OVERVIEW
Tiffany & Co. (the "Registrant") is a holding company that operates throughTiffany and Company ("Tiffany") and the Registrant's other subsidiary companies (collectively, the "Company"). The Registrant, through its subsidiaries, designs and manufactures products and operatesTIFFANY & 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 endedJanuary 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-operatedTIFFANY & CO. stores inthe United States ("U.S."),Canada andLatin America , as well as sales ofTIFFANY & CO. products in certain markets through Internet, catalog, business-to-business and wholesale operations; •Asia-Pacific includes sales in 90 Company-operatedTIFFANY & CO. stores, as well as sales ofTIFFANY & CO. products in certain markets through Internet and wholesale operations;
•Japan includes sales in 56 Company-operated
•Europe includes sales in 48 Company-operated
•Other consists of all non-reportable segments. Other includes the Emerging Markets region, which includes sales in five Company-operatedTIFFANY & CO. stores and wholesale operations in theMiddle East . In addition, Other includes wholesale sales of diamonds as well as earnings received from third-party licensing agreements.
ENTRY INTO MERGER AGREEMENT
OnNovember 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 ofFrance ("Parent"),Breakfast Holdings Acquisition Corp. , aDelaware corporation and a wholly owned subsidiary of Parent ("Holding"), andBreakfast Acquisition Corp. , aDelaware 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 theU.S. Securities and Exchange Commission (the "SEC") onNovember 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") endedOctober 31, 2019 and decreased 2% to$3.1 billion in the nine months ("year-to-date") endedOctober 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. 33 -------------------------------------------------------------------------------- Table of Contents •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
•InJune 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 withU.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 strengtheningU.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 theU.S. intoU.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 intoU.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 BasisNet 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
TIFFANY & CO. 35 -------------------------------------------------------------------------------- Table of Contents 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 ofTiffany 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. 36
-------------------------------------------------------------------------------- Table of Contents 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 inHong 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 toOctober 1, 2019 TIFFANY & CO. 37
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reflected the response of Japanese consumers to the increase in
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$14.6 million , or 4%. Management attributed the decrease in total net sales in both periods to the effect of foreign currency translation. On a constant-exchange-rate basis, total net sales increased by 1% in both the third quarter and the year-to-date, while comparable sales increased 4% and 1%, respectively, in those periods. Results in both periods reflected broad-based softness across the region, which management attributed to modest changes in spending by local customers and foreign tourists. The decrease in the number of jewelry units sold in both the third quarter and year-to-date reflected decreases in the Jewelry collections and Designer jewelry categories. Management attributed the increase in the average price per jewelry unit sold in both periods to a shift in sales mix to gold jewelry within the Jewelry collections category.
Other. Other net sales decreased
Store Data. In the year-to-date of 2019, the Company opened five Company-operated stores (one in theAmericas , one inAsia-Pacific , two inJapan and one inEurope ) and closed one Company-operated store each in theAmericas ,Asia-Pacific andJapan . Gross Margin Third Quarter Year-to-date (dollars in millions) 2019 2018 2019 2018 Gross profit$ 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$8.5 million charge recorded in the third quarter of 2018 related to the bankruptcy filing of a metal refiner to which the Company entrusted precious scrap metal. Management periodically reviews and adjusts its retail prices when appropriate to address product input cost increases, specific market conditions and changes in foreign currencies/U.S. dollar relationships. Its long-term strategy is to continue that approach, although significant increases in product input costs or weakening foreign currencies can affect gross margin negatively over the short-term until management makes necessary price adjustments. Among the market conditions that management considers are consumer demand for the product category involved, which may be influenced by consumer confidence and competitive pricing conditions. Management uses derivative instruments to mitigate certain foreign exchange and precious metal price exposures (see "Item 1. Financial Statements - Note 8. Hedging Instruments"). Management adjusted retail prices in the third quarter and year-to-date of 2019 and 2018 across most geographic regions and product categories, some of which were intended to mitigate foreign currency fluctuations. TIFFANY & CO. 38 -------------------------------------------------------------------------------- Table of Contents Selling, General and Administrative ("SG&A") Expenses Third Quarter Year-to-date (dollars in millions) 2019 2018 2019 2018 SG&A expenses$ 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 inHong Kong , with store-related expenses inAsia 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 TIFFANY & CO. 39 -------------------------------------------------------------------------------- Table of Contents •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 inHong Kong , with store-related expenses inAsia 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
TIFFANY & CO. 40 -------------------------------------------------------------------------------- Table of Contents 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 newU.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 itsU.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 atOctober 31, 2019 , compared with$3.0 billion atJanuary 31, 2019 and$3.0 billion atOctober 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). TIFFANY & CO. 41 -------------------------------------------------------------------------------- Table of Contents Accounts receivable, net atOctober 31, 2019 were 11% lower than atJanuary 31, 2019 and 3% higher than atOctober 31, 2018 . Currency translation did not have a significant effect on the change compared toJanuary 31, 2019 orOctober 31, 2018 . Inventories, net atOctober 31, 2019 were 6% higher than atJanuary 31, 2019 and 4% higher than atOctober 31, 2018 , due to increases in finished goods inventories compared to both periods, as well as increases in raw materials inventories compared toJanuary 31, 2019 . Currency translation did not have a significant effect on the change compared toJanuary 31, 2019 orOctober 31, 2018 .
Accounts payable and accrued liabilities at
The decrease in Other long-term liabilities atOctober 31, 2019 when compared toJanuary 31, 2019 andOctober 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)
InJune 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 ofRMB 408.0 million ($57.8 million atOctober 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 inJuly 2022 , was made available to refinance amounts outstanding under Tiffany-Shanghai's previously existingRMB 990.0 million three-year multi-bank revolving credit agreement (the "2016 Agreement"), which expired pursuant to its terms onJuly 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 thePeople'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, inJune 2019 , the Registrant entered into a GuarantyTIFFANY & CO. 42
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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, atOctober 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. AtOctober 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 atOctober 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
At
Share Repurchases. InMay 2018 , the Registrant's Board of Directors approved a new share repurchase program (the "2018 Program"). The 2018 Program, which became effectiveJune 1, 2018 and expires onJanuary 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 inJanuary 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 ofOctober 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 endedJuly 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 inJuly 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$15.9 million to repurchase shares under the 2016 Program during the three months endedJuly 31, 2018 , prior to the replacement of that program with the 2018 Program.
The Company's share repurchase activity was as follows:
Third Quarter Year-to-date
(in millions, except per share amounts) 2019 2018 2019
2018 Cost of repurchases$ 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 atOctober 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 sinceJanuary 31, 2019 . TIFFANY & CO. 43 -------------------------------------------------------------------------------- Table of Contents 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 theSEC , 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 endedJanuary 31, 2019 , this quarterly report on Form 10-Q and in its other filings made with theSEC from time to time, which are available via theSEC'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.
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