Tupperware Brands (TUP) Lowers FY EPS Guidance, Plans Late Filing Due to Investigation of Reporting Matters in Fuller Mexico Business

Tupperware Brands Corporation (the "Company") (NYSE: TUP) 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.

(*Consensus sees FY19 EPS of $2.78)

"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.

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.

You May Also Be Interested In

• Amphenol (APH) Tops Q1 EPS by 7c, offers guidance
• Norfolk Southern (NSC) Misses Q1 EPS by 12c
• iSun, Inc (ISUN) Announces 1:20 Reverse Share Split