MERGER AGREEMENT
OnNovember 24, 2019 ,Tiffany & Co. (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 an indirect wholly owned subsidiary of Parent ("Holding"), andBreakfast Acquisition Corp. , aDelaware corporation and a direct 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 Registrant's Definitive Proxy Statement on Schedule 14A filed with theU.S. Securities and Exchange Commission (the "SEC") onJanuary 6, 2020 and "Item 1. Financial Statements - Note 2. Merger Agreement".
NOVEL CORONAVIRUS
An outbreak of a novel strain of the coronavirus, COVID-19, was identified inChina inDecember 2019 and was subsequently recognized as a pandemic by theWorld Health Organization onMarch 11, 2020 . This COVID-19 outbreak has severely restricted the level of economic activity around the world. In addition to travel restrictions put in place in early 2020 in response to COVID-19, governments have closed borders, imposed prolonged quarantines and may continue or reinstate those measures or implement other restrictions and requirements in light of the continuing or renewed spread of COVID-19 and concern of additional waves of outbreaks. As a result of the COVID-19 outbreak, a substantial number of the Company's retail stores was closed for some portion of time in the three and six months endedJuly 31, 2020 . Company retail store closures peaked at approximately 75% to 80% of the Company's retail stores worldwide during the month of April. However, the Company gradually reopened many of its stores throughout the three months endedJuly 31, 2020 , in accordance with applicable guidelines established by local governments. For example, as ofMay 29, 2020 , approximately 80% of the Company's retail stores worldwide were fully or partially open, including approximately 70% of the Company's retail stores in theAmericas , approximately 90% of the Company's retail stores inAsia Pacific , approximately 90% of the Company's retail stores inJapan and approximately 65% of the Company's retail stores inEurope . In theU.S. , however, in connection with the widespread protests across the country and out of concern for the wellbeing of its customers and employees, the Company once again closed all of its retail locations onMay 31, 2020 . Following a brief period of closures, the Company began to re-open itsU.S. stores, and as ofJune 19, 2020 , approximately 90% of the Company's stores in theU.S. were fully or partially opened. As ofJuly 31, 2020 , virtually all of the Company's retail stores worldwide were fully or partially opened, in accordance with applicable guidelines established by local governments. For the three and six months endedJuly 31, 2020 , the Company's worldwide net sales declined 29% and 37%, respectively, compared to the prior year due to the continuing negative global impact of COVID-19. Although the Company continues to experience decreased customer traffic and retail sales in many of its retail locations as compared to comparable periods in the prior year, the Company has continued to benefit from increased sales both in Mainland China and its global e-commerce business during these periods. For example, retail sales in MainlandChina , the first market impacted by COVID-19, increased approximately 90% inMay 2020 and 80% for the full three months endedJuly 31, 2020 , in each case as compared to the corresponding periods in the prior year. The Company's e-commerce sales in the three and six months endedJuly 31, 2020 also increased 123% and 73% worldwide, with key markets such asthe United States having increased 122% and 67%, respectively, and theUnited Kingdom having increased 93% and 53%, respectively, compared to the prior year periods. The Company's worldwide e-commerce sales represented approximately 15% of its total net sales during the six months endedJuly 31, 2020 , versus 6% in each of the last three full fiscal years. While management expects that customer traffic and worldwide net sales will continue to improve throughout the second half of the Company's fiscal year endingJanuary 31, 2021 relative to its first half performance, year-to-date sales declines throughJuly 31, 2020 , along with the continuing effects of COVID-19, are expected to have a significant negative impact on the Company's sales, earnings and cash flows for the full year as compared to the prior year.TIFFANY & CO. 35
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In light of the impact of COVID-19, the Company continues to review and carefully manage its operating expenses and eliminate certain non-essential spending. As part of these efforts, the Company has negotiated, and continues to negotiate, with its landlords for rent concessions principally under leases for retail stores. The Company has also continued to pay its employees, although at a reduced level after a period of time for certain employees in locations impacted by COVID-19who cannot work from home, and has not taken action to reduce its workforce in connection with COVID-19. In response to the COVID-19 outbreak, the Company has also taken steps to further strengthen its financial position and balance sheet, and to maintain flexibility with respect to its liquidity sources and provide additional financial maintenance covenant headroom. See "Liquidity and Capital Resources" below for additional information. The extent to which the COVID-19 outbreak will continue to impact the Company's business operations, financial results, and liquidity will depend on numerous factors that the Company may not be able to accurately predict or assess due to their dynamic and evolving nature (including the duration and scope of the COVID-19 outbreak, including whether there are additional waves caused by additional periods of increases or spikes in the number of COVID-19 cases); the possibility of future mutations or outbreaks of related strains of the virus in areas in which the Company operates; whether a vaccine or cure that mitigates the effect of the virus will be synthesized, and, if so, when such vaccine or cure will be ready to be used; the extent of the protective and preventative measures that have been or will be put in place by both governmental entities and other businesses; whether the virus's impact will be seasonal; the negative impact the outbreak has on global and regional economies and economic activity, including the duration and magnitude of its impact on consumer discretionary spending and levels of consumer confidence; and how quickly economies recover after the COVID-19 outbreak subsides. Accordingly, management cannot predict with certainty for how long and to what extent the COVID-19 outbreak will impact its business operations or the global economy as a whole. See "Part II - Other Information. Item1A. Risk Factors" for additional information. The Company will continue to take steps to mitigate the potential risks posed by the spread and related circumstances and impacts of COVID-19. The Company's management also remains focused on addressing the challenges presented by COVID-19 by preserving the Company's liquidity and managing its cash flows with preemptive actions such as those described above. Despite the aforementioned challenges, the Company intends to continue to execute on its strategic plans and operational initiatives during this outbreak. However, the uncertainties associated with the protective and preventative measures put in place or recommended by both governmental entities and other businesses, among other uncertainties, will likely result in delays or modifications to these plans and initiatives.
OVERVIEW
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, 2020 ); it also sells watches, home and accessories products and fragrances.
The Company's reportable segments are as follows:
•
& CO. products in certain markets through Internet, catalog, business-to-business and wholesale operations;
•
well as sales of
business-to-business and wholesale operations;
•
sales of
wholesale operations;
•
sales ofTIFFANY & CO. products in certain markets through Internet and wholesale operations; andTIFFANY & CO. 36
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• Other consists of all non-reportable segments. Other includes the Emerging
Markets region, which includes sales in five Company-operated
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.
SUMMARY OF SECOND QUARTER AND FIRST HALF RESULTS
• Worldwide net sales decreased 29% to
("second quarter") and 37% to
half") ended
COVID-19 and the resulting store closures that began in the three months
ended
quarter as described above under "Novel Coronavirus"; comparable sales
decreased 24% in the second quarter and 34% in the first half. On a
constant-exchange-rate basis (see "Non-GAAP Measures" below), worldwide net
sales decreased 28% in the second quarter and 36% in the first half, while
comparable sales decreased 23% in the second quarter and 33% in the first
half.
• Net earnings of
quarter compared with
prior year reflecting the above factors. Net earnings in the second quarter
of 2020 also included the impact of costs related to the pending Merger, as
described below under "Non-GAAP Measures." Excluding these costs, Net earnings were$38.6 million , or$0.32 per diluted share, in the second quarter of 2020.
• Net loss of
with Net earnings of
year reflecting the above factors. Net loss in the first half of 2020 also
included the impact of costs related to the pending Merger, as well as the
compensation received in respect of the previous acquisition of the premises
containing one of the Company's leased retail stores and an administrative
office in
and a charitable contribution to The
below under "Non-GAAP Measures." Excluding these items, Net loss was
million, or
• Inventories, net increased 1% from
TIFFANY & CO. 37
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Table of Contents 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: Second Quarter 2020 vs. 2019 First Half 2020 vs. 2019 Constant- Constant- GAAP Translation Exchange- GAAP Translation Exchange- Reported Effect Rate Basis Reported Effect Rate BasisNet Sales : Worldwide (29 )% (1 )% (28 )% (37 )% (1 )% (36 )% Americas (46 ) (1 ) (45 ) (45 ) - (45 ) Asia-Pacific - (2 ) 2 (24 ) (2 ) (22 ) Japan (28 ) 1 (29 ) (34 ) 1 (35 ) Europe (28 ) (1 ) (27 ) (34 ) (2 ) (32 ) Other (73 ) - (73 ) (68 ) - (68 ) Comparable Sales: Worldwide (24 )% (1 )% (23 )% (34 )% (1 )% (33 )% Americas (44 ) - (44 ) (44 ) - (44 ) Asia-Pacific 17 (2 ) 19 (16 ) (3 ) (13 ) Japan (27 ) 1 (28 ) (34 ) 1 (35 ) Europe (27 ) (1 ) (26 ) (34 ) (1 ) (33 ) Other (25 ) - (25 ) (42 ) - (42 ) TIFFANY & CO. 38
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Table of Contents Second Quarter 2020 vs. 2019 First Half 2020 vs. 2019 Constant- Constant- GAAP Translation Exchange- GAAP Translation Exchange- Reported Effect Rate Basis Reported Effect Rate Basis Jewelry sales by product category: Jewelry collections (25 )% (1 )% (24 )% (34 )% (1 )% (33 )% Engagement jewelry (27 ) - (27 ) (38 ) - (38 ) Designer jewelry (26 ) - (26 ) (32 ) - (32 ) Statements of Earnings. Internally, management monitors and measures its earnings performance excluding certain items listed below. Management believes excluding such items provides a useful supplemental basis for the assessment of the Company's results relative to the corresponding period in the prior year. The following tables reconcile certain GAAP amounts to non-GAAP amounts: Charges related to the (in millions, except per share amounts) GAAP pending Merger a Non-GAAP Three Months EndedJuly 31, 2020 Gross Profit$ 461.6 $ 0.5$ 462.1 As a % of sales 61.8 % 0.1 % 61.8 % Selling, general & administrative 401.9 (7.3 ) 394.6 ("SG&A") expenses As a % of sales 53.8 % (1.0 )% 52.8 % Earnings from operations 59.7 7.8 67.5 As a % of sales 8.0 % 1.0 % 9.0 % Provision for income taxes b 17.5 1.1 18.6 Net earnings 31.9 6.7 38.6 Diluted earnings per share 0.26 0.06 0.32
a Costs recorded in the second quarter of 2020 related to the pending Merger.
See "Item 1. Financial Statements - Note 2. Merger Agreement" for additional
information.
b The income tax effect resulting from the adjustments has been calculated as
both current and deferred tax benefit (expense), based upon the tax laws and
statutory income tax rates applicable in the tax jurisdiction(s) of the underlying adjustment.TIFFANY & CO. 39
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Table of Contents Sydney, Australia Recovery and (in millions, except per Charges related to the Charitable share amounts) GAAP pending Merger c Contribution d Non-GAAP Six Months Ended July 31, 2020 Gross Profit$ 770.6 $ 0.9 $ -$ 771.5 As a % of sales 59.2 % 0.1 % - % 59.2 % SG&A expenses 816.3 (23.6 ) (12.0 ) 780.7 As a % of sales 62.7 % (1.8 )% (0.9 )% 59.9 % Loss from operations (45.7 ) 24.5 12.0 (9.2 ) As a % of sales (3.5 )% 1.9 % 0.9 % (0.7 )% Other income, net (26.2 ) - 31.4 5.2 Benefit for income taxes e (7.7 ) 2.3 (4.5 ) (9.9 ) Net loss (32.7 ) 22.2 (14.9 ) (25.4 ) Earnings per share (0.27 ) 0.18 (0.12 ) (0.21 )
c Costs recorded in the first half of 2020 related to the pending Merger. See
"Item 1. Financial Statements - Note 2. Merger Agreement" for additional
information. d Recognition of (i) a pre-tax gain of$31.4 million related to amounts received as compensation for the previous acquisition of the premises
containing one of the Company's leased retail stores and an administrative
office in
and (ii) a pre-tax expense of
The
connection with the compensation referenced above. See "Item 1. Financial
Statements - Note 12. Commitments and Contingencies" for additional information on the compulsory acquisition matter.
e The income tax effect resulting from the adjustments has been calculated as
both current and deferred tax benefit (expense), based upon the tax laws and
statutory income tax rates applicable in the tax jurisdiction(s) of the underlying adjustment. Comparable Sales Comparable sales include sales transacted in Company-operated stores open for more than 12 months. Sales from e-commerce sites are included in comparable sales for those sites that have been operating for more than 12 months. Sales for relocated stores are included in comparable sales if the relocation occurs within the same geographical market. In all markets, the results of a store in which the square footage has been expanded or reduced remain in the comparable sales base.TIFFANY & CO. 40
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Net sales by segment were as follows:
Second Quarter First Half (in millions) 2020 2019 Increase/(Decrease) 2020 2019 Increase/(Decrease) Americas$ 246.7 $ 454.8 (46 )%$ 471.8 $ 861.1 (45 )% Asia-Pacific 298.9 297.6 - 472.6 621.7 (24 ) Japan 111.1 155.3 (28 ) 197.4 300.0 (34 ) Europe 83.8 116.3 (28 ) 145.1 218.8 (34 ) Other 6.6 24.5 (73 ) 15.7 50.0 (68 )$ 747.1 $ 1,048.5 (29 )%$ 1,302.6 $ 2,051.6 (37 )% Worldwide net sales decreased$301.4 million , or 29%, in the second quarter of 2020 and decreased$749.0 million , or 37% in the first half, which management attributed to the effects of COVID-19 and the resulting store closures across the markets that began in the first quarter of 2020 and continued into the second quarter. On a constant-exchange-rate basis, worldwide net sales decreased 28% in the second quarter and decreased 36% in the first half compared to the prior year.
Jewelry sales by product category were as follows:
Second Quarter
(in millions) 2020 2019 $ Change % Change
Jewelry collections
First Half (in millions) 2020 2019 $ Change % Change Jewelry collections$ 725.6 $ 1,102.9 $ (377.3 ) (34 )% Engagement jewelry 343.1 556.8 (213.7 ) (38 ) Designer jewelry 152.7 225.8 (73.1 ) (32 )
Net sales reflected decreases across each of the jewelry categories in both periods.
Certain reclassifications within the jewelry categories have been made to the prior year amounts to conform to the current year category presentation.
TIFFANY & CO. 41
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Changes in net sales by reportable segment were as follows: (in millions) Comparable Sales Non-comparable Sales Wholesale/Other Total Second Quarter 2020: Americas$ (192.4 ) $ (3.7 ) $ (12.0 )$ (208.1 ) Asia-Pacific 40.0 2.0 (40.7 ) 1.3 Japan (39.4 ) 1.8 (6.6 ) (44.2 ) Europe (30.7 ) (0.4 ) (1.4 ) (32.5 ) First Half 2020: Americas$ (364.8 ) $ (4.0 ) $ (20.5 )$ (389.3 ) Asia-Pacific (77.3 ) 2.2 (74.0 ) (149.1 ) Japan (95.0 ) 3.2 (10.8 ) (102.6 ) Europe (72.8 ) (0.4 ) (0.5 ) (73.7 ) Changes in jewelry sales relative to the prior year by reportable segment were as follows: Average Price per Unit Sold Number of As Reported Impact of Currency Translation Units Sold Second Quarter 2020: Americas (17 )% (1 )% (28 )% Asia-Pacific 15 (2 ) (14 ) Japan (4 ) 1 (22 ) Europe (10 ) (1 ) (18 ) First Half 2020: Americas (11 )% - % (34 )% Asia-Pacific 7 (2 ) (31 ) Japan (3 ) 1 (32 ) Europe (5 ) (1 ) (29 )Americas . In the second quarter, total net sales decreased$208.1 million , or 46%, which included comparable sales decreasing$192.4 million , or 44%. In the first half, total net sales decreased$389.3 million , or 45%, which included comparable sales decreasing$364.8 million , or 44%. In both periods, sales decreased across the region, which management attributed to the effects of COVID-19, and the resulting store closures across the region that began inmid-March 2020 and continued into June, with most stores in the region reopened in mid-June. On a constant-exchange-rate basis, total net sales decreased 45% in the second quarter and first half, while comparable sales decreased 44% in both periods. The decrease in the number of jewelry units sold in both periods reflected decreases across all jewelry categories, which management attributed to the effects of COVID-19, and the resulting store closures across the region that began inmid-March 2020 and continued into June, with most stores in the region reopened in mid-June. The decrease in the average price per jewelry unit sold in both periods was primarily due to a change in sales mix, which management attributed to the strong growth in e-commerce sales, as well as a decline in sales of High jewelry within the Jewelry collections category.Asia-Pacific . In the second quarter, total net sales were approximately unchanged from the prior year, which included comparable sales increasing$40.0 million , or 17%. Total sales results reflected strong retail sales growth in Mainland China andKorea largely offset by softness across other markets in the region, and a decline in wholesale TIFFANY & CO. 42
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travel retail sales, which management attributed to the effects of COVID-19. In the first half, total net sales decreased$149.1 million , or 24%, which included comparable sales decreasing$77.3 million , or 16%. Total sales results reflected strong retail sales growth in Mainland China andKorea , which was more than offset by softness across other markets in the region, which management attributed to the effects of COVID-19, and the resulting store closures across the region beginning with Mainland China in February and persisting for varying durations through early June, as well as a decline in wholesale travel retail sales. On a constant-exchange-rate basis, total net sales increased 2% in the second quarter and decreased 22% in the first half, while comparable sales increased 19% and decreased 13%, respectively, in those periods. The decrease in the number of jewelry units sold in both periods reflected decreases across all jewelry categories, which management attributed to the effects of COVID-19, and the resulting store closures across the region beginning with Mainland China in February and persisting for varying durations through early June, as well as the decline in wholesale travel retail sales. The increase in the average price per jewelry unit sold in both periods was primarily due to a shift in sales mix to gold jewelry within the Jewelry collections category.Japan . In the second quarter, total net sales decreased$44.2 million , or 28%, which included comparable sales decreasing$39.4 million , or 27%. In the first half, total net sales decreased$102.6 million , or 34%, which included comparable sales decreasing$95.0 million , or 34%. Management attributed the decreases in both periods to the effects of COVID-19, including the resulting store closures across the region, which primarily began in earlyApril 2020 and continued through early June, and the decline in tourist traffic beginning early in the first quarter of 2020. On a constant-exchange-rate basis, total net sales decreased 29% and 35% in the second quarter and first half, respectively, while comparable sales decreased 28% and 35%, respectively, in those periods. The decrease in the number of jewelry units sold in both periods reflected decreases across all jewelry categories, which management attributed to the effects of COVID-19, including the resulting store closures across the region, which primarily began in earlyApril 2020 and continued through early June, and the decline in tourist traffic beginning early in the first quarter of 2020.Europe . In the second quarter, total net sales decreased$32.5 million , or 28%, which included comparable sales decreasing$30.7 million , or 27%. In the first half, total net sales decreased$73.7 million , or 34%, which included comparable sales decreasing$72.8 million , or 34%. Sales decreased across the region, which management attributed to the effects of COVID-19, and the resulting store closures across the region, which began inmid-March 2020 and continued into June, with the vast majority of the stores in the region reopened by mid-June. On a constant-exchange-rate basis, total net sales decreased 27% and 32% in the second quarter and first half, respectively, while comparable sales decreased 26% and 33%, respectively, in those periods. The decrease in the number of jewelry units sold in both periods reflected decreases across all jewelry categories, which management attributed to the effects of COVID-19, and the resulting store closures across the region, which began inmid-March 2020 and continued into June, with the vast majority of the stores in the region reopened by mid-June. The decrease in the average price per jewelry unit sold in both periods was primarily due to a change in sales mix, which management attributed to the strong growth in e-commerce sales, as well as a decline in sales of High jewelry within the Jewelry collections category. Other. Other sales decreased$17.9 million , or 73%, in the second quarter and decreased$34.3 million , or 68%, in the first half due to decreases in sales within the Emerging Markets region and in wholesale sales of diamonds in both periods. Store Data. In the first half of 2020, the Company opened one Company-operated store inJapan and closed three Company-operated stores inAsia-Pacific , one in theAmericas and one inEurope .TIFFANY & CO. 43
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Table of Contents Gross Margin Second Quarter First Half (dollars in millions) 2020 2019 2020 2019 As reported: Gross profit$ 461.6 $ 657.7 $ 770.6 $ 1,276.9 Gross profit as a percentage of net sales 61.8 % 62.7 % 59.2 % 62.2 % On a Non-GAAP basis*: Gross profit$ 462.1 $ 771.5 Gross profit as a percentage of net sales 61.8 % 59.2 % * See "Non-GAAP Measures" above for additional information. Gross margin (gross profit as a percentage of net sales) decreased 90 and 300 basis points in the second quarter and first half of 2020, respectively, largely due to (i) sales deleverage on fixed costs resulting from the effects of COVID-19 on net sales, (ii) certain overhead costs not capitalized in the periods resulting from certain manufacturing locations being closed or operating at reduced capacity during the second quarter and first half due to COVID-19 and (iii) an increase in inventory reserves, partially offset by (i) a change in sales mix to higher margin products and (ii) a decrease in the wholesale sales of diamonds. Additionally, the first half of 2020 included the impact of a$12.3 million charge that was recorded in the three months endedApril 30, 2020 to fully reserve the asset related to an expected insurance recovery in respect of the bankruptcy filing of a metal refiner to which the Company entrusted precious scrap metal (see "Item 1. Financial Statements - Note 12. Commitments and Contingencies"). Management periodically reviews and adjusts its retail prices when appropriate to address product input cost increases, specific market conditions and changes in foreign currencies/U.S. dollar relationships. Its long-term strategy is to continue that approach, although significant increases in product input costs or weakening foreign currencies can affect gross margin negatively over the short-term until management makes necessary price adjustments. Among the market conditions that management considers are consumer demand for the product category involved, which may be influenced by consumer confidence and competitive pricing conditions. Management uses derivative instruments to mitigate certain foreign exchange and precious metal price exposures (see "Item 1. Financial Statements - Note 9. Hedging Instruments"). Management adjusted retail prices in the second quarter and first half of 2020 and 2019 across most geographic regions and product categories, some of which were intended to mitigate foreign currency fluctuations.
Selling, General and Administrative ("SG&A") Expenses
Second Quarter First Half (dollars in millions) 2020 2019 2020 2019 As reported: SG&A expenses$ 401.9 $ 473.4 $ 816.3 $ 931.7 SG&A expenses as a percentage of net sales ("SG&A expense ratio") 53.8 % 45.2 % 62.7 % 45.4 % On a Non-GAAP basis*: SG&A expenses$ 394.6 $ 780.7 SG&A expense ratio 52.8 % 59.9 %
* See "Non-GAAP Measures" above for additional information.
SG&A expenses decreased$71.5 million , or 15%, in the second quarter of 2020, which included$7.3 million in costs related to the pending Merger (see "Non-GAAP Measures" for further details), and decreased$115.4 million , or 12%, in the first half of 2020, which included$23.6 million in costs related to the pending Merger and a$12.0 million charitable contribution to TheTiffany & Co. Foundation (see "Non-GAAP Measures" for further details). These costs were more than offset by decreased marketing spending (although marketing expense as percentage of netTIFFANY & CO. 44
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sales in the first half of 2020 was approximately in line with the Company's historical percentage), decreased labor and incentive compensation costs and decreased store occupancy expenses in both periods. Excluding the pending Merger-related costs in both periods and the charitable contribution in the first half noted above, SG&A expenses decreased$78.8 million , or 17%, in the second quarter of 2020 and decreased$151.0 million , or 16%, in the first half of 2020 (see "Non-GAAP Measures"). SG&A expenses as a percentage of net sales increased significantly due to sales deleverage on operating expenses resulting from the effects of COVID-19 on net sales. Changes in foreign currency exchange rates did not have a meaningful effect on SG&A expenses in the second quarter and first half as compared with the prior year.
Earnings (Loss) from Operations
Second Quarter First Half (in millions) 2020 2019 2020 2019
As reported:
Earnings (loss) from operations
8.0 % 17.6 % (3.5 )% 16.8 % On a Non-GAAP basis*: Earnings (loss) from operations$ 67.5 $ (9.2 ) Operating margin 9.0 % (0.7 )%
* See "Non-GAAP Measures" above for additional information.
Earnings from operations of$59.7 million in the second quarter of 2020 compared with earnings from operations of$184.3 million in the prior year. Loss from operations of$45.7 million in the first half of 2020 compared with earnings from operations of$345.2 million in the prior year. Excluding the pending Merger-related costs in both periods of 2020 and the charitable contribution in the first half of 2020 described in "Non-GAAP Measures", Earnings from operations was$67.5 million in the second quarter of 2020 and Loss from operations was$9.2 million in the first half of 2020.
Results by segment are as follows:
% of Net % of Net (in millions) Second Quarter 2020 Sales Second Quarter 2019 Sales Earnings (loss) from operations*: Americas $ (4.7 ) (1.9 )% $ 86.9 19.1 % Asia-Pacific 72.7 24.3 73.2 24.6 Japan 35.4 31.8 56.2 36.2 Europe 12.6 15.0 19.7 17.0 Other (5.1 ) (75.5 ) 0.2 1.0 110.9 236.2 Unallocated corporate expenses (43.4 ) (5.8 ) (51.9 ) (5.0 ) Other operating expenses (7.8 ) - Earnings from operations $ 59.7 8.0 % $ 184.3 17.6 %
* Percentages represent earnings (loss) from operations as a percentage of each
segment's net sales.
On a segment basis, the earnings (loss) from operations to each segment's net
sales in the second quarter of 2020 compared with 2019 was as follows:
•
expenses, which management attributed to the effects of COVID-19 on net sales, as discussed above, and a decrease in gross margin;TIFFANY & CO. 45
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•
largely offset by sales leverage on operating expenses;
•
expenses, which management attributed to the effects of COVID-19 on net sales, as discussed above, and a decrease in gross margin; and •Europe - The ratio decreased primarily due to a decrease in gross margin. % of Net % of Net (in millions) First Half 2020 Sales First Half 2019 Sales (Loss) earnings from operations*: Americas $ (45.9 ) (9.7 )% $ 143.8 16.7 % Asia-Pacific 88.6 18.8 159.2 25.6 Japan 51.8 26.2 109.6 36.5 Europe 2.6 1.8 31.9 14.6 Other (10.2 ) (64.7 ) 1.5 3.0 86.9 446.0 Unallocated corporate expenses (96.1 ) (7.4 ) (100.8 ) (4.9 ) Other operating expenses (36.5 )
-
(Loss) earnings from operations $ (45.7 ) (3.5 )% $
345.2 16.8 %
* Percentages represent (loss) earnings from operations as a percentage of each
segment's net sales.
On a segment basis, the (loss) earnings from operations to each segment's net
sales in the first half of 2020 compared with 2019 was as follows:
•
expenses, which management attributed to the effects of COVID-19 on net sales, as discussed above, and a decrease in gross margin;
•
expenses, which management attributed to the effects of COVID-19 on net sales, as discussed above, and a decrease in gross margin;
•
expenses, which management attributed to the effects of COVID-19 on net sales, as discussed above, and a decrease in gross margin; and
•
expenses, which management attributed to the effects of COVID-19 on net sales, as discussed above, and 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$8.5 million , or 16%, in the second quarter of 2020 and$4.7 million , or 5%, in the first half of 2020 when compared to the prior year. The decrease in both the second quarter and first half was primarily due to a decrease in incentive compensation expense, with the first half decline partly offset by a$12.3 million charge that was recorded to fully reserve the asset related to an expected insurance recovery in respect of the bankruptcy filing of a metal refiner to which the Company entrusted precious scrap metal (see "Item 1. Financial Statements - Note 12. Commitments and Contingencies"). The second quarter of 2020 amount included in other operating expenses in the table above represents$7.8 million for costs incurred related to the pending Merger (see "Item 1. Financial Statements - Note 2. Merger Agreement"). The first half of 2020 amounts included in other operating expenses in the table above represent (i)TIFFANY & CO. 46
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Interest Expense and Financing Costs
Interest expense and financing costs were
Other Income, net
Other income, net was$0.8 million in the second quarter of 2020, compared with$0.9 million in the prior year. Other income, net was$26.2 million in the first half of 2020, compared with$1.9 million in the prior year. Other income, net in the first half of 2020 included the recognition of a gain of$31.4 million related to amounts received as compensation for the previous acquisition of the premises containing one of the Company's leased retail stores and an administrative office inSydney, Australia under compulsory acquisition laws inAustralia . See "Item 1. Financial Statements - Note 12. Commitments and Contingencies" for additional information.
Provision (Benefit) for Income Taxes
The effective income tax rate for the second quarter of 2020 was 35.4% versus 22.3% in the prior year. The effective income tax rate for the first half of 2020 was 19.0% versus 20.0% in the prior year. The increase in the effective income tax rate for the second quarter of 2020 was primarily due to the application of an updated estimated annual effective income tax rate, which is influenced by the jurisdictional mix of earnings taxed at the statutory tax rates applicable to each jurisdiction and an estimated increase in the Global Intangible Low-Taxed Income ("GILTI") tax, each of which reflect the impact of COVID-19 on the Company's results of operations. The effective income tax rate for first half of 2020 reflected the impact of certain discrete items recognized in the period. The Company's effective income tax rate could be negatively impacted to the extent earnings are lower than anticipated in countries that have lower statutory tax rates and higher than anticipated in countries that have higher statutory tax rates. The effective income tax rate for the first half of 2019 included the recognition of an income tax benefit of$7.5 million , or 230 basis points or$0.06 per diluted share, related to an increase in the estimated 2018 Foreign Derived Intangible Income ("FDII") benefit as a result ofU.S. Treasury guidance issued during the first quarter of 2019.
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. In response to the COVID-19 outbreak, the Company has taken steps to further strengthen its financial position and balance sheet, and to maintain financial liquidity and flexibility, which included drawing down$500.0 million on its Credit Facility during the first quarter of 2020 as a precautionary measure in order to increase its cash position and maintain financial flexibility in light of the uncertainty in the global markets resulting from COVID-19. This drawdown was permitted under the Merger Agreement. The Company monitors its covenant compliance carefully. The agreements governing certain of the Company's material debt instruments include covenants that incorporate a (i) debt incurrence test premised on a fixed charge coverage ratio, which is the ratio of the Company's EBIT (earnings before interest and taxes) plus rent expense to its interest expense plus rent expense, and (ii) leverage ratio, which is the ratio of the Company's total adjusted debt to its consolidated EBITDAR (earnings before interest, taxes, depreciation, amortization and rent expenses). Specifically, under the terms of the Company's Senior Notes due 2026 and 2042, the Company was, prior to the amendments described below, restricted from incurring, or permitting its subsidiaries to incur, indebtedness if, among other conditions, the Company's fixed charge coverage ratio was less than 2.0 to 1.0. Under the terms of the Credit Facility, the Guaranty in respect of the three-year, multi-bank revolving credit agreement entered into by the Company's wholly owned subsidiary,Tiffany & Co. (Shanghai )Commercial Company Limited (the "Shanghai Guaranty"), and the Company's Senior Notes due 2026 and 2042, the Company was, prior to the amendmentsTIFFANY & CO. 47
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described below, required to maintain a maximum leverage ratio of 3.50 to 1.00 for the four quarter period ending as of the end of each fiscal quarter.
As a precautionary measure in order to maintain flexibility with respect to its liquidity sources and provide additional financial maintenance covenant headroom, the Company entered into amendments to its Credit Facility, the Shanghai Guaranty, and its Senior Notes due 2026 and 2042, in order to modify the leverage ratio financial maintenance covenant and, in the case of the Senior Notes due 2026 and 2042, the fixed charge coverage ratio test for debt incurrence, through and including the Company's fiscal quarter endingApril 30, 2021 . These amendments are permitted under the Merger Agreement. These amendments were executed onJune 8, 2020 and effect changes to certain provisions and covenants during the period beginning with the fiscal quarter endedJuly 31, 2020 and continuing through the fiscal quarter endingApril 30, 2021 (such period of time, the "Covenant Relief Period"), including, among others: (a) an increase in the maximum leverage ratio under the Credit Facility, the Shanghai Guaranty, and the 2026 and 2042 Senior Notes, to 4.50 to 1.00; and (b) a reduction of the fixed charge coverage ratio in the 2026 and 2042 Senior Notes to 0.75 to 1.00. During the Covenant Relief Period, the facility fee under the Credit Facility is increased by 5 basis points at all pricing levels, and the applicable margin is increased by (i) 10 basis points at all pricing levels through the quarter endedJuly 31, 2020 , (ii) 20 basis points at all pricing levels fromAugust 1, 2020 untilNovember 1, 2020 and (iii) 30 basis points at all pricing levels fromNovember 1, 2020 throughApril 30, 2021 . The coupon rate under the 2026 and 2042 Senior Notes is increased by 25 basis points during the Covenant Relief Period. The Company has the right to terminate the Covenant Relief Period under the Credit Facility, Shanghai Guaranty and the 2026 and 2042 Senior Notes, including the attendant covenant and pricing modifications referenced above, prior toApril 30, 2021 , subject to the Company's certification that its leverage ratio does not exceed 3.50 to 1.00 at such time. 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, including the next 12 months. The following table summarizes cash flows from operating, investing and financing activities: First Half (in millions) 2020 2019 Net cash provided by (used in): Operating activities$ (13.3 ) $ 153.9 Investing activities (108.6 ) (101.9 ) Financing activities 300.2 (203.1 ) Effect of exchange rate changes on cash and cash equivalents (9.3 )
(0.5 )
Net increase (decrease) in cash and cash equivalents
Operating Activities The Company had net cash outflows from operating activities of$13.3 million in the first half of 2020 compared with net cash inflows from operating activities of$153.9 million in the first half of 2019. The change in operating cash flows was primarily due to the net loss of$32.7 million incurred in the first half of 2020, which management attributed to the effects of COVID-19, compared to net income of$261.5 million generated in the first half of 2019, partly offset by a decrease in cash outflows attributable to working capital. Additionally, the Company made a$30.0 million voluntary cash contribution to itsU.S. pension plan in the first half of 2019. Working Capital. Working capital (current assets less current liabilities) was$2.8 billion atJuly 31, 2020 , compared with$2.9 billion atJanuary 31, 2020 and$2.8 billion atJuly 31, 2019 . Accounts receivable, net atJuly 31, 2020 were 18% lower than atJanuary 31, 2020 andJuly 31, 2019 . The decrease in Accounts receivable, net atJuly 31, 2020 primarily reflected the decrease in sales in 2020 attributed toTIFFANY & CO. 48
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the effects of COVID-19. Currency translation did not have a significant effect
on the change compared to
Inventories, net at
Accounts payable and accrued liabilities atJuly 31, 2020 were 27% lower than atJanuary 31, 2020 and 8% lower than atJuly 31, 2019 . The decrease compared toJanuary 31, 2020 included (i) declines in trade payables, (ii) a decrease in incentive compensation accruals and (iii) the recognition of a gain previously deferred related to amounts received as compensation for the previous acquisition of the premises containing one of the Company's leased retail stores and an administrative office inSydney, Australia under compulsory acquisition laws in that country (see "Item 1. Financial Statements - Note 12. Commitments and Contingencies" for additional information). The decrease compared toJuly 31, 2019 included (i) the recognition of the aforementioned gain and (ii) a decrease in incentive compensation accruals, partly offset by an increase in trade payables. Investing Activities The Company had net cash outflows from investing activities of$108.6 million in the first half of 2020 compared with$101.9 million in the first half of 2019. Year-over-year changes in cash flows from investing activities were primarily driven by an increase in capital expenditures.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$22.3 million during the first half of 2020 compared with$20.0 million during the first half of 2019.
Financing Activities
The Company had net cash inflows from financing activities of$300.2 million in the first half of 2020, compared with net cash outflows of$203.1 million in the first half of 2019. Year-over-year changes in cash flows from financing activities were largely driven by changes in net borrowings and share repurchases.
Recent Borrowings. The Company had net proceeds from borrowings as follows:
First Half (in millions) 2020 2019
Short-term borrowings:
Proceeds from credit facility borrowings, net
$ 448.1 $ 25.5 As noted above, during the first quarter of 2020, the Company drew down$500.0 million on its Credit Facility as a precautionary measure in order to increase its cash position and maintain financial flexibility in light of current uncertainty in the global markets resulting from COVID-19. This drawdown was permitted under the Merger Agreement. The drawdown proceeds from the Credit Facility can be repaid at any time. Under all of the Company's credit facilities, atJuly 31, 2020 , there were$591.3 million of borrowings outstanding,$2.1 million of letters of credit issued and$412.1 million available for borrowing. AtJuly 31, 2019 , there were$135.2 million of borrowings outstanding,$3.6 million of letters of credit issued and$849.2 million available for borrowing. The weighted-average interest rate for the amounts outstanding atJuly 31, 2020 and 2019 was 1.7% and 4.0%, respectively.
The ratio of total debt (short-term borrowings and long-term debt) to
stockholders' equity was 46% at
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At
Shares 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 or other structured repurchase transactions, and/or privately negotiated transactions. As ofJuly 31, 2020 ,$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 did not repurchase any shares of its Common Stock during the first half of 2020 pursuant to the 2018 Program, and 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.
The Company's share repurchase activity was as follows:
Second Quarter First
Half
(in millions, except per share amounts) 2020 2019 2020 2019 Cost of repurchases
$ -$ 60.0 $ - $
85.4
Shares repurchased and retired - 0.6 - 0.9 Average cost per share $ -$ 93.82 $ -$ 93.80 Contractual Obligations SinceJanuary 31, 2020 , the Company's contractual obligations as they relate to short-term borrowings have changed as a result of the drawdown of$500.0 million under the Credit Facility described above under "Financing Activities". The Company's remaining contractual cash obligations and commercial commitments atJuly 31, 2020 , 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, 2020 .
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
The historical trends and results reported in this quarterly report on Form 10-Q should not be considered an indication of future performance. Further, statements contained in this quarterly report on Form 10-Q that are not statements of historical fact, including those that refer to plans, assumptions and expectations for future periods, are "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 by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the pending Merger (as defined under "Item 2. Management's Discussion and Analysis - Merger Agreement") and the anticipated benefits thereof. Forward-looking statements include, but are not limited to, statements that can be identified by the use of words such as 'expects,' 'projects,' 'anticipates,' 'assumes,' 'forecasts,' 'plans,' 'believes,' 'intends,' 'estimates,' 'pursues,' 'scheduled,' 'continues,' 'outlook,' 'may,' 'will,' 'can,' 'should' and variations of such words and similar expressions. Examples of forward-looking statements include, but are not limited to, statements the Company makes regarding its plans, assumptions, expectations, beliefs and objectives with respect to the pending Merger; the Company's assumptions, expectations and beliefs with respect to COVID-19, including the continuing impact thereof on the Company's business, revenues, cash flows and results of operations; store openings and closings; store productivity; the renovation of the Company's New York Flagship store, including the timing and cost thereof, and the temporary relocation of its retail operations to6 East 57th Street ;TIFFANY & CO. 50
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product introductions; sales; sales growth; sales trends; store traffic; the Company's strategy and initiatives and the pace of execution thereon; the amount and timing of investment spending; the Company's objectives to compete in the global luxury market and to improve financial performance; retail prices; gross margin; operating margin; expenses; interest expense and financing costs; effective income tax rate; the nature, amount or scope of charges resulting from recent revisions to theU.S. tax code; net earnings and net earnings per share; share count; inventories; capital expenditures; cash flow; liquidity, including the need to incur additional indebtedness; compliance with covenants under the Company's debt instruments, including the financial ratio thresholds set forth therein; currency translation; macroeconomic and geopolitical conditions; growth opportunities; litigation outcomes and recovery related thereto; amounts recovered under Company insurance policies; contributions to Company pension plans; and certain ongoing or planned real estate, product, marketing, retail, customer experience, manufacturing, supply chain, information systems development, upgrades and replacement, and other operational initiatives and strategic priorities. These forward-looking statements are not guarantees of future results and are based upon the current views, assumptions and plans of management, and speak only as of the date on which they are made and are subject to a number of factors, risks and uncertainties, many of which are outside of the Company's control. You should not place undue reliance on such statements. Actual results could therefore differ materially from the planned, assumed or expected results expressed in, or implied by, these forward-looking statements. While the Company cannot predict all of the factors that could form the basis of such differences, key factors, risks and uncertainties include, but are not limited to: the COVID-19 pandemic, including the duration and scope thereof, the availability of a vaccine or cure that mitigates the effect of the virus, the potential for additional waves of outbreaks and changes in financial, business, travel and tourism, consumer discretionary spending and other general consumer behaviors, political, public health and other conditions, circumstances, requirements and practices resulting therefrom; global macroeconomic and geopolitical developments; changes in interest and foreign currency rates; changes in taxation policies and regulations (including changes effected by the recent revisions to theU.S. tax code) or changes in the guidance related to, or interpretation of, such policies and regulations; shifting tourism trends; protest activity in theU.S. ; regional instability; violence (including terrorist activities); political activities or events (including the potential for rapid and unexpected changes in government, economic and political policies, the imposition of additional duties, tariffs, taxes and other charges or other barriers to trade, including as a result of changes in diplomatic and trade relations or agreements with other countries); weather conditions that may affect local and tourist consumer spending; changes in consumer confidence, preferences and shopping patterns, as well as the Company's ability to accurately predict and timely respond to such changes; shifts in the Company's product and geographic sales mix; variations in the cost and availability of diamonds, gemstones and precious metals; adverse publicity regarding the Company and its products, the Company's third-party vendors or the diamond or jewelry industry more generally; any non-compliance by third-party vendors and suppliers with the Company's sourcing and quality standards, codes of conduct, or contractual requirements as well as applicable laws and regulations; changes in the Company's competitive landscape; disruptions impacting the Company's business and operations; failure to successfully implement or make changes to the Company's information systems; changes in the cost and timing estimates associated with the renovation of the Company's New York Flagship store; delays caused by third parties involved in the aforementioned renovation; any casualty, damage or destruction to the Company's New York Flagship store or6 East 57th Street location; the Company's ability to successfully control costs and execute on, and achieve the expected benefits from, the operational initiatives and strategic priorities referenced above; conditions to the completion of the pending Merger may not be satisfied or the regulatory approvals required for the pending Merger may not be obtained, in each case, on the terms expected or on the anticipated schedule; the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement (as defined under "Item 2. Management's Discussion and Analysis - Merger Agreement") or affect the ability of the parties to recognize the benefits of the pending Merger; the effect of the announcement or pendency of the Merger on the Company's business relationships, operating results and business generally; risks that the pending Merger disrupts the Company's current plans and operations and potential difficulties in the Company's employee retention as a result of the pending Merger; potential litigation that may be instituted against the Company or its directors or officers related to the pending Merger or the Merger Agreement and any adverse outcome of any such litigation; the amount of the costs, fees, expenses and other charges related to the pending Merger, including in the event of any unexpected delays; other risks to consummation of the pending Merger, including the risk that the pending Merger will not be consummated within the expected time period, or at all, which may affect the Company's business and the price of its common stock; and any adverse effects on the Company by other general industry, economic, business and/or competitive factors. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks. Developments relating to these and otherTIFFANY & CO. 51
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factors may also warrant changes to the Company's operating and strategic plans, including with respect to store openings, closings and renovations, capital expenditures, information systems development, inventory management, and continuing execution on, or timing of, the aforementioned initiatives and priorities. Such consequences and changes could also cause actual results to differ materially from the expected results expressed in, or implied by, the forward-looking statements. Additional information about potential risks and uncertainties that could affect the Company's business and financial results is included under "Item 1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year endedJanuary 31, 2020 , "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 1A. Risk Factors" in this quarterly report on Form 10-Q, the definitive proxy statement on Schedule 14A that the Company filed onJanuary 6, 2020 , and in the Company's other filings made with theSEC from time to time, which are available via theSEC's website at www.sec.gov. Readers of this Quarterly Report on Form 10-Q should consider the risks, uncertainties and factors outlined above and in the aforementioned Form 10-K and in this Form 10-Q in evaluating, and are cautioned not to place undue reliance on, the forward-looking statements contained herein. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by applicable law or regulation.TIFFANY & CO. 52
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