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Tiffany Reports Third Quarter Results; Management Revises Earnings Guidance

NEW YORK--(BUSINESS WIRE)-- Tiffany & Co. (NYSE:TIF) today reported its financial results for the three months ("third quarter") ended October 31, 2015. On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars (see "Non-GAAP Measures" schedule), worldwide net sales rose 4%; on a reported basis, worldwide net sales were 2% below the prior year. Net earnings declined 8% (excluding a prior-year charge noted below) partly reflecting the negative effects from the strong U.S. dollar. Management is now projecting net earnings for the year ending January 31, 2016 to be 5%-10% below last year's $4.20 per diluted share (excluding charges in both years), and is also now projecting free cash flow in excess of $500 million for the year.

In the third quarter:

In the nine months ("year-to-date") ended October 31:

Frederic Cumenal, chief executive officer, said, "As expected, the strong U.S. dollar continued to put pressure on our financial results, specifically from the translation of non-U.S. sales into dollars and on foreign tourist spending in the U.S. In addition, we believe that volatile, uncertain economic and market conditions in the U.S. and other regions are affecting consumer spending, causing us to maintain a cautious near-term outlook. However, focusing on what we can control, we're pleased with our progress this year in expanding our store base and introducing and communicating compelling new product designs. And we are focused on efforts to manage our operations and inventories more efficiently to enhance cash flow. We are well prepared to delight our customers as they celebrate this holiday season, and our management team's longer-term strategy continues to call for further strengthening Tiffany's solid position among global luxury brands, which we believe will ultimately drive improved financial results."

Net sales highlights by region were as follows:

Other financial highlights:

Full Year Outlook:

In light of third quarter results, negative effects from the strong U.S. dollar and increased global uncertainties, management now expects net earnings in the year ending January 31, 2016 to be 5%-10% below last year's $4.20 per diluted share (excluding the loan impairment charge in the second quarter of 2015 and a debt extinguishment charge in 2014). This forecast does not assume recording any additional loan impairment charges; continues to assume improving inventory productivity; assumes capital expenditures of $260 million; and projects free cash flow in excess of $500 million ($100 million higher than the previous forecast). All assumptions and expectations are approximate and may or may not prove valid.

Today's Conference Call:

The Company will conduct a conference call today at 8:30 a.m. (Eastern Time) to review actual results and the outlook. Please click on http://investor.tiffany.com ("Events and Presentations").

Tiffany is the internationally-renowned jeweler founded in New York in 1837. Through its subsidiaries, Tiffany & Co. manufactures products and operates TIFFANY & CO. retail stores worldwide, and also engages in direct selling through Internet, catalog and business gift operations. For additional information, please visit www.tiffany.com or call our shareholder information line at 800-TIF-0110.

Next Scheduled Announcement:

The Company expects to report its holiday sales results on Tuesday, January 19, 2016. To be notified of future announcements, please register at http://investor.tiffany.com ("E-Mail Alerts").

Forward-Looking Statements:

The statements in this document that refer to plans and expectations for the current fiscal year and future periods are forward-looking statements that involve a number of risks and uncertainties. Words such as 'expects,' 'anticipates,' 'forecasts,' 'plans,' 'believes,' 'continues,' 'may,' 'will,' and variations of such words and similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding the Company's objectives, expectations and beliefs with respect to store openings and closings, product introductions, sales, sales growth, retail prices, gross margin, expenses, operating margin, effective income tax rate, net earnings and net earnings per share, inventories, capital expenditures, cash flow, liquidity, currency translation and growth opportunities. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company's control, which could cause the Company's actual results to differ materially from those indicated in these forward-looking statements. Such factors include, but are not limited to, risks from global economic conditions, decreases in consumer confidence, the Company's significant operations outside of the United States, regional instability and conflict that could disrupt tourist travel and local consumer spending, weakening foreign currencies, changes in the Company's product or geographic sales mix and changes in costs or reduced supply availability of diamonds and precious metals. Please also see the Company's risk factors, as they may be amended from time to time, set forth in the Company's filings with the Securities and Exchange Commission, including the Company's most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q, for a discussion of these and other factors that could cause actual results to differ materially. 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. AND SUBSIDIARIES
(Unaudited)

NON-GAAP MEASURES

The Company reports information in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). 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. The Company presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company's operating results.

Net Sales

The Company's reported net sales reflect either a translation-related benefit from strengthening foreign currencies or a detriment from a strengthening U.S. dollar. Internally, management monitors and measures its sales performance on a non-GAAP basis that eliminates the positive or negative effects that result from translating sales made outside the U.S. into U.S. dollars ("constant-exchange-rate basis"). Management believes this constant-exchange-rate basis provides a more representative assessment of sales performance and provides better comparability between reporting periods. The following table reconciles the sales percentage increases (decreases) from the GAAP to the non-GAAP basis versus the previous year:

         
Third Quarter 2015 vs. 2014 Year-to-date 2015 vs. 2014
GAAP

Reported

  Translation

Effect

  Constant-

Exchange-

Rate Basis

GAAP
Reported
  Translation
Effect
  Constant-
Exchange-
Rate Basis

Net Sales:

Worldwide

(2)

%

(6)

%

4 %

(2)

%

(6)

%

4 %
Americas

(7)

 

(2)

 

(5)

 

(3)

 

(2)

 

(1 )
Asia-Pacific

(2)

 

(8)

 

6

(6)

 

6

Japan

17

(17)

 

34

(6)

 

(16)

 

10

Europe

(2)

 

(11)

 

9 1

(15)

 

16
Other

(1)

 

(9)

 

8

(13)

 

(7)

 

(6 )

Comparable Store Sales:

Worldwide

(5)

%

(6)

%

1 %

(5)

%

(7)

%

2 %
Americas

(9)

 

(3)

 

(6)

 

(4)

 

(2)

 

(2 )
Asia-Pacific

(5)

 

(7)

 

2

(2)

 

(6)

 

4
Japan 9

(15)

 

24

(12)

 

(15)

 

3
Europe

(5)

 

(11)

 

6

(2)

 

(16)

 

14
Other

(18)

 

(15)

 

(3)

 

(10)

 

(12)

 

2
 

Net Earnings

The accompanying press release presents net earnings and highlights expenses tied to certain items in the text. Management believes excluding such items presents the Company's results on a more comparable basis to the corresponding period in the prior year, thereby providing investors with an additional perspective to analyze the results of operations of the Company at October 31, 2015. The following tables reconcile certain GAAP amounts to non-GAAP amounts:

       
Nine Months Ended
October 31, 2015
(in millions, except per share amounts)         $

(after tax)

  Diluted

EPS

Net earnings, as reported $ 300.7   $ 2.32
Impairment charge a 6.3     0.05
Net earnings, as adjusted 307.0     2.37
 

a On a pre-tax basis, includes a charge of $9.6 million within Selling, general and administrative expenses associated with an impairment charge related to a financing arrangement with Koidu Limited.

       
Three Months Ended
October 31, 2014
(in millions, except per share amounts)         $
(after tax)
  Diluted
EPS
Net earnings, as reported $ 38.3   $ 0.29
Debt extinguishment b 61.0     0.47
Net earnings, as adjusted $ 99.3     $ 0.76
 
Nine Months Ended
October 31, 2014
(in millions, except per share amounts)         $
(after tax)
  Diluted
EPS
Net earnings, as reported $ 288.0 $ 2.22
Debt extinguishment b 61.0     0.47
Net earnings, as adjusted $ 349.0     $ 2.69
 

b

 

On a pre-tax basis, includes a charge of $93.8 million within Loss on extinguishment of debt associated with the redemption of $400.0 million in aggregate principal amount of long-term debt prior to their scheduled maturities which ranged from 2015 to 2019.

   

TIFFANY & CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited, in millions, except per share amounts)

 
Three Months Ended October 31, Nine Months Ended October 31,
2015   2014 2015   2014
Net sales $ 938.2 $ 959.6 $ 2,891.2 $ 2,964.7
 
Cost of sales 373.7   388.7   1,164.7   1,209.1
 
Gross profit 564.5 570.9 1,726.5 1,755.6
 
Selling, general and administrative expenses 408.1   402.4   1,227.3   1,168.8
 
Earnings from operations 156.4 168.5 499.2 586.8
 
Interest and other expenses, net 15.2 15.4 38.1 47.8
 
Loss on extinguishment of debt   93.8     93.8
 
Earnings from operations before income taxes 141.2 59.3 461.1 445.2
 
Provision for income taxes 50.2   21.0   160.4   157.2
 
Net earnings $ 91.0   $ 38.3   $ 300.7   $ 288.0
 
Net earnings per share:
 
Basic $ 0.71   $ 0.30   $ 2.33   $ 2.23
Diluted $ 0.70   $ 0.29   $ 2.32   $ 2.22
 
Weighted-average number of common shares:
 
Basic 128.6 129.4 129.0 129.2
Diluted 129.1 130.0 129.5 129.9
 
   

TIFFANY & CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions)

 
October 31,
2015
January 31,
2015
October 31,
2014

ASSETS

 
Current assets:
Cash and cash equivalents and short-term investments $ 725.1 $ 731.5 $ 383.4
Accounts receivable, net 206.5 195.2 177.3
Inventories, net 2,347.0 2,362.1 2,560.4
Deferred income taxes 102.0 102.6 104.7
Prepaid expenses and other current assets 204.2   220.0   284.6
 
Total current assets 3,584.8 3,611.4 3,510.4
 
Property, plant and equipment, net 912.2 899.5 888.1
Other assets, net 668.8   669.7   598.5
 
$ 5,165.8   $ 5,180.6   $ 4,997.0
 

LIABILITIES AND STOCKHOLDERS' EQUITY

 
Current liabilities:
Short-term borrowings $ 198.3 $ 234.0 $ 196.9
Current portion of long-term debt 82.6
Accounts payable and accrued liabilities 323.6 318.0 344.3
Income taxes payable 30.6 39.9 25.7
Merchandise credits and deferred revenue 73.4   66.1   67.7
 
Total current liabilities 708.5 658.0 634.6
 
Long-term debt 798.1 882.5 889.5
Pension/postretirement benefit obligations 545.8 524.2 284.4
Other long-term liabilities 184.5 200.7 208.5
Deferred gains on sale-leasebacks 57.9 64.5 71.3
Stockholders' equity 2,871.0   2,850.7   2,908.7
 
$ 5,165.8   $ 5,180.6   $ 4,997.0
 

TIF-E

Tiffany & Co.
Mark L. Aaron, 212-230-5301
mark.aaron@tiffany.com

Source: Tiffany & Co.

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