The following is a discussion of the results of operations for the 39 weeks endedSeptember 25, 2021 , compared with the 39 weeks endedSeptember 26, 2020 , and changes in financial condition during the 39 weeks endedSeptember 25, 2021 . This information should be read in conjunction with the Condensed Consolidated Financial Statements in Item 1. Financial Statements.
Overview
Tupperware Brands Corporation is a leading global consumer products company that designs innovative, functional, and environmentally responsible products. Founded in 1946, the Company's signature container created the modern food storage category that revolutionized the way the world stores, serves, and prepares food. Today, this iconic brand has more than 8,500 functional design and utility patents for solution-oriented kitchen and home products. The Company distributes its products into more than 70 countries primarily through a network of approximately 3 million independent Sales Force members around the world. Worldwide, the Company engages in the marketing, manufacture, and sale of design-centric preparation, storage, and serving solutions for the kitchen and home through the Tupperware brand name. The Company primarily uses a direct selling business model to distribute and market products through personal connections, product demonstrations, and understanding of consumer needs. The Company has also engaged in expanding the reach of the brand through the enhancement of digital platforms to sell and market products as well as exploring business-to-business distribution channels. With a purpose to nurture a better future, the Company's products offer an alternative to single-use items and through the direct selling channel, the Company offers individuals an opportunity to build a business as a meaningful way to make money and impact women, families and communities around the world. The Company is executing on a growth strategy leveraging the consumer acceptance of the iconic Tupperware brand. This growth strategy is rooted in growing and digitizing the direct selling business, expanding into new categories, increasing consumer access points and growing the Company's distribution channels. The Company's Turnaround Plan is intended to bring sustainable growth for the Company, and for several quarters of 2020 and 2021, the Company has seen progress against this plan through efforts like cost savings initiatives, the divestiture of non-core assets including real estate, the enhancement of internal process and controls across the global business, introduction of social selling tools for Company's global Sales Force, and product innovations to address the needs of various consumer and socioeconomic segments. In the first quarter 2021, the Company completed the sale of Avroy Shlain and in the third quarter of 2021 has classifiedHouse of Fuller , Nutrimetics and Nuvo as held for sale. Results for these beauty brands are presented within discontinued operations. The Company expects to complete the dispositions ofHouse of Fuller , Nutrimetics, and Nuvo, in the next 12 months. 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 the 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 foreign exchange impact". These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a local currency basis may not be comparable to similarly titled measures used by other companies. The negative impact of COVID-19 on net sales in the third quarter of 2021 was mainly the result of partial or country-wide lockdowns of operations in various markets which affected financial results and liquidity. While the duration and severity of this pandemic continues to be uncertain, the Company currently expects that its results of operations in the fourth quarter of 2021 may also be impacted by COVID-19. 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 COVID-19 pandemic, its severity, actions taken to contain the virus or treat its impact, availability and distribution of vaccines, new variants of the virus, and how quickly and to what extent normal economic and operating conditions can resume. Estimates included herein are those of the Company's management and are subject to the risks and uncertainties as described in the section titled Forward-Looking Statements in Item 3. Quantitative and Qualitative Disclosures About Market Risk. 35 --------------------------------------------------------------------------------
Table of contents Results of Operations Change excluding the foreign 13 weeks ended Change Foreign exchange impact (In millions, except per share Sep 25, Sep 26, exchange amounts) 2021 2020 Amount Percent impact Amount Percent Net sales$ 376.9 $ 423.7 $ (46.8) (11) %$ 7.8 $ (54.6) (13) % Gross margin as percent of sales 65.8 % 68.7 % N/A (2.9) pp N/A N/A N/A Selling, general and administrative expense as percent of net sales 50.6 % 48.5 % N/A 2.1 pp N/A N/A N/A Operating income (loss)$ 57.1 $ 49.3 $ 7.8 16 %$ 3.2 $ 4.6 9 % Income (loss) from continuing operations$ 60.4 $ 29.4 $ 31.0 +$ 2.8 $ 28.2 88 % Diluted earnings (loss) from continuing operations - per share$ 1.14 $ 0.56 $ 0.58 +$ 0.05 $ 0.53 87 % Change excluding the foreign 39 weeks ended Change Foreign exchange impact (In millions, except per share Sep 25, Sep 26, exchange amounts) 2021 2020 Amount Percent impact Amount Percent Net sales$ 1,207.4 $ 1,109.5 $ 97.9 9 %$ 34.6 $ 63.3 6 % Gross margin as percent of sales 68.5 % 67.4 % N/A 1.1 pp N/A N/A N/A Selling, general and administrative expense as percent of net sales 51.4 % 54.9 % N/A (3.5) pp N/A N/A N/A Operating income (loss)$ 206.1 $ 90.6 $ 115.5 +$ 8.0 $ 107.5 + Income (loss) from continuing operations$ 136.2 $ 83.0 $ 53.2 64 %$ 7.0 $ 46.2 51 % Diluted earnings (loss) from continuing operations - per share$ 2.56 $ 1.62 $ 0.94 58 %$ 0.13 $ 0.81 46 % ____________________ N/A - not applicable pp - percentage points + - change greater than ±100% 36 -------------------------------------------------------------------------------- Table of contents Net Sales
Net sales were
•China, from lower net studio count and negative impact from COVID-19 lockdowns and continued disruption caused by the pandemic •Indonesia, reflecting lower recruiting and a less active Sales Force including from the continued impact of mandatory or strict COVID-9 lockdowns •Italy, reflecting lower business-to-business sales compared to the prior year •theUnited States andCanada , from lower recruiting and productivity partially related to disruption to the Sales Force associated to the recent implementation of a new front end technology solution •Partially offset byArgentina , mainly from increased sales force activity and productivity, including from higher prices due to inflation The negative impact to net sales in the third quarter of 2021 as a result of COVID-19 is estimated at 4 percent. The average impact of higher prices was not significant in the third quarter of 2021 compared with 2020. The Company continues to monitor the effects of COVID-19 on its sales and has taken several steps to mobilize its resources to ensure adequate liquidity, business continuity and employee safety during this pandemic. Net sales were$1,207.4 million and$1,109.5 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Excluding foreign exchange impact, sales increased$63.3 million or 6 percent, primarily due to: •Argentina, from a more active sales force and productivity, including from higher prices due to inflation •Brazil Tupperware Mexico, andthe United States andCanada from increased Sales Force activity •Partially offset by lower sales inAsia Pacific , mainly inChina ,Indonesia andItaly , with the factors impacting year-to-date sales comparison largely mirroring those of the quarter A more detailed discussion of the sales results by segment is included in the segment results section in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. As discussed in Note 3: Promotional Costs to the Condensed Consolidated Financial Statements in Item 1. Financial Statements, the Company includes certain promotional costs in selling, general and administrative expense. As a result, the Company's net sales may not be comparable with other companies that treat these costs as a reduction of net sales. Gross Margin and Gross Profit Gross profit was$247.9 million and$291.2 million in the third quarters of 2021 and 2020, respectively. Gross margin as a percentage of sales was 65.8 percent and 68.7 percent in the third quarters of 2021 and 2020, respectively. The decrease of 2.9 percentage points ("pp") is primarily due to:
•higher overall resin costs in all segments
•higher inventory obsolescence costs in
Gross profit was$827.4 million and$747.4 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Gross margin as a percentage of sales was 68.5 percent and 67.4 percent in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. The increase of 1.1 pp is primarily due to:
•lower overall manufacturing costs, driven by
While resin costs have started to stabilize, and the Company expects them to continue to stabilize in the fourth quarter, the Company believes resin costs may still negatively impact gross margins in the fourth quarter. As discussed in Note 2: Shipping and Handling Costs to the Condensed Consolidated Financial Statements in Item 1. Financial Statements, the Company includes distribution costs of its products in selling, general and administrative expense. As a result, the Company's gross margin may not be comparable with other companies which include this expense in cost of products sold.
Selling, General and Administrative Expense
37 -------------------------------------------------------------------------------- Table of contents Selling, general and administrative expenses were$190.7 million and$205.7 million in the third quarters of 2021 and 2020, respectively. Selling, general and administrative expense as a percentage of sales was 50.6 percent and 48.5 percent in the third quarters of 2021 and 2020, respectively. The 2.1pp increase is primarily due to: •higher administration and other expenses mainly driven by higher investments in marketing, digital and business expansion talent, infrastructure and systems needs to support the growth strategy, and investments in the optimization of the Company's global tax structure •higher distribution costs, primarily related to higher logistics costs, warehousing costs inBrazil ,Italy , andthe United States andCanada •partially offset by lower selling expenses mainly from lower Sales Force commission expense predominantly inthe United States andCanada reflecting lower sales Selling, general and administrative expenses were$620.5 million and$608.7 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Selling, general and administrative expense as a percentage of sales was 51.4 percent and 54.9 percent in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. The 3.5pp decrease is primarily due to: •lower administration and other expenses mainly due to the reversal of$10.4 million non-income tax reserves inBrazil connected to a legal dispute over double taxation based on a finalSupreme Court ruling in favor of the Company in the second quarter of 2021, lower professional services fees supporting business turnaround efforts, and an enterprise aware from the local government inChina which was received in the first quarter of 2021; partially offset by the absence of a gain related to the repatriation of cash fromArgentina in the second quarter of 2020 versus a loss in the third quarter of 2021 •lower selling expenses mainly from lower allowance for credit losses, primarily inFrance ,Germany , andPhilippines •lower promotional expenses reflecting the benefits from implementation of right-sizing initiatives related to the Turnaround Plan and cancellation of certain events and travel due to COVID-19, primarily inAustralia and New Zealand ,China ,Germany , Iberia, andthe United States andCanada •partially offset by higher distribution costs, primarily related to higher outbound freight inthe United States andCanada and higher warehousing costs inAustralia and New Zealand ,South Africa , andthe United States andCanada , as well as higher investments in marketing, digital and business expansion talent, infrastructure and systems needs to support the growth strategy, and investments in the optimization of the Company's global tax structure The Company segregates selling, general and administrative expenses into allocated and unallocated expenses based upon the estimated time spent managing segment operations. The allocated expenses are then apportioned on a local currency basis to each segment based primarily upon segment net sales. The unallocated expenses reflect amounts unrelated to segment operations. Selling, general and administrative expense to be allocated is determined at the beginning of the year based upon estimated expenditures.
Unallocated expenses were an expense of
•no gain on debt extinguishment in the third quarter of 2021, compared to a gain on debt extinguishment of$9.9 million in 2020 •lower fees for professional services firms supporting the Turnaround Plan efforts •higher investments in marketing, digital and business expansion talent •infrastructure and systems needs to support the growth strategy •investments in the optimization of the Company's global tax structure Unallocated expenses were an expense of$39.8 million and income of$4.7 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. The$44.5 million increase is primarily due to: •loss on debt extinguishment of$8.1 million in 2021, compared to a gain on debt extinguishment of$49.9 million in 2020 •partially offset by the same factors impacting the comparisons of the quarter
Re-engineering Charges
Re-engineering charges were$1.8 million and$3.9 million in the third quarters of 2021 and 2020, respectively and$9.7 million and$29.6 million in the respective year-to-date periods. The multi-year decline in revenue through 2019 and the evaluation of the Company's operating structure led to actions designed to reduce costs, improve operating efficiency and otherwise turnaround the business. These actions often result in re-engineering charges related to headcount reductions and to facility down-sizing and closure, other costs that may be necessary in light of the revised operating landscape include structural changes impacting how the Company's Sales Force operates, as well as related asset write-downs. The Company may recognize gains or losses upon disposal of excess 38 -------------------------------------------------------------------------------- Table of contents facilities or other activities directly related to its re-engineering efforts. These re-engineering charges were mainly related to the transformation program, which was announced inJanuary 2019 and re-assessed inDecember 2019 (collectively the "Turnaround Plan").
The re-engineering charges were:
13 weeks ended 39 weeks ended September 25, September 26, September 25, September 26, (In millions) 2021 2020 2021 2020 Turnaround plan$ 1.6 $ 3.4 $ 8.2 $ 27.7 Other 0.2 0.5 1.5 1.9 Total re-engineering charges$ 1.8 $ 3.9 $ 9.7 $ 29.6 The key elements of the Turnaround Plan include: increasing the Company's right-sizing plans to improve profitability, accelerating the divestiture of non-core assets to strengthen the balance sheet, restructuring the Company's debt to enhance liquidity, and structurally fixing the Company's core business to create a more sustainable business model. The Turnaround Plan charges are primarily related to severance costs and outside consulting services. The Company expects to incur$10.0 million to$15.0 million of Turnaround Plan charges in 2021.
Refer to Note 5: Re-engineering Charges to the Condensed Consolidated Financial Statements in Item 1. Financial Statements for further information.
(Gain) Loss on Disposal of Assets
(Gain) loss on disposal of assets was a gain of$1.7 million and a loss of$32.3 million in the third quarters of 2021 and 2020, respectively, and a gain of$8.9 million and a loss of$18.5 million in the respective year-to-date periods. The gain is primarily due to the sale ofthe Netherlands sales office while the loss is primarily due to the write-off of software, in the third quarters of 2021 and 2020, respectively. The 2021 year-to-date gain included the sale of a manufacturing plant inFrance and the sale ofthe Netherlands sales office. The 2020 year-to-date loss included the write-off of software, partially offset by the sale of a manufacturing and distribution facility inAustralia .
(Gain) Loss on Debt Extinguishment
There was no (Gain) Loss on debt extinguishment recognized in the third quarter of 2021. There was a gain of$9.9 million in the third quarter of 2020 and there was a loss of$8.1 million and a gain of$49.9 million in the year-to-date 2020 and 2021, respectively. The Company did not make any Term Loan repayments in the third quarter of 2021. In the third quarter of 2020, the Company retired$121.1 million of Senior Notes which resulted in a gain of$9.9 million . The Company made Term Loan repayments of$101.2 million year-to-date in 2021. The loss on debt extinguishment of$8.1 million was primarily due to costs incurred for the Term Loan repayments. Year-to-date 2020, the Company paid approximately$163.9 million for the purchase of Senior Notes with a face value of approximately$219.8 million which resulted in a pre-tax gain on debt extinguishment (including costs associated with the Senior Notes repurchase) of$49.9 million .
Interest Expense
Interest expense was$8.2 million and$8.2 million in the third quarters of 2021 and 2020, respectively, and$29.7 million and$30.5 million in the respective year-to-date periods. The decrease in interest expense for the year-to-date period is related to lower term loan debt.
Interest Income
Interest income was$0.3 million and$0.3 million in the third quarters of 2021 and 2020, respectively, and$0.9 million and$1.0 million in the respective year-to-date periods. Interest income is related to the interest earned on the Company's cash balances. 39 -------------------------------------------------------------------------------- Table of contents Other (Income) expense, net Other (income) expense, net was expense of$1.2 million and$0 in the third quarters of 2021 and 2020, respectively, and expense of$0.8 million and income of$10.7 million in the respective year-to-date periods. The Company records foreign currency translation impacts and pension costs in this line item.
Provision (Benefit) for Income Taxes
Provision (benefit) for income taxes was a benefit of$12.4 million and a provision of$21.9 million in the third quarters of 2021 and 2020, respectively, and provision of$32.2 million and$38.7 million in the respective year-to-date periods. The effective tax rate was a benefit of 25.8 percent and a provision of 42.7 percent in the third quarters of 2021 and 2020, respectively. The change in the effective tax rate in the third quarters of 2021 and 2020, respectively, was primarily due to: •favorable impact from utilization of previously valued deferred tax assets due to a tax policy change discussed further below, •a favorable jurisdictional mix of earnings, •non-recurring gain from debt extinguishment in 2020 that was offset with previously reserved assets The Company made an election on its 2020 tax return to change its capitalization policy for tax purposes related to certain direct and indirect costs for inventory and self-constructed assets under IRC Section 263A. This method change will allow the Company to utilize a portion of its tax attributes in theU.S. , primarily foreign tax credits, that were previously fully reserved. The non-recurring impact of the method change is a 2020 return to provision discrete benefit of$15.7 million , related to prior years, and an additional current year benefit of approximately$15 million from the release of valuation allowances that will be included in the annual effective tax rate for the year. This change only impacts a portion of the Company's foreign tax credits and the Company will maintain a valuation allowance against the remaining balance of foreign tax credits.
Refer to Note 6: Income Taxes to the Condensed Consolidated Financial Statements in Item 1. Financial Statements for further information.
Net Income (Loss) from Continuing Operations
Net income (loss) from continuing operations was income of$60.4 million and$29.4 million in the third quarters of 2021 and 2020, respectively, and income of$136.2 million and$83.0 million in the respective year-to-date periods. See above discussion for the main drivers of changes in net income (loss). A more detailed discussion of the results by segment is included in the segment results section below. 40 -------------------------------------------------------------------------------- Table of contents Segment Results International operations generated 90.4 percent and 89.1 percent of sales in the third quarters of 2021 and 2020, respectively, and 89.0 percent and 88.9 percent in the respective year-to-date periods. These units generated 99.6 percent and 96.3 percent of segment profit in the third quarters of 2021 and 2020, respectively, and 99.1 percent and 95.5 percent in the respective year-to-date periods. See segment results discussion below for COVID-19 impact on each segment's net sales in the third quarter of 2021. While the duration and severity of this pandemic continues to be uncertain, the Company currently expects that its results of operations in the fourth quarter of 2021 may also be impacted by COVID-19. The Company continues to monitor the effects of COVID-19 on its segment net sales and profit and has taken several steps to mobilize its resources to ensure adequate liquidity, business continuity and employee safety during this pandemic. 41
-------------------------------------------------------------------------------- Table of contentsAsia Pacific Percent of total Change excluding the foreign 13 weeks ended Change Foreign exchange impact 13 weeks ended Sep 25, Sep 26, exchange Sep 25, Sep 26, (In millions) 2021 2020 Amount Percent impact Amount Percent 2021 2020 Net sales$ 112.9 $ 129.6 $ (16.7) (13) %$ 3.1 $ (19.8) (15) % 30 % 31 % Segment profit$ 25.7 $ 36.3 $ (10.6) (29) %$ 1.3 $ (11.9) (32) % 40 % 37 % Segment profit as percent of net sales 22.8 % 28.0 % N/A (5.2) pp N/A N/A N/A N/A N/A Percent of total Change excluding the foreign 39 weeks ended Change Foreign exchange impact 39 weeks ended Sep 25, Sep 26, exchange Sep 25, Sep 26, (In millions) 2021 2020 Amount Percent impact Amount Percent 2021 2020 Net sales$ 343.8 $ 368.1 $ (24.3) (7) %$ 19.2 $ (43.5) (11) % 29 % 33 % Segment profit$ 81.9 $ 84.8 $ (2.9) (3) %$ 5.2 $ (8.1) (9) % 34 % 44 % Segment profit as percent of net sales 23.8 % 23.0 % N/A 0.8 pp N/A N/A N/A N/A N/A ____________________ N/A - not applicable pp - percentage points + - change greater than ±100% Net sales were$112.9 million and$129.6 million in the third quarters of 2021 and 2020, respectively. Excluding foreign exchange impact, sales decreased$19.8 million or 15 percent, primarily due to: •China, from higher studio closings and a slower pace of new studio openings, and to COVID-19 lockdowns related to resurgence challenges and ineffective and low vaccination rates •Indonesia, as a result of lower recruiting and a less active Sales Force including from the continued impact of mandatory or strict COVID-19 lockdowns
The COVID-19 impact is estimated at negative 8 percent in the third quarter of 2021 year to net sales. The average impact of prices was flat in the third quarter of 2021 compared with 2020.
Segment profit was
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Table of contents •China, from lower sales volume and more aggressive promotional pricing •Indonesia, mainly related to lower sales volume
Net sales were$343.8 million and$368.1 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Excluding foreign exchange impact, sales decreased$43.5 million or 11 percent, due to factors largely mirroring those of the quarter. Segment profit was$81.9 million and$84.8 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Excluding foreign exchange impact, segment profit decreased$8.1 million , due to factors largely mirroring those of the quarter.
The Chinese Renminbi had the most meaningful impact on the third quarter 2021 net sales and profit comparisons.
43 -------------------------------------------------------------------------------- Table of contents Europe Percent of total Change excluding the foreign 13 weeks ended Change Foreign exchange impact 13 weeks ended Sep 25, Sep 26, exchange Sep 25, Sep 26, (In millions) 2021 2020 Amount Percent impact Amount Percent 2021 2020 Net sales$ 91.3 $ 112.5 $ (21.2) (19) %$ 1.9 $ (23.1) (20) % 24 % 27 % Segment profit$ 14.7 $ 27.1 $ (12.4) (46) %$ 0.7 $ (13.1) (47) % 23 % 28 % Segment profit as percent of net sales 16.1 % 24.1 % N/A (8.0) pp N/A N/A N/A N/A N/A Percent of total Change excluding the foreign 39 weeks ended Change Foreign exchange impact 39 weeks ended Sep 25, Sep 26, exchange Sep 25, Sep 26, (In millions) 2021 2020 Amount Percent impact Amount Percent 2021 2020 Net sales$ 326.8 $ 296.3 $ 30.5 10 %$ 14.8 $ 15.7 5 % 27 % 27 % Segment profit$ 66.5 $ 37.8 $ 28.7 76 %$ 1.3 $ 27.4 70 % 28 % 19 % Segment profit as percent of net sales 20.3 % 12.8 % N/A 7.5 pp N/A N/A N/A N/A N/A ____________________ N/A - not applicable pp - percentage points + - change greater than ±100% Net sales were$91.3 million and$112.5 million in the third quarters of 2021 and 2020, respectively. Excluding foreign exchange impact, sales decreased$23.1 million or 20 percent, primarily due to: •Italy, mainly due to timing of business-to-business sales compared to the prior year •South Africa, from the continued impact from COVID-19 resulting in lower recruiting The COVID-19 impact is estimated at negative 2 percent in the third quarter of 2021 to net sales. The average impact of prices was flat in the third quarter of 2021 compared with 2020.
Segment profit was
•Lower profitability driven by reduced sales volume, mostly in
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Net sales were$326.8 million and$296.3 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Excluding foreign exchange impact, sales increased$15.7 million or 5 percent due to increased sales mainly inGermany and Iberia, largely offset by lower sales volume inFrance andItaly . Segment profit was$66.5 million and$37.8 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Excluding foreign exchange impact, segment profit increased$27.4 million , due to higher gross margins and lower selling expenses including from lower allowance for credit losses mainly inFrance andGermany .
The South African Rand had the most meaningful impact on the third quarter 2021 net sales and profit comparisons.
45 -------------------------------------------------------------------------------- Table of contents North America Percent of total Change excluding the foreign 13 weeks ended Change Foreign exchange impact 13 weeks ended Sep 25, Sep 26, exchange Sep 25, Sep 26, (In millions) 2021 2020 Amount Percent impact Amount Percent 2021 2020 Net sales$ 103.1 $ 116.2 $ (13.1) (11) %$ 4.6 $ (17.7) (15) % 27 % 27 % Segment profit$ 10.5 $ 18.9 $ (8.4) (44) %$ 1.3 $ (9.7) (48) % 16 % 19 % Segment profit as percent of net sales 10.2 % 16.3 % N/A (6.1) pp N/A N/A N/A N/A N/A Percent of total Change excluding the foreign 39 weeks ended Change Foreign exchange impact 39 weeks ended Sep 25, Sep 26, exchange Sep 25, Sep 26, (In millions) 2021 2020 Amount Percent impact Amount Percent 2021 2020 Net sales$ 343.0 $ 289.4 $ 53.6 19 %$ 11.6 $ 42.0 14 % 28 % 26 % Segment profit$ 42.6 $ 42.6 $ - - %$ 2.6 $ (2.6) (6) % 18 % 22 % Segment profit as percent of net sales 12.4 % 14.7 % N/A (2.3) pp N/A N/A N/A N/A N/A ____________________ N/A - not applicable pp - percentage points + - change greater than ±100% Net sales were$103.1 million and$116.2 million in the third quarters of 2021 and 2020, respectively. Excluding foreign exchange impact, sales decreased$17.7 million or 15 percent, primarily due to: •Tupperware Mexico, driven by a reduction in the size of the Sales Force stemming from service issues during the second quarter, as well as lower recruiting due primarily to COVID-19 restrictions •United States andCanada , from lower recruiting and productivity partially related to disruption to the Sales Force associated to the recent implementation of a new front end technology solution The COVID-19 impact is estimated at negative 3% in the third quarter of 2021 to net sales. The average impact of prices was flat in the third quarter of 2021 compared with 2020.
Segment profit was
•Tupperware Mexico, mainly from lower margins and higher worldwide allocations •United States andCanada , from lower sales volume, higher warehousing costs, higher information technology spend related to the new front end technology solution, and partially offset by savings in selling and promotional expenses 46
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Net sales were$343.0 million and$289.4 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Excluding foreign exchange impact, sales increased$42.0 or 14%, driven by Tupperware Mexico andthe United States andCanada , mainly from a more active Sales Force, and a year-to-date net positive impact from COVID-19. Segment profit was$42.6 million and$42.6 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Excluding foreign exchange impact, segment profit decreased$2.6 million , mainly related to higher warehousing and outbound freight costs inthe United States andCanada reflecting an increase in the number of orders shipped, a change in order profile, and freight surcharges.
The Mexican Peso had the most meaningful impact on the third quarter 2021 net sales and profit comparisons.
47 -------------------------------------------------------------------------------- Table of contents South America Percent of total Change excluding the foreign exchange 13 weeks ended Change Foreign impact 13 weeks ended Sep 25, Sep 26, exchange Sep 25, Sep 26, (In millions) 2021 2020 Amount Percent impact Amount Percent 2021 2020 Net sales$ 69.6 $ 65.4 $ 4.2 6 %$ (1.8) $ 6.0 9 % 19 % 15 % Segment profit$ 13.5 $ 15.2 $ (1.7) (11) %$ (0.1) $ (1.6) (11) % 21 % 16 % Segment profit as percent of net sales 19.4 % 23.2 % N/A (3.8) pp N/A N/A N/A N/A N/A Percent of total Change excluding the foreign exchange 39 weeks ended Change Foreign impact 39 weeks ended Sep 25, Sep 26, exchange Sep 25, Sep 26, (In millions) 2021 2020 Amount Percent impact Amount Percent 2021 2020 Net sales$ 193.8 $ 155.7 $ 38.1 24 %$ (11.1) $ 49.2 34 % 16 % 14 % Segment profit$ 46.8 $ 29.4 $ 17.4 59 %$ (1.1) $ 18.5 66 % 20 % 15 % Segment profit as percent of net sales 24.1 % 18.9 % N/A 5.2 pp N/A N/A N/A N/A N/A ____________________ N/A - not applicable pp - percentage points + - change greater than ±100%
Net sales were
•Argentina, mainly from a more active Sales Force attributed to the implementation of a digital training platform and expansion of e-commerce on a national level, as well as improved productivity including from higher prices due to inflation •Brazil, with sales in line with prior year in spite of cumulative recruiting challenges stemming from the COVID-19 impact The COVID-19 impact is estimated at negative 3 percent in the third quarter of 2021 to net sales. The average impact of prices was flat in the third quarter of 2021 compared with 2020.
Segment profit was
•Brazil, from continued higher resin and manufacturing costs
•partially offset by
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Net sales were$193.8 million and$155.7 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Excluding foreign exchange impact, sales increased$49.2 million or 34 percent, mainly related to a more active sales force inArgentina andBrazil , as well as higher productivity inArgentina including from higher prices due to inflation. Segment profit was$46.8 million and$29.4 million in the year-to-date periods endedSeptember 25, 2021 andSeptember 26, 2020 , respectively. Excluding foreign exchange impact, segment profit increased$18.5 million , due to factors largely mirroring those of the quarter.
The Argentina Peso had the most meaningful impact on the third quarter 2021 net sales and profit comparisons.
49 -------------------------------------------------------------------------------- Table of contents Financial Condition
Liquidity and Capital Resources
The Company's net working capital position decreased by$27.9 million compared with the end of 2020. Excluding foreign exchange impact, net working capital decreased$20.0 million , primarily reflecting: •a$106.6 million increase in short-term borrowings, net of cash and cash equivalents, due to an increase in borrowings under the Credit Agreement •partially offset by a$62.0 million increase in inventory due to changes in net sales, a$44.9 million decrease in accounts payable and accrued liabilities, and a$15.0 million increase in non-trade accounts receivable, net OnFebruary 26, 2020 , S&P downgraded the Company's credit rating from BB+ to B and placed all of its ratings on Credit Watch with negative implication. OnFebruary 27, 2020 Moody's downgraded the Company's credit rating from Baa3 to B1. Subsequent to those dates, the Company's credit ratings have been changed further by S&P and Moody's. OnFebruary 8, 2021 , Moody's withdrew all of its ratings for the Company following the redemption of certain of our outstanding debt. OnAugust 6, 2021 , S&P's raised its rating of the Company from B to B+ with a stable outlook, due to the continued deleveraging. If the Company faces downgrades in its credit rating, the Company could also experience further strains on its liquidity and capital resources, higher cost of capital and decreased access to capital markets.
Debt Summary
The debt portfolio consisted of:
As of September 25, (In millions) 2021 December 26, 2020 Term loan$ 173.8 $ 275.0 Credit agreement 511.0 423.3 Finance leases (a) 2.1 3.3 Unamortized debt issuance costs (8.5)
(18.3)
Total debt$ 678.4 $
683.3
Current debt and finance lease obligations
424.7
Long-term debt and finance lease obligations 166.0 258.6 Total debt$ 678.4 $ 683.3 ____________________
(a)See Note 17: Leases for further details.
Term Loan
On
•a secured term loan facility in an aggregate principal amount of$200.0 million with the Company as borrower (the "Parent Term Loan"); and •a secured term loan facility in an aggregate principal amount of$75.0 million withDart Industries, Inc. as borrower and the Company as borrower (the "Dart Term Loan" and, together with the Parent Term Loan, the "Term Loan"). The Company used the aggregate borrowings of$275.0 million from the Term Loan and cash on hand to retire outstanding Senior Notes (as defined below). The Term Loan has an original issue discount and commitment fee of 4.5% or$12.4 million which has been recorded as a contra liability to the carrying value of the Term Loan and is included in the unamortized debt issuance costs balance noted above. The original issue discount and related debt issuance costs will be amortized over the term of the Term Loan. The Term Loan matures onDecember 3, 2023 . The Company has prepayment options, as well as mandatory prepayments at the option of the Lenders. The prepayments have premium protections depending on the timing of the prepayment and the source of cash used for prepayment. 50
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Table of contents
Interest is payable quarterly in arrears and on maturity. The Company has the option, to pay interest equal to either:
•the aggregate borrowing rate ("ABR"), determined by reference to the highest of: a.the "United States Prime Lending Rate" published by The Wall Street Journal, b.the federal funds effective rate from time to time plus 0.50% per annum, and c.the one-month Eurodollar Rate, plus 1.00% per annum, which shall, regardless of rate used, be no less than 2.0% per annum, or •a Eurodollar Rate for a specified period appearing on Reuters Screen LIBOR01 Page, which shall be no less than 1.00% per annum, in each case, plus an applicable margin. The applicable margin is initially 7.75% per annum for ABR borrowings and 8.75% per annum for Eurodollar Rate borrowings, and in each case, from and after the delivery of the applicable financial statements for the first full fiscal quarter following the Closing Date, the applicable margin shall then be: •for ABR borrowings, either: a.7.75% per annum, if the consolidated leverage ratio is greater than 2.75 to 1.00 or b.7.25% per annum, if the consolidated leverage ratio is less than or equal to 2.75 to 1.00 and •for Eurodollar Rate borrowings, either: a.8.75% per annum, if the consolidated leverage ratio is greater than 2.75 to 1.00 or b.8.25% per annum, if the consolidated leverage ratio is less than or equal to 2.75 to 1.00. The Parent Term Loan is fully and unconditionally guaranteed on a joint and several basis by all of the Company's existing and future domestic subsidiaries that provide a guaranty under the Company's Second Amended and Restated Credit Agreement, dated as ofMarch 29, 2019 (as amended onAugust 28, 2019 and onFebruary 28, 2020 , the "Existing Revolving Credit Agreement") among, inter alia, the Company, the other borrowers party thereto, the lenders party thereto andJPMorgan Chase Bank, N.A ., as administrative agent. The Dart Term Loan is fully and unconditionally guaranteed on a joint and several basis by the Company and certain of the Company's existing and future domestic and foreign subsidiaries. The Term Loan includes a financial covenant as well as customary affirmative and negative covenants, including, among other things, as to compliance with laws, delivery of quarterly and annual financial statements, restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments and other customary covenants. The Term Loan includes events of default relating to customary matters (and customary notice and cure periods), including, among other things, nonpayment of principal, interest or other amounts; violation of covenants; incorrectness of representations and warranties in any material respect; cross-payment default and cross acceleration with respect to material indebtedness; bankruptcy; material judgments; and certain ERISA events.
Term loan prepayments made were as follows:
(In millions) Term Loan Balance at December 26, 2020$ 275.0
Term loan prepayment on
9.0 Term loan prepayment on June 21, 2021 (c) 58.2 Total term loan prepayment amount$ 101.2 Balance at September 25, 2021$ 173.8
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(a) Includes a 1.0% prepayment premium of$0.3 million . (b) Includes a 1.0% prepayment premium of$0.1 million . (c) Includes a 3.0% prepayment premium of$1.7 million . The Company expensed unamortized deferred debt issuance costs related to this prepayment in the (gain) loss on debt extinguishment line item. The loss on debt extinguishment was calculated as follows: 51
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Table of contents 13 weeks ended 39 weeks ended September 25, September 26, (In millions) 2021 2020 Term loan retirement amount $ -$ 101.2 Less: Term loan prepayment amount - 101.2 Less: Costs incurred - 8.1 Loss on debt extinguishment (pre-tax) $
- $ (8.1)
Basic earnings (loss) per share from loss on debt extinguishment (pre-tax) $ -$ (0.16) Credit Agreement OnMarch 29, 2019 , the Company and its wholly owned subsidiaries,Tupperware Nederland B.V. , Administradora Dart,S. de R.L. de C.V. , andTupperware Brands Asia Pacific Pte. Ltd. (the "Subsidiary Borrowers"), amended and restated their multicurrency Credit Agreement (as further amended via an Amendment No. 1 datedAugust 28, 2019 , the "Credit Agreement"), withJPMorgan Chase Bank, N.A . as administrative agent (the "Administrative Agent"), swingline lender, joint lead arranger and joint bookrunner, andCredit Agricole Corporate and Investment Bank ,HSBC Securities (USA) Inc. ,Mizuho Bank, Ltd. andWells Fargo Securities, LLC , as syndication agents, joint lead arrangers and joint bookrunners. The Credit Agreement replaced the credit agreement datedSeptember 11, 2013 , and as amended (the "Old Credit Agreement"), and, other than an increased aggregate amount that may be borrowed, an improvement in the consolidated leverage ratio covenant and a slightly more favorable commitment fee rate, has terms and conditions similar to that of the Old Credit Agreement. The Credit Agreement makes available to the Company and the Subsidiary Borrowers a committed credit facility in an aggregate amount of$650.0 million (the "Facility Amount"). The Credit Agreement provides (i) a revolving credit facility, available up to the full amount of the Facility Amount, (ii) a letter of credit facility, available up to$50.0 million of the Facility Amount, and (iii) a swingline facility, available up to$100.0 million of the Facility Amount. Each of such facilities is fully available to the Company and the Facility Amount is available to the Subsidiary Borrowers up to an aggregate amount not to exceed$325.0 million . With the agreement of its lenders, the Company is permitted to increase, on up to three occasions, the Facility Amount by a total of up to$200.0 million (for a maximum aggregate Facility Amount of$850.0 million ), subject to certain conditions. Total Credit Agreement borrowings included Euro denominated debt of$94.7 million and$160.3 million as ofSeptember 25, 2021 andDecember 26, 2020 , respectively. Loans made under the Credit Agreement will be composed of (i) "Eurocurrency Borrowings", bearing interest determined in reference to the LIBOR or the EURIBOR rate for the applicable currency and interest period, plus a margin, and/or (ii) "ABR Borrowings", bearing interest at the sum of (A) the greatest of (x) the Prime Rate, (y) the NYFRB rate plus 0.5 percent, and (z) adjusted LIBOR on such day (or if such day is not a business day, the immediately preceding business day) for a deposit inUnited States Dollars with a maturity of one month plus 1.0 percent, and (B) a margin. The applicable margin in each case will be determined by reference to a pricing schedule and will be based upon the better for the Company of (a) the Consolidated Leverage Ratio (computed as consolidated funded indebtedness of the Company and its subsidiaries to the consolidated EBITDA (as defined in the Credit Agreement) of the Company and its subsidiaries for the four fiscal quarters then most recently ended) for the fiscal quarter referred to in the quarterly or annual financial statements most recently delivered, or (b) the Company's then existing long-term debt securities rating byMoody's Investor Service, Inc. orStandard and Poor's Financial Services, Inc. Under the Credit Agreement, the applicable margin for ABR Borrowings ranges from 0.375 percent to 0.875 percent, the applicable margin for Eurocurrency Borrowings ranges from 1.375 percent to 1.875 percent, and the applicable margin for the commitment fee ranges from 0.150 percent to 0.275 percent. Loans made under the swingline facility will bear interest, if denominated inUnited States Dollars, at the same rate as an ABR Borrowing and, if denominated in another currency, at the same rate as a Eurocurrency Borrowing. As ofSeptember 25, 2021 , the Company had a weighted average interest rate of 1.70 percent with a base rate spread of 163 basis points on LIBOR-based borrowings under the Credit Agreement that has a final maturity date ofMarch 29, 2024 . Similar to the Old Credit Agreement, the Credit Agreement contains customary covenants that, among other things, limit the ability of the Company's subsidiaries to incur indebtedness and limit the ability of the Company and its subsidiaries to create liens on and sell assets, engage in certain liquidations or dissolutions, engage in certain mergers or consolidations, or change lines of business. These covenants are subject to significant exceptions and qualifications. 52 -------------------------------------------------------------------------------- Table of contents OnFebruary 28, 2020 , the Company amended the Credit Agreement (the "Amendment") in order to modify certain provisions, including the consolidated leverage ratio covenant. Previously, the Company had to maintain, at specified measurement periods, a Consolidated Leverage Ratio that was not greater than or equal to 3.75 to 1.00. 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 second amendment effective date to and including June 27, 2020 5.75 to 1.00 September 26, 2020 5.25 to 1.00 December 26, 2020 4.50 to 1.00 March 27, 2021 4.00 to 1.00 June 26, 2021 and thereafter 3.75 to 1.00 Under the Credit Agreement and consistent with the Old Credit Agreement,Dart Industries Inc. (the "Guarantor") unconditionally guarantees all obligations and liabilities of the Company and the Subsidiary Borrowers relating to the Credit Agreement, supported by a security interest in certain "Tupperware" trademarks and service marks. 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. Pursuant to the Amendment, 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 "Additional Guarantee and Collateral"). For purposes of the Credit Agreement, consolidated EBITDA represents earnings before interest, income taxes, depreciation and amortization, as adjusted to exclude unusual, non-recurring gains as well as non-cash charges and certain other items. The Company is in compliance with the financial covenants in the Credit Agreement. The Credit Agreement was amended to prevent the Company from exceeding the Consolidated Leverage Ratio for the four fiscal quarters ending inMarch 2020 , and continuing through the calculation for the four fiscal quarters ending inMarch 2021 . 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. The Company routinely increases its revolver borrowings under the Credit Agreement during each quarter to fund operating, investing and financing activities and uses cash available at the end of each quarter to temporarily reduce borrowing levels. As a result, the Company incurs more interest expense and has higher foreign exchange exposure on the value of its cash and debt during each quarter than would relate solely to the quarter end balances.
At
Senior Notes
The Company had$600.0 million aggregate principal amount of 4.75% senior notes (the "Senior Notes") outstanding as ofMarch 28, 2020 . The Senior Notes were to mature onJune 1, 2021 . The Senior Notes were issued under an indenture, by and among the Company, theGuarantor andWells Fargo Bank , N.A., as trustee. During the second, third, and fourth quarters of 2020 the Company retired its Senior Notes in the aggregate principal amount of$600.0 million through tender offers, open-market purchases, and redemption by using cash on hand and the proceeds from the Term Loan received inDecember 2020 . The Company recognized a gain on debt extinguishment of$40.0 million ,$9.9 million and a loss on debt extinguishment of$9.7 million in the second, third, and fourth quarters of 2020, respectively. Cash 53
-------------------------------------------------------------------------------- Table of contents 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 a cash and cash equivalents balance of$123.8 million as ofSeptember 25, 2021 , 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. Cash and cash equivalents balance as ofSeptember 25, 2021 includes$123.2 million 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$10.0 million for the withholding tax liability for future distribution of unrepatriated foreign earnings, noUnited States 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
•Brazil •China •Tupperware Mexico •theUnited States andCanada 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 to and retention and activity of the Company's independent Sales Force or the success of new products, promotional programs, and/or changes in Sales Force compensation programs. See also Item 1A. Risk Factors.
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