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 August 27, 2015. |
TIFFANY & CO. | ||
(Registrant) | ||
By: /s/ Leigh M. Harlan | ||
Leigh M. Harlan | ||
Senior Vice President, Secretary | ||
and General Counsel | ||
Date: August 27, 2015 |
Exhibit No. | Description |
99.1 | News Release dated August 27, 2015. |
Fifth Avenue & 57th Street | Contact: | |||
New York, N.Y. 10022 | Mark L. Aaron | |||
212-230-5301 | ||||
mark.aaron@tiffany.com |
• | Worldwide net sales were $991 million versus $993 million in the prior year. 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), both worldwide net sales and comparable store sales increased 7% due to growth in Japan, Europe and Asia-Pacific, as well as increased sales of fashion gold jewelry and statement jewelry. |
• | Net earnings of $105 million, or $0.81 per diluted share, were 16% below the $124 million, or $0.96 per diluted share, earned a year ago, due to higher SG&A (selling, general and administrative) expenses which included an expected increase in marketing spending, as well as unfavorable effects from the strong U.S. dollar and the impairment charge of $0.05 per diluted share recorded for a loan to a diamond mining company. Excluding the impairment charge, net earnings (see “Non-GAAP Measures” schedule) declined 10% to $0.86 per diluted share, in line with management’s expectation. |
• | Worldwide net sales declined 3% to approximately $2 billion. However, on a constant-exchange-rate basis, worldwide net sales increased 4% and comparable store sales rose 3%. |
• | Net earnings of $210 million, or $1.62 per diluted share, were 16% lower than the $250 million, or $1.92 per diluted share, a year ago, due to higher SG&A expenses, as well as unfavorable effects from the strong U.S. dollar and the impairment charge noted above. Excluding the charge, net earnings (see “Non-GAAP Measures” schedule) declined 14%, in line with management’s expectation. |
• | In the Americas, on a constant-exchange-rate basis both total sales and comparable store sales in the second quarter were equal to the prior year, while in the first half total sales rose 1% and comparable store sales were unchanged. In both periods, higher sales to U.S. customers contrasted with lower foreign tourist spending in the U.S. which management attributes to the strong U.S. dollar, and there was healthy comparable store sales growth in Canada and Latin America. As reported in U.S. dollars, total sales of $475 million in the second quarter were 2% below the prior year and sales of $918 million in the first half were approximately equal to last year. |
• | In the Asia-Pacific region, on a constant-exchange-rate basis total sales and comparable store sales in the second quarter rose 9% and 6%, respectively, while total sales and comparable store sales rose 6% and 4% in the first half. In both periods, double-digit sales growth in China and Australia was combined with mixed performance in other markets. As reported in |
• | In Japan, on a constant-exchange-rate basis total sales and comparable store sales in the second quarter increased 27% and 21%, respectively, benefiting from higher sales to foreign tourists; in the first half total sales were unchanged and comparable store sales declined 6%. Results this year have fluctuated compared with volatile sales trends in last year’s first half when comparable store sales on a constant-exchange-rate basis had increased 30% in the first quarter, reflecting a surge in consumer spending prior to an increase in Japan’s consumption tax on April 1, 2014, and then declined 13% in the second quarter. As reported in U.S. dollars, total sales in Japan rose 5% to $125 million in the second quarter, and declined 16% to $247 million in the first half. |
• | In Europe, on a constant-exchange-rate basis both total sales and comparable store sales in the second quarter rose 19%, as growth in the U.K. and across the continent largely benefitted from higher spending by foreign tourists and, to a lesser extent, an increase in spending by local customers; total sales and comparable store sales in the first half rose 20% and 18%, respectively. As reported in U.S. dollars, total sales in Europe rose 2% to $123 million in the second quarter and 2% to $225 million in the first half. |
• | Other sales on a constant-exchange-rate basis in the second quarter declined 27% in total due to lower wholesale sales of diamonds but rose 8% on a comparable store sales basis; in the first half total sales declined 12% but comparable store sales rose 4%. As reported in U.S. dollars, Other sales declined 33% to $23 million in the second quarter and declined 19% to $58 million in the first half. |
• | Tiffany opened six Company-operated stores in the second quarter: in Geneva, Switzerland; two in China in Shanghai and Hangzhou; in Bangkok, Thailand; in Macau; and in Ottawa, Canada. At July 31, 2015, the Company operated 304 stores (124 in the Americas, 79 in Asia-Pacific, 56 in Japan, 39 in Europe, and included in Other sales are five in the United Arab Emirates and one in Russia), versus 293 stores a year ago (122 in the Americas, 72 in Asia-Pacific, 55 in Japan, 38 in Europe, and five in the U.A.E. and one in Russia). |
• | Gross margin (gross profit as a percentage of net sales) of 59.9% in the second quarter was equal to the prior year, while gross margin of 59.5% in the first half was modestly above 59.1% a year ago. Year-over-year comparisons benefited from a decline in wholesale sales of diamonds and favorable product input costs, offset by a shift in sales mix to higher-priced, relatively lower-margin products. In addition, retail price increases have been offset by the negative effect of the strong U.S. dollar. |
• | SG&A expenses rose 9% in the second quarter and 7% in the first half, due to higher marketing expenses and increased costs related to store occupancy and depreciation, as well as increased labor expenses (including costs related to the Company’s U.S. pension and postretirement plans). SG&A expense growth in both periods included a $10 million impairment charge; excluding that charge (see “Non-GAAP Measures” schedule), SG&A expenses rose 6% in both periods. Excluding both that charge and the translation effect from the strong U.S. dollar, SG&A expenses would have increased 11% in both the second quarter and first half. |
• | Interest and other expenses, net were $14 million in the second quarter and $23 million in the first half, compared with $16 million and $32 million in the respective prior-year periods. The declines in both periods reflected lower interest expense resulting from the redemption of long-term debt in October 2014 by using proceeds from the issuance of lower-rate long-term debt. In addition, the second quarter was affected by foreign currency transaction losses. |
• | The effective tax rates were 34.2% in the second quarter and 34.4% in the first half, compared with respective rates of 35.5% and 35.3% last year. |
• | Cash and cash equivalents and short-term investments were $771 million at July 31, 2015 compared with $398 million a year ago. Total debt (short-term and long-term) as a percentage of stockholders’ equity was 37% and 35% at July 31, 2015 and 2014, respectively. |
• | Net inventories of $2.4 billion at July 31, 2015 were 7% lower than the prior year, and the decline was 2% when excluding the translation effect of the strong U.S. dollar, due to reduced inventory purchases. |
• | Capital expenditures of $98 million in the first half were slightly above the prior year. |
• | The Company repurchased its shares at total costs of $23 million in the second quarter (average cost of $90 per share) and $56 million in the first half (average cost of $88 per share). At July 31, 2015, approximately $217 million remained authorized for repurchases under a $300 million, three-year program that expires in March 2017. |
Second Quarter 2015 vs. 2014 | First Half 2015 vs. 2014 | ||||||||||
GAAP Reported | Translation Effect | Constant- Exchange- Rate Basis | GAAP Reported | Translation Effect | Constant- Exchange- Rate Basis | ||||||
Net Sales: | |||||||||||
Worldwide | —% | (7)% | 7% | (3)% | (7)% | 4% | |||||
Americas | (2)% | (2)% | —% | —% | (1)% | 1% | |||||
Asia-Pacific | 4% | (5)% | 9% | 1% | (5)% | 6% | |||||
Japan | 5% | (22)% | 27% | (16)% | (16)% | —% | |||||
Europe | 2% | (17)% | 19% | 2% | (18)% | 20% | |||||
Other | (33)% | (6)% | (27)% | (19)% | (7)% | (12)% | |||||
Comparable Store Sales: | |||||||||||
Worldwide | (1)% | (8)% | 7% | (4)% | (7)% | 3% | |||||
Americas | (2)% | (2)% | —% | (1)% | (1)% | —% | |||||
Asia-Pacific | 1% | (5)% | 6% | —% | (4)% | 4% | |||||
Japan | 1% | (20)% | 21% | (20)% | (14)% | (6)% | |||||
Europe | 1% | (18)% | 19% | (1)% | (19)% | 18% | |||||
Other | (5)% | (13)% | 8% | (6)% | (10)% | 4% |
(in millions, except per share amounts) | GAAP | Impairment charge a (decrease)/increase | Non-GAAP | ||||||||
Three months ended July 31, 2015 | |||||||||||
Selling, general and administrative expenses | $ | 420.2 | $ | (9.6 | ) | $ | 410.6 | ||||
Earnings from operations | 172.8 | 9.6 | 182.4 | ||||||||
Net earnings | 104.9 | 6.3 | 111.2 | ||||||||
Diluted earnings per share | 0.81 | 0.05 | 0.86 | ||||||||
Six months ended July 31, 2015 | |||||||||||
Selling, general and administrative expenses | $ | 819.2 | $ | (9.6 | ) | $ | 809.6 | ||||
Earnings from operations | 342.8 | 9.6 | 352.4 | ||||||||
Net earnings | 209.7 | 6.3 | 216.0 | ||||||||
Diluted earnings per share | 1.62 | 0.05 | 1.67 |
a | In the three and six months ended July 31, 2015, the Company recorded an impairment charge related to a financing arrangement with Koidu Limited. |
Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | $ | 990.5 | $ | 992.9 | $ | 1,953.0 | $ | 2,005.1 | |||||||
Cost of sales | 397.5 | 397.7 | 791.0 | 820.4 | |||||||||||
Gross profit | 593.0 | 595.2 | 1,162.0 | 1,184.7 | |||||||||||
Selling, general and administrative expenses | 420.2 | 386.7 | 819.2 | 766.4 | |||||||||||
Earnings from operations | 172.8 | 208.5 | 342.8 | 418.3 | |||||||||||
Interest and other expenses, net | 13.6 | 16.1 | 22.9 | 32.4 | |||||||||||
Earnings from operations before income taxes | 159.2 | 192.4 | 319.9 | 385.9 | |||||||||||
Provision for income taxes | 54.3 | 68.3 | 110.2 | 136.2 | |||||||||||
Net earnings | $ | 104.9 | $ | 124.1 | $ | 209.7 | $ | 249.7 | |||||||
Net earnings per share: | |||||||||||||||
Basic | $ | 0.81 | $ | 0.96 | $ | 1.62 | $ | 1.93 | |||||||
Diluted | $ | 0.81 | $ | 0.96 | $ | 1.62 | $ | 1.92 | |||||||
Weighted-average number of common shares: | |||||||||||||||
Basic | 129.0 | 129.3 | 129.1 | 129.1 | |||||||||||
Diluted | 129.6 | 129.9 | 129.7 | 129.9 |
July 31, 2015 | January 31, 2015 | July 31, 2014 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents and short-term investments | $ | 771.4 | $ | 731.5 | $ | 398.4 | |||||
Accounts receivable, net | 180.3 | 195.2 | 190.3 | ||||||||
Inventories, net | 2,357.7 | 2,362.1 | 2,531.5 | ||||||||
Deferred income taxes | 101.4 | 102.6 | 104.9 | ||||||||
Prepaid expenses and other current assets | 202.9 | 220.0 | 225.9 | ||||||||
Total current assets | 3,613.7 | 3,611.4 | 3,451.0 | ||||||||
Property, plant and equipment, net | 898.4 | 899.5 | 857.3 | ||||||||
Other assets, net | 668.4 | 669.7 | 627.5 | ||||||||
$ | 5,180.5 | $ | 5,180.6 | $ | 4,935.8 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Short-term borrowings | $ | 196.8 | $ | 234.0 | $ | 275.4 | |||||
Accounts payable and accrued liabilities | 310.4 | 318.0 | 300.8 | ||||||||
Income taxes payable | 38.3 | 39.9 | 28.4 | ||||||||
Merchandise credits and deferred revenue | 73.9 | 66.1 | 65.5 | ||||||||
Total current liabilities | 619.4 | 658.0 | 670.1 | ||||||||
Long-term debt | 878.6 | 882.5 | 750.1 | ||||||||
Pension/postretirement benefit obligations | 538.9 | 524.2 | 279.5 | ||||||||
Other long-term liabilities | 189.4 | 200.7 | 213.8 | ||||||||
Deferred gains on sale-leasebacks | 59.5 | 64.5 | 77.9 | ||||||||
Stockholders’ equity | 2,894.7 | 2,850.7 | 2,944.4 | ||||||||
$ | 5,180.5 | $ | 5,180.6 | $ | 4,935.8 |