ANNUAL REPORT ON FORM 10 -K FOR THE YEAR ENDED JANUARY 31, 2013
NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT
TIFFANY & CO. SCHLUMBERGER ® STARS AND MOONS NECKLACE; TIFFANY & CO. SCHLUMBERGER ® BRACELETS OF PAILLONNÉ ENAMEL AND GOLD; TIFFANY
ENCHANT SCROLL PENDANT; PALOMA PICASSO ® VILLA PALOMA PALM PENDANT; THE TIFFANY ® SETTING DIAMOND ENGAGEMENT RING; TIFFANY 1837™ CUFF
IN RUBEDO ® METAL; TIFFANY SOLESTE ® OVAL AQUAMARINE RING; TIFFANY & CO. SCHLUMBERGER ® STARS AND MOONS NECKLACE (DETAIL).
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 22, 2013
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:
You are cordially invited to attend the Annual Meeting of Stockholders of Tiffany & Co.
on Thursday, May 16, 2013 at 9:30 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 be admitted to the meeting, you will need to provide 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 March 19, 2013 (the record date for the meeting). Stockholders owning
their shares in “registered” form (i.e. on record 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 by accessing the Internet site to
vote electronically, by completing and returning the enclosed proxy card or by calling the
number listed on the card.
.
.
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Tiffany’s financial results in fiscal 2012 (the year ended January 31, 2013) did not meet
our expectations. We faced difficult year-over-year comparisons, challenging economic
conditions and product cost pressures.
Worldwide net sales rose 4% to $3.8 billion and gross profit declined as a percentage of
net sales. Net earnings declined 11% (excluding nonrecurring items in the prior year) to
$416 million, or $3.25 per diluted share, following an earnings increase (excluding
nonrecurring items) of 24% in fiscal 2011 when worldwide net sales had increased 18%.
Tiffany’s balance sheet remains strong. We finished the year with $505 million of cash
and cash equivalents; total short-term and long-term debt represented 37% of
stockholders’ equity. During the year we took advantage of the low interest-rate
environment by securing $250 million of long-term debt at 4.40% while paying off
higher-rate maturing debt. And we increased the cash dividend on common stock by 10%,
representing the 11th increase over a 10-year period.
In 2012, we added a net of 28 Company-operated stores, including 13 in the Americas, 8
in Asia-Pacific and 2 in Europe. We also assumed control of 5 locations in the United
Arab Emirates that were previously operated through a wholesale relationship. We
operated 275 stores at year-end.
We also continued to invest in the infrastructure necessary to support our global
expansion. Our proprietary distribution, manufacturing and diamond sourcing networks
remain critical to our global supply chain and to our product quality, and represent a
sustainable competitive advantage that we will build upon going forward.
Throughout the year, we continued to evolve our product selection and our marketing
communications to enhance our competitive position among more affluent consumers.
And 2012 was the year of our 175th Anniversary, so we were proud to tell the inspired
stories behind our legendary history and design legacy across all marketing channels.
Our product development efforts generally focused upon diamond and other gemstone
jewelry and higher-price-point opportunities in our silver and gold jewelry collections.
We introduced the new TIFFANY ENCHANT diamond jewelry collection and expanded
our offerings of yellow diamonds. In Tiffany’s tradition of materials innovation, we
introduced the beautiful new RUBEDO® metal. And we were delighted to secure a long-
term commitment from Elsa Peretti allowing us to continue to present her extraordinary
body of designs.
Our plans for the coming year include new store openings, exciting product introductions
and compelling marketing and promotional activities. We remain confident in the long-
term growth potential of Tiffany, and look forward to updating you on our progress.
Thank you for your long-term interest and confidence.
Sincerely,
FFINANCIAL HIGHLIGHTS
(inthousands,exceptpercentages,pershareamountsandstores)
2012
2011
Net sales
Increase from prior year
Worldwide comparable store sales increase on a
constant-exchange-rate basis *
Net earnings
(Decrease) increase from prior year
As a percentage of net sales
Per diluted share
$ 3,794,249
$ 3,642,937
4%
1%
18%
13%
$
416,157
$
439,190
(5%)
11%
$
3.25
$
19%
12%
3.40
Weighted-average number of diluted common shares
127,934
129,083
Return on average assets
Return on average stockholders’ equity
Cash flows from operating activities
Cash dividends paid per share
Company-operated TIFFANY & CO. stores
9%
17%
11%
19%
$ 328,290
$ 210,606
$
1.25
$
275
1.12
247
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 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.
TTiffany & Co. Year-End Report 2012
Table of Contents
Annual Report on Form 10-K for the fiscal year ended January 31, 2013
Part I
Page
Item 1.
Business ..............................................................................................................
K - 3
Item 1A.
Risk Factors.........................................................................................................
K - 14
Item 1B.
Unresolved Staff Comments ................................................................................
K - 19
Item 2.
Item 3.
Item 4.
Properties ............................................................................................................
K - 19
Legal Proceedings ...............................................................................................
K - 20
Mine Safety Disclosures.......................................................................................
K - 22
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and
Item 6.
Item 7.
Issuer Purchases of Equity Securities...............................................................
K - 22
Selected Financial Data .......................................................................................
K - 24
Management’s Discussion and Analysis of Financial Condition and Results
of Operations ...................................................................................................
K - 26
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.................................
K - 43
Item 8.
Item 9.
Financial Statements and Supplementary Data ....................................................
K - 45
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.........................................................................................................
K - 89
Item 9A.
Controls and Procedures .....................................................................................
K - 89
Item 9B.
Other Information.................................................................................................
K - 90
Part III
Item 10.
Item 11.
Directors, Executive Officers and Corporate Governance.....................................
K - 91
Executive Compensation .....................................................................................
K - 91
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.........................................................................................
K - 91
Item 13.
Item 14.
Certain Relationships and Related Transactions, and Director Independence ......
K - 91
Principal Accounting Fees and Services...............................................................
K - 91
Item 15.
Exhibits, Financial Statement Schedules ..............................................................
K - 92
Part IV
TTiffany & Co. Year-End Report 2012
Table of Contents
Proxy Statement for the 2013 Annual Meeting of Stockholders
Attendance and Voting Matters ..................................................................................................
Introduction ........................................................................................................................
Matters to be Voted on at the 2013 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...................................................
Page
PS - 1
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PS - 2
PS - 2
PS - 3
PS - 3
PS - 3
PS - 4
PS - 4
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How Proxies Are Solicited...................................................................................................
PS – 5
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.................................................................
Political Spending ...............................................................................................................
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 2012 ..................................
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 ............................................................
PS - 6
PS - 6
PS - 7
PS - 9
PS - 9
PS - 10
PS - 10
PS - 10
PS - 10
PS - 11
PS - 11
PS - 11
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PS - 12
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PS - 13
PS - 16
PS - 16
PS - 17
PS - 17
PS - 18
PS - 19
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PS - 24
Compensation Discussion and Analysis .....................................................................................
PS - 25
TTiffany & Co. Year-End Report 2012
Table of Contents
Page
Report of the Compensation Committee ....................................................................................
PS - 46
Summary Compensation Table ..................................................................................................
PS - 47
Grants of Plan-Based Awards ....................................................................................................
PS - 51
Discussion of Summary Compensation Table and Grants of Plan-Based Awards.......................
PS - 53
Non-Equity Incentive Plan Awards ......................................................................................
PS - 53
Equity Incentive Plan Awards - Performance-Based Restricted Stock Units........................
PS - 55
Options...............................................................................................................................
PS - 57
Life Insurance Benefits........................................................................................................
PS - 57
Outstanding Equity Awards at Fiscal Year-End...........................................................................
PS - 59
Option Exercises and Stock Vested............................................................................................
PS - 62
Pension Benefits Table ...............................................................................................................
PS - 62
Assumptions Used in Calculating the Present Value of the Accumulated Benefits...............
PS - 63
Features of the Retirement Plans ........................................................................................
PS - 64
Nonqualified Deferred Compensation Table ...............................................................................
PS - 67
Features of the Executive Deferral Plan...............................................................................
PS - 67
Excess DCRB Feature of the Executive Deferral Plan..........................................................
PS - 68
Potential Payments on Termination or Change in Control ...........................................................
PS - 69
Explanation of Potential Payments on Termination or Change in Control ............................
PS - 70
Director Compensation Table .....................................................................................................
PS - 73
Discussion of Director Compensation Table........................................................................
PS - 74
Equity Compensation Plan Information.......................................................................................
PS - 76
Performance of Company Stock.................................................................................................
PS - 77
Discussion of Proposals Presented by the Board .......................................................................
PS - 78
Item 1. Election of Directors ................................................................................................
PS - 78
Item 2. Appointment of the Independent Registered Public Accounting Firm ......................
PS - 81
Item 3. Approval of the Compensation paid to the Named Executive Officers .....................
PS - 82
Other Matters .............................................................................................................................
PS - 82
Stockholder Proposals for Inclusion in the Proxy Statement for the 2014 Annual Meeting...
PS - 82
Other Proposals ..................................................................................................................
PS - 82
Householding......................................................................................................................
PS - 83
Reminder to Vote ................................................................................................................
PS - 83
Appendix I. Corporate Governance Principles ............................................................................
PS - 84
Board of Directors and Executive Officers of Tiffany & Co. .........................................................
Stockholder Information .............................................................................................................
C - 1
C - 2
Corporate Information
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FForm 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, 2013
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 (§229.405 of this chapter)
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
is not
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)
Accelerated filer (cid:134)
Smaller reporting company (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 31, 2012, the aggregate market value of the registrant’s voting and non-voting stock held by non-affiliates of the registrant
was approximately $6,820,050,025 using the closing sales price on this day of $54.93. See Item 5. Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
As of March 19, 2013, the registrant had outstanding 127,117,333 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
April 5, 2013 (Part III).
DOCUMENTS INCORPORATED BY REFERENCE.
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 goals, plans and projections.
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.) is a holding company that operates through its
subsidiary companies (the “Company”). The Registrant’s principal subsidiary is 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, through its subsidiaries,
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, 2013, 2012 and 2011
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.
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) 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;
(cid:120)
To provide excellent service, stores must be well staffed with knowledgeable professionals;
(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;
(cid:120)
(cid:120)
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 & CO.
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Tiffany’s packaging supports consumer expectations with respect to the Brand but is
expensive; and
(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.
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 2012, sales in the Americas were 48% of worldwide net sales, while sales in the U.S.
represented 89% of net sales in the Americas.
RetailSales.Retail sales in the Americas are transacted in 115 Company-operated TIFFANY & CO.
stores in (number of stores at January 31, 2013 included in parentheses): the U.S. (91), Canada
(11), Mexico (9) and Brazil (4). Included within these totals are 11 Company-operated stores
located within various department stores in Canada and Mexico.
InternetandCatalogSales. 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. To a lesser
extent, sales are also generated through catalogs that Tiffany distributes to its proprietary list of
customers in the U.S. and Canada and to mailing lists rented from third parties.
Business-to-BusinessSales.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 and business periodicals, and through the
publication of special catalogs. Business account holders may also make purchases through the
Company’s website at www.tiffany.com/business.
WholesaleDistribution. Selected TIFFANY & CO. merchandise is sold to independent distributors
for resale in markets in the Central/South American and Caribbean regions. Such sales represent
less than 1% of worldwide net sales.
In 2012, sales in Asia-Pacific represented 21% of worldwide net sales.
Asia-Pacific
RetailSales.Retail sales in Asia-Pacific are transacted in 66 Company-operated TIFFANY & CO.
TIFFANY & CO.
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stores in (number of stores at January 31, 2013 included in parentheses): China (22), Korea (14),
Hong Kong (8), Taiwan (7), Australia (6), Singapore (5), Macau (2) and Malaysia (2). Included within
these totals are 23 Company-operated stores located within various department stores.
InternetSales.The Company offers a selection of TIFFANY & CO. merchandise for purchase in
Australia through its website at www.tiffany.com.au.
WholesaleDistribution. Selected TIFFANY & CO. merchandise is sold to independent distributors
for resale in Asia-Pacific markets. Such sales represent less than 1% of worldwide net sales.
In 2012, sales in Japan represented 17% of worldwide net sales.
Japan
RetailSales.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 82% 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,
2013 included in parentheses): Isetan Mitsukoshi (14), J. Front Retailing Co. (Daimaru and
Matsuzakaya department stores) (10), Takashimaya (9) and Millennium Retailing Co. (Sogo and
Seibu department stores) (4). Tiffany-Japan also operates 14 stores in department stores
controlled by other Japanese companies.
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InternetSales.The Company offers a selection of TIFFANY & CO. merchandise for purchase in
Japan through its website at www.tiffany.co.jp.
Business-to-BusinessSales.Products drawn from the retail product line and items specially
developed are sold to business customers.
WholesaleDistribution. Selected TIFFANY & CO. merchandise is sold to independent distributors
for resale in Japan. Such sales represent less than 1% of worldwide net sales.
Europe
In 2012, sales in Europe represented 11% of worldwide net sales, while sales in the United
Kingdom represented slightly less than half of European net sales.
RetailSales.Retail sales in Europe are transacted in 34 Company-operated TIFFANY & CO. stores
in (number of stores at January 31, 2013 included in parentheses): the United Kingdom (10),
Germany (6), Italy (5), France (4), Spain (2), Switzerland (2), Austria (1), Belgium (1), the Czech
Republic (1), Ireland (1), and the Netherlands (1). Included within these totals are seven Company-
operated stores located within various department stores.
InternetSales.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.
WholesaleDistribution. Selected TIFFANY & CO. merchandise is sold to independent distributors
for resale in Europe. Such sales represent less than 1% of worldwide net sales.
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Other consists of all non-reportable segments.
Other
RetailSales.Since July 2012, retail sales have been transacted in five TIFFANY & CO. stores in the
United Arab Emirates (“U.A.E.”). See “Item 8. Financial Statements and Supplementary Data –
Note C. Acquisition” for additional information.
WholesaleDistribution.Selected TIFFANY & CO. merchandise is sold to independent distributors
for resale in certain emerging markets primarily in the Middle East and Russia (“Emerging
Markets”). Such sales represent less than 1% of worldwide net sales.
WholesaleSalesofDiamonds.The Company regularly purchases parcels of rough diamonds for
its polishing and further processing. Some rough diamonds so purchased, and a small percentage
of diamonds so polished, are found not to be suitable for Tiffany jewelry; those diamonds are sold
to third parties. The Company’s objective from such sales is to recoup its original costs, thereby
earning minimal, if any, gross margin on those transactions.
LicensingAgreements.The Company receives earnings 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 licensing
agreements represented less than 1% of worldwide net sales in 2012, 2011 and 2010. See “Item
3. Legal Proceedings” for additional information concerning the Swatch Group.
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 over-saturation of any
market could diminish the distinctive appeal of the Brand, but believes that there are a significant
number of opportunities remaining in new and existing markets that will meet the requirements for
a TIFFANY & CO. location in the future.
The following chart details the number of TIFFANY & CO. retail locations operated by the
Registrant’s subsidiary companies since 2002:
Americas
Canada &
Latin America
5
7
7
7
9
10
10
12
12
15
24
U.S.
47
51
55
59
64
70
76
79
84
87
91
Year:
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Asia-
Pacific
20
22
24
25
28
34
39
45
52
58
66
Japan
48
50
53
50
52
53
57
57
56
55
55
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Europe
11
11
12
13
14
17
24
27
29
32
34
Other
—
—
—
—
—
—
—
—
—
—
5
Total
131
141
151
154
167
184
206
220
233
247
275
As part of its long-term strategy to open additional stores, management plans to add 14 (net)
Company-operated stores in 2013 (opening 5 in the Americas, 7 in Asia-Pacific and 3 in Europe
while closing one in Japan).
As noted above, the Company currently operates e-commerce enabled websites in 13 countries.
Sales transacted on those websites accounted for 6% of worldwide net sales in 2012, 2011 and
2010. The Company periodically 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 90%, 91% and 91% of
worldwide net sales in 2012, 2011 and 2010. 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, leather goods, sterling silver goods (other than jewelry), china,
crystal, stationery, fragrances and accessories, which represented, in total, 8% of worldwide net
sales in 2012, 2011 and 2010. The remaining 1% - 2% of worldwide 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
2012
Statement, fine &
solitaire jewelry a
Engagement jewelry &
wedding bands b
Silver, gold & RUBEDO®
metal jewelry c
Designer jewelry d
2011
Statement, fine &
solitaire jewelry a
Engagement jewelry &
wedding bands b
Silver & gold jewelry c
Designer jewelry d
% of total
Americas
Sales
% of total
Asia-Pacific
Sales
% of total
Japan
Sales
% of total
Europe
Sales
% of total
Reportable
Segment
Sales
19%
23%
33%
14%
18%
23%
33%
14%
23%
36%
28%
11%
24%
37%
28%
9%
14%
42%
15%
21%
13%
41%
16%
22%
15%
26%
44%
11%
15%
24%
46%
11%
19%
29%
30%
14%
18%
29%
30%
14%
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2010
Statement, fine &
solitaire jewelry a
Engagement jewelry &
wedding bands b
Silver & gold jewelry c
Designer jewelry d
% of total
Americas
Sales
% of total
Asia-Pacific
Sales
% of total
Japan
Sales
% of total
Europe
Sales
17%
21%
36%
15%
24%
35%
28%
10%
13%
42%
17%
20%
15%
25%
45%
12%
% of total
Reportable
Segment
Sales
17%
28%
32%
14%
a) This category includes statement, fine and solitaire jewelry (other than engagement jewelry).
Most items in this category contain diamonds, other gemstones or both. Most jewelry in this
category is constructed of platinum, although gold was used as the primary metal in
approximately 9% of sales. The average price of merchandise sold in 2012, 2011 and 2010 in
this category was approximately $5,500, $5,400 and $4,400 for total reportable segments.
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b) This category includes diamond engagement rings and wedding bands marketed to brides and
grooms. Most sales in this category are of items containing diamonds. Most jewelry in this
category is constructed of platinum, although gold was used as the primary metal in
approximately 6% of sales. The average price of merchandise sold in 2012, 2011 and 2010 in
this category was approximately $3,800, $3,800 and $3,400 for total reportable segments.
c) This category generally consists of non-gemstone, sterling silver (approximately 70% of the
category in 2012), gold or RUBEDO® metal (beginning in 2012) jewelry, although small
gemstones are used as accents in some pieces. RUBEDO® metal is an alloy composed of
copper, gold and silver which was developed by the Company. This category does not include
jewelry that bears a designer’s name. The average price of merchandise sold in 2012, 2011 and
2010 in this category was approximately $260, $250 and $220 for total reportable segments.
d) This category generally consists of platinum, gold and sterling silver jewelry (approximately 40%
of the category in 2012), some of which contains diamonds, other gemstones or a combination
of both. 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 and Frank Gehry (refer to
“MATERIAL DESIGNER LICENSE” below). The average price of merchandise sold in 2012, 2011
and 2010 in this category was approximately $490, $470 and $410 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, MARKETING, PUBLIC AND MEDIA RELATIONS
The Company regularly advertises, primarily in newspapers and magazines, and increasingly
through digital media. Public and media relations activities are also significant to the Company's
business. The Company engages in a program of media activities and marketing events to
maintain consumer awareness of the Brand and TIFFANY & CO. products, as well as publishes its
well-known BlueBookto showcase its high-end jewelry. In 2012, 2011 and 2010, the Company
spent $242,524,000, $234,050,000 and $197,597,000, representing 6.4% of worldwide net sales in
all three years, on advertising, marketing, public and media relations, which include costs for
media, production, catalogs, Internet, visual merchandising (in-store and window displays), events
and other related items.
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In addition, management believes that the Brand is enhanced by a program of charity
sponsorships, grants and merchandise donations. The Company also 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.
TRADEMARKS
The designations TIFFANY® and TIFFANY & CO. ® are the principal trademarks of Tiffany, and also
serve 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 the
Company’s worldwide trademark rights in TIFFANY and TIFFANY & CO. are strong. However, use
of the designation TIFFANY by third parties 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.
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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
eradicate 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. Tiffany has responded to
Internet counterfeiting by engaging investigators and counsel to monitor the Internet and taking
various actions to stop infringing activity, including sending cease and desist letters, initiating civil
proceedings and participating in joint actions and anti-counterfeiting programs with other like-
minded third party rights holders.
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 of use in every country of the world; for example, 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 legal action.
MATERIAL DESIGNER LICENSE
Since 1974, Tiffany has been the sole licensee for the intellectual property rights necessary to
make and sell jewelry and other products designed by Elsa Peretti and bearing her trademarks.
The designs of Ms. Peretti accounted for 10% of the Company's worldwide net sales in 2012,
2011 and 2010.
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In December 2012, Tiffany entered into an Amended and Restated Agreement (the “Agreement”)
with Ms. Peretti. Pursuant to the Agreement, which largely reflects the long-standing rights and
marketing and royalty obligations of the parties, Ms. Peretti granted Tiffany an exclusive license, in
all of the countries in which Peretti-designed jewelry and products are currently sold, to make,
have made, advertise and sell these items. Ms. Peretti continued to retain ownership of the
copyrights for her designs and her trademarks and remains entitled to exercise approval and
consultation rights with respect to important aspects of the promotion, display, manufacture and
merchandising of the products made in accordance with her designs. Under and in accordance
with the terms set forth in the Agreement, Tiffany is required to display the licensed products in
stores, to devote a portion of its advertising budget to the promotion of the licensed products, to
pay royalties to Ms. Peretti for the licensed products sold, to increase the inventory of non-jewelry
licensed products (such as tabletop products) to approximately $8,000,000 and to take certain
actions to protect the use and registration of Ms. Peretti’s copyrights and trademarks.
The Agreement has a term of 20 years and is binding upon Ms. Peretti, her heirs, estate, trustees
and permitted assignees. During the term of the Agreement, Ms. Peretti may not sell, lease or
otherwise dispose of her copyrights and trademarks unless the acquiring party expressly agrees
with Tiffany to be bound by the provisions of the Agreement. The Agreement is terminable by
Ms. Peretti only in the event of a material breach by Tiffany (subject to a cure period) or upon a
change of control of Tiffany or the Company.
It is terminable by Tiffany only in the event of a
material breach by Ms. Peretti or following an attempt by Ms. Peretti to revoke the exclusive
license (subject, in each case, to a cure period).
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MERCHANDISE PURCHASING, MANUFACTURING AND RAW MATERIALS
Tiffany produces jewelry 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 use third party manufacturers 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.
RoughandPolishedDiamonds. Of the world’s largest diamond producing countries, the vast
majority of diamonds purchased by Tiffany originate from Australia, Botswana, Canada, Namibia,
Russia, Sierra Leone and South Africa. 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, Botswana, Mauritius, Namibia, South Africa and Vietnam.
Operations in Botswana, Namibia and South Africa are conducted through companies in which
third parties own minority interests. In Namibia and South Africa, a single third party owns a
minority interest while in Botswana, two third parties own minority interests. Tiffany maintains a
relationship and has an arrangement with these third parties in each of those countries, although
the Company may choose to supplement its current operations with alternative mine operators
from time to time. The Company’s operations in Botswana, Namibia and South Africa allow it to
access rough diamond allocations reserved for local manufacturers.
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 and polished
to meet Tiffany’s quality standards and that must be sold to third parties; such sales are reported
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in the Other non-reportable segment. To make such sales, the Company charges a market price
and is, therefore, unable to earn a significant profit, if any, 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 rough diamonds by agreeing to purchase
a defined portion of a mine’s output at the market price prevailing at the time of production.
Management anticipates that it will purchase approximately $200,000,000 of rough diamonds in
2013 under such agreements. The Company will also purchase rough diamonds from other
suppliers, although it has no contractual obligations to do so. In certain instances, the Company
has provided loans to, or made equity investments in, mining projects in order to secure diamond
supplies. The Company may continue to do so.
In recent years, approximately 50% - 60% (by dollar value) of the polished diamonds used in
jewelry have been produced from rough diamonds that the Company has purchased. The balance
of Tiffany’s needs for polished diamonds have been purchased from polishers or polished diamond
dealers. It is the Company’s intention to continue to supply the majority of Tiffany’s needs for
diamonds by purchasing and polishing rough diamonds.
The Company purchases polished diamonds principally from five key vendors. The Company
generally enters into purchase orders for fixed quantities with its polished diamond vendors. These
relationships may be terminated at any time by either party; but such a termination would not
discharge either party’s obligations under unfulfilled purchase orders accepted prior to the
termination. However, were trade relations between the Company 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.
Products containing one or more diamonds of varying sizes, including diamonds used as accents,
side-stones and center-stones, accounted for approximately 55%, 55% and 52% of Tiffany's
worldwide net sales in 2012, 2011 and 2010. Products containing one or more diamonds of one
carat or larger accounted for 13%, 14% and 12% of worldwide net sales in each of those years.
ConflictDiamonds.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. Management believes that it is not possible in most
purchasing scenarios 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 when exported from the producing
country 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.
TheDiamondTradingCompany (“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
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De Beers Group. Over the past decade, the DTC’s historical ability to control worldwide production
has been significantly diminished due to its lower share of worldwide production, changing policies
in diamond-producing countries and revised contractual arrangements with third-party mine
operators. As such, although the market share of the DTC has diminished, the DTC continues to
supply a meaningful portion of the world market for rough, gem-quality diamonds.
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.
Some, but not all, of Tiffany’s suppliers are DTC sightholders and it is estimated that a significant
portion of the diamonds that Tiffany has purchased have had their source with the DTC. The
Company is a DTC sightholder for rough diamonds through its operations in Belgium and joint
ventures (see RoughandPolishedDiamondsabove).
WorldwideAvailabilityandPriceofDiamonds. The availability and price of diamonds are
dependent on a number of factors, including global consumer demand, the political situation in
diamond-producing countries, the opening of new mines, the continuance of the prevailing supply
and marketing arrangements for rough diamonds and levels of industry liquidity. In recent years,
there has been substantial volatility in the prices of both rough and polished diamonds. Prices for
rough diamonds do not necessarily reflect current demand for polished diamonds.
Sustained interruption in the supply of 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 spending of the DTC
and its direct purchasers could affect consumer demand for diamonds.
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The Company purchases conflict-free rough and polished fine white diamonds, in the color ranges
D through I. Management does not foresee a shortage of diamonds in this color range in the short
term but believes that rising demand will eventually create such a shortage, and lead to higher
prices, unless new mines are developed.
ManufacturedDiamonds.Manufactured diamonds are produced in small but growing 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 intend
to sell manufactured diamonds.
PurchasesofOtherPolishedGemstonesandPreciousMetals. Other polished 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.
Tiffany generally enters into purchase orders for fixed quantities with other polished gemstone and
precious metals vendors. These relationships may be terminated at any time by either party; such
termination would not discharge either party’s obligations under unfulfilled purchase orders
accepted prior to the termination.
Tiffany purchases precious metals for use in its internal manufacturing operations and for use by
third party manufacturers contracted to supply Tiffany merchandise. While Tiffany may supply
precious metals to a manufacturer, Tiffany cannot determine, in all circumstances, whether the
finished goods provided by such manufacturer were actually produced with Tiffany-supplied
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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.
Tiffany believes that there are numerous alternative sources for other polished gemstones and
precious metals and that the loss of any single supplier would not have a material adverse effect
on its operations.
FinishedJewelry. Finished jewelry is purchased from approximately 60 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 either party; such termination would not discharge either party’s
obligations under unfulfilled purchase orders accepted 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 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 arranged for the production of TIFFANY & CO. brand
watches with various third party Swiss component manufacturers and assemblers. 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. (See “Item 3. Legal Proceedings”
for additional information regarding the current arbitration proceeding between both parties.)
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. Under the agreement, Tiffany
and its affiliated companies may only purchase TIFFANY & CO. brand watches from the Swatch
Group. The distribution of TIFFANY & CO. watches is made through the Company’s stores, the
Swatch Group distribution network via the Swatch Group’s affiliates, the Swatch Group’s retail
facilities and third-party distributors. This arrangement resulted in royalty revenue to the Company
from the Swatch Group that has not been significant in any year. TIFFANY & CO. brand watches
sold in the Company’s stores constituted 1% of worldwide net sales in 2012, 2011 and 2010.
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
TIFFANY & CO.
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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 a higher percentage of
annual net earnings. Management expects such seasonality to continue.
As of January 31, 2013, the Company employed an aggregate of approximately 9,900 full-time and
part-time persons. Of those employees, approximately 5,100 are employed in the United States.
EMPLOYEES
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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:
(i) 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.
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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 continue to
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 further 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.
(ii) Sales may 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 a higher percentage of annual net earnings. Poor sales
results during the Registrant’s fourth quarter would have a material adverse effect on the
Registrant’s sales and profits and would result in higher inventories.
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(iii) The Registrant conducts significant operations outside the United States, and the risks of
doing business internationally could increase its costs, reduce its profits or disrupt its
business.
The Registrant generates a majority of its worldwide net sales outside the United States. In
addition, it has foreign manufacturing operations, maintains investments in, and provides loans to,
foreign business and relies to an extent on foreign third party vendors and suppliers. As a result,
the Registrant is subject to the risks of doing business outside the United States, including:
(cid:120)
the laws, regulations and policies of foreign governments relating to investments,
loans and operations, the costs or desirability of complying with local practices and
customs and the impact of various anti-corruption and other laws affecting the
activities of U.S. companies abroad;
(cid:120) potential negative consequences from changes in taxation policies or currency
restructurings;
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
import and export licensing requirements and regulations, as well as unforeseen
changes in regulatory requirements;
economic instability in foreign countries;
the difficulty of managing an organization doing business in many jurisdictions;
uncertainties as to enforcement of certain contract and other rights;
the potential for rapid and unexpected changes in government, economic and political
policies, political or civil unrest, acts of terrorism or the threat of international boycotts
or U.S. anti-boycott legislation; and
inventory risk exposures related to providing raw materials to foreign vendors.
While these factors and the effect of these factors are difficult to predict, any one or more of them
could lower the Registrant’s revenues, increase its costs, reduce its profits or disrupt its business.
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(iv) Regional instability and conflict could 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.
(v) 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 2012, 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
29% 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 would
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 would 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.
(vi) 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. In addition, any significant deterioration in the stock market could negatively
affect the valuation of pension plan assets and result in increased minimum funding requirements.
(vii) 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.
TIFFANY & CO.
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(viii) 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. Acquiring diamonds is difficult because of limited supply 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) The Registrant may 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.
In Japan, many of the retail locations are within department stores. TIFFANY & CO. stores located
in department stores in Japan represented 82% of net sales in Japan and 13% of worldwide net
sales in 2012. 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) The value of the TIFFANY & CO. trademark could 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.
TIFFANY & CO.
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(xi) 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.
In addition, adverse publicity regarding TIFFANY & CO. products or in respect of Tiffany’s third
party vendors or the diamond or jewelry industry, and any media coverage resulting there from,
may harm the TIFFANY & CO. brand and reputation, cause a loss of consumer confidence in the
TIFFANY & CO. brand and the industry, and negatively effect the Registrant’s results of operations.
The considerable expansion in the use of social media over recent years has compounded the
potential scope of the negative publicity that could be generated by such incidents.
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(xii) If diamond mining and exploration companies, to which the Registrant or its subsidiaries
have provided financing, were to experience financial difficulties, those funds might not be
recovered, which would reduce the Registrant’s profits and could result in the Registrant
losing access to the mine’s output.
The Registrant and its subsidiaries may, from time to time, provide financing to diamond mining
and exploration companies in order to obtain rights to purchase mining output. As of January 31,
2013, the carrying amount of receivables was $66,963,000 under these arrangements. Mining
operations are inherently risky, and there is no assurance that the diamond mining and exploration
companies under these arrangements will be able to meet their obligations to the Registrant. If a
diamond mining or exploration company defaults under these financings, the Registrant would be
required to take a period charge in respect of all or a portion of the financing, which would affect
the Registrant’s profits. Additionally, the Registrant could lose access to the mine’s output under
the related supply agreements. The Registrant has experienced such situations in the past.
(xiii) A significant privacy breach of the Registrant’s information systems could affect its
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.
(xiv) The loss, or a prolonged disruption in the operation, of the Registrant’s centralized
distribution centers could adversely affect its 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.
TIFFANY & CO.
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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 3 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, 2013:
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
Other
Total
1
114
66
1
54
1
33
5
275
45,500
647,400
169,000
45,500
500 – 17,600
700 – 12,800
12,000
132,600
12,000
900 – 7,500
22,400
94,800
7,100
1,130,800
22,400
600 – 7,100
400 – 3,600
400 – 45,500
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45,500
5,700
2,600
12,000
2,500
22,400
2,900
1,400
4,100
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. Most
new stores opened in the past three years have ranged from 3,000 – 4,000 gross square feet, and
management currently expects that new U.S. stores to be opened in 2013 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. The Company is
also renovating stores to provide updated aesthetics, as well as to optimize store layouts and
increase the percentage of selling space.
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
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% of worldwide
net sales in 2012, 2011 and 2010.
TIFFANY & CO.
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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.
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.
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MANUFACTURING FACILITIES
Tiffany owns and operates jewelry manufacturing facilities in Cumberland, Rhode Island, Mount
Vernon, New York and Lexington, Kentucky and leases a jewelry manufacturing facility in Pelham,
New York. That lease expires in 2023. The owned and leased facilities total approximately 195,000
square feet.
The Company leases facilities in Belgium, South Africa and Mauritius and owns the facilities in
Botswana, Namibia and Vietnam (although the land in Namibia and Vietnam is leased) that sort,
cut and/or polish rough diamonds for use by Tiffany. These facilities total approximately 190,000
square feet and the lease expiration dates range from 2013 to 2051.
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 breach of agreements entered into by and among the
Swatch Parties and the Tiffany Parties that came into effect in December 2007 (the “Agreements”).
The 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.
All claims and counterclaims between and among the Swatch Parties and the Tiffany Parties under
the Agreements will be determined through a confidential arbitration (the “Arbitration”). The
Arbitration is pending before a three-member arbitral panel (the “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 Agreements due to alleged material breach by the Tiffany Parties.
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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 Agreements by obstructing and delaying development of Watch Company’s business and
otherwise failing to proceed in good faith. The Swatch Parties seek damages based on alternate
theories ranging from CHF 73,000,000 (or approximately $80,000,000 at January 31, 2013) (based
on its alleged wasted investment) to CHF 3,800,000,000 (or approximately $4,100,000,000 at
January 31, 2013) (calculated based on alleged future lost profits of the Swatch Parties and their
affiliates over the entire term of the Agreements).
The Registrant believes that the claims of the Swatch Parties are without merit and has defended
vigorously and (together with the other Tiffany Parties) filed a Statement of Defense and
Counterclaim on March 9, 2012. As detailed in the filing, the Tiffany Parties disputed both the
merits of the Swatch Parties’ claims and the calculation of the alleged damages. The Tiffany
Parties 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 did not have grounds for termination, failed to meet the high standard for proving material
breach set forth in the Agreements and 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
$132,000,000 at January 31, 2013) (based on its wasted investment) to approximately CHF
540,000,000 (or approximately $593,000,000 at January 31, 2013) (calculated based on future lost
profits of the Tiffany Parties).
The arbitration hearing was held in October 2012. At the hearing, witnesses were examined and
the Panel ordered additional briefs and submissions to complete the record. The record was
completed in mid-February 2013, and the Panel will issue its decision at an undetermined future
date. It is possible that the Panel will find neither the Swatch Parties nor the Tiffany Parties to be in
material breach of their respective obligations under the Agreements; should that be the
conclusion of the Panel, both sides have asked the Panel to determine that the Agreements be
deemed terminated as of October 1, 2013.
Management has not included any accrual in the consolidated financial statements for the year
ended January 31, 2013 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 Agreements should be
terminated, the Tiffany Parties will need to make new arrangements to manufacture TIFFANY &
CO. brand watches. Moreover, if the Company determines that it wishes to distribute such
watches through third party retailers, it will have to make arrangements to do so because the
Swatch Parties will no longer be responsible for such distribution. Royalties payable to the Tiffany
Parties by Watch Company under the Agreements have not been significant in any year. Watches
manufactured by Watch Company and sold in TIFFANY & CO. stores constituted 1% of worldwide
net sales in 2012, 2011 and 2010.
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 & CO.
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Tiffany, litigation instituted by persons alleged to have been injured upon premises under 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.
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 2012 were:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$ 74.20
$ 69.41
$ 65.92
$ 66.78
Low
$ 63.29
$ 49.72
$ 52.76
$ 55.83
On March 19, 2013, the high and low selling prices quoted on such exchange were $69.03 and
$67.99. On March 19, 2013, there were 16,533 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 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
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. 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.
TIFFANY & CO.
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In 2012, a dividend of $0.29 per share of Common Stock was paid on April 10, 2012. On May 17,
2012, the Registrant announced a 10% increase in its regular quarterly dividend rate to a new rate
of $0.32 per share of Common Stock which was paid on July 10, 2012, October 10, 2012 and
January 10, 2013.
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, 2,478,695 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 purchases of equity securities in the fourth quarter of
2012:
Issuer Purchases of Equity Securities
(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
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—
—
—
—
$ —
$ —
$ —
$ —
—
—
—
—
$163,794,000
$163,794,000
$163,794,000
$163,794,000
Period
November 1, 2012 to
November 30, 2012
December 1, 2012 to
December 31, 2012
January 1, 2013 to
January 31, 2013
TOTAL
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. In January 2013, the Board of Directors extended the expiration date of the
2011 Program to January 31, 2014.
TIFFANY & CO.
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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 2008-2012, which ended on January 31 of the
following calendar year:
(inthousands,exceptpershareamounts,
percentages,ratios,storesandemployees)
2012
2011
2010
2009
2008
EARNINGS DATA
Net sales
Gross profit
$ 3,794,249 $ 3,642,937 $ 3,085,290 $ 2,709,704 $ 2,848,859
1,646,442
1,822,278
2,151,154
2,163,284
1,530,219
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Selling, general & administrative expenses
Net earnings from continuing operations
1,466,067
416,157
1,442,728
439,190
1,227,497
368,403
1,089,727
265,676
1,153,944
232,155
Net earnings
Net earnings from continuing operations
per diluted share
Net earnings per diluted share
Weighted-average number of diluted
416,157
439,190
368,403
264,823
220,022
3.25
3.25
3.40
3.40
2.87
2.87
2.12
2.11
1.84
1.74
common shares
127,934
129,083
128,406
125,383
126,410
BALANCE SHEET AND CASH FLOW DATA
Total assets
Cash and cash equivalents
Inventories, net
Short-term borrowings and long-term
debt (including current portion)
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:
Gross profit
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
$ 4,630,850 $ 4,158,992 $ 3,735,669 $ 3,488,360 $ 3,102,283
504,838
2,234,334
433,954
2,073,212
681,591
1,625,302
785,702
1,427,855
160,445
1,601,236
959,272
712,147
688,240
754,049
708,804
2,611,318
2,564,997
328,290
219,530
20.57
1.25
2,348,905
2,262,998
210,606
239,443
18.54
1.12
2,177,475
2,204,632
298,925
127,002
17.15
0.95
1,883,239
1,845,393
687,199
75,403
14.91
0.68
1,588,371
1,446,812
142,270
154,409
12.83
0.66
57.0%
59.0%
59.1%
56.5%
57.8%
38.6%
11.0%
11.0%
5.8%
9.5%
16.8%
36.7%
38.1%
275
9,900
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%
9.8%
9.8%
2.8%
8.0%
15.3%
40.0%
31.9%
220
8,400
40.5%
8.1%
7.7%
5.4%
7.2%
13.3%
44.6%
37.4%
206
9,000
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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 Tiffany’s 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 Tiffany’s 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.
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 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.
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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
(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 and 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 through sales
leverage on fixed costs 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.
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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 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.
2012 SUMMARY
(cid:120) Worldwide net sales increased 4% to $3,794,249,000 due to growth in all segments. On a
constant-exchange-rate basis (see “Non-GAAP Measures” below), worldwide net sales in
2012 increased 5% and comparable store sales increased 1%.
(cid:120)
The Company added a net of 28 TIFFANY & CO. stores (13 in the Americas, 8 in
Asia-Pacific, 2 in Europe and 5 in the United Arab Emirates (“U.A.E.”)).
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(cid:120) Operating margin decreased 1.0 percentage point. Excluding charges (primarily within
selling, general and administrative expenses) of $42,719,000 in 2011 associated with
Tiffany’s relocation of its New York headquarters staff to a single location, operating margin
decreased 2.2 percentage points in 2012 due to a decline in gross margin.
(cid:120) Net earnings decreased 5% to $416,157,000, or $3.25 per diluted share. Excluding
nonrecurring charges (see “Non-GAAP Measures” below), net earnings declined 11%.
(cid:120)
(cid:120)
(cid:120)
In May 2012, the Board of Directors approved a 10% increase in the quarterly dividend rate
on the Company’s Common Stock increasing the annual dividend rate to $1.28 per share.
Free cash flow (see “Non-GAAP Measures” below) improved to an inflow of $108,760,000
in 2012, as compared to an outflow of $28,837,000 in 2011, primarily due to a decelerating
rate of inventory growth.
In July 2012, the Company issued $250,000,000 of 4.40% Senior Notes. Additionally, the
Company increased the commitments under each of the Company’s three-year and five-
year credit facilities from $200,000,000 to $275,000,000 resulting in a total borrowing
capacity of $550,000,000 under the Company’s two principal credit facilities.
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RESULTS OF OPERATIONS
Non-GAAP Measures
The Company reports information in accordance with U.S. Generally Accepted Accounting
Principles (“GAAP”). The Company’s management does not, nor does it suggest that investors
should, consider non-GAAP financial measures in isolation from, or as a substitute for, financial
information prepared in accordance with GAAP. The Company presents such non-GAAP financial
measures in reporting its financial results to provide investors with an additional tool to evaluate
the Company’s operating results.
NetSales.The Company’s reported sales reflect either a translation-related benefit from
strengthening foreign currencies or a detriment from a strengthening U.S. dollar. Internally,
management monitors its sales performance on a non-GAAP basis that eliminates the positive or
negative effects that result from translating sales made outside the U.S. into U.S. dollars
(“constant-exchange-rate basis”). Management believes this constant-exchange-rate basis
provides a more representative assessment of sales performance and provides better
comparability between reporting periods. The following table reconciles sales percentage
increases (decreases) from the GAAP to the non-GAAP basis versus the previous year:
GAAP
Reported
Translation
Effect
2012
Constant-
Exchange-
Rate Basis
GAAP
Reported
Translation
Effect
2011
Constant-
Exchange-
Rate Basis
Net Sales:
Worldwide
Americas
Asia-Pacific
Japan
Europe
Comparable Store Sales:
Worldwide
Americas
Asia-Pacific
Japan
Europe
4%
(1)%
5%
18%
3%
15%
2
8
4
3
—
—
(2)
(4)
—%
(1)%
(2)
3
4
(2)
—
1
(3)
(4)
2
8
6
7
1%
(2)
2
7
2
15
36
13
17
1
5
10
5
14
31
3
12
16%
3%
13%
13
31
13
10
—
4
9
4
13
27
4
6
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StatementofEarnings.Internally, management monitors its statement of earnings excluding non-
recurring items. Management believes excluding such items presents the Company’s results on a
more comparable basis to the corresponding period in the prior year, thereby providing investors
with an additional perspective to analyze the results of operations of the Company. The following
table reconciles GAAP amounts to non-GAAP amounts:
(inthousands)
Year Ended January 31, 2012
New York
Headquarters
Staff
Relocation
(decrease)/increase Non-GAAP
GAAP
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Selling, general and administrative expenses
$ 1,442,728
$
(42,506)
$ 1,400,222
Earnings from operations
Net earnings
708,426
439,190
42,719 a
25,994
751,145
465,184
a On a pre-tax basis includes charges of $213,000 within cost of sales and $42,506,000 within selling, general and
administrative expenses for the year ended January 31, 2012 associated with Tiffany's consolidation of its New York
headquarters staff within one location.
FreeCashFlow. Internally, management monitors its cash flow on a non-GAAP basis as the ability
to generate free cash flow demonstrates how much cash a company has available for
discretionary and non-discretionary items after deduction of capital expenditures. The Company’s
operations require regular capital expenditures for the opening, renovation and expansion of stores
and distribution and manufacturing facilities as well as ongoing investments in information
technology. Management believes this provides a more representative assessment of operating
cash flows. The following table reconciles GAAP net cash provided by operating activities to non-
GAAP free cash flows:
(inthousands)
Net cash provided by operating activities
Less: Capital expenditures
Free cash inflow (outflow)
Years Ended January 31,
2012
2013
$
$
328,290
219,530
108,760
$
$
210,606
239,443
(28,837)
Comparable Store Sales
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 geographical 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.
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Net sales by segment were as follows:
Net Sales
(inthousands)
Americas
Asia-Pacific
Japan
Europe
Other
2012
2011
2012 vs. 2011
% Change
2011 vs. 2010
% Change
2010
$ 1,839,969 $ 1,805,783
$ 1,574,571
2%
15%
810,420
639,185
432,167
748,214
616,505
421,141
549,197
546,537
360,831
72,508
51,294
$ 3,794,249 $ 3,642,937
54,154
$ 3,085,290
8
4
3
41
4%
36
13
17
(5)
18%
Americas. Americas currently includes sales in 115 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
48%, 50% and 51% of worldwide net sales in 2012, 2011 and 2010, of which the New York
Flagship store represented 8% of worldwide net sales in those same periods.
In 2012, total sales in the Americas increased $34,186,000, or 2%, due to an increase in the
average price per unit sold partly offset by fewer units sold. Comparable store sales decreased
$32,800,000, or 2%, consisting of decreases of 3% in New York Flagship store sales and 2% in
comparable branch store sales. Non-comparable store sales grew $56,362,000 and sales of
TIFFANY & CO. merchandise to independent distributors increased $3,158,000. On a constant-
exchange-rate basis, sales in the Americas increased 2%, and comparable store sales decreased
2%. Combined Internet and catalog sales in the Americas increased $6,946,000, or 4%, due to an
increase in the average sales per order.
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. 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.
Asia-Pacific.Asia-Pacific currently includes sales in 66 TIFFANY & CO. stores, as well as sales of
TIFFANY & CO. products in certain markets through Internet and wholesale operations. Asia-
Pacific represented 21%, 21% and 18% of worldwide net sales in 2012, 2011 and 2010.
In 2012, total sales in Asia-Pacific increased $62,206,000, or 8%, primarily due to an increase in
the number of units sold. Comparable store sales increased $18,374,000, or 3%, non-comparable
store sales grew $32,571,000 and sales of TIFFANY & CO. merchandise to independent
distributors increased $9,447,000. On a constant-exchange-rate basis, Asia-Pacific sales
increased 8% and comparable store sales increased 2% due to geographically broad-based sales
growth in most markets.
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. 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
TIFFANY & CO.
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27% due to geographically broad-based sales growth in most markets, especially in the greater
China region.
Japan.Japan currently includes sales in 55 TIFFANY & CO. stores, as well as sales of TIFFANY &
CO. products through business-to-business, Internet and wholesale operations. Japan
represented 17%, 17% and 18% of worldwide net sales in 2012, 2011 and 2010.
In 2012, total sales in Japan increased $22,680,000, or 4%, due to an increase in the average price
per unit sold partly offset by a decline in the number of units sold. Comparable store sales
increased $24,263,000, or 4%. On a constant-exchange-rate basis, Japan sales increased 6% and
comparable store sales increased 7%.
In 2011, total sales in Japan increased $69,968,000, or 13%, due to an increase in the average
price per unit sold partly offset by a decline in the number of units sold. 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%.
Europe.Europe currently includes sales in 34 TIFFANY & CO. stores, as well as sales of TIFFANY &
CO. products in certain markets through Internet and wholesale operations. Europe represented
11%, 12% and 12% of worldwide net sales in 2012, 2011 and 2010. The United Kingdom (“U.K.”)
represents slightly less than half of European sales.
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In 2012, total sales in Europe increased $11,026,000, or 3%, due to an increase in the average
price per unit sold partly offset by a decrease in the number of units sold. Comparable store sales
decreased $6,929,000, or 2%, non-comparable store sales increased $15,438,000 and direct
marketing sales increased $2,679,000. On a constant-exchange-rate basis, sales in Europe
increased 7% and comparable store sales increased 2% reflecting growth in most of continental
Europe and a modest sales decline in the U.K.
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. 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 growth in Continental Europe than in the U.K.
Other.Other consists of all non-reportable segments. Other consists of wholesale sales of
TIFFANY & CO. merchandise to independent distributors for resale in certain emerging markets
(primarily in the Middle East and Russia) and beginning in July 2012 retail sales in five TIFFANY &
CO. stores in the U.A.E. which were converted from independently-operated wholesale distribution
to Company-operated stores. In addition, Other includes wholesale sales of diamonds obtained
through bulk purchases that were subsequently deemed not suitable for the Company’s needs and
earnings received from third-party licensing agreements.
In 2012, Other sales increased $21,214,000, or 41%, primarily due to the addition of the five stores
in the U.A.E. 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.
ProductCategoryInformation.In 2012, worldwide net sales increased $151,312,000, or 4%,
primarily driven by increases of $44,811,000, or 7%, in the statement, fine & solitaire jewelry
category (reflecting strong sales of yellow and fancy colored diamond jewelry); $38,534,000, or
3%, in the silver, gold & RUBEDO® metal jewelry category (primarily due to the introduction of the
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RUBEDO® metal in 2012 partly offset by a decline in silver jewelry); $34,490,000, or 3%, in the
engagement jewelry & wedding bands category; and $30,179,000, or 6%, in the designer jewelry
category (reflecting sales growth in jewelry designed by Elsa Peretti and Paloma Picasso).
In 2011, worldwide net sales increased $557,647,000, or 18%, primarily driven by increases of
$205,433,000, or 24%, in the engagement jewelry & wedding bands category; $121,697,000, or
23%, in the statement, fine & solitaire category (reflecting strong sales of yellow diamond jewelry
and statement jewelry); $122,428,000, or 12%, in the silver & gold jewelry category (reflecting
strong sales of gold jewelry and modest growth in silver jewelry); and $63,776,000, or 15%, in the
designer jewelry category (reflecting sales growth in jewelry designed by Elsa Peretti and Paloma
Picasso). The remaining sales increase of $44,313,000, or 16%, in all other product categories was
primarily driven by watches and the launch of leather goods.
StoreData. In 2012, the Company added a net of 28 stores: 13 in the Americas (6 in Canada which
includes the conversion of 4 department-store locations from independently-operated wholesale
distribution to Company-operated stores, 4 in the U.S., 2 in Mexico and 1 in Brazil), 8 in Asia-
Pacific (6 in China, 1 in Singapore and 1 in Australia), 2 in Europe (France and the Czech Republic)
and 5 stores in the U.A.E. which is included as part of the “Other” non-reportable segment.
In 2011, the Company added a net of 14 stores: 6 in the Americas (3 in the U.S., 2 in Canada and
1 in Brazil), 6 in Asia-Pacific (3 in Korea, 2 in China and 1 in Taiwan), 3 in Europe (Germany, Italy
and Switzerland) and a net reduction of one in Japan.
Sales per gross square foot generated by all company-operated stores were approximately $3,000
in 2012, $3,000 in 2011 and $2,600 in 2010.
Gross Margin
Gross profit as a percentage of net sales
2012
57.0%
2011
59.0%
2010
59.1%
Gross margin (gross profit as a percentage of net sales) decreased by 2.0 percentage points in
2012 largely due to high precious metal and diamond costs, as well as sales mix favoring higher-
priced, lower margin products and reduced sales leverage on fixed costs. Sales mix was affected
by, among other items, a decline in sales of silver jewelry. Silver jewelry earns a higher margin than
the Company’s overall gross margin.
Gross margin 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.
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 recent years, the Company has increased
retail prices to address higher product costs and its strategy is to continue that approach, when
appropriate, in the future. The Company did not take retail price increases in 2011 and 2012
sufficient to offset commodity cost pressures the Company has continued to experience. The
Company intends to increase prices in 2013.
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Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses as a percentage of net sales
2012
38.6%
2011
2010
39.6%
39.8%
SG&A expenses increased $23,339,000, or 2%, in 2012 and $215,231,000, or 18%, in 2011. SG&A
expenses in those years are not comparable due to 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”).
Excluding the nonrecurring items noted above, SG&A expenses in 2011 and 2010 would have
been $1,400,222,000 and $1,210,872,000. The increase of $65,845,000, or 5%, in 2012 was
primarily due to increased store occupancy and depreciation expenses of $36,090,000 related to
new and existing stores, increased marketing expenses of $8,474,000 and increased labor and
benefit costs of $5,081,000. In 2012, the modest increase in labor and benefit costs reflected
reduced incentive compensation. 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. SG&A expenses as a percentage of net sales were 38.6% in 2012 and, excluding the
nonrecurring items noted above, would have been 38.4% and 39.2% in 2011 and 2010.
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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.
(inthousands)
Earnings (losses) from operations:
Earnings from Operations
2012
% of
Sales*
2011
% of
Sales*
2010
% of
Sales*
Americas
Asia-Pacific
Japan
Europe
Other
Unallocated corporate
expenses
Other operating expense
Earnings from operations
$ 345,917
188,510
204,510
90,955
(6,254)
823,638
18.8% $ 387,951
205,711
23.3
184,767
32.0
105,728
21.0
(5,247)
(8.6)
878,910
21.5% $ 340,331
133,448
27.5
162,800
30.0
88,309
25.1
3,358
(10.2)
728,246
21.6%
24.3
29.8
24.5
6.2
(126,421)
––
$ 697,217
(3.3)% (127,765)
(42,719)
18.4% $ 708,426
(3.5)% (115,830)
(17,635)
19.4% $ 594,781
(3.8)%
19.3%
*Percentages represent earnings (losses) from operations as a percentage of each segment’s net sales.
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Earnings from operations decreased 2% in 2012. On a segment basis, the ratio of earnings
(losses) from operations to each segment’s net sales in 2012 compared with 2011 was as follows:
(cid:120) Americas – the ratio decreased 2.7 percentage points primarily resulting from a decline in
gross margin as well as increased operating expenses due to the opening of new stores;
(cid:120) Asia-Pacific – the ratio decreased 4.2 percentage points primarily due to a decline in gross
margin as well as increased operating expenses due to the opening of new stores and
increased marketing;
(cid:120)
Japan – the ratio increased 2.0 percentage points primarily due to the sales leveraging of
operating expenses as well as an increase in gross margin;
(cid:120) Europe – the ratio decreased 4.1 percentage points primarily due to a decline in gross
margin; and
(cid:120) Other – the operating loss is primarily attributable to spending for the development of the
emerging markets region.
Earnings from operations increased 19% in 2011. On a segment basis, the ratio of earnings
(losses) from 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;
(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.
Unallocated corporate expenses include costs related to administrative support functions which
the Company does not allocate to its segments. Such unallocated costs include those for
centralized information technology, finance, legal and human resources departments. Unallocated
corporate expenses decreased as a percentage of sales in 2012 and 2011.
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”).
Interest Expense and Financing Costs
In 2012, interest expense and financing costs increased $10,495,000, or 22%, primarily due to
increased interest expense related to increased debt. In 2011, interest expense and financing
costs decreased $5,761,000, or 11%, due to maturing debt that was replaced with new lower-rate
borrowings.
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Other Income, Net
Other income, net includes interest income, gains/losses on investment activities and foreign
currency transactions. Other income, net increased $329,000 in 2012. Other income, net
decreased $1,889,000 in 2011 primarily due to changes in foreign currency gains/losses.
Provision for Income Taxes
The effective income tax rate was 35.3% in 2012 compared with 34.0% in 2011 and 32.7% in
2010. The tax rate for 2011 included a valuation allowance reversal against certain deferred tax
assets where management had determined it was more likely than not that the deferred tax assets
would be realized in the future. 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.
Management’s outlook is based on the following assumptions, which are approximate and may or
may not prove valid, and which should be read in conjunction with “Item 1A. Risk Factors” on
page K-14:
2013 Outlook
(cid:120) Worldwide net sales growth of 6% – 8% in U.S. dollars. On a constant-exchange-rate
basis, an expected high-single-digit percentage increase in worldwide net sales includes
growth in all regions, ranging from a mid-teens percentage increase in Asia-Pacific to a
low-single-digit percentage increase in Japan.
(cid:120)
The opening of 14 (net) Company-operated stores including 5 in the Americas, 7 in Asia-
Pacific, 3 in Europe and closing one in Japan, as well as refurbishing a number of existing
locations around the world.
(cid:120) Operating earnings increasing in line with sales growth; a modest improvement in the
SG&A expense ratio, due to sales leverage on fixed costs, is expected to be offset by a
modestly lower gross margin largely tied to a product sales mix skewed toward higher-
priced categories.
(cid:120)
Interest and other expenses, net of $58,000,000.
(cid:120) An effective income tax rate of 35%.
(cid:120) Net earnings from operations increasing 6% – 9% to a range of $3.43 – $3.53 per diluted
share. Net earnings from operations are expected to decline approximately 15% – 20% in
the first quarter due to gross margin pressure and higher marketing-related costs, to be
followed by earnings growth in all subsequent quarters. In addition, this forecast excludes
$0.05 per diluted share of expected first quarter charges for staffing and occupancy
adjustments.
(cid:120) An increase in net inventories of 5%, capital expenditures of $230,000,000 and free cash
flow of $300,000,000.
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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, the funds available under its revolving credit facilities and
the ability to access the debt and capital markets are sufficient to support the Company’s liquidity
and capital requirements for the foreseeable future.
As of January 31, 2013, the Company’s cash and cash equivalents totaled $504,838,000, of which
approximately one-third was held in locations outside the U.S. where the Company has the
intention to indefinitely reinvest any undistributed earnings to support its continued expansion and
investments outside of the U.S. Such cash balances are not available to fund U.S. cash
requirements unless the Company were to decide to repatriate such funds. 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:
(inthousands)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rates on cash and
cash equivalents
Net increase (decrease) in cash and cash
equivalents
2012
2011
2010
$ 328,290
(331,146)
71,446
$ 210,606
(242,583)
(213,817)
$ 298,925
(186,612)
(224,799)
2,294
(1,843)
8,375
$
70,884
$ (247,637)
$ (104,111)
Operating Activities
The Company had net cash inflows from operating activities of $328,290,000 in 2012,
$210,606,000 in 2011 and $298,925,000 in 2010. The increase in 2012 from 2011 primarily
resulted from a decelerated rate of inventory growth offset by various other outflows. The decrease
in 2011 from 2010 primarily resulted from an increase in inventories partly offset by increased net
earnings and adjustments for noncash items.
WorkingCapital.Working capital (current assets less current liabilities) and the corresponding
current ratio (current assets divided by current liabilities) were $2,564,997,000 and 5.4 at January
31, 2013, compared with $2,262,998,000 and 4.6 at January 31, 2012.
Accounts receivable, less allowances, at January 31, 2013 were 5% lower than January 31, 2012,
primarily due to changes in foreign currency exchange rates. On a 12-month rolling basis,
accounts receivable turnover was 21 times in 2012 and 20 times in 2011.
Inventories, net at January 31, 2013 were 8% higher than January 31, 2012 with finished goods
inventories increasing 13% and combined raw material and work-in-process inventories increasing
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2%. The overall increase resulted from store openings and expanded product assortments which
included a meaningful expansion of the Company’s statement jewelry assortment.
Investing Activities
The Company had net cash outflows from investing activities of $331,146,000 in 2012,
$242,583,000 in 2011 and $186,612,000 in 2010. The increased outflow in 2012 was primarily due
to payments of $82,664,000 to acquire intangible assets as well as a $25,000,000 payment related
to an acquisition. 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.
MarketableSecuritiesandShort-TermInvestments.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 $4,063,000 during 2012 and
$55,139,000 during 2011 and net purchases of investments in marketable securities and short-
term investments of $59,610,000 during 2010.
CapitalExpenditures.Capital expenditures are typically related to the opening, renovation and
expansion of stores (which represents slightly more than half of capital expenditures in 2012, 2011
and 2010 excluding the relocation of Tiffany’s New York headquarters staff), distribution and
manufacturing facilities and ongoing investments in information technology. Capital expenditures
were $219,530,000 in 2012, $239,443,000 in 2011 and $127,002,000 in 2010, representing 6%,
7% and 4% of net sales in those respective years. The increase in 2011 was primarily due to the
relocation of Tiffany’s New York headquarters staff to a single location, an increased number of
store renovations and lower-than-normal spending in 2010 due to cost containment.
NotesReceivableFunded.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 2012, the
Company loaned $8,015,000 to various companies. 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”).
Paymentstoacquireintangibleassets.In 2012, the Company made a $47,059,000 payment to
retain an exclusive license for Peretti-designed jewelry and products. The Company also made a
$35,605,000 payment to secure a prime retail location in Europe. See “Item 8. Financial
Statements and Supplementary Data – Note B. Summary of Significant Accounting Policies.”
Paymentforacquisition.In 2012, the Company made a $25,000,000 payment related to the
acquisition of net assets associated with the five existing independently-operated TIFFANY & CO.
stores located in the U.A.E. See “Item 8. Financial Statements and Supplementary Data – Note C.
Acquisition.”
Financing Activities
The Company had net cash inflows from financing activities of $71,446,000 in 2012 and net cash
outflows from financing activities of $213,817,000 in 2011 and $224,799,000 in 2010. 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 both 2012
and 2011 and twice in 2010. The Company’s Board of Directors declared quarterly dividends
which totaled $1.25, $1.12 and $0.95 per common share in 2012, 2011 and 2010 with cash
TIFFANY & CO.
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dividends paid of $158,594,000, $142,840,000 and $120,390,000 in those respective years. The
dividend payout ratio (dividends as a percentage of net earnings) was 38%, 33% and 33% in
2012, 2011 and 2010.
ShareRepurchases.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 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. In January 2013, the Board of Directors extended the expiration of the 2011
Program to January 31, 2014 and approximately $163,794,000 remained available for share
repurchases under this authorization.
The Company’s share repurchase activity was as follows:
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Cost of repurchases
Shares repurchased and retired
Average cost per share
2012
54,107
813
66.54
$
$
2011
$ 174,118
2,629
66.23
$
2010
80,786
1,843
43.83
$
$
The Company suspended share repurchases during the second quarter of 2012 in order to allow
for a more effective allocation of resources consistent with the Company’s growth strategies. The
Company may resume repurchases under the stock repurchase program at any time in its
discretion. 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.
RecentBorrowings.The Company had net repayments of or net proceeds from short-term and
long-term borrowings as follows:
(inthousands)
Short-term borrowings:
2012
2011
2010
Proceeds from credit facility borrowings, net
$
47,278
$
13,548 $
9,170
Proceeds from other credit facilities
Repayments of other credit facilities
Net proceeds from short-term borrowings
40,298
(361)
87,215
61,020
(4,517)
70,051
–
–
9,170
Long-term borrowings:
Proceeds from issuance
Repayments
Net proceeds from (repayments of) long-term
borrowings
250,000
–
118,430
(60,000)
(58,915)
(218,845)
190,000
(58,915)
(100,415)
Net proceeds from (repayments of) total borrowings
$ 277,215
$
11,136 $ (91,245)
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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”). In July 2012, the
Credit Facilities were increased from $200,000,000 to $275,000,000 resulting in a total borrowing
capacity of $550,000,000 under the Company’s two principal 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.
In total, there was $194,034,000 outstanding and $479,851,000 available under all revolving credit
facilities at January 31, 2013. The weighted-average interest rate for the outstanding amount at
January 31, 2013 was 3.05%.
In 2012, the Company issued $250,000,000 of long-term debt at an interest rate of 4.40%.
Proceeds from long-term debt issuances were used to repay $60,000,000 of 10-year term, 6.56%
Series D Senior Notes that came due in July 2012 and for general corporate purposes. In 2010, the
Company issued ¥10,000,000,000 ($118,430,000 at issuance) of long-term debt at an interest rate
of 1.72%. These proceeds, in conjunction with other short-term borrowings, were used to
refinance existing indebtedness and for general corporate purposes. 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 37% and 30% at January 31, 2013 and 2012.
At January 31, 2013, the Company was in compliance with all debt covenants.
ProceedsfromNon-controllingInterest.In 2012, the Company received proceeds of $12,750,000
associated with its venture with Damas Jewellery LLC that acquired the five existing
independently-operated TIFFANY & CO. stores located in the U.A.E. as noted in Paymentfor
acquisitionabove. See “Item 8. Financial Statements and Supplementary Data – Note C.
Acquisition” for additional details on the venture.
Contractual Cash Obligations and Commercial Commitments
The following is a summary of the Company’s contractual cash obligations at January 31, 2013:
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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
2013
2014-2015 2016-2017 Thereafter
$ 1,531,194
300,876
509,232
66,931
$ 203,479 $ 360,730 $ 272,856 $ 694,129
–
283,212
6,750
2,242
103,017
7,568
298,634
51,936
51,708
–
71,067
905
194,034
765,238
194,034
–
–
105,598
–
234,640
–
425,000
$ 3,367,505
$ 799,791 $ 579,155 $ 579,468 $ 1,409,091
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 2013 and included in this table. Purchases beyond 2013
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 fixed 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 $30,000,000 to
the pension plan in 2013. 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 $2,088,000 in 2013.
(cid:120) Unrecognized tax benefits at January 31, 2013 of $28,217,000 and accrued interest and
penalties of $7,878,000. 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, 2013:
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Three-year revolving credit facility a
Five-year revolving credit facility b
Other credit facilities c
a This facility matures in December 2014.
b This facility matures in December 2016.
C These credit facilities mature in 2013.
Total
Capacity
275,000
275,000
123,885
673,885
$
$
Borrowings
Outstanding
45,738
32,290
116,006
194,034
$
$
Available
Capacity
229,262
242,710
7,879
479,851
$
$
In addition, the Company has available letters of credit and financial guarantees of $70,055,000 of
which $30,454,000 was outstanding at January 31, 2013. Of those available letters of credit and
financial guarantees, $58,620,000 expires 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 a higher percentage of
annual net earnings. Management expects such seasonality to continue.
TIFFANY & CO.
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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
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, 2013, a 10% change in the reserve for discontinued and slow-
moving products would have resulted in a change of $5,418,000 in inventory and cost of sales.
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Property,plantandequipmentandintangiblesassetsandkeymoney. The Company reviews its
property, plant and equipment and intangibles assets and key money 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 these 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 2012, 2011 or
2010.
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. A qualitative assessment is first performed 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, an evaluation, based upon discounted cash flows, is performed and requires
management to estimate future cash flows, growth rates and economic and market conditions.
The 2012, 2011 and 2010 evaluations resulted in no impairment charges.
Notesreceivablesandotherfinancingarrangements.The Company may, from time to time,
provide financing to diamond mining and exploration companies in order to obtain rights to
purchase the mine’s output. Management evaluates these financing arrangements and any other
financing arrangements that may arise for potential impairment by reviewing the parties’ financial
statements and projections and business, operational and other economic factors on a periodic
basis. If the analyses indicate that the financing receivable is not recoverable, an impairment loss
is recognized, in respect to all or a portion of the financing, during that period. The Company did
not record any material impairment charges in 2012, 2011 or 2010.
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Incometaxes. 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-
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.
Employeebenefitplans. 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.
The Company used discount rates of 5.00% to determine its 2012 pension expense for all U.S.
plans and 5.25% to determine its 2012 postretirement expense. Holding all other assumptions
constant, a 0.5% increase in the discount rate would have decreased 2012 pension and
postretirement expenses by $5,734,000 and $342,000. A decrease of 0.5% in the discount rate
would have increased the 2012 pension and postretirement expenses by $5,892,000 and
$660,000. 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 2012 pension
expense. Holding all other assumptions constant, a 0.5% change in the long-term rate of return
would have changed the 2012 pension expense by $1,361,000. 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.
TIFFANY & CO.
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For postretirement benefit measurement purposes, 8.00% (for pre-age 65 retirees) and 6.50% (for
post-age 65 retirees) annual rates of increase in the per capita cost of covered health care were
assumed for 2013. 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
2012 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.
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. The term of all
outstanding foreign exchange forward and put option contracts as of January 31, 2013 ranged
from less than one month to 12 months. At January 31, 2013 and 2012, the fair value of the
Company’s outstanding foreign exchange forward and put option contracts were net assets of
$18,968,000 and net liabilities $3,545,000, respectively. At January 31, 2013, a 10% depreciation
in the hedged foreign exchange rates from the prevailing market rates would have resulted in an
asset with a fair value of approximately $7,000,000.
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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, 2013 and 2012, the fair value of
the Company’s outstanding precious metal derivative instruments was a net asset of $362,000 and
a net liability of $313,000, respectively. At January 31, 2013, a 10% depreciation in precious metal
prices from the prevailing market rates would have resulted in a liability with a fair value of
approximately $3,000,000.
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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 comprehensive earnings, of stockholders' equity, and of cash flows present fairly, in all material
respects, the financial position of Tiffany & Co. and its subsidiaries (the "Company") at January 31, 2013 and
2012, and the results of their operations and their cash flows for each of the three years in the period ended
January 31, 2013 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, 2013, based on criteria
established in InternalControl-IntegratedFramework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is responsible for these
financial statements and the 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, 2013
TIFFANY & CO.
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CONSO LID ATED BALANC E SHEETS
(inthousands,exceptpershareamounts)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, less allowances of $9,710 and $11,772
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
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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
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 126,934 and 126,676
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Total Tiffany & Co. stockholders’ equity
Non-controlling interests
Total stockholders’ equity
Seenotestoconsolidatedfinancialstatements.
2013
January 31,
2012
504,838
173,998
2,234,334
79,508
158,911
3,151,589
818,838
306,385
354,038
4,630,850
194,034
—
295,424
30,487
66,647
586,592
765,238
361,246
96,724
209,732
$
$
$
433,954
184,085
2,073,212
83,124
115,300
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
—
—
1,269
1,019,997
1,671,341
(93,875)
2,598,732
12,586
2,611,318
4,630,850
1,267
970,215
1,462,553
(85,130)
2,348,905
—
2,348,905
4,158,992
$
$
$
$
$
TIFFANY & CO.
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CONSOLIDATED STATEMENTS OF EARNINGS
(inthousands,exceptpershareamounts)
2013
2012
2011
Years Ended January 31,
Net sales
Cost of sales
Gross profit
$ 3,794,249
$ 3,642,937
$
3,085,290
1,630,965
1,491,783
1,263,012
2,163,284
2,151,154
1,822,278
Selling, general and administrative expenses
1,466,067
1,442,728
1,227,497
Earnings from operations
697,217
708,426
594,781
Interest expense and financing costs
Other income, net
59,069
5,428
48,574
54,335
5,099
6,988
Earnings from operations before income taxes
643,576
664,951
547,434
Provision for income taxes
227,419
225,761
179,031
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Net earnings
Earnings per share:
Basic
Diluted
Weighted-average number of common shares:
Basic
Diluted
Seenotestoconsolidatedfinancialstatements.
$
416,157
$
439,190
$
368,403
$
$
3.28
3.25
$
$
3.45
3.40
$
$
2.91
2.87
126,737
127,934
127,397
129,083
126,600
128,406
TIFFANY & CO.
KK - 4 7
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(inthousands)
Net earnings
Years Ended January 31,
2013
2012
2011
$
416,157
$
439,190
$
368,403
Foreign currency translation adjustments
(11,567)
9,997
27,167
Unrealized gain (loss) on marketable securities
Less: reclassification adjustments for loss
(gain) included in net earnings
Unrealized gain (loss) on marketable securities
2,640
6
2,646
(73)
54
(19)
3,173
(38)
3,135
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Unrealized loss on hedging instruments
(4,439)
(17,951)
(458)
Less: reclassification adjustments for loss
included in net earnings
Unrealized gain (loss) on hedging instruments
12,168
7,729
5,901
(12,050)
2,904
2,446
Net actuarial loss
(34,520)
(125,814)
(14,571)
Amortization of net loss included in net
earnings
Amortization of prior service cost included in
net earnings
Net unrealized loss on benefit plans
15,993
7,042
2,787
356
(18,171)
406
(118,366)
419
(11,365)
Other comprehensive (loss) earnings, before tax
(19,363)
(120,438)
21,383
Income tax benefit (expense) related to items of
other comprehensive (loss) earnings
10,618
47,873
(683)
Other comprehensive (loss) earnings, net of tax
(8,745)
(72,565)
20,700
Comprehensive earnings
$
407,412
$
366,625
$
389,103
Seenotestoconsolidatedfinancialstatements.
TIFFANY & CO.
KK - 4 8
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Total
Stockholders’
Equity
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Non-
controlling
Interests
$
1,883,239
$ 1,151,109 $
(33,265)
126,326
$ 1,263
$
764,132
$
23
—
—
1
(18)
—
—
—
1,269
23
—
—
1
(26)
—
—
—
1,267
10
—
—
65,660
9,811
25,815
4,999
(6,450)
—
—
—
863,967
65,543
20,944
30,753
4,499
(15,491)
—
—
—
970,215
13,002
11,730
27,224
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
K
-
0
1
M
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F
—
(8)
—
—
—
—
1,269
3,150
(5,324)
—
—
—
—
$1,019,997
$
—
—
—
—
—
12,586
12,586
(inthousands)
Balances, January 31, 2010
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
Issuance of Common Stock under
Employee Profit Sharing and Retirement
Savings (“EPSRS”) Plan
Purchase and retirement of Common Stock
Cash dividends on Common Stock
Other comprehensive earnings, 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
Other comprehensive loss, net of tax
Net earnings
Balances, January 31, 2012
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
Other comprehensive loss, net of tax
Net earnings
Non-controlling interests
Balances, January 31, 2013
$
Seenotestoconsolidatedfinancialstatements.
65,683
9,811
25,815
5,000
(80,786)
(120,390)
20,700
368,403
2,177,475
65,566
20,944
30,753
4,500
(174,118)
(142,840)
(72,565)
439,190
2,348,905
13,012
11,730
27,224
3,150
(54,107)
(158,594)
(8,745)
416,157
12,586
2,611,318
—
—
—
—
(74,318)
(120,390)
—
368,403
1,324,804
—
—
—
—
(158,601)
(142,840)
—
439,190
1,462,553
—
—
—
—
(48,775)
(158,594)
—
416,157
—
$ 1,671,341 $
—
—
—
—
—
—
20,700
—
(12,565)
—
—
—
—
—
—
(72,565)
—
(85,130)
—
—
—
—
—
—
(8,745)
—
—
(93,875)
2,382
—
—
104
(1,843)
—
—
—
126,969
2,272
—
—
64
(2,629)
—
—
—
126,676
1,026
—
—
45
(813)
—
—
—
—
126,934 $
TIFFANY & CO.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(inthousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
Adjustments to reconcile net earnings 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:
Purchases of marketable securities and short-term investments
Proceeds from sale of marketable securities and short-term investments
Capital expenditures
Notes receivable funded
Payments to acquire intangible assets
Payment for acquisition
Other
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility borrowings, net
Proceeds from other credit facility borrowings
Repayments of other credit facility borrowings
Repayment of long-term debt
Proceeds from issuance of long-term debt
Payment for settlements of interest rate swap agreements
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
Proceeds from non-controlling interest
Financing fees
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Seenotestoconsolidatedfinancialstatements.
2013
Years Ended January 31,
2011
2012
$
416,157
$
439,190
$
368,403
163,649
–
(10,812)
(11,763)
32,228
(19,282)
46,008
26,938
(1,393)
(233,700)
(22,121)
(4,561)
(13,680)
(16,559)
1,640
(24,459)
328,290
(15,226)
19,289
(219,530)
(8,015)
(82,664)
(25,000)
–
(331,146)
47,278
40,298
(361)
(60,000)
250,000
(29,335)
–
(54,107)
13,012
11,763
(158,594)
–
12,750
(1,258)
71,446
2,294
70,884
433,954
504,838
$
145,934
30,884
(10,976)
(18,771)
30,665
(50,768)
33,457
30,447
5,495
(459,416)
(5,893)
(11,371)
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)
26,893
25,436
(22,563)
(187,773)
(7,408)
4,703
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
$
TIFFANY & CO.
KK - 5 0
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. NATURE OF BUSINESS
Tiffany & Co. is a holding company that operates through its subsidiary companies (the
“Company”). Tiffany & Co.’s principal subsidiary, Tiffany and Company (“Tiffany”), is a jeweler and
specialty retailer whose principal merchandise offering is jewelry. The Company also sells
timepieces, leather goods, sterling silverware, china, crystal, stationery, fragrances and
accessories. Through Tiffany 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 of wholesale sales of
TIFFANY & CO. merchandise to independent distributors for resale in certain emerging
markets (primarily in the Middle East and Russia) and beginning in July 2012 retail
sales in five TIFFANY & CO. stores in the United Arab Emirates (“U.A.E.”) which were
converted from independently-operated to Company–operated stores. In addition,
Other includes wholesale sales of diamonds obtained through bulk purchases that
were subsequently deemed not suitable for the Company’s needs and 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. 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, are carried at fair value and are
included within prepaid expenses and other current assets. At January 31, 2013, 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, 2013 and 2012, the carrying
amount of the Credit Card Receivables (recorded in accounts receivable, net) was $56,344,000
and $58,784,000, of which 98% and 97% were considered current at January 31, 2013 and 2012,
respectively. The allowance for doubtful accounts for estimated losses associated with the Credit
Card Receivables (approximately $1,500,000 and $2,000,000 at January 31, 2013 and 2012,
respectively) was determined based on the factors discussed above. Finance charges on Credit
Card accounts are not significant.
TIFFANY & CO.
KK - 5 2
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The Company may, from time to time, provide financing to diamond mining and exploration
companies in order to obtain rights to purchase the mine’s output (see “Note K. Commitments and
Contingencies”). Management evaluates these and any other financing arrangements that may
arise for potential impairment by reviewing the parties’ financial statements and projections and
business, operational and other economic factors on a periodic basis. As of January 31, 2013, the
current portion of the carrying amount of loans receivable including accrued interest was
$12,979,000 and was recorded in prepaid expenses and other current assets. As of January 31,
2013 and 2012, the non-current portion of the carrying amount of loans receivable including
accrued interest was $53,984,000 and $58,212,000 and was included in other assets, net. The
Company has not recorded any material impairment charges on such loans as of January 31, 2013
and 2012.
Inventories
Inventories are valued at the lower of cost or market using the average cost method except for
certain diamond and gemstone jewelry which uses the specific identification 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
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
2012, 2011 or 2010.
Intangible Assets and Key Money
Intangible assets are recorded at cost and are amortized on a straight-line basis over their
estimated useful lives which range from 6 to 20 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).
Key money is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy
under a commercial property lease for a certain property. Key money represents the “right to
lease” with an automatic right of renewal. This right can be subsequently sold by the Company or
can be recovered should the landlord refuse to allow the automatic right of renewal to be
exercised. Key money is amortized over the estimated useful life, 39 years.
TIFFANY & CO.
KK - 5 3
The following table summarizes intangible assets and key money, included in other assets, net, as
follows:
(inthousands)
Product rights
Key money deposits
Trademarks
January 31, 2013
January 31, 2012
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
$
59,409 $
(6,388) $
12,350 $
(5,342)
39,632
3,452
(719)
(3,078)
2,647
3,452
$
102,493 $
(10,185) $
18,449 $
(247)
(2,911)
(8,500)
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In December 2012, the Company made a $47,059,000 payment to Elsa Peretti to retain an
exclusive license in all of the countries in which Peretti-designed jewelry and products are
currently sold, to make, have made, advertise and sell these items, which are made in
conformance to Ms. Peretti’s proprietary designs and bear her trademarks. These product rights
acquired will be amortized over 20 years.
Amortization of intangible assets and key money for the years ended January 31, 2013, 2012 and
2011 was $1,685,000, $1,263,000 and $1,016,000. Amortization expense is estimated to be
$4,374,000 in each of the next two years, $4,248,000 in the third year, $4,207,000 in the fourth
year and $4,195,000 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. A qualitative assessment is first
performed 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, a quantitative evaluation, based
on discounted cash flows, is performed and requires management to estimate future cash flows,
growth rates and economic and market conditions. If the quantitative evaluation indicates that
goodwill is not recoverable, an impairment loss is calculated and recognized during that period. At
January 31, 2013 and 2012, goodwill, included in other assets, net, consisted of the following by
segment:
(inthousands)
January 31, 2011
Translation
January 31, 2012
Acquisition
Translation
January 31, 2013
Americas
Asia-Pacific
$
$
12,482 $
(60)
12,422
—
(54)
12,368 $
295
(8)
287
—
(7)
280
$
$
Japan
1,164 $
(32)
1,132
—
(29)
1,103 $
Europe
Other
1,123 $
(8)
1,115
Total
— $ 15,064
(108)
—
14,956
—
24,493
— 24,493
315
412
(7)
1,108 $ 24,905 $ 39,764
In July 2012, the Company acquired the net assets associated with the five existing
independently-operated TIFFANY & CO. stores located in the U.A.E. for total consideration of
$25,000,000, of which $24,493,000 was allocated to goodwill. See “Note C. Acquisition” for further
details.
TIFFANY & CO.
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Impairment of Long-Lived Assets
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 2012,
2011 or 2010.
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, 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
$4,144,000 and $1,904,000 of gross unrealized gains and $1,293,000 and $1,699,000 of gross
unrealized losses within accumulated other comprehensive loss as of January 31, 2013 and 2012.
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, 2013,
2012 or 2011.
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.
TIFFANY & CO.
KK - 5 5
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.
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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. 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.
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, Marketing, Public and Media Relations Costs
Advertising, marketing, public and media relations costs include media, production, catalogs,
Internet, marketing events, visual merchandising costs (in-store and window displays) and other
related costs. In 2012, 2011 and 2010, these costs totaled $242,524,000, $234,050,000 and
$197,597,000, representing 6.4% of worldwide net sales in each of those periods. Media and
production costs for print and digital advertising are expensed as incurred, while catalog costs are
expensed upon mailing.
Costs associated with the opening of new retail stores are expensed in the period incurred.
Pre-opening Costs
TIFFANY & CO.
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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.
Foreign Currency
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
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
($2,147,000), ($54,000) and $2,413,000 in 2012, 2011 and 2010 within other income, net.
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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.
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.
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The following table summarizes the reconciliation of the numerators and denominators for the
basic and diluted EPS computations:
(inthousands)
Net earnings for basic and diluted EPS
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
Years Ended January 31,
$
2013
416,157
126,737
$
2012
439,190
127,397
$
2011
368,403
126,600
1,197
127,934
1,686
129,083
1,806
128,406
For the years ended January 31, 2013, 2012 and 2011, there were 869,000, 401,000 and 371,000
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 Company adopted the new
guidance effective February 1, 2012, and it did not have an effect on the Company’s financial
position or earnings.
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 Company adopted the new guidance effective February 1, 2012, and it did not
have a material effect on the Company’s financial position or earnings.
C. ACQUISITION
In July 2012, the Company, through a venture with a former independent distributor, Damas
Jewellery LLC (“Damas”), acquired the net assets associated with five existing independently-
operated TIFFANY & CO. stores located in the U.A.E. for total consideration of $25,000,000, of
which $24,493,000 was allocated to goodwill and the remainder to other tangible assets and
liabilities. All of the goodwill associated with the transaction would be deductible for tax purposes;
however the Company does not expect to receive a tax benefit as the U.A.E. does not impose a
corporate income tax. The purchase resulted in the recognition of goodwill because the acquisition
(i) enabled the Company to immediately integrate five existing TIFFANY & CO. stores into its
worldwide store network and (ii) will enhance awareness of the Company’s brand in the U.A.E.
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In accordance with the agreement, the Company owns 49% of the common shares of the venture
with Damas and will be entitled to 75% of the profits or losses of the venture. The Company is
responsible for all merchandise assortment and pricing, advertising and promotional activities,
staffing, store design and visual display and financial services. The Company has evaluated the
variable interest entity consolidation requirements with respect to this transaction and has
determined that the Company is the primary beneficiary as it has both the power to direct the
activities that most significantly affect the venture’s economic performance and the obligation to
absorb losses of and the right to receive benefits that are significant to the venture. Therefore, the
results of the venture will be consolidated within the financial results of the Company. Income or
loss attributable to the non-controlling interests will be presented within other income, net as the
amount is not material. The results of the venture and the associated goodwill will be included
within the Other non-reportable segment.
D. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
(inthousands)
Interest, net of interest
capitalization
Income taxes
2013
$ 49,785
$ 266,829
Years Ended January 31,
2012
2011
$ 44,799
$ 250,620
$ 47,107
$ 237,829
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Supplemental noncash investing and financing activities:
(inthousands)
Issuance of Common Stock under
the Employee Profit Sharing
and Retirement Savings Plan
2013
Years Ended January 31,
2011
2012
$
3,150
$
4,500
$
5,000
E.
INVENTORIES
(inthousands)
Finished goods
Raw materials
Work-in-process
2013
1,291,235
790,732
152,367
2,234,334
$
$
$
$
January 31,
2012
1,145,680
784,040
143,492
2,073,212
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F. PROPERTY, PLANT AND EQUIPMENT
(inthousands)
Land
Buildings
Leasehold and building improvements
Office equipment
Furniture and fixtures
Machinery and equipment
Construction-in-progress
Accumulated depreciation and amortization
2013
42,707
118,687
914,737
460,968
224,750
135,637
24,509
1,921,995
(1,103,157)
818,838
$
$
$
$
January 31,
2012
42,735
113,731
833,740
416,003
211,043
123,407
17,652
1,758,311
(991,137)
767,174
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The provision for depreciation and amortization for the years ended January 31, 2013, 2012 and
2011 was $159,018,000, $149,109,000 and $149,403,000.
G. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
(inthousands)
Accounts payable – trade
Accrued compensation and commissions
Accrued sales, withholding and other taxes
Other
2013
122,101
58,030
22,278
93,015
295,424
January 31,
2012
113,149
74,792
20,274
120,747
328,962
$
$
$
$
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H. DEBT
(inthousands)
Short-term borrowings:
Credit Facilities
Other credit facilities
Long-term debt:
Unsecured Senior Notes:
2002 6.56% Series D, due July 2012a, b
2008 9.05% Series A, due December 2015a, b
2009 10.00% Series A, due April 2018a
2009 10.00% Series A, due February 2017a
2009 10.00% Series B, due February 2019a
2010 1.72% Notes, due September 2016a, c
2012 4.40% Series B Notes, due July 2042 d
Less current portion of long-term debt
2013
78,028
116,006
194,034
—
105,598
50,000
125,000
125,000
109,640
250,000
765,238
—
765,238
$
$
$
$
January 31,
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
$
$
$
$
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a The agreements require lump sum repayments upon maturity.
b The Company entered into interest rate swaps to effectively convert these fixed rate obligations to floating
rate obligations (see “Note I. Hedging Instruments”).
c These Notes were issued, at par, ¥10,000,000,000.
d The agreement requires repayments of $50,000,000 every five years beginning in 2022.
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”). In July 2012, the commitments under each of the Company’s three-year and
five-year Credit Facilities were increased to $275,000,000 resulting in a total borrowing capacity of
$550,000,000. The Credit Facilities are available for working capital and other corporate purposes.
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. There was
$471,972,000 available to be borrowed under the Credit Facilities at January 31, 2013. The
weighted-average interest rate was 2.04% and 1.62% at January 31, 2013 and 2012. The three-
year credit facility will expire in December 2014. The five-year credit facility will expire in December
2016.
Other Credit Facilities
The Company has various other revolving credit facilities, primarily in China and Japan. At January
31, 2013, the facilities totaled $123,885,000, of which $116,006,000 was outstanding at a
TIFFANY & CO.
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weighted-average interest rate of 3.74%. At January 31, 2012, the facilities totaled $102,132,000,
of which $83,769,000 was outstanding at a weighted-average interest rate of 1.42%.
Senior Notes
In July 2012, the Company, in two private transactions with various institutional note purchasers,
issued, at par, $250,000,000 in the aggregate of its 4.40% Senior Notes due July 2042. A portion
of the proceeds was used to repay $60,000,000 of 10-year term, 6.56% Series D Senior Notes that
came due in July 2012 and the remainder will be used for general corporate purposes.
Debt Covenants
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The senior note agreements require maintenance of specific financial covenants and ratios and
limit certain changes to indebtedness and the general nature of the business, in addition to other
requirements customary to such borrowings.
The Credit Facilities include specific financial covenants and ratios and limit certain payments,
investments and indebtedness, in addition to other requirements customary to such borrowings.
As of January 31, 2013, 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 debt 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 certain 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, 2013 are as follows:
Long-Term Debt Maturities
Years Ending January 31,
2014
2015
2016
2017
2018
Thereafter
Amount
(inthousands)
—
$
—
105,598
109,640
125,000
425,000
$ 765,238
Letters of Credit
The Company has available letters of credit and financial guarantees of $70,055,000 of which
$30,454,000 was outstanding at January 31, 2013. Of those available letters of credit and financial
guarantees, $58,620,000 expires within one year.
TIFFANY & CO.
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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
criteria, it is designated as one of the following on the date it 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 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 served as a hedge to changes in the fair value of these debt instruments. The Company
hedged its exposure to changes in interest rates over the remaining maturities of the debt
agreements being hedged. The Company accounted 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 and received net proceeds of $9,527,000. The
interest rate swap associated with the 2002 Series D debt expired in July 2012.
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In the first half 2012, the Company entered into forward-starting interest rate swaps to hedge the
impact of interest rate volatility on future interest payments associated with the anticipated
incurrence of additional debt which was incurred in July 2012 (refer to “Note H. Debt”). The
Company accounted for the forward-starting interest rate swaps as cash flow hedges. The
Company settled the interest rate swaps in 2012 and paid $29,335,000.
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
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.
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As of January 31, 2013, the notional amount of foreign exchange forward and put option contracts
accounted for as cash flow hedges was $166,758,000 and the notional amount of foreign
exchange forward contracts accounted for as undesignated hedges was $20,759,000. The term of
all outstanding foreign exchange forward and put option contracts as of January 31, 2013 ranged
from less than one month to 12 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 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 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, 2013, there were
approximately 13,600 ounces of platinum and 315,000 ounces of silver precious metal derivative
instruments outstanding.
Information on the location and amounts of derivative gains and losses in the consolidated
financial statements is as follows:
Years Ended January 31,
Pre-Tax Loss
Recognized in
Earnings on
Derivatives
2013
Pre-Tax Gain
Recognized in
Earnings on
Hedged Item
Pre-Tax Gain
Recognized in
Earnings on
Derivatives
2012
Pre-Tax Loss
Recognized in
Earnings on
Hedged Item
(inthousands)
Derivatives in Fair Value Hedging Relationships:
Interest rate swaps a
$
(406)
$
464
$
3,341
$
(2,832)
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Years Ended January 31,
2013
2012
Pre-Tax Gain
(Loss)
Recognized
in OCI
(Effective Portion)
Loss
Reclassified from
Accumulated OCI
to Earnings
(Effective Portion)
Pre-Tax Loss
Recognized
in OCI
(Effective Portion)
(Loss) Gain
Reclassified from
Accumulated OCI
to Earnings
(Effective Portion)
(inthousands)
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange forward
contracts b
Put option contracts b
Precious metal collars b
Precious metal forward
contracts b
Forward-starting interest rate
swaps a
$
24,750
$
(4,221)
$ (12,624)
$
(6,974)
966
–
(129)
–
(69)
–
(2,101)
607
(3,644)
(6,842)
(5,258)
2,567
(26,511)
(4,439)
$
(928)
$ (12,120)
–
$ (17,951)
–
(5,901)
$
a The gain or loss recognized in earnings is included within Interest expense and financing costs.
b The gain or loss recognized in earnings is included within Cost of sales.
The gains and losses on derivatives not designated as hedging instruments were not significant in
the years ended January 31, 2013 and 2012. There was no material ineffectiveness related to the
Company’s hedging instruments for the periods ended January 31, 2013 and 2012. The Company
expects approximately $11,995,000 of net pre-tax derivative gains included in accumulated other
comprehensive income at January 31, 2013 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, refer to “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 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
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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 were primarily valued using the 3-
month LIBOR rate. The Company’s put 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 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.”
Financial assets and liabilities carried at fair value at January 31, 2013 are classified in the table
below in one of the three categories described above:
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Mutual funds a
Time deposits b
Estimated Fair Value
Carrying
Value
Level 1
Level 2
Level 3
$
44,114
$ 44,114
$
— $
1,363
1,363
—
Total Fair
Value
$ 44,114
1,363
1,066
1,449
17,177
342
$ 65,511
—
—
—
—
—
—
—
Derivatives designated as hedging instruments:
Precious metal forward
contracts b
Put option contracts b
Foreign exchange
forward contracts b
1,066
1,449
17,177
—
—
—
1,066
1,449
17,177
Derivatives not designated as hedging instruments:
Foreign exchange
forward contracts b
Total financial assets
342
—
342
$
65,511
$ 45,477
$ 20,034
$
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(inthousands)
Carrying
Value
Level 1
Level 2
Level 3
Total Fair
Value
Estimated Fair Value
Derivatives designated as hedging instruments:
Precious metal forward
contracts c
$
Total financial liabilities $
704
704
$
$
—
—
$
$
704
704
$
$
—
—
$
$
704
704
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:
(inthousands)
Mutual funds a
Time deposits b
Estimated Fair Value
Carrying
Value
Level 1
Level 2
Level 3
$
39,542
$ 39,542
$
— $
8,236
8,236
—
Derivatives designated as hedging instruments:
Interest rate swaps a
Precious metal forward
contracts b
Foreign exchange forward
contracts b
406
2,758
70
—
—
—
406
2,758
70
Derivatives not designated as hedging instruments:
Foreign exchange forward
contracts b
Total financial assets
$
240
51,252
—
$ 47,778
240
3,474
$
$
(inthousands)
Carrying
Value
Level 1
Level 2
Level 3
Estimated Fair Value
Derivatives designated as hedging instruments:
Foreign exchange forward
contracts c
$
3,855
Precious metal forward
contracts c
Total financial liabilities
$
3,071
6,926
$
$
a Included within Other assets, net.
b Included within Prepaid expenses and other current assets.
c Included within Accounts payable and accrued liabilities.
— $
3,855
$
—
—
3,071
6,926
$
$
—
—
—
$
3,855
3,071
6,926
$
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 and would be measured using Level 1 inputs. The fair value of debt with variable interest
rates approximates carrying value and is measured using Level 2 inputs. The fair value of debt with
fixed interest rates was determined using the quoted market prices of debt instruments with
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—
—
—
—
—
—
—
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Total Fair
Value
$ 39,542
8,236
406
2,758
70
240
$ 51,252
Total Fair
Value
similar terms and maturities, which are considered Level 2 inputs. The total carrying value of short-
term borrowings and long-term debt was $959,272,000 and $712,147,000 and the corresponding
fair value was approximately $1,100,000,000 and $860,000,000 at January 31, 2013 and 2012.
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.
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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 New Jersey, 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, 2013, $96,724,000 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 has subleased most of those previously
occupied properties through the end of their lease terms which run through 2015, but has
recovered only a portion of its rent obligations due to market conditions. Tiffany recorded
expenses of $42,719,000 during the year ended January 31, 2012 (primarily within SG&A
expenses), 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.
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The following is a reconciliation of the accrued exit charges, recorded within other long-term
liabilities, associated with the relocation:
(inthousands)
Opening balance, June 30, 2011
Cash payments, net of estimated sublease income
Interest accretion
January 31, 2012
Cash payments, net of estimated sublease income
Interest accretion
January 31, 2013
$
$
$
30,884
(7,340)
436
23,980
(8,371)
555
16,164
Rent expense for the Company’s operating leases consisted of the following:
(inthousands)
Minimum rent for retail locations
Contingent rent based on sales
Office, distribution and manufacturing
facilities and equipment a
2013
$ 127,267
31,918
Years Ended January 31,
2011
96,810
24,642
2012
$ 107,814
36,357
$
38,156
$ 197,341
71,624
$ 215,795
37,020
$ 158,472
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a Expense in the year ended January 31, 2012 includes the $30,884,000 exit expense noted above.
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 $120,967,000, $115,728,000 and $100,237,000 in
2012, 2011 and 2010, 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,
2014
2015
2016
2017
2018
Thereafter
Annual Minimum Rental Payments
(inthousands)
$
203,479
193,040
167,690
143,782
129,074
694,129
Diamond Sourcing Activities
The Company has agreements with various diamond producers to purchase defined portions of
their mines’ output at prevailing fair market prices. Under those agreements, management expects
to purchase approximately $200,000,000 of rough diamonds in 2013. Purchases beyond 2013 that
are contingent upon mine production at then-prevailing fair market prices cannot be reasonably
estimated. The Company will also purchase rough diamonds from other suppliers, although there
are no contractual obligations to do so.
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In consideration of these diamond supply agreements, the Company has provided financing 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 entered into a supply agreement, pursuant to which Laurelton is required to purchase at
fair market value diamonds recovered from the Mine that meet Laurelton’s quality standards. 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 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. In March 2013, Koidu requested that the
principal and interest payments due in 2013 under the Loan be deferred. The terms and conditions
of the deferral are currently under negotiation. Based on management’s review, it was determined
that the full amount outstanding under the Loan, including accrued interest, continues to be
collectible.
The Company also provided financing of $8,015,000 and $6,605,000 during the years ended
January 31, 2013 and 2012 to other diamond mining and exploration companies.
Contractual Cash Obligations and Contingent Funding Commitments
At January 31, 2013, the Company’s contractual cash obligations and contingent funding
commitments were for inventory purchases of $300,876,000 (which includes the $200,000,000
obligation discussed in Diamond Sourcing Activities above), as well as for other contractual
obligations of $66,931,000 (primarily for fixed royalty commitments, construction-in-progress and
packaging supplies).
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 breach of agreements entered into by and among the
Swatch Parties and the Tiffany Parties that came into effect in December 2007 (the “Agreements”).
The 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.
All claims and counterclaims between and among the Swatch Parties and the Tiffany Parties under
the Agreements will be determined through a confidential arbitration (the “Arbitration”). The
Arbitration is pending before a three member arbitral panel (the “Panel”) convened pursuant to the
Arbitration Rules of the Netherlands Arbitration Institute in the Netherlands.
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On September 12, 2011, the Swatch Parties publicly issued a Notice of Termination purporting to
terminate the 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
Agreements by obstructing and delaying development of Watch Company’s business and
otherwise failing to proceed in good faith. The Swatch Parties seek damages based on alternate
theories ranging from CHF 73,000,000 (or approximately $80,000,000 at January 31, 2013) (based
on its alleged wasted investment) to CHF 3,800,000,000 (or approximately $4,100,000,000 at
January 31, 2013) (calculated based on alleged future lost profits of the Swatch Parties and their
affiliates over the entire term of the Agreements).
The Registrant believes that the claims of the Swatch Parties are without merit and has defended
vigorously and (together with the other Tiffany Parties) filed a Statement of Defense and
Counterclaim on March 9, 2012. As detailed in the filing, the Tiffany Parties disputed both the
merits of the Swatch Parties’ claims and the calculation of the alleged damages. The Tiffany
Parties 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 did not have grounds for termination, failed to meet the high standard for proving material
breach set forth in the Agreements and 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
$132,000,000 at January 31, 2013) (based on its wasted investment) to approximately CHF
540,000,000 (or approximately $593,000,000 at January 31, 2013) (calculated based on future lost
profits of the Tiffany Parties).
The arbitration hearing was held in October 2012. At the hearing, witnesses were examined and
the Panel ordered additional briefs and submissions to complete the record. The record was
completed in mid-February 2013, and the Panel will issue its decision at an undetermined future
date. It is possible that the Panel will find neither the Swatch Parties nor the Tiffany Parties to be in
material breach of their respective obligations under the Agreements; should that be the
conclusion of the Panel, both sides have asked the Panel to determine that the Agreements be
deemed terminated as of October 1, 2013.
Management has not included any accrual in the consolidated financial statements for the year
ended January 31, 2013 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 Agreements should be
terminated, the Tiffany Parties will need to make new arrangements to manufacture TIFFANY &
CO. brand watches. Moreover, if the Company determines that it wishes to distribute such
watches through third party retailers, it will have to make arrangements to do so because the
Swatch Parties will no longer be responsible for such distribution. Royalties payable to the Tiffany
Parties by Watch Company under the Agreements have not been significant in any year. Watches
manufactured by Watch Company and sold in TIFFANY & CO. stores constituted 1% of worldwide
net sales in 2012, 2011 and 2010.
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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. Fees paid to the bank for services rendered and interest
on debt amounted to $1,658,000, $1,526,000 and $1,067,000 in 2012, 2011 and 2010.
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M. STOCKHOLDERS’ EQUITY
Accumulated Other Comprehensive Loss
The following sets forth the changes in each component of accumulated other comprehensive
losses, net of tax:
(inthousands)
January 31, 2010
Period change, before tax
Income tax (expense) benefit
January 31, 2011
Period change, before tax
Income tax (expense) benefit
January 31, 2012
Period change, before tax
Income tax benefit (expense)
Foreign
currency
translation
adjustments
$ 16,512
27,167
(2,264)
Unrealized
(loss) gain on
marketable
securities
$
(1,899)
3,135
(1,094)
41,415
9,997
(2,203)
49,209
(11,567)
6,422
142
(19)
7
130
2,646
(927)
Deferred
hedging
loss
$ (2,607)
2,446
(1,031)
(1,192)
(12,050)
4,513
(8,729)
7,729
(2,207)
Net
unrealized
loss on
benefit plans
(45,271)
$
(11,365)
3,706
(52,930)
(118,366)
45,556
(125,740)
(18,171)
7,330
January 31, 2013
$ 44,064
$
1,849
$ (3,207)
$ (136,581)
$
Stock Repurchase Program
Accumulated
other
comprehensive
loss
$
(33,265)
21,383
(683)
(12,565)
(120,438)
47,873
(85,130)
(19,363)
10,618
(93,875)
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 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. In January 2013, the Board of Directors extended the expiration date of the
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2011 Program to January 31, 2014 and approximately $163,794,000 remained available for share
repurchases under this authorization.
The Company’s share repurchase activity was as follows:
(inthousands,exceptpershareamounts)
Cost of repurchases
Shares repurchased and retired
Average cost per share
2013
54,107
813
66.54
$
$
Cash Dividends
Years Ended January 31,
2011
2012
80,786
$ 174,118
1,843
2,629
43.83
66.23
$
$
$
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The Company’s Board of Directors declared quarterly dividends which, on an annual basis, totaled
$1.25, $1.12 and $0.95 per share of Common Stock in 2012, 2011 and 2010.
On February 21, 2013, the Company’s Board of Directors declared a quarterly dividend of $0.32
per share of Common Stock. This dividend will be paid on April 10, 2013 to stockholders of record
on March 20, 2013.
N. STOCK COMPENSATION PLANS
The Company has two stock compensation plans under which awards may 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 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.
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
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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 the 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.
Dividend yield
Expected volatility
Risk-free interest rate
Expected term in years
2013
1.6%
42.2%
1.0%
6
Years Ended January 31,
2012
1.4%
40.0%
1.5%
6
2011
1.2%
37.9%
2.8%
7
A summary of the option activity for the Company’s stock option plans is presented below:
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term in Years
Aggregate
Intrinsic
Value
(inthousands)
$
$
$
41.53
63.53
31.46
35.50
45.68
38.93
6.42
$68,742
6.17
4.95
$60,402
$55,226
Number of
Shares
3,045,299
365,024
(417,460)
(20,574)
2,972,289
2,055,913
Outstanding at January 31, 2012
Granted
Exercised
Forfeited/cancelled
Outstanding at January 31, 2013
Exercisable at January 31, 2013
The weighted-average grant-date fair value of options granted for the years ended January 31,
2013, 2012 and 2011 was $21.78, $22.46 and $21.37. The total intrinsic value (market value on
date of exercise less grant price) of options exercised during the years ended January 31, 2013,
2012 and 2011 was $14,359,000, $65,268,000 and $38,315,000.
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A summary of the activity for the Company’s RSUs is presented below:
Non-vested at January 31, 2012
Granted
Vested
Forfeited
Non-vested at January 31, 2013
Number of Shares
Weighted-Average
Grant-Date Fair Value
956,471
302,295
(320,214)
(71,098)
867,454
$
$
43.28
66.18
37.92
46.22
53.05
A summary of the activity for the Company’s PSUs is presented below:
Non-vested at January 31, 2012
Granted
Vested
Forfeited/cancelled
Non-vested at January 31, 2013
Number of Shares
1,056,615
234,200
(287,894)
(14,103)
988,818
Weighted-Average
Grant-Date Fair Value
43.05
$
59.85
23.21
41.35
53.14
$
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The weighted-average grant-date fair value of RSUs granted for the years ended January 31, 2012
and 2011 was $57.89 and $46.22. The weighted-average grant-date fair value of PSUs granted for
the years ended January 31, 2012 and 2011 was $57.34 and $55.05.
As of January 31, 2013, there was $63,547,000 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 2.6 years. The total fair value of RSUs vested during the years ended
January 31, 2013, 2012 and 2011 was $21,752,000, $21,333,000 and $20,524,000. The total fair
value of PSUs vested during the years ended January 31, 2013, 2012 and 2011 was $20,340,000,
$193,000 and $174,000.
Total compensation cost for stock-based compensation awards recognized in income and the
related income tax benefit was $26,938,000 and $9,541,000 for the year ended January 31, 2013,
$30,447,000 and $11,073,000 for the year ended January 31, 2012 and $25,436,000 and
$9,181,000 for the year ended January 31, 2011. 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.
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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 $35,000,000 cash
contribution to the Qualified Plan in 2012 and plans to contribute approximately $30,000,000 in
2013. 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.
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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
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, hired on or before March 31, 2012, 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
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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.
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:
(inthousands)
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
at end of year
Pension Benefits
2012
2013
$
$ 548,641
18,058
26,796
—
—
59,910
(18,770)
(3,097)
631,538
$ 432,716
14,105
25,321
—
—
93,636
(18,315)
1,178
548,641
266,734
46,174
37,043
—
—
—
(18,770)
262,808
(4,351)
26,592
—
—
—
(18,315)
January 31,
Other Postretirement
Benefits
2012
2013
61,835
2,382
2,839
1,632
131
442
(3,538)
—
65,723
—
—
1,775
1,632
131
—
(3,538)
$
49,451
2,198
3,101
1,565
200
9,111
(3,791)
—
61,835
—
—
1,524
1,565
200
502
(3,791)
331,181
266,734
—
—
Funded status at end of year
$ (300,357)
$ (281,907)
$ (65,723)
$ (61,835)
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TIFFANY & CO.
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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:
(inthousands)
Projected benefit obligation
Fair value of plan assets
Funded status
Accumulated benefit obligation
(inthousands)
Projected benefit obligation
Fair value of plan assets
Funded status
Accumulated benefit obligation
Qualified
509,538
331,181
(178,357)
Excess/SRIP
105,503
$
—
(105,503)
$
457,363
$
70,573
Qualified
436,481
266,734
(169,747)
Excess/SRIP
94,784
$
—
(94,784)
$
396,882
$
60,339
$
$
$
$
$
$
$
$
$
$
$
$
January 31, 2013
Total
631,538
331,181
(300,357)
$
$
Japan
16,497
—
(16,497)
13,820
$
541,756
January 31, 2012
Japan
17,376
—
(17,376)
14,477
Total
548,641
266,734
(281,907)
471,698
$
$
$
At January 31, 2013, the Company had a current liability of $4,834,000 and a non-current liability
of $361,246,000 for pension and other postretirement benefits. 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.
Amounts recognized in accumulated other comprehensive loss consist of:
January 31,
(inthousands)
Net actuarial loss
Prior service cost (credit)
Total before tax
$
$
Pension Benefits Other Postretirement Benefits
2012
12,455
(5,716)
6,739
2012
196,610
2,648
199,258
2013
12,867
(5,057)
7,810
$
$
$
$
$
$
2013
214,725
1,633
216,358
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:
(inthousands)
Net actuarial loss
Prior service cost (credit)
$
Pension Benefits Other Postretirement Benefits
384
(659)
(275)
20,811
972
21,783
$
$
$
TIFFANY & CO.
KK - 7 8
Components of Net Periodic Benefit Cost and
Other Amounts Recognized in Other Comprehensive Earnings
(inthousands)
Service cost
Interest cost
Expected return on plan
assets
Amortization of prior service
cost
Amortization of net loss
Net periodic benefit cost
Net actuarial loss
Recognized actuarial loss
Recognized prior service
(cost) credit
Total recognized in other
2013
$ 18,058
26,796
Pension Benefits
2011
2012
$ 12,741
$ 14,105
23,860
25,321
Years Ended January 31,
Other Postretirement Benefits
2011
$ 1,711
2,943
2012
$ 2,198
3,101
2013
$ 2,382
2,839
(20,416)
(18,716)
(17,568)
–
–
–
1,015
15,964
41,417
1,065
7,026
28,801
1,078
2,786
22,897
34,080
(15,964)
116,703
(7,026)
10,583
(2,786)
(1,015)
(1,065)
(1,078)
(659)
29
4,591
440
(29)
659
(659)
16
4,656
9,111
(16)
(659)
1
3,996
3,988
(1)
659
659
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comprehensive earnings
17,101
108,612
6,719
1,070
9,754
4,646
Total recognized in net
periodic benefit cost and
other comprehensive
earnings
$ 58,518
$137,413 $ 29,616
$ 5,661
$ 14,410
$ 8,642
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
2013
4.50%
4.50%
1.25%
4.50%
2.75%
4.25%
7.25%
1.00%
January 31,
2012
5.00%
5.00%
1.50%
5.25%
2.75%
4.25%
7.25%
1.00%
TIFFANY & CO.
KK - 7 9
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
2013
5.00 %
5.00 %
1.50 %
5.25 %
7.50 %
2.75 %
4.25 %
7.25 %
1.00 %
Years Ended January 31,
2012
2011
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%
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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, 8.00% (for pre-age 65 retirees) and 6.50% (for
post-age 65 retirees) annual rates of increase in the per capita cost of covered health care were
assumed for 2013. 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 2012 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.
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—
—
—
—
K
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—
—
—
—
The fair value of the Company’s Qualified Plan assets at January 31, 2013 and 2012 by asset
category is as follows:
(inthousands)
Equity securities:
Fair Value at
January 31, 2013
Fair Value Measurements
Using Inputs Considered as*
Level 2
Level 1
Level 3
Common/collective trusts a
$
231,544
$
— $
231,544
$
Fixed income securities:
Government bonds
Corporate bonds
Mortgage obligations
Other types of investments:
Limited partnerships
30,320
24,429
30,233
25,374
—
—
4,946
24,429
30,233
14,655
331,181
$
$
—
25,374
—
291,152
$
$
14,655
14,655
(inthousands)
Equity securities:
Fair Value at
January 31, 2012
Fair Value Measurements
Using Inputs Considered as*
Level 2
Level 1
Level 3
Common/collective trusts a
$
187,141
$
— $
187,141
$
Fixed income securities:
Government bonds
Corporate bonds
Mortgage obligations
Other types of investments:
Limited partnerships
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
* 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.
The changes in fair value of the Company’s Qualified Plan Level 3 assets for the years ended
January 31, 2013 and 2012 are as follows:
(inthousands)
January 31, 2011
Unrealized (loss) gain, net
Realized gain (loss), net
Purchases
Settlements
January 31, 2012
Unrealized gain, net
Realized loss, net
Purchases
Settlements
January 31, 2013
Limited partnerships Multi-strategy hedge fund
$
13,059
$
(97)
624
1,641
(3,663)
11,564
1,795
(1,270)
3,793
(1,227)
14,655
$
$
TIFFANY & CO.
KK - 8 1
68
582
(583)
–
(67)
–
–
–
–
–
–
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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 were 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 was available, a value was determined by
the investment manager.
The Company expects the following future benefit payments to be paid:
Benefit Payments
Years Ending January 31,
2014
2015
2016
2017
2018
2019–2023
Pension Benefits
(inthousands)
Other Postretirement Benefits
(inthousands)
$
19,751
20,377
20,110
21,136
23,321
138,650
$
2,088
2,082
2,030
1,977
1,968
10,547
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 no expense in 2012 and an expense of
$3,150,000 and $4,500,000 in 2011 and 2010. Under the retirement savings feature of the EPSRS
Plan, employees who meet certain eligibility requirements may participate by contributing up to
50% of their annual compensation beginning in 2012, not to exceed Internal Revenue Service
limits, 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 $7,278,000, $6,968,000 and
$6,016,000 in 2012, 2011 and 2010. 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
TIFFANY & CO.
KK - 8 2
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, 2013, investments in Company stock represented 27% 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. 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
$3,387,000, $2,926,000 and $1,866,000 in 2012, 2011 and 2010.
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 $24,463,000 and $20,816,000 at January 31, 2013 and
2012, and are reflected in other long-term liabilities. The Company does not promise or guarantee
any rate of return on amounts deferred.
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P.
INCOME TAXES
Earnings from operations before income taxes consisted of the following:
(inthousands)
United States
Foreign
Years Ended January 31,
2013
$ 510,853
132,723
$ 643,576
2012
$ 448,780
216,171
$ 664,951
2011
$ 352,126
195,308
$ 547,434
Components of the provision for income taxes were as follows:
(inthousands)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Years Ended January 31,
2011
2012
$ 181,935
35,109
59,485
276,529
(49,746)
(447)
(575)
(50,768)
$ 225,761
$ 149,815
36,580
52,968
239,363
(52,452)
(8,220)
340
(60,332)
$ 179,031
2013
$ 167,462
28,461
50,778
246,701
378
223
(19,883)
(19,282)
$ 227,419
TIFFANY & CO.
KK - 8 3
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
2013
35.0%
3.0
0.5
(3.4)
0.9
(1.4)
0.7
35.3%
Years Ended January 31,
2012
35.0%
3.3
0.2
(4.0)
0.3
(1.6)
0.8
34.0%
2011
35.0%
2.8
0.6
(4.0)
0.3
(1.2)
(0.8)
32.7%
The Company has the intent to indefinitely reinvest any undistributed earnings of primarily all
foreign subsidiaries. As of January 31, 2013 and 2012, the Company has not provided deferred
taxes on approximately $474,000,000 and $403,000,000 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 $87,000,000 and $71,000,000
would be incurred if these earnings were distributed.
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Deferred tax assets (liabilities) consisted of the following:
(inthousands)
Deferred tax assets:
Pension/postretirement benefits
Accrued expenses
Share-based compensation
Depreciation
Amortization
Foreign and state net operating losses
Sale-leaseback
Inventory
Accrued exit charges
Financial hedging instruments
Unearned income
Other
Valuation allowance
Deferred tax liabilities:
Foreign tax credit
2013
$ 131,974
28,637
25,252
49,159
11,711
27,976
57,955
59,071
6,193
13,824
11,022
25,115
447,889
(14,181)
433,708
January 31,
2012
$ 123,721
30,219
24,312
42,141
11,425
20,891
73,562
35,426
9,233
4,054
13,638
16,804
405,426
(13,570)
391,856
(47,913)
(38,294)
Net deferred tax asset
$ 385,795
$ 353,562
TIFFANY & CO.
KK - 8 4
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 $7,000,000 and $107,000,000
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 2014 through 2031.
The following table reconciles the unrecognized tax benefits:
(inthousands)
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
2013
25,509
4,426
(1,713)
156
—
(161)
28,217
$
$
2012
32,273
1,365
(6,480)
312
(1,760)
(201)
25,509
$
$
January 31,
2011
32,226
2,367
(2,003)
3,241
(1,394)
(2,164)
32,273
$
$
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Included in the balance of unrecognized tax benefits at January 31, 2013, 2012 and 2011 are
$17,564,000, $12,998,000 and $11,605,000 of tax benefits that, if recognized, would affect the
effective income tax rate.
The Company recognizes interest expense and penalties related to unrecognized tax benefits
within the provision for income taxes. During the years ended January 31, 2013, 2012 and 2011,
the Company recognized approximately $650,000, $3,924,000 and $1,184,000 of expense
associated with interest and penalties. Accrued interest and penalties are included within accounts
payable and accrued liabilities and other long-term liabilities, and were $7,878,000 and $7,228,000
at January 31, 2013 and 2012.
The Company is subject to taxation in the U.S. and various state 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 2008–2010),
New York City (tax years 2009–2010), New Jersey (tax years 2006–2009) and Japan (tax years
2009–2011), as well as an audit that is being conducted by 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.
TIFFANY & CO.
KK - 8 5
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 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.
Certain information relating to the Company’s segments is set forth below:
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(inthousands)
Net sales:
Americas
Asia-Pacific
Japan
Europe
Total reportable segments
Other
Earnings (losses) from operations: *
Americas
Asia-Pacific
Japan
Europe
Total reportable segments
Other
2013
1,839,969
810,420
639,185
432,167
3,721,741
72,508
3,794,249
345,917
188,510
204,510
90,955
829,892
(6,254)
823,638
$
$
$
$
Years Ended January 31,
2012
2011
$
$
$
$
1,805,783
748,214
616,505
421,141
3,591,643
51,294
3,642,937
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
340,331
133,448
162,800
88,309
724,888
3,358
728,246
* Represents earnings (losses) from operations before unallocated corporate expenses, 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.
TIFFANY & CO.
KK - 8 6
The following table sets forth reconciliations of the segments’ earnings from operations to the
Company’s consolidated earnings from operations before income taxes:
(inthousands)
Earnings from operations for
segments
Unallocated corporate expenses
Other operating expense
Interest expense, financing costs and
other income, net
Earnings from operations before
income taxes
2013
$ 823,638
(126,421)
—
Years Ended January 31,
2012
2011
$ 878,910
(127,765)
(42,719)
$ 728,246
(115,830)
(17,635)
(53,641)
(43,475)
(47,347)
$ 643,576
$ 664,951
$ 547,434
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.
Other operating expense was related to Tiffany’s relocation of its New York headquarters staff to a
single location (see “Note K. Commitments and Contingencies”).
Sales to unaffiliated customers and long-lived assets by geographic areas were as follows:
K
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(inthousands)
Net sales:
United States
Japan
Other countries
Long-lived assets:
United States
Japan
Other countries
2013
$ 1,696,502
639,185
1,458,562
$ 3,794,249
$
$
630,805
28,971
200,480
860,256
Years Ended January 31,
2012
2011
$ 1,687,478
616,505
1,338,954
$ 3,642,937
$
$
597,124
32,030
171,014
800,168
$ 1,484,505
546,537
1,054,248
$ 3,085,290
$
$
529,763
31,729
135,486
696,978
TIFFANY & CO.
KK - 8 7
(inthousands)
Net sales:
Statement, fine & solitaire jewelry
Engagement jewelry & wedding
bands
Silver, gold & RUBEDO® metal
jewelry
Designer jewelry
All other
Classes of Similar Products
2013
Years Ended January 31,
2011
2012
$
700,615
$
655,804
$
534,107
1,093,411
1,058,921
853,488
1,146,716
531,469
322,038
$ 3,794,249
1,108,182
501,290
318,740
$ 3,642,937
985,754
437,514
274,427
$ 3,085,290
Certain reclassifications have been made to the prior years’ classes of similar products to conform
to the current year presentation.
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R. QUARTERLY FINANCIAL DATA (UNAUDITED)
(inthousands,exceptpershareamounts)
Net sales
Gross profit
Earnings from operations
Net earnings
Net earnings per share:
Basic
Diluted
April 30
$ 819,170
469,018
134,985
81,534
July 31 October 31
$ 852,741
464,289
117,295
63,179
$ 886,569
499,162
154,580
91,801
2012 Quarters Ended
January 31
$ 1,235,769
730,815
290,357
179,643
$
$
0.64
0.64
$
$
0.72
0.72
$
$
0.50
0.49
$
$
1.42
1.40
(inthousands,exceptpershareamounts)
Net sales
Gross profit
Earnings from operations
Net earnings
Net earnings per share:
April 30 a
$ 761,018
443,693
135,966
81,063
July 31 a October 31
$ 821,767
475,849
146,177
89,689
$ 872,712
514,697
140,540
90,043
2011 Quarters Ended
January 31
$ 1,187,440
716,915
285,743
178,395
Basic
Diluted
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”).
0.64
0.63
0.70
0.69
0.71
0.70
$
$
$
$
$
$
$
$
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.
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.
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Report of Management
Management’sResponsibilityforFinancialInformation. 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.
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The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm. Their report is shown on page K-45. 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.
Management’sReportonInternalControloverFinancialReporting. 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, 2013 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, 2013 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report which is shown on page K-
45.
/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
TIFFANY & CO.
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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, 2013.
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, 2013, 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, 2013.
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, 2013.
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, 2013.
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, 2013.
TIFFANY & CO.
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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, 2013 and 2012.
Consolidated Statements of Earnings for the years ended January 31, 2013, 2012 and 2011.
Consolidated Statements of Comprehensive Earnings for the years ended January 31, 2013, 2012
and 2011.
Consolidated Statements of Stockholders' Equity for the years ended January 31, 2013, 2012 and
2011.
Consolidated Statements of Cash Flows for the years ended January 31, 2013, 2012 and 2011.
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Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
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 not applicable, not required, or because the
information required is included in the consolidated financial statements and notes thereto.
3. Exhibits
The information called for by this item is incorporated herein by reference to the Exhibit Index in
this report.
TIFFANY & CO.
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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, 2013
TIFFANY & CO.
(Registrant)
By:
/s/ Michael J. Kowalski
Michael J. Kowalski
Chairman of the Board and 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)
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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/ William A. Shutzer
Peter W. May
Director
William A. Shutzer
Director
By:
/s/ Robert S. Singer
Robert S. Singer
Director
March 28, 2013
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EXHIBIT INDEX
Exhibit Table (numbered in accordance with Item 601 of Regulation S-K)
Exhibit No.
Description
3.1
3.1a
3.2
4a
10.1
10.2
10.3
10.3a
10.4
10.4a
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.
Incorporated by reference from 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.
Upon the request of the Securities and Exchange Commission, the Registrant will
furnish a copy of all instruments defining the rights of holders of long-term debt of
the Registrant.
Amended and Restated Agreement, dated as of December 27, 2012, by and
between Tiffany and Company and Elsa Peretti. Incorporated by reference from
Exhibit 10.123 filed with Registrant's Report on Form 8-K dated January 2, 2013.
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.
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.
Commitment Increase Supplement, dated as of July 26, 2012, to the Three Year
Credit Agreement (see Exhibit 10.4 above) by and among the Registrant, Tiffany
and Company, Tiffany & Co. International, Tiffany & Co. Japan Inc., the other
Borrowers party thereto, the Lenders party thereto and The Bank of New York
Mellon, as Administrative Agent.
filed with Registrant’s Report on Form 8-K dated July 27, 2012.
Incorporated by reference from Exhibit 10.146a
TIFFANY & CO.
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Exhibit No.
Description
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10.4b
10.5
10.6
10.7
10.8
10.9
10.10
10.11
Amendment No. 1 dated as of October 17, 2012, to the Three Year Credit
Agreement (see Exhibit 10.4 above) by and among the Registrant, Tiffany and
Company, Tiffany & Co. International, Tiffany & Co. Japan Inc., the other Borrowers
party thereto, the Lenders party thereto and The Bank of New York Mellon, as
Administrative Agent.
Guaranty Agreement dated as of December 21, 2011, with respect to the Three-
Year Credit Agreement (see Exhibit 10.4 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.
Amended and Restated Note Purchase and Private Shelf Agreement dated as of
July 25, 2012 by and among the Registrant and various institutional note
purchasers with respect to the Registrant’s $100 million principal amount of 9.05%
Series A Senior Notes due December 23, 2015, $150 million principal amount of
4.40% Series B-P Senior Notes due July 25, 2042 and private shelf facility.
Incorporated by reference from Exhibit 10.155 filed with Registrant’s Report on
Form 8-K dated July 27, 2012.
Amended and Restated Guaranty Agreement dated as of July 25, 2012 with respect
to the Amended and Restated Note Purchase and Private Shelf Agreement (see
Exhibit 10.7 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 July 27, 2012.
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
Agreement (see Exhibit 10.9 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.
Amended and Restated Note Purchase and Private Shelf Agreement dated as of
July 25, 2012 by and among the Registrant and various institutional note
purchasers with respect to the Registrant’s $50 million principal amount of 10.0%
Series A Senior Notes due April 9, 2018, $100 million principal amount of 4.40%
Series B-M Senior Notes due July 25, 2042 and up to $50 million private shelf
facility.
on Form 8-K dated July 27, 2012.
Incorporated by reference from Exhibit 10.159 filed with Registrant’s Report
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Exhibit No.
Description
10.12
10.13
10.14
10.15
10.15a
10.15b
10.16
10.16a
10.16b
Amended and Restated Guaranty Agreement dated as of July 25, 2012 with respect
to the Amended and Restated Note Purchase and Private Shelf Agreement (see
Exhibit 10.11 above) by Tiffany and Company, Tiffany & Co. International and Tiffany
Incorporated by reference
& Co. Japan Inc. in favor of each of the note purchasers.
from Exhibit 10.160 filed with Registrant’s Report on Form 8-K dated July 27, 2012.
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 10.13 above) by Tiffany and Company, Tiffany & Co.
International and Tiffany & Co. Japan Inc.
10.162 filed with Registrant’s Report on Form 10-Q for the Fiscal Quarter ended
July 31, 2010.
Incorporated by reference from Exhibit
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.
Amendment Agreement dated as of May 10, 2011 with respect to the Amortising
Term Loan Facility Agreement (see Exhibit 10.15 above) between and among Koidu
Holdings S.A. (as Borrower), BSG Resources Limited (as Guarantor) and Laurelton
Diamonds, Inc. (as Original Lender).
Second Amendment Agreement dated as of February 12, 2013 with respect to the
Amortising Term Loan Facility Agreement (see Exhibit 10.15 above) between and
among Koidu Limited (as Borrower), BSG Resources Limited (as Guarantor) and
Laurelton Diamonds, Inc. (as Original Lender).
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.
Commitment Increase Supplement, dated as of July 26, 2012, to the Five Year
Credit Agreement (see Exhibit 10.16 above) by and among the Registrant, Tiffany
and Company, Tiffany & Co. International, Tiffany & Co. Japan Inc., the other
Borrowers party thereto, the Lenders party thereto and The Bank of New York
Mellon, as Administrative Agent.
filed with Registrant’s Report on Form 8-K dated July 27, 2012.
Incorporated by reference from Exhibit 10.164a
Amendment No. 1 dated as of October 17, 2012, to the Five Year Credit Agreement
(see Exhibit 10.16 above) by and among the Registrant, Tiffany and Company,
Tiffany & Co. International, Tiffany & Co. Japan Inc., the other Borrowers party
thereto, the Lenders party thereto and The Bank of New York Mellon, as
Administrative Agent.
TIFFANY & CO.
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Exhibit No.
Description
10.17
14.1
21.1
23.1
31.1
31.2
32.1
32.2
101
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Guaranty Agreement dated as of December 21, 2011, with respect to the Five Year
Credit Agreement (see Exhibit 10.16 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.
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, 2013, filed 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 Comprehensive Earnings; (iv) the Consolidated Statements of
Stockholders’ Equity; (v) the Consolidated Statements of Cash Flows; (vi) the Notes
to the Consolidated Financial Statements; and (vii) Schedule II – Valuation and
Qualifying Accounts and Reserves.
Executive Compensation Plans and Arrangements
Exhibit No.
Description
10.18
10.19
10.20
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 September 4,
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.
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Exhibit No.
Description
10.21
10.22
10.23
10.24
10.24a
10.24b
10.24c
10.25
10.26
10.27
10.28
10.28a
10.28b
10.28c
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 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.
Summary of Executive Long Term Disability Plan available to executive officers.
Group Long Term Disability Insurance Policy issued by First Unum Life Insurance,
Policy No. 533717 001.
Individual Disability Insurance Policy issued by Provident Life and Casualty
Insurance Company.
Individual Disability Insurance Policy issued by Lloyd’s of London.
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.
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.
Registrant’s Amended and Restated 1998 Employee Incentive Plan effective May
19, 2005. Incorporated by reference from Exhibit 4.3 with Registrant’s Report on
Form 8-K dated May 23, 2005.
Registrant’s 2005 Employee Incentive Plan as adopted May 19, 2005. Incorporated
by reference from 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.
Registrant’s 2005 Employee Incentive Plan Amended and Adopted as of May 21,
2009.
Form of Fiscal 2013 Cash Incentive Award Agreement for certain executive officers
adopted on March 21, 2013 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 22, 2013.
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Exhibit No.
Description
10.28d
10.28e
10.28f
10.28g
10.28h
10.28i
10.28j
10.28k
10.28l
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 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.
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 (see
Exhibit 10.28d above) 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 (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.
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.
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.
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Exhibit No.
Description
10.28m
10.29
10.29a
10.30
10.30a
10.30b
10.31
10.32
10.33
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.
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.
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.
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.
Terms of Stock Option Award (Transferable Non-Qualified Option) under
Registrant’s 2008 Directors Equity Compensation Plan.
Terms of Time-Vested Restricted Stock Unit Grants under Registrant’s 2008
Directors Equity Compensation Plan.
Share Ownership Policy for Executive Officers and Directors, Amended and
Restated as of March 21, 2013.
with Registrant’s Report on Form 8-K dated March 22, 2013.
Incorporated by reference from Exhibit 10.152 filed
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.
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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Description
Year Ended January 31, 2013:
Reserves deducted from assets:
Accounts receivable allowances:
Doubtful accounts
Sales returns
Allowance for inventory
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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
$ 2,466
$ 1,346
$
9,306
3,367
—
—
—
—
$ 1,732 a
$ 2,080
5,043 b
7,630
31,991 c
2,863 d
54,175
1,232
liquidation and obsolescence
53,938
32,228
Allowance for inventory shrinkage
1,495
2,600
13,570
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.
—
6,786
6,175 e
14,181
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
Sales returns
$
4,705
$ 1,057
$
7,078
6,465
Allowance for inventory
liquidation and obsolescence
Allowance for inventory shrinkage
48,428
1,074
30,665
2,502
—
—
—
—
$ 3,296 a
$
2,466
4,237 b
9,306
25,155 c
2,081 d
10,599 e
53,938
1,495
13,570
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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
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
Balance at
end of
period
Deductions
Description
Year Ended January 31, 2011:
Reserves deducted from assets:
Accounts receivable allowances:
Doubtful accounts
Sales returns
$ 6,286
$ 2,065
$
6,606
2,075
Allowance for inventory
liquidation and obsolescence
Allowance for inventory shrinkage
46,234
954
25,608
3,653
—
—
—
—
$ 3,646 a
$ 4,705
1,603 b
7,078
23,414 c
3,533 d
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 allowances and utilization of deferred tax loss carryforwards.
—
2,408
4,262 e
22,579
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2013 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 16, 2013, at 9:30 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, 2013. 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 2013 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 19,
2013, 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 2012 (February 1, 2012 to
January 31, 2013). 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):
1) By Internet:
2) By Telephone:
www.envisionreports.com/tif
1-866-641-4276
3) By E-mail**: investorvote@computershare.com with “Proxy Materials Tiffany &
Co.” in the subject line. Include name, address and the number
located in the shaded bar on the reverse, and state in the email that
you want a paper copy of current meeting materials.
** 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 6, 2013 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 16, 2013.
The Proxy Statement and Annual Report to Stockholders are available to stockholders at
www.envisionreports.com/tif
Matters to be Voted on at the 2013 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 2013 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 2013 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 19, 2013, the record date,
was 127,117,333. Therefore, 63,558,667 shares must be present at our 2013 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 2013 will be decided by the affirmative vote of the majority of
shares present at the meeting and entitled to vote. 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 and entitled to
vote. That means that the compensation will be approved if more than half of those shares present
at the meeting and entitled to vote on the matter 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 have no effect.
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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 2013 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.
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Stockholders Who Own at Least Five Percent of the Company
OWNERSHIP OF THE COMPANY
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 19, 2013. 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 Investment Authority
Q-Tel Tower, 8th Floor
Diplomatic Area Street, West Bay
P.O. Box 23224, Doha, State of Qatar
BlackRock Inc.
40 East 52nd Street
New York, NY 10022
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, PA 19355
Capital World Investors
333 South Hope Street
Los Angeles, CA 90071
15,809,888
(b)
12.44%
8,110,200
(c)
6.38%
7,292,780
(d)
5.74%
6,878,000
(e)
5.41%
a)
b)
“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 Investment Authority, a citizen of Qatar, reported such beneficial ownership to the SEC
on its Schedule 13G/A as of March 6, 2013 and stated that, as a parent holding company or
control person, it beneficially owned 14,289,398 shares (reported as comprising 11.27% of
outstanding shares) through its wholly-owned subsidiary, Qatar Holding USA LLC, and that it
had sole voting and disposition power with respect to all such shares. Qatar Investment
Authority subsequently reported on its Form 4 dated March 19, 2013 that, as a parent
holding company or control person, it beneficially owned the number of shares referred to
above.
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c)
d)
BlackRock Inc. reported such beneficial ownership to the SEC on its Schedule 13G as of
December 31, 2012 and stated that, as a parent holding company or control person, it
beneficially owned the number of shares referred to above (reported as comprising 6.4% of
outstanding shares) through various subsidiaries that it listed in such Schedule and that it
had sole voting and disposition power with respect to all such shares.
The Vanguard Group, Inc. reported such beneficial ownership to the SEC on its Schedule
13G/A, Amendment No.1, as of December 31, 2012 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 208,701 shares of the Company’s common stock, sole power
to dispose or direct the disposition of 7,090,879 shares, and shared power to dispose or
direct the disposition of 201,901 shares, for an aggregate amount of 7,292,780 shares
beneficially owned (reported as comprising 5.75% of outstanding shares).
e) Capital World Investors reported such beneficial ownership to the SEC on its Schedule 13G
as of December 31, 2012 and stated that, as investment advisor to various investment
companies registered under Section 8 of the Investment Company Act of 1940, it had sole
voting and disposition power with respect to all such shares (reported as comprising 5.4% of
outstanding shares).
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 19, 2013 by those persons who are director nominees or who were, as of the
end of Fiscal 2012, 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. In notes (b) through (o) below, “Vested Stock Options” refer to stock options that are
exercisable as of March 19, 2013 or will become exercisable within 60 days of that date.
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Directors
Rose Marie Bravo
Gary E. Costley
Lawrence K. Fish
Abby F. Kohnstamm
Michael J. Kowalski (CEO)
Charles K. Marquis
Peter W. May
Robert S. Singer
William A. Shutzer
Amount and Nature of
Beneficial Ownership
Percent of Classa
*
*
*
*
*
*
*
*
*
66,434
11,217
44,085
68,585
780,795
194,205
45,585
10,880
338,972
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c
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e
f
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h
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Ownership by Directors, Director Nominees and Executive Officers (continued)
Name
Executive Officers
Patrick F. McGuiness (CFO)
James N. Fernandez
Frederic Cumenal
Jon M. King
All executive officers and
directors as a group (20
persons):
Amount and Nature of
Beneficial Ownership
Percent of Classa
97,260
200,332
28,584
150,078
2,679,982
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2.1%
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
An asterisk (*) is used to indicate less than 1% of the class outstanding.
Includes 61,432 shares issuable upon the exercise of Vested Stock Options. Includes 1,002
shares issuable upon the maturity of restricted stock grants made to directors on May 17,
2012.
Includes 9,215 shares issuable upon the exercise of Vested Stock Options. Includes 1,002
shares issuable upon the maturity of restricted stock grants made to directors on May 17,
2012.
Includes 15,355 shares issuable upon the exercise of Vested Stock Options. Includes 1,002
shares issuable upon the maturity of restricted stock grants made to directors on May 17,
2012.
Includes 61,432 shares issuable upon the exercise of Vested Stock Options. Includes 1,002
shares issuable upon the maturity of restricted stock grants made to directors on May 17,
2012.
Includes 536,750 shares issuable upon the exercise of Vested Stock Options and 37,936
shares under a GRAT.
Includes 61,432 shares issuable upon the exercise of Vested Stock Options, 23,771 shares
held in the Charles and Cynthia Marquis Joint Revocable Trust dated December 8, 2003 and
56,000 shares held in the Charles Marquis 2012 Irrevocable Trust, as Trustee. Mr. Marquis
disclaims beneficial ownership of Company stock held by the Charles Marquis 2012
Irrevocable Trust. Includes 1,002 shares issuable upon the maturity of restricted stock grants
made to directors on May 17, 2012.
Includes 1,002 shares reported to the SEC as under Mr. May’s beneficial ownership on his
Form 4 as of January 14, 2013. Includes 33,932 shares issuable upon the exercise of Vested
Stock Options. Includes 1,002 shares issuable upon the maturity of restricted stock grants
made to directors on May 17, 2012.
Includes 2,878 shares issuable upon the exercise of Vested Stock Options. Includes 1,002
shares issuable upon the maturity of restricted stock grants made to directors on May 17,
2012.
Includes 61,432 shares issuable upon the exercise of Vested Stock Options; 114,000 shares
held by KJC Ltd. of which Mr. Shutzer is the sole general partner and of which three of his
adult children are limited partners; 32,210 shares held in trust for one adult child of which
trust Mr. Shutzer's wife is sole trustee; and 1,002 shares issuable upon the maturity of
restricted stock grants made to directors on May 17, 2012. Mr. Shutzer disclaims beneficial
ownership of Company stock held by KJC Ltd. and shares held in the aforementioned trust.
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k)
l)
m)
n)
o)
Includes 89,920 shares issuable upon the exercise of Vested Stock Options and 678 shares
credited to Mr. McGuiness’s account under the Company’s Employee Profit Sharing and
Retirement Savings Plan.
Includes 148,750 shares issuable upon the exercise of Vested Stock Options and 151 shares
credited to Mr. Fernandez’s account under the Company’s Employee Profit Sharing and
Retirement Savings Plan. Includes 51,431 shares pledged as security in a margin account.
Includes 28,584 shares issuable upon the exercise of Vested Stock Options.
Includes 119,250 shares issuable upon the exercise of Vested Stock Options and 477 shares
held in Mr. King’s account under the Company’s Employee Profit Sharing and Retirement
Savings Plan.
Includes 1,732,878 shares issuable upon the exercise of Vested Stock Options and restricted
stock grants that will mature on May 17, 2013; 1,605 restricted stock units that will mature on
April 1, 2013; and 3,097 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 and Share Pledging by Executive Officers and
Directors” beginning on page PS-37 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 2012, all filing requirements under Section 16(a)
applicable to our directors, executive officers and greater-than-ten-percent stockholders were
satisfied in a timely manner, except that one filing was made 8 days late. Specifically, on March
26, 2013, Mr. Shutzer filed a Form 5 to report two transactions consummated in Fiscal 2012.
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, 2014. 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, 2013 and 2012, 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, 2013
2,837,200
$
29,000
2,866,200
1,636,500
234,500
$ 4,737,200
January 31, 2012
$ 2,629,300
21,500
2,650,800
1,769,450
231,500
$ 4,651,750
a)
b)
Tax fees consist of fees for tax compliance and tax consultation services. These fees
included tax filing and compliance fees of $1,549,900 for the year ended January 31, 2013
and $1,674,650 for the year ended January 31, 2012.
All other fees consist of Sustainability Assurance procedures, Kimberly Process Agreed
Upon Procedures and costs for research software for the years ended January 31, 2013
and January 31, 2012.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
The Board, In General
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.
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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.
Political Spending
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. 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.
In accordance with the Principles Governing Corporate Political Spending, the Company reported
the following expenses for Fiscal 2012. The Company paid $314,447 to Cassidy & Associates, a
government relations firm based in Washington D.C. that engaged, on behalf of the Company, in
lobbying efforts focused on public policy concerning various mining law and sustainability issues
and also addressed certain trade and industry matters for the Company. Cassidy & Associates did
not use any funds from the Company to assist candidates for office or to influence the outcome of
ballot initiatives. Additionally, funds in an amount less than $305, which reflect a portion of the
membership dues the Company or its affiliates paid to major trade associations (defined to include
those trade associations to which the Company and its affiliates pay at least $25,000 in annual
dues), were used by such trade associations for political expenditures.
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 of the nine current directors
attended the Annual Meeting held in May 2012. Mr. J. Thomas Presby, then a director, but not
then standing for election, did not attend.
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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, and Robert S. Singer.
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 Robert S. Singer, 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.
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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 2012
All current and incumbent directors attended at least 87% 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 2012.
(cid:120)
The full Board held six meetings. Attendance averaged 98% amongst all current members.
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(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
The Audit Committee held eight meetings. Attendance averaged 95% amongst all current
members.
The Compensation Committee and its Stock Option Subcommittee held six meetings.
Attendance averaged 97% amongst all current members.
The Nominating/Corporate Governance Committee held six meetings. Attendance
averaged 100% amongst all current 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 six meetings. Attendance averaged 95% amongst all current
members.
The Corporate Social Responsibility Committee held three meetings. All current members
attended all meetings.
Committees of the Board
Board Committee Membership
Compensation
& Stock
Option Sub-
committee*
x
Chair
Audit*
Director
Rose Marie Bravo
Gary E. Costley
Lawrence K. Fish
Abby F. Kohnstamm
Charles K. Marquis
Peter W. May
Robert S. Singer
William A. Shutzer
Michael J. Kowalski
*Comprised solely of independent directors.
x
x
x
x
Chair
x
x
x
x
Corporate
Social
Responsibility
x
Chair
x
Nominating/
Corporate
Governance*
x
x
x
Chair
Dividend
Finance
x
x
x
Chair
x
x
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.
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
each executive officer position. The use of this analysis is discussed in COMPENSATION
DISCUSSION AND ANALYSIS, Competitive Compensation Analysis on page PS-42. 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, nor does it have any potential or actual conflicts with the Company. 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-45 of
the "Compensation Discussion and Analysis" below. The Compensation Committee’s report
appears on page PS-46.
Stock Option Subcommittee
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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 2012 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 2012.
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:
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(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;
(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. Singer meets the SEC criteria
of an “audit committee financial expert.” The Board considered Mr. Singer’s past experience as
Chief Financial Officer of Gucci Group NV, Partner at Coopers & Lybrand, and Chairman of the
audit committee for Fairmont Hotels & Resorts, Inc. The report of the Audit Committee is on page
PS-21.
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
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
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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 sets 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 Board believes there is value in having the Chief
Executive Officer serve as Chairman of the Board for a number of reasons. The Chief Executive
Officer’s active involvement in the operations of the Company improves his ability to set the
agenda for each board meeting. Further, his dual role ensures the strategic planning process and
Company operations remain closely linked to each other.
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 2012.
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.”
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
P S - 1 9
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director. Ms. Jackey was hired as Tiffany’s Director of Product Development and Merchandising –
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 target bonus totaled approximately $230,000 for fiscal year 2012.
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)
92nd Street Y: merchandise grants totaling $875 and $8,500 in Fiscal 2012 and Fiscal 2011
respectively (Mr. May is an honorary member of the Board of Directors).
(cid:120) University of Chicago Cancer Research Foundation (Women’s Board): merchandise grants
totaling $43,620 and $49,750, in Fiscal 2011 and 2010, respectively (Mr. May is a Trustee of
The University of Chicago, a member of its Executive Committee and a member of the
Advisory Council of 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 $30,850 in Fiscal 2012 and $31,500 in each Fiscal 2011 and 2010 (Mr. May
is a Trustee).
(cid:120) Partnership for New York City: $15,000 annual dues contributions in each of Fiscal 2012,
2011 and 2010 (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 and $100,000 in Fiscal 2011 and 2010, respectively (Mr. May
is Chairman of the Board of Trustees).
(cid:120) UJA Federation: $800 in Fiscal 2011 for ticket subscriptions 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 $2,840, $975 and $925 in Fiscal 2012,
2011 and 2010, respectively (Mr. Shutzer is a Trustee).
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(cid:120) Prep for Prep: merchandise grants totaling $2,370, $1,980 and $1,980 for Fiscal 2012,
2011, and 2010, respectively (Mr. Shutzer is a Trustee).
(cid:120) Phoenix House: combination of ticket subscription and merchandise grants totaling
$13,755, $29,690 and $13,170 for Fiscal 2012, 2011 and 2010, respectively (Ms. Bravo is a
member of the Board of Directors).
(cid:120) Roundabout Theatre Company: $25,000 table purchase for spring gala in Fiscal 2012 (Ms.
Kohnstamm is a member of the Board of Directors).
P S - 2 0
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, 2013 and 2012, and the related consolidated statements of
earnings, comprehensive earnings, stockholders’ equity, and cash flows for each of the three years in the
period ended January 31, 2013. 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.
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, 2013.
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Signed:
Robert S. Singer, 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
61 Chairman of the Board and Chief Executive Officer
Michael J. Kowalski
58
Beth O. Canavan
Frederic Cumenal
53
James N. Fernandez 57
Jon M. King
56
Victoria Berger-Gross 57 Senior Vice President – Global Human Resources
Pamela H. Cloud
Patrick B. Dorsey
Andrew W. Hart
Patrick F. McGuiness 47 Senior Vice President – Chief Financial Officer
55 Senior Vice President – Chief Marketing Officer
Caroline D. Naggiar
54 Senior Vice President – Operations and Manufacturing
John S. Petterson
1983
1987
2011
1983
1990
2001
1994
43 Senior Vice President – Merchandising
62 Senior Vice President – General Counsel and Secretary 1985
1999
45 Senior Vice President – Diamonds and Gemstones
1990
1997
1988
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. In 2013, Mrs. Canavan will transition from her current responsibilities
to establish and lead a specialized selling organization focused on growth of high end statement
jewelry sales.
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. In 2012, Mr.
Cumenal’s responsibilities were expanded to include all 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.
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r
James N. Fenandez. Mr. Fernandez joined Tiffany in 1983 and 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. 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 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. From that time through 2012, Mr. King had responsibility
for Merchandising, Marketing and Public Relations. Currently, Mr. King leads the Company’s
product design and store design activities.
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.
Andrew W. Hart. Mr. Hart joined Tiffany in 1999 as Director – Materials Management and
advanced through positions of increasing management responsibility. He was promoted to Vice
President - Diamonds and Gemstones in 2002. In 2012, he was promoted to Senior Vice
President - Diamonds and Gemstones. He is responsible for the Company's global diamond and
gemstone supply chain.
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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, including
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.
P S - 2 3
COMPENSATION OF THE CEO AND OTHER EXECUTIVE OFFICERS
Contents
Compensation Discussion and Analysis .....................................................................Page PS-25
Report of the Compensation Committee ....................................................................Page PS-46
Summary Compensation Table – Fiscal 2012, 2011 and 2010 ...................................Page PS-47
Grants of Plan-Based Awards Table – Fiscal 2012......................................................Page PS-51
Discussion of Summary Compensation Table and Grants of Plan-Based Awards .....Page PS-53
Outstanding Equity Awards at Fiscal Year-end Table ..................................................Page PS-59
Option Exercises and Stock Vested Table – Fiscal 2012.............................................Page PS-62
Pension Benefits Table ................................................................................................Page PS-62
Nonqualified Deferred Compensation Table................................................................Page PS-67
Potential Payments on Termination or Change in Control...........................................Page PS-69
Director Compensation Table – Fiscal 2012 ................................................................Page PS-73
Equity Compensation Plan Information…………………………………….…………..…Page PS-76
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COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)
Executive Summary1
Say on Pay
In May 2012, the Company’s Say on Pay proposal passed with 95.7% of the stockholder votes
in favor of the Company’s executive compensation program.
2012 Company Performance and Short-term Cash Incentive Awards
The Company’s consolidated Fiscal 2012 net earnings were modestly above the minimum
established by the Compensation Committee of the Board of Directors (the “Committee”) at
the start of the year and communicated to the executive officers.
As a result, and consistent with the Committee’s communication to the executive officers at the
start of the year, the Committee paid the executive officers 14% of their target Fiscal 2012
annual incentive/bonus, with the exception of two executive officers who were paid 18-19% of
their target annual incentive/bonus based on individual factors.
2013 Executive Compensation
In January 2013, the Committee decided to leave the structure of the executive compensation
program unchanged for Fiscal 2013. The Committee considered stockholder support
demonstrated for the May 2012 Say on Pay proposal in reaching this decision. For the
executive officers, compensation will continue to be structured as follows for Fiscal 2013:
(cid:120)
(cid:120)
(cid:120)
Target incentive awards/bonuses will range from 50-70% of base salary for the
executive officers other than the chief executive officer,
Target incentive award will remain 100% for the chief executive officer, and
Long-Term incentive awards will range from 100%-300% of base salary (in each case,
comprised of 50% stock options/50% performance-based restricted stock units).
Base Salary and Incentive Awards/Bonuses
The Committee determined that base salary and target incentive awards/bonuses for Fiscal
2013 would remain the same as in Fiscal 2012 with the exception of one newly-appointed
senior vice president, whose base salary and target incentive were increased.
The Committee deferred consideration of an overall adjustment to base salary and target
incentive awards/bonuses until January 2014. The Committee had announced previously that
it would consider changes in base salary and annual incentive compensation rates on a two-
year cycle. Consistent with the foregoing, the Committee was scheduled to consider an overall
adjustment in January 2013, but deferred this decision due to a Company-wide expense
reduction program intended for Fiscal 2013 and the annual compensation review’s conclusion
that target compensation remains broadly competitive.
In January 2013, the Committee approved the target amounts (but not specific performance
targets) for annual incentives/bonuses to be paid in respect of Fiscal 2013. Payments, if any,
will be made in Fiscal 2014.
1 All references to years relate to fiscal years that end on January 31 of the following calendar year.
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In March 2013, the Committee set the specific performance targets for annual
incentives/bonuses to be paid in respect of Fiscal 2013. Payments, if any, will be made in
Fiscal 2014.
In March 2013 the Committee provided guidance to the executives with respect to annual
incentives/bonuses to be paid in respect of Fiscal 2013. No annual incentives/bonuses shall
be paid if earnings fall below $268.2 million for Fiscal 2013 and no annual incentive/bonus shall
exceed an executive’s maximum award. If earnings equal or exceed $268.2 million, annual
incentives/bonuses may be paid, in which case the Committee will base a portion of the annual
incentives/bonuses on Corporate factors (up to 160% of the target incentive award/bonus for
each executive) and a portion on Individual factors (up to 40% of the target incentive
award/bonus for each executive).
Long Term Incentive Awards
The Committee made long term incentive awards to 12 executive officers in January 2013.
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 determined that
the long-term incentive award values for Fiscal 2013 (as a ratio of base salary) would remain
the same as in Fiscal 2012 with the exception of one executive officer for whom the long-term
incentive award value was reduced due to a recent change in responsibilities, and one
executive officer for whom the long-term incentive award value was increased due to a
promotion.
Corporate Governance Best Practices
Corporate governance of the Company’s executive compensation program is demonstrated by
a number of practices, including:
o
o
o
o
o
o
o
formal stock ownership guidelines for directors and executive officers;
recoupment provisions applicable to equity awards and retirement benefits in
connection with non-compete covenants;
engagement by the Compensation Committee of the Board of Directors (the
“Committee”) of its own independent consultant;
prohibition on hedging of Parent stock;
no tax gross-ups;
“dual trigger” change in control agreements; and
limited use of employment agreements (for newly-recruited senior executives only).
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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.
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, and, for Fiscal
2013, on individual factors as well
– 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 executives2; and
(ii) life insurance benefits that
build cash value.
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.
2 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-64. 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-68.
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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 2012, the
Committee left the compensation program for Fiscal 2013 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 reviews 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. The Committee has not made an overall adjustment to the executive officers’
base salary and target incentive awards since January 2011, except for in instances of
promotions and changes in responsibility. See below under the heading Compensation
Committee Process (on PS-45) 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 – No Benchmarks on PS-42.
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.
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Relative Values of Key Compensation Components
The Committee uses the following ratios to base salary as a means of awarding short- and long-
term incentives. 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%
Maximum
Short-term
Incentive as a
Percent of
Salary
200%
Long-term
Incentive as a
Percent of
Salary
300%
50%
70%
70%
70%
100%
150%
140%
225%
140%
200%
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
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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 approximately 40% of the total compensation opportunity of the other
executive officers should be comprised of long-term incentives.
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 16, 2013 that executive salaries would remain the same
for fiscal year 2013.
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 to this group for three years; competitive market
compensation levels for comparable positions; and internal equity. In January 2013, the base
salary of only one executive officer was increased. The Committee elected to defer
consideration of an overall adjustment until January 2014, due to a Company-wide expense
P S - 2 9
reduction program intended by management for Fiscal 2013 and the annual compensation
review’s conclusion that target compensation remains broadly competitive.
Short-term Incentives
Why: The Committee uses short-term incentives to motivate executive officers to achieve the
annual profit plan and to demonstrate strategic leadership. 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.
For annual incentives/bonuses to be paid in respect of Fiscal 2013, the Committee will determine
a portion of the awards based on the following individual factors: strategic thinking; leadership,
including development of effective management teams and employee talent; demonstrated
adherence to the Company’s Standards of Business Conduct – Worldwide; financial metrics
relevant to the specific areas of responsibility; and specific objectives set for the executive
officer.
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 (see PS-53).
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 Fiscal 2012 and which will remain in effect for Fiscal 2013, 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 incentives established by the Committee for each of the named executive
officers for Fiscal 2011, Fiscal 2012, and Fiscal 2013 were each set at twice the target. That
means 200% of base salary in the case of Mr. Kowalski; 140% of base salary for Messrs.
Fernandez, Cumenal and King; and 100% of base salary for Mr. McGuiness (maximum bonus).
Fiscal 2012 Short-term Goals
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 would exercise its discretion as follows:
(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.
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(cid:120)
(cid:120)
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.
In March 2013, 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 of 14% of target to all but two of the executive officers, who were paid 18-19% of target.
Fiscal 2012 net earnings fell between $409 million and $511 million.
(cid:120)
(cid:120) Based on Fiscal 2012 net earnings, the implied payout under the goals set forth above
was 14% of target.
Fiscal 2013 Short-term Goals
In March 2013, the Committee established, as a condition to awarding the maximum incentive
awards, that the Company attain Fiscal 2013 net earnings of $268.2 million. At the same time
the Committee also advised the executive officers that the Committee will exercise its discretion
as follows:
Corporate Portion
(cid:120)
(cid:120)
(cid:120)
(cid:120)
To pay 0% of the target incentive award if Fiscal 2013 net earnings do not equal or
exceed $357.8 million;
To pay 64% of the target incentive award if Fiscal 2013 net earnings equal $447 million;
To pay 80% of the maximum incentive award if Fiscal 2013 net earnings equal $536.6
million; and
To prorate the corporate portion of the incentive award payable if Fiscal 2013 net
earnings fall between the amounts set forth above.
Individual Portion
(cid:120)
To pay up to 40% of the maximum incentive award based on demonstrated strategic
thinking; leadership; adherence to the Company’s Standards of Business Conduct –
Worldwide and professionalism; financial metrics relevant to the executive’s specific
areas of responsibility; and specific objectives set for the executive officer by the chief
executive officer, or, in the case of the chief executive officer, by the Board of Directors.
Five-year History of Short-term Incentive Payouts
The following is the record of short-term incentive payouts (including bonuses) for the executive
officers as a group average as a percent of target over the past five fiscal years:
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(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Fiscal 2012: 15% of target;
Fiscal 2011: 121% of target;
Fiscal 2010: 152% of target;
Fiscal 2009: 200% of target; and
Fiscal 2008: 0% 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
Performance-Based Restricted Stock Unit Grants Made in January 2013 and 2012
Complete vesting of performance-based restricted stock units granted in January 2013 and in
January 2012 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 2013, 2014 and
2015 for the 2013 grants) (Fiscal Years 2012, 2013 and 2014 for the 2012 grants).
P S - 3 2
(cid:120)
(cid:120)
(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.
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
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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
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
25% to 35%
12.5% to
17.5%
90% to 110%
45% to 55%
180% to 200% 90% to 100%
Performance Tagets, Thresholds and Maximums - January 2013 Performance-Based Grants
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In March 2013, the Committee established the following in respect of the performance-based
restricted stock units granted in January 2013, subject to adjustments as permitted under the
Plan:
(cid:120) Earnings Target: $11.86 per share (aggregate net earnings per share on a diluted basis over
the three-year period);
(cid:120) ROA Target: 9.8% (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);
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(cid:120) Earnings Threshold: $7.62 per share (aggregate net earnings per share on a diluted basis
over the three-year period); and
(cid:120) Earnings Maximum: $13.87 per share (aggregate net earnings per share on a diluted basis
over the three-year period).
Performance Tagets, Thresholds and Maximums - January 2012 Performance-Based Grants
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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).
Performance Tagets, Thresholds and Maximums - January 2011 Performance-Based Grants
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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 Tagets, Thresholds and Maximums - January 2010 Performance-Based Grants
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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).
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Five year History of Performance-Based Restricted Stock Unit Payouts
The following is the payout history for performance-based restricted stock units made to the
executive officers:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Fiscal 2006 through 2008 Performance Period: 36.4% of maximum;
Fiscal 2007 through 2009 Performance Period: 0% of maximum;
Fiscal 2008 through 2010 Performance Period: 0% of maximum;
Fiscal 2009 through 2011 Performance Period: 50% of maximum; and
Fiscal 2010 through 2012 Performance Period: 56% of maximum
***
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.
(For a description of the stock options see DISCUSSION OF SUMMARY COMPENSATION
TABLE AND GRANTS OF PLAN-BASED AWARDS – Options).
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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. For example, 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.
P S - 3 5
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.
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.
For executive officers hired by the Company on January 1, 2006 or later (such as Mr. Cumenal), 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.
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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.
P S - 3 6
Disability Insurance Benefits
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 and Share Pledging 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
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.
In March 2013 the Board revised the share ownership policy to provide that shares of the
Company’s common stock that are pledged to a third party (for example, where common stock
is held in a margin account maintained at a brokerage firm), will not count towards the share
ownership goals except to the extent that the market value of the pledged shares exceeds the
amount of the secured obligation on the date of valuation.
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 stock units (after paying the exercise
price and tax withholding).
P S - 3 7
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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, 2013, the chief executive officer had exceeded his goal by more than four
times and 9 of the remaining 11 executive officers had achieved their goal.3 As of January 31,
2013, 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.
Since the Company went public in 1987, it has not had a single controlling stockholder, 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.
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;
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(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)
3 Mr. Cumenal (who joined the Company in Fiscal 2011) and Mr. Hart (who was promoted to Senior Vice President in Fiscal 2012),
have not yet achieved their goals.
P S - 3 8
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.
r
Dual Tiggers
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
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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)
is not party to any employment agreement with any executive officer that provides for
severance benefits on termination of employment;
(cid:120) does not maintain any severance payment policy for executive officers; and
(cid:120)
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.
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. (In October 2012, he was
assigned such responsibility for the Americas as well.) 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
P S - 3 9
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)
(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) Severance Prior to a Change in Control – Termination without Cause; Resignation for
(cid:120)
(cid:120)
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 “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.
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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, was 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
(cid:120)
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.
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” was 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 then 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, remained in force until January 31, 2013.
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
(cid:120)
(cid:120)
of 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;
(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)
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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.
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.
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:
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(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 14, 2012
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.
In addition, for the retail market data, two retail groups are used (although for the chief executive
officer analysis the first group described, see A below, was the primary group used for analysis).
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
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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 15 U.S. public companies in the specialty retail industry with median revenues
of $3.7 billion (see A below);
a survey of 10 public and private companies in the retail industry with median revenues of
$3.5 billion (see B below); and
a survey of 292 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 2012 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.; Fifth & Pacific
(formerly Liz Claiborne, Inc.); Foot Locker, Inc.; Limited Brands Inc.; Movado Group Inc.;
Nordstrom Inc.; Pier 1 Imports Inc.; Polo Ralph Lauren Corp.; Phillips Van Heusen; Saks
Incorporated; Sotheby’s; Williams-Sonoma Inc.; and Zale Corporation.
(B) Retail Companies: Ann Inc.; Coach Inc.; Fifth & Pacific; Gap; Harry Winston Diamond Corp.;
J. Crew Group Inc.; Limited Brands, Inc.; Nordstrom Inc.; Phillips-Van Heusen; and Zale
Corporation.
Both groups were the same as those reviewed prior to the Committee’s determination of
executive officer compensation for fiscal 2012, with two exceptions. The first group previously
included Talbots, which is no longer a publicly traded company. The second group previously
included LL Bean, which no longer participates in the Towers Watson Retail survey.
***
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 2012)
was positioned as follows:
(cid:120)
(cid:120)
the chief executive officer’s target total compensation was below the 50th percentile; and
the target total compensation for all other named executive officers (Messrs. McGuiness,
Fernandez, Cumenal and King) were between the 50th and 75th percentiles.
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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 expected to be deductible by the
Company except in the following respect: compensation that exceeds $1 million in any single
year for any single named executive officer consisting of the following elements: “Salary” and “All
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Other Compensation” in the Summary Compensation Table, plus compensation that relates to
the time-vesting restricted stock units described in note (c) to the Summary Compensation
Table. The Committee may decide, in the course of exercising its business judgment, to adjust
payouts under one or more other compensation components in a way that disqualifies such
payouts as performance based for a particular year.
* * *
REPORT OF THE COMPENSATION COMMITTEE
We have reviewed and discussed with the management of Tiffany & Co. the Compensation
Discussion and Analysis section of this Proxy Statement. Based on our review and discussions,
we recommend to the Board of Directors, to the chief executive officer and to the chief financial
officer that the Compensation Discussion and Analysis be included in this Proxy Statement and
the Annual Report on Form 10-K for the fiscal year ended January 31, 2013.
Compensation Committee and its Stock Option Subcommittee:
Gary E. Costley, Chair
Rose Marie Bravo
Abby F. Kohnstamm
Charles K. Marquis
Peter W. May
Robert S. Singer
March 20, 2013
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SUMMARY COMPENSATION TABLE
Fiscal 2012, Fiscal 2011 and Fiscal 2010
Change in
Pension Value
and Nonquali-
fied
Deferred
Compen-
sation
Earnings
($) (f)
Non-
Equity
Incentive
Plan
Compen-
sation
($) (e)
All
Other
Compen-
sation
($)
Total
($)
Stock
Awards
($) (c)
Option
Awards
($) (d)
$ 1,569,229
$ 1,505,835
$ 140,000
$ 1,783,014
$ 141,158 (g) $ 6,136,551
$ 1,569,700
$ 1,514,352
$ 1,150,000
$ 3,576,867
$ 172,178 (h) $ 8,980,412
$ 2,914,347
$ 1,472,010
$ 1,550,000
$ 2,144,799
$ 167,124 (i) $ 9,207,237
Year
Salary
($) (a)
Bonus
($) (b)
2012 $ 997,315
2011 $ 997,315
2010 $ 958,957
---
---
---
2012 $ 513,617
$ 36,000
$ 402,197
$ 392,827
2011 $ 513,617
$310,000
$ 966,197
$ 936,380
---
---
$ 505,151
$ 79,642 (j) $ 1,929,434
$ 607,692
$ 79,693 (k) $ 3,413,579
2012 $ 847,748
2011 $ 847,718
2010 $ 746,452
2012 $ 847,748
2011 $ 756,425
2012 $ 738,013
2011 $ 738,013
2010 $ 604,329
---
---
---
---
---
---
---
---
$ 995,603
$ 960,243
$ 85,000
$ 1,363,317
$ 150,777 (l) $ 4,402,688
$ 2,120,758
$ 2,064,721
$ 720,000
$ 2,168,021
$ 149,252 (m) $ 8,070,470
$ 980,991
$ 883,516
$ 944,723
$ 851,124
$ 800,000
$ 85,000
$ 1,172,618
---
$ 125,244 (n) $ 4,770,028
$ 690,278 (o) $ 3,357,666
$ 3,501,889
$ 1,709,681
$ 720,000
---
$1,236,409 (p) $ 7,924,404
$ 771,428
$ 742,006
$ 70,000
$ 969,665
$ 131,548 (q) $ 3,422,660
$ 778,571
$ 746,512
$ 570,000
$ 1,491,912
$ 128,627 (r) $ 4,453,635
$ 756,938
$ 725,020
$ 650,000
$ 1,481,319
$ 98,499 (s) $ 4,316,105
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:
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(a)
(b)
(c)
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) Plan”).
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) Plan. 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 16, 2013). 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
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service-based vesting conditions. For Mr. Fernandez, the 2011 amount includes the grant
date 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
2012
$2,853,144
2011
$2,854,000
2010
$4,172,790
$ 731,268
$1,300,115
Not a named
Executive Officer
$ 1,810,188
$2,942,710
$1,783,620
$ 1,606,392
$4,980,551
$ 1,402,596
$1,415,584
Not a named
Executive Officer
$1,376,250
(d)
(e)
(f)
Amounts shown represent the dollar amount of the grant date fair value of the stock option
award (which includes the grants made on January 16, 2013) 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.
The 2011 amount includes a change in discount rate from 6.0% to 5.0% and the 2012
amount includes a change in discount rate from 5.0% to 4.5%. 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.
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(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
Mr. Kowalski’s Fiscal 2012 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($119,510); disability insurance premium ($14,298); and 401(k) Plan
matching contribution ($7,350).
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) Plan
matching contribution ($7,350).
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) Plan
matching contribution ($5,754).
Mr. McGuiness’s Fiscal 2012 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($62,181); disability insurance premium ($10,111); and 401(k) Plan
matching contribution ($7,350).
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) Plan
matching contribution ($7,350).
Mr. Fernandez’s Fiscal 2012 compensation included the following elements whose total
incremental cost to the Company is shown in the column titled “All Other Compensation”: life
insurance premium ($127,017); disability insurance premium ($16,410); and 401(k) Plan
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) Plan
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) Plan
matching contribution ($6,831).
Mr. Cumenal’s Fiscal 2012 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 ($12,475); Defined Contribution
Retirement Benefit under U.S. plan ($7,350); Excess Defined Contribution Benefit under U.S.
plan ($13,386); 401(k) Plan matching contribution ($7,350); Defined Contribution to French
Pension Scheme ($88,946); Payment to Special Retirement Account ($378,481); Payment
towards tax preparation consultation services ($32,290). 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 – 39.
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
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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 – 39.
(q) Mr. King’s Fiscal 2012 compensation included the following elements whose total incremental
cost to the Company is shown in the column titled “All Other Compensation”: life insurance
premium ($110,848); disability insurance premium ($13,350); and 401(k) Plan matching
contribution ($7,350).
(r)
(s)
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) Plan matching
contribution ($7,350).
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) Plan matching
contribution ($7,099).
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GRANTS OF PLAN-BASED AWARDS
Fiscal 2012
2005
Employee
Incentive
Plan
Name
Award Type
Grant
Date
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards
Estimated Future Payouts
Under Equity Incentive
Plan Awards (a)
All Other
Option/Stock
Awards:
Number
of Securities
Underlying
Options/Awards
(#)
Exercise
or Base
Price of
Option
Awards
($/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 $2.01
and
Return on
Assets
Target is
met)
5,950
23,800
47,600
$1,569,229
69,000 $ 63.76 $1,505,835
1,525
6,100
12,200
18,000
$ 402,197
$ 63.76 $ 392,827
3,775
15,100
30,200
44,000
$ 995,603
$ 63.76 $ 960,243
3,350
13,400
26,800
39,000
$ 883,516
$ 63.76 $ 851,124
2,925
11,700
23,400
$ 771,428
Michael J.
Kowalski
Patrick F.
McGuiness
James N.
Fernandez
Frederic
Cumenal
Jon M.
King
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Annual
Incentive
Performance-
Based RSU 1/16/13
Stock Option 1/16/13
Annual
Incentive
Performance-
Based RSU 1/16/13
Stock Option 1/16/13
Annual
Incentive
Performance-
Based RSU 1/16/13
Stock Option 1/16/13
Annual
Incentive
Performance-
Based RSU 1/16/13
Stock Option 1/16/13
Annual
Incentive
Performance-
Based RSU 1/16/13
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
$ 0 $ 518,000 $1,036,000
Stock Option 1/16/13
34,000
$ 63.76 $ 742,006
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, 2016. 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.
P S - 5 1
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 2013, 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 $7.62 per diluted share.
The Earnings Target is $11.86 per diluted share.
The Earnings Maximum is $13.87 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 9.8%.
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, 26,180;
Patrick F. McGuiness, 6,710; James N. Fernandez, 16,610; Frederic Cumenal, 14,740;
and Jon M. King, 12,870.
P S - 5 2
T
N
E
M
E
T
A
T
S
Y
X
O
R
P
(b)
(c)
(d)
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-59.
DISCUSSION OF SUMMARY COMPENSATION TABLE
AND GRANTS OF PLAN-BASED AWARDS
Non-Equity Incentive Plan Awards
Fiscal 2012
P
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O
X
Y
S
T
A
T
E
M
E
N
T
At the beginning of Fiscal 2012, the Committee granted cash (non-equity) awards. The potential
maximum payout under these awards was to be determined on the basis of Fiscal 2012 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 15% of target (7.5% of maximum), on average.
(cid:120)
The performance goal established for Fiscal 2012 was net earnings (subject to
adjustment as permitted in the Plan) of $306 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 2012 net earnings did not equal or exceed $409 million;
o to the target amount, if net earnings equaled $511 million; and
o to 200% of the target amount if net earnings equaled or exceeded $614 million.
(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 reserved 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
such growth and/or profitability);
organizational development;
(cid:120)
P S - 5 3
(cid:120)
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 2011 and Fiscal 2010
In Fiscal 2011and 2010, annual incentive awards were paid out as follows:
(cid:120)
(cid:120)
In Fiscal 2011, the Company’s consolidated net earnings exceeded the target established
by the Committee by 15.3%, and annual incentive awards and bonuses were paid out at
121% of the target amount, on average.
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.
Diference between Bonus Awards and Annual Incentive Awards
f
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.
(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)
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A
T
S
Y
X
O
R
P
P S - 5 4
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 2013 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; 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.
P
R
O
X
Y
S
T
A
T
E
M
E
N
T
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) Earnings Maximum: cumulative net EPS of $12.21 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;
(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 has been 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%;
(cid:120)
(cid:120)
P S - 5 5
(cid:120)
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) Under no combination of circumstances will vesting occur for more than the number of
Units granted (twice Target Shares).
In March 2013, it was determined that a cumulative net EPS of $9.84 per diluted share was
achieved for the performance period ending January 31, 2013. The return on assets for the
performance period equaled 10.3%. Accordingly, the Earnings Target was exceeded by $0.74,
and the ROA Target was not achieved. As a result, 56% vesting of the maximum shares granted
occurred for each executive officer.
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;
(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).
Performance tests for January 2012 Grants – Performance Period ending January 31, 2015:
(cid:120) Earnings Threshold: cumulative net EPS of $9.64 per diluted share;
(cid:120) Earnings Target: cumulative net EPS of $13.94 per diluted share;
(cid:120) Earnings Maximum: cumulative net EPS of $16.77 per diluted share;
(cid:120) ROA Target: 12.0%;
(cid:120)
If the Threshold is reached, the Committee has the discretion to vest the maximum
number of shares.
P S - 5 6
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A
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X
O
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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 at Earnings Maximum;
(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).
Performance tests for January 2013 Grants – Performance Period ending January 31, 2016:
(cid:120) Same scheme as for the January 2012 Grants – see above – but with different Earnings
Threshold, Earnings Target, Earning Maximum 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.
P
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Y
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A
T
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M
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N
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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).
Life Insurance Benefits
The key features of the life insurance benefit that the Company provides to its executive officers
are:
(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;
P S - 5 7
(cid:120)
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;
(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.
(cid:120)
(cid:120)
(cid:120)
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P S - 5 8
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
January 31, 2013
Option Awards
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
85,000
77,000
101,000
155,000
Option
Exercise
Price
($)
$
$
$
37.8350
40.1500
37.6450
$ 23.0000
67,500
22,500
$ 43.3700
33,500
17,750
0
33,500
$ 58.0000
53,250
$ 60.5400
69,000
$ 63.7600
5,920
9,000
17,000
30,000
15,000
8,500
0
4,500
0
$ 31.6750
$ 40.1500
$ 37.6450
$ 23.0000
5,000
8,500
$ 43.3700
$ 58.0000
20,000
$ 76.8500
13,500
$ 60.5400
18,000
$ 63.7600
Name
Michael J.
Kowalski
Patrick F.
McGuiness
P
R
O
X
Y
S
T
A
T
E
M
E
N
T
James N.
Fernandez
57,000
21,500
37,500
21,500
0
11,250
0
$
37.6450
$ 23.0000
12,500
$ 43.3700
21,500
$ 58.0000
40,000
$ 76.8500
33,750
$ 60.5400
44,000
$ 63.7600
P S - 5 9
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
($)
39,200 / 70,000 (c)
18,390 / 50,800 (d)
10,600 / 50,000 (e)
26,180 / 47,600 (f)
25,000 / 25,000 (k)
$2,577,400 (g)
$1,209,143 (h)
$696,950 (i)
$1,721,335 (j)
$1,643,750 (n)
8,960 / 16,000 (c)
$ 589,120 (g)
4,706 / 13,000 (d)
$ 309,420 (h)
2,756 / 13,000 (e)
$ 181,207 (i)
6,710 / 12,200 (f)
7,500 / 7,500 (l)
$ 441,183 (j)
$ 493,125 (n)
21,280 / 38,000 (c)
11,729 / 32,400 (d)
6,784 / 32,000 (e)
16,610 / 30,200 (f)
15,000 / 15,000 (l)
$1,399,160 (g)
$ 771,182 (h)
$ 446,048 (i)
$1,092,108 (j)
$ 986,250 (n)
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
1/16/23
1/20/15
1/18/17
1/17/18
1/28/19
1/20/20
1/20/21
6/21/21
1/18/22
1/16/23
1/17/18
1/28/19
1/20/20
1/20/21
6/21/21
1/18/22
1/16/23
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (continued)
January 31, 2013
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
($)
9,292
10,000
0
27,876
$ 62.4350
30,000
$ 60.5400
39,000
$ 63.7600
Option
Expiration
Date (a)
3/10/21
1/18/22
1/16/23
26,000
41,000
15,500
27,000
16,500
8,750
0
$ 40.1500
$ 37.6450
$ 23.0000
9,000
$ 43.3700
16,500
$ 58.0000
26,250
$ 60.5400
34,000
$ 63.7600
1/18/17
1/17/18
1/28/19
1/20/20
1/20/21
1/18/22
1/16/23
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
($)
10,432 / 28,818 (d)
$ 685,904 (h)
6,063 / 28,600 (e)
$ 398,642 (i)
14,740 / 26,800 (f)
$ 969,155 (j)
27,228 / 27,228 (m)
$1,790,241 (n)
15,680 / 28,000 (c)
$1,030,960 (g)
9,050 / 25,000 (d)
$ 595,038 (h)
5,258 / 24,800 (e)
$ 345,714 (i)
12,870 / 23,400 (f)
$ 846,203 (j)
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) (j), and (n) 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 2010 grant would have vested three business days following the date on which the
Company’s financial results for Fiscal 2012 are publicly reported.
This 2011 grant will vest three business days following the date on which the Company’s
financial results for Fiscal 2013 are publicly reported.
P S - 6 0
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N
E
M
E
T
A
T
S
Y
X
O
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(e)
This 2012 grant will vest three business days following the date on which the Company’s
financial results for Fiscal 2014 are publicly reported.
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
This 2013 grant will vest three business days following the date on which the Company’s
financial results for Fiscal 2015 are publicly reported.
This value has been computed at 56% of maximum based on Company EPS and ROA
performance in Fiscal 2010, Fiscal 2011 and Fiscal 2012. The resulting value was
computed on the basis of the stock closing price of $65.75 on January 31, 2013.
This value has been computed at 36.2% of maximum based upon Company EPS and
ROA performance in Fiscal 2011 and Fiscal 2012 and projections for Fiscal 2013. The
resulting value was computed on the basis of the stock closing price of $65.75 on
January 31, 2013.
This value has been computed at 21.2% of maximum based upon Company EPS and
ROA performance in Fiscal 2012 and projections for Fiscal 2013 and Fiscal 2014. The
resulting value was computed on the basis of the stock closing price of $65.75 on
January 31, 2013.
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
$65.75 on January 31, 2013.
This one-time Time-Vesting Restricted Stock Unit Award 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 $65.75 on January 31,
2013.
P
R
O
X
Y
S
T
A
T
E
M
E
N
T
P S - 6 1
OPTION EXERCISES AND STOCK VESTED
Fiscal 2012
Option Awards
Stock Awards
Number of
Shares
Acquired on
Exercise
(#)
0
Value
Realized
on Exercise
($)
$ 0
10,000 (a) $ 325,000
60,500 (b) $ 2,161,888
0 $ 0
48,500 (c) $ 1,564,436
Number of
Shares
Acquired on
Vesting
(#)
65,200
12,600
36,200
0
26,100
Value
Realized
on Vesting
($)
$ 4,658,540
$
900,270
$ 2,586,490
$
$ 1,864,845
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)
Weighted-average holding period for options exercised: 8.2 years.
Weighted-average holding period for options exercised: 4.5 years.
Weighted-average holding period for options exercised: 5.4 years.
PENSION BENEFITS TABLE
Actuarial
Present Value
of
Accumulated
Benefits
($)
$ 1,184,196
$ 13,144,982
$ 1,973,179
$ 434,885
$ 1,031,466
$ 429,243
Number
of Years
Credited
Service
34 (b) (d)
34 (b) (d)
34 (b) (d)
22
22
22
34 (c) (d)
34 (c) (d)
34 (c) (d)
$ 1,004,034
$ 6,367,498
$ 944,124
22 (d)
22 (d)
22 (d)
$ 637,197
$ 3,047,016
$ 1,533,983
Payments
During
Last
Fiscal
Year
($)
0
$
0
$
0
$
$
$
$
$
$
$
$
$
$
0
0
0
0
0
0
0
0
0
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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)
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”).
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(b)
(c)
(d)
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:
Pension Plan
Excess Plan
Supplemental Plan
$ 218,665
$ 2,427,251
$ (2,645,916)
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 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
$ 183,429
$ 1,163,293
$ (1,346,722)
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-
66. 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
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4.5%. All assumptions were consistent with those used to prepare the financial statements for
Fiscal 2012.
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)
(cid:120)
(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;
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
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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
(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)
(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) 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));
(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.
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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.
Early Retirement and Extra Service Credit
Please refer to Note (d) on page PS-63 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.
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NONQUALIFIED DEFERRED COMPENSATION TABLE
(Fiscal 2012)
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
$ 24,838
$ 69,601
$ 343,884
$ 77,500
$ 0
$ 94,127
$ 0
$ 698,254
$ 114,385
$ 0
$ 275,007
$ 19,452
$ 2,045,793
$ 360,000
$ 13,386
$ 41,464
$ 0
$ 419,645 (d)
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)
(d)
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 2012 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.
Under the terms of the Executive Deferral Plan, in March 2012, and as noted under
“Registrant Contributions,” Mr. Cumenal received an Excess DCRB contribution of
$13,386 for Fiscal 2011. This contribution will vest proportionately for Mr. Cumenal on
March 10 of 2013, 2014, 2015, 2016 and 2017 respectively. See “Excess DCRB Feature
of the Executive Deferral Plan” below.
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 annual cash
(cid:120)
incentive or bonus compensation;
The Company makes no contribution and guarantees no specific return on money
deferred;
(cid:120) Deferrals are placed in a trust that is subject to the claims of Tiffany’s creditors;
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(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, as noted in the “Registrant Contribution” column above.
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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, 2013 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
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
$43,441
$ 1,177,918
$9,570,570 (g)
$14,791,929
$ 474,896
$1,545,000
$43,441
$ 283,930 (f)
$2,399,875 (h)
$ 4,747,142
$ 0
$2,890,000
$43,441
$ 709,773 (f)
$5,607,160 (i)
$ 9,250,374
$ 0
$2,910,000
$43,441
$ 357,724
$3,680,724 (j)
$ 6,991,889
Jon M. King
$ 0
$2,516,000
$15,554
$ 533,718
$3,480,805
$ 6,546,077
Notes to Potential Payments on Termination or Change in Control Table
(a)
(b)
(c)
(d)
(e)
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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.
For the executive officers other than Mr. Cumenal, cash severance payments were
determined by multiplying the sum of (i) actual salary and (ii) the target annual incentive
award or bonus, by two. Mr. Cumenal’s cash severance payment is comprised of the
sum of (i) actual salary multiplied by two, and (ii) $1,210,000, pursuant to the terms of his
employment agreement.
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 2010, 2011 and 2012 was
determined using $65.75, the closing value of the Company’s common stock on January
31, 2013. 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
2010 and 2011 was determined using $65.75, the closing value of the Company’s
common stock on January 31, 2013. 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 2010; a 70% early vesting of performance-based restricted stock units granted
in January 2011; and a 30% early vesting of performance-based restricted stock units
granted in January 2012. This column also assumes a 100% early vesting of the one-
P S - 6 9
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 2010, 2011 and 2012, 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, 2013:
Michael J. Kowalski $12,873,850
Patrick F. McGuiness $ 3,254,625
James N. Fernandez $ 7,719,050
Frederic Cumenal
$ 5,565,475
Jon M. King
$ 5,115,350
(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, 2013, due to the strike price of $76.85 (compared to the closing price on
January 31, 2013 of $65.75).
This amount includes $1,643,750 (25,000 shares multiplied by $65.75) attributable to the
early vesting on January 31, 2013 of the one-time Time-Vesting Restricted Stock Unit
Award made to Mr. Kowalski on January 20, 2011.
This amount includes $493,125 (7,500 shares multiplied by $65.75) attributable to the
early vesting on January 31, 2013 of the one-time promotion Time-Vesting Restricted
Stock Unit Award made to Mr. McGuiness on June 21, 2011.
This amount includes $986,250 (15,000 shares multiplied by $65.75) attributable to the
early vesting on January 31, 2013 of the one-time promotion Time-Vesting Restricted
Stock Unit Award made to Mr. Fernandez on June 21, 2011.
This amount includes $1,790,241 (27,228 shares multiplied by $65.75) attributable to the
early vesting on January 31, 2013 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 (e) 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:
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(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.
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
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terminated from employment 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, 2013. His early retirement
benefit under the Pension Plan, the Excess Plan and the Supplemental Plan would have been
approximately $1,257,209 per year had he retired effective January 31, 2013, subject to
applicable offsets by benefits payable under Social Security.
Mr. Fernandez was eligible to take early retirement on January 31, 2013. His early retirement
benefit under the Pension Plan, the Excess Plan and the Supplemental Plan would have been
approximately $640,289 per year had he retired effective January 31, 2013, subject to applicable
offsets by benefits payable under Social Security.
Mr. King was eligible to take early retirement on January 31, 2013. His early retirement benefit
under the Pension Plan, the Excess Plan and the Supplemental Plan would have been
approximately $411,760 per year had he retired effective January 31, 2013, subject to applicable
offsets by benefits payable under Social Security.
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Death or Disability
If any of the named executive officers had died or become disabled on January 31, 2013, 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-69. If any of the
named executive officers had died or become disabled on January 31, 2013, 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, 2013: Mr. Kowalski, $4,634,040; Mr. McGuiness, $1,262,400;
Mr. Fernandez, $2,895,630; Mr. Cumenal, $3,490,983; and Mr. King, $1,475,430.
DIRECTOR COMPENSATION TABLE
Fiscal 2012
Name
Fees Earned
or Paid in
Cash ($)(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
$ 18,750
J. Thomas Presby
$ 90,000
William A. Shutzer
$ 76,250
Robert S. Singer
$ 61,517
$ 61,517
$ 61,517
$ 61,517
$ 61,517
$ 61,517
$ 0
$ 61,517
$ 61,517
$ 58,637 $ 42,403
$ 58,637 N/A
$ 58,637 N/A
$ 58,637 N/A
$ 58,637 $ 2,742
$ 58,637 N/A
$ 0
N/A
$ 58,637 $ 9,303
$ 58,637 N/A
Notes to Director Compensation Table
$
$
$
$
$
$
$
$
$
0
0
0
0
0
0
0
0
0
Total
($)
$ 237,557
$ 210,154
$ 210,154
$ 195,154
$ 212,896
$ 195,154
$
18,750
$ 219,457
$ 196,404
(a)
(b)
Includes amounts deferred under the Executive Deferral Plan.
Amounts shown represent the grant-date fair value for stock options granted for Fiscal
2012. 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, 2013. See Note N. “STOCK
COMPENSATION PLANS,” in Notes to Consolidated Financial Statements, under Item 8.
Financial Statements and Supplementary Data.
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(c)
Supplementary Table: Outstanding Director Option Awards at Fiscal Year End
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
Robert S. Singer
Aggregate Number of Option
Awards Outstanding at Fiscal Year End
(number of underlying shares)
61,432
9,215
15,355
61,432
61,432
33,932
11,337
61,432
2,878
(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); a change in discount
rate 5.0% to 4.5% and assumed retirement age of 65 (if the director is over age 65, the
director is assumed to retire on January 31, 2013). 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
$15,000 each to the chairperson of the Compensation, Corporate Social Responsibility,
Finance and Nominating/Corporate Governance Committee;
(cid:120) Equity compensation, as discussed below; and
(cid:120) A retirement benefit, also discussed below, for directors first elected prior to January 1,
1999.
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Under Tiffany’s Executive Deferral Plan, directors may defer up to one hundred percent (100%)
of their cash compensation and invest the amounts they defer in various accounts and funds
established under the plan. However, the Company does not guarantee any return on said
investments. The following table provides data concerning director participation in this plan:
Director
Contribution
In Last
Fiscal Year
($)
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 $ 27,273
$ 0
$ 196,935
Charles K.
Marquis
William A.
Shutzer
$
$
0
0
$ 0 $ 51,889
$ 0
$ 545,898
$ 0 $ 176,018
$ 0
$1,073,336
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
$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.
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EQUITY COMPENSATION PLAN INFORMATION
(As of Fiscal Year 2012)
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)
2,972,289a
$
45.68
3,823,394b
0
0
2,972,289a
$
45.68
0
3,823,394b
Plan category
Equity compensation
plans approved by
security holders
Equity compensation
plans not approved by
security holders
Total
(a) Shares indicated do not include 1,882,794 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
Tiffany & Co.
S&P 500 Index
S&P 500 Consumer Discretionary Index
1/31/09
1/31/10
1/31/11
1/31/12
1/31/13
$250
$200
$150
$100
$50
$0
1/31/08
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ASSUMES AN INVESTMENT OF $100 ON JANUARY 31, 2008 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.
P S - 7 7
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 2013 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, 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, 61, 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, 62, 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. and its Compensation Committee. Key
Skills: brand management, merchandising and product development.
P S - 7 8
Gary E. Costley
Lawrence K. Fish
Abby F. Kohnstamm
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Dr. Costley, 69, 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, 68, 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 Corporation and Executive
Committee of Massachusetts Institute of Technology and an Overseer
Emeritus 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 Trustee 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, 59, 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.
P S - 7 9
Charles K. Marquis
Peter W. May
William A. Shutzer
Mr. Marquis, 70, 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.
Mr. May, 70, 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, 66, 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, 61, 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. Mr. Singer was first
elected a director of Tiffany & Co. in May 2012. 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 2013. 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.
P S - 8 1
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR FISCAL 2013.
Item 3. Approval of the Compensation paid to the Named Executive Officers
Rule 14a-21(a) was adopted by the Securities and 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 once 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 2013 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-25 through PS-76 inclusive of this Proxy Statement.
At the 2012 Annual Meeting, the Company included in its proxy statement 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 95.7% of the stockholder votes in
favor of the Company’s compensation program. Of the “against” votes, 6.9% were abstaining
shares. The Committee considered stockholder approval of the compensation program when
the Committee left the program unchanged for Fiscal 2013.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE COMPENSATION PAID
TO THE NAMED EXECUTIVE OFFICERS IN FISCAL 2012.
OTHER MATTERS
Stockholder Proposals for Inclusion in the Proxy Statement for the 2014 Annual Meeting
If you wish to submit a proposal to be included in the Proxy Statement for our 2014 Annual
Meeting, we must receive it no later than December 6, 2013. 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).
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
2014 Annual Meeting unless the proposal is submitted to us no earlier than January 16, 2014
and no later than February 15, 2014 and the stockholder otherwise satisfies the requirement of
SEC Rule 14a-4.
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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 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.
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BY ORDER OF THE BOARD OF DIRECTORS
Patrick B. Dorsey
Secretary
New York, New York
April 5, 2013
P S - 8 3
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
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such Audit Committee 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.
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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.
2.
Attendance and Participation at Boad and Committee Meetings.
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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. Managemen Succession.
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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;
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
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following officers or employees of the Corporation: the president, the chief legal officer, the head
of finance, the chief information 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.
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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
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consist only of independent directors.
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. Refeence to Corporation’s Subsidiaries.
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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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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
WILLIAM A. SHUTZER
Senior Managing Director,
Evercore Partners
(1984) 4*
ROBERT S. SINGER
Former Chief Executive Officer
Barilla Holding SpA
(2012) 1*, 2 and 4
(Indicates year joined Board)
Member of:
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
ANDREW W. HART
Senior Vice President –
Diamonds and Gemstones
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 and Manufacturing
(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.
CC-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 16, 2013, 9:30 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 by e-mailing mark.aaron@tiffany.com.
Transfer Agent and Registrar
Please direct your communications regarding individual stock records, address changes or
dividend payments to: Computershare, PO Box 43006, Providence, RI 02940-3006 (for
shareholder correspondence) or 250 Royall Street, Canton, MA 02021 (for overnight
correspondence); 888-778-1307 or 201-680-6578; or www.computershare.com/investor.
Direct Stock Purchases and Dividend Reinvestment
The Computershare CIP 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. Computershare Trust Company, N.A.
administers the program, which provides Tiffany & Co. shares through market purchases. For
additional information, please contact Computershare at 888-778-1307 or 201-680-6578 or
www.computershare.com/investor.
Store Locations
For a worldwide listing of TIFFANY & CO. stores, please visit www.tiffany.com.
TIFFANY & CO.
CC-2
Catalogs
Tiffany 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
$ 65.75
$ 63.80
$ 58.13
$ 40.61
$ 20.75
2012
2011
2010
2009
2008
Quarter
First
Second
Third
Fourth
High
$74.20
69.41
65.92
66.78
Price Ranges of Tiffany & Co. Common Stock
2011
Close
$69.44
79.59
79.73
63.80
2012
Close
$68.46
54.93
63.22
65.75
Low
$54.58
66.48
56.21
58.61
High
$69.72
84.49
80.99
79.00
Low
$63.29
49.72
52.76
55.83
Cash Dividends
Per Share
2011
2012
$ 0.29
0.32
0.32
0.32
$ 0.25
0.29
0.29
0.29
On March 19, 2013, the closing price of Tiffany & Co. Common Stock was $68.50 and there were
16,533 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, 2013.
As required by the New York Stock Exchange (“NYSE”), on June 14, 2012, 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.
© 2013 TIFFANY & CO.
TIFFANY & CO.
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THE TIFFANY ANNIVERSARY MORGANITE NECKLACE; TIFFANY SOLESTE ® YELLOW DIAMOND RING; TIFFANY SOLESTE ® RINGS WITH PINK AND
WHITE DIAMONDS; TIFFANY 1837™ DESIGNS; ELSA PERETTI ® BONE CUFF; ARDEN SHOULDER BAG; THE TIFFANY ANNIVERSARY TANZANITE NECKLACE;
ROSE BRACELET OF DIAMONDS AND GEMSTONES.
THE PAGES OF THIS PUBLICATION ARE PRINTED ON PAPER THAT CONTAINS 50% POST-CONSUMER RECYCLED MATERIAL.