UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
----------------
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2006.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the transition period from ________ to _____________.
Commission file number: 1-9494
TIFFANY & CO.
(Exact name of registrant as specified in its charter)
Delaware 13-3228013
(State of incorporation) (I.R.S. Employer
Identification No.)
727 Fifth Ave. New York, NY 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 755-8000
Former name, former address and former fiscal year, if changed since last report
_________.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
One).
Large Accelerated filer X Accelerated filer ___ Non-Accelerated filer ___
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes . No X .
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock as of the latest practicable
date: Common Stock, $.01 par value, 138,148,139 shares outstanding at the close
of business on August 31, 2006.
TIFFANY & CO. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JULY 31, 2006
PART I - FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - July 31, 2006,
January 31, 2006 and July 31, 2005 (Unaudited) 3
Condensed Consolidated Statements of Earnings - for the
three and six months ended July 31, 2006
and 2005 (Unaudited) 4
Condensed Consolidated Statements of Stockholders' Equity -
for the six months ended July 31, 2006
and Comprehensive Earnings - for the three and six months
Ended July 31, 2006 and 2005 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows - for the
six months ended July 31, 2006 and 2005 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements
(Unaudited) 7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-20
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
Item 4. Controls and Procedures 22
PART II - OTHER INFORMATION
Item 1A. Risk Factors 23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 6. Exhibits 26
(a) Exhibits
2
PART I. Financial Information
Item 1. Financial Statements
TIFFANY & CO. AND SUBSIDIARIES
------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited)
-----------
(in thousands, except per share amounts)
July 31, January 31, July 31,
2006 2006 2005
-------------- -------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 146,941 $ 393,609 $ 128,611
Accounts receivable, less allowances
of $7,095, $8,002 and $6,198 143,446 142,294 126,000
Inventories, net 1,236,995 1,060,164 1,066,371
Deferred income taxes 80,404 69,576 72,084
Prepaid expenses and other current assets 62,410 33,200 51,991
---------------- ---------------- ----------------
Total current assets 1,670,196 1,698,843 1,445,057
Property, plant and equipment, net 904,479 866,004 916,374
Deferred income taxes 30,411 29,828 -
Other assets, net 181,940 182,597 139,237
---------------- ---------------- ----------------
$ 2,787,026 $ 2,777,272 $ 2,500,668
================ ================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 142,215 $ 38,942 $ 22,966
Current portion of long-term debt 6,272 6,186 -
Accounts payable and accrued liabilities 199,301 202,646 178,322
Income taxes payable 31,467 60,364 20,510
Merchandise and other customer credits 57,577 56,472 51,491
---------------- ---------------- ----------------
Total current liabilities 436,832 364,610 273,289
Long-term debt 423,819 426,548 381,297
Postretirement/employment benefit obligations 42,876 41,982 40,778
Deferred income taxes 935 - 9,790
Other long-term liabilities 122,013 113,219 101,539
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.01 par value; authorized 2,000 shares,
none issued and outstanding - - -
Common Stock, $0.01 par value; authorized 240,000 shares,
issued and outstanding 138,139, 142,509 and 142,385 1,381 1,425 1,424
Additional paid-in capital 504,678 488,960 445,349
Retained earnings 1,237,237 1,331,321 1,236,757
Accumulated other comprehensive gain, net of tax:
Foreign currency translation adjustments 16,050 5,281 9,525
Deferred hedging gain 655 3,247 591
Unrealized gain on marketable securities 550 679 329
---------------- ---------------- ----------------
Total stockholders' equity 1,760,551 1,830,913 1,693,975
----------------- ---------------- ----------------
$ 2,787,026 $ 2,777,272 $ 2,500,668
================ ================ ================
See notes to condensed consolidated financial statements.
3
TIFFANY & CO. AND SUBSIDIARIES
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
---------------------------------------------
(Unaudited)
-----------
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
July 31, July 31,
--------------------------------- ---------------------------------
2006 2005 2006 2005
-------------- -------------- -------------- --------------
Net sales $ 574,940 $ 526,701 $ 1,114,181 $ 1,036,602
Cost of sales 257,962 234,617 496,077 469,697
-------------- -------------- -------------- --------------
Gross profit 316,978 292,084 618,104 566,905
Selling, general and administrative expenses 244,342 218,016 471,221 426,526
-------------- -------------- -------------- --------------
Earnings from operations 72,636 74,068 146,883 140,379
Other expenses, net 5,307 3,858 9,282 8,064
-------------- -------------- -------------- --------------
Earnings before income taxes 67,329 70,210 137,601 132,315
Provision for income taxes 26,185 19,659 53,315 41,706
-------------- -------------- -------------- --------------
Net earnings $ 41,144 $ 50,551 $ 84,286 $ 90,609
============== ============== ============== ==============
Net earnings per share:
Basic $ 0.30 $ 0.35 $ 0.60 $ 0.63
============== ============== ============== ==============
Diluted $ 0.29 $ 0.35 $ 0.59 $ 0.62
============== ============== ============== ==============
Weighted average number of common shares:
Basic 139,170 142,989 140,556 143,618
Diluted 141,177 144,930 142,896 145,533
See notes to condensed consolidated financial statements.
4
TIFFANY & CO. AND SUBSIDIARIES
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
---------------------------------------------------------
AND COMPREHENSIVE EARNINGS
--------------------------
(Unaudited)
----------
(in thousands)
Accumulated
Total Other Additional
Stockholders' Retained Comprehensive Common Stock Paid-in
Equity Earnings Gain (Loss) Shares Amount Capital
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 2006 $ 1,830,913 $ 1,331,321 $ 9,207 142,509 $ 1,425 $ 488,960
Exercise of stock options and vesting
of restricted stock units 3,978 - - 213 2 3,976
Tax benefit from exercise of stock
options and vesting of restricted
stock units 1,034 - - - - 1,034
Share-based compensation expense 16,729 - - - - 16,729
Issuance of Common Stock
under the Employee Profit Sharing
and Retirement Savings Plan 4,550 - - 121 1 4,549
Purchase and retirement of Common
Stock (163,589) (152,972) - (4,704) (47) (10,570)
Cash dividends on Common Stock (25,398) (25,398) - - - -
Deferred hedging loss, net of tax (2,592) - (2,592) - - -
Unrealized gain on marketable
securities, net of tax (129) - (129) - - -
Foreign currency translation
adjustments, net of tax 10,769 - 10,769 - - -
Net earnings 84,286 84,286 - - - -
------------------------------------------------------------------------------------------
Balances, July 31, 2006 $ 1,760,551 $ 1,237,237 $ 17,255 138,139 $ 1,381 $ 504,678
==========================================================================================
Three Months Ended Six Months Ended
July 31, July 31,
-------------------------------- --------------------------------
2006 2005 2006 2005
-------------------------------- --------------------------------
Net earnings $ 41,144 $ 50,551 $ 84,286 $ 90,609
Other comprehensive gain (loss), net
of tax:
Deferred hedging gain (loss) 984 2,040 (2,592) 2,709
Foreign currency translation
adjustments 1,857 (16,475) 10,769 (19,520)
Unrealized (loss) gain on
marketable securities (164) 330 (129) 180
-------------------------------- --------------------------------
Comprehensive earnings $ 43,821 $ 36,446 $ 92,334 $ 73,978
================================ ================================
See notes to condensed consolidated financial statements.
5
TIFFANY & CO. AND SUBSIDIARIES
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
-----------
(in thousands)
Six Months Ended
July 31,
---------------------------------------
2006 2005
---------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 84,286 $ 90,609
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 58,259 55,099
Excess tax benefits from share-based payment arrangements (721) (1,024)
Provision for inventories 4,937 4,062
Deferred income taxes (13,067) (22,059)
Provision for postretirement/employment benefits 894 558
Share-based compensation expense 16,423 12,357
Changes in assets and liabilities:
Accounts receivable 3,391 (265)
Inventories (172,898) (34,918)
Prepaid expenses and other current assets (32,871) (23,151)
Other assets, net (348) 619
Accounts payable and accrued liabilities (32) 148
Income taxes payable (28,309) (94,954)
Merchandise and other customer credits 1,008 (732)
Other long-term liabilities 6,322 12,549
---------------- ----------------
Net cash used in operating activities (72,726) (1,102)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities and short-term investments (122,529) (99,589)
Proceeds from sale of marketable securities and short-term investments 122,215 238,175
Capital expenditures (88,339) (76,310)
Other, net (286) (101)
---------------- ----------------
Net cash (used in) provided by investing activities (88,939) 62,175
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) short-term borrowings, net 102,933 (17,089)
Fees and expenses related to new short-term borrowings - (397)
Repayment of current portion of long-term debt (5,807) -
Repurchase of Common Stock (163,589) (83,948)
Proceeds from exercise of stock options 3,978 4,330
Excess tax benefits from share-based payment arrangements 721 1,024
Cash dividends on Common Stock (25,398) (20,123)
---------------- ----------------
Net cash used in financing activities (87,162) (116,203)
---------------- ----------------
Effect of exchange rate changes on
cash and cash equivalents 2,159 (3,940)
---------------- ----------------
Net decrease in cash and cash equivalents (246,668) (59,070)
Cash and cash equivalents at beginning of year 393,609 187,681
---------------- ----------------
Cash and cash equivalents at end of six months $ 146,941 $ 128,611
---------------- ----------------
See notes to condensed consolidated financial statements.
6
TIFFANY & CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements include
the accounts of Tiffany & Co. and all majority-owned domestic and
foreign subsidiaries (the "Company"). Intercompany accounts,
transactions and profits have been eliminated in consolidation. The
interim statements are unaudited and, in the opinion of management,
include all adjustments (which include only normal recurring
adjustments) necessary to present fairly the Company's financial
position as of July 31, 2006 and 2005 and the results of its
operations and cash flows for the interim periods presented. The
condensed consolidated balance sheet data for January 31, 2006 is
derived from the audited financial statements, which are included in
the Company's Report on Form 10-K and should be read in connection
with these financial statements. In accordance with the rules of the
Securities and Exchange Commission, these financial statements do not
include all disclosures required by generally accepted accounting
principles.
The Company's business is seasonal, with a higher proportion of sales
and earnings generated in the fourth quarter of the fiscal year and,
therefore, the results of its operations for the three and six months
ended July 31, 2006 and 2005 are not necessarily indicative of the
results of the entire fiscal year.
2. NEW ACCOUNTING STANDARDS
In July 2006, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation ("FIN") No. 48, "Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement No. 109" which
clarifies the accounting for uncertainty in tax positions by
prescribing a more-likely-than-not recognition threshold for tax
positions taken or expected to be taken in a tax return. FIN No. 48 is
effective for fiscal years beginning after December 15, 2006 with the
cumulative effect of the change in accounting principle recorded as an
adjustment to opening retained earnings. Management is currently
evaluating the effect that the adoption of FIN No. 48 will have on the
Company's financial position and earnings.
In October 2005, the FASB issued Staff Position ("FSP") No. FAS 13-1,
"Accounting for Rental Costs Incurred during a Construction Period"
which requires that rental costs associated with ground or building
operating leases incurred during a construction period be recognized
as rental expense and included in income from continuing operations.
FSP No. FAS 13-1 is effective for reporting periods beginning after
December 15, 2005. The adoption of FSP No. FAS 13-1 in the first
quarter of 2006 had no impact on the Company's financial position,
earnings and cash flows.
In November 2004, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 151, "Inventory Costs - an amendment of ARB No.
43, Chapter 4." SFAS No. 151 amends the guidance in ARB No. 43,
Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs and wasted
material (spoilage). This Statement requires that those items be
recognized as current period charges. In addition, SFAS No. 151
requires that allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production
facilities. SFAS No. 151 is effective for inventory costs incurred
during fiscal years beginning after June 15, 2005. The adoption of
this Statement in the first quarter of 2006 had no impact on the
Company's financial position, earnings and cash flows.
7
3. INVENTORIES
July 31, January 31, July 31,
(in thousands) 2006 2006 2005
---------------------------------------------------------------------------------------------
Finished goods $ 847,778 $ 764,041 $ 787,973
Raw materials 318,095 244,400 231,924
Work-in-process 71,122 51,723 46,474
--------------------- ------------------- ---------------------
Inventories, net $ 1,236,995 $ 1,060,164 $ 1,066,371
--------------------- ------------------- ---------------------
LIFO-based inventories at July 31, 2006, January 31, 2006 and July 31,
2005 represented 71%, 69% and 70% of inventories, net, with the
current cost exceeding the LIFO inventory value by $85,091,000,
$75,624,000 and $68,228,000 at the end of each period.
4. INCOME TAXES
The effective income tax rates for the three and six months ended July
31, 2006 were 38.9% and 38.7%, versus 28.0% and 31.5% in the three and
six months ended July 31, 2005. The lower effective tax rates in the
three and six months ended July 31, 2005 primarily reflected tax
benefits of $6,600,000 and $8,100,000, respectively, associated with
the repatriation provisions of the American Jobs Creation Act of 2004.
5. EARNINGS PER SHARE
Basic earnings per share is computed as net earnings divided by the
weighted-average number of common shares outstanding for the period.
Diluted earnings per share includes the dilutive effect of the assumed
exercise of stock options and vesting of restricted stock units.
The following table summarizes the reconciliation of the numerators
and denominators for the basic and diluted earnings per share ("EPS")
computations:
Three Months Ended Six Months Ended
July 31, July 31,
-------------------------------------------------------------
(in thousands) 2006 2005 2006 2005
------------------------------------------------------------------------------------------------------------
Net earnings for basic
and diluted EPS $ 41,144 $ 50,551 $ 84,286 $ 90,609
=============================================================
Weighted average shares for
basic EPS 139,170 142,989 140,556 143,618
Incremental shares based
upon the assumed exercise
of stock options and
restricted stock units 2,007 1,941 2,340 1,915
-------------------------------------------------------------
Weighted average shares for
diluted EPS 141,177 144,930 142,896 145,533
=============================================================
For the three months ended July 31, 2006 and 2005, there were
6,672,000 and 7,504,000 stock options and restricted stock units
excluded from the computations of earnings per diluted share due to
their antidilutive effect. For the six months ended July 31, 2006 and
2005, there were 5,221,000 and 7,543,000 stock options and restricted
stock units excluded from the computations of earnings per diluted
share due to their antidilutive effect.
8
6. EMPLOYEE BENEFIT PLANS
The Company maintains several pension and retirement plans, as well as
provides certain health-care and life insurance benefits.
Net periodic pension and other postretirement benefit expense included
the following components:
Three Months Ended July 31,
-------------------------------------------------------------
Other
Postretirement
Pension Benefits Benefits
-------------------------------------------------------------
(in thousands) 2006 2005 2006 2005
------------------------------------------------------------------------------------------------------------
Service cost $ 3,840 $ 3,181 $ 376 $ 342
Interest cost 3,502 2,904 429 421
Expected return on plan
assets (2,944) (2,519) - -
Amortization of prior
service cost 175 201 (293) (298)
Amortization of net loss 1,147 592 85 89
-------------------------------------------------------------
Net expense $ 5,720 $ 4,359 $ 597 $ 554
============================================================-
Six Months Ended July 31,
-------------------------------------------------------------
Other
Postretirement
Pension Benefits Benefits
-------------------------------------------------------------
(in thousands) 2006 2005 2006 2005
------------------------------------------------------------------------------------------------------------
Service cost $ 7,680 $ 6,362 $ 752 $ 684
Interest cost 7,004 5,808 858 842
Expected return on plan
assets (5,888) (5,038) - -
Amortization of prior
service cost 350 402 (586) (596)
Amortization of net loss 2,294 1,184 170 178
-------------------------------------------------------------
Net expense $ 11,440 $ 8,718 $ 1,194 $ 1,108
=============================================================
7. SEGMENT INFORMATION
The Company's reportable segments are: U.S. Retail, International
Retail and Direct Marketing. These reportable segments represent
channels of distribution that offer similar merchandise and service
and have similar marketing and distribution strategies. Its "Other"
channel of distribution includes all non-reportable segments which
consist of worldwide sales and businesses operated under trademarks
and tradenames other than TIFFANY & CO., as well as wholesale sales of
diamonds obtained through the Company's diamond sourcing program but
subsequently deemed not suitable for production by its manufacturing
operations. In deciding how to allocate resources and assess
performance, the Company's Executive Officers regularly evaluate the
performance of its reportable segments on the basis of net sales and
earnings from operations, after the elimination of inter-segment sales
and transfers.
Revisions were made to the prior year's segment amounts to conform to
the current year presentation and to reflect the revised manner in
which management evaluates the performance of segments. Effective with
the first quarter of 2006, the Company allocates LIFO charges between
its reportable segments based only upon sales of U.S. and foreign
branches, which value their inventories using the LIFO method.
9
7. SEGMENT INFORMATION (continued)
Certain information relating to the Company's segments is set forth
below:
Three Months Ended Six Months Ended
July 31, July 31,
-------------------------------------------------------------------------
(in thousands) 2006 2005 2006 2005
------------------------------------------------------------------------------------------------------------
Net sales:
U.S. Retail $ 288,556 $ 267,710 $ 549,136 $ 523,562
International
Retail 223,153 202,104 438,317 392,420
Direct Marketing 35,742 30,354 65,699 59,290
-------------------------------------------------------------------------
Total reportable
segments 547,451 500,168 1,053,152 975,272
Other 27,489 26,533 61,029 61,330
-------------------------------------------------------------------------
$ 574,940 $ 526,701 $ 1,114,181 $ 1,036,602
=========================================================================
Earnings (losses)
from operations*:
U.S. Retail $ 48,799 $ 53,268 $ 95,577 $ 99,529
International
Retail 53,462 44,344 108,358 88,416
Direct Marketing 11,194 9,516 19,342 18,192
-------------------------------------------------------------------------
Total reportable
segments 113,455 107,128 223,277 206,137
Other (7,404) (3,127) (10,816) (4,642)
-------------------------------------------------------------------------
$ 106,051 $ 104,001 $ 212,461 $ 201,495
==========================================================================
* Represents earnings (losses) from operations before unallocated
corporate expenses and other expenses, net.
The following table sets forth a reconciliation of the segments'
earnings from operations to the Company's consolidated earnings before
income taxes:
Three Months Ended Six Months Ended
July 31, July 31,
-------------------------------------------------------------------------
(in thousands) 2006 2005 2006 2005
-----------------------------------------------------------------------------------------------------------
Earnings from
operations for
segments $ 106,051 $ 104,001 $ 212,461 $ 201,495
Unallocated
corporate expenses (33,415) (29,933) (65,578) (61,116)
Other expenses, net (5,307) (3,858) (9,282) (8,064)
-------------------------------------------------------------------------
Earnings before
income taxes $ 67,329 $ 70,210 $ 137,601 $ 132,315
=========================================================================
Unallocated corporate expenses include certain costs related to
administrative support functions, such as information technology,
finance, legal and human resources, which the Company does not
allocate to its segments.
10
8. SUBSEQUENT EVENTS
On August 17, 2006, the Company's Board of Directors declared a
quarterly dividend of $0.10 per share. This dividend will be paid on
October 10, 2006 to stockholders of record on September 20, 2006.
In August 2006, the Company's Board of Directors extended the expiration
date of the Company's current share repurchase program to December 2009.
The current program was scheduled to expire in March 2007. In addition,
the Company's Board of Directors authorized the Company to repurchase up
to an additional $700,000,000 of the Company's common stock through open
market or private transactions. With the additional authorization, there
remains $812,577,000 available for future repurchases.
11
PART I. Financial Information
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
OVERVIEW
- --------
Tiffany & Co. is a holding company that operates through its subsidiary
companies (the "Company"). The Company's principal subsidiary, Tiffany and
Company, is a jeweler and specialty retailer whose principal merchandise
offerings are an extensive selection of fine jewelry. It also sells timepieces,
sterling silverware, china, crystal, stationery, fragrances and accessories.
Through Tiffany and Company and other subsidiaries, the Company is engaged in
product design, manufacturing and retailing activities.
The Company's channels of distribution are as follows:
o U.S. Retail includes sales in TIFFANY & CO. stores in the U.S. and, to a
lesser extent, sales of TIFFANY & CO. products through business-to-business
sales personnel in the U.S.;
o International Retail includes sales in TIFFANY & CO. stores and department
store boutiques outside the U.S. and, to a lesser extent,
business-to-business, Internet and wholesale sales of TIFFANY & CO.
products outside the U.S.;
o Direct Marketing includes Internet and catalog sales of TIFFANY & CO.
products in the U.S.; and
o Other includes worldwide sales of businesses operated under trademarks or
tradenames other than TIFFANY & CO. ("specialty retail"), as well as
wholesale sales of diamonds obtained through the Company's diamond sourcing
program but subsequently deemed not suitable for production by its
manufacturing operations.
All references to years relate to fiscal years ended or ending on January 31 of
the following calendar year.
HIGHLIGHTS
o Net sales increased 9% in the three months ("second quarter") ended July
31, 2006 and 7% in the six months ("first half") ended July 31, 2006. On a
constant-exchange-rate basis (see Non-GAAP Measures section below), net
sales rose 10% in the second quarter and 9% in the first half and worldwide
comparable store sales rose 6% and 5% in those periods.
o U.S. comparable store sales increased 5% in the second quarter and 2% in
the first half, and Japan comparable retail sales (on a
constant-exchange-rate basis) increased 2% and 7% in those periods.
o Two retail locations were opened during the second quarter, one in
Indianapolis, Indiana and one in Beijing, China.
o The Company repurchased and retired 2.5 million and 4.7 million shares of
its Common Stock during the second quarter and first half of 2006.
o In May 2006, the Board of Directors increased the annual dividend rate by
25%.
NON-GAAP MEASURES
- -----------------
The Company's reported sales reflect either a translation-related benefit from
strengthening foreign currencies or a detriment from a strengthening U.S.
dollar.
The Company reports information in accordance with U.S. Generally Accepted
Accounting Principles ("GAAP"). Internally, management monitors the sales
performance of its international stores and boutiques on a non-GAAP basis
12
that eliminates the positive or negative effects that result from translating
international sales into U.S. dollars ("constant-exchange-rate basis").
Management believes this constant-exchange-rate measure is a more representative
assessment of the sales performance of its international stores and boutiques
and provides better comparability between reporting periods.
The Company's management does not, nor does it suggest that investors should,
consider such 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.
The following table reconciles net sales percentage increases (decreases) from
the GAAP to the non-GAAP basis:
Second Quarter 2006 vs. 2005 First Half 2006 vs. 2005
--------------------------------------------- ---------------------------------------------
Constant- Constant-
Trans- Exchange- Trans- Exchange-
GAAP lation Rate GAAP lation Rate
Reported Effect Basis Reported Effect Basis
----------------------------------------------------------------------------------------------
Net Sales:
- ----------
Worldwide 9% (1%) 10% 7% (2%) 9%
U.S. Retail 8% - 8% 5% - 5%
International
Retail 10% (2%) 12% 12% (4%) 16%
Japan Retail 1% (5%) 6% 3% (8%) 11%
Other Asia-
Pacific 23% 2% 21% 21% - 21%
Europe 19% 3% 16% 18% (3%) 21%
Comparable Store Sales:
- ----------------------
Worldwide 6% - 6% 4% (1%) 5%
U.S. Retail 5% - 5% 2% - 2%
International
Retail 8% (2%) 10% 8% (5%) 13%
Japan Retail (3%) (5%) 2% (1%) (8%) 7%
Other Asia-
Pacific 28% 1% 27% 24% - 24%
Europe 20% 3% 17% 17% (3%) 20%
13
RESULTS OF OPERATIONS
- ---------------------
Certain operating data as a percentage of net sales were as follows:
Second Quarter First Half
----------------------------------- --------------------------------------
2006 2005 2006 2005
-----------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 44.9 44.5 44.5 45.3
----------------------------------- --------------------------------------
Gross profit 55.1 55.5 55.5 54.7
Selling, general and
administrative expenses 42.5 41.4 42.3 41.1
----------------------------------- --------------------------------------
Earnings from operations 12.6 14.1 13.2 13.6
Other expenses, net 0.8 0.8 0.8 0.8
----------------------------------- --------------------------------------
Earnings before income
taxes 11.8 13.3 12.4 12.8
Provision for income
taxes 4.6 3.7 4.8 4.1
----------------------------------- --------------------------------------
Net earnings 7.2% 9.6% 7.6% 8.7%
=================================== ======================================
Net Sales
- ---------
Net sales by channel of distribution were as follows:
(in thousands) Second Quarter
- ----------------------------------------------------------------------------------------------------------------------
2006 2005 Increase
-----------------------------------------------------------------------------
U.S. Retail $ 288,556 $ 267,710 8%
International Retail 223,153 202,104 10%
Direct Marketing 35,742 30,354 18%
Other 27,489 26,533 4%
-----------------------------------------------------------------------------
$ 574,940 $ 526,701 9%
=============================================================================
(in thousands) First Half
- ----------------------------------------------------------------------------------------------------------------------
2006 2005 Increase
-----------------------------------------------------------------------------
U.S. Retail $ 549,136 $ 523,562 5%
International Retail 438,317 392,420 12%
Direct Marketing 65,699 59,290 11%
Other 61,029 61,330 -
-----------------------------------------------------------------------------
$ 1,114,181 $ 1,036,602 7%
=============================================================================
A store's sales are included in "comparable store sales" when the store has been
open for more than 12 months. In all markets except Japan, sales for relocated
stores are included if the relocation occurs within the same geographical
market. In Japan, sales for a new store or boutique are not included if the
store was relocated from one department store to another or from a department
store to a free-standing location. The results of a store in which the square
footage has been expanded or reduced remain in the comparable store base in all
markets.
U.S. Retail sales increased 8% in the second quarter and 5% in the first half.
Comparable store sales increased 5% in the second quarter (consisting of
increases of 5% in the New York flagship store and 4% in branch stores) and 2%
in the first half (consisting of a 1% decline in the New York flagship store and
a 2% increase in branch stores), due to an increase in the average transaction
size. In both the second quarter and first half, the Company experienced growth
in most jewelry categories. Management continues to expect
14
a mid-single-digit percentage increase in full year 2006 U.S. comparable store
sales.
International Retail sales, on a constant-exchange-rate basis, increased 12% in
the second quarter and 16% in the first half. Comparable store sales increased
10% and 13% for those periods.
In Japan (which represented 20% of net sales in fiscal year 2005), on a
constant-exchange-rate basis, total retail sales increased 6% in the second
quarter and 11% in the first half, due to an increase in the average transaction
size. Strong sales of engagement and designer jewelry were experienced in the
second quarter and first half. Comparable store sales increased 2% and 7% for
the same periods. In addition to marketing new products, management is focused
on enhancing the quality of selling locations and improving sales training and
selling skills. Management currently expects a low-single-digit increase in full
year 2006 Japan comparable store sales.
In the Asia-Pacific region outside Japan (which represented 8% of net sales in
fiscal year 2005), comparable store sales on a constant-exchange-rate basis
increased 27% in the second quarter and 24% in the first half due to growth in
most markets.
In Europe (which represented 6% of net sales in fiscal year 2005), comparable
store sales on a constant-exchange-rate basis increased 17% in the second
quarter and 20% in the first half due to growth in London and all Continental
European markets.
Direct Marketing sales rose 18% in the second quarter and 11% in the first half
due to growth both in the number of orders shipped and the average order size.
Other sales increased 4% in the second quarter, while sales in the first half
were equal to the prior year. In the specialty retail businesses, sales in
LITTLE SWITZERLAND stores increased 10% in the second quarter and 3% in the
first half. The Company continues to invest in new IRIDESSE stores, which are
devoted to the sale of pearl jewelry, and there are now nine such stores.
15
The Company expects to increase gross square footage of TIFFANY & CO. stores by
7% (net) in 2006. Management's plan for openings and closings of TIFFANY & CO.
stores are shown below:
Actual Openings Expected
Location (Closings) 2006 Openings 2006
- -------- --------------- -------------
Mito, Japan First Quarter
Yonago, Japan First Quarter
Busan, Korea (First Quarter)
Monterrey, Mexico First Quarter
Indianapolis, Indiana Second Quarter
Tottori, Japan (Second Quarter)
Beijing, China Second Quarter
Atlantic City, New Jersey Third Quarter
Tucson, Arizona Third Quarter
Nashville, Tennessee Third Quarter
Waikoloa, Hawaii Fourth Quarter
Tokyo-Roppongi Hills, Japan Fourth Quarter
Shanghai, China Third Quarter
Macau, China Third Quarter
Busan, Korea Third Quarter
Vienna, Austria Third Quarter
Vancouver, Canada Fourth Quarter
Gross Margin
- ------------
Gross margin declined in the second quarter by 0.4 percentage point primarily
driven by higher product costs. Gross margin improved in the first half by 0.8
percentage point driven by favorable product sales mix partly offset by higher
product costs. The Company is addressing, and as necessary will continue to
address, the effect of higher precious metal costs by adjusting retail prices in
various product categories.
Management's long-term strategy and objectives include achieving product
manufacturing/sourcing efficiencies (including increased direct rough-diamond
sourcing and internal manufacturing) and implementing selective price
adjustments in order to maintain the Company's gross margin at, or above, prior
year levels. Management expects gross margin in the full year 2006 to be
approximately equal to the prior year.
Selling, General and Administrative ("SG&A") Expenses
- -----------------------------------------------------
SG&A expenses increased 12% in the second quarter and 10% in the first half
largely due to increased labor, depreciation and occupancy expenses (largely due
to incremental growth). In addition, marketing expense increased in the first
half largely due to the launch of the Frank Gehry jewelry collection. As a
percentage of net sales, SG&A expenses increased in the second quarter and the
first half because sales growth was insufficient to offset increased marketing
expenses and fixed costs. Management's objective is to improve the ratio of SG&A
expenses to net sales by controlling expenses so that anticipated sales growth
will result in improved earnings. Management continues to expect a
high-single-digit percentage increase in SG&A expenses in full year 2006 and, if
sales expectations are achieved, an improvement in the expense ratio.
16
Earnings from Operations
- ------------------------
Revisions were made to prior year's earnings (losses) from operations by segment
to conform to the current year presentation and to reflect the manner in which
management now evaluates the performance of segments. (See Note 7 to the
Condensed Consolidated Financial Statements).
Second Second
Quarter % of Quarter % of
(in thousands) 2006 Sales* 2005 Sales*
- ----------------------------------------------------------------------------------------------------------------------
Earnings (losses) from operations:
U.S. Retail $ 48,799 17% $ 53,268 20%
International Retail 53,462 24% 44,344 22%
Direct Marketing 11,194 31% 9,516 31%
Other (7,404) (27%) (3,127) (12%)
------------------------------------------------------------------
106,051 104,001
Unallocated corporate expenses (33,415) (29,933)
------------------------------------------------------------------
Earnings from operations $ 72,636 $ 74,068
==================================================================
* Percentages represent earnings (losses) from operations as a percentage of
each segment's net sales.
Earnings from operations declined 2% in the second quarter. On a segment basis,
the ratio of earnings (losses) from operations (before the effect of unallocated
corporate expenses and other expenses, net) to each segment's net sales in the
second quarter of 2006 and 2005 was as follows:
o U.S. Retail declined 3 percentage points primarily due to a decline in
gross margin (due to higher product costs) and increased SG&A expenses
(particularly labor, depreciation and occupancy expenses);
o International Retail increased 2 percentage points primarily due to sales
growth and an improved gross margin (due to a change in product mix) and
the leveraging of operating expenses;
o Direct Marketing was consistent with the prior year. A decrease in gross
margin (due to higher product costs) was offset by the leveraging of
operating expenses; and
o Other decreased 15 percentage points primarily due to the continued
investment in the expansion of the specialty retail businesses.
First Half % of First Half % of
(in thousands) 2006 Sales* 2005 Sales*
- ----------------------------------------------------------------------------------------------------------------------
Earnings (losses) from operations:
U.S. Retail $ 95,577 17% $ 99,529 19%
International Retail 108,358 25% 88,416 23%
Direct Marketing 19,342 29% 18,192 31%
Other (10,816) (18%) (4,642) (8%)
------------------------------------------------------------------
212,461 201,495
Unallocated corporate expenses (65,578) (61,116)
------------------------------------------------------------------
Earnings from operations $ 146,883 $ 140,379
==================================================================
* Percentages represent earnings (losses) from operations as a percentage of
each segment's net sales.
Earnings from operations rose 5% in the first half. On a segment basis, the
ratio of earnings (losses) from operations (before the effect of unallocated
17
corporate expenses and other expenses, net) to each segment's net sales in the
first half of 2006 and 2005 was as follows:
o U.S. Retail decreased 2 percentage points primarily due to increased SG&A
expenses (higher labor, depreciation and occupancy expenses, as well as
marketing expenses largely tied to the launch of the Frank Gehry jewelry
collection);
o International Retail increased 2 percentage points primarily due to sales
growth and an improved gross margin (due to a change in product mix) and
the leveraging of operating expenses;
o Direct Marketing decreased 2 percentage points primarily due to a decline
in gross margin (due to higher product costs) and increased operating
expenses; and
o Other decreased 10 percentage points primarily due to the continued
investment in the expansion of the specialty retail businesses.
Unallocated corporate expenses include certain costs related to administrative
support functions, such as information technology, finance, legal and human
resources, which the Company does not allocate to its segments. Increases of 12%
in the second quarter and 7% in the first half were due to incremental labor and
occupancy costs.
Provision for Income Taxes
- --------------------------
The effective income tax rates for the second quarter and first half of 2006
were 38.9% and 38.7%, versus 28.0% and 31.5% in the prior year. The lower
effective tax rates in the second quarter and first half of 2005 primarily
reflected tax benefits of $6,600,000 and $8,100,000, respectively, associated
with the repatriation provisions of the American Jobs Creation Act of 2004.
Management continues to expect the effective tax rate to be approximately 38%
for full year 2006.
New Accounting Standards
- ------------------------
See Note 2 to Condensed Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's liquidity needs are primarily a function of its requirements for
seasonal and expansion-related working capital and capital expenditures. The
Company had a net cash outflow from operating activities of $72,726,000 in the
first half of 2006, compared with an outflow of $1,102,000 in the first half of
2005. Inventory purchases in the first half of 2006 were higher than in the
first half of 2005, as discussed in the Working Capital section below. In
addition, tax payments in 2006 were lower than 2005 when taxes on the gain from
the sale of the Company's equity investment in Aber Diamond Corporation were
paid.
Working Capital
- ---------------
Working capital (current assets less current liabilities) and the corresponding
current ratio (current assets divided by current liabilities) were
$1,233,364,000 and 3.8 at July 31, 2006, compared with $1,334,233,000 and 4.7 at
January 31, 2006 and $1,171,768,000 and 5.3 at July 31, 2005.
Accounts receivable, less allowances at July 31, 2006 were 1% higher than at
January 31, 2006 and were 14% higher than at July 31, 2005 primarily due to
sales growth.
Inventories, net at July 31, 2006 were 17% above those at January 31, 2006 and
16% above those at July 31, 2005. Combined raw material and work-in-process
inventories increased 31% versus January 31, 2006 and 40% versus July 31, 2005
due to increased precious metal costs and diamond quantities needed
18
to support increased internal jewelry manufacturing. Finished goods inventories
increased 11% versus January 31, 2006, and 8% versus July 31, 2005, reflecting
anticipated comparable store sales growth and store openings. Changes in foreign
currency exchange rates increased inventories, net by 1% compared to January 31,
2006 and had an insignificant effect on the change in inventory balances from
July 31, 2005.
The Company continually strives to improve its inventory management by
developing more effective systems and processes for product development,
assortment planning, sales forecasting, supply-chain logistics and store
replenishment. Management continues to expect a mid-to-high single-digit
percentage increase in the overall year-over-year inventory growth rate in 2006.
Capital Expenditures
- --------------------
Capital expenditures were $88,339,000 in the first half of 2006 compared with
$76,310,000 in the first half of 2005. Management estimates that capital
expenditures will be approximately $170,000,000 in 2006 (compared with
approximately $157,000,000 in the prior year) due to costs related to the
opening and renovation of stores and to ongoing investments in new systems.
In 2000, the Company began a multi-year project to renovate and reconfigure its
New York flagship store in order to increase the total sales area by
approximately 25%, and to provide additional space for customer service,
customer hospitality and special exhibitions. The Company has spent
approximately $99,000,000 to-date for New York store related projects and
estimates that the overall cost of these projects will be $110,000,000 when
completed by the end of 2006.
Share Repurchases
- -----------------
In March 2005, the Company's Board of Directors approved a stock repurchase
program ("2005 Program") that authorized the repurchase of up to $400,000,000 of
the Company's Common Stock through March 2007 by means of open market or private
transactions. The 2005 Program replaced and terminated an earlier program. The
timing of repurchases and the actual number of shares to be repurchased depend
on a variety of discretionary factors such as price and other market conditions.
In the second quarter, the Company repurchased and retired 2,525,135 shares of
Common Stock at a total cost of $83,839,000, or an average cost of $33.20 per
share. In the first half of 2006, the Company repurchased and retired 4,704,407
shares of Common Stock at a total cost of $163,589,000, or an average cost of
$34.77 per share. In August 2006, the Company's Board of Directors extended the
expiration date of the Company's 2005 Program to December 2009. In addition, the
Company's Board of Directors authorized the Company to repurchase up to an
additional $700,000,000 of the Company's common stock through open market or
private transactions. With the additional authorization, there remains
$812,577,000 available for future repurchases.
Borrowings
- ----------
The Company's sources of working capital are internally-generated cash flows and
funds available under a revolving credit facility.
The ratio of total debt (short-term borrowings, current portion of long-term
debt and long-term debt) to stockholders' equity was 33% at July 31, 2006, 26%
at January 31, 2006 and 24% at July 31, 2005.
At July 31, 2006, the Company was in compliance with all loan covenants.
Based on the Company's financial position at July 31, 2006, management
anticipates that cash on hand, internally-generated cash flows and the funds
available under its revolving credit facility will be sufficient to support
19
the Company's planned worldwide business expansion, share repurchases, debt
service and seasonal working capital increases for the foreseeable future.
Contractual Obligations
- -----------------------
The Company's contractual cash obligations and commercial commitments at July
31, 2006 and the effects such obligations and commitments are expected to have
on the Company's liquidity and cash flows in future periods have not
significantly changed since January 31, 2006.
Seasonality
- -----------
As a jeweler and specialty retailer, the Company's business is seasonal in
nature, with the fourth quarter typically representing a proportionally greater
percentage of annual sales, earnings from operations and cash flow. Management
expects such seasonality to continue.
Forward-Looking Statements
- --------------------------
This document contains certain "forward-looking statements" concerning the
Company's objectives and expectations with respect to store openings, sales,
retail prices, gross profit, expenses, inventory performance, capital
expenditures and cash flow. In addition, management makes other forward-looking
statements from time to time concerning objectives and expectations. Statements
beginning with such words as "believes", "intends", "plans", and "expects"
include forward-looking statements that are based on management's expectations
given facts as currently known by management on the date this quarterly report
was filed with the Securities and Exchange Commission. All forward-looking
statements involve risks, uncertainties and assumptions that, if they never
materialize or prove incorrect, could cause actual results to differ materially
from those expressed or implied by such forward-looking statements.
The statements in this quarterly report are made as of the date this quarterly
report was filed with the Securities and Exchange Commission and the Company
undertakes no obligation to update any of the forward-looking information
included in this document, whether as a result of new information, future
events, changes in expectations or otherwise.
20
PART I. Financial Information
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
The Company is exposed to market risk from fluctuations in foreign currency
exchange rates and interest rates, which could affect its consolidated financial
position, earnings and cash flows. The Company manages its exposure to market
risk through its regular operating and financing activities and, when deemed
appropriate, through the use of derivative financial instruments. The Company
uses derivative financial instruments as risk management tools and not for
trading or speculative purposes, and does not maintain such instruments that may
expose the Company to significant market risk.
In Japan, the Company uses yen put options to minimize the effect of a weakening
yen on U.S. dollar-denominated transactions. To a lesser extent, the Company
uses foreign-exchange forward contracts to protect against weakening local
currencies. Gains or losses on these instruments substantially offset losses or
gains on the assets, liabilities and transactions being hedged. Management
neither foresees nor expects significant changes in foreign currency exposure in
the near future.
The Company uses interest-rate swap contracts related to certain debt
arrangements to manage its net exposure to interest rate changes. The
interest-rate swap contracts effectively convert fixed-rate obligations to
floating-rate instruments. Additionally, since the fair value of the Company's
fixed-rate long-term debt is sensitive to interest rate changes, the
interest-rate swap contracts serve as a hedge to changes in the fair value of
these debt instruments.
Management does not expect significant changes in exposure to interest rate
fluctuations, nor in market risk-management practices.
21
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Based on their evaluation of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934), Registrant's chief executive officer and chief financial officer
concluded that, as of the end of the period covered by this report, Registrant's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by Registrant in the reports that it files or submits
under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and forms and
(ii) accumulated and communicated to our management, including our chief
executive officer and chief financial officer, to allow timely decisions
regarding required disclosure.
In addition, Registrant's chief executive officer and chief financial
officer have determined that there have been no changes in Registrant's internal
control over financial reporting during the period covered by this report
identified in connection with the evaluation described in the above paragraph
that have materially affected, or are reasonably likely to materially affect,
Registrant's internal control over financial reporting.
Registrant's management, including its chief executive officer and chief
financial officer necessarily applied their judgment in assessing the costs and
benefits of such controls and procedures. By their nature, such controls and
procedures cannot provide absolute certainty, but can provide reasonable
assurance regarding management's control objectives. Our chief executive officer
and our chief financial officer have concluded that Registrant's disclosure
controls and procedures are (i) designed to provide such reasonable assurance
and (ii) are effective at that reasonable assurance level.
22
PART II. Other Information
Item 1A. Risk Factors
As a jeweler and specialty retailer, the Company's success in achieving its
objectives and expectations is partially dependent upon economic conditions,
competitive developments and consumer attitudes, including changes in consumer
preferences for certain jewelry styles and materials. However, certain
assumptions are specific to the Company and/or the markets in which it operates.
The following assumptions, among others, are "risk factors" which could affect
the likelihood that the Company will achieve the objectives and expectations
communicated by management:
(i) that low or negative growth in the economy or in the financial markets,
particularly in the U.S. and Japan, will not occur and reduce discretionary
spending on goods that are, or are perceived to be, "luxuries";
(ii) that consumer spending does not decline substantially during the fourth
quarter of any year;
(iii) that unsettled regional and/or global conflicts or crises do not result in
military, terrorist or other conditions creating disruptions or disincentives
to, or changes in the pattern, practice or frequency of, tourist travel to the
various regions where the Company operates retail stores nor to the Company's
continuing ability to operate in those regions;
(iv) that sales in Japan will not decline substantially;
(v) that there will not be a substantial adverse change in the exchange
relationship between the Japanese yen and the U.S. dollar;
(vi) that Mitsukoshi and other department store operators in Japan, in the face
of declining or stagnant department store sales, will not close or consolidate
stores which have TIFFANY & CO. retail locations;
(vii) that Mitsukoshi will continue as a leading department store operator in
Japan;
(viii) that existing product supply arrangements, including license arrangements
with third-party designers, will continue;
(ix) that the wholesale and retail market for high-quality rough and cut
diamonds will provide continuity of supply and pricing within the quality
grades, colors and sizes that customers demand;
(x) that the Company's diamond supply initiatives achieve their financial and
strategic objectives;
(xi) that the Company's gross margins in Japan and for diamond products can be
maintained in the face of increased competition from traditional and e-commerce
retailers;
(xii) that the Company is able to pass on higher costs of raw materials to
consumers through price increases;
23
(xiii) that the sale of counterfeit products does not significantly undermine
the value of the Company's trademarks and demand for the Company's products;
(xiv) that new and existing stores and other sales locations can be leased,
re-leased or otherwise obtained on suitable terms in desired markets and that
construction can be completed on a timely basis;
(xv) that the Company can achieve satisfactory results from any current and
future businesses into which it enters that are operated under trademarks or
tradenames other than TIFFANY & CO.; and
(xvi) that the Company's expansion plans for retail and direct selling
operations and merchandise development, production and management can continue
to be executed without meaningfully diminishing the distinctive appeal of the
TIFFANY & CO. brand.
PART II. Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
This table provides information with respect to purchases by the Company of
shares of its Common Stock during the second fiscal quarter of 2006:
- --------------------------------------------------------------------------------------------------------------
(c)Total
Number of (d)Approximate
Shares Dollar Value
Purchased of Shares that
(a)Total Under all May Yet be
Number of (b)Average Publicly Purchased
Shares Price Paid Announced Under the
Period Purchased Per Share Programs* Programs*
- --------------------------------------------------------------------------------------------------------------
May 1, 2006
through
May 31, 2006 - - - $196,416,000
- --------------------------------------------------------------------------------------------------------------
June 1, 2006
through
June 30, 2006 2,525,135 $33.20 2,525,135 $112,577,000
- --------------------------------------------------------------------------------------------------------------
July 1, 2006
through
July 31, 2006 - - - $112,577,000
- --------------------------------------------------------------------------------------------------------------
Total 2,525,135 $33.20 2,525,135 $812,577,000
==============================================================================================================
* $812,577,000 remains available for future repurchases giving effect to
action taken by Registrant's Board of Directors in August 2006. Prior to
such action, the current stock repurchase program authorized the Company to
repurchase up to $400,000,000 of its Common Stock through open market or
private transactions and was scheduled to expire on March 30, 2007. In
August 2006, the Company's Board of Directors extended the expiration date
of the program to December 2009 and increased the authorization amount by
$700,000,000.
24
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
At Registrant's Annual Meeting of Stockholders held on May 18, 2006 each of the
nominees listed below was elected a director of Registrant to hold office until
the next annual meeting of the stockholders and until his or her respective
successor has been elected and qualified. Tabulated with the name of each of the
nominees elected is the number of Common shares cast for each nominee and the
number of Common shares withholding authority to vote for each nominee. There
were no broker non-votes or abstentions with respect to the election of
directors.
Nominee Voted For Withholding Authority
Michael J. Kowalski 122,132,608 3,771,165
Rose Marie Bravo 122,957,191 2,946,582
William R. Chaney 122,153,271 3,750,502
Samuel L. Hayes III 121,752,410 4,151,363
Abby F. Kohnstamm 120,276,399 5,627,374
Charles K. Marquis 121,838,905 4,064,868
J. Thomas Presby 121,064,363 4,839,410
James E. Quinn 122,191,322 3,712,451
William A. Shutzer 120,233,896 5,669,877
At such meeting, the stockholders approved the appointment of
PricewaterhouseCoopers LLP as the independent registered public accounting firm
to examine the Company's fiscal 2006 financial statements. With respect to such
appointment, 123,252,059 shares were voted to approve, 1,928,367 were voted
against, and 723,347 shares abstained from voting. There were no broker
non-votes with respect to the approval of the appointment of
PricewaterhouseCoopers LLP.
The stockholders approved an amendment to the Company's 2005 Employee Incentive
Plan to add additional limits on awards that may be made thereunder. With
respect to such approval, 103,032,501 shares were voted to approve, 3,289,764
shares were voted against, and 1,547,846 shares abstained from voting. There
were 18,033,662 broker non-votes with respect to the approval of the amendment
to the Company's 2005 Employee Incentive Plan.
25
ITEM 6 Exhibits
(a) Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
26
SIGNATURES
----------
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.
(Registrant)
Date: September 1, 2006 By: /s/ James N. Fernandez
----------------------------
James N. Fernandez
Executive Vice President and
Chief Financial
(principal financial officer)
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NUMBER
31.1 Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.