The following is a discussion of the results of operations for the 13 weeks endedMarch 28, 2020 , compared with the 13 weeks endedMarch 30, 2019 , and changes in financial condition during the 13 weeks endedMarch 28, 2020 . The Company's core sales are derived from the distribution of its products through independent sales organizations and individuals, who may also be its customers, who then, in turn, sell to end consumers who are not members of its sales force. The Company is largely dependent upon these independent sales organizations and individuals to reach end consumers, and any significant disruption of this distribution network would have a negative financial impact on the Company and its ability to generate sales, earnings and operating cash flows. The Company's primary business drivers are the size, activity, diversity and productivity of its independent sales organizations. In 2020, the Company continued to sell directly and/or through its sales force as well as to end consumers via the Internet and through business-to-business transactions, in which it sells products to a partner company. As the impacts of foreign currency translation are an important factor in understanding period-to-period comparisons, the Company believes the presentation of results on a local currency basis, as a supplement 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 used to translate results in the prior period. The Company uses results on a local currency basis as one measure to evaluate performance. The Company generally refers to such amounts as calculated on a "local currency" basis, or "excluding the impact of foreign currency." These results should be considered in addition to, not as a substitute for, results reported in accordance with generally accepted accounting principles inthe United States ("GAAP"). Results on a local currency basis may not be comparable to similarly titled measures used by other companies. The global spread of the novel coronavirus (COVID-19), which has been declared by theWorld Health Organization to be a "pandemic," has spread to many countries and is impacting worldwide economic activity. Many governments have implemented policies intended to stop or slow the further spread of the disease, such as shelter-in-place orders, resulting in the temporary closure of schools and non-essential businesses, and these measures may remain in place for a significant period of time. During the first quarter of 2020, the impact of COVID-19 on the Company's business was most pronounced inEurope andAsia Pacific where the Company experienced partial or country-wide lockdowns of operations in various markets, includingChina ,France ,Italy , andthe Philippines . The first quarter impact of COVID-19 largely affected March revenues, financial results and liquidity, specifically in the second half of the month. While the duration and severity of this pandemic is uncertain, the Company currently expects that its results of operations in the second quarter of 2020 will have the most significant impact of the effects of COVID-19, and that subsequent periods will also be negatively impacted. The extent to which the COVID-19 pandemic ultimately impacts the Company's business, financial condition, results of operations, cash flows, and liquidity may differ from management's current estimates due to inherent uncertainties regarding the duration and further spread of the outbreak, its severity, actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. A top priority for the Company as it navigates through the global COVID-19 pandemic is the safety of its employees and their families, sales force and consumers, and to mitigate the impact on its operations and financial results. The Company will continue to proactively respond to the situation and may take further actions that alter the Company's business operations as may be required by governmental authorities, or that the Company determines are in the best interests of its employees, sales force and consumers. 30
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Table of Contents Results of Operations 13 weeks ended Change excluding the impact of (In millions, except per Mar 28, Mar 30, foreign Foreign exchange share amounts) 2020 2019 Change exchange impact Net sales$ 375.9 $ 487.3 (22.9 )% (17.4 )%$ (32.2 ) Gross margin as percent of sales 65.5 % 66.9 % (1.4 ) pp n/a n/a DS&A as percent of sales 64.6 % 53.9 % 10.7 pp n/a n/a Operating income (loss)$ (0.7 ) $ 58.2 n/a n/a$ (6.4 ) Net income (loss)$ (7.8 ) $ 36.9 n/a n/a$ (4.7 ) Net income (loss) per diluted share$ (0.16 ) $ 0.76 n/a n/a$ (0.10 ) _________________________ n/a not applicable pp percentage points Net Sales Reported sales decreased 22.9 percent in the first quarter of 2020 compared with the first quarter of 2019. Excluding the impact of changes in foreign currency exchange rates, sales decreased 17.4 percent. The average impact of higher prices was about 3 percent. The net decrease in local currency sales was mainly driven by decreases in: •Brazil , from lower sales force activity and recruiting mainly due to
increased competition and lower consumer spending
•
consumer spending.
in January and extending throughout the quarter.
partially mitigate the impact of this health crisis by leveraging
e-commerce and social media capabilities and launching support programs
to outlet owners. •France andSwitzerland , mainly from lower business-to-business sales compared with 2019 andFrance , from government mandated lock down due to COVID-19
•
• Tupperware Mexico, from a less active and less productive sales force
•the United States andCanada , from a smaller, less active and less productive sales force The estimated impact to net sales in the first quarter of 2020 as a result of COVID-19 is estimated at 5pp of the decline versus the first quarter of 2019. The Company continues to monitor the effects of COVID-19 on its reported sales and has taken several steps to mobilize its resources to ensure adequate liquidity, business continuity and employee safety during this pandemic. The Company continues to provide digital tools and training to its sales force, where available, to enable them to connect with end consumers through social media and sell through the Internet. A more detailed discussion of the sales results by reporting segment is included in the segment results section in this Part I, Item 2. As discussed in Note 3 to the Consolidated Financial Statements in Part I, Item 1 of this Report, the Company includes certain promotional costs in DS&A. As a result, the Company's net sales may not be comparable with other companies that treat these costs as a reduction of revenue. Gross Margin Gross margin as a percentage of sales was 65.5 percent and 66.9 percent in the first quarters of 2020 and 2019, respectively. The factors leading to the 1.4pp decrease primarily reflected increased negative manufacturing variances, mainly volume, related toBrazil , Mexico andUnited States andCanada , partially offset by lower resin costs. 31
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As discussed in Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this Report, the Company includes costs related to the distribution of its products in DS&A. As a result, the Company's gross margin may not be comparable with other companies that include these costs in costs of products sold. Operating Expenses DS&A as a percentage of sales was 64.6 percent in the first quarter of 2020, compared with 53.9 percent in 2019. The 10.7 pp increase in comparison primarily reflected: • increased administration and other expenses mainly due to fees for professional services firms supporting business turnaround efforts,
leadership transition costs, net reduction of long-term management
incentive costs last year versus expense in 2020 and lower absorption
of fixed costs (7.4 pp) • increased selling expenses mainly from higher bad debt expense, primarily inFrance , higher commissions inIndonesia reflecting the new compensation program and outlet support expenses in response to COVID-19 inChina (3.6 pp) • increased distribution expenses mainly from lower fixed costs absorption predominantly impactingBrazil ,Europe andthe United States andCanada (1.6 pp)
• Partially offset by decreased promotional expenses mainly in
reflecting the new compensation program,France ,Germany and Mexico (1.9 pp) The Company segregates corporate operating expenses into allocated and unallocated components based upon the estimated time spent managing segment operations. The allocated costs are then apportioned on a local currency basis to each segment based primarily upon segment revenues. The unallocated expenses reflect amounts unrelated to segment operations. Operating expenses to be allocated are determined at the beginning of the year based upon estimated expenditures. Total unallocated expenses in the first quarter of 2020 increased$16.6 million compared with 2019, reflecting: • non-recurring fees for professional services firms supporting business turnaround efforts and leadership transition costs ( about$13.0 million )
• management incentives from a net reduction of long-term incentives last
year versus expense this year
Specific segment impacts are discussed in the segment results section in this Part I, Item 2. Re-engineering Costs Refer to Note 7 to the Consolidated Financial Statements in Part I, Item 1 of this Report, for a discussion of re-engineering activities and accruals. The multi-year decline in revenue led the Company to evaluate its operating structure leading to actions designed to reduce costs, improve operating efficiency and otherwise turnaround its business. These actions often result in re-engineering costs related to headcount reductions and to facility downsizing and closure, other costs that may be necessary in light of the revised operating landscape including structural changes impacting how its sales force operates, as well as related asset write downs. The Company may recognize gains or losses upon disposal of excess facilities or other activities directly related to its re-engineering efforts. The Company recorded$3.9 million and$4.3 million in re-engineering charges during the first quarters of 2020 and 2019, respectively. These re-engineering costs were mainly related to the transformation program, which was announced inJanuary 2019 and re-assessed inDecember 2019 (collectively the "Turnaround Plan") and theJuly 2017 revitalization program ("2017 program"). The turnaround plan was launched with the focus to drive innovation, sales force engagement and consumer experiences through a contemporized and streamlined service model. Since the inception of the turnaround plan, a reassessment of costs and priorities has occurred with a shift from a segment to a global focus with increased emphasis on procurement, sourcing and organizational realignment. This plan is expected to run through 2021 and incur approximately$50.0 million in pretax cost, with 100 percent paid in cash. The Company incurred$3.3 million and$1.2 million in the first quarters of 2020 and 2019, respectively, primarily related to severance costs, outside consulting services, project team expenses, and distributor support. Once fully executed, the plan is expected to enable annual local currency sales growth and to generate about$100.0 million in annualized savings. 32
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In relation to the 2017 program, the Company incurred$0.6 million and$3.1 million of charges in the first quarters of 2020 and 2019, respectively. Under this program, the Company has incurred$84.7 million of pretax costs starting in the second quarter of 2017 through first quarter of 2020 and expects to incur an additional$2.0 million of pretax re-engineering costs in the remaining of 2020. The annualized benefit of these actions has been approximately$36.0 million . After reinvestment of a portion of the benefits, improved profitability is reflected most significantly through lower cost of products sold, but also through lower DS&A; however, overall profitability has not risen in light of lower sales and higher costs. Net Interest Expense Net interest expense was$9.7 million in the first quarter of 2020, an increase of$0.1 million compared to the first quarter of 2019. The increase in interest expense related to the impact of higher interest on borrowings. Income Taxes The effective tax rate for the first quarter of 2020 was 5.4 percent compared with 28.9 percent for 2019. The decrease in the rate was primarily attributable to the overall decline in profitability for the quarter endedMarch 28, 2020 as compared to the same period last year and lower cash tax costs driven by lower profits. As discussed in Note 14 to the Consolidated Financial Statements in Part I, Item 1 of this Report, the Company's uncertain tax positions increase the potential for volatility in its tax rate. As such, it is reasonably possible that the effective tax rates in any individual quarter will vary from the full year expectation. At this time, the Company is unable to estimate what impact that may have on any individual quarter. Net Income Net income decreased$44.7 million in the first quarter of 2020 compared with 2019, which included a$4.7 million negative impact on the comparison from changes in foreign currency exchange rates. The net decrease primarily reflected: • decreased segment profit inAsia Pacific , primarily inChina • decreased segment profit forNorth America , primarily at Fuller Mexico and inthe United States andCanada • decreased segment profit inEurope , primarily from lower business-to-business sales • increased unallocated expenses related to fees for professional services firms supporting business turnaround efforts, leadership
transition costs and a net reduction of long-term management incentive
costs last year versus expense in 2020 • decreased segment profit, estimated at 25% of the total decline versus the first quarter of 2019, from the impact of COVID-19. These decreases were partially offset by lower income taxes. A more detailed discussion of the results by reporting segment is included in the segment results section below in this Part I, Item 2. International operations generated 92.2 percent of sales in the first quarter of 2020, and 92.7 percent of sales in the first quarter 2019. These units generated 104.6 percent of net segment profit in the first quarter of 2020, and 97.7 percent of net segment profit in the first quarter of 2019. The sale of beauty products generated 14.3 percent of sales in the first quarter of 2020, and 13.6 percent in the first quarter of 2019. 33
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Segment Results The Company did see an impact to sales and profit results by reporting segment in the first quarter of 2020 as a result of COVID-19. Also, the Company expects that its results of operations in the second quarter of 2020 will reflect the most severe impact of the effects of COVID-19, and subsequent periods may also be negatively impacted. The Company continues to monitor the effects of COVID-19 on its reported sales and profit and has taken several steps to mobilize its resources to ensure adequate liquidity, business continuity and employee safety during this pandemic.Europe 13 weeks ended Change Percent of total excluding the impact Mar 28, Mar 30, of foreign Foreign exchange (In millions) 2020 2019 Change exchange impact 2020 2019 Net sales$ 105.7 $ 138.6 (23.7 )% (19.4 )%$ (7.4 ) 28 28 Segment profit 2.5 17.7 (85.9 ) (85.0 ) (1.0 ) 9 24 Segment profit as percent of sales 2.4 % 12.8 % (10.4 ) pp n/a n/a n/a n/a _________________________ n/a not applicable pp percentage points Reported sales decreased 23.7 percent compared with the first quarter of 2019. Excluding the impact of changes in foreign currency exchange rates, sales decreased 19.4 percent compared with the first quarter of 2019. On average, the impact of higher prices was about 2 percent in the first quarter compared with 2019. The net decrease in local currency sales was mainly driven by: •France andSwitzerland , mainly from lower business-to-business sales compared with 2019 andFrance , from government mandated lock down due to COVID-19
•
negatively impacted by social gathering restrictions starting at the
end of February and a country-wide lockdown by mid-March as a result of
COVID-19
• partial or country-wide lockdowns in March due to COVID-19
Segment profit decreased$15.2 million in the first quarter of 2020 versus 2019. Excluding the impact of changes in foreign currency exchange rates, segment profit decreased$14.2 million compared to the first quarter of 2019, primarily driven by: • decreased business-to-business sales mainly inFrance andSwitzerland with higher than average profitability • increased distribution mainly from lower fixed costs absorption and selling expenses from higher bad debt expense
• impact from COVID-19
The Euro and South African rand were the main currencies that impacted the first quarter sales comparisons while the South African rand had a meaningful impact on profit comparisons. 34
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Table of ContentsAsia Pacific 13 weeks ended Change Percent of total excluding the impact Mar 28, Mar 30, of foreign Foreign exchange (In millions) 2020 2019 Change exchange impact 2020 2019 Net sales$ 120.4 $ 156.1 (22.9 )% (20.1 )%$ (5.4 ) 32 32 Segment profit 17.3 30.0 (42.3 ) (40.1 ) (1.1 ) 59 41 Segment profit as percent of sales 14.4 % 19.2 % (4.8 ) pp n/a n/a n/a n/a ______________________ n/a not applicable pp percentage points Reported sales decreased 22.9 percent compared with the first quarter of 2019. Excluding the impact of changes in foreign currency exchange rates, sales decreased 20.1 percent. On average, the impact of higher prices was about 4 percent in the first quarter compared with 2019, primarily related to less promotional pricing. The main drivers for the decrease in local currency sales were: •China , from a reduction in outlet openings, lower productivity from a shift in mix to mid-priced products from premium priced products due to lower consumer spending trends and outlet activities disruption from COVID-19.China was able to partially mitigate the impact of this
health crisis by leveraging e-commerce and social media capabilities
and launching support programs to outlet owners. •Indonesia andthe Philippines , mainly from a less active sales force andthe Philippines , from mandated lock down due to COVID-19
•
lower consumer spending
• Partial or country-wide lockdowns due to COVID-19 negatively impacted
all business units in this segment.
Segment profit decreased 42.3 percent compared with the first quarter of 2019. Excluding the impact of changes in foreign currency exchange rates, segment profit decreased 40.1 percent, primarily reflecting: • the impact from lower sales volume and shift in product mix inChina , in addition to lower margins from an increase in selling expenses driven by higher headcount and fees for professional services firms supporting business turnaround efforts and an increase in outlet support expenses related to COVID-19
• lower sales volumes in
• impact from COVID-19
The Chinese renminbi had the most meaningful impact on the first quarter sales and profit comparisons.North America 13 weeks ended Change Percent of total excluding the impact Mar 28, Mar 30, of foreign Foreign exchange (In millions) 2020 2019 Change exchange impact 2020 2019 Net sales$ 101.3 $ 119.6 (15.4 )% (10.5 )%$ (6.5 ) 27 25 Segment profit 6.5 17.4 (62.6 ) (57.8 ) (2.0 ) 22 23 Segment profit as percent of sales 6.4 % 14.5 % (8.1 ) pp n/a n/a n/a n/a _________________________ n/a not applicable pp percentage points 35
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Reported sales in the first quarter of 2020 decreased 15.4 percent compared with the first quarter of 2019. Excluding the impact of changes in foreign currency exchange rates, sales decreased 10.5 percent. The average impact of higher prices was about 1 percent. The net decrease in local currency sales was mainly driven by: • Tupperware Mexico, due to a less active and less productive sales force mainly from lower recruiting, negatively impacted by COVID-19 starting in mid-March •the United States andCanada , reflecting a smaller sales force from lower recruiting mainly due to fewer sales force members at or above
manager level, resulting in a reduction in activity and productivity
This segment, along withSouth America , were the last to start being affected by COVID-19 in the first quarter, with a greater impact expected in the second quarter. Reported and local currency segment profit decreased 62.6 percent and 57.8 percent in the first quarter of 2020, respectively, related to: •Fuller Mexico , due to lower gross margin driven by product mix •the United States andCanada , from lower sales volume and lower gross margin driven by product mix
• impact from COVID-19
The Mexican peso had the most meaningful impact on the first quarter sales and profit comparisons.South America 13 weeks ended Change Percent of total excluding the impact Foreign Mar 28, Mar 30, of foreign exchange (In millions) 2020 2019 Change exchange impact 2020 2019 Net sales$ 48.5 $ 73.0 (33.5 )% (19.2 )%$ (12.9 ) 13 15 Segment profit 3.0 8.9 (66.3 ) (58.9 ) (1.6 ) 10 12 Segment profit as percent of sales 6.2 % 12.2 % (6.0 ) pp n/a n/a n/a n/a _________________________ n/a not applicable pp percentage points Reported sales for the segment decreased 33.5 percent in the first quarter of 2020. Excluding the impact of changes in foreign currency exchange rates, sales decreased 19.2 percent, reflecting lower sales force activity and recruiting inBrazil due to increased competition, the need for digitization to attract and retain the sales force, and unfavorable macroeconomic trends, including lower consumer spending. The average impact of higher prices was about 3 percent. This segment had the least impact from COVID-19 in the first quarter of 2020, with a greater impact expected in the second quarter. Reported segment profit decreased$5.9 million or 66.3 percent in the first quarter of 2020. Excluding the impact of changes in foreign currency exchange rates, segment profit decreased 58.9 percent, primarily reflecting the impact from lower sales volume and lower gross margin driven by unfavorable product mix and higher product costs inBrazil . The Argentine peso and the Brazilian real were the main currencies that impacted the first quarter sales comparisons while the Brazilian real had a meaningful impact on profit comparisons. Financial Condition Liquidity and Capital Resources: The Company's net working capital position decreased by$41.9 million compared with the end of 2019. Excluding the impact of changes in foreign currency exchange rates, net working capital decreased$26.4 million , primarily reflecting: • a$57.5 million increase in short-term borrowings, net of cash and cash equivalents 36
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• a$1.4 million decrease in accounts receivable driven by lower sales at quarter-end, including from the impact of COVID-19
These were partially offset by favorable impacts from:
• a
due to the timing of payments around year-end, lower purchases and overall reduction in discretionary spending, partially offset by higher
accruals for professional services in support of business turnaround
efforts
• a
the balance sheet for hedging activities • a$7.7 million increase in inventory mainly related to lower than expected sales trends, including from the impact of COVID-19, and timing of sales and shipments
• a
driven by timing of payments
OnMarch 20, 2020 Moody's downgraded the Company's credit rating from Ba3 to B3. OnApril 6, 2020 , S&P downgraded the Company's credit rating from B to CCC+. Although each downgrade exceeded the threshold for additional guarantee and collateral requirements to be triggered under the Credit Agreement, at the time of the downgrade the Company had already amended the Credit Agreement (the "Amendment") onFebruary 28, 2020 . Among other things, the Amendment eliminated the requirement that a Non-Investment Grade Ratings Event, as defined in the Credit Agreement, must occur before the Company is required to cause the Additional Guarantee and Collateral Requirement, as defined in the Credit Agreement, to be satisfied. As a result, the Company is required to cause certain of its domestic subsidiaries to become guarantors and the Company and certain of its domestic subsidiaries are required to pledge additional collateral. The Amendment also modified the financial covenant. Previously, the Company had to maintain at specified measurement periods a Consolidated LeverageRatio that was not greater than or equal to 3.75 to 1.00. The Credit Agreement was amended to prevent the Company from exceeding the Consolidated LeverageRatio for the four fiscal quarters ending inMarch 2020 . If the Company had exceeded the Consolidated Leverage Ratio, this could have constituted an Event of Default, potentially resulting in a cross default under cross-default provisions with respect to other of the Company's debt obligations, giving the lenders the ability to terminate the revolving commitments, accelerate outstanding amounts under the Credit Agreement, exercise certain remedies relating to the collateral securing the Credit Agreement, and require the Company to post cash collateral for all outstanding letters of credit. In addition to the relief provided in the Amendment, the Company has reduced certain operating expenses beginning in 2020 and could use available cash, including repatriating cash held outside ofthe United States , to make debt repayments to lower its Consolidated Leverage Ratio. Following the Amendment, the Company is required to maintain at the last day of each quarterly measurement period a Consolidated Leverage Ratio not greater than or equal to the ratio as set forth below opposite the period that includes such day (or, if such day does not end on the last day of the calendar quarter, that includes the last day of the calendar quarter that is nearest to such day): Period Consolidated Leverage Ratio From the Amendment effective date to and includingJune 27, 2020 5.75 to 1.00September 26, 2020 5.25 to 1.00December 26, 2020 4.50 to 1.00March 27, 2021 4.00 to 1.00June 26, 2021 and thereafter 3.75 to 1.00 See the Company's Form 8-K with a filing date ofMarch 2, 2020 for more information. As ofMarch 28, 2020 , the Company had total borrowings of$388.1 million outstanding under the Credit Agreement, with$245.1 million of that amount denominated in Euro. As ofMarch 28, 2020 , the Company had a weighted average interest rate of 2.0 percent with a base rate spread of 150 basis points on LIBOR-based borrowings under the Credit Agreement. As ofMarch 28, 2020 , and currently, the Company was in compliance with the financial covenants in the Credit Agreement. 37
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AtMarch 28, 2020 , the Company had$318.4 million of unused lines of credit, including$260.6 million under the committed, secured Credit Agreement, and$57.8 million available under various uncommitted lines around the world. With the agreement of its lenders, the Company is permitted to increase its borrowing capacity under the Credit Agreement by a total of up to$200.0 million (for a maximum aggregate Facility Amount of$850.0 million ) subject to certain conditions. The Company has outstanding approximately$600.0 million aggregate principal amount of 4.75% senior notes (the "Senior Notes"). The Senior Notes will mature onJune 1, 2021 . The Notes were issued under an indenture (the "Indenture"), by and among the Company, its 100 percent subsidiary, the Guarantor, andWells Fargo Bank, N.A ., as trustee. As security for its obligations under the guarantee of the Senior Notes, the Guarantor has granted a security interest in certain "Tupperware" trademarks and service marks. As security for its obligations under the guarantee of the Credit Agreement, the Guarantor has granted a security interest in those certain "Tupperware" trademarks and service marks as well. The Indenture includes, among others, covenants that limit the ability of the Company and its subsidiaries to (i) incur indebtedness secured by liens on certain real property, (ii) enter into certain sale and leaseback transactions, (iii) with respect to the Company only, consolidate or merge with another entity, or sell or transfer all or substantially all of its properties and assets and (iv) sell the capital stock of the Guarantor or sell or transfer all or substantially all of its assets or properties. See Note 8 to the Consolidated Financial Statements in Part II, Item 8 in the Company's Annual Report on Form 10-K for the year endedDecember 28, 2019 filed with theSEC (the "2019 Form 10-K") for further details regarding the Senior Notes. Whether the Company will be able to repay or refinance the Senior Notes will depend on economic, financial, competitive and other factors that may be beyond its control, including the COVID-19 pandemic, and on the Company's financial performance at the time. The COVID-19 pandemic and measures implemented to slow the spread of COVID-19 may negatively impact the Company's ability to repay or refinance the Senior Notes. The extent to which the COVID-19 pandemic ultimately impacts the Company's ability to repay or refinance the Senior Notes will depend on future developments, which are highly uncertain and cannot be predicted with certainty. Any refinancing of the Senior Notes may be at a higher interest rate and may require the Company to comply with additional covenants and obligations, which could further restrict the Company's business operations. If the Company is unable to repay or refinance the Senior Notes, the holders of the Seniors Notes may pursue certain remedies relating to the collateral securing the guaranty of the Senior Notes or pursue other remedies, in each case in accordance with the Indenture and the documents relating to such collateral, all of which could have a material adverse effect on the Company. Given the fast-moving nature of the COVID-19 pandemic and the resulting uncertainty on financial markets and the economy as a whole, the Company's capital position and availability of capital to fund the Company's liquidity requirements, including repayment or refinancing of the Senior Notes, could be adversely impacted. The Company is taking proactive measures to maximize liquidity and increase available cash by reducing costs and spending across the organization. See Note 10 to the Consolidated Financial Statements in Part I, Item 1 of this Report for further details regarding the Company's debt. The Company monitors the third-party depository institutions that hold its cash and cash equivalents with an emphasis primarily on safety and liquidity of principal and secondarily on maximizing yield on those funds. The Company diversifies its cash and cash equivalents among counterparties, which minimizes exposure to any one of these entities. Furthermore, the Company is exposed to financial market risk resulting from changes in interest rates, foreign currency rates, and the possible liquidity and credit risks of its counterparties. The Company believes that it has sufficient liquidity to fund its working capital, capital spending needs and current and anticipated restructuring actions. This liquidity includes to the extent that it is accessible, its cash and cash equivalents, which totaled$174.5 million as ofMarch 28, 2020 , cash flows from operating activities, and access to its Credit Agreement, as well as access to other various uncommitted lines of credit around the world. The Company has not experienced any limitations on its ability to access its committed facility. 38
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Cash and cash equivalents ("cash") totaled$174.5 million as ofMarch 28, 2020 . Of this amount,$170.1 million was held by foreign subsidiaries. Of the cash held outsidethe United States , less than 1 percent was deemed ineligible for repatriation. Other than deferred tax liability of$8.8 million for the withholding tax liability for future distribution of unrepatriated foreign earnings, noU.S. federal income taxes or other foreign taxes have been recorded related to permanently reinvested earnings. The Company's most significant foreign currency exposures include: • Brazilian real • Chinese renminbi • Indonesian rupiah • Malaysian ringgit • Mexican peso • South African rand Business units in which the Company generated at least$100 million of sales in 2019 included: •Brazil •China •Fuller Mexico • Tupperware Mexico
•
A significant downturn in the Company's business in these units would adversely impact its ability to generate operating cash flows. Operating cash flows would also be adversely impacted by significant difficulties in the additions, retention and activity of the Company's independent sales force or the success of new products, promotional programs and/or possibly changes in sales force compensation programs. The Company has taken, and plans to continue to take, certain measures, to enhance its liquidity position and provide additional financial flexibility, including in response to the impact of COVID-19, including reductions in discretionary spending, revisiting investment strategies, the potential sale of land, and reducing payroll costs, including through organizational redesign, employee furloughs and permanent reductions in employee headcount. As ofMarch 28, 2020 , the Company is in compliance with its financial covenants under its Credit Agreement. The Company currently forecasts that it will be in compliance with its financial covenants for at least one year from the issuance of these interim financial statements, after taking into consideration the measures noted above. If the impact of COVID-19 is more severe than currently forecasted this may impact the Company's compliance with its financial covenants which could have a material adverse effect on the Company. Additionally, during the beginning of the second quarter of 2020, onMarch 30, 2020 , the Company drew$225.0 million of revolving loans under its Credit Agreement,$175.0 million of which was drawn as a proactive measure given the uncertain environment resulting from the COVID-19 pandemic and to provide the Company with further financial flexibility. See Part II, Item 1A under "The Outbreak of the Novel Coronavirus (COVID-19) Pandemic" for more information regarding COVID-19 and how it could affect the Company's business, financial condition, results of operations, cash flows and liquidity. Operating Activities: Net cash from operating activities in the first quarters of 2020 and 2019 were outflows of$47.0 million and$40.1 million , respectively. The net unfavorable comparison was primarily due to an unfavorable impact from lower segment profit, partially offset by a reduction in accounts receivable driven by lower sales and increased collection activity and lower cash tax payments. Investing Activities: During the quarter endedMarch 28, 2020 , the Company had$8.2 million of capital expenditures invested in: •$3.6 million related to global information technology projects
•
•
and equipment
•
In the quarter endedMarch 30, 2019 , the Company had$12.9 million of capital expenditures consisting of: •$5.8 million related to molds used in the manufacturing of products 39
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•
•$0.6 million related to the land development near the Company'sOrlando, Florida headquarters
•
•
Partially offsetting capital spending were proceeds from the sale of long-term assets of$0.5 million and$0.6 million in 2020 and 2019, respectively. Financing Activities: Dividends paid to shareholders was$33.9 million in the first quarter of 2019. The Company suspended its dividend beginning the fourth quarter of 2019. The Company also increased revolver borrowings by$121.0 million and$84.1 million in the first quarters of 2020 and 2019, respectively, for the funding of operating, investing and financing activities. Open market share repurchases by the Company were permitted under an authorization that ran throughFebruary 1, 2020 and allowed up to$2.0 billion to be spent and was not extended. Under this program, there were no share repurchases in the first quarters of 2020 or 2019. Since 2007, the Company has spent$1.39 billion to repurchase 23.8 million shares under this program. Repurchases under the Company's stock incentive programs are made when employees use shares to satisfy the minimum statutorily required withholding taxes. In the first quarters of 2020 and 2019, 1,127 and 23,088 shares were retained to fund withholding taxes, totaling$0.01 million and$0.70 million , respectively. New Pronouncements Refer to Note 19 to the Consolidated Financial Statements in Part I, Item 1 of this Report for a discussion of new pronouncements. 40
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