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Tiffany Reports Fourth Quarter and Full Year Results; Management Provides Its Financial Outlook for 2013



  Tiffany Reports Fourth Quarter and Full Year Results; Management Provides
  Its Financial Outlook for 2013

Business Wire

NEW YORK -- March 22, 2013

Tiffany & Co. (NYSE: TIF) today reported its financial results for the fourth
quarter and fiscal year ended January 31, 2013. In the quarter, worldwide net
sales increased 4% and net earnings rose 1%. In the year, worldwide net sales
increased 4% while net earnings declined 5% (or 11% when excluding
nonrecurring items in the prior year – see “Non-GAAP Measures” schedule).
Earnings per diluted share were $1.40 in the quarter and $3.25 in the year.
Management also provided its financial forecast for the fiscal year ending
January 31, 2014.

In the three months (“fourth quarter”) ended January 31, 2013:

  * Worldwide net sales rose 4% to $1.2 billion. 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 5% due to growth in all regions and comparable store sales
    equaled the prior year.
  * Net earnings increased 1% to $180 million, or $1.40 per diluted share,
    versus $178 million, or $1.39 per diluted share, in the prior year.

In the 12 months (“full year”) ended January 31, 2013:

  * Worldwide net sales increased 4% to $3.8 billion. On a
    constant-exchange-rate basis, worldwide net sales increased 5% due to
    growth in all regions and comparable store sales rose 1%.
  * Net earnings declined 5% to $416 million, or $3.25 per diluted share, from
    $439 million, or $3.40 per diluted share, in the prior year.
  * Net earnings in fiscal 2011 had included $26 million, or $0.20 per diluted
    share, for nonrecurring items related to the relocation of Tiffany’s New
    York headquarters staff. Excluding those nonrecurring items, net earnings
    of $3.25 per diluted share were 10% below last year’s $3.60.

Michael J. Kowalski, chairman and chief executive officer, said, “These
quarterly sales results were consistent with the holiday trends we had issued
in early January. While financial results in fiscal 2012 were disappointing
due to lower-than-expected sales growth and pressures on gross margin, we
continued to maintain a longer-term focus on strengthening global awareness of
the TIFFANY & CO. brand and on further developing compelling product
offerings.”

Net sales highlights were as follows:

  * Total sales in the Americas region increased 2% to $620 million in the
    fourth quarter and 2% to $1.8 billion in the full year (representing 48%
    of 2012 worldwide sales). On a constant-exchange-rate basis, total sales
    increased 2% in both the quarter and full year; on that basis, comparable
    store sales declined 2% in both the quarter and full year (sales in the
    New York flagship store declined 3% in both the quarter and full year,
    while comparable branch store sales were 2% below both prior-year periods
    with no meaningful geographical differences in the U.S.). Internet and
    catalog sales rose 6% and 4% in the fourth quarter and full year.
  * In the Asia-Pacific region, total sales rose 13% to $254 million in the
    fourth quarter and 8% to $810 million, or 21% of worldwide sales, in the
    full year. On a constant-exchange-rate basis, total sales rose 10% in the
    fourth quarter due to sales growth in Greater China and in other markets
    and rose 8% in the full year; on that basis, comparable store sales rose
    6% in the quarter and 2% in the full year.
  * Total sales in Japan declined 6% to $192 million in the fourth quarter,
    reflecting a weaker Japanese yen versus the U.S. dollar, and increased 4%
    to $639 million, or 17% of worldwide sales, in the full year. However, on
    a constant-exchange-rate basis, total sales rose 2% in the quarter and 6%
    in the full year; on that basis, comparable store sales rose 2% and 7% in
    the quarter and full year.
  * In Europe, total sales increased 3% to $146 million in the fourth quarter
    due to mixed performances by country and also rose 3% to $432 million, or
    11% of worldwide sales, in the full year. On a constant-exchange-rate
    basis, total sales increased 3% and 7% in the quarter and full year and
    comparable store sales were unchanged in the quarter and rose 2% in the
    full year.
  * Other sales nearly doubled to $24 million in the fourth quarter and rose
    41% to $73 million in the full year. The strong growth in both periods
    reflected the conversion in July of five TIFFANY & CO. stores in the
    United Arab Emirates from independently-operated distribution to
    Company-operated retail stores.
  * Tiffany added 28 Company-operated stores in the full year: 13 in the
    Americas with four in the U.S., six in Canada (including four
    department-store boutiques in Canada that were converted to
    Company-operated locations), two in Mexico and one in Brazil; eight in
    Asia-Pacific including six in China, one in Australia and one in
    Singapore; two in Europe including one in France and one in the Czech
    Republic; and the five stores in the U.A.E. At January 31, 2013, the
    Company operated 275 stores (115 in the Americas, 66 in Asia-Pacific, 55
    in Japan, 34 in Europe and five in the U.A.E.), compared with 247 stores
    (102 in the Americas, 58 in Asia-Pacific, 55 in Japan and 32 in Europe) a
    year ago.

Other financial highlights:

  * Gross margins (gross profit as a percentage of net sales) of 59.1% in the
    fourth quarter and 57.0% in the full year were below margins of 60.4% and
    59.0% in the respective prior-year periods. The declines largely reflected
    pressures from precious metal and diamond costs; a shift in sales mix
    toward higher-priced, lower margin products; and reduced sales leverage on
    fixed costs.
  * SG&A (selling, general and administrative) expenses increased 2% in the
    fourth quarter. In the full year, SG&A expenses increased 2%; however, if
    nonrecurring costs related to the 2011 relocation of Tiffany’s New York
    headquarters staff were excluded, SG&A expense would have increased 5%
    (see “Non-GAAP Measures” schedule) in the full year due to store occupancy
    costs related to new and existing stores, increased marketing spending and
    higher labor costs.
  * Other expenses, net were $14 million and $54 million in the fourth quarter
    and full year, compared with $13 million and $43 million in the respective
    prior-year periods. Increased average borrowing levels have resulted in
    higher interest expense in both periods.
  * The effective income tax rates were 35.0% in the fourth quarter and 35.3%
    in the full year, compared with 34.5% and 34.0% in the respective
    prior-year periods.
  * Cash and cash equivalents totaled $505 million at January 31, 2013, versus
    $434 million at the prior year-end. Short-term and long-term debt totaled
    $959 million at January 31, 2013 and represented 37% of stockholders’
    equity, compared with $712 million and 30% a year ago.
  * Net inventories of $2.2 billion at January 31, 2013 were 8% higher than
    the prior year-end, reflecting 13% growth in finished goods inventory and
    2% growth in combined raw materials and work-in-process, all to support
    new store openings and expanded product assortments.
  * Capital expenditures of $220 million in 2012 were modestly lower than $239
    million in the prior year; 2011 had included expenditures for the
    relocation of Tiffany’s headquarters staff.
  * In the full year, the Company spent $54 million to repurchase
    approximately 813,000 shares of its Common Stock at an average cost of
    $66.54 per share, but did not repurchase shares in the fourth quarter.
    Approximately $164 million remains available for repurchases under the
    currently authorized program which expires in January 2014.

Mr. Kowalski added, “We will be pursuing important growth opportunities in
2013, with plans including exciting new jewelry collections, enhanced customer
communications through print and digital media, and expansion of our global
base with additional stores. Tiffany is well positioned to achieve net
earnings growth of 6%-9% and healthy free cash flow.”

Outlook for 2013:

For the fiscal year ending January 31, 2014, management’s forecast is based on
the following assumptions (which are approximate and may or may not prove
valid):

   
       Worldwide net sales growth of 6%-8% in U.S. dollars. On a
       constant-exchange-rate basis, an expected high-single-digit percentage
    a) increase in worldwide net sales includes sales growth in all regions,
       ranging from a mid-teens percentage increase in Asia-Pacific to a
       low-single-digit increase in Japan.
       Opening a total of 14 (net) Company-operated stores including five in
    b) the Americas, seven in Asia-Pacific, three in Europe and closing one in
       Japan, as well as refurbishing a number of existing locations around
       the world.
       Operating earnings increasing in line with sales growth; a modest
       improvement in the SG&A expense ratio, due to sales leverage on fixed
    c) costs, is expected to be offset by a modestly lower gross margin
       largely tied to a product sales mix skewed toward higher-priced
       categories.
    d) Interest and other expenses, net of $58 million.
    e) An effective income tax rate of 35%.
       Net earnings from operations increasing 6%-9% to a range of $3.43-$3.53
       per diluted share. Net earnings from operations are expected to decline
       approximately 15%-20% in the first quarter due to gross margin pressure
    f) and higher marketing-related costs, to be followed by earnings growth
       in all subsequent quarters. In addition, this forecast excludes $0.05
       per diluted share of expected first quarter charges for staffing and
       occupancy adjustments.
       Net inventories increasing 5%; capital expenditures of $230 million;
    g) and free cash flow (cash flow from operating activities less capital
       expenditures) of $300 million (see “Non-GAAP Measures” schedule),
       versus $109 million in 2012.
        

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”).

Next Scheduled Announcement:

The Company expects to report its first quarter financial results on Tuesday
May 28, 2013. 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, Europe and the United Arab Emirates, and also engages in direct selling
through Internet, catalog and business gift operations. For more information,
visit www.tiffany.com or call the 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, capital
expenditures and free cash flow. 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 Form 10-K, 10-Q and 8-K 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

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 sales reflect either a translation-related benefit from
strengthening foreign currencies or a detriment from a strengthening U.S.
dollar. 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 following table reconciles sales percentage increases (decreases) from the
GAAP to the non-GAAP basis versus the previous year:

                                                           
                 Fourth Quarter 2012 vs. 2011               Year-to-Date 2012 vs. 2011
                                              Constant-                                  Constant-
                 GAAP         Translation     Exchange-     GAAP         Translation     Exchange-
                 Reported     Effect          Rate          Reported     Effect          Rate
                                              Basis                                      Basis
Net Sales:                                                                              
Worldwide        4%           (1)%            5%            4%           (1)%            5%
Americas         2%           –               2%            2%           –               2%
Asia-Pacific     13%          3%              10%           8%           –               8%
Japan            (6)%         (8)%            2%            4%           (2)%            6%
Europe           3%           –               3%            3%           (4)%            7%
Comparable Store Sales:
Worldwide        –            –               –             –            (1)%            1%
Americas         (2)%         –               (2)%          (2)%         –               (2)%
Asia-Pacific     8%           2%              6%            3%           1%              2%
Japan            (6)%         (8)%            2%            4%           (3)%            7%
Europe           1%           1%              –             (2)%         (4)%            2%
                                                                                          

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 year-to-date 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
January 31, 2013. The following table reconciles GAAP net earnings and net
earnings per diluted share (“EPS”) to non-GAAP net earnings and net earnings
per diluted share, as adjusted:

                                                    
                     Year Ended                      Year Ended
                     January 31, 2013                January 31, 2012
(in thousands,       $                 Diluted       $                 Diluted
except per           (after tax)       EPS           (after tax)       EPS
share amounts)
Net earnings,        $   416,157       $  3.25       $   439,190       $  3.40
as reported
Headquarters             –                –              25,994           0.20
relocation ^a
Net earnings,        $   416,157       $  3.25       $   465,184       $  3.60
as adjusted
                                                                        

   On a pre-tax basis includes charges of $213,000 within cost of sales and
^a $42,506,000 within SG&A for the year ended January 31, 2012 associated
   with Tiffany’s consolidation of its New York headquarters staff within     
   one location.

Free Cash Flow

Internally, management monitors its cash flow on a non-GAAP basis as the
ability to generate free cash flow demonstrates how much cash a company has
available for discretionary and non-discretionary items after deduction of
capital expenditures. The Company’s operations require regular capital
expenditures for the opening, renovation and expansion of stores and
distribution and manufacturing facilities as well as ongoing investments in
information technology. Management believes this provides a more
representative assessment of operating cash flows. The following table
reconciles GAAP net cash provided by operating activities to non-GAAP free
cash flows:

                                                 
(in thousands)                                    For the year ended
                                                  January 31, 2013
Net cash provided by operating activities         $      328,290
Capital expenditures                                     219,530
Free cash inflow                                  $      108,760
                                                   

                                                                               
TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share amounts)
                                            
                                                                                 
                     Three Months Ended January 31,       Year Ended January 31,
                           2013              2012             2013              2012
Net sales              $   1,235,769     $   1,187,440    $   3,794,249     $   3,642,937
                                                                                 
Cost of sales              504,954           470,525          1,630,965         1,491,783
                                                                                 
Gross profit               730,815           716,915          2,163,284         2,151,154
                                                                                 
Selling, general
and                        440,458           431,172          1,466,067         1,442,728
administrative
expenses
                                                                                 
Earnings from              290,357           285,743          697,217           708,426
operations
                                                                                 
Interest and
other expenses,            14,054            13,316           53,641            43,475
net
                                                                                 
Earnings from
operations                 276,303           272,427          643,576           664,951
before income
taxes
                                                                                 
Provision for              96,660            94,032           227,419           225,761
income taxes
                                                                                 
Net earnings           $   179,643       $   178,395      $   416,157       $   439,190
                                                                                 
                                                                                 
Net earnings per
share:
                                                                                 
Basic                  $   1.42          $   1.41         $   3.28          $   3.45
Diluted                $   1.40          $   1.39         $   3.25          $   3.40
                                                                                 
                                                                                 
Weighted-average
number of common
shares:
                                                                                 
Basic                      126,857           126,747          126,737           127,397
Diluted                    127,992           128,344          127,934           129,083
                                                                                 

                                                              
TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
                                                                
                                                                    
                                                 January 31,       January 31,
                                                 2013              2012
ASSETS
                                                                    
Current assets:
Cash and cash equivalents                      $ 504,838         $ 433,954
Accounts receivable, net                         173,998           184,085
Inventories, net                                 2,234,334         2,073,212
Deferred income taxes                            79,508            83,124
Prepaid expenses and other current assets        158,911           115,300
                                                                    
Total current assets                             3,151,589         2,889,675
                                                                    
Property, plant and equipment, net               818,838           767,174
Other assets, net                                660,423           502,143
                                                                    
                                               $ 4,630,850       $ 4,158,992
                                                                    
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                    
Current liabilities:
Short-term borrowings                          $ 194,034         $ 112,973
Current portion of long-term debt                0                 60,822
Accounts payable and accrued liabilities         295,424           328,962
Income taxes payable                             30,487            60,977
Merchandise and other customer credits           66,647            62,943
                                                                    
Total current liabilities                        586,592           626,677
                                                                    
Long-term debt                                   765,238           538,352
Pension/postretirement benefit                   361,246           338,564
obligations
Other long-term liabilities                      209,732           186,802
Deferred gains on sale-leasebacks                96,724            119,692
Stockholders' equity                             2,611,318         2,348,905
                                                                    
                                               $ 4,630,850       $ 4,158,992
                                                                    

Contact:

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