Tiffany & Co. tif121589aBc_Fc Proof 3
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2011 YEAR-END REPORT
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2011 YEAR-END REPORT
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FROM TOP LEFT: Tiffany Celebration® rings. Paisley diamond pendant detail. Tiffany Sparklers rings. Tiffany Keys. Tiffany Metro pendant. The Tiffany® Setting engagement ring.
Tiffany Yellow Diamonds bracelet detail. Tiffany 1837™ cuff.
FROM TOP LEFT: Jean Schlumberger paillonné enamel bracelets. Tiffany Locks bracelet. Return to Tiffany™ pendants. Blue tourmaline and diamond ring. Tiffany Leather Collection Bracelet bags.
Elsa Peretti® Bottle pendant. Tiffany Bezet rings. Peacock feather pendant with tanzanite, blue tourmaline and diamonds. Luce pendant from the Paloma Picasso® Venezia collection.
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727 FIFTH AV E N U E
N E W Y O R K , N E W Y O R K 10022
212 755 8000
March 21, 2012
M I C H A E L J . KO WA L S K I
C H A I R M A N O F T H E B OA R D
C H I E F E X E C U T I V E O F F I C E R
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders of Tiffany & Co. on Thursday, May 17,
2012 at 9:00 a.m. in the Great Ballroom of the W New York - Union Square hotel, 201 Park Avenue
South (at 17th Street), New York, New York.
In order to attend the meeting, please bring identification and proof of stock ownership.
Stockholders owning their shares in “street name” (i.e. shares held in a brokerage account) must
show either a brokerage statement or a proxy card indicating ownership as of the record date of
March 20, 2012. Stockholders owning their shares in “registered” form with Tiffany’s transfer agent
need only provide identification.
Your participation in the affairs of Tiffany & Co. is important. Therefore, whether or not you plan to
attend the meeting, please vote your shares as soon as possible by completing and returning the
enclosed proxy card, by calling the number listed on the card or by accessing the Internet site to
vote electronically.
. . . . .
Tiffany & Co. achieved record financial results in the year ended January 31, 2012 (“fiscal 2011”).
Net sales rose 18% and net earnings increased 19%, surpassing the goals we had set for
ourselves at the start of the year.
We successfully executed our strategies by opening stores, introducing compelling products and
establishing new and deeper customer relationships. And we increased the dividend rate and
repurchased shares of our common stock while maintaining a strong balance sheet.
In fiscal 2011, worldwide net sales increased 18% to $3.6 billion and our geographic presence
became more global with 54% of those sales transacted outside the United States. On a constant-
exchange-rate basis, worldwide net sales rose 15% and by region rose 14% in the Americas, 31%
in Asia-Pacific, 3% in Japan and 12% in Europe; overall comparable store sales increased 13%
due to growth in all regions. Throughout much of the year, sales growth was strong in most
regions, but trends did soften in the fourth quarter, especially in the Americas and Europe.
At year-end, we operated 247 TIFFANY & CO. stores in 22 countries. To achieve the increased
store count in 2011, we added a net of 14 stores. This included opening six stores in the Americas,
three in Europe and six in Asia-Pacific, and a net reduction of one store in Japan.
We relocated our New York headquarters staff to 200 Fifth Avenue at 23rd Street. The building
design is more productive and efficient, and we will benefit from meaningful cost savings over the
15-year term of the lease. We recorded nonrecurring charges totaling approximately 20 cents per
diluted share.
Our improved profitability benefited from the effect of sales leverage on our fixed costs. To cope
with increased costs for diamonds and precious metals, we raised retail prices to mitigate a good
portion of the negative effect on gross margin.
In total, net earnings in fiscal 2011 increased 19% to $439 million, or $3.40 per diluted share.
Excluding nonrecurring items, net earnings rose 24% and earnings per diluted share rose to $3.60.
That result exceeded the expectation of $3.35 – $3.45 that we had announced at the start of the
year. Net earnings as a percentage of net sales rose to 12.1% in 2011 from 11.9% in the prior year.
Excluding nonrecurring items, the net margin increased to 12.8% in 2011 from 12.2%.
On the balance sheet, total debt to stockholders’ equity decreased to 30% compared with 32% at
the prior year-end. During 2011, we spent $174 million to repurchase 2.6 million shares of our
common stock at an average cost of $66.23 per share; raised the dividend rate on our common
stock by 16%, the tenth increase in nine years; and achieved healthy 11% and 19% returns on
average assets and average stockholders’ equity.
I have spoken many times about the strategic importance of a strong global supply chain. This
past year we achieved greater control over diamond sourcing by further developing our extensive
relationships with diamond producers, and we further expanded finished jewelry manufacturing
capacity when we opened a new facility in Lexington, Kentucky. These initiatives are intended to
better assure product supply that supports our growing business now and in future years.
Sales growth was achieved across a range of product categories. Diamonds remained at the core
of our business, as reflected by strong sales of engagement rings and statement jewelry. Sales in
the fine and fashion jewelry categories reflected the success of a number of popular diamond-
focused collections, including the Victoria, Tiffany Metro and Tiffany Celebration® collections, as
well as our extraordinary Tiffany Yellow Diamond collection. The Return to Tiffany™ and Tiffany
1837™ collections in gold and silver continued to grow and the Tiffany Keys collection remained a
favorite among customers. The new Tiffany Locks collection was also very well received. The
designs of Elsa Peretti, highlighted by her Diamonds by the Yard®, remained a perennial favorite.
And sales growth of Paloma Picasso’s designs was supported by her introduction of the Venezia
collection. Finally, we are pleased with growing customer enthusiasm for the Tiffany Leather
Collection.
Our global Marketing efforts continue to share the excitement of Tiffany around the world,
harnessing the power of traditional media and leading the jewelry category with best-in-class
digital communications, including Tiffany.com and social media programs. As we cultivate lifelong
relationships with our customers, and invite new consumers in, our Marketing programs share the
exciting message of new products, put classic Tiffany designs in the context of fashion, detail our
legacy of the finest craftsmanship, and remind the world that a Tiffany Blue Box® is the ultimate
expression of love.
The year 2012 marks the 175th anniversary of Charles Lewis Tiffany’s opening of his store in
downtown Manhattan in 1837. It is also the 25th anniversary of Tiffany’s initial public offering in
1987. Throughout its storied history, our Company’s mission has remained clear and relevant: to
enrich the lives of our customers by creating enduring objects of extraordinary beauty that will be
cherished for generations. We have done so by crafting the world’s most beautiful designs, using
only the finest quality materials and expert workmanship, and presenting those products to our
customers with graciousness and warmth. After 175 years, we understand that our continued
commitment to that time-honored strategy remains the key to our future growth and success.
I appreciate your long-term interest and confidence.
Sincerely,
FINANCIAL HIGHLIGHTS
(in thousands, except percentages, per share amounts and retail locations)
2011
2010
Net sales
Increase from prior year
Worldwide comparable store sales increase on a
constant-exchange-rate basis *
Net earnings
Increase from prior year
As a percentage of net sales
Per diluted share
$ 3,642,937 $ 3,085,290
18%
14%
13%
8%
$ 439,190 $ 368,403
19%
39%
12.1%
11.9%
$
3.40 $
2.87
Weighted-average number of diluted common shares
129,083
128,406
Return on average assets
Return on average stockholders’ equity
Cash flows from operating activities
Cash dividends paid per share
Company-operated TIFFANY & CO. stores
11.1%
10.2%
19.4%
18.1%
$ 210,606 $ 298,925
$
1.12 $
247
0.95
233
All references to years relate to fiscal years that end on January 31 of the following calendar year.
See “Item 6. Selected Financial Data” for nonrecurring items that affected 2011 and 2010
earnings.
* See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Non-GAAP Measures” for a reconciliation of GAAP to non-GAAP measures.
Tiffany & Co. Year-End Report 2011
Table of Contents
Annual Report on Form 10-K for the fiscal year ended January 31, 2012
Part I
Business ...................................................................................................................
Risk Factors..............................................................................................................
Unresolved Staff Comments ....................................................................................
Properties .................................................................................................................
Legal Proceedings....................................................................................................
Mine Safety Disclosures...........................................................................................
Part II
Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities......................................................................
Selected Financial Data............................................................................................
Management’s Discussion and Analysis of Financial Condition and Results
of Operations............................................................................................................
Quantitative and Qualitative Disclosures About Market Risk ..................................
Financial Statements and Supplementary Data.......................................................
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................................................................
Controls and Procedures .........................................................................................
Other Information .....................................................................................................
Part III
Directors, Executive Officers and Corporate Governance.......................................
Executive Compensation .........................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.................................................................................................
Certain Relationships and Related Transactions, and Director Independence.......
Principal Accounting Fees and Services..................................................................
Part IV
Exhibits, Financial Statement Schedules.................................................................
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Proxy Statement for the 2012 Annual Meeting of Stockholders
Attendance and Voting Matters ......................................................................................................
Introduction ..............................................................................................................
Matters to be Voted on at the 2012 Annual Meeting ...............................................
How to Vote Your Shares.........................................................................................
How to Revoke Your Proxy ......................................................................................
The Number of Votes That You Have ......................................................................
What a Quorum Is ....................................................................................................
What a “Broker Non-Vote” Is ...................................................................................
What Vote Is Required to Approve Each Proposal ..................................................
Proxy Voting on Proposals in the Absence of Instructions......................................
How Proxies Are Solicited........................................................................................
Ownership of the Company ............................................................................................................
Stockholders Who Own at Least Five Percent of the Company .............................
Ownership by Directors, Director Nominees and Executive Officers ......................
Compliance of Directors, Executive Officers and Greater-Than-Ten-Percent
Stockholders with Section 16(a) Beneficial Ownership Reporting Requirements...
Relationship with Independent Registered Public Accounting Firm ..............................................
Fees and Services of PricewaterhouseCoopers LLP ..............................................
Board of Directors and Corporate Governance..............................................................................
The Board, In General ..............................................................................................
The Role of the Board in Corporate Governance ....................................................
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Executive Sessions of Non-management Directors/Presiding Non-management
Director.....................................................................................................................
Communication with Non-management Directors ..................................................
Director Attendance at Annual Meeting ...................................................................
Independent Directors Constitute a Majority of the Board......................................
Board and Committee Meetings and Attendance during Fiscal 2011.....................
Committees of the Board .........................................................................................
Self-Evaluation .........................................................................................................
Resignation on Job Change or New Directorship ...................................................
Board Leadership Structure ....................................................................................
Board Role in Risk Oversight ...................................................................................
Business Conduct Policy and Code of Ethics .........................................................
Limitation on Adoption of Poison Pill Plans .............................................................
Transactions with Related Persons ................................................................................................
Contributions to Director-Affiliated Charities..................................................................................
Report of the Audit Committee .......................................................................................................
Executive Officers of the Company ................................................................................................
Compensation of the CEO and Other Executive Officers ..............................................................
Compensation Discussion and Analysis.........................................................................................
Report of the Compensation Committee........................................................................................
Summary Compensation Table ......................................................................................................
Grants of Plan-Based Awards ........................................................................................................
Discussion of Summary Compensation Table and Grants of Plan-Based Awards .......................
Non-Equity Incentive Plan Awards...........................................................................
Equity Incentive Plan Awards - Performance-Based Restricted Stock Units .........
One-Time Restricted Stock Unit Awards to Frederic Cumenal, James N.
Fernandez and Patrick F. McGuiness ......................................................................
Options .....................................................................................................................
Life Insurance Benefits.............................................................................................
Outstanding Equity Awards at Fiscal Year-End..............................................................................
Option Exercises and Stock Vested ...............................................................................................
Pension Benefits Table ...................................................................................................................
Assumptions Used in Calculating the Present Value of the Accumulated Benefits
Features of the Retirement Plans.............................................................................
Nonqualified Deferred Compensation Table ..................................................................................
Features of the Executive Deferral Plan...................................................................
Excess DCRB Feature of the Executive Deferral Plan .............................................
Potential Payments on Termination or Change in Control .............................................................
Explanation of Potential Payments on Termination or Change in Control ..............
Director Compensation Table .........................................................................................................
Discussion of Director Compensation Table ...........................................................
Equity Compensation Plan Information ..........................................................................................
Performance of Company Stock ....................................................................................................
Discussion of Proposals Presented by the Board ..........................................................................
Item 1. Election of Directors.....................................................................................
Item 2. Appointment of the Independent Registered Public Accounting Firm........
Item 3. Approval of the Compensation paid to the Named Executive Officers.......
Other Matters ..................................................................................................................................
Stockholder Proposals for Inclusion in the Proxy Statement for the 2013
Annual Meeting.........................................................................................................
Other Proposals .......................................................................................................
Householding ...........................................................................................................
Reminder to Vote .....................................................................................................
Appendix I. Corporate Governance Principles ...............................................................................
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Board of Directors and Executive Officers of Tiffany & Co. ...........................................................
Stockholder Information..................................................................................................................
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Corporate Information
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(cid:58) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2012
OR
(cid:134) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period
from
to
Commission file no. 1-9494
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
727 Fifth Avenue, New York,
New York
(Address of principal executive offices)
13-3228013
(I.R.S. Employer Identification No.)
10022
(Zip code)
Registrant’s telephone number, including area code: ((212)755-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which
registered
Common Stock, $.01 par value per share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:58) No (cid:134)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:134) No (cid:58)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:58) No (cid:134)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes (cid:58) No (cid:134)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form10-K or any amendment to this Form10-K. (cid:134)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large Accelerated filer (cid:58)
Non-Accelerated filer (cid:134) (Do not check if a smaller reporting company) Smaller reporting company (cid:134)
Accelerated filer (cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:134) No (cid:58)
As of July 29, 2011, the aggregate market value of the registrant’s voting and non-voting stock held by non-affiliates of the registrant
was approximately $9,713,269,057 using the closing sales price on this day of $79.59. See Item 5. Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
As of March 20, 2012, the registrant had outstanding 126,379,085 shares of its common stock, $.01 par value per share.
The following documents are incorporated by reference into this Annual Report on Form 10-K: Registrant's Proxy Statement Dated
DOCUMENTS INCORPORATED BY REFERENCE.
April 5, 2012 (Part III).
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including documents incorporated herein by reference, contains
certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934 concerning the Registrant’s goals,
plans and projections with respect to store openings, sales, retail prices, gross margin, expenses,
effective tax rate, net earnings and net earnings per share, inventories, capital expenditures, cash
flow and liquidity. In addition, management makes other forward-looking statements from time to
time concerning objectives and expectations. One can identify these forward-looking statements
by the fact that they use words such as “believes,” “intends,” “plans” and “expects” and other
words and terms of similar meaning and expression in connection with any discussion of future
operating or financial performance. One can also identify forward-looking statements by the fact
that they do not relate strictly to historical or current facts. Such forward-looking statements are
based on management’s current plans and involve inherent risks, uncertainties and assumptions
that could cause actual outcomes to differ materially from current plans. The Registrant has
included important factors in the cautionary statements included in this Annual Report, particularly
under “Item 1A. Risk Factors,” that the Registrant believes could cause actual results to differ
materially from any forward-looking statement.
Although the Registrant believes it has been prudent in its plans and assumptions, no assurance
can be given that any goal or plan set forth in forward-looking statements can or will be achieved,
and readers are cautioned not to place undue reliance on such statements which speak only as of
the date this Annual Report on Form 10-K was first filed with the Securities and Exchange
Commission. The Registrant undertakes no obligation to update any of the forward-looking
information included in this document, whether as a result of new information, future events,
changes in expectations or otherwise.
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PART I
Item 1. Business.
GENERAL HISTORY OF BUSINESS
The Registrant (also referred to as Tiffany & Co. or the “Company”) is the parent corporation of
Tiffany and Company (“Tiffany”). Charles Lewis Tiffany founded Tiffany's business in 1837. He
incorporated Tiffany in New York in 1868. The Registrant acquired Tiffany in 1984 and completed
the initial public offering of the Registrant’s Common Stock in 1987. The Registrant is a holding
company and conducts all business through its subsidiary corporations. Through those
subsidiaries, the Company sells jewelry and other items that it manufactures or has made by
others to its specifications.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Registrant's segment information for the fiscal years ended January 31, 2012, 2011 and 2010
is reported in “Item 8. Financial Statements and Supplementary Data – Note Q. Segment
Information.”
NARRATIVE DESCRIPTION OF BUSINESS
All references to years relate to fiscal years that end on January 31 of the following calendar year.
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MAINTENANCE OF THE TIFFANY & CO. BRAND
The TIFFANY & CO. brand (the “Brand”) is the single most important asset of Tiffany and,
indirectly, of the Registrant. The strength of the Brand goes beyond trademark rights (see
“TRADEMARKS” below) and is derived from consumer perceptions of the Brand. Management
monitors the strength of the Brand through focus groups and survey research.
Management believes that consumers associate the Brand with high-quality gemstone jewelry,
particularly diamond jewelry; excellent customer service; an elegant store and online environment;
upscale store locations; “classic” product positioning; distinctive and high-quality packaging
materials (most significantly, the TIFFANY & CO. blue box); and sophisticated style and romance.
Tiffany’s business plan includes expenses to maintain the strength of the Brand, such as the
following:
(cid:120)
To provide excellent service, stores must be well staffed with knowledgeable professionals;
(cid:120)
(cid:120) Elegant stores in the best “high street” and luxury mall locations are more expensive and
difficult to secure and maintain, but reinforce the Brand’s luxury connotations through
association with other luxury brands;
In-store display practices enable Tiffany to showcase fine jewelry in a manner consistent
with the Brand’s positioning but require sufficient space;
The classic positioning of much of Tiffany’s product line supports the Brand, but limits the
display space that can be allocated to new product introductions;
Tiffany’s packaging supports consumer expectations with respect to the Brand but is
expensive;
(cid:120)
(cid:120)
(cid:120) A significant amount of advertising is required to both reinforce the Brand’s association
with luxury, sophistication, style and romance, as well as to market specific products; and
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(cid:120) Maintaining its position within the high-end of the jewelry market requires Tiffany to invest
significantly in diamond and gemstone inventory and to accept reduced overall gross
margins; it also causes some consumers to view Tiffany as beyond their price range.
All of the foregoing require that management make tradeoffs between business initiatives that
might generate incremental sales and profits and Brand maintenance objectives. This is a dynamic
process. To the extent that management deems that product, advertising or distribution initiatives
will unduly and negatively affect the strength of the Brand, such initiatives have been and will be
curtailed or modified appropriately. At the same time, Brand maintenance suppositions are
regularly questioned by management to determine if the tradeoff between sales and profit is truly
worth the positive effect on the Brand. At times, management has determined, and will in the
future determine, that the strength of the Brand warranted, or that it will permit, more aggressive
and profitable distribution and marketing initiatives.
REPORTABLE SEGMENTS
Americas
In 2011, sales in the Americas were 50% of consolidated worldwide net sales, while sales in the
U.S. represented 90% of net sales in the Americas.
Retail Sales. Retail sales are transacted in Company-operated TIFFANY & CO. stores in (number of
stores at January 31, 2012 included in parentheses): the U.S. (87), Mexico (7), Canada (5) and
Brazil (3). Included within these totals are six Company-operated stores located within various
department stores.
Internet and Catalog Sales. Tiffany and its subsidiaries distribute a selection of their products in
the U.S. and Canada through the websites at www.tiffany.com and www.tiffany.ca. Tiffany also
distributes catalogs of selected merchandise to its proprietary list of customers in the U.S. and
Canada and to mailing lists rented from third parties. SELECTIONS® catalogs are published four
times per year, supplemented by other targeted catalogs.
Business-to-Business Sales. Business sales executives call on business clients, selling products
drawn from the retail product line and items specially developed for the business market, including
trophies and items designed for the particular customer. Most sales occur in the U.S. Price
allowances are given to business account holders for certain purchases. Business customers have
typically made purchases for gift giving, employee service and achievement recognition awards,
customer incentives and other purposes. Products and services are marketed through a sales
organization, through advertising in newspapers, business periodicals and through the publication
of special catalogs. Business account holders may make purchases through the Company’s
website at www.tiffany.com/business.
Wholesale Distribution. Selected TIFFANY & CO. merchandise is sold to independent distributors
for resale in markets in the Central/South American, Caribbean and Canadian regions. Such sales
represent less than 1% of consolidated worldwide net sales.
Asia-Pacific
In 2011, sales in Asia-Pacific represented 21% of consolidated worldwide net sales.
Retail Sales. Retail sales are transacted in Company-operated TIFFANY & CO. stores in (number of
TIFFANY & CO.
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stores at January 31, 2012 included in parentheses): China (16), Korea (14), Hong Kong (8), Taiwan
(7), Australia (5), Singapore (4), Macau (2) and Malaysia (2). Included within these totals are 21
Company-operated stores located within various department stores.
Internet Sales. The Company offers a selection of TIFFANY & CO. merchandise for purchase in
Australia through its website at www.tiffany.com.au.
Wholesale Distribution. Selected TIFFANY & CO. merchandise is sold to independent distributors
for resale in Asia-Pacific markets. Such sales represent less than 1% of consolidated worldwide
net sales.
Japan
In 2011, sales in Japan represented 17% of consolidated worldwide net sales.
Retail Sales. The Registrant does business in Japan through its wholly-owned subsidiary, Tiffany &
Co. Japan, Inc. (“Tiffany-Japan”), in 55 stores. Included within this total are 51 Tiffany-Japan-
operated stores located within Japanese department stores, representing 79% of Tiffany-Japan’s
net sales. There are four large department store groups in Japan. Tiffany-Japan operates TIFFANY
& CO. stores in locations controlled by these groups as follows (number of locations at January 31,
2012 included in parentheses): Isetan Mitsukoshi (15), J. Front Retailing Co. (Daimaru and
Matsuzakaya department stores) (10), Takashimaya (9) and Millennium Retailing Co. (Sogo and
Seibu department stores) (3). Tiffany-Japan also operates 14 stores in department stores
controlled by other Japanese companies.
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Internet Sales. The Company offers a selection of TIFFANY & CO. merchandise for purchase in
Japan through its website at www.tiffany.co.jp.
Business-to-Business Sales. Products drawn from the retail product line and items specially
developed are sold to business customers.
Wholesale Distribution. Selected TIFFANY & CO. merchandise is sold to independent distributors
for resale in Japan. Such sales represent less than 1% of consolidated worldwide net sales.
Europe
In 2011, sales in Europe represented 12% of consolidated worldwide net sales, while sales in the
United Kingdom represented approximately half of European net sales.
Retail Sales. Retail sales are transacted in Company-operated TIFFANY & CO. stores in (number of
stores at January 31, 2012 included in parentheses): the United Kingdom (10), Germany (6), Italy
(5), France (3), Spain (2), Switzerland (2), Austria (1), Belgium (1), Ireland (1) and the Netherlands (1).
Included within these totals are seven Company-operated stores located within various
department stores.
Internet Sales. The Company offers a selection of TIFFANY & CO. merchandise for purchase in the
United Kingdom, Austria, Belgium, France, Germany, Ireland, Italy, the Netherlands and Spain
through its websites which are accessible through www.tiffany.com.
Wholesale Distribution. Selected TIFFANY & CO. merchandise is sold to independent distributors
for resale in Europe. Such sales represent less than 1% of consolidated worldwide net sales.
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Other
Other consists of all non-reportable segments. Other consists primarily of wholesale sales of
TIFFANY & CO. merchandise to independent distributors for resale in certain emerging markets
primarily in the Middle East and Russia (“Emerging Markets”) and wholesale sales of diamonds. In
addition, Other also includes earnings received from licensing agreements with Luxottica Group for
the distribution of TIFFANY & CO. brand eyewear and with The Swatch Group Ltd. (the “Swatch
Group”) for TIFFANY & CO. brand watches. The earnings received from these licensing
agreements represented less than 1% of consolidated worldwide net sales in 2011, 2010 and
2009. See “Item 3. Legal Proceedings” for additional information.
Wholesale Sales of Diamonds. The Company regularly purchases parcels of rough diamonds for
further processing, but not all rough diamonds so purchased are suitable for Tiffany’s needs. In
addition, most, but not all, diamonds polished by the Company are suitable for Tiffany jewelry. The
Company sells to third parties those diamonds that are found to be unsuitable for Tiffany’s needs.
The Company’s objective from such sales is to recoup its original costs, thereby earning minimal, if
any, gross margin on those transactions.
Iridesse, Inc. In the fourth quarter of 2008, management committed to a plan to close all IRIDESSE
stores. All stores were closed in 2009. The results of IRIDESSE are reported as discontinued
operations.
Expansion of Operations
Management regularly evaluates potential markets for new TIFFANY & CO. stores with a view to
the demographics of the area to be served, consumer demand and the proximity of other luxury
brands and existing TIFFANY & CO. locations. Management recognizes that oversaturation of any
market could diminish the distinctive appeal of the Brand, but believes that there are a significant
number of locations remaining in the Americas, Asia-Pacific (outside Japan) and Europe that meet
the requirements of a TIFFANY & CO. location.
The following chart details the number of TIFFANY & CO. retail locations operated by the
Registrant’s subsidiary companies since 2001:
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Year:
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Americas
Canada
& Latin
America
5
5
7
7
7
9
10
10
12
12
15
U.S.
44
47
51
55
59
64
70
76
79
84
87
Asia-
Pacific
20
20
22
24
25
28
34
39
45
52
58
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Japan
47
48
50
53
50
52
53
57
57
56
55
Europe
10
11
11
12
13
14
17
24
27
29
32
Total
126
131
141
151
154
167
184
206
220
233
247
As part of its long-term strategy to expand its worldwide store base, management plans to add 24
(net) Company-operated stores in 2012 (nine in the Americas, seven in Asia-Pacific, three in
Europe and commence operations of five stores in Emerging Markets).
As noted above, the Company currently operates e-commerce enabled websites in 13 countries.
Sales transacted on those websites accounted for 6% of consolidated worldwide net sales in
2011, 2010 and 2009. The Company continually invests in enhancing these websites and intends
to expand its e-commerce sites to additional countries in the future.
Products
The Company's principal product category is jewelry, which represented 91%, 91% and 90% of
the Registrant's net sales in 2011, 2010 and 2009. Tiffany offers an extensive selection of TIFFANY
& CO. brand jewelry at a wide range of prices. Designs are developed by employees, suppliers,
independent designers and independent “named” designers (see “MATERIAL DESIGNER
LICENSE” below).
The Company also sells timepieces, sterling silver goods (other than jewelry), china, crystal,
stationery, fragrances, personal accessories and leather goods, which represented, in total, 8%,
8% and 9% of the Registrant’s net sales in 2011, 2010 and 2009. The Registrant’s remaining 1%
of net sales were attributable to wholesale sales of diamonds and earnings received from third-
party licensing agreements.
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Sales by Reportable Segment of TIFFANY & CO. Jewelry by Category
% of total
Americas
Sales
% of total
Asia-Pacific
Sales
% of total
Japan
Sales
% of total
Europe
Sales
% of total
Reportable
Segment
Sales
2011
Statement, fine &
solitaire jewelry a
Engagement jewelry &
wedding bands b
Silver & gold jewelry c
Designer jewelry d
2010
Statement, fine &
solitaire jewelry a
Engagement jewelry &
wedding bands b
Silver & gold jewelry c
Designer jewelry d
2009
Statement, fine &
solitaire jewelry a
Engagement jewelry &
wedding bands b
Silver & gold jewelry c
Designer jewelry d
16%
23%
12%
14%
23%
33%
16%
37%
28%
11%
41%
16%
23%
24%
46%
12%
15%
23%
13%
13%
21%
36%
17%
35%
28%
12%
42%
17%
21%
25%
45%
13%
14%
21%
11%
13%
21%
38%
16%
34%
30%
12%
43%
19%
20%
23%
47%
14%
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16%
29%
30%
15%
16%
28%
32%
16%
14%
27%
34%
16%
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a) This category includes statement, fine and solitaire jewelry (other than engagement jewelry).
Most jewelry in this category is constructed of platinum, although gold was used as the primary
metal in approximately 5% of sales. Most items in this category contain diamonds, other
gemstones or both. The average price of merchandise sold in 2011, 2010 and 2009 in this
category was approximately $5,400, $4,400 and $4,200 for total reportable segments.
b) This category includes diamond engagement rings and wedding bands marketed to brides and
grooms. Most jewelry in this category is constructed of platinum, although gold was used as the
primary metal in approximately 5% of sales. Most sales in this category are of items containing
diamonds. The average price of merchandise sold in 2011, 2010 and 2009 in this category was
approximately $3,800, $3,400 and $3,200 for total reportable segments.
c) This category generally consists of non-gemstone, sterling silver (approximately 70% of the
category in 2011) or gold jewelry, although small gemstones are used as accents in some
pieces. This category does not include jewelry that bears a designer’s name. The average price
of merchandise sold in 2011, 2010 and 2009 in this category was approximately $250, $220 and
$210 for total reportable segments.
d) This category generally consists of platinum, gold and sterling silver jewelry, some of which
contains diamonds, other gemstones or a combination of both diamonds and other gemstones.
This category includes only items that bear the name of and are attributed to one of the
Company’s “named” designers: Elsa Peretti, Paloma Picasso, Frank Gehry and Jean
Schlumberger (refer to “MATERIAL DESIGNER LICENSE” below). The average price of
merchandise sold in 2011, 2010 and 2009 in this category was approximately $520, $450 and
$420 for total reportable segments.
Certain reclassifications within the jewelry categories have been made to the prior years’ amounts
to conform to the current year category presentation.
ADVERTISING AND MARKETING
The Registrant regularly advertises, primarily in newspapers and magazines, and also increasingly
through digital media, and periodically conducts product marketing events. In 2011, 2010 and
2009, the Registrant spent $234,050,000 (6.4% of net sales), $197,597,000 (6.4% of net sales) and
$159,891,000 (5.9% of net sales) on worldwide advertising, which include costs for media,
production, catalogs, Internet, visual merchandising (in-store and window displays), marketing
events and other related items.
PUBLIC AND MEDIA RELATIONS
Public and media relations activities are significant to the Registrant's business and are important
in maintaining the Brand. The Company engages in a program of media activities and retail
marketing events to maintain consumer awareness of the Brand and TIFFANY & CO. products.
Each year, Tiffany publishes its well-known Blue Book which showcases jewelry and other
merchandise.
Management believes that the Brand is also enhanced by a program of charity sponsorships,
grants and merchandise donations. In addition, the Company makes donations to The Tiffany &
Co. Foundation, a private foundation organized to support 501(c)(3) charitable organizations. The
efforts of this Foundation are concentrated in environmental conservation, urban parks and
support for the decorative arts.
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TRADEMARKS
The designations TIFFANY® and TIFFANY & CO.® are the principal trademarks of Tiffany, as well
as serving as tradenames. Through its subsidiaries, the Company has obtained and is the
proprietor of trademark registrations for TIFFANY and TIFFANY & CO., as well as the TIFFANY
BLUE BOX® and the color TIFFANY BLUE® for a variety of product categories in the U.S. and in
other countries.
Tiffany maintains a program to protect its trademarks and institutes legal action where necessary
to prevent others either from registering or using marks which are considered to create a likelihood
of confusion with the Company or its products.
Tiffany has been generally successful in such actions and management considers that its
worldwide trademark rights in TIFFANY and TIFFANY & CO. are strong. However, use of the
designation TIFFANY by third parties (often small companies) on unrelated goods or services,
frequently transient in nature, may not come to the attention of Tiffany or may not rise to a level of
concern warranting legal action.
Tiffany actively pursues those who produce or sell counterfeit TIFFANY & CO. goods through civil
action and cooperation with criminal law enforcement agencies. However, counterfeit TIFFANY &
CO. goods remain available in many markets because it is not possible or cost-effective to fully
address the problem. The cost of enforcement is expected to continue to rise. In recent years,
there has been an increase in the availability of counterfeit goods, predominantly silver jewelry, in
various markets by street vendors and small retailers and on the Internet. As Internet counterfeiting
continues to become increasingly prolific, Tiffany has responded by engaging investigators and
counsel to monitor the Internet and take various actions, including initiating civil proceedings
against infringers and litigating through the Internet’s Uniform Dispute Resolution Policy, to stop
infringing activity.
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Despite the general fame of the TIFFANY and TIFFANY & CO. name and mark for the Company's
products and services, Tiffany is not the sole person entitled to use the name TIFFANY in every
category in every country of the world; third parties have registered the name TIFFANY in the U.S.
in the food services category, and in a number of foreign countries in respect of certain product
categories (including, in a few countries, the categories of food, cosmetics, jewelry, clothing and
tobacco products) under circumstances where Tiffany's rights were not sufficiently clear under
local law, and/or where management concluded that Tiffany's foreseeable business interests did
not warrant the expense of litigation.
MATERIAL DESIGNER LICENSE
Tiffany has been the sole licensee for jewelry designed by Elsa Peretti and bearing her trademark
since 1974. The designs of Ms. Peretti accounted for 10% of the Company's net sales in 2011,
2010 and 2009. Ms. Peretti, age 71, retains ownership of copyrights for her designs and of her
trademarks and exercises approval rights with respect to important aspects of the promotion,
display, manufacture and merchandising of her designs. Tiffany is required by contract to devote a
portion of its advertising budget to the promotion of her products and she is paid a royalty by
Tiffany for jewelry and other items designed by her and sold under her name. A written agreement
exists between Ms. Peretti and Tiffany, but it may be terminated by either party following six
months notice to the other party. No arrangement is currently in place to continue the sale of
designs following the death or disability of Ms. Peretti. Tiffany is the sole retail source for
merchandise designed by Ms. Peretti worldwide; however, she has reserved by contract the right
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to appoint other distributors in markets outside the U.S., Canada, Japan, Singapore, Australia,
Italy, the United Kingdom, Switzerland and Germany. The Registrant's operating results would be
adversely affected were it to cease to be a licensee of Ms. Peretti or should its degree of
exclusivity in respect of her designs be diminished.
MERCHANDISE PURCHASING, MANUFACTURING AND RAW MATERIALS
Tiffany produces jewelry and silver goods in New York, Rhode Island and Kentucky, and silver
hollowware in New Jersey. Other subsidiaries of the Company process, cut and polish diamonds
at facilities outside the U.S. In total, those manufacturing facilities produce approximately 60% of
Tiffany merchandise sold. The balance, including almost all non-jewelry items, is purchased from
third parties.
The Company may increase the percentage of internally-manufactured jewelry in the future, but it
is not expected that Tiffany will ever manufacture all of its needs. Factors considered by
management in its decision to outsource manufacturing include product quality, gross margin,
access to or mastery of various jewelry-making skills and technology, support for alternative
capacity and the cost of capital investments.
Purchases of Polished Gemstones and Precious Metals. Gemstones and precious metals used in
making Tiffany’s jewelry are purchased from a variety of sources. Most purchases are from
suppliers with which Tiffany enjoys long-standing relationships.
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The Company generally enters into purchase orders for fixed quantities with nearly all of its
polished gemstone and precious metals vendors. These relationships may be terminated at any
time by the Company without penalty; such termination would not discharge the Company’s
obligations under unfulfilled purchase orders placed prior to the termination.
The Company purchases precious metals for use in its U.S. internal manufacturing operations and
for use in the manufacture of Tiffany merchandise by certain third-party vendors. While Tiffany may
supply precious metals to those vendors, the finished goods made by such vendors may not
exclusively contain Tiffany-purchased precious metals. Additionally, not all precious metals used
by third-party vendors or in Tiffany’s own manufacturing operations are sourced from a single mine
or refinery. In recent years, there has been substantial volatility in the prices of precious metals.
Products containing one or more diamonds of varying sizes, including diamonds used as accents,
side-stones and center-stones, accounted for approximately 55%, 52% and 48% of Tiffany's net
sales in 2011, 2010 and 2009. Products containing one or more diamonds of one carat or larger
accounted for 14%, 12% and 11% of net sales in each of those years.
Tiffany purchases polished diamonds principally from five key vendors. Were trade relations
between Tiffany and one or more of these vendors to be disrupted, the Company's sales could be
adversely affected in the short term until alternative supply arrangements could be established. In
2008 and early 2009, the economic environment led to a reduction of retail and wholesale demand,
and rough diamond prices and wholesale polished prices both declined accordingly. In the second
half of 2009, and throughout 2010 and 2011, a resumption of growth in industry-wide demand for
rough and polished wholesale diamonds resulted in prices rising accordingly.
Some, but not all, of Tiffany’s suppliers are Diamond Trading Company (“DTC”) sightholders (see
“The DTC” below), and it is estimated that a significant portion of the diamonds that Tiffany has
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purchased have had their source with the DTC. The Company is a DTC sightholder for rough
diamonds through its Antwerp operations and joint ventures (see below).
Except as noted above, Tiffany believes that there are numerous alternative sources for gemstones
and precious metals and that the loss of any single supplier would not have a material adverse
effect on its operations.
Purchases and Processing of Rough Diamonds. Of the world’s largest diamond producing
countries, the vast majority of diamonds purchased by Tiffany originate from Botswana, Canada,
Namibia, South Africa, Sierra Leone, Russia and Australia. The Company has established diamond
processing operations that purchase, sort, cut and/or polish rough diamonds for use by Tiffany.
The Company has such operations in Belgium, South Africa, Botswana, Namibia, Mauritius and
Vietnam. Operations in South Africa, Botswana and Namibia are conducted through joint venture
companies in which third parties own minority interests. Tiffany maintains a relationship and has an
arrangement with a single mine operator in each of these three southern African countries,
although the Company may choose to supplement its current operations with alternative mine
operators from time to time. The Company’s operations in South Africa, Botswana and Namibia
allow it to access rough diamond allocations reserved for local manufacturers.
Tiffany’s purchases of conflict-free rough (see “Conflict Diamonds” below) and polished fine white
diamonds, in the color ranges D through I and in sizes above 0.18 carats represent a significant
portion of the world’s supply of fine white diamonds in those color and size ranges. Management
does not foresee a shortage of diamonds in those color and size ranges in the short term but
believes that rising demand will eventually create such a shortage unless new mines are
developed.
In recent years, approximately 50% - 60% of the polished diamonds acquired by Tiffany for use in
jewelry have been produced from rough diamonds purchased by the Company. The balance of
Tiffany’s needs for polished diamonds have been purchased from third parties (see above).
Through purchasing rough diamonds, it is the Company’s intention to supply Tiffany’s needs for
diamonds to as great an extent as possible.
In order to acquire rough diamonds, the Company must purchase mixed assortments of rough
diamonds. It is thus necessary to purchase some rough diamonds that cannot be cut to meet
Tiffany’s quality standards and that must be sold to third parties; such sales are reported in the
Other non-reportable segment. To make such sales, the Company charges a market price and is,
therefore, unable to earn any significant profit above its original cost. Sales of rough diamonds in
the Other non-reportable segment have had and will continue to have the effect of reducing the
Company’s overall gross margins.
The Company will, from time to time, secure supplies of diamonds by agreeing to purchase a
defined portion of a mine’s output at the current market prices. Under such arrangements,
management anticipates that it will purchase approximately $200,000,000 of rough diamonds in
2012. The Company will also purchase rough diamonds from other suppliers, although there are
no contractual obligations to do so.
The DTC. The supply and price of rough and polished diamonds in the principal world markets
have been and continue to be influenced by the DTC, an affiliate of the De Beers Group. Although
the market share of the DTC has diminished, the DTC continues to supply a significant portion of
the world market for rough, gem-quality diamonds. The DTC’s historical ability to control
worldwide production has been significantly diminished due to its lower levels of production,
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changing policies in diamond-producing countries and revised contractual arrangements with
third-party mine operators.
The DTC continues to exert influence on the demand for polished diamonds through the
requirements it imposes on those (“sightholders”) who purchase rough diamonds from the DTC.
Worldwide Availability and Price of Diamonds. The availability and price of diamonds to the DTC,
Tiffany and Tiffany's suppliers are dependent on a number of factors, including global consumer
demand, the political situation in diamond-producing countries, the opening of new mines and the
continuance of the prevailing supply and marketing arrangements for rough diamonds. As a
consequence of changes in the DTC sightholder system and increased demand in the retail
diamond trade, diamond prices increased significantly in the years leading up to 2008. During
2008 and early 2009, as global demand for rough diamonds waned due to economic conditions,
diamond prices decreased but have increased again from the latter part of 2009 through 2011.
Sustained interruption in the supply of rough diamonds, an overabundance of supply or a
substantial change in the marketing arrangements described above could adversely affect Tiffany
and the retail jewelry industry as a whole. Changes in the marketing and advertising policies of the
DTC and its direct purchasers could affect consumer demand for diamonds.
Conflict Diamonds. Media attention has been drawn to the issue of “conflict” or “blood” diamonds.
These terms are used to refer to diamonds extracted from war-torn geographic regions and sold
by rebel forces to fund insurrection. Allegations have also been made that trading in such
diamonds supports terrorist activities. It is not considered possible to distinguish conflict
diamonds from diamonds produced in other regions once they have been polished. Therefore,
concerned participants in the diamond trade, including Tiffany and nongovernment organizations,
such as the Responsible Jewellery Council of which Tiffany is a member, seek to exclude such
diamonds, which represent a small fraction of the world’s supply, from legitimate trade through an
international system of certification and legislation known as the Kimberley Process Certification
Scheme. All rough diamonds the Company buys must be accompanied by a Kimberley Process
certificate and all subsequent trades of rough and polished diamonds must conform to a system of
warranties that references the aforesaid scheme. It is not expected that such efforts will
substantially affect the supply of diamonds. Concerns over human rights abuses in Zimbabwe
underscore that the aforementioned system does not control diamonds produced in state-
sanctioned mines under poor working conditions. Tiffany has informed its vendors that the
Company does not intend to purchase Zimbabwean-produced diamonds.
Manufactured Diamonds. Manufactured diamonds are produced in small quantities. Although
significant questions remain as to the ability of producers to produce manufactured diamonds
economically within a full range of sizes and natural diamond colors, and as to consumer
acceptance of manufactured diamonds, manufactured diamonds may someday become a larger
factor in the market. Should manufactured diamonds be offered in significant quantities, the supply
of and price for natural diamonds may be affected. Tiffany does not sell manufactured diamonds.
Finished Jewelry. Finished jewelry is purchased from approximately 70 manufacturers, most of
which have long-standing relationships with Tiffany. However, Tiffany does not enter into long-term
supply arrangements with its finished goods vendors. Tiffany does enter into written blanket
purchase order agreements with nearly all of its finished goods vendors. These relationships may
be terminated at any time by Tiffany without penalty; such termination would not discharge
Tiffany’s obligations under unfulfilled purchase orders placed prior to termination. The blanket
purchase order agreements establish non-price terms by which Tiffany may purchase and by
which vendors may sell finished goods to Tiffany. These terms include payment terms, shipping
TIFFANY & CO.
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procedures, product quality requirements, merchandise specifications and vendor social
responsibility requirements. Tiffany actively seeks alternative sources for its top-selling jewelry
items to mitigate any potential disruptions in supply. However, due to the craftsmanship involved in
a small number of designs, Tiffany may have difficulty finding readily available alternative suppliers
for those jewelry designs in the short term.
Watches. Prior to 2007, the Company acquired TIFFANY & CO. brand watches from various Swiss
manufacturers. In 2007, the Company entered into a 20-year license and distribution agreement
with the Swatch Group for the manufacture and distribution of TIFFANY & CO. brand watches.
Under the agreement, the Swatch Group incorporated a new watchmaking company in
Switzerland for the design, engineering, manufacturing, marketing, distribution and service of
TIFFANY & CO. brand watches. This watchmaking company is wholly-owned and controlled by
the Swatch Group but is authorized by Tiffany to use certain trademarks owned by Tiffany and
operate under the TIFFANY & CO. name as Tiffany Watch Co., Ltd. The distribution of TIFFANY &
CO. watches is made through the Swatch Group distribution network via the Swatch Group’s
affiliates, the Swatch Group’s retail facilities and third-party distributors and resulted in royalty
revenue that was less than 1% of consolidated worldwide net sales in 2011 and 2010. Watches
sold in TIFFANY & CO. stores constituted 1% of consolidated worldwide net sales in 2011, 2010
and 2009. See “Item 3. Legal Proceedings” for additional information.
COMPETITION
The global jewelry industry is competitively fragmented. The Company encounters significant
competition in all product lines. Some competitors specialize in just one area in which the
Company is active. Many competitors have established worldwide, national or local reputations for
style, quality, expertise and customer service similar to the Company and compete on the basis of
that reputation. Other jewelers and retailers compete primarily through advertised price promotion.
The Company competes on the basis of the Brand’s reputation for high-quality products, customer
service and distinctive merchandise and does not engage in price promotional advertising.
Competition for engagement jewelry sales is particularly and increasingly intense. The Company’s
retail price for diamond jewelry reflects the rarity of the stones it offers and the rigid parameters it
exercises with respect to the cut, clarity and other diamond quality factors which increase the
beauty of the diamonds, but which also increase the Company’s cost. The Company competes in
this market by stressing quality.
SEASONALITY
As a jeweler and specialty retailer, the Company’s business is seasonal in nature, with the fourth
quarter typically representing at least one-third of annual net sales and approximately one-half of
annual net earnings. Management expects such seasonality to continue.
EMPLOYEES
As of January 31, 2012, the Registrant's subsidiary corporations employed an aggregate of
approximately 9,800 full-time and part-time persons. Of those employees, approximately 5,300 are
employed in the United States.
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AVAILABLE INFORMATION
The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, proxy and information statements and amendments to reports filed or furnished
pursuant to Sections 13(a), 14 and 15(d) of the Securities Exchange Act of 1934, as amended. The
public may read and copy these materials at the SEC’s Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549. The public may obtain information on the operation of the public
reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at
www.sec.gov that contains reports, proxy and information statements and other information
regarding Tiffany & Co. and other companies that file materials with the SEC electronically. Copies
of the Company’s annual reports on Form 10-K, Forms 10-Q and Forms 8-K, may be obtained,
free of charge, on the Company’s website at http://investor.tiffany.com/financials.cfm.
Item 1A. Risk Factors.
As is the case for any retailer, the Registrant’s success in achieving its objectives and expectations
is dependent upon general economic conditions, competitive conditions and consumer attitudes.
However, certain factors are specific to the Registrant and/or the markets in which it operates. The
following “risk factors” are specific to the Registrant; these risk factors affect the likelihood that the
Registrant will achieve the financial objectives and expectations communicated by management:
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(i) Risk: that challenging global economic conditions and related low levels of consumer
confidence over a prolonged period of time could adversely affect the Registrant’s sales.
As a retailer of goods which are discretionary purchases, the Registrant’s sales results are
particularly sensitive to changes in economic conditions and consumer confidence. Consumer
confidence is affected by general business conditions; changes in the market value of securities
and real estate; inflation; interest rates and the availability of consumer credit; tax rates; and
expectations of future economic conditions and employment prospects.
Consumer spending for discretionary goods generally declines during times of falling
consumer confidence, which negatively affects the Registrant’s earnings because of its cost base
and inventory investment.
Many of the Registrant’s competitors may react to any declines in consumer confidence by
reducing retail prices and promoting such reductions; such reductions and/or inventory
liquidations can have a short-term adverse effect on the Registrant’s sales, especially given the
Registrant’s policy of not engaging in price promotional activity.
The Registrant has invested in and operates a significant number of stores in the greater
China region and anticipates significant further expansion. Should the Chinese economy
experience an economic slowdown, the sales and profitability of stores in the greater China region
as well as stores in other markets that serve Chinese tourists could be affected.
Uncertainty surrounding the current global economic environment makes it more difficult for
the Registrant to forecast operating results. The Registrant’s forecasts employ the use of estimates
and assumptions. Actual results could differ from forecasts, and those differences could be
material.
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(ii) Risk: that sales will decline or remain flat in the Registrant’s fourth fiscal quarter, which includes
the Holiday selling season.
The Registrant’s business is seasonal in nature, with the fourth quarter typically representing
at least one-third of annual net sales and approximately one-half of annual net earnings. Poor
sales results during the Registrant’s fourth quarter will have a material adverse effect on the
Registrant’s sales and profits and will result in higher inventories.
(iii) Risk: that regional instability and conflict will disrupt tourist travel and local consumer spending.
Unsettled regional and global conflicts or crises such as military actions, terrorist activities,
natural disasters, government regulations or other conditions creating disruptions or disincentives
to, or changes in the pattern, practice or frequency of tourist travel to the various regions and local
consumer spending where the Registrant operates retail stores could adversely affect the
Registrant’s sales and profits.
(iv) Risk: that changes in the Registrant’s product or geographic sales mix could affect the
Registrant’s profitability.
The Registrant sells an extensive selection of jewelry and other merchandise at a wide
range of retail price points that yield different gross profit margins. Additionally, the Registrant’s
geographical regions achieve different operating profit margins due to a variety of factors including
product mix, store size and occupancy costs, labor costs, retail pricing and fixed versus variable
expenses. If the Registrant’s sales were to shift toward products or geographic regions that are
significantly different than the Registrant’s plans, it could have an effect, either positively or
negatively, on the Registrant’s expected profitability.
(v) Risk: that weakening foreign currencies may negatively affect the Registrant’s sales and
profitability.
The Registrant operates retail stores in various countries outside of the U.S. and, as a result,
is exposed to market risk from fluctuations in foreign currency exchange rates. In 2011, sales in
countries outside of the U.S. in aggregate represented more than half of the Registrant’s net sales
and earnings from operations, of which Japan represented 17% of the Registrant’s net sales and
26% of the Registrant’s earnings from operations. In order to maintain its worldwide relative
pricing structure, a substantial weakening of foreign currencies against the U.S. dollar would
require the Registrant to raise its retail prices or reduce its profit margins in various locations
outside of the U.S. Consumers in those markets may not accept significant price increases on the
Registrant’s goods; thus, there is a risk that a substantial weakening of foreign currencies will
result in reduced sales and profitability.
The results of the operations of the Registrant’s international subsidiaries are exposed to
foreign exchange rate fluctuations as the financial results of the applicable subsidiaries are
translated from the local currency into U.S. dollars during the process of financial statement
consolidation. If the U.S. dollar strengthens against foreign currencies, the translation of these
foreign currency denominated transactions will decrease consolidated net sales and profitability.
In addition, a weakening in foreign currency exchange rates may create disincentives to, or
changes in the pattern, practice or frequency of tourist travel to the various regions where the
Registrant operates retail stores which could adversely affect the Registrant’s net sales and
profitability.
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(vi) Risk: that volatile global economic conditions may have a material adverse effect on the
Registrant’s liquidity and capital resources.
The global economy and the credit and equity markets have undergone significant
disruption in recent years. Any prolonged economic weakness could have an adverse effect on the
Registrant’s cost of borrowing, could diminish its ability to service or maintain existing financing
and could make it more difficult for the Registrant to obtain additional financing or to refinance
existing long-term obligations.
Any significant deterioration in the stock market could negatively affect the valuation of
pension plan assets and result in increased minimum funding requirements.
(vii) Risk: that the Registrant will be unable to continue to offer merchandise designed by
Elsa Peretti.
Merchandise designed by Ms. Peretti accounted for 10% of 2011 net sales. Tiffany has an
exclusive long-standing license arrangement with Ms. Peretti to sell her designs and use her
trademarks; this arrangement is subject to royalty payments as well as other requirements. This
license may be terminated by Tiffany or Ms. Peretti on six months notice, even in the case where
no default has occurred. Also, no agreement has been made for the continued sale of the designs
or use of the trademarks ELSA PERETTI following the death or disability of Ms. Peretti, who is now
71 years of age. Loss of this license would have a material adverse effect on the Registrant’s
business through lost sales and profits.
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(viii) Risk: that changes in costs of diamonds and precious metals or reduced supply availability
may adversely affect the Registrant’s ability to produce and sell products at desired profit margins.
Most of the Registrant’s jewelry and non-jewelry offerings are made with diamonds,
gemstones and/or precious metals. Presently, the Registrant purchases a significant portion of the
world’s rough and polished white diamonds that meet the Registrant’s quality standards. Acquiring
diamonds is difficult because of supply limitations and Tiffany may not be able to maintain a
comprehensive selection of diamonds in each retail location due to the broad assortment of sizes,
colors, clarity grades and cuts demanded by customers. A significant change in the costs or
supply of these commodities could adversely affect the Registrant’s business, which is vulnerable
to the risks inherent in the trade for such commodities. A substantial increase or decrease in the
cost or supply of raw materials and/or high-quality rough and polished diamonds within the quality
grades, colors and sizes that customers demand could affect, negatively or positively, customer
demand, sales and gross profit margins.
If trade relationships between the Registrant and one or more of its significant vendors were
disrupted, the Registrant’s sales could be adversely affected in the short-term until alternative
supply arrangements could be established.
(ix) Risk: that the Registrant will be unable to lease sufficient space for its retail stores in prime
locations.
The Registrant, positioned as a luxury goods retailer, has established its retail presence in
choice store locations. If the Registrant cannot secure and retain locations on suitable terms in
prime and desired luxury shopping locations, its expansion plans, sales and profits will be
jeopardized.
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In Japan, many of the retail locations are within department stores. TIFFANY & CO. stores
located in department stores in Japan represented 79% of net sales in Japan and 13% of
consolidated net sales in 2011. In recent years, the Japanese department store industry has, in
general, suffered declining sales and there is a risk that such financial difficulties will force further
consolidations or store closings. Should one or more Japanese department store operators elect
or be required to close one or more stores now housing a TIFFANY & CO. store, the Registrant’s
sales and profits would be reduced while alternative premises were being obtained. The
Registrant’s commercial relationships with department stores in Japan, and their abilities to
continue as leading department store operators, have been and will continue to be substantial
factors affecting the Registrant’s business in Japan.
(x) Risk: that the value of the TIFFANY & CO. trademark will decline due to the sale of counterfeit
merchandise by infringers.
The TIFFANY & CO. trademark is an asset which is essential to the competitiveness and
success of the Registrant’s business and the Registrant takes appropriate action to protect it.
Tiffany actively pursues those who produce or sell counterfeit TIFFANY & CO. goods through civil
action and cooperation with criminal law enforcement agencies. However, the Registrant’s
enforcement actions have not stopped the imitation and counterfeit of the Registrant’s
merchandise or the infringement of the trademark, and counterfeit TIFFANY & CO. goods remain
available in many markets. In recent years, there has been an increase in the availability of
counterfeit goods, predominantly silver jewelry, in various markets by street vendors and small
retailers, as well as on the Internet. The continued sale of counterfeit merchandise could have an
adverse effect on the TIFFANY & CO. brand by undermining Tiffany’s reputation for quality goods
and making such goods appear less desirable to consumers of luxury goods. Damage to the
Brand would result in lost sales and profits.
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(xi) Risk: that the Registrant’s business is dependent upon the distinctive appeal of the TIFFANY &
CO. brand.
The TIFFANY & CO. brand’s association with quality, luxury and exclusivity is integral to the
success of the Registrant’s business. The Registrant’s expansion plans for retail and direct selling
operations and merchandise development, production and management support the Brand’s
appeal. Consequently, poor maintenance, promotion and positioning of the TIFFANY & CO. brand,
as well as market over-saturation, may adversely affect the business by diminishing the distinctive
appeal of the TIFFANY & CO. brand and tarnishing its image. This would result in lower sales and
profits.
(xii) Risk: that a significant privacy breach of the Registrant’s information systems could affect the
Registrant’s business.
The protection of customer, employee and company data is important to the Registrant.
The Registrant’s customers expect that their personal information will be adequately protected. In
addition, the regulatory environment surrounding information security and privacy is becoming
increasingly demanding, with evolving requirements in the various jurisdictions in which the
Registrant’s subsidiaries do business. A significant breach of customer, employee or company
data could damage the Registrant’s reputation, brand and relationship with customers and could
result in lost sales, fines and lawsuits.
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(xiii) Risk: that the loss, or a prolonged disruption in the operation, of the Registrant’s centralized
distribution centers could adversely affect the Registrant’s business and operations.
The Registrant maintains two separate distribution centers in close proximity to one
another in New Jersey. Both are dedicated to warehousing merchandise, store replenishment and
processing direct-to-customer orders. Although the Registrant believes that it has appropriate
contingency plans, unforeseen disruptions impacting one or both locations for a prolonged period
of time may result in delays in the delivery of merchandise to stores or in fulfilling customer orders.
Item 1B. Unresolved Staff Comments.
NONE
Item 2.
Properties.
The Registrant leases its various store premises (other than the New York Flagship store) under
arrangements that generally range from three to 10 years. The following table provides information
on the number of locations and square footage of Company-operated TIFFANY & CO. stores as of
January 31, 2012:
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Total Stores
Total Gross
Retail Square
Footage
Gross Retail
Square
Footage Range
Average Gross
Retail Square
Footage
Americas:
New York Flagship
Other stores
Asia-Pacific
Japan:
Tokyo Ginza
Other stores
Europe:
London Old Bond Street
Other stores
Total
1
101
58
1
54
1
31
247
45,500
45,500
615,200 1,000 – 17,600
700 – 12,800
150,600
12,000
131,600
12,000
600 – 7,500
22,400
89,400
1,066,700
22,400
600 – 7,100
600 – 45,500
45,500
6,100
2,600
12,000
2,400
22,400
2,900
4,300
In the Americas, Tiffany’s U.S. stores over the years have evolved toward smaller-sized formats, as
a result of more effective use of space, visual merchandising, and inventory replenishment. New
stores opened in 2011 ranged from 2,900 – 3,500 gross square feet, and management currently
expects that new U.S. stores to be opened in 2012 and beyond will likely be in that approximate
size range. In addition, management currently does not anticipate any meaningful change in future
store sizes or formats for locations outside the U.S.
NEW YORK FLAGSHIP STORE
The Company owns the building housing the New York Flagship store at 727 Fifth Avenue, which
was designed to be a retail store for Tiffany and is well located for this function. Currently,
approximately 45,500 gross square feet of this 124,000 square foot building are devoted to retail
TIFFANY & CO.
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sales, with the balance devoted to administrative offices, certain product services, jewelry
manufacturing and storage. Tiffany’s New York Flagship store is the focal point for marketing and
public relations efforts. Retail sales in the New York Flagship store represented 8%, 8% and 9% of
consolidated worldwide net sales in 2011, 2010 and 2009.
TOKYO GINZA STORE
The Company leases 12,000 gross square feet of a multi-tenant building housing the TIFFANY &
CO. store in Tokyo’s Ginza shopping district. The 25-year lease expires in 2032; however, the
Company has options to terminate the lease in 2022 and 2027 without penalty.
LONDON OLD BOND STREET STORE
The Company leases a 22,400 gross square feet store on London’s Old Bond Street. The 15-year
lease expires in 2022, and has two 10-year renewal options.
RETAIL SERVICE CENTER
The Company’s Retail Service Center (“RSC”), located in Parsippany, New Jersey, comprises
approximately 370,000 square feet. Approximately half of the building is devoted to office and
computer operations and half to warehousing, shipping, receiving, light manufacturing,
merchandise processing and other distribution functions. The RSC receives merchandise and
replenishes retail stores. Tiffany has a 20-year lease which expires in 2025 and has two 10-year
renewal options. The Registrant believes that the RSC has been properly designed to handle
worldwide distribution functions and that it is suitable for that purpose.
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CUSTOMER FULFILLMENT CENTER
The Company owns the Customer Fulfillment Center (“CFC”) in Whippany, New Jersey and leases
the land on which the facility resides. The CFC is approximately 266,000 square feet and is
primarily used for warehousing merchandise and processing direct-to-customer orders. The lease
expires in 2032 and the Company has the right to renew the lease for an additional 20-year term.
MANUFACTURING FACILITIES
Tiffany owns and operates jewelry manufacturing facilities in Cumberland, Rhode Island, Mount
Vernon, New York and Lexington, Kentucky and leases a manufacturing facility in Pelham, New
York. The lease expires in 2023. The facilities total approximately 194,600 square feet.
The Company leases facilities in Belgium, South Africa and Mauritius and owns the facilities in
Botswana, Namibia and Vietnam that sort, cut and/or polish rough diamonds for use by Tiffany. In
addition, the land on which the Namibia and Vietnam facilities reside is leased. These facilities total
approximately 144,000 square feet and the lease expiration dates range from 2012 to 2051.
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Item 3.
Legal Proceedings.
On June 24, 2011, The Swatch Group Ltd. (“Swatch”) and its wholly-owned subsidiary Tiffany
Watch Co. (“Watch Company”; Swatch and Watch Company, together, the “Swatch Parties”),
initiated an arbitration proceeding against the Registrant and its wholly-owned subsidiaries Tiffany
and Company and Tiffany (NJ) Inc. (the Registrant and such subsidiaries, together, the “Tiffany
Parties”) seeking damages for alleged contractual breach of agreements entered into by and
among the Swatch Parties and the Tiffany Parties that came into effect in December of 2007 (the
“License and Distribution Agreements”). The License and Distribution Agreements pertain to the
development and commercialization of a watch business and, among other things, contained
various licensing and governance provisions and approval requirements relating to business,
marketing and branding plans and provisions allocating profits relating to sales of the watch
business between the Swatch Parties and the Tiffany Parties.
The Swatch Parties and the Tiffany Parties have agreed that all claims and counterclaims between
and among them under the License and Distribution Agreements will be determined through a
confidential arbitration (the “Arbitration”). The Arbitration is pending before a three-member arbitral
panel convened pursuant to the Arbitration Rules of the Netherlands Arbitration Institute in the
Netherlands.
On September 12, 2011, the Swatch Parties publicly issued a Notice of Termination purporting to
terminate the License and Distribution Agreements due to alleged material breach by the Tiffany
Parties.
On December 23, 2011, the Swatch Parties filed a Statement of Claim in the Arbitration providing
additional detail with regard to the allegations by the Swatch Parties and setting forth their
damage claims. In general terms, the Swatch Parties allege that the Tiffany Parties have breached
the License and Development Agreements by obstructing and delaying development of Watch
Company’s business. The Swatch Parties seek damages based on alternate theories ranging from
CHF 73,000,000 (or approximately $79,000,000 at January 31, 2012) (based on its alleged wasted
investment) to CHF 3,800,000,000 (or approximately $4,100,000,000 at January 31, 2012)
(calculated based on alleged future lost profits of the Swatch Parties and their affiliates).
The Registrant believes the claim is without merit and intends to defend vigorously the Arbitration
and (together with the remaining Tiffany Parties) has filed a Statement of Defense and
Counterclaim on March 9, 2012. As detailed in the filing, the Tiffany Parties dispute both the merits
of the Swatch Parties’ claims and the calculation of the alleged damages. The Tiffany Parties have
also asserted counterclaims for damages attributable to breach by the Swatch Parties and for
termination due to such breach. In general terms, the Tiffany Parties allege that the Swatch Parties
have failed to provide appropriate management, distribution, marketing and other resources for
TIFFANY & CO. brand watches and to honor their contractual obligations to the Tiffany Parties
regarding brand management. The Tiffany Parties’ counterclaims seek damages based on
alternate theories ranging from CHF 120,000,000 (or approximately $131,000,000 at January 31,
2012) (based on its wasted investment) to approximately CHF 540,000,000 (or approximately
$588,000,000 at January 31, 2012) (calculated based on future lost profits of the Tiffany Parties).
The arbitration hearing is currently expected in October 2012.
Management has not included any accrual in the consolidated financial statements for the year
ended January 31, 2012 related to the Arbitration as a result of its assessment that an award of
damages to the Swatch Parties in the Arbitration is not probable. If the Swatch Parties’ claims
were accepted on their merits, the damages award cannot be reasonably estimated at this time
TIFFANY & CO.
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but could have a material adverse effect on the Registrant’s consolidated financial statements or
liquidity.
If, as requested by both parties, the Arbitration tribunal determines that the License and
Distribution Agreements were properly terminated by one or other party, the Tiffany Parties will
need to find a new manufacturer for TIFFANY & CO. brand watches and the Swatch Parties will no
longer be responsible for distributing such watches to third-party distributors. Royalties payable to
the Tiffany Parties by Watch Company under the License and Distribution Agreements have not
been significant in any year. Watches manufactured by Watch Company and sold in TIFFANY &
CO. stores constituted 1% of net sales in 2011, 2010 and 2009.
In addition, the Registrant and Tiffany are from time to time involved in routine litigation incidental
to the conduct of Tiffany's business, including proceedings to protect its trademark rights,
litigation with parties claiming infringement of patents and other intellectual property rights by
Tiffany, litigation instituted by persons alleged to have been injured upon premises within the
Registrant's control and litigation with present and former employees and customers. Although
litigation with present and former employees is routine and incidental to the conduct of Tiffany's
business, as well as for any business employing significant numbers of employees, such litigation
can result in large monetary awards when a civil jury is allowed to determine compensatory and/or
punitive damages for actions claiming discrimination on the basis of age, gender, race, religion,
disability or other legally-protected characteristic or for termination of employment that is wrongful
or in violation of implied contracts. However, the Registrant believes that litigation currently
pending to which it or Tiffany is a party or to which its properties are subject will be resolved
without any material adverse effect on the Registrant’s financial position, earnings or cash flows.
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Item 4. Mine Safety Disclosures.
Not Applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
The Registrant's Common Stock is traded on the New York Stock Exchange. In consolidated
trading, the high and low selling prices per share for shares of such Common Stock for 2011 were:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$ 69.72
$ 84.49
$ 80.99
$ 79.00
Low
$ 54.58
$ 66.48
$ 56.21
$ 58.61
On March 20, 2012, the high and low selling prices quoted on such exchange were $74.20 and
$71.87. On March 20, 2012, there were 14,449 holders of record of the Registrant's Common
Stock.
In consolidated trading, the high and low selling prices per share for shares of such Common
Stock for 2010 were:
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First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$ 52.19
$ 49.74
$ 53.00
$ 65.76
Low
$ 38.89
$ 35.81
$ 39.43
$ 52.96
It is the Registrant’s policy to pay a quarterly dividend on the Registrant’s Common Stock, subject
to declaration by the Registrant’s Board of Directors. On January 21, 2010, the Registrant
announced an 18% increase in its regular quarterly dividend rate to a new rate of $0.20 per share
of Common Stock which was paid on April 12, 2010. On May 20, 2010, the Registrant announced
a 25% increase in its regular quarterly dividend rate to a new rate of $0.25 per share of Common
Stock which was paid on July 12, 2010, October 11, 2010 and January 10, 2011.
In 2011, a dividend of $0.25 per share of Common Stock was paid on April 11, 2011. On May 19,
2011, the Registrant announced a 16% increase in its regular quarterly dividend rate to a new rate
of $0.29 per share of Common Stock which was paid on July 11, 2011, October 11, 2011 and
January 10, 2012.
In calculating the aggregate market value of the voting stock held by non-affiliates of the
Registrant shown on the cover page of this Annual Report on Form 10-K, 6,139,699 shares of the
Registrant's Common Stock beneficially owned by the executive officers and directors of the
Registrant (exclusive of shares which may be acquired on exercise of employee stock options)
were excluded, on the assumption that certain of those persons could be considered “affiliates”
under the provisions of Rule 405 promulgated under the Securities Act of 1933.
The following table contains the Company’s repurchases of equity securities in the fourth quarter
of 2011:
Issuer Purchases of Equity Securities
Period
(a) Total Number of
Shares (or Units)
Purchased
(b) Average
Price Paid per
Share (or Unit)
(c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
(d) Maximum Number
(or Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs
November 1, 2011 to
November 30, 2011
December 1, 2011 to
December 31, 2011
January 1, 2012 to
January 31, 2012
112,844
$ 75.64
112,844
$244,670,000
351,626
$ 65.30
351,626
$221,710,000
60,422
$ 63.04
60,422
$217,901,000
TOTAL
524,892
$ 67.26
524,892
$217,901,000
In January 2011, the Company’s Board of Directors approved a new stock repurchase program
(“2011 Program”) and terminated the previously existing program. The 2011 Program authorizes
the Company to repurchase up to $400,000,000 of its Common Stock through open market or
private transactions. The 2011 Program expires on January 31, 2013.
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Item 6.
Selected Financial Data.
The following table sets forth selected financial data, certain of which have been derived from the
Company’s consolidated financial statements for fiscal years 2007-2011:
(in thousands, except per share amounts,
percentages, ratios, retail locations and employees)
2011
2010
2009
2008
2007
EARNINGS DATA
Net sales
Gross profit
$ 3,642,937 $ 3,085,290 $ 2,709,704 $ 2,848,859 $ 2,927,751
2,151,154
1,822,278
1,530,219
1,646,442
1,651,501
Selling, general & administrative expenses
1,442,728
1,227,497
1,089,727
1,153,944
1,169,108
Net earnings from continuing operations
Net earnings
Net earnings from continuing operations
per diluted share
Net earnings per diluted share
Weighted-average number of diluted
439,190
439,190
368,403
368,403
265,676
264,823
232,155
220,022
369,999
323,478
3.40
3.40
2.87
2.87
2.12
2.11
1.84
1.74
2.68
2.34
common shares
129,083
128,406
125,383
126,410
138,140
BALANCE SHEET AND CASH FLOW DATA
Total assets
$ 4,158,992 $ 3,735,669 $ 3,488,360 $ 3,102,283 $ 3,000,904
Cash and cash equivalents
433,954
681,591
785,702
160,445
246,654
Inventories, net
2,073,212
1,625,302
1,427,855
1,601,236
1,372,397
Short-term borrowings and long-term
debt (including current portion)
712,147
688,240
754,049
708,804
453,137
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Stockholders’ equity
Working capital
Cash flows from operating activities
Capital expenditures
Stockholders’ equity per share
Cash dividends paid per share
RATIO ANALYSIS AND OTHER DATA
As a percentage of net sales:
2,348,905
2,177,475
1,883,239
1,588,371
1,716,115
2,262,998
2,204,632
1,845,393
1,446,812
1,337,454
210,606
239,443
18.54
1.12
298,925
127,002
17.15
0.95
687,199
75,403
14.91
0.68
142,270
154,409
12.83
0.66
406,055
184,266
13.54
0.52
Gross profit
59.0%
59.1%
56.5%
57.8%
56.4%
Selling, general & administrative
expenses
Net earnings from continuing operations
Net earnings
Capital expenditures
Return on average assets
Return on average stockholders’ equity
Total debt-to-equity ratio
Dividends as a percentage of net earnings
Company-operated TIFFANY & CO. stores
Number of employees
39.6%
12.1%
12.1%
6.6%
11.1%
19.4%
30.3%
32.5%
247
9,800
39.8%
11.9%
11.9%
4.1%
10.2%
18.1%
31.6%
32.7%
233
9,200
40.2%
40.5%
9.8%
9.8%
2.8%
8.0%
15.3%
40.0%
31.9%
220
8,400
8.1%
7.7%
5.4%
7.2%
13.3%
44.6%
37.4%
206
9,000
39.9%
12.6%
11.0%
6.3%
11.0%
18.1%
26.4%
21.6%
184
8,800
All references to years relate to fiscal years that end on January 31 of the following calendar year.
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NOTES TO SELECTED FINANCIAL DATA
Financial information for 2011 includes $42,719,000 of net pre-tax expense ($25,994,000 net after-tax
expense, or $0.20 per diluted share after tax) associated with the relocation of the New York headquarters
staff to a single location. This expense is primarily related to the fair value of the remaining non-cancelable
lease obligations reduced by the estimated sublease rental income as well as the acceleration of the useful
lives of certain property and equipment, incremental rent during the transition period and lease termination
payments.
Financial information for 2010 includes the following amounts, totaling $17,635,000 of net pre-tax expense
($7,672,000 net after-tax expense, or $0.06 per diluted share after tax):
(cid:120)
(cid:120)
$17,635,000 pre-tax expense associated with the relocation of the New York headquarters staff to a
single location. This expense is primarily related to the acceleration of the useful lives of certain
property and equipment and incremental rent during the transition period; and
$3,096,000 net income tax benefit primarily due to a change in the tax status of certain subsidiaries
associated with the acquisition in 2009 of additional equity interests in diamond sourcing and
polishing operations.
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Financial information for 2009 includes the following amounts, totaling $442,000 of net pre-tax income
($10,456,000 net after-tax income, or $0.08 per diluted share after tax):
(cid:120)
(cid:120)
(cid:120)
$4,000,000 pre-tax expense related to the termination of a third-party management agreement;
$4,442,000 pre-tax income in connection with the assignment to an unrelated third party of the
Tahera Diamond Corporation (“Tahera”) note receivable previously impaired in 2007; and
$11,220,000 income tax benefit associated with the settlement of certain tax audits and the
expiration of statutory periods.
Financial information for 2008 includes the following amounts, totaling $121,143,000 of net pre-tax expense
($74,241,000 net after-tax expense, or $0.59 per diluted share after tax):
(cid:120)
(cid:120)
(cid:120)
(cid:120)
$97,839,000 pre-tax expense related to staffing reductions;
$12,373,000 pre-tax impairment charge related to an investment in a mining and exploration
company operating in Sierra Leone;
$7,549,000 pre-tax charge due to the closing of IRIDESSE stores, included within discontinued
operations; and
$3,382,000 pre-tax charge for the closing of a diamond polishing facility in Yellowknife, Northwest
Territories.
Financial information for 2007 includes the following amounts, totaling $41,934,000 of net pre-tax expense
($12,667,000 net after-tax expense, or $0.09 per diluted share after tax):
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
$105,051,000 pre-tax gain related to the sale of the land and multi-tenant building housing a
TIFFANY & CO. store in Tokyo’s Ginza shopping district;
$10,000,000 pre-tax contribution to The Tiffany & Co. Foundation funded with the proceeds from the
Tokyo store transaction;
$54,260,000 pre-tax expense due to the sale of Little Switzerland, Inc., included within discontinued
operations;
$47,981,000 pre-tax impairment charge on the note receivable from Tahera;
$19,212,000 pre-tax charge related to management’s decision to discontinue certain watch models
as a result of the Company entering into an agreement with The Swatch Group, Ltd.; and
$15,532,000 pre-tax charge due to impairment losses associated with the Company’s IRIDESSE
stores, included within discontinued operations.
TIFFANY & CO.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.
The following discussion and analysis should be read in conjunction with the Company’s
consolidated financial statements and related notes. All references to years relate to fiscal years
that end on January 31 of the following calendar year.
The Company’s key strategies are:
KEY STRATEGIES
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(cid:120)
To selectively expand its global distribution without compromising the value of the TIFFANY
& CO. trademark (the “Brand”).
Management employs a multi-channel distribution strategy. Management intends to
expand distribution by adding stores in both new and existing markets, and by launching
e-commerce websites in new markets. Management recognizes that over-saturation of any
market could diminish the distinctive appeal of the Brand, but believes that there are a
significant number of potential worldwide locations remaining that meet the requirements of
the Brand.
(cid:120)
To enhance customer awareness.
The Brand is the single most important asset of the Company. Management will continue to
invest in marketing and public relations programs designed to increase new and existing
customer awareness of the Brand and its message, and will continue to monitor the
strength of the Brand through market research.
(cid:120)
To increase store productivity.
The Company is committed to growing sales per square foot by increasing consumer
traffic, and the percentage of store visitors who make a purchase, through targeted
advertising, ongoing sales training and customer-focused initiatives. In addition, in recent
years, the Company has opened smaller size stores in the United States which are more
comparable to many non-U.S. stores and which have contributed to higher store
productivity.
(cid:120)
To achieve improved operating margins.
Management’s long-term objective is to improve operating margin through greater
efficiencies in product sourcing, manufacturing and distribution as well as by controlling
selling, general and administrative expenses and enhancing productivity so that sales
growth can generate a higher rate of earnings growth.
(cid:120)
To maintain an active product development program.
The Company continues to invest in product development in order to introduce new design
collections and expand existing lines.
TIFFANY & CO.
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(cid:120)
To maintain substantial control over product supply through direct diamond sourcing and
internal jewelry manufacturing.
The Company’s diamond processing operations purchase, sort, cut and/or polish rough
diamonds for use in Company merchandise. The Company will continue to seek additional
sources of diamonds which, combined with its internal manufacturing operations, are
intended to secure adequate product supplies and favorable costs.
(cid:120)
To provide superior customer service.
Maintaining the strength of the Brand requires that the Company make superior customer
service a top priority, which it achieves by employing highly qualified sales and customer
service professionals and enhancing ongoing training programs.
2011 SUMMARY
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(cid:120) Worldwide net sales increased 18% to $3,642,937,000, due to growth in all reportable
segments. Following a higher-than-expected 24% increase in worldwide net sales in the
first nine months of the year, sales increased 8% in the fourth quarter due to decelerated
rates of sales growth in most regions. On a constant-exchange-rate basis (see “Non-GAAP
Measures” below), worldwide net sales in 2011 increased 15% and comparable store sales
increased 13%.
(cid:120)
The Company added a net of 14 TIFFANY & CO. stores (six in the Americas, six in
Asia-Pacific, three in Europe and a net reduction of one in Japan).
(cid:120) Operating margin increased 0.1 percentage point. However, the Company recorded
charges (primarily within selling, general and administrative expenses) of $42,719,000 in
2011 and $17,635,000 during the prior year associated with Tiffany’s relocation of its New
York headquarters staff to a single location (see “Item 8. Financial Statements and
Supplementary Data – Note K. Commitments and Contingencies”). Excluding those
charges, operating margin increased 0.8 percentage point in 2011.
(cid:120) Net earnings increased 19% to $439,190,000, or $3.40 per diluted share. Excluding
nonrecurring items in 2011 and 2010 (see “Item 6. Selected Financial Data – Notes to
Selected Financial Data” for a listing of those items) net earnings increased 24% to
$465,184,000, or $3.60 per diluted share.
(cid:120) Consistent with the Company’s strategy to maintain substantial control over its diamond
supply through direct diamond sourcing, a subsidiary of the Company entered into a
$50,000,000 amortizing term loan facility agreement with Koidu Holdings S.A. and in return
was granted the right to purchase diamonds meeting the Company’s quality standards
recovered from their kimberlite diamond mine in Sierra Leone (see “Item 8. Financial
Statements and Supplementary Data – Note K. Commitments and Contingencies”).
(cid:120)
In May 2011, the Board of Directors approved a 16% increase in the quarterly dividend on
the Company’s Common Stock increasing the annual dividend rate to $1.16 per share.
TIFFANY & CO.
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NON-GAAP MEASURES
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 years:
GAAP
Reported
Translation
Effect
2011
Constant-
Exchange-
Rate Basis
GAAP
Reported
Translation
Effect
2010
Constant-
Exchange-
Rate Basis
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Net Sales:
Worldwide
Americas
Asia-Pacific
Japan
Europe
Comparable Store Sales:
Worldwide
Americas
Asia-Pacific
Japan
Europe
16%
13
31
13
10
1
5
10
5
3%
—
4
9
4
18%
3%
15%
14%
2%
14
31
3
12
12
29
7
18
1
6
8
(5)
12%
11
23
(1)
23
15
36
13
17
13%
10%
2%
8%
13
27
4
6
9
19
4
13
1
5
8
(5)
8
14
(4)
18
TIFFANY & CO.
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RESULTS OF OPERATIONS
Net Sales
Net sales by segment were as follows:
(in thousands)
Americas
Asia-Pacific
Japan
Europe
Other
2011
2010
2011 vs. 2010
% Change
2010 vs. 2009
% Change
2009
$1,805,783
$ 1,574,571
$ 1,410,845
748,214
616,505
421,141
549,197
546,537
360,831
426,296
512,989
306,321
51,294
$ 3,642,937
54,154
$ 3,085,290
53,253
$ 2,709,704
15%
36
13
17
(5)
18%
12%
29
7
18
2
14%
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Comparable Store Sales. Reference will be made to comparable store sales below. Comparable
store sales include only sales transacted in Company-operated stores. A store’s sales are included
in comparable store sales when the store has been open for more than 12 months. In markets
other than Japan, sales for relocated stores are included in comparable store sales if the relocation
occurs within the same geographic market. In Japan, sales for a new store are not included if the
store was relocated from one department store to another or from a department store to a free-
standing location. In all markets, the results of a store in which the square footage has been
expanded or reduced remain in the comparable store base.
Americas. Americas includes sales in TIFFANY & CO. stores in the United States, Canada and
Latin America, as well as sales of TIFFANY & CO. products in certain of those markets through
business-to-business, Internet, catalog and wholesale operations. Americas represented 50%,
51% and 52% of worldwide net sales in 2011, 2010 and 2009, of which the New York Flagship
store represented 8%, 8% and 9% of worldwide net sales.
In 2011, total sales in the Americas increased $231,212,000, or 15%, primarily due to an increase
in the average price per unit sold. There was an increase in sales in all jewelry product categories
with notable increases at the higher price points. Comparable store sales increased $175,179,000,
or 13%, consisting of increases in both New York Flagship store sales of 20% and comparable
branch store sales of 12%. Non-comparable store sales grew $47,743,000. On a constant-
exchange-rate basis, sales in the Americas increased 14%, and comparable store sales increased
13%. Combined Internet and catalog sales in the Americas increased $10,752,000, or 6%, due to
an increase in the average sales per order.
In 2010, total sales in the Americas increased $163,726,000, or 12%, primarily due to an increase
in the average price per unit sold. Comparable store sales increased $102,802,000, or 9%,
consisting of increases in both comparable branch store sales of 9% and New York Flagship store
sales of 6%. Non-comparable store sales grew $32,800,000. On a constant-exchange-rate basis,
sales in the Americas increased 11%, and comparable store sales increased 8%. Combined
Internet and catalog sales in the Americas increased $14,142,000, or 8%, due to an increase in the
average sales per order.
Asia-Pacific. Asia-Pacific includes sales in TIFFANY & CO. stores, as well as sales of TIFFANY &
CO. products in certain markets through Internet and wholesale operations. Asia-Pacific
represented 21%, 18% and 16% of worldwide net sales in 2011, 2010 and 2009.
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In 2011, total sales in Asia-Pacific increased $199,017,000, or 36%, due to similar increases in the
average price per unit sold and in the number of units sold. There was sales and unit growth in all
jewelry product categories. Comparable store sales increased $162,989,000, or 31%, and non-
comparable store sales increased $23,830,000. On a constant-exchange-rate basis, Asia-Pacific
sales increased 31% and comparable store sales increased 27% due to geographically broad-
based sales growth in most markets, especially in the greater China region.
In 2010, total sales in Asia-Pacific increased $122,901,000, or 29%, primarily due to an increase in
the average price per unit sold. This increase included a comparable store sales increase of
$77,353,000, or 19%, and non-comparable store sales growth of $40,722,000. On a constant-
exchange-rate basis, Asia-Pacific sales increased 23% and comparable store sales increased
14% due to geographically broad-based sales growth in most markets, especially in the greater
China region.
Japan. Japan includes sales in TIFFANY & CO. stores, as well as sales of TIFFANY & CO. products
through business-to-business, Internet and wholesale operations. Japan represented 17%, 18%
and 19% of worldwide net sales in 2011, 2010 and 2009.
In 2011, total sales in Japan increased $69,968,000, or 13%, due to an increase in the average
price per unit sold, which was partly offset by a decline in the number of units sold. Sales growth
was strong in both the designer jewelry and engagement jewelry & wedding bands categories.
Comparable store sales increased $67,717,000, or 13%. On a constant-exchange-rate basis,
Japan sales increased 3%, and comparable store sales increased 4%.
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In 2010, total sales in Japan increased $33,548,000, or 7%, due to an increase in the average price
per unit sold, which was partly offset by a decline in the number of units sold. Comparable store
sales increased $17,913,000, or 4%, and other non-retail store sales increased $11,599,000. On a
constant-exchange-rate basis, Japan sales decreased 1%, and comparable store sales decreased
4%.
Europe. Europe includes sales in TIFFANY & CO. stores, as well as sales of TIFFANY & CO.
products in certain markets through Internet and wholesale operations. Europe represented 12%,
12% and 11% of worldwide net sales in 2011, 2010 and 2009. The United Kingdom (“U.K.”)
represents approximately half of European sales.
In 2011, total sales in Europe increased $60,310,000, or 17%, due to similar increases in the
number of units sold and in the average price per unit sold. There was sales and unit growth in all
jewelry product categories with notable increases in the silver & gold category. Comparable store
sales increased $33,021,000, or 10%, and non-comparable store sales increased $20,274,000. On
a constant-exchange-rate basis, sales in Europe increased 12% and comparable store sales
increased 6% reflecting relatively stronger sales growth in Continental Europe than in the U.K.
In 2010, total sales in Europe increased $54,510,000, or 18%, primarily due to an increase in the
number of units sold. This included increased comparable store sales of $34,581,000, or 13%, and
non-comparable store sales growth of $19,779,000. On a constant-exchange-rate basis, sales
increased 23% and comparable store sales increased 18% due to geographically broad-based
sales growth.
Store Data. In 2011, the Company added a net of 14 stores: six in the Americas (three in the U.S.,
two in Canada and one in Brazil), six in Asia-Pacific (three in Korea, two in China and one in
Taiwan), three in Europe (one each in Germany, Italy and Switzerland) and a net reduction of one in
Japan.
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In 2010, the Company added a net of 13 stores: five in the Americas (all in the U.S.), seven in Asia-
Pacific (four in China and one each in Korea, Singapore and Taiwan), two in Europe (Spain and the
U.K.) and a net reduction of one in Japan.
Sales per gross square foot generated by all stores were approximately $3,000 in 2011, $2,600 in
2010 and $2,400 in 2009.
Other. Other consists of all non-reportable segments. Other consists primarily of wholesale sales
of TIFFANY & CO. merchandise to independent distributors for resale in certain emerging markets
(primarily in the Middle East and Russia) and wholesale sales of diamonds obtained through bulk
purchases that were subsequently deemed not suitable for the Company’s needs. In addition,
Other includes earnings received from third-party licensing agreements.
In 2011, Other sales decreased $2,860,000, or 5% due to lower wholesale sales of diamonds
partly offset by higher sales of TIFFANY & CO. merchandise to independent distributors in
emerging markets. In 2010, Other sales increased $901,000, or 2%, as increased wholesale sales
of TIFFANY & CO. merchandise to independent distributors was mostly offset by lower wholesale
sales of diamonds.
Gross Margin
Gross profit as a percentage of net sales
2011
59.0%
2010
2009
59.1%
56.5%
Gross margin (gross profit as a percentage of net sales) decreased by 0.1 percentage point in 2011
primarily due to higher product costs and changes in product mix toward higher-priced jewelry
that achieves a lower gross margin partly offset by sales leverage on fixed costs. Gross margin
increased by 2.6 percentage points in 2010 driven primarily by the recapture of higher product
costs through retail price increases, as well as manufacturing efficiencies.
Management periodically reviews and adjusts its retail prices when appropriate to address product
cost increases, specific market conditions and longer-term changes in foreign currencies/U.S.
dollar relationships. Among the market conditions that the Company addresses are consumer
demand for the product category involved, which may be influenced by consumer confidence, and
competitive pricing conditions. The Company uses derivative instruments to mitigate foreign
exchange and precious metal price exposures (see “Item 8. Financial Statements and
Supplementary Data – Note I. Hedging Instruments”). In 2011 and 2010 the Company increased
retail prices to address higher product costs and its strategy is to continue that approach as
appropriate in the future.
Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses as a percentage of net sales
2011
39.6%
2010
2009
39.8%
40.2%
SG&A expenses increased $215,231,000, or 18%, in 2011 and $137,770,000, or 13%, in 2010.
SG&A expenses in those years are not comparable due to several nonrecurring charges.
SG&A expenses in 2011 and 2010 included $42,506,000 and $16,625,000 of expenses associated
with Tiffany and Company’s (“Tiffany”) relocation of its New York headquarters staff to a single
location (see “Item 8. Financial Statements and Supplementary Data – Note K. Commitments and
Contingencies”).
TIFFANY & CO.
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SG&A expenses in 2009 included $442,000 of income (net) from the following nonrecurring items:
(cid:120)
(cid:120)
$4,442,000 of income received in connection with the assignment of the Tahera Diamond
Corporation (“Tahera”) commitments and liens to an unrelated third party (see “Item 8.
Financial Statements and Supplementary Data – Note K. Commitments and
Contingencies”); and
$4,000,000 charge to terminate a third-party management agreement (see “Item 8.
Financial Statements and Supplementary Data – Note C. Acquisitions and Dispositions”).
Excluding the nonrecurring items noted above, SG&A expenses in 2011, 2010 and 2009 would
have been $1,400,222,000, $1,210,872,000 and $1,090,169,000. The increase of $189,350,000, or
16%, in 2011 was largely due to increased labor and benefits costs of $57,672,000, increased
depreciation and store occupancy expenses of $56,657,000 due to new and existing stores, and
increased marketing expenses of $36,453,000. The increase of $120,703,000, or 11%, in 2010
was largely due to increased marketing expenses of $37,706,000, increased labor and benefits
costs of $30,323,000 and increased depreciation and store occupancy expenses of $28,704,000
due to new and existing stores. Excluding the nonrecurring items noted above, SG&A expenses as
a percentage of net sales would have been 38.4%, 39.2% and 40.2% in 2011, 2010 and 2009.
The Company’s SG&A expenses are largely fixed in nature. The improvement in SG&A expenses
excluding nonrecurring items as a percentage of net sales in 2011 reflected the leverage effect
from increased sales. Variable costs (which include items such as variable store rent, sales
commissions and fees paid to credit card companies) represent approximately one-fifth of total
SG&A expenses.
(in thousands)
2011
% of
Sales*
2010
% of
Sales*
2009
% of
Sales*
Earnings from Continuing Operations
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Earnings (losses) from continuing operations:
Americas
Asia-Pacific
Japan
Europe
$ 387,951 21.5% $ 340,331 21.6% $ 263,470
100,690
139,519
60,102
(8,767)
555,014
205,711 27.5
184,767 30.0
105,728 25.1
(10.2)
133,448
162,800
88,309
3,358
728,246
24.3
29.8
24.5
6.2
878,910
(5,247)
18.7%
23.6
27.2
19.6
(16.5)
(4.2)%
(127,765)
(3.5)% (115,830)
(3.8)%
—
(42,719)
—
(17,635)
(114,964)
4,442
(4,000)
Other
Unallocated corporate
expenses
Other operating income
Other operating expense
Earnings from continuing
operations
$ 708,426
19.4% $ 594,781
19.3% $ 440,492
16.3%
*Percentages represent earnings (losses) from continuing operations as a percentage of each segment’s net sales.
Earnings from continuing operations increased 19% in 2011. On a segment basis, the ratio of
earnings (losses) from continuing operations to each segment’s net sales in 2011 compared with
2010 was as follows:
(cid:120) Americas – the ratio decreased 0.1 percentage point primarily due to a decline in gross
margin that was offset by the leveraging of operating expenses;
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(cid:120) Asia-Pacific – the ratio increased 3.2 percentage points primarily due to the leveraging of
operating expenses as well as a decrease in marketing expenses resulting from a major
marketing and public relations event that was held in Beijing, China in 2010;
(cid:120)
Japan – the ratio increased 0.2 percentage point primarily due to an improvement in gross
margin partly offset by increased operating expenses;
(cid:120) Europe – the ratio increased 0.6 percentage point primarily due to an improvement in gross
margin partly offset by increased operating expenses; and
(cid:120) Other – the operating loss is primarily attributable to a valuation adjustment related to the
write-down of wholesale diamond inventory deemed not suitable for the Company’s needs
as well as increased spending in the latter part of 2011 for the development of the
emerging markets region.
Earnings from continuing operations increased 35% in 2010. On a segment basis, the ratio of
earnings (losses) from continuing operations to each segment’s net sales in 2010 compared with
2009 was as follows:
(cid:120) Americas – the ratio increased 2.9 percentage points primarily due to an increase in gross
margin, as well as the leveraging of operating expenses;
(cid:120) Asia-Pacific – the ratio increased 0.7 percentage point due to an increase in gross margin,
which was partly offset by an increase in marketing expenses associated with a major
marketing and public relations event held in Beijing, China;
(cid:120)
Japan – the ratio increased 2.6 percentage points primarily due to an increase in gross
margin, which was partly offset by an increase in marketing expenses;
(cid:120) Europe – the ratio increased 4.9 percentage points primarily due to the leveraging of
operating expenses, as well as an increase in gross margin; and
(cid:120) Other – the ratio improved 22.7 percentage points. The prior period operating loss included
a valuation adjustment related to the write-down of wholesale diamond inventory deemed
not suitable for the Company’s needs.
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 increased in 2011 and 2010 but decreased as a percentage of sales.
Other operating income in 2009 represents $4,442,000 of income received in connection with the
assignment of the Tahera commitments and liens to an unrelated third party (see “Item 8. Financial
Statements and Supplementary Data – Note K. Commitments and Contingencies”).
Other operating expense in 2011 and 2010 represents $42,719,000 and $17,635,000 related to
Tiffany’s relocation of its New York headquarters staff to a single location (see “Item 8. Financial
Statements and Supplementary Data – Note K. Commitments and Contingencies”). Other
operating expense in 2009 represents $4,000,000 paid to terminate a third-party management
agreement (see “Item 8. Financial Statements and Supplementary Data – Note C. Acquisitions and
Dispositions”).
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Interest Expense and Financing Costs
Interest expense and financing costs decreased $5,761,000, or 11%, in 2011 primarily due to
lower interest rates related to maturing debt that was replaced with new lower-rate borrowings.
Interest expense and financing costs decreased $706,000 in 2010.
Other Income, Net
Other income, net includes interest income, gains/losses on investment activities and foreign
currency transactions. Other income, net decreased $1,889,000 in 2011 and increased $2,465,000
in 2010 primarily due to changes in foreign currency gains/losses.
Provision for Income Taxes
The effective income tax rate was 34.0% in 2011, compared with 32.7% in 2010 and 31.9% in
2009. The tax rate for 2010 included a net income tax benefit of $3,096,000 primarily due to a
change in the tax status of certain subsidiaries associated with the acquisition in 2009 of
additional equity interests in diamond sourcing and polishing operations. The lower tax rate in
2009 was primarily due to favorable reserve adjustments of $11,220,000 during the year
associated with the settlement of certain tax audits and the expiration of statutory periods.
Net Loss from Discontinued Operations
In the fourth quarter of 2008, management committed to a plan to close all IRIDESSE stores. All
stores were closed in 2009. The results of the IRIDESSE business have been recorded in
discontinued operations. The pre-tax net loss from discontinued operations related to that
business was $6,103,000 in 2009 (see “Item 8. Financial Statements and Supplementary Data –
Note C. Acquisitions and Dispositions”).
The Company sold Little Switzerland, Inc. in 2007. In 2009, the Company received additional
proceeds of $3,650,000 and recorded a pre-tax gain of $3,289,000 in settlement of post-closing
adjustments (see “Item 8. Financial Statements and Supplementary Data – Note C. Acquisitions
and Dispositions”).
2012 Outlook
Management’s outlook is based on the following assumptions, which may or may not prove valid,
and which should be read in conjunction with “Item 1A. Risk Factors” on page K-14:
(cid:120) A worldwide net sales increase of approximately 10% for the full year, primarily driven by
sales growth in Asia-Pacific and the Americas.
(cid:120)
The opening of 24 (net) Company-operated stores (nine in the Americas, seven in Asia-
Pacific, three in Europe and commencing operation of five stores in emerging markets).
(cid:120) Operating margin approximately equal to 2011 (when excluding nonrecurring items
recorded in 2011), with an improved ratio of SG&A expenses to net sales offset by a
decline in gross margin.
(cid:120)
Interest and other expenses, net approximately equal to 2011.
(cid:120) An effective income tax rate of approximately 34% – 35%.
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(cid:120) Net earnings per diluted share of $3.95 – $4.05, representing a 16% – 19% increase over
2011, or a 10% – 13% increase when excluding the $0.20 of nonrecurring items in 2011,
with most of the year-over-year growth occurring in the latter part of the year.
(cid:120) An increase in net inventories of approximately 15%.
(cid:120) Capital expenditures of approximately $240,000,000.
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 initiatives. Management
regularly assesses its working capital needs, capital expenditure requirements, debt service,
dividend payouts, share repurchases and future investments. Management believes that cash on
hand, internally-generated cash flows and the funds available under its revolving credit facilities
are sufficient to support the Company’s liquidity and capital requirements for the foreseeable
future. From time to time, the Company may access the debt and capital markets to fund strategic
opportunities and for general corporate purposes.
As of January 31, 2012, the Company’s cash and cash equivalents totaled $433,954,000, of which
approximately half was held in locations outside the U.S. where the Company has the intention to
indefinitely reinvest any undistributed earnings. Such cash balances are not available to fund U.S.
cash requirements unless the Company were to decide to repatriate such funds. The Company
intends to use these funds to support its continued expansion and investments outside of the U.S.
The Company has sufficient sources of cash in the U.S. to fund its U.S. operations without the
need to repatriate any of those funds held outside the U.S.
The following table summarizes cash flows from operating, investing and financing activities:
(in thousands)
2011
2010
2009
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rates on cash and
cash equivalents
Net cash used in discontinued operations
Net (decrease) increase in cash and cash
$ 210,606
$ 298,925
(242,583)
(213,817)
(186,612)
(224,799)
$ 687,199
(80,893)
10,538
(1,843)
—
8,375
—
14,300
(5,887)
equivalents
$ (247,637)
$ (104,111)
$ 625,257
Operating Activities
The Company had net cash inflows from operating activities of $210,606,000 in 2011,
$298,925,000 in 2010 and $687,199,000 in 2009. The decrease in 2011 from 2010 primarily
resulted from an increase in inventories partly offset by increased net earnings and adjustments for
noncash items. The decrease in 2010 from 2009 primarily resulted from an increase in inventories.
TIFFANY & CO.
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Working Capital. Working capital (current assets less current liabilities) and the corresponding
current ratio (current assets divided by current liabilities) were $2,262,998,000 and 4.6 at January
31, 2012, compared with $2,204,632,000 and 5.6 at January 31, 2011.
Accounts receivable, less allowances, at January 31, 2012 were 1% lower than January 31, 2011,
reflecting a decline in receivables from independent wholesale distributors. On a 12-month rolling
basis, accounts receivable turnover was 20 times in 2011 and 18 times in 2010.
Inventories, net at January 31, 2012 were 28% higher than January 31, 2011 with finished goods
inventories increasing 16% and combined raw material and work-in-process inventories increasing
46%. The overall increase resulted from store openings, product introductions and expanded
assortments, and higher product and raw material acquisition costs. In addition, the increase in
raw material and work-in-process inventories reflected further vertical integration of the
Company’s diamond supply chain.
Investing Activities
The Company had net cash outflows from investing activities of $242,583,000 in 2011,
$186,612,000 in 2010 and $80,893,000 in 2009. The increased outflow in 2011 was primarily due
to higher capital expenditures and notes receivable funded which was partly offset by net
proceeds received from the sale of marketable securities and short-term investments. The
increased outflow in 2010 was primarily due to higher capital expenditures and purchases of
marketable securities and short-term investments.
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Capital Expenditures. Capital expenditures are typically related to the opening, renovation and
expansion of stores, distribution and manufacturing facilities and ongoing investments in new
systems. Capital expenditures were $239,443,000 in 2011, $127,002,000 in 2010 and $75,403,000
in 2009, representing 7%, 4% and 3% of net sales in those respective years. The increase in 2011
was primarily due to the relocation of the New York headquarters and an increased number of
store renovations. The increase in 2010 followed a moderated rate of store openings and other
cost containment in 2009.
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 received from
the sale of marketable securities and short term investments of $55,139,000 during 2011 and net
purchases of investments in marketable securities and short-term investments of $59,610,000 and
$13,433,000 during 2010 and 2009.
Notes Receivable Funded. The Company may, from time to time, extend loans to diamond mining
and exploration companies in order to obtain rights to purchase the mine’s output. In 2011, the
Company loaned $56,605,000 to various companies of which $50,000,000 was provided to Koidu
Holdings S.A. (see “Item 8. Financial Statements and Supplementary Data – Note K. Commitments
and Contingencies”).
Financing Activities
The Company had net cash outflows from financing activities of $213,817,000 in 2011 and
$224,799,000 in 2010 and a net cash inflow of $10,538,000 in 2009. Year-over-year changes in
cash flows from financing activities are largely driven by share repurchase activity, borrowings and
cash dividends on common stock.
Dividends. The cash dividend on the Company’s Common Stock was increased once in 2011,
twice in 2010 and did not change in 2009. The Company’s Board of Directors declared quarterly
TIFFANY & CO.
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dividends which, on an annual basis, totaled $1.12, $0.95 and $0.68 per common share in 2011,
2010 and 2009. Cash dividends paid were $142,840,000, $120,390,000 and $84,579,000 in 2011,
2010 and 2009. The dividend payout ratio (dividends as a percentage of net earnings) was 33%,
33% and 32% in 2011, 2010 and 2009.
Share Repurchases. In January 2008, the Company’s Board of Directors amended the existing
share repurchase program to extend the expiration date of the program to January 2011 and to
authorize the repurchase of up to an additional $500,000,000 of the Company’s Common Stock. In
January 2011, the Company’s Board of Directors approved a new stock repurchase program
(“2011 Program”) and terminated the previously existing program. The 2011 Program authorizes
the Company to repurchase up to $400,000,000 of its Common Stock through open market or
private transactions. The 2011 Program expires on January 31, 2013. The timing of repurchases
and the actual number of shares to be repurchased depend on a variety of discretionary factors
such as stock price, cash-flow forecasts and other market conditions.
The Company’s share repurchase activity was as follows:
(in thousands, except per share amounts)
Cost of repurchases
Shares repurchased and retired
Average cost per share
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$ 174,118
2,629
66.23
$
2010
80,786
1,843
43.83
$
$
2009
467
11
41.72
$
$
The Company suspended share repurchases during the third quarter of 2008 in order to conserve
cash. In January 2010, the Company resumed repurchasing its shares of Common Stock on the
open market. At January 31, 2012, there remained $217,901,000 of authorization for future
repurchases under the 2011 Program. At least annually, the Company’s Board of Directors reviews
its policies with respect to dividends and share repurchases with a view to actual and projected
earnings, cash flows and capital requirements.
Recent Borrowings. The Company had net repayments of or net proceeds from short-term and
long-term borrowings as follows:
(in thousands)
Short-term borrowings:
Proceeds from (repayment of) credit facility
borrowings, net
Proceeds from other credit facilities
Repayments of other credit facilities
Repayments of other short-term borrowings
Net proceeds from (repayments of) short-term
borrowings
Long-term borrowings:
Proceeds from issuance
Repayments
Net (repayments of) proceeds from long-term
borrowings
2011
2010
2009
$
13,548
$
9,170
$ (126,811)
61,020
(4,517)
–
–
–
–
–
–
(93,000)
70,051
9,170
(219,811)
–
118,430
(58,915)
(218,845)
300,000
(40,000)
(58,915)
(100,415)
260,000
Net proceeds from (repayments of) total borrowings
$
11,136
$ (91,245)
$
40,189
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In December 2011, the Company entered into a three-year $200,000,000 revolving credit facility
and a five-year $200,000,000 revolving credit facility (the “Credit Facilities”). Under the Credit
Facilities, borrowings may be made from 10 participating banks at interest rates based upon either
(i) local currency borrowing rates or (ii) the Federal Funds Rate plus 0.5%, whichever is higher, plus
a margin based on the Company’s leverage ratio. The Credit Facilities replaced the Company’s
previous $400,000,000 multi-bank revolving credit facility. Borrowings were at interest rates based
upon local currency borrowing rates plus a margin based on the Company’s leverage ratio.
In May 2011, the Company entered into a ¥4,000,000,000 ($49,240,000 at issuance) one-year
uncommitted credit facility. Borrowings may be made on one-, three- or 12-month terms bearing
interest at the LIBOR rate plus 0.25%, subject to bank approval.
In total, there was $112,973,000 outstanding and $389,159,000 available under all revolving credit
facilities at January 31, 2012. The weighted-average interest rate for the outstanding amount at
January 31, 2012 was 1.47%.
In 2010 and 2009, proceeds from long-term debt issuances and other short-term borrowings were
used to refinance existing indebtedness and for general corporate purposes. Long-term debt
issued in 2010 has a maturity date of 2016 at an interest rate of 1.72%. Long-term debt issued in
2009 has maturity dates that range from 2017 to 2019 at interest rates of 10.00%. See “Item 8.
Financial Statements and Supplementary Data – Note H. Debt” for additional details.
The ratio of total debt (short-term borrowings, current portion of long-term debt and long-term
debt) to stockholders’ equity was 30% and 32% at January 31, 2012 and 2011.
At January 31, 2012, the Company was in compliance with all debt covenants.
Purchase of Non-controlling Interests. In October 2009, the Company acquired all non-controlling
interests in two majority-owned entities that indirectly engage through majority-owned subsidiaries
in diamond sourcing and polishing operations in South Africa and Botswana, respectively, for total
consideration of $18,000,000, of which $11,000,000 was paid in 2009 and the remaining
$7,000,000 was paid during 2010.
Contractual Cash Obligations and Commercial Commitments
The following is a summary of the Company’s contractual cash obligations at January 31, 2012:
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(in thousands)
Unrecorded contractual obligations:
Operating leases
Inventory purchase obligations a
Interest on debt b
Other contractual obligations c
Recorded contractual obligations:
Short-term borrowings
Long-term debt
Total
2012 2013-2014 2015-2016 Thereafter
$1,425,498 $ 181,477 $ 320,026 $ 240,635 $ 683,360
–
31,847
–
–
71,784
1,106
383,317
43,142
35,205
441,760
229,382
41,458
58,443
82,609
5,147
112,973
599,174
112,973
60,822
–
–
–
238,352
–
300,000
$2,850,245 $ 816,936 $ 466,225 $ 551,877 $1,015,207
a)
The Company will, from time to time, secure supplies of diamonds by agreeing to purchase a defined portion of a
mine’s output. Inventory purchase obligations associated with these agreements have been estimated for 2012 and
included in this table. Purchases beyond 2012 that are contingent upon mine production have been excluded as
they cannot be reasonably estimated.
TIFFANY & CO.
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b) Excludes interest payments on amounts outstanding under available lines of credit, as the outstanding amounts
fluctuate based on the Company’s working capital needs.
c) Consists primarily of royalty commitments, construction-in-progress and packaging supplies.
The summary above does not include the following items:
(cid:120) Cash contributions to the Company’s pension plan and cash payments for other
postretirement obligations. The Company plans to contribute approximately $35,000,000 to
the pension plan in 2012. However, this expectation is subject to change if actual asset
performance is different than the assumed long-term rate of return on pension plan assets.
In addition, the Company estimates cash payments for postretirement health-care and life
insurance benefit obligations to be $2,461,000 in 2012.
(cid:120) Unrecognized tax benefits at January 31, 2012 of $25,509,000 and accrued interest and
penalties of $7,228,000. The final outcome of tax uncertainties is dependent upon various
matters including tax examinations, interpretation of the applicable tax laws or expiration of
statutes of limitations. The Company believes that its tax positions comply with applicable
tax law and that it has adequately provided for these matters. However, the audits may
result in proposed assessments where the ultimate resolution may result in the Company
owing additional taxes. Management anticipates that it is reasonably possible that the total
gross amount of unrecognized tax benefits will decrease by approximately $20,000,000 in
the next 12 months, a portion of which may affect the effective tax rate; however,
management does not currently anticipate a significant effect on net earnings. Future
developments may result in a change in this assessment.
The following is a summary of the Company’s outstanding borrowings and available capacity
under its credit facilities at January 31, 2012:
(in thousands)
Three-year revolving credit facility a
Five-year revolving credit facility b
Other credit facilities
Total
Capacity
200,000
200,000
102,132
502,132
Borrowings
Outstanding
$
3,380 $
25,824
83,769
$
112,973 $
Available
Capacity
196,620
174,176
18,363
389,159
$
$
a This facility matures in December 2014. The Company can request to increase the capacity up to $275,000,000.
b This facility matures in December 2016. The Company can request to increase the capacity up to $275,000,000.
In addition, the Company had letters of credit and financial guarantees of $27,880,000 at January
31, 2012, of which $17,849,000 expire within one year.
Seasonality
As a jeweler and specialty retailer, the Company’s business is seasonal in nature, with the fourth
quarter typically representing at least one-third of annual net sales and approximately one-half of
annual net earnings. Management expects such seasonality to continue.
CRITICAL ACCOUNTING ESTIMATES
The Company’s consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. These principles require
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management to make certain estimates and assumptions that affect amounts reported and
disclosed in the financial statements and related notes. Actual results could differ from those
estimates and the differences could be material. Periodically, the Company reviews all significant
estimates and assumptions affecting the financial statements and records any necessary
adjustments.
The development and selection of critical accounting estimates and the related disclosures below
have been reviewed with the Audit Committee of the Company’s Board of Directors. The following
critical accounting policies that rely on assumptions and estimates were used in the preparation of
the Company’s consolidated financial statements:
Inventory. The Company writes down its inventory for discontinued and slow-moving products.
This write-down is equal to the difference between the cost of inventory and its estimated market
value, and is based on assumptions about future demand and market conditions. If actual market
conditions are less favorable than those projected by management, additional inventory write-
downs might be required. The Company has not made any material changes in the accounting
methodology used to establish its reserve for discontinued and slow-moving products during the
past three years. At January 31, 2012, a 10% change in the reserve for discontinued and slow-
moving products would have resulted in a change of $5,394,000 in inventory and cost of sales.
The Company’s inventories are valued using the average cost method. Fluctuation in inventory
levels, along with raw material costs, could affect the carrying value of the Company’s inventory.
Long-lived assets. The Company’s long-lived assets are primarily property, plant and equipment.
The Company reviews its long-lived assets for impairment when management determines that the
carrying value of such assets may not be recoverable due to events or changes in circumstances.
Recoverability of long-lived assets is evaluated by comparing the carrying value of the asset with
estimated future undiscounted cash flows. If the comparisons indicate that the value of the asset
is not recoverable, an impairment loss is calculated as the difference between the carrying value
and the fair value of the asset and the loss is recognized during that period. The Company did not
record any material impairment charges in 2011, 2010 or 2009.
Goodwill. The Company performs its annual impairment evaluation of goodwill during the fourth
quarter of its fiscal year or when circumstances otherwise indicate an evaluation should be
performed. The evaluation, based upon discounted cash flows, requires management to estimate
future cash flows, growth rates and economic and market conditions. The 2011, 2010 and 2009
evaluations resulted in no impairment charges.
Income taxes. The Company is subject to income taxes in both the U.S. and foreign jurisdictions.
The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application
of complex tax laws and regulations in a multitude of jurisdictions across the Company’s global
operations. Significant judgments and estimates are required in determining the consolidated
income tax expense. The Company’s income tax expense, deferred tax assets and liabilities and
reserves for uncertain tax positions reflect management’s best assessment of estimated future
taxes to be paid.
Foreign and domestic tax authorities periodically audit the Company’s income tax returns. These
audits often examine and test the factual and legal basis for positions the Company has taken in
its tax filings with respect to its tax liabilities, including the timing and amount of deductions and
the allocation of income among various tax jurisdictions (“tax filing positions”). Management
believes that its tax filing positions are reasonable and legally supportable. However, in specific
cases, various tax authorities may take a contrary position. In evaluating the exposures associated
with the Company’s various tax filing positions, management records reserves using a more-likely-
TIFFANY & CO.
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than-not recognition threshold for income tax positions taken or expected to be taken. Earnings
could be affected to the extent the Company prevails in matters for which reserves have been
established or is required to pay amounts in excess of established reserves.
In evaluating the Company’s ability to recover its deferred tax assets within the jurisdiction from
which they arise, management considers all available evidence. The Company records valuation
allowances when management determines it is more likely than not that deferred tax assets will
not be realized in the future.
Employee benefit plans. The Company maintains several pension and retirement plans, as well as
provides certain postretirement health-care and life insurance benefits for retired employees. The
Company makes certain assumptions that affect the underlying estimates related to pension and
other postretirement costs. Significant changes in interest rates, the market value of securities and
projected health-care costs would require the Company to revise key assumptions and could
result in a higher or lower charge to earnings.
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The Company used discount rates of 6.00% to determine its 2011 pension expense for all U.S.
plans and 6.25% to determine its 2011 postretirement expense. Holding all other assumptions
constant, a 0.5% increase in the discount rate would have decreased 2011 pension and
postretirement expenses by $3,820,000 and $302,000. A decrease of 0.5% in the discount rate
would have increased the 2011 pension and postretirement expenses by $4,227,000 and
$537,000. The discount rate is subject to change each year, consistent with changes in the yield
on applicable high-quality, long-term corporate bonds. Management selects a discount rate at
which pension and postretirement benefits could be effectively settled based on (i) an analysis of
expected benefit payments attributable to current employment service and (ii) appropriate yields
related to such cash flows.
The Company used an expected long-term rate of return of 7.50% to determine its 2011 pension
expense. Holding all other assumptions constant, a 0.5% change in the long-term rate of return
would have changed the 2011 pension expense by $1,248,000. The expected long-term rate of
return on pension plan assets is selected by taking into account the average rate of return
expected on the funds invested or to be invested to provide for the benefits included in the
projected benefit obligation. More specifically, consideration is given to the expected rates of
return (including reinvestment asset return rates) based upon the plan’s current asset mix,
investment strategy and the historical performance of plan assets.
For postretirement benefit measurement purposes, 8.50% (for pre-age 65 retirees) and 7.00% (for
post-age 65 retirees) annual rates of increase in the per capita cost of covered health care were
assumed for 2012. The rates were assumed to decrease gradually to 4.75% by 2020 and remain at
that level thereafter. A one-percentage-point change in the assumed health-care cost trend rate
would not have a significant effect on the aggregate service and interest cost components of the
2011 postretirement expense.
NEW ACCOUNTING STANDARDS
See “Item 8. Financial Statements and Supplementary Data – Note B. Summary of Significant
Accounting Policies”.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.
TIFFANY & CO.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk from fluctuations in foreign currency exchange rates,
precious metal prices and interest rates, which could affect its consolidated financial position,
earnings and cash flows. The Company manages its exposure to market risk through its regular
operating and financing activities and, when deemed appropriate, through the use of derivative
financial instruments. The Company uses derivative financial instruments as risk management
tools and not for trading or speculative purposes, and does not maintain such instruments that
may expose the Company to significant market risk.
Foreign Currency Risk
The Company uses foreign exchange forward contracts or put option contracts to offset the
foreign currency exchange risks associated with foreign currency-denominated liabilities,
intercompany transactions and forecasted purchases of merchandise between entities with
differing functional currencies. The fair value of foreign exchange forward contracts and put option
contracts is sensitive to changes in foreign exchange rates. Gains or losses on foreign exchange
forward contracts substantially offset losses or gains on the liabilities and transactions being
hedged. For put option contracts, if the market exchange rate at the time of the put option
contract’s expiration is stronger than the contracted exchange rate, the Company allows the put
option contract to expire, limiting its loss to the cost of the put option contract. There were no
outstanding put option contracts as of January 31, 2012. The term of all outstanding foreign
exchange forward contracts as of January 31, 2012 ranged from less than one month to 13
months. At January 31, 2012 and 2011, the fair value of the Company’s outstanding foreign
exchange forward contracts were net liabilities of $3,545,000 and $1,626,000. At January 31,
2012, a 10% depreciation in the hedged foreign exchange rates from the prevailing market rates
would have resulted in a liability with a fair value of approximately $18,000,000.
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Precious Metal Price Risk
The Company periodically hedges a portion of its forecasted purchases of precious metals for use
in its internal manufacturing operations in order to minimize the effect of volatility in precious
metals prices. The Company may use either a combination of call and put option contracts in net-
zero-cost collar arrangements (“precious metal collars”) or forward contracts. For precious metal
collars, if the price of the precious metal at the time of the expiration of the precious metal collar is
within the call and put price, the precious metal collar expires at no cost to the Company. The
maximum term over which the Company is hedging its exposure to the variability of future cash
flows for all forecasted transactions is 12 months. At January 31, 2012 and 2011, the fair value of
the Company’s outstanding precious metal derivative instruments was a net liability of $313,000
and an asset of $753,000. At January 31, 2012, a 10% depreciation in precious metal prices from
the prevailing market rates would have resulted in a liability with a fair value of approximately
$7,500,000.
Interest Rate Risk
The Company uses interest rate swaps to convert certain fixed rate debt obligations to floating
rate obligations. Additionally, since the fair value of the Company’s fixed rate long-term debt is
sensitive to interest rate changes, the interest rate swaps serve as hedges to changes in the fair
value of these debt instruments. The Company hedges its exposure to changes in interest rates
over the remaining maturities of the debt agreements being hedged. At January 31, 2012 and
2011, the fair value of the outstanding interest rate swaps were assets of $406,000 and
$6,155,000. A 100 basis point increase in interest rates at January 31, 2012 would have resulted in
a fair value of the interest rate swaps of approximately $300,000.
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Item 8.
Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Tiffany & Co.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
earnings, of stockholders' equity and comprehensive earnings, and of cash flows present fairly, in all
material respects, the financial position of Tiffany & Co. and its subsidiaries (the "Company") at January 31,
2012 and 2011, and the results of their operations and their cash flows for each of the three years in the
period ended January 31, 2012 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing
under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of January 31, 2012,
based on criteria established in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is
responsible for these financial statements and financial statement schedule, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in Management's Report on Internal Control over Financial Reporting, appearing under
Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement
schedule, and on the Company's internal control over financial reporting based on our integrated audits. We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 28, 2012
TIFFANY & CO.
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CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, less allowances of $11,772 and $11,783
Inventories, net
Deferred income taxes
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Deferred income taxes
Other assets, net
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings
Current portion of long-term debt
Accounts payable and accrued liabilities
Income taxes payable
Merchandise and other customer credits
Total current liabilities
Long-term debt
Pension/postretirement benefit obligations
Deferred gains on sale-leasebacks
Other long-term liabilities
Commitments and contingencies
$
$
$
2012
January 31,
2011
$
$
$
433,954
8,236
184,085
2,073,212
83,124
107,064
2,889,675
767,174
271,156
230,987
4,158,992
112,973
60,822
328,962
60,977
62,943
626,677
538,352
338,564
119,692
186,802
681,591
59,280
185,969
1,625,302
41,826
90,577
2,684,545
665,588
202,902
182,634
3,735,669
38,891
60,855
258,611
55,691
65,865
479,913
588,494
217,435
124,980
147,372
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Stockholders’ equity:
Preferred Stock, $0.01 par value; authorized 2,000 shares,
none issued and outstanding
Common Stock, $0.01 par value; authorized 240,000 shares,
issued and outstanding 126,676 and 126,969
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Total stockholders’ equity
See notes to consolidated financial statements.
—
—
1,267
970,215
1,462,553
(85,130)
2,348,905
4,158,992
$
1,269
863,967
1,324,804
(12,565)
2,177,475
3,735,669
$
TIFFANY & CO.
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CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
2012
2011
2010
Years Ended January 31,
Net sales
Cost of sales
Gross profit
$ 3,642,937
$ 3,085,290 $ 2,709,704
1,491,783
1,263,012
1,179,485
2,151,154
1,822,278
1,530,219
Selling, general and administrative expenses
1,442,728
1,227,497
1,089,727
Earnings from continuing operations
708,426
594,781
440,492
Interest expense and financing costs
48,574
54,335
55,041
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Other income, net
5,099
6,988
4,523
Earnings from continuing operations before
income taxes
664,951
547,434
389,974
Provision for income taxes
225,761
179,031
124,298
Net earnings from continuing operations
439,190
368,403
265,676
Net loss from discontinued operations
—
—
(853)
Net earnings
Earnings per share:
Basic
$
439,190
$
368,403 $
264,823
Net earnings from continuing operations
Net loss from discontinued operations
Net earnings
Diluted
Net earnings from continuing operations
Net loss from discontinued operations
Net earnings
$
$
$
$
3.45
—
3.45
3.40
—
3.40
$
$
$
$
2.91 $
—
2.91 $
2.87 $
—
2.87 $
2.14
(0.01)
2.13
2.12
(0.01)
2.11
Weighted-average number of common shares:
Basic
Diluted
See notes to consolidated financial statements.
127,397
129,083
126,600
128,406
124,345
125,383
TIFFANY & CO.
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE EARNINGS
(in thousands)
Balances January 31, 2009
Exercise of stock options and vesting of restricted
stock units (“RSUs”)
Tax effect of exercise of stock options and
vesting of RSUs
Share-based compensation expense
Purchase and retirement of Common Stock
Purchase of non-controlling interests
Cash dividends on Common Stock
Deferred hedging gain, net of tax
Unrealized gain on marketable securities, net of tax
Foreign currency translation adjustments, net of tax
Net unrealized loss on benefit plans, net of tax
Net earnings
Balances, January 31, 2010
Exercise of stock options and vesting of RSUs
Tax effect of exercise of stock options and
vesting of RSUs
Share-based compensation expense
Issuance of Common Stock under Employee Profit
Sharing and Retirement Savings (“EPSRS”) Plan
Purchase and retirement of Common Stock
Cash dividends on Common Stock
Deferred hedging gain, net of tax
Unrealized gain on marketable securities, net of tax
Foreign currency translation adjustments, net of tax
Net unrealized loss on benefit plans, net of tax
Net earnings
Balances, January 31, 2011
Exercise of stock options and vesting of RSUs
Tax effect of exercise of stock options and
vesting of RSUs
Share-based compensation expense
Issuance of Common Stock under EPSRS Plan
Purchase and retirement of Common Stock
Cash dividends on Common Stock
Deferred hedging loss, net of tax
Unrealized loss on marketable securities, net of tax
Foreign currency translation adjustments, net of tax
Net unrealized loss on benefit plans, net of tax
Net earnings
Balances, January 31, 2012
Total
Stockholders’
Equity
Retained
Earnings
$ 1,588,371 $ 971,299
Accumulated
Other
Comprehensive
Common Stock
Gain (Loss) Shares
$
(71,433)
123,844
Amount
$ 1,238
Additional
Paid-In Capital
687,267
$
71,485
—
—
2,493
25
71,460
1,896
23,995
(467)
(20,453)
(84,579)
6,377
4,241
42,750
(15,200)
264,823
1,883,239
65,683
9,811
25,815
5,000
(80,786)
(120,390)
1,415
2,041
24,903
(7,659)
368,403
2,177,475
65,566
20,944
30,753
4,500
(174,118)
(142,840)
(7,537)
(12)
7,794
(72,810)
439,190
—
—
(434)
—
(84,579)
—
—
—
—
264,823
1,151,109
—
—
—
—
—
—
6,377
4,241
42,750
(15,200)
—
(33,265)
—
—
—
(11)
—
—
—
—
—
—
—
126,326
2,382
—
—
—
—
—
—
—
(74,318)
(120,390)
—
—
—
—
368,403
1,324,804
—
—
—
—
(158,601)
(142,840)
—
—
—
—
439,190
—
—
—
1,415
2,041
24,903
(7,659)
—
(12,565)
—
—
—
—
—
—
(7,537)
(12)
7,794
(72,810)
—
(85,130)
104
(1,843)
—
—
—
—
—
—
126,969
2,272
—
—
64
(2,629)
—
—
—
—
—
—
126,676
—
—
—
—
—
—
—
—
—
—
1,263
23
—
—
1
(18)
—
—
—
—
—
—
1,269
23
—
—
1
(26)
—
—
—
—
—
—
$ 1,267
$
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1,896
23,995
(33)
(20,453)
—
—
—
—
—
—
764,132
65,660
9,811
25,815
4,999
(6,450)
—
—
—
—
—
—
863,967
65,543
20,944
30,753
4,499
(15,491)
—
—
—
—
—
—
970,215
$ 2,348,905 $1,462,553
$
Comprehensive earnings are as follows:
Net earnings
Other comprehensive gain (loss), net of tax:
Deferred hedging (loss) gain, net of tax (benefit) expense of ($4,513), $1,031 and $3,388
Foreign currency translation adjustments, net of tax expense of $2,204, $2,264 and $716
Unrealized (loss) gain on marketable securities, net of tax (benefit) expense of ($7),
$1,094, and $2,302
Net unrealized loss on benefit plans, net of tax benefit of ($45,556), ($3,706) and ($10,525)
Comprehensive earnings
See notes to consolidated financial statements.
Years Ended January 31,
2012
2011
2010
$ 439,190
$ 368,403
$ 264,823
(7,537)
7,794
1,415
24,903
6,377
42,750
(12)
(72,810)
2,041
(7,659)
$ 366,625 $ 389,103
4,241
(15,200)
$ 302,991
TIFFANY & CO.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
Loss from discontinued operations, net of tax
Net earnings from continuing operations
Adjustments to reconcile net earnings from continuing operations to net cash provided
by (used in) operating activities:
Depreciation and amortization
Lease exit charge
Amortization of gain on sale-leasebacks
Excess tax benefits from share-based payment arrangements
Provision for inventories
Deferred income taxes
Provision for pension/postretirement benefits
Share-based compensation expense
Changes in assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Other assets, net
Accounts payable and accrued liabilities
Income taxes payable
Merchandise and other customer credits
Other long-term liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchases of marketable securities and short-term investments
Proceeds from sale of marketable securities and short-term investments
Proceeds from sale of assets, net
Capital expenditures
Notes receivable funded
Other
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) credit facility borrowings, net
Proceeds from other credit facility borrowings
Repayments of other credit facility borrowings
Repayments of short-term borrowings
Repayment of long-term debt
Proceeds from issuance of long-term debt
Net proceeds received from termination of interest rate swap
Repurchase of Common Stock
Proceeds from exercise of stock options
Excess tax benefits from share-based payment arrangements
Cash dividends on Common Stock
Purchase of non-controlling interests
Financing fees
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities
Net cash used in discontinued operations
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See notes to consolidated financial statements.
TIFFANY & CO.
K - 4 6
2012
Years Ended January 31,
2010
2011
$
439,190
–
439,190
$
$
368,403
–
368,403
264,823
853
265,676
145,934
30,884
(10,976)
(18,771)
30,665
(50,768)
33,568
30,447
5,495
(459,416)
(5,893)
(11,482)
39,862
17,551
(2,988)
(2,696)
210,606
(40,912)
96,051
–
(239,443)
(56,605)
(1,674)
(242,583)
13,548
61,020
(4,517)
–
(58,915)
–
9,527
(174,118)
65,566
18,771
(142,840)
–
(1,859)
(213,817)
(1,843)
–
–
(247,637)
681,591
433,954
$
147,870
–
(10,203)
(9,124)
25,608
(60,332)
26,993
25,436
(22,563)
(187,773)
(7,408)
4,603
21,439
501
(999)
(23,526)
298,925
(61,556)
1,946
–
(127,002)
–
–
(186,612)
9,170
–
–
–
(218,845)
118,430
–
(80,786)
65,683
9,124
(120,390)
(7,000)
(185)
(224,799)
8,375
–
–
(104,111)
785,702
681,591
$
$
139,419
–
(9,802)
(1,349)
31,599
(14,839)
24,088
23,538
13,897
163,955
60,323
(13,557)
4,369
29,066
(1,713)
(27,471)
687,199
(14,187)
754
3,650
(75,403)
–
4,293
(80,893)
(126,811)
–
–
(93,000)
(40,000)
300,000
–
(467)
71,485
1,349
(84,579)
(11,000)
(6,439)
10,538
14,300
(5,887)
(5,887)
625,257
160,445
785,702
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. NATURE OF BUSINESS
Tiffany & Co. (the “Company”) is a holding company that operates through its subsidiary
companies. The Company’s principal subsidiary, Tiffany and Company (“Tiffany”), is a jeweler and
specialty retailer whose principal merchandise offering is jewelry. The Company also sells
timepieces, sterling silverware, china, crystal, stationery, fragrances and accessories. Through
Tiffany and Company and other subsidiaries, the Company is engaged in product design,
manufacturing and retailing activities.
The Company’s reportable segments are as follows:
(cid:120) Americas includes sales in TIFFANY & CO. stores in the United States, Canada and
Latin America, as well as sales of TIFFANY & CO. products in certain markets through
business-to-business, Internet, catalog and wholesale operations;
(cid:120) Asia-Pacific includes sales in TIFFANY & CO. stores, as well as sales of TIFFANY & CO.
products in certain markets through Internet and wholesale operations;
(cid:120)
Japan includes sales in TIFFANY & CO. stores, as well as sales of TIFFANY & CO.
products through business-to-business, Internet and wholesale operations;
(cid:120) Europe includes sales in TIFFANY & CO. stores, as well as sales of TIFFANY & CO.
products in certain markets through Internet and wholesale operations; and
(cid:120) Other consists of all non-reportable segments. Other consists primarily of wholesale
sales of TIFFANY & CO. merchandise to independent distributors for resale in certain
emerging markets (primarily in the Middle East and Russia) and wholesale sales of
diamonds obtained through bulk purchases that were subsequently deemed not
suitable for the Company’s needs. In addition, Other includes earnings received from
third-party licensing agreements.
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B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company’s fiscal year ends on January 31 of the following calendar year. All references to
years relate to fiscal years rather than calendar years.
Basis of Reporting
The accompanying consolidated financial statements include the accounts of the Company and its
subsidiaries in which a controlling interest is maintained. Controlling interest is determined by
majority ownership interest and the absence of substantive third-party participating rights or, in the
case of variable interest entities (VIEs), if the Company has the power to significantly direct the
activities of a VIE, as well as the obligation to absorb significant losses of or the right to receive
significant benefits from the VIE. Intercompany accounts, transactions and profits have been
eliminated in consolidation. The equity method of accounting is used for investments in which the
Company has significant influence, but not a controlling interest.
TIFFANY & CO.
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Use of Estimates
These financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America; these principles require management to make certain
estimates and assumptions that affect amounts reported and disclosed in the consolidated
financial statements and related notes to the consolidated financial statements. The most
significant assumptions are employed in estimates used in determining inventory, long-lived
assets, goodwill, tax assets and tax liabilities and pension and postretirement benefits (including
the actuarial assumptions). Actual results could differ from these estimates and the differences
could be material. Periodically, the Company reviews all significant estimates and assumptions
affecting the financial statements relative to current conditions and records the effect of any
necessary adjustments.
Cash and Cash Equivalents
Cash and cash equivalents are stated at cost plus accrued interest, which approximates fair value.
Cash equivalents include highly liquid investments with an original maturity of three months or less
and consist of time deposits and/or money market fund investments with a number of U.S. and
non-U.S. financial institutions with high credit ratings. The Company’s policy restricts the amounts
invested in any one institution.
Short-term Investments
Short-term investments are classified as available-for-sale and are carried at fair value. At January
31, 2012, the Company’s available-for-sale investments consist entirely of time deposits. At the
time of purchase, management determines the appropriate classification of these investments and
re-evaluates such designation as of each balance sheet date.
Receivables and Finance Charges
The Company maintains an allowance for doubtful accounts for estimated losses associated with
the accounts receivable recorded on the balance sheet. The allowance is determined based on a
combination of factors including, but not limited to, the length of time that the receivables are past
due, the Company’s knowledge of the customer, economic and market conditions and historical
write-off experiences.
For the receivables associated with Tiffany & Co. credit cards (“Credit Card Receivables”), the
Company uses various indicators to determine whether to extend credit to customers and the
amount of credit. Such indicators include reviewing prior experience with the customer, including
sales and collection history, and using applicants’ credit reports and scores provided by credit
rating agencies. Credit Card Receivables require minimum balance payments. The Company
classifies a Credit Card account as overdue if a minimum balance payment has not been received
within the allotted timeframe (generally 30 days), after which internal collection efforts commence.
For all accounts receivable recorded on the balance sheet, once all internal collection efforts have
been exhausted and management has reviewed the account, the account balance is written off
and may be sent for external collection or legal action. At January 31, 2012 and 2011, the carrying
amount of the Credit Card Receivables (recorded in accounts receivable, net in the Company’s
consolidated balance sheet) was $58,784,000 and $56,926,000, of which 97% was considered
current in those same periods. The allowance for doubtful accounts for estimated losses
associated with the Credit Card Receivables (approximately $2,000,000 at both January 31, 2012
and 2011) was determined based on the factors discussed above. Finance charges on Credit Card
accounts are not significant.
TIFFANY & CO.
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The Company may, from time to time, extend loans to diamond mining and exploration companies
in order to obtain rights to purchase the mine’s output. Management evaluates these and any
other loans that may arise for potential impairment by reviewing the parties’ financial statements
and projections and other economic factors on a periodic basis. The carrying amount of loans
receivable outstanding including accrued interest (primarily included within other assets, net on the
Company’s consolidated balance sheet) was $58,212,000 as of January 31, 2012. The Company
has not recorded any material impairment charges on such loans as of January 31, 2012.
Inventories
Inventories are valued at the lower of cost or market using the average cost method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is
calculated on a straight-line basis over the following estimated useful lives:
Buildings
Building Improvements
Machinery and Equipment
Office Equipment
Furniture and Fixtures
39 years
10 years
5-15 years
3-10 years
2-10 years
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Leasehold improvements are amortized over the shorter of their estimated useful lives or the
related lease terms. Maintenance and repair costs are charged to earnings while expenditures for
major renewals and improvements are capitalized. Upon the disposition of property, plant and
equipment, the accumulated depreciation is deducted from the original cost and any gain or loss
is reflected in current earnings.
The Company capitalizes interest on borrowings during the active construction period of major
capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized
over the useful lives of the assets. The Company’s capitalized interest costs were not significant in
2011, 2010 or 2009.
Intangible Assets
Intangible assets are recorded at cost and are amortized on a straight-line basis over their
estimated useful lives which range from six to 15 years. Intangible assets are reviewed for
impairment in accordance with the Company’s policy for impairment of long-lived assets (see
“Impairment of Long-Lived Assets” below). Intangible assets amounted to $7,549,000 and
$8,566,000, net of accumulated amortization of $8,253,000 and $7,237,000 at January 31, 2012
and 2011, and consist primarily of product rights and trademarks. Amortization of intangible assets
for the years ended January 31, 2012, 2011 and 2010 was $1,016,000, $1,016,000 and $976,000.
Amortization expense is estimated to be $1,016,000 in each of the next three years, $891,000 in
the fourth year and $850,000 in the fifth year.
Goodwill
Goodwill represents the excess of cost over fair value of net assets acquired. Goodwill is
evaluated for impairment annually in the fourth quarter or when events or changes in
circumstances indicate that the value of goodwill may be impaired. This evaluation, based on
discounted cash flows, requires management to estimate future cash flows, growth rates and
TIFFANY & CO.
K - 4 9
economic and market conditions. If the evaluation indicates that goodwill is not recoverable, an
impairment loss is calculated and recognized during that period. At January 31, 2012 and 2011,
goodwill, included in other assets, net, consisted of the following by segment:
(in thousands)
Balance, January 31, 2010
Translation
Balance, January 31, 2011
Translation
Americas
$ 12,513 $
Asia-Pacific
Total
300 $ 1,183 $ 1,128 $ 15,124
Europe
Japan
(31)
12,482
(60)
(5)
295
(8)
(19)
1,164
(32)
(5)
1,123
(60)
15,064
(8)
(108)
Balance, January 31, 2012
$ 12,422 $
287 $ 1,132 $ 1,115 $ 14,956
Impairment of Long-Lived Assets
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The Company reviews its long-lived assets (such as property, plant and equipment) other than
goodwill for impairment when management determines that the carrying value of such assets may
not be recoverable due to events or changes in circumstances. Recoverability of long-lived assets
is evaluated by comparing the carrying value of the asset with the estimated future undiscounted
cash flows. If the comparisons indicate that the asset is not recoverable, an impairment loss is
calculated as the difference between the carrying value and the fair value of the asset and the loss
is recognized during that period. The Company recorded no material impairment charges in 2011,
2010 or 2009.
Hedging Instruments
The Company uses derivative financial instruments to mitigate its foreign currency, precious metal
price and interest rate exposures. Derivative instruments are recorded on the consolidated balance
sheet at their fair values, as either assets or liabilities, with an offset to current or comprehensive
earnings, depending on whether a derivative is designated as part of an effective hedge
transaction and, if it is, the type of hedge transaction.
Marketable Securities
The Company’s marketable securities, recorded within other assets, net on the consolidated
balance sheet, are classified as available-for-sale and are recorded at fair value with unrealized
gains and losses reported as a separate component of stockholders’ equity. Realized gains and
losses are recorded in other income, net. The marketable securities are held for an indefinite
period of time, but may be sold in the future as changes in market conditions or economic factors
occur. The fair value of the marketable securities is determined based on prevailing market prices.
The Company recorded $1,904,000 and $1,860,000 of gross unrealized gains and $1,699,000 and
$1,635,000 of gross unrealized losses within accumulated other comprehensive loss as of January
31, 2012 and 2011.
TIFFANY & CO.
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The following table summarizes activity in other comprehensive earnings related to marketable
securities:
(in thousands)
Change in fair value of investments, net of tax
Adjustment for net losses (gains) realized and included in net
earnings, net of tax
Change in unrealized gain on marketable securities
$
$
January 31,
2011
2,054
2012
(41) $
29
(12) $
(13)
2,041
The amount reclassified from other comprehensive earnings was determined on the basis of
specific identification.
The Company’s marketable securities consist of investments in mutual funds. When evaluating the
marketable securities for other-than-temporary impairment, the Company reviews factors such as
the length of time and the extent to which fair value has been below cost basis, the financial
condition of the issuer, and the Company’s ability and intent to hold the investments for a period of
time which may be sufficient for anticipated recovery in market value. Based on the Company’s
evaluations, it determined that any unrealized losses on its outstanding mutual funds were
temporary in nature and, therefore, did not record any impairment charges as of January 31, 2012,
2011 or 2010.
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Merchandise and Other Customer Credits
Merchandise and other customer credits represent outstanding credits issued to customers for
returned merchandise. It also includes outstanding gift cards sold to customers. All such
outstanding items may be tendered for future merchandise purchases. A merchandise credit
liability is established when a merchandise credit is issued to a customer for a returned item and
the original sale is reversed. A gift card liability is established when the gift card is sold. The
liabilities are relieved and revenue is recognized when merchandise is purchased and delivered to
the customer and the merchandise credit or gift card is used as a form of payment.
If merchandise credits or gift cards are not redeemed over an extended period of time
(approximately three to five years), the value of the merchandise credits or gift cards is generally
remitted to the applicable jurisdiction in accordance with unclaimed property laws.
Revenue Recognition
Sales are recognized at the “point of sale,” which occurs when merchandise is taken in an “over-
the-counter” transaction or upon receipt by a customer in a shipped transaction, such as through
the Internet and catalog channels. Revenue associated with gift cards and merchandise credits is
recognized upon redemption. Sales are reported net of returns, sales tax and other similar taxes.
Shipping and handling fees billed to customers are included in net sales. The Company maintains
a reserve for potential product returns and it records, as a reduction to sales and cost of sales, its
provision for estimated product returns, which is determined based on historical experience.
Additionally, outside of the U.S. the Company operates certain TIFFANY & CO. stores within
various department stores. Sales transacted at these store locations are recognized at the “point
of sale.” The Company and these department store operators have distinct responsibilities and
risks in the operation of such TIFFANY & CO. stores.
TIFFANY & CO.
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The Company (i) owns and manages the merchandise; (ii) establishes retail prices; (iii) has
merchandising, marketing and display responsibilities; and (iv) in almost all locations provides retail
staff and bears the risk of inventory loss.
The department store operators (i) provide and maintain store facilities; (ii) in almost all locations
assume retail credit and certain other risks; and (iii) act for the Company in the sale of
merchandise. In return for its services and use of its facilities, the department store operators
retain a portion of net retail sales made in TIFFANY & CO. stores which is recorded as commission
expense within selling, general and administrative expenses.
Cost of Sales
Cost of sales includes costs related to the purchase of merchandise from third parties, the cost to
internally manufacture merchandise (metal, gemstones, labor and overhead), inbound freight,
purchasing and receiving, inspection, warehousing, internal transfers and other costs associated
with distribution and merchandising. Cost of sales also includes royalty fees paid to outside
designers and customer shipping and handling charges.
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Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses include costs associated with the selling and marketing of products as well as
administrative expenses. The types of expenses associated with these functions are store
operating expenses (such as labor, rent and utilities), advertising and other corporate level
administrative expenses.
Advertising and Marketing Costs
Advertising and marketing costs, which include media, production, catalogs, Internet, marketing
events, visual merchandising costs (in-store and window displays) and other related costs, totaled
$234,050,000, $197,597,000 and $159,891,000 in 2011, 2010 and 2009, representing 6.4%, 6.4%
and 5.9% of net sales in those periods. Media and production costs for print and digital
advertising are expensed as incurred, while catalog costs are expensed upon mailing.
Pre-opening Costs
Costs associated with the opening of new retail stores are expensed in the period incurred.
Stock-Based Compensation
New, modified and unvested share-based payment transactions with employees, such as stock
options and restricted stock, are measured at fair value and recognized as compensation expense
over the requisite service period.
Merchandise Design Activities
Merchandise design activities consist of conceptual formulation and design of possible products
and creation of pre-production prototypes and molds. Costs associated with these activities are
expensed as incurred.
The functional currency of most of the Company’s foreign subsidiaries and branches is the
applicable local currency. Assets and liabilities are translated into U.S. dollars using the current
Foreign Currency
TIFFANY & CO.
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exchange rates in effect at the balance sheet date, while revenues and expenses are translated at
the average exchange rates during the period. The resulting translation adjustments are recorded
as a component of other comprehensive earnings within stockholders’ equity. The Company also
recognizes gains and losses associated with transactions that are denominated in foreign
currencies. The Company recorded a net (loss) gain resulting from foreign currency transactions of
($54,000), $2,413,000 and ($1,628,000) in 2011, 2010 and 2009 within other income, net.
Income Taxes
The Company accounts for income taxes under the asset and liability method in accordance with
U.S. GAAP, which requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial statements. Under this
method, deferred tax assets and liabilities are recognized by applying statutory tax rates in effect
in the years in which the differences between the financial reporting and tax filing bases of existing
assets and liabilities are expected to reverse. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records net deferred tax assets to the extent management believes these assets will
more likely than not be realized. In making such determination, the Company considers all
available evidence, including future reversals of existing taxable temporary differences, projected
future taxable income, tax planning strategies and recent financial operations. In the event
management were to determine that the Company would be able to realize its deferred income tax
assets in the future in excess of their net recorded amount, the Company would make an
adjustment to the valuation allowance, which would reduce the provision for income taxes. In
evaluating the exposures associated with the Company’s various tax filing positions, management
records reserves using a more-likely-than-not recognition threshold for income tax positions taken
or expected to be taken.
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The Company, its U.S. subsidiaries and the foreign branches of its U.S. subsidiaries file a
consolidated Federal income tax return.
Earnings Per Share
Basic earnings per share (“EPS”) is computed as net earnings divided by the weighted-average
number of common shares outstanding for the period. Diluted EPS includes the dilutive effect of
the assumed exercise of stock options and unvested restricted stock units.
The following table summarizes the reconciliation of the numerators and denominators for the
basic and diluted EPS computations:
Years Ended January 31,
(in thousands)
Net earnings for basic and diluted EPS
2012
$ 439,190
2011
$ 368,403
2010
$ 264,823
Weighted-average shares for basic EPS
Incremental shares based upon the assumed
exercise of stock options and unvested
restricted stock units
Weighted-average shares for diluted EPS
127,397
126,600
124,345
1,686
129,083
1,806
128,406
1,038
125,383
TIFFANY & CO.
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For the years ended January 31, 2012, 2011 and 2010, there were 401,000, 371,000 and
4,844,000 stock options and restricted stock units excluded from the computations of earnings
per diluted share due to their antidilutive effect.
New Accounting Standards
In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update No. 2011-05, “Presentation of Comprehensive Income”, which allows an entity the option
to present components of net income and other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements.
The guidance eliminates the option to present the components of other comprehensive income as
part of the statement of changes in stockholders' equity. The new guidance does not change the
items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. The new guidance is effective for fiscal
years and interim periods beginning after December 15, 2011 and will not have an impact on the
Company’s financial position or earnings.
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In September 2011, the FASB issued Accounting Standards Update No. 2011-08, “Testing
Goodwill for Impairment”, which allows an entity to use a qualitative approach to test goodwill for
impairment. The new guidance permits an entity to first perform a qualitative assessment to
determine whether it is more likely than not that the fair value of a reporting unit is less than its
carrying value. If it is concluded that this is the case, it is necessary to perform the currently
prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is
not required. The new guidance is effective for fiscal years beginning after December 15, 2011 and
earlier adoption is permitted. The Company is currently evaluating the impact of the new guidance;
however, management does not believe it will have a material impact on the Company’s financial
position or earnings.
C. ACQUISITIONS AND DISPOSITIONS
In 2009, the Company acquired all non-controlling interests in two majority-owned entities that
indirectly engage through majority-owned subsidiaries in diamond sourcing and polishing
operations in South Africa and Botswana, respectively. Of the total consideration of $18,000,000,
$11,000,000 was paid in 2009 and the remaining $7,000,000 was paid in 2010. This acquisition
was accounted for as an equity transaction since the Company maintained control of the two
entities prior to the acquisition. Therefore, the Company recorded a decrease to additional paid-in
capital of $20,453,000 in 2009 related to this transaction. In addition, the Company paid
$4,000,000 in 2009 to terminate a third-party management agreement. Management determined
that this transaction was separate from the acquisition of the remaining non-controlling interests;
accordingly, the termination fee was recorded within SG&A expenses.
In the fourth quarter of 2008, management concluded that it would no longer invest in its
IRIDESSE business due to its ongoing operating losses and insufficient near-term growth
prospects, especially in the economic environment at the time the decision was made. Therefore,
management committed to a plan to close IRIDESSE locations in 2009 as the Company reached
agreements with landlords and sold its inventory. All IRIDESSE stores have been closed. These
amounts have been recorded as discontinued operations for all periods presented.
TIFFANY & CO.
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Summarized statement of earnings data for IRIDESSE is as follows:
(in thousands)
Net sales
Loss before income taxes
Benefit from income taxes
Net loss from discontinued operations
Year Ended
January 31, 2010
$
$
13,232
(6,103)
3,192
$
(2,911)
The Company sold Little Switzerland, Inc. in 2007. In 2009, the Company received additional
proceeds of $3,650,000 and recorded a pre-tax gain within discontinued operations of $3,289,000
($2,058,000 net of tax) in settlement of post-closing adjustments.
D. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
(in thousands)
Interest, net of interest
capitalization
Income taxes
2012
2011
2010
Years Ended January 31,
$ 44,799
$ 250,620
$ 47,107
$ 237,829
$ 35,392
$ 74,690
Supplemental noncash investing and financing activities:
(in thousands)
Issuance of Common Stock under
the Employee Profit Sharing
and Retirement Savings Plan
2012
Years Ended January 31,
2010
2011
$
4,500
$
5,000
$
—
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E. INVENTORIES
(in thousands)
Finished goods
Raw materials
Work-in-process
2012
$ 1,145,680
784,040
143,492
$ 2,073,212
January 31,
2011
$ 988,085
534,879
102,338
$ 1,625,302
TIFFANY & CO.
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F. PROPERTY, PLANT AND EQUIPMENT
(in thousands)
Land
Buildings
Leasehold and building improvements
Office equipment
Furniture and fixtures
Machinery and equipment
Construction-in-progress
Accumulated depreciation and
amortization
2012
$ 42,735
113,731
833,740
416,003
211,043
123,407
17,652
1,758,311
(991,137)
$ 767,174
January 31,
2011
$ 42,383
104,487
757,633
388,224
194,945
110,367
19,603
1,617,642
(952,054)
$ 665,588
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The provision for depreciation and amortization for the years ended January 31, 2012, 2011 and
2010 was $149,109,000, $149,403,000 and $137,705,000.
G. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
(in thousands)
Accounts payable – trade
Accrued compensation and
commissions
Accrued sales, withholding
and other taxes
Other
2012
$ 113,149
74,792
20,274
120,747
$ 328,962
January 31,
2011
$ 91,313
60,474
15,414
91,410
$ 258,611
TIFFANY & CO.
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H. DEBT
(in thousands)
Short-term borrowings:
Credit Facilities
Other credit facilities
Long-term debt:
Senior Notes:
2002 6.56% Series D, due 2012
2008 9.05% Series A, due 2015
2009 10.00% Series A, due 2018
2009 10.00% Series A, due 2017
2009 10.00% Series B, due 2019
2010 1.72% Notes, due 2016
4.50% yen loan, due 2011
Less current portion of long-term debt
2012
$ 29,204
83,769
$ 112,973
$ 60,822
107,272
50,000
125,000
125,000
131,080
—
599,174
60,822
$ 538,352
January 31,
2011
$ 14,888
24,003
$ 38,891
$ 62,531
104,252
50,000
125,000
125,000
121,711
60,855
649,349
60,855
$ 588,494
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Credit Facilities
In December 2011, the Company entered into a three-year $200,000,000 and a five-year
$200,000,000 multi-bank, multi-currency, committed unsecured revolving credit facilities (the
“Credit Facilities”). The Company can request to increase the commitment under each Credit
Facility up to $275,000,000. The Credit Facilities replaced a $400,000,000 multi-bank, multi-
currency, committed unsecured revolving credit facility. The Credit Facilities are available for
working capital and other corporate purposes and include specific financial covenants and ratios
and limit certain payments, investments and indebtedness, in addition to other requirements
customary to such borrowings. Under the Credit Facilities, borrowings may be made from 10
participating banks and are at interest rates based upon either (i) local currency borrowing rates or
(ii) the Federal Funds Rate plus 0.5%, whichever is higher, plus a margin based on the Company’s
leverage ratio. There was $370,796,000 available to be borrowed under the Credit Facilities at
January 31, 2012. The weighted-average interest rate was 1.62% and 2.83% at January 31, 2012
and 2011. The three-year credit facility will expire in December 2014. The five-year credit facility
will expire in December 2016.
Other Credit Facilities
In May 2011, the Company entered into a ¥4,000,000,000 ($52,432,000 at January 31, 2012) one-
year uncommitted credit facility. Borrowings may be made on one-, three- or 12-month terms
bearing interest at the LIBOR rate plus 0.25%, subject to bank approval. As of January 31, 2012,
the Company had borrowed the full amount under the facility. The weighted-average interest rate
was 0.45% at January 31, 2012.
The Company had various other revolving credit facilities. At January 31, 2012, the facilities totaled
$49,700,000, of which $31,337,000 was outstanding at a weighted-average interest rate of 3.06%.
TIFFANY & CO.
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At January 31, 2011, the facilities totaled $46,000,000, of which $24,003,000 was outstanding at a
weighted-average interest rate of 3.21%.
2002 6.56% Series D Senior Notes
In 2002, the Company, in a private transaction with various institutional lenders, issued, at par,
$60,000,000 of 6.56% Series D Senior Notes due July 2012 with lump sum repayments upon
maturity. The proceeds of the issuance were used by the Company for general corporate
purposes, working capital and to repay previously-issued Senior Notes. The note purchase
agreement is unsecured, requires maintenance of specific financial covenants and ratios and limits
certain changes to indebtedness and the general nature of the business, in addition to other
requirements customary to such borrowings. In 2009, the Company entered into an interest rate
swap to effectively convert this fixed rate obligation to a floating rate obligation (see “Note I.
Hedging Instruments”).
2008 9.05% Series A Senior Notes
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In 2008, the Company, in a private transaction with various institutional lenders, issued, at par,
$100,000,000 principal amount 9.05% Series A Senior Notes due December 2015. The proceeds
of the issuance were used to refinance existing indebtedness and for general corporate purposes.
The note purchase agreement is unsecured, requires lump sum repayments upon maturity, and
contains covenants that require maintenance of certain debt/equity and interest-coverage ratios, in
addition to other requirements customary to such borrowings. In 2009, the Company entered into
an interest rate swap to effectively convert this fixed rate obligation to a floating rate obligation. In
2011, the interest rate swap was terminated (see “Note I. Hedging Instruments”).
2009 10.00% Series A Senior Notes
In 2009, the Company, in a private transaction with various institutional lenders, issued, at par,
$50,000,000 of 10.00% Series A Senior Notes due April 2018. The proceeds from the issuance
were available to refinance existing indebtedness and for general corporate purposes. The
agreement requires lump sum repayments upon maturity and includes specific financial covenants
and ratios and limits certain payments, investments and indebtedness, in addition to other
requirements customary to such borrowings. The note purchase agreement contains provisions for
an uncommitted shelf facility by which the Company may issue, through April 2012, up to an
additional $100,000,000 of Senior Notes for up to a 12-year term at a fixed interest rate based on
the U.S. Treasury rates at the time of borrowing plus an applicable credit spread.
2009 10.00% Series A Senior Notes and 10.00% Series B Senior Notes
In 2009, the Company, in a private transaction, issued, at par, $125,000,000 of 10.00% Series A
Senior Notes due February 2017 and $125,000,000 of 10.00% Series B Senior Notes due February
2019. The proceeds from these issuances were available to refinance existing indebtedness and
for general corporate purposes. The agreement requires lump sum repayments upon maturity and
includes specific financial covenants and ratios and limits certain payments, investments and
indebtedness, in addition to other requirements customary to such borrowings.
2010 1.72% Senior Notes
In 2010, the Company, in a private transaction, issued, at par, ¥10,000,000,000 ($131,080,000 at
January 31, 2012) of 1.72% Senior Notes due September 2016. The proceeds were used to repay
a portion of debt that came due in September 2010. The agreement requires lump sum
repayments upon maturity and includes specific financial covenants and ratios and limits certain
TIFFANY & CO.
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payments, investments and indebtedness, in addition to other requirements customary to such
borrowings.
1996 4.50% Yen Loan
The Company had a ¥5,000,000,000, 15-year term loan due April 2011, bearing interest at a rate of
4.50%. In April 2011, the Company used cash on hand and credit facility borrowings to repay the
full amount outstanding ($58,915,000 at payment date).
Debt Covenants
As of January 31, 2012, the Company was in compliance with all debt covenants. In the event of
any default of payment or performance obligations extending beyond applicable cure periods
under the provisions of any one of the Credit Facilities, Senior Notes and other loan agreements,
such agreements may be terminated or payment of the notes accelerated. Further, each of the
Credit Facilities, Senior Notes and certain other loan agreements contain cross default provisions
permitting the termination of the loans, or acceleration of the notes, as the case may be, in the
event that any of the Company’s other debt obligations are terminated or accelerated prior to the
expressed maturity.
Aggregate maturities of long-term debt as of January 31, 2012 are as follows:
Long-Term Debt Maturities
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Years Ending January 31,
2013
2014
2015
2016
2017
Thereafter
Amount
(in thousands)
$ 60,822
—
—
107,272
131,080
300,000
$ 599,174
The Company had letters of credit and financial guarantees of $27,880,000 outstanding at
January 31, 2012.
Letters of Credit
I. HEDGING INSTRUMENTS
Background Information
The Company uses derivative financial instruments, including interest rate swaps, forward
contracts, put option contracts and net-zero-cost collar arrangements (combination of call and put
option contracts) to mitigate its exposures to changes in interest rates, foreign currency and
precious metal prices. Derivative instruments are recorded on the consolidated balance sheet at
their fair values, as either assets or liabilities, with an offset to current or comprehensive earnings,
depending on whether the derivative is designated as part of an effective hedge transaction and, if
it is, the type of hedge transaction. If a derivative instrument meets certain hedge accounting
TIFFANY & CO.
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criteria, the derivative instrument is designated as one of the following on the date the derivative is
entered into:
(cid:120)
Fair Value Hedge – A hedge of the exposure to changes in the fair value of a recognized
asset or liability or an unrecognized firm commitment. For fair value hedge transactions,
both the effective and ineffective portions of the changes in the fair value of the derivative
and changes in the fair value of the item being hedged are recorded in current earnings.
(cid:120) Cash Flow Hedge – A hedge of the exposure to variability in the cash flows of a recognized
asset, liability or a forecasted transaction. For cash flow hedge transactions, the effective
portion of the changes in fair value of derivatives are reported as other comprehensive
income (“OCI”) and are recognized in current earnings in the period or periods during which
the hedged transaction affects current earnings. Amounts excluded from the effectiveness
calculation and any ineffective portions of the change in fair value of the derivative are
recognized in current earnings.
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The Company formally documents the nature of and relationships between the hedging
instruments and hedged items for a derivative to qualify as a hedge at inception and throughout
the hedged period. The Company also documents its risk management objectives, strategies for
undertaking the various hedge transactions and method of assessing hedge effectiveness.
Additionally, for hedges of forecasted transactions, the significant characteristics and expected
terms of a forecasted transaction must be specifically identified, and it must be probable that each
forecasted transaction will occur. If it were deemed probable that the forecasted transaction would
not occur, the gain or loss on the derivative financial instrument would be recognized in current
earnings. Derivative financial instruments qualifying for hedge accounting must maintain a
specified level of effectiveness between the hedge instrument and the item being hedged, both at
inception and throughout the hedged period.
The Company does not use derivative financial instruments for trading or speculative purposes.
Types of Derivative Instruments
Interest Rate Swaps – In 2009, the Company entered into interest rate swaps to convert its fixed
rate 2002 Series D and 2008 Series A obligations to floating rate obligations. Since the fair value of
the Company’s fixed rate long-term debt is sensitive to interest rate changes, the interest rate
swaps serve as a hedge to changes in the fair value of these debt instruments. The Company
hedges its exposure to changes in interest rates over the remaining maturities of the debt being
hedged. The Company accounts for the interest rate swaps as fair value hedges. During 2011, the
Company terminated the interest rate swap used to convert the 2008 Series A fixed obligation to a
floating rate obligation for net proceeds of $9,527,000. The difference between the fair value and
the cost basis of the debt at the time of the termination will be recognized within interest expense
and financing costs on the consolidated statement of earnings through December 2015, the
maturity date of the debt. As of January 31, 2012, the notional amount of interest rate swaps
outstanding was $60,000,000.
Foreign Exchange Forward and Put Option Contracts – The Company uses foreign exchange
forward contracts or put option contracts to offset the foreign currency exchange risks associated
with foreign currency-denominated liabilities, intercompany transactions and forecasted purchases
of merchandise between entities with differing functional currencies. For put option contracts, if
the market exchange rate at the time of the put option contract’s expiration is stronger than the
contracted exchange rate, the Company allows the put option contract to expire, limiting its loss
to the cost of the put option contract. The Company assesses hedge effectiveness based on the
TIFFANY & CO.
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total changes in the put option contracts’ cash flows. These foreign exchange forward contracts
and put option contracts are designated and accounted for as either cash flow hedges or
economic hedges that are not designated as hedging instruments.
In 2010, the Company de-designated all of its outstanding put option contracts (none of which
were outstanding at January 31, 2012) and entered into offsetting call option contracts. These put
and call option contracts were accounted for as undesignated hedges. Any gains or losses on
these de-designated put option contracts were substantially offset by losses or gains on the call
option contracts.
As of January 31, 2012, the notional amount of foreign exchange forward contracts accounted for
as cash flow hedges was $135,100,000 and the notional amount of foreign exchange forward
contracts accounted for as undesignated hedges was $17,469,000. The term of all outstanding
foreign exchange forward contracts as of January 31, 2012 ranged from less than one month to
13 months.
Precious Metal Collars & Forward Contracts – The Company periodically hedges a portion of its
forecasted purchases of precious metals for use in its internal manufacturing operations in order to
minimize the effect of volatility in precious metal prices. The Company may use a combination of
call and put option contracts in net-zero-cost collar arrangements (“precious metal collars”) or
forward contracts. For precious metal collars, if the price of the precious metal at the time of the
expiration of the precious metal collar is within the call and put price, the precious metal collar
expires at no cost to the Company. The Company accounts for its precious metal collars and
forward contracts as cash flow hedges. The Company assesses hedge effectiveness based on the
total changes in the precious metal collars and forward contracts’ cash flows. The maximum term
over which the Company is hedging its exposure to the variability of future cash flows for all
forecasted transactions is 12 months. As of January 31, 2012, there were approximately
29,700 ounces of platinum and 742,600 ounces of silver precious metal derivative instruments
outstanding.
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Information on the location and amounts of derivative gains and losses in the consolidated
financial statements is as follows:
Years Ended January 31,
2012
2011
Pre-Tax Gain
Recognized in
Earnings on
Derivatives
Pre-Tax Loss
Recognized in
Earnings on
Hedged Item
Pre-Tax Gain
Recognized in
Earnings on
Derivatives
Pre-Tax Loss
Recognized in
Earnings on
Hedged Item
(in thousands)
Derivatives in Fair Value Hedging Relationships:
Interest rate swaps a
$
3,341
$
(2,832)
$
4,159
$
(3,655)
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Years Ended January 31,
2012
2011
Pre-Tax Loss
Recognized
in OCI
(Effective Portion)
(Loss) Gain
Reclassified from
Accumulated OCI
to Earnings
(Effective Portion)
Pre-Tax (Loss) Gain
Recognized
in OCI
(Effective Portion)
(Loss) Gain
Reclassified from
Accumulated OCI
to Earnings
(Effective Portion)
(in thousands)
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange forward
contracts c
Put option contracts c
Precious metal collars c
Precious metal forward
contracts c
$
(12,624)
$
(6,974)
$
(2,596)
$
(885)
(69)
(2,101)
(2,236)
–
607
824
(2,711)
(1,036)
(5,258)
2,567
3,550
1,728
$
(17,951)
$
(5,901)
$
(458)
$
(2,904)
(in thousands)
Derivatives Not Designated as Hedging Instruments:
Pre-Tax (Loss) Gain Recognized
in Earnings on Derivatives
Years Ended January 31,
2012
2011
Foreign exchange forward contracts b, d
Call option contracts c
Put option contracts c
$
$
4
$
92
(92)
4
$
(918)
413
(454)
(959)
a The gain or loss recognized in earnings is included within Interest expense and financing costs on the Company’s
Consolidated Statement of Earnings.
b The gain or loss recognized in earnings is included within Other income, net on the Company’s Consolidated
Statement of Earnings.
c The gain or loss recognized in earnings is included within Cost of Sales on the Company’s Consolidated Statement of
Earnings.
d Gains or losses on the undesignated foreign exchange forward contracts substantially offset foreign exchange losses
or gains on the liabilities and transactions being hedged.
Hedging activity affected accumulated other comprehensive loss, net of tax, as follows:
(in thousands)
Balance at beginning of period
Losses transferred to earnings, net of tax
Change in fair value, net of tax
2012
(1,192)
3,948
(11,485)
(8,729)
$
$
Years Ended January 31,
2011
(2,607)
1,921
(506)
(1,192)
$
$
TIFFANY & CO.
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There was no material ineffectiveness related to the Company’s hedging instruments for the
periods ended January 31, 2012 and 2011. The Company expects approximately $12,444,000 of
net pre-tax derivative losses included in accumulated other comprehensive income at January 31,
2012 will be reclassified into earnings within the next 12 months. This amount will vary due to
fluctuations in foreign currency exchange rates and precious metal prices.
For information regarding the location and amount of the derivative instruments in the
Consolidated Balance Sheet, see “Note J. Fair Value of Financial Instruments.”
Concentration of Credit Risk
A number of major international financial institutions are counterparties to the Company’s
derivative financial instruments. The Company enters into derivative financial instrument
agreements only with counterparties meeting certain credit standards (a credit rating of A/A2 or
better at the time of the agreement) and limits the amount of agreements or contracts it enters into
with any one party. The Company may be exposed to credit losses in the event of nonperformance
by individual counterparties or the entire group of counterparties.
J. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date. U.S. GAAP establishes
a fair value hierarchy which requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. U.S. GAAP prescribes three
levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 1 inputs are
considered to carry the most weight within the fair value hierarchy due to the low levels of
judgment required in determining fair values.
Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market
data.
Level 3 – Unobservable inputs reflecting the reporting entity’s own assumptions. Level 3 inputs are
considered to carry the least weight within the fair value hierarchy due to substantial levels of
judgment required in determining fair values.
The Company uses the market approach to measure fair value for its mutual funds, time deposits
and derivative instruments. The Company’s interest rate swaps are primarily valued using the 3-
month LIBOR rate. The Company’s put and call option contracts, as well as its foreign exchange
forward contracts, are primarily valued using the appropriate foreign exchange spot rates. The
Company’s precious metal collars and forward contracts are primarily valued using the relevant
precious metal spot rate. For further information on the Company’s hedging instruments and
program, see “Note I. Hedging Instruments.”
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Financial assets and liabilities carried at fair value at January 31, 2012 are classified in the table
below in one of the three categories described above:
(in thousands)
Mutual funds a
Time deposits b
Estimated Fair Value
Carrying
Value
Level 1
Level 2
Level 3
Total Fair
Value
$
39,542
$ 39,542
$
—
$
—
$ 39,542
8,236
8,236
—
Derivatives designated as hedging instruments:
Interest rate swaps a
Precious metal forward
contracts c
Foreign exchange forward
contracts c
406
2,758
70
—
—
—
Derivatives not designated as hedging instruments:
Foreign exchange forward
contracts c
Total financial assets
$ 47,778
51,252
240
—
$
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406
2,758
70
240
—
—
—
—
—
8,236
406
2,758
70
240
$
3,474
$
— $ 51,252
(in thousands)
Carrying
Value
Level 1
Level 2
Level 3
Total Fair
Value
Estimated Fair Value
Derivatives designated as hedging instruments:
Foreign exchange forward
contracts d
Precious metal forward
contracts d
Total financial liabilities
3,855
3,071
6,926
$
$
$
—
$
3,855
$
— $ 3,855
—
3,071
—
3,071
$ —
$
6,926
$
— $ 6,926
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Financial assets and liabilities carried at fair value at January 31, 2011 are classified in the table
below in one of the three categories described above:
(in thousands)
Mutual funds a
Time deposits b
Estimated Fair Value
Carrying
Value
Level 1
Level 2
Level 3
Total Fair
Value
$
43,887
$ 43,887
$
—
$
—
$ 43,887
59,280
59,280
—
—
59,280
Derivatives designated as hedging instruments:
Interest rate swaps a
Precious metal forward
contracts c
Foreign exchange forward
contracts c
6,155
753
374
—
—
—
Derivatives not designated as hedging instruments:
Put option contracts c
Foreign exchange forward
contracts c
Total financial assets
93
205
—
—
6,155
753
374
93
205
—
—
—
—
—
6,155
753
374
93
205
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$ 110,747
$ 103,167
$
7,580
$
— $ 110,747
(in thousands)
Carrying
Value
Level 1
Level 2
Level 3
Total Fair
Value
Estimated Fair Value
Derivatives designated as hedging instruments:
Foreign exchange forward
contracts d
—
$
Derivatives not designated as hedging instruments:
Call option contracts d
—
Foreign exchange forward
contracts d
Total financial liabilities
$ —
2,064
2,297
$
141
92
—
$
$
2,064
$
— $ 2,064
92
141
—
—
92
141
$
2,297
$
— $ 2,297
a Included within Other assets, net on the Company’s Consolidated Balance Sheet.
b Included within Short-term investments on the Company’s Consolidated Balance Sheet.
c Included within Prepaid expenses and other current assets on the Company’s Consolidated Balance Sheet.
d Included within Accounts payable and accrued liabilities on the Company’s Consolidated Balance Sheet.
The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued
liabilities approximates carrying value due to the short-term maturities of these assets and
liabilities. The fair value of debt with variable interest rates approximates carrying value. The fair
value of debt with fixed interest rates was determined using the quoted market prices of debt
instruments with similar terms and maturities. The total carrying value of short-term borrowings
and long-term debt was $712,147,000 and $688,240,000 and the corresponding fair value was
approximately $860,000,000 and $750,000,000 at January 31, 2012 and 2011.
TIFFANY & CO.
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K. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases certain office, distribution, retail and manufacturing facilities, land and
equipment. Retail store leases may require the payment of minimum rentals and contingent rent
based on a percentage of sales exceeding a stipulated amount. The lease agreements, which
expire at various dates through 2051, are subject, in many cases, to renewal options and provide
for the payment of taxes, insurance and maintenance. Certain leases contain escalation clauses
resulting from the pass-through of increases in operating costs, property taxes and the effect on
costs from changes in consumer price indices.
Rent-free periods and other incentives granted under certain leases and scheduled rent increases
are charged to rent expense on a straight-line basis over the related terms of such leases. Lease
expense includes predetermined rent escalations (including escalations based on the Consumer
Price Index or other indices) and is recorded on a straight-line basis over the term of the lease.
Adjustments to indices are treated as contingent rent and recorded in the period that such
adjustments are determined.
The Company entered into sale-leaseback arrangements for its Retail Service Center, a distribution
and administrative office facility, in 2005 and for the TIFFANY & CO. stores in Tokyo’s Ginza
shopping district and on London’s Old Bond Street in 2007. These sale-leaseback arrangements
resulted in total deferred gains of $144,505,000 which will be amortized in SG&A expenses over
periods that range from 15 to 20 years. As of January 31, 2012, $119,692,000 of these deferred
gains remained to be amortized.
In April 2010, Tiffany committed to a plan to consolidate and relocate its New York headquarters
staff to a single location in New York City from three separate locations leased in midtown
Manhattan. The move occurred in June 2011. Tiffany intends to sublease its existing properties
(some of which has occurred) through the end of their lease terms which run through 2015, but
expects to recover only a portion of its rent obligations due to current market conditions.
Accordingly, Tiffany recorded expenses of $42,719,000 during the year ended January 31, 2012
primarily within SG&A expenses in the consolidated statement of earnings, of which $30,884,000
was related to the fair value of the remaining non-cancelable lease obligations reduced by the
estimated sublease rental income. The remaining expense of $11,835,000 in 2011 and expense of
$17,635,000 in 2010 (primarily recorded in SG&A expenses) was due to the acceleration of the
useful lives of certain property and equipment, incremental rent during the transition period and
lease termination payments.
The following is a reconciliation of the accrued exit charges, recorded within other long-term
liabilities on the consolidated balance sheet, associated with the relocation:
(in thousands)
Opening balance, June 30, 2011
Cash payments, net of estimated sublease income
Interest accretion
Ending balance
January 31, 2012
$
$
30,884
(7,340)
436
23,980
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Rent expense for the Company’s operating leases consisted of the following:
(in thousands)
Minimum rent for retail locations
Contingent rent based on sales
Office, distribution and manufacturing
facilities and equipment
Years Ended January 31,
2012
2011
$ 107,814
36,357
$ 96,810
24,642
2010
$ 85,571
17,135
71,624
$ 215,795
37,020
$ 158,472
28,407
$ 131,113
In addition, the Company operates certain TIFFANY & CO. stores within various department stores
and has agreements where the department store operators provide store facilities and other
services. The Company pays the department store operators a percentage fee based on sales
generated in these locations which totaled $115,728,000, $100,237,000 and $94,925,000 in 2011,
2010 and 2009, and which have been excluded from the table above.
Aggregate annual minimum rental payments under non-cancelable operating leases are as follows:
Years Ending January 31,
2013
2014
2015
2016
2017
Thereafter
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Annual Minimum Rental Payments
(in thousands)
$
181,477
166,990
153,036
130,794
109,841
683,360
Diamond Sourcing Activities
The Company has agreements with various diamond producers to purchase defined portions of
their mines’ output. Under such agreements, management expects to purchase approximately
$200,000,000 of rough diamonds in 2012. Purchases beyond 2012 that are contingent upon mine
production cannot be reasonably estimated. The Company will also purchase rough diamonds
from other suppliers, although there are no contractual obligations to do so.
In consideration of these diamond supply agreements, the Company has provided loans to certain
of these suppliers. In March 2011, Laurelton Diamonds, Inc. (“Laurelton”), a direct, wholly-owned
subsidiary of the Company, as lender, entered into a $50,000,000 amortizing term loan facility
agreement (the “Loan”) with Koidu Holdings S.A. (“Koidu”), as borrower, and BSG Resources
Limited, as a limited guarantor. Koidu operates a kimberlite diamond mine in Sierra Leone (the
“Mine”) from which Laurelton now acquires diamonds. Koidu is required under the terms of the
Loan to apply the proceeds of the Loan to capital expenditures necessary to increase the output of
the Mine, among other purposes. The Loan is required to be repaid in full by March 2017 through
semi-annual payments scheduled to begin in March 2013. Interest accrues at a rate per annum
that is the greater of (i) LIBOR plus 3.5% or (ii) 4%. In consideration of the Loan, Laurelton was
granted the right to purchase at fair market value diamonds recovered from the Mine that meet
Laurelton’s quality standards. The Loan may be drawn in multiple installments subject to certain
contingencies; as of July 31, 2011, the Loan was fully funded. The assets of Koidu, including all
equipment and rights in respect of the Mine, are subject to the security interest of a lender that is
not affiliated with the Company. The Loan will be partially secured by diamonds that have been
extracted from the Mine and that have not been sold to third parties. The Company has evaluated
TIFFANY & CO.
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the variable interest entity consolidation requirements with respect to this transaction and has
determined that it is not the primary beneficiary, as it does not have the power to direct any of the
activities that most significantly impact Koidu’s economic performance. The Company also loaned
$6,605,000 to other diamond mining and exploration companies. Loans under all agreements have
been fully funded.
The Company was party to a CDN$35,000,000 ($35,423,000 at January 31, 2008) credit facility
and a CDN$8,000,000 ($8,097,000 at January 31, 2008) working capital loan commitment
(collectively the “Commitment”) to Tahera Diamond Corporation (“Tahera”), a Canadian diamond
mining and exploration company, that was impaired in 2007 for the full amount of the Commitment
including accrued interest. Indebtedness under the Commitment was secured by certain assets of
the mine developed and constructed by Tahera in Nunavut, Canada. During 2008, the
Commitment and the liens were assigned for a nominal value to an unrelated third party in
exchange for the right to participate in future profits, if any, derived from the exploitation of the
assets. In 2009, the Company received $4,442,000 from such third party in full settlement under
the terms of the assignment agreement.
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Contractual Cash Obligations and Contingent Funding Commitments
At January 31, 2012, the Company’s contractual cash obligations and contingent funding
commitments were inventory purchases of $441,760,000 (which includes the $200,000,000
obligation discussed in Diamond Sourcing Activities above) and other contractual obligations
(primarily royalty commitments, construction-in-progress and packaging supplies) of $41,458,000.
Litigation
On June 24, 2011, The Swatch Group Ltd. (“Swatch”) and its wholly-owned subsidiary Tiffany
Watch Co. (“Watch Company”; Swatch and Watch Company, together, the “Swatch Parties”),
initiated an arbitration proceeding against the Registrant and its wholly-owned subsidiaries Tiffany
and Company and Tiffany (NJ) Inc. (the Registrant and such subsidiaries, together, the “Tiffany
Parties”) seeking damages for alleged contractual breach of agreements entered into by and
among the Swatch Parties and the Tiffany Parties that came into effect in December of 2007 (the
“License and Distribution Agreements”). The License and Distribution Agreements pertain to the
development and commercialization of a watch business and, among other things, contained
various licensing and governance provisions and approval requirements relating to business,
marketing and branding plans and provisions allocating profits relating to sales of the watch
business between the Swatch Parties and the Tiffany Parties.
The Swatch Parties and the Tiffany Parties have agreed that all claims and counterclaims between
and among them under the License and Distribution Agreements will be determined through a
confidential arbitration (the “Arbitration”). The Arbitration is pending before a three-member arbitral
panel convened pursuant to the Arbitration Rules of the Netherlands Arbitration Institute in the
Netherlands.
On September 12, 2011, the Swatch Parties publicly issued a Notice of Termination purporting to
terminate the License and Distribution Agreements due to alleged material breach by the Tiffany
Parties.
On December 23, 2011, the Swatch Parties filed a Statement of Claim in the Arbitration providing
additional detail with regard to the allegations by the Swatch Parties and setting forth their
damage claims. In general terms, the Swatch Parties allege that the Tiffany Parties have breached
the License and Development Agreements by obstructing and delaying development of Watch
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Company’s business. The Swatch Parties seek damages based on alternate theories ranging from
CHF 73,000,000 (or approximately $79,000,000 at January 31, 2012) (based on its alleged wasted
investment) to CHF 3,800,000,000 (or approximately $4,100,000,000 at January 31, 2012)
(calculated based on alleged future lost profits of the Swatch Parties and their affiliates).
The Registrant believes the claim is without merit and intends to defend vigorously the Arbitration
and (together with the remaining Tiffany Parties) has filed a Statement of Defense and
Counterclaim on March 9, 2012. As detailed in the filing, the Tiffany Parties dispute both the merits
of the Swatch Parties’ claims and the calculation of the alleged damages. The Tiffany Parties have
also asserted counterclaims for damages attributable to breach by the Swatch Parties and for
termination due to such breach. In general terms, the Tiffany Parties allege that the Swatch Parties
have failed to provide appropriate management, distribution, marketing and other resources for
TIFFANY & CO. brand watches and to honor their contractual obligations to the Tiffany Parties
regarding brand management. The Tiffany Parties’ counterclaims seek damages based on
alternate theories ranging from CHF 120,000,000 (or approximately $131,000,000 at January 31,
2012) (based on its wasted investment) to approximately CHF 540,000,000 (or approximately
$588,000,000 at January 31, 2012) (calculated based on future lost profits of the Tiffany Parties).
The arbitration hearing is currently expected in October 2012.
Management has not included any accrual in the consolidated financial statements for the year
ended January 31, 2012 related to the Arbitration as a result of its assessment that an award of
damages to the Swatch Parties in the Arbitration is not probable. If the Swatch Parties’ claims
were accepted on their merits, the damages award cannot be reasonably estimated at this time
but could have a material adverse effect on the Registrant’s consolidated financial statements or
liquidity.
If, as requested by both parties, the Arbitration tribunal determines that the License and
Distribution Agreements were properly terminated by one or other party, the Tiffany Parties will
need to find a new manufacturer for TIFFANY & CO. brand watches and the Swatch Parties will no
longer be responsible for distributing such watches to third-party distributors. Royalties payable to
the Tiffany Parties by Watch Company under the License and Distribution Agreements have not
been significant in any year. Watches manufactured by Watch Company and sold in TIFFANY &
CO. stores constituted 1% of net sales in 2011, 2010 and 2009.
In addition, the Company is, from time to time, involved in routine litigation incidental to the
conduct of its business, including proceedings to protect its trademark rights, litigation with parties
claiming infringement of patents and other intellectual property rights by the Company, litigation
instituted by persons alleged to have been injured upon premises under the Company’s control
and litigation with present and former employees and customers. Management believes that such
pending litigation, individually and in the aggregate, will not have a significant effect on the
Company’s financial position, earnings or cash flows.
L. RELATED PARTIES
The Company’s Chairman of the Board and Chief Executive Officer is a member of the Board of
Directors of The Bank of New York Mellon, which serves as the Company’s lead bank for its Credit
Facilities, provides other general banking services and serves as the trustee and an investment
manager for the Company’s pension plan. BNY Mellon Shareowner Services has served as the
Company’s transfer agent and registrar. Fees paid to the bank for services rendered, interest on
TIFFANY & CO.
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debt and premiums on derivative contracts amounted to $1,526,000, $1,067,000 and $2,090,000
in 2011, 2010 and 2009.
M. STOCKHOLDERS’ EQUITY
Accumulated Other Comprehensive Loss
(in thousands)
Accumulated other comprehensive (loss) gain, net of tax:
Foreign currency translation adjustments
Deferred hedging loss
Unrealized gain (loss) on marketable securities
Net unrealized loss on benefit plans
January 31,
2012
2011
$
$
49,209
(8,729)
130
(125,740)
$
(85,130)
$
41,415
(1,192)
142
(52,930)
(12,565)
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Stock Repurchase Program
In January 2008, the Company’s Board of Directors amended the existing share repurchase
program to extend the expiration date of the program to January 2011 and to authorize the
repurchase of up to an additional $500,000,000 of the Company’s Common Stock. In January
2011, the Company’s Board of Directors approved a new stock repurchase program (“2011
Program”) and terminated the previously existing program. The 2011 Program authorizes the
Company to repurchase up to $400,000,000 of its Common Stock through open market or private
transactions. The 2011 Program expires on January 31, 2013. The timing of repurchases and the
actual number of shares to be repurchased depend on a variety of discretionary factors such as
stock price, cash-flow forecasts and other market conditions.
The Company’s share repurchase activity was as follows:
(in thousands, except per share amounts)
Cost of repurchases
Shares repurchased and retired
Average cost per share
2012
$ 174,118
2,629
66.23
$
Years Ended January 31,
2010
2011
467
$ 80,786
11
1,843
41.72
43.83
$
$
$
The Company suspended share repurchases during the third quarter of 2008 in order to conserve
cash. In January 2010, the Company resumed repurchasing its shares of Common Stock on the
open market. At January 31, 2012, there remained $217,901,000 of authorization for future
repurchases under the 2011 Program.
Cash Dividends
The Company’s Board of Directors declared quarterly dividends on the Company’s Common Stock
which, on an annual basis, totaled $1.12, $0.95 and $0.68 per common share in 2011, 2010 and
2009.
On February 16, 2012, the Company’s Board of Directors declared a quarterly dividend of $0.29
per share of Common Stock. This dividend will be paid on April 10, 2012 to stockholders of record
on March 20, 2012.
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N. STOCK COMPENSATION PLANS
The Company has two stock compensation plans under which awards may continue to be made:
the Employee Incentive Plan and the Directors Option Plan, both of which were approved by the
stockholders. No award may be made under the Employee Incentive Plan after April 30, 2015 or
under the Directors Option Plan after May 15, 2018.
Under the Employee Incentive Plan, the maximum number of common shares authorized for
issuance was 13,500,000, as amended (subject to adjustment). Awards may be made to
employees of the Company or its related companies in the form of stock options, stock
appreciation rights, shares of stock (or rights to receive shares of stock) and cash. Awards of
shares (or rights to receive shares) reduce the above authorized amount by 1.58 shares for every
share delivered pursuant to such an award. Awards made in the form of non-qualified stock
options, tax-qualified incentive stock options or stock appreciation rights have a maximum term of
10 years from the grant date and may not be granted for an exercise price below fair market value.
The Company has granted time-vesting restricted stock units (“RSUs”), performance-based
restricted stock units (“PSUs”) and stock options under the Employee Incentive Plan. Stock
options vest in increments of 25% per year over four years. RSUs and PSUs issued to the
executive officers vest at the end of a three-year period. RSUs and PSUs issued to other
management employees vest in increments of 25% per year over a four-year period. Vesting of all
PSUs is contingent on the Company’s performance against pre-set objectives established by the
Compensation Committee of the Company’s Board of Directors. The PSUs and RSUs require no
payment from the employee. PSU and RSU payouts will be in shares of Company stock at vesting.
Compensation expense is recognized using the fair market value at the date of grant and recorded
ratably over the vesting period. However, PSU compensation expense may be adjusted over the
vesting period if interim performance objectives are not met. Award holders are not entitled to
receive dividends on unvested stock options, PSUs or RSUs.
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Under the Directors Option Plan, the maximum number of shares of Common Stock authorized for
issuance was 1,000,000 (subject to adjustment); awards may be made to non-employee directors
of the Company in the form of stock options or shares of stock but may not exceed 25,000
(subject to adjustment) shares per non-employee director in any fiscal year. Awards of shares (or
rights to receive shares) reduce the above authorized amount by 1.58 shares for every share
delivered pursuant to such an award. Awards made in the form of stock options may have a
maximum term of 10 years from the grant date and may not be granted for an exercise price below
fair market value unless the director has agreed to forego all or a portion of his or her annual cash
retainer or other fees for service as a director in exchange for below market exercise price options.
Director options vest immediately. Director RSUs vest over a one-year period.
The Company uses newly issued shares to satisfy stock option exercises and vesting of PSUs and
RSUs.
The fair value of each option award is estimated on the grant date using a Black-Scholes option
valuation model and compensation expense is recognized ratably over the vesting period. The
valuation model uses the assumptions noted in the following table. Expected volatilities are based
on historical volatility of the Company’s stock. The Company uses historical data to estimate the
expected term of the option that represents the period of time that options granted are expected
to be outstanding. The risk-free interest rate for periods within the contractual life of the option is
based on the U.S. Treasury yield curve in effect at the grant date.
TIFFANY & CO.
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Dividend yield
Expected volatility
Risk-free interest rate
Expected term in years
2012
1.4%
40.0%
1.5%
6
Years Ended January 31,
2011
1.2%
37.9%
2.8%
7
2010
1.0%
38.4%
3.1%
6
A summary of the option activity for the Company’s stock option plans is presented below:
Outstanding at January 31, 2011
Granted
Exercised
Forfeited/cancelled
Number of
Shares
4,513,970
459,984
(1,925,205)
(3,450)
$
Outstanding at January 31, 2012
3,045,299
Exercisable at January 31, 2012
2,039,131
$
$
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term in Years
Aggregate
Intrinsic
Value
(in thousands)
36.12
63.24
34.05
32.14
41.53
36.46
5.29
$99,360
6.42
5.23
$68,742
$55,868
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The weighted-average grant-date fair value of options granted for the years ended January 31,
2012, 2011 and 2010 was $22.46, $21.37 and $16.06. The total intrinsic value (market value on
date of exercise less grant price) of options exercised during the years ended January 31, 2012,
2011 and 2010 was $65,268,000, $38,315,000 and $15,894,000.
A summary of the activity for the Company’s RSUs is presented below:
Non-vested at January 31, 2011
Granted
Vested
Forfeited
Non-vested at January 31, 2012
Number of Shares
Weighted-Average
Grant-Date Fair Value
947,703
390,524
(343,160)
(38,596)
956,471
$
$
33.27
57.89
32.57
40.14
43.28
A summary of the activity for the Company’s PSUs is presented below:
Non-vested at January 31, 2011
Granted
Vested
Forfeited/cancelled
Non-vested at January 31, 2012
Number of Shares
Weighted-Average
Grant-Date Fair Value
1,118,370
271,818
(3,297)
(330,276)
1,056,615
$
$
37.46
57.34
36.23
35.94
43.05
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The weighted-average grant-date fair value of RSUs granted for the years ended January 31, 2011
and 2010 was $46.22 and $21.05. The weighted-average grant-date fair value of PSUs granted for
the years ended January 31, 2011 and 2010 was $55.05 and $41.38.
As of January 31, 2012, there was $66,836,000 of total unrecognized compensation expense
related to non-vested share-based compensation arrangements granted under the Employee
Incentive Plan and Directors Option Plan. The expense is expected to be recognized over a
weighted-average period of 2.7 years. The total fair value of RSUs vested during the years ended
January 31, 2012, 2011 and 2010 was $21,333,000, $20,524,000 and $15,288,000. The total fair
value of PSUs vested during the years ended January 31, 2012, 2011 and 2010 was $193,000,
$174,000 and $2,572,000.
Total compensation cost for stock-based compensation awards recognized in income and the
related income tax benefit was $30,447,000 and $11,073,000 for the year ended January 31, 2012,
$25,436,000 and $9,181,000 for the year ended January 31, 2011 and $23,538,000 and
$8,425,000 for the year ended January 31, 2010. Total compensation cost capitalized in inventory
was not significant.
O. EMPLOYEE BENEFIT PLANS
Pensions and Other Postretirement Benefits
The Company maintains the following pension plans: a noncontributory defined benefit pension
plan qualified in accordance with the Internal Revenue Service Code (“Qualified Plan”) covering
substantially all U.S. employees hired before January 1, 2006, a non-qualified unfunded retirement
income plan (“Excess Plan”) covering certain employees affected by Internal Revenue Service
Code compensation limits, a non-qualified unfunded Supplemental Retirement Income Plan
(“SRIP”) covering executive officers of the Company and a noncontributory defined benefit
pension plan (“Japan Plan”) covering substantially all employees of Tiffany and Company Japan
Inc.
Qualified Plan benefits are based on (i) average compensation in the highest paid five years of the
last 10 years of employment (“average final compensation”) and (ii) the number of years of service.
Participants with at least 10 years of service who retire after attaining age 55 may receive reduced
retirement benefits. The Company funds the Qualified Plan’s trust in accordance with regulatory
limits to provide for current service and for the unfunded benefit obligation over a reasonable
period and for current service benefit accruals. The Company made a $25,000,000 cash
contribution to the Qualified Plan in 2011 and plans to contribute approximately $35,000,000 in
2012. However, this expectation is subject to change based on asset performance being
significantly different than the assumed long-term rate of return on pension assets.
The Qualified Plan excludes all employees hired on or after January 1, 2006. Instead, employees
hired on or after January 1, 2006 will be eligible to receive a defined contribution retirement benefit
under the Employee Profit Sharing and Retirement Savings (“EPSRS”) Plan (see “Employee Profit
Sharing and Retirement Savings Plan” below). Employees hired before January 1, 2006 will
continue to be eligible for and accrue benefits under the Qualified Plan.
The Excess Plan uses the same retirement benefit formula set forth in the Qualified Plan, but
includes earnings that are excluded under the Qualified Plan due to Internal Revenue Service Code
qualified pension plan limitations. Benefits payable under the Qualified Plan offset benefits payable
under the Excess Plan. Employees vested under the Qualified Plan are vested under the Excess
TIFFANY & CO.
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Plan; however, benefits under the Excess Plan are subject to forfeiture if employment is terminated
for cause and, for those who leave the Company prior to age 65, if they fail to execute and adhere
to noncompetition and confidentiality covenants. The Excess Plan allows participants with at least
10 years of service who retire after attaining age 55 to receive reduced retirement benefits.
The SRIP supplements the Qualified Plan, Excess Plan and Social Security by providing additional
payments upon a participant’s retirement. SRIP benefits are determined by a percentage of
average final compensation; such percentage increases as specified service plateaus are
achieved. Benefits payable under the Qualified Plan, Excess Plan and Social Security offset
benefits payable under the SRIP. Under the SRIP, benefits vest when a participant both (i) attains
age 55 while employed by the Company and (ii) has provided at least 10 years of service. Early
vesting can occur on a change in control. In January 2009, the SRIP was amended to limit the
circumstances in which early vesting can occur due to a change in control. Benefits under the
SRIP are forfeited if benefits under the Excess Plan are forfeited.
Japan Plan benefits are based on monthly compensation and the number of years of service.
Benefits are payable in a lump sum upon retirement, termination, resignation or death if the
participant has completed at least three years of service.
The Company accounts for pension expense using the projected unit credit actuarial method for
financial reporting purposes. The actuarial present value of the benefit obligation is calculated
based on the expected date of separation or retirement of the Company’s eligible employees.
The Company provides certain health-care and life insurance benefits (“Other Postretirement
Benefits”) for retired employees and accrues the cost of providing these benefits throughout the
employees’ active service period until they attain full eligibility for those benefits. Substantially all
of the Company’s U.S. full-time employees may become eligible for these benefits if they reach
normal or early retirement age while working for the Company. The cost of providing
postretirement health-care benefits is shared by the retiree and the Company, with retiree
contributions evaluated annually and adjusted in order to maintain the Company/retiree cost-
sharing target ratio. The life insurance benefits are noncontributory. The Company’s employee and
retiree health-care benefits are administered by an insurance company, and premiums on life
insurance are based on prior years’ claims experience.
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Obligations and Funded Status
The following tables provide a reconciliation of benefit obligations, plan assets and funded status
of the plans as of the measurement date:
(in thousands)
Change in benefit obligation:
Benefit obligation at beginning
of year
Service cost
Interest cost
Participants’ contributions
MMA retiree drug subsidy
Actuarial loss
Benefits paid
Translation
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at
beginning of year
Actual return on plan assets
Employer contribution
Participants’ contributions
MMA retiree drug subsidy
ERRP subsidy
Benefits paid
Fair value of plan assets
Pension Benefits
2011
2012
January 31,
Other Postretirement
Benefits
2011
2012
$ 432,716 $ 382,264 $ 49,451 $ 42,331
1,711
2,943
1,786
116
3,988
(3,424)
—
49,451
14,105
25,321
—
—
93,636
(18,315)
1,178
548,641
12,741
23,860
—
—
30,788
(18,148)
1,211
432,716
2,198
3,101
1,565
200
9,111
(3,791)
—
61,835
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262,808
(4,351)
26,592
—
—
—
(18,315)
201,564
37,921
41,471
—
—
—
(18,148)
—
—
1,524
1,565
200
502
(3,791)
—
—
1,522
1,786
116
—
(3,424)
at end of year
266,734
262,808
—
—
Funded status at end of year
$ (281,907) $ (169,908) $
(61,835) $
(49,451)
The following tables provide additional information regarding the Company’s pension plans’
projected benefit obligations and assets (included in pension benefits in the table above) and
accumulated benefit obligation:
(in thousands)
Projected benefit obligation
Fair value of plan assets
Funded status
$
$
Qualified
436,481 $
266,734
(169,747) $
Excess/SRIP
94,784 $
—
(94,784) $
January 31, 2012
Japan
17,376 $
—
(17,376) $
Total
548,641
266,734
(281,907)
Accumulated benefit obligation $
396,882 $
60,339 $
14,477 $
471,698
TIFFANY & CO.
K - 7 5
(in thousands)
Projected benefit obligation
Fair value of plan assets
Funded status
$
$
Qualified
348,724 $
262,808
(85,916) $
Excess/SRIP
69,560 $
—
(69,560) $
January 31, 2011
Japan
14,432 $
—
(14,432) $
Total
432,716
262,808
(169,908)
Accumulated benefit obligation $
312,966 $
40,215 $
11,756 $
364,937
At January 31, 2012, the Company had a current liability of $5,178,000 and a non-current liability
of $338,564,000 for pension and other postretirement benefits. At January 31, 2011, the Company
had a current liability of $1,924,000 and a non-current liability of $217,435,000 for pension and
other postretirement benefits.
Amounts recognized in accumulated other comprehensive loss consist of:
January 31,
F
O
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M
1
0
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K
(in thousands)
Net actuarial loss
Prior service cost (credit)
Total before tax
$
2012
196,610
2,648
$ 199,258
Pension Benefits Other Postretirement Benefits
2011
3,360
(6,375)
(3,015)
2012
12,455
(5,716)
6,739 $
2011
86,934
3,712
90,646
$
$
$
$
$
The estimated pre-tax amount that will be amortized from accumulated other comprehensive loss
into net periodic benefit cost within the next 12 months is as follows:
(in thousands)
Net actuarial loss
Prior service cost (credit)
$
Pension Benefits Other Postretirement Benefits
384
(659)
(275)
15,594
1,015
16,609
$
$
$
TIFFANY & CO.
K - 7 6
Components of Net Periodic Benefit Cost and
Other Amounts Recognized in Other Comprehensive Earnings
Years Ended January 31,
(in thousands)
Service cost
Interest cost
Expected return on plan
assets
Amortization of prior service
2012
Pension Benefits
2010
2011
Other Postretirement Benefits
2010
$ 14,105 $ 12,741 $ 11,444 $ 2,198 $ 1,711 $ 1,259
2,641
22,810
23,860
25,321
2,943
3,101
2012
2011
(18,716)
(17,568)
(14,591)
–
–
–
cost
1,065
1,078
1,077
(659)
(659)
(659)
Amortization of net loss
(gain)
Settlement loss
Net periodic benefit cost
Net actuarial loss
Recognized actuarial (loss)
7,137
–
28,912
2,886
–
22,997
(84)
191
20,847
16
–
4,656
1
–
3,996
–
–
3,241
116,703
10,583
23,044
9,111
3,988
3,019
gain
(7,137)
(2,886)
84
(16)
(1)
Recognized prior service
(cost) credit
Translation
Total recognized in other
comprehensive earnings
Total recognized in net
periodic benefit cost and
other comprehensive
earnings
(1,065)
111
(1,078)
100
(1,077)
(4)
659
–
659
–
108,612
6,719
22,047
9,754
4,646
3,678
$137,524 $ 29,716 $ 42,894 $ 14,410 $ 8,642 $ 6,919
K
-
0
1
M
R
O
F
–
659
–
Weighted-average assumptions used to determine benefit obligations:
Assumptions
Discount rate:
Qualified Plan
Excess Plan/SRIP
Japan Plan
Other Postretirement Benefits
Rate of increase in compensation:
Qualified Plan
Excess Plan
SRIP
Japan Plan
TIFFANY & CO.
K - 7 7
2012
5.00%
5.00%
1.50%
5.25%
2.75%
4.25%
7.25%
1.00%
January 31,
2011
6.00%
6.00%
1.75%
6.25%
3.50%
5.00%
8.00%
1.25%
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate:
Qualified Plan
Excess Plan/SRIP
Japan Plan
Other Postretirement Benefits
Expected return on plan assets
Rate of increase in compensation:
Qualified Plan
Excess Plan
SRIP
Japan Plan
2012
2011
2010
Years Ended January 31,
6.00%
6.00%
1.75%
6.25%
7.50%
3.50%
5.00%
8.00%
1.25%
6.50%
6.75%
3.00%
6.75%
7.50%
3.75%
5.25%
8.25%
2.50%
7.25%
7.50%
2.75%
7.25%
7.50%
4.00%
5.50%
8.50%
2.25%
F
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K
The expected long-term rate of return on Qualified Plan assets is selected by taking into account
the average rate of return expected on the funds invested or to be invested to provide for benefits
included in the projected benefit obligation. More specifically, consideration is given to the
expected rates of return (including reinvestment asset return rates) based upon the plan’s current
asset mix, investment strategy and the historical performance of plan assets.
For postretirement benefit measurement purposes, 8.50% (for pre-age 65 retirees) and 7.00% (for
post-age 65 retirees) annual rates of increase in the per capita cost of covered health care were
assumed for 2012. The rates were assumed to decrease gradually to 4.75% by 2020 and remain at
that level thereafter.
Assumed health-care cost trend rates affect amounts reported for the Company’s postretirement
health-care benefits plan. A one-percentage-point change in the assumed health-care cost trend
rate would not have a significant effect on the Company’s accumulated postretirement benefit
obligation or the aggregate service and interest cost components of the 2011 postretirement
expense.
Plan Assets
The Company’s investment objectives, related to Qualified Plan assets, are the preservation of
principal and the achievement of a reasonable rate of return over time. The Qualified Plan’s assets
are allocated based on an expectation that equity securities will outperform debt securities over
the long term. The Company’s target asset allocations are as follows: 60% – 70% in equity
securities; 20% – 30% in debt securities; and 5% – 15% in other securities. The Company
attempts to mitigate investment risk by rebalancing asset allocation periodically.
TIFFANY & CO.
K - 7 8
The fair value of the Company’s Qualified Plan assets at January 31, 2012 and 2011 by asset
category is as follows:
Fair Value at
January 31,
2012
Fair Value Measurements
Using Inputs Considered as*
Level 1
Level 2
Level 3
$
187,141
$
— $
187,141 $
19,769
19,630
28,630
18,148
—
—
1,621
19,630
28,630
—
—
—
—
11,564
266,734
$
$
—
18,148
—
237,022 $
$
11,564
11,564
Fair Value at
January 31,
2011
Fair Value Measurements
Using Inputs Considered as*
Level 1
Level 2
Level 3
$
194,708
$
—
$
194,708
$
24,045
22,996
7,932
18,334
—
—
5,711
22,996
7,932
K
-
0
1
M
R
O
F
—
—
—
—
(in thousands)
Equity securities:
Common/collective trusts a
Fixed income securities:
Government bonds
Corporate bonds
Mortgage obligations
Other types of investments:
Limited partnerships
(in thousands)
Equity securities:
Common/collective trusts a
Fixed income securities:
Government bonds
Corporate bonds
Mortgage obligations
Other types of investments:
Limited partnerships
Multi-strategy hedge fund
$
* See Note J – Fair Value of Financial Instruments for a description of the levels of inputs.
a Common/collective trusts include investments in U.S. and international large, middle and small capitalization equities.
$
$
$
13,059
68
262,808
—
—
18,334
—
—
231,347
13,059
68
13,127
TIFFANY & CO.
K - 7 9
(in thousands)
Beginning balance at February 1, 2010
Unrealized gain(loss), net
Realized gain (loss), net
Purchases, sales and settlements, net
Ending balance at January 31, 2011
Unrealized (loss) gain, net
Realized gain (loss), net
Purchases
Settlements
Ending balance at January 31, 2012
Limited
partnerships
Multi-strategy
hedge fund
$
$
11,692
1,234
33
100
13,059
(97)
624
1,641
(3,663)
11,564
$
$
591
(94)
(197)
(232)
68
582
(583)
–
(67)
–
F
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0
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Valuation Techniques
Investments in common/collective trusts are stated at estimated fair value which represents the
net asset value of shares held by the Qualified Plan as reported by the investment advisor.
Investments in limited partnerships are valued at estimated fair value based on financial
information received from the investment advisor and/or general partner. The net asset value is
based on the value of the underlying assets owned by the fund, minus its liabilities and then
divided by the number of shares outstanding.
Securities traded on the national securities exchange (certain government bonds) are valued at the
last reported sales price or closing price on the last business day of the fiscal year. Investments
traded in the over-the-counter market and listed securities for which no sales were reported
(certain government bonds, corporate bonds and mortgage obligations) are valued at the last
reported bid price.
Investments in multi-strategy hedge funds are valued at fair value, generally at an amount equal to
the net asset value of the investment in the underlying funds as determined by the underlying
fund’s general partner or manager. If no such information is available, a value is determined by the
investment manager.
The Company expects the following future benefit payments to be paid:
Benefit Payments
Years Ending January 31,
Pension Benefits
(in thousands)
Other Postretirement Benefits
(in thousands)
2013
2014
2015
2016
2017
2018–2022
$ 19,707
19,692
20,036
20,566
21,091
130,137
TIFFANY & CO.
K - 8 0
$
2,461
2,425
2,414
2,385
2,343
12,294
Employee Profit Sharing and Retirement Savings Plan
The Company maintains an EPSRS Plan that covers substantially all U.S.-based employees.
Under the profit-sharing feature of the EPSRS Plan, the Company makes contributions, in the form
of newly-issued Company Common Stock, to the employees’ accounts based on the achievement
of certain targeted earnings objectives established by, or as otherwise determined by, the
Company’s Board of Directors. The Company recorded expense of $3,150,000, $4,500,000 and
$5,000,000 in 2011, 2010 and 2009. Under the retirement savings feature of the EPSRS Plan,
employees who meet certain eligibility requirements may participate by contributing up to 15% of
their annual compensation, and the Company may provide up to a 50% matching cash
contribution up to 6% of each participant’s total compensation. The Company recorded expense
of $6,968,000, $6,016,000 and $5,506,000 in 2011, 2010 and 2009. Contributions to both features
of the EPSRS Plan are made in the following year.
Under the profit-sharing feature of the EPSRS Plan, the Company’s stock contribution is required
to be maintained in such stock until the employee has two or more years of service, at which time
the employee may diversify his or her Company stock account into other investment options
provided under the plan. Under the retirement savings portion of the EPSRS Plan, the employees
have the ability to elect to invest their contribution and the matching contribution in Company
stock. At January 31, 2012, investments in Company stock represented 29% of total EPSRS Plan
assets.
The EPSRS Plan provides a defined contribution retirement benefit (“DCRB”) to eligible employees
hired on or after January 1, 2006 (see “Pensions and Other Postretirement Benefits” above). Under
the DCRB, the Company makes contributions each year to each employee’s account at a rate
based upon age and years of service. These contributions are deposited into individual accounts
set up in each employee’s name to be invested in a manner similar to the retirement savings
portion of the EPSRS Plan. The Company recorded expense of $2,926,000, $1,866,000 and
$1,685,000 in 2011, 2010 and 2009.
Deferred Compensation Plan
The Company has a non-qualified deferred compensation plan for directors, executives and
certain management employees, whereby eligible participants may defer a portion of their
compensation for payment at specified future dates, upon retirement, death or termination of
employment. The deferred compensation is adjusted to reflect performance, whether positive or
negative, of selected investment options chosen by each participant during the deferral period.
The amounts accrued under the plans were $20,816,000 and $21,232,000 at January 31, 2012 and
2011, and are reflected in other long-term liabilities. The Company does not promise or guarantee
any rate of return on amounts deferred.
P.
INCOME TAXES
Earnings from continuing operations before income taxes consisted of the following:
K
-
0
1
M
R
O
F
(in thousands)
United States
Foreign
Years Ended January 31,
2012
$ 448,780
216,171
$ 664,951
2011
$ 352,126
195,308
$ 547,434
2010
$ 226,347
163,627
$ 389,974
TIFFANY & CO.
K - 8 1
Components of the provision for income taxes were as follows:
(in thousands)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
2012
$ 181,935
35,109
59,485
276,529
(49,746)
(447)
(575)
(50,768)
$ 225,761
Years Ended January 31,
2011
2010
$ 149,815
36,580
52,968
239,363
(52,452)
(8,220)
340
(60,332)
$ 179,031
$ 73,948
25,927
39,262
139,137
(17,711)
(8,931)
11,803
(14,839)
$ 124,298
F
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Reconciliations of the provision for income taxes at the statutory Federal income tax rate to the
Company’s effective income tax rate were as follows:
Statutory Federal income tax rate
State income taxes, net of Federal benefit
Foreign losses with no tax benefit
Undistributed foreign earnings
Net change in uncertain tax positions
Domestic manufacturing deduction
Other
2012
35.0%
3.3
0.2
(4.0)
0.3
(1.6)
0.8
34.0%
Years Ended January 31,
2011
35.0%
2.8
0.6
(4.0)
0.3
(1.2)
(0.8)
32.7%
2010
35.0%
2.4
1.3
(3.4)
(1.7)
(1.0)
(0.7)
31.9%
The Company has the intent to indefinitely reinvest any undistributed earnings of primarily all
foreign subsidiaries. As of January 31, 2012 and 2011, the Company has not provided deferred
taxes on approximately $403,000,000 and $345,000,000 of undistributed earnings. Generally, such
amounts become subject to U.S. taxation upon the remittance of dividends and under certain
other circumstances. U.S. Federal income taxes of approximately $71,000,000 and $67,800,000
would be incurred if these earnings were distributed.
TIFFANY & CO.
K - 8 2
Deferred tax assets (liabilities) consisted of the following:
(in thousands)
Deferred tax assets:
Pension/postretirement benefits
Accrued expenses
Share-based compensation
Depreciation
Foreign and state net operating losses
Sale-leaseback
Inventory
Accrued exit charges
Other
Valuation allowance
Deferred tax liabilities:
Foreign tax credit
Other
Net deferred tax asset
2012
$ 123,721
30,219
24,312
42,141
20,891
73,562
35,426
9,233
45,921
405,426
(13,570)
391,856
(38,294)
—
(38,294)
$ 353,562
January 31,
2011
$ 85,302
29,120
25,093
27,775
23,438
80,829
3,824
–
39,407
314,788
(22,579)
292,209
(45,704)
(2,628)
(48,332)
$ 243,877
K
-
0
1
M
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O
F
The Company has recorded a valuation allowance against certain deferred tax assets related to
state and foreign net operating loss carryforwards where management has determined it is more
likely than not that deferred tax assets will not be realized in the future. The overall valuation
allowance relates to tax loss carryforwards and temporary differences for which no benefit is
expected to be realized. Tax loss carryforwards of approximately $8,000,000 and $84,000,000
exist in certain state and foreign jurisdictions. Whereas some of these tax loss carryforwards do
not have an expiration date, others expire at various times from January 2013 through January
2031.
The following table reconciles the unrecognized tax benefits:
(in thousands)
Unrecognized tax benefits at beginning of year
Gross increases – tax positions in prior period
Gross decreases – tax positions in prior period
Gross increases – current period tax positions
Settlements
Lapse of statute of limitations
Unrecognized tax benefits at end of year
2012
$ 32,273
1,365
(6,480)
312
(1,760)
(201)
$ 25,509
2011
$ 32,226
2,367
(2,003)
3,241
(1,394)
(2,164)
$ 32,273
January 31,
2010
$ 48,016
5,256
(12,478)
6,441
(3,518)
(11,491)
$ 32,226
Included in the balance of unrecognized tax benefits at January 31, 2012, 2011 and 2010 are
$12,998,000, $11,605,000 and $12,355,000 of tax benefits that, if recognized, would affect the
effective income tax rate.
TIFFANY & CO.
K - 8 3
The Company recognizes interest expense and penalties related to unrecognized tax benefits
within the provision for income taxes in the accompanying consolidated statement of earnings.
During the years ended January 31, 2012, 2011 and 2010, the Company recognized approximately
$3,924,000, $1,184,000 and ($3,112,000) of expense/(income) associated with interest and
penalties. Accrued interest and penalties are included within accounts payable and accrued
liabilities and other long-term liabilities in the consolidated balance sheet, and were $7,228,000
and $4,189,000 at January 31, 2012 and 2011.
The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. As a
matter of course, various taxing authorities regularly audit the Company. The Company’s tax filings
are currently being examined by a number of tax authorities in various jurisdictions. Ongoing
audits where subsidiaries have a material presence include New York state (tax years 2004–2007),
New Jersey (tax years 2006–2009) and the Internal Revenue Service (tax years 2006–2009). Tax
years from 2004–present are open to examination in U.S. Federal and various state, local and
foreign jurisdictions. The Company believes that its tax positions comply with applicable tax laws
and that it has adequately provided for these matters. However, the audits may result in proposed
assessments where the ultimate resolution may result in the Company owing additional taxes.
Management anticipates that it is reasonably possible that the total gross amount of unrecognized
tax benefits will decrease by approximately $20,000,000 in the next 12 months, a portion of which
may affect the effective tax rate; however, management does not currently anticipate a significant
effect on net earnings. Future developments may result in a change in this assessment.
Q. SEGMENT INFORMATION
The Company’s products are primarily sold in TIFFANY & CO. retail locations around the world.
Net sales by geographic area are presented by attributing revenues from external customers on
the basis of the country in which the merchandise is sold.
In deciding how to allocate resources and assess performance, the Company’s Chief Operating
Decision Maker (“CODM”) regularly evaluates the performance of its reportable segments on the
basis of net sales and earnings from continuing operations, after the elimination of inter-segment
sales and transfers. The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies.
F
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K
TIFFANY & CO.
K - 8 4
Certain information relating to the Company’s segments is set forth below:
2012
2011
2010
Years Ended January 31,
(in thousands)
Net sales:
Americas
Asia-Pacific
Japan
Europe
Total reportable segments
Other
$
$
1,805,783
748,214
616,505
421,141
3,591,643
51,294
3,642,937
Earnings (losses) from continuing operations: *
Americas
Asia-Pacific
$
Japan
Europe
Total reportable segments
Other
$
387,951
205,711
184,767
105,728
884,157
(5,247)
878,910
$
$
$
$
1,574,571
549,197
546,537
360,831
3,031,136
54,154
3,085,290
$ 1,410,845
426,296
512,989
306,321
2,656,451
53,253
$ 2,709,704
340,331
133,448
162,800
88,309
724,888
3,358
728,246
$
$
263,470
100,690
139,519
60,102
563,781
(8,767)
555,014
K
-
0
1
M
R
O
F
* Represents earnings (losses) from continuing operations before unallocated corporate expenses, other operating
income, other operating expense and interest expense, financing costs and other income, net.
The Company’s CODM does not evaluate the performance of the Company’s assets on a segment
basis for internal management reporting and, therefore, such information is not presented.
The following table sets forth reconciliations of the segments’ earnings from continuing operations
to the Company’s consolidated earnings from continuing operations before income taxes:
(in thousands)
Earnings from continuing operations
for segments
Unallocated corporate expenses
Other operating income
Other operating expense
Interest expense, financing costs and
other income, net
Earnings from continuing operations
before income taxes
2012
$ 878,910
(127,765)
—
(42,719)
Years Ended January 31,
2011
2010
$ 728,246
(115,830)
—
(17,635)
$ 555,014
(114,964)
4,442
(4,000)
(43,475)
(47,347)
(50,518)
$ 664,951
$ 547,434
$ 389,974
Unallocated corporate expenses includes certain 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.
TIFFANY & CO.
K - 8 5
Other operating income for the year ended January 31, 2010 represents $4,442,000 of income
received in connection with the assignment of the Tahera commitments and liens to an unrelated
third party (see “Note K. Commitments and Contingencies”).
Other operating expense for the years ended January 31, 2012 and 2011 represents $42,719,000
and $17,635,000 of expense related to Tiffany’s relocation of its New York headquarters staff to a
single location (see “Note K. Commitments and Contingencies”). Other operating expense for the
year ended January 31, 2010 represents $4,000,000 paid to terminate a third-party management
agreement (see “Note C. Acquisitions and Dispositions”).
Sales to unaffiliated customers and long-lived assets by geographic areas were as follows:
(in thousands)
Net sales:
United States
Japan
Other countries
Long-lived assets:
United States
Japan
Other countries
F
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K
2012
$ 1,687,478
616,505
1,338,954
$ 3,642,937
$ 597,124
32,030
171,014
$ 800,168
Years Ended January 31,
2011
2010
$ 1,484,505
546,537
1,054,248
$ 3,085,290
$ 529,763
31,729
135,486
$ 696,978
$ 1,338,216
512,989
858,499
$ 2,709,704
$ 560,450
34,334
121,558
$ 716,342
Classes of Similar Products
(in thousands)
Net sales:
Statement, fine & solitaire jewelry
Engagement jewelry & wedding
bands
Silver & gold jewelry
Designer jewelry
All other
2012
Years Ended January 31,
2011
2010
$ 596,094
$ 481,999
$ 385,250
1,058,921
1,108,182
561,000
318,740
$ 3,642,937
853,488
985,754
489,622
274,427
$ 3,085,290
730,660
913,272
427,139
253,383
$ 2,709,704
Certain reclassifications have been made to the prior years’ classes of similar products to conform
to the current year presentation.
TIFFANY & CO.
K - 8 6
R. QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share amounts)
Net sales
Gross profit
Earnings from continuing operations
Net earnings
Net earnings per share:
Basic
Diluted
April 30 a
$ 761,018
443,693
135,966
81,063
July 31 a October 31
$ 872,712 $ 821,767
475,849
146,177
89,689
514,697
140,540
90,043
2011 Quarters Ended
January 31
$ 1,187,440
716,915
285,743
178,395
$
$
0.64
0.63
$
$
0.70
0.69
$
$
0.71 $
0.70 $
1.41
1.39
a
Includes pre-tax charges of $8,221,000 and $34,497,000, for the quarters ended April 30 and July 31, which reduced
net earnings per diluted share by $0.04 and $0.16 in the respective quarters, associated with Tiffany’s relocation of its
New York headquarters staff to a single location (see “Note K. Commitments and Contingencies”).
(in thousands, except per share amounts)
Net sales
Gross profit
Earnings from continuing operations
Net earnings
Net earnings per share:
Basic
Diluted
a
April 30 a, b
$ 633,586
365,978
105,417
64,425
July 31 b October 31 b
$ 668,760 $ 681,729
398,571
97,578
55,079
386,752
113,606
67,675
2010 Quarters Ended
January 31 b
$ 1,101,215
670,977
278,180
181,224
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$
$
0.51
0.50
$
$
0.53
0.53
$
$
0.44 $
0.43 $
1.43
1.41
Includes a net income tax benefit of $3,096,000 primarily due to a change in the tax status of certain subsidiaries
associated with the acquisition in 2009 of additional equity interests in diamond sourcing and polishing operations,
which benefited net earnings per diluted share by $0.02 in the quarter.
b Includes pre-tax charges of $860,000, $3,945,000, $6,421,000 and $6,409,000, for the quarters ended April 30,
July 31, October 31 and January 31, which reduced net earnings per diluted share by less than $0.01, $0.02, $0.03
and $0.03 in the respective quarters, associated with Tiffany’s relocation of its New York headquarters staff to a single
location (see “Note K. Commitments and Contingencies”).
Basic and diluted earnings per share are computed independently for each quarter presented.
Accordingly, the sum of the quarterly earnings per share may not agree with the calculated full year
earnings per share.
TIFFANY & CO.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
NONE
Item 9A. Controls and Procedures.
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DISCLOSURE CONTROLS AND PROCEDURES
Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934), the Registrant’s chief executive officer
and chief financial officer concluded that, as of the end of the period covered by this report, the
Registrant’s disclosure controls and procedures are effective to ensure that information required to
be disclosed by the Registrant in the reports that it files or submits under the Securities Exchange
Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms and (ii) accumulated and communicated to our management,
including our chief executive officer and chief financial officer, to allow timely decisions regarding
required disclosure.
In the ordinary course of business, the Registrant reviews its system of internal control over
financial reporting and makes changes to its systems and processes to improve controls and
increase efficiency, while ensuring that the Registrant maintains an effective internal control
environment. Changes may include such activities as implementing new, more efficient systems
and automating manual processes.
The Registrant’s chief executive officer and chief financial officer have determined that there have
been no changes in the Registrant’s internal control over financial reporting during the period
covered by this report identified in connection with the evaluation described above that have
materially affected, or are reasonably likely to materially affect, the Registrant’s internal control
over financial reporting.
The Registrant’s management, including its chief executive officer and chief financial officer,
necessarily applied their judgment in assessing the costs and benefits of such controls and
procedures. By their nature, such controls and procedures cannot provide absolute certainty, but
can provide reasonable assurance regarding management’s control objectives. Our chief executive
officer and our chief financial officer have concluded that the Registrant’s disclosure controls and
procedures are (i) designed to provide such reasonable assurance and (ii) are effective at that
reasonable assurance level.
TIFFANY & CO.
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Report of Management
Management’s Responsibility for Financial Information. The Company’s consolidated financial
statements were prepared by management, who are responsible for their integrity and objectivity.
The financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America and, as such, include amounts based on management’s
best estimates and judgments.
Management is further responsible for maintaining a system of internal accounting control
designed to provide reasonable assurance that the Company’s assets are adequately
safeguarded, and that the accounting records reflect transactions executed in accordance with
management’s authorization. The system of internal control is continually reviewed and is
augmented by written policies and procedures, the careful selection and training of qualified
personnel and a program of internal audit.
The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm. Their report is shown on page K-42. The Audit
Committee of the Board of Directors, which is composed solely of independent directors, meets
regularly with financial management and the independent registered public accounting firm to
discuss specific accounting, financial reporting and internal control matters. Both the independent
registered public accounting firm and the internal auditors have full and free access to the Audit
Committee. Each year the Audit Committee selects the firm that is to perform audit services for the
Company.
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Management’s Report on Internal Control over Financial Reporting. Management is responsible for
establishing and maintaining adequate internal control over financial reporting, as defined in
Exchange Act Rule 13a – 15(f). Management conducted an evaluation of the effectiveness of
internal control over financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). Based on this evaluation, management concluded that internal control over financial
reporting was effective as of January 31, 2012 based on criteria in Internal Control – Integrated
Framework issued by the COSO. The effectiveness of the Company’s internal control over financial
reporting as of January 31, 2012 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report which is shown on page K-
42.
/s/ Michael J. Kowalski
Chairman of the Board and Chief Executive Officer
/s/ Patrick F. McGuiness
Senior Vice President and Chief Financial Officer
Item 9B. Other Information.
NONE
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Incorporated by reference from the sections titled “Ownership by Directors, Director Nominees and
Executive Officers,” “Compliance of Directors, Executive Officers and Greater-Than-Ten-Percent
Stockholders with Section 16(a) Beneficial Ownership Reporting Requirements” and
“DISCUSSION OF PROPOSALS PRESENTED BY THE BOARD. Item 1. Election of Directors” in
Registrant's Proxy Statement dated April 5, 2012.
CODE OF ETHICS AND OTHER CORPORATE GOVERNANCE DISCLOSURES
Registrant has adopted a Code of Business and Ethical Conduct for its Directors, Chief Executive
Officer, Chief Financial Officer and all other officers of the Registrant. A copy of this Code is posted
on the corporate governance section of the Registrant’s website,
http://investor.tiffany.com/governance.cfm; go to “Code of Conduct.” The Registrant will also
provide a copy of the Code of Business and Ethical Conduct to stockholders upon request.
See Registrant’s Proxy Statement dated April 5, 2012, for information within the section titled
“Business Conduct Policy and Code of Ethics.”
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Item 11. Executive Compensation.
Incorporated by reference from the section titled “COMPENSATION OF THE CEO AND OTHER
EXECUTIVE OFFICERS” in Registrant's Proxy Statement dated April 5, 2012.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
Incorporated by reference from the section titled “OWNERSHIP OF THE COMPANY” in
Registrant's Proxy Statement dated April 5, 2012.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
See Executive Officers of the Registrant and Board of Directors information incorporated by
reference from the sections titled “Independent Directors Constitute a Majority of the Board,”
“TRANSACTIONS WITH RELATED PERSONS” and “EXECUTIVE OFFICERS OF THE COMPANY”
in Registrant's Proxy Statement dated April 5, 2012.
Item 14. Principal Accounting Fees and Services.
Incorporated by reference from the section titled “Fees and Services of PricewaterhouseCoopers
LLP” in Registrant’s Proxy Statement dated April 5, 2012.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) List of Documents Filed As Part of This Report:
1. Financial Statements
Report of Independent Registered Public Accounting Firm.
Consolidated Balance Sheets as of January 31, 2012 and 2011.
Consolidated Statements of Earnings for the years ended January 31, 2012, 2011 and 2010.
Consolidated Statements of Stockholders' Equity and Comprehensive Earnings for the years
ended January 31, 2012, 2011 and 2010.
Consolidated Statements of Cash Flows for the years ended January 31, 2012, 2011 and 2010.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
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The following financial statement schedule should be read in conjunction with the Consolidated
Financial Statements:
Schedule II - Valuation and Qualifying Accounts and Reserves.
All other schedules have been omitted since they are neither applicable nor required, or because
the information required is included in the consolidated financial statements and notes thereto.
3. Exhibits
The following exhibits have been filed with the Securities and Exchange Commission, but are not
attached to copies of this Annual Report on Form 10-K other than complete copies filed with said
Commission and the New York Stock Exchange:
Exhibit
Description
3.1
3.1a
3.2
Restated Certificate of Incorporation of Registrant. Incorporated by reference from
Exhibit 3.1 to Registrant’s Report on Form 8-K dated May 16, 1996, as amended
by the Certificate of Amendment of Certificate of Incorporation dated May 20,
1999. Incorporated by reference from Exhibit 3.1 filed with Registrant’s Report on
Form 10-Q for the Fiscal Quarter ended July 31, 1999.
Amendment to Certificate of Incorporation of Registrant dated May 18, 2000.
Previously filed as Exhibit 3.1b to Registrant's Annual Report on Form 10-K for the
Fiscal Year ended January 31, 2001.
Restated By-Laws of Registrant, as last amended July 19, 2007. Incorporated by
reference from Exhibit 3.2 to Registrant’s Report on Form 8-K dated July 20, 2007.
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Exhibit
Description
10.122
10.122a
10.122b
10.122c
10.122d
10.122e
10.122f
10.123
10.128
10.132
Agreement dated as of April 3, 1996 among American Family Life Assurance
Company of Columbus, Japan Branch, Tiffany & Co. Japan, Inc., Japan Branch,
and Registrant, as Guarantor, for yen 5,000,000,000 Loan Due 2011. Incorporated
by reference from Exhibit 10.122 filed with Registrant's Report on Form 10-Q for
the Fiscal Quarter ended April 30, 1996.
Amendment No. 1 to the Agreement referred to in Exhibit 10.122 above dated
November 18, 1998. Incorporated by reference from Exhibit 10.122a filed with
Registrant's Annual Report on Form 10-K for the Fiscal Year ended January 31,
1999.
Guarantee by Tiffany & Co. of the obligations under the Agreement referred to in
Exhibit 10.122 above dated April 30, 1996. Incorporated by reference from Exhibit
10.122b filed with Registrant’s Report on Form 8-K dated August 2, 2002.
Amendment No. 2 to Guarantee referred to in Exhibit 10.122b above, dated
October 15, 1999. Incorporated by reference from Exhibit 10.122c filed with
Registrant’s Report on Form 8-K dated August 2, 2002.
Amendment No. 3 to Guarantee referred to in Exhibit 10.122b above, dated July
16, 2002. Incorporated by reference from Exhibit 10.122d filed with Registrant’s
Report on Form 8-K dated August 2, 2002.
Amendment No. 4 to Guarantee referred to in Exhibit 10.122b above, dated
December 9, 2005. Incorporated by reference from Exhibit 10.122e filed with
Registrant’s Report on Form 10-K for the Fiscal Year ended January 31, 2006.
Amendment No. 5 to Guarantee referred to in Exhibit 10.122b above, dated May
31, 2006. Incorporated by reference from Exhibit 10.122f filed with Registrant’s
Annual Report on Form 10-K for the Fiscal Year ended January 31, 2007.
Agreement made effective as of February 1, 1997 by and between Tiffany and Elsa
Peretti. Incorporated by reference from Exhibit 10.123 filed with Registrant's
Annual Report on Form 10-K for the Fiscal Year ended January 31, 1997.
Agreement and Memorandum of Agreement made the 1st day of February 2009 by
and between Tiffany & Co. Japan Inc. and Mitsukoshi Ltd. of Japan. Incorporated
by reference from Exhibit 10.128 filed with Registrant’s Report on Form 8-K dated
February 18, 2009.
Form of Note Purchase Agreement between Registrant and various institutional
note purchasers with Schedules B, 5.14 and 5.15 and Exhibits 1A, 1B and 4.7
thereto, dated as of July 18, 2002 in respect of Registrant’s $40,000,000 principal
amount 6.15% Series C Notes due July 18, 2009 and $60,000,000 principal
amount 6.56% Series D Notes due July 18, 2012. Incorporated by reference from
Exhibit 10.132 filed with Registrant’s Report on Form 8-K dated August 2, 2002.
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Exhibit
Description
10.133
10.145
10.145a
10.146
10.147
10.149
10.155
Guaranty Agreement dated July 18, 2002 with respect to the Note Purchase
Agreements (see Exhibit 10.132 above) by Tiffany and Company, Tiffany & Co.
International and Tiffany & Co. Japan Inc. in favor of each of the note purchasers.
Incorporated by reference from Exhibit 10.133 filed with Registrant’s Report on
Form 8-K dated August 2, 2002.
Ground Lease between Tiffany and Company and River Park Business Center, Inc.,
dated November 29, 2000. Incorporated by reference from Exhibit 10.145 filed with
Registrant’s Annual Report on Form 10-K for the Fiscal Year ended January 31,
2005.
First Addendum to the Ground Lease between Tiffany and Company and River
Park Business Center, Inc., dated November 29, 2000. Incorporated by reference
from Exhibit 10.145a filed with Registrant’s Annual Report on Form 10-K for the
Fiscal Year ended January 31, 2005.
Three-Year Credit Agreement dated as of December 21, 2011 by and among
Registrant, Tiffany and Company, Tiffany & Co. International, Tiffany & Co. Japan
Inc. and each other Subsidiary of Registrant that is a Borrower and is a signatory
thereto and The Bank of New York Mellon, as Administrative Agent, and various
lenders party thereto. Incorporated by reference from Exhibit 10.146 filed with
Registrant’s Report on Form 8-K dated December 23, 2011.
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Guaranty Agreement dated as of December 21, 2011, with respect to the Three-
Year Credit Agreement (see Exhibit 10.146 above) by and among Registrant,
Tiffany and Company, Tiffany & Co. International and Tiffany & Co. Japan Inc. and
The Bank of New York Mellon, as Administrative Agent. Incorporated by reference
from Exhibit 10.147 filed with Registrant’s Report on Form 8-K dated December
23, 2011.
Lease Agreement made as of September 28, 2005 between CLF Sylvan Way LLC
and Tiffany and Company, and form of Registrant’s guaranty of such lease.
Incorporated by reference from Exhibit 10.149 filed with Registrant’s Report on
Form 8-K dated September 23, 2005.
Form of Note Purchase and Private Shelf Agreement dated as of December 23,
2008 by and between Registrant and various institutional note purchasers with
respect to Registrant’s $100 million principal amount 9.05% Series A Senior Notes
due December 23, 2015 and up to $50 Million Private Shelf Facility. Incorporated
by reference from Exhibit 10.155 filed with Registrant’s Report on Form 8-K dated
February 13, 2009.
10.155a
Acknowledgement of Amendment dated September 21, 2011, with respect to the
Note Purchase and Private Shelf Agreement referred to in Exhibit 10.155 above.
Incorporated by reference from Exhibit 10.155a filed with Registrant’s Report on
Form 10-Q for the Fiscal Quarter ended October 31, 2011.
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Exhibit
Description
10.156
10.157
10.158
10.159
10.159a
10.160
10.161
10.162
Guaranty Agreement dated December 23, 2008 with respect to the Note Purchase
Agreements (see Exhibit 10.155 above) by Tiffany and Company, Tiffany & Co.
International and Tiffany & Co. Japan Inc. in favor of each of the note purchasers.
Incorporated by reference from Exhibit 10.156 filed with Registrant’s Report on
Form 8-K dated February 13, 2009.
Form of Note Purchase Agreement dated as of February 12, 2009 by and between
Registrant and certain subsidiaries of Berkshire Hathaway Inc. with respect to
Registrant’s $125 million principal amount 10% Series A-2009 Senior Notes due
February 13, 2017 and $125 million principal amount 10% Series B-2009 Senior
Notes due February 13, 2019. Incorporated by reference from Exhibit 10.157 filed
with Registrant’s Report on Form 8-K dated February 13, 2009.
Guaranty Agreement dated February 12, 2009 with respect to the Note Purchase
Agreements (see Exhibit 10.157 above) by Tiffany and Company, Tiffany & Co.
International and Tiffany & Co. Japan Inc. in favor of each of the note purchasers.
Incorporated by reference from Exhibit 10.158 filed with Registrant’s Report on
Form 8-K dated February 13, 2009.
Form of Note Purchase and Private Shelf Agreement dated as of April 9, 2009 by
and between Registrant and various institutional note purchasers with respect to
the Registrant’s $50 million principal amount 10% Series A Senior Notes due April
9, 2018 and up to $100 million Private Shelf Facility. Incorporated by reference
from Exhibit 10.159 filed with Registrant’s Report on Form 8-K dated April 13,
2009.
Acknowledgement of Amendment to Note Purchase and Private Shelf Agreement
referred to in previously filed Exhibit 10.159, dated as of September 30, 2010.
Incorporated by reference from Exhibit 10.159a filed with Registrant’s Report on
Form 10-Q for the Fiscal Quarter ended October 31, 2010.
Guaranty Agreement dated April 9, 2009 with respect to the Note Purchase and
Private Shelf Agreement (see Exhibit 10.159 above) by Tiffany and Company,
Tiffany & Co. International and Tiffany & Co. Japan Inc. Incorporated by reference
from Exhibit 10.160 filed with Registrant’s Report on Form 8-K dated April 13,
2009.
Form of Note Purchase Agreement dated as of September 1, 2010 by and
between Registrant and various institutional note purchasers with respect to the
Registrant’s yen 10,000,000,000 principal amount 1.72% Senior Notes due
September 1, 2016. Incorporated by reference from Exhibit 10.161 filed with
Registrant’s Report on Form 10-Q for the Fiscal Quarter ended July 31, 2010.
Guaranty Agreement dated September 1, 2010 with respect to the Note Purchase
Agreement (see Exhibit 10.161 above) by Tiffany and Company, Tiffany & Co.
International and Tiffany & Co. Japan Inc. Incorporated by reference from Exhibit
10.162 filed with Registrant’s Report on Form 10-Q for the Fiscal Quarter ended
July 31, 2010.
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Exhibit
Description
10.163
10.164
10.165
14.1
21.1
23.1
31.1
31.2
32.1
32.2
101
Amortising term loan facility agreement dated March 30, 2011 between and among
Koidu Holdings S.A. (as Borrower), BSG Resources Limited (as Guarantor) and
Laurelton Diamonds, Inc. (as Original Lender). Incorporated by reference from
Exhibit 10.163 filed with Registrant’s Report on Form 8-K dated March 30, 2011.
Five-Year Credit Agreement dated as of December 21, 2011 by and among
Registrant, Tiffany and Company, Tiffany & Co. International, Tiffany & Co. Japan
Inc. and each other Subsidiary of Registrant that is a Borrower and is a signatory
thereto and The Bank of New York Mellon, as Administrative Agent, and various
lenders party thereto. Incorporated by reference from Exhibit 10.164 filed with
Registrant’s Report on Form 8-K dated December 23, 2011.
Guaranty Agreement dated as of December 21, 2011, with respect to the Five-Year
Credit Agreement (see Exhibit 10.164 above) by and among Registrant, Tiffany and
Company, Tiffany & Co. International and Tiffany & Co. Japan Inc. and The Bank of
New York Mellon, as Administrative Agent. Incorporated by reference from Exhibit
10.165 filed with Registrant’s Report on Form 8-K dated December 23, 2011.
Code of Business and Ethical Conduct and Business Conduct Policy. Incorporated
by reference from Exhibit 14.1 filed with Registrant’s Annual Report on Form 10-K
for the Fiscal Year ended January 31, 2004.
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Subsidiaries of Registrant.
Consent of PricewaterhouseCoopers LLP, Independent Registered Public
Accounting Firm.
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
The following financial information from Tiffany & Co.’s Annual Report on Form 10-
K for the fiscal year ended January 31, 2012, furnished with the SEC, formatted in
Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance
Sheets; (ii) the Consolidated Statements of Earnings; (iii) the Consolidated
Statements of Stockholders’ Equity and Comprehensive Earnings; (iv) the
Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated
Financial Statements.
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Executive Compensation Plans and Arrangements
Exhibit
Description
4.3
4.3a
4.4
10.49a
10.106
10.108
10.109
10.114
10.127c
10.128
10.137
Registrant's 1998 Directors Option Plan. Incorporated by reference from Exhibit 4.3
to Registrant's Registration Statement on Form S-8, file number 333-67725, filed
November 23, 1998.
Registrant’s 2008 Directors Equity Compensation Plan. Incorporated by reference
from Exhibit 4.3a filed with Registrant’s Report on Form 8-K dated March 23, 2009.
Registrant’s Amended and Restated 1998 Employee Incentive Plan effective May 19,
2005. Previously filed as Exhibit 4.3 with Registrant’s Report on Form 8-K dated May
23, 2005.
Form of Indemnity Agreement, approved by the Board of Directors on March 11,
2005 for use with all directors and executive officers (Corrected Version).
Incorporated by reference from Exhibit 10.49a filed with Registrant’s Report on Form
8-K dated May 23, 2005.
Tiffany and Company Amended and Restated Executive Deferral Plan originally
made effective October 1, 1989, as amended and restated effective February 1,
2010. Incorporated by reference from Exhibit 10.106 filed with Registrant’s Report on
Form 8-K dated January 27, 2012.
Registrant's Amended and Restated Retirement Plan for Non-Employee Directors
originally made effective January 1, 1989, as amended through January 21, 1999.
Incorporated by reference from Exhibit 10.108 filed with Registrant's Annual Report
on Form 10-K for the Fiscal Year ended January 31, 1999.
Summary of informal incentive cash bonus plan for managerial employees.
Incorporated by reference from Exhibit 10.109 filed with Registrant’s Report on Form
8-K dated March 16, 2005.
1994 Tiffany and Company Supplemental Retirement Income Plan, Amended and
Restated as of January 31, 2009. Incorporated by reference from Exhibit 10.114 filed
with Registrant’s Report on Form 8-K dated February 2, 2009.
Form of 2009 Retention Agreement between and among Registrant and Tiffany and
Company (“Tiffany”) and those executive officers indicated within the form and
Appendices I and II to such Agreement. Incorporated by reference from Exhibit
10.127c filed with Registrant’s Report on Form 8-K dated February 2, 2009.
Group Long Term Disability Insurance Policy issued by First Reliance Standard,
Policy No. LTD 109406 on April 28, 2009. Incorporated by reference from Exhibit
10.128 filed with Registrant’s Report on Form 8-K dated March 25, 2010.
Summary of arrangements for the payment of premiums on life insurance policies
owned by executive officers. Incorporated by reference from Exhibit 10.137 filed with
Registrant’s Report on Form 8-K dated February 2, 2009.
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Exhibit
Description
10.138
10.139d
10.140
10.140a
10.140b
10.140c
10.140d
10.142
10.143
2004 Tiffany and Company Un-funded Retirement Income Plan to Recognize
Compensation in Excess of Internal Revenue Code Limits, Amended and Restated
as of October 31, 2011. Incorporated by reference from Exhibit 10.138 filed with
Registrant’s Report on Form 8-K dated January 27, 2012.
Form of Fiscal 2012 Cash Incentive Award Agreement for certain executive officers
adopted on March 14, 2012 under Registrant’s 2005 Employee Incentive Plan as
Amended and Adopted as of May 18, 2006. Incorporated by reference from Exhibit
10.139d filed with Registrant’s Report on Form 8-K dated March 19, 2012.
Form of Terms of Performance-Based Restricted Stock Unit Grants to Executive
Officers under Registrant’s 2005 Employee Incentive Plan. Incorporated by reference
from Exhibit 10.140 filed with Registrant’s Report on Form 8-K dated March 16,
2005.
Form of Non-Competition and Confidentiality Covenants for use in connection with
Performance-Based Restricted Stock Unit Grants to Registrant’s Executive Officers
and Time-Vested Restricted Unit Awards made to other officers of Registrant’s
affiliated companies pursuant to the Registrant’s 2005 Employee Incentive Plan and
pursuant to the Tiffany and Company Un-funded Retirement Income Plan to
Recognize Compensation in Excess of Internal Revenue Code Limits. Incorporated
by reference from Exhibit 10.140a filed with Registrant’s Report on Form 8-K dated
May 23, 2005.
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Terms of 2009 Performance-Based Restricted Stock Unit Grants to Executive
Officers under Registrant’s 2005 Employee Incentive Plan as adopted on January 28,
2009 for use with grants made that same date, amended and restated effective
December 29, 2011. Incorporated by reference from Exhibit 10.140b filed with
Registrant’s Report on Form 8-K dated January 27, 2012.
Terms of 2010 Performance-Based Restricted Stock Unit Grants to Executive
Officers under Registrant’s 2005 Employee Incentive Plan as adopted on January 20,
2010 for use with grants made that same date and on January 20, 2011, amended
and restated effective December 29, 2011. Incorporated by reference from Exhibit
10.140c filed with Registrant’s Report on Form 8-K dated January 27, 2012.
Form of Notice of Grant as referenced in and attached to the Terms of 2010
Performance-Based Restricted Stock Unit grants to Executive Officers under
Registrant’s 2005 Employee Incentive Plan as adopted on January 20, 2010 (Exhibit
10.140c) and completed on March 17, 2010 for use with the grants made on January
20, 2010. Incorporated by reference from Exhibit 10.140d filed with Registrant’s
Report on Form 8-K dated March 25, 2010.
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant’s
1998 Directors Option Plan as revised March 7, 2005. Incorporated by reference from
Exhibit 10.142 filed with Registrant’s Report on Form 8-K dated March 16, 2005.
Terms of Stock Option Award (Standard Non-Qualified Option) under Registrant’s
2005 Employee Incentive Plan as revised March 7, 2005. Incorporated by reference
from Exhibit 10.143 filed with Registrant’s Report on Form 8-K dated March 16,
2005.
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Exhibit
Description
10.143a
10.144
10.144a
10.144b
10.150
10.150a
10.151
10.151a
10.152
10.153
10.154
Terms of Stock Option Award (Standard Non-Qualified Option) under Registrant’s
2005 Employee Incentive Plan as revised May 19, 2005. Incorporated by reference
from Exhibit 10.143a filed with Registrant’s Report on Form 8-K dated May 23, 2005.
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant’s
2005 Employee Incentive Plan as revised March 7, 2005 (form used for Executive
Officers). Incorporated by reference from Exhibit 10.144 filed with Registrant’s Report
on Form 8-K dated March 16, 2005.
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant’s
2005 Employee Incentive Plan as revised May 19, 2005 (form used for Executive
Officers). Incorporated by reference from Exhibit 10.144a filed with Registrant’s
Report on Form 8-K dated May 23, 2005.
Stock Option Award (Transferable Non-Qualified Option) under Registrant’s 2005
Employee Incentive Plan as revised January 14, 2009 (form used for grants made to
Executive Officers subsequent to that date). Incorporated by reference from Exhibit
10.144b filed with Registrant’s Report on Form 8-K dated February 2, 2009.
Form of Terms of Time-Vested Restricted Stock Unit Grants under Registrant’s 1998
Employee Incentive Plan and 2005 Employee Incentive Plan. Incorporated by
reference as previously filed as Exhibit 10.146 with Registrant’s Report on Form 8-K
dated May 23, 2005.
Terms of Time-Vested Restricted Stock Unit Grants under Registrant’s 2005
Employee Incentive Plan as revised January 14, 2009 (form used for grants made to
employees other than Executive Officers subsequent to that date). Incorporated by
reference from Exhibit 10.150a filed with Registrant’s Report on Form 8-K dated
February 2, 2009.
Registrant’s 2005 Employee Incentive Plan as adopted May 19, 2005. Incorporated
by reference as previously filed as Exhibit 10.145 with Registrant’s Report on Form 8-
K dated May 23, 2005.
Registrant’s 2005 Employee Incentive Plan Amended and Adopted as of May 18,
2006. Incorporated by reference from Exhibit 10.151a filed with Registrant’s Report
on Form 8-K dated March 26, 2007.
Share Ownership Policy for Executive Officers and Directors, Amended and Restated
as of March 15, 2007. Incorporated by reference from Exhibit 10.152 filed with
Registrant’s Report on Form 8-K dated March 22, 2007.
Corporate Governance Principles, Amended and Restated as of March 17, 2010.
Incorporated by reference from Exhibit 10.153 filed with Registrant’s Report on Form
8-K dated March 21, 2011.
Senior Executive Employment Agreement between Frederic Cumenal and Tiffany and
Company, effective as of March 10, 2011. Incorporated by reference from Exhibit
10.154 filed with Registrant’s Report on Form 8-K dated March 21, 2011.
TIFFANY & CO.
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Exhibit
Description
10.161
10.166
Terms of Time-Vested Restricted Stock Unit Grants to certain Executive Officers
under Registrant’s 2005 Employee Incentive Plan. Incorporated by reference from
Exhibit 10.161 filed with Registrant’s Report on Form 8-K dated March 21, 2011.
Comprehensive Retirement Non-Competition Agreement between James E. Quinn
and Registrant entered into on January 19, 2012, with an effective Date of
Retirement of February 1, 2012. Incorporated by reference from Exhibit 10.166 filed
with Registrant’s Report on Form 8-K dated January 27, 2012.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: March 28, 2012
TIFFANY & CO.
(Registrant)
By:
/s/ Michael J. Kowalski
Michael J. Kowalski
Chief Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the date
indicated.
By:
/s/ Michael J. Kowalski
By:
/s/ Patrick F. McGuiness
Michael J. Kowalski
Chairman of the Board and Chief
Executive Officer
(principal executive officer) (director)
Patrick F. McGuiness
Senior Vice President and Chief Financial
Officer
(principal financial officer)
By:
/s/ Henry Iglesias
By:
/s/ Rose Marie Bravo
Henry Iglesias
Vice President and Controller
(principal accounting officer)
Rose Marie Bravo
Director
By:
/s/ Gary E. Costley
By:
/s/ Lawrence K. Fish
Gary E. Costley
Director
Lawrence K. Fish
Director
By:
/s/ Abby F. Kohnstamm
By:
/s/ Charles K. Marquis
Abby F. Kohnstamm
Director
Charles K. Marquis
Director
By:
/s/ Peter W. May
By:
/s/ J. Thomas Presby
Peter W. May
Director
J. Thomas Presby
Director
By:
/s/ William A. Shutzer
William A. Shutzer
Director
March 28, 2012
TIFFANY & CO.
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Tiffany & Co. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
(in thousands)
Column A
Column B
Column C
Additions
Column D Column E
Balance at
beginning
of period
Charged
to costs
and
expenses
Charged
to other
accounts Deductions
Balance at
end of
period
Description
Year Ended January 31, 2012:
Reserves deducted from assets:
Accounts receivable allowances:
Doubtful accounts
$ 4,705
$ 1,057
$
Sales returns
Allowance for inventory
7,078
6,465
liquidation and obsolescence
48,428
30,665
Allowance for inventory shrinkage
1,074
2,502
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—
—
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$ 3,296a
$ 2,466
4,237b
9,306
25,155c
53,938
2,081d
1,495
22,579
Deferred tax valuation allowance
a) Uncollectible accounts written off.
b) Adjustment related to sales returns previously provided for.
c) Liquidation of inventory previously written down to market.
d) Physical inventory losses.
e) Reversal of deferred tax valuation allowance and utilization of deferred tax loss carryforward.
1,590
—
10,599e
13,570
TIFFANY & CO.
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Tiffany & Co. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
(in thousands)
Column A
Column B
Column C
Additions
Column D
Column E
Description
Year Ended January 31, 2011:
Reserves deducted from assets:
Accounts receivable allowances:
Doubtful accounts
Sales returns
Allowance for inventory
liquidation and obsolescence
Allowance for inventory shrinkage
Balance at
beginning
of period
Charged to
costs and
expenses
Charged
to other
accounts Deductions
Balance at
end of
period
$
6,286 $
2,065
$
—
$ 3,646a
$ 4,705
6,606
2,075
46,234
954
25,608
3,653
—
—
—
1,603b
7,078
23,414c
3,533d
48,428
1,074
24,433
Deferred tax valuation allowance
a) Uncollectible accounts written off.
b) Adjustment related to sales returns previously provided for.
c) Liquidation of inventory previously written down to market.
d) Physical inventory losses.
e) Reversal of deferred tax valuation allowance and utilization of deferred tax loss carryforward.
2,408
—
4,262 e
22,579
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Tiffany & Co. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
(in thousands)
Column A
Column B
Column C
Additions
Column D
Column E
Description
Year Ended January 31, 2010:
Reserves deducted from assets:
Accounts receivable allowances:
Doubtful accounts
Sales returns
Allowance for inventory
liquidation and obsolescence
Allowance for inventory shrinkage
Balance at
beginning
of period
Charged to
costs and
expenses
Charged
to other
accounts Deductions
Balance at
end of
period
$ 4,694
$ 5,046 $
—
$ 3,454a $ 6,286
5,240
2,034
43,956
922
31,599
2,377
—
—
—
668b
6,606
29,321c
2,345d
46,234
954
27,486
Deferred tax valuation allowance
a) Uncollectible accounts written off.
b) Adjustment related to sales returns previously provided for.
c) Liquidation of inventory previously written down to market.
d) Physical inventory losses.
e) Reversal of deferred tax valuation allowances and utilization of deferred tax loss carryforwards.
5,505
—
8,558e
24,433
TIFFANY & CO.
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2012 Annual Meeting of Stockholders
PROXY STATEMENT
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ATTENDANCE AND VOTING MATTERS
Introduction
The Annual Meeting of the stockholders of Tiffany & Co. (the “Company”) will be held on Thursday,
May 17, 2012, at 9:00 a.m. at the W New York - Union Square hotel, 201 Park Avenue South (at
17th Street) New York, New York.
This Proxy Statement and accompanying material, including the form of proxy, was first sent to the
Company’s stockholders on or about April 5, 2012. It was sent to you on behalf of the Company
by order of the Company’s Board of Directors (the “Board”).
You are entitled to vote at our 2012 Annual Meeting because you were a stockholder, or held
Company stock through a broker, bank or other nominee, at the close of business on March 20,
2012, the record date for this year’s Annual Meeting. That is why you were sent this Proxy
Statement and accompanying material.
This proxy statement has been bound with our Annual Report on Form 10-K, which contains
financial and other information about our business during Fiscal 2011 (February 1, 2011 to
January 31, 2012). As is the practice of many other companies, the Company is now providing
proxy materials by a “notice and access” process through the Internet. This enables the Company
to reduce the cost of paper, printing and postage and to substantially reduce paper use in order to
benefit our environment. Those stockholders who wish to receive a paper report may request one.
How to Request and Receive a PAPER or E-MAIL Copy of the Proxy Materials
OPTION A:
shares held at brokerage firms or at other financial institutions):
If you are a beneficial stockholder (beneficial stockholders typically have their
1) By Internet:
2) By Telephone:
3) By E-Mail*:
www.proxyvote.com
1-800-579-1639
sendmaterial@proxyvote.com
* If requesting materials by e-mail, please send a blank e-mail with the 12-Digit Control
Number (located on the Notice of Proxy) in the subject line.
Requests, instructions and other inquiries sent to this e-mail address will NOT be
forwarded to your investment advisor.
If you are a registered stockholder (registered stockholders typically have their
OPTION B:
shares held in stock certificate form or in book entry form by Tiffany’s transfer agent,
Computershare (which acquired BNY Mellon Shareowner Services)):
1) By Internet:
2) By Telephone:
3) By E-mail**:
http://www.proxyvoting.com/tif
1-888-313-0164 (outside of the U.S. and Canada call
201-680-6688)
shrrelations@bnymellon.com
** You must reference your 11-Digit Control Number to request a paper copy of the
proxy materials.
Please make the requests as instructed above on or before May 3, 2012 to facilitate timely
delivery.
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You may also find important information about the Company, with its principal executive offices at
727 Fifth Avenue, New York, New York 10022, on our website at www.tiffany.com. By clicking
“Investors” at the bottom of the page, you will find additional information concerning some of the
subjects addressed in this document.
Important Notice Regarding Internet Availability of Proxy Materials
for the Stockholder Meeting to be Held on May 17, 2012.
The Proxy Statement and Annual Report to Stockholders
are available at http://bnymellon.mobular.net/bnymellon/tif
Matters to be Voted on at the 2012 Annual Meeting
There are three matters scheduled to be voted on at this year’s Annual Meeting:
The election of the Board;
(cid:120)
(cid:120) Ratification of the selection of the independent registered public accounting firm to audit
our Fiscal 2012 financial statements; and
(cid:120) Your approval, on an advisory basis, of the compensation of the Company’s named
executive officers as disclosed in this proxy statement (“Say on Pay”).
In addition, such other business as may properly come before the Annual Meeting or any
adjournment or postponement thereof may be voted on.
How to Vote Your Shares
You can vote your shares at the Annual Meeting by proxy or in person.
You can vote by proxy by having one or more individuals who will be at the Annual Meeting vote
your shares for you. These individuals are called “proxies” and using them to cast your ballot at
the Annual Meeting is called voting “by proxy.”
If you wish to vote by proxy, you must do one of the following:
(cid:120) Complete the enclosed form, called a “proxy card,” and mail it in the envelope provided; or
(cid:120) Call the telephone number listed on your proxy card or notice and follow the pre-recorded
instructions; or
(cid:120) Use the Internet to vote by going to the Internet address listed on your proxy card or
notice; have your proxy card or notice in hand as you will be prompted to enter your control
number and to create and submit an electronic vote.
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If you do one of the above, you will have designated three officers of the Company to act as your
proxies at the 2012 Annual Meeting. One of them will then vote your shares at the Annual Meeting
in accordance with the instructions you have given them on the proxy card, the telephone or the
Internet with respect to each of the proposals presented in this Proxy Statement. If you sign and
return your proxy card but do not give voting instructions, your proxy will vote the shares
represented thereby ffor the election of each of the director nominees listed in Proposal No. 1
below, ffor approval of Proposal No. 2, which is discussed below, and ffor approval of our named
executive officer compensation, also discussed below. Proxies will extend to, and be voted at,
any adjournment or postponement of the Annual Meeting.
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Alternatively, you can vote your shares in person by attending the Annual Meeting. You will be
given a ballot at the meeting.
While we know of no other matters to be acted upon at this year’s Annual Meeting, it is possible
that other matters may be presented at the meeting. If that happens and you have signed and not
revoked a proxy card, your proxy will vote on such other matters in accordance with his best
judgment.
A special note for those who plan to attend the Annual Meeting and vote in person: if your shares
are held in the name of a broker, bank or other nominee, you must bring a statement from your
brokerage account or a letter from the person or entity in whose name the shares are registered
indicating that you are the beneficial owner of those shares as of the record date. In addition, you
will not be able to vote at the meeting unless you obtain a legal proxy from the record holder of
your shares.
How to Revoke Your Proxy
If you decide to vote by proxy (including by mail, telephone or Internet), you can revoke – that is,
change or cancel – your vote at any time before your proxy casts his vote at the Annual Meeting.
Revoking your vote by proxy may be accomplished in one of three ways:
(cid:120) You can send an executed, later-dated proxy card to the Secretary of the Company, call in
different instructions, or access the Internet voting site;
(cid:120) You can notify the Secretary of the Company in writing that you wish to revoke your proxy;
or
(cid:120) You can attend the Annual Meeting and vote in person.
The Number of Votes That You Have
Each share of the Company’s common stock has one vote. The number of shares, or votes, that
you have at this year’s Annual Meeting is indicated on the enclosed proxy card.
What a Quorum Is
A “quorum” is the minimum number of shares that must be present at an Annual Meeting for a
valid vote. For our stockholder meetings, a majority of shares outstanding on the record date and
entitled to vote at the Annual Meeting must be present.
The number of shares outstanding at the close of business on March 20, 2012, the record date,
was 126,379,085. Therefore, 63,189,543 shares must be present at our 2012 Annual Meeting for a
quorum to be established.
To determine if there is a quorum, we consider a share “present” if:
(cid:120)
(cid:120)
The stockholder who owns the share is present at the Annual Meeting, whether or not he or
she chooses to cast a ballot on any proposal; or
The stockholder is represented by proxy at the Annual Meeting.
If a stockholder is represented by proxy at the Annual Meeting, his or her shares are deemed
present for purposes of a quorum, even if:
(cid:120)
(cid:120)
The stockholder withholds his or her vote or marks “abstain” for one or more proposals; or
There is a “broker non-vote” on one or more proposals.
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What a “Broker Non-Vote” Is
Shares held in a broker’s name may be voted by the broker, but only in accordance with the rules
of the New York Stock Exchange. Under those rules, your broker must follow your instructions. If
you do not provide instructions to your broker, your broker may vote your shares based on its own
judgment or it may withhold a vote. Whether your broker votes or withholds its vote is determined
by the New York Stock Exchange rules and depends on the proposal being voted upon. In the
absence of instructions provided by you, your broker will be required to withhold its vote unless
you provide instructions with respect to the election of the Board, and Say on Pay.
If your broker withholds its vote, that is called a “broker non-vote.” As stated above, broker non-
votes are counted as present for a quorum.
What Vote Is Required to Approve Each Proposal
Each nominee for director shall be elected by a majority of the votes cast “for” or “against” the
nominee at the Annual Meeting. That means that the number of shares voted “for” a nominee must
exceed the number of shares voted “against” that nominee. To vote “for” or “against” any of the
nominees named in this Proxy Statement, you can so mark your proxy card or ballot or, if you vote
via telephone or Internet, so indicate by telephone or electronically.
You may abstain on the vote for any nominee but your abstention will not have any effect on the
outcome of the election of directors. A broker non-vote has the same effect as an abstention:
neither will have any effect on the outcome of the election of directors. To abstain on the vote on
any or all of the nominees named in this Proxy Statement, you can so mark your proxy card or
ballot or, if you vote via telephone or Internet, so indicate by telephone or electronically.
The proposal to ratify the selection of PricewaterhouseCoopers LLP as the independent registered
public accounting firm for Fiscal 2012 will be decided by the affirmative vote of the majority of
shares present at the meeting. That means that the proposal will pass if more than half of those
shares present at the meeting vote “for” the proposal. Therefore, if you “abstain” from voting — in
other words, you indicate “abstain” on the proxy card, by telephone or by Internet — it will have
the same effect as an “against” vote. Broker non-votes on this proposal will be treated the same
as abstentions: both will have the same effect as an “against” vote.
The advisory proposal to approve the compensation of our named executive officers will be
decided by the affirmative vote of the majority of shares present at the meeting. That means that
the compensation will be approved if more than half of those shares present at the meeting vote
“for” the proposal. Therefore, if you “abstain” from voting — in other words, you indicate “abstain”
on the proxy card, by telephone or by Internet — it will have the same effect as an “against” vote.
Broker non-votes on this proposal will be treated the same as abstentions: both will have the same
effect as an “against” vote.
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Proxy Voting on Proposals in the Absence of Instructions
If you do not give any specific instructions as to how your shares are to be voted when you sign a
proxy card or vote by telephone or by Internet, your proxies will vote your shares in accordance
with the following recommendations of the Board:
(cid:120)
(cid:120)
FOR the election of all nine nominees for director named in this Proxy Statement;
FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm to examine our Fiscal 2012 financial
statements; and
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(cid:120)
FOR approval of the compensation paid to the Company’s named executive officers, as
disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the
Compensation Discussion and Analysis, compensation tables and narrative discussion
included in this Proxy Statement.
Shares held in the Company’s Employee Profit Sharing and Retirement Savings Plan will not be
voted by the Plan’s trustee unless specific instructions for voting are given by plan participants to
whose accounts such shares have been allocated.
How Proxies Are Solicited
We have hired the firm of Georgeson Inc. to assist in the solicitation of proxies on behalf of the
Board. Georgeson Inc. has agreed to perform this service for a fee of not more than $8,000, plus
out-of-pocket expenses.
Employees of Tiffany and Company, a subsidiary of the Company, may also solicit proxies on
behalf of the Board. These employees will not receive any additional compensation for their work
soliciting proxies and any costs incurred by them in doing so will be paid for by Tiffany and
Company.
Proxies may be solicited by mail, in person, by facsimile, by telephone or by electronic mail
(e-mail).
In addition, we will pay for any costs incurred by brokerage houses and others for forwarding
proxy materials to beneficial owners.
Stockholders Who Own at Least Five Percent of the Company
OWNERSHIP OF THE COMPANY
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The following table shows all persons who were known to us to be “beneficial owners” of at least
five percent of Company stock as of March 20, 2012. Footnote a) below provides a brief
explanation of what is meant by the term “beneficial ownership.” This table is based upon reports
filed with the Securities and Exchange Commission, commonly referred to as the SEC. Copies of
these reports are publicly available from the SEC. All of the reports included a certification to the
effect that the shares were acquired in the ordinary course of business and were not acquired and
were not being held for the purpose of or with the effect of changing or influencing the control of
the Company and were not acquired and were not being held in connection with or as a
participant in any transaction having that purpose or effect.
Name and Address
of Beneficial Owner
Amount and Nature
of Beneficial Ownership (a)
Percent
of Class
Qatar Holding LLC
Q-Tel Tower, 8th Floor
Diplomatic Area Street, West Bay
P.O. Box 23224, Doha, State of Qatar
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, PA 19355
6,595,418 (b)
5.20%
6,535,727 (c)
5.14%
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a)
b)
c)
“Beneficial ownership” is a term broadly defined by the SEC and includes more than the
typical form of stock ownership, that is, stock held in the person’s name. The term also
includes what is referred to as “indirect ownership” such as where, for example, the person
has or shares the power to vote the stock, sell it or acquire it within 60 days. Accordingly,
some of the shares reported as beneficially owned in this table may actually be held by other
persons or organizations. Those other persons and organizations are described in the reports
filed with the SEC.
Qatar Holding LLC (“Qatar”) reported such beneficial ownership to the SEC on its
Amendment to Schedule 13G as of December 31, 2011 and reported on behalf of itself and
its parent, Qatar Investment Authority, beneficial ownership of the number of shares referred
to above. This Schedule stated that it had sole power to vote or direct the vote of 6,595,418
shares of the Company’s common stock and shared power to dispose or direct the
disposition of all shares beneficially owned.
The Vanguard Group, Inc. (“Vanguard”) reported such beneficial ownership to the SEC on its
Schedule 13G as of December 31, 2011 and stated that, as an investment advisor, it
beneficially owned the number of shares referred to above. This Schedule stated that it had
sole power to vote 178,362 shares of the Company’s common stock and shared power to
dispose or direct the disposition of 6,357,365 shares, for an aggregate amount of 6,535,727
shares beneficially owned.
Ownership by Directors, Director Nominees and Executive Officers
The following table shows the number of shares of the Company’s common stock beneficially
owned as of March 20, 2012 by those persons who are director nominees or who were, as of the
end of Fiscal 2011, directors, the principal executive officer (the “CEO”), the principal financial
officer (the “CFO”) and the three next most highly compensated executive officers of the
Company:
Name
Directors
Rose Marie Bravo
Gary E. Costley
Lawrence K. Fish
Abby F. Kohnstamm
Michael J. Kowalski (CEO)
Charles K. Marquis
Peter W. May
J. Thomas Presby
Robert Steven Singer
William A. Shutzer
Amount and Nature of
Beneficial Ownership
Percent of Classa
*
*
*
*
*
*
2.5
*
*
*
63,457
32,957
40,205
79,705
785,045
227,825
3,194,012
17,388
3,000
340,192
b
c
d
e
f
g
h
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Executive Officers
Patrick F. McGuiness (CFO)
James N. Fernandez
Frederic Cumenal
Jon M. King
All executive officers and
directors as a group (19
persons):
Amount and Nature of
Beneficial Ownership
Percent of Classa
85,136
197,686
9,292
144,319
k
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5,751,362
o
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*
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4.7
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b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
An asterisk (*) is used to indicate less than 1% of the class outstanding.
Includes 58,554 shares issuable upon the exercise of Vested Stock Options, which are stock
options that either are exercisable as of March 20, 2012 or will become exercisable within 60
days of that date. Includes 903 shares issuable upon the maturity of restricted stock grants
made to directors on May 19, 2011.
Includes 31,054 shares issuable upon the exercise of Vested Stock Options. Includes 903
shares issuable upon the maturity of restricted stock grants made to directors on May 19,
2011.
Includes 12,477 shares issuable upon the exercise of Vested Stock Options. Includes 903
shares issuable upon the maturity of restricted stock grants made to directors on May 19,
2011.
Includes 66,054 shares issuable upon the exercise of Vested Stock Options. Includes 903
shares issuable upon the maturity of restricted stock grants made to directors on May 19,
2011.
Includes 441,000 shares issuable upon the exercise of Vested Stock Options and 100,000
shares under a GRAT.
Includes 66,054 shares issuable upon the exercise of Vested Stock Options. Includes 903
shares issuable upon the maturity of restricted stock grants made to directors on May 19,
2011.
Includes 3,162,055 shares reported to the SEC as under Mr. May’s beneficial ownership on
his Form 4 as of February 24, 2012. Includes 31,054 shares issuable upon the exercise of
Vested Stock Options. Includes 903 shares issuable upon the maturity of restricted stock
grants made to directors on May 19, 2011.
Includes 11,337 shares issuable upon the exercise of Vested Stock Options. Includes 903
shares issuable upon the maturity of restricted stock grants made to directors on May 19,
2011.
Includes 66,054 shares issuable upon the exercise of Vested Stock Options, 5,100 shares
held by or for Mr. Shutzer's child, and 114,000 shares held by KJC Ltd. of which Mr. Shutzer
is the sole general partner. Mr. Shutzer disclaims beneficial ownership of Company stock
held by KJC Ltd. and 32,210 shares under a GRAT entitled The Megan Ann Shutzer GRAT
with William A. Shutzer as Trustee. Includes 903 shares issuable upon the maturity of
restricted stock grants made to directors on May 19, 2011.
Includes 78,670 shares issuable upon the exercise of Vested Stock Options and 665 shares
credited to Mr. McGuiness’s account under the Company’s Employee Profit Sharing and
Retirement Savings Plan.
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l)
m)
n)
o)
Includes 153,250 shares issuable upon the exercise of Vested Stock Options and 147 shares
credited to Mr. Fernandez’s account under the Company’s Employee Profit Sharing and
Retirement Savings Plan.
Includes 9,292 shares issuable upon the exercise of Vested Stock Options.
Includes 126,250 shares issuable upon the exercise of Vested Stock Options and 467shares
held in Mr. King’s account under the Company’s Employee Profit Sharing and Retirement
Savings Plan.
Includes 1,597,324 shares issuable upon the exercise of Vested Stock Options and restricted
stock grants that will mature on May 19, 2012 and 2,716 shares held in the Company’s
Employee Profit Sharing and Retirement Savings Plan.
See “COMPENSATION OF THE CEO AND OTHER EXECUTIVE OFFICERS, Compensation
Discussion and Analysis, Equity Ownership by Executive Officers and Directors” beginning on
page PS-35 below for a discussion of the Company’s share ownership policy.
Compliance of Directors, Executive Officers and Greater-Than-Ten-Percent Stockholders with
Section 16(a) Beneficial Ownership Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, executive
officers and greater-than-ten-percent stockholders to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. These persons are also required to
provide us with copies of those reports.
Based on our review of those reports and of certain other documents we have received, we
believe that, during and with respect to Fiscal 2011, all filing requirements under Section 16(a)
applicable to our directors, executive officers and greater-than-ten-percent stockholders were
satisfied.
RELATIONSHIP WITH INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP (“PwC”) serves as the Company’s independent registered public
accounting firm and, through its predecessor firms, has served in that capacity since 1984.
The Audit Committee has selected PwC as the independent registered public accounting firm to
audit the Company’s financial statements and effectiveness of internal controls for the fiscal year
ending January 31, 2013. The Audit Committee is directly responsible for appointing the
independent auditors. In making this selection, the Audit Committee considered the
independence of PwC, and whether the audit and non-audit services PwC provides to the
Company are compatible with maintaining that independence.
The Audit Committee has adopted a policy requiring advance approval of PwC’s fees and services
by the Audit Committee; this policy also prohibits PwC from performing certain non-audit services
for the Company including: (i) bookkeeping, (ii) systems design and implementation, (iii) appraisal
or valuation, (iv) actuarial, (v) internal audit, (vi) management or human resources, (vii) investment
advice or investment banking, (viii) legal services, and (ix) expert services unrelated to the audit.
All fees paid to PwC by the Company as shown in the table that follows were approved by the
Audit Committee pursuant to this policy.
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Fees and Services of PricewaterhouseCoopers LLP
The following table presents fees for professional audit services rendered by PwC for the audit of
the Company’s consolidated financial statements and the effectiveness of internal controls over
financial reporting for the years ended January 31, 2012 and 2011, and for its reviews of the
Company’s unaudited condensed consolidated interim financial statements. This table also
reflects fees billed for other services rendered by PwC.
Audit Fees
Audit-related Fees
Audit and Audit-related Fees
Tax Feesa
All Other Feesb
Total Fees
January 31, 2012
2,629,300
$
21,500
2,650,800
1,769,450
231,500
$ 4,651,750
January 31, 2011
$ 2,348,200
14,500
2,362,700
1,437,720
13,600
$ 3,814,020
a)
b)
Tax fees consist of fees for tax consultation and tax compliance services. These fees
included tax filing and compliance fees of $1,674,650 for the year ended January 31, 2012
and $1,296,220 for the year ended January 31, 2011.
All other fees consist of Sustainability Assurance procedures, Kimberly Process attestation
procedures and costs for research software for the years ended January 31, 2012 and
January 31, 2011.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
The Board, In General
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The Company is a Delaware corporation. Our principal subsidiary is Tiffany and Company,
a New York corporation. In this Proxy Statement, Tiffany and Company will be referred to as simply
“Tiffany.”
The Board is currently comprised of nine members. The Board can also fill vacancies and newly
created directorships, as well as amend the By-laws to provide for a greater or lesser number of
directors.
Directors are required by our By-laws to be less than age 72 when elected or appointed unless the
Board waives that provision with respect to an individual director whose continued service is
deemed uniquely important to the Company.. Under the Company’s Corporate Governance
Principles, directors may not serve on a total of more than six public company boards. Service on
the Board is included in that total.
The Role of the Board in Corporate Governance
The Board plays several important roles in the governance of the Company, as set out in the
Company’s Corporate Governance Principles. The Corporate Governance Principles may be
viewed on the Company’s website www.tiffany.com, by clicking on “Investors” at the bottom of the
page and then selecting “Corporate Governance” from the left-hand column. The Corporate
Governance Principles can also be found as Appendix I to this Proxy Statement. The
responsibilities of the Board include:
(cid:120) Management succession;
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(cid:120) Review and approval of the annual operating plan prepared by management;
(cid:120) Monitoring of performance in comparison to the operating plan;
(cid:120) Review and approval of the Company’s strategic plan prepared by management;
(cid:120) Consideration of topics of relevance to the Company’s ability to carry out its strategic plan;
(cid:120) Review and approval of a delegation of authority by which management carries out the
day-to-day operations of the Company and its subsidiaries;
(cid:120) Review of the Company’s investor relations program;
(cid:120) Review of the Company’s schedule of insurance coverage; and
(cid:120) Review and approval of significant actions by the Company.
At its November 2011 meeting, the Board adopted the Tiffany & Co. Principles Governing
Corporate Political Spending. These principles are intended to ensure oversight, transparency,
and effective decision-making with respect to the Company’s political spending, and to protect
employees’ autonomy with respect to personal political spending. Tiffany & Co. will begin to
publicly report on the Principles at the conclusion of Fiscal 2012. The principles may be viewed on
the Company’s website, www.tiffany.com, by clicking “Investors” at the bottom of the page, and
then selecting “Corporate Governance” from the left-hand column.
Executive Sessions of Non-management Directors/Presiding Non-management Director
Non-management directors meet regularly in executive session without management participation.
This encourages open discussion. At those meetings, Charles K. Marquis, Chairman of the
Nominating/Corporate Governance Committee, presides. In addition, at least once per year the
independent directors meet separately in executive session.
Communication with Non-management Directors
Stockholders may send written communications to the entire Board or to any of the non-
management directors by addressing their concerns to Mr. Marquis, Chairman of the
Nominating/Corporate Governance Committee (presiding director), at the following address:
Corporate Secretary (Legal Department), Tiffany & Co., 727 Fifth Avenue, New York, New York
10022. All communications will be compiled by the Corporate Secretary and submitted to the
Board or an individual director, as appropriate, on a periodic basis.
Director Attendance at Annual Meeting
The Board schedules a regular meeting on the date of the Annual Meeting of Stockholders to
facilitate attendance at the Annual Meeting by the directors. All nine directors attended the Annual
Meeting held in May 2011.
Independent Directors Constitute a Majority of the Board
The Board has affirmatively determined that each of the following directors and director-nominees
is “independent” under the listing standards of the New York Stock Exchange in that none of them
has a material relationship with the Company (directly or as a partner, shareholder or officer of any
organization that has a relationship with the Company): Rose Marie Bravo, Gary E. Costley,
Lawrence K. Fish, Abby F. Kohnstamm, Charles K. Marquis, Peter W. May, J. Thomas Presby and
Robert Steven Singer.
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All of the members of the Audit, Nominating/Corporate Governance and Compensation
Committees are independent as indicated in the prior paragraph.
The Board also considered the other tests of independence set forth in the New York Stock
Exchange Corporate Governance Rules and has determined that each of the above directors and
nominees is independent as defined in such Rules.
In addition, the Board has affirmatively determined that J. Thomas Presby, Gary E. Costley,
Lawrence K. Fish, Abby F. Kohnstamm and Charles K. Marquis meet the additional, heightened
independence criteria applicable to audit committee members under New York Stock Exchange
rules.
In determining that Mr. Fish is independent, the Board considered banking relationships that exist
between ABN/AMRO and the Company. Both ABN/AMRO and Citizens Financial Group are
subsidiaries of the Royal Bank of Scotland Group. Mr. Fish was, on first election in 2008, an
employee of Citizens Financial Group and a director of Royal Bank of Scotland Group. A portion
of the operations of ABN/AMRO was acquired by Royal Bank of Scotland Group. The Company
does banking business with ABN/AMRO. Mr. Fish is no longer associated with any of those
entities.
In determining that Ms. Bravo is independent, the Board considered the employment relationship
between Ms. Bravo’s adult stepdaughter and Tiffany. This stepdaughter is not an officer of the
Company or Tiffany and does not reside in Ms. Bravo’s household and, for purposes of the New
York Stock Exchange categorical independence test, she is not deemed an immediate family
member nor is her compensation as a Tiffany employee required to be considered under such test.
She was hired in June 2009 after Tiffany acquired a product design group from a disbanding
company; subsequent to this acquisition, she was recruited to this design group because she had
previously worked for the group. She is not at a significantly high enough job level within Tiffany
so that the Compensation Committee is involved in determining the elements or level of her
compensation except as equity compensation is determined for the group of employees that work
at her job level.
To our knowledge, none of the other independent directors or director-nominees has any direct or
indirect relationship with the Company, other than as a director.
Board and Committee Meetings and Attendance during Fiscal 2011
All current and incumbent directors attended at least 85% of the aggregate number of meetings of
the Board and those committees (including the Audit Committee, Compensation Committee,
Stock Option Subcommittee, Nominating/Corporate Governance Committee, the Finance
Committee, and the Corporate Social Responsibility Committee) on which they served during
Fiscal 2011.
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
The full Board held six meetings. Attendance averaged 98% amongst all members.
The Audit Committee held eight meetings. All members attended all meetings.
The Compensation Committee and its Stock Option Subcommittee held six meetings.
Attendance averaged 97% amongst all members.
The Nominating/Corporate Governance Committee held six meetings. Attendance
averaged 97% amongst all members. On each of these occasions the Chief Executive
Officer absented himself from the meeting so as to allow the outside directors to meet
alone.
The Finance Committee held four meetings. All members attended all meetings.
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(cid:120)
The Corporate Social Responsibility Committee held three meetings. All members
attended all meetings.
Committees of the Board
Committees Composed Entirely of Independent Directors
Audit
Nominating/Corporate Governance
J. Thomas Presby, Chair
Gary E. Costley
Lawrence K. Fish
Abby F. Kohnstamm
Charles K. Marquis
Charles K. Marquis, Chair
Rose Marie Bravo
Gary E. Costley
Abby F. Kohnstamm
J. Thomas Presby
Compensation
Gary E. Costley, Chair
Rose Marie Bravo
Abby F. Kohnstamm
Charles K. Marquis
Peter W. May
Stock Option Subcommittee
Gary E. Costley, Chair
Rose Marie Bravo
Abby F. Kohnstamm
Charles K. Marquis
Peter W. May
Finance
Corporate Social Responsibility
Committees Including Non-Independent Directors
William A. Shutzer, Chair
Lawrence K. Fish
Peter W. May
Dividend
Michael J. Kowalski
Lawrence K. Fish, Chair
Gary E. Costley
Abby F. Kohnstamm
Michael J. Kowalski
Nominating/Corporate Governance Committee
The primary function of the Nominating/Corporate Governance Committee is to assist the Board in
matters of corporate governance. The Nominating/Corporate Governance Committee operates
under the charter adopted by the Board. The charter may be viewed on the Company’s website,
www.tiffany.com, by clicking “Investors” at the bottom of the page, and then selecting “Corporate
Governance” from the left-hand column. Under its charter, the role of the Nominating/Corporate
Governance Committee includes recommending to the Board:
(cid:120) Policies on the composition of the Board;
(cid:120) Criteria for the selection of nominees for election to the Board;
(cid:120) Nominees to fill vacancies on the Board;
(cid:120) Nominees for election to the Board;
(cid:120) Director compensation; and
(cid:120) Management succession.
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Submitting Candidate Names
If you would like to submit the name of a candidate for the Nominating/Corporate Governance
Committee to consider as a nominee of the Board for director, you may send your submission at
any time to the Nominating/Corporate Governance Committee, c/o Mr. Patrick B. Dorsey,
Corporate Secretary (Legal Department), Tiffany & Co., 727 Fifth Avenue, New York,
New York 10022.
Process for Identifying and Evaluating Nominees for Director
The Nominating/Corporate Governance Committee evaluates candidates recommended by
stockholders in the same manner as it evaluates director candidates suggested by others,
including those recommended by director search firms.
See our Corporate Governance Principles which are available on our website www.tiffany.com
(click “Investors” at the bottom of the page, then select “Corporate Governance” from the left-
hand column) and as Appendix I to this Proxy Statement. In accordance with these principles,
candidates for director shall be selected on the basis of their business experience and expertise,
with a view to supplementing the business experience and expertise of management and adding
further substance and insight into board discussions and oversight of management.
The policy is implemented through discussions at meetings of the Nominating/Corporate
Governance Committee and through specifications provided to director search firms when such
firms are retained. The Nominating/Corporate Governance Committee has no procedure or means
of assessing the effectiveness of this policy other than the process described under
“Self-Evaluation” below.
The Nominating/Corporate Governance Committee has no other policy with regard to the
consideration of diversity in identifying director nominees.
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Dividend Committee
The Dividend Committee declares regular quarterly dividends in accordance with the dividend
policy established by the Board. The Dividend Committee acts by unanimous written consent.
Mr. Kowalski is the sole member of the Dividend Committee.
Compensation Committee
The primary function of the Compensation Committee is to assist the Board in compensation
matters. The Compensation Committee operates under its charter which may be viewed on the
Company’s website, www.tiffany.com, by clicking “Investors” at the bottom of the page, and then
selecting “Corporate Governance” from the left-hand column. Under its charter, the
Compensation Committee's responsibilities include:
(cid:120) Approval of remuneration arrangements for executive officers; and
(cid:120) Approval of compensation plans in which officers and employees of Tiffany are eligible to
participate.
Compensation for the non-management members of the Board is set by the Board with advice
from the Nominating/Corporate Governance Committee.
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Role of Compensation Consultants
Pay Governance LLC is retained by the Compensation Committee to provide advice with respect
to the amount and form of executive compensation. This firm also provides advice to the
Nominating/Corporate Governance Committee with respect to director compensation.
The decision to retain Pay Governance LLC was made by the Committee Chair. Management has
assisted in arranging meetings between Pay Governance LLC and the Committee.
Pay Governance LLC performs two functions for the Compensation Committee. First, it prepares
and discusses with the Committee an annual competitive compensation analysis with respect to
the executive officers positions. The use of this analysis is discussed in COMPENSATION
DISCUSSION AND ANALYSIS, Competitive Compensation Analysis on page PS-41. Second, Pay
Governance LLC recommends compensation initiatives to the Compensation Committee,
including the structure of long- and short-term compensation components (including both equity
and non-equity components) and the relative value that each component should constitute within
the total portfolio of executive compensation.
Pay Governance LLC does not consult with management on compensation to be paid to non-
executive employees. The Compensation Committee has told Pay Governance LLC that it is to
act independently of management and only at the direction of the Committee and that its ongoing
engagement is determined solely by the Compensation Committee.
For additional information regarding the operation of the Compensation Committee, including the
role of consultants and management in the process of determining the amount and form of
executive compensation, see "Compensation Committee Process" beginning on page PS-43 of
the "Compensation Discussion and Analysis" below. The Compensation Committee’s report
appears on page PS-44.
Stock Option Subcommittee
The Stock Option Subcommittee determines the grant of options, restricted stock units, cash
incentive awards and other matters under our 2005 Employee Incentive Plan. All members of the
Compensation Committee are members of this subcommittee.
Compensation Committee Interlocks and Insider Participation
No director serving on the Compensation Committee or its Stock Option Subcommittee during any
part of Fiscal 2011 was, at any time either during or before such fiscal year, an officer or employee
of Tiffany & Co. or any of its subsidiaries. No interlocking relationship exists between the Board or
Compensation Committee and the board of directors or compensation committee of any other
company, nor has any interlocking relationship existed during Fiscal 2011.
Audit Committee
The Company’s Audit Committee is an “audit committee” established in accordance with Section
3(a)-(58)(A) of the Securities Exchange Act of 1934. The primary function of the Audit Committee is
to assist the Board in fulfilling its oversight responsibilities with respect to the Company’s financial
matters. The Audit Committee operates under a charter adopted by the Board; that charter may be
viewed on the Company’s website, www.tiffany.com, by clicking “Investors” at the bottom of the
page and then selecting “Corporate Governance” from the left-hand column. Under its charter,
the Audit Committee's responsibilities include:
(cid:120) Retaining and terminating the Company’s independent registered public accounting firm,
reviewing the quality-control procedures and independence of such firm and evaluating
their proposed audit scope, performance and fee arrangements;
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(cid:120) Approving in advance all audit and non-audit services to be rendered by the independent
registered public accounting firm;
(cid:120) Reviewing the adequacy of our system of internal control over financial reporting;
(cid:120) Establishing procedures for complaints regarding accounting, internal accounting controls
or auditing matters; and
(cid:120) Conducting a review of our financial statements and audit findings in advance of filing, and
reviewing in advance proposed changes in our accounting principles.
The Board has determined that all members of the Audit Committee are financially literate, that at
least one member of the Audit Committee meets the New York Stock Exchange standard of having
accounting or related financial management expertise, and that Mr. Presby meets the SEC criteria
of an “audit committee financial expert.” Mr. Presby is a Life member of the AICPA and a board
member of the New York Chapter of the National Association of Corporate Directors (NACD). He
was elected one of the Top 100 Directors of 2011 by the NACD. He chairs the audit committees of
four public companies in addition to that of the Company. In view of Mr. Presby’s full-time
commitment to work as an independent director, the Board has determined that his simultaneous
service on five audit committees has not impaired his ability to effectively serve on the Company’s
Audit Committee. The report of the Audit Committee is on page PS-20. Because of the
Company’s policy with respect to age limits, Mr. Presby, 72, is not standing for re-election at the
annual meeting.
Finance Committee
The Board formed the Finance Committee to assist the Board with its oversight of the Company’s
capital structure, dividend policy, repurchase of the Company’s common stock, debt and equity
financings, and the retention of investment bankers and other financial advisors to the Board, and
guarantee of currency, interest rate or commodity hedging transactions entered into by the
Company’s subsidiaries. The Finance Committee operates under the charter adopted by the
Board. The charter may be viewed on the Company’s website, www.tiffany.com, by clicking
“Investors” at the bottom of the page, and then selecting “Corporate Governance” from the left-
hand column.
Corporate Social Responsibility Committee
The Board formed the Corporate Social Responsibility Committee to assist the Board with its
oversight of the Company’s policies and practices involving the environment, vendor workplace
conditions and employment practices, community affairs, sustainable product sourcing, corporate
charitable giving, governmental relations, political activities and diversity in employment. The
Corporate Social Responsibility Committee operates under the charter adopted by the Board. The
charter may be viewed on the Company’s website, www.tiffany.com, by clicking “Investors” at the
bottom of the page, and then selecting “Corporate Governance” from the left-hand column.
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Self-Evaluation
The independent directors who serve on the Board conduct an annual evaluation of the workings
and efficiency of the Board and of each of the Board committees on which they serve and make
recommendations for change, if required.
Resignation on Job Change or New Directorship
Under the Company’s Corporate Governance Principles, a director must submit a letter of
resignation to the Nominating/Corporate Governance Committee on a change in employment or
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significant change in job responsibilities and upon accepting or resolving to accept a directorship
with another public company. The Committee may either accept or reject such resignation, but
must act within 10 days after considering, in light of the circumstances, the continued
appropriateness of the continued service of the director.
Board Leadership Structure
The offices of Chairman of the Board and Chief Executive Officer are held by the same person,
Michael J. Kowalski.
The Company has a lead independent director (also referred to as “presiding independent
director”). Charles K. Marquis occupies such position by virtue of his chairmanship of the
Nominating/Corporate Governance Committee.
Mr. Kowalski organizes a preliminary agenda for each board meeting and submits it for the
approval of the lead independent director.
The lead independent director chairs meetings of the independent and non-management directors
(including meetings of the Nominating/Corporate Governance Committee) and during those
meetings solicits the comments and suggestions of the independent directors and other non-
management directors with respect to the agenda for Board meetings, the information to be
provided by management and the quality of the discussions and decision-making process.
The Nominating/Corporate Governance Committee deems the existing structure appropriate in the
context of the existing board size, the tenure of the directors with the Company, the overall
experience of the directors and the experience that the directors have had with Mr. Kowalski and
the executive management group.
Mr. Kowalski has served as Chairman of the Board since the start of Fiscal 2003 and the directors
have had the opportunity during that time to assess his skills at moderating discussions during
meetings, his responsiveness to the Board’s suggestions for the agenda and the information
provided by management to the directors.
The Nominating/Corporate Governance Committee may reassess the appropriateness of the
existing leadership structure at any time, including following changes in management, in board
composition or in the scope or complexity of the Company’s operations.
Board Role in Risk Oversight
The Board believes (i) that management is responsible to manage the various risks that may arise
in the Company’s operations and (ii) that the Board has a role in overseeing management in the
risk management function.
Management’s approach to risk management includes systems of authorities and approval levels;
internal control checks and balances; analytical methods for making and evaluating decisions;
planning for annual business growth and profitability; strategic planning; and nurturing a corporate
culture that rewards integrity and supports the TIFFANY & CO. brand image. This approach to risk
management includes these goals: that every risk should, when possible and practicable, be
identified, quantified as to monetary impact, assigned a probability factor, and properly delegated
to management for a response. Operational risks so categorized are used to inform and shape the
internal audit plan and are communicated to the Company’s independent registered public
accounting firm so that they can be referenced and used, if deemed appropriate, to inform and
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shape the external audit plan. Strategic risks are identified and are addressed in the strategic
planning process.
Each year management is charged with the preparation of detailed business plans for the coming
year (the annual plan) and the ensuing five-year period (the strategic plan) and required to review
these plans, as they are developed and refined, on three separate occasions with the Board.
Among other items, such plans include budgets for capital expenditures, inventory purchases,
cash flow and liquidity, hiring, borrowing and dividends. The Board requires management to plan
on the basis of realistic assumptions concerning sales and cost increases. In this process, the
Board endeavors to assess whether management has made an appropriate analysis of the
operational and brand risks inherent in the plans.
Each year the Board reviews and approves the annual business plan and the strategic plan. The
Board also reviews specific risk areas on a regular basis. These are insured risks, management
authority, investor relations, litigation risks, foreign currency risks, diamond supply risk and
inventory risk.
The Audit Committee is required to discuss policies with respect to risk assessment and risk
management and regularly does so. The Audit Committee concerns itself most specifically with
the integrity of the financial reporting process, but also with personnel, asset and information
security risk.
The Finance Committee concerns itself principally with liquidity risk.
The Company has not designated an overall risk management officer and has no formal policy for
coordination of risk management oversight amongst the two board committees involved. The
committee structure was not organized specifically for the purpose of risk management oversight.
The Board coordinates the risk management oversight function in the following manner. Both the
Finance Committee and the Audit Committee share the minutes of their meetings with the Board
and report regularly to the Board. All committee meetings are open to the other directors and
many regularly attend because the committee meetings are regularly scheduled on the day of or
the day preceding Board meetings.
Business Conduct Policy and Code of Ethics
The Company has a long-standing policy governing business conduct for all Company employees
worldwide. The policy requires compliance with law and avoidance of conflicts of interest and sets
standards for various activities to avoid the potential for abuse or the occasion for illegal or
unethical activities. This policy covers, among other activities, the acceptance or giving of gifts
from or to those seeking to do business with the Company, processing one’s own transactions,
political contributions and reporting dishonest activity. Each year, all employees are required to
review the policy, report any violations or conflicts of interest and affirm their obligation to report
future violations to management.
The Company has a toll-free “hotline” to receive complaints from employees, vendors,
stockholders and other interested parties concerning violations of the Company’s policies or
questionable accounting, internal controls or auditing matters. The toll-free phone number is
877-806-7464. The hotline is operated by a third-party service provider to assure the
confidentiality and completeness of all information received. Users of this service may elect to
remain anonymous.
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We also have a Code of Business and Ethical Conduct for the directors, the chief executive officer,
the chief financial officer and all other officers of the Company. The Code advocates, and requires
those persons to adhere to, principles and responsibilities governing professional and ethical
conduct. This Code supplements our business conduct policy. Waivers may only be made by the
Board. A summary of our business conduct policy and a copy of the Code of Business and Ethical
Conduct are posted on our website, www.tiffany.com, by clicking “Investors” at the bottom of the
page, and then selecting “Corporate Governance” from the left-hand column. We have also filed a
copy of the Code with the SEC as an exhibit to our Annual Report on Form 10-K for Fiscal 2011.
The Board has not adopted a policy by which it will disclose amendments to, or waivers from, the
Company’s Code of Business and Ethical Conduct on our website. Accordingly, we will file a
report on Form 8-K if that Code is amended or if the Board has granted a waiver from such Code,
including an implicit waiver. We will file such a report only if the waiver applies to the Company’s
principal executive officer, principal financial officer, principal accounting officer or controller, and if
such waiver relates to: honest and ethical conduct; full, fair, accurate, timely, and understandable
disclosure; compliance with applicable governmental laws, rules and regulations; the prompt
internal reporting of violations of the Code; or accountability for adherence to the Code.
The Nominating/Corporate Governance Committee, Audit Committee and Compensation
Committee charters as well as the Code of Ethics and the Corporate Governance Principles are
available in print to any stockholder who requests them.
Limitation on Adoption of Poison Pill Plans
On January 19, 2006, the Board terminated the Company’s stockholder rights plan (typically
referred to as a “poison pill”) and adopted the following policy:
“This Board shall submit the adoption or extension of any poison pill to a stockholder vote
before it acts to adopt such poison pill; provided, however, that this Board may act on its
own to adopt a poison pill without first submitting such matter to a stockholder vote if,
under the circumstance then existing, this Board in the exercise of its fiduciary
responsibilities deems it to be in the best interests of the Company and its stockholders to
adopt a poison pill without the delay in adoption that is attendant upon the time reasonably
anticipated to seek a stockholder vote. If a poison pill is adopted without first submitting
such matter to a stockholder vote, the poison pill must be submitted to a stockholder vote
within one year after the effective date of the poison pill. Absent such submission to a
stockholder vote, and favorable action thereupon, the poison pill will expire on the first
anniversary of its effective date.”
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TRANSACTIONS WITH RELATED PERSONS
The Board has adopted policies and procedures for the review, approval or ratification of
transactions with the Company (or any subsidiary) in which any director or executive officer, any
nominee for election as a director, any immediate family member of such an officer, director or
nominee or any five-percent holder of the Company’s securities has a direct or indirect material
interest. Such transactions are referred to the Nominating/Corporate Governance Committee for
review. In determining whether to approve or ratify any transaction, the Committee applies the
following standard after considering the facts and circumstances of the transaction: whether, in the
business judgment of the Committee members, the interests of the Company appear likely to be
served by such approval or ratification.
The Board has ratified the hiring in Fiscal 2009 by Tiffany management of the following related
person: Suzanne Jackey, an adult stepdaughter of Rose Marie Bravo, a director and a nominee for
director. Ms. Jackey was hired as Tiffany’s Director of Product Development and Merchandising –
P S - 1 8
Leather Accessories because she had previously worked for the product development group hired
to develop a new product line. Ms. Jackey is a salaried employee of Tiffany whose annual salary
and bonus rate totaled approximately $218,000 for fiscal year 2011.
CONTRIBUTIONS TO DIRECTOR-AFFILIATED CHARITIES
The contributions listed below were made during the last three fiscal years to charitable
organizations with which directors or director nominees are affiliated through membership on the
governing board of such charitable organizations. None of the independent directors serves as an
executive officer of these charities:
(cid:120) University of Chicago Cancer Research Foundation (Women’s Board): merchandise grants
totaling $46,620, $49,750, and $30,300, in Fiscal 2011, 2010, and 2009, respectively
(Mr. May is a Trustee of The University of Chicago, a member of its Executive Committee,
and a member of the Advisory Council on the Graduate School of Business at
The University of Chicago).
(cid:120) Carnegie Hall: a combination of ticket subscription and advertisement for the opening night
gala program of $31,500 in Fiscal 2011 and 2010 each and advertisement for the opening
night gala program of $6,500 in Fiscal 2009 (Mr. May is a Trustee).
(cid:120)
The New York Philharmonic: a combination of merchandise grants and ticket subscriptions
for fund-raising events of $25,000 in Fiscal 2009 (Mr. May is a Trustee).
(cid:120) Partnership for New York City: $15,000 annual dues contributions in each of Fiscal 2011,
2010, and 2009 (Mr. May and Tiffany are each partners).
(cid:120) Mt. Sinai Medical Center: combination of ticket subscription, cash and merchandise grants
totaling approximately $6,000, $100,000, and $5,600, in Fiscal 2011, 2010, and 2009,
respectively (Mr. May is Chairman of the Board of Trustees).
(cid:120) UJA Federation: $800 in Fiscal 2011 for ticket subscription and $50,000 in Fiscal 2010 in
support of gala honoring Mr. May (Mr. May is a member of the Board of Trustees).
(cid:120) Paul Taylor Dance Company: merchandise grants of $975, $925 and $895 in Fiscal 2011,
2010 and 2009, respectively (Mr. Shutzer is a Trustee).
(cid:120) Prep for Prep: merchandise grants totaling $1,980, $1,980, and $5,205 for Fiscal 2011,
2010, and 2009 respectively (Mr. Shutzer is a Trustee).
(cid:120) Phoenix House: combination of ticket subscription and merchandise grants totaling
$29,690, $13,170 and $260 for Fiscal 2011, 2010 and 2009, respectively (Ms. Bravo is a
member of the Board of Directors).
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REPORT OF THE AUDIT COMMITTEE
Included in the Company’s Annual Report to Stockholders are the consolidated balance sheets of the
Company and its subsidiaries as of January 31, 2012 and 2011, and the related consolidated statements of
earnings, stockholders’ equity and comprehensive earnings, and cash flows for each of the three years in
the period ended January 31, 2012. These statements (the “Audited Financial Statements”) are the subject
of a report by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP
(“PwC”). The Audited Financial Statements are also included in the Company’s Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
The Audit Committee reviewed and discussed the Audited Financial Statements with the Company’s
management and otherwise fulfilled the responsibilities set forth in its charter. The Audit Committee has also
discussed with the Company’s management and independent registered public accounting firm their
evaluations of the effectiveness of the Company’s internal controls over financial reporting.
The Audit Committee has discussed with PwC the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended, “Communication with Audit Committees,” as adopted by the
PCAOB in Rule 3200T, and PCAOB Auditing Standard No. 5, “An Audit of Internal Control Over Financial
Reporting That Is Integrated With An Audit of Financial Statements.”
The Audit Committee received from PwC the written disclosure and letter required by PCAOB Rule 3526
“Communication with Audit Committees Concerning Independence,” and has discussed the independence
of PwC with that firm. The Audit Committee has considered whether the provision by PwC of the tax
consultation, tax compliance and other non-audit-related services disclosed above under “RELATIONSHIP
WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – Fees and Services of
PricewaterhouseCoopers LLP” is compatible with maintaining PwC’s independence and has concluded that
providing such services is compatible with that firm’s independence from the Company and its
management.
The Audit Committee is aware that the provision of non-audit services by an independent registered public
accounting firm may, in some circumstances, create the perception that independence has been
compromised. Accordingly, the Audit Committee has instructed management and management has
consequently developed professional relationships with firms other than PwC so that, when needed, other
qualified resources are available and will be used as appropriate.
Based upon the review and discussions referred to above, the Audit Committee recommended to the
Company’s Board that the Audited Financial Statements be included in the Company’s Annual Report on
Form 10-K for the fiscal year ended January 31, 2012.
Signed:
J. Thomas Presby, Chair
Gary E. Costley
Lawrence K. Fish
Abby F. Kohnstamm
Charles K. Marquis
Members of the Audit Committee
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EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are:
Name
Age Position
Year Joined
Tiffany
Executive Vice President
Executive Vice President
Executive Vice President and Chief Operating Officer
Executive Vice President
60 Chairman of the Board and Chief Executive Officer
Michael J. Kowalski
57
Beth O. Canavan
Frederic Cumenal
52
James N. Fernandez 56
Jon M. King
55
Victoria Berger-Gross 56 Senior Vice President – Global Human Resources
Pamela H. Cloud
Patrick B. Dorsey
Patrick F. McGuiness 46 Senior Vice President – Chief Financial Officer
54 Senior Vice President – Chief Marketing Officer
Caroline D. Naggiar
53 Senior Vice President – Operations
John S. Petterson
1983
1987
2011
1983
1990
2001
1994
42 Senior Vice President – Merchandising
61 Senior Vice President – General Counsel and Secretary 1985
1990
1997
1988
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Michael J. Kowalski. Mr. Kowalski assumed the role of Chairman of the Board in 2003, following
the retirement of William R. Chaney. He has served as the Registrant’s Chief Executive Officer
since 1999 and on the Registrant’s Board of Directors since 1995. After joining Tiffany in 1983 as
Director of Financial Planning, Mr. Kowalski held a variety of merchandising management positions
and served as Executive Vice President from 1992 to 1996 with overall responsibility in the areas
of merchandising, marketing, advertising, public relations and product design. He was elected
President in 1997. Mr. Kowalski is a member of the Board of Directors of the Bank of New York
Mellon. The Bank of New York Mellon is Tiffany’s principal banking relationship, serving as
Administrative Agent and a lender under Tiffany’s revolving credit facility and as the trustee and
investment manager for Tiffany’s Employee Pension Plan; and BNY Mellon Shareowner Services,
an affiliate of Bank of New York Mellon, served as the Company's transfer agent and registrar until
such affiliate was sold to Computershare in December 2011.
Beth O. Canavan. Mrs. Canavan joined Tiffany in 1987 as Director of New Store Development. She
later held the positions of Vice President, Retail Sales Development, Vice President and General
Manager of the New York flagship store, and Eastern Regional Vice President. In 1997, she
assumed the position of Senior Vice President for U.S. Retail. In 2000, she was promoted to
Executive Vice President responsible for retail sales activities in the U.S. and Canada and retail
store expansion. In 2001, Mrs. Canavan assumed additional responsibility for direct sales and
business-to-business sales activities in the Americas and in 2010 also assumed responsibility for
sales in Latin/South America.
Frederic Cumenal. Mr. Cumenal joined Tiffany in March 2011 as Executive Vice President, with
responsibility for the Asia-Pacific, Japan, Europe and Emerging Markets Regions. For 15 years
prior to joining Tiffany, Mr. Cumenal held senior leadership positions in LVMH Group’s wine and
spirits businesses, most recently as President and Chief Executive Officer of Moët & Chandon,
S.A. Previously, Mr. Cumenal served as Chief Executive Officer of Domaine Chandon, and was
Managing Director of Moët Hennessy Europe.
James N. Fernandez. Mr. Fernandez joined Tiffany in 1983 and has held various positions in
financial planning and management prior to his appointment as Senior Vice President–Chief
Financial Officer in 1989. In 1998, he was promoted to Executive Vice President–Chief Financial
Officer. In June 2011 he was promoted to Executive Vice President and Chief Operating Officer.
P S - 2 1
Mr. Fernandez serves on the Board of Directors of The Dun & Bradstreet Corporation and is the
Chairman of its Audit Committee and a member of its Board Affairs Committee.
Jon M. King. Mr. King joined Tiffany in 1990 as a jewelry buyer and has held various positions in
the Merchandising Division, assuming responsibility for product development in 2002 as Group
Vice President. In 2003, he was promoted to Senior Vice President–Merchandising. In 2006, he
was promoted to Executive Vice President and, in addition to his Merchandising leadership role,
assigned responsibility for Marketing and Public Relations.
Victoria Berger-Gross. Dr. Berger-Gross joined Tiffany in 2001 as Senior Vice President–Human
Resources. Her current title is Senior Vice President, Global Human Resources.
Pamela H. Cloud. Ms. Cloud joined Tiffany in 1994 as an Assistant Buyer and has since advanced
through positions of increasing management responsibility within the Merchandising Division. In
2007, she was promoted to Senior Vice President–Merchandising, responsible for all aspects of
product planning and inventory management.
Patrick B. Dorsey. Mr. Dorsey joined Tiffany in 1985 as General Counsel and Secretary.
Patrick F. McGuiness. Mr. McGuiness joined Tiffany in 1990 as an Analyst in Accounting &
Reporting and has held a variety of management positions within the Finance Division, most
recently as Group Vice President–Finance, and in Merchandising from 2000 to 2002 as Vice
President–Merchandising Process Improvement. In 2007, he was promoted to Senior Vice
President–Finance, responsible for Tiffany’s worldwide financial functions. In June 2011, Mr.
McGuiness was promoted to Senior Vice President–Chief Financial Officer and, in addition to his
responsibility for worldwide financial functions, was assigned responsibility for Investor Relations.
Caroline D. Naggiar. Ms. Naggiar joined Tiffany in 1997 as Vice President–Marketing
Communications. She assumed her current role and responsibilities as head of advertising and
marketing in 1998 and in 2007 she was assigned additional responsibility for the Public Relations
department and named Chief Marketing Officer. In 2009 she added Creative Visual Merchandising
to her responsibilities.
John S. Petterson. Mr. Petterson joined Tiffany in 1988 as a management associate and advanced
through positions of increasing management responsibility. He was promoted to Senior Vice
President–Corporate Sales in 1995. In 2001, Mr. Petterson assumed the role of Senior Vice
President–Operations, with responsibility for worldwide distribution, customer service and security
activities. His responsibilities were expanded in 2003 to include manufacturing operations.
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COMPENSATION OF THE CEO AND OTHER EXECUTIVE OFFICERS
Contents
Compensation Discussion and Analysis .....................................................................Page PS-24
Report of the Compensation Committee ....................................................................Page PS-44
Summary Compensation Table – Fiscal 2011, 2010 and 2009 ...................................Page PS-45
Grants of Plan-Based Awards Table – Fiscal 2011......................................................Page PS-48
Discussion of Summary Compensation Table and Grants of Plan-Based Awards .....Page PS-50
Outstanding Equity Awards at Fiscal Year-end Table ..................................................Page PS-56
Option Exercises and Stock Vested Table – Fiscal 2011.............................................Page PS-59
Pension Benefits Table ................................................................................................Page PS-60
Nonqualified Deferred Compensation Table................................................................Page PS-64
Potential Payments on Termination or Change in Control...........................................Page PS-66
Director Compensation Table – Fiscal 2011 ................................................................Page PS-70
Equity Compensation Plan Information…………………………………….…………..…Page PS-72
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COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
(cid:120) Our fiscal year ends on each January 31. Therefore, the fiscal years referred to in this
Compensation Discussion and Analysis (“CD&A”) are the 12-month periods ending on the
following dates:
o Fiscal 2009
o Fiscal 2010
o Fiscal 2011
o Fiscal 2012
January 31, 2010
January 31, 2011
January 31, 2012
January 31, 2013
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
In May 2011, the Company’s Say on Pay proposal passed with 90.6% of the stockholder votes
in favor of the Company’s compensation program. Of the “against” votes, 83.7% were
abstaining shares or broker non-votes.
The Company’s consolidated Fiscal 2011 net earnings exceeded a target established by the
Compensation Committee of the Board of Directors (the “Committee”) at the start of the year
by 15.3%. This allowed the Committee to pay the executive officers 119%, on average, of
their target Fiscal 2011 annual incentive/bonus.
In January 2012, the Committee determined that base salaries and target incentive
awards/bonuses for Fiscal 2012 would remain the same as in Fiscal 2011. This was consistent
with previous guidance from the Committee that changes in base salary and annual incentive
compensation would generally be considered on a two-year cycle. The Committee also
considered the stockholder support demonstrated for the May 2011 Say on Pay proposal
when it left the compensation program unchanged for Fiscal 2012.
The Committee made long term incentive awards to 11 executive officers in January 2012.
These awards consisted of an approximately equal mix (based on grant date fair value) of
performance-based restricted stock units and option awards.
The Committee made separate awards of stock options and three-year time-vesting restricted
stock units to Mr. Cumenal in March 2011, in connection with his commencement of
employment. In making this award, the Committee considered multiple factors, including the
personal costs, foregone compensation and professional risk that Mr. Cumenal incurred to
accept the position and relocate his family to the United States.
The Committee made separate awards of stock options and three-year time-vesting restricted
stock units to Messrs. Fernandez and McGuiness in June 2011, in connection with their
promotions to chief operating officer and chief financial officer respectively.
In January 2012, the Committee approved the target amounts (but not specific performance
targets) for annual incentives/bonuses to be paid in respect of Fiscal 2012. Payments, if any,
will be made in Fiscal 2013.
In March 2012, the Committee set the specific performance targets for annual
incentives/bonuses to be paid in respect of Fiscal 2012. Payments, if any, will be made in
Fiscal 2013.
In December 2010, by unanimous written consent, the Committee approved the key terms of
the Company’s retirement and non-competition agreement with James E. Quinn, who retired
from employment with Tiffany effective February 1, 2012. See below under the heading Other
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Employment Agreements or Severance Plans for Executives for a description of Mr. Quinn’s
retirement and non-competition agreement, entered into on January 19, 2012.
(cid:120) Corporate governance of the Company’s executive compensation program is demonstrated by
a number of practices, including:
o formal stock ownership guidelines;
o recoupment provisions applicable to equity awards and retirement benefits in
connection with non-compete covenants;
o engagement by the Compensation Committee of the Board of Directors (the
“Committee”) of its own independent consultant;
o prohibition on hedging of Parent stock;
o no tax gross-ups; and
o limited use of employment agreements.
Overview of Compensation Components
The Committee has established an executive compensation plan that contains the following key
components:
Compensation Component
Salary
Annual incentive (annual
incentive award or bonus)
Objectives
Provide cash compensation that is
not at risk so as to provide a
stable source of income and
financial security.
Motivate and reward achievement
of the annual financial results.
Long-term incentives
(performance-based
restricted stock units and
stock options)
Align management interests with
those of stockholders; retain
executives; motivate and reward
achievement of sustainable
earnings growth.
Time-vesting restricted
stock units
Benefits
Used infrequently, typically to
recognize prior performance or to
attract or retain key talent.
Retain executives over the course
of their careers.
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Key Features
Designed to retain key executives
by being competitive; not the
primary means of recognizing
performance.
Cash payments dependent on the
degree of achievement of the
annual profit plan – Committee
retains discretion to reduce
awards.
Performance-based restricted
stock unit awards vest upon
achievement of Company
financial goals over a three-year
performance period and require
continued employment.
Committee retains discretion to
reduce awards. Stock option
awards vest ratably over four
years of continued employment.
Typically time-vesting after three
years of continued employment.
A comprehensive program of
benefits that includes (i) a defined
benefit retirement program that
provides a special stay-incentive
for experienced executives1; and
(ii) life insurance benefits that
build cash value.
1 Executive officers other than Mr. Cumenal participate in a defined benefit retirement program comprised of the Pension Plan, Excess
Plan, and Supplemental Plan, available to executive officers hired on or before December 31, 2005. For a description of these plans
see PENSION BENEFITS – Features of the Retirement Plans on page PS-60. For a description of the defined contribution retirement
benefit available to Mr. Cumenal, see Excess DCRB Feature of the Executive Deferral Plan on page PS-65.
P S - 2 5
Short- and Long-term Planning for Sustainable Earnings Growth
The performance of management in planning, execution and brand stewardship and variable
external factors determines the Company’s success in achieving its financial goals – both short
and long term.
As part of each year’s planning process, the executive officers develop and submit for Board
approval:
(cid:120) A five-year strategic plan that balances earnings with “brand stewardship” (see below);
and
(cid:120) A profit plan for the fiscal year.
Both plans must incorporate challenging but achievable goals for sales growth, merchandising,
gross margins, marketing expenditures, staffing, other expenses, capital spending and all other
components of the Company’s financial statements.
“Brand stewardship” refers to actions taken by management to maintain, in the minds of
consumers, strong associations between the TIFFANY & CO. brand and product quality, product
exclusivity, the highest levels of customer service, compelling store design and product display,
and responsible product sourcing practices.
The Board recognizes that tradeoffs between short-term objectives and brand stewardship are
often difficult. For example, variations in product mix can positively affect gross margins in the
short term while negatively affecting brand image, and increased staffing can positively affect
customer service while negatively affecting earnings. Through the planning process, management
must bring into balance expectations for annual earnings growth and concerns for brand
stewardship and sustainable earnings growth.
Due in part to stockholder approval of the Company’s Say on Pay proposal in May 2011, the
Committee left the compensation program for Fiscal 2012 unchanged.
Objectives of the Executive Compensation Program
The Committee has established the following objectives for the compensation program:
(cid:120)
(cid:120)
(cid:120)
To attract, motivate and retain the management talent necessary to develop and execute
both the annual and strategic plans;
To reward achievement of annual and long-term financial goals; and
To link management’s interests with those of the stockholders.
The total executive compensation program includes base salary, annual and long-term incentives
and benefits.
Setting Executive Compensation
In January of each year, the Committee sets the target amount of total compensation for each
executive officer, as well as the target levels of key components of such compensation. This
follows a process in which the Committee conducts a detailed review of each executive’s
compensation. See below under the heading Compensation Committee Process for a discussion
of how the Committee determines compensation for executive officers. For a discussion of how
the Committee determines that the compensation of executive officers is competitive, see below
under the heading Competitive Compensation Analysis.
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The actual performance goals for the annual and long-term incentive compensation are set by the
Committee in March of each fiscal year. This goal-setting is coordinated with the Company’s
business planning process for the fiscal year and the five-year strategic period that includes the
fiscal year.
Relative Values of Key Compensation Components
The Committee used the following ratios to base salary as a means of awarding short- and long-
term incentives for Fiscal 2010 and determined that they would remain effective for Fiscal 2011
and Fiscal 2012. The Committee splits the estimated value of the long-term incentives evenly
between the grant date fair market value of the targeted number of performance-based restricted
stock units and the estimated (Black-Scholes) value of stock options.
Target Short-
term Incentive
as a Percent of
Salary
100%
50%
Maximum
Short-term
Incentive as a
Percent of
Salary
200% 300%
Long-term
Incentive as a
Percent of
Salary
100% 150% (a)
70%
140% 225% (b)
70%
70%
140% 200% (c)
140%
200%
Executive
Michael J.
Kowalski
Patrick F.
McGuiness
James N.
Fernandez
Frederic
Cumenal
Jon M. King
Position
Chairman &
CEO
Senior Vice
President &
CFO
Executive
Vice
President &
COO
Executive
Vice
President
Executive
Vice
President
(a) Does not include the one-time promotion Time-Vesting Restricted Stock Unit grant and Stock
Option grant made in June 2011. If these grants were included in the calculation of Long-Term
Incentive as a Percent of Salary, this percentage would be 369%.
(b) Does not include the one-time promotion Time-Vesting Restricted Stock Unit grant and Stock
Option grant made in June 2011. If these grants were included in the calculation of Long-Term
Incentive as a Percent of Salary, this percentage would be 556%.
(c) Does not include the one-time sign-on Time-Vesting Restricted Stock Unit grant made in
March 2011. If that grant was included in the calculation of Long-Term Incentive as a Percent
of Salary, this percentage would be 613%.
The Committee believes that the portion of an executive officer’s compensation that is “at risk”
(subject to adjustment for corporate performance factors) should vary proportionately to the
amount of responsibility the executive officer bears for the Company’s success. The Committee
also believes that a minimum of 50% of the total compensation opportunity of the chief executive
officer and 40% of the total compensation opportunity of the other executive officers should be
comprised of long-term incentives.
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Base Salary
The Committee pays the executive officers competitive salaries as one part of a total
compensation program to attract and retain them, but does not use salary increases as the
primary means of recognizing talent and performance.
The Committee determined on January 18, 2012 that executive salaries would remain the same for
fiscal year 2012.
Why: Executive salaries are generally assessed every second year. The last time the Committee
approved a general increase was in January 2011. At that time, the Committee increased the base
salaries of executive officers based on its consideration of multiple factors, including that no
general salary increases had been granted this group for three years; competitive market
compensation levels for comparable positions; and internal equity.
Salaries of all executive officers other than the chief executive officer were increased in this fashion
in January 2011. This included the salaries for Messrs. McGuiness, Fernandez and King.
Short-term Incentives
Why: The Committee uses short-term incentives to motivate executive officers to achieve the
annual profit plan. Short-term incentives consist of annual incentive awards for the four highest-
paid named executive officers (Mr. Kowalski, Mr. Fernandez, Mr. Cumenal and Mr. King) and for
Mrs. Canavan, and bonus eligibility for the other executive officers. Annual incentive awards are
primarily formula-driven, with payments based on the degree of achievement of the annual profit
plan set by the Committee under the plan. Bonuses are entirely discretionary.
Although annual incentive awards are contingent upon the degree to which the annual profit plan is
achieved, the Committee has the discretion to take other considerations into account. Such
considerations include events, unanticipated at the time that incentive award targets were set, that
affect earnings, and contributions to business outcomes consistent with the strategic plan.
For a description of the incentive awards, including incentive award targets from year-to-year and
the conditions under which the Committee may exercise discretion, see DISCUSSION OF
SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS – Non-Equity
Incentive Plan Awards.
Annual incentive awards are intended to be “qualified performance based compensation” under
Section 162(m) of the Internal Revenue Code in that the goals that are established by the
Committee are substantially uncertain of being achieved at the time of establishment and because
there is no guarantee that such goals will be achieved through actual fiscal year results.
The Committee awards annual bonuses to the other executive officers. Although the Committee
retains discretion with respect to bonuses, in practice it aligns bonuses with the annual incentive
awards.
The annual incentive targets established by the Committee for each of the named executive
officers for Fiscal 2011 and which will remain in effect for Fiscal 2012, were 100% of base salary in
the case of Mr. Kowalski; 70% of base salary for Messrs. Fernandez, Cumenal and King; and 50%
of base salary for Mr. McGuiness (target bonus).
The annual maximum incentive established by the Committee for each of the named executive
officers for Fiscal 2011 was set at twice the target. That means 200% of base salary in the case
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of Mr. Kowalski; 140% of base salary for Messrs. Fernandez, Cumenal and King; and 100% of
base salary for Mr. McGuiness (maximum bonus).
Fiscal 2011 Short-term Goals
In March 2011, the Committee established, as a condition to awarding the maximum incentive
awards, that the Company attain Fiscal 2011 net earnings of $264 million. At the same time the
Committee also advised the executive officers that, in the absence of other factors, the Committee
will exercise its discretion as follows:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
To reduce the award to zero if Fiscal 2011 net earnings do not exceed $308 million;
To pay the target incentive award if Fiscal 2011 net earnings equal $440 million;
To pay the maximum award if Fiscal 2011 net earnings equal or exceed $572 million; and
To prorate the incentive award payable if Fiscal 2011 net earnings fall between the amounts
set forth above.
In March 2012, after reviewing and concurring with the recommendation of the chief executive
officer, the Committee, in the exercise of its retained discretion, determined to pay incentive
awards in the range of 110% to 129%.
(cid:120)
Fiscal 2011 net earnings fell between $440 million and $572 million.
(cid:120) Based on Fiscal 2011 net earnings, the implied payout under the goals set forth above was
121% of target.
(cid:120) However, the Committee determined, in the exercise of its retained discretion, to pay
awards in the range of 110% to 129% of target.
Fiscal 2012 Short-term Goals
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In March 2012, the Committee established, as a condition to awarding the maximum incentive
awards, that the Company attain Fiscal 2012 net earnings of $306 million. At the same time the
Committee also advised the executive officers that, in the absence of other factors, the Committee
will exercise its discretion as follows:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
To reduce the award to zero if Fiscal 2012 net earnings do not exceed $409 million.
To pay the target incentive award if Fiscal 2012 net earnings equal $511 million.
To pay the maximum incentive award if Fiscal 2012 net earnings equal $614 million; and
To prorate the incentive award payable if Fiscal 2012 net earnings fall between the amounts
set forth above.
Three-year History of Short-term Incentive Payouts
Following is the record of short-term incentive payouts (including bonuses) for the executive
officers as a group as a percent of target over the past three fiscal years:
(cid:120)
(cid:120)
(cid:120)
Fiscal 2011: 110%-129% of target;
Fiscal 2010: 145%-155% of target; and
Fiscal 2009: 200% of target.
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Long-Term Incentives
Why: The Committee uses long-term incentives to promote the retention of executive officers and
motivate them to achieve sustainable earnings growth.
The Committee considers equity-based awards to be appropriate because, over the long term, the
Company’s stock price should be a good indicator of management’s success in achieving
sustainable earnings growth.
The total value of each year’s grant of equity awards is based on the percentage of salary
indicated above under Relative Values of Key Compensation Components, and the ratio of salary
to long-term incentives is reviewed at the same time that salaries are reviewed.
The Committee awards performance-based restricted stock units and stock options because each
form of award complements the other in helping the Company retain and motivate its executive
officers.
In its decision to use both forms of award, the Committee took into account the difficulty of setting
appropriate strategic performance goals. This difficulty arises due to the significant degree of
influence that non-controllable and highly variable external factors have upon the Company’s
performance, and the fact that the market does not always respond immediately to earnings
growth.
Performance-based restricted stock units have the advantage of rewarding executives for meeting
financial goals – even if the achievement of those goals is not reflected in the share price in the
short term.
Stock options do not reward executives in a declining market. However, they do provide gains
commensurate with those of shareholders, whether or not financial goals have been met.
In order to provide balance to the Company’s long-term incentives, the Committee determined that
the ratio of the estimated value of performance-based restricted stock unit awards to the
estimated value of stock options awards should be as nearly 50/50 as practicable. For purposes
of achieving this ratio the Committee values the awards as follows:
(cid:120)
(cid:120)
for options, on the basis of the Black-Scholes model; and
for performance-based restricted stock units, using the per share market value immediately
prior to the grant on the assumption that units would vest at the earnings target (attainment
of the ROA target was not considered in making this allocation).
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Performance-Based Restricted Stock Unit Grants Made in January 2012 and 2011
Complete vesting of performance-based restricted stock units granted in January 2012 and in
January 2011 is dependent upon achievement of earnings thresholds. Achievement of those
thresholds will give the Committee the discretion to vest the maximum number of stock units
granted or any lesser number down to zero. However, the Committee has communicated to the
executive officers that it will exercise its discretion to reduce the number of units vesting on the
basis of both cumulative earnings per share (“EPS”) goals and an average return on assets
(“ROA”) goals over each of the three-year performance periods (Fiscal Years 2012, 2013 and 2014
for the 2012 grants) (Fiscal Years 2011, 2012 and 2013 for the 2011 grants).
(cid:120)
Like most companies, the Company’s stock price over the long term is primarily driven by
growth in EPS. The Committee considers EPS performance to be the primary determiner
of vesting and no shares will vest unless a threshold level of EPS performance is achieved.
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(cid:120)
(cid:120)
The Company’s ROA is also likely to significantly affect its stock price over the long term.
This is due, in part, to the significance of inventory and capital expenses in its business.
Thus the Committee uses ROA as a supplemental indicator of management’s success in
achieving sustainable earnings growth.
The EPS and ROA goals were set by the Committee in conformance to, and as part of the
process of approving, the Company’s strategic plan.
The Committee has provided the following chart to the executive officers to illustrate the manner in
which the Committee intends to exercise its discretion at the conclusion of each three-year
performance period:
Earnings
Performance
Earnings
Threshold Not
Reached
Earnings
Threshold
Reached
Earnings Target
Reached
Earnings
Maximum
Reached
Percent of
Target Shares
Vesting for
Earnings
Performance
ROA Adjustment to
Shares Vesting for
Earnings
Performance
(percent of Target)
Percent of
Target Shares
Vesting After
ROA
Adjustment
Percent of
Maximum
Number of
Shares
Vesting
0%
None
0%
None
25%
100%
190%
10% increase if ROA
Target achieved
25% to 35%
12.5% to
17.5%
90% to 110%
45% to 55%
180% to 200%
90% to 100%
10% increase if ROA
Target achieved/
10% decrease if
ROA Target not
achieved
10% increase if ROA
Target achieved/
10% decrease if
ROA Target not
achieved
Performance Targets, Thresholds and Maximums January 2012 Performance-Based Grants
In March 2012, the Committee established the following in respect of the performance-based
restricted stock units granted in January 2012, subject to adjustments as permitted under the
Plan:
(cid:120) Earnings Target: $13.94 per share (aggregate net earnings per share on a diluted basis over the
three-year period);
(cid:120) ROA Target: 12.0% (return on average assets in each of the fiscal years in the performance
period, expressed as a percentage and then averaged over the entire performance period);
(cid:120) Earnings Threshold: $9.64 per share (aggregate net earnings per share on a diluted basis over
the three-year period); and
(cid:120) Earnings Maximum: $16.77 per share (aggregate net earnings per share on a diluted basis over
the three-year period).
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Performance Targets, Thresholds and Maximums January 2011 Performance-Based Grants
In March 2011, the Committee established the following in respect of the performance-based
restricted stock units granted in January 2011, subject to adjustments as permitted under the
Plan:
(cid:120) Earnings Target: $12.12 per share (aggregate net earnings per share on a diluted basis over the
three-year period);
(cid:120) ROA Target: 12.2% (return on average assets in each of the fiscal years in the performance
period, expressed as a percentage and then averaged over the entire performance period);
(cid:120) Earnings Threshold: $5.80 per share (aggregate net earnings per share on a diluted basis over
the three-year period); and
(cid:120) Earnings Maximum: $16.43 per share (aggregate net earnings per share on a diluted basis
over the three-year period).
Performance Targets, Thresholds and Maximums –January 2010 Performance-Based Grants
In March 2010, the Committee established the following in respect of the performance-based
restricted stock units granted in January 2010, subject to adjustments as permitted under the
Plan:
(cid:120) Earnings Target: $9.10 per share (aggregate net earnings per share on a diluted basis over the
three-year period);
(cid:120) ROA Target: 10.6% (return on average assets in each of the fiscal years in the performance
period, expressed as a percentage and then averaged over the entire performance period);
(cid:120) Earnings Threshold: $4.25 per share (aggregate net earnings per share on a diluted basis over
the three-year period); and
(cid:120) Earnings Maximum: $12.21 per share (aggregate net earnings per share on a diluted basis over
the three-year period).
Terms of Performance-Based Restricted Stock Unit Grants Made in January 2009
When the Committee met in January 2009, it considered:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
The Company’s projected financial performance for Fiscal 2008;
The economic circumstances and uncertainty then confronting retailers of luxury goods and
jewelry retailers in particular;
The difficulty of planning for Fiscal 2009 in the face of such uncertainty;
The diminished realizable and retentive value of equity awards made to the executive officers in
prior fiscal years due to the effect of significant declines in the market value for the Company’s
stock and the Company’s financial performance in Fiscal 2008; and
(cid:120) Whether the vesting provisions of performance-based restricted stock unit grants to be made
in respect of the three-year performance period ending on January 31, 2012 should be
changed, relative to those made for prior performance periods (see below), to recognize the
economic uncertainty and to provide the Company with a better opportunity to retain the
executives.
The Committee determined that the performance-based restricted stock unit grants made in
January 2009 for the three-year performance period ending January 31, 2012 (Fiscal 2009, 2010
and 2011) will vest 100% for those executives who remain employed through the end of the
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performance period if earnings from continuing operations equal or exceed $300 million in any one
of the three fiscal years ending during the performance period. Unlike prior grants, there is no
incremental opportunity for the executives if the earnings goal is overachieved, and no partial
vesting for partial performance. The Company met the $300 million hurdle rate in Fiscal 2009 and
the grants fully vested for each executive officer.
Performance-Based Restricted Stock Unit Grants Made in January 2008
Complete vesting of performance-based restricted stock units granted in January 2008 was
dependent upon achievement of both EPS goal and an ROA goal over each three-year
performance period following the grants. Due to the Company’s financial performance in Fiscal
2008, the Company did not meet the applicable three-year cumulative EPS goal and ROA goal for
these grants, and these grants did not vest.2 The Committee did not retain any discretion in that
regard.
Four year History of Performance-Based Restricted Stock Unit Payouts
Following is the payout history for performance-based restricted stock units made to the executive
officers:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Fiscal 2006 through 2008 Performance Period: 72.8% of target;
Fiscal 2007 through 2009 Performance Period: 0% of target;
Fiscal 2008 through 2010 Performance Period: 0% of target; and
Fiscal 2009 through 2011 Performance Period: 100% of target.
***
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For a more complete description of the performance-based restricted stock units, including a
description of the circumstances in which a portion of the units may vest in various circumstances
of death, disability, a Change of Control or at the initiative of the executive’s employer and the
goals set from year-to-year, see DISCUSSION OF SUMMARY COMPENSATION TABLE AND
GRANTS OF PLAN-BASED AWARDS – Equity Incentive Plan Awards – Performance-Based
Restricted Stock Units.
Stock Option Grants
Why: The Committee grants stock options in order to clarify the link between the interests of the
executive officers and those of the Company’s stockholders in long-term growth in share value
and to support the brand stewardship over the long term.
The incentive plan under which stock options are granted requires the exercise price of each
option to be established by the Committee (or determined by a formula established by the
Committee) at the time the option is granted. Options are to be granted at a value equal to or
greater than the fair market value of a share as of the grant date (or, in the case of a recipient’s
promotion or hire date, such effective promotion or hire date). The incentive plan does not permit
for the repricing of options at a later date.
2 For performance-based restricted stock units granted in January 2008, goals were as follows: Threshold cumulative net EPS of $8.54;
Target cumulative net EPS of $9.87; Maximum cumulative net EPS of $10.62; and ROA goal of 11.5%.
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As in prior years, stock options have a 10-year term and vest at the rate of 25% per year. In June
2011, the Committee granted additional stock option awards to Messrs. Fernandez and
McGuiness, in connection with their promotions to Chief Operating Officer and Chief Financial
Officer, respectively. The awards in question – for 40,000 options for Mr. Fernandez, and for
20,000 options for Mr. McGuiness – have a 10-year term and vest at the rate of 25% per year. (For
a description of the stock options see DISCUSSION OF SUMMARY COMPENSATION TABLE AND
GRANTS OF PLAN-BASED AWARDS – Options).
Time-vesting Restricted Stock Unit Awards
Why: On occasion, the Committee may make non-strategic restricted stock unit awards for
reasons such as recognition of prior performance; attraction of new talent; retention of key talent;
and in lieu of cash compensation increases. In March 2011, the Committee granted such an
award to Mr. Cumenal, in connection with the commencement of his employment, and as a “make
whole” payment for amounts Mr. Cumenal forfeited at his prior employer. Subject to certain
conditions, the award in question – for 27,228 stock units – will not vest unless Mr. Cumenal
remains employed for three years. In June 2011, the Committee granted time-vesting restricted
stock unit awards to Messrs. Fernandez and McGuiness in connection with their promotions to
Chief Operating Officer and Chief Financial Officer, respectively. Subject to certain conditions, the
awards in question – for 15,000 stock units for Mr. Fernandez, and for 7,500 stock units for Mr.
McGuiness – will not vest unless the executive officer recipient remains employed for three years.
See DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED
AWARDS – Time-Vesting Restricted Stock Awards.
Retirement Benefits
Why: Retirement benefits are offered to executive officers because the Committee seeks to retain
them over the course of their career, especially in their later years when they have gained
experience and become more valuable to the Company and to its competitors. (For a description
of the retirement benefits see PENSION BENEFITS – Features of the Retirement Plans.)
Retirement benefits offer financial security in the future and are not entirely contingent upon
corporate performance factors. It is the case, however, that average final compensation, on which
the retirement benefits of each executive officer is based, will be determined, in part, by reference
to bonus and incentive awards made in the past; such awards are determined by corporate
performance factors in the year awarded.
Executives (other than Mr. Cumenal) participate in three retirement plans: they participate in the
same tax-qualified pension plan available to all full-time U.S. employees hired before January 1,
2006 and also receive incremental benefits under the Excess Plan and the Supplemental Plan.
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The Excess Plan credits salary and bonus in excess of amounts that the Internal Revenue Service
(IRS) allows the tax-qualified pension plan to credit in computing benefits, although benefits under
both of these plans are computed under the same formula. The Committee considers it fair and
consistent with the employee retention purpose of the tax-qualified pension plan to maintain for
executives the relationship established for employees compensated below the IRS limit between
annual cash compensation and pension benefits.
The Supplemental Plan serves as a stay-incentive for experienced executives by increasing the
percentage of average final compensation provided as a benefit when the executive reaches
specified service milestones.
P S - 3 4
For executive officers hired by the Company on January 1, 2006 or later, a defined contribution
retirement benefit is available through the Tiffany & Co. Employee Profit Sharing and Retirement
Savings Plan, and excess defined retirement benefit contributions (“Excess DCRB Contribution”)
credited to the Tiffany and Company Executive Deferral Plan. Employer contributions credited to
the Deferral Plan are calculated to compensate executives for pay amounts curtailed by reason of
the limitations under Sections 401(a)(17) or 415 of the Internal Revenue Code. Mr. Cumenal is a
participant in each of these plans, and receives additional retirement benefits under his
employment agreement, which were intended as “make whole” payments for amounts
Mr. Cumenal forfeited at his prior employer. Mr. Cumenal accrued significant long-term pension
benefits with his prior employer.
Life Insurance Benefits
Why: IRS limitations render the life insurance benefits that the Company provides to all full-time
U.S. employees in multiples of their annual salaries largely unavailable to the Company’s executive
officers. The Company maintains the relationship established for lower-compensated employees
between annual salaries and life insurance benefits through executive-owned, employer-paid
whole-life policies. (For an explanation of the key features of the life insurance benefits, see
DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS
– Life Insurance Benefits.) The Committee considers the increase in policy cash value attributable
to Company contributions to be part of target total direct compensation for purposes of the
Competitive Compensation Analysis discussed below. Life insurance benefits are taxable to the
executives and no gross-up is paid.
Disability Insurance Benefits
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Why: The Committee provides executive officers with special disability insurance benefits because
their salaries are inconsistent with the income replacement limits of the Company’s standard
disability insurance policies. Thus, these special disability benefits maintain the relationship
established for employees compensated below the IRS limit between annual cash compensation
and disability benefits. Disability insurance premiums are taxable to the executives and no
gross-up is paid.
Equity Ownership by Executive Officers and Directors
In July 2006, the Board adopted a share ownership policy for executive officers to better align
management’s interests with those of stockholders over the long term. This policy was amended
in March 2007 to include directors who are not executive officers. In Fiscal 2011, the Committee
reviewed the policy with Pay Governance to assure that the levels and design remained
competitive and appropriate; no change was made as a consequence of that review.
Under the equity ownership policy, executive officers and non-executive directors are required to
accumulate shares (and options for shares) of the Company’s common stock until they have
ownership of shares or options having a total market value equal to the following multiples of their
base salaries (minimum annual retainer in the case of directors):
Position/Level
Chief Executive Officer
Non-Executive Directors
President
Executive Vice President
Senior Vice President
Market Value of Company Stock Holdings as a
Multiple of Base Salary (Minimum Annual
Retainer in the case of Non-Executive Directors)
Five Times
Five Times
Four Times
Three Times
Two Times
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Under the share ownership policy, so long as 25% of the required market value consists of shares
of the Company’s common stock owned by an executive officer or director, then 50% of the
positive current value of his or her vested (exercisable) stock options may also be counted towards
compliance. For this purpose, the current value of a vested option is calculated as follows: current
market value of the number of shares covered by the option less the total option exercise price.
Prior to satisfying this stock ownership requirement, an executive officer or director may not sell
any shares except to:
(cid:120)
satisfy required withholding for income taxes due upon exercise of stock options or
vesting of performance-based restricted stock units;
(cid:120) pay the exercise price upon exercise of stock options; and
(cid:120) dispose of no more than 50% of the remaining shares issued upon exercise of stock
options or vesting of performance-based restricted share units (after paying the exercise
price and tax withholding).
The Committee regularly reviews progress toward compliance with the policy.
The policy provides executive officers and directors with a five-year period to achieve compliance,
after first becoming subject to the policy. Executive officers or directors who achieve compliance,
but fall out of compliance under certain circumstances, shall have two years to again achieve
compliance.
As of January 31, 2012, the chief executive officer had exceeded his goal by more than four-fold
and all of the remaining ten executive officers, other than Mr. Cumenal (who joined the Company in
March 2011), had achieved their goal.
As of January 31, 2012, all of the directors had met their share ownership requirements.
Hedging Not Permitted
The Board of Directors adopted a worldwide policy on Insider Information, applicable to all
employees including executive officers. The policy expressly prohibits speculative transactions
(i.e. hedging), such as the purchase of calls or puts, selling short, or speculative transactions as to
any rights, options, warrants or convertible securities related to Company securities. This policy
does not affect the right to exercise or hold a stock option issued to the executive by the
Company.
Retention Agreements
The Committee continues to believe that, during any time of possible or actual transition of
corporate control, it would be important to keep the team of executive officers in place, free of
distractions that might arise out of concern for personal financial advantage or job security. The
Company has not had a single controlling stockholder for many years, and, depending upon the
circumstances, executive officers could consider acquisition of a controlling interest as described
in the retention agreements to be a prelude to a significant change in corporate policies and an
incentive to leave. For these reasons, the Company has entered into retention agreements with
each of the executive officers (other than Mr. Cumenal, who has an employment agreement) which
provide financial incentives for them to remain in place during any such times. For a description of
the retention agreements, see POTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN
CONTROL – Retention Agreements. For a description of Mr. Cumenal’s employment agreement,
which contains comparable provisions to those of the retention agreements see COMPENSATION
DISCUSSION AND ANALYSIS Other Employment Agreements or Severance Plans for Executives
below.
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The Committee believes that the retention agreements serve the best interests of the Company’s
stockholders because such agreements:
(cid:120) will increase the value of the Company to a potential acquirer that requires delivery of an
intact management team;
(cid:120) will help to keep management in place and focused should any situation arise in which a
change of control looms but is not welcome or agreement has not yet been reached;
are a prudent defense to the possibility that one or more senior executive officers might
retire or take a competing job offer during a time of transition; and
are not overly generous.
(cid:120)
(cid:120)
The Committee also believes that the independent directors are fully capable of weighing the
merits of any proposed transaction and reaching a proper conclusion in the interests of the
stockholders, even in the face of management’s advocacy of a transaction that would provide
change in control payments to the executive officers.
Dual Triggers
The retention agreements are “dual-trigger” arrangements in that they provide no benefits unless
two events occur: (i) a change in control followed by (ii) a loss of employment.
Definition of “Change in Control”
In Fiscal 2008, the Committee changed the definition of “Change in Control” for use in the
Company’s arrangements with the executive officers. This change was made effective for equity
grants made in January 2009 and thereafter. This change was also made for the retention
agreements (see above) and all executive officers surrendered the old form of retention agreement
and entered into a new form with the changed definition. Under the new definition, a “Change in
Control” will be deemed to occur only in the following four situations:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
a 35% share acquisition;
incumbent directors (including those nominated by incumbent directors) cease to be a
majority;
a corporate transaction, such as a merger, in which the shareholders prior to the
transaction do not own 51% of the Company’s assets; and
a sale of all or substantially all of the assets of the Company or Tiffany.
No Gross-Ups
The retention agreements do not provide executive officers with reimbursement for excise taxes or
other taxes in connection with severance payments or other amounts relating to the change in
control.
Other Employment Agreements or Severance Plans for Executives
Apart from the retention agreements, the employment agreement entered into with
Frederic Cumenal discussed below, and the retirement and non-competition Agreement with
James E. Quinn discussed below, the Company:
(cid:120)
(cid:120)
(cid:120)
is not party to any employment agreement with any executive officer that provides for
severance benefits on termination of employment;
does not maintain any severance payment policy for executive officers; and
has the right to terminate the employment of any executive officer for any reason or no
reason prior to the occurrence of a change in control.
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Frederic Cumenal Employment Agreement
On March 10, 2011, Frederic Cumenal commenced employment with Tiffany as an executive
officer with the title “Executive Vice President” and responsibility for sales and distribution of
TIFFANY & CO. products in all markets other than the Americas. Tiffany entered into an
employment agreement with Mr. Cumenal as part of the recruiting process. The employment
agreement, which was approved by the Committee, addresses certain elements of the personal
costs, foregone compensation and professional risk that Mr. Cumenal incurred to accept the
position and relocate his family to the United States. That employment agreement includes the
following key compensatory features:
(cid:120)
Term: three-year initial term with sequential one-year extensions thereafter. Either Tiffany
or Mr. Cumenal may give prior notice of non-extension. In the event of a Change in
Control the term will continue for at least two years;
(cid:120) Base Salary: $850,000 per year;
(cid:120)
Target Annual Incentive Award: $595,000 (70% of Base Salary). See Fiscal 2011 Short-
Term Goals above;
(cid:120) One-time Three-year Time-Vesting RSU Grant: grant-date fair value of $1,700,000 (200%
of Base Salary);
(cid:120) Stock Option Grant: grant date fair value of $850,000 (100% of Base Salary);
(cid:120) Performance-Based RSU Grant: grant-date fair value of $850,000 (100% of Base Salary).
See Performance Targets, Thresholds and Maximums, Fiscal 2010 Performance-Based
Grants above;
(cid:120) Relocation Payment: a one-time award of $650,000 subject to a claw-back of 38% should
Mr. Cumenal resign without good reason within 18 months of employment;
(cid:120) Deferred Compensation: because Mr. Cumenal will not be eligible to participate in any
defined benefit pension plan offered by Tiffany, Tiffany will credit $365,000 per year for the
first 10 years of his employment to an interest-bearing account for Mr. Cumenal’s
retirement. He will be fully vested in this account after three years of employment;
Life Insurance Contributions: As it does for the other executive officers, Tiffany will
contribute towards the premium on a whole-life insurance policy to be owned by
Mr. Cumenal (up to $150,000 per year). See Life Insurance Benefits above;
French Pension Scheme Payments: Tiffany will make payments of approximately $75,000
per year of employment for the benefit of Mr. Cumenal’s account with the French social
security and complementary pension schemes;
Tax Consultation: Tiffany will provide or reimburse Mr. Cumenal for income tax preparation
assistance for 2011 and 2012 up to a maximum of $30,000 each year;
(cid:120)
(cid:120)
(cid:120)
(cid:120) Severance Prior to a Change in Control –Termination without Cause; Resignation for Good
Reason (including Tiffany’s refusal to extend the term): $605,000; plus Base Salary for the
balance of Term (minimum of one year; maximum of two years); plus continuation of
medical and dental benefits for one year; and
(cid:120) Severance After a Change in Control – Termination without Cause; Resignation for Good
Reason (including Tiffany’s refusal to extend the term): $1,210,000; plus two times Base
Annual Salary; plus continuation of medical and dental benefits for two years.
If Mr. Cumenal terminates employment, Tiffany would also pay him an additional $200,000
payment if Tiffany wanted him to adhere to his non-compete.
(cid:120)
The One-time Three-year Time-Vesting RSU Grant and Deferred Compensation provisions of
Mr. Cumenal’s employment agreement were intended by the Committee and Mr. Cumenal as
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“make whole” payment for amounts Mr. Cumenal would forfeit at his prior employer. Mr. Cumenal
had accrued significant long-term pension benefits with his prior employer.
The French Pension Scheme Payments were intended by the Committee to avoid loss of
Mr. Cumenal’s accruals under the French social security and complementary pension schemes.
The employment agreement contains definitions of “Cause” and “Good Reason” and has been
filed with the Securities and Exchange Commission as Exhibit 10.154 to the Company’s Report on
Form 8-K dated March 21, 2011.
James E. Quinn Retirement and Non-Competition Agreement
On February 1, 2012, James E. Quinn retired from the Company pursuant to a retirement and
non-competition agreement entered into on January 19, 2012. Pursuant to that agreement (the
key terms of which were approved by the Committee), and in exchange for the benefits described
below, Mr. Quinn agreed to extend the duration of his non-competition covenants to one year. The
key compensatory features are as follows:
(cid:120) Non-Compete Payment: A cash payment totaling $1,887,000, to be paid in two equal
installments on or about August 1, 2012 and February 1, 2013.
(cid:120) Acceleration of Stock Option Awards: Tranches of grants of non-qualified stock options
made by the Company to Employee on January 28, 2009 and January 20, 2010, which
were otherwise scheduled to vest in January 2013, became fully vested on Mr. Quinn’s date
of retirement.
(cid:120)
2010 Grant of Performance-Based Restricted Stock Units (“2010 PSU Grant”): a portion of
the stock units from the 2010 PSU Grant were vested (the “Vested Portion”) and the
balance of units from the 2010 PSU Grant cancelled as of the Date of Retirement. The
Vested Portion was computed as follows: (28,000 Shares) times (0.66) times (the
Performance Factor). The “Performance Factor” will be computed by the Company’s Chief
Financial Officer on the basis of the Company’s actual earnings and return-on-assets
performance during the fiscal years ended January 31, 2011 and 2012 and on the basis of
performance planned for the fiscal year ending on January 31, 2013. .
The non-compete conditions of Mr. Quinn’s outstanding Equity Awards and retirement benefits
under the Excess Plan and Supplemental Plan, providing for forfeiture or recoupment in the event
of a breach within a six-month period, remain in force.
Equity Grant Change in Control Provisions
In 2009, the Committee adopted a comprehensive and restrictive view of the change in control
circumstances which should permit accelerated vesting of stock options and performance-based
restricted stock units.
The Committee believes that:
(cid:120) where practicable, executives should be required to meet the service vesting provisions of
(cid:120)
(cid:120)
equity grants following a change in control;
the definition of “Change in Control” (see above) includes circumstances where it is
sensible to require the executive to remain employed in order to vest in his/her equity grant
and other circumstances where it is not sensible;
following a change in control, an executive should have the benefit of his/her equity grants
if terminated without cause or if he/she resigns with good reason;
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(cid:120) performance-based equity grants should be treated separately from grants that are purely
time-vested because a change in control may result in a change in business strategy
making it difficult, if not impossible, for the Company to achieve the performance criteria;
and
the independent directors are fully capable of weighing the merits of any proposed
transaction and reaching a proper conclusion in the interests of the stockholders, even in
the face of management’s advocacy of a transaction that would provide change in control
payments to the executive officers.
(cid:120)
Supplemental Plan Change in Control Provisions
Consistent with its view that Change in Control (“CIC”) entitlements should be triggered, in most
circumstances, only on a loss of employment (a “dual-trigger”), the Committee’s CIC Review also
focused on the Supplemental Plan for executive retirement benefits. The Committee determined
that the Plan, as previously structured, was inconsistent with that view and necessary conforming
changes were made.
Termination for Cause
Stock options granted under the 2005 Employee Incentive Plan may not be exercised after a
termination for cause. Performance-based restricted stock units will not vest if termination for
cause occurs before the conclusion of the three-year performance period.
Recoupment Provisions
All executive officers have signed non-competition covenants that have a two-year post-
employment term. For those who are age 60 or older at termination of employment or who attain
age 60 within six months of termination, the term ends six months after termination. For all
executive officers, the term ends in six months after termination if a change in control (as defined
in the retention agreements) has occurred prior to termination of employment or during the six-
month period. For all executive officers, once the six-month minimum period has passed, a
change of control will result in an early end to the term.
Violation of the non-compete covenants will result in:
(cid:120) loss of benefits under the Excess Plan and the Supplemental Plan;
(cid:120) loss of all rights under stock options and performance-based restricted stock units; and
(cid:120) mandatory repayment of all proceeds from stock options exercised or restricted stock units
vested during a period beginning six months before termination and throughout the
duration of the non-competition covenant.
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Clawback Policy: Adjustment or Recovery of Awards
The Company currently operates in compliance with the clawback requirements of the Sarbanes
Oxley Act with respect to the chief executive officer and chief financial officer. The Company does
not currently have a separate policy that expressly provides for recoupment of executive incentive
compensation if an accounting restatement is required due to material noncompliance with any
financial reporting requirements. The Committee awaits the Securities and Exchange
Commission’s adoption of final rules under the Dodd-Frank Wall Street Reform and Consumer
Protection Act (i.e. Section 10D to the Securities Exchange Act of 1934) addressing compensation
clawbacks. After such rules are adopted, the Committee will consider adopting a policy in
conformance with such rules.
P S - 4 0
Competitive Compensation Analysis – No Benchmarks
Each year the Committee refers to competitive compensation (market) data because the
Committee believes that such data are helpful in assessing the competitiveness of the total
compensation offered to the Company’s executive officers. However, the Committee does not
consider such market data sufficient for a full evaluation of appropriate compensation for any
individual executive officer. Accordingly, the Committee:
(cid:120) Has not set a “benchmark” to such data for any executive officer, although it does look to
see if the Company’s total executive program falls between the 25th and 75th percentile of
market data;
(cid:120) Does not rely exclusively on compensation surveys or publicly available compensation
information when it determines the compensation of individual executive officers; and
(cid:120) Also considers:
o The comparability of compensation as between executive officers of comparable
experience and responsibility;
o Job comparability with market positions;
o The recommendations of the chief executive officer; and
o The Committee’s own business judgment as to an individual’s maturity, experience
and tenure, capacity for growth, demonstrated success and desirability to the
Company’s competitors.
The Committee reviewed a competitive compensation analysis prepared on November 16, 2011 by
Pay Governance LLC, a nationally recognized compensation consulting firm.
The analysis included the following elements of compensation for each executive officer:
(cid:120) base salary;
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
target annual incentive or bonus as a percentage of salary;
target total cash compensation (salary plus target incentive/bonus award);
actual total cash compensation (salary plus actual incentive/bonus granted in the prior
year);
expected value of long-term incentives as a percentage of salary;
insurance cash contribution value;
target total direct compensation (target total cash compensation, life insurance cash value
increases and the expected value of long-term incentives granted in the prior year);
actual total direct compensation (actual total cash compensation plus life insurance cash
value increases and the expected value of long-term incentives granted in the prior year);
and
(cid:120) pay mix.
(cid:120)
The Committee believes that a competitive market for the services of retail executives exists, even
among firms that operate in a different line of business. To fully understand market compensation
levels for comparable executive positions, the analysis includes data for both retail and general
industry companies, with greater emphasis on the former.
Defining an appropriate comparator group is a challenge because there are few U.S. companies of
similar size in the luxury retail business with an integrated manufacturing function similar to the
Company. Thus, as mentioned previously, the market data serve as reference points but the
Committee does not “benchmark” to specific market pay levels.
P S - 4 1
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In addition, for the retail market data, two retail groups are used. The first group is based on
publicly available pay data from annual proxy statements, and the second group is based on pay
data submitted to the Towers Watson Retail/Wholesale Industry and Executive Compensation
Surveys. The second group includes privately-held companies and also provides compensation
for positions that may not fall within the top five highest paid executives disclosed in the
comparator companies’ proxy statements, but the composition of the group varies year-over-year
due to survey participation.
The analysis included data concerning compensation for senior positions provided by:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
a survey of 16 U.S. public companies in the specialty retail industry with median revenues
of $3.1 billion (see A below);
a survey of 10 public and private companies in the retail industry with median revenues of
$3.1 billion (see B below); and
a survey of 274 companies in general industry with median revenues of $2.6 billion.
For the Senior Vice President – Chief Marketing Officer, an additional market reference
which reflects compensation for the top marketing position at the 2011 Interbrand Best
Global Brands companies that participated in the Towers Watson Survey.
Management consulted with Pay Governance LLC on the selection of companies for comparison,
but Pay Governance LLC has maintained its own judgment in that regard.
***
(A) Specialty Retail Companies: Abercrombie & Fitch; Ann Inc.; Coach Inc.; Foot Locker, Inc.;
Limited Brands Inc.; Liz Claiborne, Inc.; Movado Group Inc.; Nordstrom Inc.; Pier 1 Imports Inc.;
Polo Ralph Lauren Corp.; Phillips Van Heusen; Saks Incorporated; Sotheby’s; The Talbot’s Inc.;
Williams-Sonoma Inc.; and Zale Corporation.
(B) Retail Companies: Ann Inc.; Coach Inc.; Gap; Harry Winston Diamond Corp.; J. Crew Group
Inc.; L.L. Bean; Limited Brands, Inc.; Nordstrom Inc.; Phillips-Van Heusen; and Zale Corporation.
***
For retail-specific positions, the analysis of competitive compensation was determined by
reference only to surveys of the retail industry mentioned above.
Because the chief executive officer, the chief financial officer and the chief operating officer do not
occupy retail-specific positions, the analysis of competitive compensation was determined by
reference to surveys of the retail industry mentioned above and to the general industry survey
mentioned above.
Relative to the competitive market data, the Company’s target total compensation (Fiscal 2011)
was positioned as follows:
(cid:120)
(cid:120)
(cid:120)
the chief executive officer’s target total compensation was below the 50th percentile;
the target total compensation for the named executive officers in retail-specific positions
(Mr. Cumenal and Mr. King), and for the chief operating officer, are between the 50th and 75th
percentiles; and
the chief financial officer’s total target compensation approximates the 50th percentile.
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Compensation Committee Process
Tally sheets
The Committee reviews “tally sheets” so that the total compensation and equity position in
Company stock for each executive officer can be compared. The tally sheets are prepared by the
Company’s Human Resources Department for each executive officer and provided to the
Committee. The tally sheets include data concerning historical compensation and wealth
accumulation data from employment with Tiffany.
Consultations with the Chief Executive Officer
The Committee meets with the chief executive officer regularly and solicits his recommendations
with respect to the compensation of the executive officers. In this context, his views as to the
performance of the individual officers are provided to the Committee. Individual performance has
not factored significantly in terms of incentive pay, although the Committee has reserved discretion
in that regard, see DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF
PLAN-BASED AWARDS, Non-Equity Incentive Awards.
Coordination with Financial Results and Annual and Strategic Planning Process
In January, the Committee reviews a forecast of financial results for the fiscal year ending that
month with the chief financial officer and calculates the tentative payouts for short- and long-term
incentives on that basis. Revised calculations and adjustments are prepared at the March
meeting, when fiscal year financial results are nearly final and ready for public release, and when
the annual profit plan and the strategic plan are presented for approval by the Board. After the
public release of the financial results, the final calculation is made and the Committee authorizes
management to make payment on prior year annual incentive awards and performance-based
restricted stock unit awards for which the three-year performance period ended in the prior year
and to enter into agreements with respect to current year annual incentive awards.
The Committee awards stock options to executive officers at a meeting that occurs on the third
Wednesday of January each year, or when individual promotions are recognized. The Committee
has never authorized management to make awards of stock options. Since 2005, awards of
performance-based restricted stock units have also been made at the January meeting with
reference to a preliminary draft of the Company’s strategic plan, although the specific financial
goals are not set until the March meeting when the strategic plan is adopted.
Limitation under Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code generally denies a federal income tax deduction to
the Company for compensation in excess of $1 million per year paid to any of the named
executive officers. This denial of deduction is subject to an exception for “performance-based
compensation” such as the performance-based restricted stock units, stock options and annual
incentive awards discussed above. Although the Committee has designed the executive
compensation program with tax considerations in mind, the Committee does not believe that it
would be in the best interests of the Company to adopt a policy that would preclude
compensation arrangements subject to deduction limitations.
The compensation actually paid to the executive officers is deductible by the Company except in
the following respect: compensation that exceeds $1 million in any single year for any single
named executive officer consisting of the following elements: “Salary” and “All Other
P S - 4 3
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Compensation” in the Summary Compensation Table, plus compensation that relates to the time-
vesting restricted stock units described in note (c) to the Summary Compensation Table.
* * *
REPORT OF THE COMPENSATION COMMITTEE
We have reviewed and discussed with the management of Tiffany & Co. the Compensation
Discussion and Analysis section of this Proxy Statement. Based on our review and discussions,
we recommend to the Board of Directors, to the chief executive officer and to the chief financial
officer that the Compensation Discussion and Analysis be included in this Proxy Statement and
the Annual Report on Form 10-K for the fiscal year ended January 31, 2012.
Compensation Committee and its Stock Option Subcommittee:
Gary E. Costley, Chair
Rose Marie Bravo
Abby F. Kohnstamm
Charles K. Marquis
Peter W. May
March 14, 2012
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SUMMARY COMPENSATION TABLE
Fiscal 2011, Fiscal 2010 and Fiscal 2009
Change in
Pension Value
and Nonquali-
fied
Deferred
Compen-
sation
Earnings
($) (f)
Non-
Equity
Incentive
Plan
Compen-
sation
($) (e)
All
Other
Compen-
sation
($)
Total
($)
Stock
Awards
($) (c)
Option
Awards
($) (d)
$ 1,569,700
$ 1,514,352
$ 1,150,000
$ 3,576,867
$ 172,178 (g) $ 8,980,412
$ 2,914,347
$ 1,472,010
$ 1,550,000
$ 2,144,799
$ 167,124 (h) $ 9,207,237
$ 1,593,130
$ 1,499,400
$ 2,000,000
$ 1,615,020
$ 168,270 (i) $ 7,873,135
Year
Salary
($) (a)
Bonus
($) (b)
2011 $ 997,315
2010 $ 958,957
2009 $ 997,315
---
---
---
2011 $ 513,617
$310,000
$ 966,197
$ 936,380
---
$ 607,692
$ 79,693 (j) $ 3,413,579
2011 $ 847,718
2010 $ 746,452
2009 $ 738,013
2011 $ 756,425
2011 $ 738,013
2010 $ 604,329
2009 $ 598,389
---
---
---
---
---
---
---
$ 2,120,758
$ 2,064,721
$ 720,000
$ 2,168,021
$ 149,252 (k) $ 8,070,470
$ 980,991
$ 944,723
$ 800,000
$ 1,172,618
$ 125,244 (l) $ 4,770,028
$ 864,842
$ 833,000
$ 1,036,000
$ 738,655
$ 125,313 (m) $ 4,335,823
$ 3,501,889
$ 1,709,681
$ 720,000
$ 0
$1,236,409 (n) $ 7,924,404
$ 778,571
$ 746,512
$ 570,000
$ 1,491,912
$ 128,627 (o) $ 4,453,635
$ 756,938
$ 725,020
$ 650,000
$ 1,481,319
$ 98,499 (p) $ 4,316,105
$ 637,252
$ 599,760
$ 840,000
$ 321,836
$ 98,300 (q) $ 3,095,537
Name and
Principal Position
Michael J.
Kowalski
Chairman and
CEO
Patrick F.
McGuiness
Senior Vice
President - CFO
James N.
Fernandez
Executive Vice
President - COO
Frederic Cumenal
Executive Vice
President
Jon M. King
Executive Vice
President
Notes to Summary Compensation Table:
(a)
(b)
(c)
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Salary amounts include amounts deferred at the election of the executive under the Tiffany and
Company Executive Deferral Plan (the “Deferral Plan”) and under the 401(k) feature of the
Company’s Employee Profit Sharing and Retirement Savings Plan (the “401(k)”). Amounts
deferred to the Deferral Plan are also shown in the Nonqualified Deferred Compensation Table.
Bonus amounts include amounts deferred at the election of the executive under the Deferral
Plan and under the 401(k). Bonus amounts are earned in the fiscal year ended January 31, and
paid in April.
Amounts shown represent the dollar amount of the grant date fair value of the stock unit award
calculated in accordance with Financial Accounting Standards Board Accounting Standards
Codification Topic 718, Compensation – Stock Compensation (“Codification Topic 718”) for the
fiscal year in which the award was granted (which includes the grants made on January 18,
2012). The amounts shown are based on the assumption that the earnings target and return on
assets target for the three-year performance period identified by the Committee for each
respective grant will be met.
The maximum value of each award, assuming the highest level of performance conditions are
met for the applicable period, calculated in accordance with Codification Topic 718, appear in
the chart below. For Mr. Kowalski, the 2010 amount includes the grant date fair value of a
one-time Time-Vesting Restricted Stock Unit Award of $1,376,250, computed in accordance
with Codification Topic 718, disregarding any estimates of forfeitures related to service-based
vesting conditions. For Mr. McGuiness, the 2011 amount includes the grant date fair value of a
one-time promotion Time-Vesting Restricted Stock Unit Award of $558,075, computed in
accordance with Codification Topic 718, disregarding any estimates of forfeitures related to
service-based vesting conditions. For Mr. Fernandez, the 2011 amount includes the grant date
P S - 4 5
fair value of a one-time promotion Time-Vesting Restricted Stock Unit Award of $1,116,150
computed in accordance with Codification Topic 718, disregarding any estimates of forfeitures
related to service-based vesting conditions. For Mr. Cumenal, the 2011 amount includes the
grant date fair value of a one-time sign-on Time-Vesting Restricted Stock Unit Award of
$1,633,680, computed in accordance with Codification Topic 718, disregarding any estimates
of forfeitures related to service-based vesting conditions.
Maximum Value of Stock Awards at Grant Date Value
Executive
Michael J.
Kowalski
Patrick F.
McGuiness
Position
Chairman
& CEO
Senior Vice
President &
CFO
James N.
Fernandez
Frederic Cumenal
Jon M. King
Executive
Vice President
& COO
Executive
Vice President
Executive
Vice President
2011
$2,854,000
$1,300,115
2010
$4,172,790
2009
$2,896,600
Not a named
Executive Officer
Not a named
Executive Officer
$2,942,710
$1,783,620
$1,572,440
$4,980,551
$1,415,584
Not a named
Executive Officer
$1,376,250
Not a named
Executive Officer
$1,158,640
(d)
(e)
(f)
(g)
Amounts shown represent the dollar amount of the grant date fair value of the stock option
award (which includes the grants made on January 18, 2012) calculated in accordance with
Codification Topic 718 for the fiscal year in which the award was granted. For Mr. McGuiness,
the 2011 amount includes the grant date fair value of a one-time promotion stock option award
of $552,460, computed in accordance with Codification Topic 718, disregarding any estimates
of forfeitures related to service-based vesting conditions. For Mr. Fernandez, the 2011 amount
includes the grant date fair value of a one-time promotion stock option award of $1,104,920,
computed in accordance with Codification Topic 718, disregarding any estimates of forfeitures
related to service-based vesting conditions.
This column reflects cash annual incentive awards under the 2005 Employee Incentive Plan.
These awards are earned in the fiscal year ended January 31 and are paid on the basis of
achieved Performance Goals after the release of the Company’s financial statements for the
fiscal year. (For a description of the Performance Goals, see DISCUSSION OF SUMMARY
COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS – Non-Equity Incentive
Plan Awards.) This column includes amounts deferred at the election of the executive under the
Deferral Plan. Amounts so deferred are also shown in the Nonqualified Deferred Compensation
Table.
This column represents the aggregate change, over the course of the fiscal year, in the actuarial
present value of the executive’s accumulated benefit under all defined benefit plans. This
column does not include earnings under the Deferral Plan because neither is a defined benefit
plan and because the Deferral Plan does not pay above-market or preferential earnings on
compensation that is deferred.
Mr. Kowalski’s Fiscal 2011 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($150,530); disability insurance premium ($14,298); and 401(k) matching
contribution ($7,350).
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(h)
(i)
(j)
(k)
(l)
(m)
(n)
Mr. Kowalski’s Fiscal 2010 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($147,072); disability insurance premium ($14,298); and 401(k) matching
contribution ($5,754).
Mr. Kowalski’s Fiscal 2009 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($147,072); disability insurance premium ($14,298); and 401(k) matching
contribution ($6,900).
Mr. McGuiness’s Fiscal 2011 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($62,232); disability insurance premium ($10,111); and 401(k) matching
contribution ($7,350).
Mr. Fernandez’s Fiscal 2011 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($125,492); disability insurance premium ($16,410); and 401(k) matching
contribution ($7,350).
Mr. Fernandez’s Fiscal 2010 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($102,003); disability insurance premium ($16,410); and 401(k) matching
contribution ($6,831).
Mr. Fernandez’s Fiscal 2009 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($102,003); disability insurance premium ($16,410); and 401(k) matching
contribution ($6,900).
Mr. Cumenal’s Fiscal 2011 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($150,000); disability insurance premium ($11,500); Relocation Expenses
($650,000); Defined Contribution to French Pension Scheme ($43,621); Payment to Special
Retirement Account ($371,680); legal fees for work authorization and review of Senior Executive
Employment Agreement ($9,608). Please see the discussion of Mr. Cumenal’s Senior Executive
Employment Agreement and compensation paid thereunder, in connection with his
commencement of employment in March 2011, on page PS – 38.
(o) Mr. King’s Fiscal 2011 compensation included the following elements whose total incremental
cost to the Company is shown in the column titled “All Other Compensation”: life insurance
premium ($107,927); disability insurance premium ($13,350); and 401(k) matching contribution
($7,350).
(p)
(q)
Mr. King’s Fiscal 2010 compensation included the following elements whose total incremental
cost to the Company is shown in the column titled “All Other Compensation”: life insurance
premium ($78,050); disability insurance premium ($13,350); and 401(k) matching contribution
($7,099).
Mr. King’s Fiscal 2009 compensation included the following elements whose total incremental
cost to the Company is shown in the column titled “All Other Compensation”: life insurance
premium ($78,050); disability insurance premium ($13,350); and 401(k) matching contribution
($6,900).
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GRANTS OF PLAN-BASED AWARDS
Fiscal 2011
2005
Employee
Incentive
Plan
Name
Award Type
Grant
Date
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards
Estimated Future Payouts
Under Equity Incentive
Plan Awards (a)
All Other
Option/Stock
Awards:
Number
of Securities
Underlying
Options/Awards
(#)
Exercise
or Base
Price of
Option
Awards
($/Sh)
(b)
Grant Date Fair
Value of Equity
Awards
(c) (d)
Threshold
Number of
Shares
(assuming
Earnings
Threshold
is met, and
Return on
Assets
Target is
not met)
Target
Number of
Shares
(assuming
Earnings
Target is
reached,
with no
adjustment
for Return
on Assets
Target)
Maximum
Number of
Shares
(assuming
Earnings
Target is
exceeded
by $2.83
and
Return on
Assets
Target is
met)
6,250
25,000
50,000
$1,569,700
71,000 $ 60.54 $1,514,352
1,625
6,500
13,000
18,000
$ 408,122
$ 60.54 $ 383,920
7,500 (e)
$ 558,075
20,000 $ 76.85 $ 552,460
4,000
16,000
32,000
45,000
$1,004,608
$ 60.54 $ 959,801
15,000 (e)
$1,116,150
40,000 $ 76.85 $1,104,920
3,575
14,300
28,600
40,000
$ 897,868
$ 60.54 $ 853,156
27,228 (e)
$1,633,680
3,602
14,409
28,818
37,168
$ 970,341
$ 62.44 $ 856,525
3,100
12,400
24,800
$ 778,571
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Threshold
($)
Target
($)
Maximum
($)
$ 0 $1,000,000
$2,000,000
$ 0 $ 257,500 $ 515,000
$ 0 $ 595,000 $1,190,000
$ 0 $ 595,000 $1,190,000
Michael J.
Kowalski
Annual
Incentive
Performance-
Based RSU 1/18/12
Stock Option 1/18/12
Patrick F.
McGuiness
Annual
Incentive
Performance-
Based RSU 1/18/12
Stock Option 1/18/12
Time Vesting
RSU
6/21/11
Stock Option 6/21/11
James N.
Fernandez
Frederic
Cumenal
Annual
Incentive
Performance-
Based RSU 1/18/12
Stock Option 1/18/12
Time Vesting
RSU
6/21/11
Stock Option 6/21/11
Annual
Incentive
Performance-
Based RSU 1/18/12
Stock Option 1/18/12
Time Vesting
RSU
Performance-
Based RSU 3/10/11
Stock Option 3/10/11
3/10/11
Jon M.
King
Annual
Incentive
Performance-
Based RSU 1/18/12
$ 0 $ 518,000 $1,036,000
Stock Option 1/18/12
35,000
$ 60.54 $ 746,512
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Notes to Grants of Plan-Based Awards Table
(a)
No portion of these awards will pay out unless an Earnings Threshold is attained over the
three-year Performance Period ending January 31, 2015. If the Earnings Threshold is
attained, the Committee may vest the Maximum Number of Shares, but has the discretion
to reduce the vested number of shares by any amount down to zero shares.
The Committee has communicated to the executive officers that it intends to exercise its
discretion as indicated in the following chart (subject to interpolation):
Percent of
Target Shares
Vesting for
Earnings
Performance
Earnings
Performance
ROA Adjustment
to Shares
Vesting for
Earnings
Performance
(percent of
Target)
Percent of
Target Shares
Vesting After
ROA Adjustment
Percent of
Maximum
Number of
Shares
Vesting
Earnings
Threshold
Not
Reached
Earnings
Threshold
Reached
Earnings
Target
Reached
Earnings
Maximum
Reached
0%
None
0%
None
25% to 35%
12.5% to
17.5%
90% to 110%
45% to 55%
180% to 200%
90% to 100%
25%
100%
190%
10% increase if
ROA Target
achieved
10% increase if
ROA Target
achieved/
10% decrease if
ROA Target not
achieved
10% increase if
ROA Target
achieved/
10% decrease if
ROA Target not
achieved
In March 2012, the Committee set the Earnings Threshold and the Earnings Target in terms
of the Company’s aggregate net earnings per share on a diluted basis (subject to
adjustments as permitted under the Plan) over the three-year Performance Period.
(cid:120)
(cid:120)
(cid:120)
The Earnings Threshold is $9.64 per diluted share.
The Earnings Target is $13.94 per diluted share.
The Earnings Maximum is $16.77 per diluted share.
The Committee set the ROA Target in terms of the Company’s return on average assets in
each of the fiscal years in the Performance Period, expressed as a percentage, and then
averaged over the entire Performance Period.
(cid:120)
The ROA Target is 12.0%.
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Amounts listed in the sub-column labeled “Target Number of Shares” reflect the Target
Number of Shares, assuming the Earnings Target is reached, with no adjustment for the
Return on Assets Target. If both the Earnings Target and the Return on Assets Target are
met, the Board intends to exercise its discretion to vest the following increased number
of shares for each named executive officer: Michael J. Kowalski, 27,500;
Patrick F. McGuiness, 7,150; James N. Fernandez, 17,600; Frederic Cumenal, 15,730 and
15,849, respectively; and Jon M. King, 13,640.
The exercise price of all options was equal to or greater than the closing price of the
underlying shares on the New York Stock Exchange on the grant date. The Committee
adopted the following pricing convention on January 18, 2007: the higher of (i) the simple
arithmetic mean of the high and low sales price of such stock on the New York Stock
Exchange on the grant date or (ii) the closing price on such Exchange on the grant date.
Options granted before that date were priced at the simple arithmetic mean of the high and
low sales price of such stock on the New York Stock Exchange on the grant date.
The grant date fair value of each option award was computed in accordance with
Codification Topic 718.
The grant date fair value of each performance-based award was computed assuming that
the Target Number of Shares would vest due to earnings performance and would be
increased by 10 percent due to return-on-asset performance. For additional information
regarding performance-based compensation, see the table titled "OUTSTANDING EQUITY
AWARDS AT FISCAL YEAR-END" beginning on page PS-56.
(b)
(c)
(d)
(e)
These awards will vest and convert to Common Shares if Messrs. McGuiness and
Fernandez remain employed until the third anniversary of the grant date.
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DISCUSSION OF SUMMARY COMPENSATION TABLE
AND GRANTS OF PLAN-BASED AWARDS
Non-Equity Incentive Plan Awards
Fiscal 2011
At the beginning of Fiscal 2011, the Committee granted cash (non-equity) awards. The potential
maximum payout under these awards was to be determined on the basis of Fiscal 2011 earnings
performance. When these awards were made the Committee retained discretion to reduce the
maximum payout. The Committee used that discretion to adjust the awards; accordingly, the
awards paid out at 119% of target (59.5% of maximum), on average.
(cid:120)
The performance goal established for Fiscal 2011 was net earnings (subject to adjustment
as permitted in the Plan) of $264 million. Because that goal was reached, each of the
named executive officers was tentatively eligible to receive a maximum incentive award of
200% of target, subject to the Committee’s discretion to reduce the award.
(cid:120) When the Committee established the performance goal it also communicated to the
named executive officers that it would reduce the maximum incentive award:
o to zero, if Fiscal 2011 net earnings did not equal or exceed $308 million;
o to the target amount, if net earnings equaled $440 million; and
o to 200% of the target amount if net earnings equaled or exceeded $572 million.
P S - 5 0
(cid:120)
The Committee also communicated that if earnings were to fall between the markers
indicated, the award would be interpolated accordingly.
The Committee also communicated that it reserves the right to consider other relevant factors in
reducing an annual incentive award below the maximum allowable based on achievement of
earnings objectives set forth above.
The “other relevant factors” that the Committee indicated it would consider were:
annual progress towards strategic plan objectives;
(cid:120)
(cid:120) business unit growth and/or profitability (where the executive officer has responsibility for
(cid:120)
(cid:120)
such growth and/or profitability);
organizational development;
contributions to the working environment of his/her team and/or development of a positive
working environment for employees;
(cid:120) business process improvement;
(cid:120)
(cid:120)
cost containment and/or cost reduction efforts; and
significant force majeure events, such as earthquakes, floods and other natural disasters,
unanticipated at the time that the annual business plan was developed.
Furthermore, the applicable employee incentive plan (the Amended and Restated Tiffany & Co.
2005 Employee Incentive Plan, approved by the stockholders), permits the Committee to adjust
any evaluation of performance under a performance goal to exclude any of the following events
that occurs during a Performance Period: (i) asset write-downs, (ii) litigation or claim judgment or
settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and restructuring programs,
and (v) extraordinary non-recurring items as described in Accounting Principles Board Opinion
No. 30 and/or in management’s discussion and analysis of financial condition and results of
operations appearing in said Annual Report for the applicable year.
Fiscal 2010 and Fiscal 2009
In Fiscal 2010 and 2009, annual incentive awards were paid out as follows:
(cid:120)
(cid:120)
In Fiscal 2010, the Company’s consolidated net earnings exceeded the target established
by the Committee by 18.8%, and annual incentive awards and bonuses were paid out at
154% of the target amount, on average.
In Fiscal 2009, the Company’s consolidated net earnings exceeded the target established
by the Committee by 30%, and annual incentive awards and bonuses were paid out at
200% of the target amount.
Difference between Bonus Awards and Annual Incentive Awards
Annual incentive awards paid to Messrs. Kowalski, Fernandez, Cumenal and King differ from
bonuses paid to other executive officers as follows:
(cid:120) Annual incentive awards are paid under the terms of the 2005 Employee Incentive Plan and
will be paid only if the Company meets objective performance goals. This promise is set
out in written agreements.
(cid:120) Bonuses are not subject to written agreements. The Compensation Committee has the
discretion to increase, decrease or withhold such bonuses. It has been the Committee’s
practice to align bonuses with annual incentive awards.
P S - 5 1
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(cid:120) Annual incentive awards are designed so that the amounts paid out will be deductible to
the Company and not count against the one million dollar limitation under Section 162(m)
of the Internal Revenue Code. Each of the named executive officers is subject to that
limitation.
If a bonus is paid, and the total annual cash compensation paid to that executive in the
year of bonus was to exceed the one million dollar limitation, the excess would not be
deductible to the Company for federal income tax purposes.
(cid:120)
Equity Incentive Plan Awards – Performance-Based Restricted Stock Units
In January 2005, the Compensation Committee first awarded equity incentive awards –
Performance-Based Restricted Stock Units (“Units”) to the executive officers. Units were
subsequently granted in January of each subsequent year. The January 2012 award is reflected in
the GRANTS OF PLAN-BASED AWARDS table under the column headed “Estimated Future
Payouts Under Equity Incentive Plan Awards.”
General terms of Unit grants:
(cid:120) Units are exchanged on a one-to-one basis for shares of the Company’s common stock if
the Units vest;
(cid:120) Vesting is determined at the end of a three-year performance period;
(cid:120) No Units vest if the executive voluntarily resigns, retires or is terminated for cause during
the three-year performance period, although partial vesting is provided for in cases of
termination for death or disability;
(cid:120) No dividends are paid or accrued on Units;
(cid:120) No Units vest (other than for reasons of death, disability or on a change in control) if the
Company fails to meet a three-year cumulative EPS performance threshold set by the
Compensation Committee within 90 days after the start of the performance period (the
earnings test for the January 2009 grant differs – see below); and
(cid:120) EPS performance above the threshold results in a greater payout and failure to achieve a
return-on-asset target (“ROA Target”) results in a reduced payout (there is no ROA Target
for the January 2009 grant – see below).
Performance tests for January 2009 Grants – Performance Period ending January 31, 2012:
(cid:120) Units will vest 100% or not at all;
(cid:120) Earnings Test: earnings from continuing operations of $300 million in any one of the three
(cid:120)
years within the performance period; and
The performance test was met in the period ended January 31, 2010 and, therefore,
the Units will vest at 100% for those executives who remain employed through January 31,
2012.
Performance tests for January 2010 Grants – Performance Period ending January 31, 2013:
(cid:120) Earnings Threshold: cumulative net EPS of $4.25 per diluted share;
(cid:120) Earnings Target: cumulative net EPS of $9.10 per diluted share;
(cid:120) ROA Target: 10.6%;
(cid:120)
If the Threshold is reached, the Committee has the discretion to vest the maximum number
of shares but has indicated that it will use its retained discretion to reduce the award
based on the guidance that follows;
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(cid:120)
Target Shares for Vesting: 50% of the Units granted;
(cid:120) Units tentatively vest based on the following EPS performance hurdles:
o 25% of Target Shares at Earnings Threshold;
o 100% of Target Shares at Earnings Target; and
o 190% of Target Shares if Earnings Target is Exceeded by 34.2% ($12.21 per diluted
share);
(cid:120) No units vest if Earnings Threshold is not achieved;
(cid:120) After tentative vesting is determined, a ROA test is applied;
(cid:120)
If Earnings Threshold is met but Earnings Target has not, achievement of ROA Target will
result in a 10% increase in vesting;
If Earnings Target has been met, but ROA Target has not, the tentatively vested Units will
be reduced by 10%;
If both Earnings Target and ROA Target have been met, the tentatively vested Units will be
increased by 10%;
100% vesting (twice Target Shares) occurs only if the Company exceeds the Earnings
Target by 34.2% and achieves the ROA Target; and
(cid:120)
(cid:120)
(cid:120)
(cid:120) Under no combination of circumstances will vesting occur for more than the number of
Units granted (twice Target Shares).
Performance tests for January 2011 Grants – Performance Period ending January 31, 2014:
(cid:120) Earnings Threshold: cumulative net EPS of $5.80 per diluted share;
(cid:120) Earnings Target: cumulative net EPS of $12.12 per diluted share;
(cid:120) Earnings Maximum: cumulative net EPS of $16.43 per diluted share;
(cid:120) ROA Target: 12.2%;
(cid:120)
(cid:120)
If the Threshold is reached, the Committee has the discretion to vest the maximum number
of shares.
Target Shares for Vesting: 50% of the Units granted;
(cid:120) Units tentatively vest based on the following EPS performance hurdles:
o 25% of Target Shares at Earnings Threshold;
o 100% of Target Shares at Earnings Target; and
o 190% of Target Shares at Earnings Maximum;
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(cid:120) No units vest if Earnings Threshold is not achieved;
(cid:120) After tentative vesting is determined, a ROA test is applied;
(cid:120)
If Earnings Threshold is met but Earnings Target has not, achievement of ROA Target will
result in a 10% increase in vesting;
If Earnings Target has been met, but ROA Target has not, the tentatively vested Units will
be reduced by 10%;
If both Earnings Target and ROA Target have been met, the tentatively vested Units will be
increased by 10%;
100% vesting (twice Target Shares) occurs only if the Company attains the Earnings
Maximum and achieves the ROA Target; and
(cid:120)
(cid:120)
(cid:120)
(cid:120) Under no combination of circumstances will vesting occur for more than the number of
Units granted (twice Target Shares).
P S - 5 3
Performance tests for January 2012 Grants – Performance Period ending January 31, 2015:
(cid:120) Same scheme as for the January 2011 Grants – see above – but with different Earnings
Threshold, Earnings Target and ROA Target. See Note (a) to Grants of Plan-Based
Awards Table.
General Note: the Committee retains the discretion to adjust achieved performance so that
executive officers will not be advantaged or disadvantaged by extraordinary transactions.
One-Time Restricted Stock Unit Awards to Frederic Cumenal, James N. Fernandez and
Patrick F. McGuiness
The one-time sign-on Time-Vesting Restricted Stock Unit Award made to Frederic Cumenal on
March 10, 2011 (27,228 Units) will vest (and convert to shares of the Company’s common stock) if
Mr. Cumenal remains employed by Tiffany on March 10, 2014. The one-time promotion Time-
Vesting Restricted Stock Unit Awards made to James N. Fernandez and Patrick F. McGuiness on
June 21, 2011 (15,000 Units and 7,500 Units respectively) will vest (and convert to shares of the
Company’s common stock) for each recipient if he remains employed by Tiffany on June 21, 2014.
For each grant discussed above, there is no financial performance condition to vesting, and
vesting will occur for 100% of the Units or not at all. Earlier vesting will occur for the recipient
should such recipient die, become disabled, be terminated without cause or resign from
employment with good reason. “Good reason” effectively means a material adverse change in his
duties, authority or responsibilities. Earlier vesting may also occur in certain Change in Control
circumstances. See POTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN CONTROL
below.
Options
Options vest (become exercisable) in four equal annual installments. Vesting of each installment is
contingent on continued employment, except in the event of death, disability or change in control
(see Explanation of Potential Payments on Termination or Change in Control).
The exercise price for each share subject to an option is its fair market value on the date of grant.
(For an explanation of the method of determining the exercise price of options, see Note (b) to the
GRANTS OF PLAN-BASED AWARDS table).
Options expire no later than the 10th anniversary of the grant date. Options expire earlier on:
termination of employment (three months after termination); or
(cid:120)
(cid:120) death, disability or retirement (two years after the event).
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Life Insurance Benefits
The key features of the life insurance benefit that the Company provides to its executive officers
are:
(cid:120)
(cid:120)
(cid:120)
executive officers own whole life policies on their own lives;
the death benefit is three times annual salary and target annual incentive award or bonus,
as the case may be;
the Company pays the premium on such policies in an amount sufficient to accumulate
cash value;
(cid:120) premiums are calculated to accumulate a target cash value at age 65;
P S - 5 4
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the target cash value will allow the policy to remain in force after age 65 without payment of
further premiums with a death benefit equivalent to twice the executive officer’s ending
annual salary and target annual incentive or bonus amount;
the amount of the premiums paid by the Company is taxable income to the executive
officer;
in 2008 and years prior thereto, the Company paid the additional amounts necessary in
order to prevent the executive officer from being subjected to increased income taxes as a
result of the taxable premium income; and
since 2009, the Company has not paid any additional amounts to offset the income tax
attributable to the premiums paid on behalf of the executives.
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P S - 5 5
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
January 31, 2012
Option Awards
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
85,000
77,000
101,000
116,250
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Option
Exercise
Price
($)
$
$
$
37.8350
40.1500
37.6450
38,750
$ 23.0000
45,000
45,000
$ 43.3700
16,750
0
50,250
$ 58.0000
71,000
$ 60.5400
10,000
5,920
9,000
17,000
22,500
10,000
4,250
0
0
$
39.7500
$ 31.6750
$ 40.1500
$ 37.6450
7,500
$ 23.0000
10,000
$ 43.3700
12,750
$ 58.0000
20,000
$ 76.8500
18,000
$ 60.5400
Name
Michael J.
Kowalski
Patrick F.
McGuiness
James N.
Fernandez
39,000
57,000
21,150
25,000
10,750
0
0
$
$
40.1500
37.6450
21,150
$ 23.0000
25,000
$ 43.3700
32,250
$ 58.0000
40,000
$ 76.8500
45,000
$ 60.5400
Option
Expiration
Date (a)
1/31/16
1/18/17
1/17/18
1/28/19
1/20/20
1/20/21
1/18/22
1/15/14
1/20/15
1/18/17
1/17/18
1/28/19
1/20/20
1/20/21
6/21/21
1/18/22
1/18/17
1/17/18
1/28/19
1/20/20
1/20/21
6/21/21
1/18/22
Stock Awards
Equity
Incentive
Plan Awards
Number
Of
Unearned
Shares, Units or
Other Rights
That Have
Not Vested (b)
(#)
Equity
Incentive
Plan Awards
Market or
Payout Value
Of
Unearned
Shares, Units or
Other Rights
That Have
Not Vested
($)
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65,200 / 65,200 (c)
53,480 / 70,000 (d)
28,753 / 50,800 (e)
27,500 / 50,000 (f)
25,000 / 25,000 (k)
$4,159,760 (g)
$3,412,024 (h)
$1,834,441 (i)
$1,754,500 (j)
$1,595,000 (n)
12,600 / 12,600 (c)
$ 803,880 (g)
12,224 / 16,000 (d)
$ 779,891 (h)
7,358 / 13,000 (e)
$ 469,440 (i)
7,150 / 13,000 (f)
$ 456,170 (j)
7,500 / 7,500 (l)
$ 478,500 (n)
36,200 / 36,200 (c)
29,032 / 38,000 (d)
18,338 / 32,400 (e)
17,600 / 32,000 (f)
15,000 / 15,000 (l)
$2,309,560 (g)
$1,852,242 (h)
$1,169,964 (i)
$1,122,880 (j)
$ 957,000 (n)
P S - 5 6
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (continued)
January 31, 2012
Option Awards
Stock Awards
Name
Frederic
Cumenal
Jon M.
King
Number
Of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number
Of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Option
Exercise
Price
($)
Option
Expiration
Date (a)
0
0
37,168
$ 62.4350
40,000
$ 60.5400
3/10/21
1/18/22
23,000
10,000
26,000
41,000
15,500
18,000
8,250
0
$ 37.8350
$ 33.7850
$ 40.1500
0
$ 37.6450
15,500
$ 23.0000
18,000
$ 43.3700
24,750
$ 58.0000
35,000
$ 60.5400
1/31/16
6/07/16
1/18/17
1/17/18
1/28/19
1/20/20
1/21/21
1/18/22
Equity
Incentive
Plan Awards
Number
Of
Unearned
Shares, Units or
Other Rights
That Have
Not Vested (b)
(#)
Equity
Incentive
Plan Awards
Market or
Payout Value
Of
Unearned
Shares, Units or
Other Rights
That Have
Not Vested
($)
16,311 / 28,818 (e)
$1,040,641 (i)
15,730 / 28,600 (f)
27,228 / 27,228 (m)
$1,003,574 (j)
$1,737,146 (n)
26,100 / 26,100 (c)
$1,665,180 (g)
21,392 / 28,000 (d)
$1,364,810 (h)
14,150 / 25,000 (e)
$ 902,770 (i)
13,640 / 24,800 (f)
$ 870,232 (j)
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Notes to OOutstanding Equity Awards at Fiscal Year-end Table
(a)
(b)
(c)
(d)
For any option reported, the grant date was ten (10) years prior to the expiration date
shown. All options vest 25% per year over the four-year period following a grant date.
In this column, the number to the left of the slash mark indicates the number of shares on
which the payout value shown in the column to the right was computed. See Notes (g), (h),
(i) and (j) below. The number to the right of the slash mark indicates the total number of
shares that would vest upon attainment of all performance objectives over the three-year
performance period.
This 2009 grant would have vested three business days following the date on which the
Company’s financial results for Fiscal 2011 are publicly reported.
This 2010 grant will vest three business days following the date on which the Company’s
financial results for Fiscal 2012 are publicly reported.
P S - 5 7
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
This 2011 grant will vest three business days following the date on which the Company’s
financial results for Fiscal 2013 are publicly reported.
This 2012 grant will vest three business days following the date on which the Company’s
financial results for Fiscal 2014 are publicly reported.
This value has been computed on the assumption that the Earnings from Continuing
Operations Target will be met in any of Fiscal 2009, 2010, or 2011. The performance test
was met in the period ended January 31, 2010 and, therefore, the Units will vest at 100%.
The resulting value was computed on the basis of the stock closing price of $63.80 on
January 31, 2012.
This value has been computed at 76.4% of maximum based upon Company EPS and ROA
performance in Fiscal 2010 and Fiscal 2011 and projections for Fiscal 2012. The resulting
value was computed on the basis of the stock closing price of $63.80 on January 31, 2012.
This value has been computed at 56.6% of maximum based upon Company EPS and ROA
performance in Fiscal 2011 and projections for Fiscal 2012 and Fiscal 2013. The resulting
value was computed on the basis of the stock closing price of $63.80 on January 31, 2012.
This value has been computed on the assumption that the Earnings per Share target will be
met and on the Assumption that the Return on Asset performance goal will have been
achieved. The resulting value was computed on the basis of the stock closing price of
$63.80 on January 31, 2012.
This one-time Time-Vesting Restricted Stock Unit Award, granted on January 20, 2011, will
vest on January 20, 2014.
This one-time promotion Time-Vesting Restricted Stock Unit Award will vest on June 21,
2014.
This one-time sign-on Time-Vesting Restricted Stock Unit Award will vest on March 10,
2014.
The value was computed on the basis of the stock closing price of $63.80 on January 31,
2012.
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P S - 5 8
OPTION EXERCISES AND STOCK VESTED
Fiscal 2011
Option Awards
Stock Awards
Number of
Shares
Acquired on
Vesting
(#)
Number of
Shares
Acquired on
Exercise
(#)
Value
Realized
on Exercise
($)
640,000 (a) $22,176,353
10,000 (b) $ 476,304
169,000 (c) $ 5,139,132
0
0
0
0 $ 0 0
123,500 (d) $ 4,858,210 0
Value
Realized
on Vesting
($)
$ 0
$ 0
$ 0
$ 0
$ 0
Name
Michael J. Kowalski
Patrick F. McGuiness
James N. Fernandez
Frederic Cumenal
Jon M. King
Notes to Option Exercises and Stock Vested Table
(a)
(b)
(c)
(d)
Weighted-average holding period for options exercised: 7.8 years.
Weighted-average holding period for options exercised: 8.7 years.
Weighted-average holding period for options exercised: 5.4 years.
Weighted-average holding period for options exercised: 6.3 years.
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P S - 5 9
PENSION BENEFITS TABLE
Actuarial
Present Value
of
Accumulated
Benefits
($)
$ 1,005,922
$ 11,393,901
$ 2,119,521
$ 341,698
$ 706,967
$ 341,778
Number
of Years
Credited
Service
33 (b) (d)
33 (b) (d)
33 (b) (d)
21
21
21
33 (c) (d)
33 (c) (d)
33 (c) (d)
$ 840,532
$ 5,156,656
$ 955,152
21 (d)
21 (d)
21 (d)
$ 522,183
$ 2,356,985
$ 1,369,363
Payments
During
Last
Fiscal
Year
($)
0
$
0
$
0
$
$
$
$
$
$
$
$
$
$
0
0
0
0
0
0
0
0
0
Name
Michael J.
Kowalski
Patrick F.
McGuiness
James N.
Fernandez
Jon M. King
Plan Name (a)
Pension Plan
Excess Plan
Supplemental Plan
Pension Plan
Excess Plan
Supplemental Plan
Pension Plan
Excess Plan
Supplemental Plan
Pension Plan
Excess Plan
Supplemental Plan
Notes to Pension Benefits Table
(a)
(b)
(c)
The formal names of the plans are: the Tiffany and Company Pension Plan (“Pension
Plan”), the Tiffany and Company Un-funded Retirement Plan to Recognize Compensation
in Excess of Internal Revenue Code Limits (“Excess Plan”) and the Tiffany and Company
Supplemental Retirement Income Plan (“Supplemental Plan”).
Mr. Kowalski has been credited with 6.4 years of service for his period of employment prior
to October 15, 1984 with the corporation that was, immediately before that date, Tiffany’s
parent corporation. Under the Supplemental Plan, the combined benefit available under
the retirement plans and Social Security is 60% of average final compensation for a
participant with 25 or more years of service (see Supplemental Plan). Because
Mr. Kowalski attained 25 years of service with Tiffany as of October 14, 2009, the total
retirement benefit available to him will not increase as a result of the credited 6.4 years of
service described above. Rather, the effect of this credited service has been to augment
the present value of his accumulated benefit under the Pension Plan and Excess Plan only
as follows, resulting in a reduced obligation under the Supplemental Plan:
T
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E
M
E
T
A
T
S
Y
X
O
R
P
Pension Plan
Excess Plan
Supplemental Plan
$ 191,249
$ 2,166,248
$ (2,357,497)
Mr. Fernandez has been credited with 6.3 years of service for his period of employment
prior to October 15, 1984 with the corporation that was, immediately before that date,
Tiffany’s parent corporation. Under the Supplemental Plan, the combined benefit available
under the retirement plans and Social Security is 60% of average final compensation for a
participant with 25 or more years of service (see Supplemental Plan). Because Mr.
Fernandez attained 25 years of service with Tiffany as of October 14, 2009, the total
retirement benefit available to him will not increase as a result of the credited 6.3 years of
service described above. Rather, the effect of this credited service has been to augment
P S - 6 0
the present value of his accumulated benefit under the Pension Plan and Excess Plan only
as follows, resulting in a reduced obligation under the Supplemental Plan:
Pension Plan
Excess Plan
Supplemental Plan
$ 158,120
$ 970,064
$ (1,128,184)
(d)
Mr. Kowalski, Mr. Fernandez and Mr. King are currently eligible for early retirement under
each of the Pension, Excess and Supplemental Plan. See Early Retirement on page PS-69.
They are each eligible for early retirement because they have reached age 55 and have
accumulated at least ten years of credited service. The normal retirement age under each
of the plans is 65. However those eligible for early retirement may retire with a reduced
benefit. For retirement at age 55, the reduction in benefit would be 40%, as compared to
the benefit at age 65. The benefit reduction for early retirement is computed as follows:
(cid:120)
(cid:120)
(cid:120)
For retirement between age 60 and age 65, the executive’s age at early retirement is
subtracted from 65; for each year in the remainder the benefit is reduced by five
percent;
Thus, for retirement at age 60 the reduction is 25%;
For retirement between age 55 and age 60, the reduction is 25% plus an additional
three percent for each year by which retirement age precedes age 60.
Assumptions Used in Calculating the Present Value of the Accumulated Benefits
The assumptions used in the Pension Benefit Table are that the executive would retire at age 65;
post-retirement mortality based upon the RP2000 Male/Female Mortality Table Projected to the
date of each future cash flow (i.e. a “fully generational” mortality projection); a discount rate of
5.0%. All assumptions were consistent with those used to prepare the financial statements for
Fiscal 2011.
Features of the Retirement Plans
Tiffany has established three retirement plans for eligible employees: the Pension Plan, the Excess
Plan and the Supplemental Plan. The executive officers of the Company (other than Mr. Cumenal)
are eligible to participate in all three.
Average Final Compensation
Average final compensation is used in each plan to calculate benefits. A participant’s “average
final compensation” is the average of the highest five years of compensation received in the last
10 years of creditable service.
In general, compensation reported in the SUMMARY COMPENSATION TABLE above as “Salary”,
“Bonus” or “Non-Equity Incentive Plan Compensation” is compensation for purposes of the Plans;
amounts attributable to the exercise of stock options or to the vesting of restricted stock are not
included. However, Internal Revenue Code requirements limit the amount of compensation that
may be included in calculating the benefit under the Pension Plan.
Pension Plan
These are the key features of the Pension Plan:
(cid:120)
it is a “tax-qualified” plan, that is, it is designed to comply with those provisions of the
Internal Revenue Code applicable to retirement plans;
P S - 6 1
P
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O
X
Y
S
T
A
T
E
M
E
N
T
(cid:120)
(cid:120)
it is a “funded” plan (money has been deposited into a trust that is insulated from the
claims of the Company’s creditors);
it is available at no cost to regular full-time employees of Tiffany hired before January 1,
2006;
executive officers other than Mr. Cumenal are participants;
(cid:120)
(cid:120) benefits vest after five years of service;
(cid:120) benefits are based on the participant’s average final compensation and years of service;
(cid:120) benefits are subject to Internal Revenue Code limitations on the total benefit and the amount
that may be included in average final compensation; and
(cid:120) benefits are not offset by Social Security.
The benefit formula under the Pension Plan first calculates an annual amount based on average
final compensation and then multiplies it by years of service. This is the formula: [[(average final
compensation less covered compensation) x 0.015] plus [(average final compensation up to
covered compensation) x 0.01]] x years of service. “Covered compensation” varies by the
participant’s birth date and it is an average of taxable wage bases calculated for Social Security
purposes.
Example: covered compensation for a person born in 1952 is $72,600. This person has average final
compensation of $100,000 and 25 years of service. The Pension benefit at age 65 would be
calculated as follows: [[($100,000 - $72,600) x 0.015] plus [($72,600) x 0.01]] x 25 = $28,425 annual
benefit for a single life annuity.
The form of benefit elected can reduce the amount of benefit. The highest benefit is available for
an unmarried participant who elects to take the benefit over the course of his or her own life (a
single-life annuity). A person who elects to take the benefit over the course of two lives, such as a
100% annuity over the lives of the participant and his or her spouse, will experience an actuarial
reduction in the amount of his or her benefit.
Excess Plan
These are the key features of the Excess Plan:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
it is not a qualified plan and is not subject to Internal Revenue Code limitations;
it is not funded (benefits are paid out of the Company’s general assets, which are subject to
the claims of the Company’s creditors);
it is available only to officers and other select management employees whose benefits
under the Pension Plan are affected by Internal Revenue Code limitations, including
executive officers other than Mr. Cumenal;
it uses the same retirement benefit formula as is set forth in the Pension Plan, but includes
in average final compensation earnings that are excluded under the Pension Plan due to
Internal Revenue Code Limitations;
(cid:120) benefits are offset by benefits payable under the Pension Plan;
(cid:120) benefits are not offset by benefits payable under Social Security;
(cid:120) benefits vest after five years of service;
(cid:120) benefits are subject to forfeiture if employment is terminated for cause;
(cid:120)
for those who leave Tiffany prior to age 65, benefits are subject to forfeiture for failure to
execute and adhere to non-competition and confidentiality covenants;
(cid:120) benefits are payable upon the later of the participant’s separation from service, as defined
under the plan, or attainment of age 55; and
P S - 6 2
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(cid:120) participants will not receive any distribution from the plan until six months following
separation from service.
Supplemental Plan
These are the key features of the Supplemental Plan:
(cid:120)
(cid:120)
it is not a qualified plan and is not subject to Internal Revenue Code limitations;
it is not funded (benefits are paid out of the Company’s general assets, which are subject to
the claims of the Company’s creditors);
it is available only to executive officers, other than Mr. Cumenal;
it uses a different benefit formula than that used by the Pension Plan and the Excess Plan;
(cid:120)
(cid:120)
(cid:120) benefits are offset by benefits payable under the Pension Plan and the Excess Plan;
(cid:120) benefits are offset by benefits payable under Social Security;
(cid:120) benefits do not vest until the executive attains, while employed by Tiffany, age 65, or age
55 if he or she has provided 10 years of service (benefits will vest earlier on a termination
from employment following a change in control (See “Definition of a Change in Control”
below));
P
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Y
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T
(cid:120) benefits are subject to forfeiture if employment is terminated for cause;
(cid:120)
for those who leave Tiffany prior to age 65, benefits are subject to forfeiture for failure to
execute and adhere to non-competition and confidentiality covenants; and
(cid:120) participants will not receive any distribution from the plan until six months following
separation from service as defined under the plan.
As its name implies, the Supplemental Plan supplements payments under the Pension Plan, the
Excess Plan and from Social Security so that total benefits equal a variable percentage of the
participant’s average final compensation.
Depending upon the participant’s years of service with Tiffany, the combined benefit under the
Pension Plan, the Excess Plan, the Supplemental Plan and from Social Security would be as
follows:
Years of Service
less than 10
10-14
15-19
20-24
25 or more
Combined Annual Benefit As a
Percentage of Average Final Compensation
(a)
20%
35%
50%
60%
(a)
The formula for benefits under the Pension and Excess Plans is a function of years of
service and covered compensation (subject to Internal Revenue Code limitations in the
case of the Pension Plan) and not any specific percentage of the participant’s average final
compensation (see above). A retiree with less than 10 years of service would not receive
any benefit under the Supplemental Plan but could expect to receive a benefit of
approximately 13% of average final compensation under the Pension and Excess Plans.
P S - 6 3
Early Retirement and Extra Service Credit
Please refer to Note (d) on page PS-61 for a discussion of the early retirement features of the
Plans.
Tiffany does not have a policy for or practice of granting extra years of credited service under the
Plans. Mr. Kowalski and Mr. Fernandez have credit for service with Tiffany’s former parent
corporation. This credit was arranged in 1984 when the Company purchased Tiffany.
NONQUALIFIED DEFERRED COMPENSATION TABLE
(Fiscal 2011)
Executive
Contribution
In
Last Fiscal
Year (a)
($)
Registrant
Contribution
In
Last Fiscal
Year
($)
Aggregate
Earnings
In
Last Fiscal
Year
(b)
($)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance
At
Last Fiscal
Year End
(c)
($)
$ 0
$ 0
$ 15,328
$ 0
$ 388,652
$ 85,000
$ 0
$ (7,213)
$ 0
$ 526,627
$ 122,386
$ 0
$ 6,494
$ 0
$ 1,675,853
$ 17,607
$ 0
$ 573
$ 0
$ 18,180
Name
Michael J.
Kowalski
Patrick F.
McGuiness
James N.
Fernandez
Frederic
Cumenal
Jon M. King $ 0
$ 0
$ 0
$ 0
$
0
Note to Nonqualified Deferred Compensation Table
(a)
(b)
(c)
This column includes amounts that are also included in the amounts shown in the columns
headed “Salary” or “Non-Equity Incentive Plan Compensation” in the Summary
Compensation Table.
Amounts shown in this column are not reported as compensation in the Summary
Compensation Table because the Company’s Executive Deferral Plan does not pay above-
market or preferential earnings on compensation that is deferred.
Amounts shown in this column include amounts that were reported as compensation in the
Summary Compensation Table for Fiscal 2011 and for prior fiscal years to the extent that
such amounts were contributed by the executive but not to the extent that such amounts
represent earnings. See Note (b) above.
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Y
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P S - 6 4
Features of the Executive Deferral Plan
These are the key features of the Company’s Executive Deferral Plan:
(cid:120) Participation is open to directors and executive officers of the Company as well as other
vice presidents and “director-level” employees of Tiffany;
(cid:120) Directors of the Company may defer all of their cash compensation;
(cid:120) Employees may defer up to 50% of their salary and up to 90% of their cash annual
incentive or bonus compensation;
The Company makes no contribution and guarantees no specific return on money deferred;
(cid:120)
(cid:120) Deferrals are placed in a trust that is subject to the claims of Tiffany’s creditors;
(cid:120) Deferred compensation is invested by the trustee in various mutual funds as directed by
(cid:120)
Tiffany, which follows the directions of participants;
The value in the participant’s account (and Tiffany’s responsibility for payment) is measured
by the return on the investments selected by the participant;
(cid:120) Deferrals may be made to a Retirement Account and to accounts which will pay out on
specified “in-service” dates;
(cid:120) Participants must elect to make deferrals in advance of the period during which the
deferred compensation is earned;
(cid:120) Retirement Accounts pay out in 5, 10, 15 or 20 annual installments after retirement as
elected in advance by the participant;
(cid:120) Except in the case of previously elected “in-service” payout dates, participants are not
allowed to withdraw funds while they remain employed other than for unforeseeable
emergencies and then only with the permission of Tiffany’s Board;
Termination of services generally triggers a distribution of all account balances other than,
in the case of retirement or disability, retirement balances; and
(cid:120)
(cid:120) Most participants, including all executive officers, will not receive any distribution from the
plan until six months following termination of services.
Excess DCRB Feature of the Executive Deferral Plan
In 2010, the Executive Deferral Plan was amended to provide an excess retirement benefit to
Eligible Employees of the company with the title of “Vice President” or above. If an Eligible
Employee who is also a Vice President or above, is entitled to a DCRB Contribution under the
Tiffany & Co. Employee Profit Sharing and Retirement Savings Plan, and such DCRB Contribution
is curtailed by reason of the limitations under Sections 401(a)(17) or 415 of the Code, the Eligible
Employee shall have an Excess DCRB Contribution credited to his or her Deferred Benefit
Accounts under the Executive Deferral Plan. This feature is intended to benefit those executives
who were hired on or after January 1, 2006, and accordingly were precluded from participation in
the Pension Plan and Excess Plan.
In March 2012, Mr. Cumenal was credited with an Excess DCRB Contribution of $13,386 for Fiscal
2011.
P
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Y
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P S - 6 5
POTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN CONTROL
The following table shows payments, the value of accelerated vesting of equity compensation and
the value of benefits that would have been provided or that would have accrued, to the named
executive officers in the event that a change in control of the Company had occurred on
January 31, 2012 and on the further assumption that the employment of the executive officer was
involuntarily terminated without cause at that time:
Name
Michael J.
Kowalski
Patrick F.
McGuiness
James N.
Fernandez
Frederic
Cumenal
Jon M. King
Early Vesting of
Supplemental Plan
(a)
Cash
Severance
Payment (b)
Welfare
Benefits
(c)
Early Vesting
of Stock
Options (d)
Early Vesting of
Restricted Stock Units
(e)
Total (k)
$ 0
$4,000,000
$41,206
$3,023,260
$9,853,272 (g)
$16,917,738
$ 405,753
$1,545,000
$41,206
$ 642,930 (f)
$2,245,760 (h)
$ 4,880,649
$ 0
$2,890,000
$41,206
$1,721,700 (f)
$5,583,776 (i)
$10,236,682
$ 0
$2,890,000
$41,206
$ 181,134
$2,288,722 (j)
$ 5,401,062
$ 0
$2,516,000
$14,751
$1,257,790
$3,394,160
$ 7,182,701
Notes to Potential Payments on Termination or Change in Control Table
(a)
(b)
(c)
(d)
(e)
Absent a change in control followed by termination of employment, the Supplemental Plan
will vest only when the participant attains the in-service age of 55 years with 10 years of
service, or in-service age of 65 years.
Cash severance payments were determined by multiplying the sum of (i) actual salary and
(ii) the target annual incentive award or bonus, by two.
The amounts shown in this column represent two years of health-care coverage
determined on the basis of the Company’s “COBRA” rates for post-employment
continuation coverage. Such rates are available to all participating employees who
terminate from employment and were determined on the basis of the coverage elections
made by the executive officer.
The value of early vesting of stock options granted in January 2009, 2010 and 2011 was
determined using $63.80, the closing value of the Company’s common stock on
January 31, 2012. In the event of a change in control that is not a Terminating Transaction
the unvested portion of such options will vest only upon the executive’s involuntary
termination from employment. For the purposes of this table it is assumed that the change
in control was a 35% share acquisition and not a Terminating Transaction.
The value of early vesting of performance-based restricted stock units granted in January
2009 and 2010 was determined using $63.80, the closing value of the Company’s common
stock on January 31, 2012. In the event of a change in control that is not a Terminating
Transaction, only a portion of unvested performance-based restricted stock units will vest,
pursuant to a schedule based on the applicable three-year performance period. For the
purposes of this table it is assumed that the change in control was a 35% share acquisition
and not a Terminating Transaction. Accordingly this column assumes a 100% early vesting
of the performance-based restricted stock units granted in January 2009; a 70% early
vesting of performance-based restricted stock units granted in January 2010; and a 30%
early vesting of performance-based restricted stock units granted in January 2011. This
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S
Y
X
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P S - 6 6
column also assumes a 100% early vesting of the one-time time-vesting restricted stock
grants awarded to Mr. Kowalski in 2010, and Messrs. Cumenal, Fernandez and McGuiness
in 2011.
In the event of a Terminating Transaction, all unvested performance-based restricted stock
units granted in January 2009, 2010 and 2011, and all time-vesting restricted stock units
granted in 2011 will vest, and the value to each of the executives would have been as
follows on January 31, 2012:
Michael J. Kowalski $13,461,800
Patrick F. McGuiness $ 3,132,580
James N. Fernandez $ 7,758,080
Frederic Cumenal
$ 3,561,826
Jon M. King
$ 5,046,580
P
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Y
S
T
A
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E
M
E
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T
(f)
(g)
(h)
(i)
(j)
(k)
This amount does not include any value for the one-time promotion stock option grant
awarded on June 21, 2011, as such stock options would have been “under water” on
January 31, 2012, due to the strike price of $76.85 (compared to the closing price on
January 31, 2012 of $63.80).
This amount includes $1,595,000 (25,000 shares multiplied by $63.80) attributable to the
early vesting on January 31, 2012 of the one-time Time-Vesting Restricted Stock Unit
Award made to Mr. Kowalski on January 20, 2011.
This amount includes $478,500 (7,500 shares multiplied by $63.80) attributable to the early
vesting on January 31, 2012 of the one-time promotion Time-Vesting Restricted Stock Unit
Award made to Mr. McGuiness on June 21, 2011.
This amount includes $957,000 (15,000 shares multiplied by $63.80) attributable to the
early vesting on January 31, 2012 of the one-time promotion Time-Vesting Restricted Stock
Unit Award made to Mr. Fernandez on June 21, 2011.
This amount includes $1,737,146 (27,228 shares multiplied by $63.80) attributable to the
early vesting on January 31, 2012 of the one-time sign-on Time-Vesting Restricted Stock
Unit Award made to Mr. Cumenal on March 10, 2011.
This column is the total of columns (a) through (f) in the table above. It assumes that two
events have occurred: a change in control and a termination of employment following such
change in control.
Explanation of Potential Payments on Termination or Change in Control
Retention Agreements
The Company and Tiffany have entered into retention agreements with each of the executive
officers. These agreements would provide a covered executive with compensation if he or she
should incur an “involuntary termination” after a “change in control.” An “involuntary termination”
does not include a termination for cause, but does include a resignation for good reason.
When, if ever, a “change in control” occurs, the covered executives would have fixed terms of
employment under their retention agreements for two years.
If the executive incurs an involuntary termination during his or her fixed term of employment under
a retention agreement, compensation would be payable to the executive as follows:
P S - 6 7
(cid:120)
(cid:120)
Two times the sum of the executive’s salary and target annual incentive award or bonus, as
severance; and
Two years of benefits continuation under Tiffany’s health and welfare plans.
Vesting of Options, Restricted Stock Units on a Change in Control
Stock Option Grants
For grants awarded in 2009 or later, outstanding stock options will vest in full and
become exercisable in the event of a “change in control” if it results in the
dissolution of the Company, or the Company goes out of existence or comes under
the substantial ownership (80%) of another person, and the acquiring party does
not arrange to assume or replace the grant. These types of change in control
events are referred to as “terminating transactions.” (See “Definition of a Change in
Control” below).
For all other change in control events (see “Definition of a Change in Control”
below), early vesting will occur in full but only if the named executive officer is
involuntarily terminated from employment following the change in control.
“Involuntary termination” does not include a termination for cause, but does include
a resignation for good reason.
Performance-Based Restricted Stock Unit Grants
For grants awarded in 2009 or later, outstanding performance-based restricted
stock units will vest in full and convert to shares in the event of a terminating
transaction.
For all other change in control events (see “Definition of a Change in Control”
below), performance-based restricted stock units will vest in full if the change in
control event occurs in the last fiscal year of a three-year performance period, 70%
if it occurs in the second fiscal year of a three-year performance period; and 30% if
it occurs in the first fiscal year of a three-year performance period. In the event of
the first type of change in control event described in the definition below (a 35%
share acquisition), such proportionate vesting will occur only if the named executive
officer is involuntarily terminated following the change in control event.
Time-Vesting Restricted Stock Unit Grants
Outstanding time-vesting restricted stock units will vest in full and convert to shares
in the event of a terminating transaction.
For all other change in control events (see “Definition of a Change in Control”
below), time-vesting restricted stock units will vest in full if the change in control
event occurs and if the named executive officer is involuntarily terminated following
the change in control event.
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Supplemental Retirement Benefits Vest on a Change in Control
Benefits under the Pension Plan and Excess Plan are vested for all named executive officers, other
than Mr. Cumenal, who is not a participant. Benefits under the Supplemental Plan are vested for
Mr. Kowalski, Mr. Fernandez, and Mr. King. In the event of a change in control benefits under the
Supplemental Plan would early vest for Mr. McGuiness, should he be terminated from employment
P S - 6 8
without cause, or resign from employment with good reason. Such vesting would not necessarily
result in any payment at the time of such change in control.
Definition of a Change in Control
For purposes of the Supplemental Plan, equity awards made in 2009 and thereafter, and the
retention agreements, the term “change in control” means that one of the following events has
occurred:
(cid:120) Any person or group of persons acting in concert (a “person” being an individual or
organization) acquires 35% or more in voting power or stock of the Company, or the right
to obtain such voting power;
(cid:120) A majority of the Board is, for any reason, not made up of individuals who were either on
the Board on January 15, 2009, or, if they became members of the Board after that date,
were approved by the directors;
(cid:120) As a result of a corporate transaction such as a merger, the stockholders of Tiffany
immediately prior to such transaction do not own 51% of Tiffany’s outstanding shares; or
(cid:120) All or substantially all assets of the Company or Tiffany are sold or disposed of to an
unrelated party.
Certain change in control events will be considered “terminating transactions”, provided the
acquirer does not arrange to assume or replace the grant. Terminating transactions include (i) the
dissolution of the Company, or (ii) if the Company comes under the substantial ownership (80%) of
another person. The definition of “change in control” for equity awards made prior to 2009 is
somewhat, but not substantially, different.
Non-Competition Covenants Affected by Change in Control
In the event of a change in control, the duration of certain non-competition covenants could be cut
back from as long as two years following termination of employment to as little as six months in
the event a change in control were to occur. In the table above, we have not assigned any value to
a potential cutback.
Early Retirement
Mr. Kowalski was eligible to take early retirement on January 31, 2012. His early retirement benefit
under the Pension Plan, the Excess Plan and the Supplemental Plan would have been
approximately $1,178,506 per year had he retired effective January 31, 2012, subject to applicable
offsets by benefits payable under Social Security.
Mr. Fernandez was eligible to take early retirement on January 31, 2012. His early retirement
benefit under the Pension Plan, the Excess Plan and the Supplemental Plan would have been
approximately $581,745 per year had he retired effective January 31, 2012, subject to applicable
offsets by benefits payable under Social Security.
Mr. King was eligible to take early retirement on January 31, 2012. His early retirement benefit
under the Pension Plan, the Excess Plan and the Supplemental Plan would have been
approximately $366,987 per year had he retired effective January 31, 2012, subject to applicable
offsets by benefits payable under Social Security.
P
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O
X
Y
S
T
A
T
E
M
E
N
T
P S - 6 9
Death or Disability
If any of the named executive officers had died or become disabled on January 31, 2012, stock
options then unvested would have early vested. The value of such early vesting is shown in the
columns labeled “Early Vesting of Stock Options” in the table on page PS-66. If any of the named
executive officers had died or become disabled on January 31, 2012, certain performance-based
restricted stock units and time-vesting restricted stock units would have early vested. The value of
such early vesting would have been as follows for each of the named executive officers on January
31, 2012: Mr. Kowalski, $5,246,912; Mr. McGuiness, $1,339,800; Mr. Fernandez, $3,031,776;
Mr. Cumenal, $2,284,550; and Mr. King, $1,550,340.
DIRECTOR COMPENSATION TABLE
Fiscal 2011
Name
Fees Earned
or Paid in
Cash ($)(a)
Option
Awards
($) (b) (c)
Stock
Awards
($)
Change in
Pension Value and
Nonqualified
Deferred
Compensation
Earnings (d)
All Other
Compensation
($)
$ 75,000
Rose Marie Bravo
$ 90,000
Gary E. Costley
Lawrence K. Fish
$ 90,000
Abby F. Kohnstamm $ 75,000
Charles K. Marquis $ 90,000
$ 75,000
Peter W. May
$ 95,000
J. Thomas Presby
$ 90,000
William A. Shutzer
$ 62,599
$ 62,599
$ 62,599
$ 62,599
$ 62,599
$ 62,599
$ 62,599
$ 62,599
$ 63,463 $ 53,618
$ 63,463 N/A
$ 63,463 N/A
$ 63,463 N/A
$ 63,463 $ 27,276
$ 63,463 N/A
$ 63,463 N/A
$ 63,463 $ 72,444
$
$
$
$
$
$
$
$
0
0
0
0
0
0
0
0
Total
($)
$ 254,680
$ 216,062
$ 216,062
$ 201,062
$ 243,338
$ 201,062
$ 221,062
$ 288,506
Notes to Director Compensation Table
(a)
(b)
Includes amounts deferred under the Executive Deferral Plan.
Amounts shown represent the grant-date fair value for stock options granted for Fiscal
2011. In valuing option awards the Company made certain assumptions. For a discussion
of those assumptions, please refer to Part II of the Company’s Annual Report on Form 10-K
for the fiscal year ended January 31, 2012. See Note N. “STOCK COMPENSATION
PLANS”, in Notes to Consolidated Financial Statements, under Item 8. Financial
Statements and Supplementary Data.
(c)
Supplementary Table: Outstanding Director Option Awards at Fiscal Year End
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Name
Rose Marie Bravo
Gary E. Costley
Lawrence K. Fish
Abby F. Kohnstamm
Charles K. Marquis
Peter W. May
J. Thomas Presby
William A. Shutzer
Aggregate Number of Option
Awards Outstanding at Fiscal Year End
(number of underlying shares)
58,554
31,054
12,477
66,054
66,054
31,054
11,337
66,054
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(d)
The actuarial valuation shown takes into account the current age of the director and is
based on the following assumptions consistent with those used in preparing the Pension
Plan financial statements: RP 2000 Male/Female Mortality Table Projected to the date of
each future cash flow (i.e. a “fully generational” mortality projection); discount rate of 5.0%
and assumed retirement age of 65 (if the director is over age 65, the director is assumed to
retire on January 31, 2012). This column does not include earnings under the Deferral Plan
because the Deferral Plan does not pay above-market or preferential earnings on
compensation that is deferred. Where an N/A appears, the director is not eligible for this
benefit.
Discussion of Director Compensation Table
Directors who are not employees of the Company or its subsidiaries are paid or provided with the
following for their service on the Board:
(cid:120) An annual retainer of $75,000;
(cid:120) An additional annual retainer of $20,000 to the chairperson of the Audit Committee, and
$15,000 each to the chairperson of the Compensation, Corporate Social Responsibility,
Finance and Nominating/Corporate Governance Committee;
(cid:120) Equity compensation, as discussed below; and
(cid:120) A retirement benefit, also discussed below, for directors first elected prior to January 1,
1999.
Under Tiffany’s Amended and Restated Executive Deferral Plan, directors may defer up to one
hundred percent (100%) of their cash compensation and invest the amounts they defer in various
accounts and funds established under the plan. However, the Company does not guarantee any
return on said investments. The following table provides data concerning director participation in
this plan:
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Director
Contribution
In Last
Fiscal Year
($)
Registrant
Contribution
In Last
Fiscal Year
($)
Aggregate
Earnings
In Last
Fiscal Year
($)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance
At Last
Fiscal Year End
($)
Name
Gary E. Costley
$
0
$ 0 $ 3,193
$ 0
$169,663
Charles K.
Marquis
William A.
Shutzer
$
$
0
0
$ 0 $ 658
$ 0
$ 494,009
$ 0 $ (22,542)
$ 0
$ 897,318
Tiffany also reimburses directors for expenses they incur in attending Board and committee
meetings, including expenses for travel, food and lodging.
Each director receives annual equity compensation with a value of $125,000 on grant, half in the
form of a 10-year term stock option (vested immediately) and half in the form of restricted stock
units (payable after one-year of service or on retirement, at the prior election of the director). All
options have a strike price equal to fair market value on the date of grant. Directors joining the
board between annual meetings will receive a pro-rated annual grant.
Directors first elected prior to January 1, 1999 who retire as non-employee directors with five or
more years of Board service are also entitled to receive an annual retirement benefit equal to
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$38,000, payable at the later of age 65 or the retirement date. This benefit is payable quarterly and
continues for a period of time equal to the director's length of service on the Board, including
periods served as an employee director, or until death, if earlier. Directors Bravo, Marquis and
Shutzer are the only directors entitled to participate in this benefit plan.
Mr. Kowalski is an employee of Tiffany. He therefore receives no separate compensation for his
service as director.
* * *
EQUITY COMPENSATION PLAN INFORMATION
(As of Fiscal Year 2011)
Column A
Column B
Column C
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column A)
3,045,299a
$
41.53
4,937,420b
0
0
3,045,299a
$
41.53
0
4,937,420b
Plan category
Equity compensation plans
approved by security
holders
Equity compensation plans
not approved by security
holders
Total
(a) Shares indicated do not include 2,011,079 shares issuable under awards of stock units
already made.
(b) Shares indicated are the aggregate of those available for grant under the Company’s 2005
Employee Incentive Plan (the “Employee Plan”) and the Company’s 2008 Directors Equity
Plan (the “Directors Plan”). All plans provide for the issuance of options and stock awards.
However, under both plans the maximum number of shares that may be issued (13,500,000
under the Employee Plan and 1,000,000 under the Directors Plan) is subject to reduction by
1.58 shares for each share that is delivered on vesting of a stock award. Column C reflects
this reduction assuming that all shares granted as stock awards will vest.
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PERFORMANCE OF COMPANY STOCK
The following graph compares changes in the cumulative total shareholder return on
Tiffany & Co.’s stock for the previous five fiscal years to returns for the same five-year period on (i)
the Standard & Poor's 500 Stock Index and (ii) the Standard & Poor’s 500 Consumer Discretionary
Index. Cumulative shareholder return is defined as changes in the closing price of the stock on the
New York Stock Exchange, plus the reinvestment of any dividends paid on the stock.
Comparison of Cumulative Five Year Total Return
$200
Tiffany & Co.
S&P 500 Index
$150
S&P 500 Consumer Discretionary Index
$100
$50
$0
1/31/07
1/31/08
1/31/09
1/31/10
1/31/11
1/31/12
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ASSUMES AN INVESTMENT OF $100 ON JANUARY 31, 2007 IN COMPANY STOCK AND IN
EACH OF THE TWO INDICES. THE REINVESTMENT OF ANY SUBSEQUENT DIVIDENDS IS
ALSO ASSUMED.
TOTAL RETURNS ARE BASED ON MARKET CAPITALIZATION; INDICES ARE WEIGHTED AT THE
BEGINNING OF EACH PERIOD FOR WHICH A RETURN IS INDICATED.
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DISCUSSION OF PROPOSALS PRESENTED BY THE BOARD
Item 1.
Election of Directors
Each year, we elect directors at an Annual Meeting of Stockholders. At the 2012 Annual Meeting,
nine directors will be elected. Each of them will serve until he or she is succeeded by another
qualified director or until his or her earlier resignation or removal from office.
It is not anticipated that any of this year’s nominees will be unable to serve as a director but, if that
should occur before the Annual Meeting, the Board may either propose another nominee or reduce
the number of directors to be elected. If another nominee is proposed, you or your proxy will have
the right to vote for that person at the Annual Meeting.
Why the Nominees were Chosen to Serve. Each of the nine nominees for director was
recommended for nomination by the Nominating/Corporate Governance Committee and
nominated by the full Board to stand for election by the stockholders. The specific experience and
qualifications that led the Nominating/Corporate Governance Committee to recommend each
nominee is set forth in the brief biographies that follow, and all of the nominees have demonstrated
through their service on the Board (other than Mr. Singer), their skills as insightful questioners and
collaborative decision-makers and their ability to express differing viewpoints in a collegial and
constructive fashion. Each of the nominees has many and diverse skill sets, but those skills that
most stand out are identified below at the end of each biography as “Key Skills.”
Information concerning each of the nominees of the Board is set forth below:
Michael J. Kowalski
Rose Marie Bravo
Mr. Kowalski, 60, is Chairman of the Board and Chief Executive Officer of
Tiffany & Co. He succeeded William R. Chaney as Chairman at the end of
Fiscal 2002 and as Chief Executive Officer in February 1999. Prior to his
appointment as President in January 1996, he was an Executive Vice
President of Tiffany & Co., a position he had held since March 1992. Mr.
Kowalski also served as Tiffany & Co.’s Chief Operating Officer from January
1997 until his appointment as Chief Executive Officer. He became a director of
Tiffany & Co. in January 1995. Mr. Kowalski also serves on the Board of The
Bank of New York Mellon. The Bank of New York Mellon is Tiffany’s principal
banking relationship, serving as Administrative Agent and a lender under a
Revolving Credit Facility, and as the trustee and an investment manager for
Tiffany’s employee pension plan. Mr. Kowalski holds a B.S. from the University
of Pennsylvania’s Wharton School and an M.B.A. from the Harvard Business
School. He has been a director of the following public companies during the
past five years: Fairmont Hotels & Resorts, Inc. Key Skills: merchandising,
management, strategic planning and motivation.
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Ms. Bravo, CBE, 61, became a director of Tiffany & Co. in October 1997 when
she was selected by the Board to fill a newly created directorship. Ms. Bravo
previously served as Chief Executive Officer of Burberry Limited from 1997
until 2006 and as President of Saks Fifth Avenue from 1992 to 1997. Prior to
Saks, Ms. Bravo held a series of merchandising jobs at Macy’s, culminating in
the Chairman & Chief Executive Officer role at I. Magnin, which was a division
of R. H. Macy & Co. Ms. Bravo serves on the Board of Directors of Estee
Lauder Companies Inc. and on the Compensation and its Stock Option
Subcommittee of that Board. She also serves on the Board of Directors of
Williams-Sonoma, Inc. She has been a director of the following public
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Gary E. Costley
Lawrence K. Fish
Abby F. Kohnstamm
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companies during the past five years: Burberry Limited. Key Skills: brand
management, merchandising and product development.
Dr. Costley, 68, was first elected to the Board in May 2007. He served as
Chairman and Chief Executive Officer of International Multifoods Corporation,
a manufacturer and marketer of branded consumer food and food service
products, from November 1997 until his retirement in June 2004. Dr. Costley
was Dean of the Graduate School of Management at Wake Forest University
from 1995 until 1997. Dr. Costley held numerous positions at the Kellogg
Company from 1970 until June 1994 when he was President of Kellogg North
America. He is a director of three other public companies: The Principal
Financial Group, Covance Inc. and Prestige Brands Holdings, Inc. He has
been a director of the following public companies during the past five years:
Pharmacopeia and Accelysis. Key Skills: multi-divisional operations, global
management, marketing and manufacturing.
Mr. Fish, 67, retired as Chairman and Chief Executive Officer of Citizens
Financial Group, Inc. (“Citizens”) in 2007. He served in that role since 2005,
and before that as Chairman, President and Chief Executive Officer of Citizens
from 1992. Mr. Fish is a member of the Board of Trustees of Massachusetts
Institute of Technology and an Overseer of the Boston Symphony Orchestra.
He serves as Chairman of Houghton Mifflin Harcourt, on the board of Textron
and as Chairman of its Nominating and Corporate Governance Committee and
on the board of National Bank Holdings. He also serves as a director emeritus
of The Brookings Institution. Mr. Fish was first elected a director of the
Company in May 2008. He has been a director of the following public
companies during the past five years: Royal Bank of Scotland. Key Skills:
risk analysis, finance, brand management and community banking.
Ms. Kohnstamm, 58, is the President and founder of Abby F. Kohnstamm &
Associates, Inc., a marketing and consulting firm. Prior to establishing her
company in January 2006, Ms. Kohnstamm served as Senior Vice President,
Marketing (Chief Marketing Officer) of IBM Corporation from 1993 through
2005. In that capacity, she had overall responsibility for all aspects of
marketing across IBM on a global basis. She was also a member of the
Corporate Executive Committee, which advised the Chairman and CEO on
policy issues and the management of IBM and a member of the Strategy
Team, which focused on IBM’s strategic direction and emerging business
opportunities. A few of Ms. Kohnstamm’s major accomplishments at IBM
included developing IBM’s first professional marketing function and key
marketing processes, as well as repositioning and relaunching the IBM brand
from a weakened position to one of today’s top global brands. Before joining
IBM, Ms. Kohnstamm held a number of senior marketing positions at
American Express from 1979 through 1993. Ms. Kohnstamm joined the Board
of Directors of World Fuel Services Corporation as of January 1, 2012. She is
also a member of the Board of Directors of the Roundabout Theatre Company
and is a Trustee Emeritus of Tufts University after serving 10 years on the
Board of Trustees. She became a director of Tiffany & Co. in July 2001. She
has been a director of the following public companies during the past five
years: The Progressive Corporation. She holds a B.A. from Tufts University,
an M.A. in Education from New York University and an M.B.A. from New York
University. Key Skills: brand management, global management, strategic
planning and media management.
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Charles K. Marquis
Mr. Marquis, 69, is a Senior Advisor to Investcorp International, Inc. From 1974
through 1998, he was a partner in the law firm of Gibson, Dunn & Crutcher
L.L.P., where he practiced securities and mergers and acquisitions law. He was
elected a director of Tiffany & Co. in 1984. He has been a director of the
following public companies during the past five years: CSK Auto. Key Skills:
finance, risk analysis, crisis management and investor relations.
Peter W. May
William A. Shutzer
Mr. May, 69, is President and a founding partner of Trian Fund Management,
L.P., a New York-based asset management firm. Mr. May also serves as non-
executive Vice Chairman and a director of The Wendy’s Company (formerly
Wendy’s/Arby’s Group, Inc. and previously Triarc Companies, Inc. (“Triarc”))
(NASDAQ GS:WEN). Mr. May served as a director of Deerfield Capital Corp.
(NASDAQ CM:DFR) from December 2007 to June 2010, and as a director of
Encore Capital Group, Inc. (NASDAQ GS:ECPG) from February 1998 to May
2007. Mr. May also served as President and Chief Operating Officer of Triarc
from April 1993 through June 2007. Prior to joining Triarc, Mr. May was
President and Chief Operating Officer of Trian Group, Limited Partnership,
which provided investment banking and management services for entities
controlled by him and Nelson Peltz. From 1983 to December 1988, Mr. May
served as President and Chief Operating Officer and a director of Triangle
Industries, Inc., which, through wholly-owned subsidiaries, was, at the time, a
manufacturer of packaging products (through American National Can
Company), copper electrical wire and cable and steel conduit and currency
and coin handling products. Mr. May is the Chairman of the Board of Trustees
of The Mount Sinai Medical Center in New York, a Trustee of the University of
Chicago, a Trustee of Carnegie Hall and a Trustee of the New York
Philharmonic, and a partner of the Partnership for New York City. Mr. May
holds AB and MBA degrees from the University of Chicago and is a Certified
Public Accountant (inactive). Mr. May was first elected a director of Tiffany &
Co. in May 2008. Key Skills: multi-divisional operations, brand management,
investor relations and finance.
Mr. Shutzer, 65, is a Senior Managing Director of Evercore Partners, a financial
advisory and private equity firm. He previously served as a Managing Director
of Lehman Brothers from 2000 through 2003, a Partner in Thomas Weisel
Partners LLC, a merchant banking firm, from 1999 through 2000, as Executive
Vice President of ING Baring Furman Selz LLC from 1998 through 1999,
President of Furman Selz Inc. from 1995 through 1997 and as a Managing
Director of Lehman Brothers and its predecessors from 1978 through 1994.
He was elected a director of the Company in 1984. Mr. Shutzer is also a
member of the Board of Directors of WebMedia Brands Inc. (formerly known
as Jupiter Media Corp.) and ExamWorks Group, Inc. He was a member of the
Board of Directors of American Financial Group from 2003 to 2006. He has
been a director of the following public companies during the past five years:
CSK Auto (2002-2008); and Turbochef Technologies (2003-2009). Key Skills:
finance, investor relations and strategic development.
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Robert S. Singer Mr. Singer, 60, served as Chief Executive Officer of Barilla Holding S.p.A, a
major Italian food company, from January 2006 to April 2009. From May 2004
to September 2005, Mr. Singer served as President and Chief Operating
Officer of Abercrombie & Fitch Co., an American clothing retailer. Prior to
joining Abercrombie, Mr. Singer served as Chief Financial Officer of Gucci
Group NV, a leading luxury goods company, from September 1995 to April
2004. From 1987 to 1995 Mr. Singer was a Partner at Coopers & Lybrand.
From April 2006 to April 2010, Mr. Singer was a director and the chairman of
the compensation committee of Benetton S.p.A. From 2003 to 2006,
Mr. Singer served on the Board of Directors of Fairmont Hotels & Resorts, Inc.,
and as Chairman of the audit committee from 2004 to 2006. Mr. Singer
currently serves on the board of directors of several non-public companies.
He has been a director of the following public companies during the past five
years: Mead Johnson Nutrition since February 2009. Key Skills: accounting,
global retail, financial and general management of luxury good brands.
In the event that any of the current directors standing for reelection does not receive a majority of
“for” votes of the votes cast for or against his or her candidacy, such person would continue to
serve as a director until he or she is succeeded by another qualified director or until his or her
earlier resignation or removal from office. Each of the nominees for director has agreed to tender
his or her resignation in the event that he or she does not receive such a majority. Under the
Corporate Governance Principles adopted by the Board, the Nominating/Corporate Governance
Committee will make a recommendation to the Board on whether to accept or reject the
resignation or whether other action should be taken. Please refer to Section 1.i of the Corporate
Governance Principles, which are attached as Appendix I hereto, for further information about the
procedure that would be followed in the event of such an election result.
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THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL NINE NOMINEES FOR
DIRECTOR.
Item 2. Appointment of the Independent Registered Public Accounting Firm
The Audit Committee has appointed and the Board has ratified the appointment of
PricewaterhouseCoopers LLP (“PwC”) as the independent registered public accounting firm to
audit the Company’s consolidated financial statements for Fiscal 2012. As a matter of good
corporate governance, we are asking you to approve this selection.
PwC has served as the Company’s independent registered public accounting firm since 1984.
A representative of PwC will be in attendance at the Annual Meeting to respond to appropriate
questions raised by stockholders and will be afforded the opportunity to make a statement at the
meeting, if he or she desires to do so.
The Board may review this matter if this appointment is not approved by the stockholders.
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THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR FISCAL 2012.
Item 3. Approval of the Compensation paid to the Named Executive Officers
Rule 14a-21(a) was adopted by the Securities Exchange Commission (“SEC”). It was adopted
under the Securities Exchange Act of 1934, as amended by the Dodd-Frank Act (the “Dodd-Frank
Amendments”), and requires the Company to include in its proxy statement, at least one in every
three years, a separate stockholder advisory vote to approve the compensation of the Company’s
named executive officers. Accordingly, we are presenting the following resolution for the vote of
the stockholders at the 2012 Annual Meeting:
RESOLVED, that the compensation paid to the Company’s named executive officers, as
disclosed pursuant to Item 402 of Regulation S-K under the Securities Exchange Act of
1934 in this Proxy Statement, including the Compensation Discussion and Analysis,
compensation tables and narrative discussion be and hereby is APPROVED.
The disclosed compensation paid to the Company’s named executive officers (Messrs. Kowalski,
McGuiness, Fernandez, Cumenal, and King) for which your approval is sought, may be found on
pages PS-23 through PS-70 inclusive of this Proxy Statement.
At the 2011 Annual Meeting, the Company included in its proxy statement for the first time a
separate stockholder advisory vote to approve the compensation of the Company’s named
executive officers. The Company’s Say on Pay proposal passed with 90.6% of the stockholder
votes in favor of the Company’s compensation program. Of the “against” votes, 83.7% were
abstaining shares or broker non-votes. The Committee considered stockholder approval of the
compensation program when the Committee left the program unchanged for Fiscal 2012.
OTHER MATTERS
Stockholder Proposals for Inclusion in the Proxy Statement for the 2013 Annual Meeting
If you wish to submit a proposal to be included in the Proxy Statement for our 2013 Annual
Meeting, we must receive it no later than December 6, 2012. Proposals should be sent to the
Company at 727 Fifth Avenue, New York, New York 10022, addressed to the attention of
Patrick B. Dorsey, Corporate Secretary (Legal Department).
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Other Proposals
Our By-laws set forth certain procedures for stockholders of record who wish to nominate
directors or propose other business to be considered at an annual meeting. In addition, we will
have discretionary voting authority with respect to any such proposals to be considered at the
2013 Annual Meeting unless the proposal is submitted to us no earlier than January 17, 2013
and no later than February 16, 2013 and the stockholder otherwise satisfies the requirement of
SEC Rule 14a-4.
Householding
The SEC allows us to deliver a single proxy statement and annual report to an address shared by
two or more of our stockholders. This delivery method, referred to as “householding,” can result in
significant cost savings for us. In order to take advantage of this opportunity, the Company and
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banks and brokerage firms that hold your shares have delivered only one proxy statement and
annual report to multiple stockholders who share an address unless one or more of the
stockholders has provided contrary instructions. The Company will deliver promptly, upon written
or oral request, a separate copy of the proxy statement and annual report to a stockholder at a
shared address to which a single copy of the documents was delivered. A stockholder who wishes
to receive a separate copy of the proxy statement and annual report, now or in the future, may
obtain one, without charge, by addressing a request to Annual Report Administrator, Tiffany & Co.,
200 Fifth Avenue, 14th floor, New York, New York 10010 or by calling 212-230-5302. You may also
obtain a copy of the proxy statement and annual report from the Company’s website
www.tiffany.com, by clicking “Investors” at the bottom of the page, and selecting “Financial
Information” from the left-hand column. Stockholders of record sharing an address who are
receiving multiple copies of proxy materials and annual reports and wish to receive a single copy
of such materials in the future should submit their request by contacting us in the same manner.
If you are the beneficial owner, but not the record holder, of the Company’s shares and wish to
receive only one copy of the proxy statement and annual report in the future, you will need to
contact your broker, bank or other nominee to request that only a single copy of each document
be mailed to all stockholders at the shared address in the future.
Reminder to Vote
Please be sure to either complete, sign and mail the enclosed proxy card in the return envelope
provided or call in your instructions or vote by Internet as soon as you can so that your vote may
be recorded and counted.
BY ORDER OF THE BOARD OF DIRECTORS
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New York, New York
April 5, 2012
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Tiffany & Co.
(a Delaware corporation)
Corporate Governance Principles
(as amended and restated March 17, 2011)
Appendix I
1.
Director Qualification Standards; Size of the Board; Audit Committee Service.
a.
A majority of the directors shall meet the independence requirements set forth in
Section 303A.01 and .02 of the New York Stock Exchange Corporate Governance Rules. A
director shall not be deemed to have met such independence requirements unless the Board has
affirmatively determined that it be so. In making its determination of independence, the Board
shall broadly consider all relevant facts and circumstances and assess the materiality of each
director’s relationship(s) with the Corporation and/or its subsidiaries. If a director is determined by
the Board to be independent, all relationships, if any, that such director has with the Corporation
and/or its subsidiaries which were determined by the Board to be immaterial to independence
shall be disclosed in the Corporation’s annual proxy statement.
b.
A director shall be younger than age 72 when elected or appointed and a director
shall not be recommended for re-election by the stockholders if such director will be age 72 or
older on the date of the annual meeting or other election in question, provided that the Board of
Directors may, by specific resolution, waive the provisions of this sentence with respect to an
individual director whose continued service is deemed uniquely important to the Corporation.
c.
A director need not be a stockholder to qualify as a director, but shall be
encouraged to become a stockholder by virtue of the Corporation’s policies and plans with respect
to stock options and stock ownership for directors and otherwise.
d.
Consistent with 1.a. above, candidates for director shall be selected on the basis of
their business experience and expertise, with a view to supplementing the business experience
and expertise of management and adding further substance and insight into board discussions
and oversight of management. The Nominating/Corporate Governance Committee is responsible
for identifying individuals qualified to become directors, and for recommending to the Board
director nominees for the next annual meeting of the stockholders.
e.
From time to time, the Nominating/Corporate Governance Committee will
recommend to the Board the number of directors constituting the entire Board. Based upon that
recommendation, the current nature of the Corporation’s business, and the talents and business
experience of the existing roster of directors, the Board believes that nine directors is an
appropriate number at this time.
f.
The Board shall be responsible for determining the qualification of an individual to
serve on the Audit Committee as a designated “audit committee financial expert,” as required by
applicable rules of the SEC under Section 407 of the Sarbanes-Oxley Act. In addition, to serve on
the Audit Committee, a director must meet the standards for independence set forth in Section
301 of the Sarbanes-Oxley Act. To those ends, the Nominating/Corporate Governance Committee
will coordinate with the Board in screening any new candidate for audit committee financial expert
or who will serve on the Audit Committee and in evaluating whether to re-nominate any existing
director who may serve in the capacity of audit committee financial expert or who may serve on
the Audit Committee. If an Audit Committee member simultaneously serves on the audit
committees of more than three public companies, then, in the case of each such Audit Committee
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member, the Board must determine that such simultaneous service would not impair the ability of
such member to effectively serve on the Corporation’s Audit Committee and disclose such
determination in the Corporation’s annual proxy statement.
g.
Any director who changes his or her employer or otherwise has a significant change
in job responsibilities, or who accepts or intends to accept a directorship with another public
company (or with any other organization that would require a significant time commitment) that he
or she did not hold when such director was most recently elected to the Board, shall (1) advise the
secretary of the Corporation of such change or directorship and (2) submit to the
Nominating/Corporate Governance Committee, in care of the secretary, a signed letter, addressed
to such Committee, resigning as a director of the Corporation effective upon acceptance of such
resignation by such Committee but void ab initio if not accepted by such Committee within ten (10)
days of receipt by the secretary. The secretary of the Corporation shall promptly advise the
members of the Nominating/Corporate Governance Committee of such advice and receipt of such
letter. The Nominating/Corporate Governance Committee shall promptly meet and consider, in
light of the circumstances, the continued appropriateness of such director’s membership on the
Board and each committee of the Board on which such director participates. In some instances,
taking into account all relevant factors and circumstances, it may be appropriate for the
Nominating/Corporate Governance Committee to accept such resignation, to recommend to the
Board that the director cease participation on one or more committees, or to recommend to the
Board that such director not be re-nominated to the Board.
h.
Subject to 1.b. above, directors of the Corporation are not subject to term limits.
However, the Nominating/Corporate Governance Committee will consider each director’s
continued service on the Board each year and recommend whether each director should be re-
nominated to the Board. Each director will be given an opportunity to confirm his or her desire to
continue as a member of the Board.
i.
The Corporation has amended its By-Laws to provide for majority voting in the
election of directors. In uncontested elections, directors are elected by a majority of the votes
cast, which means that the number of shares voted “for” a director must exceed the number of
shares voted “against” that director. The Nominating/Corporate Governance Committee (or
comparable committee of the Board) shall establish procedures for any director who is not elected
to tender his or her resignation. The Nominating/Corporate Governance Committee will make a
recommendation to the Board on whether to accept or reject the resignation, or whether other
action should be taken. The Board will act on the Nominating/Corporate Governance Committee's
recommendation within 90 days following certification of the election results. In determining
whether or not to recommend that the Board of Directors accept any resignation offer, the
Nominating/Corporate Governance Committee shall be entitled to consider all factors believed
relevant by such Committee’s members. Unless applicable to all directors, the director(s) whose
resignation is under consideration is expected to recuse himself or herself from the Board vote.
Thereafter, the Board will promptly disclose its decision regarding the director's resignation offer
(including the reason(s) for rejecting the resignation offer, if applicable) in a Form 8-K furnished to
the Securities and Exchange Commission. If the Board accepts a director's resignation pursuant
to this process, the Nominating/Corporate Governance Committee shall recommend to the Board
whether to fill such vacancy or reduce the size of the Board. If, for any reason, the Board of
Directors is not elected at an annual meeting, they may be elected thereafter at a special meeting
of the stockholders called for that purpose in the manner provided in the By-laws.
j.
Including service on the Board of Directors of the Corporation, no director shall
serve on the board of directors (or any similar governing body) of more than six public companies.
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2.
Attendance and Participation at Board and Committee Meetings.
a.
Directors shall be expected to attend six regularly scheduled board meetings in
person, if practicable, or by telephone, if attendance in person is impractical. Directors should
attempt to organize their schedules in advance so that attendance at all regularly scheduled board
meetings will be practicable.
b.
For committees on which they serve, directors shall be expected to attend regularly
scheduled meetings in person, if practicable, or by telephone, if attendance in person is
impractical or if telephone participation is the expected means of participation. For committees on
which they serve, directors should attempt to organize their schedules in advance so that
attendance at all regularly scheduled committee meetings will be practicable.
c.
Directors shall attempt to make time to attend, in person or by telephone, specially
scheduled meetings of the Board or those committees on which they serve.
d.
Directors shall, if practicable, review in advance all meeting materials provided by
management, the other directors or consultants to the Board.
e.
Directors shall familiarize themselves with the policies and procedures of the Board
with respect to business conduct, ethics, confidential information and trading in the Corporation’s
securities.
f.
applicable law.
Nothing stated herein shall be deemed to limit the duties of directors under
3.
Director Access to Management and Independent Advisors.
a.
Executive officers of the Corporation and its subsidiaries shall make themselves
available, and shall arrange for the availability of other members of management, employees and
consultants, so that each director shall have full and complete access with respect to the
business, finances and accounting of the Corporation and its subsidiaries.
b.
The chief financial officer and the chief legal officer of the Corporation will regularly
attend Board meetings (other than those portions of Board meetings that are reserved for
independent or non-management directors or those portions in which the independent or
non-management directors meet privately with the chief executive officer) and the Board
encourages the chief executive officer to invite other executive officers and non-executive officers
to Board meetings from time to time in order to provide additional insight into items being
discussed and so that the Board may meet and evaluate persons with potential for advancement.
c.
If the charter of any Board committee on which a director serves provides for
access to independent advisors, any executive officer of the Corporation is authorized to arrange
for the payment of the reasonable fees of such advisors at the request of such a committee acting
by resolution or unanimous written consent.
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4.
Director Compensation.
a.
Directors shall be compensated in a manner and at a level sufficient to encourage
exceptionally well-qualified candidates to accept service upon the Board and to retain existing
directors. The Board believes that a meaningful portion of a director’s compensation should be
provided in, or otherwise based upon appreciation in the market value of, the Corporation’s
Common Stock. Compensation of the directors shall be determined by the Nominating/Corporate
Governance Committee.
b.
To help determine the form and amount of director compensation, the staff of the
Corporation shall, if requested by the Nominating/Corporate Governance Committee, provide such
committee with data drawn from public company filings with respect to the fees and emoluments
paid to outside directors by comparable public companies.
c.
Contributions to charities with which an independent or non-management director
is affiliated will not be used as compensation to such a director and management will use special
efforts to avoid any appearance of impropriety in connection with such contributions, if any.
d.
Management will advise the Board should the Corporation or any subsidiary wish to
enter into any direct financial arrangement with any director for consulting or advisory services, or
into any arrangement with any entity affiliated with such director by which the director may be
indirectly benefited, and no such arrangement shall be consummated without specific
authorization from the Board.
5.
Director Orientation and Continuing Education.
a.
Each executive officer of the Corporation shall meet with each new director and
provide an orientation into the business, finance and accounting of the Corporation.
b.
Each director shall be reimbursed for reasonable expenses incurred in pursuing
continuing education with respect to his/her role and responsibilities to the stockholders and under
law as a director.
6. Management Succession.
a.
The Board, assisted by the Corporate Nominating/Corporate Governance
Committee, shall select, evaluate the performance of, retain or replace the chief executive officer.
Such actions will be taken with (i) a view to the effectiveness and execution of strategies
propounded by and decisions taken by the chief executive officer with respect the Corporation’s
long-term strategic plan and long-term financial returns and (ii) applicable legal and ethical
considerations.
b.
In furtherance of the foregoing responsibilities, and in contemplation of the
retirement, or an exigency that requires the replacement, of the chief executive officer, the Board
shall, in conjunction with the chief executive officer, oversee the selection and evaluate the
performance of the other executive officers.
7.
Annual Performance Evaluation of the Board.
a.
The Nominating/Corporate Governance Committee is responsible to assist the
Board in the Board’s oversight of the Board’s own performance in the area of corporate
governance.
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b.
Annually, each director will participate in an assessment of the Board’s performance
in the area of corporate governance. The results of such self-assessment will be provided to each
director.
8. Matters for Board Review, Evaluation and/or Approval.
a.
The Board is responsible under the law of the State of Delaware to review and
approve significant actions by the Corporation including major transactions (such as acquisitions
and financings), declaration of dividends, issuance of securities and appointment of officers of the
Corporation.
b.
The Board is responsible, either through its committees, or as guided by its
committees, for those matters which are set forth in the respective charters of the Audit,
Nominating/Corporate Governance and Compensation Committees or as otherwise set forth in the
corporate governance rules of the New York Stock Exchange.
c.
The following matters, among others, will be the subject of Board deliberation:
i.
annually, the Board will review and if acceptable approve the Corporation’s
operating plan for the fiscal year, as developed and recommended by management;
ii.
at each regularly scheduled meeting of the Board, the directors will review
actual performance against the operating plan;
iii.
annually, the Board will review and if acceptable approve the Corporation’s
five-year strategic plan, as developed and recommended by management;
iv.
from time to time, the Board will review topics of relevance to the approved
or evolving strategic plan, including such topics identified by the Board and those identified by
management;
v.
annually, the charters of the Audit, Nominating/Corporate Governance and
Compensation Committees will be reviewed and, if necessary, modified, by the Board;
vi.
annually, the delegation of authority to officers and employees for day-to-
day operating matters of the Corporation and its subsidiaries will be reviewed and if acceptable
approved by the Board;
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vii.
annually, the Corporation’s investor relations program will be reviewed by the
Board;
viii.
annually, the schedule of insurance coverage for the Corporation and its
subsidiaries will be reviewed by the Board;
ix.
annually, the status of various litigation matters in which the Corporation and
its subsidiaries are involved will be presented to and discussed with the Board;
x.
annually, the Corporation’s policy with respect to the payment of dividends
will be reviewed and if acceptable approved by the Board;
xi.
annually, the Corporation’s program for use of foreign currency hedges and
forward contracts will be reviewed and if acceptable approved by the Board; and
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xii.
from time to time, the Corporation’s use of any stock re-purchase program
approved by the Board will be reviewed by the Board.
9. Management’s Responsibilities.
Management is responsible to operate the Corporation with the objective of achieving the
Corporation’s operating and strategic plans and building value for stockholders on a long-term
basis. In executing those responsibilities management is expected to act in accordance with the
policies and standards established by the Board (including these principles), as well as in
accordance with applicable law and for the purpose of maintaining the value of the trademarks
and business reputation of the Corporation’s subsidiaries. Specifically, the chief executive officer
and the other executive officers are responsible for:
a.
producing, under the oversight of the Board and the Audit Committee, financial
statements for the Corporation and its consolidated subsidiaries that fairly present the financial
condition, results of operation, cash flows and related risks in accordance with generally accepted
accounting principles, for making timely and complete disclosure to investors, and for keeping the
Board and the appropriate committees of the Board informed on a timely basis as to all matters of
significance;
b.
developing and presenting the strategic plan, proposing amendments to the plan as
conditions and opportunities dictate and for implementing the plan as approved by the Board;
c.
developing and presenting the annual operating plans and budgets and for
implementing those plans and budgets as approved by the Board;
d.
creating an organizational structure appropriate to the achievement of the strategic
and operating plans and recruiting, selecting and developing the necessary managerial talent;
e.
creating a working environment conducive to integrity, business ethics and
compliance with applicable legal and Corporate policy requirements;
f.
developing, implementing and monitoring an effective system of internal controls
and procedures to provide reasonable assurance that: the Corporation’s transactions are properly
authorized; the Corporation’s assets are safeguarded against unauthorized or improper use; and
the Corporation’s transactions are properly recorded and reported. Such internal controls and
procedures also shall be designed to permit preparation of financial statements for the Corporation
and its consolidated subsidiaries in conformity with generally accepted accounting principles and
any other legally required criteria applicable to such statements; and
g.
establishing, maintaining and evaluating the Corporation’s disclosure controls and
procedures. The term “disclosure controls and procedures” means controls and other procedures
of the Corporation that are designed to ensure that information required to be disclosed by the
Corporation in the reports filed by it under the Securities Exchange Act of 1934 (the “Act”) is
recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the Corporation in the
reports it files under the Act is accumulated and communicated to the Corporation’s management,
including its principal executive and financial officers, to allow timely decisions regarding required
disclosure. To assist in carrying out this responsibility, management has established a Disclosure
Control Committee, whose membership is responsible to the Audit Committee, to the chief
executive officer and to the chief financial officer, and includes the following officers or employees
of the Corporation: the president, the chief legal officer, the head of finance, the chief information
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officer, the controller, the head of internal audit & financial controls, the investor relations officer
and the treasurer.
10. Meeting Procedures.
a.
The Board shall determine whether the offices of chairman of the board and chief
executive officer shall be held by one person or by separate persons, and whether the person
holding the office of chairman of the board shall be “independent” or not. An “independent”
director meets the requirements for “independence” as referenced in item 1.a above. “Non-
management” directors include those who are independent and those who, while not independent,
are not currently employees of the Corporation or one of its subsidiaries.
b.
The chairman of the board will establish the agenda for each Board meeting but the
chairman of the board will include in such agenda any item submitted by the presiding
independent director (see item 11.c below). Each Board member is free to suggest the inclusion of
items on the agenda for any meeting and the chairman of the board will consider them for
inclusion.
c.
Management shall be responsible to distribute information and data necessary to
the Board’s understanding of all matters to be considered and acted upon by the Board; such
materials shall be distributed in writing to the Board sufficiently in advance so as to provide
reasonably sufficient time for review and evaluation. To that end, management has provided each
director with access to a secure website where confidential and sensitive materials may be
viewed. In circumstances where practical considerations do not permit advance circulation of
written materials, reasonable steps shall be taken to allow more time for discussion and
consideration, such as extending the duration of a meeting or circulating unanimous written
consent forms, which may be considered and returned at a later time.
d.
e.
The chairman of the board shall preside over meetings of the Board.
If the chairman of the board is not independent, the independent directors may
select from among themselves a “presiding independent director”; failing such selection, the
chairman of the Nominating/Corporate Governance Committee shall be the presiding independent
director. The presiding independent director shall be identified as such in the Corporation’s annual
proxy statement to facilitate communications by stockholders and employees with the non-
management directors.
f.
The non-management directors shall meet separately from the other directors in
regularly scheduled executive session, without the presence of management directors and
executive officers of the Corporation. The presiding independent director shall preside over such
meetings.
g.
At least once per year the independent directors shall meet separately from the
other directors in a scheduled executive session, without the presence of management directors,
non-management directors who are not independent and executive officers of the Corporation.
The presiding independent director shall preside over such meetings.
11. Committees.
a.
The Board shall have an Audit Committee, a Compensation Committee and a
Nominating/Corporate Governance Committee which shall have the respective responsibilities
described in the charters of each committee. The membership of each such committee shall
consist only of independent directors.
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b.
The Board may, from time to time, appoint one or more additional committees, such
as a Dividend Committee and a Corporate Social Responsibility Committee.
c.
The chairman of each Board committee, in consultation with the appropriate
members of management and staff, will develop the committee’s agenda. Management will
assure that, as a general rule, information and data necessary to the committee’s understanding of
the matters within the committee’s authority and the matters to be considered and acted upon by
a committee are distributed to each member of such committee sufficiently in advance of each
such meeting or action taken by written consent to provide a reasonable time for review and
evaluation.
d.
At each regularly scheduled Board meeting, the chairman of each committee or his
or her delegate shall report the matters considered and acted upon by such committee at each
meeting or by written consent since the preceding regularly scheduled Board meeting.
e.
The secretary of the Corporation, or any assistant secretary of the Corporation, shall
be available to act as secretary of any committee and shall, if invited, attend meetings of the
committee and prepare minutes of the meeting for approval and adoption by the committee.
12. Reliance.
Any director of the Corporation shall, in the performance of such person’s duties as a
member of the Board or any committee of the Board, be fully protected in relying in good faith
upon the records of the Corporation or upon such information, opinions, reports or statements
presented by any of the Corporation’s officers or employees, or committees of the Board, or by
any other person as to matters the director reasonably believes are within such other person’s
professional or expert competence.
13. Reference to Corporation’s Subsidiaries.
Where the context so requires, reference herein to the Corporation includes reference to
the Corporation and/or any direct or indirect subsidiary of the Corporation whose financial results
are consolidated with those of the Corporation for financial reporting purposes and reference to a
subsidiary of the Corporation shall be reference to such a subsidiary.
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EXECUTIVE OFFICERS
OF TIFFANY & CO.
MICHAEL J. KOWALSKI
Chairman of the Board and
Chief Executive Officer
JAMES N. FERNANDEZ
Executive Vice President and
Chief Operating Officer
BETH O. CANAVAN
Executive Vice President
FREDERIC CUMENAL
Executive Vice President
JON M. KING
Executive Vice President
VICTORIA BERGER-GROSS
Senior Vice President –
Global Human Resources
PAMELA H. CLOUD
Senior Vice President –
Merchandising
PATRICK B. DORSEY
Senior Vice President –
General Counsel and Secretary
PATRICK F. McGUINESS
Senior Vice President and
Chief Financial Officer
CAROLINE D. NAGGIAR
Senior Vice President and
Chief Marketing Officer
JOHN S. PETTERSON
Senior Vice President –
Operations
CORPORATE INFORMATION
BOARD OF DIRECTORS
MICHAEL J. KOWALSKI
Chairman of the Board and
Chief Executive Officer
Tiffany & Co.
(1995) 5 and 6
ROSE MARIE BRAVO, CBE
Chief Executive Officer (Retired),
Burberry Limited
(1997) 2 and 3
DR. GARY E. COSTLEY
Chairman and Chief Executive Officer (Retired),
International Multifoods Corporation
(2007) 1, 2*, 3 and 5
LAWRENCE K. FISH
Chairman and Chief Executive Officer (Retired),
Citizens Financial Group, Inc.
(2008) 1, 4 and 5*
ABBY F. KOHNSTAMM
President,
Abby F. Kohnstamm & Associates, Inc.
(2001) 1, 2, 3 and 5
CHARLES K. MARQUIS
Senior Advisor,
Investcorp International, Inc.
(1984) 1, 2 and 3*
PETER W. MAY
President and Founding Partner,
Trian Fund Management, L.P.
(2008) 2 and 4
J. THOMAS PRESBY
Deputy Chairman and
Chief Operating Officer (Retired),
Deloitte Touche Tohmatsu
(2003) 1* and 3
WILLIAM A. SHUTZER
Senior Managing Director,
Evercore Partners
(1984) 4*
(Indicates year joined Board)
Member of:
(1) Audit Committee
(2) Compensation Committee and Stock Option Subcommittee
(3) Nominating/Corporate Governance Committee
(4) Finance Committee
(5) Corporate Social Responsibility Committee
(6) Dividend Committee
* Indicates Committee Chair
TIFFANY & CO.
C-1
STOCKHOLDER INFORMATION
Company Headquarters
Tiffany & Co.
727 Fifth Avenue, New York, New York 10022
212-755-8000
Stock Exchange Listing
New York Stock Exchange, symbol TIF
Annual Meeting of Stockholders
Thursday, May 17, 2012, 9:00 a.m.
W New York – Union Square hotel, 201 Park Avenue South (at 17th Street), New York, New York
Website and Information Line
Tiffany’s financial results, other information and reports filed with the Securities and Exchange
Commission are available on our website at http://investor.tiffany.com. Certain information is also
available on our Shareholder Information Line at 800-TIF-0110.
Investor and Financial Media Contact
Investors, securities analysts and the financial media should contact Mark L. Aaron, Vice President
– Investor Relations, by calling 212-230-5301 or e-mail at mark.aaron@tiffany.com.
Transfer Agent and Registrar
Please direct your communications regarding individual stock records, address changes or
dividend payments to: Computershare (which acquired BNY Mellon Shareowner Services),
480 Washington Boulevard, Jersey City, New Jersey 07310-1900; 888-778-1307 or 201-680-6578
or www.bnymellon.com/shareowner/equityaccess.
Direct Stock Purchases and Dividend Reinvestment
The BuyDIRECT(sm) Program allows investors to purchase Tiffany & Co. Common Stock directly,
rather than through a stockbroker, and become a registered stockholder of the Company. The
program’s features also include dividend reinvestment. The Bank of New York Mellon is the
sponsor of the program, which provides Tiffany & Co. shares through market purchases. For
additional information, please contact Computershare (which acquired BNY Mellon Shareowner
Services) at 888-778-1307 or 201-680-6578 or www.bnymellon.com/shareowner/equityaccess.
Store Locations
For a worldwide listing of TIFFANY & CO. stores, please visit www.tiffany.com.
TIFFANY & CO.
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Catalogs
SELECTIONS® catalogs are automatically mailed to registered stockholders. To request a catalog,
please call 800-526-0649.
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, 300 Madison Avenue, New York, New York 10017
Dividend Payments
Quarterly dividends on Tiffany & Co. Common Stock, subject to declaration by the Company’s
Board of Directors, are typically paid in January, April, July and October.
Stock Price and Dividend Information
Stock price at end of fiscal year
$ 63.80
$ 58.13
$ 40.61
$ 20.75
$ 39.79
2011
2010
2009
2008
2007
Quarter
First
Second
Third
Fourth
High
$69.72
84.49
80.99
79.00
2011
Close
Price Ranges of Tiffany & Co. Common Stock
2010
Close
$69.44 $ 52.19 $ 38.89 $ 48.48
42.07
53.00
58.13
35.81
39.43
52.96
49.74
53.00
65.76
79.59
79.73
63.80
Low
$54.58
66.48
56.21
58.61
High
Low
Cash Dividends
Per Share
2010
2011
$ 0.25
0.29
0.29
0.29
$ 0.20
0.25
0.25
0.25
On March 20, 2012, the closing price of Tiffany & Co. Common Stock was $73.27 and there were
14,449 holders of record of the Company’s Common Stock.
Certifications
Michael J. Kowalski and Patrick F. McGuiness have provided certifications to the Securities and
Exchange Commission as required by Section 302 of the Sarbanes-Oxley Act of 2002. These
certifications are included as Exhibits 31.1, 31.2, 32.1 and 32.2 of the Company’s Form 10-K for
the year ended January 31, 2012.
As required by the New York Stock Exchange (“NYSE”), on June 10, 2011, Michael J. Kowalski
submitted his annual certification to the NYSE that stated he was not aware of any violation by the
Company of the NYSE corporate governance listing standards.
Trademarks
THE NAMES TIFFANY, TIFFANY & CO., T&CO., THE COLOR TIFFANY BLUE, THE TIFFANY BLUE
BOX, LUCIDA, THE TIFFANY MARK, ATLAS, SELECTIONS, RUBEDO AND OTHERS ARE
TRADEMARKS OF TIFFANY (NJ) LLC, TIFFANY AND COMPANY AND THEIR AFFILIATES.
© 2012 TIFFANY & CO.
TIFFANY & CO.
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Tiffany & Co. tif121589aIFC_IBC Proof 7
INSIDE FRONT COVER
2011 YEAR-END REPORT
INSIDE BACK COVER
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FROM TOP LEFT: Tiffany Celebration® rings. Paisley diamond pendant detail. Tiffany Sparklers rings. Tiffany Keys. Tiffany Metro pendant. The Tiffany® Setting engagement ring.
Tiffany Yellow Diamonds bracelet detail. Tiffany 1837™ cuff.
FROM TOP LEFT: Jean Schlumberger paillonné enamel bracelets. Tiffany Locks bracelet. Return to Tiffany™ pendants. Blue tourmaline and diamond ring. Tiffany Leather Collection Bracelet bags.
Elsa Peretti® Bottle pendant. Tiffany Bezet rings. Peacock feather pendant with tanzanite, blue tourmaline and diamonds. Luce pendant from the Paloma Picasso® Venezia collection.
8.125"
0.25"
0.375"
0.25"
8.125"
Cyan Mag Yelo Black
Tiffany & Co. tif121589aBc_Fc Proof 3
BACK
2011 YEAR-END REPORT
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Tiffany Blue Tiffany Blue kicker Black