SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarter ended October 31, 1996. 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, 34,494,963 shares outstanding at the close
of business on October 31, 1996.
TIFFANY & CO. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 31, 1996
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets - October 31, 1996
(Unaudited), January 31, 1996 and
October 31, 1995 (Unaudited) 3
Consolidated Statements of Income - for the
three and nine months ended October 31, 1996
and 1995 (Unaudited) 4
Consolidated Statements of Stockholders' Equity -
for the three and nine months ended
October 31, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows - for
the nine months ended October 31, 1996
and 1995 (Unaudited) 6
Notes to Consolidated Financial Statements
(Unaudited) 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
(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)
October 31, January 31, October 31,
1996 1996 1995*
----------- ------------ -----------
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and short-term investments $ 19,794 $ 81,966 $ 38,178
Accounts receivable, less allowances
of $5,919, $5,698 and $4,912 80,403 80,084 68,626
Inventories 389,910 311,252 323,384
Deferred income taxes 9,100 8,060 7,944
Prepaid expenses 28,843 20,584 21,372
-------- -------- --------
Total current assets 528,050 501,946 459,504
Property and equipment, net 131,232 115,214 117,628
Deferred income taxes 7,575 10,033 8,582
Other assets, net 35,531 27,064 27,461
-------- -------- --------
$702,388 $654,257 $613,175
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 74,218 $ 78,967 $ 80,476
Accounts payable and accrued liabilities 131,277 108,829 107,941
Income taxes payable 240 19,672 9,682
Merchandise and other customer credits 12,522 11,054 9,776
-------- -------- -------
Total current liabilities 218,257 218,522 207,875
Long-term trade payable - 25,688 26,975
Reserve for product return 6,428 11,238 11,941
Long-term debt 95,340 101,500 101,500
Postretirement/employment benefit obligation 18,997 18,031 17,715
Other long-term liabilities 15,496 14,900 11,834
Commitments and contingencies
Stockholders' equity:
Common Stock, $.01 par value; authorized
60,000 shares, issued 34,495, 31,976 and 31,622 345 320 316
Additional paid-in capital 148,979 82,460 75,019
Retained earnings 203,918 185,823 161,464
Foreign currency translation adjustments (5,372) (4,225) (1,464)
-------- -------- --------
Total stockholders' equity 347,870 264,378 235,335
-------- -------- --------
$702,388 $654,257 $613,175
======== ======== ========
* 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 For the
Three Months Ended Nine Months Ended
October 31, October 31,
------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
Net sales $210,985 $187,766 $594,489 $522,592
Cost of goods sold 96,701 87,062 279,957 248,107
-------- -------- -------- --------
Gross profit 114,284 100,704 314,532 274,485
Selling, general and administrative
expenses 95,183 88,776 265,483 242,537
Provision for uncollectible accounts 458 110 1,250 806
-------- -------- -------- --------
Income from operations 18,643 11,818 47,799 31,142
Other expenses, net 2,186 765 7,886 6,948
-------- -------- -------- --------
Income before income taxes 16,457 11,053 39,913 24,194
Provision for income taxes 7,110 4,779 17,243 10,452
-------- -------- -------- --------
Net income $ 9,347 $ 6,274 $ 22,670 $ 13,742
======== ======== ======== ========
Net income per share:
Primary $ 0.26 $ 0.19 $ 0.65 $ 0.43
======== ======== ======== ========
Fully diluted $ 0.26 $ 0.19 $ 0.65 $ 0.43
======== ======== ======== ========
Weighted average number of common shares:
Primary 35,845 32,407 34,654 31,995
Fully diluted 35,845 34,212 35,675 34,115
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, 1996 $264,378 15,988 $160 $82,620 $185,823 $(4,225)
Two-for-one stock split - 16,195 162 (162) - -
Issuance of Common Stock 1,000 18 - 1,000 - -
Exercise of stock options 6,809 189 2 6,807 - -
Tax benefit from exercise of
stock options 1,303 - - 1,303 - -
Cash dividends on Common Stock (1,131) - - - (1,131) -
Foreign currency translation
adjustments 638 - - - - 638
Net income 5,077 - - - 5,077 -
-------------- ------ ---- ---------- --------- ----------
BALANCES, April 30, 1996 278,074 32,390 324 91,568 189,769 (3,587)
-------------- ------ ---- ---------- --------- ----------
Final stock adjustment to reflect
actual two-for-one stock split - 1,002 10 (10) - -
Exercise of stock options 4,151 136 1 4,150 - -
Tax benefit from exercise of
stock options 2,442 - - 2,442 - -
Conversion of Convertible
Subordinated Debentures 49,084 877 9 49,075 - -
Bond fees relating to the
conversion of Convertible
Subordinated Debentures (741) - - (741) - -
Cash dividends on Common Stock (1,720) - - - (1,720) -
Foreign currency translation
adjustments 646 - - - - 646
Net income 8,246 - - - 8,246 -
------------- ------ ---- --------- -------- ---------
BALANCES, July 31, 1996 340,182 34,405 344 146,484 196,295 (2,941)
------------- ------ ---- --------- -------- ---------
Exercise of stock options 1,707 90 1 1,706 - -
Tax benefit from exercise of
stock options 789 - - 789 - -
Cash dividends on Common Stock (1,724) - - - (1,724) -
Foreign currency translation
adjustments (2,431) - - - - (2,431)
Net income 9,347 - - - 9,347 -
------------- ------ ---- --------- --------- ---------
BALANCES, October 31, 1996 $347,870 34,495 $345 $148,979 $203,918 $(5,372)
------------- ====== ==== ========= ========= =========
See notes to consolidated financial statements.
- 5 -
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
For the
Nine Months Ended
October 31,
------------------
1996 1995*
-------- --------
Cash Flows From Operating Activities:
Net income $ 22,670 $13,742
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 15,502 14,454
Provision for uncollectible accounts 1,250 806
Reduction in reserve for product return (4,810) (1,162)
Provision for inventories 3,594 2,673
Deferred income taxes 1,371 (5,891)
Income tax receivable - 7,925
Gain on liquidation of subsidiary - (2,330)
Impairment loss on certain assets - 2,519
(Gain)/loss on disposal of fixed assets (24) 1,482
Provision for postretirement/employment benefits 966 1,134
(Increase)/decrease in assets and increase/(decrease) in liabilities:
Accounts receivable (3,624) (7,351)
Inventories (91,071) (58,394)
Prepaid expenses (9,168) (4,233)
Other assets, net (10,634) 3,257
Accounts payable 16,322 22,246
Accrued liabilities 9,353 8,228
Income taxes payable (19,309) (3,978)
Merchandise and other customer credits 1,468 1,247
Other long-term liabilities 645 97
------- -------
Net cash used in operating activities (65,499) (3,529)
------- -------
Cash Flows From Investing Activities:
Capital expenditures (30,456) (21,323)
Proceeds from sale of fixed assets 26 159
Proceeds from lease incentives 1,590 -
------- -------
Net cash used in investing activities (28,840) (21,164)
------- -------
Cash Flows From Financing Activities:
(Payments on)/proceeds from short-term borrowings (351) 19,104
Prepayment of long-term trade payable (25,432) -
Proceeds from issuance of long-term debt 45,324 -
Proceeds from exercise of stock options 12,667 2,061
Tax benefit from exercise of stock options 4,534 698
Cash dividends on Common Stock (4,575) (3,310)
------- -------
Net cash provided by financing activities 32,167 18,553
------- -------
Net decrease in cash and short-term investments (62,172) (6,140)
Cash and short-term investments at beginning of year 81,966 44,318
------- -------
Cash and short-term investments at end of period $19,794 $38,178
======= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the nine months for:
Interest expense $ 8,735 $7,124
======= =======
Income taxes (Net of $7,925 Federal income
tax refund in 1995) $32,641 $10,848
======= =======
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Conversion of Subordinated Debentures to Equity $48,343 -
======= =======
Issuance of Common Stock for the Employee Profit
Sharing and Retirement Savings Plan $ 1,000 $ 598
======= =======
*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 October 31, 1996 and the results of operations
and cash flows for the interim periods presented. The audited financial
statements for January 31, 1996 are derived from the audited financial
statements which are included in the Company's Form 10-K filing, but do
not include all disclosures required by generally accepted accounting
principles.
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 and nine months ended October 31,
1996 and 1995 are not necessarily indicative of the results of the
entire fiscal year.
2. INVENTORIES
Inventories at October 31, 1996, January 31, 1996 and October 31, 1995
are summarized as follows:
October 31, January 31, October 31,
(in thousands) 1996 1996 1995
-------------- ----------- ----------- -----------
Finished goods $329,917 $257,344 $268,749
Raw materials 53,640 48,366 49,519
Work-in-process 11,004 7,217 7,264
------- ------- -------
394,561 312,927 325,532
Reserves (4,651) (1,675) (2,148)
------- ------- -------
$389,910 $311,252 $323,384
======== ======== ========
At October 31, 1996, January 31, 1996 and October 31, 1995,
$289,403,000, $229,300,000 and $230,222,000, 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 $14,649,000 at October 31, 1996 and $11,870,000 at both
January 31, 1996 and October 31, 1995. The LIFO valuation method had
the effect of decreasing net income by $0.02 and $0.01 per share for
the three-month periods ended October 31, 1996 and 1995, respectively.
The LIFO valuation method had the effect of decreasing net income by
$0.05 and $0.04 per share for the nine-month periods ended October 31,
1996 and 1995, respectively.
- 7 -
3. EARNINGS PER SHARE
Primary earnings per common share is 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 is 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.
4. LONG TERM DEBT
In the first quarter of 1996, the Company borrowed yen 5,000,000,000
($43,840,000) from a lender in Japan. The loan has a 15-year term at a
rate of 4.50%. The proceeds were used for working capital and
construction costs associated with the Company's flagship store in
Tokyo which opened in May 1996, as well as to reduce short-term
indebtedness in Japan.
On June 24, 1996 (the "Redemption Date"), the Company redeemed
approximately $900,000 of Tiffany's $50,000,000 principal amount 6-3/8%
Convertible Subordinated Debentures Due 2001 (the "Debentures"). The
remaining $49,100,000 principal amount of the Debentures was converted
into shares of the Company's Common Stock at the option of the holders.
In accordance with the terms of the Debentures, the redemption price
was 101 percent of their principal amount, subject to conversion of
principal at the rate of $28.00 per share (adjusted to reflect the
two-for-one stock split in July 1996). The right of conversion
expired at the close of business on the Redemption Date.
5. FINANCIAL HEDGING INSTRUMENTS
In accordance with the Company's foreign currency hedging program, at
October 31, 1996, the Company had outstanding purchased put options
maturing at various dates through January 23, 1998, giving it the
right, but not the obligation, to sell yen 9,344,000,000 for dollars at
predetermined contract-exchange rates. The deferred unrealized gain on
the Company's purchased put options amounted to $5,072,000 at October
31, 1996. If the market yen/dollar-exchange rates at maturity are below
the contract rates, the Company will allow the options to expire.
To mitigate exchange rate fluctuations related to intercompany
inventory purchases for the Company's business in Japan, the Company
enters into forward exchange yen contracts. At October 31, 1996, the
Company had $13,636,000 of such contracts outstanding, which
subsequently matured on November 26, 1996. At October 31, 1995, the
Company had $11,178,000 of such contracts outstanding, which
subsequently matured on November 27, 1995.
6. COMMON STOCK
On May 16, 1996, the stockholders approved an amendment to the
Company's Restated Certificate of Incorporation to increase the number
of common shares authorized from 30,000,000 to 60,000,000.
- 8 -
6. (COMMON STOCK CONT.)
On May 16, 1996, the Board of Directors declared a two-for-one split of
the Company's Common Stock, effected in the form of a share
distribution (stock dividend) paid on July 23, 1996 to stockholders of
record on June 28, 1996. Stock options and per share data have been
retroactively adjusted to reflect the split.
7. SUBSEQUENT EVENT
On November 21, 1996 Tiffany's Board of Directors declared a quarterly
dividend of $0.05 per common share. This dividend will be paid on
January 10,1997 to stockholders of record on December 20, 1996.
- 9 -
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 the Americas; Direct Marketing includes corporate
(business-to-business) and catalog sales in the U.S.; and International Retail
includes retail sales through Company-operated stores and boutiques, corporate
sales, and wholesale sales to independent retailers and distributors in the
Asia-Pacific region, Europe, Canada and the Middle East.
Net sales in the three months ended October 31, 1996 (third quarter) increased
12% over 1995's third quarter. Net sales in the nine-month period ended October
31, 1996 (year-to-date) rose 14% over 1995's year-to-date. Net sales by channel
of distribution were as follows:
Three months Nine months
ended October 31, ended October 31,
------------------- ------------------
(in thousands) 1996 1995 1996 1995
- -------------- -------- -------- -------- --------
U.S. Retail $ 99,715 $ 87,372 $272,610 $231,281
Direct Marketing 22,546 20,820 63,572 59,940
International Retail 88,724 79,574 258,307 231,371
-------- -------- -------- --------
$210,985 $187,766 $594,489 $522,592
======== ======== ======== ========
U.S. Retail sales increased 14% in the third quarter and 18% for the
year-to-date over the corresponding 1995 periods. The increases were primarily
generated by comparable U.S. store sales growth of 9% in the third quarter and
11% for the year-to-date, as well as the addition of new stores that opened in
the past year -- Short Hills, NJ (September 1995), King of Prussia, PA (November
1995) and Chevy Chase, MD (May 1996). Comparable U.S. store sales growth was
primarily generated by an increase in the number of retail transactions made by
local-resident customers. In addition, wholesale sales increased in the third
quarter and year-to-date.
Direct Marketing sales increased 8% in the third quarter and 6% for the
year-to-date. The increases were largely due to higher catalog sales, which rose
13% in the third quarter and 12% for the year-to-date, primarily resulting from
increased catalog orders. Corporate sales rose 5% in the third quarter and 3%
for the year-to-date, largely due to a higher number of orders. Management
believes that its corporate customers remain generally cautious in their
spending and, as such, that the sales environment remains challenging.
Therefore, in order to increase U.S. market penetration, the corporate division
has established a presence in 11 additional U.S. markets in 1996.
International Retail sales increased 11% in the third quarter and 12% for the
year-to-date. Sales growth was achieved in the Asia-Pacific, Europe, Canada and
Middle East regions. In Japan, the Company's largest international market, total
sales in local currency rose 22% in both the third quarter and year-to-date.
When translated into U.S. dollars, these yen-denominated sales increases were
partially offset by the effect of a weakening yen against the dollar in
comparison to 1995. Sales increases in Japan in local currency were due to
comparable store sales growth of 6% in the quarter and 9% for the year-to-date,
as well as strong sales in the Company's new flagship store in Tokyo that opened
- 10 -
in May 1996. Although the flagship store adversely affected comparable store
sales growth in several existing department-store boutiques in Tokyo, total
sales in Tokyo were substantially above 1995 levels. Sales growth was also
achieved in other Asia-Pacific markets, while European comparable store sales in
local currencies rose 13% in the third quarter and 21% for the year-to-date.
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 on the Company's financial results of a significant strengthening of the
U.S. dollar against the yen. At October 31, 1996, the Company had outstanding
purchased put options maturing at various dates through January 23, 1998, giving
it the right, but not the obligation, to sell yen 9,344,000,000 for dollars at
predetermined contract-exchange rates. The deferred unrealized gain on the
Company's purchased put options amounted to $5,072,000 at October 31, 1996. If
the market yen/dollar-exchange rates at maturity are below the contract rates,
the Company will allow the options to expire. In addition, at October 31, 1996,
the Company had $13,636,000 of outstanding forward exchange yen contracts, which
subsequently matured on November 26, 1996, to mitigate exchange rate
fluctuations related to intercompany inventory purchases for the Company's
business in Japan. At October 31, 1995, the Company had $11,178,000 of
outstanding forward exchange yen contracts, which subsequently matured on
November 27, 1995.
Gross margin (gross profit as a percentage of net sales) of 54.2% in the third
quarter and 52.9% for the year-to-date compared with 53.6% and 52.5% in the
respective 1995 periods. The year-over-year increases were due to shifts in
sales mix toward the Company's retail businesses and product categories that
achieve gross margins above the total Company average.
Operating expenses (selling, general and administrative expenses and the
provision for uncollectible accounts) increased 8% in the third quarter and 10%
for the year-to-date over the corresponding 1995 periods. The increases were
largely due to incremental occupancy, staffing and marketing expenses related to
the Company's worldwide expansion program, as well as to sales-related variable
expenses. The rate of expense growth was moderated due to the effect of
translating yen-denominated expenses into dollars. In addition, the third
quarter of 1995 included a $2.5 million charge for the impairment of assets in
the Company's Frankfurt store, in accordance with Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". As a percentage of net sales, operating
expenses of 45.3% in 1996's third quarter were lower than 47.3% in the prior
year, and the ratio of 44.9% for the year-to-date was lower than 46.6% in the
prior year. Excluding the SFAS No. 121 charge, operating expenses as a
percentage of net sales would have been 46.0% in 1995's third quarter and 46.1%
for 1995's year-to-date.
As a result of the above factors, income from operations increased 58% in 1996's
third quarter and rose 53% for the year-to-date over the respective 1995
periods.
Other expenses, net in 1996's third quarter and the year-to-date were higher
than the prior year due to a $2.3 million pretax gain in the third quarter of
1995 that was related to the restructuring of the Company's watch assembly
operations in Switzerland. Excluding that gain, other expenses declined
year-over-year due to lower interest expense related to the conversion and
redemption in June 1996 of the Company's $50,000,000 principal amount 6-3/8%
Convertible Subordinated Debentures Due 2001.
- 11 -
Net income in the third quarter rose 49% over 1995 and increased 65% for the
year-to-date. Net income as a percentage of net sales in the third quarter was
4.4% in 1996 versus 3.3% in 1995, while the year-to-date ratio was 3.8% in 1996
versus 2.6% in 1995.
FINANCIAL CONDITION
Management believes that the Company's financial condition at October 31, 1996
provides sufficient liquidity and resources to support current business activity
and planned expansion. Working capital and the corresponding current ratio were
$309,793,000 and 2.4:1 at October 31, 1996 compared with $283,424,000 and 2.3:1
at January 31, 1996. Inventories (representing the largest component of working
capital and assets) were $389,910,000 at October 31, 1996, or 25% higher than at
January 31, 1996. The increase was primarily due to merchandise purchases to
support sales growth, new stores (including the Company's new flagship store in
Tokyo, Japan) and expanded product offerings. Inventory turnover was 0.9 times
at October 31, 1996 and 1.0 times at January 31, 1996. The Company's ongoing
objective is to improve inventory performance through: refinement of worldwide
replenishment systems; focus on the specialized disciplines of product
development, assortment planning and inventory management; improved presentation
and management of display inventories in each store; assortment editing by
product category; and a time-phased program of improvements in warehouse
management and supply chain logistics.
Capital expenditures were $30,456,000 in 1996's year-to-date compared with
$21,323,000 in the corresponding 1995 period. On the basis of current plans, the
Company expects capital expenditures in the year ending January 31, 1997 to be
approximately $42,000,000 compared with $26,455,000 in the prior year. The
increase is primarily related to the opening of new retail stores (particularly
the Company's flagship store in Tokyo, Japan), expansion of administrative and
office facilities and certain costs associated with development of the Company's
new customer service/distribution center in Parsippany, New Jersey.
The Company incurred a net cash outflow from operating activities of $65,499,000
in 1996's year-to-date compared with an outflow of $3,529,000 in 1995. The
increased cash outflow was largely due to higher inventory purchases compared
with 1995's year-to-date. 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 $149,764,000 and 30% at October 31, 1996
compared with $98,501,000 and 27% at January 31, 1996. The increase in net-debt
was necessary to support working capital increases. If the Company achieves its
objectives for fourth quarter sales growth and receivable collections,
management expects the resulting excess cash flow will be used to reduce
net-debt and finance future business activities and planned expansion.
In the first quarter of 1996, the Company borrowed yen 5,000,000,000
($43,840,000) from a lender in Japan. The loan has a 15-year term at a rate of
4.50%. The proceeds were used for working capital and construction costs
associated with the Company's flagship store in Tokyo which opened in May 1996,
as well as to reduce short-term indebtedness in Japan. The Company also prepaid
a long-term trade payable of yen 2,750,000,000 ($25,807,000) which was due on or
before February 28, 1998 and which related to certain merchandise repurchased in
1993 as part of the Company's realignment of its Japan business.
On June 24, 1996 (the "Redemption Date"), the Company redeemed approximately
$900,000 of Tiffany's $50,000,000 principal amount 6-3/8% Convertible
- 12 -
Subordinated Debentures Due 2001 (the "Debentures"). The remaining $49,100,000
of the Debentures were converted into shares of the Company's Common Stock at
the option of the holders. In accordance with the terms of the Debentures, the
redemption price was 101 percent of their principal amount, subject to
conversion of principal at the rate of $28.00 per share (adjusted to reflect the
two-for-one stock split in July 1996). The right of conversion expired at the
close of business on the Redemption Date.
The Company's sources of working capital are internally generated cash flows and
funds available under a five-year, $130,000,000 multicurrency revolving credit
facility established in June 1995. Management anticipates that internally
generated cash flows and funds available under the revolving credit 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 and cash flow. Management expects such seasonality to continue in the
future.
- 13 -
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement re Computation of Per Share Earnings.
27 Financial Data Schedule (SEC/EDGAR only).
(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: December 12, 1996 By: /s/ James N. Fernandez
------------------------------------
James N. Fernandez
Senior Vice President - Finance
and Chief Financial Officer
(principal financial officer)
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EXHIBIT INDEX
Exhibit Sequentially
Number Numbered Page
11 Statement re Computation of 16
Per Share Earnings
27 Financial Data Schedule --
(submitted to SEC only)
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Item 6. TIFFANY & CO. AND SUBSIDIARIES
EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
- ---------- ----------------------------------------------
Unaudited)
(in thousands, except per share data)
For the
Three Months Ended Nine Months Ended
October 31, October 31,
--------------------------- --------------------------
1996 1995 1996 1995
---------- ---------- --------- ----------
PRIMARY EARNINGS PER SHARE:
Net income on which primary
earnings per share are based $ 9,347 $ 6,274 $22,670 $13,742
======= ======= ======= =======
Weighted average number of
common shares 34,488 31,620 33,398 31,528
Add:
Weighted average effect of the
exercise of stock options 1,357 787 1,256 467
------- ------- ------- -------
Weighted average number of shares on
which primary earnings are based 35,845 32,407 34,654 31,995
======= ======= ======= =======
Primary net income per common share $ 0.26 $ 0.19 $ 0.65 $ 0.43
======= ======= ======= =======
FULLY DILUTED EARNINGS PER SHARE:
Net income on which primary earnings
per share are based $ 9,347 $ 6,274 $22,670 $13,742
Add:
Interest and fees on convertible
subordinated debt, net of
applicable income taxes - 428 682 1,298
------- ------- ------- -------
Net income on which fully diluted
earnings per share are based $ 9,347 $ 6,702 $23,352 $15,040
======= ======= ======= =======
Weighted average number of common shares
on which fully diluted earnings are based 35,845 32,426 34,755 32,329
Add:
Shares assumed upon conversion
of convertible debt, using the
"if converted" method - 1,786 920 1,786
------- ------- ------- -------
Weighted average number of shares
used in calculating fully diluted
earnings per share 35,845 34,212 35,675 34,115
======= ======= ======= =======
Fully diluted net income per common share $ 0.26 $ 0.19 $ 0.65 $ 0.43
======= ======= ======= =======
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