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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). |
Emerging growth company | o | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act | o |
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits |
99.1 | News Release dated March 16, 2018 |
TIFFANY & CO. | ||
(Registrant) | ||
By: /s/ Leigh M. Harlan | ||
Leigh M. Harlan | ||
Senior Vice President, Secretary | ||
and General Counsel | ||
Date: March 16, 2018 |
Exhibit No. | Description |
Fifth Avenue & 57th Street | Contact: | |||
New York, N.Y. 10022 | Mark L. Aaron | |||
212-230-5301 | ||||
mark.aaron@tiffany.com |
• | Worldwide net sales increased 4% to $4.2 billion, reflecting sales growth in most regions and across most jewelry categories; comparable store sales were equal to 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”), worldwide net sales also increased 4% and comparable store sales were equal to the prior year. |
• | Net earnings of $370 million, or $2.96 per diluted share, were 17% below the prior year’s $446 million, or $3.55 per diluted share. However, net earnings in 2017 included charges recorded in the fourth quarter totaling $146 million, or $1.17 per diluted share, related to the enactment of the U.S. Tax Cuts and Jobs Act. Net earnings in the prior year included a net charge recorded in the fourth quarter totaling $38 million, or $0.19 per diluted share, related to certain impairments. Excluding all such charges, net earnings of $516 million, or $4.13 per diluted share, in 2017 were 10% higher than the prior year’s $470 million, or $3.75 per diluted share (see “Non-GAAP Measures”). |
• | Worldwide net sales rose 9% to $1.3 billion, resulting from growth in all regions and across all product categories; comparable store sales rose 3%. On a constant-exchange-rate basis, worldwide net sales rose 6% and comparable store sales were 1% above the prior year. |
• | Net earnings of $62 million, or $0.50 per diluted share, were 61% below the prior year’s $158 million, or $1.26 per diluted share. However, as noted above, the Company recorded tax-related charges in the fourth quarter of 2017 and certain impairment charges in last year’s fourth quarter. Excluding all such charges, net earnings rose 15% to $208 million, or $1.67 per diluted share, from last year’s $182 million, or $1.45 per diluted share (see “Non-GAAP Measures”). |
• | In the Americas, total net sales rose 2% to $1.9 billion in the full year and 5% to $619 million in the fourth quarter; comparable store sales increased 1% and 5% in the respective periods. There were no meaningful geographic differences across the region. On a constant-exchange-rate basis, total sales increased 1% in the full year and 5% in the fourth quarter; comparable store sales were unchanged in the full year and up 4% in the fourth quarter. |
• | In Asia-Pacific, total net sales increased 10% to $1.1 billion in the full year and 13% to $320 million in the fourth quarter; comparable store sales declined 1% and rose 3% in those respective periods. Total |
• | In Japan, total net sales of $596 million in the full year were 1% below the prior year, while sales in the fourth quarter rose 2% to $189 million; comparable store sales declined 1% and rose 1%, respectively. On a constant-exchange-rate basis, total sales rose 1% in both the full year and fourth quarter; comparable store sales rose 2% in the full year and were unchanged in the fourth quarter. |
• | In Europe, total net sales rose 6% in the full year to $483 million and 13% to $165 million in the fourth quarter, reflecting the positive effects from currency translation, new stores and e-commerce sales growth; comparable store sales declined 2% and rose 1% in the respective periods, which management attributes in part to softness across much of the region as well as negative effects from new stores on existing store sales. On a constant-exchange-rate basis, total sales rose 3% in the full year and 4% in the fourth quarter, and comparable store sales declined 4% and 8%, respectively. |
• | Other net sales were $125 million in the full year and $41 million in the fourth quarter, representing increases of 26% and 48% over the respective prior-year periods. Growth in both periods reflected higher wholesale sales of diamonds as well as comparable stores sales growth of 2% and 6%, respectively. |
• | Tiffany opened nine Company-operated stores in the full year and closed seven. At January 31, 2018, the Company operated 315 stores (124 in the Americas, 87 in Asia-Pacific, 54 in Japan, 46 in Europe, and four in the UAE), versus 313 stores a year ago (125 in the Americas, 85 in Asia-Pacific, 55 in Japan, 43 in Europe, and five in the UAE). |
• | From a product category perspective, in the full year, sales increased in the Jewelry Collections category (which now combines the previously-reported High, Fine and Solitaire Jewelry and the Fashion Jewelry categories) and the Designer Jewelry category and decreased in the Engagement Jewelry category, while in the fourth quarter, all categories achieved varying degrees of sales growth. |
• | Gross margin (gross profit as a percentage of net sales) was 62.5% in the full year and 63.7% in the fourth quarter, compared with 62.2% and 64.1% in the respective prior-year periods. In both periods, |
• | Selling, general and administrative (“SG&A”) expenses increased 2% in both the full year and fourth quarter, reflecting a favorable comparison to the prior year, in which the Company had recorded certain impairment charges totaling $38 million (see “Non-GAAP Measures”); excluding those charges, SG&A expenses in the full year and fourth quarter were 5% and 10% above the respective prior-year periods as a result of higher labor and incentive compensation costs, higher store occupancy and depreciation expenses and increased marketing spending in both periods of 2017. |
• | Earnings from operations as a percentage of net sales (“operating margin”) was 19.1% in the full year and 23.0% in the fourth quarter, compared with 18.0% and 20.9% in the respective prior-year periods. Excluding the aforementioned prior-year charges (see “Non-GAAP Measures”), the operating margin in the full year rose fractionally from the prior year’s 19.0% and in the fourth quarter declined from last year’s 23.9%. |
• | Interest and other expenses, net in the full year and fourth quarter were lower than the respective prior-year periods. |
• | The effective income tax rate increased to 51.3% in the full year and to 79.4% in the fourth quarter, compared with 34.1% and 36.0% in the respective prior-year periods, largely as a result of charges related to the enactment of the U.S. Tax Cuts and Jobs Act. In addition to the impact of this new legislation, the effective income tax rate in the full year and fourth quarter was reduced by an increase in the domestic manufacturing deduction, lower state taxes and a benefit from the implementation of a new accounting standard related to the treatment of excess tax benefits from the vesting or exercise of share-based compensation, while the 2016 full year rate included a benefit from the conclusion of a tax examination. |
• | The Company generated $932 million of cash flow from operations in 2017 (versus $706 million in 2016) and, after subtracting $239 million of capital expenditures (versus $223 million in 2016), generated $693 million in free cash flow (see “Non-GAAP Measures”) in 2017 (versus $483 million in 2016). |
• | Net inventories of $2.3 billion at January 31, 2018 were 4% above the prior year, and consistent with full year sales growth. The majority of the increase was attributed to currency translation. |
• | The Company repurchased more than one million shares in the full year, including almost 400,000 shares in the fourth quarter, at a total cost of $99 million in the year and $39 million in the fourth quarter, representing an average price of $95 in the year and $99 in the fourth quarter. At January 31, 2018, $211 million remained available for repurchases under the program that authorizes the repurchase of up to $500 million of the Company’s Common Stock and that expires on January 31, 2019. |
• | At January 31, 2018, cash and cash equivalents and short-term investments totaled $1.3 billion and total debt (short-term and long-term) was $1.0 billion; total debt as a percentage of stockholders’ equity was 31% at January 31, 2018 versus 37% a year ago. |
Fourth Quarter 2017 vs. 2016 | Full Year 2017 vs. 2016 | ||||||||||||||||
GAAP Reported | Translation Effect | Constant- Exchange- Rate Basis | GAAP Reported | Translation Effect | Constant- Exchange- Rate Basis | ||||||||||||
Net Sales: | |||||||||||||||||
Worldwide | 9 | % | 3 | % | 6 | % | 4 | % | — | % | 4 | % | |||||
Americas | 5 | — | 5 | 2 | 1 | 1 | |||||||||||
Asia-Pacific | 13 | 4 | 9 | 10 | 2 | 8 | |||||||||||
Japan | 2 | 1 | 1 | (1 | ) | (2 | ) | 1 | |||||||||
Europe | 13 | 9 | 4 | 6 | 3 | 3 | |||||||||||
Other | 48 | — | 48 | 26 | — | 26 | |||||||||||
Comparable Store Sales: | |||||||||||||||||
Worldwide | 3 | % | 2 | % | 1 | % | — | % | — | % | — | % | |||||
Americas | 5 | 1 | 4 | 1 | 1 | — | |||||||||||
Asia-Pacific | 3 | 4 | (1 | ) | (1 | ) | 1 | (2 | ) | ||||||||
Japan | 1 | 1 | — | (1 | ) | (3 | ) | 2 | |||||||||
Europe | 1 | 9 | (8 | ) | (2 | ) | 2 | (4 | ) | ||||||||
Other | 6 | — | 6 | 2 | — | 2 |
(in millions, except per share amounts) | GAAP | Charges related to the 2017 Tax Act a | Non-GAAP | ||||||||
Quarter Ended January 31, 2018 | |||||||||||
Provision for income taxes | $ | 239.5 | $ | (146.2 | ) | $ | 93.3 | ||||
Effective income tax rate | 79.4 | % | (48.5 | )% | 30.9 | % | |||||
Net earnings | 61.9 | 146.2 | 208.1 | ||||||||
Diluted earnings per share | 0.50 | 1.17 | 1.67 | ||||||||
Year Ended January 31, 2018 | |||||||||||
Provision for income taxes | $ | 390.4 | $ | (146.2 | ) | $ | 244.2 | ||||
Effective income tax rate | 51.3 | % | (19.2 | )% | 32.1 | % | |||||
Net earnings | 370.1 | 146.2 | 516.3 | ||||||||
Diluted earnings per share | 2.96 | 1.17 | 4.13 |
a | Net expense recognized in 2017 related to the estimated impact of the U.S. Tax Cuts and Jobs Act ("2017 Tax Act"). The charges recorded included: |
• | Estimated tax expense of $94.8 million, or $0.76 per diluted share, for the impact of the reduction in the U.S. tax rate on the Company’s deferred tax assets and liabilities; |
• | Estimated tax expense of $56.0 million, or $0.45 per diluted share, for the one-time transition tax effected via a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits; and |
• | A tax benefit of $4.6 million, or $0.04 per diluted share, resulting from the effect of the 21% statutory tax rate for the month of January 2018 on the Company’s annual statutory tax rate for the year ended January 31, 2018. Because the Company’s fiscal year ended on January 31, 2018, the Company’s statutory tax rate for fiscal 2017 is 33.8%, rather than 35.0%. |
(in millions, except per share amounts) | GAAP | Impairment charges b | Non-GAAP | ||||||||
Quarter Ended January 31, 2017 | |||||||||||
Selling, general and administrative ("SG&A") expenses | $ | 531.7 | $ | (38.0 | ) | $ | 493.7 | ||||
As a % of sales | 43.2 | % | 40.1 | % | |||||||
Earnings from operations | 256.5 | 38.0 | 294.5 | ||||||||
As a % of sales | 20.9 | % | 23.9 | % | |||||||
Provision for income taxes c | 88.7 | 14.0 | 102.7 | ||||||||
Net earnings | 157.8 | 24.0 | 181.8 | ||||||||
Diluted earnings per share * | 1.26 | 0.19 | 1.45 | ||||||||
Year Ended January 31, 2017 | |||||||||||
SG&A expenses | $ | 1,769.1 | $ | (38.0 | ) | $ | 1,731.1 | ||||
As a % of sales | 44.2 | % | 43.3 | % | |||||||
Earnings from operations | 721.2 | 38.0 | 759.2 | ||||||||
As a % of sales | 18.0 | % | 19.0 | % | |||||||
Provision for income taxes c | 230.5 | 14.0 | 244.5 | ||||||||
Net earnings | 446.1 | 24.0 | 470.1 | ||||||||
Diluted earnings per share * | 3.55 | 0.19 | 3.75 |
b | Expenses associated with the following: |
• | $25.4 million of pre-tax expense ($16.0 million after tax expense, or $0.13 per diluted share) associated with an asset impairment charge related to software costs capitalized in connection with the development of a new finished goods inventory management and merchandising information system; and |
• | $12.6 million of pre-tax expense ($8.0 million after tax expense, or $0.06 per diluted share) associated with impairment charges related to financing arrangements with diamond mining and exploration companies. |
c | The income tax effect resulting from the adjustments has been calculated as both current and deferred tax benefit (expense), based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying adjustment. |
Years Ended January 31, | ||||||
(in millions) | 2018 | 2017 | ||||
Net cash provided by operating activities | $ | 932.2 | $ | 705.7 | ||
Less: Capital expenditures | (239.3 | ) | (222.8 | ) | ||
Free cash flow a | $ | 692.9 | $ | 482.9 |
a | Increases in net cash provided by operating activities and free cash flow in 2017 reflected more effective management and timing of payables and reduced payments for income taxes partly offset by increased inventory purchases. Additionally, net cash provided by operating activities and free cash flow in 2017 and 2016 included voluntary cash contributions of $15.0 million and $120.0 million, respectively, made by the Company to its U.S. pension plan. |
Three Months Ended January 31, | Years Ended January 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 1,334.3 | $ | 1,229.6 | $ | 4,169.8 | $ | 4,001.8 | |||||||
Cost of sales | 483.7 | 441.4 | 1,565.1 | 1,511.5 | |||||||||||
Gross profit | 850.6 | 788.2 | 2,604.7 | 2,490.3 | |||||||||||
Selling, general and administrative expenses | 543.4 | 531.7 | 1,810.2 | 1,769.1 | |||||||||||
Earnings from operations | 307.2 | 256.5 | 794.5 | 721.2 | |||||||||||
Interest and other expenses, net | 5.8 | 10.0 | 34.0 | 44.6 | |||||||||||
Earnings from operations before income taxes | 301.4 | 246.5 | 760.5 | 676.6 | |||||||||||
Provision for income taxes | 239.5 | 88.7 | 390.4 | 230.5 | |||||||||||
Net earnings | $ | 61.9 | $ | 157.8 | $ | 370.1 | $ | 446.1 | |||||||
Net earnings per share: | |||||||||||||||
Basic | $ | 0.50 | $ | 1.27 | $ | 2.97 | $ | 3.57 | |||||||
Diluted | $ | 0.50 | $ | 1.26 | $ | 2.96 | $ | 3.55 | |||||||
Weighted-average number of common shares: | |||||||||||||||
Basic | 124.2 | 124.5 | 124.5 | 125.1 | |||||||||||
Diluted | 124.9 | 125.0 | 125.1 | 125.5 |
January 31, 2018 | January 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents and short-term investments | $ | 1,291.2 | $ | 985.8 | |||
Accounts receivable, net | 231.2 | 226.8 | |||||
Inventories, net | 2,253.5 | 2,157.6 | |||||
Prepaid expenses and other current assets | 207.4 | 203.4 | |||||
Total current assets | 3,983.3 | 3,573.6 | |||||
Property, plant and equipment, net | 990.5 | 931.8 | |||||
Other assets, net | 494.3 | 592.2 | |||||
$ | 5,468.1 | $ | 5,097.6 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term borrowings | $ | 120.6 | $ | 228.7 | |||
Accounts payable and accrued liabilities | 437.4 | 312.8 | |||||
Income taxes payable | 89.4 | 22.1 | |||||
Merchandise credits and deferred revenue | 77.4 | 69.2 | |||||
Total current liabilities | 724.8 | 632.8 | |||||
Long-term debt | 882.9 | 878.4 | |||||
Pension/postretirement benefit obligations | 287.4 | 318.6 | |||||
Other long-term liabilities | 284.3 | 193.5 | |||||
Deferred gains on sale-leasebacks | 40.5 | 45.9 | |||||
Stockholders’ equity | 3,248.2 | 3,028.4 | |||||
$ | 5,468.1 | $ | 5,097.6 |