Chris: One issue that is not obvious with TUP is they are juicing operating earnings with profits from land sales. They're also experiencing some channel conflicts as indicated by the exit from Target which reduces options for growth. None of the above or below means you won't profit handsomely from your TUP as long as the market keeps it's glasses on - the rose colored ones, that is.
Here's an article that discusses some of the negatives:
Tupperware Land Sales Lift Goings's Pay as Sales Wilt
May 30, 2003 16:13 EDT
May 30 (Bloomberg) -- Tupperware Corp. Chief Executive Officer Rick Goings has found a way to boost profit, and his own paycheck, without lifting the sagging sales of his company's famous plastic food containers: He's gotten into real estate.
Tupperware's net income rose last year for the first time since 1999 as Goings began selling some of the 1,200 acres Tupperware owns near its headquarters in Orlando, Florida.
``They're using the land sales to cover up the dismal operations,'' said Marc Heilweil, president of Spectrum Advisory Services in Atlanta. It had 22,499 Tupperware shares as of March.
Last year was a rewarding one for Goings, who also serves as chairman of the 57-year-old company. His salary rose 45 percent, even after Tupperware's operating profit, margin and net income all had fallen for four of the previous five years. In all, Goings received $2.73 million in compensation.
Starting this year, he'll also be eligible for a new bonus that will reward him for selling Tupperware land, some of which is worth as much as $1 million an acre. The company paid about nine times that amount for the entire tract almost a half century ago.
Goings's rising pay, despite dwindling sales of the renowned U.S. houseware brand, contrasts with efforts at many companies to link executive compensation closely to operating performance, corporate-governance experts said.
``It seems like the CEO wants a piece of the pie,'' said Paul Hodgson of the Corporate Library, a corporate-governance research group.
Goings's compensation last year included the value of interest he didn't pay in 2002 on a $7.65 million interest-free loan Tupperware gave him in 1998, according to company filings. Goings has also received an interest-bearing loan from the company; in 2002 he owed Tupperware as much as $10.6 million.
Bonus to Sell Land
The loans are legal. Tupperware directors approved them before such company loans to executives were banned last year under the Sarbanes-Oxley Act.
Investors haven't fared so well. Tupperware's share price and the company's operating income have been cut in half since Goings took the helm in October 1997. Sales have fallen 19 percent.
The stock dropped 22 percent last year, compared with a rise of 11 percent in the Standard and Poor's 500 Housewares and Specialties Index. The stock, trading near all-time lows, rose 31 cents to $15.88 at 4:02 p.m. in New York Stock Exchange composite trading.
Goings's compensation may rise further, even if Tupperware's direct-sales business continues to slide. Under a new incentive plan for land sales, he will be eligible to share as much as $1.5 million, according to company officials and a 2002 proxy filing with the U.S. Securities and Exchange Commission.
`Icing on the Cake'
``Don't look at this as an asset sale,'' Goings said in an interview in his second-floor office on the Tupperware corporate campus, overlooking a courtyard lined with palm trees and a billowing fountain shaped like the round Tupperware logo. ``Look at this as a temporary business that we're in, and it's very profitable. This land is just the icing on the cake.''
Tupperware has said it intends to sell about 470 acres in the next three to five years to generate pretax revenue of $100 million.
Goings said in the interview that the $100 million estimate was ``very minimal.'' He said of the land values: ``This kind of stuff doesn't go down. It goes up.''
``I haven't kept it a secret,'' he said of the sales. ``What we didn't say was how big it was going to be.''
Goings, 57, a former executive of Avon Products Inc., the direct-seller of beauty products, said he deserved extra compensation for the land sales.
``We found a way to convert property,'' Goings said. ``There ought to be some compensation for that.''
`It's Improper'
Corporate scandals and a three-year stock market slump have prompted many company boards to tie executive pay to operating performance.
Chief executives' pay at companies in the Standard & Poor's 500 Index fell 46 percent in 2002 to an average of $4.4 million, according to a recent study by Aon Consulting Inc. The total includes salary bonus and gains from stock options. Salaries fell to $2.05 million from $2.1 million. It was the second straight year that executives' compensation dropped.
``It's improper for the CEO to be included in such a scheme,'' said Hodgson of Corporate Library. ``The CEO's job is to improve the performance of Tupperware as a whole. He's just exploiting the fact that land prices have gone up. It's not a land- sale company. It's a consumer-products company.''
Tupperware Parties
Tupperware was founded in 1946 by Earl Silas Tupper, a Massachusetts inventor. He discovered a plastic suitable for storing food and patented an airtight container that ``burped'' to keep contents fresh.
Financial success followed, in large part due to Tupper's marketing assistant, Brownie Wise. She pioneered the home-based ``Tupperware parties'' and the network of independent distributors known as ``Tupperware ladies.'' Her sales built Tupperware into a plastics empire, an icon of the postwar American home kitchen, and later a global brand name. About 70 percent of sales now come from outside the U.S., the company says.
In recent years, consumers have turned away from Tupperware's parties and products.
The company has had trouble recruiting enough independent representatives to sell its products, such as the $9.99 plastic drink shaker, the $34.49 Spin'N'Save salad spinner and the Silver Satin canister set now for sale on the company Web site for $29.99, a $30 discount.
NET INCOME HAS FALLEN BY HALF IN THE SIX FULL YEARS SINCE GOINGS TOOK CHARGE. It dropped to $90.1 million last year from $174.7 million in 1996, when Tupperware first sold shares to the public.
Falling Sales
OPERATING INCOME -- profit from selling classic Tupperware items such as three-piece bowl sets with airtight seals -- FELL 55 PERCENT, to $115.7 million last year from $257.7 million in 1996, according to Bloomberg data. It fell 11 percent last year alone.
Sales dropped 19 percent, to $1.1 billion last year from $1.37 billion in 1996. They have declined an average 2.1 percent a year over the past five years, according to Bloomberg data.
Operating margins have fallen yearly since 1999, to 10.5 percent from 13.3 percent.
Fortunately for Tupperware, the value of the company's land has moved in the opposite direction of its main business.
Tupperware set up its headquarters 49 years ago on a 1,200- acre former cattle farm on Orange Blossom Trail in Osceola County. The company paid about $9 million for the land in 1954.
The area's truck stops and topless bars have since given way to shopping centers, housing developments and theme parks including Walt Disney World and Universal Studios movie theme park.
Land values have risen more than 110-fold in four decades around Orlando, according to the Osceola County Economic Development Department.
$300,000 an Acre
Tupperware sold $10 million worth of land last year through its Deerfield Land Corp. subsidiary to begin taking advantage of the escalating prices.
The company retained $5.4 million from the $10 million sale, after paying taxes and incentives of $1.3 million, said a company spokeswoman, Jane Garrard.
The company expects to sell the land for an average price of about $300,000 an acre, with some parcels selling for $1 million an acre, said General Counsel Thomas Roehlk, who heads the land- development effort.
``They're selling the family jewels,'' said Heilweil of Spectrum Advisory Services. ``It's a disgrace to see a good consumer brand running itself into the ground.''
`Sacred Ground'
The sales may boost earnings in the short term, enabling the company to pay down debt and maintain its 5.65 percent dividend yield, Heilweil said. They won't resuscitate its struggling direct- sales business.
``It certainly doesn't give me a lot of confidence,'' said Heilweil.
The company has no plans to sell any of its 126-acre corporate campus adjacent to the Gatorland theme park, the ``Alligator Capital of the World.''
``This is like sacred ground,'' Goings said.
Not all investors are concerned about the real-estate transactions.
``It's just a couple of cents a share,'' said Stephen Yacktman, of Yacktman Asset Management, which owned 154,300 Tupperware shares as of December. ``It's really just not material to ongoing business.''
Proceeds from real-estate sales added 13 cents a share to net income last year of $1.54 per share, the company said. That helped end a two-year decline in net income.
This year, land sales are expected to boost earnings by 13 cents to 16 cents a share, while operating profit will fall by as much as 9 cents, the company said in February.
A New Strategy
To counter falling demand, Tupperware has introduced products that include cookware, kitchen utensils and cosmetics.
The company is also moving away from reliance on direct sales through home-based parties. It has added retail partners and sales channels, including Target Corp.'s discount stores, Internet sales, shopping mall kiosks and television channels such as USA Interactive's Home Shopping Network. Tupperware parties still provide most sales.
``We're not a company in search of a strategy,'' Goings said. ``We're in the implementation mode of a strategy.''
Implementation hasn't been easy. In January, Tupperware said it was ending home-based sales in the U.K. and Ireland because of waning interest. In February, the company cut its earnings forecast for this year.
`Growing Pains'
The strategy has brought ``growing pains,'' said analyst Douglas Lane of Avondale Partners Inc.
``Tupperware is in the middle innings of a turnaround,'' said Lane, who rates the shares ``market perform'' and doesn't own any.
Starting this year, whether operating profit rises or falls, Goings is eligible for a land-sales bonus based on ``levels of completed sale proceeds,'' according to Tupperware's proxy filing with the SEC.
Goings and Roehlk will split as much as $1.5 million over the coming three to five years, the company said.
Garrard, the company spokeswoman, said she couldn't describe more specifically what land sale benchmarks had been set for Goings and Roehlk to qualify for the incentives.
Last year, Roehlk received a bonus of $429,993 for his role in the land sales, out of a total $1.3 million in bonuses for the sales. Garrard didn't name the other people receiving the incentives, saying the SEC didn't require the company to identify them because they weren't among the top five officers of Tupperware.
Loans for Goings
Goings hasn't gotten a bonus for two years because Tupperware failed to meet its goal for net-income growth, according to regulatory filings.
Even so, he received a raise in 2002. He collected a salary of $907,654, up from $627,480 in 2001, $1.32 million in gains from exercising stock options and $421,313 in savings from the no- interest $7.65 million loan made in 1998, according to the company's proxy filing.
Goings also received an interest-bearing loan from the company under a ``management stock purchase plan'' that started in October 2000, according to the proxy. In 2002, he owed the company as much as $3.1 million for that loan, and a total of $10.6 million for both loans.
Such personal loans were banned under the Sarbanes-Oxley Act, passed last year in response to accounting and executive fraud scandals at Enron Corp., WorldCom Inc., Tyco International Ltd. and other companies. The provisions were intended to prevent abuse of corporate funds, including non-repayment of loans by executives and loans made without board approval.
The purpose of the interest-free loan to Goings was to enable him to purchase 400,000 Tupperware shares, according to the proxy and company officials.
Goings said he received the loan, rather than options, as an incentive to stay at Tupperware. Any benefit he may have derived from dividends is negated by taxes, he said.
``It's an out-of-pocket cost to me,'' Goings said. ``It's of no economic benefit'' unless the shares he bought rise above $30.
That's a price they haven't touched since just before Goings took over. |
