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 quarter ended April 30, 1995. OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition 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 .
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, 15,736,784 shares outstanding
at the close of business on April 30, 1995.
TIFFANY & CO. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED APRIL 30, 1995
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets - April 30, 1995
(Unaudited) and January 31, 1995 3
Consolidated Statements of Income - for the
three months ended April 30, 1995
and 1994 (Unaudited) 4
Consolidated Statements of Stockholders'
Equity - for the three months ended
April 30, 1995 (Unaudited) 5
Consolidated Statements of Cash Flows - for
the three months ended April 30, 1995
and 1994 (Unaudited) 6
Notes to Consolidated Financial Statements 7-8
(Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
(a) Exhibits
(b) Reports on Form 8-K
- 2 -
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
April 30, January 31,
1995 1995*
(Unaudited)
ASSETS
Current assets:
Cash and short-term investments $ 16,631 $ 44,318
Accounts receivable, less allowances of
$5,051 and $5,721 58,216 61,622
Income tax receivable 7,925 7,925
Inventories 295,370 270,075
Prepaid expenses 16,786 17,868
------- -------
Total current assets 394,928 401,808
Property and equipment, net 107,815 103,478
Deferred income taxes 14,324 14,094
Other assets, net 32,740 31,992
------- -------
$549,807 $551,372
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 58,122 $ 60,696
Accounts payable and accrued liabilities 76,673 81,639
Income taxes payable 4,383 13,607
Merchandise and other customer credits 8,606 8,529
------- -------
Total current liabilities 147,784 164,471
Long-term trade payable 32,659 27,591
Reserve for product return 13,103 13,103
Long-term debt 101,500 101,500
Deferred income taxes 2,917 3,298
Postretirement/employment benefit obligation 17,015 16,581
Other long-term liabilities 3,244 3,131
Commitments and contingencies
Stockholders' equity:
Common Stock, $.01 par value; authorized
30,000 shares, issued 15,737 and 15,703 157 157
Additional paid-in capital 72,757 71,821
Retained earnings 152,091 151,032
Foreign currency translation adjustments 6,580 (1,313)
------- --------
Total stockholders' equity 231,585 221,697
======= ========
$549,807 $551,372
* Reclassified for comparative purposes
See notes to consolidated financial statements
- 3 -
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
For the
Three Months Ended
April 30,
1995 1994
Net sales $150,144 $131,207
Cost of goods sold 72,781 64,007
------- -------
Gross profit 77,363 67,200
Selling, general and administrative
expenses 70,272 60,783
Provision for uncollectible accounts 334 303
------- -------
Income from operations 6,757 6,114
Other expenses, net 2,961 2,817
------- -------
Income before income taxes 3,796 3,297
Provision for income taxes 1,636 1,421
------- -------
Net income $ 2,160 $ 1,876
======= =======
Net income per share:
Primary $ 0.14 $ 0.12
======= =======
Fully diluted $ 0.14 $ 0.12
======= =======
Weighted average number of common shares:
Primary 15,862 15,803
Fully diluted 16,759 16,696
See notes to consolidated financial statements.
- 4 -
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)
Foreign
Total Additional Currency
Stockholders' Common Stock Paid-In Retained Translation
Equity Shares Amount Capital Earnings Adjustments
BALANCES, January 31, 1995 $221,697 15,703 $157 $71,821 $151,032 $(1,313)
Issuance of Common Stock 598 19 - 598 - -
Exercise of stock options 231 15 - 231 - -
Tax benefit from exercise of
stock options 107 - - 107
Cash dividends on
Common Stock (1,101) - - - (1,101) -
Foreign currency translation
adjustments 7,893 - - - - 7,893
Net income 2,160 - - - 2,160 -
------- ------ ------ ------- ------- -------
BALANCES, April 30, 1995 $231,585 15,737 $157 $72,757 $152,091 $ 6,580
======= ====== ====== ======= =======
See notes to consolidated financial statements
- 5 -
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
For the
Three Months Ended
April 30,
1995 1994*
Cash Flows From Operating Activities:
Net income $ 2,160 $ 1,876
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 4,360 4,196
Provision for uncollectible accounts 334 303
Reduction in reserve for product return - (184)
Provision for inventories 212 255
Deferred income taxes (711) (362)
Income tax receivable - (2,972)
Provision for postretirement/employment benefits 434 426
(Increase)/decrease in assets and increase/
(decrease) in liabilities, net of acquisitions:
Accounts receivable 6,196 12,957
Inventories (6,176) (12,641)
Prepaid expenses 1,640 (109)
Other assets, net (627) (3,386)
Accounts payable 2,394 (505)
Accrued liabilities (9,587) (181)
Income taxes payable (9,867) (4,055)
Merchandise and other customer credits 77 (23)
Other long-term liabilities 141 332
------ ------
Net cash used in operating activities (9,020) (4,073)
====== ======
Cash Flows From Investing Activities:
Capital expenditures (7,396) (2,495)
Disposal of assets 357 -
Other - (127)
------ -------
Net cash used in investing activities (7,039) (2,622)
------ -------
Cash Flows From Financing Activities:
(Decrease)/increase in short-term borrowings (11,463) 10,983
Issuance of Common Stock 598 -
Proceeds from exercise of stock options 231 70
Tax benefit from exercise of stock options 107 4
Cash dividends on Common Stock (1,101) (1,096)
------ ------
Net cash (used in)/provided by financing activities (11,628) 9,961
====== ======
Net (decrease)/increase in cash and
short-term investments (27,687) 3,266
Cash and short-term investments at beginning
of year 44,318 4,994
------ ------
Cash and short-term investments at end of three
months $ 16,631 $ 8,260
====== ======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the three months for:
Interest expense $ 3,670 $ 3,102
====== ======
Income taxes $ 12,179 $ 8,816
====== ======
*Reclassified for comparative purposes
See notes to consolidated financial statements
- 6 -
TIFFANY & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the accounts
of Tiffany & Co. and all majority-owned domestic and foreign
subsidiaries (the "Company"). All material intercompany balances and
transactions have been eliminated. The statements are without audit
and, in the opinion of management, include all adjustments (which
include only normal recurring adjustments except for the adjustment
necessary as a result of the LIFO method of inventory valuation, which
is based on assumptions as to inflation rates and projected fiscal year-
end inventory levels) necessary to present fairly the Company's
financial position as of April 30, 1995 and the results of operations
and cash flows for the interim periods presented. The audited financial
statements for January 31, 1995 are presented without accompanying
footnotes which are included in the Company's Form 10-K filing.
Since the Company's business is seasonal, with a higher proportion of
sales and income generated in the last quarter of the fiscal year, the
results of operations for the three months ended April 30, 1995 and 1994
are not necessarily indicative of the results of the entire fiscal year.
2. INVENTORIES
Inventories at April 30, 1995 and January 31, 1995 are summarized
as follows:
April 30, January 31,
1995 1995
(in thousands)
Finished goods $248,706 $227,412
Raw materials 43,128 38,262
Work in process 6,476 6,869
------- -------
298,310 272,543
Reserves (2,940) (2,468)
------- -------
$295,370 $270,075
======= =======
At April 30, and January 31, 1995, $198,321,000 and $189,943,000,
respectively, of inventories were valued using the LIFO method. The
excess of such inventories valued at replacement cost over the value
based upon the LIFO method was approximately $10,670,000 and $9,770,000
at April 30, 1995 and January 31, 1995, respectively. The LIFO
valuation method had the effect of decreasing net income by $0.03 per
share, for the three month periods ended April 30, 1995 and 1994,
respectively.
- 7 -
3. REVOLVING CREDIT FACILITY
The Company is in the process of arranging for a new five-year
$130,000,000 multicurrency revolving credit facility to replace the
current $100,000,000 revolving credit facility and yen 2,500,000,000
($29,690,000) non-collateralized line of credit, both of which expire in
July 1995. The Company has received signed commitment letters from the
participating lenders, subject to their satisfactory review of
documentation.
4. EARNINGS PER SHARE
Primary earnings per common share data has been computed by dividing net
income by the weighted average number of shares outstanding during the
period, including dilutive stock options. Fully diluted earnings per
common share has been computed by dividing net income, after giving
effect to the elimination of interest expense and bond amortization
fees, net of income tax effect, applicable to the convertible
subordinated debentures, by the weighted average number of shares
outstanding including dilutive stock options and the assumed conversion
of the subordinated debentures using the "if converted" method.
5. SUBSEQUENT EVENT
On May 18, 1995, Tiffany's Board of Directors declared a quarterly
dividend of $0.07 per common share. This dividend will be paid on
July 10, 1995 to stockholders of record on June 20, 1995.
- 8 -
PART I. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company operates three channels of distribution: U.S. Retail includes
retail sales in Company-operated stores in the U.S. and wholesale sales to
independent retailers in North America; Direct Marketing includes corporate
(business-to-business) and catalog sales; and International Retail includes
retail sales through Company-operated stores and boutiques, corporate sales,
and wholesale sales to independent retailers and distributors in Asia-Pacific,
Europe, Canada and the Middle East.
Net sales increased 14% in the first quarter. Sales by channel of distribution
were as follows:
Three months ended
April 30,
(in thousands) 1995 1994
U.S. Retail $ 61,769 $ 57,223
Direct Marketing 18,763 18,807
International Retail 69,612 55,177
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$150,144 $131,207
======= =======
======= ========
U.S. Retail sales increased 8% in the first quarter. Comparable U.S. store
sales increased 7%, which included 5% growth in New York retail sales and 9%
growth in U.S. branch store sales. The sales increase was generated by a
higher volume of retail transactions, primarily made by local-resident
customers, as opposed to international tourists.
Direct Marketing sales in the first quarter were nearly equal to the prior
year. Catalog sales rose 11% due to a higher number of orders; however,
corporate sales declined 5%, reflecting continued cautious spending by the
corporate division's customers.
International Retail sales increased 26% in the first quarter. The Company
achieved sales growth in many of its international markets which, based on the
generally weakened U.S. dollar, was further increased when translated into
U.S. dollars. In Japan, the Company's largest international market,
comparable store sales rose 11% in yen. Management believes the Company's
results in Japan have benefitted from the Company's recent merchandising,
marketing and publicity initiatives, as well as from favorable consumer
response to price reductions made in Japan in October 1993 and June 1994. The
Company also achieved sales growth elsewhere in the Asia-Pacific region and in
Europe.
The Company's reported sales and earnings results benefit from a strengthening
Japanese yen and are adversely affected by a strengthening U.S. dollar. The
Company maintains a foreign currency hedging program for merchandise purchase
transactions initiated from Japan in order to reduce the potential negative
impact of a significant strengthening of the U.S. dollar against the yen on
the Company's financial results. The Company's pretax expense related to its
hedging program was $252,000 in 1995's first quarter, compared with $182,000
in 1994's first quarter.
Gross margin (gross profit as a percentage of net sales) was 51.5% in the
first quarter, compared with 51.2% in the comparable 1994 period. The
increase was primarily attributable to favorable shifts in sales mix between
channels of distribution, which more than offset the effect of a June 1994
price reduction in Japan.
Operating expenses (selling, general and administrative expenses and the
provision for uncollectible accounts) increased 16% in the first quarter
compared with 1994's first quarter. The increase was due to incremental
occupancy, staffing and marketing expenses related to the Company's worldwide
expansion program, as well as to the weakened U.S. dollar and its effect on
the translation of foreign operating expenses into U.S. dollars. As a
percentage of net sales, operating expenses were 47.0% and 46.6% in the first
quarters of 1995 and 1994, respectively.
As a result of the above factors, net income of $2,160,000, or $0.14 per
share, was 15% higher than $1,876,000, or $0.12 per share, in the first
quarter of 1994.
FINANCIAL CONDITION
Management believes that the Company's financial condition at April 30, 1995
provides sufficient liquidity and resources to support current business
activity and planned expansion.
Working capital and the current ratio were $247,144,000 and 2.7:1 at April 30,
1995 compared with $234,687,000 and 2.4:1 at January 31, 1995. Inventories
(which represent the largest component of working capital) at April 30, 1995
were 9% higher than at January 31, 1995. A significant portion of the
increase was due to the weakened U.S. dollar and its effect on the translation
of foreign inventories into U.S. dollars and, to a lesser extent, to
merchandise purchases to support sales growth, new stores and expanded product
offerings. Inventory turnover was 1.0 times at April 30, 1995 and 0.9 times at
January 31, 1995. The Company's objective is to continue to improve inventory
performance through: refinement of replenishment systems; a reorganization of
merchandising management to increase the focus on the specialized disciplines
of product development, assortment planning and inventory management; the
creation of a visual merchandising group to improve the presentation and
management of display inventories in each store; and assortment editing by
product category.
Capital expenditures were $7,396,000 in the first quarter of 1995 compared
with $2,495,000 in 1994's first quarter. The increase was related to the
opening and/or renovation of retail stores, as well as relocations and/or
renovations of certain administrative and manufacturing facilities. Based on
current expansion plans, the Company expects capital expenditures in fiscal
1995 will be approximately $30,000,000, compared with $18,977,000 in fiscal
1994.
The Company incurred a net cash outflow from operating activities of
$9,020,000 in the first quarter of 1995, compared with an outflow of
$4,073,000 in 1994's first quarter. Net debt (short-term borrowings and long-
term debt, less cash and short-term investments) and the ratio of net debt to
total capital (net debt and stockholders' equity) was $142,991,000 and 38% at
April 30, 1995 compared with $117,878,000 and 35% at January 31, 1995. In
addition, the Company had a long-term trade payable of yen 2,750,000,000
($32,659,000) at April 30, 1995 and yen 2,750,000,000 ($27,591,000) at January
31, 1995 which relates to certain merchandise repurchased in 1993 under the
Company's realignment of its Japan business and is payable to Mitsukoshi Ltd.
on February 28, 1998. It is management's goal, on an annual basis, to improve
inventory turnover and generate excess cash flow to reduce the ratio of net
debt to total capital.
The Company's sources of working capital are internally generated funds and
funds available under a $100,000,000 revolving credit facility and a yen
2,500,000,000 ($29,690,000) non-collateralized line of credit. The Company is
in the process of arranging for a new five-year $130,000,000 multicurrency
revolving credit facility to replace the current credit facility and line of
credit, both of which expire in July 1995. The Company has received signed
commitment letters from the participating lenders, subject to their
satisfactory review of documentation. Management anticipates that internally
generated funds and funds available under the new facility will be sufficient
to support the Company's planned worldwide business expansion, as well as
seasonal working capital increases typically required during the third and
fourth quarters of each year.
The Company's business is seasonal in nature, with the fourth quarter
typically representing a proportionally greater percentage of annual sales,
income from operations, net income and cash flow. Management expects such
seasonality to continue in the future.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.60 Registrant's 1988 Director Stock Option Plan as amended May
18, 1995, and form of Stock Option Agreement.
11 Statement re Computation of Per Share Earnings.
(b) Reports on form 8-K
None.
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: June 8, 1995 By: /s/ James N. Fernandez
James N. Fernandez
Senior Vice President - Finance
and Chief Financial Officer
(principal financial officer)
EXHIBIT INDEX
Exhibit
Number
10.60 Registrant's 1988 Director Stock Option Plan as amended May 18,
1995, and form of Stock Option Agreement.
11 Statement re Computation of Per Share Earnings