ORLANDO, Fla., Feb. 24, 2020 /PRNewswire/ -- (NYSE:
TUP) Tupperware Brands Corporation (the "Company")
today announced select preliminary financial results for the fiscal
year ended December 28, 2019. The
Company also announced it will file a Form 12b-25 Notification of
Late Filing with the Securities and Exchange Commission to provide
a 15-calendar day extension within which to file its Form 10-K for
the fiscal year ended December 28,
2019. The extension will provide the Company time to
finalize additional procedures as part of its investigation
regarding the impact of certain financial reporting matters in its
Fuller Mexico beauty business and to finalize its tax rate, as
further described below.
As a result, the earnings call on February 25, 2020 at 8:30
a.m. Eastern Time will not be held as scheduled.
Full-Year Preliminary Financial Updates
- Full-year sales are expected to be in line with previously
provided outlook ranges of down 12% to 14% as reported and down 8%
to 10% in local currency+
- GAAP pre-tax return on sales is expected to be approximately
6%
- GAAP diluted E.P.S. is expected to be in the range of breakeven
to $0.34 versus $3.11 in the prior year. The current year
was negatively impacted by $40
million for the non-cash impairment of goodwill and
intangible assets and $35 million of
re-engineering costs
- The Fuller Mexico full-year 2019 negative impact on an
adjusted* pre-tax basis is expected to be in the range of
$19-21 million
- Impact of taxes on adjusted* E.P.S. is expected to be in the
range of $1.66-$1.98 in 2019
- Adjusted* pre-tax return on sales is expected to be
approximately 10% or 12% excluding the Fuller Mexico impact, versus
14% in the prior year
- Adjusted* diluted E.P.S. is expected to be $1.35-$1.70 versus
$4.30 in the prior year, including
$0.26 cents from foreign
currency
The primary drivers of the decline in profit are expected to
be:
- The Company increased its valuation allowances for deferred tax
assets related to foreign tax credits and disallowed interest
deductions due to the Company's multi-year declining domestic
performance resulting in an elevated GAAP tax rate of 84% to 100%
and operating tax rate of 55% to 66% for fiscal 2019.
- The Company experienced continued execution challenges and
unfavorable macro-economic trends most notably in its core markets
of Brazil, China, and U.S. & Canada. The impact on segment profit is
expected to be approximately $83
million or $0.75 cents per
share, excluding Fuller Mexico of $19-21 million.
- The Company is conducting an investigation primarily into the
accounting for accounts payable and accrued liabilities at its
Fuller Mexico beauty business to determine the extent to which
these matters may further impact results and to assess and enhance
the effectiveness of internal controls at this business. This
matter is $9-11 million of the total
expected $19-21 million full-year
impact on an adjusted* pre-tax basis. In addition, total
impairments for Fuller Mexico are expected to be approximately
$31 million. The total pre-tax
impact for 2019 is approximately $50-52 million.
"While challenges in Brazil,
China, and the U.S. &
Canada businesses persisted in the
fourth quarter in line with our expectations, our preliminary
results were further affected by financial reporting issues in
Fuller Mexico. We are working rapidly to address these Fuller
Mexico issues in order to finalize our 2019 results. We are also
focused on facing the clear headwinds in our core markets and
accelerating the pace at which we can achieve meaningful
improvement in the business," said Chris
O'Leary, the Company's Interim CEO.
O'Leary continued, "Our actions in the fourth quarter of 2019
and year-to-date already show promising results in reducing
expenses across various payroll, promotional incentives and
discretionary spending activities, and we expect to realize
associated cost savings of approximately $50
million in 2020. Our team is focused on making the Company a
leaner and more agile organization that is better able to compete
in a growing direct-selling industry and deliver long-term value to
shareholders."
2020 Outlook
The Company will only be providing full-year guidance going
forward. Based on current business trends and foreign currency
rates, the Company's full-year fiscal 2020 outlook is provided
below.
The first half of 2020 reflects similar sales trends as 2019,
together with continued investments to drive savings. The
second half of 2020 reflects better sales trends supported by
go-to-market work in Brazil,
China and U.S. & Canada along with the majority of the
$50 million cost savings efforts.
Company
Level
|
Dec 26,
2020
|
|
|
Low
|
|
High
|
|
|
|
|
|
|
USD Sales
|
$1,582M
|
|
$1,617M
|
|
|
vs. prior
year
|
(12%)
|
|
(10%)
|
|
|
Local Currency Sales
+
|
$1,582M
|
|
$1,617M
|
|
|
vs. prior
year
|
(11%)
|
|
(9%)
|
|
|
GAAP Pre-Tax
Income
|
$164M
|
|
$173M
|
|
|
GAAP EPS
|
$1.16
|
|
$1.23
|
|
|
GAAP Pre-Tax
ROS
|
10.4%
|
|
10.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FX Impact on EPS
Comparison (a)
|
($0.02)
|
|
($0.02)
|
|
|
|
|
|
|
Operating Cash
Flow**
|
$135M
|
|
|
|
GAAP Tax
Rate
|
65%
|
|
|
|
|
|
|
|
(a) Impact of changes
in foreign currency vs. prior year is updated monthly
at: Tupperware Brands Foreign Exchange Translation Impact
Update.
|
|
* Adjusted means GAAP
adjusted for certain items - See Non-GAAP Financial Measures
Reconciliation Schedule
|
+ Local currency changes are measured
by comparing current year results with those of the prior year
translated at the current year's foreign exchange rates.
|
** Reflects $60
million of capital expenditures
|
Segment Level Outlook
Local currency sales for full-year 2020 are expected to be down
9% to 11% and are reflective of the difficult consumer trends in
key markets and a lower average active sales force.
- Sales – Europe down high
single digits; Asia Pacific down
mid double digits, North America
down low double digits and South
America down mid single digits
- Segment profit return on sales is expected to be 330-350 basis
points above 2019 reflecting the expected cost savings
opportunities of $50 million
Debt Covenant
Based on the 2020 outlook, the Company is forecasting a need for
relief concerning its existing leverage ratio covenant in its
$650 million Credit Agreement dated
March 29, 2019 (the "Credit
Agreement"), to avoid a potential acceleration of the debt, which
could have a material adverse impact on the Company.
Approvals have been received, pending completion of final
documentation, from participating banks to amend the maximum
consolidated leverage (debt-to-EBITDA) in the Credit Agreement for
the required relief. In connection with the amendment, the
Company and certain of its subsidiaries will provide additional
collateral and subsidiary guarantees.
About Tupperware Brands Corporation
Through an independent sales force of 2.9 million, Tupperware
Brands Corporation is a leading global marketer of innovative,
premium household, beauty and personal care products across
multiple brands utilizing social selling. Product brands and
categories include design-centric preparation, storage and serving
solutions for the kitchen and home through the Tupperware brand and
beauty and personal care products through the Avroy Shlain, Fuller
Cosmetics, NaturCare, Nutrimetics and Nuvo brands. The Company's
stock is listed on the New York Stock Exchange (NYSE: TUP).
Safe Harbor Statement
Statements contained in this release that are not historical
fact and use predictive words such as "preliminary", "estimates",
"outlook", "guidance", "expects", "believes", "intends", "target",
"plans", "may", "will", and similar words are forward-looking
statements. These forward-looking statements and related
assumptions involve risks and uncertainties that could cause actual
results and outcomes to differ materially from any forward-looking
statements or views expressed herein. These risks and uncertainties
include, but are not limited to, the following: the success and
timing of growth and transformation initiatives; the ability to
timely complete the investigation of the Fuller Mexico matters
referred to in this release; the execution of the amendment to the
Credit Agreement for relief under the debt leverage covenant, as
contemplated in this release; the ability to realize cost savings
goals for 2020; impairment and other charges related to
intellectual property, purchase accounting goodwill and
restructuring actions; risk of foreign-currency fluctuations and
the currency translation impact on the Company's business
associated with these fluctuations; uncertainties related to the
interpretation of, and regulations under, the recently enacted U.S.
Tax Cuts and Jobs Act of 2017; the Company's future tax-planning
initiatives; any prospective or retrospective increases in duties
on the Company's products; any adverse results of tax audits or
unfavorable changes to tax laws in the Company's various markets;
risk that direct selling laws and regulations in any of the
Company's markets may be modified, interpreted or enforced in a
manner that results in negative changes to the Company's business
models or negatively impacts its revenue, sales force or business,
including through the interruption of recruiting and sales
activities, loss of licenses, imposition of fines, or any other
adverse actions or events; unpredictable economic and political
conditions and events globally; the success of new product
introductions and promotional programs to generate interest among
the Company's sales force and customers and generate selling
activities on a sustained basis; success of business-to-business
selling arrangements and their timing; success of buyers in
obtaining financing or attracting tenants for commercial and
residential developments; the timing and success of closing asset
sales related to re-engineering actions; risks related to
accurately predicting, delivering or maintaining sufficient
quantities of products to support planned initiatives or launch
strategies; governmental approvals of materials for use in food
containers and beauty, personal care, nutritional and nutraceutical
products; continued competitive pressures for products or sales
force in the Company's markets; leadership development and
succession changes; and other risks detailed in the Company's
periodic reports as filed in accordance with the Securities
Exchange Act of 1934, as amended.
The Company updates each month the impact of changes in foreign
exchange rates versus the prior year, posting it on Tupperware
Brands Foreign Exchange Translation Impact Update. Other than
updating for changes in foreign currency exchange rates, the
Company does not intend to update forward-looking information,
except through its quarterly earnings releases.
Non-GAAP Financial Measures
The Company has utilized non-GAAP financial measures in this
release, which are provided to assist readers' understanding of the
Company's results of operations. These amounts exclude certain
items that at times materially impact the comparability of the
Company's results of operations. The adjusted information is
intended to be indicative of the Company's primary operations, and
to assist readers in evaluating performance, analyzing trends
across periods and provide a useful measure for predictive
purposes. These results should be considered in addition to, not as
a substitute for, results reported in accordance with GAAP.
The non-GAAP financial measures include comparisons related to
profit and exclude:
- gains from the sale of property, plant and equipment and other
real estate related operations
- insurance settlement gains or significant charges related to
casualty losses caused by significant weather events, fires or
similar circumstances
- exit or disposal cost obligations related to rationalizing
supply chain operations and other re-engineering activities
performed to wind-down or significantly restructure businesses,
including cumulative translation adjustments recognized in income
upon liquidation of operations in a country, asset sales or fixed
asset impairments, inventory obsolescence and other operating
losses incurred in conjunction with such activities
- certain asset retirement obligations
- pension settlements
- significant discrete impacts of new tax laws upon adoption,
including the impact on cumulative deferred taxes from items
previously recorded as cumulative translation adjustments
- amortization of definite-lived intangible assets
- non-cash impairment charges related to the carrying value of
acquired intangible assets and goodwill
- infrequent costs incurred in connection with a change in
capital structure
- the impact from hyper-inflationary economies on net monetary
assets and other balance sheet positions that impact near term
income
While these types of events can and do recur periodically, they
are not part of its primary business operations and are excluded
from indicated financial information due to their distinction from
ongoing business operations, inherent volatility and impact on the
comparability of earnings across periods as amounts recognized in
any given period are not indicative of amounts that may be
recognized in any particular future period.
Additionally, the Company engages in business-to-business
transactions, in which it sells products to a partner company.
Since the level of these sales is volatile from quarter-to-quarter
and year-to-year, and is largely independent of the activities of
its sales force, the Company at times, in addition to disclosing
reported sales, discloses "core" sales amounts and comparisons,
which excludes amounts sold under business-to-business
transactions. This illustrates sales results and trends directly
associated with activities of its independent sales force. All
financial information disclosed and presented includes
business-to-business transactions unless specifically stated as
"core" sales.
Also, as the impact of changes in exchange rates is an important
factor in understanding period-to-period comparisons. The
Company believes the presentation of results on a local currency
basis, in addition to reported results, helps improve readers'
ability to understand the Company's operating results and evaluate
performance in comparison with prior periods. The Company presents
local currency information that compares results between periods as
if current period exchange rates had been the exchange rates in the
prior period. The Company uses results on a local currency basis as
one measure to evaluate performance and generally refers to such
amounts as restated or excluding the impact of foreign
currency.
These core sales and local currency results should be considered
in addition to, not as a substitute for, results reported in
accordance with GAAP. Core sales and results on a local currency
basis may not be comparable to similarly titled measures used by
other companies and are not measures of performance presented in
accordance with GAAP.
Information included with this release includes references to
Adjusted EBITDA and a Debt/Adjusted EBITDA ratio, which are
non-GAAP financial measures used in the Company's Credit Agreement.
The Company uses these measures in its capital allocation decision
process and in discussions with investors, analysts and other
interested parties, and therefore believes it is useful to disclose
this amount and ratio. The Company's calculation of these measures
is in accordance with its Credit Agreement, and is set forth in the
reconciliation from GAAP amounts in an attachment to this release;
however, the reader is cautioned that other companies define these
measures in different ways, and consequently they may not be
comparable with similarly labeled amounts disclosed by others.
TUPPERWARE BRANDS
CORPORATION
|
NON-GAAP FINANCIAL
MEASURES
|
(UNAUDITED)
|
|
|
|
|
(In millions,
except per share data)
|
|
52 Weeks Ended
Dec. 28, 2019
|
|
Reported
(High end)
|
|
Adj's
|
|
Excl Adj's
(High end)
|
|
Reported
(Low end)
|
|
Adj's
|
|
Excl Adj's
(Low end)
|
|
Segment
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
$
|
38.0
|
|
|
$
|
1.4
|
|
b,f
|
$
|
39.4
|
|
|
$
|
38.0
|
|
|
$
|
1.4
|
|
b,f
|
$
|
39.4
|
|
|
Asia
Pacific
|
124.3
|
|
|
1.7
|
|
a,b
|
126.0
|
|
|
124.3
|
|
|
1.7
|
|
a,b
|
126
|
|
|
North
America
|
42.8
|
|
|
5.9
|
|
a,b,g
|
48.7
|
|
|
40.3
|
|
|
5.9
|
|
a,b,g
|
46.2
|
|
|
South
America
|
43.8
|
|
|
1.8
|
|
a,c
|
45.6
|
|
|
43.8
|
|
|
1.8
|
|
a,c
|
45.6
|
|
|
|
248.9
|
|
|
10.8
|
|
|
259.7
|
|
|
246.4
|
|
|
10.8
|
|
|
257.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated
expenses
|
(41.7)
|
|
|
8.9
|
|
b,h
|
(32.8)
|
|
|
(41.7)
|
|
|
8.9
|
|
b,h
|
(32.8)
|
|
|
Gain on disposal of
assets
|
12.9
|
|
|
(12.9)
|
|
d
|
—
|
|
|
12.9
|
|
|
(12.9)
|
|
d
|
—
|
|
|
Re-engineering
|
(34.7)
|
|
|
34.7
|
|
e
|
—
|
|
|
(34.7)
|
|
|
34.7
|
|
e
|
—
|
|
|
Impairment of
goodwill and intangible assets
|
(40.0)
|
|
|
40.0
|
|
i
|
—
|
|
|
(40.0)
|
|
|
40.0
|
|
i
|
—
|
|
|
Interest expense,
net
|
(39.3)
|
|
|
—
|
|
|
(39.3)
|
|
|
(39.3)
|
|
|
—
|
|
|
(39.3)
|
|
|
Income before
taxes
|
106.1
|
|
|
81.5
|
|
|
187.6
|
|
|
103.6
|
|
|
81.5
|
|
|
185.1
|
|
|
Provision for income
taxes
|
89.2
|
|
|
15.0
|
|
j
|
104.2
|
|
|
103.8
|
|
|
15.0
|
|
j
|
118.8
|
|
|
Net income
|
$
|
16.9
|
|
|
$
|
66.5
|
|
|
$
|
83.4
|
|
|
$
|
(0.2)
|
|
|
$
|
66.5
|
|
|
$
|
66.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
(diluted)
|
$
|
0.34
|
|
|
$
|
1.36
|
|
|
$
|
1.70
|
|
|
$
|
—
|
|
|
$
|
1.35
|
|
|
$
|
1.35
|
|
|
a Amortization of
intangibles of acquired beauty units.
|
b Pension settlement
costs.
|
c As a result of
devaluations in the Venezuelan bolivar, and beginning July 1, 2018,
Argentine peso, as Venezuela and Argentina are accounted for as
hyperinflationary, the Company had negative impacts of $1.6 million
and $2.1 million year-to-date periods of
2019 and 2018, respectively. These amounts were related to
expense from re-measuring bolivar and peso denominated net
monetary assets at the lower exchange rates at the times of
devaluations, along with the impact of recording in income
amounts on the balance sheet when the devaluations occurred,
primarily inventory, at the exchange rates at the time the amounts
were made or purchased, rather than the exchange rates in use when
they were included in income.
|
d Gain on disposal of
assets in 2019 mainly relate to the sale of a
building in Tupperware France. In 2018, gains on disposal of
assets mainly relate to the sale of a warehouse in
Japan and a building owned by Beauticontrol. In both
years, the sale of land held near the Orlando, FL headquarters also
resulted in gains.
|
e In both years,
re-engineering and impairment charges were primarily related to
severance costs incurred for headcount reduction in several of the
Company's locations in connection with changes in its
management and organizational structures, and in 2018, the costs
associated with the closure of Beauticontrol and the French supply
chain facility.
|
f Write-off of
inventory and bad debt associated with changes in business
model.
|
g Beauticontrol
wind-down loss and inventory write-off .
|
h Consultant fees for
transformation and CEO transition costs.
|
i Impairment of
goodwill of House of Fuller Mexico and trademarks of Nutrimetics
and Fuller.
|
j Provision for
income taxes represents the net tax impact of adjusted*
amounts
|
See note regarding
non-GAAP financial measures in the attached press
release.
|
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SOURCE Tupperware Brands Corporation