ANNUAL REPORT ON FORM 10 -K FOR THE YEAR ENDED JANUARY 31, 2017
NOTICE OF 2017 ANNUAL MEETING AND PROXY STATEMENT
CLOCKWISE, FROM TOP LEFT: the Tiffany® Setting with Tiffany Embrace® band ring, Elsa Peretti® Diamonds by the Yard® pendant and necklace, Tiffany Embrace® band ring,
Tiffany & Co. Schlumberger® Sixteen Stone ring, Tiffany Victoria® band ring, Tiffany T wire bracelet with diamonds, Tiffany T square bracelet.
727 FIFTH A V E N U E
N E W Y O R K N E W Y O R K 10022
212 755 8000
M I C H A E L J . K O W A L S K I
C H A I R M A N O F T H E B O A R D A N D
I N T E R I M C H I E F E X E C U T I V E O F F I C E R
Dear Shareholder:
April 7, 2017
You are cordially invited to attend the Annual Meeting of Shareholders of Tiffany & Co. on Thursday,
May 25, 2017. This year’s meeting will be held at The Rubin Museum of Art, 150 West 17th Street (at
Seventh Avenue) in New York, and will begin at 9:30 a.m.
To attend the meeting, you will need to register online. To do so, please follow the instructions in the
Proxy Statement on page PS-10. When you arrive at the meeting, you will be asked to provide your
registration confirmation and photo identification. We appreciate your cooperation.
Your participation in the affairs of Tiffany & Co. is important. Therefore, please vote your shares
regardless of whether or not you plan to attend the meeting. You can vote by accessing the Internet site
to vote electronically, by completing and returning the enclosed proxy card by mail, or by calling the
number listed on the card and following the prompts.
Fiscal 2016 was a year of significant challenges. However, we made progress in pursuing strategies
that we expect will drive sales, earnings growth and long-term shareholder value. We are focused
on increasing the rate of our new product introductions and innovations, maximizing our marketing
effectiveness, strengthening relationships with customers, optimizing our store network, and improving
our business operations and processes, all while effectively managing our capital and costs.
Worldwide net sales of $4 billion were 3% lower than a year ago and comparable store sales declined 5%
due to varying degrees of softness in most regions. There was no translation effect on sales on a full-year
worldwide basis.
Net earnings of $446 million, or $3.55 per diluted share, were modestly below the prior year, as the sales
decline was mitigated by a higher gross margin and prudent expense management. Excluding charges
recorded in the current and prior years, net earnings per diluted share declined 2% to $3.75 in 2016
(see “Non-GAAP Measures” on page K-29).
We remained focused on capital stewardship and managing our balance sheet with discipline, and
we generated strong cash flow that is available to reinvest in our business and return to shareholders
through dividends and share repurchases.
Last May, our Board of Directors approved a 12.5% increase in the quarterly cash dividend, representing
the 15th increase in the past 14 years, and, during the last fiscal year, we repurchased $184 million of
shares. Our strong balance sheet provides us with the flexibility to pursue our growth strategies while
enabling us to deliver cash returns to shareholders.
Tiffany and the broader luxury industry were faced with macroeconomic challenges, geopolitical
uncertainties, and volatile currencies in 2016, which we believe affected spending by both local
customers and foreign tourists. While we anticipate that these factors will continue to be relevant in
2017, our management team continues to believe in our core strategies and is focused on accelerating
execution of those strategies.
We introduced new products in 2016 across a wide range of materials and price points – including
magnificent high jewelry crafted in diamonds and platinum, beautiful jewelry designs in gold and sterling
silver, and our growing collection of watches. We remain committed to a more active pace of new product
introductions and innovations.
Our marketing communications reached an increasingly global audience through print, digital and social
media, and we aired our first-ever commercial during the Super Bowl.
We further optimized our worldwide distribution in 2016 by opening 11 stores, relocating five, closing
five, and renovating many additional stores, as well as adding visually appealing and informative features
to our website – all of which are intended to enhance engagement with our customers and better their
experiences with Tiffany.
The focus on advancing our business operations through supply chain excellence, systems
enhancements and our global procurement strategy is helping to ensure product availability, streamlined
operations and cost efficiency.
We also continued to demonstrate our commitment to corporate social responsibility and environmental
sustainability, an area of great importance to us and our customers. It is one of the core values of our
brand, and I encourage you to learn more about our practices and objectives on Tiffany’s website.
In sum, Tiffany’s Board and management team remain focused on strengthening the Company’s position
as one of the world’s most important luxury brands, and delivering attractive total shareholder returns
over time.
Our Board of Directors also believes that our recent change in leadership and our intention to accelerate
the execution of our strategic initiatives is paramount to delivering on these objectives. We are committed
to hiring a new chief executive officer who has the right combination of skills and experience to help us
improve our financial performance in the long term by executing on our core business strategies, and
realizing the many opportunities before us.
We appreciate your ongoing interest and support.
Sincerely,
FINANCIAL HIGHLIGHTS
(in millions, except percentages, per share amounts and stores)
2016
2015
Net sales
Decrease from prior year
On a constant-exchange-rate basis: *
Net sales (decrease) increase from prior year *
Comparable store sales (decrease) increase from prior year *
Net earnings
Decrease from prior year
As a percentage of net sales
Per diluted share
Net earnings, as adjusted *
Decrease from prior year
As a percentage of net sales *
Per diluted share *
Weighted-average number of diluted common shares
Cash flow from operating activities
Free cash flow *
Total debt-to-equity ratio
Cash dividends paid per share
Company-operated TIFFANY & CO. stores
$
4,001.8
$
4,104.9
(3)%
(3)%
(5)%
(3)%
2 %
— %
446.1
$
463.9
(4)%
11 %
3.55
470.1
(5)%
12 %
3.75
125.5
702.1
479.3
37 %
1.75
313
$
$
$
$
$
$
(4)%
11 %
3.59
493.8
(9)%
12 %
3.83
129.1
813.6
560.9
37 %
1.58
307
$
$
$
$
$
$
$
All references to the years relate to fiscal years which ended on January 31 of the following calendar year.
See "Item 6. Selected Financial Data" for certain expenses that affected 2016 and 2015 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.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
r
For the fiscal year
ended January 31, 2017
r
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-9494
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-3228013
(I.R.S. Employer Identification No.)
727 Fifth Avenue, New York, NY
(Address of principal executive offices)
10022
(Zip Code)
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Registrant's telephone number, including area code: (212) 755-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
g
Name of each exchange on which registered
g
Common Stock, $.01 par value per share
New York Stock Exchange
YY
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
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
No
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
No
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
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form10-K or any amendment to this Form10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
As of July 31, 2016, the aggregate market value of the registrant's voting and non-voting stock held by non-affiliates of the registrant was
approximately $8,002,474,636 using the closing sales price on July 29, 2016 of $64.52. See Item 5. Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities.
As of March 13, 2017, the registrant had outstanding 124,564,854 shares of its common stock, $.01 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE.
The following documents are incorporated by reference into this Annual Report on Form 10-K: Registrant's Proxy Statement Dated April 7, 2017
(Part III).
Tiffany & Co. Year-End Report 2016
Table of Contents
Annual Report on Form 10-K for the fiscal year ended January 31, 2017
PART I
Page
Item 1.
Business................................................................................................................... K-3
Item 1A.
Risk Factors.............................................................................................................. K-11
Item 1B.
Unresolved Staff Comments ....................................................................................... K-18
Item 2.
Item 3.
Item 4.
Properties ................................................................................................................. K-18
Legal Proceedings ..................................................................................................... K-19
Mine Safety Disclosures ............................................................................................. K-21
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ................................................................................. K-22
Item 6.
Item 7.
Selected Financial Data ............................................................................................. K-25
Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................................................. K-27
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk ........................................... K-48
Item 8.
Item 9.
Financial Statements and Supplementary Data............................................................. K-49
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................................................................. K-97
Item 9A.
Controls and Procedures............................................................................................. K-97
Item 9B.
Other Information ...................................................................................................... K-98
PART III
Item 10.
Directors, Executive Officers and Corporate Governance ................................................ K-99
Item 11.
Item 12.
Executive Compensation ............................................................................................ K-99
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters............................................................................................... K-99
Item 13.
Certain Relationships and Related Transactions, and Director Independence................... K-99
Item 14.
Principal Accounting Fees and Services ....................................................................... K-99
Item 15.
Exhibits, Financial Statement Schedules ..................................................................... K-100
Item 16.
Form 10-K Summary. ................................................................................................ K-100
PART IV
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The historical trends and results reported in this annual report on Form 10-K should not be considered an indication
of future performance. Further, statements contained in this annual report on Form 10-K that are not statements of
historical fact, including those that refer to plans, assumptions and expectations for future periods, are forward-
looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, but are not limited to, the statements under "2017 Outlook" as well as statements that can be
identified by the use of words such as 'expects,' 'projects,' 'anticipates,' 'assumes,' 'forecasts,' 'plans,' 'believes,'
'intends,' 'estimates,' 'pursues,' 'continues,' 'outlook,' 'may,' 'will,' 'can,' 'should' and variations of such words and
similar expressions. Examples of forward-looking statements include, but are not limited to, statements we make
regarding the Company's plans, assumptions, expectations, beliefs and objectives with respect to store openings and
closings; product introductions; sales; sales growth; sales trends; store traffic; the Company's strategy and initiatives
and the pace of execution thereon; the Company's objectives to compete in the global luxury market and to improve
financial performance; retail prices; gross margin; operating margin; expenses; interest expense and financing costs;
effective income tax rate; net earnings and net earnings per share; share count; inventories; capital expenditures;
cash flow; liquidity; currency translation; macroeconomic conditions; growth opportunities; litigation outcomes and
recovery related thereto; the collectability of amounts due under financing arrangements with diamond mining and
exploration companies; contributions to Company pension plans; and certain ongoing or planned real estate, product,
marketing, retail, customer experience, manufacturing, supply chain, information systems development, upgrades
and replacement, and other operational and strategic initiatives.
These forward-looking statements are based upon the current views and plans of management, speak only as of the
date on which they are made and are subject to a number of risks and uncertainties, many of which are outside of
our control. Actual results could therefore differ materially from the planned, assumed or expected results expressed
in, or implied by, these forward-looking statements. While we cannot predict all of the factors that could form the
basis of such differences, key factors include, but are not limited to: global macroeconomic and geopolitical
developments; changes in interest and foreign currency rates; changes in taxation policies and regulations; shifting
tourism trends; regional instability; violence (including terrorist activities); political activities or events; weather
conditions that may affect local and tourist consumer spending; changes in consumer confidence, preferences and
shopping patterns, as well as our ability to accurately predict and timely respond to such changes; shifts in the
Company's product and geographic sales mix; variations in the cost and availability of diamonds, gemstones and
precious metals; adverse publicity regarding the Company and its products, the Company’s third-party vendors or the
diamond or jewelry industry more generally; any non-compliance by third-party vendors and suppliers with the
Company’s sourcing and quality standards, codes of conduct, or contractual requirements as well as applicable laws
and regulations; changes in our competitive landscape; disruptions impacting the Company's business and
operations; failure to successfully implement or make changes to the Company's information systems; gains or losses
in the trading value of the Company's stock, which may impact the amount of stock repurchased; and our ability to
successfully control costs and execute on, and achieve the expected benefits from, the operational and strategic
initiatives referenced above; and any difficulties or delays encountered in identifying a successor chief executive
officer. Developments relating to these and other factors may also warrant changes to the Company's operating and
strategic plans, including with respect to store openings, closings and renovations, capital expenditures, information
systems development, inventory management, and continuing execution on, or timing of, the aforementioned
initiatives. Such changes could also cause actual results to differ materially from the expected results expressed in,
or implied by, the forward-looking statements.
Additional information about potential risks and uncertainties that could affect the Company’s business and financial
results is included under "Item 1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" in this annual report on Form 10-K for the fiscal year ended January 31, 2017.
Readers of this annual report on Form 10-K should consider the risks, uncertainties and factors outlined above and
in this Form 10-K in evaluating, and are cautioned not to place undue reliance on, the forward-looking statements
contained herein. The Company undertakes no obligation to update or revise any forward-looking statements to
reflect subsequent events or circumstances, except as required by applicable law or regulation.
TIFFANY & CO.
K-2
PART I
Item 1. Business.
GENERAL HISTORY AND NARRATIVE DESCRIPTION OF BUSINESS
Tiffany & Co. (the "Registrant") is a holding company that operates through its subsidiary companies (collectively, 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.
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 Company.
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; sophisticated style and romance; excellent customer service; an elegant store and online environment;
upscale store locations; "classic" product positioning; and distinctive and high-quality packaging materials (most
significantly, the TIFFANY & CO. blue box). Tiffany's business plan includes expenses to maintain the strength of the
Brand, such as the following:
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• Maintaining its position within the high-end of the jewelry market requires Tiffany to invest significantly in
diamond and gemstone inventory, which carries a lower overall gross margin; it also causes some consumers
to view Tiffany as beyond their price range;
• To provide excellent service, stores must be well staffed with knowledgeable professionals;
• 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;
• While the classic positioning of much of Tiffany's product line supports the Brand and requires sufficient
display space in its stores, management's strategy also includes an active pace of new product introductions
which could result in a necessary reallocation of product display space;
• Tiffany's packaging supports consumer expectations with respect to the Brand but is expensive; and
• 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 earnings and Brand maintenance objectives. This is a dynamic process. To the extent that
management deems that product, marketing 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 any tradeoff between sales and
earnings is truly worth the positive effect on the Brand. At times, management has determined, and may in the
future determine, that the strength of the Brand warranted, or that it will permit, more aggressive and profitable
product, marketing or distribution initiatives.
FINANCIAL INFORMATION ABOUT REPORTABLE SEGMENTS
The Company has four reportable segments: (i) Americas, (ii) Asia-Pacific, (iii) Japan and (iv) Europe. All non-
reportable segments are included within Other. The Company transacts business within certain of its segments
through the following channels: (i) retail, (ii) Internet, (iii) catalog, (iv) business-to-business (products drawn from
the retail product line and items specially developed for the business market) and (v) wholesale distribution
TIFFANY & CO.
K-3
(merchandise sold to independent distributors for resale). The Company's segment information for the fiscal years
ended January 31, 2017, 2016 and 2015 is reported in "Item 8. Financial Statements and Supplementary Data -
Note P. Segment Information."
Americas
Sales in the Americas were 46% of worldwide net sales in 2016, while sales in the U.S. represented 88% of net
sales in the Americas. Sales are transacted through the following channels: retail, Internet and catalog (in the U.S.
and Canada), business-to-business (in the U.S.) and wholesale distribution (in Central/South America and the
Caribbean).
Retail sales in the Americas are transacted in 125 Company-operated TIFFANY & CO. stores in (number of stores at
January 31, 2017 included in parentheses): the U.S. (95), Canada (13), Mexico (11), Brazil (5) and Chile (1).
Included within these totals are 13 Company-operated stores located within various department stores in Canada and
Mexico. Included in the U.S. retail stores is the New York Flagship store, which represented less than 10% of
worldwide net sales in 2016.
Asia-Pacific
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Sales in Asia-Pacific represented 25% of worldwide net sales in 2016, while sales in Greater China represented
more than half of Asia-Pacific's net sales. Sales are transacted through the following channels: retail, Internet (in
Australia) and wholesale distribution.
Retail sales in Asia-Pacific are transacted in 85 Company-operated TIFFANY & CO. stores in (number of stores at
January 31, 2017 included in parentheses): China (31), Korea (15), Australia (9), Hong Kong (9), Taiwan (8),
Singapore (5), Macau (4), Malaysia (2), New Zealand (1) and Thailand (1). Included within these totals are 30
Company-operated stores located within various department stores.
Japan
Sales in Japan represented 15% of worldwide net sales in 2016. Sales are transacted through the following
channels: retail, Internet, business-to-business and wholesale distribution.
Retail sales in Japan are transacted in 55 Company-operated TIFFANY & CO. stores. Included within this total are 50
stores located within department stores, generating approximately 75% of Japan's net sales. There are four large
department store groups in Japan. The Company operates TIFFANY & CO. stores in locations controlled by these
groups as follows (number of locations at January 31, 2017 included in parentheses): Isetan Mitsukoshi Ltd. (13), J.
Front Retailing Co., Ltd. (Daimaru and Matsuzakaya department stores) (9), Takashimaya Co., Ltd. (8) and Seven & i
Holding Co., Ltd. (Sogo and Seibu department stores) (5). The Company also operates 15 stores in other department
stores.
Europe
Sales in Europe represented 11% of worldwide net sales in 2016, while sales in the United Kingdom ("U.K.")
represented approximately 40% of European net sales. Sales are transacted through the following channels: retail,
Internet and wholesale distribution.
Retail sales in Europe are transacted in 43 Company-operated TIFFANY & CO. stores in (number of stores at January
31, 2017 included in parentheses): the U.K. (10), Italy (9), Germany (6), France (5), Spain (3), Switzerland (3), the
Netherlands (2), Austria (1), Belgium (1), the Czech Republic (1), Ireland (1), and Russia (1). Included within these
totals are eight Company-operated stores located within various department stores. Internet sales are conducted
within the following countries: U.K., Austria, Belgium, France, Germany, Ireland, Italy, the Netherlands and Spain.
Other consists of all non-reportable segments, including: (i) retail sales and wholesale distribution in the Emerging
Markets region (which represented approximately 60% of Other net sales in 2016); (ii) wholesale sales of diamonds
Other
TIFFANY & CO.
K-4
(see "PRODUCT SUPPLY CHAIN – Supply of Diamonds" below); and (iii) licensing agreements. Retail sales are
transacted in five Company-operated TIFFANY & CO. stores in the United Arab Emirates.
Licensing Agreements. The Company receives earnings from a licensing agreement with Luxottica Group for the
distribution of TIFFANY & CO. brand eyewear. The earnings received from this licensing agreement represented less
than 1% of worldwide net sales in 2016.
In 2015, the Company entered into a licensing agreement with Coty Inc. regarding the development, production and
distribution of a new line of TIFFANY & CO. brand fragrances. The Company did not receive any earnings from this
agreement in 2015 or 2016, and does not expect any earnings in 2017 to be significant.
Retail Distribution Base
Management regularly evaluates opportunities to optimize its retail store base. This includes evaluating potential
markets for new TIFFANY & CO. stores, as well as the renovation, relocation, or, in certain instances, closure of
existing stores. Considerations include the characteristics of the markets 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 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 Company since 2012:
Year:
2012
2013
2014
2015
2016
Americas
U.S.
91
94
95
95
95
Canada &
Latin America
Asia-Pacific
Japan
Europe
Emerging
Markets
24
27
27
29
30
66
72
73
81
85
55
54
56
56
55
34
37
39
41
43
5
5
5
5
5
Total
275
289
295
307
313
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As part of the Company's strategy, management plans to increase gross retail square footage by approximately 3%,
net through the addition of new stores, relocations, renovations and closings in 2017. For a summary of the
Company's existing retail square footage, see "Item 2. Properties".
E-Commerce
The Company currently operates e-commerce enabled websites in 13 countries as well as informational websites in
several additional countries. Sales transacted on those websites accounted for 6% of worldwide net sales in 2016,
2015 and 2014. The Company invests in ongoing website enhancements and is evaluating opportunities to expand
its e-commerce sites to additional countries. In addition, management believes that these websites serve a role as
marketing tools to attract customers to the Company's stores.
Products
The Company's principal product category is jewelry, which represented 92%, 93% and 92% of worldwide net sales
in 2016, 2015 and 2014. The Company 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, 7% of worldwide net sales in 2016, 2015 and 2014. The
remaining approximately 1% of worldwide net sales were attributable to wholesale sales of diamonds and earnings
received from a third-party licensing agreement.
TIFFANY & CO.
K-5
Sales by Reportable Segment of TIFFANY & CO. Jewelry by Category
2016
High, fine & solitaire jewelry a
Engagement jewelry & wedding
bands b
Fashion jewelry c
Designer jewelry d
High, fine & solitaire jewelry a
Engagement jewelry & wedding
bands b
Fashion jewelry c
Designer jewelry d
High, fine & solitaire jewelry a
Engagement jewelry & wedding
bands b
Fashion jewelry c
Designer jewelry d
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% of total
Americas
Sales
% of total
Asia-Pacific
Sales
% of total
Japan
Sales
% of total
Europe
Sales
% of total
Reportable
Segment Sales
21%
22%
34%
12%
22%
23%
33%
12%
21%
23%
33%
12%
22%
35%
35%
6%
24%
35%
33%
7%
23%
37%
31%
7%
14%
39%
19%
21%
16%
39%
18%
20%
17%
41%
14%
21%
15%
26%
46%
10%
16%
25%
45%
10%
16%
24%
47%
10%
20%
28%
33%
12%
21%
28%
33%
11%
21%
29%
32%
12%
a) This category includes high, fine and solitaire jewelry (other than engagement jewelry). Most sales in this category
are of items containing diamonds, other gemstones or both. Most jewelry in this category is constructed of
platinum, although gold was used as the primary metal in approximately 15% of sales in 2016. The average price
of merchandise sold in 2016, 2015 and 2014 in this category was approximately $6,300, $6,300 and $5,800
for total reportable segments.
b) This category includes engagement rings (approximately 60% of the category) and wedding bands. 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 10% of sales in 2016. The average price of merchandise
sold in 2016, 2015 and 2014 in this category was approximately $3,400, $3,500 and $3,800 for total
reportable segments.
c) This category generally consists of non-gemstone jewelry, primarily containing sterling silver and gold jewelry,
although small gemstones are used as accents in some pieces. The average price of merchandise sold in 2016,
2015 and 2014 in this category was approximately $350, $335 and $310 for total reportable segments.
d) This category includes only items that are attributed to one of the Company’s "named" designers: Elsa Peretti
(refer to "MATERIAL DESIGNER LICENSE" below) and Paloma Picasso. Merchandise primarily consists of sterling
silver and gold jewelry, although platinum was used as the primary metal in approximately 15% of sales in 2016.
Some of the items sold contain diamonds, other gemstones or a combination of both. The average price of
merchandise sold in 2016, 2015 and 2014 in this category was approximately $530, $525 and $535 for total
reportable segments.
Items bearing the name of and attributed to one of the Company's "named" designers: Elsa Peretti and Paloma
Picasso, which were previously reported across the high, fine & solitaire jewelry, engagement jewelry & wedding
bands and fashion jewelry categories, have been reclassified into the designer jewelry category to conform with
management's current internal analysis of product sales. Additionally, certain reclassifications within the jewelry
categories have been made to the prior years' amounts to conform to the current year category presentation.
TIFFANY & CO.
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ADVERTISING, MARKETING, PUBLIC AND MEDIA RELATIONS
The Company regularly advertises in newspapers, magazines and 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. It also publishes its
well-known Blue Book to showcase its high-end jewelry. In
million, $302.0 million and $284.0 million, representing 7.5%, 7.4% and 6.7% of worldwide net sales in those
respective years, on advertising, marketing and public and media relations, which include costs for media,
production, catalogs, Internet, visual merchandising (in-store and window displays), marketing events and other
related items.
2016, 2015 and 2014, the Company spent $299.0
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In addition, management believes that the Brand is enhanced by a program of charitable sponsorships, grants and
merchandise donations. The Company also periodically makes donations to The Tiffany & Co. Foundation, a private
foundation organized to support 501(c)(3) charitable organizations. The efforts of this Foundation are primarily
focused on environmental conservation.
TRADEMARKS
The designations TIFFANY ® and TIFFANY & CO.® are the principal trademarks of Tiffany, and also serve as
tradenames. Tiffany has obtained and is the proprietor of trademark registrations for TIFFANY and TIFFANY & CO., as
well as the TIFFANY BLUE BOX ®, the TIFFANY BLUE BOX design, TIFFANY BLUE ®E and the color Tiffany Blue for a
variety of product categories and services 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
rights in its principal trademarks, TIFFANY and TIFFANY & CO., are strong. However, use of the designation TIFFANY
by third parties on related or 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, on the Internet and in various markets by street vendors and small retailers. Tiffany
pursues infringers through leads generated internally and through a network of investigators, legal counsel, law
enforcement and customs authorities worldwide. The Company responds to such infringing activity by taking various
actions, including sending cease and desist letters, cooperating with law enforcement in criminal prosecutions,
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, in some countries, third parties have registered the name TIFFANY in connection with certain
product categories (including, in the U.S., the category of bedding and, in certain foreign countries, the categories of
food, cosmetics, clothing, paper goods 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.
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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
9%, 8% and 8% of the Company's worldwide net sales in 2016, 2015 and 2014.
Tiffany is party to an Amended and Restated Agreement (the "Peretti Agreement") with Ms. Peretti, which largely
reflects the long-standing rights and marketing and royalty obligations of the parties. Pursuant to the Peretti
Agreement, Ms. Peretti grants 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 continues 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 Peretti
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 maintain
total on-hand and on-order inventory of non-jewelry licensed products (such as tabletop products) at approximately
$8.0 million and to take certain actions to protect Ms. Peretti's intellectual property, including to maintain
trademark registrations reasonably necessary to sell the licensed products in the markets in which the licensed
products are sold by Tiffany.
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The Peretti Agreement has a term that expires in 2032 and is binding upon Ms. Peretti, her heirs, estate, trustees
and permitted assignees. During the term of the Peretti 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 Peretti Agreement. The Peretti 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).
PRODUCT SUPPLY CHAIN
The Company manufactures jewelry in New York, Rhode Island and Kentucky, polishes jewelry in the Dominican
Republic and crafts silver hollowware in Rhode Island. The Company processes, cuts and polishes rough diamonds at
facilities outside the U.S. In total, these internal manufacturing facilities produce approximately 60% of the jewelry
sold by the Company. 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 management does not
expect that the Company will ever manufacture all of its needs. Factors considered by management in its decision to
use third-party manufacturers include access to or mastery of various product-making skills and technology, support
for alternative capacity, product cost and the cost of capital investments. To supply its internal manufacturing
facilities, the Company sources precious metals, rough diamonds, polished diamonds and other gemstones, as well
as certain fabricated components, from third parties.
Supply of Diamonds. The Company regularly purchases parcels of rough diamonds for polishing and further
processing. The vast majority of diamonds acquired by the Company originate from Botswana, Canada, Namibia,
Russia, Sierra Leone and South Africa. The Company has diamond processing operations in Belgium, Botswana,
Cambodia, Mauritius and Vietnam that prepare and/or cut and polish rough diamonds for its use. The Company
conducts operations in Botswana through a subsidiary in which local third-parties own minority, non-controlling
interests, allowing the Company to access rough diamond allocations reserved for local manufacturers. The Company
maintains a relationship and has an arrangement with these local third-parties; however, if circumstances warrant,
the Company could seek to replace its existing local partners or operate without local partners.
The Company secures supplies of rough diamonds primarily through arrangements with diamond producers and, to a
lesser extent, on the secondary market. These arrangements include purchase agreements under which the Company
agrees to purchase a minimum volume of rough diamonds, as well as arrangements in which the Company maintains
access to rough diamonds that are offered for sale (including as a sightholder), although with no contractual
obligation to purchase such rough diamonds. Additionally, the Company has a limited number of arrangements under
which the Company, having provided loans to, or made equity investments in, mining projects, has agreed to, or has
the right to, purchase a defined portion of a mine's output. All such supply arrangements are generally at the market
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price prevailing at the time of purchase. Management anticipates that its minimum purchase obligations of rough
diamonds under all of these arrangements will be approximately $60.0 million in 2017.
As a result of the manner in which rough diamonds are typically assorted for sale, it is occasionally necessary for the
Company to knowingly purchase, as part of a larger assortment, rough diamonds that do not meet the Company's
quality standards or assortment needs. The Company seeks to recover its costs related to these diamonds by selling
such diamonds to third parties (generally other diamond polishers), which has the effect of modestly reducing the
Company's overall gross margins. Any such sales are included in the Other non-reportable segment.
In recent years, approximately 65% - 75% (by dollar value) of the polished diamonds used in the Company's jewelry
have been produced from rough diamonds that the Company has purchased. The balance of the Company's needs for
polished diamonds is purchased from polishers or polished-diamond dealers generally through purchase orders for
fixed quantities. 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. It is the
Company's intention to continue to supply the majority of its needs for diamonds by purchasing and polishing rough
diamonds.
Products containing one or more diamonds of varying sizes, including diamonds used as accents, side-stones and
center-stones, accounted for 59%, 59% and 58% of worldwide net sales in 2016, 2015 and 2014. Products
containing one or more diamonds of one carat or larger accounted for 13%, 14% and 14% of worldwide net sales in
each of those years.
Conflict Diamonds. Media attention has been drawn to the issue of "conflict" diamonds. This term is 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 diamonds produced in conflict regions from diamonds produced
in other regions once they have been polished. Therefore, concerned participants in the diamond trade, including the
Company and nongovernment organizations, seek to exclude "conflict" 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, crossing an international border,
must be accompanied by a Kimberley Process certificate and all 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. In addition, concerns over human rights abuses in Zimbabwe, Angola
and the Democratic Republic of the Congo underscore that the aforementioned system has not deterred the
production of diamonds in state-sanctioned mines under poor working conditions. The Company has informed its
vendors that it does not intend to purchase Zimbabwean, Angolan or Congolese-produced diamonds. Accordingly, the
Company has implemented the Diamond Source Warranty Protocol, which requires vendors to provide a warranty,
and a qualified independent audit certificate, that loose polished diamonds were not obtained from Zimbabwean,
Angolan or Congolese mines.
Worldwide Availability and Price of Diamonds. 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.
In addition, the supply and prices of rough and polished diamonds in the principal world markets have been and
continue to be influenced by the Diamond Trading Company ("DTC"), an affiliate of the De Beers Group. Although the
DTC's historical ability to control worldwide production has diminished due to its lower share of worldwide production
and changing policies in diamond-producing countries, the DTC continues to supply a meaningful portion of the
world market for rough, gem-quality diamonds and continues to impact diamond supply through its marketing and
advertising initiatives. A significant portion of the diamonds that the Company purchased in 2016 had their source
with the DTC.
Sustained interruption in the supply of diamonds, an overabundance of supply or a substantial change in the
marketing arrangements described above could adversely affect the Company 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 colorless diamonds, in high color and clarity ranges.
Management does not foresee a shortage of diamonds in these quality ranges in the short term but believes that,
unless new mines are developed, rising demand will eventually create such a shortage and lead to higher prices.
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Synthetic and Treated Diamonds. Synthetic diamonds (diamonds manufactured but not naturally occurring) and
treated diamonds (naturally occurring diamonds subject to treatment processes, such as irradiation) are produced in
growing quantities. Although significant questions remain as to the ability of producers to produce synthetic and/or
treated diamonds economically within a full range of sizes and natural diamond colors, and as to consumer
acceptance of these diamonds, such diamonds are becoming a larger factor in the market. Should synthetic and/or
treated diamonds be offered in significant quantities, the supply of and prices for natural diamonds may be affected.
The Company does not produce and does not intend to purchase or sell such diamonds.
Purchases of Precious Metals and Other Polished Gemstones. Precious metals and other polished gemstones used in
making jewelry are purchased from a variety of sources for use in the Company's internal manufacturing operations
and/or for use by third-party manufacturers contracted to supply Tiffany merchandise. The silver, gold and platinum
sourced directly by the Company principally comes from two sources: in-ground, large-scale deposits of metals,
primarily in the U.S., that meet the Company's standards for responsible mining and metals from recycled sources.
While the Company may supply precious metals to a manufacturer, it cannot determine, in all circumstances,
whether the finished goods provided by such manufacturer were actually produced with Company-supplied precious
metals.
The Company generally enters into purchase orders for fixed quantities with precious metals and other polished
gemstone vendors. Purchases are generally made at prevailing market prices, which have, with respect to precious
metals, experienced substantial volatility in recent years. 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. The Company 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.
Finished Jewelry. Finished jewelry is purchased from approximately 45 manufacturers. However, the Company does
not enter into long-term supply arrangements with its finished goods vendors. The Company does enter into
merchandise vendor agreements with nearly all of its finished goods vendors. The merchandise vendor agreements
establish non-price terms by which the Company may purchase and by which vendors may sell finished goods to the
Company. These terms include payment terms, shipping procedures, product quality requirements, merchandise
specifications and vendor social responsibility requirements. The Company generally enters into purchase orders for
fixed quantities of merchandise with its 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 Company actively seeks alternative sources for its best-selling jewelry items to mitigate any
potential disruptions in supply. However, due to the craftsmanship involved in a small number of designs, the
Company may have difficulty finding readily available alternative suppliers for those jewelry designs in the short
term.
Watches. In 2015, management introduced new TIFFANY & CO. brand watches, which have been designed,
produced, marketed and distributed through certain of the Company's Swiss subsidiaries. In support of this
introduction, the Company has relationships with approximately 30 component and subassembly vendors to
manufacture watches. The terms of the Company's contractual relationships with these vendors are substantially
similar to those described under "Finished Jewelry" above. Sales of these new TIFFANY & CO. brand watches
represented approximately 1% of worldwide net sales in both 2016 and 2015. While management anticipates an
increase in these sales in 2017, it does not expect this new watch business to increase the Company's profitability in
2017, as the Company expects to continue to invest significant resources in marketing to continue to build customer
awareness and further establish product differentiation.
The global jewelry industry is competitively fragmented. The Company encounters significant competition in all
product categories. 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
COMPETITION
TIFFANY & CO.
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the Company and compete on the basis of that reputation. Certain other jewelers and retailers compete primarily
through advertised price promotion. The Company competes on the basis of the Brand's reputation for high-quality
products, customer service and distinctive merchandise and does not engage in price promotional advertising.
Competition for engagement jewelry sales is particularly and increasingly intense. The Company's retail price for
diamond jewelry reflects the rarity of the stones it offers and the rigid parameters it exercises with respect to the cut,
clarity and other diamond quality factors which increase the beauty of the diamonds, but which also increase the
Company's cost. The Company competes in this market by emphasizing quality.
As a jeweler and specialty retailer, the Company's business is seasonal in nature, with the fourth quarter typically
representing approximately one-third of annual net sales and a higher percentage of annual net earnings.
Management expects such seasonality to continue.
SEASONALITY
As of January 31, 2017, the Company employed an aggregate of approximately 11,900 full-time and part-time
persons. Of those employees, approximately 5,200 are employed in the United States.
EMPLOYEES
AVAILABLE INFORMATION
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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.govg
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that contains reports, proxy and information statements and other information regarding Tiffany & Co.
and other companies that electronically file materials with the SEC. Copies of the Company's 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.
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Item 1A. Risk Factors.
As is the case for any retailer, the Company'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 Company and/or the markets in which it operates. The following "risk factors" are specific to the Company; these
risk factors affect the likelihood that the Company will achieve the 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 Company's sales and earnings.
As a retailer of goods which are discretionary purchases, the Company's sales results are particularly sensitive to
changes in economic conditions and consumer confidence. Consumer confidence is affected by general business
conditions; political uncertainties and/or developments; changes in the market value of equity 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 Company's sales and earnings.
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Certain competitors may react to such conditions by reducing retail prices and promoting such reductions; such
reductions and/or inventory liquidations can have a short-term adverse effect on the Company's sales, especially
given the Company's policy of not engaging in price promotional activity.
The Company has invested in and operates a significant number of stores in Greater China and anticipates
continuing to do so. Any slowdown in the Chinese economy could have a negative impact on the sales and
profitability of stores in Greater China as well as stores in other markets that serve Chinese tourists.
Uncertainty surrounding the current global economic environment makes it more difficult for the Company to
forecast operating results. The Company'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 Company's fourth fiscal quarter, which includes the Holiday selling season.
The Company's business is seasonal in nature, with the fourth quarter typically representing approximately one-third
of annual net sales and a higher percentage of annual net earnings. Poor sales results during the fourth quarter
would have an adverse effect on annual earnings and inventories in the short-term.
(iii) The Company conducts operations globally, the risks of which could increase its costs, reduce its profits or disrupt its
business.
The Company operates globally and generates a majority of its worldwide net sales outside the United States. It also
has both U.S. and foreign manufacturing operations, and relies on certain U.S. and foreign third-party vendors and
suppliers. In addition, the Company maintains investments in, and has provided loans to, certain foreign suppliers.
As a result, the Company is subject to the risks of doing business globally, including:
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the laws, regulations and policies of 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;
uncertainties from changes in U.S. or foreign taxation policies, including, for example, as a result of
recent proposals to reform the manner in which the earnings of U.S. multinational corporations are
taxed by the U.S. government;
compliance by third party vendors and suppliers with the Company’s sourcing and quality standards,
codes of conduct, or contractual requirements as well as applicable laws and regulations;
import and export licensing requirements and regulations, as well as unforeseen changes in regulatory
requirements;
political or economic instability in foreign countries, including the potential for rapid and unexpected
changes in government, economic and political policies (including diplomatic and trade relations with
other countries), political or civil unrest, acts of terrorism or the threat of international boycotts or U.S.
anti-boycott legislation – as a result of, for example, (1) the United Kingdom's referendum vote to exit
the European Union, as discussed below, or (2) changes in government policies resulting from the
recent change in the U.S. Presidential administration;
challenges inherent in oversight of foreign operations, systems and controls; for example, in the fourth
quarter of 2015, management identified inaccuracies in the Japan segment relating to the timing of
recognizing sales and related costs, as well as inventory, at period-ends. Management determined
these inaccuracies did not materially affect the Company's annual or quarterly financial statements,
including the reported financial information for the Japan segment. However, management has
reviewed the processes and personnel involved and completed appropriate remediation activities;
potential negative consequences from foreign governments' currency management practices;
uncertainties as to enforcement of certain contract and other rights; and
inventory risk exposures.
In June 2016, voters in the United Kingdom approved an advisory referendum to withdraw from the European Union,
commonly referred to as "Brexit." If passed into law, negotiations will commence to determine the United Kingdom's
future relationship with the European Union, including terms of trade. Such negotiations will likely be complex and
TIFFANY & CO.
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protracted, and there can be no assurance regarding the terms or timing of any such arrangements. A withdrawal
could significantly disrupt the free movement of goods, services, and people between the United Kingdom and the
European Union, and result in increased legal and regulatory complexities, as well as potential higher costs of
conducting business in Europe. There may be similar referendums or votes in other European countries in which the
Company does business. The uncertainty surrounding the terms of the United Kingdom's withdrawal and its
consequences, as well as the impact of any similar circumstances that may arise elsewhere in Europe, could increase
the Company's costs and adversely impact consumer and investor confidence, and the level of consumer
discretionary purchases, including purchases of the Company’s products.
While these factors and the effect of these factors are difficult to predict, any one or more of them could lower the
Company's revenues, increase its costs, reduce its earnings or disrupt its business.
(iv) A strengthening of the U.S. dollar against foreign currencies would negatively affect the Company's sales and
profitability.
The Company operates retail stores in more than 20 countries outside of the U.S. and, as a result, is exposed to
market risk from fluctuations in foreign currency exchange rates, including, among others, the Japanese Yen, Euro,
British Pound, Chinese yuan and the Hong Kong dollar. In 2016, sales in countries outside of the U.S. in aggregate
represented more than half of the Company's net sales and earnings from operations. A continued strengthening of
the U.S. dollar against foreign currencies would require the Company to raise its retail prices in order to maintain its
worldwide relative pricing structure, 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 Company's goods; thus, there is a risk that a
continued strengthening of the U.S. dollar would result in reduced sales and profitability. In addition, a continued
weakening of any foreign currency relative to other currencies may negatively affect spending by foreign tourists in
the various regions where the Company operates retail stores which would adversely affect its net sales and
profitability.
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The reported results of operations of the Company'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 continues to strengthen
against foreign currencies, the translation of these foreign currency-denominated transactions would decrease
consolidated net sales and profitability. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations." for a discussion of such impacts.
(v) Political activities, regional instability and/or conflict or similar events could disrupt tourist travel and local consumer
spending.
Regional and global conflicts or crises, such as military actions, terrorist activities (like those that occurred in several
major European cities in 2016 and 2015) and natural disasters, geopolitical or regulatory developments (and any
related protests) and other similar events and conditions in the various regions and cities where the Company
operates retail stores may negatively affect spending by both foreign tourists and local consumers. The Company's
retail stores, many of which are located in major metropolitan areas globally, may in fact have close proximity to the
locations of such events – for example, the Company's New York Flagship store is located adjacent to a private
residence of the U.S. President which has, at times, impacted consumer access as a result of security measures. The
occurrence of the types of events or conditions described above, or the related effect of security measures
implemented to address the possibility of such occurrences, could affect consumer traffic and/or spending in one or
more of the Company's locations, which could adversely affect the Company's sales and earnings. While sales in the
Company's largest store (the New York Flagship) represent less than 10% of worldwide net sales, the impact of
significant sales declines in any one store could still be meaningful to consolidated results.
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(vi) Changes in the Company's product or geographic sales mix could affect the Company's profitability.
The Company 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 Company's geographic 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. The increasing availability of, and ease of access to, retail price information
across markets, primarily through the Internet, may affect consumers' decisions regarding in which geographies to
shop. If the Company's sales mix were to shift toward products or geographic regions that are significantly different
than the Company's plans, it could have an effect, either positively or negatively, on its expected profitability.
(vii) Increases in costs of diamonds and precious metals or reduced supply availability may adversely affect the Company's
ability to produce and sell products at desired profit margins.
Most of the Company's jewelry offerings are made with diamonds, gemstones and/or precious metals. A significant
increase in the costs or change in the supply of these commodities could adversely affect the Company'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 precious metals 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. Additionally, should synthetic diamonds (diamonds manufactured but not naturally occurring) and/or
treated diamonds (naturally occurring diamonds subject to treatment processes, such as irradiation) be offered in
significant quantities and gain consumer acceptance, the supply of, demand for and prices for natural diamonds may
be affected.
(viii) The Company may be unable to secure and retain sufficient space for its retail stores in prime locations, and
maintaining the Company's brand image and desirability to consumers requires significant investment in store construction,
maintenance and periodic renovation.
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The Company, positioned as a luxury goods retailer, has established its retail presence in choice store locations.
Management regularly evaluates opportunities to optimize its retail store base, including potential markets for new
TIFFANY & CO. stores, as well as the renovation and relocation of its existing stores. Maintaining the Company's
brand image and desirability to consumers requires that stores be constructed and maintained in a manner
consistent with that brand image. This requires significant capital investment, including for periodic renovations of
existing stores. Renovations of existing stores may also result in temporary disruptions to an individual store's
business. For example, the Company has begun the conceptual phase of a multi-year effort to renovate its New York
Flagship store, which may result in business and/or consumer traffic disruptions to that store once such renovations
begin. If the Company cannot secure and retain store locations on suitable terms in prime and desired luxury
shopping locations, or if its investments to construct and/or renovate existing stores do not generate sufficient
incremental sales and/or profitability, the Company's sales and/or earnings performance could be jeopardized.
(ix) The value of the TIFFANY & CO. and TIFFANY trademarks could decline due to third-party use and infringement.
The TIFFANY & CO. and TIFFANY trademarks are assets that are essential to the competitiveness and success of the
Company's business, and the Company takes appropriate action to protect them. The Company actively pursues
those who produce or sell counterfeit TIFFANY & CO. goods through civil action and cooperation with criminal law
enforcement agencies. However, use of the designation TIFFANY by third parties on related goods or services and the
Company's failure or inability to protect against such use could adversely affect and dilute the value of the TIFFANY
& CO. brand.
Notwithstanding the general success of the Company's enforcement actions, such actions have not stopped the
imitation and counterfeiting of the Company's merchandise or the infringement of the trademark, and counterfeit
TIFFANY & CO. goods remain available in most markets. In recent years, there has been an increase in the
availability of counterfeit goods, predominantly silver jewelry, on the Internet and in various markets by street
vendors and small retailers. The continued sale of counterfeit merchandise or merchandise that infringes the
Company's trademarks could have an adverse effect on the TIFFANY & CO. brand by undermining the Company's
reputation for quality goods and making such goods appear less desirable to consumers of luxury goods. Damage to
the TIFFANY & CO. brand could result in lost sales and earnings.
TIFFANY & CO.
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(x) The Company's business is dependent upon the distinctive appeal of the TIFFANY & CO. brand.
The TIFFANY & CO. brand's association with quality and luxury is integral to the success of the Company's business.
The Company's expansion plans for retail and direct selling operations and development, production and
management support the appeal of the TIFFANY & CO. brand. 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 could result in lower
sales and earnings.
In addition, adverse publicity regarding TIFFANY & CO. and its products, as well as adverse publicity in respect of, or
resulting from, the Company's third-party vendors or the diamond or jewelry industries more generally, could
adversely affect the Company’s business. For example, the Company sources from third-party vendors certain
products that, from time to time, may not, or may contain raw materials that do not, meet the Company's sourcing
and quality standards as well as applicable requirements and regulations. In such instances, although the Company
may have recourse against such third-party vendors, the Company may self-report to the relevant regulatory agencies,
recall affected products and/or pay potential fines. By way of further example, during the Company's regular internal
quality testing, the Company identified a potential breach of the Company's sourcing and quality standards
applicable to third party vendors. The Company is currently in the early stages of assessing the composition of
certain of its gold products manufactured by certain U.S. third-party vendors, which contain gold solder
manufactured by other U.S. vendors, to determine whether such products are in compliance with applicable
consumer products requirements and regulations.
Any of the above could harm the TIFFANY & CO. brand and reputation, cause a loss of consumer confidence in the
TIFFANY & CO. brand, its products and the industry, and/or negatively affect the Company's results of operations.
The considerable expansion in the use of social media in recent years has compounded the potential scope of any
negative publicity.
(xi) A significant data security or privacy breach of the Company's information systems could affect its business.
The protection of customer, employee and Company data is important to the Company, and its customers and
employees 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 Company does business. Although the Company has developed
and implemented systems and processes that are designed to protect personal and Company information and prevent
data loss and other security breaches, such measures cannot provide absolute security. Additionally, the Company’s
increased use and reliance on web-based hosted (i.e., cloud computing) applications and systems for the storage,
processing and transmission of information, including customer and employee information, could expose the
Company, its employees and its customers to a risk of loss or misuse of such information. The Company’s efforts to
protect personal and Company information may also be adversely impacted by data security or privacy breaches that
occur at its third-party vendors. While the Company's contractual arrangements with such third-party vendors provide
for the protection of Company data, the Company cannot control these vendors or their systems and cannot
guarantee that a data security or privacy breach of their systems will not occur in the future. A significant breach of
customer, employee or Company data could damage the Company's reputation, its relationship with customers and
the TIFFANY & CO. brand and could result in lost sales, sizable fines, significant breach-notification costs and
lawsuits as well as adversely affect results of operations. The Company may also incur additional costs in the future
related to the implementation of additional security measures to protect against new or enhanced data security and
privacy threats, to comply with state, federal and international laws that may be enacted to address those threats or
to investigate or address potential or actual data security or privacy breaches.
(xii) Any material disruption of, or a failure to successfully implement or make changes to, information systems could
negatively impact the Company's business.
The Company is increasingly dependent on its information systems to operate its business, including in designing,
manufacturing, marketing and distributing its products, as well as processing transactions, managing inventory and
accounting for and reporting its results. Given the complexity of the Company’s global business, it is critical that the
Company maintain the uninterrupted operation of its information systems. Despite the Company’s preventative
efforts, its information systems may be vulnerable to damage, disruption or shutdown due to power outages,
TIFFANY & CO.
K-15
computer and telecommunications failures, computer viruses, security breaches or natural disasters. Damage,
disruption or shutdown of the Company’s information systems may require a significant investment to fix or replace
them, and the Company could suffer interruptions in its operations in the interim.
In addition, in the ordinary course of business, the Company regularly evaluates and makes changes and upgrades to
its information systems. The Company has commenced a multi-year effort to evaluate and, where appropriate, to
upgrade and/or replace certain of its information systems, including systems for global customer relationship
management, order management and inventory management. These system changes and upgrades can require
significant capital investments and dedication of resources. While the Company follows a disciplined methodology
when evaluating and making such changes, there can be no assurances that the Company will successfully
implement such changes, that such changes will occur without disruptions to its operations or that the new or
upgraded systems will achieve the desired business objectives. For example, in 2016 the Company recorded a pre-
tax impairment charge of $25.4 million related to software costs capitalized in connection with the development of a
new finished goods inventory management and merchandising information system. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations – Information Systems Assessment" for a
discussion of this impairment charge.
Any damage, disruption or shutdown of the Company's information systems, or the failure to successfully implement
new or upgraded systems, such as those referenced above, could have a direct material adverse effect on the
Company's results of operations, could undermine the Company's ability to execute on its strategic and operational
initiatives, and could also affect the Company's reputation, its ability to compete effectively, its relationship with
customers and the TIFFANY & CO. brand, which could result in reduced sales and profitability.
(xiii) The loss or a prolonged disruption in the operation of the Company's centralized distribution centers could adversely
affect its business and operations.
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The Company maintains two separate distribution centers in close proximity to one another in New Jersey. Both are
dedicated to warehousing merchandise; one handles worldwide store replenishment and the other processes direct-
to-customer orders. Although the Company 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.
(xiv) The loss or a prolonged disruption in the operation of the Company's internal manufacturing facilities could adversely
affect its business and operations.
The Company's internal manufacturing facilities produce approximately 60% of the merchandise sold by the
Company. Any prolonged disruption to their operations would require the Company to seek alternate sources of
production and could have a negative effect on inventory availability and sales until such sources are established.
(xv) If diamond mining and exploration companies to which the Company or its subsidiaries have provided financing were to
experience financial difficulties, those funds might not be recovered, which would reduce the Company's earnings.
The Company 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. Mining operations are inherently risky, and often
occur in regions subject to additional political, social and environmental risks. Given these risks, there is no
assurance that the diamond mining and exploration companies subject to these arrangements will be able to meet
their obligations to the Company under their financing agreements. If a diamond mining or exploration company
defaults under its financing agreement, the Company would be required to evaluate whether it should take a period
charge in respect of all or a portion of the financing, which would affect the Company's earnings.
For example, in 2016 and 2015, the Company recorded impairment charges, and related valuation allowances, of
$4.2 million and $37.9 million, respectively, associated with a $43.8 million financing arrangement with Koidu
Limited (previously Koidu Holdings S.A.). See "Item 8. Financial Statements and Supplementary Data – Note J.
Commitments and Contingencies" for additional information.
TIFFANY & CO.
K-16
(xvi) There is no assurance that the Company will be able to effectively and successfully grow its new watch business.
In 2015, management introduced new TIFFANY & CO. brand watches, which have been designed, produced,
marketed and distributed through certain of the Company's Swiss subsidiaries. The effective development of this
watch business has required and will continue to require additional resources and involves risks and uncertainties,
including: (i) significant ongoing expenditures; (ii) the need to employ highly specialized and experienced personnel;
(iii) new regulatory requirements; (iv) dependence on relatively small supply partners; and (v) production and
distribution inefficiencies. Sales of these new TIFFANY & CO. brand watches represented approximately 1% of
worldwide net sales in 2016 and 2015. While management anticipates an increase in these sales in 2017, it does
not expect this new watch business to significantly contribute to the Company's profitability in the near term. As with
any new business, the Company is competing with businesses with stronger market positions and has invested and
will continue to invest significant resources in marketing to build customer awareness and to establish product
differentiation. There is, however, no assurance that the Company will be able to effectively grow its new watch
business or that such business will be successful in growing the Company's revenues or enhancing its profitability.
(xvii) If the Company is unable to effectively anticipate and respond to changes in consumer preferences and shopping
patterns, or introduce new products or marketing programs that appeal to new or existing customers, the Company's sales
and profitability could be adversely affected.
The Company's continued success depends on its ability to anticipate and respond in a timely and cost-effective
manner to changes in consumer preferences for jewelry and other luxury goods, attitudes towards the global jewelry
industry as a whole, as well as the manner and locations in which consumers purchase such goods. The Company
recognizes that consumer tastes cannot be predicted with certainty and are subject to change, which is compounded
by the expanding use of digital and social media by consumers and the speed by which information and opinions are
shared. The Company's product development strategy is to introduce new design collections, primarily jewelry, and/or
expand certain existing collections annually. In addition, management intends to continue to invest in marketing and
public relations programs designed to build awareness of the Brand, its heritage and its products, as well as to
enhance the Brand's association among consumers with quality and luxury. There can be no assurance these
strategies will appeal to new or existing customers or will result in increased sales or profitability. Further, if the
Company is unable to anticipate and respond in a timely and cost-effective manner to changes in consumer
preferences and shopping patterns, the Company’s sales and profitability could be adversely impacted.
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In addition, approximately 75% of the Company's stores are located within luxury department stores and shopping
malls and benefit from the ability of those locations to generate consumer traffic. A substantial decline in
department store and/or mall traffic may negatively impact the Company's ability to maintain or increase its sales in
existing stores, as well as its ability to open new stores.
(xviii) The price of the Company's common stock may periodically rise or fall based on the Company's achievement of
earnings forecasts and investors' expectations.
The Company's strategic planning process is designed to maximize its long-term strength, growth, and profitability,
and not to achieve an earnings target in any particular fiscal period. Management believes that this longer-term focus
is in the best interests of the Company and its stockholders. At the same time, however, the Company recognizes
that, from time to time, it may be helpful to provide investors with guidance as to management's annual earnings
forecast. If, or when, the Company announces actual results that differ from those that have been forecast by
management or others, the market price of the Company's common stock could be adversely affected.
The Company periodically returns value to its stockholders through common stock share repurchases and payment of
quarterly cash dividends. The market price of the Company's common stock could be adversely affected if the
Company’s share repurchase activity and/or cash dividend rate differs from investors' expectations.
(xix) Recent changes in the Company's executive management team may be disruptive to, or cause uncertainty in, its
business, results of operations and the price of the Company's common stock.
On February 5, 2017, Frederic Cumenal stepped down from his position as Chief Executive Officer of the Company,
and the Company’s Board of Directors appointed Michael J. Kowalski, Chairman of the Board, as the Company’s
Interim Chief Executive Officer. The Company's Board of Directors has commenced an external search to recruit a
successor with the assistance of a leading executive search firm. In addition to this recent change, certain members
TIFFANY & CO.
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of the Company's executive management team have left the Company in recent years, which has required the
Company to focus time and resources on recruiting the new members of its current executive management team.
These changes in the Company's executive management team, may be disruptive to, or cause uncertainty in, the
Company's business, and any additional changes to the executive management team could have a negative impact
on the Company's ability to manage and grow its business effectively. In addition, if the Company is not effective in
succession planning, there may be a negative impact on the Company's ability to successfully hire for key executive
management roles, including the Chief Executive Officer position, in a timely manner. Any such disruption or
uncertainty or difficulty in efficiently and effectively filling key roles could have a material adverse impact on the
Company's results of operations and the price of the Company's common stock.
(xx) Environmental and climate changes could affect the Company's business.
The Company operates retail stores in more than 20 countries and has both domestic and foreign manufacturing
operations that are susceptible to the risks associated with climate change, including the potential for more frequent
and severe weather events. Such events could result in social, cultural and economic disruptions in these areas,
including the disruption of local infrastructure and transportation systems that could limit the ability of the
Company's employees and/or its customers to access the Company's stores or manufacturing locations. Despite the
fact that the Company is pursuing numerous initiatives to reduce its environmental footprint, including its recent
pledge to achieve net-zero greenhouse gas emissions by the year 2050, there remains the risk that insufficient global
cooperation could lead to heightened levels of climate change. While the Company has a program for reviewing its
vulnerability to the impacts of severe weather events and other risks associated with climate change, these events
could nonetheless negatively affect the Company's business and operations.
Item 1B. Unresolved Staff Comments.
NONE
Item 2. Properties.
The Company leases its various store premises (other than the New York Flagship store, which is owned by the
Company) 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, 2017:
Total Stores
Total Gross Retail
Square Footage
Gross Retail
Square Footage
Range
Average Gross
Retail Square
Footage
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Americas:
New York Flagship
Other stores
Asia-Pacific
Japan:
Tokyo Ginza
Other stores
Europe:
London Old Bond Street
Other stores
Emerging Markets
Total
1
124
85
1
54
1
42
5
45,500
45,500
676,200
1,000 - 17,600
240,600
400 - 12,800
13,300
13,300
140,100
1,600 - 7,500
22,400
135,300
7,900
22,400
600 - 9,600
400 - 3,600
313
1,281,300
400 - 45,500
45,500
5,500
2,800
13,300
2,600
22,400
3,200
1,600
4,100
TIFFANY & CO.
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NEW YORK FLAGSHIP STORE
The Company owns the building, but not the air rights above the building, housing its 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.
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. The New York
Flagship store is also the focal point for marketing and public relations efforts. Sales in this store represent less than
10% of worldwide net sales.
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 information technology operations and half to
warehousing, shipping, receiving, merchandise processing and other distribution functions. The RSC receives
merchandise and replenishes retail stores. The Company has a 20-year lease for this facility, 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 land lease expires in 2032 and the Company has the
right to renew the lease for an additional 20-year term.
MANUFACTURING FACILITIES
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The Company owns and operates jewelry manufacturing facilities in Cumberland, Rhode Island and Lexington,
Kentucky, and leases a jewelry manufacturing facility in Pelham, New York as well as a facility in the Dominican
Republic which performs certain functions such as jewelry polishing. Lease expiration dates range from 2019 to
2023. The owned and leased facilities total approximately 225,000 square feet.
The Company leases a facility in Belgium and owns facilities in Botswana, Cambodia, Mauritius and Vietnam
(although the land in Botswana, Cambodia and Vietnam is leased) that prepare, cut and/or polish rough diamonds for
use by Tiffany. These facilities total approximately 280,000 square feet and the lease expiration dates range from
2021 to 2062.
Item 3. Legal Proceedings.
Arbitration Award. On December 21, 2013, an award was issued (the "Arbitration Award") in favor of The Swatch
Group Ltd. ("Swatch") and its wholly owned subsidiary Tiffany Watch Co. ("Watch Company"; Swatch and Watch
Company, together, the "Swatch Parties") in an arbitration proceeding (the "Arbitration") between the Registrant and
its wholly owned subsidiaries, Tiffany and Company and Tiffany (NJ) Inc. (the Registrant and such subsidiaries,
together, the "Tiffany Parties") and the Swatch Parties.
The Arbitration was initiated in June 2011 by the Swatch Parties, who sought damages for alleged breach of
agreements entered into by and among the Swatch Parties and the Tiffany Parties in December 2007 (the
"Agreements"). The Agreements pertained 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.
In general terms, the Swatch Parties alleged that the Tiffany Parties breached the Agreements by obstructing and
delaying development of Watch Company’s business and otherwise failing to proceed in good faith. The Swatch
Parties sought damages based on alternate theories ranging from CHF 73.0 million (or approximately $73.0 million
at January 31, 2017) (based on its alleged wasted investment) to CHF 3.8 billion (or approximately $3.8 billion at
January 31, 2017) (calculated based on alleged future lost profits of the Swatch Parties and their affiliates over the
entire term of the Agreements).
TIFFANY & CO.
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The Registrant believes that the claims of the Swatch Parties are without merit. In the Arbitration, the Tiffany Parties
defended against the Swatch Parties’ claims vigorously, disputing both the merits of the claims and the calculation
of the alleged damages. The Tiffany Parties also asserted counterclaims for damages attributable to breach by the
Swatch Parties, stemming from the Swatch Parties’ September 12, 2011 public issuance of a Notice of Termination
purporting to terminate the Agreements due to alleged material breach by the Tiffany Parties, and for termination
due to such breach. In general terms, the Tiffany Parties alleged 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 sought damages based on alternate theories ranging from CHF 120.0 million (or approximately
$121.0 million at January 31, 2017) (based on its wasted investment) to approximately CHF 540.0 million (or
approximately $542.0 million at January 31, 2017) (calculated based on alleged future lost profits of the Tiffany
Parties).
The Arbitration hearing was held in October 2012 before a three-member arbitral panel convened in the Netherlands
pursuant to the Arbitration Rules of the Netherlands Arbitration Institute (the "Rules"), and the Arbitration record was
completed in February 2013.
Under the terms of the Arbitration Award, and at the request of the Swatch Parties and the Tiffany Parties, the
Agreements were deemed terminated. The Arbitration Award stated that the effective date of termination was March
1, 2013. Pursuant to the Arbitration Award, the Tiffany Parties were ordered to pay the Swatch Parties damages of
CHF 402.7 million (the "Arbitration Damages"), as well as interest from June 30, 2012 to the date of payment, two-
thirds of the cost of the Arbitration and two-thirds of the Swatch Parties' legal fees, expenses and costs. These
amounts were paid in full in January 2014.
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Prior to the ruling of the arbitral panel, no accrual was established in the Company's consolidated financial
statements because management did not believe the likelihood of an award of damages to the Swatch Parties was
probable. As a result of the ruling, in the fourth quarter of 2013, the Company recorded a charge of $480.2 million,
which included the damages, interest, and other costs associated with the ruling and which was classified as
Arbitration award expense in the consolidated statement of earnings.
On March 31, 2014, the Tiffany Parties took action in the District Court of Amsterdam to annul the Arbitration
Award. Generally, arbitration awards are final; however, Dutch law does provide for limited grounds on which arbitral
awards may be set aside. The Tiffany Parties petitioned to annul the Arbitration Award on these statutory grounds.
These grounds include, for example, that the arbitral tribunal violated its mandate by changing the express terms of
the Agreements.
A three-judge panel presided over the annulment hearing on January 19, 2015, and, on March 4, 2015, issued a
decision in favor of the Tiffany Parties. Under this decision, the Arbitration Award is set aside. However, the Swatch
Parties took action in the Dutch courts to appeal the District Court's decision, and a three-judge panel presided over
an appellate hearing in respect of the annulment, and the related claim by the Tiffany Parties for return of the
Arbitration Damages and related costs, on June 29, 2016. That panel's decision, which may be appealed to the
Supreme Court of the Netherlands, is pending. As a result of this ongoing appellate process, the Arbitration Award
may ultimately be upheld by the courts of the Netherlands. Registrant’s management expects that the annulment
action is not likely to be ultimately resolved until, at the earliest, Registrant's fiscal year ending January 31, 2018.
If the Arbitration Award is finally annulled, management anticipates that the claims and counterclaims that formed
the basis of the Arbitration, and potentially additional claims and counterclaims, will be litigated in court
proceedings between and among the Swatch Parties and the Tiffany Parties. The identity and location of the courts
that would hear such actions have not been determined at this time.
In any litigation regarding the claims and counterclaims that formed the basis of the arbitration, issues of liability
and damages will be pled and determined without regard to the findings of the arbitral panel. As such, it is possible
that the court could find that the Swatch Parties were in material breach of their obligations under the Agreements,
that the Tiffany Parties were in material breach of their obligations under the Agreements or that neither the Swatch
Parties nor the Tiffany Parties were in material breach. If the Swatch Parties’ claims of liability were accepted by the
court, the damages award cannot be reasonably estimated at this time, but could exceed the Arbitration Damages
and could have a material adverse effect on the Registrant’s consolidated financial statements or liquidity.
TIFFANY & CO.
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Although the District Court issued a decision in favor of the Tiffany Parties, an amount will only be recorded for any
return of amounts paid under the Arbitration Award when the District’s Court decision is final (i.e., after all rights of
appeal have been exhausted) and return of these amounts is deemed probable and collection is reasonably
assured. As such, the Company has not recorded any amounts in its consolidated financial statements related to the
District Court’s decision.
Additionally, management has not established any accrual in the Company's consolidated financial statements for
the year ended January 31, 2017 related to the annulment process or any potential subsequent litigation because it
does not believe that the final annulment of the Arbitration Award and a subsequent award of damages exceeding the
Arbitration Damages is probable.
Royalties payable to the Tiffany Parties by Watch Company under the Agreements and sales of watches manufactured
by Watch Company and sold in TIFFANY & CO. stores were not significant in any year.
In 2015, management introduced new TIFFANY & CO. brand watches, which have been designed, produced,
marketed and distributed through certain of the Company's Swiss subsidiaries. The effective development and growth
of this watch business has required and will continue to require additional resources and involves risks and
uncertainties.
Other Matters. 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.
Although litigation with present and former employees is routine and incidental to the conduct of the Company'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 Company believes
that all such litigation currently pending to which it is a party or to which its properties are subject will be resolved
without any material adverse effect on the Company's financial position, earnings or cash flows.
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Gain Contingency. On February 14, 2013, Tiffany and Company and Tiffany (NJ) LLC (collectively, the "Tiffany
plaintiffs") initiated a lawsuit against Costco Wholesale Corp. ("Costco") for trademark infringement, false designation
of origin and unfair competition, trademark dilution and trademark counterfeiting (the "Costco Litigation"). The
Tiffany plaintiffs sought injunctive relief, monetary recovery and statutory damages on account of Costco's use of
"Tiffany" on signs in the jewelry cases at Costco stores used to describe certain diamond engagement rings that were
not manufactured by Tiffany. Costco filed a counterclaim arguing that the TIFFANY trademark was a generic term for
multi-pronged ring settings and seeking to have the trademark invalidated, modified or partially canceled in that
respect. On September 8, 2015, the U.S. District Court for the Southern District of New York (the "Court") granted
the Tiffany plaintiffs' motion for summary judgment of liability in its entirety, dismissing Costco's genericism
counterclaim and finding that Costco was liable for trademark infringement, trademark counterfeiting and unfair
competition under New York law in its use of "Tiffany" on the above-referenced signs. On September 29, 2016, a
civil jury rendered its verdict, finding that Costco's profits on the sale of the infringing rings should be awarded at
$5.5 million, and further finding that an award of punitive damages was warranted. On October 5, 2016, the jury
awarded $8.25 million in punitive damages. The aggregate award of $13.75 million is not final, and is subject to
post-verdict motion practice and ultimately to adjustment by the Court. In such post-verdict motion practice, the
Tiffany plaintiffs asserted that the profits award should be trebled and that Costco should also pay the Tiffany
plaintiffs' legal fees in respect of this matter. Management expects that the Court will enter its final judgment as to
the damages and other monetary recovery that Costco will be ordered to pay to the Tiffany plaintiffs during the
Company's 2017 fiscal year. Management also expects that Costco will appeal this judgment, and that the Tiffany
plaintiffs will be unable to enforce the judgment while the appeal is pending. As such, the Company has not
recorded any amount in its consolidated financial statements related to this gain contingency as of January 31,
2017, and expects that this matter will not ultimately be resolved until, at the earliest, the Company's fiscal year
ending January 31, 2018.
Item 4. Mine Safety Disclosures.
Not Applicable.
TIFFANY & CO.
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PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
In calculating the aggregate market value of the voting stock held by non-affiliates of the Company shown on the
cover page of this Annual Report on Form 10-K, 860,775 shares of Common Stock beneficially owned by the
executive officers and directors of the Company (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, as amended.
Performance of Company Stock
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 2016 were:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$ 74.06
$ 72.18
$ 74.81
$ 85.44
Low
$ 59.75
$ 56.99
$ 58.77
$ 71.86
On March 13, 2017, the high and low selling prices quoted on such exchange were $88.93 and $88.29. On March
13, 2017, there were 14,241 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 2015 were:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$ 90.83
$ 96.33
$ 96.43
$ 84.19
Low
$ 82.64
$ 84.83
$ 74.28
$ 59.73
The following graph compares changes in the cumulative total shareholder return on the Company’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. The graph assumes an investment of $100 on January 31, 2012 in the Company's common stock and in each
of the two indices as well as the reinvestment of any subsequent dividends.
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TIFFANY & CO.
K-22
Total returns are based on market capitalization; indices are weighted at the beginning of each period for which a
return is indicated. The stock performance shown in the graph is not intended to forecast or be indicative of future
performance.
Comparison of Cumulative Five Year Total Return
Tiffany & Co.
S&P 500 Stock Index
S&P 500 Consumer Discretionary Index
$250
$200
$150
$100
$50
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$0
1/31/12
1/31/13
1/31/14
1/31/15
1/31/16
1/31/17
Tiffany & Co.
S&P 500 Stock Index
S&P 500 Consumer
Discretionary Index
1/31/12
1/31/13
1/31/14
1/31/15
1/31/16
1/31/17
$ 100.00
$ 105.24
$ 135.48
$ 143.26
$ 107.59
$ 136.00
100.00
116.78
141.91
162.09
161.01
193.28
100.00
123.67
157.51
178.00
191.84
223.45
Dividends
It is the Company's policy to pay a quarterly dividend on its Common Stock, subject to declaration by its Board of
Directors. In 2015, a dividend of $0.38 per share of Common Stock was paid on April 10, 2015. On May 28, 2015,
the Company announced a 5% increase in its regular quarterly dividend rate to a new rate of $0.40 per share of
Common Stock which was paid on July 10, 2015, October 13, 2015 and January 11, 2016.
In 2016, a dividend of $0.40 per share of Common Stock was paid on April 11, 2016. On May 26, 2016, the
Company announced a 12.5% increase in its regular quarterly dividend rate to a new rate of $0.45 per share of
Common Stock which was paid on July 11, 2016, October 11, 2016 and January 10, 2017.
TIFFANY & CO.
K-23
Issuer Purchases of Equity Securities
In January 2016, the Registrant's Board of Directors approved the termination of the Company's then-existing share
repurchase program, which was approved in March 2014 and had authorized the Company to repurchase up to
$300.0 million of its Common Stock through open market transactions (the "2014 Program"), in favor of a new share
repurchase program ("2016 Program"). The 2016 Program, which will expire on January 31, 2019, authorizes the
Company to repurchase up to $500.0 million of its Common Stock through open market transactions, block trades or
privately negotiated transactions. Purchases under the 2014 Program were, and purchases under the 2016 Program
have been, executed under a written plan for trading securities as specified under Rule 10b5-1 promulgated under
the Securities and Exchange Act of 1934, as amended, the terms of which are within the Company's discretion,
subject to applicable securities laws, and are based on market conditions and the Company's liquidity needs.
Approximately $310.4 million remained available for repurchase under the 2016 Program at January 31, 2017.
The following table contains the Company's purchases of equity securities in the fourth quarter of 2016:
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Period
November 1, 2016 to
November 30, 2016
December 1, 2016 to
December 31, 2016
January 1, 2017 to
January 31, 2017
(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
(in millions)
39,480
$ 73.10
39,480
—
—
$ —
$ —
—
—
$ 310.4
$ 310.4
$ 310.4
$ 310.4
TOTAL
39,480
$ 73.10
39,480
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 2012-2016, which ended on January 31 of the following calendar
year:
(in millions, except per share amounts,
percentages, ratios, stores and employees)
2016 a
2015 b
2014 c
2013 d
2012
EARNINGS DATA
Net sales
Gross profit
Selling, general & administrative expenses
Net earnings
Net earnings per diluted share
Weighted-average number of diluted
common shares
BALANCE SHEET AND CASH FLOW DATA
$
4,001.8
$
4,104.9
$
4,249.9
$
4,031.1
$
3,794.2
2,490.3
1,769.1
446.1
3.55
2,491.3
1,731.2
463.9
3.59
2,537.2
1,645.8
484.2
3.73
2,340.4
1,555.9
181.4
1.41
2,163.3
1,466.1
416.2
3.25
125.5
129.1
129.9
128.9
127.9
Total assets *
$
5,097.6
$
5,121.6
$
5,171.8
$
4,745.1
$
4,628.9
Cash and cash equivalents
928.0
843.6
730.0
345.8
504.8
Inventories, net
2,157.6
2,225.0
2,362.1
2,326.6
2,234.3
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
Earnings from 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
1,107.1
3,028.4
2,940.8
702.1
222.8
24.33
1.75
1,095.8
2,929.5
2,778.5
813.6
252.7
23.10
1.58
1,107.8
2,850.7
2,850.8
615.1
247.4
22.04
1.48
996.3
2,734.0
2,431.1
154.7
221.4
21.31
1.34
957.4
2,611.3
2,485.4
328.3
219.5
20.57
1.25
62.2%
44.2%
18.0%
11.1%
5.6%
8.7%
15.0%
36.6%
49.0%
313
60.7%
42.2%
18.5%
11.3%
6.2%
9.0%
16.1%
37.4%
43.8%
307
59.7%
38.7%
21.0%
11.4%
5.8%
9.8%
17.3%
38.9%
39.5%
295
58.1%
38.6%
7.5%
4.5%
5.5%
3.9%
6.8%
36.4%
93.9%
289
57.0%
38.6%
18.4%
11.0%
5.8%
9.5%
16.8%
36.7%
38.1%
275
9,900
Number of employees
11,900
12,200
12,000
10,600
* The Company adopted ASU No. 2015-03 – Simplifying the Presentation of Debt Issuance Costs retrospectively as
of February 1, 2016. Accordingly, debt issuance costs were reclassified from an asset to a direct deduction from
long-term debt in each of the years presented. See "Item 8. Financial Statements and Supplementary Data - Note
B. Summary of Significant Accounting Policies" for additional information.
s
TIFFANY & CO.
K-25
NOTES TO SELECTED FINANCIAL DATA
a. Financial information and ratios for 2016 include the following amounts, totaling $38.0 million of pre-tax
expense ($24.0 million net after tax expense, or $0.19 per diluted share):
• $25.4 million of net pre-tax expense ($16.0 million net after tax expense, or $0.13 per diluted share)
associated with an asset impairment charge related to software costs capitalized in connection with the
development of a new finished goods inventory management and merchandising information system. See
"Item 8. Financial Statements and Supplementary Data - Note B. Summary of Significant Accounting
Policies" and "Note E. Property, Plant and Equipment" for additional information; and
• $12.6 million of net pre-tax expense ($8.0 million net after tax expense, or $0.06 per diluted share)
associated with impairment charges related to financing arrangements with diamond mining and exploration
companies. See "Item 8. Financial Statements and Supplementary Data - Note B. Summary of Significant
Accounting Policies" for additional information.
b. Financial information and ratios for 2015 include the following amounts, totaling $46.7 million of net pre-tax
expense ($29.9 million net after tax expense, or $0.24 per diluted share):
• $37.9 million of net pre-tax expense ($24.3 million net after tax expense, or $0.19 per diluted share)
associated with impairment charges related to a financing arrangement with Koidu Limited. See "Item 8.
Financial Statements and Supplementary Data - Note J. Commitments and Contingencies" for additional
information; and
• $8.8 million of net pre-tax expense ($5.6 million net after tax expense, or $0.05 per diluted share)
associated with severance related to staffing reductions and subleasing of certain office space for which only
a portion of the Company's future rent obligations will be recovered.
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c. Financial information and ratios for 2014 include $93.8 million of net pre-tax expense ($60.9 million net after
tax expense, or $0.47 per diluted share) associated with the redemption of $400.0 million in aggregate principal
amount of certain senior notes prior to their scheduled maturities. See "Item 8. Financial Statements and
Supplementary Data - Note G. Debt" for additional information.
d. Financial information and ratios for 2013 include the following amounts, totaling $482.1 million of net pre-tax
expense ($299.2 million net after-tax expense, or $2.32 per diluted share):
• $480.2 million pre-tax expense associated with the Swatch arbitration award and $7.5 million pre-tax
income associated with a foreign currency transaction gain on this expense. See "Item 8. Financial
Statements and Supplementary Data - Note J. Commitments and Contingencies" for additional information
regarding the arbitration proceeding; and
• $9.4 million pre-tax expense associated with severance related to staffing reductions and subleasing of
certain office space for which only a portion of the Company's future rent obligations will be recovered.
TIFFANY & CO.
K-26
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 which ended on January 31 of the
following calendar year.
The Company's key strategies are:
KEY STRATEGIES
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•
To enhance the customer experience through engaging service and store environments.
To ensure a superior shopping experience, the Company employs highly qualified sales and customer service
professionals, focuses on enhancing sales and product training programs, and is investing in enhancing its
information systems for customer relationship management. The Company also focuses on enhancing the
design of its stores, as well as the creative visual presentation of its merchandise, to provide an engaging
luxury experience in both its new and existing stores.
•
To regularly develop and introduce new products.
The Company's product development strategy is to introduce new design collections, primarily in jewelry,
and/or expand certain existing collections annually, both of which are intended to appeal to the Company’s
existing customer base as well as to new customers. The Company is also investing in the watch category,
which it deems appropriate for the Brand and which presents an incremental long-term growth opportunity.
•
To enhance customer awareness of the TIFFANY & CO. trademark (the "Brand"), its heritage, its products and
its association with quality and luxury.
The Brand is the single most important asset of Tiffany and, indirectly, of the Company. Management
intends to continue to invest in marketing and public relations programs designed to build awareness of the
Brand, its heritage and its products, as well as to enhance the Brand’s association among consumers with
quality and luxury. Management monitors these efforts and the strength of the Brand through market
research.
•
To expand and optimize its global distribution base.
Management intends to continue to expand and optimize its global store base by evaluating potential
markets for new TIFFANY & CO. stores, as well as through the renovation, relocation, or, in certain cases, the
closure of existing stores. Management will also continue to pursue opportunities to grow sales through its e-
commerce websites and utilize the websites to drive store traffic. Management recognizes that over-
saturation of any market could diminish the distinctive appeal of the Brand, but believes that there are a
number of potential worldwide locations remaining that meet financial and Brand requirements.
•
To improve its business operations and processes, while efficiently managing its capital and costs
The Company is focused on improving its business operations and processes, including by realizing greater
efficiencies in its product supply chain and other operations, and enhancing its global procurement
capabilities.
•
To maintain substantial control over product supply through direct diamond sourcing and internal jewelry
manufacturing.
The Company has developed substantial product supply infrastructure related to the procurement and
processing of diamonds and to the manufacturing of jewelry. This infrastructure is intended to ensure
adequate product supply and favorable product costs while adhering to the Company's quality and ethical
standards. The Company will continue to supplement its internal capabilities through its network of external
suppliers.
TIFFANY & CO.
K-27
Through the efforts above, management is committed to the following long-term financial objectives:
• To achieve improved operating margins, through both improved gross margin and efficient expense
management.
Management's long-term objective is to improve gross margin, including through controlling product input
costs, realizing greater efficiencies in its product supply chain and adjusting retail prices when appropriate.
Additionally, management is focused on efficient selling, general and administrative expense management,
thereby generating sales leverage on fixed costs. These efforts are collectively intended to generate a higher
rate of operating earnings growth relative to sales growth, and management targets an improvement in
operating margin of 50 basis points per year over the long term.
• To increase store productivity and profitability.
Management is focused on increasing the frequency of store visits and the percentage of store visitors who
make a purchase, as well as optimal utilization of square footage, to grow sales and sales per square foot.
• To improve inventory and other asset productivity and cash flow.
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Management's long-term objective is to maintain inventory growth at a rate less than sales growth, with
greater focus on efficiencies in product sourcing and manufacturing as well as optimizing store inventory
levels, all of which is intended to contribute to improvements in cash flow and return on assets.
• To maintain a capital structure that provides financial strength and the ability to invest in strategic
initiatives, while also allowing for the return of excess capital to shareholders.
2016 SUMMARY
• Worldwide net sales decreased 3% to $4.0 billion reflecting declines in the Americas and Europe partly
offset by an increase in Japan and unchanged sales in Asia-Pacific, and comparable store sales decreased
5% due to declines in all regions except Japan. On a constant-exchange-rate basis (see "Non-GAAP
Measures"), worldwide net sales decreased 3% and comparable store sales decreased 5% reflecting similar
trends.
• The Company added a net of 6 TIFFANY & CO. stores (opening seven in Asia-Pacific, three in Europe and
one in the Americas, while closing three in Asia-Pacific and one each in Japan and Europe and relocating 5
stores) resulting in a 3% net increase in gross retail square footage.
• The Company expanded its offerings within several existing jewelry collections, including its TIFFANY T and
RETURN TO TIFFANY®YY LOVE collections, and introduced new watch designs.
• Earnings from operations as a percentage of net sales ("operating margin") decreased 0.5 percentage point.
Excluding impairment charges recorded in 2016 and 2015 (see "Non-GAAP Measures"), operating margin
decreased 0.7 percentage point. An improvement in gross margin was more than offset by a lack of sales
leverage on selling, general and administrative ("SG&A") expenses.
• Net earnings decreased 4% to $446.1 million, or $3.55 per diluted share. Net earnings in 2016 included
impairment charges of $0.19 per diluted share (see "Non-GAAP Measures") and an income tax benefit of
$0.05 per diluted share (as a result of the conclusion of a tax examination). Net earnings in 2015 included
charges of $0.24 per diluted share (see "Non-GAAP Measures"). Excluding these charges, net earnings per
diluted share declined 2% to $3.75.
•
Inventories, net decreased 3%.
• Cash flow from operating activities of $702.1 million in 2016, compared with $813.6 million in 2015. Free
cash flow (see "Non-GAAP Measures") of $479.3 million in 2016, compared with $560.9 million in 2015.
Cash flow from operating activities and free cash flow in 2016 include a voluntary cash contribution of
TIFFANY & CO.
K-28
$120.0 million made by the Company to its U.S. pension plan (See "Item 8. Financial Statements and
Supplementary Data - Note N. Employee Benefit Plans").
•
The Company returned cash to shareholders by continuing to pay regular quarterly dividends (which were
increased 12.5% effective July 2016 to $0.45 per share, or an annualized rate of $1.80 per share) and
spending $183.6 million to repurchase 2.8 million shares of its Common Stock.
RESULTS OF OPERATIONS
Non-GAAP Measures
The Company reports information in accordance with U.S. Generally Accepted Accounting Principles ("GAAP").
Internally, management also monitors and measures its performance using certain sales and earnings measures that
include or exclude amounts, or are subject to adjustments that have the effect of including or excluding amounts,
from the most directly comparable GAAP measure ("non-GAAP financial measures"). The Company presents such
non-GAAP financial measures in reporting its financial results to provide investors with useful supplemental
information that will allow them to evaluate the Company's operating results using the same measures that
management uses to monitor and measure its performance. 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. These non-GAAP financial measures presented here may
not be comparable to similarly-titled measures used by other companies.
Net Sales. The Company's reported net sales reflect either a translation-related benefit from strengthening foreign
currencies or a detriment from a strengthening U.S. dollar. Internally, management monitors and measures its sales
performance on a non-GAAP basis that eliminates the positive or negative effects that result from translating sales
made outside the U.S. into U.S. dollars ("constant-exchange-rate basis"). Sales on a constant-exchange-rate basis are
calculated by taking the current year's sales in local currencies and translating them into U.S. dollars using the prior
year's foreign exchange rates. Management believes this constant-exchange-rate basis provides a useful
supplemental basis for the assessment of sales performance and of comparability between reporting periods. The
following table reconciles the sales percentage increases (decreases) from the GAAP to the non-GAAP basis versus
the previous year:
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Net Sales:
Worldwide
Americas
Asia-Pacific
Japan
Europe
Other
Comparable Store Sales:
p
Worldwide
Americas
Asia-Pacific
Japan
Europe
Other
2016
2015
GAAP
Reported
Translation
Effect
Constant-
Exchange-
Rate Basis
GAAP
Reported
Translation
Effect
Constant-
Exchange-
Rate Basis
(3)%
—%
(3)%
(3)%
(5)%
(5)
—
12
(10)
(8)
—
(1)
12
(7)
—
(5)
1
—
(3)
(8)
(4)
(2)
(2)
(1)
(13)
(2)
(5)
(12)
(13)
—
(5)%
—%
(5)%
(6)%
(6)%
(6)
(9)
16
(14)
(15)
(1)
(2)
11
(5)
—
(5)
(7)
5
(9)
(6)
(5)
(7)
(5)
(15)
(15)
(2)
(5)
(12)
(14)
—
TIFFANY & CO.
K-29
2%
(2)
3
10
12
(13)
—%
(4)
—
5
9
(15)
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Statements of Earnings. Internally, management monitors and measures its earnings performance excluding certain
items listed below. Management believes excluding such items provides a useful supplemental basis for the
assessment of the Company's results relative to the corresponding period in the prior year. The following tables
reconcile certain GAAP amounts to non-GAAP amounts:
(in millions, except per share amounts)
Year Ended January 31, 2017
SG&A expenses
As a % of sales
Earnings from operations
As a % of sales
Provision for income taxes b
Net earnings
Diluted earnings per share*
*Amounts may not add due to rounding.
a Expenses associated with the following:
GAAP
Impairment
charges a
Non-GAAP
$
1,769.1
$
(38.0) $
1,731.1
44.2%
721.2
18.0%
230.5
446.1
3.55
38.0
14.0
24.0
0.19
43.3%
759.2
19.0%
244.5
470.1
3.75
• $25.4 million of net pre-tax expense ($16.0 million net after tax expense, or $0.13 per diluted share)
associated with an asset impairment charge related to software costs capitalized in connection with the
development of a new finished goods inventory management and merchandising information system (see
"Information Systems Assessment"); and
• $12.6 million of net pre-tax expense ($8.0 million net after tax expense, or $0.06 per diluted share)
associated with impairment charges related to financing arrangements with diamond mining and exploration
companies (see "Financing Arrangements with Diamond Mining and Exploration Companies").
b The income tax effect resulting from the adjustments has been calculated as both current and deferred tax benefit
(expense), based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the
underlying adjustment.
(in millions, except per share amounts)
GAAP
Impairment
charges c
Specific cost-
reduction
initiatives d
Non-GAAP
Year Ended January 31, 2016
SG&A expenses
As a % of net sales
Earnings from operations
As a % of net sales
Provision for income taxes b
Net earnings
Diluted earnings per share
$
1,731.2
$
(37.9) $
(8.8) $
1,684.5
42.2%
760.1
18.5%
246.0
463.9
3.59
37.9
13.6
24.3
0.19
8.8
3.2
5.6
0.05
41.0%
806.8
19.7%
262.8
493.8
3.83
c Expenses associated with impairment charges related to a financing arrangement with Koidu Limited (see
"Financing Arrangements with Diamond Mining and Exploration Companies").
d Expenses associated with specific cost-reduction initiatives which included severance related to staffing reductions
and subleasing of certain office space for which only a portion of the Company's future rent obligations will be
recovered.
TIFFANY & CO.
K-30
(in millions, except per share amounts)
Year Ended January 31, 2015
Loss on extinguishment of debt
Provision for income taxes b
Net earnings
Diluted earnings per share
GAAP
Debt
extinguishment e
Non-GAAP
$
93.8 $
(93.8) $
253.4
484.2
3.73
32.8
60.9
0.47
—
286.2
545.1
4.20
e Expenses associated with the redemption of $400.0 million in aggregate principal amount of certain senior notes
prior to their scheduled maturities (see "Loss on Extinguishment of Debt").
Free Cash Flow. Internally, management monitors its cash flow on a non-GAAP basis. Free cash flow is calculated by
deducting capital expenditures from net cash provided by operating activities. The ability to generate free cash flow
demonstrates how much cash the Company has available for discretionary and non-discretionary purposes 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 useful supplemental basis for assessing the Company's
operating cash flows. The following table reconciles GAAP net cash provided by operating activities to non-GAAP free
cash flow:
(in millions)
2017
Net cash provided by operating activities
$
702.1 $
Less: Capital expenditures
Free cash flow a
(222.8)
$
479.3 $
2016
813.6
(252.7)
560.9
Years Ended January 31,
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a Free cash flow in 2016 reflects a voluntary cash contribution of $120.0 million made by the Company to its U.S.
pension plan (See "Item 8. Financial Statements and Supplementary Data - Note N. Employee Benefit Plans").
Comparable Store Sales
Comparable store sales include only sales transacted in Company-operated stores open for more than 12 months.
Sales for relocated stores are included in comparable store sales if the relocation occurs within the same
geographical market. Sales for a new store are not included in comparable store sales if that 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.
TIFFANY & CO.
K-31
Net Sales
The Company generates sales through its retail, Internet, wholesale, business-to-business and catalog channels (see
"Item 1. Business - Financial Information about Reportable Segments").
Net sales by segment were as follows:
(in millions)
Americas a
Asia-Pacific b
Japan c
Europe d
Other
2016
2015
2014
2016 vs 2015
% Change
2015 vs 2014
% Change
$
1,841.9 $
1,947.0 $
2,033.5
(5)%
999.1
604.4
457.6
98.8
1,003.1
1,025.2
541.3
505.7
107.8
554.3
513.3
123.6
—
12
(10)
(8)
$
4,001.8 $
4,104.9 $
4,249.9
(3)%
(4)%
(2)
(2)
(1)
(13)
(3)%
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a) Represented 46% of worldwide net sales in 2016, 47% in 2015 and 48% in 2014, while sales in the U.S.
represented 88% of net sales in the Americas in those periods. Total sales in the Company's New York Flagship
store represented less than 10% of worldwide net sales in 2016, 2015 and 2014.
b) Represented 25% of worldwide net sales in 2016 and 24% in 2015 and 2014, while sales in Greater China
represented more than half of Asia-Pacific's net sales in those periods.
c) Represented 15% of worldwide net sales in 2016 and 13% in 2015 and 2014.
d) Represented 11% of worldwide net sales in 2016 and 12% in 2015 and 2014, while sales in the United
Kingdom ("U.K.") represented approximately 40% of European net sales in those periods.
Net Sales — 2016 compared with 2015
declines in the Americas and Europe, an increase in Japan and unchanged sales in Asia-Pacific. There was no
significant impact from foreign currency translation on worldwide net sales.
. In 2016, worldwide net sales decreased $103.1 million, or 3%, reflecting
p
In 2016, jewelry sales represented 92% of worldwide net sales. Changes in jewelry sales by product category relative
to the prior year were as follows:
(in millions)
High, fine & solitaire jewelry
Engagement jewelry & wedding bands
Fashion jewelry
Designer jewelry
$ Change
% Change
$
(75.0)
(20.2)
(11.8)
4.2
(9)%
(2)
(1)
1
The decrease in sales of high, fine & solitaire jewelry reflected declines across the category, while the engagement
jewelry & wedding bands category decreased due to a shift in sales mix towards wedding bands. The fashion jewelry
category decreased as declines in silver jewelry, although at a smaller rate than in prior year, more than offset
increases in gold jewelry.
Items bearing the name of and attributed to one of the Company's "named" designers: Elsa Peretti and Paloma
Picasso, which were previously reported across the high, fine & solitaire jewelry, engagement jewelry & wedding
bands and fashion jewelry categories, have been reclassified into a designer jewelry category to conform with
management's current internal analysis of product sales. Additionally, certain reclassifications within the jewelry
categories have been made to the prior years' amounts to conform to the current year category presentation.
TIFFANY & CO.
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Changes in net sales by reportable segment were as follows:
(in millions)
Americas
Asia-Pacific
Japan
Europe
Comparable Store
Sales
Non-comparable
Store Sales
Wholesale/Other
$
(96.1) $
2.3 $
(11.3) $
(80.1)
78.8
(59.7)
59.8
(1.3)
13.1
16.3
(14.4)
(1.5)
Total
(105.1)
(4.0)
63.1
(48.1)
In 2016, jewelry sales represented 90%, 98%, 93% and 96% of total sales in the Americas, Asia-Pacific, Japan and
Europe, respectively. Changes in jewelry sales relative to the prior year were as follows:
Change in Jewelry Sales
Americas
Asia-Pacific
Japan
Europe
Average Price per Unit Sold
As Reported
Impact of
Currency
Translation
Number of
Units Sold
1 %
(5)%
(2)%
(1)%
— %
(2)%
11 %
(6)%
(6)%
4 %
13 %
(9)%
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Americas. In 2016, total sales decreased $105.1 million, or 5%, which management attributed to lower sales to
U.S. customers and foreign tourist spending (primarily Chinese tourists). Comparable store sales decreased $96.1
million, or 6%. On a constant-exchange-rate basis, both total sales and comparable store sales decreased 5%.
The decrease in the number of jewelry units sold reflected declines across most categories, particularly in fashion
silver jewelry.
Asia-Pacific. In 2016, total sales were approximately equal to the prior year, decreasing $4.0 million, partly
reflecting new stores and increased wholesale sales; comparable store sales decreased $80.1 million, or 9%.
Management attributed performance in this region to increased purchasing by local customers and declines in
spending by foreign tourists. In addition, sales growth in China, increased wholesale sales in Korea, a decelerating
rate of retail sales declines in Hong Kong and varying performance in other countries. On a constant-exchange-rate
basis, total sales increased 1% and comparable store sales decreased 7%.
The increase in the number of jewelry units sold reflected increases in fashion jewelry, particularly in silver jewelry,
and wedding bands within the engagement category. Management attributed the decrease in the average price per
jewelry unit sold to a shift in mix away from high, fine & solitaire jewelry to fashion jewelry and within the
engagement jewelry & wedding bands category toward wedding bands.
Japan. In 2016, total sales increased $63.1 million, or 12%, and comparable store sales increased $78.8 million,
or 16%. On a constant-exchange-rate basis, total sales were in line with prior year and comparable store sales
increased 5%. Management attributed this performance to higher spending by local customers and lower spending
by Chinese tourists, as well as lower wholesale sales.
The increase in number of jewelry units sold primarily reflected increases in the fashion jewelry, designer jewelry and
the engagement jewelry & wedding bands categories. Management attributed the decrease in the average price per
jewelry unit sold to a shift away from the high, fine & solitaire jewelry category to designer jewelry, as well as a shift
in sales mix within the fashion jewelry category towards silver jewelry.
Europe. In 2016, total sales decreased $48.1 million, or 10%, and comparable store sales decreased $59.7 million,
or 14%, which management attributed to lower spending by foreign tourists and local customers across continental
Europe. On a constant-exchange-rate basis, total sales decreased 3% and comparable store sales decreased 9%, as
TIFFANY & CO.
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softness across continental Europe was partially offset by sales increases in the U.K. (particularly in the second half
of the year, largely attributable to foreign tourist spending).
The decrease in the number of jewelry units sold reflected decreases across all categories, especially in fashion silver
jewelry. Management attributed the decrease in average price per unit sold to the negative effect of currency
translation, which offset a favorable shift toward higher-priced products within the engagement jewelry & wedding
bands category.
Other. In 2016, total sales decreased $9.0 million, or 8%, partly due to a $16.9 million, or 22%, sales decline in
the Emerging Markets region partly offset by an increase in wholesale sales of diamonds.
p
. In 2015, worldwide net sales decreased $145.0 million, or 3%, due to
Net Sales — 2015 compared with 2014
lower sales in all regions. The strengthening of the U.S. dollar versus other currencies had the translation effect of
reducing worldwide net sales growth by 5%, with net sales on a constant-exchange-rate basis increasing 2% (due to
growth in Europe, Japan and Asia-Pacific, while sales in the Americas decreased modestly from the prior year).
In 2015, jewelry sales represented 93% of worldwide net sales. Changes in jewelry sales by product category were as
follows:
F
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(in millions)
High, fine & solitaire jewelry
Engagement jewelry & wedding bands
Fashion jewelry
Designer jewelry
$ Change
% Change
$
(16.3)
(78.8)
(16.9)
(20.7)
(2)%
(6)
(1)
(4)
The decrease in the high, fine & solitaire jewelry category reflected lower sales of fine jewelry partly offset by
increased high jewelry sales. The decrease in the engagement jewelry & wedding bands category reflected decreases
in both solitaire diamond rings and wedding bands. The decrease in the fashion jewelry category reflected a decline
in sales of entry-level price point jewelry, largely in silver, partly offset by growth in gold jewelry sales. The decrease
in designer jewelry primarily reflected decreases in gold and silver jewelry.
Items bearing the name of and attributed to one of the Company's "named" designers: Elsa Peretti and Paloma
Picasso, which were previously reported across the high, fine & solitaire jewelry, engagement jewelry & wedding
bands and fashion jewelry categories, have been reclassified into the designer jewelry category to conform with
management's current internal analysis of product sales. Additionally, certain reclassifications within the jewelry
categories have been made to the prior years' amounts to conform to the current year category presentation.
Changes in net sales by reportable segment were as follows:
(in millions)
Americas
Asia-Pacific
Japan
Europe
Comparable Store
Sales
Non-comparable
Store Sales
Wholesale/Other
$
(103.5) $
12.9 $
4.1 $
(46.0)
(36.4)
(24.0)
32.7
9.6
11.7
(8.8)
13.8
4.7
Total
(86.5)
(22.1)
(13.0)
(7.6)
TIFFANY & CO.
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In 2015, jewelry sales represented 89%, 98%, 93% and 96% of total sales in the Americas, Asia-Pacific, Japan and
Europe, respectively. Changes in jewelry sales relative to the prior year were as follows:
Change in Jewelry Sales
Americas
Asia-Pacific
Japan
Europe
Average Price per Unit Sold
As Reported
Impact of
Currency
Translation
Number of
Units Sold
6 %
4 %
(2)%
— %
(2)%
(5)%
(12)%
(14)%
(11)%
(6)%
— %
(2)%
Americas. In 2015, total sales decreased $86.5 million, or 4%, and comparable store sales decreased $103.5
million, or 6%, while on a constant-exchange-rate basis, total sales decreased 2% and comparable store sales
decreased 4%. Management attributed the decrease in total sales and comparable store sales to lower foreign tourist
spending in the U.S. (which management believes was the result of a strong U.S. dollar) as well as to lower sales to
U.S. customers. The strong sales growth in Canada and Latin America was more than offset by currency translation.
The decrease in the number of jewelry units sold reflected decreases across most categories, especially in entry-level
price point silver jewelry. Management attributed the increase in the average price per jewelry unit sold to price
increases and a shift in sales mix toward higher-priced products within the fashion jewelry category and toward high
jewelry.
Asia-Pacific. In 2015, total sales decreased $22.1 million, or 2%, and comparable store sales decreased $46.0
million, or 5%, while on a constant-exchange-rate basis, total sales increased 3% and comparable store sales were
unchanged. Sales rose in China and declined in Hong Kong; overall sales results were negatively affected by currency
translation.
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The decrease in the number of jewelry units sold primarily reflected declines in entry-level price point silver jewelry.
Management attributed the increase in the average price per jewelry unit sold to price increases and a shift in sales
mix toward higher-priced products within the fashion jewelry category and toward high jewelry.
Japan. In 2015, total sales decreased $13.0 million, or 2%, and comparable store sales declined $36.4 million, or
7%, while on a constant-exchange-rate basis, total sales increased 10% and comparable store sales increased 5%.
Management attributed the decrease in sales to currency translation, which offset higher spending by foreign
tourists.
Management attributed the decrease in average price per unit sold to currency translation, which offset the favorable
effect of price increases and a shift in sales mix toward higher-priced products.
Europe. In 2015, total sales decreased $7.6 million, or 1%, and comparable store sales declined $24.0 million, or
5%, while on a constant-exchange-rate basis, total sales increased 12% and comparable store sales increased 9%.
Growth across the region, which management attributed to higher spending by foreign tourists and, to a lesser extent,
higher sales to local customers was entirely offset by currency translation.
The decrease in the number of jewelry units sold was attributed to soft demand for silver jewelry. Management
attributed the increase in average price per jewelry unit sold to price increases and a shift in sales mix toward higher-
priced products, entirely offset by currency translation.
Other. In 2015, total sales decreased $15.8 million, or 13%, partly due to a $9.2 million, or 11%, sales decline in
the Emerging Markets region that largely reflected lower comparable store sales. The remainder of the decrease was
related to lower wholesale sales of diamonds.
Store Data. In 2016, the Company increased gross retail square footage by 3%, net, through store openings, closings
and relocations. The Company opened 11 stores and closed five: opening seven in Asia-Pacific (three in China, two
TIFFANY & CO.
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F
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in Australia and one each in Korea and New Zealand), three in Europe (two in Italy and one in the Netherlands) and
one in the Americas (in Canada) while closing three stores in Asia-Pacific (two in China and one in Singapore) and
one each in Japan and Europe (in Germany). In addition, the Company relocated five existing stores.
In 2015, the Company increased gross retail square footage by 4%, net, through store openings, closings and
relocations. The Company opened 16 stores and closed four: opening three in the Americas (in the U.S., Canada and
Chile), 11 in Asia-Pacific (five in China, two in Macau and one each in Korea, Singapore, Taiwan and Thailand) and
two in Europe (in Spain and Switzerland) while closing one store in the Americas and three stores in Asia-Pacific. In
addition, the Company relocated nine existing stores.
Sales per gross square foot generated by all company-operated stores were approximately $2,700 in 2016, $2,900
in 2015 and $3,100 in 2014. The declines in 2016 and 2015 reflected the effects of decreased sales (which in
2015 were negatively affected by currency translation) and growth in retail square footage.
Gross Margin
2016
2015
2014
Gross profit
$
2,490.3
$
2,491.3
$
2,537.2
Gross profit as a percentage of net sales
62.2%
60.7%
59.7%
Gross margin (gross profit as a percentage of net sales) increased 1.5 percentage points in 2016 reflecting favorable
product input costs and the effect of price increases, and, to a lesser extent, favorable changes in product sales mix.
Gross margin increased 1.0 percentage point in 2015 reflecting favorable product input costs that were partly offset
by a shift in sales mix to higher-priced, lower-margin products. In addition, the benefit from retail price increases
was partly offset by the negative effect from the strong U.S. dollar.
Management periodically reviews and adjusts its retail prices when appropriate to address product input cost
increases, specific market conditions and changes in foreign currencies/U.S. dollar relationships. Its long-term
strategy is to continue that approach, although significant increases in product input costs or weakening foreign
currencies can affect gross margin negatively over the short-term until management makes necessary price
adjustments. Among the market conditions that management considers are consumer demand for the product
category involved, which may be influenced by consumer confidence, and competitive pricing conditions.
Management uses derivative instruments to mitigate certain foreign exchange and precious metal price exposures
(see "Item 8. Financial Statements and Supplementary Data – Note H. Hedging Instruments"). Management
increased retail prices in both 2016 and 2015 across most geographic regions and product categories, some of
which were intended to mitigate foreign currency fluctuations.
Selling, General and Administrative Expenses
(in millions)
As reported:
SG&A expenses
SG&A expenses as a percentage of net sales
Excluding items in "Non-GAAP Measures":
SG&A expenses
2016
2015
2014
$
$
1,769.1
$
1,731.2
$
1,645.8
44.2%
42.2%
38.7%
1,731.1
$
1,684.5
$
1,645.8
SG&A expenses as a percentage of net sales
43.3%
41.0%
38.7%
SG&A expenses increased $37.9 million, or 2%, in 2016 and $85.4 million, or 5%, in 2015. SG&A expenses in 2016
included various impairment charges and, in 2015, included loan impairment charges and certain expenses associated
with specific cost-reduction initiatives. See "Non-GAAP Measures" for further details.
SG&A expenses in 2016 (excluding the 2016 and 2015 items noted in "Non-GAAP Measures") increased $46.6
million, or 3%, largely reflecting increased store occupancy and depreciation expenses and labor and incentive
compensation costs. There was no significant effect on SG&A expense changes from foreign currency translation.
TIFFANY & CO.
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SG&A expenses in 2015 (excluding the 2015 items noted in "Non-GAAP Measures") increased $38.7 million, or
2%, largely reflecting increased marketing expenses and store occupancy and depreciation expenses partly offset by
decreased labor costs (primarily lower variable labor costs for incentive compensation and sales commissions partly
offset by increased costs for U.S. pension and postretirement benefit plans). The strengthening of the U.S. dollar
had the effect of decreasing SG&A expense growth by 4%.
The Company's SG&A expenses are largely fixed in nature. Variable costs (which include items such as variable store
rent, sales commissions and fees paid to credit card companies) typically represent approximately 15 - 20% of total
SG&A expenses.
Earnings from Operations
(dollars in millions)
As reported:
Earnings from operations
Operating margin
Percentage point change from prior year
Excluding other operating expenses:
Earnings from operations
Operating margin
Percentage point change from prior year
$
$
2016
2015
2014
721.2
$
760.1
$
891.4
18.0%
(0.5)
18.5%
(2.5)
21.0%
13.5
759.2
$
806.8
$
891.4
19.0%
(0.7)
19.7%
(1.3)
21.0%
1.3
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The declines in both 2016 and 2015 resulted from sales deleveraging of SG&A expenses, which were only partly
offset by higher gross margins.
Results by segment are as follows:
(in millions)
Earnings from operations*:
2016
% of Net
Sales
2015
% of Net
Sales
2014
% of Net
Sales
Americas
Asia-Pacific
Japan
Europe
Other
Unallocated corporate
expenses
Earnings from operations
before other operating
expenses
$
373.0
256.0
204.6
81.6
5.9
921.1
20.3 % $
25.6
33.9
17.8
6.0
390.8
264.4
199.9
97.4
6.4
958.9
20.1 % $
26.4
36.9
19.3
6.0
435.5
281.6
196.0
110.5
4.9
1,028.5
21.4 %
27.5
35.4
21.5
4.0
(161.9)
(4.0)%
(152.1)
(3.7)%
(137.1)
(3.2)%
759.2
19.0 %
806.8
19.7 %
891.4
21.0 %
Other operating expenses
(38.0)
(46.7)
—
Earnings from operations
$
721.2
18.0 % $
760.1
18.5 % $
891.4
21.0 %
* Percentages represent earnings from operations as a percentage of each segment's net sales.
On a segment basis, the ratio of earnings from operations to each segment's net sales in 2016 compared with
2015 was as follows:
•
Americas – the ratio increased 0.2 percentage point due to an improvement in gross margin, largely
offset by a lack of sales leverage on operating expenses resulting from a decrease in net sales;
TIFFANY & CO.
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•
•
•
Asia-Pacific – the ratio decreased 0.8 percentage point due to a lack of sales leverage on operating
expenses, primarily attributable to new store-related expenses, partly offset by an improvement in
gross margin;
Japan – the ratio decreased 3.0 percentage points primarily due to a decrease in gross margin that
reflected an unfavorable impact tied to the strengthening of the Yen on the Company's program to
utilize Yen forward contracts for a portion of its forecasted merchandise purchases; and
Europe – the ratio decreased 1.5 percentage points due to a decrease in net sales resulting in a lack of
sales leverage on operating expenses, partly offset by an improvement in gross margin.
On a segment basis, the ratio of earnings from operations to each segment's net sales in 2015 compared with
2014 was as follows:
•
•
•
•
Americas – the ratio decreased 1.3 percentage points due to a decrease in net sales resulting in sales
deleveraging of operating expenses, partly offset by an improvement in gross margin;
Asia-Pacific – the ratio decreased 1.1 percentage points due to increased store-related operating
expenses and marketing spending, partly offset by an improvement in gross margin;
Japan – the ratio increased 1.5 percentage points due to leveraging of operating expenses (as
operating expenses decreased at a higher rate than sales), partly offset by a decrease in gross margin
attributable to currency translation; and
Europe – the ratio decreased 2.2 percentage points resulting from increased store-related operating
expenses and marketing spending, partly offset by an improvement in gross margin.
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Unallocated corporate expenses include costs related to administrative support functions which the Company does
not allocate to its segments. Such unallocated costs include those for centralized information technology, finance,
legal and human resources departments. Unallocated corporate expenses increased by $9.8 million in 2016 and
$15.0 million in 2015, primarily due to increased costs, including depreciation and amortization expense,
associated with upgrades to the Company's information technology systems as well as increased incentive
compensation expense in 2016.
Included in other operating expenses in the table above, the 2016 amount represented $25.4 million associated
with an impairment charge related to software costs capitalized in connection with the development of a new
finished goods inventory management and merchandising information system (see "Item 8. Financial Statements
and Supplementary Data - Note B. Summary of Significant Accounting Policies and Note E. Property, Plant and
Equipment") and $12.6 million associated with impairment charges related to financing arrangements with
diamond mining and exploration companies (see "Item 8. Financial Statements and Supplementary Data - Note B.
Summary of Significant Accounting Policies").
Included in other operating expenses in the table above, the 2015 amount represented $37.9 million associated
with impairment charges related to a financing arrangement with Koidu Limited and $8.8 million of expenses
associated with specific cost-reduction initiatives. See "Item 8. Financial Statements and Supplementary Data -
Note J. Commitments and Contingencies."
Interest Expense and Financing Costs
Interest expense and financing costs decreased $3.0 million, or 6%, in 2016 due to lower interest expense. Interest
expense and financing costs decreased $13.9 million, or 22%, in 2015 as a result of lower interest expense on long-
term debt (reflecting the October 2014 redemption of long-term debt using proceeds from the issuance of lower-rate
long-term debt in September 2014) as well as lower average credit facility borrowings.
Other (Income) Expense, Net
Other (income) expense, net includes interest income as well as gains/losses on investment activities and foreign
currency transactions. Net income of $1.4 million in 2016 compared with net expense of $1.2 million in 2015.
The $2.6 million change was primarily due to reduced foreign currency transaction losses. Net expense of $1.2
TIFFANY & CO.
K-38
million in 2015 compared with net income of $2.8 million in 2014. The $4.0 million change was primarily due to
foreign currency transaction losses.
Loss on Extinguishment of Debt
In 2014, the Company recorded a loss on extinguishment of debt of $93.8 million associated with the redemption of
all of the aggregate principal amount outstanding of the Company's (i) $100.0 million principal amount of 9.05%
Series A Senior Notes due December 23, 2015; (ii) $125.0 million principal amount of 10.0% Series A-2009
Senior Notes due February 13, 2017; (iii) $50.0 million principal amount of 10.0% Series A Senior Notes due April
9, 2018; and (iv) $125.0 million principal amount of 10.0% Series B-2009 Senior Notes due February 13, 2019
(collectively, the "Private Placement Notes") prior to maturity in accordance with the respective note purchase
agreements governing each series of Private Placement Notes, which included provisions for make-whole payments
in the event of early repayment.
Provision for Income Taxes
The effective income tax rate was 34.1% in 2016 compared with 34.7% in 2015 and 34.4% in 2014. The effective
income tax rate in 2016 was reduced by 1.0 percentage point due to an income tax benefit of $6.6 million, or
$0.05 per diluted share, resulting from the conclusion of a tax examination during the first quarter of 2016.
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, 2017, the Company’s cash and cash equivalents totaled $928.0 million, 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 and
incur applicable income tax charges. 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:
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(in millions)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rates on cash and cash equivalents
2016
2015
2014
$
702.1 $
813.6 $
(236.8)
(382.8)
1.9
(278.2)
(422.3)
0.5
615.1
(217.0)
(23.4)
9.5
384.2
Net increase in cash and cash equivalents
$
84.4 $
113.6 $
Operating Activities
The Company had net cash inflows from operating activities of $702.1 million in 2016, $813.6 million in 2015 and
$615.1 million in 2014. The decrease from 2015 to 2016 was primarily due to a $120.0 million voluntary
contribution made by the Company to its U.S. pension plan in 2016. The year-over-year improvement from 2014 to
2015 was primarily due to reduced inventory purchases.
TIFFANY & CO.
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Working Capital. Working capital (current assets less current liabilities) increased to $2.9 billion at January 31,
2017 from $2.8 billion at January 31, 2016. The increase was primarily due to the repayment of the ¥10.0 billion
($88.0 million) Senior Notes due in September 2016 (which had been classified as Current portion of long-term
debt) and the issuance of the ¥10.0 billion Senior Notes due in August 2026 (which is classified as Long-term
debt). See "Financing Activities" below for additional information.
Accounts receivable, less allowances at January 31, 2017 were 10% higher than at January 31, 2016 largely
attributable to sales growth in Japan and the timing of collections from department stores. Currency translation had
the effect of increasing accounts receivable, less allowances by 2% from January 31, 2016, primarily from the
strengthening of the Japanese yen. On a 12-month rolling basis, accounts receivable turnover was 18 times in 2016
and 21 times in 2015.
Inventories, net at January 31, 2017 were 3% lower than at January 31, 2016, which reflected similar declines in
both finished goods inventories and combined raw material and work-in-process inventories. Currency translation did
not have a significant effect on the change in inventories, net.
Investing Activities
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The Company had net cash outflows from investing activities of $236.8 million in 2016, $278.2 million in 2015
and $217.0 million in 2014. The decrease in net cash outflows in 2016 was driven by decreased capital
expenditures as well as reduced net purchases of marketable securities and short-term investments. The increased
outflow in 2015 was primarily due to increased purchases of marketable securities and short-term investments.
Marketable Securities and Short-Term Investments. The Company invests a portion of its cash in marketable
securities and short-term investments. The Company had net purchases of $15.7 million during 2016 and $26.4
million during 2015 compared with net proceeds received from the sale of marketable securities and short-term
investments of $15.2 million during 2014.
Capital Expenditures. Capital expenditures are typically related to the opening, renovation and/or relocation of stores
(which represented approximately 60% of capital expenditures in 2016 and approximately half in 2015 and 2014)
as well as distribution and manufacturing facilities and ongoing investments in information technology. Capital
expenditures were $222.8 million in 2016, $252.7 million in 2015 and $247.4 million in 2014, representing 6%
of worldwide net sales in those years.
Proceeds from Notes Receivable Funded. In 2016 and 2014, the Company received $1.7 million and $15.2 million
of repayments associated with loans extended to diamond mining and exploration companies. No such proceeds were
received in 2015.
Financing Activities
The Company had net cash outflows from financing activities of $382.8 million in 2016, $422.3 million in 2015 and
$23.4 million in 2014. Year-over-year changes in cash flows from financing activities were largely driven by share
repurchases and borrowings.
TIFFANY & CO.
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Recent Borrowings. The Company had net proceeds from (repayments of) short-term and long-term borrowings as
follows:
(in millions)
Short-term borrowings:
Proceeds from (repayments of) credit facility
borrowings, net
Proceeds from other credit facility borrowings
Repayments of other credit facility borrowings
Net proceeds from (repayments of) short-term borrowings
Long-term borrowings:
Proceeds from issuances
Repayments
Net proceeds from long-term borrowings
Net proceeds from (repayments of) total borrowings
Payments of debt extinguishment costs (included in
operating activities)
Net proceeds (repayments)
2016
2015
2014
$
14.2 $
(11.3) $
76.8
(83.1)
7.9
98.1
(97.1)
1.0
8.9
—
24.8
(16.0)
(2.5)
—
—
—
(2.5)
—
$
8.9 $
(2.5) $
(12.5)
19.8
(3.4)
3.9
548.0
(400.0)
148.0
151.9
(93.4)
58.5
Credit Facilities. In 2014, the Registrant entered into a four-year $375.0 million and a five-year $375.0 million
multi-bank, multi-currency, committed unsecured revolving credit facility, including letter of credit subfacilities
(collectively, the "Credit Facilities"), resulting in a total borrowing capacity of $750.0 million. In October 2016, the
maturity for each of the Credit Facilities was extended for one additional year pursuant to the terms set forth in the
respective agreements governing the Credit Facilities. Therefore, the four-year and five-year Credit Facilities will
mature in October of 2019 and 2020, respectively. See "Item 8. Financial Statements and Supplementary Data -
Note G. Debt" for additional information.
Other Credit Facilities. In 2016, the Registrant's wholly owned subsidiary, Tiffany & Co. (Shanghai) Commercial
Company Limited ("Tiffany-Shanghai"), entered into a three-year multi-bank revolving credit agreement (the "Tiffany-
Shanghai Credit Agreement"). The Tiffany-Shanghai Credit Agreement has an aggregate borrowing limit of RMB
990.0 million ($143.8 million at January 31, 2017). The Tiffany-Shanghai Credit Agreement, which matures in July
2019, was made available to refinance amounts outstanding under Tiffany-Shanghai's previously existing RMB
930.0 million three-year multi-bank revolving credit agreement (the "2013 Agreement"), which expired pursuant to
its terms in July 2016, as well as for Tiffany-Shanghai's general working capital requirements. See "Item 8. Financial
Statements and Supplementary Data - Note G. Debt" for additional information.
Under all of the Company's credit facilities, at January 31, 2017, there were $228.7 million of borrowings
outstanding, $4.0 million of letters of credit issued but not outstanding and $798.4 million available for borrowing.
At January 31, 2016, there were $221.6 million of borrowings outstanding, $5.6 million of letters of credit issued
but not outstanding and $790.8 million available for borrowing. The weighted-average interest rate for borrowings
outstanding was 2.71% at January 31, 2017 and 2.90% at January 31, 2016.
Senior Notes. In 2014, the Registrant issued $250.0 million aggregate principal amount of 3.80% Senior Notes due
2024 (the "2024 Notes") and $300.0 million aggregate principal amount of 4.90% Senior Notes due 2044 (the
"2044 Notes" and, together with the 2024 Notes, the "Senior Notes"). The Senior Notes were issued at a discount
with aggregate net proceeds of $548.0 million (with an effective yield of 3.836% for the 2024 Notes and an
effective yield of 4.926% for the 2044 Notes). The Registrant used the net proceeds from the issuance of the Senior
Notes to redeem $400.0 million in aggregate principal amount of long-term debt prior to their scheduled maturities
which ranged from 2015 to 2019 and paid $93.4 million of debt extinguishment costs associated with the
redemption. The Company used the remaining net proceeds from the sale of the Senior Notes for general corporate
purposes. See "Item 8. Financial Statements and Supplementary Data - Note G. Debt" for additional information.
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In August 2016, the Registrant issued ¥10.0 billion ($88.0 million at January 31, 2017) of 0.78% Senior Notes
due August 2026 (the "Yen Notes") in a private transaction. The Yen Notes bear interest at a rate of 0.78% per
annum, payable semi-annually on February 26 and August 26 of each year, commencing February 26, 2017. The
proceeds from the issuance of the Yen Notes were used to repay the Registrant's ¥10.0 billion 1.72% Senior Notes
due September 2016 upon the maturity thereof. See "Item 8. Financial Statements and Supplementary Data - Note
G. Debt" for additional information.
The ratio of total debt (short-term borrowings, current portion of long-term debt and long-term debt) to stockholders'
equity was 37% at both January 31, 2017 and 2016.
At January 31, 2017, the Company was in compliance with all debt covenants.
Share Repurchases. In March 2014, the Company's Board of Directors approved a share repurchase program ("2014
Program") which authorized the Company to repurchase up to $300.0 million of its Common Stock through open
market transactions. The program had an expiration date of March 31, 2017, but was terminated in January 2016 in
connection with the authorization of a new program with increased repurchase capacity (as described in more detail
below). Approximately $58.6 million remained available for repurchase under the 2014 Program at the time of its
termination.
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In January 2016, the Company's Board of Directors approved a new share repurchase program ("2016 Program")
which authorizes the Company to repurchase up to $500.0 million of its Common Stock through open market
transactions, block trades or privately negotiated transactions and terminated the 2014 Program. Purchases under
the 2014 Program were, and purchases under the 2016 Program have been, executed under a written plan for
trading securities as specified under Rule 10b5-1 promulgated under the Securities and Exchange Act of 1934, as
amended, the terms of which are within the Company's discretion, subject to applicable securities laws, and are
based on market conditions and the Company's liquidity needs. The 2016 Program will expire on January 31, 2019.
Approximately $310.4 million remained available for repurchase under the 2016 Program at January 31, 2017.
The Company's share repurchase activity was as follows:
(in millions, except per share amounts)
Cost of repurchases
Shares repurchased and retired
Average cost per share
$
$
2016
183.6 $
2.8
2015
220.4 $
2.8
65.24 $
78.40 $
2014
27.0
0.3
89.91
Dividends. The cash dividend on the Company's Common Stock was increased once in each of 2016, 2015 and
2014. The Company's Board of Directors declared quarterly dividends which totaled $1.75, $1.58 and $1.48 per
common share in 2016, 2015 and 2014 with cash dividends paid of $218.8 million, $203.4 million and $191.2
million in those respective years. The dividend payout ratio (dividends as a percentage of net earnings) was 49%,
44% and 39% in 2016, 2015 and 2014. Dividends as a percentage of adjusted net earnings (see "Non-GAAP
Measures") were 47% in 2016, 41% in 2015 and 35% in 2014.
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.
Financing Arrangements with Diamond Mining and Exploration Companies
The Company has provided financing to diamond mining and exploration companies in order to obtain rights to
purchase the output from mines owned by these companies. At January 31, 2016, there was $43.8 million of
principal outstanding under a financing arrangement (the "Loan") with Koidu Limited (previously Koidu Holdings
S.A.) ("Koidu"), with a carrying amount, net of valuation allowance, of $5.9 million. The Loan, which was entered
into between Koidu and Laurelton Diamonds, Inc. ("Laurelton"), a wholly owned subsidiary of the Company, in March
2011, originally provided that repayments of principal would begin in March 2013. However, in March 2013, the
Company agreed to Koidu's request to defer the principal and interest payments due in 2013 to subsequent years
and, in March 2014, the Company agreed to Koidu's request to provide for monthly rather than semi-annual
payments of the principal payments due in 2014. The Company received such scheduled monthly payments from
Koidu in 2014. On April 30, 2015, the Company also agreed to defer Koidu's principal payment due on March 30,
TIFFANY & CO.
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2015 ("2015 Amendment"), subject to certain conditions set forth in the 2015 Amendment, which were met in June
2015.
As of January 31, 2016, Koidu had not made any of its interest payments due in July 2015 and thereafter, nor its
principal payment due in September 2015. The missed payments constitute events of default under the Loan. In
February 2016, the Company received the results from two separate and independent reviews of Koidu's operational
plans, forecasts, and cash flow projections for the mine, which were commissioned by the Company and by Koidu's
largest creditor, respectively. Based on these factors, ongoing discussions with Koidu, and consideration of the
possible actions that all parties, including the Government of Sierra Leone and Koidu's largest creditor, might take
under the circumstances, management determined that it was probable that it would be unable to collect a portion
of the amounts due under the contractual terms of the Loan, and recorded impairment charges, and a related
valuation allowance, of $37.9 million in 2015. Additionally, the Company ceased accruing interest income on the
outstanding Loan balance as of July 31, 2015. The carrying amount of the Company’s loan receivable from Koidu,
net of the valuation allowance, was $5.9 million at January 31, 2016.
Koidu did not make any payments due to the Company under the Loan in 2016. On March 17, 2017, the Company
entered into an agreement with Koidu's largest creditor under which that creditor has agreed to purchase the
Company's interest in the loan, on and effective March 22, 2017, for $1.7 million. Based on this agreement, the
Company has recorded an additional impairment charge, and a related valuation allowance, of $4.2 million in 2016
to reduce the carrying amount of the Company’s loan receivable from Koidu, net of the valuation allowance, to $1.7
million at January 31, 2017. Additionally, on March 16, 2017, the Company and Koidu entered into an agreement
to terminate the supply agreement between the parties, pursuant to which Laurelton had previously been required to
purchase at fair market value certain diamonds recovered from Koidu's mine that met Laurelton's quality standards.
See "Item 8. Financial Statements and Supplementary Data - Note B. Summary of Significant Accounting Policies
and Note J. Commitments and Contingencies" for additional information on this financing arrangement.
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The Company also recorded an impairment charge, and a related valuation allowance, of $8.4 million during the
fiscal year ended January 31, 2017 related to a separate financing arrangement with another diamond mining and
exploration company.
Information Systems Assessment
The Company is engaged in a multi-year program to evaluate and, where appropriate, upgrade and/or replace certain
of its information systems. As part of this program, the Company identified opportunities to enhance its finished
goods inventory management and merchandising capabilities, and began development efforts to replace certain of its
existing systems and provide these enhanced capabilities. The Company recently completed an assessment of the
replacement system under development to evaluate whether the continued development of this system would deliver
sufficiently improved operating capabilities. Following the completion of this assessment, in the three months ended
January 31, 2017, the Company concluded that the development of this system should be modified such that the
finished goods inventory management and merchandising capabilities that were intended to be delivered utilizing
this new system will instead be delivered through further development of the Company’s current Enterprise Resource
Planning system and continued implementation of a new order management system. Accordingly, the Company has
evaluated the costs capitalized for the development of the replacement system for impairment in accordance with its
policy on the review of long-lived assets, and determined, based on specific identification of costs capitalized
pertaining to the development of specific capabilities in the new system, that $25.4 million of such capitalized costs
relate to software functionality which will not be utilized, and therefore will not have future benefit to the Company.
As such, the Company recorded a pre-tax impairment charge of $25.4 million as a component of Selling, General
and Administrative expenses in the three months ended January 31, 2017. This multi-year program is ongoing and,
as previously disclosed, may require significant capital expenditures and dedication of resources in both current and
future periods, though management believes that the modified approach referenced above will ultimately result in a
lower overall cost to the Company in delivering these capabilities.
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Contractual Cash Obligations and Commercial Commitments
The following is a summary of the Company's contractual cash obligations at January 31, 2017:
(in millions)
Total
2017
2018-2019
2020-2021
Thereafter
Unrecorded contractual obligations:
Operating leases a
$
1,552.7 $
286.2 $
390.8 $
317.5 $
558.2
Inventory purchase obligations b
Interest on debt c
Other contractual obligations d
Recorded contractual obligations:
Short-term borrowings
Long-term debt e
196.6
665.0
71.4
228.7
888.0
196.6
35.9
48.9
228.7
—
—
71.8
15.4
—
—
—
71.8
1.0
—
—
—
485.5
6.1
—
888.0
$
3,602.4 $
796.3 $
478.0 $
390.3 $
1,937.8
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a) Operating lease obligations do not include obligations for contingent rent, property taxes, insurance and
maintenance that are required by most lease agreements. Contingent rent for the year ended January 31, 2017
totaled $32.4 million. See "Item 8. Financial Statements and Supplementary Data - Note J. Commitment and
Contingencies" for a discussion of the Company’s operating leases.
b) The Company will, from time to time, enter into arrangements to purchase rough diamonds that contain
minimum purchase obligations. Inventory purchase obligations associated with these agreements have been
estimated at approximately $60.0 million for 2017 and included in this table. Purchases beyond 2017 that are
contingent upon mine production have been excluded as they cannot be reasonably estimated.
c) Excludes interest payments on amounts outstanding under available lines of credit, as the outstanding amounts
fluctuate based on the Company's working capital needs.
d) Consists primarily of technology licensing and service contracts, fixed royalty commitments, construction-in-
progress and packaging supplies.
e) Amounts exclude any unamortized discount or premium.
The summary above does not include the following items:
•
Cash contributions to the Company's pension plan and cash payments for other postretirement obligations.
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. To the extent that these requirements are fully covered by assets in the Qualified Plan, the
Company may elect not to make any contribution in a particular year. No cash contribution was required in
2016, and none is required in 2017, to meet the minimum funding requirements of the Employee
Retirement Income Security Act ("ERISA"). However, the Company periodically evaluates whether to make
discretionary cash contributions to the Qualified Plan and made a voluntary cash contribution of $120.0
million in 2016 but currently does not anticipate making such contributions in 2017. This expectation is
subject to change based on management's assessment of a variety of factors, including, but not limited to,
asset performance, interest rates and changes in actuarial assumptions. The Company estimates cash
payments for postretirement health-care and life insurance benefit obligations to be $1.9 million in 2017.
• Unrecognized tax benefits at January 31, 2017 of $3.4 million and accrued interest and penalties of $8.3
million. 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 examinations may result in proposed assessments where the ultimate resolution may
result in the Company owing additional taxes. At January 31, 2017, approximately $1.0 million of total
unrecognized tax benefits, if recognized, would affect the effective income tax rate. As of January 31, 2017,
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unrecognized tax benefits are not expected to change materially in the next 12 months. 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, 2017:
Total
Capacity
Borrowings
Outstanding
Letters of
Credit Issued
Available
Capacity
$
$
375.0 $
26.3 $
— $
375.0
281.1
66.7
135.7
4.0
—
1,031.1 $
228.7 $
4.0 $
348.7
304.3
145.4
798.4
Four-year revolving credit facility a
Five-year revolving credit facility b
Other credit facilities c
a Matures in October 2019.
b Matures in October 2020.
c Maturities through 2019.
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In addition, the Company has other available letters of credit and financial guarantees of $76.1 million of which
$26.4 million was outstanding at January 31, 2017. Of those available letters of credit and financial guarantees,
$57.5 million 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 approximately one-third of annual net sales and a higher percentage of annual net earnings. Management
expects such seasonality to continue.
Critical Accounting Estimates
The Company's consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. These principles require 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, 2017, a 10% change in the reserve for discontinued and slow-moving products
would have resulted in a change of $6.5 million in inventory and cost of sales.
Property, plant and equipment and intangibles assets and key money. 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. In
2016, the Company recorded an asset impairment charge of $25.4 million associated with software costs capitalized
in connection with the development of a new finished goods inventory management and merchandising information
system (see "Item 8. Financial Statements and Supplementary Data - Note B. Summary of Significant Accounting
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Policies and Note E. Property, Plant and Equipment" for additional information). The Company did not record any
material impairment charges in 2015 or 2014.
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 for each reporting unit to determine whether it is more-likely-than-not that the fair value of the 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 2016, 2015 and 2014 evaluations resulted in no impairment charges.
Notes receivable and other financing arrangements. The Company has provided financing to diamond mining and
exploration companies in order to obtain rights to purchase the mine's output. Management evaluates these
financing arrangements for potential impairment by reviewing the parties' financial statements and projections along
with 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. In 2016 and 2015, the Company recorded impairment charges totaling $12.6 million and $37.9
million, respectively (see "Item 8. Financial Statements and Supplementary Data - Note B. Summary of Significant
Accounting Policies and Note J. Commitments and Contingencies" for additional information). The Company did not
record any material impairment charges in 2014.
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Income taxes. The Company is subject to income taxes in U.S. federal and state, as well as 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 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. At January 31, 2017, total unrecognized tax benefits were $3.4 million of
which approximately $1.0 million, if recognized, would affect the effective income tax rate. As of January 31, 2017,
unrecognized tax benefits are not expected to change materially in the next 12 months. Future developments may
result in a change in this assessment.
In evaluating the Company's ability to recover its deferred tax assets within the jurisdiction from which they arise,
management considers all available evidence. The Company records valuation allowances when management
determines it is more likely than not that deferred tax assets will not be realized in the future.
Employee benefit plans. The Company maintains several pension and retirement plans, as well as provides certain
postretirement health-care and life insurance benefits for retired employees. The Company makes certain
assumptions that affect the underlying estimates related to pension and other postretirement costs. Significant
changes in interest rates, the market value of securities and projected health-care costs would require the Company
to revise key assumptions and could result in a higher or lower charge to earnings.
The Company used discount rates of 4.50% to determine 2016 expense for its U.S. Qualified Plan as well as its
postretirement plans and 4.25% for its Excess Plan/SRIP. Holding all other assumptions constant, a 0.5% increase
in the discount rates would have decreased 2016 pension and postretirement expenses by $6.1 million and $0.5
million. A decrease of 0.5% in the discount rates would have increased the 2016 pension and postretirement
expenses by $6.6 million and $0.3 million. 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.
TIFFANY & CO.
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The Company used an expected long-term rate of return on pension plan assets of 7.00% to determine its 2016
pension expense. Holding all other assumptions constant, a 0.5% change in the long-term rate of return would have
changed the 2016 pension expense by approximately $1.7 million. The expected long-term rate of return on pension
plan assets is selected by taking into account the average rate of return expected on the funds invested or to be
invested to provide for the benefits included in the projected benefit obligation. More specifically, consideration is
given to the expected rates of return (including reinvestment asset return rates) based upon the plan's current asset
mix, investment strategy and the historical performance of plan assets.
For postretirement benefit measurement purposes, a 7.00% annual rate of increase in the per capita cost of covered
health care was assumed for 2017. The rate was assumed to decrease gradually to 4.75% by 2023 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 Company's accumulated postretirement benefit obligation for the year ended January 31,
2017 or aggregate service and interest cost components of the 2016 postretirement expense.
2017 Outlook
For the fiscal year ending January 31, 2018 ("fiscal 2017"), management's outlook calls for: (i) worldwide net sales
increasing over the prior year by a low-single-digit percentage and by a mid-single-digit percentage on a constant-
exchange-rate basis and (ii) net earnings per diluted share increasing by a high-single-digit percentage over 2016's
earnings per diluted share of $3.55 and by a mid-single-digit percentage over 2016's earnings per diluted share
(excluding charges) of $3.75 (see "Non-GAAP Measures"). These expectations are approximations and are based on
the Company's plans and assumptions, including: (i) worldwide gross retail square footage increasing 3%, net
through 11 store openings, 9 relocations and 6 closings; (ii) operating margin above the prior year entirely due to an
expected increase in gross margin, with SG&A expenses increasing slightly faster than sales growth; (iii) interest and
other expenses, net of approximately $40 million; (iv) an effective income tax rate consistent with the prior year; (v)
the U.S. dollar in 2017 stronger overall than other foreign currencies on a year-over-year basis; and (vi) minimal
benefit to net earnings per diluted share from share repurchases.
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Management also expects for fiscal 2017: (i) net cash provided by operating activities of approximately $700 million
and (ii) free cash flow (see "Non-GAAP Measures") of approximately $450 million. These expectations are
approximations and are based on the Company's plans and assumptions, including: (i) net inventories unchanged
from the prior year, (ii) capital expenditures of $250 million and (iii) net earnings in line with management’s
expectations as described above.
See "Item 8. Financial Statements and Supplementary Data - Note B. Summary of Significant Accounting Policies."
NEW ACCOUNTING STANDARDS
The Company does not have any off-balance sheet arrangements.
OFF-BALANCE SHEET ARRANGEMENTS
TIFFANY & CO.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk from fluctuations in foreign currency exchange rates, precious metal prices
and interest rates, which could affect its consolidated financial position, earnings and cash flows. The Company
manages its exposure to market risk through its regular operating and financing activities and, when deemed
appropriate, through the use of derivative financial instruments. The Company uses derivative financial instruments
as risk management tools and not for trading or speculative purposes.
Foreign Currency Risk
The Company uses foreign exchange forward contracts or put option contracts to offset a portion of 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 maximum term of the
Company's outstanding foreign exchange forward contracts as of January 31, 2017 is 12 months. At January 31,
2017 and 2016, the fair values of the Company's outstanding foreign exchange forwards were net assets of $7.1
million and net liabilities of $0.9 million, respectively.
In 2016, the Company entered into cross-currency swaps to hedge the foreign exchange risk associated with
Japanese yen-denominated intercompany loans. As of January 31, 2017, the notional amount of these cross-
currency swaps was approximately ¥10.6 billion or $100.0 million. The cross-currency swaps have a term ending on
October 1, 2024. At January 31, 2017, the fair value of the Company's outstanding cross-currency swaps were
liabilities of $0.4 million.
At January 31, 2017, for the total contracts and swaps noted above, a 10% depreciation in the hedged foreign
exchange rates from the prevailing market rates would have resulted in a liability with a fair value of approximately
$44.0 million.
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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 manage the effect of volatility in precious metal prices. The Company may use
a combination of call and put option contracts in net-zero-cost collar arrangements ("precious metal collars") or
forward contracts. For precious metal collars, if the price of the precious metal at the time of the expiration of the
precious metal collar is within the call and put price, the precious metal collar would expire at no cost to the
Company. The maximum term of the Company's outstanding precious metal forward contracts as of January 31,
2017 is 24 months. At January 31, 2017 and 2016, the fair values of the Company's outstanding precious metal
derivative instruments were net liabilities of $1.7 million and $12.6 million, respectively. At January 31, 2017, a
10% depreciation in precious metal prices from the prevailing market rates would have resulted in a liability with a
fair value of approximately $16.0 million.
TIFFANY & CO.
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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, 2017 and 2016, and the
results of their operations and their cash flows for each of the three years in the period ended January 31, 2017 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, 2017, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's
management is responsible for these financial statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in Management's Report on Internal Control over Financial Reporting, appearing under
Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement
schedule, and on the Company's internal control over financial reporting based on our integrated audits. We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the financial statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
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/s/ PricewaterhouseCoopers LLP
New York, New York
March 17, 2017
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CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, less allowances of $11.5 and $11.5
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Inventories, net
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Deferred income taxes
Other assets, net
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings
Current portion of long-term debt
Accounts payable and accrued liabilities
Income taxes payable
Merchandise credits and deferred revenue
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 2.0 shares, none issued
and outstanding
Common Stock, $0.01 par value; authorized 240.0 shares, issued and
outstanding 124.5 and 126.8
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Total Tiffany & Co. stockholders' equity
Non-controlling interests
Total stockholders' equity
See notes to consolidated financial statements.
TIFFANY & CO.
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2017
January 31,
2016
$
928.0 $
57.8
226.8
2,157.6
203.4
3,573.6
931.8
301.8
290.4
843.6
43.0
206.4
2,225.0
190.4
3,508.4
935.8
382.8
294.6
5,097.6 $
5,121.6
$
$
228.7 $
—
312.8
22.1
69.2
632.8
878.4
318.6
45.9
193.5
—
1.2
1,190.2
2,078.3
(256.2)
3,013.5
14.9
3,028.4
221.6
84.2
329.1
27.1
67.9
729.9
790.0
428.1
55.1
189.0
—
1.3
1,175.7
2,012.5
(278.1)
2,911.4
18.1
2,929.5
5,121.6
$
5,097.6 $
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except per share amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Earnings from operations
Interest expense and financing costs
Other (income) expense, net
Loss on extinguishment of debt
Earnings from operations before income taxes
Provision for income taxes
Net earnings
Net earnings per share:
Basic
Diluted
Weighted-average number of common shares:
Basic
Diluted
See notes to consolidated financial statements.
2017
2016
$
4,001.8 $
4,104.9 $
1,511.5
2,490.3
1,769.1
721.2
46.0
(1.4)
—
676.6
230.5
1,613.6
2,491.3
1,731.2
760.1
49.0
1.2
—
709.9
246.0
$
$
$
446.1 $
463.9 $
3.57 $
3.55 $
3.61 $
3.59 $
125.1
125.5
128.6
129.1
2015
4,249.9
1,712.7
2,537.2
1,645.8
891.4
62.9
(2.8)
93.8
737.5
253.3
484.2
3.75
3.73
129.2
129.9
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(in millions)
Net earnings
Other comprehensive earnings (loss), net of tax
Foreign currency translation adjustments
Unrealized gain (loss) on marketable securities
Unrealized gain (loss) on hedging instruments
Net unrealized gain (loss) on benefit plans
Total other comprehensive earnings (loss), net of tax
Years Ended January 31,
2017
2016
$
446.1 $
463.9 $
(8.4)
1.8
10.7
17.8
21.9
(59.0)
(2.9)
(21.4)
95.7
12.4
2015
484.2
(93.1)
(0.8)
1.2
(139.2)
(231.9)
Comprehensive earnings
$
468.0 $
476.3 $
252.3
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions)
Total
Stockholders'
Equity
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Non-
Controlling
Interests
Balance at January 31, 2014
$
2,734.0 $
1,682.5 $
(58.6)
128.3 $
1.3
$
1,095.3 $
13.5
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 Plan
Purchase and retirement of
Common Stock
Cash dividends on Common Stock
Other comprehensive loss, net of
tax
Net earnings
Redemption of non-controlling
interest
Non-controlling interests
36.9
14.1
26.7
3.9
(27.0)
(191.2)
(231.9)
484.2
—
1.0
—
—
—
—
(24.8)
(191.2)
—
484.2
—
—
—
—
—
—
—
—
(231.9)
—
—
—
1.3
—
—
—
(0.3)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
36.9
14.1
26.7
3.9
(2.2)
—
—
—
(1.1)
—
Balance at January 31, 2015
2,850.7
1,950.7
(290.5)
129.3
1.3
1,173.6
Exercise of stock options and
vesting of RSUs
Tax effect of exercise of stock
options and vesting of RSUs
Share-based compensation expense
Purchase and retirement of
Common Stock
Cash dividends on Common Stock
Other comprehensive earnings, net
of tax
Net earnings
Redemption of non-controlling
interest
Non-controlling interests
0.3
2.1
24.8
(220.4)
(203.4)
12.4
463.9
(2.2)
1.3
—
—
—
(198.7)
(203.4)
—
463.9
—
—
—
—
—
—
—
12.4
—
—
—
0.3
—
—
(2.8)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.3
2.1
24.8
(21.7)
—
—
—
(3.4)
—
Balance at January 31, 2016
2,929.5
2,012.5
(278.1)
126.8
1.3
1,175.7
Exercise of stock options and
vesting of RSUs
Tax effect of exercise of stock
options and vesting of RSUs
Share-based compensation expense
Purchase and retirement of
Common Stock
Cash dividends on Common Stock
Other comprehensive earnings, net
of tax
Net earnings
Non-controlling interests
12.5
(0.5)
24.5
(183.6)
(218.8)
21.9
446.1
(3.2)
—
—
—
(161.5)
(218.8)
—
446.1
—
—
—
—
—
—
21.9
—
—
0.5
—
—
—
—
—
12.5
(0.5)
24.5
(2.8)
(0.1)
(22.0)
—
—
—
—
—
—
—
—
—
—
—
—
Balance at January 31, 2017
$
3,028.4 $
2,078.3 $
(256.2)
124.5 $
1.2
$
1,190.2 $
See notes to consolidated financial statements.
—
—
—
—
—
—
—
—
1.1
1.0
15.6
—
—
—
—
—
—
—
1.2
1.3
18.1
—
—
—
—
—
—
—
(3.2)
14.9
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
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
Loan impairment charges
Asset impairment charge
Changes in assets and liabilities:
Accounts receivable
Inventories
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Prepaid expenses and other current assets
Other assets, net
Accounts payable and accrued liabilities
Income taxes payable
Merchandise credits and deferred revenue
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 sales of marketable securities and short-term investments
Capital expenditures
Proceeds from sale of assets, net
Proceeds from notes receivable
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) credit facility borrowings, net
Proceeds from other credit facility borrowings
Repayment of other credit facility borrowings
Proceeds from the issuance of long-term debt
Repayment of long-term debt
Payment for settlement of interest rate swaps
Repurchase of Common Stock
Proceeds from exercised stock options
Excess tax benefits from share-based payment arrangements
Cash dividends on Common Stock
Distribution to non-controlling interest
Financing fees
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See notes to consolidated financial statements.
2017
Years Ended January 31,
y
2016
2015
$
446.1
$
463.9
$
484.2
208.5
(8.5)
(0.7)
19.2
46.1
45.4
24.3
12.6
25.4
(19.2)
54.8
33.6
0.8
(24.6)
(39.3)
1.5
(123.9)
702.1
(125.5)
109.8
(222.8)
—
1.7
202.5
(8.3)
(2.2)
25.4
(1.9)
65.8
24.5
37.9
—
(16.7)
63.7
1.1
(17.5)
(15.3)
3.1
3.0
(15.4)
813.6
(100.0)
73.6
(252.7)
0.9
—
(236.8)
(278.2)
14.2
76.8
(83.1)
98.1
(97.1)
—
(183.6)
15.3
0.7
(218.8)
(3.8)
(1.5)
(382.8)
1.9
84.4
843.6
928.0
$$
(11.3)
24.8
(16.0)
—
—
—
(220.4)
2.0
2.2
(203.4)
—
(0.2)
(422.3)
0.5
113.6
730.0
843.6
$$
$$
194.2
(9.2)
(14.1)
33.6
37.7
39.2
26.5
—
—
(17.6)
(167.6)
(20.9)
(20.2)
(5.9)
81.9
(2.7)
(24.0)
615.1
(40.1)
55.3
(247.4)
—
15.2
(217.0)
(12.5)
19.8
(3.4)
548.0
(400.0)
(4.2)
(27.0)
42.9
14.1
(191.2)
(1.9)
(8.0)
(23.4)
9.5
384.2
345.8
730.0
TIFFANY & CO.
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A.
NATURE OF BUSINESS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tiffany & Co. is a holding company that operates through its subsidiary companies (collectively, the "Company"). Its
principal subsidiary, Tiffany and Company ("Tiffany"), is a jeweler and specialty retailer. Through its subsidiaries, the
Company designs and manufactures products and operates TIFFANY & CO. retail stores worldwide, and also sells its
products through Internet, catalog, business-to-business and wholesale operations. The Company's principal
merchandise offering is jewelry (representing 92% of worldwide net sales in 2016); it also sells timepieces, leather
goods, sterling silverware, china, crystal, stationery, fragrances and accessories.
The Company's reportable segments are as follows:
• Americas includes sales in Company-operated TIFFANY & CO. stores in the United States, Canada and
Latin America, as well as sales of TIFFANY & CO. products in certain markets through Internet, catalog,
business-to-business and wholesale operations;
• Asia-Pacific includes sales in Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY &
CO. products in certain markets through Internet and wholesale operations;
•
Japan includes sales in Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY & CO.
products through Internet, business-to-business and wholesale operations;
• Europe includes sales in Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY & CO.
products in certain markets through the Internet and wholesale operations; and
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• Other consists of all non-reportable segments. Other includes the Emerging Markets region, which
includes sales in Company-operated TIFFANY & CO. stores and wholesale operations in the Middle East.
In addition, Other includes wholesale sales of diamonds as well as earnings received from third-party
licensing agreements.
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 Tiffany & Co. 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.
Certain prior year amounts have been reclassified to conform with the current year presentation. The Company
adopted ASU No. 2015-03 – Simplifying the Presentation of Debt Issuance Costs, on a retrospective basis, as of
February 1, 2016. Accordingly, debt issuance costs of $8.1 million were reclassified from other assets, net to a
direct deduction from long-term debt at January 31,
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
Use of Estimates
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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 amount invested with any one financial institution.
Short-Term Investments
Short-term investments are classified as available-for-sale and are carried at fair value. At January 31, 2017 and
2016, the Company's short-term available-for-sale investments consisted entirely of time deposits. At the time of
purchase, management determines the appropriate classification of these investments and reevaluates such
designation as of each balance sheet date.
Receivables and Financing Arrangements
Receivables. The Company's accounts receivable, net primarily consists of amounts due from Credit Receivables
(defined below), department store operators that host TIFFANY & CO. boutiques in their stores, third-party credit
card issuers and wholesale customers. 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,
management'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"), management 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. Certain customers may be granted payment terms which
permit purchases above a minimum amount to be paid for in equal monthly installments over a period not to exceed
12 months (together with Credit Card Receivables, "Credit Receivables"). Credit Receivables require minimum
balance payments. An account is classified as overdue if a minimum balance payment has not been received within
the allotted timeframe (generally 30 days), after which internal collection efforts commence. In order for the account
to return to current status, full payment on all past due amounts needs to be received by the Company. For all Credit
Receivables 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, 2017 and 2016, the carrying amount of the Credit Receivables (recorded in accounts receivable, net)
was $71.9 million and $75.2 million, of which 97% were considered current in both periods. The allowance for
doubtful accounts for estimated losses associated with the Credit Receivables (approximately $1.1 million at
January 31, 2017 and $1.0 million at January 31, 2016) was determined based on the factors discussed above.
Finance charges earned on Credit Card accounts are not significant.
Financing Arrangements. The Company has provided financing to diamond mining and exploration companies in
order to obtain rights to purchase the mine's output (see "Note J. Commitments and Contingencies"). Management
evaluates these financing arrangements for potential impairment by reviewing the parties' financial statements along
with projections and business, operational and other economic factors on a periodic basis.
As of January 31, 2017, the Company had a $43.8 million financing arrangement (the "Loan") with Koidu Limited
(previously Koidu Holdings S.A.) ("Koidu"). The Company recorded impairment charges totaling $4.2 million and
$37.9 million during the fiscal years ended January 31, 2017 and 2016 related to the Loan and ceased accruing
interest income on the loan as of July 2015. The net carrying amount of the Loan was $1.7 million as of January 31,
2017. See "Note J. Commitments and Contingencies" for additional information on this financing arrangement.
TIFFANY & CO.
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The Company also recorded an impairment charge, and a related valuation allowance, of $8.4 million during the
fiscal year ended January 31, 2017 related to a separate financing arrangement with another diamond mining and
exploration company.
At January 31, 2017 and 2016, the current portion of the carrying amount of financing arrangements including
accrued interest was $4.6 million and $2.1 million and was recorded in prepaid expenses and other current
assets. At January 31, 2017 and 2016, the non-current portion of the carrying amount of financing arrangements
including accrued interest was $4.4 million and $18.9 million and was included in other assets, net.
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 are stated at cost less accumulated depreciation. Depreciation is calculated on a
straight-line basis over the following estimated useful lives:
Property, Plant and Equipment
Buildings
Machinery and equipment
Office equipment
Software
Furniture and fixtures
39 years
5-15 years
3-8 years
5-10 years
3-10 years
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Leasehold improvements and building improvements are amortized over the shorter of their estimated useful lives
(ranging from 8-10 years) or the related lease terms or building life, respectively. 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 2016, 2015 or 2014.
Information Systems Development Costs
Eligible costs incurred during the development stage of information systems projects are capitalized and amortized
over the estimated useful life of the related project. Eligible costs include those related to the purchase,
development, and installation of the related software. Costs incurred prior to the development stage, as well as costs
for maintenance, data conversion, training, and other general and administrative costs, are expensed as incurred.
Costs that are capitalized are included in Property, Plant and Equipment, in Construction-in-progress while in the
development stage and in Software once placed into service.
Capitalized software costs are subject to the Company’s accounting policy related to the review of long-lived assets
for impairment. See "Impairment of Long-Lived Assets" below for further details.
Intangible Assets and Key Money
Intangible assets, consisting of product rights and trademarks, are recorded at cost and are amortized on a straight-
line basis over their estimated useful lives which range from 15 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.
TIFFANY & CO.
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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.
The following table summarizes intangible assets and key money, included in other assets, net, as follows:
(in millions)
Product rights
Key money deposits
Trademarks
January 31, 2017
January 31, 2016
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
$
$
48.9 $
(11.0) $
49.6 $
31.9
2.5
(4.1)
(2.5)
32.7
2.5
(9.2)
(3.3)
(2.5)
83.3 $
(17.6) $
84.8 $
(15.0)
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Amortization of intangible assets and key money for the years ended January 31, 2017, 2016 and 2015 was $3.4
million, $3.7 million and $7.8 million. Amortization expense is estimated to be approximately $3.4 million in each
of the next five years.
Goodwill
Goodwill represents the excess of cost over fair value of net assets acquired in a business combination. 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 for each reporting unit 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, 2017 and 2016, goodwill, included in other assets, net, consisted of the following by
segment:
(in millions)
Americas
Asia-Pacific
Japan
Europe
Other
Total
January 31, 2015
$
12.3 $
0.3 $
1.1 $
1.1 $
24.0 $
Translation
January 31, 2016
Translation
(0.1)
12.2
(0.1)
—
0.3
—
—
1.1
(0.1)
(0.1)
1.0
0.1
(0.1)
23.9
—
January 31, 2017
$
12.1 $
0.3 $
1.0 $
1.1 $
23.9 $
38.8
(0.3)
38.5
(0.1)
38.4
The Company recorded no impairment charges related to goodwill in 2016, 2015 or 2014.
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. In 2016, the Company recorded an asset impairment charge of
$25.4 million associated with the costs capitalized in connection with the development of a new finished goods
inventory management and merchandising information system (see "Note E. Property, Plant and Equipment" for
additional information). The Company recorded no significant impairment charges related to long-lived assets in
2015 or 2014.
TIFFANY & CO.
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Hedging Instruments
The Company uses derivative financial instruments to mitigate a portion of 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 other 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) expense, 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
$2.9 million and $0.9 million of gross unrealized gains and $1.1 million and $1.8 million of gross unrealized losses
within accumulated other comprehensive loss as of January 31, 2017 and 2016.
Realized gains or losses reclassified from other comprehensive earnings are determined on the basis of specific
identification.
The Company's marketable securities primarily consist of investments in mutual funds. When evaluating 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, 2017, 2016 or
2015.
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Merchandise Credits and Deferred Revenue
Merchandise credits and deferred revenue primarily represent outstanding gift cards sold to customers and
outstanding credits issued to customers for returned merchandise. All such outstanding items may be tendered for
future merchandise purchases. A gift card liability is established when the gift card is sold. 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. The liabilities are relieved and revenue is recognized when merchandise is purchased and delivered to the
customer and the merchandise credit or gift card is used as a form of payment.
If merchandise credits or gift cards are not redeemed over an extended period of time (for example, approximately
three to five years in the U.S.), the value of the merchandise credits or gift cards is generally remitted to the
applicable jurisdiction in accordance with unclaimed property laws.
Revenue Recognition
Sales are recognized at the "point of sale," which occurs when merchandise is taken in an "over-the-counter"
transaction or upon receipt by a customer in a shipped transaction, such as through the Internet and catalog
channels. Revenue associated with gift cards and merchandise credits is recognized upon redemption. Sales are
reported net of returns, sales tax and other similar taxes. Shipping and handling fees billed to customers are
included in net sales. The Company maintains a reserve for potential product returns and it records, as a reduction to
sales and cost of sales, its provision for estimated product returns, which is determined based on historical
experience.
Additionally, outside of the U.S., the Company operates certain TIFFANY & CO. stores within various department
stores. Sales transacted at these store locations are recognized at the "point of sale." The Company and these
department store operators have distinct responsibilities and risks in the operation of such TIFFANY & CO. stores.
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
TIFFANY & CO.
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assume retail credit and certain other risks; and (iii) act for the Company in the sale of merchandise. In return for
their services and use of their 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 to internally manufacture merchandise (primarily metal, gemstones, labor and overhead),
costs related to the purchase of merchandise from third-parties, 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 2016, 2015 and 2014,
these costs totaled $299.0 million, $302.0 million and $284.0 million, representing 7.5%, 7.4% and 6.7% 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 first distribution.
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Pre-Opening Costs
Costs associated with the opening of new retail stores are expensed in the period incurred.
Stock-Based Compensation
New, modified and unvested share-based payment transactions with employees, such as stock options and restricted
stock, are measured at fair value and recognized as compensation expense over the requisite service period.
Merchandise design activities 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.
Merchandise Design Activities
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. Within other (income) expense, net, the Company recorded net losses resulting from foreign currency
transactions of $4.8 million, $9.8 million and $3.7 million in 2016, 2015 and 2014, respectively.
Income Taxes
The Company accounts for income taxes under the asset and liability method, 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.
TIFFANY & CO.
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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 ("EPS")
Basic EPS is computed as net earnings divided by the weighted-average number of common shares outstanding for
the period. Diluted EPS includes the dilutive effect of the assumed exercise of stock options and unvested restricted
stock units.
The following table summarizes the reconciliation of the numerators and denominators for the basic and diluted EPS
computations:
(in millions)
Net earnings for basic and diluted EPS
Weighted-average shares for basic EPS
2017
2016
$
446.1 $
463.9 $
125.1
128.6
Incremental shares based upon the assumed exercise of stock
options and unvested restricted stock units
Weighted-average shares for diluted EPS
0.4
125.5
0.5
129.1
2015
484.2
129.2
0.7
129.9
Years Ended January 31,
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For the years ended January 31, 2017, 2016 and 2015, there were 1.3 million, 0.8 million and 0.3 million stock
options and restricted stock units excluded from the computations of earnings per diluted share due to their
antidilutive effect.
New Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.
2014-09 – Revenue From Contracts with Customers, to clarify the principles of recognizing revenue and create
common revenue recognition guidance between U.S. Generally Accepted Accounting Principles ("GAAP") and
International Financial Reporting Standards. The core principle of the guidance is that a company should recognize
revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to
which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need
to use more judgment and make more estimates than under current guidance. These may include identifying
performance obligations in the contract, estimating the amount of variable consideration to include in the
transaction price and allocating the transaction price to each separate performance obligation. In August 2015, the
FASB issued ASU 2015-14 – Revenue from Contracts with Customers: Deferral of the Effective Date, deferring the
effective date of ASU 2014-09 for one year to interim and annual reporting periods beginning after December 15,
2017. Early adoption is also permitted as of the original effective date (interim and annual periods beginning after
December 15, 2016) and full or modified retrospective application is permitted. Subsequently, the FASB has issued
a number of ASU's amending ASU-2014-09 and providing further guidance related to revenue recognition, which
management is collectively evaluating. The effective date and transition requirements for these amendments are the
same as ASU 2014-09, as amended by ASU 2015-14. Management is currently evaluating the impact of the new
guidance on the consolidated financial statements. The Company has identified an implementation project team and
related oversight processes and has commenced the assessment phase of the project. The Company has not
concluded as to whether the new guidance will be adopted on a full or modified retrospective basis, but will not
apply the early adoption provisions of the new guidance.
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In July 2015, the FASB issued ASU No. 2015-11 – Inventory: Simplifying the Measurement of Inventory, which
states an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the
estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal
and transportation. This amendment applies to all inventory that is measured using the average costs or first-in first-
out (FIFO) methods. This supersedes prior guidance which allowed entities to measure inventory at the lower of cost
or market, where market could be replacement cost, net realizable value or net realizable value less an approximately
normal profit margin. This ASU is effective for interim and annual periods beginning after December 15, 2016. The
amendments should be applied prospectively and earlier application is permitted. This ASU is not expected to have a
material impact on the consolidated financial statements.
yy
In February 2016, the FASB issued ASU No. 2016-02 – Leases, which requires an entity that leases assets to
recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases.
Leases will be classified as either financing or operating, similar to current accounting requirements, with the
applicable classification determining the pattern of expense recognition in the statement of earnings. This ASU is
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 and must
be adopted using a modified retrospective approach. Management is currently evaluating the impact of this ASU on
the consolidated financial statements, but expects that adoption will result in a significant increase in the Company's
assets and liabilities. The Company has identified an implementation project team and related oversight processes
and has commenced the assessment phase of the project.
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In March 2016, the FASB issued ASU No. 2016-05 – Derivatives and Hedging: Effect of Derivative Contract
Novations on Existing Hedge Accounting Relationships, which states that a change in counterparty to a derivative
instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge
account criteria continue to be met. This ASU is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2016. The amendments should be applied on either a prospective basis or a
modified retrospective basis and earlier application is permitted. Management does not believe the adoption of this
ASU will have a material impact on the consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09 – Compensation – Stock Compensation: Improvements to
Employee Share-Based Payment Accounting, which provides guidance on several aspects of accounting for share-
based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding
requirements, as well as classification on the statement of cash flows. Most notably, the Company will be required to
recognize all excess tax benefits and shortfalls as income tax expense or benefit in the statement of earnings within
the reporting period in which they occur. This ASU is effective for interim and annual periods beginning after
December 15, 2016 and early adoption is permitted. Management is currently evaluating the impact of this ASU on
the consolidated financial statements, but anticipates adoption will result in increased earnings volatility due to the
immediate recognition of excess tax benefits and shortfalls.
In June 2016, the FASB issued ASU 2016-13 – Financial Instruments – Credit Losses: Measurement of Credit
Losses on Financial Instruments. ASU 2016-13 amends the impairment model to utilize an expected loss
methodology in place of the currently used incurred loss methodology, which will result in the more timely
recognition of losses. The new standard applies to financial assets measured at amortized cost basis, including
receivables that result from revenue transactions and held-to-maturity debt securities. The ASU is effective for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2019, and early adoption is
permitted for fiscal years beginning after December 15, 2018. Management is currently evaluating the impact of
this ASU on the consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15 – Statement of Cash Flows: Classification of Certain Cash Receipts
and Cash Payments, which provides guidance on eight specific cash flow issues in an effort to reduce diversity in
practice in how certain transactions are classified within the statement of cash flows. This ASU is effective for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted
and the amendments should be applied using a retrospective method. Management is currently evaluating the
impact of this ASU on the consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16 – Income Taxes: Intra-Entity Transfers of Assets Other Than
Inventory. This ASU eliminates the requirement to defer the recognition of current and deferred income taxes for an
intra-entity asset transfer until the asset has been sold to an outside party. Therefore, under the new guidance, an
entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when
TIFFANY & CO.
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the transfer occurs. This ASU is effective for interim and annual reporting periods beginning after December 15,
2017. Early adoption is permitted as of the first interim period and the amendments should be applied on a
modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning
of the period of adoption. Management is currently evaluating the impact of this ASU on the consolidated financial
statements.
In January 2017, the FASB issued ASU 2017-04 – Intangibles - Goodwill and Other: Simplifying the Test for
Goodwill Impairment. This ASU eliminates step 2 (which measures a goodwill impairment loss by comparing the
implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill) from the goodwill
impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall
be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting
unit. This ASU should be adopted by the Company for its annual or any interim goodwill impairment tests in fiscal
years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment
tests performed on testing dates after January 1, 2017. Management does not believe the adoption of this ASU will
have a material impact on the consolidated financial statements.
C.
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
(in millions)
2017
2016
Interest, net of interest capitalization
$
40.6 $
42.5 $
2015
59.7
Income taxes
$
213.9 $
237.5 $
133.4
Years Ended January 31,
Supplemental noncash investing and financing activities:
(in millions)
2017
2016
Accrued capital expenditures
$
10.7 $
8.2 $
Issuance of Common Stock under the Employee
Profit Sharing and Retirement Savings Plan
$
— $
— $
2015
8.2
3.9
Years Ended January 31,
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D.
INVENTORIES
(in millions)
Finished goods
Raw materials
Work-in-process
Inventories, net
2017
January 31,
2016
$
1,249.4 $
1,292.9
806.3
101.9
813.7
118.4
$
2,157.6 $
2,225.0
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E.
PROPERTY, PLANT AND EQUIPMENT
(in millions)
Land
Buildings
Leasehold and building improvements
Office equipment
Software
Furniture and fixtures
Machinery and equipment
Construction-in-progress
Accumulated depreciation and amortization
2017
$
41.8 $
122.5
1,195.8
245.7
312.4
281.2
177.7
78.6
2,455.7
(1,523.9)
January 31,
2016
45.6
120.9
1,108.6
254.0
295.1
265.3
169.2
95.7
2,354.4
(1,418.6)
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$
931.8 $
935.8
The provision for depreciation and amortization for the years ended January 31, 2017, 2016 and 2015 was $202.5
million, $196.3 million and $182.8 million, respectively.
Information Systems Assessment. The Company is engaged in a multi-year program to evaluate and, where
appropriate, upgrade and/or replace certain of its information systems. As part of this program, the Company
identified opportunities to enhance its finished goods inventory management and merchandising capabilities, and
began development efforts to replace certain of its existing systems and provide these enhanced capabilities. The
Company recently completed an assessment of the replacement system under development to evaluate whether the
continued development of this system would deliver sufficiently improved operating capabilities. Following the
completion of this assessment, in the three months ended January 31, 2017, the Company concluded that the
development of this system should be modified such that the finished goods inventory management and
merchandising capabilities that were intended to be delivered utilizing this new system will instead be delivered
through further development of the Company’s current Enterprise Resource Planning system and continued
implementation of a new order management system. Accordingly, the Company has evaluated the costs capitalized
for the development of the replacement system for impairment in accordance with its policy on the review of long-
lived assets (see "Note B. Summary of Significant Accounting Policies"), and determined, based on specific
identification of costs capitalized pertaining to the development of specific capabilities in the new system, that
$25.4 million of such capitalized costs relate to software functionality which will not be utilized, and therefore will
not have future benefit to the Company. As such, the Company recorded a pre-tax impairment charge of $25.4
million as a component of SG&A expenses in the three months ended January 31, 2017.
F.
ACCOUNTS PAYABLE AND ACCRUED LIABILTIES
(in millions)
Accounts payable - trade
Accrued compensation and commissions
Accrued sales, withholding and other taxes
Other
2017
$
108.6 $
96.3
26.7
81.2
$
312.8 $
January 31,
2016
127.8
77.9
21.9
101.5
329.1
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G.
DEBT
(in millions)
Short-term borrowings:
Credit Facilities
Other credit facilities
Long-term debt:
Unsecured Senior Notes:
2017
January 31,
2016
$
93.0 $
135.7
$
228.7 $
76.6
145.0
221.6
84.2
250.0
250.0
300.0
—
884.2
84.2
10.0
790.0
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2010 1.72% Senior Notes, due September 2016 a, b
$
— $
2012 4.40% Series B Notes, due July 2042 c
2014 3.80% Senior Notes, due October 2024 d, e
2014 4.90% Senior Notes, due October 2044 d, e
2016 0.78% Senior Notes, due August 2026 b, d
Less current portion of long-term debt
Less unamortized discounts and debt issuance costs
250.0
250.0
300.0
88.0
888.0
—
9.6
$
878.4 $
a These Senior Notes were repaid upon the maturity thereof during the year ended January 31, 2017 using the
proceeds from the issuance of the 0.78% Senior Notes due August 2026.
b These Senior Notes were issued, at par, ¥10.0 billion.
c The agreements governing these Senior Notes require repayments of $50.0 million in aggregate every five years
beginning in July 2022.
d These agreements require lump sum repayments upon maturity.
e These Senior Notes were issued at a discount which will be amortized until the debt maturity.
Credit Facilities
In 2014, Tiffany & Co. entered into a four-year $375.0 million and a five-year $375.0 million multi-bank, multi-
currency, committed unsecured revolving credit facility, including letter of credit subfacilities, (collectively, the "New
Credit Facilities") resulting in a total borrowing capacity of $750.0 million. The New Credit Facilities replaced the
previously existing $275.0 million three-year unsecured revolving credit facility and $275.0 million five-year
unsecured revolving credit facility, which were terminated and repaid concurrently with Tiffany & Co.'s entry into the
New Credit Facilities. The New Credit Facilities are available for working capital and other corporate purposes.
Borrowings under the New Credit Facilities will bear interest at a rate per annum equal to, at the option of the
Company, (1) LIBOR (or other applicable reference rate) for the relevant currency plus an applicable margin based
upon the Company's leverage ratio as defined under the New Credit Facilities, or (2) an alternate base rate equal to
the highest of (i) the Federal Funds Rate plus 0.50%, (ii) Bank of America, N.A.’s prime rate and (iii) one-month
LIBOR plus 1%, plus an applicable margin based upon the Company's leverage ratio as defined under the New
Credit Facilities. The New Credit Facilities also require payment to the lenders of a facility fee on the amount of the
lenders’ commitments under the credit facilities from time to time at rates based upon the Company's leverage ratio
as defined under the New Credit Facilities. Voluntary prepayments of the loans and voluntary reductions of the
unutilized portion of the commitments under the New Credit Facilities are permissible without penalty, subject to
certain conditions pertaining to minimum notice and minimum reduction amounts.
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In October 2016, the maturity for each of the New Credit Facilities was extended for one additional year pursuant to
the terms set forth in the respective agreements governing the New Credit Facilities. Therefore, the four-year and
five-year New Credit Facilities will mature in October of 2019 and 2020, respectively.
At January 31, 2017, there were $93.0 million of borrowings outstanding, $4.0 million of letters of credit issued but
not outstanding and $653.0 million available for borrowing under the New Credit Facilities. At January 31, 2016,
there were $76.6 million of borrowings outstanding, $5.6 million of letters of credit issued but not outstanding and
$667.8 million available for borrowings. The weighted-average interest rate for borrowings outstanding was 1.72% at
January 31, 2017 and 1.54% at January 31, 2016.
Other Credit Facilities
Tiffany-Shanghai Credit Agreement. In July 2016, Tiffany & Co.'s wholly owned subsidiary, Tiffany & Co. (Shanghai)
Commercial Company Limited ("Tiffany-Shanghai"), entered into a three-year multi-bank revolving credit agreement
(the "Tiffany-Shanghai Credit Agreement"). The Tiffany-Shanghai Credit Agreement has an aggregate borrowing limit
of RMB 990.0 million ($143.8 million at January 31, 2017). The Tiffany-Shanghai Credit Agreement, which
matures in July 2019, was made available to refinance amounts outstanding under Tiffany-Shanghai’s previously
existing RMB 930.0 million three-year multi-bank revolving credit agreement (the "2013 Agreement"), which expired
pursuant to its terms in July 2016, as well as for Tiffany-Shanghai's ongoing general working capital requirements.
The six lenders party to the Tiffany-Shanghai Credit Agreement will make loans, upon Tiffany-Shanghai's request, for
periods of up to 12 months at the applicable interest rates as announced by the People's Bank of China (provided,
that if such announced rate is below zero, the applicable interest rate shall be deemed to be zero). In connection
with the Tiffany-Shanghai Credit Agreement, in July 2016 Tiffany & Co. entered into a Guaranty Agreement by and
between Tiffany & Co. and the facility agent under the Tiffany-Shanghai Credit Agreement (the "Guaranty"). At
January 31, 2017, there was $103.6 million available to be borrowed under the Tiffany-Shanghai Credit Agreement
and $40.2 million was outstanding at a weighted-average interest rate of 4.35%. At January 31, 2016, there was
$99.3 million available to be borrowed under the 2013 Agreement and $42.1 million was outstanding at a
weighted-average interest rate of 4.72%.
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Other. The Company has various other revolving credit facilities, primarily in Japan and China. At January 31, 2017,
the facilities totaled $137.3 million and $95.5 million was outstanding at a weighted-average interest rate of
2.99%. At January 31, 2016, the facilities totaled $126.6 million and $102.9 million was outstanding at a
weighted-average interest rate of 3.16%.
Senior Notes
2014 Senior Notes. In 2014, Tiffany & Co. issued $250.0 million aggregate principal amount of 3.80% Senior
Notes due 2024 (the "2024 Notes") and $300.0 million aggregate principal amount of 4.90% Senior Notes due
2044 (the "2044 Notes" and, together with the 2024 Notes, the "2014 Notes"). The 2014 Notes were issued at a
discount with aggregate net proceeds of $548.0 million (with an effective yield of 3.836% for the 2024 Notes and
an effective yield of 4.926% for the 2044 Notes). Tiffany & Co. used the net proceeds from the issuance of the
Notes to redeem all of the aggregate principal amount outstanding of its (i) $100.0 million principal amount of
9.05% Series A Senior Notes due December 23, 2015; (ii) $125.0 million principal amount of 10.0% Series
A-2009 Senior Notes due February 13, 2017; (iii) $50.0 million principal amount of 10.0% Series A Senior Notes
due April 9, 2018; and (iv) $125.0 million principal amount of 10.0% Series B-2009 Senior Notes due February
13, 2019 (collectively, the "Private Placement Notes") prior to maturity in accordance with the respective note
purchase agreements governing each series of Private Placement Notes, which included provisions for make-whole
payments in the event of early redemption. As a result of the redemptions, the Company recorded a loss on
extinguishment of debt of $93.8 million in 2014. The Company used the remaining net proceeds from the sale of
the 2014 Notes for general corporate purposes. The 2014 Notes are Tiffany & Co.’s general unsecured obligations
and rank equally in right of payment with all of Tiffany & Co.’s existing and any future unsecured senior debt and
rank senior in right of payment to any of Tiffany & Co.’s future subordinated debt.
The 2024 Notes bear interest at a fixed rate of 3.80% per annum and the 2044 Notes bear interest at a fixed rate of
4.90% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1,
2015. Tiffany & Co. will make each interest payment to the holders of record of the 2014 Notes on the immediately
preceding March 15 and September 15.
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Tiffany & Co. has the option to redeem the 2014 Notes, in whole or in part, by providing no less than 30 nor more
than 60 days' prior notice at a redemption price equal to the sum of (i) 100% of the principal amount of the 2014
Notes to be redeemed, plus (ii) accrued and unpaid interest, if any, on those 2014 Notes to the redemption date,
plus (iii) a make-whole premium as of the redemption date, as defined in the indenture governing the 2014 Notes,
as amended and supplemented in respect of each series of Notes (the "Indenture"). In addition, Tiffany & Co. has the
option to redeem some or all of the 2024 Notes on or after July 1, 2024, at a redemption price equal to the sum of
100% of the principal amount of the 2024 Notes to be redeemed, together with accrued and unpaid interest, if any,
on those 2024 Notes to the redemption date. Tiffany & Co. also has the option to redeem some or all of the 2044
Notes on or after April 1, 2044, at a redemption price equal to the sum of 100% of the principal amount of the
2044 Notes to be redeemed, together with accrued and unpaid interest, if any, on those 2044 Notes to the
redemption date.
Upon the occurrence of a change of control triggering event (as defined in the Indenture), unless Tiffany & Co. has
exercised its right to redeem the 2014 Notes, each holder of 2014 Notes will have the right to require Tiffany & Co.
to repurchase all or a portion of such holder’s Notes at a price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase.
2016 Senior Notes. In August 2016, Tiffany & Co. issued ¥10.0 billion ($88.0 million at January 31, 2017) of
0.78% Senior Notes due August 2026 (the "Yen Notes") in a private transaction. The proceeds from the issuance of
the Yen Notes were used to repay Tiffany & Co.'s ¥10.0 billion 1.72% Senior Notes due September 2016 upon the
maturity thereof. The Yen Notes bear interest at a rate of 0.78% per annum, payable semi-annually on February 26
and August 26 of each year, commencing February 26, 2017. Tiffany & Co. may redeem all or part of the Yen Notes
upon not less than 30 nor more than 60 days' prior notice at a redemption price equal to the sum of (i) 100% of the
principal amount of the Yen Notes to be redeemed, plus (ii) accrued and unpaid interest, if any, on those Yen Notes
to the redemption date, plus (iii) a make-whole premium as of the redemption date.
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Debt Covenants
The agreements governing the New Credit Facilities include specific financial covenants, as well as other covenants
that limit the ability of Tiffany & Co. to incur certain subsidiary indebtedness, incur liens, impose restrictions on
subsidiary distributions and engage in mergers, consolidations and sales of all or substantially all of Tiffany & Co.
and its subsidiaries' assets, in addition to other requirements and "Events of Default" (as defined in the agreements
governing the New Credit Facilities) customary to such borrowings.
The Tiffany-Shanghai Credit Agreement includes certain covenants that limit Tiffany-Shanghai's ability to pay certain
dividends, make certain investments and incur certain indebtedness, and the Guaranty requires maintenance by
Tiffany & Co. of specific financial covenants and ratios, in addition to other requirements and limitations customary
to such borrowings.
The Indenture contains covenants that, among other things, limit the ability of Tiffany & Co. and its subsidiaries
under certain circumstances to create liens and impose conditions on Tiffany & Co.’s ability to engage in mergers,
consolidations and sales of all or substantially all of its or its subsidiaries’ assets. The Indenture also contains certain
"Events of Default" (as defined in the Indenture) customary for indentures of this type. The Indenture does not
contain any specific financial covenants.
The agreements governing the 2012 4.40% Series B Senior Notes and the Yen Notes require maintenance of
specific financial covenants and ratios and limit certain changes to indebtedness of Tiffany & Co. and its subsidiaries
and the general nature of the business, in addition to other requirements customary to such borrowings.
At January 31, 2017, 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 as set forth in the agreements
governing the Company's applicable debt instruments, such agreements may be terminated or payment of the
applicable debt may be accelerated. Further, each of the New Credit Facilities, the Tiffany-Shanghai Credit
Agreement, the agreements governing the 2012 4.40% Series B Senior Notes and the Yen Notes, and certain other
loan agreements contain cross default provisions permitting the termination and acceleration 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 their maturity.
TIFFANY & CO.
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Aggregate maturities of long-term debt as of January 31, 2017 are as follows:
Long-Term Debt Maturities
Years Ending January 31,
2018
2019
2020
2021
2022
Thereafter
$
$
Amount a
(in millions)
—
—
—
—
—
888.0
888.0
a
Amounts exclude any unamortized discount or premium.
Letters of Credit
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The Company has available letters of credit and financial guarantees of $76.1 million of which $26.4 million was
outstanding at January 31, 2017. Of those available letters of credit and financial guarantees, $57.5 million expires
within one year. These amounts do not include letters of credit issued under the Credit Facilities.
H.
HEDGING INSTRUMENTS
Background Information
The Company uses derivative financial instruments, including interest rate swaps, cross-currency swaps, forward
contracts, put option contracts and net-zero-cost collar arrangements (combination of call and put option contracts)
to mitigate a portion of its exposures to changes in interest rates, foreign currency and precious metal prices.
Derivative Instruments Designated as Hedging Instruments. If a derivative instrument meets certain hedge
accounting criteria, it is recorded on the consolidated balance sheet at its fair value, as either an asset or a liability,
with an offset to current or comprehensive earnings, depending on whether the hedge is designated as one of the
following on the date it is entered into:
• 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.
• 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.
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
TIFFANY & CO.
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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.
Derivative Instruments Not Designated as Hedging Instruments. Derivative instruments which do not meet the
criteria to be designated as a hedge are recorded on the consolidated balance sheet at their fair values, as either
assets or liabilities, with an offset to current earnings.
The Company does not use derivative financial instruments for trading or speculative purposes.
Types of Derivative Instruments
Interest Rate Swapsp – In 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 $250.0 million of
additional debt which was incurred in July 2012. The Company accounted for the forward-starting interest rate
swaps as cash flow hedges. As of January 31, 2017, $19.8 million remains recorded as an unrealized loss in
accumulated other comprehensive loss, which is being amortized over the term of the 2042 Notes to which the
interest rate swaps related.
In 2014, 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 long-term debt which was incurred shortly
thereafter (refer to "Note G. Debt"). The Company accounted for the forward-starting interest rate swaps as cash flow
hedges. The Company settled the interest rate swaps in 2014 and recorded an unrealized loss within accumulated
other comprehensive loss. As of January 31, 2017, $3.8 million remains recorded as an unrealized loss and is being
amortized over the terms of the respective 2024 Notes or 2044 Notes to which the interest rate swaps related.
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Cross-currencyy Swapsp – In 2016, the Company entered into cross-currency swaps to hedge the foreign exchange risk
associated with Japanese yen-denominated intercompany loans. These cross-currency swaps are designated and
accounted for as cash flow hedges. As of January 31, 2017, the notional amount of cross-currency swaps accounted
for as cash flow hedges was approximately ¥10.6 billion or $100.0 million. The cross-currency swaps have a term
ending on October 1, 2024.
g
g
– The Company uses foreign exchange forward contracts to offset a portion of
Foreign Exchange Forward Contracts
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
Company assesses hedge effectiveness based on the total changes in the foreign exchange forward contracts' cash
flows. These foreign exchange forward contracts are designated and accounted for as either cash flow hedges or
economic hedges that are not designated as hedging instruments.
TIFFANY & CO.
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As of January 31, 2017, the notional amount of foreign exchange forward contracts accounted for as cash flow
hedges was as follows:
(in millions)
Notional Amount
USD Equivalent
Derivatives designated as hedging instruments:
Japanese yen
British pound
Derivatives not designated as hedging instruments:
U.S. dollar
Euro
British pound
Japanese yen
Korean won
Mexican peso
New Zealand dollar
Singapore dollar
Swiss franc
¥
£
$
€
£
¥
NZ$
S$
Fr.
16,669.0
$
$
13.3
58.3
28.0
5.5
952.8
15,011.6
167.1
11.7
25.1
4.3
156.1
17.5
58.3
29.7
6.8
8.4
12.5
7.7
8.4
17.7
4.2
The maximum term of the Company's outstanding foreign exchange forward contracts as of January 31, 2017 is 12
months.
Precious Metal Collars and 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 manage 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. As of January 31, 2017, the maximum term over which
the Company is hedging its exposure to the variability of future cash flows for all forecasted transactions is 24
months. As of January 31, 2017, there were precious metal derivative instruments outstanding for approximately
72,000 ounces of platinum, 1,440,000 ounces of silver and 51,500 ounces of gold.
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Information on the location and amounts of derivative gains and losses in the consolidated financial statements is as
follows:
Years Ended January 31,
2017
2016
Pre-Tax Gain
(Loss) Recognized
in OCI (Effective
Portion)
Pre-Tax Gain (Loss)
Reclassified from
Accumulated OCI
into Earnings
(Effective Portion)
Pre-Tax Gain
(Loss) Recognized
in OCI
(Effective Portion)
Pre-Tax Gain
(Loss) Reclassified
from Accumulated
OCI into Earnings
(Effective Portion)
(in millions)
Derivatives in Cash Flow Hedging
Relationships:
Foreign exchange forward contracts a
$
(1.5) $
(1.5) $
3.9 $
Precious metal collars a
Precious metal forward contracts a
Cross-currency swaps c
Forward-starting interest rate swaps b
—
14.0
(0.4)
—
—
(8.5)
6.6
(1.5)
0.2
(26.3)
—
—
$
12.1 $
(4.9) $
(22.2) $
a
b
c
The gain or loss recognized in earnings is included within Cost of sales.
The gain or loss recognized in earnings is included within Interest expense and financing costs.
The gain or loss recognized in earnings is included within Other (income) expense, net.
20.2
—
(7.0)
—
(1.5)
11.7
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The pre-tax losses on derivatives not designated as hedging instruments were $9.2 million in the year ended
January 31, 2017 and were included in other (income) expense, net. Such gains and losses were not significant in
the year ended January 31, 2016. There was no material ineffectiveness related to the Company's hedging
instruments for the periods ended January 31, 2017 and 2016. The Company expects approximately $1.1 million of
net pre-tax derivative losses included in accumulated other comprehensive income at January 31, 2017 will be
reclassified into earnings within the next 12 months. This amount will vary due to fluctuations in foreign currency
exchange rates and precious metal prices.
For information regarding the location and amount of the derivative instruments in the Consolidated Balance Sheet,
see "Note I. 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.
I.
FAIR VALUE OF FINANCIAL INSTRUMENTS
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 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 and are considered to be most reliable.
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 and require the most judgment.
TIFFANY & CO.
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The Company's derivative instruments are considered Level 2 instruments for the purposes of determining fair value.
The Company's foreign exchange forward contracts, as well as its put option contracts and cross-currency swaps, are
primarily valued using the appropriate foreign exchange spot rates. The Company's precious metal forward contracts
and collars are primarily valued using the relevant precious metal spot rate. The Company's interest rate swaps were
primarily valued using the 3-month LIBOR rate. For further information on the Company's hedging instruments and
program, see "Note H. Hedging Instruments."
Financial assets and liabilities carried at fair value at January 31, 2017 are classified in the table below in one of
the three categories described above:
(in millions)
Financial assets
Marketable securities a
Time deposits b
Estimated Fair Value
Level 1
Level 2
Level 3
Total Fair
Value
$
36.4 $
57.8
— $
—
Derivatives designated as hedging instruments:
Precious metal forward contracts c
Precious metal collars c
Foreign exchange forward contracts c
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts c
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—
—
—
3.6
0.4
9.6
0.3
— $
—
—
—
—
—
36.4
57.8
3.6
0.4
9.6
0.3
Total financial assets
$
94.2 $
13.9 $
— $
108.1
(in millions)
Financial liabilities
Derivatives designated as hedging instruments:
Estimated Fair Value
Level 1
Level 2
Level 3
Total Fair
Value
Precious metal forward contracts d
$
— $
5.4 $
— $
Precious metal collars d
Foreign exchange forward contracts d
Cross-currency swaps d
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts d
—
—
—
—
0.3
0.6
0.4
2.2
—
—
—
—
Total financial liabilities
$
— $
8.9 $
— $
5.4
0.3
0.6
0.4
2.2
8.9
TIFFANY & CO.
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Financial assets and liabilities carried at fair value at January 31, 2016 are classified in the table below in one of
the three categories described above:
(in millions)
Financial assets
Marketable securities a
Time deposits bs
Estimated Fair Value
Level 1
Level 2
Level 3
Total Fair
Value
$
31.8 $
43.0
— $
—
Derivatives designated as hedging instruments:
Precious metal forward contracts c
Precious metal collar contracts c
Foreign exchange forward contracts c
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts c
—
—
—
—
0.6
0.2
1.6
1.3
— $
—
—
—
—
—
31.8
43.0
0.6
0.2
1.6
1.3
78.5
Total financial assets
$
74.8 $
3.7 $
— $
(in millions)
Financial liabilities
Derivatives designated as hedging instruments:
Precious metal forward contracts d
Foreign exchange forward contracts d
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts d
Total financial liabilities
$
$
Estimated Fair Value
Level 1
Level 2
Level 3
Total Fair
Value
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— $
13.4 $
— $
—
—
2.4
1.4
—
—
— $
17.2 $
— $
13.4
2.4
1.4
17.2
a
b
c
d
Included within Other assets, net.
Included within Short-term investments.
Included within Prepaid expenses and other current assets or Other assets, net evaluated based on the maturity
of the contract.
Included within Accounts payable and accrued liabilities or Other long-term liabilities evaluated based on the
maturity of the contract.
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 as such is 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 similar terms and maturities, which are considered Level 2 inputs. The total carrying value
of short-term borrowings and long-term debt was $1.1 billion and the corresponding fair value was approximately
$1.1 billion at January 31, 2017 and 2016.
J.
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 2062, are subject, in many cases, to
renewal options and provide for the payment of taxes, insurance and maintenance. Certain leases contain escalation
TIFFANY & CO.
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clauses resulting from the pass-through of increases in operating costs, property taxes and the effect on costs from
changes in consumer price indices.
Rent-free periods and other incentives granted under certain leases and scheduled rent increases are charged to rent
expense on a straight-line basis over the related terms of such leases, beginning from when the Company takes
possession of the leased facility. 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 $144.5 million which are being amortized in SG&A expenses over periods that range from 15 to 20 years.
As of January 31, 2017, $45.9 million of these deferred gains remained to be amortized.
Rent expense for the Company's operating leases consisted of the following:
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Minimum rent for retail locations
Contingent rent based on sales
Office, distribution and manufacturing facilities
and equipment
Years Ended January 31,
2017
184.1 $
32.4
40.0
2016
172.2 $
34.9
37.0
256.5 $
244.1 $
2015
158.2
38.6
35.8
232.6
$
$
In addition, the Company operates certain TIFFANY & CO. stores within various department stores outside the U.S.
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 (recorded as
commission expense within SG&A expenses) which totaled $117.9 million, $109.4 million and $113.7 million in
2016, 2015 and 2014, and which are not included in the table above.
Aggregate annual minimum rental payments under non-cancelable operating leases are as follows:
Years Ending January 31,
Annual Minimum Rental Payments a
(in millions)
2018
2019
2020
2021
2022
Thereafter
$
286.2
203.6
187.2
168.8
148.7
558.2
a Operating lease obligations do not include obligations for property taxes, insurance and maintenance that are
required by most lease agreements.
Diamond Sourcing Activities
The Company has agreements with various diamond producers to purchase a minimum volume of rough diamonds at
prevailing fair market prices. Under those agreements, management anticipates that it will purchase approximately
$60.0 million of rough diamonds in 2017. Purchases beyond 2017 that are contingent upon mine production at
then-prevailing fair market prices cannot be reasonably estimated. In addition, the Company also regularly purchases
rough and polished diamonds from other suppliers, although it has no contractual obligations to do so.
TIFFANY & CO.
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In consideration of its diamond supply agreements, the Company has provided financing to certain suppliers of its
rough diamonds. In March 2011, Laurelton Diamonds, Inc. ("Laurelton"), a wholly owned subsidiary of the Company,
as lender, entered into a $50.0 million amortizing term loan facility agreement with 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 acquires diamonds. Koidu was 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. As of July 31,
2011, the Loan was fully funded. In consideration of the Loan, Laurelton entered into a supply agreement, pursuant
to which Laurelton is required to purchase at fair market value certain diamonds recovered from the Mine that meet
Laurelton's quality standards. 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 is partially secured by
the diamonds, if any, 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.
On March 29, 2013, the Company entered into an amendment relating to the Loan which deferred principal and
interest payments due in 2013 to subsequent years, and, on March 31, 2014, the Company entered into a further
amendment providing that the principal payments due in 2014 be paid on a monthly basis rather than on a semi-
annual basis. On April 30, 2015, the Company entered into a further amendment (the "2015 Amendment").
Pursuant to the 2015 Amendment, once certain customary conditions relating to the addition of one of Koidu's
affiliates as an obligor under the Loan were satisfied, the principal payment due on March 30, 2015 would be
deferred until a date to be specified by the Company (which date may be upon at least 30 days' written notice to
Koidu, or upon the occurrence of certain specified acceleration conditions). As of June 2015, all of the conditions
had been satisfied and the deferral of the principal payment due on March 30, 2015 had become effective, subject
to the acceleration conditions set forth in the 2015 Amendment, which include Koidu remaining current on its other
payment obligations to the Company. The Loan, as amended, is required to be repaid in full by March 2017 through
semi-annual payments. Under the 2015 Amendment, the interest rate on the Loan was increased and, as of April 1,
2015, interest will accrue at a rate per annum that is the greater of (i) LIBOR plus 3.5% or (ii) 6.75%. Koidu also
agreed to pay, and subsequently paid, an additional 2% per annum of interest on all deferred principal repayments.
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As of January 31, 2016, Koidu had not made any of its interest payments due in July 2015 and thereafter, nor its
principal payment due in September 2015. The missed payments constitute events of default under the Loan. In
February 2016, the Company received the results from two separate and independent reviews of Koidu's operational
plans, forecasts, and cash flow projections for the mine, which were commissioned by the Company and by Koidu's
largest creditor, respectively. Based on these factors, ongoing discussions with Koidu, and consideration of the
possible actions that all parties, including the Government of Sierra Leone and Koidu's largest creditor, might take
under the circumstances, management determined that it was probable that it would be unable to collect a portion of
the amounts due under the contractual terms of the Loan, and recorded impairment charges, and a related valuation
allowance, of $37.9 million in 2015. Additionally, the Company ceased accruing interest income on the outstanding
Loan balance as of July 31, 2015. The carrying amount of the Company’s loan receivable from Koidu, net of the
valuation allowance, was $5.9 million at January 31, 2016.
Koidu did not make any payments due to the Company under the Loan in 2016. On March 17, 2017, the Company
entered into an agreement with Koidu's largest creditor under which that creditor has agreed to purchase the
Company's interest in the loan, on and effective March 22, 2017, for $1.7 million. Based on this agreement, the
Company has recorded an additional impairment charge, and a related valuation allowance, of $4.2 million in 2016
to reduce the carrying amount of the Company's loan receivable from Koidu, net of the valuation allowance, to $1.7
million at January 31, 2017. Additionally, on March 16, 2017, the Company and Koidu entered into an agreement
to terminate the supply agreement between the parties, pursuant to which Laurelton had previously been required to
purchase at fair market value certain diamonds recovered from the Mine that met Laurelton's quality standards.
Contractual Cash Obligations and Contingent Funding Commitments
At January 31, 2017, the Company's contractual cash obligations and contingent funding commitments were for
inventory purchases of $196.6 million (which includes the $60.0 million obligation discussed in Diamond Sourcing
Activities above), as well as for other contractual obligations of $71.4 million (primarily for construction-in-progress,
technology licensing and service contracts, advertising and media agreements and fixed royalty commitments).
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Litigation
Arbitration Award. On December 21, 2013, an award was issued (the "Arbitration Award") in favor of The Swatch
Group Ltd. ("Swatch") and its wholly owned subsidiary Tiffany Watch Co. ("Watch Company"; Swatch and Watch
Company, together, the "Swatch Parties") in an arbitration proceeding (the "Arbitration") between the Registrant and
its wholly owned subsidiaries, Tiffany and Company and Tiffany (NJ) Inc. (the Registrant and such subsidiaries,
together, the "Tiffany Parties") and the Swatch Parties.
The Arbitration was initiated in June 2011 by the Swatch Parties, who sought damages for alleged breach of
agreements entered into by and among the Swatch Parties and the Tiffany Parties in December 2007 (the
"Agreements"). The Agreements pertained 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.
In general terms, the Swatch Parties alleged that the Tiffany Parties breached the Agreements by obstructing and
delaying development of Watch Company’s business and otherwise failing to proceed in good faith. The Swatch
Parties sought damages based on alternate theories ranging from CHF 73.0 million (or approximately $73.0 million
at January 31, 2017) (based on its alleged wasted investment) to CHF 3.8 billion (or approximately $3.8 billion at
January 31, 2017) (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. In the Arbitration, the Tiffany Parties
defended against the Swatch Parties’ claims vigorously, disputing both the merits of the claims and the calculation
of the alleged damages. The Tiffany Parties also asserted counterclaims for damages attributable to breach by the
Swatch Parties, stemming from the Swatch Parties’ September 12, 2011 public issuance of a Notice of Termination
purporting to terminate the Agreements due to alleged material breach by the Tiffany Parties, and for termination due
to such breach. In general terms, the Tiffany Parties alleged 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 sought damages based on alternate theories ranging from CHF 120.0 million (or approximately
$121.0 million at January 31, 2017) (based on its wasted investment) to approximately CHF 540.0 million (or
approximately $542.0 million at January 31, 2017) (calculated based on alleged future lost profits of the Tiffany
Parties).
The Arbitration hearing was held in October 2012 before a three-member arbitral panel convened in the Netherlands
pursuant to the Arbitration Rules of the Netherlands Arbitration Institute (the "Rules"), and the Arbitration record was
completed in February 2013.
Under the terms of the Arbitration Award, and at the request of the Swatch Parties and the Tiffany Parties, the
Agreements were deemed terminated. The Arbitration Award stated that the effective date of termination was March
1, 2013. Pursuant to the Arbitration Award, the Tiffany Parties were ordered to pay the Swatch Parties damages of
CHF 402.7 million (the "Arbitration Damages"), as well as interest from June 30, 2012 to the date of payment, two-
thirds of the cost of the Arbitration and two-thirds of the Swatch Parties' legal fees, expenses and costs. These
amounts were paid in full in January 2014.
Prior to the ruling of the arbitral panel, no accrual was established in the Company's consolidated financial
statements because management did not believe the likelihood of an award of damages to the Swatch Parties was
probable. As a result of the ruling, in the fourth quarter of 2013, the Company recorded a charge of $480.2 million,
which included the damages, interest, and other costs associated with the ruling and which was classified as
Arbitration award expense in the consolidated statement of earnings.
On March 31, 2014, the Tiffany Parties took action in the District Court of Amsterdam to annul the Arbitration
Award. Generally, arbitration awards are final; however, Dutch law does provide for limited grounds on which arbitral
awards may be set aside. The Tiffany Parties petitioned to annul the Arbitration Award on these statutory grounds.
These grounds include, for example, that the arbitral tribunal violated its mandate by changing the express terms of
the Agreements.
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A three-judge panel presided over the annulment hearing on January 19, 2015, and, on March 4, 2015, issued a
decision in favor of the Tiffany Parties. Under this decision, the Arbitration Award is set aside. However, the Swatch
Parties took action in the Dutch courts to appeal the District Court's decision, and a three-judge panel presided over
an appellate hearing in respect of the annulment, and the related claim by the Tiffany Parties for return of the
Arbitration Damages and related costs, on June 29, 2016. That panel's decision, which may be appealed to the
Supreme Court of the Netherlands, is pending. As a result of this ongoing appellate process, the Arbitration Award
may ultimately be upheld by the courts of the Netherlands. Registrant’s management expects that the annulment
action is not likely to be ultimately resolved until at the earliest, Registrant's fiscal year ending January 31, 2018.
If the Arbitration Award is finally annulled, management anticipates that the claims and counterclaims that formed
the basis of the Arbitration, and potentially additional claims and counterclaims, will be litigated in court
proceedings between and among the Swatch Parties and the Tiffany Parties. The identity and location of the courts
that would hear such actions have not been determined at this time.
In any litigation regarding the claims and counterclaims that formed the basis of the arbitration, issues of liability
and damages will be pled and determined without regard to the findings of the arbitral panel. As such, it is possible
that the court could find that the Swatch Parties were in material breach of their obligations under the Agreements,
that the Tiffany Parties were in material breach of their obligations under the Agreements or that neither the Swatch
Parties nor the Tiffany Parties were in material breach. If the Swatch Parties’ claims of liability were accepted by the
court, the damages award cannot be reasonably estimated at this time, but could exceed the Arbitration Damages
and could have a material adverse effect on the Registrant’s consolidated financial statements or liquidity.
Although the District Court issued a decision in favor of the Tiffany Parties, an amount will only be recorded for any
return of amounts paid under the Arbitration Award when the District’s Court decision is final (i.e., after all rights of
appeal have been exhausted) and return of these amounts is deemed probable and collection is reasonably
assured. As such, the Company has not recorded any amounts in its consolidated financial statements related to the
District Court’s decision.
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Additionally, management has not established any accrual in the Company's consolidated financial statements for
the year ended January 31, 2017 related to the annulment process or any potential subsequent litigation because it
does not believe that the final annulment of the Arbitration Award and a subsequent award of damages exceeding the
Arbitration Damages is probable.
In 2015, management introduced new TIFFANY & CO. brand watches, which have been designed, produced,
marketed and distributed through certain of the Company's Swiss subsidiaries.
Other Litigation Matters. 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.
Although litigation with present and former employees is routine and incidental to the conduct of the Company'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 Company believes
that all such litigation currently pending to which it is a party or to which its properties are subject will be resolved
without any material adverse effect on the Company's financial position, earnings or cash flows.
Gain contingency. On February 14, 2013, Tiffany and Company and Tiffany (NJ) LLC (collectively, the "Tiffany
plaintiffs") initiated a lawsuit against Costco Wholesale Corp. ("Costco") for trademark infringement, false designation
of origin and unfair competition, trademark dilution and trademark counterfeiting (the "Costco Litigation"). The
Tiffany plaintiffs sought injunctive relief, monetary recovery and statutory damages on account of Costco's use of
"Tiffany" on signs in the jewelry cases at Costco stores used to describe certain diamond engagement rings that were
not manufactured by Tiffany. Costco filed a counterclaim arguing that the TIFFANY trademark was a generic term for
multi-pronged ring settings and seeking to have the trademark invalidated, modified or partially canceled in that
respect. On September 8, 2015, the U.S. District Court for the Southern District of New York (the "Court") granted
the Tiffany plaintiffs' motion for summary judgment of liability in its entirety, dismissing Costco's genericism
counterclaim and finding that Costco was liable for trademark infringement, trademark counterfeiting and unfair
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competition under New York law in its use of "Tiffany" on the above-referenced signs. On September 29, 2016, a
civil jury rendered its verdict, finding that Costco's profits on the sale of the infringing rings should be awarded at
$5.5 million, and further finding that an award of punitive damages was warranted. On October 5, 2016, the jury
awarded $8.25 million in punitive damages. The aggregate award of $13.75 million is not final, and is subject to
post-verdict motion practice and ultimately to adjustment by the Court. In such post-verdict motion practice, the
Tiffany plaintiffs asserted that the profits award should be trebled and that Costco should also pay the Tiffany
plaintiffs' legal fees in respect of this matter. Management expects that the Court will enter its final judgment as to
the damages and other monetary recovery that Costco will be ordered to pay to the Tiffany plaintiffs during the
Company's 2017 fiscal year. Management also expects that Costco will appeal this judgment, and that the Tiffany
plaintiffs will be unable to enforce the judgment while the appeal is pending. As such, the Company has not
recorded any amount in its consolidated financial statements related to this gain contingency as of January 31,
2017, and expects that this matter will not ultimately be resolved until, at the earliest, the Company's fiscal year
ending January 31, 2018.
Environmental Matter
In 2005, the U.S. Environmental Protection Agency ("EPA") designated a 17-mile stretch of the Passaic River (the
"River") part of the Diamond Alkali "Superfund" site. This designation resulted from the detection of hazardous
substances emanating from the site, which was previously home to the Diamond Shamrock Corporation, a
manufacturer of pesticides and herbicides. Under the Superfund law, the EPA will negotiate with potentially
responsible parties to agree on remediation approaches.
The Company, which operated a silverware manufacturing facility near a tributary of the River from approximately
1897 to 1985, is one of more than 300 parties (the "Potentially Responsible Parties") designated in litigation as
potentially responsible parties with respect to the River. The EPA issued general notice letters to 125 of these
parties. The Company, along with approximately 70 other Potentially Responsible Parties (collectively, the
"Cooperating Parties Group" or "CPG") voluntarily entered into an Administrative Settlement Agreement and Order on
Consent ("AOC") with the EPA in May 2007 to perform a Remedial Investigation/Feasibility Study (the "RI/FS") of the
lower 17 miles of the River. In June 2012, most of the CPG voluntarily entered into a second AOC related to focused
remediation actions at Mile 10.9 of the River. The actions under the Mile 10.9 AOC are complete (except for
continued monitoring), the Remedial Investigation ("RI") portion of the RI/FS was submitted to the EPA on February
19, 2015, and the Feasibility Study ("FS") portion of the RI/FS was submitted to the EPA on April 30, 2015. The
Company has accrued for its financial obligations under both AOCs, which have not been material to its financial
position or results of operations in previous financial periods or on a cumulative basis.
The FS presented and evaluated three options for remediating the lower 17 miles of the River, including the
approach recommended by the EPA in its Focused Feasibility Study discussed below, as well as a fourth option of
taking no action, and recommended an approach for a targeted remediation of the entire 17-mile stretch of the
River. The estimated cost of the approach recommended by the CPG in the FS is approximately $483.0 million. The
RI and FS are being reviewed by the EPA and other governmental agencies and stakeholders. Ultimately, the
Company expects that the EPA will identify and negotiate with any or all of the potentially responsible parties
regarding any remediation action that may be necessary, and issue a Record of Decision with a proposed approach to
remediating the entire lower 17-mile stretch of the River.
Separately, on April 11, 2014, the EPA issued a proposed plan for remediating the lower eight miles of the River,
which is supported by a Focused Feasibility Study (the "FFS"). The FFS evaluated three remediation options, as well
as a fourth option of taking no action. Following a public review and comment period and the EPA's review of
comments received, the EPA issued a Record of Decision on March 4, 2016 that set forth a remediation plan for the
lower eight miles of the River (the "RoD Remediation"). The RoD Remediation is estimated by the EPA to cost $1.38
billion. The Record of Decision did not identify any party or parties as being responsible for the design of the
remediation or for the remediation itself. The EPA did note that it estimates the design of the necessary remediation
activities will take three to four years, with the remediation to follow, which is estimated to take an additional six
years to complete.
On March 31, 2016, the EPA issued a letter to approximately 100 companies (including the Company) (collectively,
the "notified companies") notifying them of potential liability for the RoD Remediation and of the EPA’s planned
approach to addressing the cost of the RoD Remediation, which included the possibility of a de-minimis cash-out
settlement (the "settlement option") for certain parties. In April of 2016, the Company notified the EPA of its interest
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in pursuing the settlement option, and accordingly recorded an immaterial liability representing its best estimate of
its minimum liability for the RoD Remediation, which reflects the possibility of a de-minimis settlement. Although
the EPA must determine which parties are eligible for the settlement option, the Company does not expect any
settlement amount that it might agree with the EPA to be material to its financial position, results of operations or
cash flows.
In October 2016, the EPA announced that it entered into a legal agreement with one of the notified companies,
pursuant to which such company agreed to spend $165.0 million to perform the engineering and design work
required in advance of the clean-up contemplated by the RoD Remediation (the "RoD Design Phase"). In the absence
of a viable settlement option, the Company is unable to determine its participation in the overall RoD Remediation
(of which the RoD Design Phase is only a part), if any, relative to the other potentially responsible parties or the
allocation of the estimated cost thereof among the potentially responsible parties, until such time as the EPA reaches
an agreement with any potentially responsible party or parties to fund the overall RoD Remediation (or pursues legal
or administrative action to require any potentially responsible party or parties to perform, or pay for, the overall RoD
Remediation). With respect to the RI/FS (which is distinct from the RoD Remediation), until a Record of Decision is
issued with respect to the RI/FS, neither the ultimate remedial approach for the remaining upper nine miles of the
relevant 17-mile stretch of the River and its cost, nor the Company's participation, if any, relative to the other
potentially responsible parties in this approach and cost, can be determined.
As such, the Company's liability, if any, beyond that already recorded for (1) its obligations under the 2007 AOC and
the Mile 10.9 AOC, and (2) its estimate related to a de minimis cash-out settlement for the RoD Remediation,
cannot be determined at this time. However, the Company does not expect that its ultimate liability related to the
relevant 17-mile stretch of the River will be material to its financial position, in light of the number of companies
that have previously been identified as Potentially Responsible Parties (i.e., the more than 300 parties that were
initially designated in litigation as potentially responsible parties), which includes, but goes well beyond those
approximately 70 companies in the CPG that participated in the 2007 AOC and the Mile 10.9 AOC, and the
Company's relative participation in the costs related to the 2007 AOC and Mile 10.9 AOC. It is nonetheless possible
that any resulting liability when the uncertainties discussed above are resolved could be material to the Company's
results of operations or cash flows in the period in which such uncertainties are resolved.
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Other Regulatory Matters
The Company is subject to regulations in various jurisdictions in which the Company operates, including those
related to the sale of consumer products. During the Company's regular internal quality testing, the Company
identified a potential breach of the Company's sourcing and quality standards applicable to third party vendors. The
Company is currently in the early stages of assessing the composition of certain of its gold products manufactured by
certain U.S. third-party vendors, which contain gold solder manufactured by other U.S. vendors, to determine
whether such products are in compliance with applicable consumer products requirements and regulations. This
assessment could result in the Company reporting instances of non-compliance to regulatory authorities in one or
more markets, and incurring costs, including for the possible payment of fines and penalties. Management has not
recorded any liability for these matters as it does not believe that such liability is probable and reasonably estimable.
It is nonetheless possible that any resulting liability when the uncertainties discussed above are resolved could be
material to the Company's results of operations or cash flows in the periods in which such uncertainties are resolved.
Other
In the fourth quarter of 2015, the Company implemented specific cost-reduction initiatives and recorded $8.8
million of expense within SG&A expenses. These unrelated cost-reduction initiatives included severance related to
staffing reductions and subleasing of certain office space for which only a portion of the Company's future rent
obligations will be recovered.
K.
RELATED PARTIES
The Company's Chairman of the Board and, effective February 5, 2017, Interim Chief Executive Officer was a
member of the Board of Directors of The Bank of New York Mellon through April 14, 2015. The Bank of New York
Mellon serves as the Company's trustee for its Senior Notes due in 2024 and 2044, participates as a co-syndication
agent and lender for its New Credit Facilities, provides other general banking services and serves as the trustee for
TIFFANY & CO.
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the Company's pension plan. Fees paid to the bank for services rendered and interest on debt amounted to $0.7
million and $1.3 million in 2015 and 2014.
L.
STOCKHOLDERS' EQUITY
Accumulated Other Comprehensive Loss
(in millions)
Accumulated other comprehensive (loss) earnings, net of tax:
Foreign currency translation adjustments
Unrealized gain (loss) on marketable securities
Deferred hedging loss
Net unrealized loss on benefit plans
2017
(143.7) $
0.8
(16.1)
(97.2)
(256.2) $
January 31,
2016
(135.3)
(1.0)
(26.8)
(115.0)
(278.1)
$
$
Additions to and reclassifications out of accumulated other comprehensive earnings (loss) are as follows:
(in millions)
2017
2016
2015
Foreign currency translation adjustments
$
8.3 $
(59.9) $
(101.9)
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Income tax (expense) benefit
Foreign currency adjustments, net of tax
Unrealized gain (loss) on marketable securities
Reclassification for gain included in net earnings a
Income tax (expense) benefit
Unrealized gain (loss) on marketable securities, net of tax
Unrealized gain (loss) on hedging instruments
Reclassification adjustment for loss (gain) included in
net earnings b
Income tax (expense) benefit
Unrealized gain (loss) on hedging instruments, net of tax
Prior service cost
Net actuarial gain (loss)
Amortization of net loss included in net earnings c
Amortization of prior service credit included in net earnings c
Income tax (expense) benefit
Net unrealized gain (loss) on benefit plans, net of tax
(16.7)
(8.4)
2.7
—
(0.9)
1.8
12.1
4.9
(6.3)
10.7
—
14.1
14.7
(0.7)
(10.3)
17.8
0.9
(59.0)
(4.1)
(0.4)
1.6
(2.9)
(22.2)
(11.7)
12.5
(21.4)
—
122.5
30.4
(0.6)
(56.6)
95.7
Total other comprehensive earnings (loss), net of tax
$
21.9 $
12.4 $
8.8
(93.1)
(0.9)
—
0.1
(0.8)
14.6
(13.0)
(0.4)
1.2
(0.5)
(234.6)
13.1
(0.4)
83.2
(139.2)
(231.9)
a These gains are reclassified into Other (income) expense, net.
b These losses (gains) are reclassified into Interest expense and financing costs and Cost of sales (see "Note H.
Hedging Instruments" for additional details).
c These accumulated other comprehensive income components are included in the computation of net periodic
pension costs (see "Note N. Employee Benefit Plans" for additional details).
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Stock Repurchase Program
In January 2016, the Registrant's Board of Directors approved the termination of the Company's then-existing share
repurchase program, which was approved in March 2014 and had authorized the Company to repurchase up to
$300.0 million of its Common Stock through open market transactions (the "2014 Program") in favor of a new
share repurchase program ("2016 Program"). The 2016 Program, which will expire on January 31, 2019, authorizes
the Company to repurchase up to $500.0 million of its Common Stock through open market transactions, block
trades or privately negotiated transactions. Purchases under the 2014 Program were, and purchases under the
2016 Program have been, executed under a written plan for trading securities as specified under Rule 10b5-1
promulgated under the Securities and Exchange Act of 1934, as amended, the terms of which are within the
Company's discretion, subject to applicable securities laws, and are based on market conditions and the Company's
liquidity needs. Approximately $310.4 million remained available for repurchase under the 2016 Program at
January 31, 2017.
The Company's share repurchase activity was as follows:
(in millions, except per share amounts)
Cost of repurchases
Shares repurchased and retired
Average cost per share
Years Ended January 31,
2017
2016
183.6 $
220.4 $
2.8
2.8
2015
27.0
0.3
65.24 $
78.40 $
89.91
$
$
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Cash Dividends
The Company's Board of Directors declared quarterly dividends which, on an annual basis, totaled $1.75, $1.58
and $1.48 per share of Common Stock in 2016, 2015 and 2014.
On February 16, 2017, the Company's Board of Directors declared a quarterly dividend of $0.45 per share of
Common Stock. This dividend will be paid on April 10, 2017 to stockholders of record on March 20, 2017.
M.
STOCK COMPENSATION PLANS
The Company has two stock compensation plans under which awards may be made: the Employee Incentive Plan
and the Directors Equity Compensation Plan, both of which were approved by the stockholders. No award may be
made under the Employee Incentive Plan after May 22, 2024 or under the Directors Equity Compensation Plan after
May 15, 2018.
Under the Employee Incentive Plan, the maximum number of common shares authorized for issuance was 8.7
million. 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 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 and RSUs vest primarily in increments
of 25% per year over four years. PSUs issued to the executive officers vest at the end of a three-year period. Vesting
of all PSUs is contingent on the Company's performance against established 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 based on interim estimates of performance against
the established objectives. Award holders are not entitled to receive dividends or dividend equivalents on unvested
stock options or PSUs or RSUs granted prior to January 2017. PSUs and RSUs granted in January 2017 accrue
dividend equivalents that may only be paid or delivered upon vesting of the underlying stock units.
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Under the Directors Equity Compensation Plan, the maximum number of shares of Common Stock authorized for
issuance was 1.0 million (subject to adjustment); awards may be made to non-employee directors of the Company in
the form of stock options or shares of stock but may not exceed 25 thousand (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 expected term of the option
is based on the U.S. Treasury yield curve in effect at the grant date.
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Dividend yield
Expected volatility
Risk-free interest rate
Expected term in years
Years Ended January 31,
2017
2.0%
23.8%
1.8%
5
2016
1.9%
28.1%
1.5%
5
2015
1.3%
30.2%
1.5%
5
A summary of the option activity for the Company's stock option plans is presented below:
Number of
Shares
(in millions)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term in Years
Aggregate
Intrinsic
Value
(in millions)
Outstanding at January 31, 2016
2.1 $
67.59
7.02 $
7.9
Granted
Exercised
Forfeited/canceled
Outstanding at January 31, 2017
Exercisable at January 31, 2017
0.6
(0.3)
(0.1)
77.20
57.40
75.16
2.3 $
70.72
1.1 $
66.42
7.50 $
5.70 $
23.8
17.0
The weighted-average grant-date fair value of options granted for the years ended January 31, 2017, 2016 and
2015 was $14.36, $14.42 and $22.25. The total intrinsic value (market value on date of exercise less grant price)
of options exercised during the years ended January 31, 2017, 2016 and 2015 was $4.5 million, $2.4 million and
$44.1 million.
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A summary of the activity for the Company's RSUs is presented below:
Number of Shares
(in millions)
Weighted-Average
Grant-Date Fair Value
Non-vested at January 31, 2016
0.5 $
Granted
Vested
Forfeited
0.4
(0.2)
(0.1)
Non-vested at January 31, 2017
0.6 $
A summary of the activity for the Company's PSUs is presented below:
79.02
67.46
71.29
79.51
73.33
Number of Shares
(in millions)
Weighted-Average
Grant-Date Fair Value
Non-vested at January 31, 2016
0.7 $
Granted
Vested
Forfeited/canceled
Non-vested at January 31, 2017
0.2
(0.1)
(0.1)
0.7 $
70.56
79.23
67.15
69.85
73.52
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The weighted-average grant-date fair value of RSUs granted for the years ended January 31, 2016 and 2015 was
$80.44 and $90.68. The weighted-average grant-date fair value of PSUs granted for the years ended January 31,
2016 and 2015 was $58.09 and $82.88.
As of January 31, 2017, there was $69.2 million of total unrecognized compensation expense related to non-vested
share-based compensation arrangements granted under the Employee Incentive Plan and Directors Equity
Compensation 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, 2017, 2016 and 2015 was $13.6 million, $18.0
million and $27.7 million. The total fair value of PSUs vested during the years ended January 31, 2017, 2016 and
2015 was $6.3 million, $4.1 million and $8.1 million.
Total compensation cost for stock-based compensation awards recognized in income and the related income tax
benefit was $24.3 million and $7.7 million for the year ended January 31, 2017, $24.5 million and $7.9 million
for the year ended January 31, 2016 and $26.5 million and $8.9 million for the year ended January 31, 2015.
Total stock-based compensation cost capitalized in inventory was not significant.
N.
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 U.S.
employees hired before January 1, 2006 and affected by Internal Revenue Service Code compensation limits, a non-
qualified unfunded Supplemental Retirement Income Plan ("SRIP") covering certain executive officers of the
Company hired before January 1, 2006 and noncontributory defined benefit pension plans in certain of its
international locations ("Other Plans").
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. Participants who have at
least five years of service when their employment with the Company terminates may also receive certain benefits.
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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. To the extent
that these requirements are fully covered by assets in the Qualified Plan, the Company may elect not to make any
contribution in a particular year. No cash contribution was required in 2016 and none is required in 2017 to meet
the minimum funding requirements of the Employee Retirement Income Security Act. The Company periodically
evaluates whether to make discretionary cash contributions to the Qualified Plan and made a voluntary cash
contribution of $120.0 million in 2016 but currently does not anticipate to make such contributions in 2017. This
expectation is subject to change based on management’s assessment of a variety of factors, including, but not
limited to, asset performance, interest rates and changes in actuarial assumptions.
The Qualified Plan, Excess Plan and SRIP exclude all employees hired on or after January 1, 2006. Instead,
employees hired on or after January 1, 2006 are 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 continue to be eligible for and accrue benefits under
the Qualified Plan.
The Excess Plan uses the same retirement benefit formula set forth in the Qualified Plan, but includes earnings that
are excluded under the Qualified Plan due to Internal Revenue Service Code qualified pension plan limitations.
Benefits payable under the Qualified Plan offset benefits payable under the Excess Plan. Employees vested under
the Qualified Plan are vested under the Excess 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; this
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. In certain
limited circumstances, early vesting can occur due to a change in control. Benefits under the SRIP are forfeited if
benefits under the Excess Plan are forfeited.
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Benefits for the Other Plans are typically based on monthly eligible compensation and the number of years of
service. Benefits are typically payable in a lump sum upon retirement, termination, resignation or death if the
participant has completed the requisite service period.
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 certain
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 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.
TIFFANY & CO.
K-84
The following tables provide a reconciliation of benefit obligations, plan assets and funded status of the pension and
other postretirement benefit plans as of the measurement date:
Obligations and Funded Status
(in millions)
Change in benefit obligation:
Pension Benefits
January 31,
Other Postretirement
Benefits
2017
2016
2017
2016
K
-
0
1
M
R
O
F
Benefit obligation at beginning of year
$
742.6 $
841.7 $
78.4 $
92.9
Service cost
Interest cost
Participants' contributions
MMA retiree drug subsidy
Actuarial loss (gain)
Benefits paid
Curtailments
Translation
17.4
31.6
—
—
15.9
(24.3)
—
0.5
22.6
30.6
—
—
(128.8)
(23.1)
(0.2)
(0.2)
2.8
3.1
1.2
—
(10.5)
(2.5)
—
—
4.2
3.2
1.3
0.2
(20.4)
(3.0)
—
—
Benefit obligation at end of year
783.7
742.6
72.5
78.4
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
Benefits paid
Fair value of plan assets at end of year
385.8
42.9
125.7
—
—
(24.3)
530.1
406.0
(2.2)
5.1
—
—
(23.1)
385.8
—
—
1.3
1.2
—
(2.5)
—
—
—
1.5
1.3
0.2
(3.0)
—
Funded status at end of year
$
(253.6) $
(356.8) $
(72.5) $
(78.4)
Actuarial gains in 2015 reflect increases in the discount rates for all plans.
The following tables provide additional information regarding the Company's pension plans' projected benefit
obligations and assets (included in pension benefits in the table above) and accumulated benefit obligation:
(in millions)
Projected benefit obligation
Fair value of plan assets
Funded status
Accumulated benefit obligation
Qualified
Excess/SRIP
661.5 $
530.1
(131.4) $
599.0 $
103.6 $
—
(103.6) $
90.9 $
$
$
$
January 31, 2017
Other
18.6 $
—
(18.6) $
16.9 $
Total
783.7
530.1
(253.6)
706.8
TIFFANY & CO.
K-85
(in millions)
Projected benefit obligation
Fair value of plan assets
Funded status
Accumulated benefit obligation
Qualified
Excess/SRIP
620.8 $
385.8
(235.0) $
556.8 $
105.5 $
—
(105.5) $
92.1 $
$
$
$
January 31, 2016
Other
16.3 $
—
(16.3) $
13.5 $
Total
742.6
385.8
(356.8)
662.4
At January 31, 2017, the Company had a current liability of $7.5 million and a non-current liability of $318.6
million for pension and other postretirement benefits. At January 31, 2016, the Company had a current liability of
$7.1 million and a non-current liability of $428.1 million for pension and other postretirement benefits.
Amounts recognized in accumulated other comprehensive loss consist of:
(in millions)
Net actuarial loss (gain)
Prior service cost (credit)
Total before tax
F
O
R
M
1
0
-
K
January 31,
Pension Benefits
Other Postretirement Benefits
2017
2016
2017
$
$
161.8 $
180.1 $
0.8
0.8
162.6 $
180.9 $
(0.1) $
(2.4)
(2.5) $
2016
10.4
(3.0)
7.4
The estimated pre-tax amount that will be amortized from accumulated other comprehensive loss into net periodic
benefit cost within the next 12 months is as follows:
(in millions)
Net actuarial loss
Prior service cost (credit)
Pension Benefits
Other Postretirement Benefits
$
14.0 $
0.2
$
14.2 $
—
(0.7)
(0.7)
TIFFANY & CO.
K-86
(in millions)
Service cost
Interest cost
Expected return on plan assets
Curtailments
Amortization of prior service cost
Amortization of net loss
Net periodic benefit cost
Prior service cost
Recognized prior service (cost)
credit
Total recognized in other
comprehensive earnings
Total recognized in net periodic
benefit cost and other
comprehensive earnings
Components of Net Periodic Benefit Cost and
Other Amounts Recognized in Other Comprehensive Earnings
Pension Benefits
Other Postretirement Benefits
2017
2016
2015
2017
2016
2015
Years Ended January 31,
$
17.4 $
22.6 $
16.8
$
2.8 $
4.2 $
31.6
(23.5)
—
—
14.7
40.2
30.6
(24.7)
0.2
—
28.9
57.6
28.3
(23.6)
—
0.3
13.1
34.9
3.1
—
—
(0.7)
—
5.2
3.2
—
—
(0.7)
1.5
8.2
(20.4)
(1.5)
—
0.7
2.4
2.6
—
—
(0.7)
—
4.3
34.8
—
—
0.7
K
-
0
1
M
R
O
F
Net actuarial (gain) loss
(3.6)
(102.1)
199.8
(10.5)
Recognized actuarial loss
(14.7)
(28.9)
(13.1)
—
—
—
0.5
(0.1)
(0.3)
—
—
0.7
(18.3)
(131.1)
186.9
(9.8)
(21.2)
35.5
$
21.9 $
(73.5) $
221.8
$
(4.6) $
(13.0) $
39.8
Weighted-average assumptions used to determine benefit obligations:
Assumptions
Discount rate:
Qualified Plan
Excess Plan/SRIP
Other Plans
Other Postretirement Benefits
Rate of increase in compensation:
Qualified Plan
Excess Plan
SRIP
Other Plans
2017
4.25%
4.25%
0.81%
4.25%
3.00%
4.25%
6.50%
1.12%
January 31,
2016
4.50%
4.25%
1.05%
4.50%
3.00%
4.25%
6.50%
1.18%
TIFFANY & CO.
K-87
F
O
R
M
1
0
-
K
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate:
Qualified Plan
Excess Plan/SRIP
Other Plans
Other Postretirement Benefits
Expected return on plan assets
Rate of increase in compensation:
Qualified Plan
Excess Plan
SRIP
Other Plans
2017
2016
2015
Years Ended January 31,
4.50%
4.25%
1.40%
4.50%
7.00%
3.00%
4.25%
6.50%
1.38%
3.75%
3.75%
1.71%
3.50%
7.50%
2.75%
4.25%
7.25%
1.56%
4.75%
5.00%
1.81%
5.00%
7.50%
2.75%
4.25%
7.25%
1.33%
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, a 7.00% annual rate of increase in the per capita cost of covered
health care was assumed for 2017. This rate was assumed to decrease gradually to 4.75% by 2023 and remain at
that level thereafter.
Assumed health-care cost trend rates can 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 for the year ended January 31, 2017 or
aggregate service and interest cost components of the 2016 postretirement expense.
Plan Assets
The Company's investment objectives, related to the Qualified Plan's assets, are the preservation of principal and
balancing the management of interest rate risk associated with the duration of the plan's liabilities with 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, but that as the plan's funded
status (assets relative to liabilities) increases, the amount of assets allocated to fixed income securities which match
the interest rate risk profile of the plan's liabilities will increase. The Company's target asset allocations based on its
funded status as of January 31, 2017 is as follows: approximately 50% in equity securities; approximately 35% in
fixed income securities; and approximately 15% in other securities. The Company attempts to mitigate investment
risk by rebalancing asset allocation periodically.
TIFFANY & CO.
K-88
K
-
0
1
M
R
O
F
The fair value of the Qualified Plan's assets at January 31, 2017 and 2016 by asset category is as follows:
(in millions)
Equity securities:
Fair Value at
Fair Value Measurements
Using Inputs Considered as*
January 31, 2017
Level 1
Level 2
Level 3
U.S. equity securities
$
Mutual fund
Fixed income securities:
Government bonds
Corporate bonds
Other types of investments:
Cash and cash equivalents
Mutual funds
Net assets in fair value hierarchy
Investments at NAV practical expedient a
56.2 $
35.1
56.2 $
35.1
— $
—
78.2
83.8
7.8
36.7
297.8
232.3
77.8
—
7.8
36.7
213.6
0.4
83.8
—
—
84.2
Plan assets at fair value
$
530.1 $
213.6 $
84.2 $
(in millions)
Equity securities:
Fair Value at
Fair Value Measurements
Using Inputs Considered as*
January 31, 2016
Level 1
Level 2
Level 3
U.S. equity securities
$
Mutual fund
Fixed income securities:
Government bonds
Corporate bonds
Other types of investments:
Cash and cash equivalents
Mutual funds
Net assets in fair value hierarchy
Investments at NAV practical expedient at
45.6 $
27.4
45.6 $
27.4
— $
—
62.3
87.7
2.5
25.6
251.1
134.7
61.3
—
2.5
25.6
162.4
1.0
87.7
—
—
88.7
Plan assets at fair value
$
385.8 $
162.4 $
88.7 $
* See "Note I. Fair Value of Financial Instruments" for a description of the levels of inputs.
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
a
In accordance with ASC 820-10, certain investments that are measured at fair value using the net asset value
("NAV") per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The
fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the
Qualified Plan's fair value of plan assets at the end of each respective year.
Valuation Techniques
Investments within the fair value hierarchy. 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.
TIFFANY & CO.
K-89
Certain fixed income investments are held in separately managed accounts and those investments are valued using
the underlying securities in the accounts.
Investments in mutual funds are stated at fair value as determined by quoted market prices based on the NAV of
shares held by the Plan at year-end. Investments in U.S. equity securities are valued at the closing price reported on
the active market on which the individual securities are traded.
Investments measured at NAV. This category consists of common/collective trusts and limited partnerships.
Common/collective trusts include investments in U.S. and international large, middle and small capitalization
equities. 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. The net asset value is based on the
value of the underlying assets owned by the common/collective trusts, minus its liabilities and then divided by the
number of shares outstanding. The NAV is used as a practical expedient to estimate fair value.
The Qualified Plan maintains investments in limited partnerships that are valued at estimated fair value based on
financial information received from the investment advisor and/or general partner. The NAV 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.
The NAV is used as a practical expedient to estimate fair value.
F
O
R
M
1
0
-
K
The Company expects the following future benefit payments to be paid:
Benefit Payments
Years Ending January 31,
Pension Benefits
(in millions)
Other Postretirement Benefits
(in millions)
2018
2019
2020
2021
2022
2023-2027
$
25.6 $
26.5
27.2
28.6
29.7
171.5
1.9
2.0
2.1
2.2
2.3
14.3
Employee Profit Sharing and Retirement Savings ("EPSRS") 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 made contributions, in the form of newly issued Company Common Stock
through 2014, 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. Beginning in 2015, these
contributions were made in cash. The Company recorded expense of $2.3 million in 2016, no expense in 2015 and
expense of $3.1 million in 2014. 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, not to
exceed Internal Revenue Service limits, and the Company may provide a matching cash contribution of 50% of each
participant's contributions, with a maximum matching contribution of 3% of each participant's total compensation.
The Company recorded expense of $7.5 million, $7.3 million and $7.7 million in 2016, 2015 and 2014.
Contributions to both features of the EPSRS Plan are made in the following year.
Under the profit-sharing feature of the EPSRS Plan, for contributions made in the Company's stock, the Company's
stock contribution is required to be maintained in such stock until the employee has two or more years of service, at
which time the employee may diversify his or her Company stock account into other investment options provided
under the plan. For contributions made in cash, the contribution is allocated within the participant's account based
on their investment elections under the EPSRS Plan. If the participant has made no election, the contribution will be
invested in the appropriate default target fund as determined by each participant's date of birth. Under the
retirement savings portion of the EPSRS Plan, the employees have the ability to elect to invest a portion of their
contribution and the related matching contribution in Company stock. At January 31, 2017, investments in
Company stock represented 20% of total EPSRS Plan assets.
TIFFANY & CO.
K-90
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 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 $4.6 million, $3.2 million and $4.6 million in 2016, 2015 and 2014.
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. This plan also provides for an excess defined
contribution retirement benefit ("Excess DC benefit") for certain eligible executives and management employees,
hired on or after January 1, 2006. The Excess DC benefit is credited to the eligible employee's account, based on
the compensation paid to the employee in excess of the IRS limits for contribution under the DCRB Plan. Under the
plan, 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
$26.5 million and $24.9 million at January 31, 2017 and 2016, and are reflected in other long-term liabilities. The
Company does not promise or guarantee any rate of return on amounts deferred.
O.
INCOME TAXES
Earnings from operations before income taxes consisted of the following:
(in millions)
United States
Foreign
Years Ended January 31,
2017
478.2 $
198.4
676.6 $
2016
502.5 $
207.4
709.9 $
2015
484.5
253.0
737.5
$
$
Components of the provision for income taxes were as follows:
K
-
0
1
M
R
O
F
(in millions)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Years Ended January 31,
2017
2016
$
125.5 $
175.8 $
15.4
43.5
184.4
36.7
7.1
2.3
46.1
22.3
49.8
247.9
(15.4)
3.9
9.6
(1.9)
2015
130.9
18.2
66.5
215.6
25.2
13.2
(0.7)
37.7
$
230.5 $
246.0 $
253.3
TIFFANY & CO.
K-91
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
2017
35.0%
2.2
0.2
(2.3)
(0.7)
(0.9)
0.6
Years Ended January 31,
2016
35.0%
2.4
—
(2.5)
0.5
(1.3)
0.6
2015
35.0%
2.8
0.7
(4.2)
0.3
(1.3)
1.1
34.1%
34.7%
34.4%
The Company has the intent to indefinitely reinvest any undistributed earnings of all foreign subsidiaries. As of
January 31, 2017 and 2016, the Company has not provided deferred taxes on approximately $769.0 million and
$685.0 million 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 $129.0
million and $118.0 million would be incurred if these earnings were distributed.
F
O
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M
1
0
-
K
Deferred tax assets (liabilities) consisted of the following:
(in millions)
Deferred tax assets:
2017
January 31,
2016
Pension/postretirement benefits
$
124.7 $
166.7
Accrued expenses
Share-based compensation
Depreciation
Amortization
Foreign and state net operating losses
Sale-leaseback
Inventory
Financial hedging instruments
Unearned income
Other
Valuation allowance
Deferred tax liabilities:
Foreign tax credit
Net deferred tax asset
$
36.1
17.3
6.5
10.8
25.5
25.8
57.6
11.9
10.6
23.0
349.8
(24.1)
325.7
(25.8)
299.9 $
34.3
18.3
6.6
11.4
23.5
30.4
50.9
19.7
11.3
53.6
426.7
(19.5)
407.2
(25.1)
382.1
The Company has recorded a valuation allowance against certain deferred tax assets related to 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
TIFFANY & CO.
K-92
which no benefit is expected to be realized. Tax loss carryforwards of approximately $88.5 million exist in certain
foreign jurisdictions. Whereas some of these tax loss carryforwards do not have an expiration date, others expire at
various times from 2019 through 2024.
The following table reconciles the unrecognized tax benefits:
(in millions)
Unrecognized tax benefits at beginning of year
$
2017
10.2 $
2016
8.3 $
Gross increases – tax positions in prior period
Gross decreases – tax positions in prior period
Gross increases – tax positions in current period
Settlements
Lapse of statute of limitations
0.9
(5.0)
0.3
(3.0)
—
1.0
(0.4)
1.4
—
(0.1)
Unrecognized tax benefits at end of year
$
3.4 $
10.2 $
January 31,
2015
27.6
1.0
(5.4)
0.1
(14.8)
(0.2)
8.3
K
-
0
1
M
R
O
F
Included in the balance of unrecognized tax benefits at January 31, 2017, 2016 and 2015 are $1.0 million, $9.1
million and $5.3 million 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 year ended January 31, 2017, the Company recognized no expense associated with interest
and penalties while during the years ended January 31, 2016 and 2015, the Company recognized approximately
$1.7 million and $1.8 million of expense. Accrued interest and penalties are included within accounts payable and
accrued liabilities and other long-term liabilities, and were $8.3 million and $7.8 million at January 31, 2017 and
2016.
At January 31, 2017, the Company's gross uncertain tax positions decreased $6.8 million and gross accrued interest
and penalties were unchanged from January 31, 2016, primarily as a result of the conclusion of a tax examination
during the three months ended April 30, 2016. This settlement resulted in an income tax benefit of $6.6 million for
the year ended January 31, 2017, and reduced the effective income tax rate by 1.0 percentage point versus the
prior year.
The Company conducts business globally, and, as a result, is subject to taxation in the U.S. and various state and
foreign jurisdictions. As a matter of course, tax authorities regularly audit the Company. The Company's tax filings
are currently being examined by a number of tax authorities in several jurisdictions, both in the U.S. and in foreign
jurisdictions. Ongoing audits where subsidiaries have a material presence include New York City (tax years 2011–
2013) and New York State (tax years 2012–2014). Tax years from 2010–present are open to examination in the
U.S. Federal jurisdiction and 2006–present are open in various state, local and foreign jurisdictions. As part of these
audits, the Company engages in discussions with taxing authorities regarding tax positions. At January 31, 2017,
total unrecognized tax benefits were $3.4 million of which approximately $1.0 million, if recognized, would affect
the effective income tax rate. As of January 31, 2017, unrecognized tax benefits are not expected to change
materially in the next 12 months. Future developments may result in a change in this assessment.
P.
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
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.
TIFFANY & CO.
K-93
Certain information relating to the Company's segments is set forth below:
(in millions)
Net sales:
Americas
Asia-Pacific
Japan
Europe
Total reportable segments
Other
Earnings from operations*:
Americas
Asia-Pacific
Japan
Europe
Total reportable segments
Other
F
O
R
M
1
0
-
K
Years Ended January 31,
2017
2016
2015
$
1,841.9 $
1,947.0 $
999.1
604.4
457.6
3,903.0
98.8
1,003.1
541.3
505.7
3,997.1
107.8
$
$
4,001.8 $
4,104.9 $
373.0 $
390.8 $
256.0
204.6
81.6
915.2
5.9
264.4
199.9
97.4
952.5
6.4
2,033.5
1,025.2
554.3
513.3
4,126.3
123.6
4,249.9
435.5
281.6
196.0
110.5
1,023.6
4.9
* Represents earnings from operations before (i) unallocated corporate expenses, (ii) interest expense, financing
costs and other (income) expense, net, (iii) loss on extinguishment of debt, and (iv) other operating expenses.
$
921.1 $
958.9 $
1,028.5
The Company's Chief Operating Decision Maker does not evaluate the performance of the Company's assets on a
segment basis for internal management reporting and, therefore, such information is not presented.
The following table sets forth a reconciliation of the segments' earnings from operations to the Company's
consolidated earnings from operations before income taxes:
Years Ended January 31,
(in millions)
Earnings from operations for segments
$
Unallocated corporate expenses
Interest expense, financing costs and other
(income) expense, net
Loss on extinguishment of debt
Other operating expense
2017
921.1 $
(161.9)
(44.6)
—
(38.0)
2016
958.9 $
(152.1)
(50.2)
—
(46.7)
Earnings from operations before income taxes
$
676.6 $
709.9 $
2015
1,028.5
(137.1)
(60.1)
(93.8)
—
737.5
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 in the year ended January 31, 2017 represents an impairment charge related to software
costs capitalized in connection with the development of a new finished goods inventory management and
merchandising information system and impairment charges related to a financing arrangements with diamond mining
and exploration companies. See "Note B. Summary of Significant Accounting Policies" and "Note E. Property, Plant
TIFFANY & CO.
K-94
and Equipment" for additional details on the asset impairment and "Note B. Summary of Significant Accounting
Policies" and "Note J. Commitments and Contingencies" for additional details on the loan impairments.
Other operating expense in the year ended January 31, 2016 represents impairment charges related to a financing
arrangement with Koidu and expenses related to specific cost-reduction initiatives. See "Note J. Commitments and
Contingencies" for additional details.
Loss on extinguishment of debt in the year ended January 31, 2015 was related to the redemption of $400.0 million
in aggregate principal amount of the Private Placement Notes prior to their scheduled maturities. See "Note G. Debt"
for additional details.
Sales to unaffiliated customers and long-lived assets by geographic areas were as follows:
(in millions)
Net sales:
United States
Japan
Other countries
Long-lived assets:
United States
Japan
Other countries
(in millions)
Net sales:
2017
2016
2015
Years Ended January 31,
$
$
$
$
1,691.4 $
1,795.5 $
604.4
1,706.0
541.3
1,768.1
4,001.8 $
4,104.9 $
691.3 $
706.9 $
21.7
269.0
20.6
256.7
982.0 $
984.2 $
Classes of Similar Products
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1,870.8
554.3
1,824.8
4,249.9
680.1
24.4
239.2
943.7
2017
2016
2015
Years Ended January 31,
High, fine & solitaire jewelry
Engagement jewelry & wedding bands
Fashion jewelry
Designer jewelry
All other
$
$
779.1 $
854.1 $
1,122.0
1,328.9
465.0
306.8
1,142.2
1,340.7
460.8
307.1
870.4
1,221.0
1,357.6
481.5
319.4
4,001.8 $
4,104.9 $
4,249.9
Items bearing the name of and attributed to one of the Company's "named" designers: Elsa Peretti and Paloma
Picasso, which were previously reported across the high, fine & solitaire jewelry, engagement jewelry & wedding
bands and fashion jewelry categories, have been reclassified into the designer jewelry category to conform with
management's current internal analysis of product sales. Additionally, certain reclassifications within the jewelry
categories have been made to the prior years' amounts to conform to the current year category presentation.
TIFFANY & CO.
K-95
Q.
QUARTERLY FINANCIAL DATA (UNAUDITED)
(in millions, except per share amounts)
April 30
July 31
October 31
January 31 a
2016 Quarters Ended*
Net sales
Gross profit
Earnings from operations
Net earnings
Net earnings per share:
Basic
Diluted
$
891.3 $
931.6 $
949.3 $
1,229.6
545.6
134.6
87.5
577.1
174.9
105.7
579.5
155.2
95.1
$
$
0.69 $
0.69 $
0.84 $
0.84 $
0.76 $
0.76 $
788.2
256.5
157.8
1.27
1.26
a On a pre-tax basis, includes charges for the quarter ended January 31, 2017 of:
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i. $25.4 million, which reduced net earnings per diluted share by $0.13, associated with an impairment
charge related to software costs capitalized in connection with the development of a new finished goods
inventory management and merchandising information system (see "Note B. Summary of Significant
Accounting Policies" and "Note E. Property, Plant and Equipment"); and
ii. $12.6 million, which reduced net earnings per diluted share by $0.06, associated with impairment
charges related to financing arrangements with diamond mining and exploration companies (see "Note
B. Summary of Significant Accounting Policies" and "Note J. Commitments and Contingencies").
(in millions, except per share amounts)
April 30
July 31 b
October 31
January 31 c
2015 Quarters Ended*
Net sales
Gross profit
Earnings from operations
Net earnings
Net earnings per share:
Basic
Diluted
$
962.4 $
990.5 $
938.2 $
1,213.6
569.0
170.0
104.9
593.0
172.8
104.9
564.5
156.4
91.0
$
$
0.81 $
0.81 $
0.81 $
0.81 $
0.71 $
0.70 $
764.8
260.9
163.2
1.28
1.28
b
On a pre-tax basis, includes a charge of $9.6 million for the quarter ended July 31, 2015, which reduced net
earnings per diluted share by $0.05, associated with an impairment charge related to a financing arrangement
with Koidu Limited (see "Note B. Summary of Significant Accounting Policies" and "Note J. Commitments and
Contingencies").
c On a pre-tax basis, includes charges for the quarter ended January 31, 2016 of:
i. $28.3 million, which reduced net earnings per diluted share by $0.14, associated with an impairment
charge related to a financing arrangement with Koidu Limited (see "Note B. Summary of Significant
Accounting Policies" and "Note J. Commitments and Contingencies"); and
ii. $8.8 million, which reduced net earnings per diluted share by $0.04, associated with severance related
to staffing reductions and subleasing of certain office space for which only a portion of the Company's
future rent obligations will be recovered (see "Note J. Commitments and Contingencies").
* The sum of quarterly amounts may not agree with full year amounts due to rounding.
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.
K-96
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 the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15
(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), the Registrant's principal executive
officer and principal 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, as amended, 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 principal executive officer and principal
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 activities such as implementing
new, more efficient systems and automating manual processes.
The Registrant's principal executive officer and principal financial officer have determined that there have been no
changes in the Registrant's internal control over financial reporting during the most recently completed fiscal quarter
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.
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The Registrant's management, including its principal executive officer and principal 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 principal executive officer and our principal financial officer have concluded
that the Registrant's disclosure controls and procedures are (i) designed to provide such reasonable assurance and
(ii) are effective at that reasonable assurance level.
TIFFANY & CO.
K-97
Report of Management
Management's Responsibility for Financial Information. The Company's consolidated financial statements were
prepared by management, who are responsible for their integrity and objectivity. The financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America and, as such,
include amounts based on management's best estimates and judgments.
Management is further responsible for maintaining a system of internal accounting control designed to provide
reasonable assurance that the Company's assets are adequately safeguarded, and that the accounting records reflect
transactions executed in accordance with management's authorization. The system of internal control is continually
reviewed and is augmented by written policies and procedures, the careful selection and training of qualified
personnel and a program of internal audit.
The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm. Their report is shown on page K-49. The Audit Committee of the Board of Directors, which is
composed solely of independent directors, meets regularly with the Company's management and the independent
registered public accounting firm to discuss specific accounting, financial reporting and internal control matters.
Both the independent registered public accounting firm and the internal auditors have full and free access to the
Audit Committee. Each year the Audit Committee selects the firm that is to perform audit services for the Company.
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Management's Report on Internal Control over Financial Reporting. Management is responsible for establishing and
maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a - 15(f).
Management conducted an evaluation of the effectiveness of internal control over financial reporting using the
criteria set forth by the Committee of Sponsoring Organizations ("COSO") of the Treadway Commission in Internal
Control - Integrated Framework issued in 2013. 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. Based on this evaluation, management
concluded that internal control over financial reporting was effective as of January 31, 2017 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, 2017 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which is shown on page K-49.
k
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/s/ Michael J. Kowalski
Chairman of the Board and Interim Chief Executive Officer
/s/ Mark J. Erceg
Executive Vice President and Chief Financial Officer
Item 9B. Other Information.
NONE
TIFFANY & CO.
K-98
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Incorporated by reference from the sections titled "Section 16(a) Beneficial Ownership Reporting Compliance,"
"Executive Officers of the Company," "Item 1. Election of the Board," and "Board of Directors and Corporate
Governance" in Registrant's Proxy Statement dated April 7, 2017.
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
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Registrant will also provide a copy of the Code of Business and Ethical Conduct to stockholders upon request.
; go to "Code of Conduct." The
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See Registrant's Proxy Statement dated April 7, 2017, for additional information within the section titled "Business
Conduct Policy and Code of Ethics."
Item 11. Executive Compensation.
Incorporated by reference from the section titled "Board of Directors and Corporate Governance" and "Compensation
of the CEO and Other Executive Officers" in Registrant's Proxy Statement dated April 7, 2017.
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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" and "Compensation of the CEO and
Other Executive Officers" in Registrant's Proxy Statement dated April 7, 2017.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Incorporated by reference from the sections titled "Board of Directors and Corporate Governance" and "Transactions
with Related Persons" in Registrant's Proxy Statement dated April 7, 2017.
Item 14. Principal Accounting Fees and Services.
Incorporated by reference from the section titled "Relationship with Independent Registered Public Accounting Firm"
in Registrant's Proxy Statement dated April 7, 2017.
TIFFANY & CO.
K-99
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, 2017 and 2016.
Consolidated Statements of Earnings for the years ended January 31, 2017, 2016 and 2015.
Consolidated Statements of Comprehensive Earnings for the years ended January 31, 2017, 2016 and 2015.
Consolidated Statements of Stockholders' Equity for the years ended January 31, 2017, 2016 and 2015.
Consolidated Statements of Cash Flows for the years ended January 31, 2017, 2016 and 2015.
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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.
Item 16. Form 10-K Summary.
Not Applicable.
TIFFANY & CO.
K-100
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.
SIGNATURES
Date: March 17, 2017
TIFFANY & CO.
(Registrant)
By: /s/ Michael J. Kowalski
Michael. J. Kowalski
Chairman of the Board and
Interim Chief Executive Officer
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TIFFANY & CO.
K-101
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
Michael J. Kowalski
Chairman of the Board and
Interim Chief Executive Officer
By:
/s/ Mark J. Erceg
Mark J. Erceg
Executive Vice President,
Chief Financial Officer
(Principal Executive Officer) (Director)
(Principal Financial Officer)
By:
/s/ John S. Barresi
John S. Barresi
Vice President, Controller
(Principal Accounting Officer)
By:
/s/ Rose Marie Bravo
Rose Marie Bravo
Director
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By:
/s/ Gary E. Costley
By:
/s/ Roger N. Farah
Gary E. Costley
Director
Roger N. Farah
Director
By:
/s/ Lawrence K. Fish
By:
/s/ Abby F. Kohnstamm
Lawrence K. Fish
Director
Abby F. Kohnstamm
Director
By:
/s/ James E. Lillie
By:
/s/ Charles K. Marquis
James E. Lillie
Director
By:
/s/ Peter W. Mayy
Peter W. May
Director
Charles K. Marquis
Director
By:
/s/ William A. Shutzer
William A. Shutzer
Director
By:
/s/ Robert S. Singer
By:
/s/ Francesco Trapani
Robert S. Singer
Director
March 17, 2017
Francesco Trapani
Director
TIFFANY & CO.
K-102
Exhibit Table (numbered in accordance with Item 601 of Regulation S-K)
EXHIBIT INDEX
Exhibit No.
Description
p
3.1
3.1a
3.2
4.5
4.6
4.7
4.8
10.1
10.2
10.2a
10.3
10.4
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 March 16, 2017. Incorporated by reference from
Exhibit 3.2 to Registrant’s Report on Form 8-K dated March 16, 2017.
Indenture, dated September 25, 2014, among Registrant, as issuer, and The Bank of New York
Mellon Trust Company, as trustee. Incorporated by reference from Exhibit 4.5 to Registrant’s
Report on Form 8-K dated September 26, 2014.
Supplemental Indenture No. 1, dated September 25, 2014, among Registrant, as issuer, certain
subsidiaries of Registrant, as guarantors thereto, and The Bank of New York Mellon Trust
Company, as trustee. Incorporated by reference from Exhibit 4.6 to Registrant’s Report on Form
8-K dated September 26, 2014.
Supplemental Indenture No. 2, dated September 25, 2014, among Registrant, as issuer, certain
subsidiaries of Registrant, as guarantors thereto, and The Bank of New York Mellon Trust
Company, as trustee. Incorporated by reference from Exhibit 4.7 to Registrant’s Report on Form
8-K dated September 26, 2014.
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Upon the request of the Securities and Exchange Commission, Registrant will furnish a copy of
all instruments defining the rights of holders of all other long-term debt of 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.
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.
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.
Four Year Credit Agreement dated as of October 7, 2014 by and among Registrant and each other
Subsidiary of Registrant that is a Borrower and is a signatory thereto and Bank of America, N.A.,
as Administrative Agent, and various lenders party thereto. Incorporated by reference from Exhibit
10.37 filed with Registrant’s Report on Form 8-K dated October 10, 2014.
TIFFANY & CO.
K-103
Exhibit No.
Description
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10.5
10.6
10.6a
10.7
10.7a
10.8
10.9
10.9a
10.9b
10.9c
Five Year Credit Agreement dated as of October 7, 2014 by and among Registrant and each other
Subsidiary of Registrant that is a Borrower and is a signatory thereto and Bank of America, N.A.,
as Administrative Agent, and various lenders party thereto. Incorporated by reference from Exhibit
10.39 filed with Registrant’s Report on Form 8-K dated October 10, 2014.
Amended and Restated Note Purchase and Private Shelf Agreement dated as of July 25, 2012 by
and among Registrant and various institutional note purchasers with respect to 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.
Amendment dated as of January 14, 2014 to the Amended and Restated Note Purchase and
Private Shelf Agreement (see Exhibit 10.6 above) by and among Registrant, and various
institutional note purchasers. Incorporated by reference from Exhibit 10.157 filed with
Registrant’s Report on Form 8-K dated January 17, 2014.
Amended and Restated Note Purchase and Private Shelf Agreement dated as of July 25, 2012 by
and among Registrant and various institutional note purchasers with respect to 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. Incorporated by reference from Exhibit 10.159 filed with Registrant’s Report
on Form 8-K dated July 27, 2012.
Amendment dated as of January 14, 2014 to the Amended and Restated Note Purchase and
Private Shelf Agreement, dated as of July 25, 2012 (see Exhibit 10.7 above), by and among
Registrant and various institutional note purchasers. Incorporated by reference from Exhibit
10.161 filed with Registrant’s Report on Form 8-K dated January 17, 2014.
Note Purchase Agreement dated as of August 26, 2016 by and between Registrant and the
institutional note purchasers with respect to Registrant’s ¥ 10,000,000,000 principal amount of
0.78% Senior Notes due August 26, 2026. Incorporated by reference from Exhibit 10.37 filed
with Registrant’s Report on Form 8-K dated September 1, 2016.
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 10.9 above) 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 10.15a filed with Registrant’s Report on Form
10-K dated March 28, 2013.
Second Amendment Agreement dated as of February 12, 2013 with respect to the Amortising
Term Loan Facility Agreement (see Exhibit 10.9 above) between and among Koidu Limited (as
Borrower), BSG Resources Limited (as Guarantor) and Laurelton Diamonds, Inc. (as Original
Lender). Incorporated by reference from Exhibit 10.15b filed with Registrant’s Report on Form
10-K dated March 28, 2013.
Third Amendment Agreement dated as of March 29, 2013 with respect to the Amortising Term
Loan Facility Agreement (see Exhibit 10.9 above) between and among Koidu Limited (as
Borrower), BSG Resources Limited (as Guarantor) and Laurelton Diamonds, Inc. (as Original
Lender). Incorporated by reference from Exhibit 10.15c filed with Registrant’s Report on Form 8-
K dated April 2, 2013.
TIFFANY & CO.
K-104
Exhibit No.
Description
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10.9d
10.9e
10.9f
10.10
10.11
10.12
10.13
12.1
14.1
21.1
23.1
31.1
31.2
32.1
Fourth Amendment Agreement dated as of March 31, 2014 with respect to the Amortising Term
Loan Facility Agreement (see Exhibit 10.9 above) between and among Koidu Limited (as
Borrower), BSG Resources Limited (as Guarantor) and Laurelton Diamonds, Inc. (as Original
Lender). Incorporated by reference from Exhibit 10.15d filed with Registrant’s Report on Form 8-
K dated March 31, 2014.
Fifth Amendment Agreement dated as of April 30, 2015 with respect to the Amortising Term
Loan Facility Agreement (see Exhibit 10.9 above) between and among Koidu Limited, Octea
Limited, BSG Resources Limited and Laurelton Diamonds, Inc. Incorporated by reference from
Exhibit 10.14e filed with Registrant’s Report on Form 8-K dated May 6, 2015.
Sixth Amendment Agreement dated as of October 10, 2016 with respect to the Amortising Term
Loan Facility Agreement (see Exhibit 10.9 above) between and among Koidu Limited, Octea
Limited, BSG Resources Limited and Laurelton Diamonds, Inc.
Credit Agreement dated as of July 11, 2016 by and among Tiffany & Co. (Shanghai) Commercial
Company Limited, Bank of America, N.A., Shanghai Branch and Mizuho Bank (China), Ltd. as
Jointed Coordinators, Mandated Lead Arrangers and Bookrunners, Mizuho Bank (China), Ltd. as
Facility Agent and certain other banks and financial institutions party thereto as original lenders.
Incorporated by reference from Exhibit 10.15 filed with Registrant’s Report on Form 8-K dated
July 15, 2016.
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Guaranty Agreement dated as of July 11, 2016, with respect to the Credit Agreement (see Exhibit
10.10 above) by and between Registrant and Mizuho Bank (China), Ltd. as Facility Agent.
Incorporated by reference from Exhibit 10.16 filed with Registrant’s Report on Form 8-K dated
July 15, 2016.
Cooperation Agreement, dated February 20, 2017, between JANA Partners LLC and Registrant.
Incorporated by reference from Exhibit 10.37 filed with Registrant’s Report on Form 8-K dated
February 21, 2017.
Cooperation Agreement, dated February 20, 2017, between Francesco Trapani and Registrant.
Incorporated by reference from Exhibit 10.38 filed with Registrant’s Report on Form 8-K dated
February 21, 2017.
Ratio of Earnings to Fixed Charges.
Code of Business and Ethical Conduct. Incorporated by reference from Exhibit 14.1 filed with
Registrant’s Report on Form 8-K dated March 22, 2016.
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.
TIFFANY & CO.
K-105
Exhibit No.
Description
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101
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 Registrant’s Annual Report on Form 10-K for the fiscal
year ended January 31, 2017, 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
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10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.20a
10.20b
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 Executive Deferral Plan originally made effective October 1, 1989, as
amended and restated effective January 19, 2017. Incorporated by reference from Exhibit 10.18
filed with Registrant’s Report on Form 8-K dated January 25, 2017.
Registrant's Amended and Restated Retirement Plan for Non-Employee Directors originally made
effective January 1, 1989, as amended through January 21, 1999. Incorporated by reference
from Exhibit 10.108 filed with Registrant's Annual Report on Form 10-K for the Fiscal Year
ended January 31, 1999.
Summary of informal incentive cash bonus plan for managerial employees. Incorporated by
reference from Exhibit 10.109 filed with Registrant’s Report on Form 8-K dated March 16,
2005.
1994 Tiffany and Company Supplemental Retirement Income Plan, Amended and Restated as of
March 17, 2016. Incorporated by reference from Exhibit 10.21 filed with Registrant’s Report on
Form 8-K dated March 22, 2016.
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. Incorporated by
reference from Exhibit 10.24 filed with Registrant’s Report on Form 10-K dated March 28,
2013.
Group Long Term Disability Insurance Policy issued by First Unum Life Insurance, Policy No.
533717 001. Incorporated by reference from Exhibit 10.24a filed with Registrant’s Report on
Form 10-K dated March 28, 2013.
Individual Disability Insurance Policy issued by Provident Life and Casualty Insurance Company.
Incorporated by reference from Exhibit 10.24b filed with Registrant’s Report on Form 10-K dated
March 28, 2013.
TIFFANY & CO.
K-106
Exhibit No.
Description
p
10.20c
10.21
10.22
10.23
10.23a
10.23b
10.23c
10.23d
10.23e
10.23f
10.23g
10.23h
Individual Disability Insurance Policy issued by Lloyd’s of London. Incorporated by reference from
Exhibit 10.24c filed with Registrant’s Report on Form 10-K dated March 28, 2013.
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 January 19, 2017.
Incorporated by reference from Exhibit 10.25 filed with Registrant’s Report on Form 8-K dated
January 25, 2017.
Registrant’s 2005 Employee Incentive Plan Amended and Adopted as of May 21, 2009.
Incorporated by reference from Exhibit 10.28b filed with Registrant’s Report on Form 10-K dated
March 28, 2013.
Form of Fiscal 2014 Cash Incentive Award Agreement for certain executive officers as adopted on
March 19, 2014 under Registrant’s 2005 Employee Incentive Plan. Incorporated by reference
from Exhibit 10.139d filed with Registrant’s Report on Form 8-K dated March 21, 2014.
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 10.141a filed with Registrant’s Report on Form 8-K dated
May 23, 2005.
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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.
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant’s 2005
Employee Incentive Plan. Incorporated by reference from Exhibit 10.28n filed with Registrant’s
Report on Form 8-K dated September 24, 2013.
Terms of Restricted Stock Grant (Non-Transferable) under Registrant’s 2005 Employee Incentive
Plan. Incorporated by reference from Exhibit 10.28o filed with Registrant’s Report on Form 8-K
dated September 24, 2013.
Terms of Time-Vesting Restricted Stock Unit Grant to executive officers as adopted on November
20, 2013 under Registrant’s 2005 Employee Incentive Plan. Incorporated by reference from
Exhibit 10.28p filed with Registrant’s Report on Form 8-K dated March 21, 2014.
Terms of Performance-Based Restricted Stock Unit Grants to executive officers, effective January
15, 2014, under Registrant’s 2005 Employee Incentive Plan. Incorporated by reference from
Exhibit 10.28s filed with Registrant’s Report on Form 8-K dated September 19, 2014.
TIFFANY & CO.
K-107
Exhibit No.
Description
p
F
O
R
M
1
0
-
K
10.23i
10.23j
10.23k
10.24
10.24a
10.25
10.25a
10.25b
10.25c
10.25d
10.25e
10.26
10.26a
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-Vesting
Restricted Unit Awards and Certain Non-Qualified Retirement Contributions made to other
officers of Registrant’s affiliated companies pursuant to Registrant’s 2005 Employee Incentive
Plan and pursuant to the Tiffany and Company Deferral Plan. Incorporated by reference from
Exhibit 10.28r filed with Registrant’s Report on Form 8-K dated March 21, 2014.
Terms of 2014 Amended and Restated Performance-Based Restricted Stock Unit Grant for
Michael J. Kowalski. Incorporated by reference from Exhibit 10.27s filed with Registrant’s Report
on Form 8-K dated March 24, 2015.
Terms of 2015 Amended and Restated Performance-Based Restricted Stock Unit Grant for
Michael J. Kowalski. Incorporated by reference from Exhibit 10.27t filed with Registrant’s Report
on Form 8-K dated March 24, 2015.
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. Incorporated by reference from Exhibit 10.30a filed with
Registrant’s Report on Form 10-K dated March 28, 2013.
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant’s 2008
Directors Equity Compensation Plan, effective May 26, 2016. Incorporated by reference from
Exhibit 10.28c filed with Registrant’s Report on Form 8-K dated June 2, 2016.
Terms of Restricted Stock Unit Grant under Registrant’s 2008 Directors Equity Compensation
Plan, effective May 26, 2016. Incorporated by reference from Exhibit 10.28d filed with
Registrant’s Report on Form 8-K dated June 2, 2016.
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant’s 2008
Directors Equity Compensation Plan, effective March 16, 2017.
Terms of Restricted Stock Unit Grant under Registrant’s 2008 Directors Equity Compensation
Plan, effective March 16, 2017.
Registrant’s 2014 Employee Incentive Plan, amended and restated as of March 16, 2016.
Incorporated by reference from Exhibit 10.29 filed with Registrant’s Report on Form 8-K dated
March 22, 2016.
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant’s 2014
Employee Incentive Plan. Incorporated by reference from Exhibit 10.31a filed with Registrant’s
Report on Form 8-K dated July 18, 2014.
TIFFANY & CO.
K-108
Exhibit No.
Description
p
10.26b
10.26c
10.26d
10.26e
10.26f
10.26g
10.26h
10.26i
10.26j
10.26k
10.26l
Terms of Cliff-Vesting Restricted Stock Grant (Non-Transferable) under Registrant’s 2014
Employee Incentive Plan. Incorporated by reference from Exhibit 10.31b filed with Registrant’s
Report on Form 8-K dated July 18, 2014.
Terms of Tranche-Vesting Restricted Stock Grant (Non-Transferable) under Registrant’s 2014
Employee Incentive Plan. Incorporated by reference from Exhibit 10.31c filed with Registrant’s
Report on Form 8-K dated July 18, 2014.
Terms of Time-Vesting Restricted Stock Grant (Non-Transferable) under Registrant’s 2014
Employee Incentive Plan. Incorporated by reference from Exhibit 10.31d filed with Registrant’s
Report on Form 8-K dated July 18, 2014.
Amended and Restated Terms of Performance-Based Restricted Stock Unit Grant (Non-
Transferable) to executive officers under Registrant’s 2014 Employee Incentive Plan, effective
January 14, 2015.
Form of Fiscal 2016 Cash Incentive Award Agreement for certain executive officers as adopted on
March 16, 2016 under Registrant’s 2014 Employee Incentive Plan. Incorporated by reference
from Exhibit 10.29e filed with Registrant’s Report on Form 8-K dated March 22, 2016.
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-Vesting
Restricted Unit Awards and Certain Non-Qualified Retirement Contributions made to other
officers of Registrant’s affiliated companies pursuant to Registrant’s 2014 Employee Incentive
Plan and pursuant to the Tiffany and Company Executive Deferral Plan. Incorporated by reference
from Exhibit 10.29f filed with Registrant’s Report on Form 8-K dated March 22, 2016.
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Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant’s 2014
Employee Incentive Plan, as revised March 16, 2016. Incorporated by reference from Exhibit
10.29g filed with Registrant’s Report on Form 8-K dated March 22, 2016.
Terms of Tranche-Vesting Restricted Stock Grant (Non-Transferable) under Registrant’s 2014
Employee Incentive Plan, as revised March 16, 2016. Incorporated by reference from Exhibit
10.29j filed with Registrant’s Report on Form 8-K dated March 22, 2016.
Terms of Time-Vesting Restricted Stock Grant (Non-Transferable) under Registrant’s 2014
Employee Incentive Plan, as revised March 16, 2016. Incorporated by reference from Exhibit
10.29k filed with Registrant’s Report on Form 8-K dated March 22, 2016.
Form of Cash Incentive Award Agreement for executive officers as adopted on January 19, 2017
under Registrant’s 2014 Employee Incentive Plan. Incorporated by reference from Exhibit 10.29l
filed with Registrant’s Report on Form 8-K dated January 25, 2017.
Form of Non-Competition and Confidentiality Covenants for use in connection with Performance-
Based Restricted Stock Unit Grants to Registrant’s executive officers, Time-Vesting Restricted
Stock Unit Grants, Stock Option Awards and certain non-qualified retirement contributions made
to executive officers and certain other officers of Registrant’s affiliated companies pursuant to
Registrant’s 2014 Employee Incentive Plan, the Tiffany and Company Executive Deferral Plan
and the 2004 Tiffany and Company Un-funded Retirement Income Plan to Recognize
Compensation in Excess of Internal Revenue Code Limits. Incorporated by reference from Exhibit
10.29m filed with Registrant’s Report on Form 8-K dated January 25, 2017.
10.26m
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant’s 2014
Employee Incentive Plan, as revised January 19, 2017. Incorporated by reference from Exhibit
10.29n filed with Registrant’s Report on Form 8-K dated January 25, 2017.
TIFFANY & CO.
K-109
Exhibit No.
Description
p
10.26n
10.26o
10.26p
10.27
10.28
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10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
Terms of Performance-Based Restricted Stock Unit Grant (Non-Transferable) to executive officers
under Registrant’s 2014 Employee Incentive Plan, as revised January 19, 2017. Incorporated by
reference from Exhibit 10.29o filed with Registrant’s Report on Form 8-K dated January 25,
2017.
Terms of Restricted Stock Unit Grant (Non-Transferable) under Registrant’s 2014 Employee
Incentive Plan, as revised January 19, 2017. Incorporated by reference from Exhibit 10.29p filed
with Registrant’s Report on Form 8-K dated January 25, 2017.
Terms of Stock Option Award (Transferable Non-Qualified Option) granted to Michael J. Kowalski
under Registrant’s 2014 Employee Incentive Plan on February 15, 2017. Incorporated by
reference from Exhibit 10.39 filed with Registrant’s Report on Form 8-K/A dated February 22,
2017.
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.
Employment offer letter, dated as of March 7, 2014, between Ralph Nicoletti and Tiffany and
Company. Incorporated by reference from Exhibit 10.33 filed with the Registrant’s Report on
Form 10-K dated March 20, 2015.
Employment offer letter, dated as of September 7, 2016, between Mark J. Erceg and Tiffany and
Company.
Employment offer letter, dated as of April 18, 2014, between Jean-Marc Bellaiche and Tiffany
and Company. Incorporated by reference from Exhibit 10.32 to Registrant’s Annual Report on
Form 10-K for the Fiscal Year ended January 31, 2016.
Employment offer letter, dated as of December 19, 2014, between Jennifer de Winter and Tiffany
and Company. Incorporated by reference from Exhibit 10.33 to Registrant’s Annual Report on
Form 10-K for the Fiscal Year ended January 31, 2016.
Employment offer letter, dated as of June 15, 2015, between Philippe Galtie and Tiffany and
Company.
Form of 2016 Retention Agreement with Registrant and Tiffany and Company. Incorporated by
reference from Exhibit 10.34 filed with Registrant’s Report on Form 8-K dated March 22, 2016.
Share Ownership Policy for Executive Officers and Directors, Amended and Restated as of
November 19, 2014. Incorporated by reference from Exhibit 10.152 filed with Registrant’s
Report on Form 8-K dated December 1, 2014.
Separation Agreement and Release, dated as of March 6, 2017, by and among Registrant, Tiffany
and Company and Frederic Cumenal. Incorporated by reference from Exhibit 10.41 filed with the
Registrant’s Report on Form 8-K dated March 6, 2017.
Form of Retention Agreement with Registrant and Tiffany and Company, adopted March 15,
2017.
Corporate Governance Principles, amended and restated effective March 16, 2017. Incorporated
by reference from Exhibit 10.42 to Registrant’s Report on Form 8-K dated March 16, 2017.
TIFFANY & CO.
K-110
Tiffany & Co. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
(in millions)
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, 2017:
Reserves deducted from assets:
Accounts receivable allowances:
Doubtful accounts
$
3.2 $
3.8 $
— $
Sales returns
Allowance for inventory liquidation
and obsolescence
Allowance for inventory shrinkage
Deferred tax valuation allowance
a) Uncollectible accounts written off.
8.3
59.2
1.2
19.5
2.5
19.2
0.5
5.0
—
—
—
—
5.1 a $
1.2 b
13.0 c
0.7 d
0.4 e
1.9
9.6
65.4
1.0
24.1
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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.
TIFFANY & CO.
K-111
Tiffany & Co. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
(in millions)
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, 2016:
Reserves deducted from assets:
Accounts receivable allowances:
Doubtful accounts
$
1.8 $
4.4 $
— $
Sales returns
8.8
3.5
F
O
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0
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K
Allowance for inventory liquidation
and obsolescence
Allowance for inventory shrinkage
Deferred tax valuation allowance
a) Uncollectible accounts written off.
63.2
2.2
16.2
25.4
0.8
5.3
—
—
—
—
3.0 a $
4.0 b
29.4 c
1.8 d
2.0 e
3.2
8.3
59.2
1.2
19.5
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.
TIFFANY & CO.
K-112
Tiffany & Co. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
(in millions)
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, 2015:
Reserves deducted from assets:
Accounts receivable allowances:
Doubtful accounts
$
1.9 $
1.9 $
— $
Sales returns
8.5
1.9
Allowance for inventory liquidation
and obsolescence
Allowance for inventory shrinkage
Deferred tax valuation allowance
a) Uncollectible accounts written off.
64.1
1.5
17.7
33.6
2.6
4.0
b) Adjustment related to sales returns previously provided for.
c) Liquidation of inventory previously written down to market.
d) Physical inventory losses.
—
—
—
—
2.0 a $
1.6 b
34.5 c
1.9 d
5.5 e
1.8
8.8
63.2
2.2
16.2
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e) Reversal of deferred tax valuation allowance and utilization of deferred tax loss carryforward.
TIFFANY & CO.
K-113
(This page intentionally left blank.)
2017 Annual Meeting of Shareholders
PROXY STATEMENT
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Tiffany & Co. Year-End Report 2016
Table of Contents
Proxy Statement for the 2017 Annual Meeting of Shareholders
Page
Proxy Summary..............................................................................................................................
PS - 2
Questions You May Have Regarding This Proxy Statement..................................................................
PS - 6
Ownership of the Company .............................................................................................................
PS - 12
Shareholders Who Own at Least Five Percent of the Company ......................................................
PS - 12
Ownership by Directors, Director Nominees and Executive Officers ...............................................
PS - 13
Section 16(a) Beneficial Ownership Reporting Compliance ..........................................................
PS - 14
Executive Officers of the Company...................................................................................................
PS - 15
Item 1. Election of the Board..........................................................................................................
PS - 17
Board of Directors and Corporate Governance ...................................................................................
PS - 21
Corporate Governance Highlights ...............................................................................................
PS - 21
The Board, In General ..............................................................................................................
PS - 21
The Role of the Board in Corporate Governance ..........................................................................
PS - 21
Board Leadership Structure ......................................................................................................
PS - 22
Executive Sessions of Non-management Directors/Presiding Independent Director .........................
PS - 23
Communication with Non-management Directors ........................................................................
PS - 23
Independent Directors Constitute a Majority of the Board.............................................................
PS - 23
Board and Committee Meetings and Attendance during Fiscal 2016.............................................
PS - 23
Committees of the Board ..........................................................................................................
PS - 24
Board Self-Evaluation...............................................................................................................
PS - 28
Board Refreshment ..................................................................................................................
PS - 28
Resignation on Job Change or New Directorship ..........................................................................
PS - 29
Management Succession Planning.............................................................................................
PS - 29
Board Role in Risk Oversight.....................................................................................................
PS - 29
Business Conduct Policy and Code of Ethics...............................................................................
PS - 30
Political Spending....................................................................................................................
PS - 30
Commitment to Corporate Social Responsibility ..........................................................................
PS - 31
Limitation on Adoption of Poison Pill Plans ................................................................................
PS - 31
Transactions with Related Persons.............................................................................................
PS - 31
Contributions to Director-Affiliated Charities ...............................................................................
PS - 32
Item 2. Ratification of the Selection of the Independent Registered Public Accounting Firm to Audit
our Fiscal 2017 Financial Statements........................................................................................
PS - 33
Report of the Audit Committee ..................................................................................................
PS - 34
Relationship with Independent Registered Public Accounting Firm ...............................................
PS - 35
Fees and Services of PricewaterhouseCoopers LLP ......................................................................
PS - 35
Item 3. Approval, on an Advisory Basis, of the Compensation of the Company's Named Executive
Officers...................................................................................................................................
PS - 36
Compensation Discussion and Analysis ......................................................................................
PS - 38
Report of the Compensation Committee .....................................................................................
PS - 67
Summary Compensation Table...................................................................................................
PS - 68
Grants of Plan-Based Awards ....................................................................................................
PS - 73
Discussion of Summary Compensation Table and Grants of Plan-Based Awards..............................
PS - 75
Outstanding Equity Awards at Fiscal Year-End ............................................................................
PS - 80
Option Exercises and Stock Vested ............................................................................................
PS - 84
Pension Benefits Table.............................................................................................................
PS - 84
Nonqualified Deferred Compensation Table ................................................................................
PS - 88
Potential Payments on Termination or Change in Control..............................................................
PS - 90
Director Compensation Table.....................................................................................................
PS - 95
Equity Compensation Plan Information.......................................................................................
PS - 98
Item 4. Preference, on an Advisory Basis, on the Frequency of Seeking Shareholder Approval of the
Compensation Paid to the Company's Named Executive Officers...................................................
PS - 99
Item 5. Approval of the Tiffany & Co. 2017 Directors Equity Compensation Plan..................................
PS - 100
Other Matters ................................................................................................................................
PS - 104
Shareholder Proposals for Inclusion in the Proxy Statement for the 2018 Annual Meeting ..............
PS - 104
Other Proposals .......................................................................................................................
PS - 104
Householding ..........................................................................................................................
PS - 104
Reminder to Vote .....................................................................................................................
PS - 104
Appendix I. Non-GAAP Measures.....................................................................................................
PS - 105
Appendix II. Tiffany & Co. 2017 Directors Equity Compensation Plan .................................................
PS - 107
Board of Directors and Executive Officers of Tiffany & Co...................................................................
Shareholder Information .................................................................................................................
C-1
C-2
Corporate Information
PROXY SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all
of the information you should consider. You should read the entire Proxy Statement carefully before voting.
ANNUAL MEETING OF SHAREHOLDERS
Date
Time
Place
Thursday, May 25, 2017
9:30 a.m.
The Rubin Museum of Art
150 West 17th Street
New York, New York
Record Date
March 27, 2017
Voting
Shareholders as of the record date are entitled to vote.
Each share of common stock of Tiffany & Co., a Delaware corporation (the "Company"), has one
vote.
Admission
Attendance at the 2017 Annual Meeting will be limited to those persons who were shareholders,
or held Company stock through a broker, bank or other nominee, at the close of business on the
record date.
Pre-registration is required to attend the 2017 Annual Meeting. Registration confirmation and
photo identification are also required for admission.
Shareholders of record will have the opportunity to vote by ballot at the 2017 Annual Meeting.
Beneficial owners of shares held in street name must contact their broker before the 2017 Annual
Meeting to obtain a legal proxy and bring the legal proxy with them to the meeting.
There are five matters scheduled to be voted on at the 2017 Annual Meeting:
MATTERS TO BE VOTED ON AT 2017 ANNUAL MEETING
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Matter
Item No. 1: Election of the Board;
Item No. 2: Ratification of the selection of the
independent registered public accounting firm
to audit our Fiscal 2017 financial statements;
Item No. 3: Approval, on an advisory basis, of
the compensation of the Company's named
executive officers as disclosed in this Proxy
Statement ("Say on Pay");
Item No. 4: Preference, on an advisory basis,
on the frequency of seeking shareholder
approval of the compensation paid to the
Company's named executive officers; and
Board Recommended
Vote
Required Vote
Broker Discretionary
Vote Allowed
"FOR" the election
of all 11 nominees
for director
Majority of votes cast
"for" or "against" the
nominee
"FOR"
"FOR"
Majority of shares
present and entitled to
vote
Majority of shares
present and entitled to
vote
No
Yes
No
Not applicable
(shareholder preference
only)
No
"FOR" a
recommendation
that the
shareholders
approve the
compensation paid
to the Company's
named executive
officers every year
Item No. 5: Approval of the Tiffany & Co. 2017
Directors Equity Compensation Plan.
"FOR"
Majority of shares
present and entitled to
vote
No
TIFFANY & CO.
PS-2
The following table provides summary information about each director nominee. Each director is elected annually by a
majority of votes cast. See "Item 1. Election of the Board" at PS-17 for more information.
ELECTION OF THE BOARD
Director
Since
Principal
Occupation
Age
Independent
Audit
Committee
66
1997 Retired Chief
Compensation
Committee
& Stock
Option Sub-
Committee
Corporate
Social
Responsibility
Committee
Dividend
Committee
Finance
Committee
Nominating/
Corporate
Governance
Committee
Search
Committee
Chair
Executive
Officer
("CEO") of
Burberry
Limited
73
2007 Retired
Chair
Name
Rose Marie
Bravo
Gary E.
Costley
Roger N.
Farah
64
2017
Chairman
and CEO of
International
Multifoods
Corporation
Executive
Director at
Tory Burch
LLC
Lawrence K.
Fish
72
2008 Retired
Chair
Chairman
and CEO of
Citizens
Financial
Group, Inc.
Executive
Vice
President
and Chief
Marketing
Officer at
Pitney Bowes
Inc.
Vice
Chairman of
Mariposa
Capital and
Consultant
for Newell
Brands
Senior
Advisor to
Investcorp
International,
Inc.
Senior
Managing
Director of
Evercore
Partners
Former CEO
of Barilla
Holding
S.p.A
Former
Chairman of
Clessidra
SGR S.p.A.
and Senior
Advisor to
LVMH CEO
Interim CEO
of Tiffany &
Co.
Chair
Chair
Chair
Abby F.
Kohnstamm
63
2001
James E.
Lillie
55
2017
Charles K.
Marquis
74
1984
William A.
Shutzer
70
1984
Robert S.
Singer
65
2012
Francesco
Trapani
60
2017
Michael J.
Kowalski
65
1995
Other
Public
Company
Boards
2
1
3
2
0
1
0
1
3
0
0
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Each director who served on the Company's Board of Directors (the "Board") during Fiscal 2016 (February 1, 2016 to
January 31, 2017) attended at least 83% of the aggregate number of meetings of the Board and those committees on
which he or she served.
TIFFANY & CO.
PS-3
AUDITORS
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 2017 (February 1, 2017 to January 31, 2018). As a matter of good corporate governance, we are asking you
to ratify this selection.
See "Item 2. Ratification of the Selection of the Independent Registered Public Accounting Firm to Audit Our Fiscal
2017 Financial Statements" at PS-33 and "Relationship with Independent Registered Public Accounting Firm" at PS-35
for more information.
EXECUTIVE COMPENSATION MATTERS
See "Item 1. Election of the Board" at PS-17 and "Compensation of the CEO and Other Executive Officers" at PS-37
for more information.
BUSINESS HIGHLIGHTS
Key highlights of Fiscal 2016 performance were as follows:
Sales:
Profitability:
Worldwide net sales decreased 3% to $4.0 billion reflecting declines in the Americas and
Europe partly offset by an increase in Japan and unchanged sales in Asia-Pacific. On a
constant-exchange-rate basis that eliminates the effect from translating sales made outside
the U.S. into U.S. dollars (see Appendix I at PS-105), worldwide net sales decreased 3%
from the prior year.
Net earnings decreased 4% to $446.1 million in 2016, or $3.55 per diluted share. Net
earnings in 2016 included impairment charges of $0.19 per diluted share (see Appendix
I at PS-105). Net earnings in 2015 included charges of $0.24 per diluted share (see
Appendix I at PS-105).
Store Expansion:
The Company added a net of 6 TIFFANY & CO. stores, resulting in a 3% net increase in
gross retail square footage.
Product Introductions:
The Company expanded its offerings within several existing jewelry collections, including
its TIFFANY T and RETURN TO TIFFANY®YY LOVE collections, and introduced new watch
designs.
Cash Flow:
The Company generated cash flow from operating activities of $702.1 million in 2016,
compared with $813.6 million in 2015. Cash flow from operating activities in 2016
included a voluntary cash contribution of $120.0 million made by the Company to its U.S.
pension plan.
Returning Capital to
Shareholders:
The Company returned cash to shareholders by continuing to pay regular quarterly dividends
(which were increased 12.5% effective July 2016 to $0.45 per share, or an annualized
rate of $1.80 per share) and spending $183.6 million to repurchase 2.8 million shares of
its common stock.
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EXECUTIVE COMPENSATION HIGHLIGHTS
The Board's continued commitment to pay for performance, and other leading compensation practices, was demonstrated
in Fiscal 2016 by the following highlights:
• The majority of compensation payable to the CEO and other named executive officers is tied to the Company's
financial performance and/or the performance of the stock price (87% for the CEO and 72% for the other named
executive officers, on average), with significant emphasis on long-term incentives.
• Long-term and short-term incentive awards are payable contingent on key performance measures, including
operating earnings, net earnings per share and return on assets.
• Short-term incentive awards for Fiscal 2016 were paid out to the named executive officers at 87-99% of target,
based on achievement of operating earnings for the year relative to target and individual performance factors.
• For the performance period beginning February 1, 2014 and ending January 31, 2017 (Fiscal 2014-Fiscal
2016), performance-based restricted stock units vested at 54.92% of target shares (27.46% of maximum
TIFFANY & CO.
PS-4
shares), based on achievement of net earnings per share, on a diluted basis, and return on assets relative to
pre-established targets.
•
Incentive compensation is subject to recoupment in the event of an accounting restatement due to material
noncompliance with financial reporting requirements.
• Executive officers are expected under the Company's share ownership policy to hold shares of common stock
worth five times their annual base salary for the CEO and two to three times their annual base salary for other
named executive officers.
•
In the event of a change in control, severance benefits are only payable upon an involuntary termination ("dual
trigger").
• The Compensation Committee of the Board retains an independent compensation consultant to advise on the
executive compensation program and practices.
2018 ANNUAL MEETING
If you wish to submit a proposal to be included in the Proxy Statement for our 2018 Annual Meeting, we must receive
it no later than December 8, 2017. Proposals should be sent to the Company at 727 Fifth Avenue, New York, New York
10022 to the attention of the Corporate Secretary (Legal Department).
Our By-laws set forth certain procedures for shareholders of record who wish to nominate directors or propose other
business to be considered at an annual meeting. If you wish to nominate a candidate for election as a director at an
annual meeting or propose other business for consideration at an annual meeting, written notice complying with the
requirements set forth in our By-laws generally must be delivered to the Company at 727 Fifth Avenue, New York, New
York 10022 to the attention of the Corporate Secretary (Legal Department), not later than 90 days, and not earlier than
120 days, prior to the first anniversary of the preceding year's annual meeting. Accordingly, a shareholder nomination
or proposal intended to be considered at the 2018 Annual Meeting must be received by the Company no earlier than
January 25, 2018 and no later than February 24, 2018.
Except as required by applicable law, the Company will consider only proposals meeting these requirements and the
applicable requirements of the Securities and Exchange Commission (the "SEC") and our By-laws.
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TIFFANY & CO.
PS-5
QUESTIONS YOU MAY HAVE REGARDING THIS PROXY STATEMENT
WHAT IS THE PURPOSE OF THIS PROXY STATEMENT AND THE ACCOMPANYING MATERIAL?
This Proxy Statement and accompanying material, including the form of proxy, have been sent to you on behalf of the
Company by order of the Board.
This Proxy Statement was first sent to the Company's shareholders on or about April 7, 2017, in connection with the
2017 Annual Meeting of the shareholders of the Company to be held on Thursday, May 25, 2017, at 9:30 a.m. at The
Rubin Museum of Art, 150 West 17th Street, New York, New York.
You are entitled to vote at our 2017 Annual Meeting because you were a shareholder, or held Company stock through
a broker, bank or other nominee, at the close of business on March 27, 2017, the record date for this year's Annual
Meeting. That is why you were sent this Proxy Statement and accompanying material.
WHAT INFORMATION IS CONTAINED IN THIS PROXY STATEMENT AND THE ACCOMPANYING MATERIAL?
The information included in this Proxy Statement relates to the proposals to be considered and voted on at the 2017
Annual Meeting, the voting process, the compensation of our directors and most highly compensated executive officers,
and other required information. This Proxy Statement is accompanied by our Annual Report on Form 10-K, which
contains financial and other information about our business during Fiscal 2016.
WHY DID I RECEIVE A NOTICE REGARDING THE INTERNET AVAILABILITY OF THIS PROXY STATEMENT AND THE ACCOMPANYING
MATERIAL INSTEAD OF A PAPER COPY OF THE PROXY MATERIALS?
As is the practice of many other companies, the Company is now providing proxy materials by a "notice and access"
process. As a shareholder, you will receive a written notice of proxy, by postal service or e-mail, with instructions on
how to access the proxy materials. 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 shareholders who wish to receive a paper
report may request one. In some instances, shareholders will receive a proxy card and paper report automatically.
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HOW CAN I REQUEST AND RECEIVE A PAPER OR E-MAIL COPY OF THE PROXY MATERIALS?
To receive a paper or e-mail copy of the proxy materials, please visit or contact:
1) By Internet:
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2) By Telephone:
1-800-579-1639
3) By E-Mail*:
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sendmaterial@proxyvote.com
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*
If requesting materials by e-mail, please send a blank e-mail with the 16-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.
Please make the request as instructed above on or before May 11, 2017 to facilitate timely delivery.
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.comy
. 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 Shareholder Meeting to
be Held on May 25, 2017
The Proxy Statement and Annual Report on Form 10-K are available to shareholders at
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TIFFANY & CO.
PS-6
WHAT MATTERS WILL BE VOTED ON AT THE 2017 ANNUAL MEETING?
There are five matters scheduled to be voted on at the 2017 Annual Meeting:
Item No. 2: Ratification of the selection of the independent registered public accounting firm
to audit our Fiscal 2017 financial statements;
Item No. 3: Approval, on an advisory basis, of the compensation of the Company's named
executive officers as disclosed in this Proxy Statement ("Say on Pay");
Item No. 4: Preference, on an advisory basis, on the frequency of seeking shareholder
approval of the compensation paid to the Company's named executive officers; and
Item No. 5: Approval of the Tiffany & Co. 2017 Directors Equity Compensation Plan.
In addition, such other business as may properly come before the 2017 Annual Meeting or any adjournment or
postponement thereof may be voted on.
DOES THE BOARD OF DIRECTORS RECOMMEND VOTING IN FAVOR OF THE PROPOSALS?
The Board recommends a vote "FOR" each of the director nominees and the proposals set forth in Items 2, 3 and 5. In
respect of Item 4, the Board recommends a vote "FOR" a recommendation that the shareholders approve the compensation
paid to the Company's named executive officers every year.
WHAT SHARES CAN I VOTE?
You may vote all of the shares of the Company's common stock that you owned at the close of business on March 27,
2017, the record date.
HOW MANY VOTES DO I HAVE?
Each share of the Company's common stock has one vote. The number of shares, or votes, that you have at the 2017
Annual Meeting is indicated on the enclosed proxy card or notice.
HOW DO I VOTE MY SHARES?
You can vote your shares at the 2017 Annual Meeting either by submitting your vote or instruction prior to the meeting,
or by attending the meeting and voting in person.
Voting instructions, whether voting is in person or by proxy, vary depending on whether you are a shareholder of record
(also known as a "registered shareholder") or a beneficial owner of shares held in street name:
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Shareholder of Record: If your shares are registered directly in your name with the Company's transfer agent,
Computershare, you are considered the shareholder of record with respect to those shares. Instructions for how
to vote your shares are set forth below.
Beneficial Owner of Shares Held in Street Name: If your shares are held in an account at a brokerage firm,
bank, broker-dealer, or other similar organization, or if your shares are held in the Tiffany and Company Employee
Profit Sharing and Retirement Savings Plan (the "401K Plan"), then you are the "beneficial owner" of shares
held in "street name." The organization holding, or trustee of, your account is considered the shareholder of
record for purposes of voting at the 2017 Annual Meeting. As a beneficial owner, you have the right to instruct
that organization or trustee on how to vote the shares held in your account. Those instructions are contained
in the "voting instruction form" sent to you and are summarized below.
TIFFANY & CO.
PS-7
HOW DO I VOTE MY SHARES BEFORE THE 2017 ANNUAL MEETING IF I AM A SHAREHOLDER OF RECORD?
You can vote by proxy by having one or more individuals who will be at the 2017 Annual Meeting vote your shares for
you. These individuals are called "proxies," and using them to cast your ballot at the 2017 Annual Meeting is called
voting "by proxy."
Proxies will extend to, and be voted at, any adjournment or postponement of the 2017 Annual Meeting.
If you vote by proxy, you will have designated three officers of the Company to act as your proxies at the 2017 Annual
Meeting. One of them will then vote your shares at the 2017 Annual Meeting in accordance with the instructions you
have given them on the proxy card or by telephone or the Internet with respect to each of the proposals presented in
this Proxy Statement.
While we know of no other matters to be acted upon at the 2017 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, your proxy will vote on such
other matters in accordance with his or her best judgment.
A shareholder of record may vote by proxy any of the following ways:
• Via the Internet. You may vote by proxy via the Internet by following the instructions provided in the notice or
proxy card; have your notice or proxy card in hand as you will be prompted to enter your control number.
• Via Telephone. You may vote by proxy via telephone by following the instructions provided in the proxy card;
have your notice or proxy card in hand as you will be prompted to enter your control number.
• By Mail. You may vote by proxy by filling out the proxy card and returning it in the envelope provided.
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CAN I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY?
If you decide to vote by proxy (whether by Internet, telephone or mail), you can revoke – that is, change or cancel –
your vote at any time before your proxy casts his or her vote at the 2017 Annual Meeting. Revoking your vote by proxy
may be accomplished in one of three ways:
• You can send an executed, later-dated proxy card to the Corporate Secretary of the Company, call in different
instructions, or provide different instructions through the Internet voting site; or
• You can notify the Corporate Secretary of the Company in writing that you wish to revoke your proxy; or
• You can attend the 2017 Annual Meeting and vote in person.
HOW DO I VOTE MY SHARES BEFORE THE 2017 ANNUAL MEETING IF I AM A BENEFICIAL OWNER OF SHARES HELD IN STREET
NAME?
You may instruct your broker or the 401K Plan's trustee, as applicable, how to vote on your behalf in any of the following
ways:
• Via the Internet. You may instruct your broker or the 401K Plan's trustee, as applicable, as to your vote via the
Internet by visiting www.proxyvote.com and entering the control number found in the notice or voting instruction
form sent to you.
• Via Telephone. You may instruct your broker or the 401K Plan's trustee, as applicable, as to your vote by calling
the toll-free number found in your voting instruction form and entering the control number found in the notice
or voting instruction form sent to you.
• By Mail. You may instruct your broker or the 401K Plan's trustee, as applicable, as to your vote by mail by
filling out the voting instruction form provided to you and returning it in the envelope provided.
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. For more details, see "WHAT IS A BROKER NON-VOTE?" immediately below.
TIFFANY & CO.
PS-8
Shares held in the 401K Plan will be voted by the 401K Plan's trustee in accordance with specific instructions given
by 401K Plan participants to whose accounts such shares have been allocated.
WHAT IS A BROKER NON-VOTE?
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 is permitted
to vote or withhold its vote is determined by the New York Stock Exchange rules and depends on the proposal being
voted upon. With respect to voting on the election of the Board, Say on Pay, the frequency of seeking shareholder
approval of the compensation paid to the Company's named executive officers and the Tiffany & Co. 2017 Directors
Equity Compensation Plan, your broker will be required to withhold its vote unless you provide instructions on those
matters.
If your broker withholds its vote, that is called a "broker non-vote." As stated below, broker non-votes are counted as
present for a quorum, but will have no effect on the outcome of the election of directors or any of the other proposals
set forth herein. See "WHAT CONSTITUTES A QUORUM?" and "WHAT VOTE IS REQUIRED TO APPROVE EACH
PROPOSAL?" below.
CAN I CHANGE THE INSTRUCTION TO MY BROKER OR THE 401K PLAN TRUSTEE?
You may vote in person at the 2017 Annual Meeting, or you may change your instruction to your broker or the 401K
Plan trustee, as applicable, by submitting a subsequent instruction through one of the means set forth above under
"HOW DO I VOTE MY SHARES BEFORE THE 2017 ANNUAL MEETING IF I AM A BENEFICIAL OWNER OF SHARES
HELD IN STREET NAME?".
HOW WILL MY SHARES BE VOTED IN THE ABSENCE OF INSTRUCTIONS?
If you are a shareholder of record and 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:
•
•
•
•
•
FOR the election of all 11 nominees for director named in this Proxy Statement;
FOR the ratification of the selection of PwC as the independent registered public accounting firm to audit our
Fiscal 2017 financial statements;
FOR approval of the compensation paid to the Company's named executive officers in Fiscal 2016;
FOR a recommendation that the shareholders approve the compensation paid to the Company's named executive
officers every year; and
FOR the Tiffany & Co. 2017 Directors Equity Compensation Plan.
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Shares held in a broker's name for which no instructions are received may be voted by the broker, but only in accordance
with the rules of the New York Stock Exchange. For more details, see "WHAT IS A BROKER NON-VOTE?" above. Any
shares held in the 401K Plan for which no instructions are received will be voted in the same proportion as those shares
for which instructions are received.
DO I NEED TO ATTEND THE 2017 ANNUAL MEETING?
No. You may authorize your shares to be voted by following the instructions presented in the notice, proxy card or voting
instruction form.
TIFFANY & CO.
PS-9
IF I WISH TO ATTEND THE 2017 ANNUAL MEETING AND VOTE IN PERSON, WHAT DO I NEED TO DO?
To attend the 2017 Annual Meeting, you will need to pre-register as instructed on your notice or proxy card and print
out the registration confirmation. You will be required to show the registration confirmation as well as photo identification
to enter the 2017 Annual Meeting.
To vote in person at the 2017 Annual Meeting:
• For shareholders of record, you will have the opportunity to vote by ballot at the meeting.
• For beneficial owners of shares held in street name, contact your broker before the 2017 Annual Meeting to
obtain a legal proxy, and bring the legal proxy with you to the meeting. To submit a vote by ballot at the meeting,
you will be required to show the legal proxy as well as photo identification.
WHAT CONSTITUTES A QUORUM?
A "quorum" is the minimum number of shares that must be present at the 2017 Annual Meeting for a valid vote. For
the 2017 Annual Meeting, a majority of shares issued and outstanding on the record date and entitled to vote at the
Annual Meeting must be present.
The number of shares issued and outstanding at the close of business on March 27, 2017, the record date, was
124,775,006. Therefore, 62,387,504 shares must be present at the 2017 Annual Meeting for a quorum to be
established.
To determine if there is a quorum, we consider a share "present" if:
• The shareholder who owns the share is present in person at the 2017 Annual Meeting, whether or not he or
she chooses to cast a ballot on any proposal; or
• The shareholder is represented by proxy at the 2017 Annual Meeting, including, for any beneficial owner of
shares held in street name, by the organization holding such shareholder's account.
If a shareholder is represented by proxy at the 2017 Annual Meeting as described above, his or her shares are deemed
present for purposes of a quorum, even if:
• The shareholder 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.
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 2017
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 PwC as the independent registered public accounting firm to audit the Company's
consolidated financial statements for Fiscal 2017 will be decided by the affirmative vote of the majority of shares
present in person or represented by proxy at the 2017 Annual Meeting and entitled to vote on the matter. That means
that the proposal will pass if more than half of those shares present in person or represented by proxy at the 2017
Annual 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.
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 in person or represented by proxy at the 2017 Annual Meeting and entitled to
TIFFANY & CO.
PS-10
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vote on the matter. That means that the advisory proposal will be approved if more than half of those shares present in
person or represented by proxy at the 2017 Annual Meeting and entitled to vote on the matter vote "for" the
proposal. Therefore, if you abstain from voting it will have the same effect as an "against" vote. Broker non-votes on this
proposal will have no effect.
Because the advisory vote regarding the frequency of seeking shareholder approval of the compensation paid to the
Company's named executive officers does not seek approval of any specific matter — it seeks your specific advice on
when a future vote will be held (every year, every second year or every third year) — no specific percentage of the
vote is required. Abstentions and broker non-votes will not be counted as expressing any preference. The results of
the vote will be compiled and reported to you.
The proposal to approve the Tiffany & Co. 2017 Directors Equity Compensation Plan will be decided by the affirmative
vote of the majority of shares present in person or represented by proxy at the 2017 Annual Meeting and entitled to
vote on the matter. That means that the proposal will be approved if more than half of those shares present in person
or represented by proxy at the 2017 Annual Meeting and entitled to vote on the matter vote "for" the proposal. Therefore,
if you abstain from voting it will have the same effect as an "against" vote. Broker non-votes on this proposal will have
no effect.
WHAT HAPPENS IF A DIRECTOR NOMINEE DOES NOT RECEIVE A MAJORITY OF THE VOTES CAST?
In the event that any of the current directors standing for re-election 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 tendered a resignation letter to the Nominating/Corporate Governance Committee to be considered in
the event that he or she does not receive such a majority vote. 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 such resignation or whether other action should be taken.
HOW ARE PROXIES SOLICITED?
The Company has hired the firm of Georgeson LLC to assist in the solicitation of proxies on behalf of the Board. Georgeson
LLC has agreed to perform this service for a fee of not more than $8,500, plus out-of-pocket expenses.
Employees of Tiffany and Company, a New York corporation and the principal subsidiary of the Company ("Tiffany"),
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.
Proxies may be solicited by mail, in person, by facsimile, by telephone or by e-mail. In addition, we will pay for any
costs incurred by brokerage houses and others for forwarding proxy materials to beneficial owners.
WHO WILL COUNT THE VOTES?
All votes will be tabulated by American Election Services, LLC, the inspector of elections appointed for the 2017 Annual
Meeting.
WHERE CAN I FIND THE VOTING RESULTS OF THE 2017 ANNUAL MEETING?
The Company will announce preliminary voting results at the 2017 Annual Meeting and publish final results in a Form
8-K filed with the SEC within four business days after the 2017 Annual Meeting.
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TIFFANY & CO.
PS-11
OWNERSHIP OF THE COMPANY
SHAREHOLDERS WHO OWN AT LEAST FIVE PERCENT 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 20, 2017. 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 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 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
Qatar Investment Authority
Q-Tel Tower, 8 th88 Floor
Diplomatic Area Street, West Bay
P.O. Box 23224, Doha, State of Qatar
The Vanguard Group, Inc.
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
Blackrock, Inc.
55 East 52nd Street
New York, New York 10055
JPMorgan Chase & Co.
270 Park Avenue
New York, New York 10017
Amount and
Nature of Beneficial
Ownership (a)
Percent of
Class
16,222,436 (b)
13.01%
11,741,458 (c)
9.41%
8,103,518 (d)
6.50%
6,297,742 (e)
5.05%
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a) "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 circumstances where a person has the right to acquire
stock within 60 days or has or shares the power to vote the stock or to sell it. 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.
b) Qatar Investment Authority, a citizen of Qatar, reported such beneficial ownership to the SEC on its Schedule 13G/
A as of February 12, 2014 and stated that it had sole voting and disposition power with respect to all such shares.
c) The Vanguard Group, Inc. reported such beneficial ownership to the SEC on its Schedule 13G/A as of February 10,
2017 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 172,717 shares of the Company's common stock, shared power to vote
23,239 shares, sole power to dispose or direct the disposition of 11,543,497 shares, and shared power to dispose or
direct the disposition of 197,961 shares.
d) Blackrock, Inc. reported such beneficial ownership to the SEC on its Schedule 13G/A as of January 27, 2017 and
stated that, as a parent holding company of the subsidiaries identified in that Schedule, it beneficially owned the
number of shares referred to above. This Schedule stated that Blackrock, Inc. had sole power to vote 6,866,745 shares
of the Company's common stock and sole power to dispose or direct the disposition of 8,103,518 shares.
e) JPMorgan Chase & Co. reported such beneficial ownership to the SEC on its Schedule 13G/A as of January 19, 2017
and stated that, as a parent holding company of the wholly owned subsidiaries identified in that Schedule, it beneficially
owned the number of shares referred to above. This Schedule stated that JPMorgan Chase & Co. had sole power to vote
6,069,644 shares of the Company's common stock, shared power to vote 8,265 shares, sole power to dispose or direct
the disposition of 6,279,482 shares, and shared power to dispose or direct the disposition of 13,590 shares.
TIFFANY & CO.
PS-12
OWNERSHIP BY DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
The following table shows the number of shares of the Company's common stock beneficially owned as of March 20,
2017 by: those persons who are director nominees or who were directors on such date; the principal executive officer
(the "CEO") and the principal financial officers (the "CFO") during Fiscal 2016; the three next most highly compensated
executive officers of the Company as of the end of Fiscal 2016; and the directors and executive officers on March 20,
2017 (see "Executive Officers of the Company" at PS-15) as a group. In the notes to the table below, "Vested Stock
Options" refer to stock options that are exercisable as of March 20, 2017 or will become exercisable within 60 days of
that date.
Name
Directors
Rose Marie Bravo
Gary E. Costley
Roger N. Farah
Lawrence K. Fish
Abby F. Kohnstamm
Michael J. Kowalski (Interim CEO, appointed in Fiscal 2017)
James E. Lillie
Charles K. Marquis
Peter W. May
William A. Shutzer
Robert S. Singer
Francesco Trapani
Executive Officers
Frederic Cumenal (CEO during Fiscal 2016)
Mark J. Erceg (CFO effective October 2016)
Ralph Nicoletti (CFO through May 2016)
Jean-Marc Bellaiche
Pamela H. Cloud
Philippe Galtie
All executive officers and
directors as a group (21 persons):
Amount and Nature of
Beneficial Ownership
Percent of Class a
28,506 b
25,506 c
—
61,983 d
76,483 e
150,020 f
11,000
162,203 g
56,223 h
348,870 i
28,028 j
200,000 k
463,055 l
— m
— n
39,073 o
138,298 p
13,492 q
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
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1,632,715 r
1.3%
a) An asterisk (*) is used to indicate less than 1% of the class outstanding.
b)
c)
d)
e)
f)
Includes 24,506 shares issuable upon the exercise of Vested Stock Options.
Includes 24,506 shares issuable upon the exercise of Vested Stock Options.
Includes 20,646 shares issuable upon the exercise of Vested Stock Options.
Includes 39,223 shares issuable upon the exercise of Vested Stock Options.
Includes 25,679 shares issuable upon the exercise of Vested Stock Options, 12,357 shares issuable upon the vesting
of performance-based restricted stock units on March 22, 2017, 17,572 shares held by the Kowalski Family
Foundation and 50,000 shares held in trust of which Mr. Kowalski is the sole trustee. Mr. Kowalski, the Chairman
of the Tiffany & Co. Board of Directors, was named Interim CEO effective February 5, 2017, in connection with the
departure of Frederic Cumenal as CEO on that same date.
g)
Includes 29,223 shares issuable upon the exercise of Vested Stock Options, 28,980 shares held in the Charles and
Cynthia Marquis Joint Revocable Trust dated December 8, 2003 and 56,000 shares held in the Marquis 2012
TIFFANY & CO.
PS-13
h)
i)
j)
k)
Children's Trust, as Trustee. Mr. Marquis disclaims beneficial ownership of Company shares held by the Marquis
2012 Children's Trust.
Includes 49,223 shares issuable upon the exercise of Vested Stock Options. Mr. May will not stand for re-election
at the 2017 Annual Meeting.
Includes 39,223 shares issuable upon the exercise of Vested Stock Options; 107,500 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 163,937 shares pledged
as security in a margin account. Mr. Shutzer disclaims beneficial ownership of Company shares held by KJC Ltd.
and shares held in the aforementioned trust.
Includes 18,169 shares issuable upon the exercise of Vested Stock Options.
Includes 200,000 shares held by Argenta Holdings Sarl, of which Mr. Trapani owns 100% of the equity interests.
Pursuant to the Schedule 13D filed jointly by Mr. Trapani and JANA Partners LLC ("JANA") with the SEC on February
22, 2017, as of the date of the event which required the filing of such Schedule, Mr. Trapani and JANA may have
been deemed to be members of a "group" for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Rule 13d-5(b)(1) promulgated thereunder for the purpose of working together
to appoint Mr. Trapani to the Board. From and after the time of signing the Cooperation Agreement (as defined below)
and the Trapani Cooperation Agreement (as defined below), each dated as of February 20, 2017, Mr. Trapani and
JANA are required, in accordance with the Cooperation Agreements, to be independent of each other and, as reported
in the Schedule 13D, Mr. Trapani and JANA are no longer working together for any purpose and believe they should
no longer be deemed to be a "group." As a result, Mr. Trapani expressly disclaims beneficial ownership of the
6,095,740 shares reported as beneficially owned by JANA in such Schedule 13D. For more information regarding
the Cooperation Agreement and the Trapani Cooperation Agreement see "Item. 1 Election of the Board" at PS-17.
l)
Includes 417,927 shares issuable upon the exercise of Vested Stock Options and 8,348 shares issuable upon the
vesting of performance-based restricted stock units on March 22, 2017. Mr. Cumenal stepped down from his position
as CEO effective February 5, 2017 and resigned as a director effective February 10, 2017.
m) Mr. Erceg was appointed as CFO effective October 18, 2016.
n) Mr. Nicoletti resigned as CFO effective May 20, 2016.
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p)
Includes 36,894 shares issuable upon the exercise of Vested Stock Options.
Includes 109,126 shares issuable upon the exercise of Vested Stock Options, 3,406 shares issuable upon the vesting
of performance-based restricted stock units on March 22, 2017 and 512 shares held in Ms. Cloud's account under
the Tiffany Employee Profit Sharing and Retirement Savings Plan.
q)
Includes 12,822 shares issuable upon the exercise of Vested Stock Options.
r)
Includes 635,981 shares issuable upon the exercise of Vested Stock Options; 25,297 shares issuable upon the
vesting of performance-based restricted stock units on March 22, 2017; 936 shares held in accounts under the
Tiffany Employee Profit Sharing and Retirement Savings Plan; and three shares held in the Tiffany Employee Stock
Purchase Plan.
See "Compensation of the CEO and other Executive Officers–Compensation Discussion and Analysis–Equity Ownership
by Executive Officers and Non-Executive Directors," beginning at PS-61 for a discussion of the Company's share ownership
policy.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors, executive officers and greater-than-10-percent
shareholders 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 2016, all filing requirements under Section 16(a) applicable to our directors, executive officers and
greater-than-10-percent shareholders were satisfied in a timely manner.
TIFFANY & CO.
PS-14
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are:
Name
Age
Position
Michael J. Kowalski
Mark J. Erceg
Jean-Marc Bellaiche
Victoria Berger-Gross
Pamela H. Cloud
Jennifer de Winter
Philippe Galtie
Leigh M. Harlan
Andrew W. Hart
Caroline D. Naggiar
65
48
47
61
47
56
56
40
49
59
Chairman of the Board and Interim Chief Executive Officer
Executive Vice President – Chief Financial Officer
Senior Vice President – Strategy & Business Development
Senior Vice President – Chief Human Resources Officer
Senior Vice President – Global Category Marketing
Senior Vice President – Americas
Senior Vice President – International
Senior Vice President – Secretary & General Counsel
Senior Vice President – Diamond & Jewelry Supply
Senior Vice President – Chief Brand Officer
Year Joined
Tiffany
1983
2016
2014
2001
1994
2015
2015
2012
1999
1997
Michael J. Kowalski. Mr. Kowalski joined Tiffany in 1983 and served as Chief Executive Officer ("CEO") from 1999 until
his retirement from that position in 2015. Mr. Kowalski has been a director of Tiffany & Co. since 1995 and has been
Chairman since the end of Fiscal 2002. He was appointed Interim CEO of Tiffany & Co. effective February 5, 2017,
and it is expected that he will continue to serve in such capacity until a new CEO is appointed by the Company. Mr.
Kowalski also served on the Board of Directors of The Bank of New York Mellon Corporation from 2007 to 2015. The
Bank of New York Mellon Corporation is one of Tiffany & Co.'s principal banking relationships, serving as a co-syndication
agent and lender under Tiffany & Co.'s revolving credit facilities, as the trustee under the indenture governing certain
of Tiffany & Co.'s senior notes and as the trustee for the Tiffany and Company 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.
Mark J. Erceg. Mr. Erceg joined Tiffany on October 18, 2016 as Executive Vice President – Chief Financial Officer. Prior
to joining Tiffany, Mr. Erceg held the role of executive vice president and chief financial officer for Canadian Pacific
Railway Limited, a transcontinental railway, from 2015 to 2016, and for Masonite International Corporation, a global
manufacturer of commercial and residential doors, from 2010 to 2015. Previously, Mr. Erceg held finance, market
strategy, customer response, general management and global investor relations positions at The Procter & Gamble
Company during his tenure there from 1992 to 2010.
Jean-Marc Bellaiche. Mr. Bellaiche joined Tiffany in 2014 as Senior Vice President – Strategy & Business Development,
with responsibility for business initiatives outside of jewelry such as watches, leather goods, eyewear and fragrance.
Mr. Bellaiche was designated an executive officer of the Company effective April 1, 2015. Prior to joining Tiffany, Mr.
Bellaiche held positions of increasing responsibility at the Boston Consulting Group from 1992 to 2014, where he was
appointed as a partner and managing director in 2003 and senior partner and managing director – global leader, luxury
fashion beauty and department stores, in 2010. In those roles, Mr. Bellaiche was responsible for leading and directing
teams of worldwide consulting professionals as they designed and implemented long-term competitive business strategies
for that company's clients.
Victoria Berger-Gross. Dr. Berger-Gross joined Tiffany in 2001 as Senior Vice President – Human Resources. Her current
title is Senior Vice President – Chief Human Resources Officer.
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. In February
2016, Ms. Cloud was named Senior Vice President – Global Category Marketing, with responsibility for management
of the Company's key product categories as well as global merchandising operations.
Jennifer de Winter. Ms. de Winter joined Tiffany in March 2015 as Senior Vice President – Northern America, with
responsibility for all sales channels in the United States and Canada. In July 2015, Ms. De Winter was designated an
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PS-15
executive officer of the Company and her responsibilities were expanded, as she became responsible for all sales channels
in the Company's Americas region. Her current title is Senior Vice President – Americas. Prior to joining Tiffany, Ms.
de Winter served as Executive Vice President, Stores at Saks Fifth Avenue from 2008 to 2013. Following the acquisition
of Saks Fifth Avenue by Hudson's Bay Company in 2013, Ms. de Winter was appointed Executive Vice President and
Chief Merchandising Officer of Saks Fifth Avenue and served in that role until 2015.
Philippe Galtie. Mr. Galtie joined Tiffany in August 2015 as Senior Vice President – International, with responsibility
for all sales channels in the Company's Asia Pacific, Europe, Japan and Emerging Markets regions, as well as oversight
of global store development and global sales operations. In 2016, Mr. Galtie assumed responsibility for global customer
and omnichannel management and in 2017 he also assumed responsibility for global customer and sales service. Prior
to joining Tiffany, Mr. Galtie held the role of International Retail Director at Cartier since 2011, where he was responsible
for oversight of retail and client strategy, client relations and services, operations, store design and merchandising.
Leigh M. Harlan. Ms. Harlan joined Tiffany in 2012 as Associate General Counsel. In 2014, she was promoted to Senior
Vice President – Secretary & General Counsel, with responsibility for the Company's worldwide legal affairs. Prior to
joining Tiffany, Ms. Harlan was an attorney at the law firm of Cravath, Swaine & Moore LLP, where she practiced corporate,
transactional and finance law, from 2005 to 2012.
Andrew W. Hart. Mr. Hart joined Tiffany in 1999 as Director – Materials Management and advanced through positions
of increasing management responsibility. In 2012, he was promoted to Senior Vice President – Diamonds and Gemstones,
with responsibility for the Company's global diamond and gemstone supply chain. In 2013, Mr. Hart assumed
responsibility for jewelry manufacturing as well. His current title is Senior Vice President – Diamond & Jewelry Supply.
Caroline D. Naggiar. Ms. Naggiar joined Tiffany in 1997 as Vice President – Marketing Communications. She was
promoted to Senior Vice President, responsible for advertising and marketing in 1998, and in 2007 she was assigned
additional responsibility for the Public Relations department and named Chief Marketing Officer. In February 2016,
Ms. Naggiar was named Senior Vice President – Chief Brand Officer. Her current responsibilities include the establishment
of the strategic vision for the TIFFANY & CO. brand, managing brand equity, global brand management and global public
relations.
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TIFFANY & CO.
PS-16
ITEM 1. ELECTION OF THE BOARD
Each year, the Company elects directors at an annual meeting of its shareholders. Pursuant to the Company's By-laws,
directors are required to be less than age 74 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. The Board
has granted such a waiver in respect of the nomination of Charles K. Marquis, who is currently age 74, at the 2017
Annual Meeting. See "Board of Directors and Corporate Governance–Board Leadership Structure" and "–Board
Refreshment" for additional information regarding this waiver.
At the 2017 Annual Meeting, 11 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. Peter W. May is not standing for
re-election at the 2017 Annual Meeting, and the Board thanks him for his exemplary service to the Company.
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 2017 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 2017 Annual
Meeting.
Why the Nominees were Chosen to Serve. Each of the 11 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
shareholders. All nominees, except Messrs. Farah, Lillie and Trapani, have previously been elected as directors by the
Company's shareholders.
On February 20, 2017, JANA and the Company entered into a Cooperation Agreement (the "Cooperation Agreement"),
pursuant to which the Company agreed that, subject to the conditions set forth therein, the Board would appoint (i)
Messrs. Farah, Lillie and Trapani to the Board and (ii) Mr. Trapani to the Search and Nominating/Corporate Governance
Committees, in each case no later than 10 business days after the date of the Cooperation Agreement. Messrs. Farah,
Lillie and Trapani were subsequently appointed to the aforementioned positions on March 6, 2017. Pursuant to the
Cooperation Agreement, the Company also agreed that, subject to the conditions set forth therein, the Board would
nominate each of Messrs. Farah, Lillie and Trapani for election to the Board at the 2017 Annual Meeting.
Messrs. Farah, Lillie and Trapani have each provided to the Company an executed irrevocable resignation letter from
the Board that will be effective (subject to Board acceptance) if JANA ceases to comply with or breaches any of the
terms of the Cooperation Agreement in any material respect and, after receiving notice of such breach, does not cure
such breach, and, solely with respect to Mr. Trapani, such resignation letter will also be effective (subject to Board
acceptance) if Mr. Trapani ceases to comply with or breaches any of the terms of a separate cooperation agreement,
entered into on February 20, 2017 between the Company and Mr. Trapani (the "Trapani Cooperation Agreement") in
any material respect and, after receiving notice of such breach, does not cure such breach. JANA and Mr. Trapani have
also each agreed that, for a specified period of time, they will vote their respective shares in favor of the election of
each of Messrs. Farah, Lillie and Trapani, as well as all directors who were members of the Board as of February 20,
2017 who are nominated and recommended by the Board for election at an annual meeting of shareholders. Pursuant
to the Cooperation Agreement and the Trapani Cooperation Agreement, JANA and Mr. Trapani are each committed to
be independent of each other following the date of such Agreements.
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Pursuant to the Cooperation Agreement, the Company agreed to limit waivers under the retirement age provision of its
By-laws referenced above, such that, in accordance with such mandatory retirement age, Mr. May will not stand for re-
election at the 2017 Annual Meeting and Messrs. Marquis and Costley will not stand for re-election at the 2018 Annual
Meeting. The foregoing summary of the Cooperation Agreement and Trapani Cooperation Agreement is not complete
and is subject to, and is qualified by reference to, the full text of the Cooperation Agreement and Trapani Cooperation
Agreement, which are filed as Exhibits 10.37 and 10.38, respectively, to the Company's Current Report on Form 8-K
filed with the SEC on February 21, 2017.
The specific experience and qualifications of each director nominee is set forth in the brief biographies that follow.
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."
TIFFANY & CO.
PS-17
Information concerning each of the nominees of the Board is set forth below:
Michael J.
Kowalski
Rose Marie Bravo
Gary E. Costley
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Roger N. Farah
Mr. Kowalski, 65, was named Interim Chief Executive Officer of Tiffany & Co. effective February
5, 2017 and it is expected that he will continue to serve in such capacity until a new Chief
Executive Officer ("CEO") is appointed by the Company. Mr. Kowalski joined Tiffany in 1983
and was CEO from 1999 until his retirement effective March 31, 2015. Mr. Kowalski has
been a director of Tiffany & Co. since 1995 and has been Chairman since the end of Fiscal
2002. He has also served on the Board of Directors of the following public company during
the past five years: The Bank of New York Mellon Corporation. The Bank of New York Mellon
Corporation is one of Tiffany & Co.'s principal banking relationships, serving as a co-syndication
agent and lender under Tiffany & Co.'s revolving credit facilities, as the trustee under the
indenture governing certain of Tiffany & Co.'s senior notes and as the trustee for the Tiffany
and Company 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.
Key Skills: merchandising, management, motivation and strategic planning.
Ms. Bravo, CBE, 66, became a director of Tiffany & Co. in 1997. Ms. Bravo previously served
as CEO 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 positions at Macy's,
culminating in the Chairman & CEO role at I. Magnin, which was a division of R. H. Macy &
Co. Ms. Bravo also serves on the Board of Directors of Estee Lauder Companies Inc. and
Williams-Sonoma, Inc.
Key Skills: retail and brand management, merchandising and product development.
Dr. Costley, 73, became a director of Tiffany & Co. in 2007. He served as Chairman and CEO
of International Multifoods Corporation, a manufacturer and marketer of branded consumer
food and food service products, from 1997 until his retirement in 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 1994 when he was
President of Kellogg North America. Dr. Costley serves on the Board of Directors and as Lead
Director of Prestige Brands Holdings, Inc. and as the Chairman of the Board of Directors of
NanoBio Corporation, a private early stage vaccine company. He has also served on the Board
of Directors of the following public companies during the past five years: Covance Inc. and
The Principal Financial Group.
Key Skills: multi-divisional operations, global management, marketing and manufacturing.
Mr. Farah, 64, became a director of Tiffany & Co. on March 6, 2017. He served as the Co-
CEO of Tory Burch LLC from September 2014 to March 1, 2017, when he transitioned to the
role of Executive Director in which he serves in an advisory capacity to that company. He has
also served as a member of the Board of Directors of Tory Burch LLC since September 2014.
Mr. Farah served as President and Chief Operating Officer of Ralph Lauren Corporation from
2000 to 2013 and as Executive Vice Chairman from November 2013 to May 2014. He was
a member of the Board of Directors of Ralph Lauren Corporation from 2000 to 2014. Prior
to joining Ralph Lauren Corporation, he served as Chairman of the Board and CEO of Venator
Group, Inc. (now Foot Locker, Inc.), as President and Chief Operating Officer of R.H. Macy &
Co., Inc. and as Chairman and CEO of Federated Merchandising Services. Mr. Farah currently
serves on the Board of Directors of The Progressive Corporation and Aetna, Inc., and as a non-
executive director of Metro Bank PLC. Mr. Farah holds a B.S. in Economics from the University
of Pennsylvania, Wharton School of Business.
Key Skills: luxury brand management, global management, marketing and product
development.
TIFFANY & CO.
PS-18
Lawrence K. Fish
Abby F. Kohnstamm
Mr. Fish, 72, became a director of Tiffany & Co. in 2008. Mr. Fish previously served as
Chairman, President and CEO of Citizens Financial Group, Inc. ("Citizens") from 1992 until
2005, when he relinquished the title of President. Mr. Fish relinquished the title of CEO of
Citizens in 2007 and retired as Chairman in 2009. Mr. Fish is a member of the Corporation
and Executive Committee of Massachusetts Institute of Technology. Mr. Fish serves as
Chairman of Houghton Mifflin Harcourt and as a member of the Board of Directors of Textron.
He has also served on the Board of Directors of the following public company during the past
five years: National Bank Holdings. Mr. Fish serves as a Trustee Emeritus of The Brookings
Institution, as Chairman of Management Sciences for Health and as a Trustee of Woods Hole
Oceanographic Institute.
Key Skills: risk analysis, finance, brand management and community banking.
Ms. Kohnstamm, 63, is Executive Vice President and Chief Marketing Officer at Pitney Bowes
Inc. ("Pitney Bowes"). In this role, she oversees all of Pitney Bowes's marketing and
communications worldwide, as well as citizenship and philanthropy. Before joining Pitney
Bowes in June 2013, Ms. Kohnstamm was the President and founder of Abby F. Kohnstamm
& Associates, Inc., a marketing and consulting firm. Prior to establishing her company in
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. Before joining IBM, Ms. Kohnstamm
held a number of senior marketing positions at American Express from 1979 through 1993.
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 2001. Ms. Kohnstamm also served on the Board of
Directors of the following public company during the past five years: World Fuel Services
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 digital marketing.
James E. Lillie
Mr. Lillie, 55, became a director of Tiffany & Co. on March 6, 2017. He is the Vice Chairman
of Mariposa Capital, a private investment office, and a consultant for Newell Brands, which
acquired Jarden Corporation in April 2016. He held senior positions at Jarden Corporation
from 2003 through the aforementioned acquisition of the company, including as President
and Chief Operating Officer and, beginning in 2011, CEO. He also served as a member of the
Board of Directors of Jarden Corporation from 2011 until the aforementioned acquisition.
Prior to joining Jarden Corporation, Mr. Lillie served as Executive Vice President of Operations
at Moore Corporation Limited and held several senior level management positions at portfolio
companies of Kohlberg, Kravis, Roberts & Company. Mr. Lillie serves on the Board of Directors
of Nomad Foods Limited and Royal Oak Charcoal, and previously served on the Board of
Directors of Radio Prisa in Spain and the US-China Business Council. Mr. Lillie holds a B.A.
from the University of Wisconsin.
Key Skills: global management, strategic planning, finance, product innovation and business
process optimization.
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Charles K. Marquis
Mr. Marquis, 74, has been a Senior Advisor to Investcorp International, Inc. since 1999. 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 first elected a director
of Tiffany & Co. in 1984.
Key Skills: finance, governance, risk analysis, crisis management and investor relations.
TIFFANY & CO.
PS-19
William A. Shutzer
Robert S. Singer
Francesco Trapani
Mr. Shutzer, 70, has been a Senior Managing Director of Evercore Partners, a financial advisory
and private equity firm, since 2004. 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 first elected a director of Tiffany & Co. in 1984. Mr. Shutzer serves on the
Board of Directors of ExamWorks Group, Inc., Evercore Trust Company and RSI Home Products,
Inc. He has also served on the Board of Directors of the following public company during the
past five years: Mecklermedia Corporation (formerly known as Mediabistro Inc.).
Key Skills: finance, investor relations and strategic planning.
Mr. Singer, 65, served as CEO of Barilla Holding S.p.A, a major Italian food company, from
2006 to 2009. From 2004 to 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 1995 to 2004. From 1987 to 1995, Mr. Singer was a Partner at Coopers & Lybrand.
Mr. Singer served on the Board of Directors of Benetton S.p.A. from 2006 to 2010, and on
the Board of Directors of Fairmont Hotels & Resorts, Inc. from 2003 to 2006. Mr. Singer
currently serves on the Board of Directors of the following public companies: Mead Johnson
Nutrition Company, Coty Inc. and Jimmy Choo PLC. Mr. Singer also currently serves on the
Board of Directors of several non-public companies. Mr. Singer was first elected a director of
Tiffany & Co. in 2012.
Key Skills: accounting, global retail, financial and general management of luxury brands.
Mr. Trapani, 60, became a director of Tiffany & Co. on March 6, 2017. From 1984 until 2011,
Mr. Trapani served as CEO of Bulgari S.p.A., including in connection with the company's listing
on the Italian Stock Exchange, creation of Bulgari Hotels & Resorts, and acquisition by LVMH
Moët Hennessy – Louis Vuitton S.A. ("LVMH") in 2011. From 2011 to 2014, Mr. Trapani
served as Chairman and CEO of the LVMH Watches and Jewelry Division, following which he
served on the Board of Directors of LVMH and as a senior advisor to the LVMH CEO until his
resignation on February 20, 2017. Mr. Trapani joined Clessidra SGR, the largest private equity
fund in Italy, as Executive Vice-Chairman in 2014, and later served as Chairman of the Board
until the company's sale in 2016. Mr. Trapani holds a degree in business administration from
the University of Naples.
Key Skills: luxury brand management, finance, strategic planning and global management.
In the event that any of the current directors standing for re-election 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 tendered a resignation letter to the Nominating/Corporate Governance Committee to be considered in
the event that he or she does not receive such a majority vote. 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.h of our Corporate
Governance Principles for further information about the procedure that would be followed in the event of such an election
result. The Corporate Governance Principles may be viewed on the Company's website www.tiffany.comy
, by clicking on
"Investors" at the bottom of the page and then selecting "Corporate Governance" from the left-hand column.
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL 11 NOMINEES FOR DIRECTOR.
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PS-20
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
CORPORATE GOVERNANCE HIGHLIGHTS
The Company and its Board are committed to maintaining strong corporate governance practices that serve the interests
of the Company and its shareholders. The Board recognizes that the Company's corporate governance practices must
continually evolve, and the Board monitors developments in governance best practices to ensure that the Company
continues to effectively represent the interests of its shareholders. The Board has adopted several corporate governance
practices in support of this commitment, including:
• Annual election of directors;
• Majority voting standard for director elections – each director must be elected by a majority of votes cast, not a
plurality;
• Director resignation policy – each of the nominees for director has tendered a resignation letter to the Nominating/
Corporate Governance Committee to be considered in the event that he or she does not receive a majority of
"for" votes of the votes cast "for" or "against" his or her candidacy. The Nominating/Corporate Governance
Committee will then make a recommendation to the Board on whether to accept or reject the resignation or
whether other action should be taken;
• Director independence – 9 of the Company's 11 directors up for election are independent;
• Presiding independent director – the Company's Corporate Governance Principles require a presiding independent
director, tasked with specific responsibilities, to ensure independent oversight whenever the Chairman of the
Board is not independent and to facilitate communication by shareholders and employees with non-management
directors;
• Director overboarding policy – directors may not serve on a total of more than five public company boards
(including the Board);
• Resignation on job change or new directorship – a director must submit a letter of resignation to the Nominating/
Corporate Governance Committee on a change in employment and upon accepting a directorship with another
public company (or any other organization that would require a significant time commitment). The Nominating/
Corporate Governance Committee may then accept or decline such resignation;
• Annual self-evaluation – the Company's independent directors participate in an annual assessment and evaluation
of the workings and efficiency of the Board and each of the committees on which they serve, the results of
which are discussed with the full Board;
Long-standing policies governing business and ethical conduct;
•
• Commitment to corporate social responsibility; and
•
Leading compensation practices – see "Compensation of the CEO and Other Executive Officers–Compensation
Discussion and Analysis–Executive Summary–Corporate Governance Best Practices" at PS-44.
THE BOARD, IN GENERAL
The Board is currently composed of 12 members. The Board can fill vacancies and newly created directorships, as well
as provide for a greater or lesser number of directors, subject to the terms of the Cooperation Agreement, which limits
the Board's ability to increase in size over 12 members (with certain exceptions, including an increase in the Board's
size to accommodate the appointment to the Board of a new CEO). Effective as of the date of the 2017 Annual Meeting,
the Board intends to take action to establish the number of directors constituting the whole Board at 11.
Under the Company's Corporate Governance Principles, directors may not serve on a total of more than five public
company boards. Service on the Board is included in that total.
THE ROLE OF THE BOARD IN CORPORATE GOVERNANCE
The Board plays several important roles in the governance of the Company, as set out in the Company's Corporate
Governance Principles. The Corporate Governance Principles may be viewed on the Company's website www.tiffany.comy
,
by clicking on "Investors" at the bottom of the page and then selecting "Corporate Governance" from the left-hand
column. The responsibilities of the Board include:
• Review and approval of the annual operating plan prepared by management;
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• Monitoring of performance in comparison to the annual operating plan;
• Review and approval of the Company's multi-year strategic plan prepared by management;
• Consideration of topics of relevance to the Company's ability to carry out its strategic plan;
• Selection and evaluation of, and determination of whether to retain or replace, the Company's CEO;
• Participation in succession planning for the Company's other executive officers;
• Review and approval of delegations of authority by which management carries out the day-to-day operations of
the Company and its subsidiaries;
• Review of management's enterprise risk assessment;
• Review and, if appropriate, modification of Board committee charters;
• Review and approval of the Company's policies or programs with respect to payment of dividends and the
repurchase of common stock; and
• Review and approval of significant actions by the Company.
BOARD LEADERSHIP STRUCTURE
Michael J. Kowalski, the Company's current Interim CEO, served as the Company's CEO from 1999 until March 31,
2015 and has held the position of Chairman of the Board since the end of Fiscal 2002. As such, the role of Chairman
of the Board and the office of CEO have been held by the same individual for much of the Company's recent history
(other than from March 31, 2015 through February 5, 2017, when the position of CEO was held by Mr. Cumenal). On
February 5, 2017, when Mr. Kowalski was named Interim CEO, the Board also commenced a search to recruit a new
CEO. Mr. Kowalski has stated that he anticipates relinquishing his responsibilities as Chairman of the Board to a
successor after an appropriate period following the appointment of a new CEO.
The Company also has a presiding independent director. Charles K. Marquis occupies such position.
Mr. Kowalski, as Chairman of the Board, sets a preliminary agenda for each Board meeting and submits it for the approval
of the presiding independent director. The Chairman of the Board is required to include in such agenda any item
submitted by the presiding independent director. The presiding independent director also approves meeting schedules
for the Board.
Mr. Marquis, as the presiding independent director, has the authority to call meetings of the independent directors. Mr.
Marquis also chairs meetings of the independent and non-management directors, and acts as a liaison between the
Chairman of the Board and the independent directors.
The Board believes the presiding independent director position provides additional independent oversight of the
Company's management and other Board matters. The existence of a presiding independent director also facilitates
communication among the Company's directors or between any of them and the Chairman of the Board, as well as
communication between shareholders and Company employees and the Company's independent and other non-
management directors. As such, the Board recognizes that the presiding independent director can be an important
advisor to the CEO. The Board further believes the presiding independent director performs an important role in the
Board's consideration of, and efforts regarding, its own effectiveness, in establishing leading governance practices and
in facilitating effective Board oversight in crisis or transitional situations.
The Nominating/Corporate Governance Committee believes the Company's existing leadership structure is appropriate
in the context of the Board's current size and given the recent addition of three new directors, the recent departure of
the Company's CEO and the ongoing search for a new CEO. See "Item 1. Election of the Board" at PS-17.
Given Mr. Kowalski's tenure as Chairman of the Board, the Board has had significant opportunity to assess his skills at
moderating discussions during meetings, as well as his responsiveness to the Board's suggestions for the agenda and
the information to be provided by management to the Board. The Board also believes Mr. Kowalski's extensive experience
as the CEO of the Company is valuable to his service as Chairman of the Board. Not only does his in-depth understanding
of the Company's operations improve his ability to set the agenda for each Board meeting, but his experience in leading
the Company also allows the Board additional insight into key matters within its purview, including the strategic planning
process and management succession.
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The independent directors of the Board similarly believe that Mr. Marquis's extensive experience with the Company
and his expertise in governance matters are invaluable in light of the changes in Board composition and executive
leadership. During Mr. Marquis's tenure, the Board has effectively planned for and implemented changes in Board
composition as well as CEO transitions. The Board believes his continued role as presiding independent director,
until his planned retirement from the Board in May 2018, is uniquely important to the Company during the current
period of transition. Therefore, the Board has granted a waiver of the Company's policy on the mandatory retirement
age for directors in respect of the nomination of Mr. Marquis at the 2017 Annual Meeting.
The Board, with the assistance of the Nominating/Corporate Governance Committee, will reassess the appropriateness
of the existing leadership structure as warranted, including following changes in management, in Board composition
or in the nature, scope or complexity of the Company's operations.
EXECUTIVE SESSIONS OF NON-MANAGEMENT DIRECTORS/PRESIDING INDEPENDENT DIRECTOR
Non-management directors meet regularly in executive session without the participation of management directors or
executive officers. This encourages open discussion. In addition, at least once per year the independent directors meet
separately in executive session. In these executive sessions, Mr. Marquis, as presiding independent director, presides.
COMMUNICATION WITH NON-MANAGEMENT DIRECTORS
Shareholders and other interested persons 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 independent 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.
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, Roger N. Farah, Lawrence K. Fish, Abby F. Kohnstamm, James E. Lillie, Charles K.
Marquis, Peter W. May, Robert S. Singer and Francesco Trapani.
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. Trapani is independent, the Board specifically considered the Cooperation Agreement, the
Trapani Cooperation Agreement and the Nomination Agreement (as defined below). In determining that Messrs. Farah
and Lillie are independent, the Board specifically considered the Cooperation Agreement. See "Item 1. Election of the
Board" at PS-17 for additional information regarding the Cooperation Agreement and Trapani Cooperation Agreement.
See "Item 3. Approval, on an Advisory Basis, of the Compensation of the Company's Named Executive Officers–Director
Compensation Table–Additional Compensation from JANA Partners LLC" at PS-97 for additional information regarding
the Nomination Agreement.
To the Company's knowledge, none of the other independent directors or director nominees has any direct or indirect
relationship with the Company, other than as a director.
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BOARD AND COMMITTEE MEETINGS AND ATTENDANCE DURING FISCAL 2016
Pursuant to the Company's Corporate Governance Principles, directors are expected to attend the regularly scheduled
Board meetings, as well as all regularly scheduled meetings for those committees on which they serve. Directors are
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PS-23
expected to attend such meetings in person or, if such attendance in person is not practicable, by telephone or other
communications equipment.
The Board holds one of its regularly scheduled meetings on the date of the annual meeting of its shareholders to facilitate
attendance at the annual meeting by the directors. Seven of the Company's 11 directors up for election attended the
2016 Annual Meeting (three of the non-attending directors were not on the Board in May 2016). Mr. Cumenal, who
resigned as a director as of February 10, 2017, also attended the 2016 Annual Meeting.
Each director who served on the Board during Fiscal 2016 attended at least 83% 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, Finance Committee and Corporate Social Responsibility
Committee) on which he or she served.
• The full Board held six meetings. Attendance averaged 98% amongst all members.
• The Audit Committee held ten meetings. Attendance averaged 93% amongst all members.
• The Compensation Committee and its Stock Option Subcommittee held six meetings. Attendance averaged
97% amongst all members.
• The Nominating/Corporate Governance Committee held six meetings. Attendance averaged 96% amongst all
members.
• The Finance Committee held six meetings. All members attended all meetings.
• The Corporate Social Responsibility Committee held three meetings. All members attended all meetings.
Board Committee Membership
COMMITTEES OF THE BOARD
The committees of the Board, as well as the memberships thereof, consisted of the following as of March 20, 2017:
Search
Chair
Director
Audit*
Compensation
Committee
& Stock
Option Sub-
committee*
Corporate
Social
Responsibility
Dividend
Finance
Nominating/
Corporate
Governance*
Chair
Chair
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Rose Marie
Bravo
Gary E. Costley
Roger N. Farah
Lawrence K.
Fish
Abby F.
Kohnstamm
James E. Lillie
Charles K.
Marquis
Peter W. May
William A.
Shutzer
Robert S.
Singer
Francesco
Trapani
Michael J.
Kowalski
Chair
* Composed solely of independent directors.
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PS-24
Chair
Chair
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.comy
, 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:
• Appointing, compensating, retaining and providing oversight of the Company's independent registered public
accounting firm retained to audit the Company's consolidated financial statements;
• Reviewing the quality-control procedures and independence of the Company's independent registered public
accounting firm and evaluating their proposed audit scope, performance and fee arrangements;
• Approving in advance all audit and non-audit services to be rendered by the independent registered public
accounting firm;
• Reviewing the adequacy of the Company's system of internal accounting and financial controls;
• Discussing the Company's earnings press releases, as well as financial information and earnings guidance
provided to analysts and rating agencies;
• Discussing guidelines and policies with respect to risk assessment and risk management;
• Reviewing with the independent auditor any difficulties the auditor encountered in the course of its audit work,
including any restrictions on the scope of the independent auditor's activities or on access to requested
information, and any significant disagreements with management;
• Setting clear hiring policies for employees or former employees of the independent auditor;
• Establishing procedures for complaints regarding accounting, internal accounting controls or auditing matters;
and
• Conducting a review of our financial statements and audit findings in advance of filing, and reviewing in advance
significant 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. and Mead Johnson Nutrition Company. The
Board also considered Mr. Singer's role as Chairman of the audit committee for Jimmy Choo PLC and Coty Inc. The
Board has determined that Mr. Singer's simultaneous service on the audit committee of two other public companies
will not impair his ability to effectively serve on the Company's Audit Committee. See "Report of the Audit Committee"
at PS-34.
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For additional information regarding the Company's relationship with its independent registered public accounting firm,
see "Relationship with Independent Registered Public Accounting Firm" at PS-35.
Compensation Committee
The primary function of the Compensation Committee is to assist the Board in compensation matters. The Compensation
, by clicking
Committee operates under its charter which may be viewed on the Company's website, www.tiffany.comy
"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:
• Reviewing and approving corporate goals and objectives relevant to the compensation of our CEO;
• Evaluating our CEO's performance in light of those corporate goals and objectives;
• Determining and approving our CEO's compensation level based on such evaluation;
• Making recommendations to the Board with respect to the compensation of our other executive officers, including
compensation under incentive and equity-based plans;
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PS-25
• Reviewing and approving remuneration arrangements for executive officers;
• Making awards to executive officers under the Company's compensation plans, including equity-based plans;
• Considering the expressed view of shareholders on executive compensation matters, including shareholder
proposals and advisory votes, and considering communications with proxy advisory firms and related matters;
and
• Assessing on an annual basis potential material risks to the Company from its compensation programs and
plans.
Pursuant to its charter, the Compensation Committee may delegate any of its functions to one or more subcommittees
composed entirely of members of the Compensation Committee.
Compensation for the non-management members of the Board is set by the Board with advice from the Nominating/
Corporate Governance Committee.
Role of Compensation Consultants
Frederic W. Cook & Co., Inc. ("FW Cook") is an independent advisor retained by the Compensation Committee to provide
advice with respect to the amount and form of executive compensation. FW Cook also provides advice to the Nominating/
Corporate Governance Committee with respect to non-management director compensation.
FW Cook assists the Compensation Committee's development and evaluation of executive compensation policies and
practices and the Compensation Committee's determinations of executive compensation awards by:
• attending Compensation Committee meetings;
• meeting with the Compensation Committee without management present;
• providing third-party data, advice and expertise on proposed executive compensation awards and plan design
(see "Compensation of the CEO and Other Executive Officers–Compensation Discussion and Analysis–
Competitive Compensation Analysis - No Benchmarks" at PS-47);
•
reviewing materials prepared by management and advising the Compensation Committee on the matters included
in these materials, including the consistency of proposals with the Compensation Committee's compensation
philosophy and comparisons to programs at other companies; and
• preparing its own analysis of compensation matters, including positioning of programs in the competitive market
and the design of plans consistent with the Compensation Committee's compensation philosophy.
Independence factors as reflected in the Compensation Committee charter were considered in selecting FW Cook, and
FW Cook was found to be independent. The Compensation Committee has instructed FW Cook to act independently of
management and only at the direction of the Committee, and has advised FW Cook that its ongoing engagement will
be determined solely by the Compensation Committee. FW Cook 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. Management
has assisted in arranging meetings between FW Cook and the Compensation Committee and in facilitating FW Cook's
review of Compensation Committee materials.
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
of the CEO and Other Executive Officers–Compensation Discussion and Analysis–Compensation Evaluation Process" at
PS-46 and "Report of the Compensation Committee" at PS-67.
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Stock Option Subcommittee
The Stock Option Subcommittee determines the grant of options, restricted stock units, cash incentive awards and
other matters under our 2014 Employee Incentive Plan. All members of the Compensation Committee are members of
this subcommittee.
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Compensation Committee Interlocks and Insider Participation
During 2016, the members of the Compensation Committee and its Stock Option Subcommittee were Rose Marie Bravo,
Gary E. Costley, Abby F. Kohnstamm, Charles K. Marquis, Peter W. May and Robert S. Singer. No director serving on
the Compensation Committee or its Stock Option Subcommittee during any part of Fiscal 2016 was, at any time either
during or before such fiscal year, an officer or employee of Tiffany & Co. or any of its subsidiaries. None of the Company's
executive officers serves, or in the past fiscal year served, as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a member of the Board or the Compensation
Committee and its Stock Option Subcommittee.
Nominating/Corporate Governance Committee
The primary function of the Nominating/Corporate Governance Committee is to identify individuals to become Board
members consistent with criteria approved by the Board, and 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
, by clicking "Investors" at the bottom of the page, and then
be viewed on the Company's website, www.tiffany.comy
selecting "Corporate Governance" from the left-hand column. Under its charter, the role of the Nominating/Corporate
Governance Committee includes recommending to the Board:
• Policies on the composition of the Board;
• Criteria for the selection of nominees for election to the Board;
• Nominees to fill vacancies on the Board;
• Nominees for election to the Board;
• Corporate governance principles applicable to the Company;
• Non-management director compensation; and
• Management performance and succession planning.
Submitting Candidate Names
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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 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 shareholders 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.comy
, by clicking "Investors"
at the bottom of the page, and then selecting "Corporate Governance" from the left-hand column. In accordance with
these principles, candidates for director shall be selected on the basis of their business experience, expertise and skills,
with a view to supplementing the business experience, expertise and skills of management and adding further substance
and insight into Board discussions and oversight of management.
The candidate identification and evaluation process includes discussions at meetings of the Nominating/Corporate
Governance Committee and specifications provided to director search firms when such firms are retained. The
Nominating/Corporate Governance Committee engaged a third party search firm in 2015 to assist the Committee in the
identification of certain non-executive director candidates, in light of the fact that certain of the Company's directors
would reach the mandatory retirement age of 74 set forth in the Company's By-laws prior to the Company's 2017 and
2018 Annual Meetings. The Nominating/Corporate Governance Committee has no procedure or means of assessing the
effectiveness of this process other than the process described under "Board Refreshment" below.
While the Company's Corporate Governance Principles do not prescribe diversity standards, as a matter of practice, the
Nominating/Corporate Governance Committee considers the diversity of the Board as a whole when considering
candidates for director. In this context, diversity is broadly construed to include differences of viewpoint, professional
experience, education, skill and other individual qualities and attributes that contribute to an active, effective board.
In addition, one of the factors that the Board considers during its annual self-evaluation is whether the membership of
the Board provides an appropriate mix of skills, experience and backgrounds.
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Messrs. Farah, Lillie and Trapani were appointed to the Board pursuant to the Cooperation Agreement, as discussed
under "Item 1. Election of the Board" above.
Corporate Social Responsibility Committee
The Board formed the Corporate Social Responsibility Committee in 2009 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.comy
, by clicking "Investors" at the bottom of
the page, and then selecting "Corporate Governance" from the left-hand column.
Dividend Committee
The Dividend Committee exercises the power otherwise vested in the Board with respect to the declaration of regular
quarterly dividends in accordance with the dividend policy established by the Board. The Dividend Committee operates
under the charter adopted by the Board. The charter may be viewed on the Company's website, www.tiffany.comy
, by
clicking "Investors" at the bottom of the page, and then selecting "Corporate Governance" from the left-hand column.
Mr. Kowalski is the sole member of the Dividend Committee.
Finance Committee
The Board formed the Finance Committee to assist the Board with its oversight of the Company's capital structure,
liquidity risk, dividend policy, purchase and repurchase of the Company's common stock, debt and equity financings,
the retention of investment bankers and other financial advisors to the Board, the Company's hedging policy and
guarantee of indebtedness incurred by the Company's subsidiaries, as well as of currency, interest rate or commodity
hedging transactions entered into by the Company's subsidiaries. The Finance Committee operates under the charter
, by clicking "Investors"
adopted by the Board. The charter may be viewed on the Company's website, www.tiffany.comy
at the bottom of the page, and then selecting "Corporate Governance" from the left-hand column.
Search Committee
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The Board formed the Search Committee in February 2017, following the departure of Frederic Cumenal as CEO, in
order to identify and perform an initial assessment of potential candidates to serve as CEO of the Company and, based
on such assessment, to propose suitable individuals for consideration by the full Board. The Search Committee operates
under the charter adopted by the Board. The charter may be viewed on the Company's website, www.tiffany.comy
, by
clicking "Investors" at the bottom of the page, and then selecting "Corporate Governance" from the left-hand column.
Pursuant to its charter, the Search Committee will dissolve automatically and without any further action of the Board
once a new CEO is appointed, unless the Board determines otherwise by resolution prior to such time.
BOARD SELF-EVALUATION
Annually, each independent director participates in an assessment and evaluation of the Board's performance and the
performance of each of the Board committees on which he or she serves. The presiding independent director leads a
full Board discussion of the results of such self-assessments.
BOARD REFRESHMENT
Changes to Board composition may result from the Board's self-evaluation practices and related discussions; however,
the Board also ensures refreshment through By-law provisions requiring that directors be less than age 74 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. The Board has granted such a waiver in respect of the nomination of
Charles K. Marquis, who is currently age 74, for election at the 2017 Annual Meeting. The Board has deemed Mr.
Marquis's continued service to be uniquely important to the Company at this time, as discussed above under "Board
Leadership Structure".
In light of upcoming retirements, in 2015 the Board engaged a leading search firm to assist in its search for new
director candidates. On March 6, 2017, after working collaboratively with JANA Partners LLC in connection with the
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Board's refreshment objectives, the Board appointed three new independent directors as contemplated by the
Cooperation Agreement.
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 (or any other organization that would require
a significant time commitment). The Committee shall promptly determine, in light of the circumstances, whether to
accept or decline such resignation. In certain instances, taking into account all relevant factors and circumstances, the
Nominating/Corporate Governance Committee may decline such resignation, but recommend to the Board that such
director cease participation in one or more committees or that such director not be re-nominated to the Board. The
letter of resignation will be of no force and effect if not accepted by the Committee within 10 days of receipt.
MANAGEMENT SUCCESSION PLANNING
One of the Board's primary responsibilities is to ensure that the Company has a high-quality management team in place.
The Board, assisted by the Nominating/Corporate Governance Committee, is responsible for selecting, evaluating the
performance of, and determining whether to retain or replace the Company's CEO. Pursuant to the Company's Corporate
Governance Principles, any such evaluations and determinations must be made with a view towards the effectiveness
and execution of the strategies and decisions set forth by the CEO regarding the Company's long-term strategic plan
and long-term financial performance.
In February 2017, the Board determined that accelerating execution of the Company's core business strategies was
necessary for the Company to compete more effectively and improve performance, and the Company's then-serving CEO
stepped down from that position. On that same date, the Board appointed Mr. Kowalski as Interim CEO and formed a
Search Committee to identify potential candidates for the CEO position. Based on the Search Committee's initial
assessment of candidates, it will propose suitable individuals for consideration by the full Board. The Company expects
that Mr. Kowalski will continue to serve as Interim CEO until a new CEO is appointed by the Company.
The Board also evaluates at least annually, in conjunction with the CEO, the performance and potential of the Company's
other executive officers. The Board, assisted by the Nominating/Corporate Governance Committee, also participates in
the planning for the succession of the Company's other executive officers.
BOARD ROLE IN RISK OVERSIGHT
The Board believes that (i) management is responsible for identifying, assessing and managing the various risks that
may arise in the Company's operations and ensuring that the Board is appropriately aware of any such material risks,
and (ii) 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; annual operating and profit planning; 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 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 one-year (the annual
operating plan) and three-year (the strategic plan) periods and is required to review these plans, as they are developed
and refined, with the Board. Such plans include both financial and non-financial considerations. The Board requires
management to plan on the basis of realistic assumptions. 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.
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TIFFANY & CO.
PS-29
Each year the Board reviews and approves the annual operating plan and the strategic plan. The Board also reviews
specific risk areas on a regular basis. These include insured risks, management authority, investor relations, litigation
risks, foreign currency risks, diamond and product supply risks and inventory risks.
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 risks.
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, to the
extent the full Board is not otherwise present for such meetings. All committee meetings are open to the other directors
and most 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
protection of confidential Company information, insider information and transactions in Company securities, the
acceptance of gifts from those seeking to do business with the Company, the giving of gifts or other items of value to
third parties, processing one's own transactions, protection of computer passwords, political contributions made through
the use of Company funds, prohibition of discrimination or harassment, theft or unauthorized use of Company assets
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.
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The Company has a toll-free "hotline" to receive complaints from employees, vendors, shareholders 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.
The Company also has a Code of Business and Ethical Conduct for the directors, the CEO, the Chief Financial Officer
and all other executive 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 the Company's business conduct
policy. Waivers may only be made by the Board. A summary of the Company's business conduct policy and a copy of
the Code of Business and Ethical Conduct are posted on the Company's website, www.tiffany.comy
, by clicking "Investors"
at the bottom of the page, and then selecting "Corporate Governance" from the left-hand column. 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 the Company's website. Accordingly, the Company 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. The Company 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.
POLITICAL SPENDING
The Board has adopted the Tiffany & Co. Principles Governing Corporate Political Spending, which are intended to
ensure oversight, transparency and effective decision-making with respect to the Company's political spending. The
principles may be viewed on the Company's website, www.tiffany.comy
, by clicking "Investors" at the bottom of the page,
and then selecting "Corporate Governance" from the left-hand column.
TIFFANY & CO.
PS-30
In accordance with the Principles Governing Corporate Political Spending, the Company reported the following expenses
for Fiscal 2016: the Company paid $314,100 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 associated with various mining
law and sustainability issues, including with respect to the proposed Pebble Mine in Bristol Bay, Alaska, and in
communications with certain governmental agencies regarding international gemstone sourcing as well as actions
necessary to protect against wildlife trafficking. Cassidy & Associates did not use any funds from the Company to assist
candidates for any office or to influence the outcome of ballot initiatives or elections. The Company and its affiliates
did not make any political expenditures during Fiscal 2016.
The Tiffany & Co. Principles Governing Corporate Political Spending define "political expenditures" to include payments
of money as well as provision of goods, services or use of facilities to candidates, political parties, political organizations,
campaign funds or to any other organization, fund, person or trust, whose purpose, in whole or in part, is (i) to advance
the candidacy of any person or persons seeking elective office, including the candidacies of nominees of any political
party on a federal, national, statewide or local basis; (ii) to influence the outcome of any ballot initiative; or (iii) to
influence the outcome of any election through issues advocacy communications, whether or not such communications
specifically refer to a named candidate or party. Political expenditures also include indirect expenditures whose purpose
includes any of the foregoing.
COMMITMENT TO CORPORATE SOCIAL RESPONSIBILITY
Corporate social responsibility has long been a priority of the Company. The Company strives to protect the interests of
our shareholders, customers and other stakeholders through responsible business decisions that reflect the integrity of
the TIFFANY & CO. brand in both the short- and long-term; enhance the communities in which we source, operate and
sell our merchandise; improve our environmental performance; and promote responsible practices within our supply
chain and our industry.
Underscoring the importance of sustainability and corporate social responsibility to the Company, the Board established
a Corporate Social Responsibility Committee in 2009. See "Corporate Social Responsibility Committee" at PS-28 for
more information.
The Company publicly discloses information regarding its corporate social responsibility strategy, programs and
.
performance at www.tiffany.com/CSR
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LIMITATION ON ADOPTION OF POISON PILL PLANS
On January 19, 2006, the Board terminated the Company's shareholder 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 and approval or ratification of any transaction with the
Company (or any subsidiary) in which (i) the aggregate amount involved will, or may be expected to, exceed $120,000
in any fiscal year and (ii) any director or executive officer, any nominee for election as a director, any five-percent or
greater holder of the Company's securities, or any immediate family member of such an officer, director, nominee or
holder, has a direct or indirect material interest. Any such transaction is referred to the Nominating/Corporate Governance
Committee for review. The Nominating/Corporate Governance Committee will then evaluate such transaction and, where
the Nominating/Corporate Governance Committee determines in its business judgment that such transaction is in the
best interest of the Company, recommend such transaction for approval or ratification to the Board.
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TIFFANY & CO.
PS-31
CONTRIBUTIONS TO DIRECTOR-AFFILIATED CHARITIES
Pursuant to the Company's Corporate Governance Principles, contributions made by the Company during any fiscal year
to charitable organizations with which the Company's directors are affiliated, through memberships on the governing
body of such charitable organization, are required to be disclosed in the Company's annual proxy statement for such
fiscal year. The contributions listed below were made during Fiscal 2016. None of the independent directors serve as
an executive officer of these charities:
• 92nd Street Y: merchandise grants of $950 (Mr. May is an Honorary Director).
• Fish Family Foundation: $10,000 cash contribution to support the Japanese Women's Leadership Initiative
and merchandise grants of $135 (Mr. Fish is a Trustee).
• Partnership for New York City: $15,000 annual dues contributions (Mr. May is a member of the Executive
Committee).
• Paul Taylor Dance Company: merchandise grants of $1,850 (Mr. Shutzer is a Trustee).
• Prep for Prep: merchandise grants of $2,600 (Mr. Shutzer is a Trustee).
• Whitney Museum of American Art (the "Whitney"): $1,000,000 sponsorship payment pursuant to the terms of
the sponsorship agreement entered into between Tiffany and the Whitney in February 2015. Pursuant to the
terms of the sponsorship agreement Mr. Cumenal was proposed for election, and was subsequently elected, to
the Board of Trustees of the Whitney. Mr. Cumenal served on the Board of Trustees of the Whitney during Fiscal
2016 and resigned as a Trustee effective February 10, 2017 in connection with his departure as CEO.
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PS-32
ITEM 2. RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO AUDIT OUR
FISCAL 2017 FINANCIAL STATEMENTS
The Audit Committee has appointed, and the Board has ratified the appointment of, PwC as the independent registered
public accounting firm to audit the Company's consolidated financial statements for Fiscal 2017. As a matter of good
corporate governance, we are asking you to ratify this selection.
PwC, directly and through its predecessor firms, has served as the Company's independent registered public accounting
firm since 1984.
A representative of PwC will be in attendance at the 2017 Annual Meeting to respond to appropriate questions raised
by shareholders 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 ratified by the shareholders.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO AUDIT THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS FOR FISCAL 2017.
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TIFFANY & CO.
PS-33
REPORT OF THE AUDIT COMMITTEE
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.comy
, by clicking "Investors" at the bottom of the page and then
selecting "Corporate Governance" from the left-hand column. The Company's management is responsible for the
Company's internal controls and for preparing the Company's financial statements contained in the Company's public
reports. The Company's independent registered public accounting firm, PricewaterhouseCoopers LLP ("PwC"), is
responsible for auditing the annual financial statements prepared by management and for expressing opinions on the
Company's consolidated financial statements and on the effectiveness of the Company's internal control over financial
reporting in accordance with the Public Company Accounting Oversight Board (United States) (the "PCAOB").
Included in the Company's Annual Report to Shareholders are the consolidated balance sheets of the Company and its
subsidiaries as of January 31, 2017 and 2016, 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, 2017. These
statements (the "Audited Financial Statements") are the subject of a report by 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
PwC, as appropriate, and otherwise fulfilled the responsibilities set forth in its charter. The Audit Committee has also
discussed with the Company's management and PwC their evaluations of the effectiveness of the Company's internal
control over financial reporting, as well as the quality of the accounting principles applied and the reasonableness of
the significant accounting judgments and estimates incorporated in the Audited Financial Statements.
The Audit Committee has discussed with PwC the matters required to be discussed by PCAOB Auditing Standard No.
1301, "Communications with Audit Committees." In connection with such discussion, the Audit Committee and PwC
also discussed the business, compliance and financial reporting risks to which the Company is subject. 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 with them their independence. The Audit Committee
has considered whether the provision by PwC of the tax consultation, tax compliance and other non-audit-related services
disclosed below under
Independent 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 PwC's independence from the Company and its management.
"Relationship with
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, 2017.
Signed:
Robert S. Singer, Chair
Lawrence K. Fish
Abby F. Kohnstamm
Charles K. Marquis
Members of the Audit Committee
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TIFFANY & CO.
PS-34
RELATIONSHIP WITH INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
As noted under "Board of Directors and Corporate Governance–Committees of the Board–Audit Committee" at PS-25,
the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of
any registered public accounting firm engaged by the Company for the purpose of preparing or issuing an audit report
or performing other audit, review or attest services for the Company. Further, the Audit Committee ensures the rotation
of the lead audit partner having responsibility for the audit of the Company's consolidated financial statements and
effectiveness of internal control over financial reporting and the audit partner responsible for reviewing such audit, as
required by law, and periodically considers whether, in order to assure continuing auditor independence, there should
be regular rotation of the Company's independent registered public accounting firm.
The Audit Committee has selected PwC as the independent registered public accounting firm to audit the Company's
consolidated financial statements and effectiveness of internal control over financial reporting for the fiscal year ending
January 31, 2018. PwC has, directly or through its predecessor firms, served as the Company's independent registered
public accounting firm continuously since 1984. In selecting PwC to serve in this capacity for the fiscal year ending
January 31, 2018, 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) financial information systems design and implementation, (iii) appraisal or valuation services, fairness opinions or
contribution in kind reports, (iv) actuarial services, (v) internal audit outsourcing services, (vi) management functions
or human resources, (vii) investment advisor or investment banking services, and (viii) legal and 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.
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 control over financial reporting for the years ended
January 31, 2017 and 2016, 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 Fees as
All Other Fees b
Total Fees
January 31, 2017
January 31, 2016
$
3,345,400 $
3,618,400
163,300
3,508,700
2,003,900
195,400
147,300
3,765,700
1,253,600
203,400
$
5,708,000 $
5,222,700
a) Tax fees consist of fees for tax compliance and tax consulting services. These fees include tax compliance fees of
$947,300 for the year ended January 31, 2017 and $1,090,500 for the year ended January 31, 2016.
b) All other fees consist primarily of the Sustainability Assurance procedures, Kimberley Process Agreed Upon
Procedures and costs for research software for the years ended January 31, 2017 and January 31, 2016.
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TIFFANY & CO.
PS-35
ITEM 3. APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS
Rule 14a-21(a) ("SEC Rule 14") was adopted by the SEC under the Exchange Act. It requires the Company to include
in its proxy statement, at least once every three years, a separate shareholder 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
shareholders at the 2017 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 (as amended) 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. Cumenal, Erceg, Nicoletti,
Bellaiche and Galtie, and Ms. Cloud) for which your approval is sought may be found at PS-38 through PS-94 inclusive
of this Proxy Statement.
At the 2016 Annual Meeting, the Company included in its proxy statement a separate shareholder advisory vote to
approve the compensation of the Company's named executive officers for the 2015 fiscal year. The Company's Say on
Pay proposal passed with 96.6% of the shareholder advisory votes in favor of the Company's executive compensation
program. The Committee considered shareholder approval of the executive compensation program in evaluating the
design of the program for Fiscal 2017.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE COMPENSATION PAID TO THE NAMED EXECUTIVE OFFICERS IN
FISCAL 2016.
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PS-36
COMPENSATION OF THE CEO AND OTHER EXECUTIVE OFFICERS
Contents
Compensation Discussion and Analysis
Report of the Compensation Committee
Summary Compensation Table - Fiscal 2016, 2015 and 2014
Grants of Plan-Based Awards Table – Fiscal 2016
Discussion of Summary Compensation Table and Grants of Plan-
Based Awards
Outstanding Equity Awards at Fiscal Year-End Table
Option Exercises and Stock Vested Table – Fiscal 2016
Pension Benefits Table
Nonqualified Deferred Compensation Table
Potential Payments on Termination or Change in Control
Director Compensation Table – Fiscal 2016
Equity Compensation Plan Information
Page PS-38
Page PS-67
Page PS-68
Page PS-73
Page PS-75
Page PS-80
Page PS-84
Page PS-84
Page PS-88
Page PS-90
Page PS-95
Page PS-98
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TIFFANY & CO.
PS-37
COMPENSATION DISCUSSION AND ANALYSIS ("CD&A")
This Compensation Discussion and Analysis explains the Company's compensation program as it pertains to the
Company's named executive officers ("NEOs") for Fiscal 2016.
The Company's NEOs for Fiscal 2016 were as follows:
NAMED EXECUTIVE OFFICERS
Frederic Cumenal
Chief Executive Officer, departure effective February 5, 2017
Mark J. Erceg
Ralph Nicoletti
Executive Vice President – Chief Financial Officer,
appointment effective October 18, 2016
Executive Vice President – Chief Financial Officer,
departure effective May 20, 2016
Jean-Marc Bellaiche
Senior Vice President – Strategy and Business Development
Pamela H. Cloud
Senior Vice President – Global Category Marketing
Philippe Galtie
Senior Vice President – International
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2016 Company Performance
p
Reflected below are key highlights for Fiscal 2016:
EXECUTIVE SUMMARY
Stock Price at
January 31, 2017
Stock Price at
January 31, 2016
Total Dividends Paid
Per Share
Total Shareholder
Return
$78.72
$63.84
$1.75
26%
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(in millions, except per share
amounts)
Earnings from operations
As reported
As adjusted*
Net earnings
As reported
As adjusted*
Diluted earnings per share
As reported
As adjusted*
Fiscal 2016
Fiscal 2015
Percentage
Increase/
(Decrease)
$
721.2 $
759.2
446.1
470.1
3.55
3.75
760.1
806.8
463.9
493.8
3.59
3.83
(5)%
(6)%
(4)%
(5)%
(1)%
(2)%
*See Appendix I at PS-105 for Non-GAAP reconciliation.
TIFFANY & CO.
PS-38
Sales:
Profitability:
Worldwide net sales decreased 3% to $4.0 billion reflecting declines in the Americas
and Europe partly offset by an increase in Japan and unchanged sales in Asia-Pacific.
On a constant-exchange-rate basis that eliminates the effect from translating sales made
outside the U.S. into U.S. dollars (see Appendix I at PS-105), worldwide net sales
decreased 3% from the prior year.
Net earnings decreased 4% to $446.1 million in 2016, or $3.55 per diluted share. Net
earnings in 2016 included impairment charges of $0.19 per diluted share (see Appendix
I at PS-105). Net earnings in 2015 included charges of $0.24 per diluted share (see
Appendix I at PS-105).
Store Expansion:
The Company added a net of 6 TIFFANY & CO. stores, resulting in a 3% net increase in
gross retail square footage.
Product Introductions: The Company expanded its offerings within several existing jewelry collections, including
its TIFFANY T and RETURN TO TIFFANY®YY LOVE collections, and introduced new watch
designs.
Cash Flow:
The Company generated cash flow from operating activities of $702.1 million in 2016,
compared with $813.6 million in 2015. Cash flow from operating activities in 2016
included a voluntary cash contribution of $120.0 million made by the Company to its
U.S. pension plan.
Returning Capital to
Shareholders:
The Company returned cash to shareholders by continuing to pay regular quarterly
dividends (which were increased 12.5% effective July 2016 to $0.45 per share, or an
annualized rate of $1.80 per share) and spending $183.6 million to repurchase 2.8
million shares of its common stock.
Chief Executive Officer Transition
After the close of Fiscal 2016, on February 5, 2017, Frederic Cumenal stepped down as Chief Executive Officer,
and Michael J. Kowalski was appointed Interim Chief Executive Officer. For transition purposes, Mr. Cumenal
remained employed by the Company until February 10, 2017.
Frederic Cumenal Departure
p
The Company and Tiffany entered into a separation agreement with Mr. Cumenal on March 6, 2017. The separation
agreement affirmed that Mr. Cumenal would receive the following severance payments and benefits required by
his employment agreement:
• Cash severance in the amount of $1,909,387;
• Payment of his short-term incentive award for Fiscal 2016 based on actual performance, as determined
by the Committee in accordance with the targets and guidelines established at the beginning of the
performance period. For information concerning the payout of this award, see below under "2016
Incentive Compensation"; and
• Payment of the cost of one year of continued health care coverage.
The separation agreement also provided for a release and waiver of claims by Mr. Cumenal in favor of the Company
and its affiliates, as well as his agreement to assist in the transition of his responsibilities and with respect to
litigation matters. As additional consideration for these benefits (which were not contemplated by his employment
agreement), the separation agreement provided Mr. Cumenal (i) an additional cash payment of $690,613, (ii)
a reduction in the length of certain post-employment non-solicitation obligations from eighteen to twelve months,
(iii) certain outplacement benefits and (iv) amendment to the terms applicable to certain of Mr. Cumenal's equity
awards to provide that:
• All stock option awards that were vested but unexercised as of the termination of his employment –
which ordinarily would have expired three months after the termination date – will remain exercisable
until February 10, 2018 (the one-year anniversary of his termination of employment);
• The unvested portions of stock option awards granted to Mr. Cumenal in September 2013, January
2014, January 2015 and January 2016 that were scheduled to vest in Fiscal 2017, and that ordinarily
TIFFANY & CO.
PS-39
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would have been forfeited upon the termination of his employment, vested as of March 14, 2017, and
will remain exercisable until February 10, 2018; and
•
Performance-based restricted stock units granted to Mr. Cumenal in January 2015, which otherwise
would have been forfeited upon the termination of his employment, will continue to vest according to
their terms. The payout of this award to Mr. Cumenal – which will remain contingent upon pre-established
performance goals that were not amended in any respect – will be pro-rated to reflect Mr. Cumenal's
employment during the performance period. In addition, the Committee may only exercise its discretion
to reduce the amount of the award to be vested if the reduction applies to the executive officers generally.
Aside from the grants described above and others that vested according to their terms, all of Mr. Cumenal's
unvested equity grants were forfeited upon his departure. The Company will be entitled to recover or revoke the
additional consideration in the event Mr. Cumenal breaches his agreement to provide transition or litigation
assistance or his applicable confidentiality, no-hire and non-solicitation obligations. As required by his
employment agreement, the Company also paid Mr. Cumenal for accrued but unused vacation and an amount
in lieu of the applicable notice period.
The foregoing summary of the separation agreement by and among Mr. Cumenal, Tiffany and the Company is
not complete and is subject to, and is qualified by reference to, the full text of the agreement filed as Exhibit
10.41 to the Company's Current Report on Form 8-K filed with the SEC on March 7, 2017.
Michael J. Kowalski Appointment
pp
In connection with his appointment as Interim Chief Executive Officer, Mr. Kowalski was provided a monthly
base salary of $60,078. In addition, on February 15, 2017, Mr. Kowalski was granted an award of 43,615 stock
options with a grant date fair value of $625,395, which will vest in its entirety on the first anniversary of the
grant date, subject to certain conditions. As an executive, Mr. Kowalski is eligible to participate in certain
executive benefits programs; however, unless the Board determines otherwise, he will not be eligible to participate
in the Company's 2014 Employee Incentive Plan (aside from the stock options above), any cash bonus program
or any Company severance program, plan or arrangement. While serving as Interim Chief Executive Officer, Mr.
Kowalski will remain Chairman of the Board but will no longer receive compensation for his service in such
position.
Other Changes g
in Executive Management
g
Mark J. Erceg was appointed Executive Vice President – Chief Financial Officer, effective October 18, 2016.
The former Executive Vice President – Chief Financial Officer, Ralph Nicoletti, resigned effective May 20, 2016.
2016 Incentive Compensation
p
Short-Term Incentive Award
Under the targets and guidelines established by the Committee at the start of Fiscal 2016, the NEOs shown
below were eligible to earn up to 200% of their target short-term incentive awards based on corporate and
individual performance, as described below. Based on the extent to which those pre-established goals were
achieved, Fiscal 2016 short-term incentive awards were paid out as follows:
Potential Payout Based
on Achievement of
Operating Earnings
Target (160% of Target)
Potential Payout
Based on Individual
Performance
(40% of Target)
Potential Total
Payout of Annual
Incentive Award
(200% of Target)
Actual Payout of
Annual Incentive
Award
(87-99% of Target)
Frederic Cumenal
Jean-Marc
Bellaiche
Pamela H. Cloud
Philippe Galtie
$
$
$
$
3,000,000 $
750,000 $
3,750,000 $
1,631,250
720,000 $
180,000 $
900,000 $
445,500
576,000 $
552,000 $
144,000 $
138,000 $
720,000 $
690,000 $
356,400
341,550
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TIFFANY & CO.
PS-40
Mr. Erceg was not granted a short-term incentive award for Fiscal 2016 due to his appointment in October 2016.
Mr. Nicoletti was not eligible to be paid a short-term incentive award for Fiscal 2016 as a result of his departure
in May 2016.
Performance-Based Restricted Stock Units
The performance-based restricted stock units ("PSUs") awarded to executive officers in January 2014 for the
three-year period ended January 31, 2017, vested at 54.92% of target shares (27.46% of maximum shares).
This was based on diluted earnings per share ("EPS") of $11.77 for the three-year performance period, compared
to the EPS threshold, target and maximum of $10.18, $14.17 and $16.26, respectively, for the three-year
performance period; and average return on assets ("ROA") of 9.9% for the three-year performance period, compared
to the ROA target of 11%, resulting in no ROA modifier being applied.
Messrs. Cumenal and Nicoletti and Ms. Cloud were the only NEOs granted PSUs for the three-year period ended
January 31, 2017. Mr. Nicoletti was not eligible for a payout with respect to these PSUs due to his departure
in May 2016. The extent to which goals were achieved resulted in payouts to Mr. Cumenal and Ms. Cloud as
follows:
Potential Performance-
Based Restricted Stock
Units under January 2014
Award (200% of target)
Actual Performance-Based
Restricted Stock Units to Vest
under January 2014 Award, in
accordance with achievement
of pre-established goals
Frederic Cumenal
Pamela H. Cloud
30,400
12,400
8,348
3,406
Fiscal 2017 Changes g
to Executive Incentive Compensation
p
During Fiscal 2016, with the assistance of its independent compensation consultant, the Committee reviewed
the Company's senior executive compensation program and adopted several changes to its incentive compensation
design. The changes take into account the executive compensation program objectives of attracting, motivating
and retaining talent; rewarding achievement of short- and long-term financial goals; and linking management
and shareholder interests. The changes also enhance alignment with the Company's strategic goals of driving
total shareholder return through sales growth, margin expansion and cash flow generation.
Annual incentive awards and long-term incentive awards granted in January 2017 have the following new features:
• New performance metric for annual incentive awards: net sales growth on a constant currency basis. To
support the Company's strategy to accelerate sales growth, the Committee added growth in annual net
sales, on a constant-exchange-rate basis that excludes the effect of translating foreign-currency-
denominated sales into U.S. dollars (see Appendix I at PS-105), as a performance metric for annual
incentive awards (such metric, "Constant Currency Sales Growth"). The Committee believes that Constant
Currency Sales Growth serves as an appropriate measure of the success of product initiatives, as well
as other initiatives to enhance brand positioning and the overall customer experience. Constant Currency
Sales Growth goals will be weighted 20%, while operating earnings and individual factors will be weighted
60% and 20%, respectively. The performance weighting of metrics for the annual incentive awards
granted in January 2017, compared to those for annual incentive awards granted in January 2016, are
shown below.
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Operating Earnings
Annual incentive awards
granted in January 2017
Annual incentive awards
granted in January 2016
60%
80%
Weighting*
Constant Currency
Sales Growth
20%
—
Individual Factors
20%
20%
* Percentage of target award that may be paid upon achievement of goals at target.
TIFFANY & CO.
PS-41
• New performance metric for performance-based restricted stock units: operating cash flow. To incentivize
execution of the Company's strategy to maximize cash flow through inventory management, cost-reducing
procurement initiatives and systems and process enhancements, the Committee added operating cash
flow as a performance metric for PSUs in lieu of the ROA modifier used in prior years. Operating cash
flow goals will be weighted 20% and EPS goals will be weighted 80% (reduced from 100% in the prior
year). The performance metrics for the PSUs granted in January 2017, compared to those for the PSUs
granted in January 2016, are shown below.
Performance-based
restricted stock units
granted in January 2017
Performance-based
restricted stock units
granted in January 2016
EPS
80%
100%
Weighting*
Return on Assets
—
Modifier
(adjustment of
+/-10% if target
achieved)
Operating
Cash Flow
20%
—
* Percentage of target award that may be paid upon achievement of goals at target.
• Summary of performance metrics for short-term and long-term incentives. The new performance metrics
for short-term and long-term incentive compensation, and the strategic objectives to which they are
linked, are summarized below.
Incentive
Strategic objective
Increased profitability through sales growth and
margin expansion.
Annual
incentive awards
Sales growth through effective brand positioning
and customer engagement initiatives.
Performance metric
and weighting*
Operating earnings
(60%)
Constant Currency
Sales Growth**
(20%)
Individual goals, including strategic thinking and
leadership.
Individual factors determined
by the Committee
(20%)
Earnings growth through sales growth, margin
expansion, network optimization and capital
allocation decisions.
EPS
(80%)
Performance-
based restricted
stock units
Effective cash generation, excluding impact of
capital expenditures, through focus on inventory
management, procurement strategy and systems
and process enhancements.
Ability to return value to shareholders through
dividends and share repurchases.
Operating cash flow **
(20%)
*Percentage of target award that may be paid upon achievement of goals at target.
** New performance metric added for Fiscal 2017.
• Addition of time-vesting restricted stock units. Time-vesting restricted stock units ("RSUs") were added
to the long-term incentive compensation provided to senior executive officers other than the Chief
Executive Officer ("CEO") and executives with the title of Executive Vice President (which currently
includes only the Chief Financial Officer ("CFO")). The NEOs affected by this change will receive 25%
of their long-term incentive compensation in the form of RSUs, 25% in the form of stock options (reduced
from 50% in past years), and 50% in the form of PSUs (unchanged from past years). The addition of
RSUs is designed to balance the Company's objectives of attracting and retaining key talent with
incentivizing performance. The CEO and the CFO will continue to receive 50% of their long-term incentives
in the form of stock options, and 50% in the form of PSUs, as the Committee believes that executives
in these positions have the greatest direct influence on achievement of financial performance metrics
TIFFANY & CO.
PS-42
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and total shareholder return. The long-term incentives provided to NEOs in January 2017, compared to
those provided in January 2016, are shown below.
Mix of Long-term Incentive Opportunities
Stock Options
Time-Vesting Restricted
Stock Units
Performance-based
Restricted Stock Units
Long-term incentives
granted in January 2017
CEO and CFO: 50%
Other NEOs: 25%
CEO and CFO: 0%
Other NEOs: 25%
All NEOs: 50%
Long-term incentives
granted in January 2016
All NEOs: 50%
All NEOs: 0%
All NEOs: 50%
• Other changes to grant terms. RSUs and PSUs will be credited with dividend equivalent units that will
be converted into shares (with fractional units being paid out in cash) upon vesting of the underlying
stock units. This change is designed to permit executives to participate in total shareholder return, in
alignment with the interests of shareholders, and supports the balanced consideration of share
repurchases and dividend payments in capital allocation decisions.
•
In the event of an executive's voluntary retirement at age 65 (or age 55 with 10 years of service), or
involuntary termination without cause following at least 10 years of service as an executive, stock options
and PSUs granted at least six months prior to retirement or termination will continue to vest in accordance
with their terms, and the exercise period applicable to vested options will be five years (not to exceed
the original expiration date). For grants made in the prior fiscal year, retirement resulted in forfeiture of
unvested stock options, the application of a two-year exercise period to any vested stock options (not to
exceed the expiration date), and continued pro rata vesting of PSUs; while involuntary termination without
cause resulted in forfeiture of unvested stock options, application of a three-month exercise period to
any vested options (not to exceed the expiration date), and Committee discretion to permit continued
pro rata vesting of PSUs. These changes — the benefits of which are subject to compliance with restrictive
covenants — were made to advance the Company's goals of attracting and retaining talent and ensuring
executives remain focused on the Company's long-term performance.
p
Target g Compensation
for Named Executive Officers in Fiscal 2017
At its January 2017 meeting, the Committee approved the following target direct compensation for Fiscal 2017:
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Change in total
target direct
compensation
from Fiscal 2016
appointed in
October 2016
7.6%
6.7%
Annual Base
Salary
Target Short-
Term Incentive
Award (% of
base salary)
Target Long-Term
Incentive Award (%
of base salary)
Total Target
Direct
Compensation
Mark J. Erceg
$850,000
Jean-Marc
Bellaiche
$770,000
Pamela H. Cloud
$650,000
Philippe Galtie
$650,000
$680,000
(80%)
$577,500
(75%)
$390,000
(60%)
$487,500
(75%)
$2,125,000
(250%)
$1,155,000
(150%)
$1,105,000
(170%)
$975,000
(150%)
$3,655,000
$2,502,500
$2,145,000
$2,112,500
18.51%
In addition to the amounts shown above, for Fiscal 2017 the Committee left Mr. Cumenal's compensation
unchanged from Fiscal 2016, granting him a base salary at $1,250,000, a target short-term incentive award at
$1,875,000 (150% of base salary), and a target long-term incentive award at $6,250,000 (500% of base
salary), for total target direct compensation of $9,375,000. However, the short- and long-term incentives awarded
to Mr. Cumenal were forfeited upon his departure in February 2017.
TIFFANY & CO.
PS-43
p
Corporate
Governance Best Practices
The Board seeks to ensure that the Company's executive compensation program conforms to sound corporate
governance principles and policies, as demonstrated by the following practices:
WHAT WE DON'T DO
Tax gross-ups: No tax gross-ups, for example for life
insurance benefits, are paid to executive officers, other
than for one-time relocation expenses.
Pay current dividends on unvested long-term incentives:
Current dividends are not paid on stock options and are
not paid on unvested RSUs and PSUs until vesting.
The
Repricing of underwater stock options without shareholder
shareholder-approved
approval:
employee and director incentive plans do not permit
repricing
options without
shareholder approval.
of underwater stock
Company's
Allow pledged shares to count under Share Ownership
Policy: Shares of the Company's common stock that are
pledged to a third party do not count toward the share
ownership requirements.
Grant stock options below 100% of fair market value: The
shareholder-approved employee and
Company's
director incentive plans do not permit stock options to
be granted below 100% of fair market value.
Permit hedging of Company stock: The Company's policy
on insider information, applicable to all employees,
officers, and directors, 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.
Pay for performance: 87% of CEO compensation and,
on average, 72% of other NEO compensation, is tied
to the Company's financial performance and/or the
performance of the stock price.
Limited use of employment agreements: Employment
agreements and formal severance arrangements are
used only as necessary to attract newly recruited
executives.
Independent Executive Compensation Consultant: The
Committee retains an independent compensation
consultant to advise on the executive compensation
program and practices.
Share Ownership Policy: Executive officers are expected
to acquire and hold Company common stock worth two
to five times their annual base salary. Non-employee
directors are expected to own Company common stock
worth five times their annual retainer.
"Dual trigger" requirement for Change in Control severance
benefits: Following a change in control, outstanding
equity awards and unvested retirement benefits will
only be accelerated, and cash severance benefits will
only be paid, in the event of an involuntary termination
of employment, or if the Company does not survive the
transaction.
Provide limited perquisites: Perquisites provided to
executive officers on a limited basis only (for example,
life insurance benefits and executive long-term
disability benefits).
Clawback policy: Incentive-based compensation such
as cash incentive awards and PSUs are subject to
recoupment in the event of an accounting restatement
due to material noncompliance with financial reporting
requirements.
Say y on Payy
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In May 2016, the Company's Say on Pay proposal passed with 96.6% of the shareholder advisory votes in favor
of the Company's executive compensation program, which indicated to the Committee that shareholders were
supportive of the Company's executive compensation design and philosophy, and that significant changes were
not warranted. The Committee will continue to consider Say on Pay results, as well as shareholder feedback, in
the design of the compensation program.
TIFFANY & CO.
PS-44
The Committee has established an executive compensation program that contains the following key components:
OVERVIEW OF COMPENSATION COMPONENTS
The above chart reflects the average percentage contribution of key compensation components awarded to the
CEO and the other NEOs in January 2017. See charts of "CEO Target Pay Mix" and "Named Executive Officer
Target Pay Mix" under "Relative Values of Key Compensation Components" at PS-51. However, Mr. Cumenal is
not eligible for payment of short- or long-term incentives granted in January 2017 due to his departure in February
2017.
The Company also offers the following compensation components, in addition to the annual compensation program
described above:
Time-vesting
restricted stock
units
Benefits
In addition to being granted as a component of long-term incentive
compensation to certain NEOs, RSUs are granted periodically on a selective
basis, typically in connection with a promotion or new hire, to recognize prior
performance or to attract or retain key talent. These awards vest according to
their terms.
Used to attract and retain executives. Includes a comprehensive program of
benefits that includes retirement benefits and life insurance benefits that build
cash value.
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TIFFANY & CO.
PS-45
SHORT- AND LONG-TERM PLANNING
The performance of management in developing and executing operational and strategic plans and initiatives
determines the Company's success in achieving its financial and brand stewardship goals – both short- and long-
term.
As part of each year's planning process, the executive officers develop and submit for Board approval:
•
•
A three-year strategic plan that balances financial and "brand stewardship" objectives (see below); and
An annual operating plan for the fiscal year.
Each plan must incorporate goals that are both challenging and realistic for sales, gross margins, selling, general
and administrative expenses (including marketing, staffing and other expenses), inventory management, capital
spending and all other elements of the Company's financial performance (including capital allocation).
"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, luxury, the highest levels of customer service,
compelling store design and product display and responsible product sourcing practices.
The Committee recognizes that trade-offs between near-term financial objectives and brand stewardship are
often difficult. For example, introducing certain new designs can enhance brand image and attract new customers,
but affect overall margin negatively in the short term; increased staffing can positively affect customer service
while negatively affecting earnings in the short term; and expanding inventory can enhance the customer
experience but also affect operating cash flow negatively in the short term. Through the planning process,
management must balance expectations for annual earnings growth and cash flow generation with its focus on
brand stewardship and sustainable growth.
OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM
The Committee has established the following objectives for the compensation program:
•
•
•
To attract, motivate and retain the management talent necessary to develop and execute both the annual
operating plan and the strategic plan;
To reward achievement of short- and long-term financial goals; and
To link management's interests with those of the shareholders.
The total executive compensation program includes base salary, short- and long-term incentives, RSUs and
benefits.
SETTING EXECUTIVE COMPENSATION
The Committee determines all remuneration arrangements for executive officers and compensation plans in
which officers of the Company are eligible to participate, as more fully described in the Committee Charter. 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 officer's compensation.
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COMPENSATION EVALUATION PROCESS
The following are key components of the Committee's evaluation process.
Consideration of Say y on Pay y
The Committee weighs the level of shareholder support for the compensation program as demonstrated by
the Say on Pay vote.
Independent
p
Compensation
p
Consultant
In connection with carrying out its responsibilities, the Committee considers the advice of FW Cook, its
independent compensation consultant, and the competitive compensation analysis provided by FW Cook.
TIFFANY & CO.
PS-46
See "Board of Directors and Corporate Governance–Committees of the Board–Role of Compensation
Consultants" at PS-26 for discussion of the selection process for FW Cook, inclusive of an independence
analysis.
Tally y Sheets
The Committee regularly reviews "tally sheets," prepared by the Company's Human Resources division for
each executive officer. The tally sheets include data concerning historical compensation as well as information
regarding share ownership and other benefits accumulated from employment with Tiffany. The tally sheets
provide a historical view of multiple compensation elements, as further context for compensation decisions.
Consultations with the Chief Executive Officer
In periodic meetings with the Committee, the CEO provides his views as to the individual performance of
the other executive officers, and the Committee solicits his recommendations with respect to their
compensation. His input is especially important with respect to the evaluation of the individual performance
parameters used in determining short-term incentives, as well as for setting base salary and target incentive
compensation as a percentage of base salary. The Committee also relies on its own business judgment as
to each executive officer's experience, capacity for growth, expected future contributions, complexity of role,
demonstrated success and desirability to the Company's competitors.
Coordination with Financial Results and Annual Operating
g and Strategic g Planning g Process
p
In January, the Committee reviews a forecast of financial results for the fiscal year ending that month with
the CFO and reviews calculations of the tentative payouts for short- and long-term incentives on that basis.
Final calculations are reviewed and approved at the March meeting, when fiscal year financial results are
nearly final. After the public disclosure of financial results, the calculations are confirmed, and management
makes payment on the prior year's short-term incentive awards and causes the applicable percentage of PSU
awards for which the three-year performance period ended in the prior year to vest, in each case pursuant
to the Committee's authorization.
The Committee grants stock option awards and, if applicable, RSUs to executive officers at a meeting in
January of each year. Stock option awards and RSUs may also be granted in connection with new hires or
promotions, or for recognition purposes. The Committee has never delegated to management its authority
to make such awards. At that same January meeting, PSUs are granted for the three-year performance period
beginning the next February 1, with reference to preliminary drafts of the Company's strategic plan, while
annual incentive awards are granted for the one-year performance period beginning the next February 1,
with reference to the Company's annual operating plan. However, the specific financial goals for the PSUs
and the annual incentive awards are not established until the March meeting when the strategic plan and
annual operating plan are adopted.
COMPETITIVE COMPENSATION ANALYSIS - NO BENCHMARKS
Each year the Committee refers to competitive compensation data because the Committee believes that such
data is helpful in assessing the competitiveness of the total compensation offered to the Company's executive
officers. However, the Committee does not consider such data sufficient for a full evaluation of appropriate
compensation for any individual executive officer. Accordingly, the Committee:
• Has not set a "benchmark" to such data for any executive officer, although it does look to see if the
Company's total executive compensation program falls between the 25th and 75th percentile of competitive
data;
• Does not rely exclusively on compensation surveys or publicly available compensation information when
it determines the compensation of individual executive officers; and
•
Also considers those factors described above in "Compensation Evaluation Process."
The Committee also reviews a competitive compensation analysis by FW Cook, which includes the following
elements of compensation for each executive officer:
•
base salary;
TIFFANY & CO.
PS-47
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•
•
•
•
•
target short-term incentive;
target total cash compensation (salary plus target short-term incentive);
target long-term incentive;
target total direct compensation (target total cash compensation plus target long-term incentive); and
target total compensation (target total direct compensation plus all other compensation, above market
interest on deferred compensation and change in pension value).
DEFINING APPROPRIATE COMPARATORS
Defining an appropriate comparator group within the retail industry is challenging because there are few U.S.-
based companies of similar size in the luxury retail business with an integrated manufacturing function and
extensive global organization similar to the Company. In addition, the Committee believes that an appropriate
comparator group must include non-retail companies because a competitive market for the services of our
executives exists, even among companies outside the retail industry. Accordingly, 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.
For the NEOs, a defined peer group was used for comparative purposes, composed of U.S. public companies
similar to Tiffany, selected by the Committee. For the executive officers as a whole, third-party surveys for both
retail and general industry were used.
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TIFFANY & CO.
PS-48
Peer Groupp
The Committee reviewed comparisons of the Company's NEOs to the NEOs of the peer group. In selecting the
peer group, the Committee sought to include companies similar to the Company across a range of factors,
including size, business model (e.g., significant global sales, manufacturing/sourcing operations), products and
customers. The peer group used in Fiscal 2016 consists of the 19 companies shown below:
Financial Data
Common Factors
Revenue
(in millions)
Net Income
(in millions)
Market Cap
(in millions)
Multi-
Channel
Retailing
Mfg.
Operations
Significant
Foreign
Sales
Similar
Products/
Customers
Tiffany & Co.
Burberry
Coach
Coty
Fossil
Hanesbrands
Kate Spade
L Brands
Estee Lauder
Lululemon Athletica
Michael Kors
Nordstrom
Pier 1 Imports
PVH
Ralph Lauren
Restoration Hardware
Signet Jewelers
Starwood Hotels
VF Corporation
$
$
$
$
$
$
$
3,975 $
3,622 $
4,499 $
4,349 $
3,076 $
5,862 $
1,340 $
447 $
9,170
446 $
7,858
482 $ 10,060
157 $
100 $
501 $
129 $
7,733
1,312
9,713
2,144
$ 12,381 $
1,205 $ 20,644
$ 11,292 $
1,100 $ 31,914
$
$
2,194 $
4,714 $
$ 14,421 $
$
$
$
$
$
$
1,845 $
8,128 $
7,339 $
2,178 $
6,814 $
2,965 $
270 $
812 $
424 $
20 $
678 $
310 $
47 $
516 $
7,846
8,582
9,019
358
8,583
8,070
1,179
6,143
81 $ 13,064
$ 12,369 $
1,122 $ 22,483
Williams-Sonoma
Source: S&P Capital IQ; revenue and net income based on the most recent four quarters for which data was publicly available
as of October 31, 2016; market capitalization based on the most recent publicly available data as of October 31, 2016.
5,075 $
303 $
4,092
$
In terms of size, the Company's revenues were between the 25th percentile and median of the peer companies,
and net income and market capitalization were between the median and 75th percentile.
For Fiscal 2016, target total direct compensation was at the 25th percentile for Mr. Bellaiche and Ms. Cloud, at
the median for Mr. Cumenal, and in the median to 75th percentile range for Mr. Erceg. Target total compensation,
which includes the value of pension accruals and all other compensation, was at the median for Messrs. Cumenal
and Erceg and Ms. Cloud, and at the 25th percentile for Mr. Bellaiche. Mr. Galtie's compensation was compared
solely to third party survey data and was not compared to the peer group, as he was not an NEO prior to Fiscal
2016.
TIFFANY & CO.
PS-49
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Survey y Data
The Committee used third-party survey data to evaluate compensation for the CEO and all other executive officers.
The surveys used were:
•
•
•
Towers Watson Retail Survey;
Towers Watson General Industry Survey; and
Hay Group Luxury Retail Survey.
Relative to the survey data, target total direct compensation was at the median for Mr. Galtie, and at or above
the 75th percentile for the other NEOs.
RELATIVE VALUES OF KEY COMPENSATION COMPONENTS
In January 2017, as part of its annual review of the target level of short- and long-term incentives for each
executive officer, the Committee adopted the following target incentive opportunities expressed as a percentage
of base salary. For the CEO and CFO, the Committee split the estimated value of the long-term incentives evenly
between the grant-date fair market value of the targeted number of PSUs and the estimated (Black-Scholes)
value of stock options. For the remaining NEOs, the Committee awarded 50% of target long-term incentives in
the form of PSUs (calculated based on the grant date fair market value), 25% in the form of stock options
(calculated based on the Black-Scholes value) and 25% in the form of RSUs (calculated based on the grant date
fair market value).
Executive
Position
Frederic Cumenal
CEO, departure effective February
2017
Mark J. Erceg
EVP – CFO
Jean Marc Bellaiche
Pamela H. Cloud
SVP – Strategy and
Business Development
SVP – Global Category
Marketing
Philippe Galtie
SVP – International
Target
Short-term Incentive
as a Percent of Salary
Target
Long-term Incentive
as a Percent of Salary
150%
80%
75%
60%
75%
500%
250%
150%
170%
150%
The amounts shown above for Mr. Cumenal were adopted by the Committee in January 2017; however, Mr.
Cumenal will not be eligible for payment of short- or long-term incentives granted in January 2017 due to his
departure in February 2017.
The Committee believes that a minimum of 60% of the target total direct compensation of the CEO and 50%
of the target total direct compensation of the other executive officers should be composed of long-term incentives
to link realized compensation to the Company's longer-term operating and stock price performance.
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TIFFANY & CO.
PS-50
Based on target levels for incentive compensation granted in January 2017, the mix of pay for the CEO and other
NEOs, on average, is shown below:
BASE SALARY
The Committee pays the executive officers competitive base salaries as one part of a total compensation program
to attract and retain talent, but does not use base salary increases as the primary means of recognizing talent
and performance.
In January 2017, the Committee reviewed base salaries for all executive officers. The Committee increased the
base salaries for all NEOs other than Messrs. Cumenal and Erceg.
Executive
Frederic Cumenal
Fiscal 2017 salary ceased upon
departure in February 2017
Position
CEO
Mark J. Erceg
Fiscal 2016 salary commenced
with appointment in October 2016
EVP – CFO
Jean-Marc Bellaiche
Pamela H. Cloud
SVP – Strategy and
Business Development
SVP – Global Category
Marketing
Philippe Galtie
SVP – International
Fiscal 2016
Base Salary
Fiscal 2017
Base Salary
1,250,000 $
1,250,000
850,000 $
850,000
750,000 $
770,000
600,000 $
650,000
Percent Increase
from Fiscal 2016
to Fiscal 2017
—%
—%
2.67%
8.33%
575,000 $
650,000
13.04%
$
$
$
$
$
Base salaries for Fiscal 2017 for executive officers were determined based on multiple factors, including
competitive market compensation levels for comparable positions; executive experience and skill set; expected
contributions; breadth, scope and complexity of role; internal equity; and overall shareholder support as evidenced
by the 2016 Say on Pay vote.
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PS-51
SHORT-TERM INCENTIVES
The Committee uses short-term incentives, which are typically awarded in January of each year, to motivate
executive officers to achieve the annual financial targets established by the Committee and to demonstrate
strategic leadership. Short-term incentives for the executive officers consist of annual cash incentive awards
under the 2014 Employee Incentive Plan. Short-term incentive awards have an individual component but are
primarily formula-driven, with the majority of the award based on achievement of annual financial targets that
agree to the Company's annual operating plan.
For short-term incentives for Fiscal 2016, the Committee determined 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 Business Conduct Policy – Worldwide, and
professionalism; financial metrics relevant to specific areas of responsibility; and specific objectives set for the
executive officer. These same factors will be used to determine a portion of the short-term incentives to be paid
in respect of Fiscal 2017.
For Fiscal 2017, the Committee increased the short-term incentives granted to Messrs. Bellaiche and Galtie
from 60% to 75% of base salary. The Committee did not change short-term incentives, as a percentage of base
salary, for any of the other NEOs.
The maximum short-term incentive established by the Committee for each of the NEOs is equal to twice the
target.
Fiscal 2016
For Fiscal 2016, the Committee established target and maximum short-term incentive opportunities for the
executive officers, the payment of which would be wholly contingent on the Company meeting an operating
earnings threshold. The Committee determined that, if the operating earnings threshold was not met, then no
short-term incentive would be paid. The Committee provided guidance to the executive officers indicating that,
if the operating earnings threshold was met, then the Committee intended to calculate the amount to be paid
based 80% on corporate performance (the "Corporate Portion") and 20% on individual performance (the
"Individual Portion"). Thus, full achievement of corporate goals at the maximum goal level would result in payment
of 80% of the maximum short-term incentive (160% of target), while full achievement of individual goals at the
maximum would result in payment of 20% of the maximum short-term incentive (40% of target). Notwithstanding
this guidance, the Committee retained the discretion to pay out the maximum short-term incentive, or reduce
the payout from the maximum to any amount down to $0, provided the operating earnings threshold was met.
At the beginning of the fiscal year, the Committee established the operating earnings threshold at $457 million
(subject to permitted adjustments). The operating earnings goals (outlined below) against which performance
was measured were substantially in excess of this threshold amount.
Neither Mr. Nicoletti (due to his departure in May 2016) nor Mr. Erceg (due to his appointment in October 2016)
was eligible for payment of a short-term incentive award for Fiscal 2016.
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Portion
The Committee advised the executive officers that it intended to calculate payment of the Corporate Portion of
the award based on the following operating earnings targets, subject to proration if Fiscal 2016 operating earnings
fell between the amounts in the first column:
If Operating Earnings, as adjusted, Equal:
Then Percentage Payout of Incentive Award Will Be:
Below $609 million
$609 million
$762 million
At least $914 million
0% of Target Short-term Incentive Award
25% of Target Short-term Incentive Award
80% of Target Short-term Incentive Award
160% of Target Short-term Incentive Award
TIFFANY & CO.
PS-52
In March 2017, after reviewing and concurring with the recommendation of the Interim CEO, the Committee
determined that the payout percentage for the Corporate Portion would be 79% of the target short-term incentive
award, as Fiscal 2016 operating earnings, excluding certain charges as permitted under the 2014 Employee
Incentive Plan, equaled $759.2 million (see Appendix I at PS-105).
Individual Portion
In March 2017, the Committee reviewed and concurred with the Interim CEO's recommendations with respect
to the payout of the Individual Portion for the NEOs. The individual performance of each NEO eligible for payment
of a Fiscal 2016 award was compared to the objectives set at the beginning of Fiscal 2016. Based on the
Individual Portion, the Committee determined to pay Mr. Cumenal 8% of his target award, and each of the
remaining NEO's 20% of his or her target award.
Based on the Committee's determination as to the Corporate and Individual Portions, Mr. Cumenal was paid
87% of his target award. The remaining NEOs eligible for payment of a short-term incentive award for Fiscal
2016 were paid 99% of their target awards.
Fiscal 2017
For Fiscal 2017, the Committee generally retained the short-term incentive structure from Fiscal 2016, but
added a second corporate performance metric, Constant Currency Sales Growth. In January 2017, the Committee
established target and maximum short-term incentive amounts for the NEOs, with the maximum amount equal
to 200% of the target amount.
In March 2017, the Committee established $469 million of operating earnings (subject to permitted adjustments)
as the threshold necessary for a pay-out of the Fiscal 2017 short-term incentive awards (the "Base Threshold").
Payment of any short-term incentive awarded for Fiscal 2017 will be contingent on meeting the Base Threshold.
If the Base Threshold is not met, no short-term incentive will be paid. The Committee has provided guidance to
the executive officers indicating that, if the Base Threshold is met, the Committee intends to calculate the
amount to be paid based 60% on achievement of operating earnings goals, 20% on achievement of Constant
Currency Sales Growth goals, and 20% on individual performance based on the factors described at PS-52.
Thus, full achievement of operating earnings goals, Constant Currency Sales Growth goals and individual goals,
each at the maximum goal levels, will result in payment of 60%, 20% and 20%, respectively, of the maximum
short-term incentive (120%, 40%, and 40%, respectively, of target). Notwithstanding this guidance, the
Committee has retained the discretion to pay out the maximum short-term incentive, or reduce the payout from
the maximum to any amount down to $0, provided the Base Threshold is met.
For purposes of evaluating performance once the Base Threshold is achieved, the Committee also established
in March 2017 threshold, target and maximum performance goals for operating earnings and Constant Currency
Sales Growth. The operating earnings goals against which operating earnings performance will be measured are
substantially higher than the Base Threshold. In addition, in recognition of the challenges of setting precise
target amounts, and to avoid windfalls or deficits resulting from slight variances from target, target goals for
operating earnings and Constant Currency Sales Growth were expressed as ranges. To increase incentives for
above-target performance and in recognition of the difficulty of achieving above-target results, the threshold,
target and maximum goals for each metric were set so that the increase in payout resulting from above-target
performance is greater than the reduction in payout resulting from an equivalent level of below-target performance.
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Corporate
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and Individual Performance Goals
The operating earnings and Constant Currency Sales Growth goals for the grants made in January 2017, and the
corresponding percentage of target short-term incentives to be paid out (if any), together with the percentage of
target short-term incentives that may be paid out based on individual performance, are shown below. In evaluating
achievement of performance goals, the Committee is permitted under the 2014 Employee Incentive Plan to
exclude certain events. See "Short-Term Incentives–Permissible Adjustments to Evaluation of Performance"
below.
Operating Earnings
Constant Currency Sales Growth
Individual
Performance
Operating
earnings
(millions)
Percentage of
target short-term
incentive that
may be paid:*
Threshold
Less than or
equal to $626
Target
Within the range
of $774 to $790
Maximum
Equal to or
greater than
$861
0%
60%
120%
Constant
Currency Sales
Growth
Less than or
equal to -6.3%
Within the range
of 2.7% to 4.7%
Equal to or
greater than
8.7%
Percentage of
target short-term
incentive that
may be paid:* Up to 40% of the
target short-term
incentive may be
paid based on
individual
performance
factors
20%
0%
40%
Percentage calculated based on operating earnings, Constant Currency Sales Growth and
individual performance = total percentage of target annual incentive paid out*
*Subject to linear interpolation if actual performance falls between the threshold and the bottom of the target
range, or between the top of the target range and the maximum. Target ranges include the ends of the ranges.
y
Five-year
History y of Short-term Incentive Payouts
y
The following summarizes average short-term incentive payouts (including bonuses) for the executive officers as
a group, as a percentage of target, over the past five fiscal years (without giving effect to payments that were
prorated in light of mid-year individual hire dates):
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Fiscal Year
2016
2015
2014
2013
2012
Five-Year Average
Total Payout as a
Percentage of Target
Short-term Incentive Award
96%
75%
101%
124%
15%
82%
Permissible Adjustments
j
to Evaluation of Performance
The 2014 Employee Incentive Plan, approved by the shareholders, permits the Committee, in evaluating
achievement of 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, (v) extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 (subsequently referred to as FASB Codification reference ASC 225-20) and/or
in management's discussion and analysis of financial condition and results of operations appearing in the Annual
Report for the applicable year (effective March 2016, the 2014 Employee Incentive Plan refers to unusual or
infrequently occurring items, rather than extraordinary non-recurring items, as described in the Annual Report
for the applicable year), (vi) acquisitions or divestitures, (vii) any other specific unusual or nonrecurring events,
TIFFANY & CO.
PS-54
or objectively determinable category thereto, (viii) foreign exchange gains and losses and (ix) a change in the
Company's fiscal year. The 2005 Employee Incentive Plan, under which earlier grants were made, permits similar
adjustments.
LONG-TERM INCENTIVES
The Committee uses long-term incentives to align management interest with those of shareholders, to motivate
management to achieve earnings growth and generate operating cash flow, as well as to promote the retention
of executive officers.
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 the above objectives.
The total value of each executive officer's target long-term incentive grant each year is based on a percentage
of base salary as indicated above for NEOs under "Relative Values of Key Compensation Components" at PS-50
for Fiscal 2017, and the ratio of long-term incentive target to base salary is reviewed annually at the same time
that base salaries are reviewed.
Ms. Cloud's target long-term incentive as a percentage of base salary decreased from 175% for Fiscal 2016 to
170% for Fiscal 2017. This change was intended to better align the target long-term incentive percentage for
Ms. Cloud with those of the other executive officers, as an increase in a prior year had been intended to recognize
specific contributions and was not intended to be a long-term increase. For the remaining NEOs, the Fiscal 2017
target long-term incentive opportunities as a percentage of base salary remain unchanged from Fiscal 2016.
yp
Types
q
of Equity
y Awards
The Committee awards three different types of equity awards to NEOs: PSUs, stock options and RSUs.
• PSUs reward executives for meeting key financial goals that are important to the long-term performance
of the Company, even if the achievement of those goals is not necessarily reflected in the share price
as the market does not always respond to earnings growth in a predictable manner.
• Stock options reward executives for increases in stock price and provide returns aligned with those of
shareholders, whether or not performance goals have been met. This balances an inherent challenge
associated with PSUs, as non-controllable and highly variable external factors affect the Company's
performance and make it difficult to establish appropriate strategic performance goals.
• RSUs support talent attraction and retention objectives.
For Fiscal 2016, the NEOs were provided long-term incentives divided equally between PSUs and stock options.
Prior to Fiscal 2017, it was the Committee's practice to award RSUs on occasion for reasons such as recognition
of prior performance; promotion; attraction of new talent; retention of key talent; and in lieu of cash compensation
increases.
For Fiscal 2017, NEOs other than the CEO and CFO received 50% of their long-term incentives in the form of
PSUs, 25% in the form of stock options, and 25% in the form of RSUs. Consistent with the prior year, the CEO
and the CFO received 50% of their long-term incentives in the form of PSUs, and 50% in the form of stock
options.
For purposes of achieving the grant date target value, apportioned according to the above-described mix of long-
term incentives, the Committee values awards as follows:
•
for PSUs and RSUs, using the higher of (i) the simple arithmetic mean of the high and low sale price of
the Company's common stock on the New York Stock Exchange on the grant date or (ii) the closing price
on such Exchange on the grant date; and assuming that PSUs will vest at the target value described under
"Performance-Based Restricted Stock Unit Grants" below; and
•
for stock options, on the basis of the Black-Scholes model.
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PS-55
Performance-Based Restricted Stock Unit Grants
Performance-Based Restricted Stock Units Granted for Fiscal 2017
The Committee's practice has generally been to award PSUs to executive officers in January of each year. For
the PSUs granted in January 2017, the Committee established threshold, target and maximum goals for EPS
and operating cash flow at the start of the performance period. Vesting of these PSUs is dependent upon
achievement of either the EPS or operating cash flow threshold. If neither threshold is met, no PSUs will vest.
The Committee has provided guidance to the executive officers indicating that, if either the EPS or operating
cash threshold is met, it intends to calculate the number to vest based 80% on EPS goals and 20% on operating
cash flow goals. Thus, full achievement of the EPS goals and operating cash flow goals at the maximum goal
levels will result in vesting of 80% and 20%, respectively, of the maximum PSUs granted (160% and 40%,
respectively, of target PSUs).
•
EPS was selected as a performance metric to reward earnings growth and incentivize execution of the
Company's strategic plans relating to sales growth, margin expansion, network optimization and efficient
capital allocation. This metric also aligns with shareholder interest, as the Committee believes the
Company's stock price over the long term is primarily driven by growth in EPS. EPS goals are measured
on a diluted basis and calculated on a cumulative basis for the three-year performance period.
• Operating cash flow was added as a performance metric in January 2017, in lieu of the ROA modifier
used in prior years, to reward cash flow generation from operations through measures such as inventory
management, procurement initiatives intended to reduce costs, and systems and process enhancements.
Operating cash flow goals are also calculated on a cumulative basis for the three-year performance period.
The target goal is expressed as a range.
•
•
The EPS and operating cash flow goals were set by the Committee with reference to the Company's strategic
plan as approved by the Board.
The EPS and operating cash flow threshold, target and maximum goals, and the corresponding percentage
of target shares to be paid out at the end of the performance period (if any), are shown below. In evaluating
achievement of performance goals, the Committee is permitted under the 2014 Employee Incentive Plan
to exclude certain events. See "Short-Term Incentives–Permissible Adjustments to Evaluation of
Performance" at PS-54.
EPS
Operating Cash Flow
EPS
Percentage of target
shares earned*
Operating Cash Flow
(millions)
Percentage of target
shares earned:*
Below Threshold Less than $9.55
Threshold
Equal to $9.55
Target
Equal to $12.80
Maximum
Equal to or
greater than
$13.66
0%
20%
80%
160%
Less than $1,997
Equal to $1,997
Within the range of
$2,447 to $2,547
Equal to or greater
than $2,746
0%
0%
20%
40%
Shares calculated based on EPS goals plus operating cash flow goals =
total percentage of target shares paid out*
*Subject to linear interpolation if actual performance falls between threshold and target (or, in the case
of a target expressed as a range, the bottom of the target range), or between target (or, in the case of a
target expressed as a range, the top of the target range) and maximum. Target ranges include the ends
of the ranges.
• Notwithstanding the above guidance, the Committee has retained the discretion to vest the maximum
number of PSUs granted, or reduce the number to vest from the maximum to any number down to zero,
provided that either the EPS or operating cash flow threshold is met.
TIFFANY & CO.
PS-56
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Performance-Based Restricted Stock Units Granted for Fiscal 2016,, 2015 and 2014
Vesting of PSUs granted in January 2016, 2015 and 2014 is dependent upon the achievement of an EPS
threshold. If the EPS threshold is not met, no shares will vest. The Committee has provided guidance to the
executive officers indicating that, if the EPS threshold is met, it intends to calculate the number of shares to
vest based on achievement of EPS goals and an average ROA goal over the applicable three-year performance
period. The Committee provided the following chart to the NEOs to illustrate the manner in which the number
of shares to vest would be calculated at the conclusion of the three-year performance period, subject to
interpolation if actual amounts fall between the levels shown:
EPS
Performance
Percentage of
Target Shares
Earned under
EPS Goal
ROA ADJUSTMENT TO SHARES EARNED UNDER EPS GOAL
ROA Achievement
of 0 to 89.9%
ROA Achievement
of 90.0% to
99.9%
ROA Achievement
of 100.0% to
109.9%
ROA Achievement of
110% or Greater
Percentage of
Target Shares
Earned with
Impact of ROA
Adjustment
EPS Threshold
Not Reached
EPS Threshold
Reached
EPS Target
Reached
0%
25%
No ROA
Adjustment
No ROA
Adjustment
No ROA
Adjustment
No ROA
Adjustment
100%
-10%
EPS Maximum
Reached
190%
-10%
No ROA
Adjustment
No ROA
Adjustment
0%
+10%
25% to 35%
90% to 110%
p
0% to 9% upward
adjustment
adjustment
contingent on
level of ROA
achievement,
e.g. Achievement
of 105% of ROA
Target = 5%
adjustment
upward;
Achievement of
109% of ROA
Target = 9%
adjustment
upward
-1% to -9%
downward
adjustment
contingent on
level of ROA
achievement,
e.g. Achievement
of 95% of ROA
Target = 5%
adjustment
downward;
Achievement of
99% of ROA
Target = 1%
adjustment
downward
+10%
180% to 200%
Notwithstanding the guidance shown above, the Committee retained the discretion to vest the maximum number
of PSUs granted, or reduce the number to vest from the maximum to any number down to zero, provided the
EPS threshold is met.
The EPS and ROA goals for the January 2014, 2015 and 2016 grants were set by the Committee in March of
each respective year, with reference to the Company's strategic plan as approved by the Board. The EPS goals
are cumulative over the three-year performance period and determined on a diluted basis. The ROA goal is
calculated for each year, as a percentage, and then averaged over each of the three years in the performance
period. The EPS and ROA goals for the PSUs granted in January 2014, 2015 and 2016, compared to the EPS
goals established for the PSUs granted in January 2017, are shown below. The goals are subject to adjustment
as permitted under the applicable employee incentive plan.
For Performance Period:
EPS Threshold
EPS Target
EPS Maximum
ROA Target
February 2014 - January 2017
February 2015 - January 2018
February 2016 - January 2019
$
$
$
10.18 $
10.38 $
8.80 $
14.17 $
13.89 $
11.79 $
16.26
15.76
12.58
11.0%
10.6%
9.2%
February 2017 - January 2020
$
9.55 $
12.80 $
13.66
Replaced with
operating cash flow
for Fiscal 2017
TIFFANY & CO.
PS-57
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Vesting of Performance-Based Restricted Stock Units Granted for Fiscal 2014
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In March 2017, the PSU awards granted in January 2014, for the three-year period ended January 31, 2017,
vested at 54.92% of target shares (27.46% of maximum shares). This was based on cumulative EPS of $11.77
for the three-year period ended January 31, 2017, against the EPS target of $14.17 for such three-year period,
and without an ROA modifier based on ROA of 9.9% compared to the ROA target of 11%.
For additional information about the PSUs, including a description of the circumstances in which a portion of
the units may vest in various circumstances of death, disability, retirement, a change in control or at the initiative
of the Company, see "Discussion of Summary Compensation Table and Grants of Plan-Based Awards–Equity
Incentive Plan Awards–Performance-Based Restricted Stock Units" at PS-75.
Stock Option
p
Grants
Each January, the Committee grants stock options in order to further link the interests of the executive officers
and the Company's shareholders in long-term growth in stock price and to support the brand stewardship over
the long term. Special grants are occasionally made in connection with promotions and new hires, and for
recognition purposes.
The 2014 Employee Incentive Plan under which stock options are granted, and the 2005 Employee Incentive
Plan under which stock options were previously granted, require 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 with an exercise price equal to or greater than the fair market value of a share as of
the grant date. The Committee calculates the exercise price to be the higher of (i) the simple arithmetic mean
of the high and low sale price of such stock on the New York Stock Exchange on grant date or (ii) the closing
price on such Exchange on the grant date. The incentive plan does not permit for the repricing of underwater
options at a later date without shareholder approval.
In addition to the stock option awards granted in January 2017, the Committee granted Mr. Erceg an award of
140,847 stock options in November 2016, in connection with his recruitment and appointment to the role of
Executive Vice President – CFO. Mr. Erceg's award will vest in equal installments on the first, second and third
anniversary of the grant, provided he remains employed on those dates.
For additional information about stock options see "Discussion of Summary Compensation Table and Grants of
Plan-Based Awards–Equity Incentive Plan Awards–Stock Options" at PS-76.
Time-Vesting g Restricted Stock Unit Awards
The RSUs granted to NEOs other than the CEO and CFO in January 2017 vest ratably over four years. For
additional information about the RSUs, see "Discussion of Summary Compensation Table and Grants of Plan-
Based Awards–Equity Incentive Plan Awards–Time-Vesting Restricted Stock Units" at PS-77. Special grants of
RSUs may be made from time to time in connection with promotions and new hires, and for recognition purposes.
In addition to the RSUs granted to certain executive officers in January 2017, the Committee granted Mr. Erceg
an award of 26,253 RSUs in November 2016, in connection with his recruitment and appointment. Mr. Erceg's
award will vest in equal installments on the first, second and third anniversary of the grant, provided he remains
employed on those dates.
Mr. Cumenal's Long-Term Incentive Awards
g
Upon the termination of Mr. Cumenal's employment on February 10, 2017, 12,419 RSUs granted to him in
September 2013 vested according to their terms. The PSUs granted to him in January 2014 for the performance
period ending on January 31, 2017 likewise vested according to their terms in March 2017, as the performance
period had been completed by the time of his departure from the Company.
In accordance with Mr. Cumenal's separation agreement (which provided for a release and waiver of claims by
Mr. Cumenal in favor of the Company and its affiliates, as well as his agreement to assist in the transition of his
responsibilities and with respect to litigation matters), in March 2017 the Committee amended certain of his
equity grants to provide for the following:
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PS-58
• All stock option awards that were vested but unexercised as of the termination of his employment –
which would ordinarily have expired three months after that date – will remain exercisable until February
10, 2018;
•
The unvested portions of stock option awards granted in September 2013, January 2014, January 2015,
and January 2016 that were scheduled to vest in Fiscal 2017 (a total of 36,523, 11,000, 35,250 and
57,743 stock options, respectively), and that ordinarily would have been forfeited upon the termination
of his employment, vested as of March 14, 2017, and will remain exercisable until February 10, 2018;
and
• A maximum number of 71,000 PSUs granted to Mr. Cumenal in January 2015, which otherwise would
have been forfeited upon his termination date, will continue to vest according to their terms. The payout
of this award to Mr. Cumenal – which will remain contingent upon pre-established performance goals
that were not amended in any respect – will be pro-rated to reflect Mr. Cumenal's employment during
the performance period. Pursuant to the terms of the separation agreement, the Committee may only
exercise its discretion to reduce the amount of the award to be vested if the reduction applies to the
executive officers generally.
• The benefits described above are contingent on Mr. Cumenal's continued compliance with his obligation
to provide transition and litigation assistance, and with his confidentiality, no-hire and non-solicitation
restrictive covenants.
All other unvested long-term incentive awards granted to Mr. Cumenal were forfeited upon the termination of his
employment. For additional information about the equity awards granted to Mr. Cumenal that remained
outstanding at the end of Fiscal 2016, see the Outstanding Equity Awards at Fiscal Year-End Table at PS-80.
For information concerning his separation agreement, see "Chief Executive Officer Transition" at PS-39.
RETIREMENT BENEFITS
Retirement benefits are offered to attract and retain qualified executive officers. Retirement benefits offer
financial security in the future and are not entirely contingent upon corporate performance factors. It is the case,
however, that the compensation on which the retirement benefits of each executive officer are based includes
bonus and incentive awards made in the past; such awards are determined by corporate and individual performance
factors in the year awarded.
Defined Contribution Retirement Benefit
For the NEOs other than Ms. Cloud, a defined contribution retirement benefit is available through the Tiffany and
Company Employee Profit Sharing and Retirement Savings Plan ("401k Plan"). Excess defined contribution
retirement benefit contributions ("Excess DCRB Contributions") are credited to the Tiffanyand Company Executive
Deferral Plan (the "Deferral Plan"). Employer contributions credited to the Deferral Plan are calculated to
compensate executives for pay amounts limited by reason of the Internal Revenue Code. Messrs. Erceg, Bellaiche,
and Galtie are eligible to receive Excess DCRB Contributions. Messrs. Cumenal and Nicoletti became entitled
to distribution of their vested Excess DCRB Contributions upon their departures from the Company, and forfeited
the unvested portion of their Excess DCRB Contributions. See Note (b) to the Nonqualified Deferred Compensation
Table at PS-88 for further information concerning their Excess DCRB Contributions.
Mr. Cumenal's employment agreement called for payments during the first 10 years of his employment to an
interest-bearing retirement account. These payments were intended to make Mr. Cumenal whole for significant
long-term pension benefits he forfeited at his prior employer. See "Other Employment Agreements or Severance
Plans for Named Executive Officers–Frederic Cumenal Employment Agreement" at PS-63. Upon his departure
the balance of this account became payable in ten annual installments starting on the first anniversary of his
termination date. During his employment, additional contributions were made on his behalf to certain French
social security and pension schemes.
Mr. Galtie also receives additional retirement benefits agreed upon at the time of his recruitment. See "Discussion
of Summary Compensation Table and Grants of Plan-Based Awards-Philippe Galtie Compensatory Arrangement"
at PS-78.
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PS-59
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Traditional Pension Retirement Benefit
Ms. Cloud participates in the tax-qualified defined benefit pension plan available to all full-time U.S. employees
hired before January 1, 2006. She also receives incremental benefits under the 2004 Tiffany and Company Un-
funded Retirement Income Plan to Recognize Compensation in Excess of Internal Revenue Code Limits ("Excess
Plan") and the 1994 Tiffany and Company Supplemental Retirement Income Plan ("Supplemental Plan").
The Excess Plan credits base salary and short-term incentive 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 retention incentive for experienced executives by increasing the percentage
of average final compensation provided as a benefit when the executive reaches specified service milestones.
For a further description of these traditional pension retirement benefits see "Pension Benefits Table–Features
of the Pension Benefit Plans" at PS-84.
Equity
y Grants - Retirement Provisions
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RSUs are forfeited upon retirement. Prior to January 2017, the terms applicable to stock options did not provide
for continued vesting beyond retirement, and the exercise period for vested options was two years from retirement.
Stock options awarded in January 2017 provide for continued vesting upon retirement, and an exercise period
for vested options of five years from retirement, provided that the grant was made at least six months prior to
the retirement date, and subject to continued compliance with post-employment restrictive covenants.
Prior to 2015, the terms applicable to awards of PSUs did not provide for continued vesting beyond retirement.
The Committee amended the terms applicable to the PSUs awarded beginning in January 2015 to provide for
continued vesting beyond retirement. A recipient of these awards who retires from employment during the
applicable performance period will vest in a pro-rated portion of the award, reflective of the number of months
worked during the performance period, and contingent on the satisfaction of pre-determined performance goals.
The Committee again amended the terms applicable to PSUs in January 2017 such that PSUs awarded in January
2017 will continue to vest upon retirement in accordance with their terms (including satisfaction of pre-
determined performance goals), without pro-rating based on length of time worked during the performance period,
provided that the grant was awarded at least six months prior to the retirement date, and subject to continued
compliance with post-employment restrictive covenants.
LIFE INSURANCE BENEFITS
IRS limitations render the life insurance benefits that the Company provides to all full-time U.S. employees in
multiples of their annual base salaries largely unavailable to the Company's executive officers. The Company
maintains the relationship established for lower-compensated employees between annual base 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" at PS-77.) Life insurance premiums are taxable to the executives, and
no gross-up is paid. Mr. Nicoletti declined this benefit upon joining the Company.
DISABILITY INSURANCE BENEFITS
The Company 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.
TIFFANY & CO.
PS-60
EQUITY OWNERSHIP BY EXECUTIVE OFFICERS AND NON-EXECUTIVE DIRECTORS
The Company has in place a share ownership policy for executive officers and non-executive directors, to enhance
alignment of management's interests with those of shareholders over the long term.
Significant
g
Portfolio
Under the share ownership policy, executive officers and non-executive directors are subject to restrictions on
the disposal of shares of the Company's common stock. For each executive officer or non-executive director,
"Significant Portfolio" means ownership of shares having a total market value equal to or greater than the following
multiples of their annual base salaries/annual retainer:
Position/Level
Chief Executive Officer
Non-Executive Directors
Executive Vice President
Senior Vice President
Market Value of Company Stock
Holdings as a Multiple of
Base Salary/Retainer
(Significant Portfolio Requirement)
Five Times
Five Times
Three Times
Two Times
Equity
y Used to Meet Stock Ownership p Guidelines
q
The share ownership policy counts shares owned as follows:
Shares Counted:
Shares not Counted:
Outstanding shares that the person beneficially owns
or is deemed to beneficially own, directly or indirectly,
under the federal securities laws, including shares held
in the 401k Plan.
Rights to acquire shares of the Company's common
stock through derivative securities, including stock
options or the vesting of restricted stock units.
RSUs issued under the Company's 2008 Directors
Incentive Plan that have vested but will not be delivered
until retirement of the applicable director from the
Board.
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).
For purposes of determining the amount of shares constituting a Significant Portfolio, shares will be valued at
the mean of the high and low trading prices on the New York Stock Exchange on the relevant calculation date.
Each officer's or director's attainment of a Significant Portfolio is measured annually on April 1 or the first trading
day thereafter. However, an officer or director who acquires a Significant Portfolio after the annual calculation
date shall be deemed to hold a Significant Portfolio for purposes of any proposed disposition after such acquisition.
p
Disposal
Restrictions
An executive officer or non-executive director who has a Significant Portfolio may not dispose of shares of the
Company's common stock if the disposition would cause his or her holdings to fall below the Significant Portfolio
threshold. He or she may, however, dispose of any or all shares in excess of the Significant Portfolio threshold.
For an executive officer or non-executive director who does not have a Significant Portfolio, he or she is permitted
to dispose of shares of the Company's common stock only as follows:
• no more than 50% of the net shares deemed issued as a consequence of any vesting or exercise of an
equity award;
• under circumstances constituting a financial hardship, as so determined by the Board; or
• pursuant to a qualified domestic relations order.
TIFFANY & CO.
PS-61
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Compliance
The amended and restated policy does not contain an express compliance deadline in recognition that the disposal
restrictions ensure that the executive officers and non-executive directors are making progress toward meeting
the Significant Portfolio requirements and provide for greater administrative ease.
As of January 31, 2017, one NEO held a Significant Portfolio. The remaining NEOs were all appointed to their
current positions in Fiscal 2014 or later. As of March 20, 2017, one non-executive director (who became a
director in March 2017) did not hold a Significant Portfolio; each of the other non-executive directors held a
Significant Portfolio.
HEDGING NOT PERMITTED
The Board adopted a worldwide policy on insider information, applicable to all employees, officers and directors.
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.
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 and 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 shareholder, 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. To ensure that executive officers remain with the Company,
stay focused on the business and maximize shareholder value during a period of uncertainty resulting from a
potential Change in Control transaction (as defined below), the Company entered into retention agreements with
each of the executive officers (other than Mr. Cumenal, who had 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–Explanation of Potential Payments
on Termination Following a Change in Control–Severance Arrangements" at PS-93. For a description of
Mr. Cumenal's employment agreement, which contained comparable provisions to those of the retention
agreements, see "Other Employment Agreements or Severance Plans for Named Executive Officers" below.
The Committee believes that the retention agreements serve the best interests of the Company's shareholders
because such agreements:
• will increase the value of the Company to a potential acquirer that requires delivery of an intact management
team;
• will help to keep management in place and focused should any situation arise in which a Change in 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.
•
•
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 shareholders, even if management
would benefit financially from change in control payments to the executive officers.
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Dual Triggers
The retention agreements are "dual-trigger" arrangements in that they provide no benefits unless two events
occur: (i) a Change in Control followed by (ii) a loss of employment.
TIFFANY & CO.
PS-62
Definition of "Change in Control"
The retention agreements in place for executive officers deem a "Change in Control" to occur only in the following
four situations:
•
•
•
•
a share acquisition resulting in a person, syndicate or group beneficially owning 35% or more of the voting
power of the Company;
incumbent directors (including those appointed or nominated by incumbent directors) cease to be a
majority of the Board;
a corporate transaction, such as a merger, in which the shareholders prior to the transaction do not
thereafter own more than 50% of the voting power of the resulting company's shares; and
a sale of 50% or more of the consolidated assets of the Company or its subsidiaries.
No Gross-Ups
The retention agreements do not provide executive officers with reimbursement for excise taxes or other taxes
in connection with severance payments or other amounts relating to the change in control.
OTHER EMPLOYMENT AGREEMENTS OR SEVERANCE PLANS FOR NAMED EXECUTIVE OFFICERS
Aside from the retention letters previously described and the arrangements described below, the Company is not
party to any employment agreement with an NEO that currently provides for cash severance or other severance
benefits upon termination (absent a change in control), although the Company is permitted to provide such
benefits if it deems appropriate to do so.
Under his employment agreement with Tiffany, Mr. Cumenal was entitled to cash payments and other severance
benefits upon termination of his employment under certain circumstances. Under the offer letters extended to
them, Messrs. Erceg and Galtie are similarly entitled to severance benefits upon termination of employment
under certain circumstances. The foregoing arrangements were negotiated in connection with the recruitment
of those individuals to the Company.
Frederic Cumenal Employment Agreement
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On March 10, 2011, Mr. Cumenal commenced employment with Tiffany as an executive officer and was promoted
to CEO effective April 1, 2015.
Tiffany entered into an employment agreement with Mr. Cumenal as part of the recruiting process in Fiscal 2011.
The employment agreement, which was approved by the Committee, addressed certain elements of the personal
costs, foregone compensation and professional risk that Mr. Cumenal incurred to accept the position and relocate
his family to the United States.
The employment agreement included the following key compensatory features, subject to increase:
• Term: Sequential one-year terms following an initial term;
•
Initial compensatory terms related to base salary, short-term incentive award and long-term incentive
award, a sign-on equity grant and a one-time relocation award;
• Deferred compensation: Credit of $365,000 per year, subject to cost of living adjustments, for the first
10 years of employment to an interest-bearing account for retirement. Mr. Cumenal became fully vested
in this account after three years of employment. Together with the sign-on equity awards, these payments
were intended as "make whole" payments for significant long-term pension benefits Mr. Cumenal forfeited
at his prior employer;
• French pension scheme payments: Payment of approximately $75,000 annually for the benefit of Mr.
Cumenal's account with certain French social security and pension schemes. This payment was intended
to avoid loss of Mr. Cumenal's accruals under those schemes;
• Severance absent a Change in Control - Applicable in the event of termination without Cause or resignation
for Good Reason, including Tiffany's refusal to extend the term: $605,000, subject to increase based
on annual cost of living adjustments; base salary for the balance of the term (minimum of one year);
any unpaid short-term incentive award for the last completed fiscal year; and continuation of medical
and dental benefits for one year;
TIFFANY & CO.
PS-63
• Severance payments and other benefits following a Change in Control - Certain payments and other
benefits applicable in the event of termination without Cause or resignation for Good Reason, including
Tiffany's refusal to extend the term; and
•
Absent termination with cause or for disability, upon termination of employment, Tiffany would pay an
additional $200,000 if it wished Mr. Cumenal to continue to comply with non-competition covenants.
The employment agreement contained definitions of "Change in Control," "Cause" and "Good Reason." For
additional information about Mr. Cumenal's compensatory arrangements, see "Discussion of Summary
Compensation Table and Grants of Plan-Based Awards–Frederic Cumenal Employment Agreement" at PS-77.
For a discussion of benefits provided to Mr. Cumenal upon his departure in February 2017, pursuant to the
above employment agreement and otherwise, see "Chief Executive Officer Transition" at PS-39.
Mark J. Erceg g Offer Letter
On October 18, 2016, Mr. Erceg commenced employment with Tiffany and was appointed Executive Vice President
– Chief Financial Officer. The key terms of the offer letter were:
•
•
•
Initial Base Salary: $850,000 per year;
Initial Target Annual Incentive Award (beginning in Fiscal 2017): 80% of base salary;
Initial Target Long-term Incentive Award (beginning in Fiscal 2017): 250% of base salary;
• One-time sign-on awards of (i) RSUs equal in value to $2,000,000 on the grant date, to vest in equal
installments on the first, second and third anniversary of the grant date; (ii) stock options equal in value
to $2,000,000 on the grant date, to vest in equal installments on the first, second and third anniversary
of the grant date; and (iii) a $750,000 cash sign-on bonus, and an additional cash payment of $750,000
as reimbursement for the repayment of a sign-on award to his prior employer, both of which are subject
to recoupment pursuant to a schedule in the event of resignation without good reason or termination
with cause on or before January 31, 2020; and
• Severance benefits, absent a Change in Control, in the event of termination without Cause or resignation
for Good Reason prior to the second year anniversary of hire: one year of base salary; any unpaid short-
term incentive award for the last completed fiscal year (or if the last completed fiscal year is Fiscal
2016, the unpaid portion of the cash sign-on bonus); pro-rated short-term incentive award for the current
year (calculated based on actual corporate results and as if individual achievement goals had been met
at target or, if the termination or resignation occurs in Fiscal 2016, then a pro-rated portion of the cash
sign-on bonus); plus reimbursement of continued health coverage for one year.
The offer letter incorporates definitions of "Change in Control," "Cause" and "Good Reason." For additional
information about Mr. Erceg's compensatory arrangements, see "Discussion of Summary Compensation Table
and Grants of Plan-Based Awards–Mark J. Erceg Compensatory Arrangement" at PS-77.
Offer Letters Extended to Other NEOs
Offer letters were also extended to Messrs. Nicoletti, Bellaiche and Galtie in connection with their respective
recruitments to the company. Each of these offer letters captures the key terms negotiated as part of the
recruitment, including compensatory terms relating to base salary, short-term incentives, long-term incentives
and sign-on awards. Mr. Galtie's offer letter also provides for severance benefits and payments to certain retirement
schemes. For a more detailed discussion of these arrangements, see "Discussion of Summary Compensation
Table and Grants of Plan-Based Awards–Ralph Nicoletti Compensatory Arrangement," "–Jean-Marc Bellaiche
Compensatory Arrangement," and "–Philippe Galtie Compensatory Arrangement" beginning at PS-78.
CHANGE IN CONTROL PROVISIONS
Equity awards and certain executive retirement benefits provide certain entitlements following a Change in
Control, which entitlements will only be triggered on a loss of employment (a "dual trigger") or if the Company
does not survive the transaction. For a more detailed discussion of applicable change in control provisions, see
"Potential Payments on Termination or Change in Control–Explanation of Potential Payments on Termination
following a Change in Control" at PS-93.
TIFFANY & CO.
PS-64
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TERMINATION FOR CAUSE
Stock options granted under the 2005 Employee Incentive Plan or the 2014 Employee Incentive Plan may not
be exercised after a termination for cause. PSUs will not vest if termination for cause occurs before the conclusion
of the three-year performance period. Likewise, time-vesting RSUs will not vest if termination for cause occurs
before the vesting date provided for in the award.
RESTRICTIVE COVENANTS
Mr. Nicoletti is subject to restrictive covenants that will terminate in January 2018 or, if earlier, a change in
control (as defined in such covenants). Mr. Cumenal's employment agreement also provided for certain post-
employment restrictions (as modified by his separation agreement). See "Other Employment Agreements or
Severance Plans for Named Executive Officers–Frederic Cumenal Employment Agreement" at PS-63.
The remaining NEOs are required to sign restrictive covenants with a post-employment term that will end upon
the earlier of a Change in Control (as defined in the retention agreements), or the first anniversary of the termination
of employment. The restrictive covenants include a non-compete restriction, a non-solicitation restriction with
respect to employees and customers and a no-hire restriction with respect to employees.
Violation of the covenants will result in:
•
•
loss of certain benefits under the nonqualified retirement plans;
loss of all rights under stock options, RSUs and PSUs (whether or not vested); and
• mandatory repayment of all proceeds from stock options exercised or RSUs or PSUs vested during a period
beginning six months before termination and throughout the duration of the non-competition covenant.
CLAWBACK POLICY
The executive officers are subject to a policy that expressly provides for recoupment of executive incentive-based
compensation if an accounting restatement is required due to material noncompliance with any financial reporting
requirements. For purposes of the policy, incentive-based compensation means pay which has been calculated
based on objective performance criteria included in publicly reported financial information reported by the
Company, and includes PSUs and cash incentive awards. Time-vesting stock options and RSUs, or proceeds
therefrom, are not subject to this policy.
Under the policy, in the event of a material restatement, the Board will review the incentive-based compensation
paid to executive officers during the three-year period preceding the issuance of the restatement to determine
if excess incentive compensation was paid. Excess incentive compensation is defined to be any incentive
compensation in excess of that which would have been paid if the applicable material restatement had been
applied at the time of payment.
The Board may seek recoupment of after-tax excess incentive compensation from one or more of the executive
officers who received excess payment.
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COMPENSATION RISK ASSESSMENT
The Committee has reviewed an assessment by management of the Company's compensation programs and
practices for employees, including executive and non-executive programs and practices. Selected key areas that
were reviewed, together with management's assessment of these elements, included pay mix, performance
metrics, performance goals and payout curves, payment timing and adjustments, equity incentives, stock
ownership requirements and trading policies, and leadership and culture. Sound practices were identified in
each of these respective areas. As a result of the review, the Committee determined that any risks that may result
from the Company's compensation programs and practices are not reasonably likely to have a material adverse
effect on the Company.
TIFFANY & CO.
PS-65
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 $1,000,000 per year paid to any of the NEOs other than the CFO or any officer
who ceases employment prior to the end of the tax year. This denial of deduction is subject to an exception for
"performance-based compensation" such as the PSUs, 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 $1,000,000 in any single year for any single NEO to whom
Section 162(m) applies, consisting of the following elements: "Salary" and "All Other Compensation" in the
Summary Compensation Table at PS-68, plus compensation that relates to the RSUs described in note (c) to
the Summary Compensation Table. The Committee may decide, in the course of exercising its business judgment,
to adjust payouts under one or more other compensation components in a way that disqualifies such payouts as
performance-based for a particular year.
* * *
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TIFFANY & CO.
PS-66
REPORT OF THE COMPENSATION COMMITTEE
We have reviewed and discussed with the management of Tiffany & Co. the Compensation Discussion and Analysis
section of this Proxy Statement. Based on our review and discussions, we recommend to the Board of Directors, to the
Interim Chief Executive Officer and to the Chief Financial Officer that the Compensation Discussion and Analysis be
included in this Proxy Statement and the Annual Report on Form 10-K for the fiscal year ended January 31, 2017.
Compensation Committee and its Stock Option Subcommittee:
Gary E. Costley, Chair
Rose Marie Bravo
Abby F. Kohnstamm
Charles K. Marquis
Peter W. May
Robert S. Singer
March 15, 2017
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PS-67
SUMMARY COMPENSATION TABLE
Fiscal 2016, Fiscal 2015 and Fiscal 2014
Name and
Principal Position
Frederic Cumenal
CEO 1
Year
Salary
($) (a)
Bonus
($) (b)
Stock
Awards
($) (c)
Option
Awards
($) (d)
Non-
Equity
Incentive
Plan
Compensation
($) (e)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) (f)
All
Other
Compensation
($) (g)
Total
($)
2016 $ 1,246,644 $ — $ 3,125,069 $ 3,128,754 $ 1,631,250 $
— $
941,686 $ 10,073,403
2015 $ 1,239,931 $ — $ 2,886,364 $ 3,131,796 $ 1,406,250 $
— $
758,640 $
9,422,981
2014 $
896,625 $ — $ 2,919,875 $ 3,041,032 $ 1,136,250 $
— $
755,209 $
8,748,991
Mark J. Erceg
2016 $
224,971 $ — $ 2,979,811 $ 3,065,962 $
—
$
815,104 $
7,085,848
Executive Vice President CFO 2
Ralph Nicoletti
2016 $
252,206 $ — $
— $
— $
— $
Executive Vice President - CFO 2
2015 $
747,986 $ — $
715,840 $
776,779 $
420,000 $
— $
— $
50,577 $
302,783
33,667 $
2,694,272
2014 $
642,117 $ — $ 2,851,466 $ 1,484,359 $
530,250 $
— $
166,913 $
5,675,105
Jean-Marc Bellaiche
2016 $
747,986
$
866,539 $
289,140 $
445,500 $
— $
157,879 $
2,507,044
Senior Vice President - Strategy
and Business Development3tt
2015 $
747,986 $ — $
519,542 $
563,737 $
315,000 $
— $
597,105 $
2,743,370
Pamela H. Cloud
2016 $
597,909 $ — $
828,904 $
276,630 $
356,400 $
170,297 $
53,920 $
2,284,060
Senior Vice President - Global
Category Marketing
2015 $
572,977 $ — $
484,952 $
526,151 $
258,750 $
— $
64,667 $
1,907,497
2014 $
547,852 $ — $
534,625 $
560,758 $
333,300 $
1,576,062 $
86,572 $
3,639,169
Philippe Galtie
2016 $
572,018 $ — $
731,531 $
244,044 $
341,550 $
— $
278,773 $
2,167,916
Senior Vice President -
International 4
1 Mr. Cumenal held the role of Chief Executive Officer from April 1, 2015 to February 5, 2017.
2 Mr. Erceg assumed responsibilities as Executive Vice President - Chief Financial Officer on October 18, 2016. Mr. Nicoletti held this role from April 2, 2014 to May 20,
2016.
3 Mr. Bellaiche assumed responsibilities as Senior Vice President - Strategy and Business Development on June 2, 2014, and was designated an executive officer of the
Company on April 1, 2015.
4 Mr. Galtie assumed responsibilities as Senior Vice President - International on August 17, 2015, and was not an NEO for Fiscal 2015.
Notes to Summary Compensation Table:
(a) Salary. Salary amounts include amounts deferred at the election of the executive under the Deferral Plan and under
the 401(k) Plan. Amounts deferred to the Deferral Plan are also shown in the "Nonqualified Deferred Compensation
Table" at PS-88.
(b) Bonus. 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 as soon as reasonably
practicable following the March meeting of the Committee, at which the Committee determines the payout of short-
term incentive awards. Annual incentive awards granted to NEOs are granted pursuant to the 2014 Employee
Incentive Plan and paid only if objective performance goals are met, and accordingly appear in the column headed
"Non-Equity Incentive Plan Compensation."
(c) Stock Awards. Except to the extent otherwise noted below in this note, 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"), disregarding any estimates of forfeitures related to service-based vesting conditions, for the fiscal year in
which the award was granted. The amounts shown for Fiscal 2016 include grants of PSUs (and, where applicable,
RSUs) made in January 2017, and the amounts shown for the prior fiscal years likewise include grants made in
January of the applicable fiscal year. The amounts shown are based on the assumption that applicable performance
targets for the three-year performance period established by the Committee for each respective grant of PSUs will
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PS-68
be met at 100%. The amounts further reflect that the PSU and RSU grants made on January 19, 2017 provide for
dividend equivalent units, while prior awards do not.
The maximum value of each PSU award, assuming the highest level of performance conditions are met for the
applicable period, calculated in accordance with Codification Topic 718, appears in the chart below.
For Mr. Cumenal, the amounts reported for 2016 and 2015 (which represent PSUs granted in January 2017 and
January 2016, respectively) were forfeited upon his departure in February 2017. With respect to the amount reported
for 2014 (which represents PSUs granted in January 2015), in March 2017 the Committee amended the terms of
the award to permit continued vesting following his departure and a pro-rated payout (contingent on achievement
of performance goals) based on the length of his employment during the performance period. See "Chief Executive
Officer Transition–Frederic Cumenal Departure" at PS-39.
For Mr. Erceg, the 2016 amount represents: (i) the grant date fair value of the PSU award made on January 19,
2017, and (ii) a one-time award of RSUs with a grant date fair value of $1,917,257, made on November 16, 2016,
in connection with his recruitment to the Company.
For Mr. Nicoletti, the 2014 amount represents, in addition to the grant date fair value of a PSU award made on
January 14, 2015, (i) a one-time RSU award with a grant date fair value of $1,434,894, made on March 19, 2014,
in connection with his recruitment to the Company; and (ii) a PSU award with a grant date fair value of $717,447,
made on March 19, 2014, in lieu of the Fiscal 2014 PSU award that would have been made to him in January
2014, had he commenced employment at that time. These awards, as well as the awards reflected in the amounts
shown for Fiscal 2014 and Fiscal 2015, were forfeited upon his departure in May 2016.
Maximum Value of Stock Awards at Grant Date Value
Executive
Frederic Cumenal
Mark J. Erceg
Ralph Nicoletti
Jean-Marc Bellaiche
Pamela H. Cloud
Philippe Galtie
$
$
$
$
$
$
2016
2015
6,250,138 $
5,772,729 $
2014
5,839,750
4,042,364 Not a named executive officer Not a named executive officer
— $
1,431,681 $
4,268,038
2,021,553 $
1,381,454 $
1,039,084 Not a named executive officer
969,903 $
1,069,250
1,219,033 Not a named executive officer Not a named executive officer
(d) Option Awards. Amounts shown represent the dollar amount of the grant date fair value of the stock option award
(which includes the grants made on January 19, 2017) calculated in accordance with Codification Topic 718 for
the fiscal year in which the award was granted, disregarding any estimates of forfeitures related to service-based
vesting conditions.
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For Mr. Cumenal, the amount reported for 2016 (which reflects stock options granted in January 2017) was forfeited
upon his departure in February 2017. With respect to the amounts reported for 2015 and 2014 (which reflect stock
options granted in January 2016 and January 2015, respectively), the Committee amended the terms of applicable
awards in March 2017 to cause the number of stock options that were scheduled to vest in Fiscal 2017 to vest on
March 14, 2017. This resulted in the vesting of 57,743 stock options granted in January 2016, and 35,250 stock
options granted in January 2015. See "Chief Executive Officer Transition–Frederic Cumenal Departure" at PS-39.
All other unvested stock options granted in January 2016 and 2015 that were outstanding on his termination date
were forfeited.
For Mr. Erceg, the 2016 amount represents: (i) the grant date fair value of the stock option award made on January
19, 2017, and (ii) a one-time award of stock options with a grant date fair value of $2,002,154, made on November
16, 2016, in connection with his recruitment to the Company.
For Mr. Nicoletti, the 2014 amount represents, in addition to the grant date fair value of the stock option award
made on January 14, 2015, a stock option award with a grant date fair value of $751,061. This grant was awarded
to Mr. Nicoletti on March 19, 2014, in lieu of the Fiscal 2014 stock option award that would have been made to
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him in January 2014, had he commenced employment at that time. The unvested portion of this award was forfeited
upon his departure in May 2016.
(e) Non-Equity Incentive Plan Compensation. This column reflects cash short-term incentive awards under the 2005
Employee Incentive Plan or 2014 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" at PS-75.) 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.
(f) Change in Pension Value and Nonqualified Deferred Compensation Earnings. This column represents the aggregate
change, over the course of the fiscal year, in the actuarial present value of the executive's accumulated benefit
under all defined benefit plans. This column does not include earnings under the Deferral Plan because it does not
pay above-market or preferential earnings on compensation that is deferred.
For each fiscal year reported, the present value of the benefit is affected by a number of factors including
compensation levels, credited years of service, the discount rate used to determine the present value of the benefit,
the executive's age, and the applicable mortality table. For the reported fiscal years, applicable discount rates were
as follows:
Discount Rate Applicable to
Benefits Accrued under
Qualified Pension Plan
Discount Rate Applicable to
Benefits Accrued under
Nonqualified Pension Plans
Fiscal 2016
Fiscal 2015
Fiscal 2014
4.25%
4.50%
3.75%
4.25%
4.25%
3.75%
In addition to the above changes in applicable discount rates, the 2014 change in pension value also reflects an
update to the applicable mortality tables. These newly applicable tables extended life expectancy, resulting in
increased present values. The applicable mortality tables for the 2014 change in pension value are the RP-2014
Mortality Tables with White Collar Adjustments and generational projections using the Scale MP-2014.
The 2015 change in pension value was a negative amount for Ms. Cloud (-$82,253) due to an increase in applicable
discount rates (4.50% for the qualified plan, 4.25% for the nonqualified plans).
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(g) All Other Compensation. The table below shows a detailed description of all other compensation paid to the NEOs.
In addition to the payments reported below, executive officers are from time to time permitted to borrow merchandise
for their personal use to support the Company's marketing efforts.
Leadership Benefits
Broad-Based Retirement Benefits
Other ($)
Notes
Total ($)
Premium on
Additional
Disability
Insurance
($)
Premium on
Life
Insurance
($)
401(k) Plan
Company
Match ($)
Defined
Contribution
Retirement
Benefit ($)
(i)
Excess
Defined
Contribution
Retirement
Benefit ($)
13,194
276,513
12,475
178,671
12,475
178,671
6,578
4,280
8,330
7,948
9,669
9,669
9,366
9,366
8,909
1,540
—
—
101,788
109,788
36,604
47,001
70,013
10,043
106,103
7,950
7,800
7,650
—
7,950
7,800
—
7,950
5,610
7,950
7,800
7,650
7,950
9,275
7,800
26,220
—
7,950
7,800
—
6,625
6,500
—
72,952
46,294
20,332
561,802 (ii)
941,686
505,600 (iii)
758,640
509,861 (iv)
755,209
—
806,986 (v)
815,104
30,397
9,737
—
—
50,577
33,667
—
158,965 (vi)
166,913
31,847
15,538
—
—
157,879
450,000 (vii)
597,105
—
500 (viii)
53,920
64,667
86,572
5,466
—
149,211 (ix)
278,773
Name
Frederic Cumenal
Mark J. Erceg
Ralph Nicoletti
Jean-Marc Bellaiche
Pamela H. Cloud
Philippe Galtie
Year
2016
2015
2014
2016
2016
2015
2014
2016
2015
2016
2015
2014
2016
(i)
(ii)
(iii)
(iv)
(v)
This amount reflects the benefit paid under the defined contribution retirement benefit ("DCRB") feature of the
401(k) Plan. Messrs. Cumenal and Nicoletti forfeited a portion of these benefits upon their departures from the
Company. See Note (b) under "Note to Nonqualified Deferred Compensation Table" at PS-88.
For Mr. Cumenal, the amount reported as "other compensation" for Fiscal 2016 represents: defined contribution
to certain French social security and pension schemes ($80,046); payment to a special retirement account
($462,834); and payment towards tax preparation consultation services ($18,922). Please see the discussion
of Mr.Cumenal's employment agreement and compensation paid thereunder under "Other Employment Agreements
or Severance Plans for Named Executive Officers–Frederic Cumenal Employment Agreement" at PS-63.
For Mr. Cumenal, the amount reported as "other compensation" for Fiscal 2015 represents: defined contribution
to certain French social security and pension schemes ($75,017); payment towards tax preparation consultation
services ($22,895); and payment to a special retirement amount ($407,688). (The amount of the payment to
the special retirement account differs from the amount reported for this payment in the Proxy Statement for Fiscal
2015 ($406,757) due to the use of updated interest rates and cost of living adjustments.)
For Mr. Cumenal, the amount reported as "other compensation" for Fiscal 2014 represents: defined contribution
to certain French social security and pension schemes ($84,655); payment towards tax preparation consultation
services ($23,890); and payment to a special retirement amount ($401,316). (The amount of the payment to
the special retirement account differs from the amount reported for this payment in the Proxy Statements for
Fiscal 2014 and Fiscal 2015 ($435,291) due to the use of updated interest rates and cost of living adjustments.)
For Mr. Erceg, the amount reported as "other compensation" for Fiscal 2016 represents relocation expenses
($56,986), and a one-time cash payment of $750,000 to reimburse Mr. Erceg for his repayment of a prior sign-
on bonus, each of which was contemplated in the offer letter extended to him. For a more detailed discussion of
Mr. Erceg's compensatory arrangements, see "Other Employment Agreements or Severance Plans for Named
Executive Officers–Mark J. Erceg Offer Letter" at PS-64.
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(vi)
For Mr. Nicoletti, the amount reported as "other compensation" for Fiscal 2014 reflects relocation expenses
incurred by Mr. Nicoletti in his relocation to New York in connection with his commencement of employment with
the Company.
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(vii) For Mr. Bellaiche, the amount reported as "other compensation" for Fiscal 2015 reflects the second installment
of a one-time sign-on cash bonus in connection with his recruitment in 2014. For a more detailed discussion of
Mr. Bellaiche's compensatory arrangements, see "Discussion of Summary Compensation Table and Grants of Plan-
Based Awards–Jean-Marc Bellaiche Compensatory Arrangement" at PS-78.
(viii) For Ms. Cloud, the amount reported as "other compensation" for Fiscal 2015 reflects a payment made pursuant
to a Company travel policy.
(ix)
For Mr. Galtie, the amount reported as "other compensation" for Fiscal 2016 represents: defined contribution to
certain French social security and pension schemes ($106,354) and relocation costs provided in the offer letter
extended to him ($42,857). For a more detailed discussion of Mr. Galtie's compensatory arrangements, see
"Discussion of Summary Compensation Table and Grants of Plan-Based Awards–Philippe Galtie Compensatory
Arrangement" at PS-78.
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GRANTS OF PLAN-BASED AWARDS
Fiscal 2016
2014 Employee Incentive Plan
Name (a)
Award
Type
Grant
Date
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards
Estimated Future Payouts
Under Equity Incentive
Plan Awards (b)
Thres
hold
($)
Target
($)
Maximum
($)
Threshold
Number of
Shares
Target
Number of
Shares
Maximum
Number of
Shares
Frederic
Cumenal
Annual
Incentive
$ — $ 1,875,000 $ 3,750,000
All Other
Option/
Stock
Awards:
Number of
Securities
Underlying
Options/
Awards
(#) (b)
Exercise
or Base
Price of
Option
Awards
($/Sh)
(c)
Grant Date
Fair Value
of Equity
Awards
(d)
PSU
1/19/2017
Stock Option
1/19/2017
7,889 39,443
78,886
$ 3,125,069
215,076 $ 79.23 $ 3,128,754
Mark J.
Erceg
Annual
Incentive
$ — $
680,000 $ 1,360,000
January 2017
PSU
January 2017
Stock Option
November
2016 RSU
November
2016 Stock
Option
Annual
Incentive
Jean-Marc
Bellaiche
1/19/2017
1/19/2017 $ —
11/16/2016
11/16/2016
2,683 13,411
26,822
$ 1,062,554
73,128 $ 79.23 $ 1,063,808
26,253
$ 1,917,257
140,847 $ 76.19 $ 2,002,154
$ — $
577,500 $ 1,155,000
PSU
1/19/2017
Stock Option
1/19/2017
RSU
1/19/2017
1,458
7,289
14,578
$
577,507
19,876 $ 79.23 $
289,140
3,648
$
289,031
Pamela H.
Cloud
Annual
Incentive
$ — $
390,000 $
780,000
PSU
1/19/2017
Stock Option
1/19/2017
RSU
1/19/2017
1,395
6,974
13,948
$
552,550
19,016 $ 79.23 $
276,630
3,488
$
276,354
Philippe
Galtie
Annual
Incentive
$ — $
487,500 $
975,000
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PSU
1/19/2017
Stock Option
1/19/2017
RSU
1/19/2017
1,231
6,153
12,306
$
487,502
16,776 $ 79.23 $
244,044
3,080
$
244,028
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Notes to Grants of Plan-Based Awards Table
(a) All grants shown above for Mr. Cumenal were forfeited upon his departure in February 2017. Mr. Nicoletti was
granted no plan-based awards during Fiscal 2016 due to his departure in May 2016.
(b) All grants shown above for Mr. Cumenal were forfeited upon his departure in February 2017. Mr. Nicoletti was
granted no plan-based awards during Fiscal 2016 due to his departure in May 2016.
The RSUs and stock options granted to Mr. Erceg on November 16, 2016 will vest in equal installments on the
first, second and third anniversaries of the grant date, subject to continued employment on those dates.
The other RSUs and stock options shown will vest in equal installments on the first, second, third and fourth
anniversaries of the grant date, subject to continued employment. For the PSU grants shown, the Committee
established threshold, target and maximum goals for EPS and operating cash flow at the beginning of the applicable
performance period. The Committee has communicated to the NEOs that, if the EPS threshold or the operating
cash flow threshold is attained, the Committee intends to calculate the number of shares to vest as indicated in
the chart below, based on actual results compared to threshold, target and maximum goals shown; however, the
Committee retains the discretion to vest the maximum number of shares granted, or reduce the number to vest to
any amount down to zero, provided the EPS or operating cash flow threshold is met.
EPS
Operating Cash Flow
EPS
Percentage of target
shares earned*
Operating Cash Flow
(millions)
Percentage of target
shares earned:*
Below Threshold
Less than $9.55
Threshold
Equal to $9.55
Target
Equal to $12.80
Maximum
Equal to or greater
than $13.66
0%
20%
80%
160%
Less than $1,997
Equal to $1,997
Within the range of
$2,447 to $2,547
Equal to or greater
than $2,746
0%
0%
20%
40%
Shares calculated based on EPS goals plus operating cash flow goals =
total percentage of target shares paid out*
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*Subject to linear interpolation if actual performance falls between threshold and target (or, in the case of a target
expressed as a range, the bottom of the target range), or between target (or, in the case of a target expressed as a
range, the top of the target range) and maximum. Target ranges include the ends of the ranges.
Amounts listed in the sub-column labeled "TargetNumber of Shares" reflects the number of shares awarded assuming
the EPS and operating cash flow targets are met at 100%. By contrast, if the EPS target is met at 100% and the
operating cash flow threshold is not met, exercise of the Committee's discretion in accordance with the chart above
would result in vesting of 80% of target stock units for each NEO, corresponding to an aggregate number of shares
as follows: Mr. Erceg - 10,729 shares, Mr. Bellaiche - 5,832 shares, Ms. Cloud - 5,580 shares and Mr. Galtie -
4,923 shares. Conversely, if the EPS threshold is not met and the operating cash flow target is met at 100%,
exercise of the Committee's discretion in accordance with the chart above would result in vesting of 20% of target
stock units for each NEO, corresponding to an aggregate number of shares as follows: Mr. Erceg - 2,683 shares,
Mr. Bellaiche - 1,458 shares, Ms. Cloud - 1,395 shares and Mr. Galtie - 1,231 shares. Amounts listed in the sub-
column labeled "Maximum Number of Shares" reflects the number of shares awarded assuming the EPS and operating
cash flow maximums are met.
(c) The exercise price of all options was the closing price of the underlying shares on the New York Stock Exchange on
the grant date.
(d) The grant date fair value of each stock option award was computed in accordance with Codification Topic 718 for
the fiscal year in which the award was granted, disregarding any estimates of forfeitures related to service-based
vesting conditions. The grant date fair value of each PSU award was computed assuming that the EPS target and
operating cash flow target were each met at 100%, resulting in vesting of the target number of shares. For additional
information regarding PSU awards, see the table titled "Outstanding Equity Awards at Fiscal Year-End" at PS-80.
The amount reported for the RSUs shown represents the grant date fair value of those grants.
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DISCUSSION OF SUMMARY COMPENSATION TABLE
AND GRANTS OF PLAN-BASED AWARDS
NON-EQUITY INCENTIVE PLAN AWARDS
Fiscal 2016 Grants - Performance and Payout
y
Payout amounts for the short-term incentive awards granted in January 2016 are shown in the Summary Compensation
Table under the column headed "Non-Equity Incentive Plan Compensation." For a description of these awards, including
the performance goals established at the start of the performance period for the Corporate Portion and the Individual
Portion, see "Short-Term Incentives–Fiscal 2016" at PS-52.
In March 2017, the Committee determined that the operating earnings threshold of $457 million had been met. The
Committee further determined that the payout percentage for the Corporate Portion would be 79% of the target award,
based on Fiscal 2016 operating earnings of $759.2 million, excluding certain charges as permitted under the 2014
Employee Incentive Plan. See "Short-Term Incentives–Permissible Adjustments to Evaluation of Performance" at PS-54.
Based on achievement of individual goals, the Committee determined that the payout percentage of the Individual
Portion would be 8% of the target award for Mr. Cumenal and 20% for the remaining NEOs.
As a result of the Committee's determination as to the Corporate and Individual Portions, Mr. Cumenal was paid 87%
of his target award, and each of the remaining NEOs eligible for a short-term incentive for Fiscal 2016 was paid 99%
of his or her target award.
Fiscal 2015 and Fiscal 2014 Grants
In Fiscal 2015 and 2014, short-term incentive awards were paid out as follows:
•
•
In Fiscal 2015, the Company's consolidated operating earnings exceeded the threshold established by the
Committee, and short-term incentive awards were paid out at 75% of the target amount, on average.
In Fiscal 2014, the Company's consolidated operating earnings, exceeded the threshold established by the
Committee, and short-term incentive awards were paid out at 101% of the target amount, on average.
EQUITY INCENTIVE PLAN AWARDS – PERFORMANCE-BASED RESTRICTED STOCK UNITS
The PSUs awarded in January 2017 are reflected in the Grants of Plan-Based Awards table under the column headed
"Estimated Future Payouts Under Equity Incentive Plan Awards."
General Terms of PSU Grants
PSU grants have the following general features:
•
•
Stock units included in the grant ("Units") are exchanged on a one-to-one basis for shares of the Company's
common stock if the Units vest.
Vesting is determined at the end of a three-year performance period.
• No Units vest if the executive voluntarily resigns (unless for retirement, as described below) 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 (or, if such death or disability occurs in the final year of the performance period, then full
vesting will occur, subject to performance conditions).
• PSUs granted in January 2017 continue to vest upon retirement, subject to compliance with applicable restrictive
covenants, though payout remains contingent on the extent to which pre-established performance goals have
been achieved. PSUs granted in January 2015 and January 2016 similarly continue to vest upon retirement,
but on a pro-rated basis reflecting the portion of the performance period worked. PSUs granted in January 2014
are forfeited upon retirement.
•
In the event of an executive's involuntary termination without cause following at least 10 years of service, PSUs
granted in January 2017, if granted at least six months prior to such termination, will continue to vest, though
payout again remains contingent on attainment of performance goals, and is further subject to compliance with
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applicable restrictive covenants. PSUs granted in January 2014, 2015 and 2016 are forfeited upon involuntary
termination without cause, subject to the Committee's discretion to permit continued vesting.
• PSUs granted in January 2017 accrue dividend equivalent units that will only be paid out upon vesting of the
underlying Units, if any. No dividend equivalent units are paid or accrued on PSUs granted prior to January
2017, and no dividends are paid on any PSUs.
• Vesting of PSUs (for reasons other than those described above or upon a Change in Control) is dependent upon
achievement of one or more threshold performance goals established by the Committee within 90 days of the
start of the performance period.
• Under no combination of circumstances will vesting occur for more than the number of Units granted (twice the
number of target Units).
For a further description of the PSUs granted in January of 2017, 2016, 2015 and 2014, including the performance
goals established at the start of each performance period, see "Performance-Based Restricted Stock Unit Grants–
Performance-Based Restricted Stock Units Granted for Fiscal 2017" and "–Performance-Based Restricted Stock Units
Granted for Fiscal 2016, 2015 and 2014" at PS-56 to PS-57.
Vesting g of Performance-Based Restricted Stock Units for the February y 2014 - January y 2017 Performance Period
In March 2017, for the three-year performance period ending January 31, 2017, it was determined that a cumulative
net EPS of $11.77 per diluted share was achieved, compared to the EPS target of $14.17 and, based on ROA of 9.9%
compared to the ROA target of 11%, no ROA modifier was applied. As a result, vesting of 54.92% of target shares
(27.46% of the maximum shares granted) occurred.
As permitted under the 2005 Employee Incentive Plan and the 2014 Employee Incentive Plan, the Committee retains
the discretion to adjust achieved performance so that executive officers will not be advantaged or disadvantaged by
certain types of events. For the PSUs granted for the three-year performance period ending January 31, 2017:
• The EPS considered for Fiscal 2014 excluded a charge of approximately $60.9 million related to the redemption
of certain senior notes prior to their scheduled maturities.
• The EPS considered for Fiscal 2015 excluded $29.9 million associated with impairment charges related to a
financing arrangement with Koidu Limited and expenses associated with specific cost-reduction initiatives.
• The EPS considered for Fiscal 2016 excluded $24.0 million associated with impairment charges related to
capitalized software development costs and loans to diamond mining companies.
EQUITY INCENTIVE PLAN AWARDS – STOCK OPTIONS
Stock options typically vest (become exercisable) in four equal annual installments. Vesting of each installment is
contingent on continued employment, except in the event of death, disability, certain events following a change in
control or, in the case of stock options granted in January 2017, retirement or involuntary termination without cause
following at least 10 years of service, provided certain conditions are met. See "Potential Payments on Termination or
Change in Control–Explanation of Potential Payments on Termination following a Change in Control" at PS-93. Special
grants are occasionally made in connection with promotions and new hires and for recognition purposes, and may be
awarded on a cliff-vesting basis. For an explanation of the method of determining the exercise price of options, see
"Long Term Incentive–Stock Option Grants" at PS-58.
Stock options expire no later than the tenth anniversary of the grant date. Stock options generally expire earlier on:
• Termination of employment for cause (immediately upon termination);
• Voluntary resignation, other than for retirement (three months after termination);
• Retirement (for stock options granted in January 2017, five years after retirement provided certain circumstances
are met; for prior grants, two years after retirement);
•
Involuntary termination without cause following 10 years of service (for stock options granted in January 2017,
five years after retirement provided certain circumstances are met; for prior grants, three months after retirement);
or
• Death or disability (two years after the event).
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EQUITY INCENTIVE PLAN AWARDS – TIME-VESTING RESTRICTED STOCK UNITS
The RSUs granted in January 2017 vest in equal installments on the first, second, third and fourth anniversary of the
grant date. Outstanding RSUs vest upon death, disability or certain events following a change in control. Termination
of employment for any other reason results in forfeiture of any unvested RSUs.
RSUs may also be granted from time to time in connection with promotions and new hires and for recognition purposes,
and may be awarded on a cliff-vesting basis.
LIFE INSURANCE BENEFITS
The key features of the life insurance benefit that the Company provides to its executive officers are:
•
•
•
•
•
•
•
executive officers own whole life policies on their own lives;
the death benefit is three times annual base salary and target short-term incentive award;
the Company pays the premium on such policies in an amount sufficient to accumulate cash value;
premiums are calculated to accumulate a target cash value at age 65;
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 base salary and target short-term
incentive award;
the amount of the premiums paid by the Company is taxable income to the executive officer; and
the Company does not pay any additional amounts to offset the income tax attributable to the premiums paid
on behalf of the executives.
Mr. Nicoletti declined this benefit. See the table shown under note (g) to the Summary Compensation Table at PS-71
for information concerning life insurance premiums paid for the benefit of the other NEOs.
FREDERIC CUMENAL EMPLOYMENT AGREEMENT
Elements of Mr. Cumenal's compensation disclosed in the Summary Compensation Table were provided pursuant to the
employment agreement, entered into between Tiffany, the Company and Mr. Cumenal as part of his recruiting process
in March 2011. For key features of this Agreement, see "Other Employment Agreements or Severance Plans for Named
Executive Officer–Frederic Cumenal Employment Agreement" at PS-63.
The employment agreement 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. As disclosed in the Summary Compensation Table at PS-68,
after being hired in Fiscal 2011 under the terms of his employment agreement, Mr. Cumenal received various
compensation increases and promotions outside of the original terms of his agreement.
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MARK J. ERCEG COMPENSATORY ARRANGEMENT
Elements of Mr. Erceg's compensation disclosed in the Summary Compensation Table are provided pursuant to the
terms of the offer letter extended to him in connection with his recruitment. For terms of the offer letter, see "Other
Employment Agreements or Severance Plans for Named Executive Officers–Mark J. Erceg Offer Letter" at PS-64. The
offer letter has been filed with the Securities and Exchange Commission as Exhibit 10.29 to the Company's Annual
Report on Form 10-K dated March 17, 2017.
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RALPH NICOLETTI COMPENSATORY ARRANGEMENT
Elements of Mr. Nicoletti's compensation disclosed in the Summary Compensation Table were provided pursuant to the
terms of the offer letter extended to Mr. Nicoletti in connection with his recruitment. The key terms of the offer letter
were:
Initial Base Salary: $750,000 per year;
•
•
Initial Target Annual Incentive Award: $525,000 (70% of Base Salary);
Initial Target Long-term Incentive Award: $1,500,000 (200% of Base Salary);
•
• One-time sign-on award of RSUs equal in value to $1,500,000, to vest in full on the third anniversary of the
grant date; and
• Relocation benefits in support of Mr. Nicoletti's relocation for the role.
JEAN-MARC BELLAICHE COMPENSATORY ARRANGEMENT
Elements of Mr. Bellaiche's compensation disclosed in the Summary Compensation Table are provided pursuant to the
terms of the offer letter extended to Mr. Bellaiche in connection with his recruitment. The key terms of the offer letter
were:
•
•
•
Initial Base Salary: $750,000 per year;
Initial Target Annual Incentive Award: 60% of base salary;
Initial Target Long-term Incentive Award: 150% of base salary;
• One-time sign-on awards of (i) RSUs equal in value to $562,500, to vest in equal installments on the first,
second and third anniversary of the grant date; (ii) stock options equal in value to $562,500, to vest in equal
installments on the first, second and third anniversary of the grant date; and (iii) a $900,000 cash bonus, half
of which was to be paid within 30 days of his date of hire, and the remaining half on or about April 1, 2015,
such bonus being subject to recoupment in the event of resignation without Good Reason or termination with
Cause on or before January 31, 2016; and
• Severance benefits, absent a change in control, in the event of termination without Cause or resignation for
Good Reason prior to the second year anniversary of hire (a period that has since expired): one year of base
salary; any unpaid short-term incentive award for the last completed fiscal year; pro-rated short-term incentive
award for the current year (calculated at target); plus reimbursement of continued health coverage for one year.
The offer letter contains definitions of "Cause" and "Good Reason" and has been filed with the Securities and Exchange
Commission as Exhibit 10.32 to the Company's Annual Report on Form 10-K dated March 28, 2016.
PHILIPPE GALTIE COMPENSATORY ARRANGEMENT
Elements of Mr. Galtie's compensation disclosed in the Summary Compensation Table are provided pursuant to the
terms of the offer letter extended to Mr. Galtie in connection with his recruitment. The key terms of the offer letter were:
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Initial base salary: $500,000 per year;
•
Initial Target Annual Incentive Award: 50% of base salary;
•
Initial Target Long-term Incentive Award: 150% of base salary;
• One-time sign-on awards of (i) RSUs equal in value to $375,000, to vest in equal installments on the first,
second, third and fourth anniversary of the grant date; and (ii) stock options equal in value to $375,000, to
vest in equal installments on the first, second, third and fourth anniversary of the grant date. Vesting of these
awards is subject to conditions, including continued employment;
• Severance benefits, absent a change in control, in the event of termination without Cause or resignation for
Good Reason prior to the second year anniversary of hire: one year of base salary; any unpaid short-term incentive
TIFFANY & CO.
PS-78
award for the last completed fiscal year; and a pro-rated short-term incentive award for the current year, calculated
at target;
•
French pension scheme payments: payment of contributions for the benefit of Mr. Galtie's account with certain
French social security and pension schemes. This payment is intended to avoid loss of Mr. Galtie's accrual
under such schemes; and
• Certain relocation costs.
The offer letter contains definitions of "Cause" and "Good Reason" and has been filed with the Securities and Exchange
Commission as Exhibit 10.32 to the Company's Annual Report on Form 10-K dated March 17, 2017.
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TIFFANY & CO.
PS-79
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
January 31, 2017
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Option
Exercise
Price
($)
Option
Expiration
Date (a)
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 ($)
Name
Frederic Cumenal
37,168
40,000
39,000
— $
62.44
3/10/2021
— $
60.54
1/18/2022
— $
63.76
1/16/2023
—
36,523 $
80.52
9/19/2023
33,000
70,500
57,743
11,000 $
88.77
1/16/2024
70,500 $
86.74
1/14/2025
173,229 $
61.80
1/20/2026
—
215,076 $
79.23
1/19/2027
Mark J. Erceg
Ralph Nicoletti (n)
Jean-Marc Bellaiche
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—
140,847 $
76.19 11/16/2026
73,128 $
79.23
1/19/2027
14,000
12,500
10,394
7,000 $ 100.65
7/16/2024
12,500 $
86.74
1/14/2025
31,182 $
61.80
1/20/2026
—
19,876 $
79.23
1/19/2027
8,348/30,400 (c) $
657,155 (d)
8,875/71,000 (e) $
698,640 (f)
12,642/101,134 (g) $
995,178 (h)
7,889/78,886 (i)
$
621,022 (j)
12,419/12,419 (k) $
977,624 (l)
2,683/26,822 (i)
$
211,206 (j)
26,253/26,253 (m) $
2,066,636 (l)
1,600/12,800 (e) $
125,952 (f)
2,276/18,204 (g) $
179,167 (h)
1,458/14,578 (i)
$
114,774 (j)
1,863/1,863 (o) $
146,655 (l)
3,648/3,648 (p) $
287,171 (l)
TIFFANY & CO.
PS-80
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Option
Exercise
Price
($)
Option
Expiration
Date (a)
Equity Incentive
Plan Awards
Number of
Unearned
Shares, Units, or
Other Rights
That Have Not
Vested (#) (b)
Equity Incentive
Plan Awards
Market or Payout
Value of
Unearned Shares,
Units, or Other
Rights That Have
Not Vested ($)
Name
Pamela H. Cloud
20,000
17,000
18,000
18,000
13,425
13,000
9,701
— $
— $
— $
43.37
1/20/2020
58.00
1/20/2021
60.54
1/18/2022
— $
63.76
1/16/2023
4,475 $
88.77
1/16/2024
13,000 $
86.74
1/14/2025
29,103 $
61.80
1/20/2026
—
19,016 $
79.23
1/19/2027
Philippe Galtie
4,853
7,969
14,557 $
81.44
9/16/2025
23,907 $
61.80
1/20/2026
—
16,776 $
79.23
1/19/2027
3,406/12,400 (c) $
268,120 (d)
1,625/13,000 (e) $
127,920 (f)
2,124/16,992 (g) $
167,201 (h)
1,395/13,948 (i)
$
109,814 (j)
3,488/3,488 (p) $
274,575 (l)
1,745/13,958 (g) $
137,366 (h)
1,231/12,306 (i)
$
96,904 (j)
3,453/3,453 (q) $
271,820 (l)
3,080/3,080 (p) $
242,458 (l)
Notes to Outstanding Equity Awards at Fiscal Year-End Table
(a) For all option grants shown, the grant date was 10 years prior to the expiration date shown. All options vest
25% per year over the four-year period following a grant date other than the option grants expiring September
19, 2023 (granted to Mr. Cumenal, which were scheduled to vest on a three-year cliff-vesting basis), July 16,
2024 (granted to Mr. Bellaiche, which vest in three equal installments) and November 16, 2026 (granted to
Mr. Erceg, which vest in three equal installments).
The unvested options shown for Mr. Cumenal in the column headed "Number of Securities Underlying Unexercised
Options Unexercisable" became subject to forfeiture upon, and the exercise period for options shown in the
column headed "Number of Securities Underlying Unexercised Options Exercisable" would ordinarily have ended
three months following, his departure in February 2017. In March 2017, the Committee amended the applicable
grant terms to provide that the following unvested stock options would vest on March 14, 2017: all of the
unvested stock options shown with the expiration date of September 19, 2023 (granted on September 19, 2013);
all of the unvested stock options shown with the expiration date of January 16, 2024 (granted on January 16,
2014); a portion (35,250) of the unvested stock options shown with the expiration date of January 14, 2025
(granted on January 14, 2015); and a portion (57,743) of the unvested stock options shown with the expiration
date of January 20, 2026 (granted on January 20, 2016). The remaining unvested stock options were forfeited
upon his departure. In addition, the amendments also extended the end of the expiration period for all vested
stock options to the one-year anniversary of his termination date. See "Long-Term Incentives–Mr. Cumenal's
Long-Term Incentive Awards" at PS-58.
TIFFANY & CO.
PS-81
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(b) 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 (e) through (p) 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 at the maximum goal level over the three-year performance period.
(c) This January 2014 grant of PSUs vested three business days following the date on which the Company's audited
financial results for Fiscal 2016 were publicly reported.
(d) This value has been computed at 27.46% of maximum based on Company EPS and ROA performance in Fiscal
2014, Fiscal 2015 and Fiscal 2016. The resulting value was computed on the basis of the closing stock price
of $78.72 on January 31, 2017.
(e) This January 2015 grant of PSUs will vest three business days following the date on which the Company's audited
financial results for Fiscal 2017 are publicly reported. The grant shown for Mr. Cumenal became forfeitable upon
his departure in February 2017. In March 2017, the terms of Mr. Cumenal's award were amended to provide
for continued vesting following his departure. Payout of this award will remain contingent upon pre-established
performance goals, will be pro-rated based on his employment during the performance period, and may only be
reduced in the Committee's discretion if the reduction applies to the executive officers generally. See "Chief
Executive Officer Transition–Frederic Cumenal Departure" at PS-39.
(f) This value has been computed at 12.5% of maximum on the assumption that the EPS threshold is reached but
not exceeded and the ROA target is not met (resulting in no ROA adjustment) for the performance period of
Fiscal 2015 through Fiscal 2017. The resulting value was computed on the basis of the closing stock price of
$78.72 on January 31, 2017. If the EPS and ROA targets are both met at 100% (again resulting in no ROA
adjustment) for the respective performance period, the value would be computed at 50% of maximum,
corresponding to an aggregate number of shares as follows: Mr. Bellaiche - 6,400 shares and Ms. Cloud - 6,500
shares.
(g) This January 2016 grant of PSUs will vest three business days following the date on which the Company's audited
financial results for Fiscal 2018 are publicly reported. The grant shown for Mr. Cumenal was forfeited upon his
departure in February 2017.
(h) This value has been computed at 12.5% of maximum on the assumption that the EPS threshold is reached but
not exceeded and the ROA target is not met (resulting in no ROA adjustment) for the performance period of
Fiscal 2016 through Fiscal 2018. The resulting value was computed on the basis of the closing stock price of
$78.72 on January 31, 2017. If the EPS and ROA targets are both met at 100% (again resulting in no ROA
adjustment) for the respective performance period, the value would be computed at 50% of maximum,
corresponding to an aggregate number of shares as follows: Mr. Bellaiche - 9,102 shares, Ms. Cloud - 8,496
shares and Mr. Galtie - 6,979 shares.
(i) This January 2017 grant of PSUs will vest three business days following the date on which the Company's audited
financial results for Fiscal 2019 are publicly reported. The grant shown for Mr. Cumenal was forfeited upon his
departure in February 2017.
(j) This value has been computed at 10% of maximum on the assumption that the EPS and operating cash flow
thresholds are reached but not exceeded. The resulting value was computed on the basis of the closing stock
price of $78.72 on January 31, 2017. If the EPS and operating cash flow targets are both met at 100%, the
value would be computed at 50% of maximum, corresponding to an aggregate number of shares as follows: Mr.
Erceg - 13,411 shares, Mr. Bellaiche - 7,289 shares, Ms. Cloud - 6,974 shares and Mr. Galtie - 6,153 shares.
(k) This one-time RSU award, granted to Mr. Cumenal in September 2013 in connection with his promotion to
President, vested in full pursuant to its terms upon his departure in February 2017.
(l) The value was computed on the basis of the Company's closing stock price of $78.72 on January 31, 2017.
(m) This one-time RSU award, granted to Mr. Erceg in November 2016 in connection with his recruitment, vests in
equal installments over a three-year period ending November 16, 2019. The number of shares shown is the
portion of the award that had not vested as of January 31, 2017.
TIFFANY & CO.
PS-82
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(n) All outstanding grants to Mr. Nicoletti were forfeited upon his departure, effective May 20, 2016.
(o) This one-time RSU award, granted to Mr. Bellaiche in July 2014 in connection with his recruitment, vests in
equal installments over a three-year period ending July 16, 2017. The number of shares shown is the portion
of the award that had not vested as of January 31, 2017.
(p) This January 2017 grant of RSUs will vest in equal installments over a four-year period ending January 19,
2021. The number of shares shown is the portion of the award that had not vested as of January 31, 2017.
(q) This one-time RSU award, granted to Mr. Galtie in September 2015 in connection with his recruitment, vests
in equal installments over a four-year period ending September 16, 2019. The number of shares shown is the
portion of the award that had not vested as of January 31, 2017.
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TIFFANY & CO.
PS-83
OPTION EXERCISES AND STOCK VESTED
Fiscal 2016
Option Awards
Stock Awards
Number of
Shares
Acquired on
Exercise
(#)
Value
Realized
on Exercise
($)
Number of
Shares
Acquired
on Vesting
(#)
Value
Realized
on Vesting
($)
—
—
—
—
—
—
—
—
—
—
—
—
14,499 $
1,060,747
— $
— $
—
—
1,863 $
114,658
6,601 $
482,929
1,152 $
83,388
PENSION BENEFITS TABLE
Plan Name (b)
Pension Plan
Excess Plan
Supplemental Plan
Number of
Years Credited
Service
22.5
22.5
22.5
Notes to Pension Benefits Table
Actuarial
Present Value of
Accumulated
Benefits
Payments
During Last
Fiscal Year
$
$
$
525,071 $
1,434,073 $
643,097 $
—
—
—
Name
Frederic Cumenal
Mark J. Erceg
Ralph Nicoletti
Jean-Marc Bellaiche
Pamela H. Cloud
Philippe Galtie
Name (a)
Pamela H. Cloud
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(a) Only executive officers hired prior to January 1, 2006 are eligible for participation in the Pension Plan, Excess
Plan, and Supplemental Plan. Messrs. Cumenal, Erceg, Nicoletti, Bellaiche and Galtie accordingly do not participate
in these plans.
(b) The formal names of the plans are: the Tiffany and Company Pension Plan ("Pension Plan"), the 2004 Tiffany and
Company Un-funded Retirement Income Plan to Recognize Compensation in Excess of Internal Revenue Code
Limits and the 1994 Tiffany and Company Supplemental Retirement Income Plan.
Assumptions Used in Calculating the Present Value of the Accumulated Benefits
The assumptions used in the Pension Benefit Table are that an active executive would retire at age 65; post-retirement
mortality based upon the RP-2014 Male/Female Mortality Table with White Collar Adjustments regressed to base year
2006 and projected generationally from 2006 with Scale MP-2016; and a discount rate of 4.25% for the Pension Plan
and 4.25% for the Excess and Supplemental Plans. All assumptions were consistent with those used to prepare the
financial statements for Fiscal 2016, except for the retirement age assumption, which represents the normal retirement
age under these plans.
Tiffany established three traditional pension retirement plans for eligible employees hired before January 1, 2006: the
Pension Plan, the Excess Plan and the Supplemental Plan. Ms. Cloud is eligible to participate in these plans.
Features of the Pension Benefit Plans
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.
TIFFANY & CO.
PS-84
In general, compensation reported in the Summary Compensation Table at PS-68 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:
•
•
•
•
•
•
•
•
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 U.S. employees hired by Tiffany before January 1, 2006;
executive officers hired before January 1, 2006 are participants;
benefits vest after five years of service;
benefits are based on the participant's average final compensation and years of service;
benefits are subject to Internal Revenue Code limitations on the total benefit and the amount that may be
included in average final compensation; and
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 is an average of taxable wage bases calculated for Social
Security purposes.
Examplep : covered compensation for a person born in 1952 is $79,824. 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 -
$79,824) x 0.015] plus [($79,824) x 0.01]] x 25 = $27,522 annual benefit for a single life annuity.
The form of benefit elected can reduce the amount of benefit. The highest benefit is available for an unmarried participant
who elects to take the benefit over the course of his or her own life (a single-life annuity). A person who elects to take
the benefit over the course of two lives, such as a 100% annuity over the lives of the participant and his or her spouse,
will experience an actuarial reduction in the amount of his or her benefit.
Excess Plan
These are the key features of the Excess Plan:
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•
•
•
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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 who participate in the Pension
Plan;
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;
benefits are offset by benefits payable under the Pension Plan;
benefits are not offset by benefits payable under Social Security;
benefits vest after five years of service;
benefits are subject to forfeiture if employment is terminated for cause;
TIFFANY & CO.
PS-85
•
•
•
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;
benefits are payable upon the later of the participant's separation from service, as defined under the plan, or
attainment of age 55; and
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:
•
•
•
•
•
•
•
•
•
•
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 hired before January 1, 2006;
it uses a different benefit formula than that used by the Pension Plan and the Excess Plan;
benefits are offset by benefits payable under the Pension Plan and the Excess Plan;
benefits are offset by benefits payable under Social Security;
benefits do not vest until the executive attains age 65 while employed, 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
"Potential Payments on Termination or Change in Control–Explanation of Potential Payments on Termination
following a Change in Control–Definition of a Change in Control" at PS-94);
benefits are subject to forfeiture if employment is terminated for cause;
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
participants will not receive any distribution from the plan until six months following separation from service as
defined under the plan.
As its name implies, the Supplemental Plan supplements payments under the Pension Plan, the Excess Plan and from
Social Security so that total benefits equal a variable percentage of the participant's average final compensation.
Depending upon the participant's years of service, 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.
TIFFANY & CO.
PS-86
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Early Retirement and Extra Service Credit
The normal retirement age under the Pension, Excess and Supplemental Plans is 65. However, those eligible for early
retirement (defined as age 55 with at least 10 years of service) 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:
• 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.
Tiffany does not have a policy or practice of granting extra years of credited service under the Excess, Pension and
Supplemental Plans.
Retirement Benefits for Executive Officers hired on or after January 1, 2006
Executive officers hired on or after January 1, 2006 are eligible for a defined contribution retirement benefit through
the 401(k) Plan, and for an Excess DCRB Contribution, credited on their behalf to an account under the Deferral Plan.
For details about the Excess DCRB Contribution, see "Excess DCRB Feature of the Executive Deferral Plan" at PS-89.
Messrs. Erceg, Bellaiche and Galtie are eligible to receive Excess DCRB Contributions. Upon their departures, Messrs.
Cumenal and Nicoletti became entitled to distribution of their vested Excess DCRB Contributions, and forfeited the
unvested portion of their Excess DCRB Contributions. See Note (b) to the Nonqualified Deferred Compensation Table
at PS-88 for further information concerning their Excess DCRB Contributions.
During Mr. Cumenal's employment, contributions intended to make up amounts he forfeited at his prior employer were
made to a special retirement account for his benefit. Contributions were also made for the benefit of his account with
certain French social security and pension schemes. Mr. Galtie also receives contributions for the benefit of his accounts
with those schemes. For details about the foregoing retirement benefits, see "Other Employment Agreements or Severance
Plans for Named Executive Officers–Frederic Cumenal Employment Agreement" at PS-63 and "Discussion of Summary
Compensation Table and Grants of Plan-Based Awards–Philippe Galtie Compensatory Arrangement" at PS-78.
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TIFFANY & CO.
PS-87
NONQUALIFIED DEFERRED COMPENSATION TABLE
(Fiscal 2016)
Executive
Contribution
In
Last Fiscal
Year (a)
($)
Registrant
Contribution
In
Last Fiscal
Year (b)
($)
Aggregate
Earnings
In
Last Fiscal
Year (c)
($)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance
At
Last Fiscal
Year End (d)
($)
$
$
$
$
$
$
984,375 $
72,952 $
483,668 $
— $ 3,372,240
— $
— $
— $
30,397 $
— $
9 $
— $
8,029 $
—
—
579,818 $
31,847 $
121,888 $
— $ 1,298,130
— $
— $
— $
— $
— $
— $
— $
— $
—
—
Note to Nonqualified Deferred Compensation Table
Name
Frederic Cumenal
Mark J. Erceg
Ralph Nicoletti
Jean-Marc Bellaiche
Pamela H. Cloud
Philippe Galtie
(a) 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 at PS-68.
(b) Under the terms of the Deferral Plan, and as noted under "Registrant Contribution in Last Fiscal Year" in the table
above, Messrs. Cumenal, Nicoletti and Bellaiche received Excess DCRB Contributions of $72,952, $30,397 and
$31,847, respectively, in Fiscal 2016. As of January 31, 2017, Mr. Cumenal was vested in 80% of the total Excess
DCRB Contributions credited to him, based on his years of service; following his departure in February 2017, the
vested amount of his aggregate balance, totaling $157,772, became payable to him in accordance with the form
of payment he elected, and the remainder was forfeited. Mr. Nicoletti was vested in 20% of the total Excess DCRB
Contributions credited to him; upon his departure in May 2016, the vested amount of his aggregate balance, totaling
$8,029, was distributed to him, and the remainder was forfeited. Mr. Bellaiche is vested in 20% of the total Excess
DCRB Contributions credited to him. See "Excess DCRB Feature of the Deferral Plan" below.
(c) Amounts shown in this column are not reported as compensation in the Summary Compensation Table because the
Deferral Plan does not pay above-market or preferential earnings on compensation that is deferred.
(d) Amounts shown in this column include amounts that were reported as compensation in the Summary Compensation
Table to the extent that such amounts were contributed by the executive but not to the extent that such amounts
represent earnings. See Note (c) above.
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These are the key features of the Company's Deferral Plan:
Features of the Deferral Plan
•
Participation is open to directors and executive officers of the Company as well as other vice presidents and
"director-level" employees of Tiffany;
• Directors of the Company may defer all of their cash compensation;
•
Employees may defer up to 50% of their salary and up to 90% of their short-term cash incentive or bonus
compensation;
• Other than the Excess Defined Contribution Retirement Benefits available to individuals who do not participate
in the Company's defined benefit pension plan, the Company makes no contribution to the plan;
•
The Company guarantees no specific return on contributions under the plan;
• Deferrals are placed in a trust that is subject to the claims of Tiffany's creditors;
•
The value in the participant's account depends on the return on investments in various mutual funds that may
be selected by the participant;
TIFFANY & CO.
PS-88
• Deferrals may be made to a retirement account and to accounts which will pay out on specified "in-service" dates;
•
Participants must elect to make deferrals in advance of the period during which the deferred compensation is
earned;
• Retirement accounts pay out in 5, 10, 15 or 20 annual installments after retirement as elected in advance by
the participant;
•
•
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 the
Board;
Terminationof services generally triggers a distribution of all account balances other than, in the case of retirement
or disability, retirement balances; and
• 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 Deferral Plan
The Deferral Plan provides for an Excess DCRB Contribution each year with respect to certain eligible employees under
the DCRB feature of the 401(k) Plan. If an eligible employee under the DCRB feature (i) holds a title of Vice President
or above, (ii) receives a DCRB Contribution under the 401(k) Plan in a given year, and (iii) such DCRB Contribution is
curtailed by reason of the limitations under Sections 401(a)(17) or 415 of the Internal Revenue Code, the eligible
employee shall have an Excess DCRB Contribution credited to his or her Deferred Benefit Accounts under the Deferral
Plan.
The Excess DCRB feature is intended to benefit those eligible employees who were hired on or after January 1, 2006,
and accordingly were precluded from participation in the Pension Plan, Excess Plan and Supplemental Plan. Messrs.
Erceg, Bellaiche and Galtie are eligible for benefits under the Excess DCRB feature of the Deferral Plan. Upon their
departures, Messrs. Cumenal and Nicoletti became entitled to distribution of their vested Excess DCRB Contributions,
and forfeited the unvested portion of their Excess DCRB Contributions. See Note (b) to the Nonqualified Deferred
Compensation Table above for further information concerning their Excess DCRB Contributions.
The Excess DCRB Contribution vests in accordance with the vesting schedule for DCRB Contributions under the 401
(k) Plan, as follows:
Years of Service
Vested Percentageg
Less than 2 Years
2 years or more
3 years or more
4 years or more
5 years or more
6 years or more
—%
20%
40%
60%
80%
100%
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TIFFANY & CO.
PS-89
POTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN CONTROL
The following table shows benefits payable to the NEOs shown upon involuntary termination absent a Change in Control
(defined below), and upon involuntary termination subsequent to a Change in Control. In either case, the values below
assume the NEO shown was involuntarily terminated on January 31, 2017. An "involuntary termination" does not include
a termination for cause, but does include a resignation for good reason.
For information about payments and other benefits provided to Mr. Cumenal upon his actual departure in February
2017, see "Payments and Other Benefits Provided to Mr. Cumenal" below.
No information is shown for Mr. Nicoletti on the following table because his departure in May 2016 was prior to the
date of the assumed involuntary termination.
Involuntary Terminations Absent a Change in
Control
Involuntary Terminations Following a Change in Control
Cash
Severance
Payment
(a)
Early
Vesting of
Equity
Awards (b)
Welfare
Benefit (a)
Early Vesting
of
Supplemental
Plan (c)
Cash
Severance
Payment (d)
Welfare
Benefits
(e)
Total
Early
Vesting
of
Stock
Options (f)
Early Vesting
of Restricted
Stock Units
(g)
Total
$1,909,387 $
23,424 $ 977,624 $2,910,435 $
— $ 3,818,774 $ 47,143 $ 2,931,035 $ 9,147,491 $ 15,944,443
$1,065,164 $
23,424 $
— $1,088,588 $
— $ 1,700,000 $ 47,143 $
356,343 $ 2,066,636 $ 4,170,122
$
$
— $
— $
— $
— $
— $ 2,400,000 $ 47,143 $
527,599 $ 1,776,159 $ 4,750,901
— $
— $
— $
— $
694,701 $ 1,920,000 $ 47,143 $
492,423 $ 1,865,607 $ 5,019,874
$ 919,057 $
— $
— $ 919,057 $
— $ 1,840,000 $ 34,576 $
404,506 $ 1,118,532 $ 3,397,614
Name
Frederic
Cumenal
Mark J.
Erceg
Jean-Marc
Bellaiche
Pamela H.
Cloud
Philippe
Galtie
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Notes to Potential Payments on Termination or Change in Control Table
(a)
(b)
(c)
(d)
(e)
Prior to his departure, Mr. Cumenal was, and Messrs. Erceg and Galtie currently are, entitled to certain severance
benefits in the event of involuntary termination, without cause, in the absence of a change in control. For a
summary of these arrangements, see "Other Employment Agreements or Severance Plans for Named Executive
Officers–Frederic Cumenal Employment Agreement," and "–Mark J. Erceg Offer Letter" at PS-63 and PS-64
and "Discussion of Summary Compensation Table and Grants of Plan-Based Awards–Philippe Galtie
Compensatory Arrangement" at PS-78.
The terms applicable to the one-time award of time-vesting restricted stock units made to Mr. Cumenal on
September 19, 2013 (12,419), with respect to his promotion to President, provide for acceleration of 100%
of the outstanding shares in the event of an involuntary termination without cause.
Following a Change in Control, the Supplemental Plan will vest upon involuntary termination, or at the time of
the Change in Control if the participant has either attained age 65, or age 55 with 10 years of service. The
value reported reflects the present value at age 55 of the benefit accrued as of January 31, 2017, reduced for
early retirement.
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 short-term incentive award or bonus, by two. Mr. Cumenal's cash
severance payment is the sum of (i) actual salary multiplied by two, and (ii) $1,318,774, 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
TIFFANY & CO.
PS-90
(f)
(g)
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 annual stock option grants made in 2014, 2015, 2016 and 2017 was determined
using $78.72, the closing value of the Company's common stock on January 31, 2017. In the event of a Change
in Control that is not a Terminating Transaction (as defined below), 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. This
column also assumes early vesting of the outstanding portions of the stock option grants awarded to Mr. Cumenal
upon his promotion in September 2013 (36,523 outstanding), to Mr. Erceg upon his hire in November 2016
(140,847 outstanding), to Mr. Bellaiche upon his hire in July 2014 (7,000 outstanding) and to Mr. Galtie upon
his hire in September 2015 (14,557 outstanding).
The value of early vesting of annual PSU and RSU grants made in 2014, 2015, 2016 and 2017 was determined
using $78.72, the closing value of the Company's common stock on January 31, 2017. In the event of a Change
in Control that is not a Terminating Transaction, vesting of these RSUs and PSUs will only occur upon the
executive's involuntary termination from employment. Upon such an involuntary termination, the outstanding
portion of the RSUs will vest in full, while the portion of PSUs to vest will be determined by 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
early vesting of 30% of the total number of PSU's granted in 2014; early vesting of 55% of the PSUs granted
in 2015 and 2016; and no early vesting of PSUs granted in 2017. This column also assumes early vesting of
100% of the outstanding portions of the RSU grants awarded to certain executive officers in January 2017, as
well as of the RSUs granted to Mr. Cumenal in September 2013 (12,419), to Mr. Erceg in November 2016
(26,253 outstanding), to Mr. Bellaiche in July 2014 (1,863 outstanding) and to Mr. Galtie in September 2015
(3,453 outstanding).
Payments and Other Benefits Provided to Mr. Cumenal
In connection with the termination of his employment on February 10, 2017, Mr. Cumenal was provided the following
severance payments and benefits, as required by his employment agreement and affirmed in his separation agreement
with Tiffany and the Company:
• Cash severance in the amount of $1,909,387;
• Payment of his short-term incentive award for Fiscal 2016. Based on achievement of corporate and individual
performance goals, Mr. Cumenal was paid $1,631,250, less applicable withholdings, representing 87% of his
target award of $1,875,000. For additional information concerning the payout of this award, see "Short-Term
Incentives–Fiscal 2016" at PS-52; and
• Payment of the cost of one year of continued health-care coverage.
For a discussion of severance provisions in Mr. Cumenal's employment agreement, see "Other Employment Agreements
or Severance Plans for Named Executive Officers–Frederic Cumenal Employment Agreement" at PS-63. For a discussion
of his separation agreement, see "Chief Executive Officer Transition–Frederic Cumenal Departure" at PS-39.
The separation agreement also provided for a release and waiver of claims by Mr. Cumenal in favor of the Company and
its affiliates, as well as his agreement to assist in the transition of his responsibilities and with respect to litigation
matters. As additional consideration for these benefits (which were not contemplated by his employment agreement),
the separation agreement provided Mr. Cumenal (i) an additional cash payment of $690,613, (ii) a reduction in the
length of certain post-employment non-solicitation obligations from 18 to 12 months, (iii) certain outplacement benefits
and (iv) amendment to the terms applicable to certain of Mr. Cumenal's equity awards to provide that:
• The following stock option grants, or portions thereof, which ordinarily would have been forfeited on his
termination date, vested as of March 14, 2017: 36,523 stock options granted in September 2013, 11,000
stock options granted in January 2014, 35,250 stock options granted in January 2015, and 57,743 stock
options granted in January 2016. These stock options, as well as stock options that were vested but unexercised
as of February 10, 2017, remain exercisable until February 10, 2018. The aggregate fair value of the amended
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TIFFANY & CO.
PS-91
stock option grants described, calculated in accordance with Codification Topic 718 as of the amendment date,
was $2,859,100.
•
A maximum number of 71,000 PSUs granted to Mr. Cumenal in January 2015, which otherwise would have
been forfeited upon his termination date, will continue to vest in accordance with their terms. The payout of
this award to Mr. Cumenal will remain contingent upon pre-established performance goals, will be pro-rated to
reflect Mr. Cumenal's employment during the performance period, and may only be reduced in the Committee's
discretion if the reduction applies to the executive officers generally. The fair value of the amended award,
calculated in accordance with Codification Topic 718 as of the amendment date, was $2,089,266 (computed
at 50% of maximum on the assumption that the EPS target is reached but not exceeded and the ROA target
is not met (resulting in no ROA adjustment) for the performance period of Fiscal 2015 through Fiscal 2017).
The Company will be entitled to recover or revoke the additional consideration in the event Mr. Cumenal breaches his
agreement to provide transition or litigation assistance or his applicable confidentiality, no-hire and non-solicitation
obligations. As required by his employment agreement, the Company also paid Mr. Cumenal for accrued but unused
vacation and an amount in lieu of the applicable notice period.
In addition, upon the termination date, 12,419 RSUs granted to Mr. Cumenal in September 2013 vested according to
their terms. Based on $81.37, the closing value of the Company's stock on February 10, 2017, the value of the early
vesting of this award was $1,010,534.
PSUs granted to Mr. Cumenal in January 2014 for the performance period ending on January 31, 2017 likewise vested
according to their terms, as the performance period had been completed by the time of his departure from the Company.
Based on the Company's achievement of applicable performance goals, this award vested at 54.92% of target shares,
resulting in the vesting of 8,348 shares for Mr. Cumenal. For additional information concerning the payout of this award,
see "Long-Term Incentives–Vesting of Performance-Based Restricted Stock Units Granted for Fiscal 2014" at PS-58.
For information concerning the distribution, following the termination of Mr. Cumenal's employment, of his vested,
nonqualified deferred compensation benefits and the special retirement account required by his employment agreement,
see Note (b) to the Nonqualified Deferred Compensation Table at PS-88 and "Retirement Benefits–Defined Contribution
Retirement Benefit" at PS-59, respectively.
Explanation of Potential Payments on a Termination Absent a Change in Control
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Severance Arrangements
Messrs. Erceg and Galtie are entitled to severance benefits in the event of an involuntary termination in the absence of
a Change in Control, as was Mr. Cumenal prior to his departure from the Company. For a full discussion of these
arrangements, see "Compensation Discussion and Analysis–Other Employment Agreements or Severance Plans for Named
Executive Officers" at PS-63. Aside from these individuals, the Company is not obligated to pay cash severance benefits
to any other NEO upon termination, unless a Change in Control has occurred, although it is permitted to provide such
benefits if it deems it appropriate to do so.
Performance-Based Restricted Stock Unit Awards
The terms applicable to PSUs granted in January 2016 and 2015 reserve the right of the Committee, under certain
circumstances, to permit vesting of such units in the event of an involuntary termination without cause absent a Change
in Control. The terms applicable to PSUs granted in January 2017 provide for continued vesting in the event of an
involuntary termination without cause absent a Change in Control following at least 10 years of service as an executive,
provided the PSUs were granted at least six months prior to such termination. In each case the terms set forth parameters
and requirements for vesting. The amounts reported assume no units were vested in this manner.
TIFFANY & CO.
PS-92
Explanation of Potential Payments on Termination Following a Change in Control
Severance Arrangements
g
The Company and Tiffany entered into retention agreements with each of the executive officers (other than Mr. Cumenal,
whose employment agreement with the Company addressed severance benefits following a change in control). These
agreements would provide a covered executive with compensation if he or she should incur an involuntary termination
after a Change in Control.
In the event that a Change in Control occurs, the covered executives would have fixed terms of employment under their
retention agreements of 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:
•
•
Two times the sum of the executive's salary and target short-term incentive award, as severance; and
Two years of benefits continuation under Tiffany's health and welfare plans.
Vesting g of Options
p
and Restricted Stock Units on an Involuntary y Termination following g a Change g in Control
Stock Option
p
Grants
Outstanding stock options will vest in full and become exercisable in the event of a Change in Control that is a Terminating
Transaction (as defined below in "Definition of a Change in Control.")
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 executive is involuntarily terminated from employment following the Change in Control.
Performance-Based Restricted Stock Unit Grants
In the event of a Change in Control, PSUs convert to time-vesting restricted stock units as follows:
i.
ii.
If a Change in Control occurs before the start of the three-year performance period, no conversion or vesting
shall occur for the award in connection with the change in control;
If a Change in Control occurs in the first or second fiscal year of the three-year performance period, then 55%
of the performance-based stock units awarded shall convert to time-vesting restricted stock units; and
iii. If a Change in Control occurs in the last fiscal year of the three-year performance period, the percentage of
PSUs to convert to time-vesting restricted stock units will be based on the Company's cumulative performance
during the first and second fiscal year of the performance period, as compared to the performance goals expressed
in the original notice of grant; however, such performance goals will be pro-rated for the cumulative two-year
period (66.67%). For PSUs granted in 2014, 2015 and 2016, the ROA target will be disregarded for these
purposes.
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The resulting time-vesting restricted stock units will vest on the earlier of (i) the original maturity date in the notice of
grant (which, for grants made in January 2014, 2015 and 2016, is three business days following the public announcement
of the Company's audited, consolidated financial results for the last fiscal year in the performance period), or (ii) if the
executive is earlier involuntarily terminated without cause, on such termination date.
An assumed Change of Control on January 31, 2017, would occur in the third year of the performance period of the
PSUs granted in 2014. Actual results for the first and second years of the performance period, compared to pro-rated
performance goals, would result in 30% of such PSUs converting to time-vesting restricted stock units. The assumed
Change in Control would occur in the first two years of the performance period of the 2015 and 2016 PSUs, resulting
in 55% of each of those grants converting to time-vesting restricted stock units. For the grants awarded in January
2017, the three-year performance period began on February 1, 2017; because the Change in Control is assumed to
have taken place before that date, no portion of the January 2017 grants are reflected as vested as a result of the
assumed Change in Control.
TIFFANY & CO.
PS-93
Time-Vesting Restricted Stock Unit Grants
g
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 executive is involuntarily terminated following the Change in Control event.
Supplemental
pp
Retirement Benefits Vest on a Change g in Control
Ms. Cloud participates in the Pension Plan, Excess Plan, and Supplemental Plan. She is vested in the Pension Plan
and Excess Plan but not in the Supplemental Plan. No other NEO as of January 31, 2017 was a participant in these
retirement plans.
Definition of a Change g in Control
For purposes of the Supplemental Plan, outstanding equity awards made to the named executive officers, and the
retention agreements, the term "Change in Control" means that one of the following events has occurred:
•
•
•
•
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;
A majority of the Board is, for any reason, not made up of individuals who are currently on the Board or who were
approved by the current directors or directors approved by the current directors;
As a result of a corporate transaction such as a merger, the shareholders of the Company immediately prior to
such transaction do not own more than 50% of the Company's outstanding shares; or
50% or more of the assets of the Company and its subsidiaries are sold or distributed, unless the shareholders
of the Company continue to own those assets in the same percentage as their ownership of Company stock prior
to the sale or liquidation (in the case of the Supplemental Plan, the retention agreements and certain outstanding
equity awards); or all or substantially all assets of the Company or Tiffany are sold or disposed of to an unrelated
party (in the case of other outstanding equity awards).
Certain Change in Control events will be considered "Terminating Transactions," provided the acquirer does not arrange
to assume or replace the grant. TerminatingTransactions include (i) the dissolution of the Company, or (ii) if the Company
comes under the substantial ownership (80%) of another person.
p
Non-Competition
Covenants Affected by y Change g in Control
In the event of a Change in Control, certain non-competition covenants, which ordinarily would apply for the year following
termination of employment, would terminate upon a Change in Control. In the table at PS-90, we have not assigned
any value to a potential reduction.
Death or Disability
OTHER TERMINATIONS
If any of the NEOs had died or become disabled on January 31, 2017, stock options then unvested would have vested
at the values disclosed in the column "Early Vesting of Stock Options" in the table above at PS-90. Further, RSUs and
certain PSUs would have vested under the terms of the outstanding awards at the following values: Mr. Cumenal,
$5,044,929; Mr. Erceg, $2,066,636; Mr. Bellaiche, $1,019,975; Ms. Cloud, $1,181,745; and Mr. Galtie, $701,002.
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PS-94
DIRECTOR COMPENSATION TABLE
Fiscal 2016
Fees
Earned or
Paid in
Cash
($) (a)
Option
Awards
($) (b) (c)
Stock
Awards
($)
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings (d)
All Other
Compensation
($)
Total
($)
Rose Marie Bravo
$
80,000 $
79,492 $
78,005 $
Gary E. Costley
$ 100,000 $
79,492 $
78,005
Lawrence K. Fish
Abby F. Kohnstamm
$
$
95,000 $
79,492 $
78,005
80,000 $
79,492 $
78,005
Michael J. Kowalski
$ 110,000 $
79,492 $
78,005
Charles K. Marquis
Peter W. May
William A. Shutzer
$
$
$
95,000 $
79,492 $
78,005 $
80,000 $
79,492 $
78,005
95,000 $
79,492 $
78,005 $
Robert S. Singer
$ 100,000 $
79,492 $
78,005
— $
N/A $
N/A $
N/A $
N/A $
— $
N/A $
— $
N/A $
— $ 237,497
— $ 257,497
— $ 252,497
— $ 237,497
— $ 267,497
— $ 252,497
— $ 237,497
— $ 252,497
— $ 257,497
(a) Includes amounts deferred under the Deferral Plan.
Notes to Director Compensation Table
(b) Amounts shown represent the grant date fair value for stock options granted for Fiscal 2016. 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, 2017. See Note M. "Stock
Compensation Plans," in Notes to Consolidated Financial Statements, under Item 8. Financial Statements and
Supplementary Data.
(c) Supplementary Table: Outstandingg Director Option
p
Awards at Fiscal Year End
Name
Rose Marie Bravo
Gary E. Costley
Lawrence K. Fish
Abby F. Kohnstamm
Michael Kowalski
Charles K. Marquis
Peter W. May
William A. Shutzer
Robert S. Singer
Aggregate Number of Option
Awards Outstanding at
Fiscal Year End (number of
underlying shares)
24,506
24,506
20,646
39,223
9,429
39,223
49,223
39,223
18,169
The amount reported above and in the Director Compensation Table for Mr. Kowalski is limited to awards granted
to him in connection with his service as a non-executive director and does not include awards granted to him in
connection with his employment with Tiffany.
TIFFANY & CO.
PS-95
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(d) The actuarial valuation shown takes into account the current age of the director and is based on the following
assumptions: RP2014 Male/Female Mortality Table with White Collar Adjustments regressed to base year 2006
and projected generationally from 2006 with Scale MP-2016; discount rate of 4.25%; and assumed retirement
age of 65 (if the director is over age 65, the director is assumed to retire on January 31, 2017). These assumptions
are consistent with those used to prepare the Company's financial statements, except for the retirement age
assumption. 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. The pension benefit for Ms. Bravo and Messrs. Marquis and Shutzer decreased
in value in Fiscal 2016 by $18,007, $19,845 and $18,763, respectively. In addition, this column does not
include changes in pension value or nonqualified deferred compensation earnings for Mr. Kowalski that are
attributable to his employment.
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:
Board Fees
Annual Cash Retainer
Annual Cash Retainer for Non-Executive Chairperson
Stock Options - 10-year option vested immediately; options have a
strike price equal to fair market value on date of
grant
Restricted Stock Units - payable after one year of service or on
retirement, at the prior election of the director
Committee Fees
Audit Committee Chair
Compensation Committee Chair
Corporate Social Responsibility Committee Chair
Finance Committee Chair
Nominating/Corporate Governance Committee Chair
$
$
$
$
$
$
$
80,000
30,000
targeted at approximately $80,000
targeted at approximately $80,000
20,000
20,000
15,000
15,000
15,000
Directors are also reimbursed for expenses they incur in attending Board and committee meetings, including expenses
for travel, food and lodging.
The Nominating/Corporate Governance Committee of the Board reviews comparisons of the compensation of the
Company's directors to the compensation of directors of peer companies. See "Defining Appropriate Comparators–Peer
Group" at PS-49. For Fiscal 2016, compensation of the Company's directors approximated the peer group median.
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 $38,000, payable at the later of age 65 or the
retirement date. This benefit is payable quarterly and continues for a period of time equal to the director's length of
service on the Board, including periods served as an employee director, or until death, if earlier. Directors Bravo, Marquis
and Shutzer are the only directors entitled to participate in this benefit plan.
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PS-96
Under the Deferral Plan, directors may defer up to one hundred percent (100%) of their cash compensation and invest
the amounts they defer in various accounts and funds established under the plan. However, the Company does not
guarantee any return on said investments. The following table provides data concerning director participation in this
plan:
Director
Contribution
In Last
Fiscal Year
($)
Registrant
Contribution
In Last
Fiscal Year
($)
Aggregate
Earnings/
(Losses)
In Last
Fiscal Year
($)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance
At Last
Fiscal Year End
($)
$
$
$
100,000 $
— $
— $
— $
— $
— $
9,479 $
80,411 $
— $
— $
109,479
713,155
271,816 $
— $
1,561,279
Name
Gary E. Costley
Charles K. Marquis
William A. Shutzer
Mr. Cumenal, as an employee, received no separate compensation for service as a director.
Additional Compensation from JANA Partners LLC
In addition to the compensation described above to be paid by the Company as compensation for his service as a director,
Mr. Trapani received additional compensation from JANA in connection with his appointment to the Board. Pursuant
to the nomination agreement (the "Nomination Agreement") entered into between JANA and Mr. Trapani on February
8, 2017, in which Mr. Trapani agreed to serve as a nominee of a JANA affiliate for election or appointment to the Board,
Mr. Trapani is to receive from JANA:
• $100,000 in cash to be paid by JANA within three business days of the date of the Nomination Agreement;
• $150,000 in cash to be paid by JANA within three business days of the appointment of Mr. Trapani to the
Board. The Nomination Agreement requires Mr. Trapani to hold an amount of Company common stock with a
fair market value equal to the estimated after-tax proceeds of $250,000 (assuming a combined federal, state
and city tax rate of 45%) until at least the later of (A) the first date as of which Mr. Trapani is no longer a
director of the Company and (B) three (3) years from the date of his appointment or election. As Mr. Trapani
owned more than such after-tax amount in Company common stock at the time of his appointment to the Board,
he was not required to invest any additional funds in Company shares; and
• certain cash settled stock appreciation rights ("SARs") with respect to a total of 75,000 shares of Company
common stock as follows: (i) SARs with respect to 37,500 shares payable in 2020 (the "2020 SARs"); and (ii)
SARs with respect to 37,500 shares payable in 2022 (the "2022 SARs"). The payment obligations with respect
to the 2020 SARs and 2022 SARs are subject to the requirement that Mr. Trapani have served as a director
for one full term. The amounts payable by JANA with respect to the SARs, if any, will be based on the increase
in value from the share price on the date of the Nomination Agreement and the lesser of the share price and
the 30 day volume weighted average price on the third anniversary (in respect of the 2020 SARs) and fifth
anniversary (in respect of the 2022 SARs) of Mr. Trapani's appointment to the Board, as applicable.
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The 2020 SARs vest immediately on the third anniversary of Mr. Trapani's appointment to the Board and the 2022
SARs vest immediately on the fifth anniversary of his appointment to the Board. The 2020 SARs and 2022 SARS will
be settled in cash within 10 business days of the applicable vesting date.
The payment obligations with respect to the 2020 SARs and 2022 SARs are subject to the terms of the Nomination
Agreement. The Company is not party to the Nomination Agreement nor is the Company responsible for any of the
payments thereunder.
TIFFANY & CO.
PS-97
EQUITY COMPENSATION PLAN INFORMATION
(As of Fiscal Year 2016)
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)
1,712,149 a $
70.72
6,343,541 b
—
—
—
Plan category
Equity compensation plans approved by
security holders
Equity compensation plans not approved
by security holders
Total
1,712,149 a $
70.72
6,343,541 b
(a) Shares indicated are the aggregate of those issuable upon exercise of outstanding options awarded under the
Company's 2014 Employee Incentive Plan (the "2014 Plan") and the 2008 Directors Equity Plan (the "Directors
Plan"). They do not include 1,118,060 shares issuable with respect to stock units awarded under those plans.
They also do not include shares issuable under options or stock units that were awarded and remain outstanding
under the Company's 2005 Employee Incentive Plan, which total 615,885 and 279,448 shares, respectively.
(b) Shares indicated are the aggregate of those available for grant under the 2014 Plan and the Directors Plan.
Under the Directors plan, the maximum number of shares that may be issued (1,000,000) 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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TIFFANY & CO.
PS-98
ITEM 4. PREFERENCE, ON AN ADVISORY BASIS, ON THE FREQUENCY OF SEEKING SHAREHOLDER APPROVAL OF THE
COMPENSATION PAID TO THE COMPANY'S NAMED EXECUTIVE OFFICERS
SEC Rule 14 requires the Company to ask shareholders, on an advisory basis, how often a Say on Pay vote such as the
one held under Item 3 above should be held. Accordingly, we are presenting the following question for the vote of the
shareholders at the 2017 Annual Meeting:
Should the Company solicit shareholder approval of the compensation of the Company's named executive
officers each year, every second year or every third year?
Under SEC Rule 14, your advice on this question will be sought at least once every six years. In May 2011, 89.7% of
the shareholder advisory votes supported conducting a Say on Pay vote every year.
Although polling on the frequency of Say on Pay votes is advisory, regulations adopted by the SEC require us to disclose
to you how frequently the Company will conduct Say on Pay votes. We will make that disclosure by filing a Form 8-K
no later than 150 days after the date of the meeting.
THE BOARD RECOMMENDS A VOTE TO SOLICIT SHAREHOLDER APPROVAL OF THE COMPENSATION
PAID TO THE COMPANY'S NAMED EXECUTIVE OFFICERS ON AN ANNUAL BASIS.
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TIFFANY & CO.
PS-99
ITEM 5. APPROVAL OF THE TIFFANY & CO. 2017 DIRECTORS EQUITY COMPENSATION PLAN
On March 16, 2017, the Board adopted, subject to stockholder approval at the 2017 Annual Meeting, the Tiffany &
Co. 2017 Directors Equity Compensation Plan (the "2017 Directors Plan" or the "Plan"). If approved, the 2017 Directors
Plan will become effective on the date of the 2017 Annual Meeting immediately following such Annual Meeting (the
"Effective Time") and will replace the 2008 Directors Equity Compensation Plan (the "2008 Directors Plan"), under
which no further awards may be granted after the Effective Time. The Tiffany & Co. 2014 Employee Incentive Plan will
remain in full force and effect.
The Board believes adoption of the Plan will advance the interests of the Company by enabling the Company to attract,
retain and motivate qualified individuals to serve on the Company's Board of Directors and to further link directors'
interests with those of the Company's shareholders through compensation that is based on the Company's common
stock, thereby promoting the long-term financial interests of the Company, including the growth in value of the Company's
shareholders' equity and the enhancement of long-term returns to the Company's shareholders.
MATERIAL FEATURES OF THE 2017 DIRECTORS EQUITY COMPENSATION PLAN
Below is a summary of the principal features of the 2017 Directors Plan. This summary is not a complete description
of the Plan, and is qualified in its entirety by reference to the full text of the Plan, which is attached as Appendix II.
As of the record date, the closing value of the Company's stock was $95.07 per share.
Participants
Participation in the Plan is limited to directors who are not, at the time of an award under the Plan, also employees of
the Company or any of its affiliated companies. Currently, 11 directors are eligible to participate in the Plan.
Grants Under the 2008 Directors Plan and Current Awards Outstanding
The Plan will replace the Company's 2008 Directors Plan approved by the Company's shareholders on May 15, 2008.
As of the record date, 599,316 shares of the Company's common stock remained available for grant under the 2008
Directors Plan. Such shares will not be transferred to the 2017 Directors Plan and may not be awarded under the 2008
Directors Plan following the 2017 Annual Meeting if the proposed plan is approved by the shareholders. Whether or
not the 2017 Directors Plan is approved by the shareholders, no further awards may be made under the 2008 Directors
Plan after May 15, 2018. The 2008 Directors Plan itself replaced the Company's 1998 Directors Option Plan, under
which no shares remain available for grant.
Shares currently subject to outstanding grants under the 2008 Directors Plan and the 1998 Directors Option Plan are
shown below. Also shown below are shares currently subject to outstanding grants under the 2014 Employee Incentive
Plan and the 2005 Employee Incentive Plan.
Selected data as of January 31, 2017:
Stock options outstanding
240,485
30,000
1,471,664
615,885
2008 Directors
Plan*
1998 Directors
Option Plan
2014 Employee
Incentive Plan
2005 Employee
Incentive Plan*
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weighted average exercise price
$
65.82 $
37.65 $
74.68 $
weighted average remaining term
Full value share awards outstanding
Shares remaining for grant
6.01
27,789
599,316
0.96
—
—
9.03
64.80
4.76
491,237
241,188
5,743,877
—
* Under the 2008 Directors Plan and the 2005 Employee Incentive Plan, stock option grants reduce the number of
available shares by one share for every stock option granted, while full value awards (restricted stock units) reduce the
number of available shares by 1.58 shares for every share subject to an award. Under the other plans, stock option and
full value awards reduce the number of available shares by one share for every share subject to an award.
In May 2017, prior to the 2017 Annual Meeting, the Company will make annual grants to directors, which will reduce
the number of shares available under the 2008 Directors Plan. In addition, in March 2017, the Company made annual,
TIFFANY & CO.
PS-100
new hire and promotional and recognition grants to employees, in the total amount of 370,525 shares, and these and
other grants awarded under the 2014 Employee Incentive Plan after January 31, 2017 will reduce the number of shares
available under that plan.
Maximum Number of Shares
The maximum number of shares of common stock that may be issued under the 2017 Directors Plan is 1,000,000.
The maximum number of shares that will be available for grant under the Plan will be reduced by one share for each
share that is delivered on vesting of a stock award. The maximum number of shares available for grant under the Plan
is also subject to adjustment for corporate transactions. See "Maximum Number of Shares and Adjustments for Corporate
Transactions" below.
Per-Year-Per-Participant Limit Under the Plan
The Plan imposes the following limit: the total compensation (including without limitation cash, options, stock awards,
or any combination thereof) that may be awarded to any one participant in any single fiscal year may not exceed
$750,000. This limitation applies to all participants other than a non-executive chairperson of the Board.
Administration of the Plan
The Plan will be administered by the Board and/or a committee selected by the Board from amongst its members. If
such a committee is selected, it must consist of two or more directors. As used below, the term "Board" refers to the
Board or such a committee. The Board has the authority to determine:
• directors to whom awards are granted,
•
•
the size and type of awards, and
the terms and conditions of such awards.
Number and Identity of Future Participants and Form of Awards Not Yet Determined
Under the 2017 Directors Plan, the Board may designate any non-employee director of the Company as a participant.
The number and identity of participants to whom awards will eventually be made under the Plan has not yet been
determined, and, subject to the Plan, the form of such awards is at the discretion of the Board. It is therefore not
possible at this time to provide specific information as to actual future award recipients or the form of such awards.
Under the 2008 Directors Plan, non-employee directors were granted options to purchase shares of Company common
stock in May of each year. These options vest immediately, expire after 10 years and have an exercise price equal to
the fair market value of the Company's common stock on the date of grant, which is calculated as the average of the
highest and lowest sales prices on the date of grant. Most recently, in May 2016, non-employee directors were granted
options with a grant date target value of approximately $80,000.
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Under the 2008 Directors Plan, non-employee directors were also granted RSUs in May of each year. These RSUs vest
in full after one year of service, and may be paid on the vest date or a later date, at the prior election of the director.
Most recently, in May 2016, non-employee directors were granted RSUs with a grant date target value of approximately
$80,000.
Awards Available under the 2017 Directors Plan
The following awards are available under the Plan:
Options. The grant of a stock option entitles the holder to purchase a specified number of shares of the Company's
common stock at an exercise price specified at the time of grant. Stock options may be granted only in the form of
nonqualified stock options ("NQSOs"). A NQSO does not qualify for special tax treatment under Section 422(b) of the
Internal Revenue Code as a so-called "incentive stock option."
The Plan limits the discretion of the Board with respect to options as follows:
•
the term of an option may not exceed 10 years,
TIFFANY & CO.
PS-101
•
•
•
the per-share exercise price of each option must be established at or prior to the time of grant or determined by
a formula established at the time of grant,
the exercise price may not be less than 100% of fair market value as of the grant date (or if the relevant exchange
is not open on the grant date, the most recent trading date prior to the grant date),
the per-share exercise price may not be decreased after grant except for adjustments made to reflect stock splits
and other corporate transactions (see Maximum Number of Shares above and Adjustments for Corporate
Transactions under the Plan below), and
• an option may not be surrendered for cash, a new award, or a new option with a lower exercise price.
Stock Awards. A stock award is the grant of shares of the Company's common stock or a right to receive such shares,
their cash equivalent or a combination of both. Each stock award shall be subject to such conditions, restrictions and
contingencies as the Board or its committee shall determine.
Settlement of Awards, Deferred Settlements, Tax Withholding and Dividends and Dividend Equivalent Payments
The Board has the discretion to settle awards through cash payments, delivery of common stock, the grant of replacement
awards or any combination thereof.
The Board may permit the payment of the option exercise price to be made as follows:
•
in cash,
• by the tender of the Company's shares of common stock or the withholding of shares, or
• by irrevocable authorization to a third party to sell shares received upon exercise of the option and to remit the
exercise price.
Before distribution of any shares pursuant to an award, the Board may require the participant to remit funds for any
required tax withholdings. Alternatively, shares may be withheld to satisfy such tax requirements. All cash payments
made may be net of any required tax withholdings.
The Committee has the discretion to provide participants with the right to receive dividends or dividend equivalent
payments with respect to the underlying shares of common stock. No dividends or dividend equivalent payments may
be settled or paid prior to the date that the underlying award vests or becomes payable according to its terms.
Duration of the Plan
If the 2017 Directors Plan is approved by the shareholders at the 2017 Annual Meeting, no award may be made under
that Plan more than 10 years after such approval date. However, the Plan shall remain in effect as long as any awards
previously made remain outstanding.
Adjustments for Corporate Transactions under the Plan
In the event of certain corporate changes, such as mergers, reorganizations, reclassifications, recapitalizations, stock
splits, dividends (other than regular, quarterly dividends), or other distributions, spin-offs or the like, or if substantially
all of the property and assets of the Company are sold, the 2017 Directors Plan provides for adjustments of the number
and kinds of shares which may be delivered or subject to outstanding awards under the Plan. Such adjustments shall
be made for the purpose of preserving the benefits or potential benefits of the Plan and the original awards under the
Plan. However, adjustments may not change the aggregate exercise price applicable to the unexercised portions of
outstanding options.
Amendment of Plan
The Board may, at any time, amend or terminate the Plan. However, the approval of the Company's shareholders will
be required for any amendment (other than adjustments for corporate transactions discussed above) which would:
•
•
increase the maximum number of shares that may be delivered under the Plan,
increase the per-participant limit described above under Per-Year-Per-Participant Limit Under the Plan,
TIFFANY & CO.
PS-102
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• decrease the minimum exercise price for an option or permit the surrender of an option as consideration in
exchange for a new award with a lower exercise price, or
•
increase the maximum term of an Option as described above under Options.
Federal Income Tax Consequences of Plan Awards
The Company believes that the federal income tax treatment of the various awards that may be made under the Plan
will be as described below. The following is based on existing United States laws and regulations, and there can be no
assurance that those laws and regulations will not change in the future. Tax consequences in other countries may vary.
This information is not intended as tax advice to anyone, including participants in the 2017 Directors Plan.
The grant of an NQSO will not have any tax consequence to the Company nor to the participant. The exercise of an
NQSO will require the participant to include in his or her taxable ordinary income the amount by which the fair market
value of the acquired shares on the exercise date exceeds the option price. Upon a subsequent sale or taxable exchange
of shares acquired upon the option exercise, the participant will recognize a long- or short-term capital gain or loss
equal to the difference between the amount realized on the sale and the tax basis of such shares (the fair market value
on the exercise date). The Company will be entitled to a deduction at the same time and in the same amount as the
participant is in receipt of income in consequence of his or her exercise of an NQSO.
The grant of a stock award (including a stock unit) will not have any tax consequence to the Company nor to the
participant if, at the time of the grant, the shares or units provided to the participant are subject to a substantial risk
of forfeiture, and provided further that the participant chooses not to elect to recognize income. The participant may,
however, elect to recognize taxable ordinary income at the time of a stock (but not a unit) grant equal to the fair market
value of the stock awarded. Failing such an election, as of the date the shares provided to a participant under a stock
award are no longer subject to a substantial risk of forfeiture, the participant will recognize taxable ordinary income
equal to the fair market value of the stock. The Company will be entitled to a deduction at the same time and in the
same amount as the participant is in receipt of income in consequence of the grant of a stock award.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE ADOPTION
OF THE TIFFANY & CO. 2017 DIRECTORS EQUITY COMPENSATION PLAN.
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TIFFANY & CO.
PS-103
Shareholder Proposals for Inclusion in the Proxy Statement for the 2018 Annual Meeting
OTHER MATTERS
If you wish to submit a proposal to be included in the Proxy Statement for our 2018 Annual Meeting, we must receive
it no later than December 8, 2017. Proposals should be sent to the Company at 727 Fifth Avenue, New York, New York
10022 addressed to the attention of Corporate Secretary (Legal Department).
Other Proposals
Our By-laws set forth certain procedures for shareholders of record who wish to nominate directors or propose other
business to be considered at an annual meeting. If you wish to nominate a candidate for election as a director at an
annual meeting or propose other business for consideration at an annual meeting, written notice complying with the
requirements set forth in our By-laws generally must be delivered to the Company at 727 Fifth Avenue, New York, New
York 10022 to the attention of the Corporate Secretary (Legal Department), not later than 90 days, and not earlier than
120 days, prior to the first anniversary of the preceding year's annual meeting. Accordingly, a shareholder nomination
or proposal intended to be considered at the 2018 Annual Meeting must be received by the Company no earlier than
January 25, 2018 and no later than February 24, 2018.
Except as required by applicable law, the Company will consider only proposals meeting the requirements of the applicable
requirements of the SEC and our By-laws.
Householding
The SEC allows us to deliver a single proxy statement and annual report to an address shared by two or more of our
shareholders. 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 shareholders who share an address unless one or more of the
shareholders 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 shareholder at a shared address to which a single copy of
the documents was delivered. A shareholder 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
, by clicking
obtain a copy of the proxy statement and annual report from the Company's website www.tiffany.comy
"Investors" at the bottom of the page, and selecting "Financial Information" from the left-hand column. Shareholders 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 shareholders at the shared address in the future.
Please be sure to either complete, sign and mail the proxy card or voting instruction form, as applicable, in the return
envelope provided or call in your instructions or vote via the Internet as soon as you can so that your vote may be recorded
and counted.
Reminder to Vote
BY ORDER OF THE BOARD OF DIRECTORS
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Leigh M. Harlan
Secretary
New York, New York
April 7, 2017
TIFFANY & CO.
PS-104
NON-GAAP MEASURES
APPENDIX I
Net Sales. The Company's reported net sales reflect either a translation-related benefit from strengthening
foreign currencies or a detriment from a strengthening U.S. dollar. Internally, management monitors and
measures its sales performance on a non-GAAP basis that eliminates the positive or negative effects that
result from translating sales made outside the U.S. into U.S. dollars ("constant-exchange-rate basis"). Sales
on a constant-exchange-rate basis are calculated by taking the current year's sales in local currencies and
translating them into U.S. dollars using the prior year's foreign exchange rates. Management believes this
constant-exchange-rate basis provides a useful supplemental basis for the assessment of sales performance
and of comparability between reporting periods. The following table reconciles the sales percentage increases
(decreases) from the GAAP to the non-GAAP basis versus the previous year:
2016
GAAP
Reported
Translation
Effect
Constant-
Exchange-
Rate Basis
(3)%
—%
(3)%
(5)
—
12
(10)
(8)
—
(1)
12
(7)
—
(5)
1
—
(3)
(8)
Net Sales:
Worldwide
Americas
Asia-Pacific
Japan
Europe
Other
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Net earnings. Internally, management monitors and measures its earnings performance excluding certain
items listed below. Management believes excluding such items provides a useful supplemental basis for the
assessment of the Company's results relative to the corresponding period in the prior year. The following tables
reconcile certain GAAP amounts to non-GAAP amounts:
(in millions, except per share amounts)
GAAP
Year Ended January 31, 2017
Impairment
charges (a)
Non-GAAP
Selling, general and administrative
$
1,769.1
$
(38.0) $
1,731.1
("SG&A") expenses
As a % of sales
Earnings from operations
As a % of sales
Provision for income taxes (b)
Net earnings
Diluted earnings per share *
*Amounts may not add due to rounding.
(a) Expenses associated with the following:
44.2%
721.2
18.0%
230.5
446.1
3.55
38.0
14.0
24.0
0.19
43.3%
759.2
19.0%
244.5
470.1
3.75
• $25.4 million of net pre-tax expense ($16.0 million net after tax expense, or $0.13 per diluted share)
associated with an asset impairment charge related to software costs capitalized in connection with the
development of a new finished goods inventory management and merchandising information system. See
"Item 7. Management's Discussion and Analysis–Information Systems Assessment" in our Annual Report
on Form 10-K, filed with the SEC on March 17, 2017, for further information; and
• $12.6 million of net pre-tax expense ($8.0 million net after tax expense, or $0.06 per diluted share)
TIFFANY & CO.
PS-105
associated with impairment charges related to financing arrangements with diamond mining and
exploration companies. See "Item 8. Financial Statements and Supplementary Data–Note B. Summary
of Significant Accounting Policies" in our Annual Report on Form 10-K, filed with the SEC on March 17,
2017, for further information.
(b) The income tax effect resulting from the adjustments has been calculated as both current and deferred tax
benefit (expense), based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction
(s) of the underlying adjustment.
(in millions, except per share
amounts)
Year Ended January 31, 2016
SG&A expenses
As a % of sales
Earnings from operations
As a % of sales
Provision for income taxes (b)
Net earnings
GAAP
Impairment
charges (c)
Specific cost-
reduction
initiatives (d)
Non-GAAP
$
1,731.2
$
(37.9) $
(8.8) $
1,684.5
42.2%
760.1
18.5%
246.0
463.9
37.9
13.6
24.3
8.8
3.2
5.6
41.0%
806.8
19.7%
262.8
493.8
3.83
Diluted earnings per share
$
3.59
$
0.19 $
0.05 $
(c) Expenses associated with impairment charges related to a financing arrangement with Koidu Limited. See
"Item 8. Financial Statements and Supplementary Data–Note J. Commitments and Contingencies" in our
Annual Report on Form 10-K, filed with the SEC on March 17, 2017, for further information.
(d) Expenses associated with specific cost-reduction initiatives which included severance related to staffing
reductions and subleasing of certain office space for which only a portion of the Company's future rent
obligations will be recovered.
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TIFFANY & CO.
2017 DIRECTORS EQUITY COMPENSATION PLAN
APPENDIX II
1. General
1.1 Purpose. The Tiffany & Co. 2017 Directors Equity Compensation Plan (the "Plan") has been established
by Tiffany & Co., a Delaware corporation, (the "Company") to advance the interests of the Company by
enabling the Company to attract, retain and motivate qualified individuals to serve on the Company's
Board of Directors and to further link Participants' interests with those of the Company's stockholders
through compensation that is based on the Company's Common Stock ("Stock"), thereby promoting the
long-term financial interests of the Company and its Related Companies, including the growth in value
of the Company's stockholders' equity and the enhancement of long-term returns to the Company's
stockholders.
1.2 Participation. Subject to the terms and conditions of the Plan, the Committee shall, from time to time,
determine and designate from among Eligible Individuals those persons who will be granted one or more
Awards under the Plan. Eligible Individuals who are granted Awards become "Participants" in the Plan.
At the discretion of the Committee, a Participant may be granted any Award permitted under the provisions
of the Plan, and more than one Award may be granted to a Participant. Awards need not be identical but
shall be subject to the terms and conditions specified in the Plan. Subject to the last two sentences of
subsection 2.2 of the Plan, Awards may be granted as alternatives to or in replacement for awards
outstanding under the Plan, or any other plan or arrangement of the Company.
1.3 Operation, Administration, and Definitions. The operation and administration of the Plan, including the
Awards made under the Plan, shall be subject to the provisions of Section 4 (relating to operation and
administration). Initially capitalized terms used in the Plan shall be defined as set forth in the Plan
(including in the definitional provisions of Section 7 of the Plan).
1.4 Prior Plan. This Plan is intended to become effective on approval by the Company's stockholders, as
provided for in Section 4.1 below. This Plan is intended to replace the Company's 2008 Directors Equity
Compensation Plan (the "2008 Plan") and the 1998 Directors Option Plan (the "1998 Plan") approved
by the Company's stockholders on May 15, 2008 and May 21, 1998, respectively (together, the "Prior
Plans"). In accordance with the terms of the Prior Plans: (i) no Award may be granted or otherwise made
under the 1998 Plan after May 21, 2008, or under the 2008 Plan after May 25, 2017, but (ii) the Prior
Plans shall remain in effect as long as any awards under the Prior Plans are outstanding. Shares subject
to the Prior Plans which are not subject to outstanding awards under the Prior Plans as of the Effective
Date of this Plan (see subsection 4.1 of this Plan) and which have not been delivered to participants
under the Prior Plans as of such Effective Date may not be awarded under the Prior Plans on or after
such Effective Date and the Prior Plans shall be deemed amended accordingly on such Effective Date.
Shares subject to the Prior Plans, as described in the preceding sentence, shall not be deemed transferred
to this Plan.
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2. Options
2.1 Definition. The grant of an "Option" entitles the Participant to purchase Shares at an Exercise Price
established by the Committee. Options granted under this Section 2 shall be Non-Qualified Options. A
"Non-Qualified Option" is an Option that is not intended to be an "incentive stock option" as that term is
described in section 422(b) of the Code.
2.2 Exercise Price. The per-share "Exercise Price" of each Option granted under this Section 2 shall be
established by the Committee or shall be determined by a formula established by the Committee at or
prior to the time the Option is granted; except that the Exercise Price shall not be less than 100% of the
Fair Market Value of a Share as of the Pricing Date. For purposes of the preceding sentence, the "Pricing
Date" shall be the date on which the Option is granted unless the Option is granted on a date on which
the principal exchange on which the Stock is then listed or admitted to trading is closed for trading, in
which case the "Pricing Date" shall be the most recent date on which such exchange was open for trading
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prior to such grant date. Except as provided in subsection 4.2(c), the Exercise Price of any Option may
not be decreased after the grant of the Award. An Option may not be surrendered as consideration in
exchange for cash or a new Award (including a new Option with a lower Exercise Price).
2.3 Exercise. Options shall be exercisable in accordance with such terms and conditions and during such
periods as may be established by the Committee provided that no Option shall be exercisable after, and
each Option shall become void no later than, the tenth (10th) anniversary of the date of the grant of such
option.
2.4 Payment of Option Exercise Price. The payment of the Exercise Price of an Option granted under this
Section 2 shall be subject to the following:
(a) The Exercise Price may be paid by ordinary check or such other form of tender as the Committee
may specify.
(b) If permitted by the Committee, the Exercise Price for Shares purchased upon the exercise of an
Option may be paid in part or in full by tendering Shares (either by actual delivery of shares or
attestation), or the Company may withhold from the Shares to be delivered and/or otherwise issued
Shares sufficient to pay the Exercise Price, in each case with such Shares valued at Fair Market Value
as of the date of exercise. The Committee may refuse to accept payment in Shares if such payment
would result in an accounting charge to the Company.
(c) The Committee may permit a Participant to elect to pay the Exercise Price upon the exercise of an
Option by irrevocably authorizing a third party to sell Shares acquired upon exercise of the Option
(or a sufficient portion of such shares) and remit to the Company a sufficient portion of the sale
proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise.
3. Stock Awards
3.1 Definition. A "Stock Award" is a grant of Shares or of a right to receive Shares.
3.2 Restrictions on Stock Awards. Each Stock Award shall be subject to such conditions, restrictions and
contingencies, if any, as the Committee shall determine.
4. Operation and Administration
4.1 Effective Date and Duration. Subject to approval of the stockholders of the Company at the Company's
2017 annual meeting, the Plan shall be effective as of the date of such approval (the "Effective Date")
and shall remain in effect as long as any Awards under the Plan are outstanding; provided, however, that
no Award may be granted or otherwise made under the Plan on a date that is more than ten (10) years
from the Effective Date.
4.2 Shares Subject to Plan.
(a) (i) Subject to the following provisions of this subsection 4.2, the maximum aggregate number of
Shares that may be delivered to Participants and their beneficiaries under the Plan shall be One
Million (1,000,000) Shares, provided that such maximum shall be reduced by one Share for each
Share that is delivered pursuant to a Stock Award. Shares issued under the Plan may be authorized
and unissued Shares or Shares reacquired by the Company.
(ii) Any Shares granted under the Plan that are forfeited because of the failure to meet a Stock
Award contingency or condition shall again be available for delivery pursuant to new Awards granted
under the Plan. To the extent any Shares covered by an Award are not delivered to a Participant or
a Participant's beneficiary because the Award is forfeited or canceled, such shares shall not be
deemed to have been delivered for purposes of determining the maximum number of Shares available
for delivery under the Plan.
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(iii)
If the Exercise Price and/or tax withholding obligation for any Option or Award granted under
the Plan is satisfied by tendering Shares to the Company (by either actual delivery or attestation) or
by the Company withholding Shares, the number of Shares issued on such exercise or Award without
offset for the number of Shares so tendered shall be deemed delivered for purposes of determining
the maximum number of Shares available for delivery under the Plan; if the Exercise Price and/or
tax withholding obligation for any Option or Award granted under the Plan is satisfied by the Company
withholding Shares, the full number of Shares for which such Option was exercised or such Award
was granted, without reduction for the number of Shares withheld, shall be deemed delivered for
purposes of determining the maximum number of Shares available for delivery under the Plan.
(b) The following additional limitation is imposed under the Plan: the total compensation (including
without limitation non-equity compensation and the grant-date fair value of Options or Stock Awards,
or any combination of Options and Stock Awards) that may be awarded to any one Participant in any
single fiscal year of the Company in connection with his or her service as a member of the Board
shall not exceed $750,000; provided, however, that this limitation shall not apply to a non-executive
chairperson of the Board.
(c) If the outstanding Shares are increased or decreased, or are changed into or exchanged for cash,
property, or a different number or kind of shares or securities, or if cash, property or Shares or other
securities are distributed in respect of such outstanding Shares, in either case as a result of one or
more mergers, reorganizations, reclassifications, recapitalizations, stock splits, reverse stock splits,
stock dividends, dividends (other than regular, quarterly dividends), or other distributions, spin-offs
or the like, or if substantially all of the property and assets of the Company are sold, then, unless
the terms of the transaction shall provide otherwise, appropriate adjustments shall be made in the
number and/or type of shares or securities for which Awards may thereafter be granted under the
Plan and for which Awards then outstanding under the Plan may thereafter be exercised. Any such
adjustments in outstanding Awards shall be made without changing the aggregate Exercise Price
applicable to the unexercised portions of outstanding Options. The Committee shall make such
adjustments to preserve the benefits or potential benefits of the Plan and the Awards; such adjustments
may include, but shall not be limited to, adjustment of: (i) the number and kind of shares which may
be delivered under the Plan; (ii) the number and kind of shares subject to outstanding Awards; (iii)
the Exercise Price of outstanding Options; (iv) the limit specified in subsection 4.2(b) above; and
(v) any other adjustments that the Committee determines to be equitable. No right to purchase or
receive fractional shares shall result from any adjustment in Options or Stock Awards pursuant to
this paragraph 4.2(c). In case of any such adjustment, Shares subject to the Option or Stock Award
shall be rounded up to the nearest whole Share.
4.3 Limit on Distribution. Distribution of Shares or other amounts under the Plan shall be subject to the
following:
(a) Notwithstanding any other provision of the Plan, the Company shall have no obligation to deliver any
Shares under the Plan or make any other distribution of benefits under the Plan unless such delivery
or distribution would comply with all applicable laws (including, without limitation, the requirements
of the Securities Act of 1933) and the applicable requirements of any securities exchange or similar
entity and the Committee may impose such restrictions on any Shares acquired pursuant to the Plan
as the Committee may deem advisable, including, without limitation, restrictions under applicable
federal securities laws, under the requirements of any stock exchange or market upon which such
Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to
such Shares. In the event that the Committee determines in its discretion that the registration, listing
or qualification of the Shares issuable under the Plan on any securities exchange or under any
applicable law or governmental regulation is necessary as a condition to the issuance of such Shares
under an Option or Stock Award, such Option or Stock Award shall not be exercisable or exercised
in whole or in part unless such registration, listing and qualification, and any necessary consents or
approvals have been unconditionally obtained.
(b) Distribution of Shares under the Plan may be effected on a non-certificated basis, to the extent not
prohibited by applicable law or the applicable rules of any stock exchange.
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4.4 Tax Withholding. Before distribution of Shares under the Plan, the Company may require the recipient
to remit to the Company an amount sufficient to satisfy any federal, state or local tax withholding
requirements or, if agreed by the Committee, the Company may withhold from the Shares to be delivered
and/or otherwise issued Shares sufficient to satisfy all or a portion of such tax withholding requirements.
Whenever under the Plan payments are to be made in cash, such payments shall be in an amount sufficient
to satisfy any federal, state or local tax withholding requirements as well as the amount of the cash
payment otherwise required. Neither the Company nor any Related Company shall be liable to a Participant
or any other person as to any tax consequence expected, but not realized, by any Participant or other
person due to the receipt or exercise of any Award hereunder.
4.5 Reserved Rights. Subject to the limitations of subsection 4.2 on the number of Shares that may be
delivered under the Plan, the Plan does not limit the right of the Company to use available Shares,
including authorized but un-issued Shares and treasury Shares, as the form of payment for compensation,
grants or rights earned or due under any other compensation plans or arrangements of the Company or
a Related Company, including the plans or arrangements of the Company or a Related Company, including
the plans or arrangements of the Company or a Related Company acquiring another entity (or an interest
in another entity). The Committee may provide in the Award Agreement that the Shares to be issued upon
exercise of an Option or receipt of a Stock Award shall be subject to such further conditions, restrictions
or agreements as the Committee in its discretion may specify, including without limitation, conditions
on vesting or transferability, and forfeiture and repurchase provisions.
4.6 Dividends and Dividend Equivalents. An Award may provide the Participant with the right to receive
dividends or dividend equivalent payments with respect to Shares which may be paid currently or credited
to an account for the Participant, and which may be settled in cash or Shares as determined by the
Committee; provided, however, that no dividends or dividend payments shall be settled or paid prior to
the date such Award vests or becomes payable according to its terms. Any such settlements, and any
such crediting of dividends or dividend equivalents or reinvestment in Shares may be subject to such
conditions, restrictions and contingencies as the Committee shall establish, including reinvestment of
such credited amounts in Stock equivalents.
4.7 Settlements; Deferred Delivery. Awards may be settled through cash payments, the delivery of Shares,
the granting of replacement Awards, or combinations thereof, all subject to such conditions, restrictions
and contingencies as the Committee shall determine. The Committee may establish provisions for the
deferred delivery of Shares in connection with the settlement of a Stock Award in accordance with Code
Section 409A, with the deferral evidenced by use of "Stock Units" equal in number to the number of
Shares whose delivery is so deferred. Stock Units represent an unfunded and unsecured obligation of the
Company except as otherwise provided by the Committee. Settlement of Stock Units upon expiration of
the deferral period shall be made in Shares or otherwise as determined by the Committee. The amount
of Shares, or other settlement medium, to be distributed following such deferral may be increased by an
interest factor or by dividend equivalents. Until such distribution, the number of Shares to be so distributed
shall be subject to adjustment pursuant to paragraph 4.2(c). Unless otherwise specified by the Committee,
any deferred delivery of Shares pursuant to an Award shall be settled by the delivery of Shares within 60
days following the date the person to whom such deferred delivery must be made incurs a "separation
from service" as defined in Treasury Regulation 1.409A-1(h).
4.8 Transferability. Unless otherwise provided by the Committee, any Option granted under the Plan, and,
until vested, any Stock Award granted under the Plan, shall by its terms be nontransferable by the
Participant otherwise than by will, the laws of descent and distribution, and shall be exercisable by, or
become vested in, during the Participant's lifetime, only the Participant.
4.9 Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to
be made by any Participant or other person entitled to benefits under the Plan, and any permitted
modification, or revocation thereof, shall be in writing filed with the secretary of the Company at such
times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of
the Plan, as the Committee shall require.
4.10 Award Agreements with Company; Vesting and Acceleration of Vesting of Awards. At the time of an Award
to a Participant, the Committee may require the Participant to enter into an agreement with the Company
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(an "Award Agreement") in a form specified by the Committee, agreeing to the terms and conditions of
the Plan and to such additional terms and conditions, not inconsistent with the Plan, as the Committee
may, in its sole discretion, prescribe, including, but not limited to, conditions to the vesting or exercise
of an Award, such as continued service as a director of the Company for a specified period of time. The
Committee may waive such conditions to and/or accelerate exercisability or vesting of an Option or Stock
Award, either automatically upon the occurrence of specified events (including in connection with a
change of control of the Company) or otherwise in its discretion.
4.11 Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of the Plan or any Award Agreement,
acquire any right in or title to any assets, funds or property of the Company or any Related Company
whatsoever, including, without limitation, any specific funds, assets, or other property which the
Company or any Related Company, in their sole discretion, may set aside in anticipation of a liability
under the Plan. A Participant shall have only a contractual right to the Shares or amounts, if any,
payable under the Plan, unsecured by the assets of the Company or of any Related Company. Nothing
contained in the Plan or any Award Agreement shall constitute a guarantee that the assets of such
companies shall be sufficient to pay any benefits to any person.
(b) Neither the Plan nor any Award Agreement shall constitute a contract of employment, and selection
as a Participant will not confer upon any Participant any right to serve as a director of the Company,
nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan or an Award. Except as otherwise provided in the Plan, no Award under
the Plan shall confer upon the holder thereof any right as a stockholder of the Company prior to the
date on which the individual fulfills all conditions for receipt of such rights.
4.12 Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other
information which an officer of the Company acting on it considers pertinent and reliable, and signed,
made or presented by the proper party or parties.
4.13 Action by Company. Any action required or permitted to be taken by the Company shall be by resolution
of the Board, or by action of one or more members of such Board (including a committee of such Board)
who are duly authorized to act for such Board, or (except to the extent prohibited by applicable law or
applicable rules of any stock exchange) by a duly authorized officer of the Company.
4.14 Gender and Number. Where the context admits, words in any gender shall include any other gender,
words in the singular shall include the plural and the plural shall include the singular.
4.15 Non-exclusivity of the Plan. Neither the adoption of the Plan by the Board nor the submission of the Plan
to the stockholders of the Company for approval shall be construed as creating any limitations on the
power of such Board or a committee of such Board to adopt such other incentive arrangements as it or
they may deem desirable, including without limitation, the granting of restricted stock, stock options or
cash bonuses otherwise than under the Plan, and such arrangements may be generally applicable or
applicable only in specific cases.
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5. Committee
5.1 Administration. The authority to control and manage the operation and administration of the Plan shall
be vested in the Board and/or a committee of the Board (either the Board or such committee the
"Committee" hereunder) in accordance with this Section 5.
5.2 Selection of Committee. If consisting of less than the full membership of the Board, the Committee shall
be selected by the Board and shall consist of two or more members of the Board.
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5.3 Powers of Committee. The authority to manage and control the operation and administration of the Plan
shall be vested in the Committee, subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select
from amongst Eligible Individuals those persons who shall receive Awards, to determine who is an
Eligible Individual, to determine the time or times of receipt, to determine the types of Awards and
the number of Shares covered by the Awards, to establish the terms, conditions, restrictions, and
other provisions of such Awards and Award Agreements, and (subject to the restrictions imposed by
Section 6) to cancel, amend or suspend Awards. In making such Award determinations, the Committee
may take into account such factors as the Committee deems relevant.
(b) The Committee will have the authority and discretion to establish terms and conditions of Awards as
the Committee determines to be necessary or appropriate to conform to applicable requirements or
practices of jurisdictions outside the United States.
(c) The Committee will have the authority and discretion to interpret the Plan, to establish, amend and
rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any
Award Agreements, and to make all other determinations that may be necessary or advisable for the
administration of the Plan.
(d) Interpretations of the Plan by the Committee and decisions made by the Committee under the Plan
are final and binding.
(e) In controlling and managing the operation and administration of the Plan, the Committee shall act
by a majority of its then members, by meeting or by writing filed without a meeting. The Committee
shall maintain adequate records concerning the Plan and concerning its proceedings and acts in
such form and detail as the Committee may decide.
5.4 Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a
stock exchange, the Committee may allocate all or any portion of its powers and responsibilities to any
one or more of its members and may delegate all or part of its responsibilities and powers to any person
or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any
time.
5.5 Information to be furnished to Committee. The Company shall furnish the Committee with such data and
information as may be requested by the Committee to discharge its duties. The records of the Company
as to an Eligible Individual's or a Participant's service as a director shall be conclusive on all persons
unless determined to be incorrect by the Committee. Participants and other persons entitled to benefits
under the Plan must furnish the Committee such evidence, data or information as the Committee considers
necessary or desirable to carry out the terms of the Plan.
6. Amendment and Termination
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6.1 Board's Right to Amend or Terminate. Subject to the limitations set forth in this Section 6, the Board
may, at any time, amend or terminate the Plan.
6.2 Amendments Requiring Stockholder Approval. Other than as provided in subsection 4.2 (c) (relating to
certain adjustments to Shares), the approval of the Company's stockholders shall be required for any
amendment which: (i) increases the maximum number of Shares that may be delivered to Participants
under the Plan set forth in subsection 4.2(a); (ii) increases the maximum limitation contained in Section
4.2(b); (iii) decreases the Exercise Price of any Option below the minimum provided in subsection 2.2;
(iv) modifies or eliminates the prohibitions stated in the final two sentences of subsection 2.2; or (v)
increases the maximum term of any Option set forth in Section 2.3. Whenever the approval of the
Company's stockholders is required pursuant to this subsection 6.2, such approval shall be sufficient if
obtained by a majority vote of those stockholders present or represented and actually voting on the matter
at a meeting of stockholders duly called, at which meeting a majority of the outstanding shares actually
vote on such matter.
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6.3 Consent of Affected Participants. No amendment to or termination of the Plan shall, in the absence of
written consent to the change by the affected Participant (or, if the Participant is not then living or if the
Award has been transferred pursuant to a right of transfer contained in an Award Agreement, the affected
beneficiary or affected transferee, as the case may be), adversely affect the rights of any Participant,
beneficiary or permitted transferee under any Award granted under the Plan prior to the date such
amendment or termination is adopted by the Board.
7. Defined Terms
For the purposes of the Plan, the terms listed below shall be defined as follows:
Award. The term "Award" shall mean, individually and collectively, any award or benefit granted to any Participant
under the Plan, including, without limitation, the grant of Options and Stock Awards.
Award Agreement. The term "Award Agreement" is defined in subsection 4.10.
Board. The term "Board" shall mean the Board of Directors of the Company.
Code. The term "Code" shall mean the Internal Revenue Code of 1986, as amended. A reference to any provision
of the Code shall include reference to any successor provision of the Code or of any law that is enacted to
replace the Code.
Eligible Individual. The term "Eligible Individual" shall mean a Non-Employee Director. The term "Non-Employee
Director" means a member of the Board who is not at the time of an Award also an employee of the Company
or a Related Company.
Fair Market Value. For purposes of determining the "Fair Market Value" of a share of Stock, the following rules
shall apply:
(i) If the Stock is at the time listed or admitted to trading on any stock exchange, then the Fair Market
Value shall be the simple arithmetic mean between the lowest and the highest reported sales prices
of the Stock on the date in question on the principal exchange on which the Stock is then listed or
admitted to trading. If no reported sale of Stock takes place on the date in question on the principal
exchange, then the reported closing asked price of the Stock on such date on the principal exchange
shall be determinative of Fair Market Value.
(ii) If the Stock is not at the time listed or admitted to trading on a stock exchange, the Fair Market
Value shall be the mean between the lowest reported bid price and the highest reported asked price
of the Stock on the date in question in the over-the-counter market, as such prices are reported in
a publication of general circulation selected by the Committee and regularly reporting the market
price of the Stock in such market.
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(iii) If the Stock is not listed or admitted to trading on any stock exchange or traded in the over-the-
counter market, the Fair Market Value shall be as determined by the Committee, acting in good faith.
Related Companies. The term "Related Company" means:
(i) any corporation, partnership, joint venture or other entity during any period in which such corporation,
partnership, joint venture or other entity owns, directly or indirectly, at least fifty percent (50%) of
the voting power of all classes of voting stock of the Company (or any corporation, partnership, joint
venture or other entity which is a successor to the Company);
(ii) any corporation, partnership, joint venture or other entity during any period in which the Company
(or any corporation, partnership, joint venture or other entity which is a successor to the Company
or any entity that is a Related Company by reason of clause (i) next above) owns, directly or indirectly,
at least a fifty percent (50%) voting or profits interest; or
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(iii) any business venture in which the Company has a significant interest, as determined at the discretion
of the Committee.
Shares. The term "Shares" shall mean shares of the Common Stock of the Company, $.01 par value, as presently
constituted, subject to adjustment as provided in paragraph 4.2(c) above.
8. Other Provisions
8.1 Successors. All obligations of the Company under the Plan with respect to Awards shall be binding on
any successor to the Company, whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of
the Company.
8.2 Unfunded Plan. The adoption of the Plan and any reservation of shares of Common Stock or cash amounts
by the Company to discharge its obligations hereunder shall not be deemed to create a trust or other
funded arrangement. Except upon the issuance of Common Stock pursuant to an Award, any rights of a
Participant under the Plan shall be those of a general unsecured creditor of the Company, and neither a
Participant nor the Participant's permitted transferees or estate shall have any other interest in any assets
of the Company by virtue of the Plan. Notwithstanding the foregoing, the Company shall have the right
to implement or set aside funds in a grantor trust, subject to the claims of the Company's creditors or
otherwise, to discharge its obligations under the Plan.
8.3 Governing Law. The Plan and all rights hereunder shall be subject to and interpreted in accordance with
the laws of the State of New York, without reference to the principles of conflicts of laws, and to applicable
Federal securities laws.
9. Section 409A
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The Plan is intended to comply with the requirements of Code Section 409A, to the extent such requirements are
applicable, and shall be limited, construed and interpreted in accordance with such intent. To the extent that any
Award is subject to Code Section 409A, it shall be granted and paid in a manner intended to ensure that such
Award complies with Code Section 409A. Any provision in the Plan or an Award Agreement that is inconsistent with
Code Section 409A shall be deemed to be amended to comply with Code Section 409A and to the extent such
provision cannot be amended to comply therewith, such provision shall be null and void. Notwithstanding any
provision of the Plan or an Award Agreement to the contrary, the Board may at any time (without the consent of a
Participant) modify or amend any or all of the provisions of the Plan or an Award to the extent the Board believes
in good faith that such action is necessary to conform the provisions of the Plan or an Award with Code Section
409A and the regulations issued thereunder or an exception thereto, regardless of whether such modification or
amendment of the Plan and/or Award shall adversely affect the rights of a Participant, subject to the limitations,
if any, of applicable law; provided, however,such modification or amendment shall, to the maximum extent reasonably
possible, maintain the original intent and economic benefit to the Participant and the Company without violating
the provisions of Code Section 409A. Notwithstanding the foregoing, any tax liabilities arising under Code Section
409A will be solely the responsibility of the affected Participants, and in no event shall any member of the Board,
the Committee or the Company (or its employees, officers or directors) have any liability to any Participant (or any
other person) due to the failure of an Award to satisfy the requirements of Code Section 409A.
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CORPORATE INFORMATION
BOARD OF DIRECTORS
MICHAEL J. KOWALSKI
Chairman of the Board and Interim Chief Executive Officer,
Tiffany & Co.
(1995) 5, 6 and 7
ROSE MARIE BRAVO, CBE
Chief Executive Officer (Retired),
Burberry Limited
(1997) 2, 3 and 7*
GARY E. COSTLEY, Ph. D.
Chairman and Chief Executive Officer (Retired),
International Multifoods Corporation
(2007) 2*, 3 and 5
ROGER N. FARAH
Executive Director,
Tory Burch LLC
(2017)
LAWRENCE K. FISH
Chairman and Chief Executive Officer (Retired),
Citizens Financial Group, Inc.
(2008) 1, 4 and 5*
ABBY F. KOHNSTAMM
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, 4 and 7
WILLIAM A. SHUTZER
Senior Managing Director,
Evercore Partners
(1984) 4* and 7
ROBERT S. SINGER
Former Chief Executive Officer,
Barilla Holding SpA
(2012) 1*, 2 and 4
FRANCESCO TRAPANI
Former Chief Executive Officer,
Bulgari
(2017) 3 and 7
(Year joined Board)
Executive Vice President and Chief Marketing Officer,
Member of (* indicates Committee Chair):
Pitney Bowes Inc.
(2001) 1, 2, 3, 5 and 7
JAMES E. LILLIE
Former Chief Executive Officer,
Jarden Corporation
(2017)
(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
(7) Search Committee
EXECUTIVE OFFICERS OF TIFFANY & CO.
MICHAEL J. KOWALSKI
JENNIFER DE WINTER
Chairman of the Board and Interim Chief Executive Officer
Senior Vice President – Americas
MARK J. ERCEG
PHILIPPE GALTIÉ
Executive Vice President – Chief Financial Officer
Senior Vice President – International
JEAN-MARC BELLAICHE
LEIGH M. HARLAN
Senior Vice President – Strategy and Business Development
Senior Vice President – Secretary and General Counsel
VICTORIA BERGER-GROSS
ANDREW W. HART
Senior Vice President – Chief Human Resources Officer
Senior Vice President – Diamond and Jewelry Supply
PAMELA H. CLOUD
CAROLINE D. NAGGIAR
Senior Vice President – Global Category Marketing
Senior Vice President – Chief Brand Officer
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SHAREHOLDER 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 Shareholders
Thursday, May 25, 2017, 9:30 a.m.
The Rubin Museum of Art, 150 West 17th Street (at Seventh Avenue), New York, New York
Website
For Tiffany’s financial results, other information and reports filed with the Securities and Exchange
Commission, please visit our website at http://investor.tiffany.com.
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 30170, College Station, TX 77842-3170 (by regular mail) or
211 Quality Circle, Suite 210, College Station, TX 77845 (by overnight delivery); 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 shareholder 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.
Catalogs
To request a catalog, please call 800-526-0649.
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, 300 Madison Avenue, New York, New York 10017
TIFFANY & CO.
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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
$ 78.72 $ 63.84 $ 86.64 $ 83.19 $ 65.75
2016
2015
2014
2013
2012
Price Ranges of Tiffany & Co. Common Stock
High
Low
2016
Close
High
Low
2015
Close
Cash Dividends
Per Share
2016
2015
$ 74.06
$59.75
$71.35
$90.83
$82.64
$87.48
$0.40
$0.38
72.18
56.99
64.52
96.33
84.83
95.70
74.81
58.77
73.42
96.43
74.28
82.44
85.44
71.86
78.72
84.19
59.73
63.84
0.45
0.45
0.45
0.40
0.40
0.40
Quarter
First
Second
Third
Fourth
On March 20, 2017, the closing price of Tiffany & Co. Common Stock was $93.83 and there were
14,244 holders of record of the Company's Common Stock.
Certifications
Michael J. Kowalski and Mark J. Erceg 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, 2017.
As required by the New York Stock Exchange ("NYSE"), on June 22, 2016, Frederic Cumenal, former chief
executive officer, 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
AND OTHERS ARE TRADEMARKS OF TIFFANY (NJ) LLC. AND TIFFANY AND COMPANY.
© 2017 TIFFANY & CO.
TIFFANY & CO.
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CLOCKWISE, FROM TOP LEFT: Tiffany Cocktail watch, Tiffany T Two rings with diamonds, Paloma Picasso® Olive Leaf cuff , Tiffany Victoria® key pendant.