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EXHIBIT 13.1
Tiffany & Co. Report on Form 10-K FY 1993
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SELECTED FINANCIAL DATA
- - -------------------------------------------------------------------------------
The following table sets forth selected financial data with respect to the
Company for Fiscal 1987 - Fiscal 1993. All share and per share data have been
retroactively adjusted to reflect the three-for-two split of the Company's
common stock effected in the form of a share distribution ("stock dividend") in
Fiscal 1989.
(in thousands, except FISCAL Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
per share amounts and employees) 1993 1992 1991 1990 1989 1988 1987
- - --------------------------------------------------------------------------------------------------------------------
Net sales $566,501 $486,396 $491,906 $455,712 $383,964 $290,344 $230,488
Gross profit 232,882 237,033 243,009 223,600 191,683 144,511 112,140
Income/(loss) from operations (10,029) 26,741 61,028 67,806 60,977 44,193 33,691
Income/(loss) before accounting
change and extraordinary item (10,242) 15,712 31,805 36,661 33,305 24,901 16,820
Income/(loss) per share before
accounting change and
extraordinary item:
Primary (0.65) 1.00 2.01 2.34 2.13 1.62 1.17
Fully diluted (0.65) 1.00 2.01 2.34 2.13 1.62 1.17
Cash dividends per share 0.28 0.28 0.28 0.26 0.18 0.10 -
Weighted average number of
common shares (primary) 15,781 15,786 15,835 15,694 15,606 15,332 14,300
Net inventories 262,282 224,151 213,435 173,964 142,545 103,771 70,778
Working capital 212,266 199,334 159,466 131,219 112,735 81,829 66,772
Capital expenditures 18,028 22,754 41,385 24,835 14,040 9,680 1,895
Total assets 504,409 419,355 394,882 307,268 237,061 162,648 126,669
Short-term borrowings 59,289 22,458 43,566 31,046 14,339 7,253 -
Long-term debt 101,500 101,500 50,000 18,226 18,226 - -
Stockholders' equity 189,081 204,806 200,039 176,183 135,568 99,193 71,621
Number of employees 3,133 2,865 2,735 2,379 2,085 1,741 1,324
SALES BY CHANNEL OF DISTRIBUTION
FISCAL Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
(in thousands) 1993 1992 1991 1990 1989 1988 1987
- - --------------------------------------------------------------------------------------------------------------------
U.S. Retail $268,706 $241,127 $225,248 $227,585 $218,358 $192,896 $154,511
Direct Marketing 87,429 89,541 82,390 73,461 69,721 59,414 54,566
International Retail 210,366 155,728 184,268 154,666 95,885 38,034 21,411
----------------------------------------------------------------------------
Net sales $566,501 $486,396 $491,906 $455,712 $383,964 $290,344 $230,488
============================================================================
(percentage of net sales)
U.S. Retail 47.4% 49.6% 45.8% 50.0% 56.9% 66.4% 67.0%
Direct Marketing 15.5 18.4 16.7 16.1 18.1 20.5 23.7
International Retail 37.1 32.0 37.5 33.9 25.0 13.1 9.3
----------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
============================================================================
Tiffany & Co. and Subsidiaries
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
NET SALES
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, primarily in the
Far East, Europe, Canada and the Middle East.
Net sales (before the product return for the Japan realignment in 1993,
discussed below) increased 16.5% in Fiscal 1993 and decreased 1.1% in Fiscal
1992.
U.S. Retail sales increased 11.4% in Fiscal 1993 and 7.0% in Fiscal 1992.
Comparable U.S. store sales increased 7.6% in Fiscal 1993 and 3.2% in Fiscal
1992, primarily resulting from sales growth in the Company's U.S. branch
stores. The New York store contributed sates of $117.7 million, $115.0 million
and $111.9 million in Fiscal 1993, 1992 and 1991, respectively. Management
believes that sales in its U.S. retail stores in Fiscal 1993 benefitted from
enhanced merchandising, marketing and customer service programs, as well as
from some improvement in reported consumer confidence levels. Overall sales
growth in both Fiscal 1993 and 1992 was primarily attributable to increased
sales to local-resident consumers, as opposed to tourists, although growth in
some markets was restrained by cautious consumer spending tied to regional
economic conditions. Sales to international tourists as a percentage of retail
store sales in the U.S. were approximately 15%, 15% and 22% in Fiscal 1993,
1992 and 1991, respectively. The Company opened one new U.S. TIFFANY & CO.
store and closed one boutique in Fiscal 1993, and opened three new U.S. stores
in Fiscal 1992. Wholesale trade and fragrance sales accounted for 7.8%, 8.4%
and 9.1% of U.S. Retail sales in Fiscal 1993, 1992 and 1991, respectively.
Direct Marketing sales declined 2.4% in Fiscal 1993 following an 8.6% increase
in Fiscal 1992. Corporate sales (the larger portion of this channel of
distribution) declined in Fiscal 1993 after increasing in Fiscal 1992.
Management believes that corporate sales have been affected by conservative
spending related to an uncertain business and economic environment. This was
evidenced by a decline in the average corporate order size in both years,
although the number of orders rose. Catalog sales increased in both years,
although only modestly in Fiscal 1993. The Company mailed 14.1 million, 12.9
million and 12.4 million catalogs in Fiscal 1993, 1992 and 1991, respectively.
Despite the increase in catalogs mailed, management attributes the smaller
sales growth in Fiscal 1993 to a lower catalog response rate and a lower
average order size, following increases in both statistics in Fiscal 1992.
International Retail sales increased 35.1% in Fiscal 1993 following a 15.5%
decline in Fiscal 1992. Sales in Fiscal 1993 are not comparable to Fiscal 1992
because of the Japan realignment discussed below.
In July 1993, the Company effected a realignment of its business in Japan by
assuming the merchandising and marketing responsibilities for each of the 29
TIFFANY & CO. boutiques in Japan previously operated by Mitsukoshi Ltd., an
operator of department stores in Japan. As part of this transaction, the
Company agreed to repurchase $115.0 million of merchandise previously sold to
Mitsukoshi. As a consequence, the Company recorded a $115.0 million provision
for product return in the second quarter of 1993 which reduced gross profit by
$57.5 million and reduced net income by $32.7 million (net of income tax
benefit of $24.8 million), or $2.07 per share. At January 31, 1994,
approximately $30.0 million of merchandise remained to be repurchased
throughout the period ending February 28, 1998. No further charges or sales
reversals are anticipated in connection with this transaction. Under the new
arrangement, Mitsukoshi no longer purchases TIFFANY & CO. merchandise on a
wholesale basis for resale in Japan. Instead, Mitsukoshi acts for the Company
in the sale of merchandise owned by the Company and the Company recognizes as
revenues the retail price charged to the ultimate consumer in Japan, as opposed
to the wholesale price previously charged to Mitsukoshi. As a result, the
Company's reported sales in Fiscal 1993 showed a significant increase due to
the Japan realignment. The Company now holds inventories for sale, establishes
retail prices, bears the risk of currency
Tiffany & Co. and Subsidiaries
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fluctuations, provides one or more brand managers in each boutique, controls
merchandising and display within the boutiques, manages inventory and controls
and funds all advertising and publicity programs with respect to TIFFANY & CO.
merchandise. Mitsukoshi is paid at the rate of approximately 27% of retail
sales in compensation for providing boutique facilities and sales and clerical
staff, as well as for the collection of receivables and security of store
inventories. The new arrangement entails greater seasonality in sales for the
Company than did the prior wholesale arrangement with Mitsukoshi. The Company
is experiencing greater expenses in Japan under the new arrangement, but is
also recording higher revenues at the retail level. In general, management
believes that the Company's increased revenues and corresponding gross profit
more than offset the increased expenses. In addition, as a result of this
business realignment in Japan, the Company's reported sales and earnings
results benefit from a strengthening Japanese yen and are adversely affected by
a strengthening U.S. dollar. However, in early Fiscal 1994, the Company
initiated a foreign currency hedging program intended to minimize the negative
impact of changes in the dollar-yen relationship on the Company's financial
results.
For the International Retail channel of distribution, management believes that
prolonged, soft economic conditions and cautious consumer spending affected the
retail sales performance of many of its locations in Fiscal 1993 and 1992.
When measured in yen, retail sales in TIFFANY & CO. boutiques in Japan open
more than one year declined in both Fiscal 1993 and 1992. In Fiscal 1992, the
Company's sales were negatively affected by lower wholesale shipments resulting
from Mitsukoshi's decision to reduce its inventory levels to address soft
consumer demand. International Retail sales in both Fiscal 1993 and 1992 were
also adversely affected by weak results in most of the Company's European
stores. In Fiscal 1993, the Company opened a second TIFFANY & CO. store in
Singapore and two Company-operated boutiques were opened in Japan. Two
boutiques were also opened by independent retailers in Saipan and the
Philippines. In Fiscal 1992, five TIFFANY & CO. boutiques were opened in Japan
and two boutiques were opened by an independent retailer in Korea. The Company
plans to open additional international locations in the future, however, due to
the significant number of TIFFANY & CO. boutiques now operated by the Company
in Japan, future openings in that country are expected to occur at a modest
rate.
GROSS MARGIN
Gross margin (gross profit as a percentage of net sales), excluding the
nonrecurring charge related to the Japan realignment, was 51.3% in Fiscal 1993,
48.7% in Fiscal 1992 and 49.4% in Fiscal 1991. Management attributes the
increase in Fiscal 1993 primarily to the effect of recording higher revenues at
the retail level in Japan. Management attributes the decline in Fiscal 1992 to
shifts in sales mix across product categories that achieve varying levels of
gross margins. Management anticipates a continued higher gross margin compared
with the prior year until the first anniversary of the Japan business
realignment in July 1994.
OPERATING EXPENSES
Fiscal 1993 operating expenses (selling, general and administrative expenses
and the provision for uncollectible accounts) increased 15.5% over Fiscal 1992,
which had increased 15.6% over Fiscal 1991. The increase in Fiscal 1993 was
largely attributable to staffing-related expenses due to the Japan business
realignment. In addition, a portion of the increase in Fiscal 1993 and most
of the increase in Fiscal 1992 resulted from incremental occupancy, staffing
and marketing expenses related to the Company's worldwide expansion program.
In Fiscal 1992, additional pre-tax charges were recorded in the fourth quarter
which were related to the anticipated closing of two retail locations and a
reduction in worldwide staff levels as part of an expense reduction effort.
Based on current expansion plans and the annualization of Japan retail-related
expenses during the first half of Fiscal 1994, management expects that
operating expenses in Fiscal 1994 will increase at a somewhat higher rate than
in Fiscal 1993.
INTEREST EXPENSE
Interest expense rose in Fiscal 1993 and 1992 as a result of higher borrowings
to support the Company's worldwide expansion program, which necessitated
incremental operating expenses, inventories and capital expenditures, as well
as the effect of the Company's Japan business realignment in 1993. A
significant portion of the Company's year-end Fiscal 1993 short-term borrowings
are denominated in Japanese yen and are used to support the local working
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capital requirements of the Company's Japan operations. Management expects
interest expense will increase in Fiscal 1994 primarily due to the
annualization of year-end Fiscal 1993 debt levels.
INCOME TAXES
The provision for income taxes resulted in an effective tax rate of 43.1% in
Fiscal 1993, compared with 21.1% in Fiscal 1992 and 42.2% in Fiscal 1991. The
low effective tax rate in Fiscal 1992 primarily resulted from an adjustment to
tax reserves that had been established for the Company's 1985-1988 fiscal years
(see Note L to Consolidated Financial Statements).
ACCOUNTING STANDARDS
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, "Accounting for Postemployment
Benefits." The adoption of this new standard, required for the fiscal year
ending January 31, 1995, is not expected to have a material effect on the
Company's consolidated results of operations or financial condition.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Management believes the Company's financial condition at January 31, 1994
provides sufficient liquidity and resources to support current operations and
planned expansion.
Working capital and the corresponding current ratio were $212.3 million and
2.4:1 at January 31, 1994, compared with $199.3 million and 3.2:1 at January
31, 1993. Accounts receivable increased 31.0% in Fiscal 1993, following a 0.6%
decline in Fiscal 1992. The Fiscal 1993 increase was primarily due to higher
sales levels and receivables in Japan due to the business realignment.
Inventories, which are the largest component of working capital, increased 17.0%
in Fiscal 1993 and 5.0% in Fiscal 1992. The Fiscal 1993 increase primarily
reflected the repurchase of inventories from Mitsukoshi related to the Japan
business realignment, partially offset by reductions in comparable store
inventory levels elsewhere. The Fiscal 1992 increase was necessary to support
the opening and expansion of Company-owned locations, as well as for expanded
internal manufacturing operations and new product introductions. The Company's
objective is to further reduce worldwide comparable store inventory levels in
Fiscal 1994, in order to improve inventory turnover and asset productivity.
Capital expenditures were $18.0 million in Fiscal 1993, compared with $22.8
million in Fiscal 1992 and $41.4 million in Fiscal 1991. These expenditures
were primarily required for the opening of new stores and boutiques and the
expansion of certain existing stores, as well as for the renovation and
expansion of administrative office facilities and the purchase of equipment for
enhanced computer operations and distribution capabilities. The decline in
Fiscal 1993 and 1992 reflected a decelerated rate of growth in store expansion
in those periods. Based on current expansion plans, the Company expects
capital expenditures in Fiscal 1994 to increase to approximately $25.0 million.
Cash dividends of $0.28 per share of common stock were paid in Fiscal 1993,
1992 and 1991. The Company expects to retain the majority of its earnings to
support its business and future expansion.
As a result of the Company's expansion program, as well as the effect of the
1993 realignment of its Japan business, total debt (short-term borrowings and
long-term debt) increased in both Fiscal 1993 and 1992. Total debt and the
corresponding ratio to total capital (total debt and stockholders' equity) were
$160.8 million and 46.0%, respectively, at January 31, 1994, compared with
$124.0 million and 37.7%, respectively, at January 31, 1993. The Company also
has a long-term trade payable of $25.4 million at January 31, 1994, payable to
Mitsukoshi February 28, 1998, relating to certain merchandise repurchased under
the Japan business realignment.
The Company's sources of working capital continue to be internally generated
funds, as well as funds available under a $100.0 million revolving credit
facility and a yen 2.5 billion (approximately $23.1 million) line of credit.
Management anticipates that these sources of funds will be sufficient to
support planned worldwide business expansion, as well as seasonal working
capital increases typically required during the third and fourth quarters of
the year.
SEASONALITY
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 net income. Management expects such seasonality to continue in
the future.
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CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended January 31,
-----------------------------------------------
(in thousands, except per share amounts) 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
Net Sales $566,501 $486,396 $491,906
Product return for Japan realingment (115,000) -- --
-----------------------------------------------
451,501 486,396 491,906
Cost of goods sold 276,119 249,363 248,897
Cost related to product return for Japan realignment (57,500) -- --
-----------------------------------------------
Gross Profit 232,882 237,033 243,009
Selling, general and administrative expenses 240,283 209,140 180,939
Provision for uncollectible accounts 2,628 1,152 1,042
-----------------------------------------------
Income/(loss) from operations (10,029) 26,741 61,028
Interest expense and financing costs 9,562 7,231 6,337
Other income 1,591 415 375
-----------------------------------------------
Income/(loss) before income taxes (18,000) 19,925 55,066
(Benefit)/provision for income taxes (7,758) 4,213 23,261
-----------------------------------------------
Income/(loss) before cumulative effect of accounting change (10,242) 15,712 31,805
Cumulative effect of accounting change for postretirement
benefits other than pensions, net of tax effect of $4,625 -- -- (6,335)
-----------------------------------------------
NET INCOME/(LOSS) $(10,242) $ 15,712 $ 25,470
==============================================
Per share data:
Primary:
Income/(loss) before cumulative effect of accounting change $ (0.65) $ 1.00 $ 2.01
Cumulative effect of accounting change for
postretirement benefits other than pensions -- -- (0.40)
-----------------------------------------------
Net income/(loss) $ (0.65) $ 1.00 $ 1.61
===============================================
Fully diluted:
Income/(loss) before cumulative effect of accounting change $ (0.65) $ 1.00 $ 2.01
Cumulative effect of accounting change for
postretirement benefits other than pensions -- -- (0.40)
-----------------------------------------------
Net income/(loss) $ (0.65) $ 1.00 $ 1.61
===============================================
Weighted average number of common shares:
Primary 15,781 15,786 15,835
Fully diluted 16,674 16,679 16,618
See notes to consolidated financial statements
Tiffany & Co. and Subsidiaries
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CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31,
---------------------------
1994 1993*
- - ----------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and short-term investments $ 4,994 $ 6,672
Accounts receivable, less allowances of $4,170 and $7,293) 67,330 51,378
Income tax receivable 12,517 --
Inventories 262,282 224,151
Prepaid expenses 17,718 11,207
-----------------------
Total current assets 364,841 293,408
Property and equipment, net 97,365 94,454
Deferred income taxes 15,404 5,723
Other assets, net 26,799 25,770
-----------------------
$504,409 $419,355
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 59,289 $ 22,458
Accounts payable and accrued liabilities 79,980 63,619
Income taxes payable 6,359 2,679
Merchandise and other customer credits 6,947 5,318
----------------------
Total current liabilities 152,575 94,074
Long-term trade payable 25,394 --
Reserve for product return 13,663 --
Long-term debt 101,500 101,500
Deferred income taxes 6,758 3,858
Postretirement benefit obligation 14,320 12,960
Other long-term liabilities 1,118 2,157
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; authorized
30,000 shares, issued 15,660 and 15,620 157 156
Additional paid-in capital 70,498 69,553
Retained earnings 126,082 140,705
Foreign currency translation adjustments (7,656) (5,608)
-----------------------
Total stockholders' equity 189,081 204,806
-----------------------
$504,409 $419,355
=======================
*Reclassified for comparative purposes.
See notes to consolidated financial statements.
Tiffany & Co. and Subsidiaries
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended January 31,
-----------------------------------------------
(in thousands) 1994 1993* 1992*
- - -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $(10,242) $15,712 $25,470
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,587 11,425 8,134
Provision for uncollectible accounts 2,628 1,152 1,042
Provision for product return 57,500 -- --
Reduction in reserve for product return (43,837) -- --
Provision for inventories 3,833 2,020 2,189
Provision for operational realignment -- 7,000 --
Deferred income taxes (7,181) (4,596) (4,111)
Income tax receivable (12,517) -- --
Postretirement benefit provision 1,550 1,600 11,960
(Increase)/decrease in assets and increase/
(decrease) in liabilities, net of acquisitions:
Accounts receivable (18,317) (1,976) (9,747)
Inventories (15,792) (17,586) (42,841)
Prepaid expenses (7,193) 1,474 (647)
Other assets, net (1,850) (7,278) (5,068)
Accounts payable and accrued liabilities 13,943 (10,578) 8,418
Income taxes payable 3,044 (4,906) (1,689)
Merchandise and other customer credits 1,629 631 (545)
Other long-term liabilities (798) 352 246
----------------------------------------------
Total adjustments to net income (9,771) (21,266) (32,659)
----------------------------------------------
Net cash used in operating activities (20,013) (5,554) (7,189)
----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (18,028) (22,754) (41,385)
Acquisitions, net of cash acquired -- (945) (1,382)
Other 2,450 4,310 4,218
----------------------------------------------
Net cash used in investing activities (15,578) (19,389) (38,549)
----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase/(decrease) in short-term borrowings 37,348 (21,200) 12,052
Proceeds from debt offering -- 51,500 50,000
Decrease in long-term debt -- -- (18,226)
Proceeds from exercise of stock options 569 1,095 2,013
Tax benefit from exercise of stock options 377 619 3,572
Cash dividends on common stock (4,381) (4,371) (4,344)
----------------------------------------------
Net cash provided by financing activities 33,913 27,643 45,067
----------------------------------------------
Net(decrease)/increase in cash and short-term investments (1,678) 2,700 (671)
Cash and short-term investments at beginning of year 6,672 3,972 4,643
----------------------------------------------
Cash and short-term investments at end of year $ 4,994 $ 6,672 $ 3,972
==============================================
*Reclassified for comparative purposes.
See notes to consolidated financial statements
Tiffany & Co. and Subsidiaries
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Total Foreign
Total Common Stock Additional Currency Treasury Stock
Stockholders' ----------------- Paid-in Retained Translation ----------------
(in thousands) Equity Shares Amount Capital Earnings Adjustments Share Amount
- - -------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1991 $176,183 15,672 $157 $62,094 $108,238 $5,785 (299) $(91)
Issuance of common stock 250 6 - 250 - - - -
Exercise of stock options 2,013 187 2 2,011 - - - -
Tax benefit from exercise of
stock options 3,572 - - 3,572 - - - -
Cash dividends on
common stock (4,344) - - - (4,344) - - -
Foreign currency translation
adjustments (3,105) - - - - (3,105) - -
Net income 25,470 - - - 25,470 - - -
-----------------------------------------------------------------------------------------
Balances, January 31, 1992 200,039 15,865 159 67,927 129,364 2,680 (299) (91)
Exercise of stock options 1,095 54 - 1,095 - - - -
Tax benefit from exercise of
stock options 619 - - 619 - - - -
Cash dividends on
common stock (4,371) - - - (4,371) - - -
Foreign currency translation
adjustments (8,288) - - - - (8,288) - -
Retirement of treasury stock - (299) (3) (88) - - 299 91
Net income 15,712 - - - 15,712 - - -
------------------------------------------------------------------------------------------
Balances, January 31, 1993 204,806 15,620 156 69,553 140,705 (5,608) - -
Exercise of stock options 569 40 1 568 - - - -
Tax benefit from exercise of
stock options 377 - - 377 - - -
Cash dividends on
common stock (4,381) - - - (4,381) - - -
Foreign currency translation
adjustments (2,048) - - - - (2,048) - -
Net Loss (10,242) - - - (10,242) - - -
-----------------------------------------------------------------------------------------
Balances, January 31, 1994 $189,081 15,660 $157 $70,498 $126,082 $(7,656) - -
=========================================================================================
See notes to consolidated financial statements.
Tiffany & Co. and Subsidiaries
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Tiffany & Co. and
all majority-owned domestic and foreign subsidiaries (the "Company") after
elimination of all material intercompany balances and transactions.
CASH AND SHORT-TERM INVESTMENTS AND SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
Short-term investments with an original maturity of 90 days or less are
considered cash equivalents. The carrying amount of these instruments
approximates fair value due to their short-term maturity.
Supplemental cash flow information for the years ended January 31, 1994, 1993
and 1992 is as follows:
(In thousands) 1994 1993 1992
Cash paid during
the year for:
Interest $8,714 $ 6,571 $ 2,822
==========================================
Income taxes $5,535 $13,932 $20,947
==========================================
Details of businesses
acquired in purchase
transactions were as follows:
Fair value of
assets acquired $ - $ 1,284 $ 2,633
Less: Liabilities assumed - 339 1,079
------------------------------------------
Cash paid for
acquisitions - 945 1,554
Less: Cash acquired - - 172
------------------------------------------
Net cash paid for
acquisitions $ - $ 945 $ 1,382
==========================================
RECEIVABLES AND FINANCE CHARGES
Accounts receivable finance charge income on retail revolving charge accounts
is included as a reduction in selling, general and administrative expenses.
The Company's domestic and international presence and large diversified
customer base serve to limit overall credit risk. The Company maintains
reserves for potential credit losses and such losses, in the aggregate, have
not exceeded expectations.
INVENTORIES
Inventories are valued at the lower of cost or market, with cost being
determined by the LIFO (last-in, first-out) method for domestic and foreign
branch inventories and the FIFO (first-in, first-out) method for inventories
held by foreign subsidiaries.
PROPERTY AND EQUIPMENT
Property and equipment is depreciated on a straight-line basis over the
estimated useful lives of the assets. Leasehold improvements are amortized
over the shorter of the useful lives of the improvements or the terms of the
related leases.
Expenditures for repairs and maintenance are charged to operations as incurred,
and expenditures for major renewals and betterments are capitalized.
PREOPENING COSTS
Costs associated with the opening of new retail stores are charged to
operations in the period incurred.
INCOME TAXES
The Company, its domestic subsidiaries and its foreign branches file a
consolidated Federal income tax return. Certain items of revenue and expense
are reported for Federal income tax purposes in different periods than for
financial reporting purposes, thereby resulting in deferred income tax items.
FOREIGN CURRENCY TRANSLATION
In accordance with Statement of Financial Accounting Standards No. 52, assets
and liabilities of foreign operations are translated into U.S. dollars using
current exchange rates in effect at the balance sheet date, while revenue and
expense accounts are translated at average rates of exchange prevailing during
the period. Adjustments resulting from such translation are included as a
separate component of stockholders' equity.
The Company recognized approximately $1,534,000 of net foreign currency
transaction gains (included in Other income) related to its foreign operations
for the year ended January 31, 1994. Gains or losses resulting from foreign
currency transactions were not material for the years ended January 31, 1993
and 1992.
GOODWILL
Goodwill represents the excess of cost over fair value of net assets acquired
and is being amortized over 20 years using
Tiffany & Co. and Subsidiaries
18
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the straight-line method. At January 31, 1994 and 1993, the remaining
unamortized amounts of $6,974,000 and $7,383,000, respectively, are included in
Other assets, net.
B. OPERATIONAL REALIGNMENT
During the year ended January 31, 1994, the Company realigned its business with
Mitsukoshi Ltd. in Japan (see Note H).
During the year ended January 31, 1993, the Company charged $7,000,000 to
operations which included a selective realignment of store operations and the
implementation of improved organizational efficiencies leading to a reduction
in worldwide staff levels.
C. INVENTORIES
(in thousands) 1994 1993
- - ----------------------------------------------------------------------------------
Finished goods $219,010 $188,609
Raw materials 40,210 33,616
Work in process 5,097 4,076
-----------------------------------
264,317 226,301
Reserves (2,035) (2,150)
-----------------------------------
$262,282 $224,151
===================================
At January 31, 1994 and 1993, $177,379,000 and $193,362,000, respectively, of
inventories were valued using the LIFO method. The excess of current cost over
the LIFO inventory value was $8,470,000 and $6,871,000 at January 31, 1994 and
1993, respectively. The LIFO valuation method had the effect of increasing the
net loss by $0.06 per share for the year ended January 31, 1994 and decreasing
net income by $0.01 and $0.03 per share for the years ended January 31, 1993
and 1992, respectively.
D. PROPERTY AND EQUIPMENT
(in thousands) 1994 1993
- - -------------------------------------------------------------------------
Leasehold improvements $ 81,214 $ 74,870
Office equipment 26,613 26,574
Machinery and equipment 26,184 18,858
--------------------------------
134,011 120,302
Accumulated depreciation
and amortization (36,646) (25,848)
--------------------------------
$ 97,365 $ 94,454
================================
For the years ended January 31, 1994, 1993 and 1992, the provision for
depreciation and amortization amounted to $11,947,000, $9,928,000 and
$7,024,000, respectively.
E. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
(in the thousands) 1994 1993
- - ----------------------------------------------------------------
Accounts payable-trade $40,476 $30,631
Accrued rent payable 6,777 5,325
Accrued compensation and
commissions 5,906 5,313
Retail sales taxes 2,333 2,233
Other 24,488 20,117
---------------------------
$79,980 $63,619
===========================
F. DEBT
On January 29, 1993, the Company entered into an agreement with a group of
lenders to issue, at par, $51,500,000 of 7.52% Senior Notes Due 2003. The Note
Purchase Agreements (the "Note Agreements") require maintenance of specific
financial covenants and ratios, and limit certain payments, investments and
indebtedness, in addition to other requirements customary in such
circumstances. The Note Agreements also provide that, in the event a default
has occurred under any debt of the Company in excess of $1,000,000, the unpaid
principal amount of these Senior Notes may become immediately due and payable.
The proceeds from this loan were used entirely to repay short-term indebtedness
under the Company's revolving credit facility (the "Credit Facility"). As of
January 31, 1994, the fair value of the Company's Senior Notes was estimated to
be $54,278,000 based upon the quoted market prices of comparable instruments.
On January 31, 1993, the Company entered into a three-year $50,000,000 interest
rate swap agreement. In addition to the interest on the 7.52% Senior Notes,
the Company will pay the six-month LIBOR rate, adjusted every six months, and
will receive a fixed rate of 5.30%. The interest rate swap agreement had the
effect of reducing interest by approximately $891,000 for the year ended
January 31, 1994.
On March 19, 1991, the Company completed a Euro-offering of $50,000,000, at
par, of 6 3/8% Convertible Subordinated Debentures Due 2001 (the "Debentures")
issued pursuant to an Indenture (the "Indenture"), which are convertible into
shares of the Company's common stock at a conversion price of $56.00, subject
to certain adjustments, and are subordinated in right of payment to all
existing and future senior indebtedness of the Company. The Deben-
19
12
tures are redeemable at the option of either the Company or the holder under
certain circumstances. The Indenture contains a cross-default provision
relating to an event of default under any of the Company's debt agreements
whereby outstanding debt in excess of $3,000,000 has been accelerated and such
acceleration has not been rescinded within 10 days after notification. In
addition, the Indenture requires the Debentures to be collateralized equally
and ratably with any collateralized subordinated debt of the Company. As of
January 31, 1994, the fair value of the Company's Debentures was estimated to
be $50,000,000, based upon the quoted market price of this instrument.
The Company also maintains a $100,000,000 Credit Facility expiring July 1995,
which it uses to support short-term borrowings. The Credit Facility entitles
the Company to borrow up to $20,000,000 on a non-collateralized basis from each
of five banks at interest rates based upon Eurodollar rates, a prime rate,
certificate of deposit rates or money market rates. During the years ended
January 31, 1994 and 1993, interest rates ranged from 1.35% to 10.95% and 3.25%
to 11.95% respectively. Each Credit Facility agreement provides for the
payment of an annual commitment fee based on unused amounts and contains
covenants that require maintenance of specific net worth, working capital and
capital expenditure levels, in addition to other requirements customary in such
circumstances. In addition, each Credit Facility agreement contains a
cross-default provision relating to an event of default under any debt of the
Company which exceeds $100,000.
In connection with the Company's realignment of its business in Japan, the
Company modified certain covenants of the Note Agreements and Credit Facility
and received a waiver of compliance with respect to certain of the Credit
Facility's financial covenant requirements through January 31, 1994. The
Company expects to be in compliance with its modified financial covenant
requirements.
During the year ended January 31, 1994, the Company established a yen
2,500,000,000 (approximately $23,100,000) non-collateraliled line of credit
expiring in July 1995. This line of credit bears interest at a Euroyen rate
plus 55 basis points. At January 31, 1994, the Company had yen 2,000,000,000
(approximately $18,500,000) outstanding at an average rate of 2.91% under this
line.
G. COMMITMENTS AND CONTINGENCIES
The Company leases certain office, distribution, retail and manufacturing
facilities. The leases, which expire at various dates through 2009, also
provide for the payment of taxes, insurance and maintenance, and certain leases
contain escalation clauses resulting from the pass-through of increases in
operating costs, property taxes and consumer price indices.
Rent-free periods granted under certain leases, including scheduled rent
increases, are charged to rent expense on a straight-line basis over the
related terms of such leases. Rent expense under leases, including
escalations, for the years ended January 31, 1994, 1993 and 1992, amounted to
$26,552,000, $24,015,000 and $19,382,000, respectively.
Future minimum annual rental payments under non-cancelable operating leases are
as follows:
Minimum Annual
Fiscal Year Ending Retail Payments
January 31, (in thousands)
- - ------------------------------------------------
1995 $23,581
1996 17,043
1997 15,310
1998 15,203
1999 15,216
2000 and thereafter 91,736
The Company is, from time to time, involved in routine litigation incidental to
the conduct of its business including proceedings to protect its trademark
rights, litigation instituted by persons injured upon premises within the
Company's control and litigation with present and former employees. Management
believes that such pending litigation will not have a material adverse effect
on the Company's consolidated results of operations or financial condition.
H. RELATED PARTY TRANSACTIONS
Mitsukoshi Ltd. ("Mitsukoshi"), a leading Japanese department store group, owns
approximately 14% of the Company's outstanding common stock. Until July 1993,
Mitsukoshi served as the Company's principal distributor in Japan. Pursuant to
written agreement, the Company now operates TIFFANY & CO. boutiques in
Mitsukoshi's stores in exchange for a percentage of net sales. Wholesale sales
to Mitsukoshi amounted to $42,000,000, $74,000,000 and $115,000,000 for the
years ended January 31, 1994, 1993
20
13
and 1992, respectively. There were no trade receivables due from Mitsukoshi at
January 31, 1994 and 1993.
During the year ended January 31, 1994, the Company realigned its primary
Japanese distribution arrangement and assumed full merchandising and marketing
responsibilities for 29 TIFFANY & CO. boutiques previously operated by
Mitsukoshi in Japan. As part of the transaction, the Company agreed to
repurchase over the next four years approximately $115,000,000 of TIFFANY & CO.
merchandise previously sold to Mitsukoshi. Accordingly, in the second quarter
of 1993 the Company established a reserve for product return of $57,500,000
which had the effect of reducing net income by $32,700,000 (net of income tax
benefit of $24,800,000), or $2.07 per share. Under this agreement,
approximately $30,000,000 of merchandise remains to be repurchased throughout
the period ending February 28, 1998. Approximately $25,400,000 is owed to
Mitsukoshi through a long-term trade payable agreement, due February 28, 1998,
which has been accounted for as a non-cash transaction.
During the year ended January 31, 1993, the Company assumed the operation of
seven boutiques previously operated by Mitsukoshi in non-Mitsukoshi department
stores in Japan.
I. STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Board of Directors is authorized to issue, without further action by the
stockholders, shares of preferred stock, and to fix and alter the rights
related to such stock. In March 1987, the stockholders authorized 2,000,000
shares of preferred stock, par value $0.01 per share. In November 1988, the
Board of Directors designated certain shares of such preferred stock as Series
A Junior Participating Cumulative Preferred Stock, par value $0.01 per share,
to be issued in connection with the exercise of certain stock purchase rights
under the Stockholder Rights Plan (described below). At January 31, 1994 and
1993, there were no shares of preferred stock issued or outstanding.
STOCKHOLDER RIGHTS PLAN
Under the Company's Stockholder Rights Plan, each outstanding share of common
stock has a stock purchase right which will become exercisable should certain
takeover-related events occur. The rights expire on November 17, 1998 and are
subject to redemption at $.01 per right. Following such events, but before any
person has acquired beneficial ownership of 20%. of the common shares, each
right may be used to purchase one one-hundredth of a share of Series A Junior
Participating Cumulative Preferred Stock at an exercise price of $140 (subject
to adjustment); after such an acquisition, each right may be used to purchase,
for the exercise price, common shares having a market value equal to two times
such exercise price. If, after such an acquisition, a merger of the Company
occurs (or 50% of the Company's assets are sold), each right may be exercised
to purchase, for the exercise price, common shares of the acquiring corporation
having a market value equal to two times the exercise price. Rights held by
such a 20% owner may not be exercised.
CASH DIVIDENDS
Cash dividends declared and paid during the years ended January 31, 1994 and
1993 amounted to $4,381,000 and $4,371,000, respectively. On February 17,
1994, the Company's Board of Directors declared a regular quarterly dividend of
$0.07 per common share, for stockholders of record on March 21, 1994, to be
paid on April 11, 1994.
STOCK OPTIONS
Under the 1985 Stock Option Plan, options to acquire up to 360,000 shares of
common stock may be granted to key employees of the Company at no less than
100% of fair market value on the date of grant. Certain options granted under
the 1985 Plan are intended to qualify as "incentive stock options" pursuant to
Section 422A of the Internal Revenue Code. Of the options granted, options for
180,000 shares became exercisable in full two years following the date of
grant. The balance became exercisable in part one year following the date of
grant. Options under the 1985 Plan have maximum terms of 10 or 11 years.
Under the 1986 Stock Option Plan, non-qualified stock options to acquire
2,209,000 shares of common stock may be granted to key employees of the Company
at no less than 100%. of the fair market value on the date of the grant. The
stockholders of the Company will be asked to approve an amendment to the 1986
Plan increasing by 500,000 the number of shares of common stock available for
issuance under the 1986 Plan. Options granted under the 1986 Plan have a
maximum term of 11 years and are exercisable in four equal installments with
the first install-
21
14
ment becoming exercisable on the first anniversary of the grant date.
The stockholders of the Company have also approved the 1988 Director Option
Plan, under which options to acquire 150,000 shares of common stock may be
granted to non-employee directors of the Company at a price equal to 50% of the
fair market value on the date of grant. Each director may elect to receive
options in lieu of all or 50% of an annual retainer fee. Options granted under
this plan have a maximum term of 15 years and are exercisable in full one year
following the date of grant.
Changes in options under these plans during the years ended
January 31, 1992, 1993 and 1994 were as follows:
Number of Option Price
Shares Per Share
- - --------------------------------------------------------------
Outstanding-
January 31, 1991 1,122,506 $ 1.81-$52.88
Granted 172,810 $22.19-$52.31
Exercised (186,935) $ 1.81-$44.69
Canceled (33,574) $15.54-$52.88
---------
Outstanding-
January 31, 1992 1,074,807 $ 1.81-$52.88
Granted 433,890 $16.91-$50.94
Exercised (54,338) $ 1.81-$44.63
Canceled (57,164) $14.75-$52.88
---------
Outstanding-
January 31, 1993 1,397,195 $ 1.81-$52.88
Granted 321,270 $15.88-$31.88
Exercised (39,826) $ 1.81-$26.71
Canceled (108,888) $25.21-$52.88
---------
OUTSTANDING-
JANUARY 31, 1994 1,569,751 $1.81-$52.88
=========
EXERCISABLE-
JANUARY 31, 1994 820,079
=========
J. POSTRETIREMENT HEALTH CARE AND
LIFE INSURANCE BENEFITS
In addition to providing pension benefits, the Company provides certain health
care and life insurance benefits for retired employees. Substantially all of
the Company's employees may become eligible for these benefits if they reach
normal or early retirement age while working for the Company. The Company's
employee and retiree health care benefits are administered by an insurance
company and premiums on life insurance are based on benefits paid during the
year. The Company's policy had been to expense these retiree benefit costs
when paid. Effective February 1, 1991, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106"), which requires
companies to accrue the cost of providing postretirement benefits throughout
the employees' active service periods until they attain full eligibility for
those benefits. Under SFAS 106, the Company recognized its transition
obligation under the immediate recognition basis which amounted to $10,960,000
and resulted in a reduction of net income of $6,335,000, or $0.40 per share,
for the year ended January 31, 1992.
The following table sets forth the Company's cumulative postretirement benefit
obligation and the amount recognized in the Company's consolidated balance
sheets at January 31, 1994 and 1993:
(in thousands, except percentages) 1994 1993
- - --------------------------------------------------------------
Retirees $ 9,294 $ 7,304
Fully eligible plan participants 855 672
Other active plan participants 9,852 7,742
----------------------
Total accumulated postretirement
benefit obligation 20,001 15,718
Unrecognized loss 4,891 2,158
----------------------
Postretirement benefit obligation $15,110 $13,560
======================
Discount rate 7.50% 8.25%
Rate of increase in compensation 5.00% 5.50%
Health care cost trend 11.00%(a) 14.00%(b)
(a) Gradually declining to 5.50% to be achieved in the year, 2011
(b) Gradually declining to 5.50% to be achieved in the year 2050.
22
15
Postretirement benefit cost included the following components:
(in thousands, except percentages) 1994 1993 1992
- - ----------------------------------------------------------------------------
Service cost $1,042 $988 $655
Interest cost on Projected
benefit obligation 1,298 1,178 991
----------------------------------------
Total postretirement
benefit cost $2,340 $2,166 $1,646
========================================
Discount rate 8.25% 8.25% 8.50%
Rate of increase
in compensation 5.50% 6.00% 6.00%
Health care cost trend(a) 14.00% 14.50% 15.00%
(a) Gradually declining to 5.50% to be achieved in the Year 2050.
Based on current estimates, increasing the health care cost trend rate by one
percentage point would increase the Company's accumulated postretirement
benefit obligation by $2,762,000 and the aggregate service and interest cost
components of net periodic postretirement benefit cost for the year ended
January 31,1994 by $425,000.
K. PENSION PLAN
The Company has a non-contributory defined benefit pension plan (the "Plan")
covering substantially all domestic salaried and full-time hourly employees.
The Company accounts for pension expense under the provision of Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for Pensions,"
which requires the use of the projected unit credit actuarial method for
financial reporting purposes. Plan benefits are based on the highest five
years of compensation or as a percentage of actual compensation, as applicable
in the circumstances, and the number of years of service. The actuarial
present value of the vested benefit obligation is calculated based on the
expected date of separation or retirement of the Company's eligible employees.
Net pension expense included the following components:
(in thousands, except percentages) 1994 1993 1992
- - --------------------------------------------------------------------
Service cost-benefits
earned during period $2,076 $1,850 $1,284
Interest cost on projected
benefit obligation 2,493 2,299 2,074
Return on assets (3,073) (1,015) (3,604)
Net amortization
and deferrals 1,411 (326) 2,522
----------------------------
Net periodic
pension cost $2,907 $2,808 $2,276
============================
Discount rate 8.25% 8.50% 9.25%
Rate of increase
in compensation 5.50% 6.00% 6.00%
Long-term rate of
return on assets 9.00% 9.00% 9.00%
The following table sets forth the funded status of the Plan and amounts
recognized in the Company's consolidated balance sheets at January 31, 1994 and
1993:
(in thousands, except percentages) 1994 1993
- - ---------------------------------------------------------------
Actuarial present value
of benefit obligation:
Vested $26,852 $22,372
Nonvested 3,889 3,165
--------------------
Accumulated benefit obligation $30,741 $25,537
====================
Projected benefit obligation $36,440 $30,761
Plan assets at fair value,
primarily stocks and
fixed income securities 30,131 26,394
--------------------
Projected benefit obligation
in excess of Plan assets 6,309 4,367
Unrecognized net loss (5,182) (3,763)
Unrecognized net obligation (755) (858)
Recognition of minimum liability 237 -
--------------------
Pension liability/(cost) recognized
in the consolidated
balance sheets $609 $ (254)
====================
The assumptions used in the calculation of the projected benefit obligation are
as follows:
1994 1993
- - ---------------------------------------------------------------
Discount rate 7.50% 8.25%
Rate of increase in compensation 5.00% 5.50%
23
16
L. INCOME TAXES
Effective February 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires the
Company to provide for taxes based upon the tax rate at which the items of
income and expense are expected to be settled in the Company's tax return. The
adoption of this standard did not have a material impact on the Company's
consolidated results of operations or financial condition. Prior years'
financial statements have not been restated.
Components of the (benefit)/provision for income taxes are as follows:
(in thousands) 1994 1993 1992
- - ----------------------------------------------------------------------------
Current:
Federal $(9,472) $ 4,827 $15,716
State and foreign 7,782 4,954 7,721
------------------------------------------
(1,690) 9,781 23,437
------------------------------------------
Deferred:
Federal (2,324) (5,078) 32
State and foreign (3,744) (490) (208)
------------------------------------------
(6,068) (5,568) (176)
------------------------------------------
$(7,758) $ 4,213 $23,261
==========================================
The Company has an income tax receivable amounting to $12,517,000, primarily
due to the recognition of a tax benefit from its year ended January 31, 1994
domestic net operating loss, as well as foreign tax credits available for
carryback and the overpayment of estimated Federal and state income taxes.
Deferred tax assets/(liabilities) as of January 31, 1994 consisted of the
following:
(in thousands) 1994
- - -----------------------------------------------------------
Postretirement benefits $ 6,434
Product return reserve 6,267
State net operating loss carryforward 2,703
Inventory reserves 5,210
Accrued expenses 2,383
Depreciation (5,189)
Pension contribution (2,160)
Undistributed earnings of foreign
subsidiaries (3,868)
Other (3,134)
-------
Net deferred tax assets $ 8,646
=======
The income tax effects of items comprising the deferred income tax expense are
as follows:
(in thousands) 1994 1993 1992
- - ----------------------------------------------------------------------------
Postretirement
benefit obligation $ (711) $ (544) $(340)
Tax audit settlement - (4,196) -
Lease buyout provision 510 (510)
Product return reserve (6,267) - -
Undistributed earnings of
foreign subsidiaries 1,028 1,211 686
State net operating loss
carryforward (2,703) - -
Other 2,075 (1,529) (522)
------------------------------------------
$(6,068) $(5,568) $(176)
==========================================
24
17
For the year ended January 31,1994, the Company recognized a state income tax
benefit of approximately $2,703,000 attributable to net operating loss
carryforwards which expire at various dates through 2009. The Company has
approximately $8,000,000 of foreign tax credits available for carryback or
carryforward, which expire in 1999.
A reconciliation of the benefit)/provision for income taxes at the statutory
Federal income tax rate to the Company's effective income tax rate as reported
is as follows:
1994 1993 1992
- - ----------------------------------------------------------------------------
Statutory Federal income
tax rate (35.0)% 34.0% 34.0%
Tax audit settlement - (21.1) -
State income taxes, net of
Federal benefit (14.2) 6.1 7.2
Foreign tax rates in excess
of foreign tax credits 4.8 - -
Other 1.3 2.1 1.0
-----------------------------------------
Effective income tax rate (43.1)% 21.1% 42.2%
=========================================
During the year ended January 31, 1993, the Company was advised by the Internal
Revenue Service that its audit of the Company's Federal tax returns for the
1985-1988 fiscal years was completed. The statute of limitations with respect
to such fiscal periods had expired. All material proposed adjustments related
to the acquisition of Tiffany and Company from Avon Products, Inc. in October
1984 and with respect to certain indebtedness incurred prior to the completion
of the Company's May 1987 initial public offering were withdrawn. As a result,
the provision for income taxes was reduced by $4,196,000, in order to adjust
tax reserves that had been established for the 1985-1988 fiscal years.
M. FOREIGN OPERATIONS
Certain information relating to the Company's foreign operations is set forth
below:
(in thousands) 1994 1993 1992
- - ----------------------------------------------------------------------------
Net sales:
Domestic-U.S. $364,556 $326,828 $316,282
-Export 41,106 87,730 122,773
Foreign 160,839 71,838 52,851
-------------------------------------------
$566,501 $486,396 $491,906
===========================================
Income/(loss) from
operations:
Domestic $ 77,321 $ 73,559 $ 98,229
Foreign 12,420 2,381 3,888
Corporate expenses (42,270) (42,199) (41,089)
Japan realignment (57,500)
Operational
realignment - (7,000)
Interest and other
expense, net (7,971) (6,816) (5,962)
-------------------------------------------
Income/(loss) before
income taxes $(18,000) $19,925 $55,066
===========================================
Identifiable assets:
Domestic $330,324 $287,127 $278,730
Foreign 174,085 132,228 116,152
-------------------------------------------
$504,409 $419,355 $394,882
===========================================
25
18
N. QUARTERLY FINANCIAL DATA (UNAUDITED)
Fiscal 1993 Quarter Ended
----------------------------------------------------------
(in thousands except per share amounts) April 30 July 31 October 31 January 31
- - ----------------------------------------------------------------------------------------------------
Net sales $109,481 $114,233 $134,750 $208,037
Gross profit/(loss) 50,781 (2,053)(a) 71,832 112,322
Income/(loss) from operations 3,705 (55,675) 7,916 34,025
Net income/(loss) 1,037 (32,550) 3,255 18,016
Net income/(loss) per share:
Primary $ 0.07 $ (2.06) $ 0.21 $ 1.14
==========================================================
Fully diluted $ 0.07 $ (2.06) $ 0.21 $ 1.11
==========================================================
Fiscal 1992 Quarter Ended
----------------------------------------------------------
(in thousands, except per share amounts) April 30 July 31 October 31 January 31
- - ----------------------------------------------------------------------------------------------------
Net sales $107,238 $120,830 $105,897 $152,431
Gross profit 49,594 58,993 54,304 74,142
Income from operations 6,998 8,553 607 10,583
Net income 3,103 3,889 56 8,664
Net income per share:
Primary $ 0.20 $ 0.25 $ 0.00 $ 0.55
==========================================================
Fully diluted $ 0.20 $ 0.25 $ 0.00 $ 0.55
==========================================================
(a) includes a $57,500 provision related to the realignment of the Company's
business in Japan.
The sum of the quarterly net income per share amounts may not equal the full
year amount since the computations of the weighted average number of common and
common equivalent shares outstanding for each quarter and the full year are
made independently.
26
19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Tiffany & Co.
We have audited the accompanying consolidated balance sheets of Tiffany & Co.
and Subsidiaries as of January 31, 1994 and 1993, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended January 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tiffany &
Co. and Subsidiaries as of January 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended January 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note J to the consolidated financial statements, in 1991 the
Company changed its method of accounting for postretirement benefits other than
pensions to conform with Statement of Financial Accounting Standards No. 106.
/s/ Coopers & Lybrand
- - ---------------------
New York, New York
March 7,1994.
REPORT OF MANAGEMENT
The Company's consolidated financial statements were prepared by management,
who are responsible for their integrity and objectivity. The financial
statements have been prepared in accordance with generally accepted accounting
principles and, as such, include amounts based on management's best estimates
and judgments.
Management is further responsible for maintaining a system of internal
accounting control designed to provide reasonable assurance that the Company's
assets are adequately safeguarded and that the accounting records reflect
transactions executed in accordance with management's authorization. The
system of internal control is continually reviewed and is augmented by written
policies and procedures, the careful selection and training of qualified
personnel and a program of internal audit.
The consolidated financial statements have been audited by Coopers & Lybrand,
Independent Accountants. Their report is shown on this page.
The Audit Committee of the Board of Directors, which is composed solely of
independent directors, meets regularly to discuss specific accounting,
financial reporting and internal control matters. Both the independent
accountants and the internal auditors have full and free access to the Audit
Committee. Each year the Audit Committee selects the firm that is to perform
audit services for the Company.
27