Delaware | 1-9494 | 13-3228013 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
200 Fifth Avenue, New York, New York | 10010 | |||
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits |
99.1 | News Release dated March 18, 2016. |
TIFFANY & CO. | ||
(Registrant) | ||
By: /s/ Leigh M. Harlan | ||
Leigh M. Harlan | ||
Senior Vice President, Secretary | ||
and General Counsel | ||
Date: March 18, 2016 |
Exhibit No. | Description |
99.1 | News Release dated March 18, 2016. |
Fifth Avenue & 57th Street | Contact: | |||
New York, N.Y. 10022 | Mark L. Aaron | |||
212-230-5301 | ||||
mark.aaron@tiffany.com |
TIFFANY REPORTS FULL YEAR AND FOURTH QUARTER | |
2015 RESULTS; | |
MANAGEMENT COMMENTS ON SALES AND EARNINGS | |
OUTLOOK | |
• | Sales and earnings negatively affected by the strong U.S. dollar |
• | Full year sales rose 2% in local currencies, but declined 3% as reported |
• | EPS of $3.83 down 9% excluding charges in both years; EPS of $3.59 as |
reported down 4% from prior year | |
• | Company generated strong free cash flow |
• | On a constant-exchange-rate basis (see “Non-GAAP Measures”), worldwide net sales rose 2% due to higher sales in Asia-Pacific, Japan and Europe and comparable store sales were equal to the prior year. Reported in U.S. dollars, worldwide net sales declined 3% to $4.1 billion. |
• | Net earnings of $493.8 million, or $3.83 per diluted share (excluding pre-tax charges of $37.9 million for two impairments of a loan made to a diamond mining company and $8.8 million for staffing and occupancy reductions) were 9% lower than last year’s $545.1 million, or $4.20 per diluted share, which had excluded a debt extinguishment charge (see “Non-GAAP Measures”); the decline was due to lower sales and higher selling, general and administrative (“SG&A”) expenses partly offset by a higher gross margin. On a reported basis, which included the charges in both years, net earnings per diluted share of $3.59 were 4% below the prior year. |
• | On a constant-exchange-rate basis (see “Non-GAAP Measures”), worldwide net sales declined 2%, reflecting lower sales in the Americas and Asia-Pacific and sales growth in Japan and Europe and comparable store sales declined 5%. Reported in U.S. dollars, worldwide net sales of $1.2 billion were 6% lower than the prior year. |
• | Net earnings of $186.8 million, or $1.46 per diluted share (excluding pre-tax charges of $28.3 million for impairment of a loan made to a diamond mining company and $8.8 million for staffing and occupancy reductions - see “Non-GAAP Measures”), declined from $196.2 million, or $1.51 per diluted share in the prior year; the decline reflected a lack of sales leverage on higher selling, general and administrative expenses partly offset by a higher gross margin. On a reported basis, net earnings were $1.28 per diluted share. |
• | In the Americas, on a constant-exchange-rate basis, total sales and comparable store sales in the full year were 2% and 4%, respectively, below the prior year while total and comparable store sales in the fourth quarter declined 6% and 8%, respectively. These declines in both periods reflected lower foreign tourist spending in the U.S., which management attributes to the strong U.S. dollar, as well as varying degrees of softness in sales to U.S. customers. Elsewhere in the region, total sales on a constant-exchange-rate basis rose in Canada and Latin America. Reported in U.S. dollars, total sales of $1.9 billion (47% of worldwide net sales) in the full year and $604 million in the fourth quarter were 4% and 8%, respectively, below the prior year. |
• | In the Asia-Pacific region, on a constant-exchange-rate basis, in the full year total sales rose 3% and comparable store sales were unchanged from the prior year while in the fourth quarter total sales declined 3% and comparable store sales declined 8%. In both periods, sales on a constant-exchange-rate basis rose in China and Australia, which contrasted with continued weakness in Hong Kong. Reported in U.S. dollars, total sales of $1 billion (24% of worldwide net sales) in the full year and $260 million in the fourth quarter were 2% and 8%, respectively, below the prior year. |
• | In Japan, on a constant-exchange-rate basis, full year total sales and comparable store sales rose 10% and 5%, respectively, and in the fourth quarter total sales rose 12% and comparable store sales rose 10%. The majority of this sales growth in both periods reflected higher sales to foreign tourists. Reported in U.S. dollars, total sales declined 2% in the full year to $541 million (13% of worldwide net sales) and rose 9% to $161 million in the fourth quarter. |
• | In Europe, on a constant-exchange-rate basis, total sales and comparable store sales in the full year rose 12% and 9%, respectively, due to geographically broad-based sales growth that reflected higher spending by local customers and foreign tourists; on that same basis, total sales in the fourth quarter increased 2% and comparable store sales declined 3% due to varying performance across the region, including sales growth in the U.K. and a noteworthy decline in France. Reported in U.S. dollars, total sales in Europe of $506 million (12% of worldwide net sales) in the full year and $157 million in the fourth quarter were 1% and 6%, respectively, below the prior year. |
• | Other sales of $108 million in the full year and $31 million in the fourth quarter declined 13% and 6%, respectively, while comparable store sales declined 15% and 21%, respectively, reflecting lower sales in the United Arab Emirates (“UAE”) as well as lower wholesale sales of diamonds in the year. |
• | Tiffany opened 16 Company-operated stores in the full year and closed four locations. At January 31, 2016, the Company operated 307 stores (124 in the Americas, 81 in Asia-Pacific, 56 in Japan, 41 in Europe, and five in the UAE), compared with 295 stores a year ago (122 in the Americas, 73 in Asia-Pacific, 56 in Japan, 39 in Europe, and five in the UAE). |
• | Gross margin (gross profit as a percentage of net sales) in the full year rose to 60.7%, from 59.7% in the prior year, reflecting favorable product input costs and price increases partly offset by sales mix. Gross margin in the fourth quarter was 63.0%, versus 60.8% in the prior year, due to favorable product input costs and price increases. |
• | SG&A expenses rose 5% in the full year and 6% in the fourth quarter as reported. SG&A expenses include charges recorded in the second and fourth quarters related to the impairment of a loan to a diamond mining company in Sierra Leone, as well as a charge recorded in the fourth quarter for staffing and occupancy reductions (see “Non-GAAP Measures”). Excluding these charges, SG&A expenses rose 2% in the full year due to higher marketing spending and store-related and pension costs, partly offset by a benefit from the translation effect of the strong U.S. dollar. Excluding the fourth quarter charges, SG&A expenses declined 2% in the fourth quarter, benefitting from the strong U.S. dollar, as well as lower marketing and variable labor costs. Management continues to evaluate the collectability of the remaining $6 million of the loan to the diamond mining company. Management believes that it is possible that ongoing developments could require the Company to impair some or all of that amount. |
• | Interest and other expenses, net declined in the full year as a result of lower interest expense on long-term debt (reflecting the October 2014 redemption of long-term debt using proceeds from the issuance of lower-rate long-term debt in September 2014) as well as lower average credit facility borrowings. Interest and other expenses, net were virtually unchanged in the fourth quarter. Both periods were also affected by increased foreign currency transaction losses. |
• | The effective tax rate was 34.7% in the full year, versus 34.4% in the prior year, and was 34.4% in the fourth quarter, compared with 32.9% in the prior year. |
• | Net inventories of $2.2 billion at January 31, 2016 were 6% lower than the prior year, which included a 2% benefit from the translation effect of the strong U.S. dollar. |
• | Capital expenditures were $253 million in the full year, compared with $247 million in the prior year. |
• | The Company spent $220 million in the full year (at an average cost of $78 per share), including $104 million in the fourth quarter (at an average cost of $73 per share) to repurchase shares of its Common Stock. On January 21, 2016, the Company’s Board of Directors approved a new stock repurchase program, authorizing the repurchase of up to $500 million of the Company’s Common Stock; this new program immediately replaced the Company’s previously-existing program that had authorized the repurchase of up to $300 million of its Common Stock, and which had $59 million remaining available for repurchases at the time of termination. At January 31, 2016, $494 million remained available for repurchases under the new program that expires on January 31, 2019. |
• | Cash and cash equivalents and short-term investments were $887 million at January 31, 2016, up from $731 million a year ago. Total debt (short-term and long-term) as a percentage of stockholders’ equity was 38% and 39% at January 31, 2016 and 2015, respectively. |
• | The Company will host an Analyst/Investor Day on April 12th at its corporate office in New York during which members of Company management will provide overviews of their respective areas of responsibility and strategic direction. A live webcast of the presentations will be available on the Company’s website at http://investor.tiffany.com. Due to space restrictions, a limited number of in-person invitations have been issued. For those unable to |
• | The Company expects to report its first quarter results on Wednesday May 25th before the market opens. To be notified of future announcements, please register at http://investor.tiffany.com (“E-Mail Alerts”). |
Fourth Quarter 2015 vs. 2014 | Full Year 2015 vs. 2014 | ||||||||||||||||
GAAP Reported | Translation Effect | Constant- Exchange- Rate Basis | GAAP Reported | Translation Effect | Constant- Exchange- Rate Basis | ||||||||||||
Net Sales: | |||||||||||||||||
Worldwide | (6 | )% | (4 | )% | (2 | )% | (3 | )% | (5 | )% | 2 | % | |||||
Americas | (8 | ) | (2 | ) | (6 | ) | (4 | ) | (2 | ) | (2 | ) | |||||
Asia-Pacific | (8 | ) | (5 | ) | (3 | ) | (2 | ) | (5 | ) | 3 | ||||||
Japan | 9 | (3 | ) | 12 | (2 | ) | (12 | ) | 10 | ||||||||
Europe | (6 | ) | (8 | ) | 2 | (1 | ) | (13 | ) | 12 | |||||||
Other | (6 | ) | — | (6 | ) | (13 | ) | — | (13 | ) | |||||||
Comparable Store Sales: | |||||||||||||||||
Worldwide | (9 | )% | (4 | )% | (5 | )% | (6 | )% | (6 | )% | — | % | |||||
Americas | (10 | ) | (2 | ) | (8 | ) | (6 | ) | (2 | ) | (4 | ) | |||||
Asia-Pacific | (13 | ) | (5 | ) | (8 | ) | (5 | ) | (5 | ) | — | ||||||
Japan | 7 | (3 | ) | 10 | (7 | ) | (12 | ) | 5 | ||||||||
Europe | (12 | ) | (9 | ) | (3 | ) | (5 | ) | (14 | ) | 9 | ||||||
Other | (21 | ) | — | (21 | ) | (15 | ) | — | (15 | ) |
(in millions, except per share amounts) | GAAP | Impairment charge a | Specific cost-reduction initiatives b | Non-GAAP | ||||||||||
Quarter Ended January 31, 2016 | ||||||||||||||
Selling, general and administrative ("SG&A") expenses | $ | 503.9 | (28.3 | ) | $ | (8.8 | ) | $ | 466.8 | |||||
As a % of sales | 41.5 | % | 38.5 | % | ||||||||||
Earnings from operations | 260.9 | 28.3 | 8.8 | 298.0 | ||||||||||
As a % of sales | 21.5 | % | 24.6 | % | ||||||||||
Net earnings | 163.2 | 18.0 | 5.6 | 186.8 | ||||||||||
Diluted earnings per share | 1.28 | 0.14 | 0.04 | 1.46 |
(in millions, except per share amounts) | GAAP | Impairment charges a | Specific cost-reduction initiatives b | Non-GAAP | |||||||||||
Year Ended January 31, 2016 | |||||||||||||||
SG&A expenses | $ | 1,731.2 | $ | (37.9 | ) | $ | (8.8 | ) | $ | 1,684.5 | |||||
As a % of sales | 42.2 | % | 41.0 | % | |||||||||||
Earnings from operations | 760.1 | 37.9 | 8.8 | 806.8 | |||||||||||
As a % of sales | 18.5 | % | 19.7 | % | |||||||||||
Net earnings | 463.9 | 24.3 | 5.6 | 493.8 | |||||||||||
Diluted earnings per share | 3.59 | 0.19 | 0.05 | 3.83 |
a | Expenses associated with impairment charges related to a financing arrangement with Koidu Limited. |
b | Expenses associated with specific cost-reduction initiatives which included severance related to staffing reductions and subleasing of certain office space for which only a portion of the Company's future rent obligations will be recovered. |
(in millions, except per share amounts) | GAAP | Debt extinguishment c | Non-GAAP | ||||||||
Year Ended January 31, 2015 | |||||||||||
Loss on extinguishment of debt | $ | 93.8 | $ | (93.8 | ) | $ | — | ||||
Provision for income taxes | 253.4 | 32.8 | 286.2 | ||||||||
Net earnings | 484.2 | 60.9 | 545.1 | ||||||||
Diluted earnings per share | 3.73 | 0.47 | 4.20 |
c | Expenses associated with the redemption of $400.0 million in aggregate principal amount of certain senior notes prior to their scheduled maturities. |
Years Ended January 31, | ||||||
(in millions) | 2016 | 2015 | ||||
Net cash provided by operating activities | $ | 813.6 | $ | 615.1 | ||
Less: Capital expenditures | (252.7 | ) | (247.4 | ) | ||
Free cash inflow | $ | 560.9 | $ | 367.7 |
Three Months Ended January 31, | Years Ended January 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net sales | $ | 1,213.6 | $ | 1,285.3 | $ | 4,104.9 | $ | 4,249.9 | |||||||
Cost of sales | 448.8 | 503.7 | 1,613.6 | 1,712.7 | |||||||||||
Gross profit | 764.8 | 781.6 | 2,491.3 | 2,537.2 | |||||||||||
Selling, general and administrative expenses | 503.9 | 477.0 | 1,731.2 | 1,645.8 | |||||||||||
Earnings from operations | 260.9 | 304.6 | 760.1 | 891.4 | |||||||||||
Interest and other expenses, net | 12.1 | 12.3 | 50.2 | 60.1 | |||||||||||
Loss on extinguishment of debt | — | — | — | 93.8 | |||||||||||
Earnings from operations before income taxes | 248.8 | 292.3 | 709.9 | 737.5 | |||||||||||
Provision for income taxes | 85.6 | 96.1 | 246.0 | 253.3 | |||||||||||
Net earnings | $ | 163.2 | $ | 196.2 | $ | 463.9 | $ | 484.2 | |||||||
Net earnings per share: | |||||||||||||||
Basic | $ | 1.28 | $ | 1.52 | $ | 3.61 | $ | 3.75 | |||||||
Diluted | $ | 1.28 | $ | 1.51 | $ | 3.59 | $ | 3.73 | |||||||
Weighted-average number of common shares: | |||||||||||||||
Basic | 127.4 | 129.3 | 128.6 | 129.2 | |||||||||||
Diluted | 127.9 | 130.0 | 129.1 | 129.9 |
January 31, 2016 | January 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents and short-term investments | $ | 886.6 | $ | 731.5 | |||
Accounts receivable, net | 206.4 | 195.2 | |||||
Inventories, net | 2,225.0 | 2,362.1 | |||||
Prepaid expenses and other current assets | 190.4 | 220.0 | |||||
Total current assets | 3,508.4 | 3,508.8 | |||||
Property, plant and equipment, net | 935.8 | 899.5 | |||||
Other assets, net | 685.5 | 772.3 | |||||
$ | 5,129.7 | $ | 5,180.6 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term borrowings | $ | 221.6 | $ | 234.0 | |||
Current portion of long-term debt | 84.2 | — | |||||
Accounts payable and accrued liabilities | 329.1 | 318.0 | |||||
Income taxes payable | 27.1 | 39.9 | |||||
Merchandise credits and deferred revenue | 67.9 | 66.1 | |||||
Total current liabilities | 729.9 | 658.0 | |||||
Long-term debt | 798.1 | 882.5 | |||||
Pension/postretirement benefit obligations | 428.1 | 524.2 | |||||
Other long-term liabilities | 189.0 | 200.7 | |||||
Deferred gains on sale-leasebacks | 55.1 | 64.5 | |||||
Stockholders’ equity | 2,929.5 | 2,850.7 | |||||
$ | 5,129.7 | $ | 5,180.6 |