UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report: May 28, 2013

 

 

TIFFANY & CO.

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware   1-9494   13-3228013

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

200 Fifth Avenue, New York, New York   10010
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (212) 755-8000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On May 28, 2013, Registrant issued a press release announcing its unaudited earnings and results of operations for the first quarter ended April 30, 2013. A copy of the May 28, 2013 press release is attached hereto as Exhibit 99.1 to this Form 8-K.

The information in this Current Report on Form 8-K is being furnished pursuant to Item 2.02 Results of Operations and Financial Condition. In accordance with General Instruction B.2 of Form 8-K, the information in this report shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly stated by specific reference in such filing.

 

Item 9.01. Financial Statements and Exhibits.

 

  (d) Exhibits

 

  99.1 Press Release dated May 28, 2013.

 

2


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  TIFFANY & CO.
BY:  

/s/ Patrick B. Dorsey

  Patrick B. Dorsey
  Senior Vice President, Secretary and
  General Counsel

Date: May 28, 2013

 

3


EXHIBIT INDEX

 

Exhibit No.    Description
99.1    Press Release dated May 28, 2013.

EX-99.1

Exhibit 99.1

TIFFANY & CO.

NEWS RELEASE

 

Fifth Avenue & 57th Street    Contact:
New York, N.Y. 10022    Mark L. Aaron
   212-230-5301
   mark.aaron@tiffany.com

TIFFANY REPORTS FIRST QUARTER RESULTS

New York, N.Y., May 28, 2013 – Tiffany & Co. (NYSE: TIF) today reported financial results for the first quarter ended April 30, 2013. Worldwide net sales increased 9% and net earnings rose 3%. In addition, management maintained its fiscal 2013 forecast.

In the three months (“first quarter”) ended April 30, 2013:

 

   

Worldwide net sales increased 9% to $895 million. On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars (see “Non-GAAP Measures” schedule), worldwide net sales increased 13% and comparable store sales rose 8%.

 

   

Net earnings increased 3% to $84 million, or $0.65 per diluted share, versus the prior year’s $82 million, or $0.64 per diluted share. Expenses of $9 million, or $0.05 per diluted share, were recorded in the quarter for recent staff and occupancy reductions; excluding those costs, net earnings increased 10% to $89 million, or $0.70 per diluted share (see “Non-GAAP Measures” schedule).

Michael J. Kowalski, chairman and chief executive officer, said, “We are pleased with this start to the year. Worldwide, first quarter sales exceeded our expectations, enabling us to improve our sales leverage on fixed expenses and achieve earnings growth. In addition, we celebrated Tiffany’s 175th anniversary with our very successful Blue Book event and promotional activities surrounding the debut of the film The Great Gatsby, for which we designed the jewelry.”

Net sales highlights were as follows:

 

   

In the Americas region, total sales rose 6% to $408 million. On a constant-exchange-rate basis, total sales increased 6%; comparable store sales rose 3% with relatively stronger growth in the New York flagship store. Sales in New York benefitted from purchases by customers who attended the Blue Book event.

 

1


   

In the Asia-Pacific region, total sales of $223 million were 15% higher than a year ago. On a constant-exchange-rate basis, total sales increased 14%, due to sales growth in Greater China and most other countries, and comparable store sales rose 9%.

 

   

Total sales in Japan increased 2% to $145 million despite a negative translation effect from a weakening yen. On a constant-exchange-rate basis, total sales increased 20% and comparable store sales rose 21% due to particularly strong growth in Tiffany’s engagement and higher-end jewelry categories.

 

   

In Europe, total sales of $93 million were 6% higher than last year due to sales growth across continental Europe. On a constant-exchange-rate basis, total sales and comparable store sales rose 8% and 6% respectively.

 

   

Other sales tripled to $27 million from $9 million in the prior year, primarily reflecting the conversion in July 2012 of five TIFFANY & CO. stores in the United Arab Emirates from independently-operated to Company-operated.

 

   

In the first quarter, Tiffany opened one store, in Xi’an, China and closed one in Taichung, Taiwan. At April 30, 2013, the Company operated 275 stores (115 in the Americas, 66 in Asia-Pacific, 55 in Japan, 34 in Europe and five in the U.A.E.), compared with 251 stores (105 in the Americas, 59 in Asia-Pacific, 55 in Japan and 32 in Europe) a year ago.

Other financial highlights:

 

   

Gross margin (gross profit as a percentage of net sales) was 56.2% versus last year’s 57.3%. As expected, the decline continued to reflect a shift in sales mix toward higher-priced, lower gross margin products. In addition, gross margin, in comparison to recent quarters, benefitted from diminished product cost pressure and recent price increases.

 

   

SG&A (selling, general and administrative) expenses increased 8% in the quarter. The increase included $9 million of expenses tied to cost reduction initiatives related to staffing reductions, as well as subleasing of office space at a loss; excluding such costs, SG&A expenses would have increased 6% (see “Non-GAAP Measures” schedule) due to new store-related costs and higher marketing spending for the Blue Book event.

 

   

Other expenses, net were $13 million this year, versus last year’s $11 million, primarily due to increased interest expense related to higher average borrowing levels.

 

2


   

The effective income tax rate was 34.9% compared with 34.5% last year.

 

   

The Company had cash and cash equivalents of $465 million at April 30, 2013, versus $322 million in the prior year. Short-term and long-term debt totaled $974 million at April 30, 2013 and represented 37% of stockholders’ equity, compared with $834 million and 35% a year ago.

 

   

Net inventories were $2.3 billion at April 30, 2013, or 4% higher than a year ago. A 12% increase in finished goods inventories to support new store openings and expanded product assortments was partly offset by a 5% decline in combined raw material and work-in-process inventories. On a constant-exchange-rate basis, net inventories were 7% higher than a year ago.

Mr. Kowalski added, “While first quarter sales and earnings exceeded our expectations, we are maintaining our earnings forecast for the full year, mindful of continuing soft sales results in the Americas and the negative translation effect of a weaker yen. However, we remain focused on exciting initiatives for this year, including jewelry introductions highlighted by our GREAT GATSBY and ZIEGFELD collections, the HARMONY engagement ring and a reinterpretation of our iconic ATLAS collection. Tiffany’s global store base is growing this year with a planned net addition of 14 stores, and we will be launching our redesigned website later this year.”

Outlook for 2013:

For the fiscal year ending January 31, 2014, management forecasts net earnings in a range of $3.43-$3.53 per diluted share, unchanged from its previously-published outlook and versus $3.25 per diluted share in 2012. This forecast is based on the following assumptions (which are approximate and may or may not prove valid):

 

  a) Worldwide net sales increasing by a mid-single-digit percentage in U.S dollars (a high-single-digit percentage increase on a constant-exchange-rate basis).

 

  b) Adding a net of 14 Company-operated stores (opening six in the Americas, seven in Asia-Pacific and three in Europe, and closing one each in Japan and Taiwan), as well as refurbishing a number of existing locations around the world.

 

  c) Operating earnings increasing in line with sales growth; an improvement in the SG&A expense ratio, due to sales leverage on fixed costs, is expected to be offset by a slight decline in gross margin largely tied to a sales mix skewed toward higher-priced, lower margin, product categories.

 

  d) Interest and other expenses, net of $58 million.

 

3


  e) An effective income tax rate of 35%.

 

  f) Management expects net earnings in the second quarter to be equal to the prior year based on an expected mid-single-digit sales increase, with earnings growth in the third and fourth quarters. This forecast excludes $0.05 per diluted share of expenses tied to cost-reduction initiatives that were recorded in the first quarter.

 

  g) Net inventories increasing 5%; capital expenditures of $230 million (versus $220 million in 2012); and free cash flow (cash flow from operating activities less capital expenditures) of $300 million (versus $109 million in 2012).

Today’s Conference Call:

The Company will conduct a conference call today at 8:30 a.m. (Eastern Time) to review actual results and the outlook. Please click on http://investor.tiffany.com (“Events and Presentations”).

Next Scheduled Announcement:

The Company expects to report second quarter financial results on Tuesday August 27, 2013. For notification of future announcements, register at http://investor.tiffany.com (“E-Mail Alerts”).

Tiffany & Co. operates jewelry stores and manufactures products through its subsidiary corporations. Its principal subsidiary is Tiffany and Company. The Company operates TIFFANY & CO. retail stores in the Americas, Asia-Pacific, Japan, Europe and the United Arab Emirates, and also engages in direct selling through Internet, catalog and business gift operations. For more information, visit www.tiffany.com or call the shareholder information line at 800-TIF-0110.

This document contains certain “forward-looking” statements concerning the Company’s objectives and expectations with respect to sales, products, store openings and closings, operating margin, interest and other expenses, the effective income tax rate, net earnings, inventories, growth opportunities, capital expenditures and free cash flow. Actual results might differ materially from those projected in the forward-looking statements. Information concerning risk factors that could cause actual results to differ materially is set forth in the Company’s Form 10-K, 10-Q and 8-K reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

# # #

 

4


TIFFANY & CO. AND SUBSIDIARIES

(Unaudited)

NON-GAAP MEASURES

The Company reports information in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The Company’s management does not, nor does it suggest that investors should, consider non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company’s operating results.

Net Sales

The Company’s reported sales reflect either a translation-related benefit from strengthening foreign currencies or a detriment from a strengthening U.S. dollar. Internally, management monitors its sales performance on a non-GAAP basis that eliminates the positive or negative effects that result from translating sales made outside the U.S. into U.S. dollars (“constant-exchange-rate basis”). Management believes this constant-exchange-rate basis provides a more representative assessment of sales performance and provides better comparability between reporting periods. The following table reconciles sales percentage increases (decreases) from the GAAP to the non-GAAP basis versus the previous year:

 

     First Quarter 2013 vs. 2012  
     GAAP Reported     Translation Effect     Constant-Exchange-
Rate Basis
 

Net Sales:

      

Worldwide

     9     (4 )%      13

Americas

     6            6

Asia-Pacific

     15     1     14

Japan

     2     (18 )%      20

Europe

     6     (2 )%      8

Comparable Store Sales:

      

Worldwide

     4     (4 )%      8

Americas

     3            3

Asia-Pacific

     9            9

Japan

     3     (18 )%      21

Europe

     4     (2 )%      6

 

5


Net Earnings

The accompanying press release presents net earnings and highlights expenses tied to cost reduction initiatives in the text. Management believes excluding such items presents the Company’s quarter-to-date results on a more comparable basis to the corresponding period in the prior year, thereby providing investors with an additional perspective to analyze the results of operations of the Company at April 30, 2013. The following table reconciles GAAP net earnings and net earnings per diluted share (“EPS”) to non-GAAP net earnings and net earnings per diluted share, as adjusted:

 

     Quarter Ended
April 30, 2013
 

(in thousands, except per share amounts)

   $
(after tax)
     Diluted
EPS
 

Net earnings, as reported

   $ 83,577       $ 0.65   

Cost reduction initiatives a

     5,785         0.05   
  

 

 

    

 

 

 

Net earnings, as adjusted

   $ 89,362       $ 0.70   
  

 

 

    

 

 

 

 

a 

On a pre-tax basis, includes charges of $9,379,000 within SG&A for the first quarter of 2013 associated with severance related to staffing reductions and subleasing of certain office space for which only a portion of the Company’s future rent obligations will be recovered.

 

6


TIFFANY & CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited, in thousands, except per share amounts)

 

     Three Months Ended April 30,  
     2013      2012  

Net sales

   $ 895,484       $ 819,170   

Cost of sales

     392,260         350,152   
  

 

 

    

 

 

 

Gross profit

     503,224         469,018   

Selling, general and administrative expenses

     362,066         334,033   
  

 

 

    

 

 

 

Earnings from operations

     141,158         134,985   

Interest and other expenses, net

     12,712         10,554   
  

 

 

    

 

 

 

Earnings from operations before income taxes

     128,446         124,431   

Provision for income taxes

     44,869         42,897   
  

 

 

    

 

 

 

Net earnings

   $ 83,577       $ 81,534   
  

 

 

    

 

 

 

Net earnings per share:

     

Basic

   $ 0.66       $ 0.64   
  

 

 

    

 

 

 

Diluted

   $ 0.65       $ 0.64   
  

 

 

    

 

 

 

Weighted-average number of common shares:

     

Basic

     127,318         126,723   

Diluted

     128,441         128,178   

 

7


TIFFANY & CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

     April 30,
2013
     January 31,
2013
     April 30,
2012
 

ASSETS

        

Current assets:

        

Cash and cash equivalents

   $ 464,916       $ 504,838       $ 321,582   

Accounts receivable, net

     181,715         173,998         181,641   

Inventories, net

     2,280,390         2,234,334         2,189,869   

Deferred income taxes

     80,568         79,508         91,280   

Prepaid expenses and other current assets

     176,894         158,911         148,742   
  

 

 

    

 

 

    

 

 

 

Total current assets

     3,184,483         3,151,589         2,933,114   
        

Property, plant and equipment, net

     807,875         818,838         766,874   

Other assets, net

     673,398         660,423         506,681   
  

 

 

    

 

 

    

 

 

 
   $ 4,665,756       $ 4,630,850       $ 4,206,669   
  

 

 

    

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Current liabilities:

        

Short-term borrowings

   $ 216,898       $ 194,034       $ 242,768   

Current portion of long-term debt

     0         0         60,357   

Accounts payable and accrued liabilities

     280,956         295,424         285,193   

Income taxes payable

     30,817         30,487         31,971   

Merchandise and other customer credits

     69,213         66,647         62,074   
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     597,884         586,592         682,363   
        

Long-term debt

     757,191         765,238         531,244   

Pension/postretirement benefit obligations

     336,739         361,246         309,545   

Other long-term liabilities

     220,003         209,732         190,514   

Deferred gains on sale-leasebacks

     89,493         96,724         114,113   

Stockholders’ equity

     2,664,446         2,611,318         2,378,890   
  

 

 

    

 

 

    

 

 

 
   $ 4,665,756       $ 4,630,850       $ 4,206,669   
  

 

 

    

 

 

    

 

 

 

 

8