appreciation and/or dividend growth), achievement of cost control, working capital turns, cash flow, net income, economic value added, segment profit, sales force growth, or stock price of the Company or such subsidiary, division or department of the Company for or within which the Participant is primarily employed and that are intended to qualify under Section 162(m) (4) (c) of the Code. Such Performance Goals also may be based upon the attaining of specified levels of Company performance under one or more of the measures described above relative to the performance of other corporations. Such Performance Goals shall be set by the Committee within the time period prescribed by Section 162(m) of the Code and related regulations. (ac) ''Performance Period'' means a time period during which Performance Goals established in connection with Performance Awards must be met. (ad) ''Performance Unit'' means an Award granted to an Employee, as described in Article 9 herein. (ae) ''Performance Share'' means an Award granted to an Employee, as described in Article 9 herein. (af) ''Restriction Period'' or ''Period'' means the period or periods during which the transfer of Shares of Restricted Stock is limited based on the passage of time and the continuation of service with the Company, and the Shares are subject to a substantial risk of forfeiture, as provided in Article 8 herein. (ag) ''Person'' shall have the meaning ascribed to such term in Section 3(a) (9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a ''group'' as defined in Section 13(d). (ah) ''Restricted Stock'' means an Award granted to a Participant pursuant to Article 8 herein. (ai) ''Share'' means a share of common stock of the Company. (aj) ''Subsidiary'' or ''Subsidiaries'' means any corporation or corporations in which the Company owns directly, or indirectly through subsidiaries, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns at least fifty percent (50%) of the combined equity thereof. (ak) ''Stock Appreciation Right'' or ''SAR'' means an Award, granted alone (Freestanding SAR) or in connection with a related Option (Tandem SAR), designated as a SAR, pursuant to the terms of Article 7 herein. (al) ''Tandem SAR'' means an SAR that is granted in connection with a related Option pursuant to Section 7.1 herein, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be cancelled). Article 3. Administration 3.1 The Committee. The Plan shall be administered by the Compensation and Directors Committee or such other committee of the Board as the Board may from time to time designate (the ''Committee''), which shall be composed of not less than two Disinterested Persons each of whom shall be an ''outside director'' for purposes of Section 162(m)(4) of the Code, and shall be appointed by and serve at the pleasure of the Board. 3.2 Authority of the Committee. The Committee shall have plenary authority to grant Awards pursuant to the terms of the Plan to officers and employees of the Company and its subsidiaries and Affiliates. Among other things, the Committee shall have the authority, subject to the terms of the Plan: (a) To select the officers and employees to whom Awards may from time to time be granted; (b) To determine whether and to what extent Incentive Stock Options, NonQualified Stock Options, SARs, Restricted Stock and Performance Awards or any combination thereof are to be granted hereunder; (c) To determine the number of Shares to be covered by each Award granted hereunder; (d) To determine the terms and conditions of any Award granted hereunder (including, but not limited to, the option price (subject to Section 6.4 (a)), any vesting condition, restriction or limitation (which may be related to the performance of the Participant, the Company or any subsidiary or Affiliate) and any vesting acceleration or forfeiture waiver regarding any Award and the Shares relating thereto, based on such factors as the Committee shall determine; (e) To modify, amend or adjust the terms and conditions of any Award, at any time or from time to time, including but not limited to Performance Goals, unless at the time of establishment of goals the Committee shall have precluded its authority to make such adjustments; and (f) To determine to what extent and under what circumstances Shares and other amounts payable with respect to an Award shall be deferred. The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreement relating thereto) and to otherwise supervise the administration of the Plan. 3.3 Action of the Committee. The Committee may act only by a majority of its members then in office, except that the members thereof may (i) delegate to an officer of the Company the authority to make decisions pursuant to Section 6.4, provided that no such delegation may be made that would cause Awards or other transactions under the Plan to cease either to be exempt from Section 16(b) of the Exchange Act or to qualify as ''qualified performance-based compensation'' as such term is defined in the regulations promulgated under Section 162(m) of the Code, and (ii) authorize any one or more of their number or any officer of the Company to execute and deliver documents on behalf of the Committee. 3.4 Decisions Binding. Any determination made by the Committee or pursuant to delegated authority pursuant to the provisions of the Plan with respect to any Award shall be made in the sole discretion of the Committee or such delegate at the time of the grant of the Award or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by the Committee or any appropriately delegated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan Participants. Article 4. Shares Subject to the Plan 4.1 Number of Shares. Subject to adjustment as provided in Section 4.3 herein, the total number of Shares available for grant under the Plan shall be six million one hundred thousand (6,100,000); provided, however, that if during the term of the Plan the Company repurchases Shares, additional Options may be granted equal to the number of Shares so repurchased, except that no more than one million five hundred thousand (1,500,000) additional Shares shall be authorized for Options under this proviso; and provided further that the total number of available Shares that may be used for Restricted Stock Awards under the Plan shall be limited to three hundred thousand (300,000). No Participant may be granted Awards covering in excess of 10% of the Shares available for issuance over the life of the Plan. Shares subject to an Award under the Plan may be authorized and unissued shares or may be treasury shares. The following rules will apply for purposes of the determination of the number of Shares available for grant under the Plan: (a) While an Award is outstanding, it shall be counted against the authorized pool of Shares, regardless of its vested status. (b) The grant of an Option or Restricted Stock shall reduce the Shares available for grant under the Plan by the number of Shares subject to such Award. (c) The grant of a Tandem SAR shall not reduce the number of Shares available for grant by the number of Shares subject to the related Option (i.e., there is no double counting of Options and their related Tandem SARs). (d) The grant of a Freestanding SAR shall reduce the number of Shares available for grant by the number of Freestanding SARs granted. (e) The Committee shall reduce the appropriate number of Shares from the authorized pool where a Performance Award is payable in Shares. 4.2 Lapsed Awards. If any Award granted under this Plan is cancelled, forfeited, terminates, expires, or lapses for any reason (with the exception of the termination of a Tandem SAR upon exercise of the related Option or the termination of a related Option upon exercise of the corresponding Tandem SAR), any Shares subject to such Award again shall be available for the grant of an Award under the Plan. However, in the event that prior to the Award's cancellation, forfeiture, termination, expiration, or lapse, the holder of the Award at any time received one or more ''benefits of ownership'' pursuant to such Award (as defined by the Commission, pursuant to any rule or interpretation promulgated under Section 16 or any successor rule of the Exchange Act), the Shares subject to such Award shall not be made available for regrant under the Plan to Insiders, but shall be available for regrants under the Plan to Participants who are not Insiders. 4.3 Adjustments in Authorized Shares and Prices. 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 or SARs, 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. Such adjusted option price shall also be used to determine the amount payable by the Company upon the exercise of any Tandem SAR. Article 5. Eligibility and Participation 5.1 Eligibility. Persons eligible to be granted Awards under this Plan include all Employees of the Company and its Subsidiaries, as determined by the Committee, including Employees who are members of the Board, but excluding Directors who are not Employees. 5.2 Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees, those to whom Awards shall be granted and shall determine the nature and amount of each Award. Article 6. Stock Options 6.1 Grant of Options. Stock Options may be granted alone or in addition to other Awards granted under the Plan and may be of two types: Incentive Stock Options and Nonqualified Stock Options. Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve. The Committee shall have the authority to grant any optionee Incentive Stock Options, Nonqualified Stock Options or both types of Stock Options (in each case with or without Stock Appreciation Rights); provided, however, that grants hereunder are subject to the aggregate limit on grants to individual Participants set forth in Article 4. Incentive Stock Options may be granted only to employees of the Company and any ''subsidiary corporation'' (as such term is defined in Section 424(f) of the Code). To the extent that any Stock Option is not designated as an Incentive Stock Option or even if so designated does not qualify as an Incentive Stock Option, it shall constitute a Nonqualified Stock Option. 6.2 Award Agreement. Stock Options shall be evidenced by option agreements, the terms and provisions of which may differ. An option agreement shall indicate on its face whether it is intended to be an agreement for an Incentive Stock Option or a Nonqualified Stock Option. The grant of a Stock Option shall occur on the date the Committee by resolution selects an individual to be a Participant in any grant of a Stock Option, determines the number of Shares to be subject to such Stock Option to be granted to such individual and specifies the terms and provisions of the Stock Option, or such later date as the Committee designates. The Company shall notify a Participant of any grant of a Stock Option, and a written option agreement or agreements shall be duly executed and delivered by the Company to the Participant. Such agreement or agreements shall become effective upon execution by the Company and the Participant. 6.3 Incentive Stock Options. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options shall be interpreted, amended or altered nor shall any discretion or authority granted under the Plan be exercised so as to disqualify the Plan under Section 422 of the Code or, without the consent of the optionee affected, to disqualify any Incentive Stock Option under such Section 422. 6.4 Terms and Conditions. Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions as the Committee shall deem desirable: (a) Option Price. The option price per Share purchasable under a Stock Option shall be determined by the Committee and set forth in the option agreement, and shall not be less than the Fair Market Value of the Common Stock subject to the Stock Option on the date of grant. Options may not be repriced without shareholder approval. (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but no Incentive Stock Option shall be exercisable more than 10 years after the date the Stock Option is granted. (c) Exercisability. Except as otherwise provided herein, Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. If the Committee provides that any Stock Option is exercisable only in installments, the Committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Committee may determine. In addition, the Committee may at any time accelerate the exercisability of any Stock Option. (d) Method of Exercise. Subject to the provisions of this Article 6, Stock Options may be exercised, in whole or in part, at any time during the option term by giving written notice of exercise to the Company specifying the number of Shares subject to the Stock Option to be purchased. Such notice shall be accompanied by payment in full of the purchase price by certified or bank check or such other instrument as the Company may accept. If approved by the Committee, payment, in full or in part, may also be made in the form of delivery of unrestricted Shares already owned by the optionee of the same class as the Shares subject to the Stock Option (based on the Fair Market Value of the shares on the date the Stock Option is exercised), or by certifying ownership of such Shares by the Participant to the satisfaction of the Company for later delivery to the Company as specified by the Committee; provided, however, that, in the case of an Incentive Stock Option the right to make a payment in the form of already owned Shares of the same class as the Shares subject to the Stock Option may be authorized only at the time the Stock Option is granted. In the discretion of the Committee, payment for any Shares subject to a Stock Option may also be made pursuant to a ''cashless exercise'' by delivering a properly executed exercise notice to the Company, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the purchase price, and, if requested, the amount of any federal, state, local or foreign withholding taxes. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. No shares shall be issued until full payment therefor has been made. An optionee shall have all of the rights of a stockholder of the Company holding the class or series of Shares that is subject to such Stock Option (including, if applicable, the right to vote the shares and the right to receive dividends), when the optionee has given written notice of exercise and has paid in full for such Shares. (e) Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option under the Plan as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. (f) Nontransferability of Stock Options. No Stock Option shall be transferable by the optionee other than (i) by will or by application of the laws of descent and distribution; or (ii) in the case of a Nonqualified Stock Option, pursuant to (a) a domestic relations order issued by a tribunal of competent jurisdiction or (b) a gift to members of such optionee's immediate family, whether directly or indirectly or by means of a trust or partnership or otherwise, if expressly permitted under the applicable option agreement. All Stock Options shall be exercisable, subject to the terms of this Plan, during the optionee's lifetime, only by the optionee or by the guardian or legal representative of the optionee or, in the case of a Nonqualified Stock Option, its alternative payee pursuant to such domestic relations order, it being understood that the term ''holder'' and ''optionee'' include the guardian and legal representative of the optionee named in the option agreement and any person to whom an option is transferred by will or the laws of descent and distribution or, in the case of a Nonqualified Stock Option, pursuant to a domestic relations order or a gift permitted under the applicable option agreement. (g) Death. Unless otherwise determined by the Committee, if an optionee's employment terminates by reason of death, any Stock Option held by such optionee shall become immediately and fully exercisable and (unless another period is specified by the Committee in the option agreement) may thereafter be exercised by the estate of the optionee for a period of three years from the date of such death; provided, however, that if the optionee is at least sixty years of age at the time of death and has fifteen years service with the Company, such Stock Option may thereafter be exercised by the estate of the optionee for a period of six years from the date of such death. In no event, however, may a Stock Option be exercisable beyond the stated expiration date of such Stock Option. Notwithstanding any provision herein to the contrary, unless otherwise determined by the Committee, if an optionee dies after termination of the optionee's employment, any Stock Option held by such optionee may thereafter be exercised, to the extent such Stock Option was exercisable as of the date of such death, for a period that expires on the earliest of (i) the first anniversary of the date of such death, (ii) the last date on which the optionee would have been entitled to exercise such Stock Option had the optionee not died or (iii) the date on which the stated term of such Stock Option expires; provided, however, that if such optionee had retired from the Company prior to the date of death, the estate of the optionee shall continue to have the benefit of the vesting and exercisability benefits specified by Section 6.4(i). (h) Termination by Reason of Disability. Unless otherwise determined by the Committee, if an optionee's employment terminates by reason of Disability, any Stock Option held by such optionee, if not fully vested and exercisable as of the date of such termination, shall continue to vest according to such Stock Option's stated vesting schedule and may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination or thereafter becomes exercisable, or on such accelerated basis as the Committee may determine, for a period of three years (or such shorter period as the Committee may specify in the option agreement) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter; provided, however, that if the optionee dies within such period, any unexercised Stock Option held by such optionee shall continue to be exercisable to the extent to which it was exercisable at the time of death for the remainder of such period, or for a period of 12 months from the date of such death, or until the expiration of the stated term of such Stock Option, whichever period is the shortest. In the event of termination of employment by reason of Disability, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Nonqualified Stock Option. (i) Termination by Reason of Retirement. Unless otherwise determined by the Committee, if an optionee's employment terminates by reason of retirement, the following vesting and exercisability terms will apply. For purposes of this Plan, an optionee shall be deemed to have terminated employment by reason of retirement if such optionee is age 55 years or older with 10 or more years of service with the Company, has given due notice (as determined by the Committee), and has entered into an agreement, the form and content of which shall be specified by the Committee, not to compete with the Company and its Affiliates for a period of one year following such retirement. Years of Years of Age at Continued Continued Retirement Vesting Exercisability Following Following Retirement Retirement ---------- ---------- -------------- 55-59 1 2 60-64 2 3 65 or more 3 3 With respect to any grants of a Stock Option occurring after August 18, 1999, and notwithstanding any inconsistent provision contained in the first paragraph of this Section 6.4(i), the following vesting and exercisability terms shall apply. Any optionee who has attained the age of 60 years or older with 15 or more years of service with the company, and who meets the other conditions specified by the second sentence of the first paragraph of the Section 6.4(i), shall have 6 years of continued vesting and exercisability following retirement. Notwithstanding the foregoing, if the optionee dies within such period of continued exercisability, any unexercised Stock Option held by such optionee shall continue to be exercisable to the extent to which it was exercisable at the time of death for the remainder of such period, or for a period of 12 months from the date of such death, or until the expiration of the stated term of such Stock Option, whichever period is the shortest. In the event of termination of employment by reason of retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Nonqualified Stock Option. (j) Other Termination. Unless otherwise determined by the Committee: (A) if an optionee incurs a voluntary termination of Employment, any Stock Option held by such optionee, to the extent then exercisable, or on such accelerated basis as the Committee may determine, may be exercised for the lesser of thirty days from the date of such termination of Employment or the balance of such Stock Option's term; and (B) if an optionee incurs a termination of Employment because such optionee's Employment is terminated by the Company or an Affiliate, other than by reason of retirement or Disability or for Cause, any Stock Option held by such optionee, to the extent then exercisable, or becomes exercisable during the one-year period following termination of employment by the Company or an Affiliate, or on such accelerated basis as the Committee may determine, may be exercised for the lesser of one year from the date of such termination of Employment or the balance of such Stock Option's term; provided, however, that if the optionee dies within such thirty-day or one- year period, as the case may be, any unexercised Stock Option held by such optionee shall continue to be exercisable to the extent to which it was exercisable at the time of death for the remainder of such period, or for a period of 12 months from the date of such death, or until the expiration of the stated term of such Stock Option, whichever period is the shortest. Notwithstanding the foregoing, if an optionee incurs a Termination of Employment at or after a Change of Control, other than by reason of death, Disability or Retirement, any Stock Option held by such optionee shall be exercisable for the lesser of (1) six months and one day from the date of such termination of Employment, and (2) the balance of such Stock Option's term. In the event of termination of Employment, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Nonqualified Stock Option. (k) Termination for Cause. Unless otherwise determined by the Committee, if an optionee incurs a Termination of Employment for Cause, all Stock Options held by such optionee shall thereupon terminate. (l) Change of Control Cash-Out. Notwithstanding any other provision of the Plan, during the 60-day period from and after a Change of Control (the ''Exercise Period''), unless the Committee shall determine otherwise at the time of grant, an optionee shall have the right, whether or not the Stock Option is fully exercisable and in lieu of the payment of the exercise price for the Shares being purchased under the Stock Option and by giving notice to the Company, to elect (within the Exercise Period) to surrender all or part of the Stock Option to the Company and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change of Control Price per Share shall exceed the exercise price per Share under the Stock Option (the ''Spread'') multiplied by the number of Shares granted under the Stock Option as to which the right granted under this Section 6.4(l) shall have been exercised; provided, however, that if the Change of Control is within six months of the date of grant of a particular Stock Option held by an optionee who is an officer or director of the Company and is subject to Section 16(b) of the Exchange Act no such election shall be made by such optionee with respect to such Stock Option prior to six months from the date of grant. However, if the end of such 60-day period from and after a Change of Control is within six months of the date of grant of a Stock Option held by an optionee who is an officer or director of the Company and is subject to Section 16(b) of the Exchange Act, such Stock Option shall be cancelled in exchange for a cash payment to the optionee, effected on the day which is six months and one day after the date of grant of such Option, equal to the Spread multiplied by the number of Shares granted under the Stock Option. Article 7. Stock Appreciation Rights 7.1 Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be granted to an Employee at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SAR. In the case of a Nonqualified Stock Option, Tandem SARs may be granted either at or after the time of grant of such Stock Option. In the case of an Incentive Stock Option, Tandem SARs may be granted only at the time of grant of such Stock Option. The Committee shall have complete discretion in determining the number of SARs granted to each Participant (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs. However, the grant price of a Freestanding SAR shall be at least equal to the Fair Market Value of a Share on the date of grant of the SAR. The grant price of Tandem SARs shall equal the Option Price of the related Option. In no event shall any SAR granted hereunder become exercisable within the first six (6) months of its grant. SARs may not be repriced without stockholder approval. 7.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO; (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO. 7.3 Exercise of Freestanding SARs. Subject to the other provisions of this Article 7, Freestanding SARs may be exercised upon whatever terms and conditions the Committee, at its sole discretion, imposes upon them. 7.4 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine. 7.5 Term of SARs. The term of a SAR granted under the Plan shall be determined by the Committee, at its sole discretion; provided, however, that such term shall not exceed ten (10) years. 7.6 Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (a) The excess of the Fair Market Value of a Share on the date of exercise over the grant price of the SAR; by (b) The number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. 7.7 Rule 16b-3 Requirements. Notwithstanding any other provision of the Plan, the Committee may impose such conditions on exercise of a SAR (including, without limitation, the right of the Committee to limit the time of exercise to specified periods) as may be required to satisfy the requirements of any rule or interpretation promulgated under Section 16 (or any successor rule) of the Act. 7.8 Nontransferability of SARs. No SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by application of the laws of descent and distribution. Further, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. Notwithstanding the foregoing, at the discretion of the Committee, an Award Agreement may permit the transferability of a SAR by a Participant solely to members of the Participant's immediate family or trusts for the benefit of such persons. Article 8. Restricted Stock 8.1 Administration. Shares of Restricted Stock may be awarded either alone or in addition to other Awards granted under the Plan. The Committee shall determine the officers and employees to whom and the time or times at which grants of Restricted Stock will be awarded, the number of shares to be awarded to any Participant (subject to the aggregate limit on grants to individual Participants set forth in Article 4), the conditions for vesting, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards, in addition to those contained in Section 8.3. The Committee may, prior to grant, condition the vesting of Restricted Stock upon continued service of the Participant. The provisions of Restricted Stock Awards need not be the same with respect to each recipient. 8.2 Awards and Certificates. Shares of Restricted Stock shall be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates. Any certificate issued in respect of shares of Restricted Stock shall be registered in the name of such Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form: ''The sale or other transfer of the Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Tupperware Corporation 1996 Incentive Plan, and in a Restricted Stock Agreement. A copy of the Plan and such Restricted Stock Agreement may be obtained from Tupperware Corporation.'' The Committee may require that the certificates evidencing such Shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition of any Award of Restricted Stock, the Participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award. 8.3 Terms and Conditions. Shares of Restricted Stock shall be subject to the following terms and conditions: (a) Subject to the provisions of the Plan and the Restricted Stock Agreement referred to in Section 8.3(f), during the Restricted Period, the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock, except that, if expressly provided in the Restricted Stock Agreement, a Participant may, during the Restriction Period, transfer shares of Restricted Stock to members of the Participant's immediate family or trusts or partnerships for the benefit of such persons. Within these limits, the Committee may provide for the lapse of restrictions based upon period of service in installments or otherwise and may accelerate or waive, in whole or in part, restrictions based upon period of service. Notwithstanding the foregoing, any Restricted Stock Award granted hereunder shall have a Restriction Period of not less than three years, except that an aggregate amount of Restricted Stock Awards not exceeding one-third of the Shares available for use as Restricted Stock Awards pursuant to Section 4.1 of the Plan may be issued without a minimum Restriction Period. (b) Except as provided in this paragraph (b) and paragraph (a), above, and the Restricted Stock Agreement, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Company holding the class or series of Shares that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares and the right to receive any cash dividends. Unless otherwise determined by the Committee in the applicable Restricted Stock Agreement, dividends payable in Shares shall be paid in the form of Restricted Stock of the same class as the Shares with which such dividend was paid, held subject to the vesting of the underlying Restricted Stock. In the event that any dividend constitutes a ''derivative security'' or an ''equity security'' pursuant to Rule 16(a) under the Act, such dividend shall be subject to a vesting period equal to the longer of: (i) the remaining vesting period of the Shares of Restricted Stock with respect to which the dividend is paid; or (ii) six months. The Committee shall establish procedures for the application of this provision. (c) Except to the extent otherwise provided in the applicable Restricted Stock Agreement and paragraphs (a) and (d) of this Section 8.3 and Section 13.1(b), upon a Participant's Termination of Employment for any reason during the Restriction Period, all Shares still subject to restriction shall be forfeited by the Participant. (d) Except to the extent otherwise provided in Section 13.1(b), in the event that a Participant retires or such Participant's employment is involuntarily terminated (other than for Cause), the Committee shall have the discretion to waive, in whole or in part, any or all remaining restrictions with respect to any or all of such Participant's shares of Restricted Stock. (e) If and when any applicable Restriction Period expires without a prior forfeiture of the Restricted Stock, unlegended certificates for such shares shall be delivered to the Participant upon surrender of the legended certificates. (f) Each Award shall be confirmed by, and be subject to, the terms of a Restricted Stock Agreement. Article 9. Performance Awards 9.1 Grant of Performance Awards. Subject to the terms of the Plan, Performance Awards may be granted to eligible Employees at any time and from time to time, as shall be determined by the Committee, and may be granted either alone or in addition to other Awards granted under the Plan. The Committee shall have complete discretion in determining the number, amount and timing of Awards granted to each Participant. Such Performance Awards may take the form determined by the Committee, including without limitation, cash, Shares, Performance Units and Performance Shares, or any combination thereof. Performance Awards may be awarded as short-term or long-term incentives. 9.2 Performance Goals. (a) The Committee shall set Performance Goals at its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Awards that will be paid out to the Participants, and may attach to such Performance Awards one or more restrictions, including, without limitation, a requirement that Participants pay a stipulated purchase price for each Performance Share, or restrictions which are necessary or desirable as a result of applicable laws or regulations. Each Performance Award may be confirmed by, and be subject to, a Performance Award Agreement. (b) The Committee shall have the authority at any time to make adjustments to Performance Goals for any outstanding Performance Awards which the Committee deems necessary or desirable unless at the time of establishment of goals the Committee shall have precluded its authority to make such adjustments. (c) Performance Periods shall, in all cases, exceed six (6) months in length. 9.3 Value of Performance Units/Shares. (a) Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. (b) Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. 9.4 Earning of Performance Awards. After the applicable Performance Period has ended, the holder of Performance Awards shall be entitled to receive the payout earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals have been achieved, except as adjusted pursuant to Section 9.2(b) or as deferred pursuant to Article 11. 9.5 Timing of Payment of Performance Awards. Payment of earned Performance Awards shall be made in accordance with terms and conditions prescribed or authorized by the Committee. The Committee may permit the Participants to elect to defer or the Committee may require the deferral of, the receipt of Performance Awards upon such terms as the Committee deems appropriate. 9.6 Nontransferability. Performance Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by application of the laws of descent and distribution. Further, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's Beneficiary. Notwithstanding the foregoing, at the discretion of the Committee, an Award Agreement may permit the transferability of a Performance Award by a Participant solely to members of the Participant's immediate family or trusts or partnerships for the benefit of such persons. 9.7 Termination. Performance Awards shall be subject to the following terms and conditions: (a) Except to the extent otherwise provided in the applicable Performance Award Agreement, if any, and Sections 9.7(b) and 13.1(c), upon a Participant's Termination of Employment for any reason during the Performance Period or before any applicable Performance Goals are satisfied, the rights to the shares still covered by the Performance Award shall be forfeited by the Participant. (b) Except to the extent otherwise provided in Section 13.1(c), in the event that a Participant's employment is terminated (other than for Cause), or in the event a Participant retires, the Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations (other than, in the case of Performance Awards with respect to which a Participant is a Covered Employee, satisfaction of any applicable Performance Goals unless the Participant's employment is terminated by reason of death or disability) with respect to any or all of such Participant's Performance Awards. Article 10. Beneficiary 10.1 Designation. Each Participant under the Plan may, from time to time, name any Beneficiary or Beneficiaries (who may be named contingently or successively). Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and shall be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. Any such designation shall control over any inconsistent testamentary or inter vivos transfer by a Participant, and any benefit of a Participant under the Plan shall pass automatically to a Participant's Beneficiary pursuant to a proper designation pursuant to this Section 10.1 without administration under any statute or rule of law governing the transfer of property by will, trust, gift or intestacy. 10.2 Absence of Designation. In the absence of any such designation contemplated by Section 10.1, benefits remaining unpaid at the Participant's death shall be paid pursuant to the Participant's will or pursuant to the laws of descent and distribution. Article 11. Deferrals The Committee may permit a Participant to elect, or the Committee may require at its sole discretion subject to the proviso set forth below, any one or more of the following: (i) the deferral of the Participant's receipt of cash, (ii) a delay in the exercise of an Option or SAR, (iii) a delay in the lapse or waiver of restrictions with respect to Restricted Stock, or (iv) a delay of the satisfaction of any requirements or goals with respect to Performance Awards; provided, however, the Committee's authority to take such actions hereunder shall exist only to the extent necessary to reduce or eliminate a limitation on the deductibility of compensation paid to the Participant pursuant to (and so long as such action in and of itself does not constitute the exercise of impermissible discretion under) Section 162(m) of the Code, or any successor provision thereunder. If any such deferral is required or permitted, the Committee shall establish rules and procedures for such deferrals, including provisions relating to periods of deferral, the terms of payment following the expiration of the deferral periods, and the rate of earnings, if any, to be credited to any amounts deferred thereunder. Article 12. Rights of Employees 12.1 Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. For purposes of the Plan, transfer of employment of a Participant between the Company and any one of its Subsidiaries (or between Subsidiaries) shall not be deemed a termination of employment. 12.2 Participation. No Employee shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. Article 13. Change of Control 13.1 Impact of Event. Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control: (a) Any Stock Options or SARs outstanding as of the date such Change of Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, however, that in the case of the holder of Stock Options or SARs who is actually subject to Section 16(b) of the Exchange Act, such Stock Options or SARs shall have been outstanding for at least six months at the date such Change of Control is determined to have occurred. (b) The restrictions and deferral limitations applicable to any Restricted Stock shall lapse, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant. (c) All Performance Awards shall be considered to be earned and payable in full, and any deferral or other restriction shall lapse and such Performance Units shall be settled in cash as promptly as is practicable. Article 14. Amendment, Modification, and Termination 14.1 Amendment, Modification, and Termination. At any time and from time to time, the Board may terminate, amend, or modify the Plan. However, no amendment, alteration or discontinuation shall be made which would disqualify the Plan from the exemption provided by Rule 16b-3, and no such amendment shall be made without the approval of the Company's stockholders to the extent such approval is required by law or agreement. 14.2 Awards Previously Granted. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award except such an amendment made to cause the Plan or Award to qualify for the exemption provided by Rule 16b-3. The Committee shall have the right to replace any previously-granted Award under the Plan with an Award equal to the value of the replaced Award at the time of replacement, without obtaining the consent of the Participant holding such Award. Subject to the above provisions, the Board shall have authority to amend the Plan to take into account changes in law and tax and accounting rules as well as other developments, and to grant Awards which qualify for beneficial treatment under such rules without stockholder approval. Article 15. Withholding 15.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any taxable event arising under or as a result of this Plan. 15.2 Share Withholding. With respect to withholding required and/or permitted upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares (or by surrendering Shares previously owned which have been held for longer than six months) having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing, signed by the Participant, and elections by Insiders shall additionally comply with the requirements established by the Committee. Article 16. Successors All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, spin-off, or otherwise, of all or substantially all of the business and/or assets of the Company. Article 17. Legal Construction 17.1 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 17.2 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 17.3 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the plan or action by the Committee fails to comply with Section 17.3, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. Notwithstanding any other provision set forth in the Plan, if required by any rule or interpretation promulgated under Section 16 of the Exchange Act, any ''derivative security'' or ''equity security'' offered pursuant to the Plan to any Insider may not be sold or transferred for at least six (6) months after the date of grant of such Award. The terms ''equity security'' and ''derivative security'' shall have the meanings ascribed to them in the then-current Rule 16(a) under the Exchange Act. Notwithstanding any other provision of the Plan or agreements made pursuant thereto, the Company shall not be required to issue or deliver any certificate or certificates for Shares under the Plan prior to fulfillment of all of the following conditions: i. Listing or approval for listing upon notice of issuance, of such shares on the New York Stock Exchange, Inc., or such other securities exchange as may at the time be the principal market for the Shares; ii. Any registration or other qualification of such Shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and iii. Obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its absolute discretion after receiving the advice of counsel, determine to be necessary or advisable. 17.4 Pooling. Notwithstanding anything in the Plan to the contrary, if any right granted pursuant to this Plan would make a Change of Control transaction ineligible for pooling-of-interests accounting under APB No.16 that but for the nature of such grant would otherwise be eligible for such accounting treatment, the Committee shall have the ability to substitute for the cash payable pursuant to such grant Common Stock with a Fair Market Value equal to the cash that would otherwise be payable hereunder. 17.5 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-10.11 3 ex1011.txt FORM OF PROMISSORY NOTE EXHIBIT 10.11 FORM OF PROMISSORY NOTE between Tupperware and various executives $___________ [Date] FOR VALUE RECEIVED, ________[Name]__________________ (the "Maker") promises to pay to the order of Dart Industries Inc., a Delaware corporation (which together with any successor, assignee or endorsee is hereinafter referred to as the "Holder"), at its office at 14901 South Orange Blossom Trail, Orlando, Florida 32837, or at such other place as the Holder may designate in writing, in lawful money of the United States of America, the principal sum of _________ and No/100 Dollars ($______), together with interest on the principal amount of this Note as described below and in accordance with the following terms and provisions: 1. Interest Rate. Interest will accrue on the outstanding principal balance of this Note at the rate of 5.96% per annum, compounded quarterly as provided below. 2. Interest Payments. Accrued interest will be calculated quarterly in arrears on the ____day of each February, May, August and November after the date hereof, commencing on ___________, _____, and such accrued interest will be added to the outstanding principal balance of this Note. All determinations of interest under this Note will be calculated for actual days elapsed on the basis of a year of 365 or 366 days, as applicable. Cash dividends payable to the Maker on the Tupperware Corporation ("Tupperware") common stock pledged by the Maker pursuant to the Pledge Agreement referred to below shall be applied on the date such dividends are paid to the Associated Interest (as defined below) with respect to each of the principal installments described in Section 3 below in proportion to the original principal amount included in each such installment, taking into account all payments prior to such date. 3. Principal Payments. For so long as the Maker remains on the active payroll of Tupperware or any of its wholly-owned subsidiaries (collectively, the "Company"), payment of the principal of this Note will be made in three installments on the fifth, sixth and eighth anniversaries of the date of this Note. Twenty-five percent (25%) of the original principal balance of this Note will be due and payable on each of the fifth and sixth anniversaries of the date hereof, together in each case with all accrued and unpaid interest on such portion of the original principal balance of this Note, including any such interest that was added to the original principal balance of this Note in accordance with Section 2 above (the "Associated Interest"). On the eighth anniversary of the date of this Note, the entire remaining outstanding principal balance together with all accrued and unpaid interest will be due and payable. Notwithstanding the foregoing, in the event of (a) death or disability of the Maker, the outstanding principal balance of this Note and all accrued and unpaid interest hereunder will be due and payable on the earlier of the repayment schedule set forth above or three years after the date of death or disability, (b) retirement of the Maker at age 55 or older with at least ten years of service with the Company or its predecessors, the outstanding principal balance of this Note and all accrued and unpaid interest hereunder will be due and payable on the earlier of the repayment schedule set forth above or two years after the date of retirement, and (c) retirement of the Maker after age 60 with at least fifteen years of service with the Company or its predecessors, the outstanding principal balance of this Note and all accrued and unpaid interest hereunder will be due and payable on the earlier of the repayment schedule set forth above or six years after the date of retirement. 4. 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 satisfying the terms and conditions of the Company's Management Stock Purchase Plan (the "Plan"). The Maker will use all proceeds of the loan to purchase shares of common stock of Tupperware pursuant to the Plan and for no other purpose. 5. Disbursement of Proceeds. Maker hereby authorizes and directs Holder to disburse all proceeds of the Loan evidenced by this Note directly to Tupperware, or to such account as Tupperware may direct, for application solely to the purchase price for common stock to be acquired from Tupperware pursuant to the Plan. Disbursement when so made shall constitute value given to the Maker in an amount equal to the initial principal sum of this Note. 6. Prepayment. This Note may be prepaid in whole or in part at any time without penalty. Voluntary prepayments shall be applied first to Associated Interest and then to principal of the installment payments required under this Note in the order of their maturities. 7. Default and Accelerated Maturity. If any amount under this Note or under the Pledge Agreement is not paid when due and such default continues for five (5) days thereafter, the entire principal balance of this Note and all accrued interest thereon will become immediately due and payable. If any covenant, term, condition or other provision in this Note or in the Pledge Agreement is not performed, fulfilled, satisfied or met as promised or required, and such failure does not constitute a monetary default triggering acceleration under the preceding sentence, then the Holder will notify the Maker of the default. If the default is not fully rectified and cured within fifteen (15) days after the date of the notice, the entire principal balance of this Note and all accrued interest thereon will become immediately due and payable. Without limiting the generality of the foregoing, the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, will become immediately due and payable without notice on the following dates: (a) the date of any voluntary or involuntary termination of the Maker's employment with the Company, except as otherwise provided in Section 3 above; and (b) the date on which a bankruptcy or insolvency proceeding is initiated by or against the Maker or the Maker makes an assignment for the benefit of creditors. 8. Right of Setoff. The Maker expressly agrees that, if a default or accelerated maturity occurs pursuant to Section 7 of this Note, the Holder has a right of setoff 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 Company 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 Company 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 setoff. 9. 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. 10. Waiver, Extensions. Presentment, demand, notice of dishonor, the homestead exemption, 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. 11. 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. 12. Governing Law; Usury. This Agreement will be governed by Florida law. It is the intention of the Maker and the Holder to comply with the usury laws of the United States and the State of Florida. Accordingly, it is agreed that, notwithstanding any provision in this Note to the contrary, this Note will not require the payment of, or permit the collection of, interest in excess of the maximum permitted by law. 13. Notices. All notices, requests, demands and other communications with respect to this Note will be in writing and will be delivered by hand, by telecopy, 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: Dart Industries Inc. 14901 South Orange Blossom Trail Orlando, Florida 32837 Attn: Vice President and Secretary Fax: 407-826-4505 If to Maker: _____________________ _____________________ _____________________ _____________________ 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. 14. 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. 15. Time of Essence. TIME IS OF THE ESSENCE with respect to the performance by the Maker of each of its obligations hereunder. IN WITNESS WHEREOF, the Maker has duly executed this Note. _______________________________ Name: _______________________________ EX-10.12 4 ex1012.txt FORM OF STOCK PLEDGE AGREEMENT EXHIBIT 10.12 FORM OF STOCK PLEDGE AGREEMENT between Tupperware and various executives THIS STOCK PLEDGE AGREEMENT dated as of __________, ______ (this "Agreement") by and between __________________ (the "Pledgor") and Dart Industries Inc., 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 $__________, together with accrued interest thereon at the rate set forth therein. The Pledgor has agreed to pledge and deliver to the Secured Party, as security for the payment of the indebtedness evidenced by the Note, ______ shares of common stock of Tupperware Corporation, a Delaware corporation (the "Company"), in accordance with the terms and conditions set forth in this Agreement. 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 in the form of Exhibit A hereto-endorsed in blank, _________ shares of common stock of the Company. Such securities, and any replacements or substitutions thereof, all dividends and distributions thereon, all accessions thereto, and all proceeds thereof, 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 in the form of Exhibit A hereto endorsed in blank or other appropriate instruments of assignment, all certificates (if any) representing stock dividends or 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 and all obligations of the Pledgor to the Secured Party under this Agreement, including any attorneys' fees and other expenses incurred in the collection of the Note or the enforcement of this Agreement. Upon payment of the entire indebtedness of the Pledgor to the Secured Party evidenced by the Note, this Agreement will terminate and all the Collateral will be returned and delivered by the Secured Party to the Pledgor. 4. Sale of Collateral. The Pledgor covenants and agrees that he or she will not sell, assign, transfer, pledge or otherwise dispose of or create a lien on or security interest in any of the Collateral so long as it is subject to this Agreement, except that the Pledgor may, by irrevocable written notice to the Secured Party, transfer all or any portion of the Collateral to the Secured Party on a date specified in the notice (which shall not be earlier than the date on which the Secured Party receives the notice) and apply the value of the transferred Collateral to the indebtedness evidenced by the Note in accordance with the terms of the Note. The value of the transferred Collateral will be calculated on the basis of the closing price of the Company's common stock on the New York Stock Exchange on the date of transfer to the Secured Party. 5. Partial Release of Collateral. When the Pledgor has paid 25% of the original principal sum of this Note and the Associated Interest (as defined in the Note), the Secured Party will promptly release to the Pledgor 25% of the number of shares of common stock originally pledged hereunder (adjusted for any stock splits and stock dividends), taking into account any sale of Collateral pursuant to paragraph 4 hereof. When the Pledgor has paid 50% of the original principal sum of this Note and the Associated Interest (as defined in the Note), the Secured Party will promptly release to the Pledgor 50% of the number of shares of common stock originally pledged hereunder (adjusted for any stock splits and stock dividends), taking into account any sale of Collateral pursuant to paragraph 4 hereof and any previous release of Collateral pursuant to this paragraph 5. When the Pledgor has paid 75% of the original principal sum of this Note and the Associated Interest (as defined in the Note), the Secured Party will promptly release to the Pledgor 75% of the number of shares of common stock originally pledged hereunder (adjusted for any stock splits and stock dividends), taking into account any sale of Collateral pursuant to paragraph 4 hereof and any previous release of Collateral pursuant to this paragraph 5. Any release of Collateral pursuant to this paragraph 5 shall be subject to the conditions that at the time thereof no default by the Pledgor shall have occurred and be continuing under the Note or under this Agreement and that such release will not result in any violation of Regulation U of the Board of Governors of the Federal Reserve System. 6. Pledgor's Representation. The Pledgor represents, warrants and covenants that he or she 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 or she 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 exercise any and all voting rights and the right to receive all dividends, subject to Section 2 of the Note. 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 or partial satisfaction of the outstanding indebtedness evidenced by the Note, which indebtedness will be reduced by an amount equal to the value of the Collateral on the date of its delivery to the Secured Party. The value of the Collateral will be calculated on the basis of the closing price of the Company's common stock on the New York Stock Exchange on the date of transfer to the Secured Party. If the value of the Collateral is insufficient to discharge the outstanding indebtedness and other costs and expenses owed under the Note and this Agreement, the Pledgor will remain liable for the deficiency. If the value of the Collateral exceeds the outstanding indebtedness and other costs and expenses owed under the Note and this Agreement, the Secured Party will transfer to the Pledgor such excess in the form of common stock of the Company with a cash payment for any fractional share, and thereafter the Pledgor will have no other or further liability arising from such indebtedness. 10. Expenses. The Pledgor will pay all costs of collection and enforcement of this Agreement (including court costs and attorneys' fees) in the event of default or failure of the Pledgor to fulfill any term, covenant or condition under this Agreement. 11. Binding Agreement; Governing Law. This Agreement will bind the parties hereto and their respective heirs, personal representatives, successors and assigns. This Agreement will be governed by Florida law. 12. Notices. All notices, requests, demands and other communications with respect to this Agreement will be in writing and will be delivered in the manner and at the addresses specified in the Note. IN WITNESS WHEREOF, the Pledgor and the Secured Party have executed or caused this Agreement to be executed in their names as of the date first above written. PLEDGOR _______________________________ Name:__________________________ SECURED PARTY DART INDUSTRIES INC. By:____________________________ Title:_________________________ EXHIBIT A STOCK POWER FOR VALUE RECEIVED, the undersigned does hereby sell, assign and transfer to _____________________________ _____ Shares of Common Stock of Tupperware Corporation, a Delaware corporation, represented by Certificate No. ___________ (the "Stock"), standing in the name of the undersigned on the books of said corporation and does hereby irrevocably constitute and appoint ___________________________________ as the undersigned's true and lawful attorney, for it and in its name and stead, to sell, assign and transfer all or any of the Stock, and for that purpose to make and execute all necessary acts of assignment and transfer thereof; and to substitute one or more persons with like full power, hereby ratifying and confirming all that said attorney or substitute or substitutes shall lawfully do by virtue hereof. Dated: _______________ IMPORTANT ____________________________ The signature must correspond in every particular, without alteration, with the name as Name:_______________________ printed on your Certificate. EX-21 5 ex21.txt SUBSIDIARIES OF TUPPERWARE CORPORATION EXHIBIT 21 TUPPERWARE CORPORATION Active Subsidiaries As of March 20, 2001 The following subsidiaries are wholly owned by Tupperware Corporation or a subsidiary of Tupperware Corporation (degree of remoteness from the registrant is shown by indentations). Tupperware Corporation Tupperware Financial Corporation Dart Industries Inc. Tupperware Espana, S.A. Deerfield Land Corporation Tupperware Far East, Inc. Tupperware Turkey, Inc. Dart Far East Sdn. Bhd. Dart de Venezuela, C.A. Tupperware Colombia S.A. Dart do Brasil Industria e Comercio Ltda. Daypar Participacoes Ltda Academia de Negocios S/C Ltda. Tupperware Hellas S.A.I.C. Tupperware Del Ecuador Cia. Ltda. Dart Industries Hong Kong Limited Dart Industries (New Zealand) Limited Tupperware New Zealand Staff Superannuation Plan Dart, S.A. de C.V. Servicios Especializados de Arrendamiento en Latinoamerica S.A. de C.V. Dartco Manufacturing Inc. Tupperware, Industria Lusitana de Artigos Domesticos, Limitada Tupperware (Portugal) Artigos Domesticos,Ltda Premiere Products, Inc. Premiere Korea Ltd. Premiere Marketing Company Exportadora Lerma, S.A. de C.V. Tupperware Australia Pty. Ltd. Tupperware Singapore Pte. Ltd. Newco Logistica e Participacoes Ltda. Centro de Distribuicao RS Ltda. Distribuidora Comercial Nordeste de Produtos Plasticos Ltda. Distribuidora Comercial Paulista de Plasticos Ltda. Centro de Distribuicao Mineira de Produtos de Plastico Ltda. Distribuidora Esplanada de Produtos Plasticos Ltda. Corcovado-Plast Distribuidora de Artigos Domesticos Ltda. Distribuidora Baiana de Produtos Plasticos Ltda. Uniao Norte Distribuidora de Produtos Plasticos Ltda Uniao Sul Comercial de Plasticos Ltda. Centro Oeste Distribuidora de Produtos Plasticos Ltda. Premiere Manufacturing, Inc. Tupperware U.S., Inc. Tupperware Distributors, Inc. Tupperware Factors Inc. Tupperware.com, Inc. Tupperware Canada Inc. Dart Staff Superannuation Fund Pty Ltd. Importadora Y Distribuidora Importupp Limitada Tupperware Iberica S.A. Tupperware (Thailand) Limited Tupperware Uruguay S.A. Dart Executive Pension Fund Limited Dart Pension Fund Limited Tupperware U.K. Holdings, Inc. The Tupperware Foundation Tupperware Products, Inc. Tupperware de El Salvador, S.A. de C.V. Tupperware del Peru S.R.L. Dart Holdings, S. de R.L. Tupperware Honduras, S. de R.L. Tupperware de Costa Rica, S.A. Tupperware de Guatemala, S.A. Asociacion Nacional de Distribuidores de Productos Tupperware, A.C. Tupperware International Holdings Corporation Tupperware International Holdings BV Tupperware Israel Ltd. Tupperware Belgium N.V. Tupperware France S.A. Tupperware Polska Sp.zo.o Dart Argentina S.A. TWP S.A. Tupperware Asia Pacific Holdings Private Limited Tupperware India Private Limited Tupperware China, LLC Tupperware (China) Company Limited Dart (Philippines), Inc. Tupperware Realty Corporation Tupperware Philippines, Inc. Tupperware Holdings B.V. Tupperware Services GmbH Tupperware Nederland Properties B.V. Tupperware Nederland B.V. Tupperware Deutschland GmbH Tupperware Osterreich G.m.b.H. Tupperware Southern Africa Proprietary) Limited Tupperware Products B.V. Tupperware (Suisse) SA Tupperware Products S.A. Tupperware d.o.o. Tupperware Bulgaria EOOD Tupperware Eesti OU UAB "Tupperware" SIA Tupperware Latvia Tupperware Luxembourg S.ar.l. Tupperware Slovakia s.r.o. Tupperware Morocco Tupperware Asset Management Sarl Diecraft Australia Pty. Ltd. Tupperware Egypt Ltd Tupperware East Africa Limited Tupperware Italia S.p.A. Tupperware General Services N.V. Japan Tupperware Co., Ltd. Tupperware Trading Ltd. Tupperware Czech Republic, spol. s.r.o. Tupperware United Kingdom & Ireland Limited Tupperware Nordic A/S Tupperware Panama, S.A. Dart Manufacturing India Pvt. Ltd. Premiere Products Mexico S.de R.L. BeautiControl Mexico, S.de R.L. Tupperware Finance Holding Company B.V. Tupperware Finance Company B.V. Tupperware Holdings Corporation Tupperware Home Parties Corporation Tupperware Export Sales, Ltd. Tupperware Services, Inc. Tupperware Holdings Ltd. BeautiControl, Inc. BC International Cosmetic & Image Services, Inc. BeautiControl Canada, Ltd. BeautiControl International, Inc. BeautiControl International Services, Inc. BeautiControl Asia Pacific Inc. BeautiControl Hong Kong, Inc. BeautiControl Japan, Inc. BeautiControl Taiwan, Inc. Eventus International, Inc. JLH Properties, Inc. BeautiControl Cosmeticos do Brasil Ltda. International Investor, Inc. EX-23 6 ex23.txt CONSENT OF INDEPENDENT CPAS 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. 333-04871), the Registration Statement on Form S-8 (No. 333-04869), the Registration Statement on Form S-8 (No. 333-18331), the Registration Statement on Form S-8 (No. 333-48650) and the Registration Statement on Form S-3 (No. 333-12125) of Tupperware Corporation of our report dated February 20, 2001, relating to the financial statements which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 20, 2001, relating to the Financial Statement Schedule, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Orlando, Florida March 21, 2001 EX-24 7 ex24.txt POWERS OF ATTORNEY EXHIBIT 24 POWERS 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 30, 2000, 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 13th day of March, 2001. /s/ Rita Bornstein --------------------------- Rita Bornstein /s/ Clifford J. Grum --------------------------- Cliford J. Grum /s/ Betsy D. Holden --------------------------- Betsy D. Holden /s/ Joe R. Lee --------------------------- Joe R. Lee /s/ Bob Marbut --------------------------- Bob Marbut /s/ Angel R. Martinez --------------------------- Angel R. Martinez /s/ David R. Parker --------------------------- David R. Parker /s/ Robert M. Price --------------------------- Robert M. Price /s/ Joyce M. Roche --------------------------- Joyce M. Roche /s/ M. Anne Szostak --------------------------- M. Anne Szostak EX-13 8 segment3.txt TUPPERWARE CORPORATION ANNUAL REPORT EXHIBIT 13 [LOGO] TUPPERWARE CORPORATION 2000 ANNUAL REPORT Tupperware Corporation 1 DEAR SHAREHOLDERS, Strong Results For the Year I am pleased to report another good year for Tupperware. Once again we succeeded by building on the fundamental strengths of our Company: our brand, our direct selling channel, our global beachheads and our cash flow. In 2000, we achieved strong, double-digit growth in local currency earnings, excluding re-engineering costs, and a solid gain in sales. Our string of local currency income increases now has been extended to eight quarters. We continue on our strategic march toward becoming the world's premier direct selling company. We made no changes in direction in 2000. Rather, all of the performance gains resulted from a sharp focus on capitalizing on our three primary strategic growth levers: expanding the number of sellers in our system, developing our integrated direct access channels and adding new products and categories. More Sales Consultants We ended 2000, compared with 1999, with a larger sales force in every region. A highlight was the 10-percent improvement in the United States, our first year-over-year gain in several years, even in the midst of a full employment economy. The gain clearly demonstrates how our integrated direct access strategies are helping to build our core business. At the close of 2000, our worldwide sales force numbered 1.1 million, up 5 percent from the preceding year. Importantly, the active sales force was up as well, 2 percent in total. More Selling Channels - Integrated Direct Access The development of multiple sales channels has been the key initiative driving the revitalization of Tupperware over the past couple of years. We are pleased that our plan is working to accelerate revenue growth by reaching consumers who are not in contact with a member of our sales force, while at the same time strengthening our core party plan channel. The program, which we call "integrated direct access," makes our direct sales force a vital partner in each of our new platforms: showcases, Internet selling and television shopping. The essence of this effort has been integrating all of these channels, initially in the United States and now throughout the world, so that they work in harmony and build the revenue potential for both the members of our direct sales force and the Company. Chairman's Letter 2 Tupperware Corporation In 2000, we dramatically expanded our major new selling platform - showcases - adding locations in the United States and in multiple markets within each of our international regions. Showcases give customers more choice in how they interact with Tupperware and purchase our products, and they create expanded horizons for our sales force. Millions of shoppers visit malls throughout the year in the United States alone, presenting an outstanding opportunity for introduction to or reconnection with Tupperware. The showcase channel is fully integrated with our core direct selling channel. Our distributors operate the showcases using the independent sales force they have trained. The sales consultants, in turn, make incremental sales and generate a growing number of party dating and recruiting leads from this new channel. In April 2000, we began offering U.S. sales consultants their own personalized web sites, which provide their customers with the ability to purchase Tupperware(R) products conveniently and instantly on a 24-hour basis. The Internet is a revolutionary communication and sales tool, and in the United States now reaches more than half of all households. The Internet brings Tupperware(R) products to people who do not have the opportunity or the desire to attend a Tupperware home party. It also gives customers who are geographically distant from their consultants or who are just looking to fill in their collection of Tupperware(R) the opportunity to purchase our products with great convenience, and gives the Company a younger, more modern, image. As with our showcase development, our direct sales force is totally integrated into our Internet strategy. For every sale made over the Internet, sales consultants earn a commission at a level commensurate with their net earnings from their party plan sales, and are provided with strong incentives to utilize the Internet to expand their businesses and streamline their administrative tasks. We further enriched our multiple channel strategy last year by doubling the number of Tupperware television shows to 12 on the Home Shopping Network. Television has proved a potent vehicle for promoting our products and increasing brand awareness among consumers. These shows highlight the benefits of attending and hosting our Tupperware parties, and also portray the attractive opportunities for viewers to begin direct selling careers with Tupperware. Our integrated direct access channels accounted for 8 percent of U.S. sales in 2000, up from 4 percent in 1999. Chairman's Letter Tupperware Corporation 3 More Products and More Product Categories We continued to emphasize product innovation in 2000 and again met our goal of obtaining more than 20 percent of our total revenues from products introduced in the preceding two years. Our ability to perceive and predict market needs and rapidly design and introduce new products to meet those needs is a cornerstone of our long-term growth strategy. Equally significant, we are creating global branded products in addition to products tailored for a specific culture or market. For example, our breakthrough food storage product, FridgeSmart(TM), developed in conjunction with the University of Florida, was successfully introduced worldwide over the course of 2000. The same was true of our popular salad spinner and E-Series(TM) knives. Previously, it took five years or more of phased launches to distribute a new product across all of our world markets. We have expanded our categories as well as our products. Tupperware products outside of our traditional areas of food storage, food preparation and food serving categories, such as children's, microwave, cookware, kitchen gadgets and knives, now account for over 20 percent of total revenues. A decade ago these categories contributed virtually none of our revenues. BeautiControl Acquisition We added another leg to our growth strategy with the acquisition in October of BeautiControl, Inc., a 20-year-old company whose vision is to be the premier direct seller of cosmetics and skin care products. This acquisition gives us a new, attractive product category in an industry that we know well. In addition, BeautiControl's marketing structure is built much like Tupperware's, and its North American direct sales force, numbering approximately 47,000 at the end of 2000, is one of the best trained in the industry. BeautiControl represents an ideal strategic expansion for Tupperware. Beauty and skin care is the largest single category in the direct selling industry. In Latin America, for example, the overall market for personal care products is estimated to be $18 billion annually, compared with less than $1 billion for Tupperware product categories. Plus, most beauty and skin care products in Latin America are sold through the direct channel. BeautiControl adds not only a new product category, but also a valuable line of consumable products that must be replaced as used. Tupperware products, by contrast, are long lasting and seldom need replacing. BeautiControl is now profitable in North America, and will continue to be led by its co-founders, Jinger and Dick Heath. We plan to grow BeautiControl by increasing its North American sales force and by drawing upon Tupperware's extensive international direct selling experience and operational capabilities. We plan to launch the BeautiControl line in Mexico in the second quarter of 2001, and then will move into Brazil. In addition, we foresee excellent future opportunities in Asia Pacific. We warmly welcome BeautiControl's employees and independent sales force to the Tupperware family. Chairman's Letter 4 Tupperware Corporation Stock Purchase by Tupperware Executives In October we announced that a group of 33 senior executives would participate in a voluntary plan to purchase 847,000 shares of the Company's stock. Executives were given the opportunity to borrow money from the Company for these purchases, with their loans secured by the stock. These share purchases involve a substantial financial commitment on the part of the executives. Participation in the program reflects to a strong degree the management team's confidence in the Company's future and the value of its stock. This plan enabled our management team to raise its stock ownership significantly and increase its incentive for improving Tupperware's performance. In conjunction with this plan, we repurchased 800,000 shares of our stock in the fourth quarter of 2000 at a total cost of $14.4 million, or an average price of $18 per share. In Memoriam We were saddened by the unexpected and untimely loss of William E. Spears, senior vice president in charge of worldwide integrated direct access programs. Bill was a colleague and friend who inspired everyone who had the privilege of working with him. We will miss his vision and leadership. We offer our deepest condolences to his family. Management Change Robert W. Williams, who has been president of our Asia Pacific business since 1995, has decided to retire as of the end of March 2001. Bob has made tremendous contributions to our business, for which we are grateful. We wish him the best in his retirement. Taking over for Bob as president of our Asia Pacific region is Steven R. Kroos, currently president of Tupperware Japan. Steve has been successful in running our Japanese business, and before that our operations in Korea, and we are confident that he will do very well with his new responsibilities. New Board Member In August, we welcomed M. Anne Szostak to the Company's board of directors. Anne is an executive vice president and corporate director of human resources for FleetBoston Financial, the nation's seventh largest bank holding company. We look forward to significant contributions from Anne. In Conclusion We believe that we have "cracked the code," creating the template of the future for direct selling by Tupperware. The convergence of the party plan with showcases, Internet selling and television shopping, and the new opportunities from the BeautiControl acquisition will bring increasing value to our stockholders. On behalf of Tupperware, we thank you for your continuing support. RICK GOINGS /s/ Rick Goings CHAIRMAN AND CHIEF EXECUTIVE OFFICER FEBRUARY 28, 2001 Chairman's Letter [TUPPERWARE GRAPHIC] 6 Tupperware Corporation BUSINESS OVERVIEW Overall Performance As a result of progress made on a number of our initiatives during the year, net income in 2000 increased by 9 percent to $99.1 million, or $1.71 per share, up from $91.3 million, or $1.58 per share in 1999, excluding re-engineering costs. Weak currencies, especially the euro, again impacted our results significantly, reducing earnings per share by 25 cents. Excluding the impact of foreign exchange and re-engineering costs, net income increased 30 percent. Revenues showed good growth for the year, increasing by 8 percent to $1.1 billion, excluding the negative impact of foreign exchange. Sales of BeautiControl products contributed to results beginning with its acquisition in October. A change in the distribution model in some Latin American countries, under which product is now sold directly to the sales force, also contributed positively. Cash flow from operations, after capital expenditures but before re-engineering, was $53 million for 2000. We have averaged $72 million in annual cash flow each year for the past five years, a level that supports our dividend and the funding of business needs. We continued to be financially strong. Our total debt-to-capital ratio was 76 percent at the end of 2000, after the $56 million of borrowings to fund the BeautiControl acquisition and the $14 million expended for the share repurchase. We plan to use the growing cash flow generated by the business to reduce debt, with the expectation of lowering our debt-to-capital ratio to the 45-percent range by the end of 2002. Our 2000 pretax interest coverage was 8 times, equaling our 1999 coverage. This important measure of financial strength places us in the upper third of Standard & Poor's 500 companies with similar credit ratings. We invested $46 million in capital expenditures in our business in 2000, approximately 40 percent of which was used for new molds to support the manufacture of new products. Business Overview Tupperware Corporation 7 Dividends of $0.88 per share were declared during 2000, unchanged from the previous year. The dividend yield was 4.3 percent, based on Tupperware's year-end closing price. The dividend is well protected by our cash flow. Management's goal is to restore the dividend payout ratio to the targeted 35-percent level through future earnings growth. We completed the second year of our three-year re-engineering program. We estimate that the re-engineering initiatives will produce recurring benefits of $40 to $50 million each year, beginning in 2002. We are well on target toward meeting this objective and restoring our return on sales to the highly attractive 19 to 20 percent range last realized in 1996. Return on sales was 16 percent in 2000, before re-engineering costs and the inclusion of BeautiControl, up from 12 percent just two years ago. Phase I of the re-engineering program, which involved rationalizing our manufacturing operations and resizing and realigning some of our regional offices, was completed in 1999. Phase II of the program, which began in 2000, is still proceeding. In this phase, we are centralizing our information technology operations, greatly standardizing our software systems and implementing shared service centers for appropriate functions and regions. Further, we are implementing an importer-distributor model in our smaller Latin American markets - - outside of Mexico and Brazil. Also part of Phase II is the formation of eight purchasing councils to coordinate our worldwide procurement of several commodities, ranging from raw materials to printed matter to services. Benefits of $25 million were realized in 2000, which include $10 million of annual benefits first realized in 1999. Costs incurred in 2000 totaled $27 million, and program-to-date costs have been $43 million. Total costs for the program are now expected to run from $50 to $60 million, as the high end of the spending range has been trimmed by $15 million from the original forecast made in 1999. Business Overview 8 Tupperware Corporation Regional Review - Europe Europe, which continues to be the most significant regional contributor to revenues and income, performed well in 2000, achieving increases in sales and profits in local currency in spite of the dampened consumer-spending environment caused by the weak euro. By contrast, most other direct selling companies experienced sales declines, many by double-digit percentages. The difficulties experienced in 1999 by all direct sellers in Germany as a result of government-imposed social security regulations on part-time workers were successfully addressed. We developed a program that provided assistance to our sales force to help them comply with these regulations, and, as a result, enjoyed increases in both our sales and the size of our sales force in Germany, which is our largest European market. Sales improved in France through the year after a slow start related to terrible storms there in late December 1999 and January 2000. We grew in the middle-size markets of Austria and Scandinavia, where we are expanding our opportunities as a result of more aggressive recruiting of sales consultants. We made nice progress in the emerging Russian market as well, where we approached profitability. Late in 2000, we entered Morocco and Egypt, two countries with expanding middle classes. Based on our success in similar countries in the region, we are optimistic about the future of these new Tupperware markets. We continue to strengthen our competitive position each year in Europe and are encouraged about our longer-term prospects for modest sales growth in this region with a strong, mid-20-percent return on sales. Regional Review Tupperware Corporation 9 Regional Review - Asia Pacific Strong gains were achieved in 2000 in Asia Pacific, with local currency operating profit up 35 percent over 1999 on a small gain in sales, the result of aggressive recruiting in recent years, a steady flow of new product introductions and the one-time benefit of a use-tax abatement incentive. Asia Pacific's performance was led by continued improvement in Japan, the second largest economy in the world, where we grew our sales force through record recruiting, and where we have profited over the past two years from the increased efficiency of our restructured manufacturing operation and cost control. Our price points are higher in Japan than elsewhere in the region, and we have been successful with a number of new high-end products specifically designed for this market. We achieved these favorable results in spite of a Japanese economy that remains extremely sluggish. A number of other markets in the area also performed well in 2000, including Korea, where we finished the year with another improvement in the size of the sales force. The economy of the Philippines, the other of the three large markets in the region, suffered throughout the year from political upheaval and the resulting social unrest. The key emerging markets of Indonesia, India and China, which account for almost half of the world's population, finished the year with rising sales. Although all three markets are currently relatively small for Tupperware, they are growing nicely and we see great potential for the future. Indonesia improved its profitability, and India and China both became profitable for the first time in 2000. Regional Review 10 Tupperware Corporation Regional Review - Latin America Latin America showed substantial improvement in 2000, reflecting continuing strong growth in our lead market in the region, Mexico, and the positive impact on sales of a new distribution model in Brazil. By improving distributor profitability through centralized order processing and distribution, we have succeeded in re-focusing distributors' efforts on the key sales drivers of recruiting, training and motivating their sales forces. As a result of these factors, the region achieved a double-digit increase in local currency sales, before the positive impact of the new distribution model, and a profit increase over 1999 of more than 20 percent, excluding re-engineering costs. In January 2001, we announced our decision to move to an importer-distributor model for all of the region's markets, except for Mexico and Brazil. We expect this change to significantly improve the profitability in these smaller markets by removing company overhead and stimulating the entrepreneurial spirit of the importer distributors. Regional Review - United States Nowhere has the revitalization of Tupperware taken hold more strongly than in our home market, which benefited from a larger, more productive sales force, and the successful expansion of distribution channels as a result of our integrated direct access strategy. We achieved a double-digit sales increase and a tripling of operating profit, along with an outstanding 10-percent year-end 2000 sales force size advantage. This was the first such year-over-year sales force increase since 1995. The increase was achieved in the midst of the worst recruiting environment in a generation, as a result of an extremely strong economy and a low unemployment rate. Another initiative under way is a new business model for our sales force. This model includes an Internet ordering capability for our sales force's party plan orders. We believe using this capability will reduce costs for the sales force and us, and will free up the sales force's time, allowing them to devote more effort to productive selling activities. Regional Review Integrated Direct Access... TUPPERWARE - ANYWHERE, ANYTIME. [CIRCLE GRAPHIC CONTAINING:] INTERNET SHOWCASES CORE DIRECT SELLING TELEVISION SHOPPING ALLIANCES Tupperware Corporation 13 Showcases, the Internet and Home Shopping Network television blossomed in the past year as new Tupperware sales channels, making our products accessible to a vastly larger audience and helping build our core party plan business. Integrated direct access has been one of the most successful new initiatives in Tupperware's history. It has launched dramatic new income opportunities for our sales force and brought new and former participants into the party plan business, and helped us to retain people in our sales force by creating new party dating and consultant recruitment opportunities. Designing new sales channels that do not weaken traditional channels has been a challenge for many companies. Tupperware, however, has met that challenge with great success. We have developed a multiple channel network of showcase, e-commerce and television that actually enhances our existing sales force rather than competes with it. The use of multiple channels not only allows us to reach new customers and accelerate our revenue growth, but also to strengthen and lift the performance of our direct sales force, which participates financially in sales from every channel. Integrated Direct Access 14 Tupperware Corporation The showcase program began on a test basis in 1998. Its overwhelmingly positive reception by consumers and our distributors led us to expand the program during the holiday season to more than 250 malls across the United States in 1999, and more than 450 malls in 2000. Over 90 percent of our U.S. distributors participated in showcases in 2000. Showcases were opened as well in more than a dozen countries in Europe, Latin America and Asia Pacific in 2000, based on the U.S. model. Our goal over the next 3 to 5 years is to open, along with our sales force partners, 1,000 year-round showcases in the United States, and year-round and seasonal showcases in as many of our international markets as local laws and culture permit. The Internet is our second major new integrated direct access channel. We launched our e-commerce program in the United States in August 1999, with a complete redesign of our web site, Tupperware.com, and our first offering of products for sale via the Internet. The content of the site was designed to support our direct sales force and promote our brand, which it has done very effectively. Integrated Direct Access Tupperware Corporation 15 We began with an immediate advantage enjoyed by very few e-commerce companies. We already had in place a sophisticated and efficient order fulfillment system. This system, developed to serve our direct sales force, was easily modified to fulfill Internet orders and continues to function very efficiently, delivering most orders in 2 to 3 days from receipt. We have been successful in driving traffic to our web site, and last year enhanced its attractiveness by offering personalized web sites to all of our U.S. sales force. This initiative creates sales force sites that sit on top of, and act as a gateway to, Tupperware.com. These sites allow for personalization and the ability of customers to buy Tupperware(R) products through the web for the credit of their sales consultant, further harmonizing our Internet strategy with the interests of our sales force partners. In fact, the sales force is now earning commissions for orders placed through Tupperware.com as well. Integrated Direct Access 16 Tupperware Corporation We have created additional incentives for our sales people and their customers to embrace this initiative. More than 10,000 members of the U.S. sales force now have their own web sites. We look forward to an increasing percentage of our 80,000-plus U.S. sales people operating their Tupperware-sponsored personal sites. Finally, we expanded our Home Shopping Network commitment to 12 one-hour shows in 2000, double the number in 1999. Our own sales consultants demonstrate Tupperware(R) products on these shows, providing valuable exposure to our brand, our products, the party plan and the Tupperware consultant earnings opportunity. Integrated Direct Access Expanding the Marketplace...OUR 40-YEAR GLOBAL TRADITION. [GRAPHIC WITH NAMES OF COUNTRIES] Tupperware Corporation 19 Consumers can purchase Tupperware(R) products in more than 100 countries representing every type of economy in the world. We continue to enter new markets and succeed across a broad cultural spectrum. Our opportunities for expansion are unlimited. We have sold Tupperware(R) products in international markets for more than 40 years. Some Tupperware(R) products are tailored for consumers in highly developed countries, others for consumers in emerging economies and still others for consumers worldwide. For example, high price-point air and water purifiers succeed in Japan, as does low price-point melamine tableware in the Philippines. Our Rock `N Serve(TM) microwave products are popular in all of our geographic regions, while the OvenWorks(TM) high-end products, which can go from microwave to conventional oven then to refrigerator and freezer, are enthusiastically received by consumers in the United States and Europe. In the latter part of the 1990s and in 2000, we developed a presence in a number of new markets throughout the world, including China, the Czech Republic, India, Indonesia, Poland, the Slovak Republic, Slovenia, Turkey and Russia. Expanding the Marketplace 20 Tupperware Corporation We re-entered the market in Mainland China two years ago through a combination of storefronts and other channels, and are continuing to add sales personnel and increase sales. China, with its large population, strong family tradition and relatively undeveloped retail infrastructure, is a country with obvious long-term potential for Tupperware. In India, the country with the second largest population in the world, we reached profitability in 2000, only four years after our market entry. We opened a manufacturing plant there in the spring of 2000 to meet our growing needs in that important country. Our solid position throughout the world is built on the strength of our more than 1 million sales consultants and the global strength of our brands. In addition, quality products that meet the different cultural and lifestyle needs of consumers throughout the world support our growing market power. Our international strength is built also on the basic social need of all people to interact with and learn from their fellow human beings, a key underpinning of the entire direct selling industry. Expanding the Marketplace Growing the Product Line...CREATING FOR CONSUMER NEEDS. [CIRCLE GRAPHIC CONTAINING:] HOME ORGANIZATION BEAUTY KNIVES & CUTLERY COOKWARE AIR/WATER PURIFICATION TABLE SERVICE AND DECORATION NEW CHILDREN'S LINES CORE FOOD STORAGE, PREPARATION AND SERVING Tupperware Corporation 23 We added the exciting new product categories of premium beauty and skin care last year through the acquisition of BeautiControl, opening new opportunities for leveraging Tupperware's direct selling channel and international market strength. We also introduced many new Tupperware products in 2000, again meeting the goal of obtaining 20 percent of sales from new products introduced in the past two years. Our new product strategy is first of all to support and extend our core product lines of food storage, food preparation and food serving, and then to expand into new categories that complement these core product lines. Examples of such new categories opened by Tupperware in recent years include cookware, home organization and environment, candles and accessories, bath organization, cutlery and knives, and table service and decoration. Expansion into these categories has broadened our growth horizons substantially, none more so than Beauticontrol, which brings us consumable cosmetics and skin care lines. Growing the Product Line Tupperware Corporation 24 Beauticontrol's line of high quality skin care products and cosmetics are formulated for different skin colors and types and matched to a client's needs with the assistance of Beauticontrol's exclusive "Skin Sensors" analysis system. This system enables Beauticontrol's sales consultants to recommend a customized skin care regimen for each client. People have become more aware of the need to treat sun-damaged skin, protect their skin from environmental elements and keep their skin clean and free of harmful toxins. Beauticontrol's research institute has developed a number of advanced products to address these issues of beauty and health. One of Beauticontrol's best-selling skin care products is the Regeneration(R) Gold Line. This treatment utilizes alpha hydroxy acids and tissue stimulation compounds to help firm, tighten and smooth skin and minimize lines and wrinkles. Beauticontrol holds one of only two patents in the world on an alpha hydroxy skin care product. Growing the Product Line Tupperware Corporation 25 We expanded our core lines as well in 2000, including product extensions for the revolutionary Fridgesmart(TM) food storage systems that double the life of fresh produce in a refrigerator. The Fridgesmart(TM) line, developed in conjunction with the University of Florida, is now being sold very successfully throughout the world. Solving consumer problems is an important part of Tupperware's value, and the drip-less straw seal introduced in 2000 is a prime example. This seal enables children and adults to transport beverages from one location to another without spills. Several new, beautiful and cleverly designed food preparation products help with kitchen tasks, including our new egg slicer, horizontal peeler, whisk, zester, silicone spatulas and "On The Dot" timer. All incorporate exceptional Tupperware quality throughout. The peeler, for example, is incredibly sharp and fitted to the hand for perfect control. Growing the Product Line 26 Tupperware Corporation A wide range of the storage, preparation, microwave, cooking, serving and home decoration products that were introduced during the year are shown in the following product showcase. One relatively new and very successful category among this group is our children's line, which in 2000 added a "Mini Expressions" toy set, Tupperware baby bottle, divided feeding bowl, toddler's meal set, "Winnie the Pooh"(*) canteen and "Toy Story 2"(*) line of products. As the latter two examples illustrate, we have been successful in licensing names and images that are popular with children for use in our products, including characters licensed from the Walt Disney Company, as well as Pokemon(R), Barbie(R) and Barney(R) characters. Growing the Product Line [GRAPHIC SHOWING STRIPED BARS] Product Showcase A Tupperware party started every two seconds somewhere in the world in 2000. Our parties were attended by 100 million people, who were attracted by the color, quality of materials, design and utility of our products. Whether they came to us through parties, showcases, the Internet or television, consumers were treated to a dazzling array of new Tupperware and BeautiControl products in 2000, some of which are shown on the following pages. [PICTURE OF IMPRESSIONS PITCHER] TUPPERWARE(R) IMPRESSIONS PITCHER [PICTURE OF FRIDGESMART COLLECTION] [PICTURE OF FRIDGESMART COLLECTION] FRIDGESMART(TM) COLLECTION [GRAPHIC OF LEGACY RICE SERVER] [PICTURE OF LEGACY RICE SERVER] LEGACY RICE SERVER [PICTURE OF CARVING FORK AND CHEESE KNIFE] [PICTURE OF CARVING FORK AND CHEESE KNIFE] E-SERIES(TM) CARVING FORK AND CHEESE KNIFE [PICTURE OF SPICE LINE] [PICTURE OF SPICE LINE] PREMIUM SPICE LINE [PICTURE OF BAKING ESSENTIALS LINE] [PICTURE OF BAKING ESSENTIALS LINE] BAKING ESSENTIALS LINE [PICTURE OF CAKE SERVER] [PICTURE OF CAKE SERVER] TUPPERWARE(R) EXPRESSIONS CAKE SERVER [PICTURE OF ICING BALL] ICING BALL [PICTURE OF KEEP 'N HEAT CONTAINER] KEEP `N HEAT(TM) CONTAINER [PICTURE OF SALT & PEPPER SHAKER] [PICTURE OF SALT & PEPPER SHAKER] TUPPERWARE(R) EXPRESSIONS SALT AND PEPPER SHAKERS [PICTURE OF PRESSURE COOKER] PERFECT KITCHEN(TM) PRESSURE COOKER [PICTURE OF TIMER] ON THE DOT TIMER [PICTURE OF LOTION] SKINLOGICS(R) CLEANSING LOTION [PICTURE OF GOLD EYE REPAIR] REGENERATION(R) GOLD EYE REPAIR [PICTURE OF NAILOGICS(R) NAIL COLOR] [PICTURE OF NAILOGICS(R) NAIL COLOR] NAILOGICS(R) NAIL COLOR [PICTURE OF FREEZESMART CONTAINER] [PICTURE OF FREEZESMART CONTAINER] FREEZESMART(TM) WITH DATING DIAL [PICTURE OF REFRIGERATOR CONTAINER] [PICTURE OF REFRIGERATOR CONTAINER] FORGET-ME-NOT(TM) REFRIGERATOR CONTAINERS [PICTURE OF SPIN 'N SAVE] SPIN `N SAVE(TM) SALAD SPINNER Tupperware Corporation 57 FINANCIAL TABLE OF CONTENTS SELECTED FINANCIAL DATA 58 MANAGEMENT'S DISCUSSION AND ANALYSIS 62 CONSOLIDATED STATEMENTS OF INCOME 76 CONSOLIDATED BALANCE SHEETS 77 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 78 CONSOLIDATED STATEMENTS OF CASH FLOWS 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 81 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 101 REPORT OF MANAGEMENT 102 OFFICERS AND BOARD OF DIRECTORS 103 CORPORATE INFORMATION 104
58 Tupperware Corporation SELECTED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 2000 1999 - ----------------------------------------------------------------------------------------------------- OPERATING RESULTS Net sales: (a) Europe $ 424.1 $ 489.1 Asia Pacific 242.0 242.3 Latin America 193.0 154.2 United States 201.8 178.2 BeautiControl (b) 12.2 -- - ----------------------------------------------------------------------------------------------------- Total net sales $ 1,073.1 $ 1,063.8 ===================================================================================================== Operating profit (loss): Europe $ 94.1 $ 110.7 Asia Pacific 44.8 35.0 Latin America 8.0 (c) 12.0 United States 15.6 4.7 BeautiControl (b) 0.1 -- - ----------------------------------------------------------------------------------------------------- Total operating profit (loss) 162.6 162.4 - ----------------------------------------------------------------------------------------------------- Unallocated expenses (27.9)(c) (23.1)(c) Costs associated with becoming an independent company -- -- Re-engineering and impairment charge (12.5)(c) (15.1)(c) Interest (expense) income, net (21.1) (20.9) - ----------------------------------------------------------------------------------------------------- Income (loss) before income taxes and cumulative effect of accounting changes 101.1 (c) 103.3 (c) - ----------------------------------------------------------------------------------------------------- Provision for income taxes 26.2 24.3 - ----------------------------------------------------------------------------------------------------- Income (loss) before cumulative effect of accounting changes $ 74.9 (c) $ 79.0 (c) ===================================================================================================== Net income (pre-1997 pro forma) $ 74.9 (c) $ 79.0 (c) ===================================================================================================== Earnings per common share (pre-1997 pro forma):(f) Basic $ 1.30 (c) $ 1.37 (c) ===================================================================================================== Diluted $ 1.29 (c) $ 1.37 (c) =====================================================================================================
a. In October 2000, the Emerging Issues Task Force issued EITF 00-10, "Accounting for Shipping and Handling Revenues and Costs", which requires fees billed to customers associated with shipping and handling to be classified as revenue. Accordingly, Tupperware Corporation (Tupperware, the Company) has reclassified the revenue related to shipping and handling fees billed to customers from delivery expense to net sales for all periods presented. b. In October 2000, the Company purchased all of the outstanding shares of BeautiControl, Inc. (BeautiControl), and its results of operations have been included since the date of acquisition. c. In 1999, the Company announced a three-year re-engineering program. The re-engineering and impairment charge line provides for severance and other exit costs. In addition, unallocated expenses include $7.9 million and $1.0 million for internal and external consulting costs incurred in connection with the program in 2000 and 1999, respectively. Also in 2000, $6.3 million was recorded as a reduction to Latin America's operating profit related to the write-down of inventory and receivables associated with adopting an importing distributor model for certain countries. Total after-tax impact of these costs was $24.2 million and $12.3 million in 2000 and 1999, respectively. See Note 3 to the financial statements. Tupperware Corporation 59
1998 1997 1996 1995 1994 1993 1992 - --------------------------------------------------------------------------------------------------------- $ 518.7 $ 546.6 $ 581.7 $ 595.1 $ 540.1 $ 505.1 $ 490.7 211.5 279.0 338.0 355.1 329.3 286.9 268.3 186.8 247.2 268.5 200.6 176.4 154.4 138.7 186.9 176.7 200.5 227.0 247.5 245.8 225.9 -- -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- $1,103.9 $1,249.5 $1,388.7 $1,377.8 $1,293.3 $1,192.2 $1,123.6 ========================================================================================================= $ 123.9 $ 144.6 $ 153.0 $ 156.8 $ 125.0 $ 110.3 $ 92.4 20.2 37.2 61.0 59.4 46.3 40.3 32.9 (16.4) (5.7)(d) 43.3 19.4 15.7 15.7 5.9 4.0 (29.5)(d) 10.4 10.3 16.0 12.5 (139.6) -- -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- 131.7 146.6 267.7 245.9 203.0 178.8 (8.4)(e) - --------------------------------------------------------------------------------------------------------- (17.5) (18.0)(d) (16.1) (22.9) (12.0) (17.8) (24.1) -- -- (9.1) -- -- -- -- -- -- -- -- -- -- -- (22.7) (17.8) (8.0) 1.9 0.2 (12.6) (9.3) - --------------------------------------------------------------------------------------------------------- 91.5 110.8 (d) 234.5 224.9 191.2 148.4 (41.8)(e) 22.4 28.8 59.8 53.5 42.0 30.5 1.9 - --------------------------------------------------------------------------------------------------------- $ 69.1 $ 82.0 (d) $ 174.7 $ 171.4 $ 149.2 $ 117.9 $ (43.7)(e) ========================================================================================================= $ 69.1 $ 82.0 (d) $ 170.4 $ 161.1 ======================================================== $ 1.19 $ 1.34 (d) $ 2.75 $ 2.60 ======================================================== $ 1.18 $ 1.32 (d) $ 2.71 $ 2.57 ========================================================
d. Includes a $42.4 million 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. e. 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. f. In May 1996, 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. 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. Information is not applicable prior to 1995. 60 Tupperware Corporation SELECTED FINANCIAL DATA (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 2000 1999 - -------------------------------------------------------------------------------------------- PROFITABILITY RATIOS Operating profit as a percent of sales: Europe 22.2% 22.6% Asia Pacific 18.5 14.4 Latin America 4.1 7.8 United States 7.8 2.6 BeautiControl (b) 1.1 -- Total operating profit 15.2 15.3 Return on average equity (g,h) 52.6 60.5 Return on average invested capital (g,h) 17.8 19.5 FINANCIAL CONDITION Working capital $ 96.6 $ 61.3 Property, plant and equipment, net 233.1 242.9 Total assets 849.4 796.1 Short-term borrowings and current portion of long-term debt 26.9 43.9 Long-term debt 358.1 248.5 Shareholders' equity 123.9 145.3 Current ratio 1.35 1.20 Long-term debt-to-equity (g) 289.0% 171.0% Total debt-to-capital (g) 75.6% 66.8% OTHER DATA Net cash provided by operating activities $ 86.1 $ 113.0 Capital expenditures 46.3 40.9 Depreciation 52.1 55.6 COMMON STOCK DATA (g) Dividends declared per share $ 0.88 $ 0.88 Dividend payout ratio (j) 68.2% 64.2% Average common shares outstanding (thousands): Basic 57,692 57,519 Diluted 57,974 57,870 Year-end book value per share $ 2.14 $ 2.52 Year-end price/earnings ratio 15.8 12.3 Year-end market/book ratio 9.5 6.7 Year-end shareholders (thousands) 12.7 14.1
g. 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. h. Returns on average equity and invested capital are calculated using net income (pre-1997 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. i. Includes $105.0 million of the $150.0 million of 8.375 percent notes that were called at par on February 1, 1994. Tupperware Corporation 61
1998 1997 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------- 23.9% 26.5% 26.3% 26.3% 23.1% 21.8% 18.8% 9.5 13.3 18.0 16.7 14.1 14.1 12.3 nm nm 16.1 9.7 8.9 10.2 4.3 2.1 nm 5.2 4.5 6.5 5.1 nm -- -- -- -- -- -- -- 11.9 11.7 19.3 17.8 15.7 15.0 nm 47.5 30.5 65.0 17.6 17.1 32.6 $ 95.5 $ 103.3 $ 156.2 $ 88.1 $ 72.9 $ (49.6) $ (11.3) 271.0 293.0 331.0 317.7 310.2 277.2 250.8 823.4 847.2 978.5 944.0 882.6 785.1 661.1 18.7 -- 25.3 83.8 58.3 139.9(i) 19.3 300.1 236.7 215.3 0.4 0.5 45.6 153.3 135.8 214.2 305.5 415.6 395.1 163.3 68.2 1.33 1.34 1.43 1.20 1.18 0.90 0.97 221.0% 110.5% 70.5% 70.1% 52.5% 44.1% $ 118.1 $ 161.8 $ 150.5 $ 179.2 $ 142.7 $ 150.3 $ 152.0 46.2 67.5 96.0 69.3 72.9 85.6 80.0 64.0 66.1 65.3 61.3 55.7 44.7 50.1 $ 0.88 $ 0.88 $ 0.44(j) 74.6% 66.7% 32.5% 58,235 61,334 62,016 58,736 61,827 62,806 $ 2.36 $ 3.51 $ 4.90 13.6 20.7 20.1 6.8 7.8 11.1 15.6 20.5 21.6
j. 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. 62 Tupperware Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion of the results of operations for 2000 compared with 1999 and 1999 compared with 1998, and changes in financial condition during 2000. The Company's fiscal year ends on the last Saturday of December. Fiscal 2000 consisted of 53 weeks compared with 52 weeks in 1999. This information should be read in conjunction with the consolidated financial information provided on pages 76 to 102 of this Annual Report. In October 2000, the Emerging Issues Task Force issued EITF 00-10, "Accounting for Shipping and Handling Revenues and Costs", which requires fees billed to customers associated with shipping and handling to be classified as revenue. Accordingly, the Company has reclassified the revenue related to the shipping and handling fees billed to customers from delivery expense to net sales for all periods presented and restated sales and percent of sales information where appropriate in the following tables and discussion. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements", which provided guidance related to revenue recognition based on interpretations and practices followed by the SEC. SAB No. 101 was effective for the Company's fourth quarter 2000. The Company is in compliance with the provisions of SAB No. 101, and adoption of the provisions did not have an impact on the consolidated financial statements. RESULTS OF OPERATIONS NET SALES AND NET INCOME. Net sales in 2000 were $1,073.1 million, an increase of $9.3 million, or 1 percent, from $1,063.8 million in 1999. Excluding a $72.8 million negative impact of foreign exchange, net sales increased 8 percent over 1999. In local currency, all areas reported improved sales. Included in 2000 are the results of BeautiControl, Inc. (BeautiControl), since the acquisition in October 2000. Also impacting sales is a modification in the distribution model for three countries in Latin America. In these countries, sales are now made directly to the sales force with distributors compensated through commission payments. This model results in sales being recorded at an amount that includes the margin that previously was realized by the distributors, although there is no impact on operating profit. Excluding the impact of this new model, the BeautiControl sales and the impact of foreign exchange, net sales increased 5 percent over 1999. In 2000, net income decreased 5 percent to $74.9 million from $79.0 million in 1999. Included in the 2000 results were $26.7 million ($24.2 million after tax) of re-engineering and impairment costs related to the three-year program announced in 1999. The re-engineering and impairment charge of $12.5 million, in addition to $6.3 million of operating expense, provides for severance and other exit costs primarily related to the decision to begin operating the Latin America businesses, other than Mexico and Brazil, under an importing distributor model. This change is expected to improve the Company and distributor value chains while retaining a structure for growth. In addition, $7.9 million was incurred for internal and external consulting costs to design and execute the re-engineering actions. Foreign exchange had a $14.2 million negative impact on the comparison. Excluding re-engineering and impairment costs in both years and the impact of foreign exchange, net income increased 30 percent, with improvements coming from all areas. Net sales in 1999 of $1,063.8 million were 4 percent lower than 1998 net sales, reflecting decreases from operations in all areas except Asia Pacific, which had a significant improvement. Excluding the $19.7 million negative foreign exchange impact, 1999 sales decreased 2 percent. In 1999, net income increased 14 percent to $79.0 million from $69.1 million in 1998. Included in the 1999 results were $16.1 million ($12.3 million after tax) of re-engineering costs. The re-engineering Tupperware Corporation 63 and impairment charge of $15.1 million provided for severance and other exit costs associated with the decision to close manufacturing plants in Spain and Argentina, and to restructure manufacturing operations in Japan and the headquarters for Europe and Asia Pacific. The additional $1.0 million expense incurred was for internal and external consulting costs to design and execute the re-engineering actions. Excluding the re-engineering costs, net income increased to $91.3 million, or 32 percent. All areas except Europe reported improved earnings. The decline in Europe was primarily due to higher expenses related to addressing a change in German social security legislation and higher promotion expense incurred to stimulate sales growth. Foreign exchange did not have an impact on net income. The re-engineering project is designed to increase operating profit return on sales by improving organizational alignment, increasing the gross margin percentage and reducing operating expenses. Re-engineering costs incurred to date total $42.9 million. The annual benefit of the actions when they are fully implemented is expected to be approximately $40 million to $50 million. Total one-time costs to be incurred through 2001 in implementing the program are projected to be between $50 million and $60 million, mainly for severance, plant closure costs and other costs. In 2000, unallocated corporate expenses increased to $27.9 million from $23.1 million in 1999. The increase was due to the inclusion of more internal and external consulting costs for the re-engineering program. In 1999,unallocated corporate expenses increased to $23.1 million from $17.5 million in 1998. The increase was primarily due to accrual for bonuses, which were not incurred in 1998, higher expenses for integrated direct access programs and the inclusion of the costs for the re-engineering program. In 2000, 80 percent of sales and 90 percent of the Company's operating profit was generated by international operations. In 1999, 83 percent of sales and 97 percent of the operating profit was generated by international operations. COSTS AND EXPENSES. The cost of products sold in relation to sales was 33.3 percent, 34.3 percent and 36.8 percent, in 2000, 1999 and 1998, respectively. All areas reported improved margins in 2000 primarily due to the sale of a greater proportion of high-margin products and lower manufacturing costs. The lower manufacturing costs were a result of the savings generated from the re-engineering efforts, and were partially offset by higher raw material prices and a weaker euro. All areas reported improved margins in 1999, also primarily due to the sale of a greater proportion of high-margin products, and lower manufacturing costs. Europe's cost of products sold improved only slightly due to lower sales volumes in Germany. Delivery, sales and administrative expense as a percentage of sales was 53.9 percent, 52.3 percent and 52.8 percent, in 2000, 1999 and 1998, respectively. The increase in cost in 2000 was due to higher operating expenses from the implementation of the new distribution center model in Latin America, as well as higher internal and external consulting costs for re-engineering. The decrease in the 1999 expenses compared with 1998 as a percent of sales was due to lower operating expenses partially offset by higher promotion expense. TAX RATE. The effective tax rate for 2000, 1999 and 1998, was 25.9 percent, 23.5 percent and 24.5 percent, respectively. The 2000 rate increase reflects the impact from the re-engineering and impairment costs. Excluding the impact of re-engineering and impairment costs for which no tax benefit was recognized, the effective tax rate was 22.5 percent. The 2000 and 1999 effective rate decreases were the result of the benefit of much lower foreign effective rates only partially offset in 1999 by the absence of a reduction in a valuation allowance against federal deferred tax assets. NET INTEREST. The Company had $21.1 million of net interest expense in 2000, compared with $20.9 million in 1999 and $22.7 million in 1998. The 2000 increase resulted from higher borrowing levels due to the acquisition of BeautiControl and the repurchase of common shares in the fourth quarter. The 2000 increase was partially offset by lower interest rates from carrying a higher proportion of debt offshore, and also from shifting the offshore debt to lower cost countries with lower interest rates, which also accounted for the decrease in 1999 compared with 1998. 64 Tupperware Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REGIONAL RESULTS 2000 VS. 1999
(Dollars in millions) 2000 1999 - ---------------------------------------------------------------------- Net sales: Europe $ 424.1 $ 489.1 Asia Pacific 242.0 242.3 Latin America 193.0 154.2 United States 201.8 178.2 BeautiControl 12.2 -- - ---------------------------------------------------------------------- Total net sales $1,073.1 $1,063.8 ====================================================================== Operating profit: Europe $ 94.1 $ 110.7 Asia Pacific 44.8 35.0 Latin America 8.0(b) 12.0 United States 15.6 4.7 BeautiControl 0.1 -- - ---------------------------------------------------------------------- Total operating profit $ 162.6 $ 162.4 ======================================================================
a. 2000 actual compared with 1999 translated at 2000 exchange rates. b. Includes $6.3 million of costs associated with the write-down of inventory and receivables related to adopting an importing distributor model for certain countries. nm - Not meaningful. na - Not applicable. Tupperware Corporation 65
INCREASE NEGATIVE (DECREASE) RESTATED(A) FOREIGN PERCENT OF TOTAL - ---------------------- INCREASE EXCHANGE ------------------ DOLLAR PERCENT (DECREASE) IMPACT 2000 1999 - ----------------------------------------------------------------------------- $(65.0) (13)% 1% $(68.2) 39% 46% (0.3) -- 1 (2.9) 23 23 38.8 25 27 (1.7) 18 14 23.6 13 13 na 19 17 12.2 na na na 1 na - ----------------------------------------------------------------------------- $ 9.3 1% 8% $(72.8) 100% 100% ============================================================================= $(16.6) (15)% 1% $(17.3) 58% 68% 9.8 28 35 (1.7) 27 22 (4.0) (33) (32) (0.2) 5 7 10.9 nm nm na 10 3 0.1 na na na -- na - ----------------------------------------------------------------------------- $ 0.2 --% 14% $(19.2) 100% 100% =============================================================================
66 Tupperware Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EUROPE Excluding the impact of weaker currencies, the sales increase for 2000 was due to increases in Germany and Scandinavia, driven by larger sales forces and improved productivity. Also contributing to the sales increase was growth in the emerging Russian market. These increases were partially offset by declines in Switzerland, Belgium and Greece due to smaller active sales forces. In 1999, Germany, the region's largest market, experienced a decline in sales due to the impact of legislation that imposes a tax on certain part-time workers. The Company held meetings in 1999 with the German sales force to explain the impact of the new legislation, as well as to offer financial assistance in addressing this issue to members of the sales force who remain with the Company for a specified period. As a result of these actions, and effective recruiting programs, Germany's sales were $184.8 million in 2000, an increase of 3 percent in local currency. In 1999, restated for the negative foreign exchange impact of $30.3 million, sales were $178.9 million. The Company does not expect the legislation to impact Germany's 2001 results. The German market also accounts for a substantial portion of Europe's operating profit. In local currency, operating profit improved slightly over 1999 due to improvements in Germany and Scandinavia, partially offset by declines in Switzerland, Spain and the United Kingdom. The increase was the result of the higher sales levels, as well as a slightly higher gross margin percentage, partially offset by higher operating expenses. ASIA PACIFIC Japan was the main contributor to the sales increase in 2000, in addition to improvements in Australia, Thailand and the new market of India. These increases were driven by promotional programs, as well as larger, more productive sales forces. Offsetting these improvements was a decline in the Philippines, due to the economic and political situation that continued throughout 2000. The significant improvement in operating profit was driven by higher gross margins, primarily due to an increase in Japan, as well as the focus on cost reductions. Also contributing to the area's increase was a benefit of a use tax incentive of $4.7 million, which resulted from a change in legal structure. A weaker Philippine peso and Australian dollar were primarily responsible for the negative impact of foreign exchange on sales and operating profit comparisons. Tupperware Corporation 67 LATIN AMERICA Beginning in the first quarter of 2000, the distribution model for Brazil, Argentina and Venezuela was modified. In these markets, sales are now made directly to the sales force with distributors compensated through commission payments. Although there is no impact on operating profit, this model results in sales being recorded at an amount that includes the margin that previously was realized by the distributors. This change increases distributor profitability and enables them to focus less on administrative tasks and more on recruiting, training and motivating their sales forces. Excluding the impact of the change in the distribution center model and foreign exchange, net sales increased 14 percent due to increases in Mexico and Brazil. Mexico's increase was due to strong promotional programs and higher sales force productivity. In Brazil, the number of distributors has significantly increased, leading to a larger sales force and increased sales. The impact of foreign exchange on the sales comparison reflected the weakening of Central American currencies. In the fourth quarter of 2000, the Company decided to begin operating the Latin America businesses, other than Mexico and Brazil, under an importing distributor model. This change is expected to improve the Company and distributor value chains while retaining a structure for growth. The decrease in operating profit in 2000 is due to a $6.3 million charge for the related write-down of inventory and accounts receivable, operating expenses in Brazil incurred to implement the new distribution center model and a decline in Argentina due to lower sales volumes and higher costs. UNITED STATES The 13-percent sales increase for the year was attributable to a more productive sales force and the integrated direct access (IDA) initiatives, which are a convergence of the core party plan business with showcases, the Internet and television sales. The IDA initiatives directly contributed approximately 35 percent of the sales increase, and represented 8 percent of total sales. Despite difficulty in recruiting and motivating consultants in a full employment environment, the total sales force grew 10 percent over 1999, reflecting the success of recruiting initiatives and benefits of the IDA channels. Operating profit more than tripled in 2000 primarily driven by the increase in sales volume and the related increase in gross profits. The gross margin percentage increased slightly over 1999, and operating expenses decreased as a percent of sales. BEAUTICONTROL In October 2000, the Company completed the acquisition of BeautiControl, a party plan direct seller that markets premium cosmetics and skin care products through a highly trained independent sales force. On a pro forma basis, comparing all of October through December 2000 with the same 1999 period, sales were 10 percent higher and profit was up substantially. Subsequent to the acquisition, the Company announced the closure of BeautiControl's Taiwan and Hong Kong subsidiaries and discontinued its Eventus nutritional supplement product line. In 2001, the Company will focus on enhancing the North American beauty business, and starting operations in Latin America. By late second quarter of 2001, the Company expects to launch operations in Mexico. 68 Tupperware Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REGIONAL RESULTS 1999 VS. 1998
(DOLLARS IN MILLIONS) 1999 1998 - ------------------------------------------------------------------------ Net sales: Europe $ 489.1 $ 518.7 Asia Pacific 242.3 211.5 Latin America 154.2 186.8 United States 178.2 186.9 - ------------------------------------------------------------------------ Total net sales $1,063.8 $1,103.9 ======================================================================== Operating profit (loss): Europe $ 110.7 $ 123.9 Asia Pacific 35.0 20.2 Latin America 12.0 (16.4) United States 4.7 4.0 - ------------------------------------------------------------------------ Total operating profit (loss) $ 162.4 $ 131.7 ========================================================================
a. 1999 actual compared with 1998 translated at 1999 exchange rates. nm - Not meaningful. na - Not applicable EUROPE The sales decline in Europe was primarily due to lower volume in Germany, which was driven by the impact of new social security tax legislation. The United Kingdom and Scandinavia also had lower sales volumes. Offsetting these declines was a significant sales increase in France in addition to improvement in Italy. The German market had a sequential sales improvement, comparing fourth quarter 1999 with fourth quarter 1998, due primarily to recruiting programs that had a positive impact on the sales force trends. Germany had sales of $209.2 million in 1999 compared with $241.2 million in 1998. Foreign exchange had a $9.4 million negative impact on the comparison. The decrease in the area's operating profit primarily reflected the lower sales level along with higher operating expense partially offset by a slightly higher gross margin percentage. Operating expenses in Germany increased in 1999 due to the reimbursement of a portion of the social security tax, as well as higher promotion expenses incurred to stimulate sales growth. ASIA PACIFIC Asia Pacific led the areas with a 4-percent increase in sales and a 49-percent increase in operating profit, excluding the favorable impact of exchange rates. The sales increase was primarily due to improvements in Korea, Australia, Indonesia, the Philippines and India, and was driven by the economic recovery in Korea in addition to an increase in the total sales force as a result of successful recruiting programs. Partially offsetting this improvement was a decline in Japan. Difficulties in the local economy and a less active sales force contributed to the decline in Japan, although there was improvement in the fourth quarter. The improvement in area's operating profit was due to the focus on cost reduction measures and higher sales volumes, in addition to smaller losses in China and India. Currencies throughout the region strengthened in comparison with the U.S. dollar. Tupperware Corporation 69
POSITIVE INCREASE (NEGATIVE) DECREASE RESTATED(A) FOREIGN PERCENT OF TOTAL - -------------------- INCREASE EXCHANGE ----------------- DOLLAR PERCENT (DECREASE) IMPACT 1999 1998 - ------------------------------------------------------------------------- $(29.6) (6)% (1)% $(23.9) 46% 47% 30.8 15 4 20.8 23 19 (32.6) (18) (9) (16.6) 14 17 (8.7) (5) (5) na 17 17 - ------------------------------------------------------------------------- $(40.1) (4)% (2)% $(19.7) 100% 100% ========================================================================= $(13.2) (11)% (7)% $ (5.2) 68% 94% 14.8 73 49 3.3 22 15 28.4 nm nm 1.7 7 nm 0.7 17 17 na 3 3 - ------------------------------------------------------------------------- $ 30.7 23% 23% $ (0.2) 100% nm =========================================================================
LATIN AMERICA In local currency, Latin American sales decreased 9 percent as declines in Venezuela, Argentina and Brazil offset improved performance in Mexico. These declines were due to a smaller sales force resulting mainly from the decision to significantly reduce the number of distributors in those markets in order to enhance the opportunity for profitability of those remaining. The improvement in Mexico was primarily due to price increases. Operating profits improved significantly to $12.0 million profit versus a $16.4 million operating loss. The increase was due to cost reductions, a higher gross margin percentage and lower promotion expenses. The impact of foreign exchange on the sales comparisons reflected weakness in the Brazilian real and the Mexican peso. UNITED STATES The 5-percent sales decrease for the year was primarily the result of a smaller sales force reflecting the difficulty of recruiting and motivating consultants in a full employment environment. This factor was somewhat mitigated by further improvements in sales force productivity and by sales through the integrated direct access channels. In the fourth quarter, IDA, mainly showcases, accounted for 7 percent of U.S. sales. Higher operating profit is primarily being driven by improved gross margin percentages, reflecting a more favorable mix of sales and a modest price increase. A decrease in operating expenses partially offset by an increase in promotional spending associated with additional recruiting programs also contributed to the operating profit increase. 70 Tupperware Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES. Working capital increased to $96.6 million as of December 30, 2000 compared with $61.3 million as of December 25, 1999 and $95.5 million as of December 26, 1998. The current ratio was 1.4 to 1 at the end of 2000 compared with 1.2 to 1 at the end of 1999 and 1.3 to 1 at the end of 1998. In 2000, working capital increased from a higher level of net inventories and cash, as well as lower accrued liabilities and current portion of long-term debt. The increase in inventory has a seasonal component, and reflects higher sales levels and a modest increase in raw material inventory in light of increasing prices. The level of short-term borrowings reflects the Company's classification of a portion of its outstanding borrowings that are due within one year by their terms as non-current due to its ability and intent that they remain outstanding throughout the succeeding twelve months. Based on the timing of the Company's cash inflows during the year, as well as the overall level of short-term borrowings at the end of each period, a higher amount was classified as current at the end of 1999 than at the end of 2000. In 1999, working capital decreased from a lower level of net inventories reflecting the Company's reduction initiatives, partially offset by an increase in accounts receivable, primarily reflecting higher December 1999 sales in Europe compared with December 1998, and a higher current portion of long-term debt. The Company has a $300.0 million unsecured multicurrency credit facility that expires on August 8, 2002, and $280.0 million of foreign uncommitted lines of credit. As of December 30, 2000, the Company had $129.9 million available under the multicurrency credit facility and $204.0 million available under the foreign lines of credit. The multicurrency credit facility, the foreign uncommitted lines of credit and cash generated by operating activities are expected to be adequate to finance working capital needs and capital expenditures. The total debt-to-capital ratio at the end of 2000 was 75.6 percent compared with 66.8 percent at the end of 1999. The increase in debt primarily reflects the borrowings in the fourth quarter of 2000 associated with the acquisition of BeautiControl, the increase in working capital and the common stock repurchase. Tupperware Corporation 71 OPERATING ACTIVITIES. Cash provided by operating activities was $86.1 million in 2000, compared with $113.0 million in 1999 and $118.1 million in 1998. The 2000 decrease in cash flow reflects a decrease in accrued liabilities versus an increase in 1999, as well as an increase in net inventories in 2000 versus a decrease in 1999. This impact was partially offset by a smaller increase in accounts receivable. The 1999 decrease in cash flow reflects a smaller decrease in inventories, and an increase in accounts receivable, partially offset by an increase in net income and cash taxes in excess of the effective tax rate to a lower extent than in 1998. Cash flow reflects the payment of $11.4 million and $11.1 million of re-engineering and impairment costs in 2000 and 1999, respectively. INVESTING ACTIVITIES. For 2000, 1999 and 1998, respectively, capital expenditures totaled $46.3 million, $40.9 million and $46.2 million. The most significant individual component of capital spending was new molds. The increase in capital spending in 2000 was due to the purchase of an operating software system, partially offset by the steadily decreasing level of spending on plant and equipment in light of the Company's manufacturing productivity improvements. Capital expenditures are expected to be between $45 million and $50 million in 2001. In October 2000, the Company completed the acquisition of BeautiControl, purchasing all of the 7,231,448 common shares for $7 per share. The purchase price, net of cash acquired, was $56.3 million and included the shares acquired, the settlement of in-the-money stock options as well as transaction costs. DIVIDENDS. During 2000, 1999 and 1998, the Company declared dividends of $0.88 per share of common stock totaling $50.9 million, $50.7 million and $51.6 million, respectively. SUBSCRIPTIONS RECEIVABLE. In 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 awards are being 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 is being reduced as payments are received. As of December 30, 2000, the loan balance was $7.6 million. In October 2000, a subsidiary of the Company adopted a Management Stock Purchase Plan (the MSPP), which provides for eligible executives to purchase Company stock. Under the MSPP, subsidiaries of the Company have issued full recourse loans for $13.6 million to 33 senior executives to purchase 847,000 common shares from treasury stock. SHARE REPURCHASES. In conjunction with the MSPP, in order to minimize the increase in the number of shares outstanding, the Company repurchased in the open market 800,000 shares of common stock in the fourth quarter of 2000 for $14.4 million, or an average of $18 per share. In 1998, the Company repurchased 3.5 million shares in the open market, completing a 5.0 million share repurchase program announced in 1996. Share repurchases in 1998 cost $93.1 million, or an average of $27 per share. 72 Tupperware Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS YEAR 2000 ISSUES The Company studied the "Year 2000" issues affecting its information technology, non-information technology systems and the issues with third party companies and other significant suppliers, and implemented a plan to address them. Year 2000 issues have not had a material adverse effect on the Company's operations. The cost of addressing its Year 2000 issues was approximately $5.3 million. These costs did not have a material effect on the Company's financial position or results of operations in any one period in part because they represented the re-deployment of existing information technology resources, and because they would have been incurred as part of normal software upgrades and replacements. Due to the Company's extensive foreign operations, it is exposed to Year 2000 issues related to the infrastructures of the countries where these operations are located; however, the Company is not aware of any specific issues that have not been addressed through implementation of its plan. Although the Company believes that it successfully avoided any significant disruption from the Year 2000 issue, it will continue to monitor all critical systems for the appearance of delayed complications or disruptions, problems relating to the leap year and problems encountered through suppliers, customers and other third parties with whom the Company deals. EURO IMPLEMENTATION On January 1, 1999, several European countries that are members of the European Monetary Union adopted one common currency - the euro. To date there has been no significant impact from the adoption of the euro, and none is expected. The incremental cost to the Company of addressing the euro conversion has not been material. IMPACT OF INFLATION Inflation as measured by consumer price indices has continued at a low level in most of the countries in which the Company operates. Tupperware Corporation 73 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, forward contracts and local currency borrowings 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 forward contracts and currency options certain other exposures to various currencies arising from non-permanent intercompany loans and forecasted purchase commitments. NEW PRONOUNCEMENTS The Company is required to adopt the provisions of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAS 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities", as of the beginning of its 2001 fiscal year. These statements establish 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 fair value is reported either in earnings or in other comprehensive income. Adoption of the statements will have no significant impact on the accounting treatment and financial results related to the hedging programs the Company has undertaken. 74 Tupperware Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a listing of the Company's outstanding derivative financial instruments as of December 30, 2000 and December 25, 1999.
FORWARD CONTRACTS 2000 1999 - ------------------------------------------------------------------------------------------------------------------------ WEIGHTED WEIGHTED AVERAGE AVERAGE CONTRACT CONTRACT RATE OF RATE OF (DOLLARS IN MILLIONS) BUY SELL EXCHANGE BUY SELL EXCHANGE - ------------------------------------------------------------------------------------------------------------------------ Euro with U.S. dollars $ 90.2 0.9091 $70.2 1.0340 Japanese yen with U.S. dollars 49.2 109.0744 19.2 101.3265 Mexican pesos with U.S. dollars 33.9 9.8267 17.5 9.5463 Australian dollars with U.S. dollars 13.3 0.5559 12.7 0.6457 Philippine pesos with U.S. dollars 9.5 51.8567 13.6 40.9280 Swiss francs with U.S. dollars 8.3 1.6488 21.1 1.5677 Singapore dollars with U.S. dollars 4.6 1.7139 4.8 1.6688 Greek drachma with U.S. dollars 4.4 370.5800 3.1 324.9300 Danish krona with U.S. dollars 3.2 8.1195 Canadian dollars with U.S. dollars 1.4 1.5086 3.9 1.4718 German marks with U.S. dollars 24.4 1.9333 Euro for U.S. dollars $40.0 0.9103 $ 4.6 1.0470 Swiss francs for U.S. dollars 11.8 1.6508 19.3 1.5631 Mexican pesos for U.S. dollars 9.7 9.8156 21.3 10.3200 Japanese yen for U.S. dollars 8.0 107.0402 17.5 101.8794 British pounds for U.S. dollars 4.5 1.4763 South Korean won for U.S. dollars 1.5 1,130.5000 Philippine pesos for U.S. dollars 1.2 51.8500 German marks for U.S. dollars 4.2 1.9368 Other currencies 4.2 4.4 various 16.2 7.6 various - ------------------------------------------------------------------------------------------------------------------------ Total $222.2 $81.1 $206.7 $ 74.5 ========================================================================================================================
Tupperware Corporation 75
CROSS CURRENCY INTEREST RATE SWAPS 1999 - --------------------------------------------------------------------------- (DOLLARS IN MILLIONS) WEIGHTED AVERAGE AMOUNT AT CONTRACT RATE CURRENCY OWED INCEPTION OF EXCHANGE - --------------------------------------------------------------------------- Euro $65.5 1.0650 Japanese yen 14.2 141.3300 Swiss francs 10.0 1.5000 - --------------------------------------------------------------------------- Total $89.7 ===========================================================================
The Company's derivative financial instruments at December 30, 2000 and December 25, 1999, consisted solely of the financial instruments summarized above. All of the contracts mature within 12 months. Related to the forward contracts, the "buy" amounts represent the U.S. dollar equivalent of commitments to purchase foreign currencies and the "sell" amounts represent the U.S. dollar equivalent of commitments to sell foreign currencies, all translated at the year-end market exchange rates for the U.S. dollar. All forward contracts are hedging cross-currency intercompany loans that are not permanent in nature, balance sheet exposures or forcasted purchase commitments. As of the end of fiscal 2000, the Company had no cross currency interest rate swaps. FORWARD-LOOKING STATEMENTS Certain written and oral statements made or incorporated by reference from time to time by the Company or its representatives in this report, other reports, filings with the Securities and Exchange Commission, press releases, conferences or otherwise, are "forward-looking statements" within the meaning of the Private Securities Litigation Report Reform Act of 1995 ("the Act"). Investors should also be aware that while the Company does, from time to time, communicate with securities analysts, it is against the Company's policy to disclose to them any material nonpublic information or other confidential commercial information. Accordingly, shareholders should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the confirming financial forecasts or projections issued by others. 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, integration of the BeautiControl business, expansion of the BeautiControl business into foreign markets, expansion of the Company's integrated direct access initiatives into foreign markets, 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. 76 Tupperware Corporation CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED ------------------------------------------------------ (In millions, except per share amounts) DEC. 30, 2000 DEC. 25, 1999 DEC. 26, 1998 - ---------------------------------------------------------------------------------------------------------- Net sales $ 1,073.1 $ 1,063.8 $ 1,103.9 - ---------------------------------------------------------------------------------------------------------- Costs and expenses: Cost of products sold 358.4 365.1 406.3 Delivery, sales and administrative expense 578.4 556.8 583.4 Interest expense 22.9 23.0 24.8 Interest income (1.9) (2.1) (2.1) Re-engineering and impairment charge 12.5 15.1 -- Other expense, net 1.7 2.6 -- - ---------------------------------------------------------------------------------------------------------- Total costs and expenses 972.0 960.5 1,012.4 - ---------------------------------------------------------------------------------------------------------- Income before income taxes 101.1 103.3 91.5 Provision for income taxes 26.2 24.3 22.4 - ---------------------------------------------------------------------------------------------------------- Net income $ 74.9 $ 79.0 $ 69.1 ========================================================================================================== Net income per common share: Basic $ 1.30 $ 1.37 $ 1.19 ========================================================================================================== Diluted $ 1.29 $ 1.37 $ 1.18 ==========================================================================================================
See Notes to the Consolidated Financial Statements. Tupperware Corporation 77 CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts) DEC. 30, 2000 DEC. 25, 1999 - ---------------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 32.6 $ 24.4 Accounts receivable, less allowances of $27.7 million in 2000 and $22.5 million in 1999 112.5 114.4 Inventories 144.1 136.7 Deferred income tax benefits 47.1 48.5 Prepaid expenses and other 36.1 46.5 - ---------------------------------------------------------------------------------------------------------------- Total current assets 372.4 370.5 - ---------------------------------------------------------------------------------------------------------------- Deferred income tax benefits 123.2 107.9 Property, plant and equipment, net 233.1 242.9 Long-term receivables, net of allowances of $28.4 million in 2000 and $28.0 million in 1999 31.2 34.2 Goodwill, net of amortization of $0.2 million in 2000 57.7 2.9 Other assets 31.8 37.7 - ---------------------------------------------------------------------------------------------------------------- Total assets $ 849.4 $ 796.1 ================================================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $ 88.6 $ 87.8 Short-term borrowings and current portion of long-term debt 26.9 43.9 Accrued liabilities 160.3 177.5 - ---------------------------------------------------------------------------------------------------------------- Total current liabilities 275.8 309.2 - ---------------------------------------------------------------------------------------------------------------- Long-term debt 358.1 248.5 Accrued post-retirement benefit cost 37.4 37.0 Other liabilities 54.2 56.1 Commitments and contingencies (Note 13) Shareholders' equity: Preferred stock, $0.01 par value, 200,000,000 shares authorized; none issued -- -- Common stock, $0.01 par value, 600,000,000 shares authorized; 62,367,289 shares issued 0.6 0.6 Paid-in capital 21.7 20.3 Subscriptions receivable (21.2) (7.7) Retained earnings 493.7 484.0 Treasury stock, 4,483,151 and 4,701,740 shares at cost in 2000 and 1999, respectively (125.5) (140.2) Unearned portion of restricted stock issued for future service (0.4) (0.6) Accumulated other comprehensive loss (245.0) (211.1) - ---------------------------------------------------------------------------------------------------------------- Total shareholders' equity 123.9 145.3 - ---------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 849.4 $ 796.1 ================================================================================================================
See Notes to the Consolidated Financial Statements. 78 Tupperware Corporation CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK TREASURY STOCK ---------------------------------------------- (In millions, except per share amounts) SHARES DOLLARS SHARES DOLLARS - ----------------------------------------------------------------------------------------------- December 27, 1997 62.4 $0.6 1.4 $ (54.0) Net income Other comprehensive income: Foreign currency translation adjustments, net of tax benefit of $3.7 million Comprehensive income Cash dividends declared ($0.88 per share) Stock issued for note receivable Purchase of treasury stock 3.5 (93.1) Earned restricted stock, net Stock issued for incentive plans and related tax benefits (0.1) 5.1 - ----------------------------------------------------------------------------------------------- December 26, 1998 62.4 0.6 4.8 (142.0) Net income Other comprehensive loss: Foreign currency translation adjustments, net of tax provision of $4.2 million Comprehensive income Cash dividends declared ($0.88 per share) Earned restricted stock, net Stock issued for incentive plans and related tax benefits (0.1) 1.8 - ----------------------------------------------------------------------------------------------- December 25, 1999 62.4 0.6 4.7 (140.2) Net income Other comprehensive loss: Foreign currency translation adjustments, net of tax provision of $3.3 million Comprehensive income Cash dividends declared ($0.88 per share) Acquisition of BeautiControl, Inc. Stock sold under Management Stock Purchase Plan (0.8) 25.5 Purchase of treasury stock 0.8 (14.4) Payment of subscription receivable Earned restricted stock, net Stock issued for incentive plans and related tax benefits (0.2) 3.6 - ----------------------------------------------------------------------------------------------- December 30, 2000 62.4 $0.6 4.5 $(125.5) ===============================================================================================
See Notes to the Consolidated Financial Statements. Tupperware Corporation 79
UNEARNED ACCUMULATED PORTION OF OTHER RESTRICTED STOCK COMPREHENSIVE TOTAL COMPRE- PAID-IN SUBSCRIPTIONS RETAINED ISSUED FOR INCOME SHAREHOLDERS' HENSIVE CAPITAL RECEIVABLE EARNINGS FUTURE SERVICE (LOSS) EQUITY INCOME - ----------------------------------------------------------------------------------------------------- $ 19.5 $ -- $ 441.4 $ (2.4) $(190.9) $ 214.2 69.1 69.1 $ 69.1 0.5 0.5 0.5 ------ $ 69.6 ====== (50.9) (50.9) (7.7) (7.7) (93.1) 1.0 1.0 (2.4) 2.7 - --------------------------------------------------------------------------------------- 19.5 (7.7) 457.2 (1.4) (190.4) 135.8 79.0 79.0 $ 79.0 (20.7) (20.7) (20.7) ------- $ 58.3 ======= (50.7) (50.7) 0.8 0.8 0.8 (1.5) 1.1 - --------------------------------------------------------------------------------------- 20.3 (7.7) 484.0 (0.6) (211.1) 145.3 74.9 74.9 $ 74.9 (33.9) (33.9) (33.9) ------- $ 41.0 ======= (50.9) (50.9) 1.0 1.0 (13.6) (11.8) 0.1 (14.4) 0.1 0.1 0.2 0.2 0.4 (2.5) 1.5 - --------------------------------------------------------------------------------------- $ 21.7 $(21.2) $ 493.7 $ (0.4) $(245.0) $ 123.9 =======================================================================================
80 Tupperware Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED ------------------------------------------------------ (In millions) DEC. 30, 2000 DEC. 25, 1999 DEC. 26, 1998 - -------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $ 74.9 $ 79.0 $ 69.1 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 52.1 55.6 64.0 Loss on sale of assets 3.3 3.3 3.4 Foreign exchange loss (gain), net 0.3 0.1 (0.6) Non-cash re-engineering and impairment costs 13.2 3.1 -- Changes in assets and liabilities: (Increase) decrease in accounts and notes receivable (9.3) (30.1) 2.2 (Increase) decrease in inventories (17.9) 9.1 29.8 (Decrease) increase in accounts payable and accrued liabilities (21.2) 6.0 (1.8) Increase (decrease) in income taxes payable 2.7 0.6 (27.9) Increase in net deferred income taxes (13.8) (17.7) (15.1) Other, net 1.8 4.0 (5.0) - -------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 86.1 113.0 118.1 - -------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Capital expenditures (46.3) (40.9) (46.2) Purchase of BeautiControl, Inc., net of cash acquired (56.3) -- -- - -------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (102.6) (40.9) (46.2) - -------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Dividend payments to shareholders (50.8) (50.7) (51.6) Payments to acquire treasury stock (14.4) -- (93.1) Payment of long-term debt (15.0) -- -- Proceeds from exercise of stock options 1.0 0.6 1.4 Payment (issuance) of subscription receivable 0.1 -- (7.7) Net increase (decrease) in short-term debt 105.5 (23.2) 80.9 - -------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 26.4 (73.3) (70.1) - -------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents (1.7) 2.6 (0.9) - -------------------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 8.2 1.4 0.9 Cash and cash equivalents at beginning of year 24.4 23.0 22.1 - -------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 32.6 $ 24.4 $ 23.0 ========================================================================================================================== SUPPLEMENTAL DISCLOSURE: Treasury shares sold for notes receivable $ 13.6 $ -- $ -- ==========================================================================================================================
See Notes to the Consolidated Financial Statements. Tupperware Corporation 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of Tupperware Corporation and all of its subsidiaries (Tupperware, the Company). All significant intercompany accounts and transactions have been eliminated. The Company's fiscal year ends on the last Saturday of December. Fiscal year 2000 consisted of 53 weeks compared with 52 weeks in 1999. 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 30, 2000 and December 25, 1999, $16.5 million and $8.3 million, respectively, of the cash and cash equivalents included on the consolidated balance sheets 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 Tupperware inventories, approximately 12 percent and 17 percent of total inventories, at December 30, 2000 and December 25, 1999, 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 $13.1 million and $11.9 million higher at the end of 2000 and 1999, respectively. INTERNAL USE SOFTWARE DEVELOPMENT COSTS. The Company capitalizes internal use software development costs as they are incurred and amortizes such costs over their estimated useful lives of three to five years beginning when the software is placed in service. PROPERTY, PLANT AND EQUIPMENT. 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. GOODWILL. Goodwill represents the excess of cost over the fair value of net assets acquired and is being amortized over 40 years using the straight-line method. REVENUE RECOGNITION. Revenue is recognized when product is shipped to customers. 82 Tupperware Corporation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SHIPPING AND HANDLING COSTS. In October 2000, the Emerging Issues Task Force issued EITF 00-10, "Accounting for Shipping and Handling Revenues and Costs", which requires fees billed to customers associated with shipping and handling to be classified as revenue, and costs associated with shipping and handling to be either classified as cost of sales or disclosed in the notes to the financial statements. Accordingly, the Company has reclassified the revenue related to the shipping and handling fees billed to customers, which was previously recorded as a reduction of delivery expense, to net sales for all periods presented. Costs associated with shipping and handling activities are comprised of outbound freight and associated direct labor costs and were $70.0 million, $69.0 million and $76.4 million for 2000, 1999 and 1998, respectively and were recorded in delivery, sales and administrative expense. ADVERTISING AND RESEARCH AND DEVELOPMENT COSTS. Advertising and research and development costs are charged to expense as incurred. Advertising expense totaled $5.9 million, $8.7 million and $7.2 million in 2000, 1999 and 1998, respectively. Research and development costs totaled $12.8 million, $12.3 million and $13.8 million, in 2000, 1999 and 1998, 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 11 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 enacted rates applicable to taxable income in the years in which the temporary differences are expected to reverse and the credits are expected to be used. The effect on deferred tax assets and liabilities of the change in tax rates is recognized in income in the period that includes the enactment date. An assessment is made as to whether or not a valuation allowance is required to offset deferred tax assets. This assessment includes anticipating future income. NET INCOME PER COMMON SHARE. The financial statements include "basic" and "diluted" per share information. Basic per share information is calculated by dividing net income by the weighted average number of shares outstanding. Diluted per share information is calculated by also considering the impact of potential common stock on both net income and the weighted average number of shares outstanding. The weighted average number of shares used in the basic earnings per share computations were 57.7 million, 57.5 million and 58.2 million, in 2000, 1999 and 1998, respectively. The only difference in the computation of basic and diluted earnings per share is the inclusion of potential common stock of 0.3 million in 2000, 0.4 million in 1999 and 0.5 million in 1998. Options to purchase 7.1 million, 2.4 million and 2.6 million shares of common stock in 2000, 1999 and 1998, respectively, were outstanding but not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares during the respective periods and, therefore, would have been anti-dilutive if included. The Company's potential common stock consists of employee and director stock options and restricted stock. Tupperware Corporation 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DERIVATIVE FINANCIAL INSTRUMENTS. The Company uses derivative financial instruments, principally cross-currency interest rate swaps, over-the-counter forward exchange contracts and local currency options with major international financial institutions, to offset the effects of exchange rate changes on net investments in certain foreign subsidiaries, forecasted purchase commitments and certain intercompany loan transactions. Gains and losses on instruments designated as hedges of net investments in a foreign subsidies 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 nonpermanent intercompany transactions and identifiable foreign currency firm commitments are held to maturity. The Company is required to adopt the provisions of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", as of the beginning of its 2001 fiscal year. These statements establish 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 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 fair value is reported either in earnings or in other comprehensive income. Adoption of the statements will have no significant impact on the accounting treatment and financial results related to the hedging programs the Company has undertaken. FOREIGN CURRENCY TRANSLATION. Results of operations for foreign subsidiaries are translated into U.S. dollars using the average exchange rates during the year. The assets and liabilities of those subsidiaries, other than those of operations in highly inflationary countries, are translated into U.S. dollars using the exchange rates at the balance sheet date. The related translation adjustments are "Accumulated other comprehensive income." Foreign currency transaction gains and losses, as well as translation of financial statements of subsidiaries in highly inflationary countries, are included in income. RECLASSIFICATIONS. Certain prior year amounts have been reclassified to conform with the current year presentation. 84 Tupperware Corporation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2: ACQUISITION In October 2000, the Company completed the acquisition of BeautiControl, Inc. (BeautiControl), by purchasing all of the 7,231,448 common shares outstanding for $7 per share. BeautiControl is a party plan direct seller that markets premium cosmetics and skin care products through a highly trained independent sales force in North America. The purchase price, net of cash acquired, was $56.3 million and included shares acquired, settlement of in-the-money stock options and other transaction costs. The Company also assumed $5.6 million of debt. The acquisition has been accounted for under the purchase method of accounting, and results of operations of BeautiControl have been included in the consolidated financial statements since October 18, 2000. The total cost of the acquisition was allocated to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values. Subsequent to the acquisition, the Company has closed BeautiControl's Taiwan and Hong Kong subsidiaries, discontinued its Eventus nutritional supplement product line and recorded $5.0 million of associated costs. Goodwill recorded in connection with the transaction was $55.0 million and is being amortized over 40 years using the straight-line method. On a pro forma basis, if the acquisition would have occurred January 1, 1999, the results of BeautiControl would not have had a material impact on consolidated results in 1999 and 2000. NOTE 3: RE-ENGINEERING PROGRAM In 1999, the Company announced a three-year re-engineering program designed to improve operating profit return on sales through improved organizational alignment, a higher gross margin percentage and reduced operating expenses. In conjunction with implementing this program, the Company recorded a pretax re-engineering and impairment charge of $12.5 million in the fourth quarter of 2000 and $15.1 million in the second quarter of 1999. The Company also incurred $7.9 million and $1.0 million in 2000 and 1999, respectively, of internal and external consulting costs associated with designing and executing the re-engineering projects, which are included in delivery, sales and administrative expense. As part of the organizational alignment, the Company decided in 2000 that all Latin American countries other than Mexico and Brazil will be operated under third party importer arrangements. This decision resulted in the write-down of inventory and accounts receivable totaling $6.3 million, as well as fixed asset write-downs and severance payments. The fixed asset write-downs and severance payments are classified as part of the re-engineering and impairment charge, while the inventory write-down is included in cost of sales, and the accounts receivable write-down is classified as delivery, sales and administrative expense. As a result of the importer arrangements, certain assets will be held for sale, and the fixed asset write-downs represent the book value in excess of fair market values less estimated selling expenses. The total after tax cost of the re-engineering program was $24.2 million in 2000 and $12.3 million in 1999. Tupperware Corporation 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The re-engineering charge includes the following categories of expenditures and relates to activities in the Company's geographic segments as indicated below (in millions):
2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------- Severance $ 3.1 $ 9.0 Europe $ 0.8 $ 7.1 Fixed asset write-downs 3.7 3.1 Asia Pacific 0.7 4.0 Other 5.7 3.0 Latin America 8.7 4.0 United States 2.3 -- - -------------------------------------------------------------------------------------------------------------- Total $ 12.5 $ 15.1 Total $ 12.5 $ 15.1 ==============================================================================================================
In 2000, the severance costs relate primarily to the approximately 115 employees whose positions were eliminated as a result of the decision to close the Argentina distribution center. The fixed asset write-downs and other expenses relate primarily to the closure of certain Latin America offices associated with the new importer distribution method. In 1999, the severance costs relate primarily to the approximately 200 employees whose positions were eliminated as a result of the decision to close the Spanish and Argentine manufacturing plants and to restructure the Japanese manufacturing operation and the area headquarters in Europe and Asia Pacific. The fixed asset write-downs relate primarily to the plant closures. The expenses included in the other category are primarily for non-asset write-down costs of exiting facilities and professional fees associated with accomplishing the re-engineering actions. The liability balance as of December 30, 2000 and December 25, 1999 was as follows:
(In millions) 2000 1999 - ------------- ------- ------- Beginning balance $ 0.9 $ -- Provision 12.5 15.1 Cash expenditures: Severance (3.0) (9.0) Other (0.5) (2.1) Non-cash write downs (7.6) (3.1) - -------------------------------------------------------------------------------------------------------------- Ending balance $ 2.3 $ 0.9 ==============================================================================================================
NOTE 4: INVENTORIES
(In millions) 2000 1999 - ------------- -------- -------- Finished goods $ 70.4 $ 66.0 Work in process 25.5 27.9 Raw materials and supplies 48.2 42.8 - --------------------------------------------------------------------------------------------------------------- Total inventories $ 144.1 $ 136.7 ===============================================================================================================
86 Tupperware Corporation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 5: PROPERTY, PLANT AND EQUIPMENT
(In millions) 2000 1999 - --------------------------------------------------------------------------------------------------------------- Land $ 19.9 $ 12.5 Buildings and improvements 169.8 173.2 Machinery and equipment 746.2 758.1 Construction in progress 13.0 10.3 - --------------------------------------------------------------------------------------------------------------- Total property, plant and equipment 948.9 954.1 Less accumulated depreciation (715.8) (711.2) - --------------------------------------------------------------------------------------------------------------- Property, plant and equipment, net $ 233.1 $ 242.9 ===============================================================================================================
NOTE 6: ACCRUED LIABILITIES
(In millions) 2000 1999 - --------------------------------------------------------------------------------------------------------------- Compensation and employee benefits $ 51.3 $ 55.1 Advertising and promotion 18.9 33.8 Taxes other than income taxes 17.8 18.3 Other 72.3 70.3 - --------------------------------------------------------------------------------------------------------------- Total accrued liabilities $ 160.3 $ 177.5 ===============================================================================================================
NOTE 7: FINANCING ARRANGEMENTS Debt Debt consists of the following:
(In millions) 2000 1999 - --------------------------------------------------------------------------------------------------------------- 6.84% Series Notes due 2000 $ -- $ 15.0 7.05% Series Notes due 2003 15.0 15.0 7.25% Notes due 2006 100.0 100.0 8.33% Mortgage Note 5.6 -- Short-term borrowings 264.0 161.9 Other 0.4 0.5 - --------------------------------------------------------------------------------------------------------------- 385.0 292.4 Less current portion (26.9) (43.9) - --------------------------------------------------------------------------------------------------------------- Long-term debt $ 358.1 $ 248.5 ===============================================================================================================
Tupperware Corporation 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions) 2000 1999 - --------------------- -------- -------- Total short-term borrowings at year-end $ 264.0 $ 161.9 Weighted average interest rate at year-end 5.8% 5.3% Average short-term borrowings during the year $ 242.3 $ 217.6 Weighted average interest rate for the year 5.9% 4.6% Maximum short-term borrowings during the year $ 300.3 $ 258.5
The average borrowings and weighted average interest rates were determined using month-end borrowings and the interest rates applicable to them. Of total short-term year-end borrowings at December 30, 2000, $170.1 million consisted of outstanding commercial paper. The remaining $93.9 million of short-term borrowings was loaned by several banks, with $57.1 million in Japanese yen, $15.3 million in German marks, $11.1 million in Belgian francs and $10.4 million in various other currencies. As of December 30, 2000, $237.1 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 2001. The mortgage note is a ten-year note amortized over a twenty-two year period with monthly payments of principal and interest of $47,988. The note is secured by certain real estate, and a balloon payment of $4.4 million is due to be paid June 1, 2009. As of December 30, 2000, the Company had $333.9 million of unused lines of credit, including $129.9 million under the Company's $300.0 million multicurrency financing facility (the $300 Million Facility) and $204.0 million available under the $280.0 million foreign uncommitted lines of credit. The $300 Million Facility supports the Company's commercial paper borrowing capability and expires on August 8, 2002. Interest paid on total debt in 2000, 1999 and 1998 was $21.9 million, $21.6 million and $26.2 million, respectively. 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 30, 2000 and December 25, 1999. 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 $97.1 million and $92.5 million as of December 30, 2000 and December 25, 1999, respectively. The fair value of the remaining long-term debt approximated its book value at the end of 2000 and 1999. 88 Tupperware Corporation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Derivative Financial Instruments Following is a listing of the Company's outstanding derivative financial instruments as of December 30, 2000 and December 25, 1999:
FORWARD CONTRACTS 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE CONTRACT CONTRACT RATE OF RATE OF (Dollars in millions) BUY SELL EXCHANGE BUY SELL EXCHANGE - ---------------------------------------------------------------------------------------------------------------------------- Euro with U.S. dollars $ 90.2 0.9091 $ 70.2 1.0340 Japanese yen with U.S. dollars 49.2 109.0744 19.2 101.3265 Mexican pesos with U.S. dollars 33.9 9.8267 17.5 9.5463 Australian dollars with U.S. dollars 13.3 0.5559 12.7 0.6457 Philippine pesos with U.S. dollars 9.5 51.8567 13.6 40.9280 Swiss francs with U.S. dollars 8.3 1.6488 21.1 1.5677 Singapore dollars with U.S. dollars 4.6 1.7139 4.8 1.6688 Greek drachma with U.S. dollars 4.4 370.5800 3.1 324.9300 Danish krona with U.S. dollars 3.2 8.1195 Canadian dollars with U.S. dollars 1.4 1.5086 3.9 1.4718 German marks with U.S. dollars 24.4 1.9333 Euro for U.S. dollars $ 40.0 0.9103 $ 4.6 1.0470 Swiss francs for U.S. dollars 11.8 1.6508 19.3 1.5631 Mexican pesos for U.S. dollars 9.7 9.8156 21.3 10.3200 Japanese yen for U.S. dollars 8.0 107.0402 17.5 101.8794 British pounds for U.S. dollars 4.5 1.4763 South Korean won for U.S. dollars 1.5 1,130.5000 Philippine pesos for U.S. dollars 1.2 51.8500 German marks for U.S. dollars 4.2 1.9368 Other currencies 4.2 4.4 various 16.2 7.6 various - ---------------------------------------------------------------------------------------------------------------------------- Total $ 222.2 $ 81.1 $ 206.7 $ 74.5 ============================================================================================================================
Tupperware Corporation 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CROSS-CURRENCY INTEREST RATE SWAPS 1999 - ---------------------------------- --------------------------- (Dollars in millions) WEIGHTED AVERAGE AMOUNT AT CONTRACT RATE Currency owed INCEPTION OF EXCHANGE - ------------- --------- ------------- Euro $ 65.5 1.0650 Japanese yen 14.2 141.3300 Swiss francs 10.0 1.5000 - -------------------------------------------------------------------------------------------------------------- Total $ 89.7 ==============================================================================================================
The Company's derivative financial instruments at December 30, 2000 and December 25, 1999, consisted solely of the financial instruments summarized above. All of the contracts mature within 12 months. Related to the forward contracts, the "buy" amounts represent the U.S. dollar equivalent of commitments to purchase foreign currencies and the "sell" amounts represent the U.S. dollar equivalent of commitments to sell foreign currencies, all translated at the year-end market exchange rates for the U.S. dollar. All forward contracts are hedging cross-currency intercompany loans that are not permanent in nature, balance sheet exposures or forecasted purchase commitments. As of the end of fiscal 2000, the Company had no cross currency interest rate swaps. The Company's theoretical credit risk for each derivative instrument is its replacement cost, but management believes that the risk of incurring credit losses is remote and that such losses, if any, would not be material. The Company also is exposed to market risk on its derivative instruments due to potential changes in foreign exchange rates; however, such market risk would be substantially offset by changes in the valuation of the underlying items being hedged. For all outstanding derivative instruments, the net accrued loss was $0.8 million and $3.3 million, at December 30, 2000 and December 25, 1999, respectively. The aggregate impact of all foreign currency transactions was not material to the Company's income. 90 Tupperware Corporation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8: SUBSCRIPTIONS RECEIVABLE In October 2000, a subsidiary of the Company adopted a Management Stock Purchase Plan (the MSPP), which provides for eligible executives to purchase Company stock. Under the MSPP, subsidiaries of the Company have issued full recourse loans for $13.6 million to 33 senior executives to purchase 847,000 common shares from treasury stock. The annual interest rate on the loans is 5.96 percent, and all dividends, while the loans are outstanding, will be applied toward interest due. Under the terms of the MSPP, at scheduled repayment dates, if the Company's stock price per share is below the executive's per share purchase price, and the associated loan remains outstanding, the Company will make cash bonus payments to be applied toward the repayment of the loan. The cash bonus payments are limited to not more than 25 percent of the outstanding principle on the loan then due. For each share purchased, a stock option on two shares of the Company's common stock was granted under the 2000 Incentive Plan. See Note 11 - Incentive Compensation. The loans have been recorded as subscriptions receivable, and are secured by the shares purchased. Principal amounts are due as follows: $3.4 million in 2005, $3.4 million in 2006 and $6.8 million in 2008. 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 awards to the chairman are being 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 is being reduced as payments are received. In late 2000, the loan and related agreements were assigned to a subsidiary of the Company. Tupperware Corporation 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 9: INCOME TAXES For income tax purposes, the domestic and foreign components of income (loss) before taxes were as follows:
(In millions) 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- Domestic $ 39.0 $ (15.7) $ 24.5 Foreign 62.1 119.0 67.0 - ---------------------------------------------------------------------------------------------------------------------------- Total $ 101.1 $ 103.3 $ 91.5 =============================================================================================================================
The provision for income taxes was as follows:
(In millions) 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- Current: Federal $ 10.8 $ 8.7 $ (2.1) Foreign 25.4 26.1 43.9 State 3.6 3.5 1.4 - ---------------------------------------------------------------------------------------------------------------------------- 39.8 38.3 43.2 - ---------------------------------------------------------------------------------------------------------------------------- Deferred: Federal (13.5) (15.9) (10.3) Foreign 0.8 3.7 (9.3) State (0.9) (1.8) (1.2) - ---------------------------------------------------------------------------------------------------------------------------- (13.6) (14.0) (20.8) - ---------------------------------------------------------------------------------------------------------------------------- Total $ 26.2 $ 24.3 $ 22.4 =============================================================================================================================
The differences between the provision for income taxes and income taxes computed using the U.S. federal statutory rate were as follows:
(In millions) 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- Amount computed using statutory rate $ 35.4 $ 36.1 $ 32.0 Increase (reduction) in taxes resulting from: Net benefit from repatriating foreign earnings (18.8) (0.3) (22.0) Foreign income taxes 10.3 (11.5) 11.1 Other (0.7) -- 1.3 - ---------------------------------------------------------------------------------------------------------------------------- Total $ 26.2 $ 24.3 $ 22.4 =============================================================================================================================
92 Tupperware Corporation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In 2000, 1999 and 1998, the Company recognized $0.4 million, $0.2 million and $0.6 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) 2000 1999 - -------------------------------------------------------------------------------------------------------------- Depreciation $ (4.3) $ (4.2) Other (2.6) (2.9) - -------------------------------------------------------------------------------------------------------------- Gross deferred tax liabilities (6.9) (7.1) - -------------------------------------------------------------------------------------------------------------- Credit carry forwards 50.7 42.6 Fixed assets basis differences 57.2 60.5 Employee benefits accruals 13.7 21.0 Post-retirement benefits 15.9 15.8 Inventory reserves 16.8 17.3 Bad debt reserves 10.7 3.2 Other accruals 39.3 29.3 - -------------------------------------------------------------------------------------------------------------- Gross deferred tax assets 204.3 189.7 - -------------------------------------------------------------------------------------------------------------- Valuation allowances (31.8) (30.8) - -------------------------------------------------------------------------------------------------------------- Net deferred tax assets $ 165.6 $ 151.8 ==============================================================================================================
At December 30, 2000, the Company has a domestic net operating loss carry forward of $7.7 million, which expires in 2018, and foreign net operating loss carry forwards of $119.9 million. Of the total net operating loss carry forwards, $62.1 million expire at various dates from 2001 to 2010, while the remainder have unlimited lives. During 2000, the Company recognized net benefits of $7.6 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 30, 2000, the Company had a foreign tax credit carry forward of $3.6 million, which expires in 2005. At December 30, 2000 and December 25, 1999, the Company had valuation allowances against certain deferred tax assets totaling $31.8 million and $30.8 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 2000, 1999 and 1998, of $35.5 million, $47.7 million and $65.3 million, respectively. NOTE 10: 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 Tupperware Corporation 93 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS requirements. The medical plans are contributory, with retiree contributions adjusted annually, and contain other cost-sharing features, such as deductibles and coinsurance. The medical plans include an allowance for Medicare for post-65 retirees. The Company has the right to modify or terminate these plans. The funded status of the plans was as follows:
U.S. plans Foreign plans - ------------------------------------------------------------------------------------------------------------------------ Pension benefits Post-retirement benefits Pension benefits ------------------- ------------------------ --------------------- (In millions) 2000 1999 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------ Change in benefit obligations: Beginning balance $ 26.3 $ 29.9 $ 36.5 $ 41.0 $ 58.6 $ 64.1 Service cost 1.2 1.2 0.4 0.4 2.4 2.7 Interest cost 2.2 1.9 2.8 2.6 2.5 2.5 Actuarial loss (gain) 3.4 (4.8) 2.7 (4.0) 2.7 (4.4) Benefits paid (2.2) (1.9) (3.1) (3.5) (6.9) (4.8) Impact of exchange rates -- -- -- -- (5.7) (1.5) - ------------------------------------------------------------------------------------------------------------------------ Ending balance 30.9 26.3 39.3 36.5 53.6 58.6 - ------------------------------------------------------------------------------------------------------------------------ Change in plan assets at fair value: Beginning balance 27.1 25.3 -- -- 29.8 27.4 Actual return on plan assets 0.2 3.6 -- -- 2.1 4.9 Company contributions 1.1 -- 3.1 3.5 2.3 2.1 Plan participant contributions -- -- -- -- 0.2 0.2 Benefits paid (2.2) (1.8) (3.1) (3.5) (6.9) (4.8) Impact of exchange rates -- -- -- -- (2.7) -- - ------------------------------------------------------------------------------------------------------------------------ Ending balance 26.2 27.1 -- -- 24.8 29.8 - ------------------------------------------------------------------------------------------------------------------------ Funded status of the plan (4.7) 0.8 (39.3) (36.5) (28.8) (28.8) Unrecognized actuarial (gain) loss (1.3) (6.6) 1.0 (1.9) (2.1) (5.7) Unrecognized prior service benefit (0.1) (0.1) (1.5) (1.7) -- (0.2) Unrecognized net transaction (asset) liability -- (0.1) -- -- 0.9 1.5 Impact of exchange rates -- -- -- -- (0.1) 0.5 - ------------------------------------------------------------------------------------------------------------------------ Accrued benefit cost $ (6.1) $ (6.0) $ (39.8) $ (40.1) $ (30.1) $ (32.7) ======================================================================================================================== Weighted average assumptions: Discount rate 7.5% 7.8% 7.5% 7.8% 4.7% 4.5% Return on plan assets 9.0 9.0 n/a n/a 5.2 5.3 Salary growth rate 4.5 6.0 n/a n/a 2.3 2.5
94 Tupperware Corporation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Plan assets consist primarily of equity securities and corporate and government bonds. At December 30, 2000 and December 25, 1999, the accumulated benefit obligations of certain pension plans exceeded those plans' assets. For those plans, the accumulated benefit obligations were $65.7 million and $41.0 million, and the fair value of those plans' assets as of December 30, 2000 and December 25, 1999, were $41.3 million and $18.2 million, respectively. The costs associated with the plans were as follows:
(In millions) Pension benefits Post-retirement benefits - -------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- Components of net periodic benefit cost: Service cost $ 3.4 $ 4.0 $ 4.1 $ 0.4 $ 0.4 $ 0.3 Interest cost 4.7 4.5 4.7 2.8 2.6 2.7 Actual return on plan assets (1.2) (5.2) (2.3) -- -- -- Net deferral and (amortization) (2.2) 2.4 (0.3) (0.1) (0.1) (0.2) - -------------------------------------------------------------------------------------------------------------------------- Net periodic benefit cost $ 4.7 $ 5.7 $ 6.2 $ 3.1 $ 2.9 $ 2.8 ==========================================================================================================================
The assumed healthcare cost trend rate was 6 percent where it is expected to remain. 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:
(In millions) One percentage point - --------------------------------------------------------------------------------------------------------------- Increase Decrease - --------------------------------------------------------------------------------------------------------------- Effect on total of service and interest cost components $ 0.3 $ (0.3) Effect on post-retirement benefit obligation 4.1 (3.5)
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 2000, $3.8 million in 1999 and $4.5 million in 1998. NOTE 11: INCENTIVE COMPENSATION PLANS INCENTIVE PLANS. Certain officers and other key employees of the Company participate in the Tupperware Corporation 2000 and 1996 Incentive Plans (the Incentive Plans). Annual and long-term performance awards and awards of options to purchase Tupperware shares and of restricted stock are made under the Incentive Plans. For the 2000 Incentive Plan, which was approved by the Company's shareholders in May 2000, the total number of shares initially available for grant was 4,000,000 and 200,000 shares may be used for restricted stock awards. For the 1996 Incentive Plan, the total number of shares initially available for grant was 7,600,000 and 300,000 shares may be used for restricted stock awards. As of December 30, 2000, shares available for award under the Incentive Plans totaled 1,454,393, of which 238,693 could be granted in the form of restricted stock. For options granted in 2000,approximately 1.7 million shares under option were granted in conjunction with the Management Stock Purchase Plan. See Note 8 - Subscriptions Receivable. Tupperware Corporation 95 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Other than the 157,118 options exchanged for certain BeautiControl options and issued below the grant date value, all options' exercise prices are equal to the underlying shares' grant date market values. Outstanding options granted in 1998 on 339,000 shares and options granted in 1999 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 granted in conjunction with participation under the Management Stock Purchase Plan vest seven years after date of the grant; however, vesting may be accelerated beginning three years after the grant date if certain stock appreciation goals are attained. Other than 34,400 options that vest two years from the date of the grant, the remainder of the non-MSPP related options granted in 2000 vest three years from the date of the grant. Outstanding restricted shares have initial vesting periods ranging from 1 to 5 years. All outstanding options have exercise periods that are 10 years from the date of grant. DIRECTOR PLAN. Under the Tupperware Corporation Director Stock Plan (Director Plan), non-employee directors may elect to receive their annual retainers in the form of stock or stock options. Options granted to directors become exercisable on the last day of the fiscal year in which they are granted, have a term of 10 years and have an exercise price that compensates for the foregone cash retainer. This amount and the value of stock grants on the date of award have been recognized as an expense by the Company. The number of shares initially available for grant under the Director Plan and the number of shares available as of December 30, 2000, were 300,000 and 190,604, respectively. Earned performance awards of $12.8 million, $9.3 million and $9.6 million are included in the consolidated statements of income for 2000, 1999 and 1998, respectively. Stock option and restricted stock activity and information about stock options for the Incentive Plans and the Director Plan are summarized in the following tables:
Shares subject Average option Stock options to option price per share - --------------------------------------------------------------------------- Balance at December 27, 1997 3,346,870 $ 27.81 Granted 1,975,402 19.43 Canceled (174,646) 32.84 Exercised (125,413) 11.65 - -------------------------------------------------------- Balance at December 26, 1998 5,022,213 24.75 Granted 1,434,650 18.62 Canceled (233,732) 29.78 Exercised (70,805) 11.42 - -------------------------------------------------------- Balance at December 25, 1999 6,152,326 23.28 Granted 3,818,968 17.11 Canceled (485,262) 22.64 Exercised (115,707) 9.86 - -------------------------------------------------------- Balance at December 30, 2000 9,370,325 $ 20.95 ===========================================================================
96 Tupperware Corporation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Shares Shares available Restricted stock outstanding for issuance - --------------------------------------------------------------------------- Balance at December 27, 1997 127,341 134,604 Awarded 59,760 (59,760) Canceled (7,000) 7,000 Vested (29,728) -- - --------------------------------------------------------------------------- Balance at December 26, 1998 150,373 81,844 Awarded 11,000 (11,000) Canceled -- -- Vested (101,711) -- - --------------------------------------------------------------------------- Balance at December 25, 1999 59,662 70,844 Increase in shares available due to adoption of 2000 Incentive Plan 200,000 Shares transferred to 1996 Incentive Plan non-qualified status (23,151) Awarded 15,000 (15,000) Canceled (6,000) 6,000 Vested (3,662) -- - --------------------------------------------------------------------------- Balance at December 30, 2000 65,000 238,693 =========================================================================== Stock options outstanding As of December 30, 2000 Outstanding Exercisable - --------------------------------------------------------------------------------------------------- Average Average Average remaining exercise exercise Exercise price range Shares life price Shares price - --------------------------------------------------------------------------------------------------- $ 8.40 - $11.84 127,015 3.9 $ 10.95 127,015 $ 10.95 12.85 - 15.94 2,164,379 8.3 15.40 430,129 13.30 18.39 - 25.55 5,435,780 8.4 19.40 1,027,930 21.95 26.70 - 34.28 1,108,801 3.3 30.26 727,468 32.08 39.18 - 42.25 534,350 4.9 42.19 534,350 42.19 - ------------------------------- --------- 9,370,325 7.5 $ 20.95 2,846,892 $ 26.54 ===================================================================================================
The Company uses the intrinsic value method of accounting for stock-based compensation. The Company has estimated the fair value of its option grants. If these fair value estimates had been used to record compensation expense in the consolidated statements of income, net income would have been reduced by $5.6 million, $4.5 million and $3.7 million, to $69.3 million, $74.5 million and $65.3 million, or $1.19, $1.29 and $1.11 per diluted common share ($1.20, $1.30 and $1.12 per basic common share) in 2000, 1999 and 1998, 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 3.5 percent for 2000 and 1999 grants and 3.0 percent for 1998 grants; expected volatility of 40.0 percent for 2000, 1999 and 1998 grants; risk-free interest rates of 5.9 percent for 2000 and 1999 and 4.5 percent for 1998; 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. Tupperware Corporation 97 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 12: SEGMENT INFORMATION The Company manufactures and distributes products primarily through independent direct sales forces: (1) plastic food storage and serving containers, microwave cookware and educational toys marketed under the Tupperware brand worldwide, and organized into four geographic segments; and (2) premium cosmetics and skin care products marketed under the BeautiControl brand in North America.
(In millions) 2000 1999 1998 - ------------------------------------------------------------------------------------------- Net sales: Europe $ 424.1 $ 489.1 $ 518.7 Asia Pacific 242.0 242.3 211.5 Latin America 193.0 154.2 186.8 United States 201.8 178.2 186.9 BeautiControl 12.2 -- -- - ------------------------------------------------------------------------------------------- Total net sales $1,073.1 $1,063.8 $1,103.9 =========================================================================================== Operating profit (loss): Europe $ 94.1 $ 110.7 $ 123.9 Asia Pacific 44.8 35.0 20.2 Latin America 8.0(a) 12.0 (16.4)(b) United States 15.6 4.7 4.0(b) BeautiControl 0.1 -- -- - ------------------------------------------------------------------------------------------- Total operating profit 162.6 162.4 131.7 Unallocated expenses (27.9)(a) (23.1)(a) (17.5)(b) Re-engineering and impairment charge (12.5)(a) (15.1)(a) -- Interest expense, net (21.1) (20.9) (22.7) - ------------------------------------------------------------------------------------------- Income before income taxes $ 101.1 $ 103.3 $ 91.5 =========================================================================================== Depreciation and amortization: Europe $ 17.0 $ 22.0 $ 25.7 Asia Pacific 10.6 11.5 12.0 Latin America 9.9 10.0 12.5 United States 11.6 10.3 11.7 BeautiControl 0.2 -- -- Corporate 2.8 1.8 2.1 - ------------------------------------------------------------------------------------------- Total depreciation and amortization $ 52.1 $ 55.6 $ 64.0 ===========================================================================================
a. The Company announced a three-year re-engineering program in 1999. The re-engineering and impairment charge line provides for severance and other exit costs. In addition, unallocated expenses include $7.9 million and $1.0 million for 2000 and 1999, respectively, for internal and external consulting costs incurred in connection with the program. Additionally, $6.3 million was recorded as a reduction to Latin America's operating profit related to the write-down of inventory and receivables associated with adopting an importing distribution model for certain countries. Together, the after-tax impact of these costs was $24.2 million and $12.3 million in 2000 and 1999, respectively. See Note 3 to the financial statements. b. Includes a pretax charge totaling $42.4 million ($31.4 million after tax): $22.2 million in Latin America, primarily for bad debts in Brazil; $16.0 million in the United States, primarily for inventory obsolescence; and $4.2 million in unallocated expenses, primarily for corporate downsizing. 98 Tupperware Corporation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In millions) 2000 1999 1998 - ----------------------------------------------------------------------------------------- Capital expenditures: Europe $ 16.4 $ 14.1 $ 13.1 Asia Pacific 7.2 2.6 5.6 Latin America 7.3 11.5 13.6 United States 6.5 11.5 9.0 BeautiControl -- -- -- Corporate 8.9 1.2 4.9 - ----------------------------------------------------------------------------------------- Total capital expenditures $ 46.3 $ 40.9 $ 46.2 ========================================================================================= Identifiable assets: Europe $ 228.1 $ 237.6 $ 260.7 Asia Pacific 128.2 139.1 148.4 Latin America 130.8 148.7 165.1 United States 141.7 153.4 151.7 BeautiControl 24.4 -- -- Corporate 196.2 117.3 97.5 - ----------------------------------------------------------------------------------------- Total identifiable assets $ 849.4 $ 796.1 $ 823.4 =========================================================================================
Sales and operating profit in the preceding table are from transactions with customers. Inter-area transfers of inventory are accounted for at cost. Sales generated by product line are not captured in the financial statements, and disclosure of the information is impractical. Sales to a single customer did not exceed 10 percent of total sales. Export sales were insignificant. Sales to customers in Germany were $184.8 million, $209.2 million and $241.2 million in 2000, 1999 and 1998, respectively ($178.9 million and $198.1 million in 1999 and 1998, respectively, at 2000 exchange rates). No other foreign country's sales were material to the Company's total sales. The accounting policies of the segments are the same as those described in Note 1 - Summary of Significant Accounting Policies. The Company evaluates the performance of its segments based on operating profit. Operating profit for each segment included promotion, distribution and other expenses directly attributable to the segment and excluded certain expenses managed outside the reportable segment. Unallocated expenses are corporate expenses and other items not directly related to the operations of any particular segment. Corporate assets consist of cash, goodwill 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 30, 2000. As of the end of 2000, 1999 and 1998, respectively, long-lived assets in the United States were $99.3 million, $109.0 million and $110.3 million. As of December 30, 2000 and December 25, 1999, the Company's net investment in international operations was $190.8 million and $223.7 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 13: COMMITMENTS AND CONTINGENCIES The Company and certain subsidiaries are involved in litigation and various legal matters that are being defended and handled in the ordinary course of business. Included among these matters are environmental issues. None of the Company's contingencies are expected to have a material adverse effect on its financial position, results of operations or cash flow. Tupperware Corporation 99 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Kraft Foods, Inc., which was formerly affiliated with Premark International, Inc., the Company's former parent, and Tupperware, has assumed any liabilities arising out of any legal proceedings in connection with certain divested or discontinued businesses. The liabilities assumed include matters alleging product liability, environmental liability and infringement of patents. OPERATING LEASES. Net rental expense for operating leases totaled $35.0 million in 2000, $37.0 million in 1999 and $36.7 million in 1998. Approximate minimum rental commitments under non-cancelable operating leases in effect at December 30, 2000, were: 2001 - $14.5 million; 2002 - $8.3 million; 2003 - $2.7 million; 2004 - $1.0 million; 2005 - $0.7; and after 2005 - $0.3 million. NOTE 14: QUARTERLY FINANCIAL SUMMARY (UNAUDITED) Following is a summary of the unaudited interim results of operations for each quarter in the years ended December 30, 2000 and December 25, 1999.
(In millions, except per share amounts) First quarter Second quarter Third quarter Fourth quarter - ------------------------------------------------------------------------------------------------------------------------ Year ended December 30, 2000: Net sales $ 273.1(a) $ 278.4(a) $ 225.1(a) $ 296.5 Cost of products sold 93.8 93.5 74.8 96.3 Net income 19.2(b) 29.1(b) 4.7(b) 21.9(b) Net income per share: Basic 0.33(b) 0.50(b) 0.09(b) 0.38(b) Diluted 0.33(b) 0.50(b) 0.08(b) 0.38(b) Dividends declared per share 0.22 0.22 0.22 0.22 Composite stock price range: High 19.00 24.50 23.13 20.62 Low 14.56 15.50 17.19 15.50 Close 15.81 22.02 18.00 20.44 Year ended December 25, 1999: Net sales $ 255.1(a) $ 276.9(a) $ 216.2(a) $ 315.6(a) Cost of products sold 84.1 93.1 79.1 108.8 Net income 17.8 14.3(c) 3.5 43.4(c) Net income per share: Basic 0.31 0.25(c) 0.06 0.75(c) Diluted 0.31 0.25(c) 0.06 0.75(c) Dividends declared per share 0.22 0.22 0.22 0.22 Composite stock price range: High 21.44 24.06 25.50 21.13 Low 15.06 17.00 19.13 16.00 Close 19.06 20.44 19.38 16.88
a. In October 2000, the Emerging Issues Task Force issued EITF 00-10 "Accounting for Shipping and Handling Revenues and Costs", which requires fees billed to customers associated with shipping and handling to be classified as revenue. Accordingly, the Company has reclassified the revenue related to the shipping and handling fees billed to customers, which was previously recorded as a reduction of delivery expense, to net sales. For 2000, $4.5 million, $5.8 million and $4.9 million were reclassified in the first, second and third quarters, respectively. For 1999, $4.2 million, $5.6 million, $4.3 million and $5.9 million were reclassified in the first, second, third and fourth quarters, respectively. b. Includes pretax re-engineering and impairment costs of $2.5 million ($1.9 million after tax), $2.1 million ($1.7 million after tax), $1.8 million ($1.3 million after tax) and $20.3 million ($19.3 million after tax) for the first, second, third and fourth quarter, respectively. c. Includes pretax re-engineering costs of $15.1 million in the second quarter ($11.6 million after tax) and $1.0 million in the fourth quarter ($0.7 million after tax). 100 Tupperware Corporation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: 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. Tupperware Corporation 101 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF TUPPERWARE CORPORATION: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Tupperware Corporation and its subsidiaries at December 30, 2000 and December 25, 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Tupperware Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Orlando, Florida February 20, 2001 102 Tupperware Corporation 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, transactions are executed in accordance with management's authorization and properly recorded and accounting records may be relied upon for the preparation of financial information. There are inherent limitations in all internal control systems based on the fact that the cost of such systems should not exceed the benefit derived. Management believes that the Company's systems provide the appropriate balance of costs and benefits. The Company also maintains an internal auditing function that evaluates and reports on the adequacy and effectiveness of internal accounting controls, policies and procedures. The Audit and Corporate Responsibility Committee of the Board of Directors is composed entirely of outside directors. The Committee meets periodically and independently with management, the vice president of internal audit and PricewaterhouseCoopers LLP to discuss the Company's internal accounting controls, auditing and financial reporting matters. The vice president of internal audit and PricewaterhouseCoopers LLP have unrestricted access to the Audit and Corporate Responsibility Committee. Management recognizes its responsibility for conducting the Company's affairs in a manner that is responsive to the interests of its shareholders and its employees. This responsibility is characterized in the Code of Conduct, which provides that the Company will fully comply with laws, rules and regulations of every country in which it operates and will observe the rules of ethical business conduct. Employees of the Company are expected and directed to manage the business of the Company accordingly. /s/ Rick Goings /s/ Paul B. Van Sickle Rick Goings Paul B. Van Sickle Chairman and Chief Executive Vice President Executive Officer and Chief Financial Officer Tupperware Corporation 103 OFFICERS AND BOARD OF DIRECTORS
OFFICERS RICK GOINGS MICHAEL S. POTESHMAN JOE R. LEE(2,3) Chairman of the Board and Vice President, Investor Chairman and Chief Executive Chief Executive Officer Relations and Treasurer Officer, Darden Restaurants, Inc., GERALD M. CROMPTON THOMAS M. ROEHLK Casual Dining Restaurants Senior Vice President, Senior Vice President, Product Marketing Worldwide General Counsel and BOB MARBUT(2(*),3) Secretary Chairman, JUDY B. CURRY Hearst-Argyle Television, Inc., Vice President and Controller JAMES E. ROSE, JR. Television and Senior Vice President, Communications KAREL A. DEVYDT Taxes and Government Affairs Vice President and Chief ANGEL R. MARTINEZ(2) Information Officer HANS JOACHIM SCHWENZER Executive Vice President and Senior Vice President, Chief Marketing Officer, R. GLENN DRAKE Tupperware Worldwide Reebok International Ltd., President, Tupperware North Athletic Apparel America CHRISTIAN E. SKRODER Group President, Tupperware DAVID R. PARKER(1(*),3) LILLIAN D. GARCIA Europe, Africa and Managing Partner, Senior Vice President, Middle East Interprise Technology Human Resources Partners, L.P. JOSE R. TIMMERMAN DAVID T. HALVERSEN Senior Vice President, ROBERT M. PRICE(1) Senior Vice President, Worldwide Operations President, Business Development and PSV, Inc., Communications PAUL B. VAN SICKLE Technology Consulting Executive Vice President Services RICHARD W. HEATH and Chief Financial Officer Senior Vice President, JOYCE M. ROCHE(1) Beauty and Nutritional BOARD OF DIRECTORS President and Products Chief Executive Officer, RITA BORNSTEIN, PH.D.(1) Girls Incorporated CHARLES H.R. HENRY President, Rollins College Vice President, M. ANNE SZOSTAK(2) Process Re-engineering RICK GOINGS(3(*)) Executive Vice President and Chairman of the Board and Corporate Director of ALAN D. KENNEDY Chief Executive Officer, Human Resources, President Tupperware Corporation FleetBoston Financial, Diversified Financial Company STEVEN R. KROOS CLIFFORD J. GRUM(1) President, Chairman and Chief Tupperware Asia Pacific Executive Officer, retired, Temple-Inland Inc., ANNE E. NAYLOR Packaging, Paperboard, Vice President, Internal Audit Building Products and Financial Services GAYLIN L. OLSON President, Tupperware BETSY D. HOLDEN(2) Latin America President and Chief Executive Officer, Kraft Foods, Inc., Food Products
Numbers denote committee memberships: 1 Audit and Corporate Responsibility Committee 2 Compensation and Directors Committee 3 Executive Committee (*) Chairperson 104 Tupperware Corporation CORPORATE INFORMATION CORPORATE OFFICE Tupperware Corporation P.O. Box 2353 Orlando, FL 32802-2353 (407) 826-5050 14901 S. Orange Blossom Trail Orlando, FL 32837 TRANSFER AGENT AND REGISTRAR Wells Fargo Bank Minnesota, N.A. Shareholder inquiries should be directed to the agent at: Wells Fargo Shareowner Services 161 North Concord Exchange South St. Paul, MN 55075 or: P.O. Box 64854 St. Paul, MN 55164-0854 Telephone: (800) 468-9716 or (651) 450-4064 Fax: (651) 450-4033 E-mail: stocktransfer@wellsfargo.com Notices regarding changes of address and inquiries regarding lost dividend checks, lost or stolen certificates and transfers of stock should be directed to the transfer agent. COMMON STOCK Listed in the United States on the New York Stock Exchange and traded under the symbol TUP. INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP Orlando, Florida SEC FILINGS AND OTHER INFORMATION Copies of the Annual Report, filings with the Securities and Exchange Commission and press releases maybe obtained by writing to: Tupperware Corporation Investor Relations Department P.O. Box 2353 Orlando, FL 32802-2353 or by calling: (800) 514-3081 via email: finrel@tupperware.com FINANCIAL RELATIONS Michael S. Poteshman Vice President, Investor Relations and Treasurer (407) 826-4522 Website: www.tupperware.com ANNUAL MEETING The Annual Meeting of Shareholders will be held at 1:00 p.m. on Thursday, May 17, 2001, at The Hyatt Regency Orlando International Airport Hotel, 9300 Airport Boulevard, Orlando, Florida. Note: Except as indicated below, trademarks owned by the Company are (indicated by the use of (R) or (TM) throughout this report. HSN is a service mark of the Home Shopping Network, Inc. (*)(C) Disney Pokemon is a registered trademark of Nintendo of America, Inc. Barbie is a registered trademark of Mattel, Inc. Barney is a registered trademark of Lyons Partnership L.P. -----END PRIVACY-ENHANCED MESSAGE-----