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MarketScreener Homepage  >  Equities  >  Nyse  >  Tiffany & Co.    TIF

TIFFANY & CO.

(TIF)
  Report
Delayed Quote. Delayed Nyse - 01/17 04:05:20 pm
134.25 USD   +0.10%
01/02TIFFANY & CO. : Report
CO
2019Tiffany Sets Stockholder Meeting to Vote on Merger With LVMH
DJ
2019TIFFANY & CO : Other Events, Financial Statements and Exhibits (form 8-K)
AQ
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TIFFANY : & CO Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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12/05/2019 | 06:52am EST

OVERVIEW


Tiffany & Co. (the "Registrant") is a holding company that operates through
Tiffany and Company ("Tiffany") and the Registrant's other subsidiary companies
(collectively, the "Company"). The Registrant, through its subsidiaries, designs
and manufactures products and operates TIFFANY & CO. retail stores worldwide,
and also sells its products through Internet, catalog, business-to-business and
wholesale operations. The Company's principal merchandise offering is jewelry
(representing 92% of worldwide net sales in the fiscal year ended January 31,
2019); it also sells watches, home and accessories products and fragrances.

The Company's reportable segments are as follows:


•Americas includes sales in 124 Company-operated TIFFANY & CO. stores in the
United States ("U.S."), Canada and Latin America, as well as sales of TIFFANY &
CO. products in certain markets through Internet, catalog, business-to-business
and wholesale operations;

•Asia-Pacific includes sales in 90 Company-operated TIFFANY & CO. stores, as
well as sales of TIFFANY & CO. products in certain markets through Internet and
wholesale operations;

•Japan includes sales in 56 Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY & CO. products through Internet, business-to-business and wholesale operations;

•Europe includes sales in 48 Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY & CO. products in certain markets through Internet and wholesale operations; and


•Other consists of all non-reportable segments. Other includes the Emerging
Markets region, which includes sales in five Company-operated TIFFANY & CO.
stores and wholesale operations in the Middle East. In addition, Other includes
wholesale sales of diamonds as well as earnings received from third-party
licensing agreements.

ENTRY INTO MERGER AGREEMENT


On November 24, 2019, the Registrant entered into an Agreement and Plan of
Merger (the "Merger Agreement") by and among the Registrant, LVMH Moët Hennessy
- Louis Vuitton SE, a societas Europaea (European company) organized under the
laws of France ("Parent"), Breakfast Holdings Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("Holding"), and Breakfast
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Holding ("Merger Sub"). Pursuant to the Merger Agreement, Merger Sub will be
merged with and into the Registrant (the "Merger"), with the Registrant
continuing as the surviving company in the Merger and a wholly owned indirect
subsidiary of Parent.

For additional information related to the Merger Agreement, please refer to the
Company's Current Report on Form 8-K filed with the U.S. Securities and Exchange
Commission (the "SEC") on November 25, 2019 and "Item 1. Financial Statements -
Note 15. Subsequent Events".

SUMMARY OF THIRD QUARTER AND YEAR-TO-DATE RESULTS


•Worldwide net sales were approximately unchanged in the three months ("third
quarter") ended October 31, 2019 and decreased 2% to $3.1 billion in the nine
months ("year-to-date") ended October 31, 2019; comparable sales were
approximately unchanged in the third quarter and decreased 3% in the
year-to-date. On a constant-exchange-rate basis (see "Non-GAAP Measures" below),
worldwide net sales increased 1% in the third quarter and were approximately
unchanged in the year-to-date, while comparable sales increased 1% in the third
quarter and decreased 1% in the year-to-date.

•Earnings from operations decreased $7.9 million, or 6%, in the third quarter
and $58.3 million, or 11%, in the year-to-date, with earnings from operations as
a percentage of net sales ("operating margin") decreasing 80 basis points and
160 basis points in the third quarter and year-to-date, respectively.

                                 TIFFANY & CO.
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•Net earnings decreased 17% to $78.4 million, or $0.65 per diluted share, in the
third quarter from $94.9 million, or $0.77 per diluted share, in the prior year.
Net earnings decreased 11% to $339.9 million, or $2.80 per diluted share, in the
year-to-date from $381.9 million, or $3.08 per diluted share, in the prior year.

•Inventories, net increased 4% from October 31, 2018.


•In June 2019, the Board of Directors approved a 5% increase in the quarterly
dividend rate to $0.58 per share of the Company's Common Stock, or an annual
dividend rate of $2.32 per share.


RESULTS OF OPERATIONS

Non-GAAP Measures

The Company reports information in accordance with U.S. Generally Accepted
Accounting Principles ("GAAP"). Internally, management also monitors and
measures its performance using certain sales and earnings measures that include
or exclude amounts, or are subject to adjustments that have the effect of
including or excluding amounts, from the most directly comparable GAAP measure
("non-GAAP financial measures"). The Company presents such non-GAAP financial
measures in reporting its financial results to provide investors with useful
supplemental information that will allow them to evaluate the Company's
operating results using the same measures that management uses to monitor and
measure its performance. The Company's management does not, nor does it suggest
that investors should, consider non-GAAP financial measures in isolation from,
or as a substitute for, financial information prepared in accordance with GAAP.
These non-GAAP financial measures presented here may not be comparable to
similarly-titled measures used by other companies.

Net Sales. The Company's reported net sales reflect either a translation-related
benefit from strengthening foreign currencies or a detriment from a
strengthening U.S. dollar. Internally, management monitors and measures its
sales performance on a non-GAAP basis that eliminates the positive or negative
effects that result from translating sales made outside the U.S. into U.S.
dollars ("constant-exchange-rate basis"). Sales on a constant-exchange-rate
basis are calculated by taking the current year's sales in local currencies and
translating them into U.S. dollars using the prior year's foreign currency
exchange rates. Management believes this constant-exchange-rate basis provides a
useful supplemental basis for the assessment of sales performance and of
comparability between reporting periods. The following tables reconcile the
sales percentage increases (decreases) from the GAAP to the non-GAAP basis
versus the previous year:
                                                       Third Quarter 2019 vs. 2018                                                                                   Year-to-date 2019 vs. 2018
                                                                                          Constant-                                                                     Constant-
                                        GAAP                  Translation                 Exchange-                  GAAP                  Translation                  Exchange-
                                      Reported                   Effect                  Rate Basis                Reported                   Effect                   Rate Basis
Net Sales:
Worldwide                                      -  %                      (1) %                      1  %                   (2) %                      (2) %                        -  %
Americas                                      (4)                         -                        (4)                     (4)                         -                          (4)
Asia-Pacific                                   -                         (3)                        3                      (1)                        (4)                          3
Japan                                         19                          5                        14                       5                          1                           4
Europe                                        (3)                        (4)                        1                      (4)                        (5)                          1
Other                                        (13)                         -                       (13)                      2                          -                           2

Comparable Sales:
Worldwide                                      -  %                      (1) %                      1  %                   (3) %                      (2) %                       (1) %
Americas                                      (4)                         -                        (4)                     (5)                        (1)                         (4)
Asia-Pacific                                  (2)                        (3)                        1                      (3)                        (4)                          1
Japan                                         19                          5                        14                       4                          1                           3
Europe                                         -                         (4)                        4                      (4)                        (5)                          1
Other                                         (3)                         -                        (3)                    (17)                         -                         (17)



                                 TIFFANY & CO.
                                       34

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                                                 Third Quarter 2019 vs. 2018                                                                                   Year-to-date 2019 vs. 2018
                                                                                    Constant-                                                                     Constant-
                                  GAAP                  Translation                 Exchange-                  GAAP                  Translation                  Exchange-
                                Reported                   Effect                  Rate Basis                Reported                   Effect                   Rate Basis
Jewelry sales by product
category:
Jewelry collections                      -  %                      (1) %                      1  %                    -  %                      (2) %                        2  %
Engagement jewelry                       -                         (1)                        1                      (3)                        (2)                         (1)
Designer jewelry                         1                          -                         1                      (8)                        (1)                         (7)



Comparable Sales

Comparable sales include sales transacted in Company-operated stores open for
more than 12 months. Sales from e-commerce sites are included in comparable
sales for those sites that have been operating for more than 12 months. Sales
for relocated stores are included in comparable sales if the relocation occurs
within the same geographical market. In all markets, the results of a store in
which the square footage has been expanded or reduced remain in the comparable
sales base.

Net Sales

Net sales by segment were as follows:

                                                       Third Quarter                                                                                      Year-to-date
(in millions)                   2019               2018                Increase/(Decrease)                2019               2018                Increase/(Decrease)
Americas                    $   422.5$   442.1                                  (4) %       $ 1,283.6$ 1,342.2                                  (4) %
Asia-Pacific                    294.1              294.0                                   -              915.8              923.1                                  (1)
Japan                           169.3              142.1                                  19              469.3              447.3                                   5
Europe                          111.3              114.1                                  (3)             330.0              342.6                                  (4)
Other                            17.4               20.1                                 (13)              67.4               66.3                                   2
                            $ 1,014.6$ 1,012.4                                   -  %       $ 3,066.1$ 3,121.5                                  (2) %


Worldwide net sales were approximately unchanged in the third quarter of 2019 and decreased $55.4 million, or 2%, in the year-to-date. On a constant-exchange-rate basis, worldwide net sales increased 1% in the third quarter of 2019 and were approximately unchanged in the year-to-date.

                                 TIFFANY & CO.
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Jewelry sales by product category were as follows:
                           Third Quarter
(in millions)            2019          2018        $ Change      % Change
Jewelry collections   $ 541.8$ 543.5$  (1.7)            -  %
Engagement jewelry      276.8         276.5           0.3             -
Designer jewelry        112.0         111.1           0.9             1



                              Year-to-date
(in millions)             2019            2018         $ Change       % Change
Jewelry collections   $ 1,644.7$ 1,642.7$    2.0             -  %
Engagement jewelry        833.6           857.9          (24.3)           (3)
Designer jewelry          337.8           367.6          (29.8)           (8)



In both the third quarter and year-to-date of 2019, net sales in the Jewelry
collections category were largely unchanged from the prior year, which included
the benefit of increased sales of Tiffany T and High jewelry offset by softness
in other collections. In the year-to-date, net sales in the Engagement jewelry
and Designer jewelry categories reflected decreases across the categories. On a
constant-exchange-rate basis, net sales in each jewelry product category
increased 1% in the third quarter, while in the year-to-date net sales increased
2% in the Jewelry collections category, decreased 1% in the Engagement jewelry
category and decreased 7% in the Designer jewelry category.

Certain reclassifications within the jewelry categories have been made to the prior year amounts to conform to the current year category presentation.

Changes in net sales by reportable segment were as follows: (in millions)

                      Comparable Sales          Non-comparable Sales          Wholesale/Other             Total
Third Quarter 2019:
Americas                          $        (18.6)          $              0.3             $         (1.3)         $      (19.6)
Asia-Pacific                                (4.7)                        (2.0)                       6.8                   0.1
Japan                                       24.7                          2.8                       (0.3)                 27.2
Europe                                      (0.1)                        (1.3)                      (1.4)                 (2.8)
Year-to-date 2019:
Americas                          $        (58.8)          $              0.6             $         (0.4)         $      (58.6)
Asia-Pacific                               (23.8)                         2.9                       13.6                  (7.3)
Japan                                       17.6                          6.5                       (2.1)                 22.0
Europe                                     (14.6)                         3.0                       (1.0)                (12.6)





                                 TIFFANY & CO.
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Changes in jewelry sales relative to the prior year by reportable segment were
as follows:
                                                              Average Price per Unit Sold
                                                                                Impact of Currency                 Number of
                                                       As Reported                  Translation                   Units Sold
Third Quarter 2019:
Americas                                                          10  %                          -  %                        (15) %
Asia-Pacific                                                      10                            (3)                          (10)
Japan                                                             15                             5                             3
Europe                                                            14                            (4)                          (15)
Year-to-date 2019:
Americas                                                           9  %                          -  %                        (13) %
Asia-Pacific                                                       8                            (4)                           (9)
Japan                                                              7                             1                            (3)
Europe                                                             6                            (5)                          (10)



Management believes the changes in average price per jewelry unit sold and the
number of jewelry units sold include the effect of the Company's strategy of
increasing average price per unit sold by growing sales of High jewelry and
other gold and diamond jewelry within the Jewelry collections category at a
faster rate than sales within the Engagement jewelry category and silver jewelry
within the Jewelry collections category.

Americas. In the third quarter, total net sales decreased $19.6 million, or 4%,
which included comparable sales decreasing $18.6 million, or 4%. In the
year-to-date, total net sales decreased $58.6 million, or 4%, which included
comparable sales decreasing $58.8 million, or 5%. In both periods, sales
decreased across most of the region, which management attributed to lower
spending by foreign tourists and, to a lesser extent, local customers. On a
constant-exchange-rate basis, total net sales and comparable sales decreased 4%
in both the third quarter and year-to-date.

The decrease in the number of jewelry units sold in both the third quarter and
year-to-date reflected decreases in all product categories. Management
attributed the increase in the average price per jewelry unit sold to a shift in
sales mix to gold jewelry within the Jewelry collections category in both
periods, as well as to High jewelry in the year-to-date.

Asia-Pacific. In the third quarter, total net sales were largely unchanged from
the prior year, which included comparable sales decreasing $4.7 million, or 2%.
In the year-to-date, total net sales decreased $7.3 million, or 1%, which
included comparable sales decreasing $23.8 million, or 3%. Management attributed
the decrease in sales in the year-to-date to the effect of foreign currency
translation. On a constant-exchange-rate basis, total net sales increased by 3%
in both the third quarter and year-to-date, while comparable sales increased 1%
in both periods. Sales results reflected double-digit growth in the Chinese
Mainland in both periods, which was offset by a decrease in net sales in Hong
Kong of 49% in the third quarter and 27% in the year-to-date, which management
attributed to significant disruptions that began earlier this year. Sales
performance was mixed in other markets in the region in both periods. Management
also attributed these sales results to higher spending by local customers,
largely offset by lower spending by foreign tourists.

The decrease in the number of jewelry units sold in both the third quarter and year-to-date reflected decreases in all product categories. Management attributed the increase in the average price per jewelry unit sold in both periods to a shift in sales mix to High jewelry and gold jewelry within the Jewelry collections category.


Japan. In the third quarter, total net sales increased $27.2 million, or 19%,
which included comparable sales increasing $24.7 million, or 19%. In the
year-to-date, total net sales increased $22.0 million, or 5%, which included
comparable sales increasing $17.6 million, or 4%. On a constant-exchange-rate
basis, total net sales increased by 14% in the third quarter and 4% in the
year-to-date, while comparable sales increased 14% and 3%, respectively, in
those periods. Management believes that strong sales growth in the quarter prior
to October 1, 2019TIFFANY & CO.
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Table of Contents reflected the response of Japanese consumers to the increase in Japan's consumption tax that took effect on that date.


The increase in the number of jewelry units sold in the third quarter reflected
increases in the Designer jewelry and Engagement jewelry categories. The
decrease in the number of jewelry units sold in the year-to-date reflected
decreases in the Jewelry collections and Designer jewelry categories. Management
attributed the increase in the average price per jewelry unit sold to a shift in
sales mix within the Engagement jewelry category in the third quarter and within
the Jewelry collections category in both periods.

Europe. In the third quarter, total net sales decreased $2.8 million, or 3%, and
comparable sales were largely unchanged from the prior year. In the
year-to-date, total net sales decreased $12.6 million, or 4%, which included
comparable sales decreasing $14.6 million, or 4%. Management attributed the
decrease in total net sales in both periods to the effect of foreign currency
translation. On a constant-exchange-rate basis, total net sales increased by 1%
in both the third quarter and the year-to-date, while comparable sales increased
4% and 1%, respectively, in those periods. Results in both periods reflected
broad-based softness across the region, which management attributed to modest
changes in spending by local customers and foreign tourists.

The decrease in the number of jewelry units sold in both the third quarter and
year-to-date reflected decreases in the Jewelry collections and Designer jewelry
categories. Management attributed the increase in the average price per jewelry
unit sold in both periods to a shift in sales mix to gold jewelry within the
Jewelry collections category.

Other. Other net sales decreased $2.7 million, or 13%, in the third quarter and increased $1.1 million, or 2%, in the year-to-date.


Store Data. In the year-to-date of 2019, the Company opened five
Company-operated stores (one in the Americas, one in Asia-Pacific, two in Japan
and one in Europe) and closed one Company-operated store each in the Americas,
Asia-Pacific and Japan.

Gross Margin
                                                  Third Quarter                                       Year-to-date
(dollars in millions)                        2019               2018               2019                2018
Gross profit                             $   625.7$   629.3$ 1,902.7$    1,969.0
Gross profit as a percentage of net
sales                                         61.7  %            62.2  %            62.1  %               63.1  %



Gross margin (gross profit as a percentage of net sales) decreased 50 basis
points in the third quarter and 100 basis points in the year-to-date of 2019
primarily due to a shift in sales mix toward higher price point jewelry in both
periods, as well as the unfavorable effect from an increase in wholesale sales
of diamonds in the year-to-date. Additionally, the prior year periods included
the impact of an $8.5 million charge recorded in the third quarter of 2018
related to the bankruptcy filing of a metal refiner to which the Company
entrusted precious scrap metal.

Management periodically reviews and adjusts its retail prices when appropriate
to address product input cost increases, specific market conditions and changes
in foreign currencies/U.S. dollar relationships. Its long-term strategy is to
continue that approach, although significant increases in product input costs or
weakening foreign currencies can affect gross margin negatively over the
short-term until management makes necessary price adjustments. Among the market
conditions that management considers are consumer demand for the product
category involved, which may be influenced by consumer confidence and
competitive pricing conditions. Management uses derivative instruments to
mitigate certain foreign exchange and precious metal price exposures (see "Item
1. Financial Statements - Note 8. Hedging Instruments"). Management adjusted
retail prices in the third quarter and year-to-date of 2019 and 2018 across most
geographic regions and product categories, some of which were intended to
mitigate foreign currency fluctuations.

                                 TIFFANY & CO.
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Selling, General and Administrative ("SG&A") Expenses
                                                  Third Quarter                                       Year-to-date
(dollars in millions)                        2019               2018               2019                2018
SG&A expenses                            $   507.2$   502.9$ 1,439.1$    1,447.1
SG&A expenses as a percentage of net
sales                                         50.0  %            49.7  %            46.9  %               46.4  %


SG&A expenses increased $4.3 million, or 1%, in the third quarter of 2019 and
decreased $8.0 million, or 1%, in the year-to-date of 2019. These changes
reflected an increase in store occupancy and depreciation expenses, a decrease
in labor and incentive compensation costs and a decrease in marketing spending.
The SG&A expense ratio (SG&A expenses as a percentage of net sales) increased 30
basis points in the third quarter and 50 basis points in the year-to-date due to
sales deleverage on operating expenses. Changes in foreign currency exchange
rates did not have a meaningful effect on SG&A expenses in the third quarter or
year-to-date of 2019 as compared with each of the prior year periods.

Earnings from Operations
                                Third Quarter                            Year-to-date
(in millions)                 2019          2018          2019            2018
Earnings from operations   $ 118.5$ 126.4$ 463.6$     521.9
Operating margin              11.7  %       12.5  %       15.1  %           16.7  %



Earnings from operations decreased $7.9 million, or 6%, in the third quarter of
2019 and $58.3 million, or 11%, in the year-to-date of 2019 and the operating
margin decreased 80 basis points and 160 basis points, respectively, due to a
decrease in gross margin and an increase in the SG&A expense ratio.

Results by segment were as follows:

                                                                      % of Net                                           % of Net
(in millions)                           Third Quarter 2019              Sales              Third Quarter 2018              Sales
Earnings from operations*:
Americas                               $            60.5                    14.3  %       $            60.0                    13.6  %
Asia-Pacific                                        42.9                    14.6                       66.2                    22.5
Japan                                               57.4                    33.9                       49.3                    34.7
Europe                                              12.1                    10.9                       12.3                    10.8
Other                                               (3.6)                  (20.9)                      (2.0)                  (10.0)
                                                   169.3                                              185.8
Unallocated corporate expenses                     (50.8)                   (5.0)                     (59.4)                   (5.9)
Earnings from operations               $           118.5                    11.7  %       $           126.4                    12.5  %


* Percentages represent earnings from operations as a percentage of each
segment's net sales.
On a segment basis, the ratio of earnings from operations to each segment's net
sales in the third quarter of 2019 compared with 2018 was as follows:
•Americas - the ratio increased 70 basis points due to a decrease in the SG&A
expense ratio, primarily due to a decrease in labor and incentive compensation
costs, and an increase in gross margin primarily attributable to an increase in
sales of gold jewelry within the Jewelry collections category;
•Asia-Pacific - the ratio decreased 790 basis points due to sales deleverage on
operating expenses largely attributed to business disruptions in Hong Kong, with
store-related expenses in Asia Pacific growing while net sales were
approximately unchanged, and a decrease in gross margin;
•Japan - the ratio decreased 80 basis points due to a decrease in gross margin
attributable to growth in net sales of Engagement jewelry, partly offset by a
decrease in the SG&A expense ratio; and
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•Europe - the ratio increased 10 basis points due to a decrease in the SG&A
expense ratio attributable to a decrease in marketing spending, partly offset by
a decrease in gross margin.

                                                                     % of Net                                          % of Net
(in millions)                           Year-to-date 2019              Sales              Year-to-date 2018              Sales
Earnings from operations*:
Americas                               $          204.3                    15.9  %       $          230.4                    17.2  %
Asia-Pacific                                      202.1                    22.1                     245.8                    26.6
Japan                                             167.0                    35.6                     165.3                    37.0
Europe                                             44.1                    13.4                      44.2                    12.9
Other                                              (2.2)                   (3.2)                     (0.5)                   (0.8)
                                                  615.3                                             685.2
Unallocated corporate expenses                   (151.7)                   (4.9)                   (163.3)                   (5.2)
Earnings from operations               $          463.6                    15.1  %       $          521.9                    16.7  %


* Percentages represent earnings from operations as a percentage of each
segment's net sales.
On a segment basis, the ratio of earnings from operations to each segment's net
sales in the year-to-date of 2019 compared with 2018 was as follows:
•Americas - the ratio decreased 130 basis points due to a decrease in gross
margin primarily attributable to the increase in sales of High jewelry within
the Jewelry collections category;
•Asia-Pacific - the ratio decreased 450 basis points due to sales deleverage on
operating expenses largely attributed to business disruptions in Hong Kong, with
store-related expenses in Asia Pacific growing while net sales decreased, and a
decrease in gross margin;
•Japan - the ratio decreased 140 basis points due to sales deleverage on
operating expenses and a decrease in gross margin; and
•Europe - the ratio increased 50 basis points due to a decrease in the SG&A
expense ratio attributable to a decrease in marketing spending, partly offset by
a decrease in gross margin.
Unallocated corporate expenses include costs related to administrative support
functions which the Company does not allocate to its segments. Such unallocated
costs include those for centralized information technology, finance, legal and
human resources departments. Unallocated corporate expenses decreased $8.6
million, or 14%, in the third quarter of 2019 and $11.6 million, or 7%, in the
year-to-date of 2019 when compared to corresponding periods in the prior year,
primarily due to an $8.5 million charge recorded in the third quarter of 2018
related to the bankruptcy filing of a metal refiner to which the Company
entrusted precious scrap metal.

Interest Expense and Financing Costs


Interest expense and financing costs were $9.2 million in the third quarter of
2019, compared with $10.1 million in the prior year. Interest expense and
financing costs were $29.4 million in the year-to-date of 2019, compared with
$29.7 million in the prior year.

Other Expense, net

Other expense, net was $4.2 million in the third quarter of 2019, compared with $1.8 million in the prior year. Other expense, net was $2.2 million in the year-to-date of 2019, compared with $5.1 million in the prior year.

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Provision for Income Taxes

The effective income tax rate for the third quarter of 2019 was 25.4% versus
17.1% in the prior year. The effective income tax rate for the year-to-date of
2019 was 21.3% versus 21.6% in the prior year. The effective income tax rate for
the third quarter and year-to-date of 2019 was increased by an income tax
expense of $5.8 million, or 550 basis points and 130 basis points, respectively,
due to a reduction in the estimated Foreign Derived Intangible Income ("FDII")
benefit for fiscal 2019. The effective income tax rate for the year-to-date of
2019 also included the recognition of an income tax benefit of $7.5 million, or
170 basis points or $0.06 per diluted share, related to an increase in the
estimated fiscal 2018 FDII benefit as a result of new U.S.Treasury guidance
issued during the first quarter of 2019. The effective income tax rate for the
third quarter and year-to-date of 2018 was reduced by 380 basis points and 90
basis points, respectively, or $0.04 per diluted share in each period, as a
result of the true-up of $4.4 million of the Company's prior year tax provision
in conjunction with the filing of the 2017 tax returns. The effective income tax
rate in the year-to-date of 2018 was also reduced by 160 basis points, or $0.06
per diluted share, due to the recognition of an income tax benefit of
$8.0 million primarily as a result of a decrease in the gross amount of
unrecognized tax benefits and accrued interest and penalties related thereto due
to a lapse in a statute of limitations.

LIQUIDITY AND CAPITAL RESOURCES


The Company's liquidity needs have been, and are expected to remain, primarily a
function of its ongoing, seasonal and expansion-related working capital
requirements and capital expenditure needs. Over the long term, the Company
manages its cash and capital structure to maintain a strong financial position
that provides flexibility to pursue strategic priorities. Management regularly
assesses its working capital needs, capital expenditure requirements, debt
service, dividend payouts, share repurchases and future investments. Management
believes that cash on hand, internally generated cash flows and the funds
available under its revolving credit facilities are sufficient to support the
Company's liquidity and capital requirements for the foreseeable future.

The following table summarizes cash flows from operating, investing and
financing activities:
                                                                      Year-to-date
(in millions)                                                     2019           2018
Net cash provided by (used in):
Operating activities                                           $  263.7$  157.2
Investing activities                                             (174.1)         115.1
Financing activities                                             (392.9)        (603.5)

Effect of exchange rate changes on cash and cash equivalents 0.3

3.1

Net decrease in cash and cash equivalents                      $ (303.0)$ (328.1)



Operating Activities

The Company had net cash inflows from operating activities of $263.7 million in
the year-to-date of 2019, compared with $157.2 million in the year-to-date of
2018. The variance was primarily due to decreases in inventory purchases and
income tax payments, partly offset by activity within accounts payable and
accrued liabilities and decreased earnings. Additionally, the Company made a
$30.0 million voluntary cash contribution to its U.S. pension plan in the
year-to-date of 2019, compared with an $11.8 million voluntary cash contribution
made in the prior year.

Working Capital. Working capital (current assets less current liabilities) was
$2.7 billion at October 31, 2019, compared with $3.0 billion at January 31, 2019
and $3.0 billion at October 31, 2018. The decrease in the third quarter of 2019
compared with the third quarter of 2018 was primarily due to a decrease in cash
and cash equivalents, an increase in inventories, net and an increase in current
liabilities (which reflects the adoption of ASC 842 - Leases in the current
period, which established the Current portion of operating lease liabilities on
the Condensed Consolidated Balance Sheet).
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Accounts receivable, net at October 31, 2019 were 11% lower than at January 31,
2019 and 3% higher than at October 31, 2018. Currency translation did not have a
significant effect on the change compared to January 31, 2019 or October 31,
2018.

Inventories, net at October 31, 2019 were 6% higher than at January 31, 2019 and
4% higher than at October 31, 2018, due to increases in finished goods
inventories compared to both periods, as well as increases in raw materials
inventories compared to January 31, 2019. Currency translation did not have a
significant effect on the change compared to January 31, 2019 or October 31,
2018.

Accounts payable and accrued liabilities at October 31, 2019 were 4% lower than at January 31, 2019 and 11% higher from October 31, 2018.


The decrease in Other long-term liabilities at October 31, 2019 when compared to
January 31, 2019 and October 31, 2018 included the impact of the adoption of ASC
842 - Leases, which resulted in the reclassification of the balances for
unamortized lease incentives and the lease straight-line liability from Other
long-term liabilities to Operating lease right-of-use assets during the first
quarter of 2019.

Investing Activities

The Company had net cash outflows from investing activities of $174.1 million in
the year-to-date of 2019, compared with net cash inflows of $115.1 million in
the year-to-date of 2018. The decrease was driven primarily by net activity
related to sales and purchases of marketable securities and short-term
investments.

Marketable Securities and Short-Term Investments. The Company invests a portion
of its cash in marketable securities and short-term investments. The Company had
net proceeds from the sales of marketable securities and short-term investments
of $19.9 million during the year-to-date of 2019, compared with $289.8 million
during the year-to-date of 2018.

Financing Activities


The Company had net cash outflows from financing activities of $392.9 million in
the year-to-date of 2019, compared with $603.5 million in the year-to-date of
2018. Year-over-year changes in cash flows from financing activities were
largely driven by changes in share repurchases.

Recent Borrowings. The Company had net repayments of borrowings as follows:

                                                                        Year-to-date
(in millions)                                                        2019          2018
Short-term borrowings:
Proceeds from (repayments of) credit facility borrowings, net     $  10.4$ (31.7)
Proceeds from other credit facility borrowings                       55.3   

7.7

Repayment of other credit facility borrowings                       (83.5)  

(18.4)

Net repayments of total borrowings                                $ (17.8)

$ (42.4)




In June 2019, the Registrant's indirect, wholly owned subsidiary, Tiffany & Co.
(Shanghai) Commercial Company Limited ("Tiffany-Shanghai"), entered into a
three-year multi-bank revolving credit agreement (the "Tiffany-Shanghai Credit
Agreement"). The Tiffany-Shanghai Credit Agreement has an aggregate borrowing
limit of RMB 408.0 million ($57.8 million at October 31, 2019), which may be
increased to the RMB equivalent of 100.0 million, subject to certain conditions
and limitations, at the request of Tiffany-Shanghai. The Tiffany-Shanghai Credit
Agreement, which matures in July 2022, was made available to refinance amounts
outstanding under Tiffany-Shanghai's previously existing RMB 990.0 million
three-year multi-bank revolving credit agreement (the "2016 Agreement"), which
expired pursuant to its terms on July 11, 2019, as well as for
Tiffany-Shanghai's ongoing general working capital requirements. The
participating lenders will make loans, upon Tiffany-Shanghai's request, for
periods of up to 12 months at the applicable interest rates equal to 95% of the
applicable rate as announced by the People's Bank of China (provided, that if
such announced rate is below zero, the applicable interest rate shall be deemed
to be zero). In connection with the Tiffany-Shanghai Credit Agreement, in June
2019, the Registrant entered into a Guaranty
                                 TIFFANY & CO.
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Table of Contents Agreement by and between the Registrant and the facility agent under the Tiffany-Shanghai Credit Agreement (the "Guaranty").


Under all of the Company's credit facilities, at October 31, 2019, there were
$89.9 million of borrowings outstanding, $3.6 million of letters of credit
issued and $892.7 million available for borrowing. At October 31, 2018, there
were $68.9 million of borrowings outstanding, $6.0 million of letters of credit
issued and $951.4 million available for borrowing. The weighted-average interest
rate for the amounts outstanding at October 31, 2019 and 2018 was 4.0% and 5.7%,
respectively.

The ratio of total debt (short-term borrowings and long-term debt) to stockholders' equity was 31% at October 31, 2019, 32% at January 31, 2019 and 31% at October 31, 2018.

At October 31, 2019, the Company was in compliance with all debt covenants.


Share Repurchases. In May 2018, the Registrant's Board of Directors approved a
new share repurchase program (the "2018 Program"). The 2018 Program, which
became effective June 1, 2018 and expires on January 31, 2022, authorizes the
Company to repurchase up to $1.0 billion of its Common Stock through open market
transactions, including through Rule 10b5-1 plans and one or more accelerated
share repurchase ("ASR") or other structured repurchase transactions, and/or
privately negotiated transactions. The 2018 Program replaced the Company's
previous share repurchase program approved in January 2016 (the "2016 Program"),
under which the Company was authorized to repurchase up to $500.0 million of its
Common Stock. At the time of termination, $154.9 million remained available for
repurchase under the 2016 Program. As of October 31, 2019, $471.6 million
remained available under the 2018 Program; however, pursuant to the terms of the
Merger Agreement, and subject to certain limited exceptions, the Company may not
repurchase its Common Stock other than in connection with the forfeiture
provisions of Company equity awards or the cashless exercise or tax withholding
provisions of such Company equity awards, in each case, granted under the
Company's stock-based compensation plans. Accordingly, the Company does not
expect to repurchase any shares of its Common Stock in connection with the 2018
Program prior to the Merger or earlier termination of the Merger Agreement.

During the three months ended July 31, 2018, the Company entered into ASR
agreements with two third-party financial institutions to repurchase an
aggregate of $250.0 million of its Common Stock. The ASR agreements were entered
into under the 2018 Program. Pursuant to the ASR agreements, the Company made an
aggregate payment of $250.0 million from available cash on hand in exchange for
an initial delivery of 1,529,286 shares of its Common Stock. Final settlement of
the ASR agreements was completed in July 2018, pursuant to which the Company
received an additional 353,112 shares of its Common Stock. In total,
1,882,398 shares of the Company's Common Stock were repurchased under these ASR
agreements at an average cost per share of $132.81 over the term of the
agreements. The Company also spent $15.9 million to repurchase shares under the
2016 Program during the three months ended July 31, 2018, prior to the
replacement of that program with the 2018 Program.

The Company's share repurchase activity was as follows:

                                                Third Quarter                            Year-to-date

(in millions, except per share amounts) 2019 2018 2019

            2018
Cost of repurchases                       $  78.0$   71.0$ 163.4$      377.3
Shares repurchased and retired                0.9            0.6           1.8                3.0
Average cost per share                    $ 88.42$ 118.36$ 91.15$     123.99



Contractual Obligations

The Company's contractual cash obligations and commercial commitments at October
31, 2019 and the effects such obligations and commitments are expected to have
on the Company's liquidity and cash flows in future periods have not changed
significantly since January 31, 2019.

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Seasonality

As a jeweler and specialty retailer, the Company's business is seasonal in
nature, with the fourth quarter typically representing approximately one-third
of annual net sales and a higher percentage of annual net earnings. Management
expects such seasonality to continue.

Forward-Looking Statements


Certain statements in this quarterly report on Form 10-Q may constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private
Securities Litigation Reform Act of 1995, each as amended. Forward-looking
statements provide current expectations of future events and include any
statement that does not directly relate to any historical or current fact. Words
such as "anticipates," "believes," "expects," "intends," "plans," "projects," or
other similar expressions may identify such forward-looking statements.

Actual results may differ materially from those discussed in forward-looking
statements as a result of factors, risks and uncertainties over which we have no
control. These factors, risks and uncertainties include, but are not limited to,
the following: (i) conditions to the completion of the proposed acquisition,
including stockholder approval of the proposed acquisition, may not be satisfied
or the regulatory approvals required for the proposed acquisition may not be
obtained on the terms expected or on the anticipated schedule; (ii) the
occurrence of any event, change or other circumstance that could give rise to
the termination of the merger agreement between the parties to the proposed
acquisition; (iii) the effect of the announcement or pendency of the proposed
acquisition on the Company's business relationships, operating results, and
business generally; (iv) risks that the proposed acquisition disrupts the
Company's current plans and operations and potential difficulties in the
Company's employee retention as a result of the proposed acquisition; (v) risks
related to diverting management's attention from the Company's ongoing business
operations; (vi) potential litigation that may be instituted against the Company
or its directors or officers related to the proposed acquisition or the merger
agreement between the parties to the proposed acquisition; (vii) the amount of
the costs, fees, expenses and other charges related to the proposed acquisition;
and (viii) such other factors as are set forth in the Company's periodic public
filings with the SEC, including but not limited to those described under the
headings "Risk Factors" and "Forward Looking Statements" in its Form 10-K for
the fiscal year ended January 31, 2019, this quarterly report on Form 10-Q and
in its other filings made with the SEC from time to time, which are available
via the SEC's website at www.sec.gov.

Forward-looking statements reflect the views and assumptions of management as of
the date of this communication with respect to future events. The Company does
not undertake, and hereby disclaims, any obligation, unless required to do so by
applicable securities laws, to update any forward-looking statements as a result
of new information, future events or other factors. The inclusion of any
statement in this communication does not constitute an admission by the Company
or any other person that the events or circumstances described in such statement
are material.

© Edgar Online, source Glimpses

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