TUP 10Q 6.28.14
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________
FORM 10-Q
________________________________________
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the 13 weeks ended June 28, 2014
OR
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition period from               to             
Commission file number 1-11657
________________________________________
TUPPERWARE BRANDS CORPORATION
(Exact name of registrant as specified in its charter)  
 ________________________________________
Delaware
36-4062333
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
14901 South Orange Blossom Trail, Orlando, Florida
32837
(Address of principal executive offices)
(Zip Code)
 
Registrant's telephone number, including area code: (407) 826-5050
________________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No   o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
x
 
Accelerated filer
o
 
 
 
 
 
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o  No   x
As of July 31, 2014, 50,390,064 shares of the common stock, $0.01 par value, of the registrant were outstanding.

Table of Contents

TABLE OF CONTENTS

 
 
Page
Number  
PART I. FINANCIAL INFORMATION
 
 
 
Item 1.
Financial Statements (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
PART II. OTHER INFORMATION
 
 
 
Item 2.
 
 
 
Item 6.
 
 


2
Table of Contents


Item 1.
Financial Statements (Unaudited)

TUPPERWARE BRANDS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
13 weeks ended
 
26 weeks ended
(In millions, except per share amounts)
June 28,
2014
 
June 29,
2013
 
June 28,
2014
 
June 29,
2013
Net sales
$
674.3

 
$
688.4

 
$
1,337.5

 
$
1,351.3

Cost of products sold
225.7

 
226.0

 
447.3

 
448.8

Gross margin
448.6

 
462.4

 
890.2

 
902.5

 
 
 
 
 
 
 
 
Delivery, sales and administrative expense
348.6

 
349.3

 
693.1

 
697.8

Re-engineering and impairment charges
3.4

 
2.2

 
5.7

 
4.4

Gains on disposal of assets
0.5

 
0.2

 
2.3

 
0.2

Operating income
97.1

 
111.1

 
193.7

 
200.5

 
 
 
 
 
 
 
 
Interest income
0.5

 
0.7

 
1.2

 
1.3

Interest expense
11.6

 
10.3

 
24.0

 
19.2

Other expense
16.0

 
0.7

 
30.1

 
3.6

Income before income taxes
70.0

 
100.8

 
140.8

 
179.0

 
 
 
 
 
 
 
 
Provision for income taxes
22.4

 
24.5

 
41.0

 
44.5

Net income
$
47.6


$
76.3

 
$
99.8

 
$
134.5

 
 
 
 
 
 
 
 
Earnings per share:
 

 
 

 
 
 
 
Basic
$
0.95

 
$
1.46

 
$
1.99

 
$
2.54

Diluted
0.93

 
1.43

 
1.95

 
2.49

 
 
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 

 
 
 
 
Basic
50.2

 
52.4

 
50.2

 
53.0

Diluted
51.1

 
53.5

 
51.1

 
54.1

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.68

 
$
0.62

 
$
1.36

 
$
1.24


See accompanying Notes to Consolidated Financial Statements (Unaudited).

3
Table of Contents

TUPPERWARE BRANDS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
13 weeks ended
 
26 weeks ended
(In millions)
June 28,
2014
 
June 29,
2013
 
June 28,
2014
 
June 29,
2013
Net income
$
47.6

 
$
76.3

 
$
99.8

 
$
134.5

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustments
7.3

 
(56.0
)
 
6.4

 
(43.8
)
Deferred gain (loss) on cash flow hedges, net of tax provision (benefit) of ($0.5), $1.0, ($0.3) and $0.7, respectively
(1.4
)
 
2.1

 
0.1

 
2.2

Pension and other post-retirement income (costs), net of tax provision of $0.3, $0.7, $0.4 and $0.2, respectively
0.5

 
1.1

 
0.8

 
(0.3
)
Other comprehensive income (loss)
6.4

 
(52.8
)
 
7.3

 
(41.9
)
Total comprehensive income
$
54.0

 
$
23.5

 
$
107.1

 
$
92.6


See accompanying Notes to Consolidated Financial Statements (Unaudited).

4
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TUPPERWARE BRANDS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share amounts)
June 28,
2014
 
December 28,
2013
ASSETS
 

 
 

Cash and cash equivalents
$
82.7

 
$
127.3

Accounts receivable, less allowances of $34.6 and $32.9, respectively
191.1

 
168.8

Inventories
351.8

 
313.4

Deferred income tax benefits, net
86.3

 
96.4

Non-trade amounts receivable, net
56.4

 
50.1

Prepaid expenses and other current assets
30.9

 
23.0

Total current assets
799.2

 
779.0

Deferred income tax benefits, net
434.2

 
397.9

Property, plant and equipment, net
301.4

 
300.9

Long-term receivables, less allowances of $19.2 and $20.5, respectively
20.7

 
23.1

Trademarks and tradenames, net
120.6

 
125.7

Other intangible assets, net
2.3

 
3.2

Goodwill
182.5

 
181.5

Other assets, net
36.4

 
32.6

Total assets
$
1,897.3

 
$
1,843.9

LIABILITIES AND SHAREHOLDERS' EQUITY
 

 
 

Accounts payable
$
121.9

 
$
149.7

Short-term borrowings and current portion of long-term debt and capital lease obligations
299.1

 
235.4

Accrued liabilities
343.5

 
352.4

Total current liabilities
764.5

 
737.5

Long-term debt and capital lease obligations
617.8

 
619.9

Other liabilities
229.6

 
233.6

Shareholders' equity:
 

 
 

Preferred stock, $0.01 par value, 200,000,000 shares authorized; none issued
—

 
—

Common stock, $0.01 par value, 600,000,000 shares authorized; 63,607,090 shares issued
0.6

 
0.6

Paid-in capital
184.6

 
178.3

Retained earnings
1,308.0

 
1,289.2

Treasury stock, 13,206,611 and 13,282,929 shares, respectively, at cost
(898.3
)
 
(898.4
)
Accumulated other comprehensive loss
(309.5
)
 
(316.8
)
Total shareholders' equity
285.4

 
252.9

Total liabilities and shareholders' equity
$
1,897.3

 
$
1,843.9


See accompanying Notes to Consolidated Financial Statements (Unaudited).

5
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TUPPERWARE BRANDS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
26 weeks ended
(In millions)
June 28,
2014
 
June 29,
2013
Operating Activities:
 
 
 

Net income
$
99.8

 
$
134.5

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
31.6

 
24.8

Unrealized foreign exchange loss
29.2

 
2.5

Equity compensation
8.5

 
7.7

Amortization of deferred debt costs
0.4

 
0.4

Premium on senior notes
—

 
6.3

Net gains on disposal of assets
(2.2
)
 
—

Provision for bad debts
6.6

 
5.9

Write-down of inventories
10.6

 
7.2

Non-cash impact of re-engineering and impairment costs
0.4

 
—

Net change in deferred income taxes
(21.1
)
 
(19.1
)
Excess tax benefits from share-based payment arrangements
(7.1
)
 
(9.8
)
Changes in assets and liabilities:
 

 
 

Accounts and notes receivable
(27.1
)
 
(31.5
)
Inventories
(47.4
)
 
(40.9
)
Non-trade amounts receivable
(10.7
)
 
(0.4
)
Prepaid expenses
(8.6
)
 
(6.8
)
Other assets
(0.7
)
 
3.0

Accounts payable and accrued liabilities
(6.1
)
 
(19.2
)
Income taxes payable
(12.7
)
 
0.4

Other liabilities
(0.5
)
 
1.7

Net cash impact from hedging activity
(0.6
)
 
4.5

Other
0.1

 
0.2

Net cash provided by operating activities
42.4

 
71.4

Investing Activities:
 

 
 

Capital expenditures
(31.2
)
 
(23.8
)
Proceeds from disposal of property, plant and equipment
5.5

 
7.1

Net cash used in investing activities
(25.7
)
 
(16.7
)
Financing Activities:
 

 
 

Dividend payments to shareholders
(65.2
)
 
(52.7
)
Net proceeds from issuance of senior notes
—

 
200.0

Proceeds from exercise of stock options
10.7

 
16.7

Repurchase of common stock
(31.4
)
 
(203.7
)
Repayment of capital lease obligations
(2.0
)
 
(1.4
)
Net change in short-term debt
63.5

 
(17.9
)
Debt issuance costs
—

 
(0.7
)
Excess tax benefits from share-based payment arrangements
7.1

 
9.8

Net cash used in financing activities
(17.3
)
 
(49.9
)
Effect of exchange rate changes on cash and cash equivalents
(44.0
)
 
(12.2
)
Net change in cash and cash equivalents
(44.6
)
 
(7.4
)
Cash and cash equivalents at beginning of year
127.3

 
119.8

Cash and cash equivalents at end of period
$
82.7

 
$
112.4

See accompanying Notes to Consolidated Financial Statements (Unaudited).

6
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1:
Summary of Significant Accounting Policies
Basis of Presentation: The condensed consolidated financial statements include the accounts of Tupperware Brands Corporation and its subsidiaries, collectively “Tupperware” or the “Company”, with all intercompany transactions and balances having been eliminated. These condensed consolidated financial statements and related notes should be read in conjunction with the audited 2013 financial statements included in the Company's Annual Report on Form 10-K for the year ended December 28, 2013.
Certain prior year amounts have been reclassified to conform with current year presentation.
These condensed consolidated financial statements are unaudited and have been prepared following the rules and regulations of the United States Securities and Exchange Commission and, in the Company's opinion, reflect all adjustments, including normal recurring items that are necessary for a fair statement of the results for the interim periods. Certain information and note disclosures normally included in the statement of financial position, results of operations, comprehensive income and cash flows prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. Operating results of any interim period presented herein are not necessarily indicative of the results that may be expected for a full fiscal year.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates.
Venezuela Foreign Currency Translation: In June 2010, several large Venezuelan commercial banks began operating the Transaction System for Foreign Currency Denominated Securities (SITME), which established a "banded" exchange rate of 5.3 bolivars to the U.S. dollar. In February 2013, the Venezuelan government set a new official exchange rate of 6.3 bolivars to the U.S. dollar ("Official Rate") and abolished the banded exchange rate. In March 2013, the Venezuelan government created the Complimentary System of Foreign Currency Acquirement ("SICAD 1"). SICAD 1 is an auction system and allows entities in specific sectors to bid for U.S. dollars. In March 2014, the Venezuelan government opened an additional foreign exchange mechanism known as SICAD 2, which is available to all industry sectors.
In late March 2014, the Company was invited to participate, for the first time, in the SICAD 1 auction process at a rate of 10.8 bolivars to the U.S. dollar ("SICAD 1 Rate"). The Company did not exchange bolivars through either the SICAD 1 or SICAD 2 mechanisms in the first or second quarters of 2014, though it did exchange currency at the Official Rate in the first quarter. As a result, the Company continued to use the Official Rate to measure its operating activity during the first quarter of 2014. As of the end of the first quarter of 2014, the Company anticipated making future currency exchanges under the SICAD 1 Rate as the Official Rate was not expected to be widely available in the future. As a result, the Company used the SICAD 1 Rate to remeasure the balance sheet at March 29, 2014. The negative impact of this change in exchange rates used to remeasure the net monetary assets on the balance sheet was $13.4 million pretax and was recorded in Other Expense on the Consolidated Statements of Income.
In June 2014, the Venezuelan government mandated, based on the results of a pricing audit, that the Company significantly lower its suggested retail selling prices in order to comply with laws limiting prices and profit margins across the Venezuelan economy. Due to certain assumptions made by the Venezuelan government during the pricing audit, as well as anticipated changes in its value chain in light of the pricing mandate, the Company anticipates using the SICAD 2 rate, which is currently 50.0 bolivars to the U.S. dollar, to make certain future exchanges of bolivars for U.S. dollars and measure its operating activities. As a result, the Company remeasured the net monetary assets on the balance sheet at the end of the second quarter at the SICAD 2 rate. The negative impact of this change in exchange rate was $15.8 million, which is also recorded in Other Expense. There was also a negative $6.4 million pretax impact of recording in income the sale of inventory included in cost of goods sold at the 6.3 exchange rate at which it was purchased, or manufactured, rather than the 10.8 exchange rate in use when those amounts were included in cost of sales.

7
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

As of June 28, 2014, the Company had approximately $4 million of net monetary assets in Venezuela, which were of a nature that would generate income or expense associated with future exchange rate fluctuations versus the U.S. dollar. As of June 28, 2014, there was also $16 million of inventory on the balance sheet in Venezuela, which when it is sold will be included in cost of sales at the dollar value at which it was originally recorded. In addition, the Company had $3 million in net deferred tax assets that will impact the income tax provision in 2014 at the dollar value at which they were originally recorded.
Note 2:
Shipping and Handling Costs
The cost of products sold line item includes costs related to the purchase and manufacture of goods sold by the Company. Among these costs are inbound freight charges, purchasing and receiving costs, inspection costs, depreciation expense, internal transfer costs and warehousing costs of raw material, work in process and packing materials. The warehousing and distribution costs of finished goods are included in delivery, sales and administrative expense (“DS&A”). Distribution costs are comprised of outbound freight and associated labor costs. Fees billed to customers associated with the distribution of products are classified as revenue. The distribution costs included in DS&A expense for the second quarters of 2014 and 2013 were $41.3 million and $40.4 million, respectively, and were $80.0 million and $78.4 million for the year-to-date periods ended June 28, 2014 and June 29, 2013, respectively.
Note 3:
Promotional Costs
The Company frequently makes promotional offers to members of its independent sales force to encourage them to fulfill specific goals or targets for sales levels, party attendance, recruiting of new sales force members or other business-critical functions. The awards offered are in the form of cash, product awards, special prizes or trips.
The Company accrues for the costs of these awards during the period over which the sales force qualifies for the award and reports these costs primarily as a component of DS&A expense. These accruals require estimates as to the cost of the awards, based upon estimates of achievement and actual cost to be incurred. During the qualification period, actual results are monitored, and changes to the original estimates are made when known. Promotional and other sales force compensation expenses included in DS&A expense totaled $111.4 million and $114.7 million for the second quarters of 2014 and 2013, respectively, and $225.2 million and $230.0 million for the year-to-date periods ended June 28, 2014 and June 29, 2013, respectively.
Note 4:
Inventories
(In millions)
June 28,
2014
 
December 28,
2013
Finished goods
$
269.4

 
$
245.0

Work in process
35.8

 
27.4

Raw materials and supplies
46.6

 
41.0

Total inventories
$
351.8

 
$
313.4

Note 5:
Net Income Per Common Share
Basic per share information is calculated by dividing net income by the weighted average number of shares outstanding. Diluted per share information is calculated by also considering the impact of potential common stock on both net income and the weighted average number of shares outstanding.

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TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The elements of the earnings per share computations were as follows:
 
13 weeks ended
 
26 weeks ended
(In millions, except per share amounts)
June 28,
2014
 
June 29,
2013
 
June 28,
2014
 
June 29,
2013
Net income
$
47.6

 
$
76.3

 
$
99.8

 
$
134.5

Weighted-average shares of common stock outstanding
50.2

 
52.4

 
50.2

 
53.0

Common equivalent shares:
 
 
 
 
 
 
 
Assumed exercise of dilutive options, restricted shares, restricted stock units and performance share units
0.9

 
1.1

 
0.9

 
1.1

Weighted-average common and common equivalent shares outstanding
51.1

 
53.5

 
51.1

 
54.1

Basic earnings per share
$
0.95

 
$
1.46

 
$
1.99

 
$
2.54

Diluted earnings per share
$
0.93

 
$
1.43

 
$
1.95

 
$
2.49

Shares excluded from the determination of potential common stock because inclusion would have been anti-dilutive
0.4

 
0.1

 
0.4

 
0.1

Note 6:
Accumulated Other Comprehensive Loss
(In millions, net of tax)
Foreign Currency Items
 
Cash Flow Hedges
 
Pension and Other Post-retirement Items
 
Total
Balance at December 28, 2013
$
(283.1
)
 
$
2.2

 
$
(35.9
)
 
$
(316.8
)
Other comprehensive income before reclassifications
6.4

 
2.6

 
0.1

 
9.1

Amounts reclassified from accumulated other comprehensive income
—

 
(2.5
)
 
0.7

 
(1.8
)
Net current-period other comprehensive income
6.4

 
0.1

 
0.8

 
7.3

Balance at June 28, 2014
$
(276.7
)
 
$
2.3

 
$
(35.1
)
 
$
(309.5
)
(In millions, net of tax)
Foreign Currency Items
 
Cash Flow Hedges
 
Pension and Other Post-retirement Items
 
Total
Balance at December 29, 2012
$
(218.2
)
 
$
(0.2
)
 
$
(52.9
)
 
$
(271.3
)
Other comprehensive income (loss) before reclassifications
(43.8
)
 
2.6

 
(2.1
)
 
(43.3
)
Amounts reclassified from accumulated other comprehensive loss
—

 
(0.4
)
 
1.8

 
1.4

Net current-period other comprehensive income (loss)
(43.8
)
 
2.2

 
(0.3
)
 
(41.9
)
Balance at June 29, 2013
$
(262.0
)
 
$
2.0

 
$
(53.2
)
 
$
(313.2
)
Pretax amounts reclassified from accumulated other comprehensive loss that related to cash flow hedges consisted of net gains of $3.2 million and $0.6 million for the year-to-date periods ended June 28, 2014 and June 29, 2013, respectively. Associated with these items were tax provisions of $0.7 million and $0.2 million for the periods ended June 28, 2014 and June 29, 2013, respectively. See Note 10 for further discussion of derivatives.

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TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

For the year-to-date periods ended June 28, 2014 and June 29, 2013, pretax amounts reclassified from accumulated other comprehensive loss related to pension and other post-retirement items consisted of prior service benefits of $0.4 million and $0.2 million, respectively, and actuarial losses of $1.3 million and $2.4 million, respectively. For the period ended June 29, 2013, there were pension settlement costs of $0.4 million. There were no such costs for the period ended June 28, 2014. The tax benefit associated with these items was $0.2 million and $0.8 million, respectively. See Note 12 for further discussion of pension and other post-retirement benefit costs.
Note 7:
Re-engineering and Other Exit Costs
The Company recorded $3.4 million and $2.2 million in re-engineering and impairment charges during the second quarters of 2014 and 2013, respectively, and $5.7 million and $4.4 million for the respective year-to-date periods. In both years, these charges were primarily related to severance costs incurred for headcount reductions in several of the Company’s operations in connection with changes in its management and organizational structures, and in 2014, the decision to cease operating the Armand Dupree business in the United States and the Nutrimetics business in Thailand.
The balances included in accrued liabilities related to re-engineering and impairment charges as of June 28, 2014 and December 28, 2013 were as follows:
(In millions)
June 28,
2014
 
December 28,
2013
Beginning of the year balance
$
2.6

 
$
1.5

Provision
5.7

 
9.3

Cash expenditures:
 
 
 

Severance
(4.6
)
 
(6.1
)
Other
(1.1
)
 
(2.0
)
Non-cash asset impairments
(0.4
)
 
(0.1
)
End of period balance
$
2.2

 
$
2.6

The accrual balance as of June 28, 2014, related primarily to severance payments to be made by the end of the third quarter of 2014. In connection with the decisions to cease operating the Armand Dupree business in the United States and the Nutrimetics business in Thailand, the Company recorded $1.9 million and $0.4 million, respectively, in cost of sales for inventory obsolescence during the first half of 2014.
Note 8:
Segment Information
The Company manufactures and distributes a broad portfolio of products, primarily through independent direct sales consultants. Certain operating segments have been aggregated based upon consistency of economic substance, geography, products, production process, class of customers and distribution method.
Effective with the first quarter of 2014, the management structure of the Company’s Nutrimetics France business was re-aligned for operational and strategic purposes. Consequently, Nutrimetics France is now being reported in the Asia Pacific segment, whereas it had previously been reported in the Europe segment. Comparable information from 2013 has been reclassified to conform to the new presentation. In full year 2013, Nutrimetics France generated less than 1 percent of total sales.

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TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The Company's reportable segments include the following:
Europe
Primarily design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware® brand. Europe also includes Avroy Shlain® which sells beauty and personal care products. Asia Pacific also sells beauty and personal care products in some of its units under the NaturCare®, Nutrimetics® and Fuller® brands.
Asia Pacific
Tupperware North America
Beauty North America
Premium cosmetics, skin care and personal care products marketed under the BeautiControl® brand in the United States, Canada and Puerto Rico and the Armand Dupree® and Fuller Cosmetics® brands in Mexico and Central America.
South America
Both housewares and beauty products under the Armand Dupree®, Fuller®, Nutrimetics®, Nuvo® and Tupperware® brands.
Worldwide sales of beauty and personal care products totaled $137.1 million and $142.7 million in the second quarters of 2014 and 2013, respectively, and $264.8 million and $287.4 million for the respective year-to-date periods.
 
13 weeks ended
 
26 weeks ended
(In millions)
June 28,
2014
 
June 29,
2013
 
June 28,
2014
 
June 29,
2013
Net sales:
 
 
 
 
 
 
 
Europe
$
186.3

 
$
196.7

 
$
399.6

 
$
411.6

Asia Pacific
211.1

 
212.8

 
410.1

 
415.2

Tupperware North America
93.4

 
99.7

 
174.9

 
182.5

Beauty North America
77.7

 
81.8

 
151.2

 
167.3

South America
105.8

 
97.4

 
201.7

 
174.7

Total net sales
$
674.3

 
$
688.4

 
$
1,337.5

 
$
1,351.3

Segment profit (loss):
 
 
 

 
 
 
 
Europe
$
27.9

 
$
34.2

 
$
68.2

 
$
71.7

Asia Pacific
46.5

 
46.5

 
87.4

 
89.0

Tupperware North America
19.8

 
17.0

 
33.4

 
29.3

Beauty North America (a)
3.0

 
7.1

 
2.3

 
13.5

South America
(0.4
)
 
22.0

 
3.0

 
27.7

Total segment profit
$
96.8

 
$
126.8

 
$
194.3

 
$
231.2

Unallocated expenses
(12.9
)
 
(14.4
)
 
(27.3
)
 
(30.1
)
Re-engineering and impairment charges (a)
(3.4
)
 
(2.2
)
 
(5.7
)
 
(4.4
)
Gains on disposal of assets
0.5

 
0.2

 
2.3

 
0.2

Interest expense, net
(11.0
)
 
(9.6
)
 
(22.8
)
 
(17.9
)
Income before taxes
$
70.0

 
$
100.8

 
$
140.8

 
$
179.0


11
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

(In millions)
June 28,
2014
 
December 28,
2013
Identifiable assets:
 
 
 
Europe
$
361.9

 
$
360.8

Asia Pacific
352.9

 
315.3

Tupperware North America
167.1

 
148.4

Beauty North America
347.3

 
356.7

South America
155.5

 
127.6

Corporate
512.6

 
535.1

Total identifiable assets
$
1,897.3

 
$
1,843.9

_________________________
(a)
See Note 7 to the Consolidated Financial Statements for a discussion of re-engineering and impairment charges.
Note 9:
Debt
Senior Notes
On June 2, 2011, the Company completed the sale of $400 million in aggregate principal amount of 4.750% Senior Notes due June 1, 2021 at an issue price of 98.989% under an indenture (the "Indenture") entered into by the Company and its 100% owned subsidiary, Dart Industries Inc. (the “Guarantor”).
On March 11, 2013, the Company issued and sold an additional $200 million in aggregate principal amount of these notes (both issuances together, the "Senior Notes") at an issue price of 103.781% in a registered public offering. The Senior Notes form a single series under the Indenture. The March 2013 proceeds were used to repay a 90-day $75 million promissory note entered into on February 1, 2013, as well as a portion of outstanding borrowings under the Company's multicurrency credit agreement in place at that time. The remaining net proceeds were used to fund share repurchases under the Company's common stock repurchase authorization. As a result of the 2013 issuance, the Company recorded a premium of $7.6 million to be amortized over the life of the Senior Notes. The Company also incurred $1.5 million in deferred financing costs, of which $1.3 million was netted with the bond premium on the statement of cash flows.
The Senior Notes were issued under an Indenture between the Company, the Guarantor and Wells 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. The guarantee and the lien securing the guarantee may be released under certain customary circumstances specified in the Indenture. These customary circumstances include:
•payment in full of principal of and premium, if any, and interest on the Senior Notes;
•satisfaction and discharge of the Indenture;
•upon legal defeasance or covenant defeasance of the Senior Notes as set forth in the Indenture;
•
as to any property or assets constituting Collateral owned by the Guarantor that is released from its Guarantee in accordance with the Indenture;
•
with the consent of the Holders of the requisite percentage of Senior Notes in accordance with the Indenture; and
•if the rating on the Senior Notes is changed to investment grade in accordance with the Indenture.

12
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Credit Agreement
In September 2013, the Company and its wholly-owned subsidiary, Tupperware International Holdings B.V. (the “Subsidiary Borrower”), amended and restated their multicurrency Credit Agreement (the “Credit Agreement”) with their consortium of lenders. The Credit Agreement replaced the credit facility dated June 2, 2011 (the “Old Credit Facility”) and, other than an increased amount that may be borrowed and a more favorable interest rate spread, has terms and conditions similar to that of the Old Credit Facility. The Credit Agreement makes available to the Company and the Subsidiary Borrower a committed five-year credit facility in an aggregate amount of $650 million (the “Facility Amount”). 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 million (for a maximum aggregate Facility Amount of $850 million), subject to certain conditions. As of June 28, 2014, the Company had total borrowings of $296.1 million outstanding under its Credit Agreement, with $108.9 million of that amount denominated in euro. The Company routinely increases its revolver borrowings under the Credit Agreement and uncommitted lines, as well as previously under the Old Credit Facility, during each quarter to fund operating, investing and financing activities and uses cash available at the end of each quarter to reduce borrowing levels. As a result, the Company has higher foreign exchange exposure on the value of its cash during each quarter than at the end of each quarter.
Loans made under the revolving credit facility bear interest under a formula that includes, at the Company's option, one of three different base rates, plus an applicable spread. The Company generally selects the London interbank offered rate ("LIBOR") for the applicable currency and interest period as its interest rate base. As of June 28, 2014, the Credit Agreement dictated a spread of 150 basis points, which gave the Company a weighted average interest rate on LIBOR based borrowings of 1.73 percent under the Credit Agreement. During the third quarter of 2014, in light of the Company's increased debt-to-EBITDA ratio (as defined in the Credit Agreement), the spread will increase by 25 basis points.
The Credit Agreement has customary financial covenants related to interest coverage and leverage. These restrictions are not expected to impact the Company's operations. As of June 28, 2014, and currently, the Company had considerable cushion under its financial covenants.
The Guarantor unconditionally guarantees all obligations and liabilities of the Company and the Subsidiary Borrower relating to this Credit Agreement, as well as the Senior Notes, supported by a security interest in certain "Tupperware" trademarks and service marks.
In February 2014, the Company entered into a $75.0 million uncommitted line of credit with Credit Agricole Corporate and Investment Bank, one of the participating banks in the Company's Credit Agreement. This line of credit dictates an interest rate of LIBOR plus 125 basis points. As of June 28, 2014, there was no amount outstanding under this uncommitted line of credit.
At June 28, 2014, the Company had $537.3 million of unused lines of credit, including $351.7 million under the committed, secured Credit Agreement, and $185.6 million available under various uncommitted lines around the world, including the uncommitted line of credit with Credit Agricole Corporate and Investment Bank. In July 2014, the Company entered into a $100.0 million uncommitted line of credit with HSBC Bank USA, one of the participating banks in the Company's Credit Agreement. This line of credit dictates an interest rate of LIBOR plus 100 basis points.
Note 10:
Derivative Instruments and Hedging Activities
The Company is exposed to fluctuations in foreign currency exchange rates on the earnings, cash flows and financial position of its international operations. Although this currency risk is partially mitigated by the natural hedge arising from the Company's local manufacturing in many markets, a strengthening U.S. dollar generally has a negative impact on the Company. In response to this fact, the Company uses financial instruments to hedge certain of its exposures and to manage the foreign exchange impact to its financial statements. At its inception, a derivative financial instrument used for hedging is designated as a fair value, cash flow or net equity hedge.

13
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Fair value hedges are entered into with financial instruments such as forward contracts, with the objective of limiting exposure to certain foreign exchange risks primarily associated with accounts payable and non-permanent intercompany transactions. For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in current earnings. In assessing hedge effectiveness, the Company excludes forward points, which are considered to be a component of interest expense. The forward points on fair value hedges resulted in pretax gains of $2.8 million and $2.2 million in the second quarters of 2014 and 2013, respectively, and pretax gains of $5.2 million and $4.2 million for the respective year-to-date periods.
The Company also uses derivative financial instruments to hedge foreign currency exposures resulting from certain forecasted purchases and classifies these as cash flow hedges. The Company's cash flow hedge contracts are for periods ranging from one to twelve months. The effective portion of the gain or loss on the hedging instrument is recorded in other comprehensive income and is reclassified into earnings as the transactions being hedged are recorded. As such, the balance at the end of the reporting period in other comprehensive income, related to cash flow hedges, will be reclassified into earnings within the next twelve months. The associated asset or liability on the open hedges is recorded in other current assets or accrued liabilities, as applicable. In assessing hedge effectiveness, the Company excludes forward points, which are included as a component of interest expense.
The Company also uses financial instruments, such as forward contracts, to hedge a portion of its net equity investment in international operations and classifies these as net equity hedges. Changes in the value of these derivative instruments, excluding any ineffective portion of the hedges, are included in foreign currency translation adjustments within accumulated other comprehensive loss. The Company recorded a net gain/(loss) associated with these hedges, in other comprehensive income, net of tax, of ($0.5) million and $16.4 million in the second quarters of 2014 and 2013, respectively, and a net gain/(loss) of $(3.8) million and $11.1 million for the respective year-to-date periods. Due to the permanent nature of the investments, the Company does not anticipate reclassifying any portion of these amounts to the income statement in the next twelve months. In assessing hedge effectiveness, the Company excludes forward points, which are included as a component of interest expense.
While the Company's net equity and fair value hedges of non-permanent intercompany balances mitigate its exposure to foreign exchange gains or losses, they result in an impact to operating cash flows as they are settled, whereas in some cases the hedged items do not generate offsetting cash flows. The net cash flow impact of these currency hedges was an outflow of $0.6 million and an inflow of $4.5 million for the year-to-date periods ended June 28, 2014 and June 29, 2013, respectively.

14
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Following is a listing of the Company's outstanding derivative financial instruments at fair value as of June 28, 2014 and December 28, 2013. Related to the forward contracts, the “buy” amounts represent the U.S. dollar equivalent of commitments to purchase foreign currencies, and the “sell” amounts represent the U.S. dollar equivalent of commitments to sell foreign currencies, all translated at the period-end market exchange rates for the U.S. dollar. All forward contracts are hedging net investments in certain foreign subsidiaries, cross-currency intercompany loans that are not permanent in nature, cross-currency external payables and receivables or forecasted purchases. Some amounts are between two foreign currencies:
Forward Contracts
 
June 28, 2014
 
December 28, 2013
(In millions)
 
Buy
 
Sell 
 
Buy
 
Sell
Euro
 
$
146.0

 
 
 
$
157.7

 
 
Philippine peso
 
17.2

 
 
 
11.3

 
 
Danish krone
 
14.1

 
 
 
 
 
$
3.5

Chinese renminbi
 
9.7

 
 
 
8.1

 
 
South Korean won
 
9.5

 
 
 
9.7

 
 
Mexican peso
 
4.4

 
 
 
18.2

 
 
Malaysian ringgit
 
2.6

 
 
 
 
 
2.7

New Zealand dollar
 
2.0

 
 
 
4.5

 
 
Uruguayan peso
 
1.3

 
 
 
4.7

 
 
U.S. dollar
 
 
 
$
40.6

 
 
 
54.7

Indonesian rupiah
 
 
 
37.1

 
2.3

 
 
Swiss franc
 
 
 
32.9

 
 
 
49.4

Russian ruble
 
 
 
15.4

 
 
 
22.9

Japanese yen
 
 
 
12.2

 
 
 
3.7

Turkish lira
 
 
 
11.5

 
 
 
11.7

Brazilian real
 
 
 
10.7

 
 
 
6.6

Canadian dollar
 
 
 
7.5

 
 
 
11.0

Singapore dollar
 
 
 
6.1

 
 
 
1.7

South African rand
 
 
 
5.6

 
 
 
10.4

Czech koruna
 
 
 
3.5

 
 
 
2.5

Australian dollar
 
 
 
3.4

 
 
 
6.8

Indian rupee
 
 
 
3.1

 
 
 
6.6

Polish zloty
 
 
 
3.1

 
 
 
4.7

Norwegian krone
 
 
 
2.7

 
 
 
1.7

Croatian kuna
 
 
 
2.6

 
 
 
2.6

Argentine peso
 
 
 
2.3

 
 
 
3.7

Swedish krona
 
 
 
2.2

 
 
 
1.7

Hungarian forint
 
 
 
1.6

 
 
 
2.4

Romanian leu
 
 
 
1.4

 
 
 
1.2

British pound
 
 
 
1.0

 
 
 
1.0

Other currencies (net)
 
 
 
1.8

 
 
 
4.4

 
 
$
206.8

 
$
208.3

 
$
216.5

 
$
217.6



15
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

In agreements to sell foreign currencies in exchange for U.S. dollars, for example, an appreciating dollar versus the opposing currency would generate a cash inflow for the Company at settlement, with the opposite result in agreements to buy foreign currencies for U.S. dollars. The above noted notional amounts change based upon changes in the Company's outstanding currency exposures.
The following table summarizes the Company's derivative positions, which are the only assets and liabilities recorded at fair value on a recurring basis, and the impact they had on the Company's financial position as of June 28, 2014 and December 28, 2013. Fair values were determined based on third party quotations (Level 2 fair value measurement):

 
Asset derivatives
 
Liability derivatives
 
 
 
 
Fair value
 
 
 
Fair value
Derivatives designated as hedging instruments (in millions)
 
Balance sheet location
 
Jun 28,
2014
 
Dec 28,
2013
 
Balance sheet location
 
Jun 28, 2014
 
Dec 28,
2013
Foreign exchange contracts
 
Non-trade amounts receivable
 
$
12.2

 
$
20.3

 
Accrued liabilities
 
$
12.6

 
$
19.2

The following table summarizes the impact of the Company's derivative positions on the results of operations for the second quarters of 2014 and 2013:
Derivatives designated as fair value hedges (in millions)
 
Location of gain or (loss) recognized in income on derivatives
 
Amount of gain or (loss) recognized in income on derivatives 
 
Location of gain or (loss) recognized in income on related hedged items
 
Amount of gain or (loss) recognized in income on related hedged items
 
 
 
 
2014
2013
 
 
 
2014
2013
Foreign exchange contracts
 
Other expense
 
$
4.8

$
(23.9
)
 
Other expense
 
$
(5.0
)
$
23.8

The following table summarizes the impact of Company's derivative positions on comprehensive income for the second quarters of 2014 and 2013:
Derivatives designated as cash flow and net equity hedges (in millions)
 
Amount of gain or (loss) recognized in OCI on derivatives (effective portion)
 
Location of gain or (loss) reclassified from accumulated OCI into income (effective portion)
 
Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion)
 
Location of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)
 
Amount of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)
Cash flow hedging relationships
 
2014
2013
 
 
 
2014
2013
 
 
 
2014
2013
Foreign exchange contracts
 
$
(0.4
)
$
3.6

 
Cost of products sold
 
$
1.5

$
0.6

 
Interest expense
 
$
(1.5
)
$
(0.8
)
Net equity hedging relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
(0.9
)
25.6

 
Other expense
 
—

—

 
Interest expense
 
(3.1
)
(2.7
)
The following table summarizes the impact of the Company's derivative positions on the results of operations for the year-to-date periods ended June 28, 2014 and June 29, 2013:
Derivatives designated as fair value hedges (in millions)
 
Location of gain or (loss) recognized in income on derivatives
 
Amount of gain or (loss) recognized in income on derivatives 
 
Location of gain or (loss) recognized in income on related hedged items
 
Amount of gain or (loss) recognized in income on related hedged items
 
 
 
 
2014
2013
 
 
 
2014
2013
Foreign exchange contracts
 
Other expense
 
$
5.8

$
(12.1
)
 
Other expense
 
$
(5.5
)
$
12.1



16
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The following table summarizes the impact of Company's derivative positions on comprehensive income for the year-to-date periods ended June 28, 2014 and June 29, 2013:
Derivatives designated as cash flow and net equity hedges (in millions)
 
Amount of gain or (loss) recognized in OCI on derivatives (effective portion)
 
Location of gain or (loss) reclassified from accumulated OCI into income (effective portion)
 
Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion)
 
Location of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)
 
Amount of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)
Cash flow hedging relationships
 
2014
2013
 
 
 
2014
2013
 
 
 
2014
2013
Foreign exchange contracts
 
$
2.9

$
3.4

 
Cost of products sold
 
$
3.2

$
0.6

 
Interest expense
 
$
(2.8
)
$
(1.3
)
Net equity hedging relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
(6.0
)
17.3

 
Other expense
 
—

—

 
Interest expense
 
(6.7
)
(5.6
)
Note 11:
Fair Value Measurements
Due to their short maturities or their insignificance, the carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable, accrued liabilities and short-term borrowings approximated their fair values at June 28, 2014 and December 28, 2013. The Company estimates that, based on current market conditions, the value of its 4.750% 2021 Senior Notes was $646 million at June 28, 2014, compared with the carrying value of $602.5 million. The higher fair value resulted from changes, since issuance, in the corporate bond market and investor preferences. The fair value of debt is classified as a Level 2 liability and is estimated using quoted market prices as provided in secondary markets which consider the Company's credit risk and market related conditions. See Note 10 to the Consolidated Financial Statements for discussion of the Company's derivative instruments and related fair value measurements.
Note 12:
Retirement Benefit Plans
Components of net periodic benefit cost for the second quarter and year-to-date periods ended June 28, 2014 and June 29, 2013 were as follows:
 
Second Quarter
 
Year-to-Date
 
Pension benefits
 
Postretirement benefits
 
Pension benefits
 
Postretirement benefits
(In millions)
2014
2013
 
2014
2013
 
2014
2013
 
2014
2013
Service cost
$
2.8

$
2.6

 
$
0.1

$
—

 
$
5.6

$
5.3

 
$
0.1

$
—

Interest cost
2.2

2.1

 
0.2

0.3

 
4.4

4.2

 
0.6

0.6

Expected return on plan assets
(1.5
)
(1.4
)
 
—

—

 
(3.1
)
(2.9
)
 
—

—

Settlement/curtailment
—

0.4

 
—

—

 
—

0.4

 
—

—

Net amortization
0.6

1.2

 
(0.1
)
(0.1
)
 
1.2

2.4

 
(0.3
)
(0.2
)
Net periodic benefit cost
$
4.1

$
4.9

 
$
0.2

$
0.2

 
$
8.1

$
9.4

 
$
0.4

$
0.4

During the year-to-date periods ended June 28, 2014 and June 29, 2013, approximately $0.9 million and $2.6 million, respectively, of pretax expenses were reclassified from other comprehensive income to a component of net periodic benefit cost. As they relate to foreign plans, the Company uses current exchange rates to make these reclassifications. The impact of exchange rate fluctuations is included on the net amortization line of the table above.

17
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 13:
Income Taxes
As of June 28, 2014 and December 28, 2013, the Company's gross unrecognized tax benefit was $24.2 million and $27.4 million, respectively. During 2014, the accrual for uncertain tax positions decreased by $3.2 million primarily as a result of the Company agreeing to a transfer pricing settlement with various foreign jurisdictions and entering into an Advanced Pricing Agreement, as well as other adjustments. The Company estimates that approximately $21.5 million of the unrecognized tax benefits, if recognized, would impact the effective tax rate. Interest and penalties related to uncertain tax positions in the Company's global operations are recorded as a component of the provision for income taxes. Accrued interest and penalties were $6.1 million and $5.9 million as of June 28, 2014 and December 28, 2013, respectively.
The Company estimates that it may settle one or more foreign audits in the next twelve months that may result in a decrease in the amount of accrual for uncertain tax positions of up to $0.4 million. For the remaining balance as of June 28, 2014, the Company is not able to reliably estimate the timing or ultimate settlement amount. While the Company does not currently expect material changes, it is possible that the amount of unrecognized benefit with respect to the uncertain tax positions will significantly increase or decrease related to audits in various foreign jurisdictions that may conclude during that period or new developments that could also, in turn, impact the Company's assessment relative to the establishment of valuation allowances against certain existing deferred tax assets. These valuation allowances relate to tax assets in jurisdictions where it is management's best estimate that there is not a greater than 50 percent probability that the benefit of the assets will be realized in the associated tax returns. The likelihood of realizing the benefit of deferred tax assets is assessed on an ongoing basis. This assessment requires estimates as to future operating results, as well as an evaluation of the effectiveness of the Company's tax planning strategies. At this time, the Company is not able to make a reasonable estimate of the range of impact on the balance of unrecognized tax benefits or the impact on the effective tax rate related to these items.
The effective tax rates for the second quarter and year-to-date period of 2014 were 32.0 percent and 29.1 percent, respectively, compared with 24.3 percent and 24.9 percent, respectively, for the comparable 2013 periods. The higher 2014 rates were due to higher 2014 losses incurred in conjunction with the change in exchange rate of the Venezuelan bolivar, for which there was limited tax benefit. The effective tax rates are below the U.S. statutory rate primarily due to lower foreign effective tax rates.
Note 14:
Statement of Cash Flow Supplemental Disclosure
Under the Company's stock incentive programs, employees are allowed to use shares retained by the Company to satisfy minimum statutorily required withholding taxes. In the year-to-date periods ended June 28, 2014 and June 29, 2013, 87,290 and 47,187 shares, respectively, were retained to fund withholding taxes, with values totaling $7.0 million and $3.7 million, respectively, which were included as a component of stock repurchases in the Consolidated Statements of Cash Flows.
During the first quarter of 2014, the Company entered into a joint venture with a real estate development partner. The Company contributed land to the joint venture in exchange for 50 percent ownership of the joint venture. The carrying value of the land was $3.1 million. The Company's ownership interest in the joint venture is accounted for using the equity method and was included in long-term other assets on the June 28, 2014 balance sheet at the carrying value of the contributed land. The Company does not expect to have any significant cash inflows or outflows related to the joint venture until such time as the joint venture completes and sells its development.
There were no capital lease arrangements initiated in the year-to-date periods ended June 28, 2014 and June 29, 2013.
In relation to the issuance of the Senior Notes in the first quarter of 2013, the proceeds related to the $7.6 million debt premium were reduced by $1.3 million of non-cash debt issuance costs.

18
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 15:
Stock Based Compensation
The Company records compensation expense using the applicable accounting guidance for share-based payments related to stock options, restricted stock, restricted stock units, performance vesting and market vesting awards granted to directors and employees. Compensation expense for share-based awards is recorded straight line over the required service period, based on the fair value of the award, although with respect to performance-vested awards, this is subject to an assessment of the likelihood of reaching performance levels included in the programs. The grant date fair value per share of market-vested awards already reflects the probability of achieving the market condition, and is therefore used to record expense regardless of actual achievement.
Stock Options
Stock options to purchase the Company's common stock are granted to employees and directors by the Company's Board of Directors, with an exercise price equal to the fair market value of the stock on the date of grant. Options generally become exercisable in three years, in equal installments beginning one year from the date of grant, and generally expire 10 years from the date of grant. Options to acquire 6,050 shares of stock were granted during the year-to-date period of 2013. There were no stock options granted in the year-to-date period of 2014. Compensation expense associated with all outstanding stock option awards was $0.5 million and $0.4 million in the second quarters of 2014 and 2013, respectively, and $0.9 million in each of the respective year-to-date periods.
Stock option activity for 2014, under all of the Company's incentive plans, is summarized in the following table:
 
Shares subject to option
 
Weighted average exercise price per share
 
Aggregate intrinsic value
(in millions)
Outstanding at December 28, 2013
2,360,275

 

$44.16

 
 
Granted
—

 
—

 
 
Expired / Forfeited
(5,711
)
 
72.26

 
 
Exercised
(305,170
)
 
34.98

 
 
Outstanding at June 28, 2014
2,049,394

 

$45.43

 

$77.5

Exercisable at June 28, 2014
1,489,165

 

$36.57

 

$69.0

The intrinsic value of options exercised totaled $5.5 million and $4.8 million in the second quarters of 2014 and 2013, respectively, and $13.9 million and $29.3 million in the respective year-to-date periods. The average remaining contractual life on outstanding and exercisable stock options was 5.9 years and 4.9 years, respectively.
Restricted Stock, Restricted Stock Units, Performance Vested and Market Vested Awards
The Company has time-vested, performance-vested and market-vested awards which typically have initial vesting periods ranging from one to six years. Compensation expense associated with restricted stock and restricted stock units is equal to the market value of the Company's common stock on the date of grant, and for time-vested awards, is recorded straight-line over the required service period. For performance-vested awards, expense is determined as described below and is recorded over the required service period, subject to a probability assessment of achieving the performance criteria. The grant date fair value per share of market-vested awards already reflects the probability of achieving the market condition, and is therefore used to record expense regardless of actual achievement.
The Company granted 49,410 and 64,725 performance-vested award shares under its performance share program in March 2014 and February 2013, respectively. The Company's performance-vested awards provide incentive opportunity based on the overall success of the Company over a three year performance period, as reflected through a measure of diluted earnings per share in 2014 and 2013 and also cash flow with respect to the 2013 award.

19
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

In March 2014, the Company also granted 16,470 market-vested award shares. These awards provide incentive opportunity based on the relative total shareholder return ("rTSR") of the Company's common stock against a group of companies composed of the S&P 400 Mid-cap Consumer Discretionary index and the Company's 2014 Compensation Peer Group (collectively, the "Comparative Group") over a three year period. As the rTSR grant has a market condition, the fair value per share of $70.85 was determined using a Monte-Carlo simulation. The Monte-Carlo simulation estimated the fair value based on the Company's share price activity between the beginning of the year and the grant date relative to the Comparative Group, expected term of the award, risk-free interest rate, expected dividends, and the expected volatility of the stock of the Company and that of the Comparative Group. There were no awards granted of this type in 2013.
The incentive program for the performance and market-vested awards are based upon a target number of share units, although the actual number of performance and market-vested shares ultimately earned can vary from zero to 150 percent of target depending on the Company's achievement under the performance criteria of the grants. The payouts, if earned, will be settled in Tupperware common stock after the end of the three year performance period.
In the year-to-date periods of 2014 and 2013, the Company granted 4,000 and 40,480 shares of time-vested restricted stock units with average fair values of $92.97 and $78.99 per share, respectively that vest three years from the date of grant. In addition, in February 2014, the Company granted 50,000 shares of restricted stock units with a grant date fair value of $77.66 per share which will cliff vest on December 29, 2017.
During the second quarters of 2014 and 2013, the Company granted 13,650 and 13,910 shares of time-vested restricted stock units with average fair values of $84.28 and $82.72 per share, respectively, that vest/vested one year from the date of grant.
For the second quarters of 2014 and 2013, compensation expense associated with all employee and director restricted stock and restricted stock unit awards outstanding, including performance and market-vested shares, was $3.0 million and $2.6 million, respectively. Such expense was $7.5 million and $6.7 million for the year-to-date periods of 2014 and 2013, respectively.
Restricted stock, restricted stock units, performance-vested and market-vested share award activity for 2014 under all of the Company's incentive plans is summarized in the following table:
 
Shares outstanding
 
Weighted average grant date fair value
December 28, 2013
813,732

 

$51.92

Granted
133,530

 
79.61

Performance share adjustments
(3,850
)
 
78.35

Vested
(281,894
)
 
43.39

Forfeited
(7,055
)
 
70.72

June 28, 2014
654,463

 

$60.77

The fair value of performance-vested awards, restricted stock and restricted stock units vested in the second quarters of 2014 and 2013 was $1.2 million and $0.7 million, respectively, and $22.5 million and $7.6 million in the respective year-to-date periods.
As of June 28, 2014, total unrecognized stock based compensation expense related to all stock based awards was $25.8 million, which is expected to be recognized over a weighted average period of 2.1 years.
Note 16:
Allowance for Long-Term Receivables
As of June 28, 2014, $25.0 million of long-term receivables from both active and inactive customers were considered past due, the majority of which were reserved through the Company's allowance for uncollectible accounts.

20
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The balance of the allowance for long-term receivables as of June 28, 2014 was as follows:
(In millions)
 
Balance at December 28, 2013
$
20.5

Write-offs
(3.0
)
Provision and reclassifications
2.2

Currency translation adjustment
(0.5
)
Balance at June 28, 2014
$
19.2

Note 17:
Guarantor Information
The Company's payment obligations under the Notes are fully and unconditionally guaranteed, on a senior secured basis, by the Guarantor. The guarantee is secured by certain "Tupperware" trademarks and service marks owned by the Guarantor, as discussed in Note 9 to the Consolidated Financial Statements.
Condensed consolidated financial information as of June 28, 2014 and December 28, 2013 and for the quarter-to-date and year-to-date periods ended June 28, 2014 and June 29, 2013 for Tupperware Brands Corporation (the "Parent"), Dart Industries Inc. (the "Guarantor") and all other subsidiaries (the "Non-Guarantors") is as follows.
Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use by the Parent and Guarantor of the equity method of accounting to reflect ownership interests in subsidiaries that are eliminated upon consolidation. The Guarantor is 100% owned by the Parent, and there are certain entities within the Non-Guarantors classification which the Parent owns directly. There are no significant restrictions on the ability of either the Parent or the Guarantor from obtaining adequate funds from their respective subsidiaries by dividend or loan that should interfere with their ability to meet their operating needs or debt repayment obligations.
In November 2013, the Company determined that it had misclassified certain intercompany transactions previously reported in the Condensed Consolidated Statements of Cash Flows for each period included in Note 18, Guarantor Information, in the Company's 2012 Annual Report on Form 10-K and its Form 10-Qs for the first two quarters of 2013. These transactions primarily represented intercompany loans and borrowings between the Parent, Guarantor and Non-Guarantor that were classified as operating activities. Depending on whether it was from the perspective of the Parent, Guarantor or Non-Guarantor, the cash flows related to these transactions should have been classified as either investing or financing activities. These misclassifications did not change the total cash flows reported in each column presented in Note 18 in the Company's 2012 Annual Report or in its Form 10-Qs for the first two quarters of 2013. There was no impact on the Company's Consolidated Statements of Cash Flows. The Company assessed the materiality of these items on its previously issued annual report and quarterly financial statements in accordance with SEC Staff Accounting Bulletin No. 99, and concluded that the errors were not material to the consolidated financial statements taken as a whole. As such, the Company has and is revising the statements of cash flows included in the guarantor financial information of future filings in which the revised information is being presented, to reflect the required classification adjustments in the respective periods. The statements of cash flow presented below for the period ended June 29, 2013, as revised, reflect the correct classification of intercompany transactions as investing and financing activities.

21
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Condensed Consolidating Balance Sheet
 
June 28, 2014
(In millions)
Parent
 
Guarantor
 
Non-Guarantors
 
Eliminations
 
Total
ASSETS
 

 
 

 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
0.1

 
$
82.6

 
$
—

 
$
82.7

Accounts receivable, net
—

 
—

 
191.1

 
—

 
191.1

Inventories
—

 
—

 
351.8

 
—

 
351.8

Deferred income tax benefits, net
4.7

 
25.9

 
55.7

 
—

 
86.3

Non-trade amounts receivable, net
—

 
28.0

 
83.0

 
(54.6
)
 
56.4

Intercompany receivables
20.8

 
346.9

 
448.8

 
(816.5
)
 
—

Prepaid expenses and other current assets
1.1

 
3.8

 
51.2

 
(25.2
)
 
30.9

Total current assets
26.6

 
404.7

 
1,264.2

 
(896.3
)
 
799.2

Deferred income tax benefits, net
93.3

 
170.9

 
170.0

 
—

 
434.2

Property, plant and equipment, net
—

 
41.0

 
260.4

 
—

 
301.4

Long-term receivables, net
—

 
0.1

 
20.6

 
—

 
20.7

Trademarks and tradenames, net
—

 
—

 
120.6

 
—

 
120.6

Other intangible assets, net
—

 
—

 
2.3

 
—

 
2.3

Goodwill
—

 
2.9

 
179.6

 
—

 
182.5

Investments in subsidiaries
1,796.2

 
2,359.8

 
—

 
(4,156.0
)
 
—

Intercompany notes receivable
51.1

 
696.9

 
1,877.6

 
(2,625.6
)
 
—

Other assets, net
4.7

 
0.7

 
35.7

 
(4.7
)
 
36.4

Total assets
$
1,971.9

 
$
3,677.0

 
$
3,931.0

 
$
(7,682.6
)
 
$
1,897.3

LIABILITIES AND SHAREHOLDERS' EQUITY
 

 
 

 
 

 
 

 
 

Accounts payable
$
—

 
$
1.7

 
$
120.2

 
$
—

 
$
121.9

Short-term borrowings and current portion of long-term debt and capital lease obligations
187.2

 
—

 
111.9

 
—

 
299.1

Intercompany payables
319.8

 
457.2

 
39.5

 
(816.5
)
 
—

Accrued liabilities
91.4

 
34.0

 
297.9

 
(79.8
)
 
343.5

Total current liabilities
598.4

 
492.9

 
569.5

 
(896.3
)
 
764.5

Long-term debt and capital lease obligations
602.5

 
—

 
15.3

 
—

 
617.8

Intercompany notes payable
471.0

 
1,406.5

 
748.1

 
(2,625.6
)
 
—

Other liabilities
14.6

 
26.3

 
193.4

 
(4.7
)
 
229.6

Shareholders' equity
285.4

 
1,751.3

 
2,404.7

 
(4,156.0
)
 
285.4

Total liabilities and shareholders' equity
$
1,971.9

 
$
3,677.0

 
$
3,931.0

 
$
(7,682.6
)
 
$
1,897.3



22
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Condensed Consolidating Balance Sheet
 
December 28, 2013
(In millions)
Parent
 
Guarantor
 
Non-Guarantors
 
Eliminations
 
Total
ASSETS
 

 
 

 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
0.1

 
$
127.2

 
$
—

 
$
127.3

Accounts receivable, net
—

 
—

 
168.8

 
—

 
168.8

Inventories
—

 
—

 
313.4

 
—

 
313.4

Deferred income tax benefits, net
4.7

 
39.3

 
52.4

 
—

 
96.4

Non-trade amounts receivable, net
0.2

 
11.9

 
38.0

 
—

 
50.1

Intercompany receivables
12.0

 
447.0

 
467.3

 
(926.3
)
 
—

Prepaid expenses and other current assets
1.7

 
78.6

 
64.4

 
(121.7
)
 
23.0

Total current assets
18.6

 
576.9

 
1,231.5

 
(1,048.0
)
 
779.0

Deferred income tax benefits, net
86.2

 
191.1

 
120.6

 
—

 
397.9

Property, plant and equipment, net
—

 
38.6

 
262.3

 
—

 
300.9

Long-term receivables, net
—

 
0.1

 
23.0

 
—

 
23.1

Trademarks and tradenames, net
—

 
—

 
125.7

 
—

 
125.7

Other intangible assets, net
—

 
—

 
3.2

 
—

 
3.2

Goodwill
—

 
2.9

 
178.6

 
—

 
181.5

Investments in subsidiaries
1,679.9

 
2,333.2

 
—

 
(4,013.1
)
 
—

Intercompany notes receivable
53.7

 
585.8

 
1,841.9

 
(2,481.4
)
 
—

Other assets, net
5.1

 
8.1

 
36.4

 
(17.0
)
 
32.6

Total assets
$
1,843.5

 
$
3,736.7

 
$
3,823.2

 
$
(7,559.5
)
 
$
1,843.9

LIABILITIES AND SHAREHOLDERS' EQUITY
 

 
 

 
 

 
 

 
 

Accounts payable
$
0.2

 
$
3.7

 
$
145.8

 
$
—

 
$
149.7

Short-term borrowings and current portion of long-term debt and capital lease obligations
121.0

 
—

 
114.4

 
—

 
235.4

Intercompany payables
412.1

 
466.9

 
47.3

 
(926.3
)
 
—

Accrued liabilities
80.5

 
61.8

 
331.8

 
(121.7
)
 
352.4

Total current liabilities
613.8

 
532.4

 
639.3

 
(1,048.0
)
 
737.5

Long-term debt and capital lease obligations
602.6

 
—

 
17.3

 
—

 
619.9

Intercompany notes payable
349.7

 
1,492.2

 
639.5

 
(2,481.4
)
 
—

Other liabilities
24.5

 
31.5

 
194.6

 
(17.0
)
 
233.6

Shareholders' equity
252.9

 
1,680.6

 
2,332.5

 
(4,013.1
)
 
252.9

Total liabilities and shareholders' equity
$
1,843.5

 
$
3,736.7

 
$
3,823.2

 
$
(7,559.5
)
 
$
1,843.9




23
Table of Contents
TUPPERWARE BRANDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Consolidating Statement of Income
 
13 Weeks Ended June 28, 2014
(In millions)
Parent
 
Guarantor
 
Non-Guarantors
 
Eliminations
 
Total
Net sales
$
—

 
$
—

 
$
677.5

 
$
(3.2
)
 
$
674.3

Other revenue
—

 
38.4

 
6.4

 
(44.8
)
 
—

Cost of products sold
—

 
6.4

 
264.9

 
(45.6
)
 
225.7

Gross margin
—

 
32.0

 
419.0

 
(2.4
)
 
448.6

Delivery, sales and administrative expense
3.2

 
20.4

 
327.4

 
(2.4
)
 
348.6

Re-engineering and impairment charges
—

 
—

 
3.4

 
—

 
3.4

Gains on disposal of assets
—

 
—

 
0.5

 
—

 
0.5

Operating income (loss)
(3.2
)
 
11.6

 
88.7

 
—

 
97.1

Interest income
0.1

 
7.4

 
1.1

 
(8.1
)
 
0.5

Interest expense
9.3

 
5.4

 
5.0

 
(8.1
)
 
11.6

Income from equity investments in subsidiaries
55.6

 
47.5

 
—

 
(103.1
)
 
—

Other expense
—

 
0.1

 
15.9

 
—

 
16.0

Income before income taxes
43.2

 
61.0

 
68.9

 
(103.1
)
 
70.0

Provision (benefit) for income taxes
(4.4
)
 
5.1

 
21.7

 
—

 
22.4

Net income (loss)
$
47.6

 
$
55.9

 
$
47.2

 
$
(103.1
)
 
$
47.6

Comprehensive income (loss)
$
54.0

 
$
61.3