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) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | 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. |
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits |
99.1 | News Release dated March 20, 2015. |
TIFFANY & CO. | ||
(Registrant) | ||
By: /s/ Leigh M. Harlan | ||
Leigh M. Harlan | ||
Senior Vice President, Secretary | ||
and General Counsel | ||
Date: March 20, 2015 |
Exhibit No. | Description |
99.1 | News Release dated March 20, 2015. |
Fifth Avenue & 57th Street | Contact: | |||
New York, N.Y. 10022 | Mark L. Aaron | |||
212-230-5301 | ||||
mark.aaron@tiffany.com |
• | Worldwide net sales of $1.3 billion were 1% below the prior year. However, on a constant-exchange-rate basis (see “Non-GAAP Measures” schedule) which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales increased 3% led by growth in Europe and Asia-Pacific, with the largest growth in the fashion jewelry category, and worldwide comparable store sales were equal to the prior year. |
• | Net earnings were $196 million, or $1.51 per diluted share, compared with a net loss of $104 million, or $0.81 per diluted share, in the prior year which included a charge related to an adverse arbitration ruling. Excluding that charge (see “Non GAAP Measures” schedule), net earnings increased 3% from $190 million, or $1.47 per diluted share, earned in the prior year. |
• | Worldwide net sales rose 5% to $4.25 billion. On a constant-exchange-rate basis, worldwide net sales rose 7% due to sales growth in all regions and product categories, and worldwide comparable store sales rose 4%. |
• | Net earnings were $484 million, or $3.73 per diluted share, compared with $181 million, or $1.41 per diluted share, in the prior year. The current year’s earnings included a pretax charge of $94 million ($61 million after tax, or $0.47 per diluted share) related to the extinguishment of debt when Tiffany redeemed $400 million of long-term debt in the third quarter (see other financial highlights below). The prior year included pretax charges of $473 million ($293 million after tax, or $2.28 per diluted share) related to the aforementioned adverse arbitration ruling and $9 million ($6 million after tax, or $0.04 per diluted share), related to staff and occupancy reductions. Therefore, excluding charges in both years (see “Non-GAAP Measures” schedule), net earnings of $545 million, or $4.20 per diluted share, in the full year were 13% higher than the $481 million, or $3.73 per diluted share, earned in the prior year. |
• | In the Americas, both total and comparable store sales on a constant-exchange-rate basis in the fourth quarter were equal to the prior year due to softness across the U.S. Management believes recent strength of the U.S. dollar is having a negative effect on spending by foreign tourists. In the full year, both total sales and comparable store sales on that basis rose 6% due to geographically-broad-based growth across the region. As reported in U.S. dollars, total sales declined 1% to $653 million in the fourth quarter and rose 6% to $2.0 billion in the full year. |
• | In the Asia-Pacific region, total sales on a constant-exchange-rate basis rose 7% and comparable store sales rose 3% in the fourth quarter with noteworthy sales growth in China, Australia and Singapore, and softness in Hong Kong; on that basis for the full year, total and comparable store sales increased 10% and 4%, respectively, due to sales growth in most markets. As reported in U.S. dollars, total sales increased 4% to $284 million in the fourth quarter and rose 9% to $1.0 billion in the full year. |
• | In Japan, on a constant-exchange-rate basis, total sales increased 1% in the fourth quarter and comparable store sales declined 5% which management attributes to weak economic conditions affecting consumer spending; on that basis for the full year, total sales increased 4% and comparable store sales rose 1%. As reported in U.S. dollars, total sales in Japan declined 13% to $148 million in the fourth quarter and 4% to $554 million in the full year. |
• | In Europe, total sales on a constant-exchange-rate basis increased 9% in the fourth quarter due to growth in major markets in continental Europe and comparable store sales rose 4%; on that basis for the full year, total sales rose 6% and comparable store sales declined 1%. As reported in U.S. dollars, total sales of $162 million in the fourth quarter were unchanged from the prior year, while total sales of $497 million in the full year were 6% above the prior year. |
• | Other sales increased 12% to $39 million in the fourth quarter and rose 26% to $140 million in the full year, with the growth largely driven by sales in Tiffany’s new store in Moscow which opened in February 2014. Comparable store sales declined 8% in the fourth quarter and increased 8% in the full year. Wholesale sales of diamonds increased in both periods. |
• | Tiffany opened eight and closed two Company-operated stores in 2014. At January 31, 2015, the Company operated 295 stores (122 in the Americas, 73 in Asia-Pacific, 56 in Japan, 38 in Europe, and included in Other sales are five in the United Arab Emirates |
• | Gross margin (gross profit as a percentage of net sales) in both the fourth quarter and full year increased over prior-year periods: to 60.8% in the quarter from 60.5% a year ago, and to 59.7% in the full year from 58.1% a year ago. The increases in the quarter and year primarily reflected favorable product input costs and price increases taken earlier in the year across all product categories and regions, as well as a favorable shift in product sales mix toward the higher-margin fashion jewelry category. |
• | SG&A (selling, general and administrative) expenses rose 1% in the fourth quarter, as higher marketing spending was mostly offset by the translation effect of the strong U.S. dollar. SG&A expenses increased 6% in the full year due to increased marketing spending as well as labor and other store-related costs. |
• | The operating margin (earnings from operations as a percentage of net sales) was 23.7% in the fourth quarter of 2014, compared with 24.1% in 2013’s fourth quarter (excluding the arbitration charge in 2013 referred to above - see “Non-GAAP Measures”); the operating margin was 21.0% in the full year versus 19.7% in 2013 (excluding the charges in 2013). |
• | Interest and other expenses, net were $12 million in the fourth quarter, compared with $8 million in the prior year, and were $60 million in the full year, versus $49 million in the prior year. In the prior year’s fourth quarter and year, interest and other expenses, net included a gain of $7 million associated with a foreign currency transaction related to the payment of the arbitration award (see “Non-GAAP Measures”). |
• | In the third quarter of 2014, the Company issued $550 million of long-term debt ($250 million at a 3.8% interest rate maturing in 2024 and $300 million at a 4.9% interest rate maturing in 2044). The net proceeds were primarily applied to redeem $400 million of |
• | The effective tax rate was 32.9% in the fourth quarter and 34.4% in the full year. The effective tax rates in the prior year were 36.1% in the fourth quarter and 34.8% in the full year when excluding the charge for the adverse arbitration ruling. |
• | Cash and cash equivalents and short-term investments totaled $731 million at January 31, 2015, compared with $367 million a year ago. Total short-term and long-term debt, and as a percentage of stockholders’ equity, were $1.1 billion and 39%, respectively, at January 31, 2015, versus $1.0 billion and 37% a year earlier. |
• | Net inventories were $2.4 billion at January 31, 2015 and $2.3 billion a year ago, with the 2% increase in support of new stores and product introductions. |
• | Capital expenditures were $247 million in the full year versus $221 million a year ago, or 6% and 5%, respectively, of net sales. The $26 million increase reflected incremental spending for information technology systems and internal manufacturing capacity. |
• | The Company spent $5 million in the fourth quarter to repurchase approximately 53,000 shares of its common stock at an average cost of $89.89 per share, and it spent $27 million in the full year to repurchase approximately 301,000 shares at an average cost of $89.91 per share. At January 31, 2015, $273 million remained authorized for repurchases under a $300 million, three-year program that expires in March 2017. |
1) | Worldwide net sales increasing by a mid-single-digit percentage on a constant-exchange-rate basis with sales growth in all regions. The strong U.S. dollar is expected to have an adverse translation effect on sales throughout fiscal 2015 and, therefore, result in a low-single-digit percentage increase for the full year when reported in U.S. dollars. |
2) | Additionally, worldwide net sales in the first quarter are expected to decline by approximately 10%, as reported in U.S. dollars, primarily due to a difficult comparison to strong sales growth achieved in Japan in last year’s first quarter and continued softness currently being experienced in the Americas; worldwide net sales are expected to increase by a low-single-digit percentage, as reported in U.S. dollars, in the second quarter. |
3) | Increasing the number of Company-operated stores by 12-15, net, with the majority of expansion planned in Asia-Pacific and the balance in the Americas and Europe. |
4) | Selling, general and administrative expenses increasing at a greater rate than sales growth, partly due to expansion and higher marketing expenses. In addition, overall expense growth includes the effect of a noncash increase in employee-benefit-related expenses of $30 million, or $0.15 per diluted share after-tax, tied to changes in actuarial assumptions for the Company’s U.S. pension and postretirement benefit plans. |
5) | Earnings from operations equal to the prior year. |
6) | Interest and other expenses, net of $50 million. |
7) | An effective income tax rate equivalent to the prior year. |
8) | The assumptions for declines in net earnings in the first and second quarters are tied to the sales expectations noted above, and the related effects on gross margin, along with higher marketing spending tied to the launch of the watch collection. |
9) | Minimal growth in net inventories. |
10) | Capital expenditures of $260 million, versus $247 million last year. |
11) | Free cash flow (cash flow from operating activities less capital expenditures) exceeding $400 million. |
Fourth Quarter 2014 vs. 2013 | Full Year 2014 vs. 2013 | ||||||||||
GAAP Reported | Translation Effect | Constant- Exchange- Rate Basis | GAAP Reported | Translation Effect | Constant- Exchange- Rate Basis | ||||||
Net Sales: | |||||||||||
Worldwide | (1)% | (4)% | 3% | 5% | (2)% | 7% | |||||
Americas | (1)% | (1)% | —% | 6% | —% | 6% | |||||
Asia-Pacific | 4% | (3)% | 7% | 9% | (1)% | 10% | |||||
Japan | (13)% | (14)% | 1% | (4)% | (8)% | 4% | |||||
Europe | —% | (9)% | 9% | 6% | —% | 6% | |||||
Other | 12% | —% | 12% | 26% | —% | 26% | |||||
Comparable Store Sales: | |||||||||||
Worldwide | (4)% | (4)% | —% | 2% | (2)% | 4% | |||||
Americas | (2)% | (2)% | —% | 5% | (1)% | 6% | |||||
Asia-Pacific | —% | (3)% | 3% | 3% | (1)% | 4% | |||||
Japan | (18)% | (13)% | (5)% | (7)% | (8)% | 1% | |||||
Europe | (4)% | (8)% | 4% | (1)% | —% | (1)% | |||||
Other | (8)% | —% | (8)% | 8% | —% | 8% |
(in thousands, except per share amounts) | GAAP | Debt extinguishment a increase/(decrease) | Non-GAAP | ||||||||
Year Ended January 31, 2015 | |||||||||||
Loss on extinguishment of debt | $ | 93,779 | $ | (93,779 | ) | $ | — | ||||
Provision for income taxes | 253,358 | 32,823 | 286,181 | ||||||||
Net earnings | 484,179 | 60,956 | 545,135 | ||||||||
Diluted earnings per share | 3.73 | 0.47 | 4.20 |
a | Expenses associated with the redemption of $400,000,000 in aggregate principal amount of certain senior notes prior to their scheduled maturities. |
(in thousands, except per share amounts) | GAAP | Arbitration award a increase/(decrease) | Non-GAAP | |||||||||
Quarter Ended January 31, 2014 | ||||||||||||
(Loss) earnings from operations | $ | (167,333 | ) | $ | 480,211 | $ | 312,878 | |||||
As a % of sales | (12.9 | )% | 24.1 | % | ||||||||
Interest and other expenses, net | 8,135 | 7,489 | 15,624 | |||||||||
(Benefit) provision for income taxes | (71,869 | ) | 179,319 | 107,450 | ||||||||
Effective tax rate | 41.0 | % | 36.1 | % | ||||||||
Net (loss) earnings | (103,599 | ) | 293,403 | 189,804 | ||||||||
As a % of sales | (8.0 | )% | 14.6 | % | ||||||||
Diluted (loss) earnings per share | (0.81 | ) | 2.27 | b | 1.47 | b |
(in thousands, except per share amounts) | GAAP | Arbitration award a increase/(decrease) | Specific cost-reduction initiatives c (decrease)/increase | Non-GAAP | |||||||||||
Year Ended January 31, 2014 | |||||||||||||||
SG&A expenses | $ | 1,555,903 | $ | — | $ | (9,379 | ) | $ | 1,546,524 | ||||||
Earnings from operations | 304,329 | 480,211 | 9,379 | 793,919 | |||||||||||
As a % of sales | 7.5 | % | 19.7 | % | |||||||||||
Interest and other expenses, net | 49,463 | 7,489 | — | 56,952 | |||||||||||
Provision for income taxes | 73,497 | 179,319 | 3,594 | 256,410 | |||||||||||
Effective tax rate | 28.8 | % | 34.8 | % | |||||||||||
Net earnings | 181,369 | 293,403 | 5,785 | 480,557 | |||||||||||
As a % of sales | 4.5 | % | 11.9 | % | |||||||||||
Diluted earnings per share | 1.41 | 2.28 | 0.04 | 3.73 |
a | Amounts associated with the award issued in arbitration between the Swatch Group Ltd. and the Company. |
b | Calculated using weighted-average diluted shares of 129,283,000 which include 1,091,000 of incremental shares based upon the assumed exercise of stock options and unvested restricted stock units. |
c | Expenses associated with specific cost reduction initiatives which included 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. |
Years Ended January 31, | ||||||
(in thousands) | 2015 | 2014 | ||||
Net cash provided by operating activities | $ | 615,117 | $ | 154,652 | ||
Less: Capital expenditures | (247,394 | ) | (221,452 | ) | ||
Free cash inflow (outflow) | $ | 367,723 | $ | (66,800 | ) |
Three Months Ended January 31, | Years Ended January 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | $ | 1,285,262 | $ | 1,298,284 | $ | 4,249,913 | $ | 4,031,130 | |||||||
Cost of sales | 503,647 | 512,675 | 1,712,738 | 1,690,687 | |||||||||||
Gross profit | 781,615 | 785,609 | 2,537,175 | 2,340,443 | |||||||||||
Selling, general and administrative expenses | 476,991 | 472,731 | 1,645,746 | 1,555,903 | |||||||||||
Arbitration award expense | — | 480,211 | — | 480,211 | |||||||||||
Earnings (loss) from operations | 304,624 | (167,333 | ) | 891,429 | 304,329 | ||||||||||
Interest and other expenses, net | 12,311 | 8,135 | 60,113 | 49,463 | |||||||||||
Loss on extinguishment of debt | — | — | 93,779 | — | |||||||||||
Earnings (loss) from operations before income taxes | 292,313 | (175,468 | ) | 737,537 | 254,866 | ||||||||||
Provision (benefit) for income taxes | 96,131 | (71,869 | ) | 253,358 | 73,497 | ||||||||||
Net earnings (loss) | $ | 196,182 | $ | (103,599 | ) | $ | 484,179 | $ | 181,369 | ||||||
Net earnings (loss) per share: | |||||||||||||||
Basic | $ | 1.52 | $ | (0.81 | ) | $ | 3.75 | $ | 1.42 | ||||||
Diluted | $ | 1.51 | $ | (0.81 | ) | $ | 3.73 | $ | 1.41 | ||||||
Weighted-average number of common shares: | |||||||||||||||
Basic | 129,347 | 128,192 | 129,221 | 127,835 | |||||||||||
Diluted | 129,991 | 128,192 | 129,918 | 128,867 |
January 31, 2015 | January 31, 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents and short-term investments | $ | 731,457 | $ | 367,035 | |||
Accounts receivable, net | 195,168 | 188,814 | |||||
Inventories, net | 2,362,112 | 2,326,580 | |||||
Deferred income taxes | 102,613 | 101,012 | |||||
Prepaid expenses and other current assets | 220,037 | 244,947 | |||||
Total current assets | 3,611,387 | 3,228,388 | |||||
Property, plant and equipment, net | 899,507 | 855,095 | |||||
Other assets, net | 669,709 | 668,868 | |||||
$ | 5,180,603 | $ | 4,752,351 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term borrowings | $ | 234,013 | $ | 252,365 | |||
Accounts payable and accrued liabilities | 318,023 | 342,090 | |||||
Income taxes payable | 39,859 | 31,976 | |||||
Merchandise and other customer credits | 66,138 | 70,309 | |||||
Total current liabilities | 658,033 | 696,740 | |||||
Long-term debt | 882,535 | 751,154 | |||||
Pension/postretirement benefit obligations | 524,218 | 268,112 | |||||
Other long-term liabilities | 200,675 | 220,512 | |||||
Deferred gains on sale-leasebacks | 64,471 | 81,865 | |||||
Stockholders’ equity | 2,850,671 | 2,733,968 | |||||
$ | 5,180,603 | $ | 4,752,351 |