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TheStreet Open House

Tiffany Reports First Quarter Results; Management Updates Annual Forecast

Stocks in this article: TIF

Updated Outlook for 2012:

Management’s outlook for the full year ending January 31, 2013 is based on the following assumptions (which may or may not prove valid and all of which are approximate):

      a)   Worldwide net sales (in U.S. dollars) increasing 7-8%, versus the previous expectation calling for 10% growth.
b) Adding 24 Company-operated stores including nine in the Americas, eight in Asia-Pacific, two in Europe, and commencing operation of five stores in the United Arab Emirates. Four of these stores were opened in the first quarter.
c) The operating margin modestly below the prior year (excluding nonrecurring items recorded in 2011).
d) Interest and other expenses, net of approximately $55 million. This forecast now includes the expected cost of additional debt incurrence for working capital, repayment of maturing debt and general corporate purposes.
e) An effective income tax rate of 34 - 35%.
f) Net earnings per diluted share in a range of $3.70 - $3.80. This compares with the previous forecast of $3.95 - $4.05 per diluted share; approximately $0.20 of the decrease is tied to a reduction in operating expectations and $0.05 is related to the additional debt incurrence. All of the annual earnings growth over 2011 is expected to occur in the fourth quarter, with net earnings in the second and third quarters expected to be below last year.
g) Net inventories increasing 10%, versus a previous expectation of 15%.
h) Capital expenditures of $240 million.
 

Today’s Conference Call:

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

Next Scheduled Announcement:

The Company expects to report its second quarter results on Monday August 27, 2012. To be notified of future announcements, please register at http://investor.tiffany.com (“E-Mail Alerts”).

Tiffany & Co. operates jewelry stores and manufactures products through its subsidiary corporations. Its principal subsidiary is Tiffany and Company. The Company operates TIFFANY & CO. retail stores in the Americas, Asia-Pacific, Japan and Europe and 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.

This document contains certain “forward-looking” statements concerning the Company’s objectives and expectations with respect to sales, products, store openings, operating margin, interest and other expenses, the effective income tax rate, net earnings, inventories, growth opportunities and capital expenditures. Actual results might differ materially from those projected in the forward-looking statements. Information concerning risk factors that could cause actual results to differ materially is set forth in the Company’s 2011 Annual Report on Form 10-K and in other reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

 
 

TIFFANY & CO. AND SUBSIDIARIES

(Unaudited)

 

NON-GAAP MEASURES

 

Net Sales

 
The Company’s reported sales reflect either a translation-related benefit from strengthening foreign currencies or a detriment from a strengthening U.S. dollar.
 
The Company reports information in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Internally, management monitors 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 Company’s management does not, nor does it suggest that investors should, consider such 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. The following table reconciles sales percentage increases (decreases) from the GAAP to the non-GAAP basis versus the previous year:
             
 

First Quarter 2012 vs. 2011

 
 

GAAP

Reported

   

Translation

Effect

   

Constant-

Exchange-

Rate Basis

 

Net Sales:

       
Worldwide 8 % % 8 %
Americas 3 % % 3 %
Asia-Pacific 17 % 1 % 16 %
Japan 15 % 2 % 13 %
Europe 3 % (4 )% 7 %
 

Comparable Store Sales:

Worldwide 4 % % 4 %
Americas (1 )% (1 )% %
Asia-Pacific 11 % 1 % 10 %
Japan 15 % 3 % 12 %
Europe (4 )% (4 )% %
 

Net Earnings

The accompanying press release presents net earnings and highlights prior year nonrecurring items in the text. Management believes excluding such items presents the Company’s first quarter 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 April 30, 2012. The following table reconciles GAAP net earnings and net earnings per diluted share (“EPS”) to the non-GAAP net earnings and net earnings per diluted share, as adjusted:

        Three Months Ended

April 30, 2012

        Three Months Ended

April 30, 2011

( in thousands, except per share amounts)         $

(after tax)

      Diluted

EPS

        $

(after tax)

      Diluted

EPS

Net earnings, as reported   $ 81,534       $ 0.64         $ 81,063       $ 0.63
Headquarters relocation a                       5,003         0.04
Net earnings, as adjusted   $ 81,534       $ 0.64         $ 86,066       $ 0.67

a On a pre-tax basis includes charges of $213,000 within cost of sales and $8,008,000 within selling, general and administrative expenses for the three months ended April 30, 2011 associated with Tiffany’s consolidation of its New York headquarters staff within one location.

 
 
TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share amounts)
         
 

Three Months Ended April 30, 

2012  

2011  

Net sales $ 819,170 $ 761,018
 
Cost of sales 350,152 317,325
 
Gross profit 469,018 443,693
 
Selling, general and administrative expenses 334,033 307,727
 
Earnings from operations 134,985 135,966
 
Interest and other expenses, net 10,554 10,147
 
Earnings from operations before income taxes 124,431 125,819
 
Provision for income taxes 42,897 44,756
 
Net earnings $ 81,534 $ 81,063
 
 
Net earnings per share:
 
Basic $ 0.64 $ 0.64
Diluted $ 0.64 $ 0.63
 
 
Weighted-average number of common shares:
 
Basic 126,723 127,601
Diluted 128,178 129,381
 
 
TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
             
April 30, January 31, April 30,
2012 2012 2011

ASSETS

 
Current assets:
Cash and cash equivalents and short-term investments $ 343,029 $ 442,190 $ 622,320
Accounts receivable, net 181,641 184,085 175,926
Inventories, net 2,189,869 2,073,212 1,720,895
Deferred income taxes 91,280 83,124 49,118
Prepaid expenses and other current assets 127,295 107,064 122,694
 
Total current assets 2,933,114 2,889,675 2,690,953
 
Property, plant and equipment, net 766,874 767,174 685,457
Other assets, net 506,681 502,143 381,722
 
$ 4,206,669 $ 4,158,992 $ 3,758,132
 

LIABILITIES AND STOCKHOLDERS' EQUITY

 
Current liabilities:
Short-term borrowings $ 242,768 $ 112,973 $ 97,632
Current portion of long-term debt 60,357 60,822 0
Accounts payable and accrued liabilities 285,193 328,962 216,788
Income taxes payable 31,971 60,977 14,600
Merchandise and other customer credits 62,074 62,943 67,259
 
Total current liabilities 682,363 626,677 396,279
 
Long-term debt 531,244 538,352 589,255
Pension/postretirement benefit obligations 309,545 338,564 198,315
Other long-term liabilities 190,514 186,802 171,226
Deferred gains on sale-leasebacks 114,113 119,692 124,809
Stockholders' equity 2,378,890 2,348,905 2,278,248
 
$ 4,206,669 $ 4,158,992 $ 3,758,132
 




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