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 November 24, 2015. |
TIFFANY & CO. | ||
(Registrant) | ||
By: /s/ Leigh M. Harlan | ||
Leigh M. Harlan | ||
Senior Vice President, Secretary | ||
and General Counsel | ||
Date: November 24, 2015 |
Exhibit No. | Description |
99.1 | News Release dated November 24, 2015. |
Fifth Avenue & 57th Street | Contact: | |||
New York, N.Y. 10022 | Mark L. Aaron | |||
212-230-5301 | ||||
mark.aaron@tiffany.com |
TIFFANY REPORTS THIRD QUARTER RESULTS; | |
MANAGEMENT REVISES EARNINGS GUIDANCE | |
• | Strong U.S. dollar continued to negatively affect results |
• | Sales +4% in local currencies (comps +1%), but -2% as reported |
• | EPS of 70 cents -8% from last year’s 76 cents excluding charge |
• | Strong free cash flow |
• | Worldwide net sales on a constant-exchange-rate basis rose 4% and comparable store sales increased 1% due to growth in Japan, Europe and Asia-Pacific partly offset by lower sales in the Americas. Sales growth was led by higher sales of fashion gold jewelry and statement jewelry. Reported in U.S. dollars, worldwide net sales were $938 million, versus $960 million a year ago. |
• | Net earnings were $91 million, or $0.70 per diluted share, compared with $99 million, or $0.76 per diluted share, when excluding a pre-tax charge of $94 million, or $61 million and |
• | $0.47 per diluted share after-tax, on the extinguishment of debt related to prepaying $400 million of long-term debt (see “Non-GAAP Measures”); and the year-over-year decline reflected the lower sales and higher selling, general and administrative expenses partly offset by a higher gross margin. On a reported basis, which included that charge, net earnings in last year’s third quarter were $38 million, or $0.29 per diluted share. |
• | Worldwide net sales and comparable store sales on a constant-exchange-rate basis rose 4% and 2%, respectively. Reported in U.S. dollars, worldwide net sales of $2.9 billion were 2% below the prior year. |
• | Net earnings of $307 million, or $2.37 per diluted share, were 12% lower than last year’s $349 million, or $2.69 per diluted share, when excluding the debt extinguishment charge in last year’s third quarter and an impairment charge in this year’s second quarter for a loan to a diamond mining company (see “Non-GAAP Measures”); the year-over-year decline was due to lower sales and higher selling, general and administrative expenses partly offset by a higher gross margin; on a reported basis, which included the charges in both years, net earnings rose 4%. |
• | In the Americas, on a constant-exchange-rate basis total sales and comparable store sales in the third quarter were 5% and 6% below the prior year, respectively, (compared with an 11% |
• | In the Asia-Pacific region, on a constant-exchange-rate basis total sales increased 6% in the third quarter and comparable store sales increased 2%, while total sales and comparable store sales in the year-to-date increased 6% and 4%, respectively. In the quarter, on a constant-exchange-rate basis the Company continued to experience healthy sales growth in China and Australia, while sales again declined in Hong Kong and Macau. Reported in U.S. dollars, total sales declined 2% to $238 million in the quarter while sales of $743 million in the year-to-date were unchanged from the prior year. |
• | In Japan, on a constant-exchange-rate basis total sales and comparable store sales in the third quarter rose 34% and 24%, respectively, largely reflecting a continuation of considerably higher sales to foreign tourists as well as increased local customer demand; in the year-to-date, on that same basis total sales and comparable store sales rose 10% and 3%, respectively. Reported in U.S. dollars, total sales increased 17% to $133 million in the third quarter, and declined 6% to $380 million in the year-to-date. |
• | In Europe, on a constant-exchange-rate basis total sales rose 9% in the third quarter and comparable store sales rose 6%, due to broad-based growth across the region tied to higher spending by foreign tourists and, to a lesser extent, an increase in spending by local customers; total and comparable store sales on that same basis in the year-to-date increased 16% and 14%, respectively. Reported in U.S. dollars, total sales in Europe declined 2% to $112 million in the third quarter and rose 1% to $338 million in the year-to-date. |
• | Other sales on a constant-exchange-rate basis increased 8% in the third quarter and declined 6% in the year-to-date; comparable store sales on that same basis declined 3% and rose 2% in the respective periods. Reported in U.S. dollars, Other sales of $30 million in the third |
• | Tiffany opened two Company-operated stores in the third quarter: in Santiago, Chile; and in Macau, while closing one in Korea; it has added 10 stores, net of closings, in the year-to-date. At October 31, 2015, the Company operated 305 stores (125 in the Americas, 79 in Asia-Pacific, 56 in Japan, 39 in Europe, and five stores in the United Arab Emirates and one in Russia), versus 294 stores a year ago (122 in the Americas, 72 in Asia-Pacific, 56 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) in the third quarter rose to 60.2%, from 59.5% a year ago, and in the year-to-date was 59.7%, versus 59.2% a year ago. The year-over-year increases benefited from favorable product input costs as well as price increases partly necessitated by the strong U.S. dollar, partially offset by a shift in sales mix to higher-priced, relatively lower-margin products, and in the third quarter higher wholesale sales of diamonds. |
• | SG&A expenses increased 1% in the third quarter, as higher store-related and pension costs were largely offset by the translation effect of the strong U.S. dollar and lower variable labor costs. SG&A expenses rose 5% in the year-to-date due to the above-mentioned factors and higher marketing spending. Excluding the translation effect from the strong U.S. dollar, SG&A expenses would have increased 6% and 10% in the third quarter and year-to-date. |
• | Interest and other expenses, net of $15 million in the third quarter were unchanged from the prior year and year-to-date expenses of $38 million were lower than the prior year. In both periods, lower interest expense reflected the redemption of long-term debt in October 2014 by using proceeds from an issuance of lower-rate long-term debt. However, the third quarter and year-to-date were also affected by varying degrees of foreign currency transaction losses. |
• | The effective tax rates were 35.5% in the third quarter and 34.8% in the year-to-date, compared with 35.5% and 35.3% in the respective prior-year periods. |
• | Net inventories of $2.3 billion at October 31, 2015 were 8% lower than the prior year; excluding the translation effect of the strong U.S. dollar, net inventories declined 4%. |
• | Capital expenditures were $159 million in the year-to-date, versus $153 million a year ago. |
• | The Company spent approximately $60 million in the third quarter to repurchase its shares at an average cost of $80 per share, and has spent approximately $116 million in the year-to-date at an average cost of $84 per share. At October 31, 2015, approximately $157 million remained authorized for repurchases under a $300 million, three-year program that expires in March 2017. |
• | Cash and cash equivalents and short-term investments were $725 million at October 31, 2015, up from $383 million a year ago. Total debt (short-term and long-term) as a percentage of stockholders’ equity was 38% and 37% at October 31, 2015 and 2014, respectively. |
Third Quarter 2015 vs. 2014 | Year-to-date 2015 vs. 2014 | ||||||||||||||||
GAAP Reported | Translation Effect | Constant- Exchange- Rate Basis | GAAP Reported | Translation Effect | Constant- Exchange- Rate Basis | ||||||||||||
Net Sales: | |||||||||||||||||
Worldwide | (2 | )% | (6 | )% | 4 | % | (2 | )% | (6 | )% | 4 | % | |||||
Americas | (7 | ) | (2 | ) | (5 | ) | (3 | ) | (2 | ) | (1 | ) | |||||
Asia-Pacific | (2 | ) | (8 | ) | 6 | — | (6 | ) | 6 | ||||||||
Japan | 17 | (17 | ) | 34 | (6 | ) | (16 | ) | 10 | ||||||||
Europe | (2 | ) | (11 | ) | 9 | 1 | (15 | ) | 16 | ||||||||
Other | (1 | ) | (9 | ) | 8 | (13 | ) | (7 | ) | (6 | ) | ||||||
Comparable Store Sales: | |||||||||||||||||
Worldwide | (5 | )% | (6 | )% | 1 | % | (5 | )% | (7 | )% | 2 | % | |||||
Americas | (9 | ) | (3 | ) | (6 | ) | (4 | ) | (2 | ) | (2 | ) | |||||
Asia-Pacific | (5 | ) | (7 | ) | 2 | (2 | ) | (6 | ) | 4 | |||||||
Japan | 9 | (15 | ) | 24 | (12 | ) | (15 | ) | 3 | ||||||||
Europe | (5 | ) | (11 | ) | 6 | (2 | ) | (16 | ) | 14 | |||||||
Other | (18 | ) | (15 | ) | (3 | ) | (10 | ) | (12 | ) | 2 |
Nine Months Ended October 31, 2015 | |||||||
(in millions, except per share amounts) | $ (after tax) | Diluted EPS | |||||
Net earnings, as reported | $ | 300.7 | $ | 2.32 | |||
Impairment charge a | 6.3 | 0.05 | |||||
Net earnings, as adjusted | 307.0 | 2.37 |
a | On a pre-tax basis, includes a charge of $9.6 million within Selling, general and administrative expenses associated with an impairment charge related to a financing arrangement with Koidu Limited. |
Three Months Ended October 31, 2014 | |||||||
(in millions, except per share amounts) | $ (after tax) | Diluted EPS | |||||
Net earnings, as reported | $ | 38.3 | $ | 0.29 | |||
Debt extinguishment b | 61.0 | 0.47 | |||||
Net earnings, as adjusted | $ | 99.3 | $ | 0.76 | |||
Nine Months Ended October 31, 2014 | |||||||
(in millions, except per share amounts) | $ (after tax) | Diluted EPS | |||||
Net earnings, as reported | $ | 288.0 | $ | 2.22 | |||
Debt extinguishment b | 61.0 | 0.47 | |||||
Net earnings, as adjusted | $ | 349.0 | $ | 2.69 |
b | On a pre-tax basis, includes a charge of $93.8 million within Loss on extinguishment of debt associated with the redemption of $400.0 million in aggregate principal amount of long-term debt prior to their scheduled maturities which ranged from 2015 to 2019. |
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | $ | 938.2 | $ | 959.6 | $ | 2,891.2 | $ | 2,964.7 | |||||||
Cost of sales | 373.7 | 388.7 | 1,164.7 | 1,209.1 | |||||||||||
Gross profit | 564.5 | 570.9 | 1,726.5 | 1,755.6 | |||||||||||
Selling, general and administrative expenses | 408.1 | 402.4 | 1,227.3 | 1,168.8 | |||||||||||
Earnings from operations | 156.4 | 168.5 | 499.2 | 586.8 | |||||||||||
Interest and other expenses, net | 15.2 | 15.4 | 38.1 | 47.8 | |||||||||||
Loss on extinguishment of debt | — | 93.8 | — | 93.8 | |||||||||||
Earnings from operations before income taxes | 141.2 | 59.3 | 461.1 | 445.2 | |||||||||||
Provision for income taxes | 50.2 | 21.0 | 160.4 | 157.2 | |||||||||||
Net earnings | $ | 91.0 | $ | 38.3 | $ | 300.7 | $ | 288.0 | |||||||
Net earnings per share: | |||||||||||||||
Basic | $ | 0.71 | $ | 0.30 | $ | 2.33 | $ | 2.23 | |||||||
Diluted | $ | 0.70 | $ | 0.29 | $ | 2.32 | $ | 2.22 | |||||||
Weighted-average number of common shares: | |||||||||||||||
Basic | 128.6 | 129.4 | 129.0 | 129.2 | |||||||||||
Diluted | 129.1 | 130.0 | 129.5 | 129.9 |
October 31, 2015 | January 31, 2015 | October 31, 2014 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents and short-term investments | $ | 725.1 | $ | 731.5 | $ | 383.4 | |||||
Accounts receivable, net | 206.5 | 195.2 | 177.3 | ||||||||
Inventories, net | 2,347.0 | 2,362.1 | 2,560.4 | ||||||||
Deferred income taxes | 102.0 | 102.6 | 104.7 | ||||||||
Prepaid expenses and other current assets | 204.2 | 220.0 | 284.6 | ||||||||
Total current assets | 3,584.8 | 3,611.4 | 3,510.4 | ||||||||
Property, plant and equipment, net | 912.2 | 899.5 | 888.1 | ||||||||
Other assets, net | 668.8 | 669.7 | 598.5 | ||||||||
$ | 5,165.8 | $ | 5,180.6 | $ | 4,997.0 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Short-term borrowings | $ | 198.3 | $ | 234.0 | $ | 196.9 | |||||
Current portion of long-term debt | 82.6 | — | — | ||||||||
Accounts payable and accrued liabilities | 323.6 | 318.0 | 344.3 | ||||||||
Income taxes payable | 30.6 | 39.9 | 25.7 | ||||||||
Merchandise credits and deferred revenue | 73.4 | 66.1 | 67.7 | ||||||||
Total current liabilities | 708.5 | 658.0 | 634.6 | ||||||||
Long-term debt | 798.1 | 882.5 | 889.5 | ||||||||
Pension/postretirement benefit obligations | 545.8 | 524.2 | 284.4 | ||||||||
Other long-term liabilities | 184.5 | 200.7 | 208.5 | ||||||||
Deferred gains on sale-leasebacks | 57.9 | 64.5 | 71.3 | ||||||||
Stockholders’ equity | 2,871.0 | 2,850.7 | 2,908.7 | ||||||||
$ | 5,165.8 | $ | 5,180.6 | $ | 4,997.0 |