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UALUALUALUAUALUALUAUALUALLUALLUALALLLUALUALALALLLL RERERERERERERREEPORPORPORPORPORORRPOPORORORPPPORPORT OT OT OTT OOT OT OOT OTTT OON FN FN FN FN FN FN FNN FN ORORRORRRRRRMMMMMMMMMMMRMORMMRMMMRRRRRMMRRMORMRRRMMM 10101010101010101000 -K
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RY RY RY RY RYRYRYRYRRRYRYRRYRRRYY 31,331,31,31,11,31,1,31,31,11 20202020220200181818181881818181818181
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CLOCKWISE, FROM TOP LEFT: Tiffany Charms tags and Return to Tiffany® zodiac tag charm. The Tiffany® Setting. Tiffany T and Tiffany Metro rings and bangles.
Ring in platinum with diamonds.
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
A L E S S A N D R O B O G L I O L O
C H I E F E X E C U T I V E O F F I C E R
Dear Shareholder:
April 6, 2018
You are invited to attend the Annual Meeting of Shareholders of Tiffany & Co. on Thursday, May 24,
2018. The 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-9. 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 in
advance 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.
Our Company experienced a year of commemoration, change and progress in 2017.
It was the 180th anniversary of our founder, Charles Lewis Tiffany, opening his first store in downtown
Manhattan, and it was also the 30th anniversary of Tiffany’s initial public offering. Our Company has
created substantial value since that IPO through earnings growth, returning capital to shareholders
and stock price appreciation.
The year 2017 was also a year of changes in management and on our Board of Directors. I
am delighted and honored to have been appointed the new chief executive officer to lead this
extraordinary Company.
I’ve been asked about what attracted me to Tiffany, and my answer is straightforward. Tiffany is
a powerhouse, an authority in the global jewelry industry, and a legendary brand that I have long
respected. During my first six months here, I’ve spent considerable time with our global and regional
teams, visited more than 70 stores in all regions, and called on our people in several manufacturing,
logistic and support sites in Rhode Island, New Jersey and New York.
I am impressed with the strengths of our brand: a 180-year legacy, global reach, extraordinary
designs, powerful and proprietary symbols in the world of luxury, like our robin’s-egg color Blue Box,
collaborations with celebrated designers, personal connections with generations of customers all
over the world and landmark stores in the most important cosmopolitan cities, are some of the many
elements that make our brand truly special and powerful.
Thousands of artisans bring to Tiffany a level of craftsmanship in product making with a mastery in
platinum and other precious materials, as well as internal capabilities in the cutting and polishing of
rough diamonds, which are unique in the industry.
I am thrilled by the dedication of my colleagues and excellence they bring in all aspects of the
Company. Tiffany is a family of committed professionals who treasure the legacy of our brand and
are devoted to our customers’ delight. We also continue to believe that Tiffany should be committed
to improving the world around us, and a core value is our focus on corporate social responsibility.
We have demonstrated that commitment through our advocacy of responsible sourcing and
environmental sustainability, by showing respect and providing meaningful opportunities for our
employees, and by being engaged in charitable work in our communities. Our employees are proud of
these efforts, and we believe that our customers and our shareholders expect nothing less.
While our 2017 financial results pointed to progress in a number of areas, we will not be satisfied until
we are achieving sustainable financial performance that is truly representative of the greatness of
our brand.
To that end, our management team and Board have been devoting a great deal of attention to the
Company’s multi-year strategic plan. The plan calls for us to focus on the following strategic priorities:
(i) Amplifying an evolved brand message; (ii) Renewing our product offerings and enhancing in-store
presentations; (iii) Delivering an exciting omnichannel customer experience; (iv) Strengthening our
competitive position and leading in key markets; (v) Cultivating a more efficient operating model; and
(vi) Inspiring an aligned and agile organization to win.
Going forward, we will be communicating the key attributes of the brand through various media, in
order to be most relevant to a wide audience, both geographically and demographically, accelerating
the pace of product innovation, and ensuring that customers enjoy the experience of shopping in our
stores and online.
We are managing our business with a long-term strategic perspective. In fact, in January we
announced our decision to increase investment spending in a number of areas in 2018, which we
expect will limit pre-tax earnings growth in the near-term, but which we believe is necessary to
strengthen our ability to achieve sustainable growth in sales, operating margins and net earnings over
the longer term.
Undoubtedly there were many achievements in 2017. We enticed customers with exciting
new product offerings and marketing campaigns, and we worked to create more exciting and engaging
in-store and online environments. Product highlights in 2017 included the debut of our HARDWEAR
jewelry collection in gold and silver, the addition of the METRO collection to our watch assortment
and the introduction of our Home & Accessories collection. We also had the global launch of our new
signature fragrance.
Our marketing continued to evolve, spanning print media and increasingly digital and social media,
to ensure that our messaging resonates with a wide range of existing and new customers. And we
received extensive publicity and attracted many customers when we opened The Blue Box Cafe in our
New York Flagship store, delighting those who can now enjoy breakfast (or lunch) at Tiffany’s.
As part of our work to enhance our in-store environments, we completed significant renovations
in many stores, including those in San Francisco and Vancouver. Tiffany also further expanded its
geographical presence over the past year. In 2017, we opened nine stores globally, including major
stores in Milan at Piazza del Duomo and in Moscow on fashionable Petrovka Street. In the last quarter
we also opened “pop-up” stores in several markets, including two in Manhattan: Rockefeller Center
and Grand Central Terminal, which generated much attention.
We now operate TIFFANY & CO. stores in 28 countries, in 13 of which customers can also purchase
through e-commerce on our website.
In 2017, Tiffany continued to enhance its website and posted a solid sales increase. Importantly,
our website serves as a provider of exciting and compelling information, and acts as a catalyst for
customers to visit our stores. Research indicates that many customers first visit the website to learn
about our Company and products before visiting our stores. In fact, going forward we will combine
store sales with online and catalog sales when we report comparable sales growth.
In very select markets we continued to operate through distributors and generate wholesale
sales accordingly.
All in all, worldwide net sales increased 4% to $4.2 billion in 2017, with comparable store sales equal to
the prior year, and the operating margin was 19%. Net earnings of $370 million were below the prior
year’s $446 million after we recorded charges that resulted from the 2017 U.S. Tax Cuts and Jobs Act.
However, excluding those charges, as well as charges recorded in 2016 for the impairments of assets,
net earnings of $516 million, or $4.13 per diluted share, were 10% higher than 2016’s $470 million, or
$3.75 per diluted share (see “Non-GAAP Measures” beginning on page K-29 of this report).
We also managed our balance sheet effectively and were in a strong financial position at year-end with
cash and cash equivalents and short-term investments of $1.3 billion. Total short-term and long-term
debt of $1.0 billion represented 31% of stockholders’ equity. Net inventories rose 4%, which was in line
with sales growth. We generated cash flow from operations of $932 million and free cash flow of $693
million (see “Non-GAAP Measures” beginning on page K-29 of this report).
In addition to a strong increase in our stock price, we also continued to return capital to shareholders
by increasing our quarterly cash dividend by 11%, representing the 16th increase in the past 15 years,
and by spending $99 million to repurchase our shares.
Throughout its 180-year history, Tiffany has adapted to and evolved with the changing desires of many
generations, while always remaining true to its heritage and brand integrity. I believe that, with clear
strategic direction and effective execution, Tiffany’s future is very bright.
I look forward to providing updates to you, and appreciate your ongoing interest and support.
Sincerely,
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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
R O G E R N . F A R A H
C H A I R M A N O F T H E B O A R D
Dear Shareholder:
April 6, 2018
I joined Tiffany’s Board of Directors in March 2017 and was honored to become chairman in October,
at the same time that Alessandro Bogliolo joined our Company as chief executive officer.
As an independent, non-executive chairman, my efforts are dedicated to Board governance matters
and leading the Board in its fundamental role of providing oversight and guidance regarding the
business, operations and strategy of the Company. I am also pleased to serve in an advisory capacity
to Alessandro.
Two of our directors, Charles K. Marquis and Gary E. Costley, will be retiring from the Board in May in
accordance with our mandatory age requirement. In addition, Michael J. Kowalski, Tiffany’s former
chairman and chief executive officer, who has served our Company in a distinguished career for 35
years, has decided to not seek re-election to the Board in order to pursue his other passions. On behalf
of the Board and everyone at Tiffany, I want to thank them for their dedicated service and numerous
contributions to our Company over many years and wish them the best in the future.
I am pleased to add that the Board has nominated Annie Young-Scrivner, the chief executive officer
of Godiva Chocolatier, for election at the 2018 Annual Meeting. Annie’s global leadership experience
in consumer products should be of great benefit to our Company (her biography can be found on
page PS-20).
In addition, we will continue our ongoing initiatives to periodically refresh our Board with new
members, with a focus on ensuring an optimal mix of skills and experience as well as a diversity of
backgrounds and perspectives.
Our Board is excited about Tiffany’s opportunities and believes we are well positioned to succeed and
reward our shareholders.
Sincerely,
FINANCIAL HIGHLIGHTS
(in millions, except percentages, per share amounts and stores)
2017
2016
Net sales
Increase (decrease) from prior year
On a constant-exchange-rate basis: *
Net sales increase (decrease) from prior year *
Comparable store sales increase (decrease) from prior year *
Net earnings
Decrease from prior year
As a percentage of net sales
Per diluted share
Net earnings, as adjusted *
Increase (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
$
4,169.8
$
4,001.8
4 %
4 %
— %
(3)%
(3)%
(5)%
370.1
$
446.1
(17)%
9 %
2.96
516.3
10 %
12 %
4.13
125.1
932.2
692.9
31 %
1.95
315
$
$
$
$
$
$
(4)%
11 %
3.55
470.1
(5)%
12 %
3.75
125.5
705.7
482.9
37 %
1.75
313
$
$
$
$
$
$
$
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 2017 and 2016 earnings.
* See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -
Non-GAAP Measures" for a reconciliation of GAAP to Non-GAAP measures.
Tiffany & Co. Year-End Report 2017
Table of Contents
Annual Report on Form 10-K for the fiscal year ended January 31, 2018
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-49
Item 8.
Item 9.
Financial Statements and Supplementary Data............................................................. K-50
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................................................................. K-101
Item 9A.
Controls and Procedures............................................................................................. K-101
Item 9B.
Other Information ...................................................................................................... K-102
PART III
Item 10.
Directors, Executive Officers and Corporate Governance ................................................ K-103
Item 11.
Item 12.
Executive Compensation ............................................................................................ K-103
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters............................................................................................... K-103
Item 13.
Certain Relationships and Related Transactions, and Director Independence................... K-103
Item 14.
Principal Accounting Fees and Services ....................................................................... K-103
Item 15.
Exhibits, Financial Statement Schedules ..................................................................... K-104
Item 16.
Form 10-K Summary. ................................................................................................ K-104
PART IV
Tiffany & Co. Year-End Report 2017
Table of Contents
Proxy Statement for the 2018 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 - 12
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 - 22
Corporate Governance Highlights ...............................................................................................
PS - 22
The Board, In General ..............................................................................................................
PS - 22
The Role of the Board in Corporate Governance ..........................................................................
PS - 22
Board Leadership Structure ......................................................................................................
PS - 23
Executive Sessions of Non-management Directors .......................................................................
PS - 24
Shareholder Engagement and Communication with Non-management Directors .............................
PS - 24
Independent Directors Constitute a Majority of the Board.............................................................
PS - 24
Board and Committee Meetings and Attendance during Fiscal 2017.............................................
PS - 25
Committees of the Board ..........................................................................................................
PS - 26
Board Self-Evaluation...............................................................................................................
PS - 30
Board Refreshment ..................................................................................................................
PS - 30
Resignation on Job Change or New Directorship ..........................................................................
PS - 31
Management Succession Planning.............................................................................................
PS - 31
Board Role in Risk Oversight.....................................................................................................
PS - 31
Business Conduct Policy and Code of Ethics...............................................................................
PS - 33
Political Spending....................................................................................................................
PS - 33
Commitment to Corporate Social Responsibility ..........................................................................
PS - 34
Limitation on Adoption of Poison Pill Plans ................................................................................
PS - 34
Transactions with Related Persons.............................................................................................
PS - 34
Contributions to Director-Affiliated Charities ...............................................................................
PS - 34
Item 2. Ratification of the Selection of the Independent Registered Public Accounting Firm to Audit
our Fiscal 2018 Financial Statements........................................................................................
PS - 36
Report of the Audit Committee ..................................................................................................
PS - 37
Relationship with Independent Registered Public Accounting Firm ...............................................
PS - 38
Fees and Services of PricewaterhouseCoopers LLP ......................................................................
PS - 38
Item 3. Approval, on an Advisory Basis, of the Compensation of the Company's Named
Executive Officers ....................................................................................................................
Page
PS - 39
Compensation Discussion and Analysis ......................................................................................
PS - 41
Report of the Compensation Committee .....................................................................................
PS - 73
Summary Compensation Table...................................................................................................
PS - 74
Grants of Plan-Based Awards ....................................................................................................
PS - 80
Discussion of Summary Compensation Table and Grants of Plan-Based Awards..............................
PS - 84
Outstanding Equity Awards at Fiscal Year-End ............................................................................
PS - 89
Option Exercises and Stock Vested ............................................................................................
PS - 93
Pension Benefits Table.............................................................................................................
PS - 93
Nonqualified Deferred Compensation Table ................................................................................
PS - 97
Potential Payments on Termination or Change in Control..............................................................
PS - 99
CEO Pay Ratio .........................................................................................................................
PS - 104
Director Compensation Table.....................................................................................................
PS - 105
Equity Compensation Plan Information.......................................................................................
PS - 109
Other Matters ................................................................................................................................
PS - 110
Shareholder Proposals for Inclusion in the Proxy Statement for the 2019 Annual Meeting ..............
PS - 110
Other Proposals .......................................................................................................................
PS - 110
Householding ..........................................................................................................................
PS - 110
Reminder to Vote .....................................................................................................................
PS - 111
Appendix I. Non-GAAP Measures.....................................................................................................
PS - 112
Board of Directors and Executive Officers of Tiffany & Co...................................................................
Shareholder Information .................................................................................................................
C-1
C-2
Corporate Information
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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
For the fiscal year ended January 31, 2018
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
Name of each exchange on which registered
Common Stock, $.01 par value per share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company,
or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth
company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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, 2017, the aggregate market value of the registrant's voting and non-voting stock held by non-affiliates of the registrant was
approximately $11,993,601,775 using the closing sales price on July 31, 2017 of $95.51. See Item 5. Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities.
As of March 12, 2018, the registrant had outstanding 124,398,512 shares of its common stock, $.01 par value per share.
The following documents are incorporated by reference into this Annual Report on Form 10-K: Registrant's Proxy Statement Dated April 6, 2018
(Part III).
DOCUMENTS INCORPORATED BY REFERENCE.
F
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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 "2018 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,' 'scheduled,' '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; the nature, amount or scope of charges resulting from recent revisions to
the U.S. tax code; 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; 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 initiatives and strategic priorities.
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 (including
changes effected by the recent revisions to the U.S. tax code) or changes in the guidance related to, or interpretation
of, such 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 the Company's ability to successfully control costs and execute on, and achieve
the expected benefits from, the operational initiatives and strategic priorities referenced above. 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 and
priorities. 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, 2018.
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 Tiffany and Company ("Tiffany") and the
Registrant's other subsidiary companies (collectively, the "Company"). 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 strategic priorities also include the accelerated introduction of new
design collections primarily in jewelry, but also in non-jewelry products, 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
TIFFANY & CO.
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the retail product line and items specially developed for the business market) and (v) wholesale distribution
(merchandise sold to independent distributors for resale). The Company's segment information for the fiscal years
ended January 31, 2018, 2017 and 2016 is reported in "Item 8. Financial Statements and Supplementary Data -
Note P. Segment Information."
Americas
Sales in the Americas represented 45% of worldwide net sales in 2017, while sales in the United States ("U.S.")
represented approximately 90% of net sales in the Americas. Sales are transacted through the following channels:
retail (in the U.S., Canada and Latin America), Internet and catalog (in the U.S. and Canada), business-to-business
(in the U.S.) and wholesale distribution (in Latin America and the Caribbean).
Retail sales in the Americas are transacted in 124 Company-operated TIFFANY & CO. stores in (number of stores at
January 31, 2018 included in parentheses): the U.S. (94), Canada (13), Mexico (11), Brazil (5) and Chile (1).
Included within these totals are 10 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 2017.
Asia-Pacific
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Sales in Asia-Pacific represented 26% of worldwide net sales in 2017, while sales in Greater China represented
approximately 60% 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 87 Company-operated TIFFANY & CO. stores in (number of stores at
January 31, 2018 included in parentheses): China (31), Korea (15), Australia (11), Hong Kong (10), Taiwan (7),
Singapore (5), Macau (4), Malaysia (2), New Zealand (1) and Thailand (1). Included within these totals are 34
Company-operated stores located within various department stores.
Japan
Sales in Japan represented 14% of worldwide net sales in 2017. Sales are transacted through the following
channels: retail, Internet, business-to-business and wholesale distribution.
Retail sales in Japan are transacted in 54 Company-operated TIFFANY & CO. stores. Included within this total are 49
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, 2018 included in parentheses): Isetan Mitsukoshi Ltd. (13), J.
Front Retailing Co., Ltd. (Daimaru and Matsuzakaya department stores) (8), 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 12% of worldwide net sales in 2017, 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 46 Company-operated TIFFANY & CO. stores in (number of stores at January
31, 2018 included in parentheses): the U.K. (11), Italy (10), Germany (6), France (5), Spain (3), Switzerland (3),
the Netherlands (2), Russia (2), Austria (1), Belgium (1), the Czech Republic (1) and Ireland (1). Included within
these totals are nine Company-operated stores located within various department stores. The Company currently
operates e-commerce enabled websites within the following countries: U.K., Austria, Belgium, France, Germany,
Ireland, Italy, the Netherlands and Spain.
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Other
Other consists of all non-reportable segments, including: (i) retail sales transacted in four Company-operated
TIFFANY & CO. stores in the United Arab Emirates ("U.A.E.") and wholesale distribution in the Emerging Markets
region (which represented approximately 50% of Other net sales in 2017); (ii) wholesale sales of diamonds (see
"PRODUCT SUPPLY CHAIN – Supply of Diamonds" below); and (iii) licensing agreements.
Licensing Agreements. The Company receives earnings from a licensing agreement with Luxottica Group, for the
development, production and distribution of TIFFANY & CO. brand eyewear, and from a licensing agreement with
Coty Inc., for the development, production and distribution of a new line of TIFFANY & CO. brand fragrances. The
earnings received from these licensing agreements represented less than 1% of worldwide net sales in 2017.
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 closing 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 2013:
Year:
2013
2014
2015
2016
2017
Americas
U.S.
94
95
95
95
94
Canada &
Latin America
Asia-Pacific
Japan
Europe
Emerging
Markets
27
27
29
30
30
72
73
81
85
87
54
56
56
55
54
37
39
41
43
46
5
5
5
5
4
Total
289
295
307
313
315
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As part of the Company's long-term objectives, management plans to increase gross retail square footage by
approximately 2%, net through the addition of new stores, relocations, renovations and closings in 2018. For a
summary of the Company's existing retail square footage, see "Item 2. Properties".
E-Commerce, Catalog and Phone Orders
The Company currently operates e-commerce enabled websites in 13 countries as well as informational websites in
several additional countries. To a lesser extent, sales are also generated through catalogs that the Company
distributes in certain countries as well as orders placed via telephone in certain markets. Sales transacted on those
websites, through catalogs or via telephone accounted for 7% of worldwide net sales in 2017, 2016 and 2015. 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 an important marketing role in
attracting customers to the Company's stores.
Products
The Company's principal product category is jewelry, which represented 91%, 92% and 93% of worldwide net sales
in 2017, 2016 and 2015. 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,
eyewear, fragrances and other accessories, which represented, in total, 7% of worldwide net sales in 2017, 2016
and 2015. The remainder of worldwide net sales were attributable to wholesale sales of diamonds and earnings
received from third-party licensing agreements.
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Sales by Reportable Segment of TIFFANY & CO. Jewelry by Category
% of total
Americas
Sales
% of total
Asia-Pacific
Sales
% of total
Japan
Sales
% of total
Europe
Sales
% of total
Reportable
Segment Sales
54%
21%
14%
54%
22%
14%
53%
23%
14%
61%
30%
8%
56%
35%
7%
56%
35%
8%
31%
38%
22%
31%
39%
23%
33%
39%
21%
61%
24%
12%
59%
26%
11%
60%
25%
11%
53%
26%
14%
52%
28%
13%
52%
28%
13%
2017
Jewelry collections a
Engagement jewelry b
Designer jewelry c
2016
Jewelry collections a
Engagement jewelry b
Designer jewelry c
2015
Jewelry collections a
Engagement jewelry b
Designer jewelry c
a) This category includes jewelry in a wide range of prices within the Company's high jewelry and named jewelry
collections such as Tiffany Victoria®, Tiffany Soleste®, Tiffany Keys, Tiffany T, Tiffany HardWear and Return to
Tiffany®, among others. Jewelry in this category is primarily crafted using precious metals (platinum, gold or
sterling silver) and may contain diamonds and/or other gemstones.
b) This category includes engagement rings (approximately 60% of the category) and wedding bands. Most jewelry in
this category contains diamonds and is constructed of platinum and/or gold.
c) This category includes only jewelry that is attributed to one of the Company’s "named" designers: Elsa Peretti
(refer to "MATERIAL DESIGNER LICENSE" below), Paloma Picasso and Jean Schlumberger. Jewelry in this
category is primarily crafted using precious metals (platinum, gold or sterling silver) and may contain diamonds
and/or other gemstones.
The Jewelry collections category reflects the combination of the previously reported high, fine & solitaire jewelry and
fashion jewelry categories. Additionally, jewelry bearing the name of and attributed to Jean Schlumberger, which was
previously reported within the high, fine & solitaire jewelry category, has been reclassified into the Designer jewelry
category. Such changes or reclassifications have been made to conform with management's current internal analysis
of product sales and are reflected for each of the periods presented in the table above.
ADVERTISING, MARKETING, PUBLIC AND MEDIA RELATIONS
The Company's strategy is 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. 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 2017, 2016 and 2015, the Company
spent $314.9 million, $299.0 million and $302.0 million, representing 7.6%, 7.5% and 7.4% 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.
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
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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 ® 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.
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.
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Despite the general fame of the TIFFANY and TIFFANY & CO. name and mark for the Company's products and
services, Tiffany is not the sole person entitled to use the name TIFFANY in every category 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.
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%, 9% and 8% of the Company's worldwide net sales in 2017, 2016 and 2015.
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
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trademark registrations reasonably necessary to sell the licensed products in the markets in which the licensed
products are sold by Tiffany.
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's strategic priorities include maintaining substantial control over its product supply chain through
internal jewelry manufacturing and direct diamond sourcing. The Company manufactures jewelry in New York, Rhode
Island and Kentucky, polishes jewelry in the Dominican Republic and crafts silver hollowware in Rhode Island. In
total, these internal manufacturing facilities produce approximately 60% of the jewelry sold by the Company. The
balance, and 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
processes, cuts and polishes rough diamonds at its facilities outside the U.S. and sources precious metals, rough
diamonds, polished diamonds and other gemstones, as well as certain fabricated components, from third parties.
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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 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. Most of this supply comes from arrangements in which the Company
accesses rough diamonds that are offered for sale (including as a sightholder or through the right to purchase a
defined portion of a mine's output), although with no contractual purchase obligation for such rough diamonds. A
smaller portion of rough diamond purchases is made through agreements in which the Company is required to
purchase a minimum volume of rough diamonds (anticipated to be approximately $45.0 million in 2018). All such
supply arrangements are generally at the market price prevailing at the time of purchase.
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.
TIFFANY & CO.
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Products containing one or more diamonds of varying sizes, including diamonds used as accents, side-stones and
center-stones, accounted for 57%, 59% and 59% of worldwide net sales in 2017, 2016 and 2015.
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.
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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 2017 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.
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.
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 come from two sources: (i) in-ground, large-scale deposits of metals,
primarily in the U.S., that meet the Company's standards for responsible mining and (ii) metals from recycled
sources. While the Company may supply precious metals to a manufacturer, it cannot determine, in all
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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 50 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. The Company sells TIFFANY & CO. brand watches, which are designed, produced, marketed and
distributed through certain of the Company's Swiss subsidiaries. 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 TIFFANY & CO. brand watches represented approximately 1% of worldwide net sales in 2017, 2016 and
2015.
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COMPETITION
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
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, 2018, the Company employed an aggregate of approximately 13,100 full-time and part-time
persons. Of those employees, approximately 5,600 are employed in the United States.
EMPLOYEES
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AVAILABLE INFORMATION
The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy
and information statements and amendments to reports filed or furnished pursuant to Sections 13(a), 14 and 15(d)
of the Securities Exchange Act of 1934, as amended. The public may read and copy these materials at the
Securities and Exchange Commission's ("SEC") Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. The public may obtain information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information
statements and other information regarding Tiffany & Co. and other companies that electronically file materials with
the SEC. Copies of the Company's reports on Form 10-K, Form 10-Q and Form 8-K may be obtained, free of charge,
on the Company's website at http://investor.tiffany.com/financials.cfm.
Item 1A. Risk Factors.
As is the case for any retailer, the 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.
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Consumer spending for discretionary goods generally declines during times of falling consumer confidence, which
negatively affects the Company's sales and earnings.
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.
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(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:
•
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 revisions to the U.S. tax code;
• 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 or
agreements 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 ("U.K.")
referendum vote to exit the European Union ("E.U."), as discussed below, or (2) changes in government
policies resulting from the change in the U.S. Presidential administration in 2017;
• challenges inherent in oversight of foreign operations, systems and controls;
• 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 U.K. approved an advisory referendum to withdraw from the E.U., commonly referred to
as "Brexit." Negotiations have commenced to determine the U.K.'s future relationship with the E.U., including terms
of trade. However, there can be no assurance regarding the duration of such negotiations or the terms thereof. A
withdrawal could significantly disrupt the free movement of goods, services, and people between the U.K. and the
E.U., 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 U.K.'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) Recent revisions to the U.S. tax code, including changes in the guidance related to, or interpretation and application of,
such revisions could materially affect the Company's tax obligations, provision for income taxes and effective tax rate.
On December 22, 2017, the U.S. enacted comprehensive tax legislation, commonly referred to as the 2017 U.S. Tax
Cuts and Jobs Act (the "2017 Tax Act"), which significantly affected U.S. tax law by changing how the U.S. imposes
income tax on U.S. taxpayers. In particular, these changes impact the U.S. taxation of earnings in the jurisdictions in
which the Company operates, the measurement of its deferred tax assets and liabilities and the Company's plans to
repatriate the earnings of its non-U.S. subsidiaries to the U.S. The provisions of the 2017 Tax Act will likely be
subject to further interpretation by the Internal Revenue Service, which has broad authority to issue regulations and
interpretative guidance that may significantly impact how the Company will apply such provisions.
Changes in tax law are accounted for in the period of enactment. As a result, the Company's 2017 consolidated
financial statements reflect provisional estimates of the immediate tax effect of the 2017 Tax Act. As the Company
TIFFANY & CO.
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refines its provisional estimate calculations, further analyzes provisions of the 2017 Tax Act and any subsequent
guidance related thereto, these provisional estimates could be affected, which could have a material impact on the
Company's future financial results, including its fiscal 2018 results (see "Item 7. Management's Discussion and
Analysis - 2018 Outlook"). Additionally, further regulatory or GAAP accounting guidance regarding the 2017 Tax Act
could also materially affect the Company's future financial results.
(v) 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 and Chinese Yuan. In 2017, sales in countries outside of the U.S. in aggregate represented a
substantial portion of the Company's net sales and earnings from operations. A strengthening of the U.S. dollar
against foreign currencies would require the Company to raise its retail prices in various locations outside of the U.S.
in order to maintain its worldwide relative pricing structure, or reduce its profit margins. Consumers in those markets
may not accept significant price increases on the Company's goods; thus, there is a risk that a strengthening of the
U.S. dollar would result in reduced sales and profitability. In addition, a 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.
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 strengthens 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.
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(vi) 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 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.
(vii) 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.
(viii) Increases in costs of diamonds, other gemstones 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, other 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
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decrease in the cost or supply of precious metals, high-quality rough and polished diamonds (within the quality
grades, colors and sizes that customers demand) and/or other gemstones 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.
(ix) 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.
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 is in the conceptual phase of a multi-year effort to renovate its New York
Flagship store, which will require significant capital investment and 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 or significantly disrupt sales and/or
profitability during renovations, the Company's sales and/or earnings performance could be jeopardized.
(x) The value of the TIFFANY & CO. and TIFFANY trademarks could decline due to third-party use and infringement.
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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.
(xi) 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, e-commerce and other direct selling operations and merchandise
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
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quality testing in 2016, the Company identified a potential breach of the Company's sourcing and quality standards
applicable to third party vendors. The Company assessed the composition of certain of its gold products
manufactured primarily by certain U.S. third-party vendors, which contained gold solder manufactured by other U.S.
vendors, to determine whether such products were in compliance with applicable consumer products requirements
and regulations. Following this assessment, management determined that no liability was required to be recorded.
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.
(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,
computer and telecommunications failures, computer viruses, systems failures, 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 is in the process of executing its 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) New and existing data privacy laws and/or a significant data security breach of the Company's information systems
could increase the Company’s operational costs, subject the Company to claims and otherwise adversely affect its
business.
The protection of customer, employee and Company information is important to the Company, and its customers and
employees expect that their personal data will be adequately protected. In addition, the regulatory environment
surrounding information security and data privacy is becoming increasingly demanding, with evolving requirements
in respect of personal data use and processing, including significant penalties for non-compliance, in the various
jurisdictions in which the Company does business. Although the Company has developed and implemented systems,
policies, procedures and controls that are designed to protect personal data and Company information, prevent data
loss and other security breaches, and otherwise identify, assess and analyze cybersecurity risks, such measures
cannot provide absolute security. For example, the Company faces a complex and evolving threat landscape in which
cybercriminals, nation-states and "hacktivists" employ a complex array of techniques designed to access personal
data and other information, including the use of stolen access credentials, malware, ransomware, phishing,
structured query language ("SQL") injection attacks and distributed denial-of-service attacks, which may penetrate
TIFFANY & CO.
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the Company's systems despite its extensive and evolving protective information security measures. Further, the
Company relies on its software and hardware providers to issue timely patches for known vulnerabilities; however, the
failure of software and hardware companies to release or to timely release effective patching and the Company's
reliance on patches or inability to patch software and hardware vulnerabilities, could expose it to increased risk of
attack, data loss and data breach.
Additionally, the Company's implementation of new information technology or information systems and/or 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 personal data, 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 data 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 personal data and Company information, 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 violation of applicable privacy laws or the occurrence of a cybersecurity incident resulting in breach of
personal data or Company information could result in the temporary suspension of some or all of the Company's
operating and/or information systems, damage the Company's reputation, its relationships with customers, vendors
and service providers and the TIFFANY & CO. brand and could result in lost data, lost sales, sizable fines, increased
insurance premiums, substantial breach-notification and other remediation 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 personal data processing risks and data security
threats or to investigate or address potential or actual data security or privacy breaches.
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(xiv) The loss or a prolonged disruption in the operation of the Company's centralized distribution centers could adversely
affect its business and operations.
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.
(xv) 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.
(xvi) There is no assurance that the Company will be able to successfully grow its watch business.
The Company sells TIFFANY & CO. brand watches, which are designed, produced, marketed and distributed through
certain of the Company's Swiss subsidiaries. Sales of these TIFFANY & CO. brand watches represented approximately
1% of worldwide net sales in 2017, 2016 and 2015. The 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) dependence on relatively
small supply partners; and (iv) production and distribution inefficiencies. In addition, the Company is competing
with businesses with stronger market positions and has invested and will continue to invest 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 watch business or that such business will be successful in growing the Company's
revenues or enhancing its profitability.
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(xvii) If the Company is unable to effectively anticipate and respond to changes in consumer preferences and shopping
patterns, or introduce new products or 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. If the Company is unable to anticipate and respond in a timely and
cost-effective manner to changes in consumer preferences and shopping patterns, including the development of an
engaging omnichannel experience for its customers, the Company’s sales and profitability could be adversely
affected.
In addition, management intends to increase its spending in a number of areas, including technology, marketing
communications, visual merchandising, digital, and store presentations, which it believes are necessary to achieve
its longer term sales, margin and earnings growth objectives. Such investment is also intended 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, however, be no assurance these strategies will appeal to new or existing customers or will
result in increased sales or profitability.
Lastly, 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.
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(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.
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 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.
Certain members 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 new members of its executive management team.
For example, in February 2017, Frederic Cumenal stepped down from his position as Chief Executive Officer ("CEO")
of the Company, and the Company’s Board of Directors appointed Michael J. Kowalski (Chairman of the Board and
former CEO at the time of appointment) as the Company’s Interim CEO. In October 2017, Alessandro Bogliolo joined
the Company as CEO replacing Mr. Kowalski, who stepped down from that role. Any further changes in the
Company's executive management team may be disruptive to, or cause uncertainty in, the Company's business, and
could have a negative impact on the Company's ability to manage and grow its business effectively, its results of
operations and the price of the Company's common stock.
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(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. Such risks include those related to the
physical impacts of climate change, such as more frequent and severe weather events and/or long term shifts in
climate patterns, and risks related to the transition to a lower-carbon economy, such as reputational, market and/or
regulatory risks. Climate change and climate events could result in social, cultural and economic disruptions in these
areas, including supply chain disruptions, 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, damage to such stores or locations or reductions in material availability and quality. These events could
also compound adverse economic conditions and impact consumer confidence and discretionary spending. Despite
the fact that the Company is pursuing numerous initiatives to reduce its environmental footprint, including efforts
related to energy efficiency, renewable energy use and carbon offsets, there remains the risk that insufficient global
cooperation could lead to increased negative impacts from climate change. While the Company has an ongoing
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.
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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, 2018:
Total Stores
Total Gross Retail
Square Footage
Gross Retail
Square Footage
Range
Average Gross
Retail Square
Footage
Americas:
New York Flagship
Other stores
Asia-Pacific
Japan:
Tokyo Ginza
Other stores
Europe:
London Old Bond Street
Other stores
Emerging Markets
Total
1
123
87
1
53
1
45
4
45,500
45,500
684,700
1,000 - 17,600
245,900
400 - 12,800
13,300
13,300
141,800
1,600 - 7,500
22,400
22,400
160,700
600 - 18,200
6,900
400 - 3,600
315
1,321,200
400 - 45,500
45,500
5,600
2,800
13,300
2,700
22,400
3,600
1,700
4,200
Excluded from the store count and square footage amounts above are pop-up stores (stores with lease terms of 24
months or less).
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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 and The
Blue Box Cafe, which opened in 2017. The balance is 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 AND DESIGN FACILITIES
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The Company owns and operates jewelry manufacturing facilities in Cumberland, Rhode Island and Lexington,
Kentucky, leases a jewelry manufacturing facility in Pelham, New York, leases a facility in the Dominican Republic
which performs certain functions such as jewelry polishing and leases a facility containing its Jewelry Design and
Innovation Workshop in New York, New York. Lease expiration dates range from 2019 to 2029. The owned and
leased facilities total approximately 244,000 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
2018 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 $78.0 million
at January 31, 2018) (based on its alleged wasted investment) to CHF 3.8 billion (or approximately $4.1 billion at
TIFFANY & CO.
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January 31, 2018) (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
$129.0 million at January 31, 2018) (based on its wasted investment) to approximately CHF 540.0 million (or
approximately $578.0 million at January 31, 2018) (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.
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 was set aside. However, the
Swatch Parties took action in the Dutch courts to appeal the District Court's decision, and a three-judge panel of the
Appellate Court of Amsterdam presided over an appellate hearing in respect of the annulment, and the related claim
by the Tiffany Parties for the return of the Arbitration Damages and related costs, on June 29, 2016. The Appellate
Court issued its decision on April 25, 2017, finding in favor of the Swatch Parties and ordering the Tiffany Parties to
reimburse the Swatch Parties EUR 6,340 in legal costs. The Tiffany Parties have taken action to appeal the decision
of the Appellate Court to the Supreme Court of the Netherlands. As such, the Arbitration Award may ultimately be
set aside by the Supreme Court. Registrant's management believes it is likely that the Supreme Court will issue its
decision during Registrant's fiscal year ending January 31, 2019. However, it is possible that such decision could be
later issued or that such decision could require the Appellate Court to reconsider certain elements of the dispute
and, as such, the annulment action may not be ultimately resolved until, at the earliest, Registrant's fiscal year
ending January 31, 2020.
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.
TIFFANY & CO.
K-20
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 a 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.
Management has not established any accrual in the Company's consolidated financial statements for the year ended
January 31, 2018 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.
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 such as
those 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 was not final, as it was subject
to post-verdict motion practice and ultimately to adjustment by the Court. On August 14, 2017, the Court issued its
ruling, finding that the Tiffany plaintiffs are entitled to recover (i) $11.1 million in respect of Costco's profits on the
sale of the infringing rings (which amount is three times the amount of such profits, as determined by the Court), (ii)
prejudgment interest on such amount (calculated at the applicable statutory rate) from February 15, 2013 through
August 14, 2017, (iii) an additional $8.25 million in punitive damages, and (iv) Tiffany's reasonable attorneys' fees
(which will be determined at a later date), and, on August 24, 2017, the Court entered judgment in the amount of
$21.0 million in favor of the Tiffany plaintiffs (reflecting items (i) through (iii) above). Costco has filed an appeal
from the judgment, as well as a motion in the Court for a new trial. The appeal has been automatically stayed
pending determination of the Court motion. Costco has also filed an appeal bond to secure the amount of the
judgment entered by the Court pending appeal, so the Tiffany plaintiffs will be unable to enforce the judgment while
the motion for a new trial and the appeal are pending. As such, the Company has not recorded any amount in its
consolidated financial statements related to this gain contingency as of January 31, 2018, and expects that this
matter will not ultimately be resolved until, at the earliest, the Company's fiscal year ending January 31, 2019.
Item 4. Mine Safety Disclosures.
Not Applicable.
TIFFANY & CO.
K-21
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, 1,062,096 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 2017 were:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$ 97.29
$ 96.94
$ 97.10
$ 111.44
Low
$ 77.52
$ 84.15
$ 86.15
$ 90.46
On March 12, 2018, the high and low selling prices quoted on such exchange were $102.75 and $99.78. On March
12, 2018, there were 13,756 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 2016 were:
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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
TIFFANY & CO.
K-22
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 and such indices, plus the reinvestment of any dividends paid. The graph assumes an
investment of $100 on January 31, 2013 in the Company's common stock and in each of the two indices as well as
the reinvestment of any subsequent dividends.
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 to be indicative of future
performance.
Comparison of Cumulative Five Year Total Return
$250
$200
$150
$100
$50
$0
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01/31/13
01/31/14
01/31/15
01/31/16
01/31/17
01/31/18
Tiffany & Co.
S&P 500 Stock Index
S&P 500 Consumer Discretionary Index
Tiffany & Co.
S&P 500 Stock Index
S&P 500 Consumer
Discretionary Index
1/31/13
1/31/14
1/31/15
1/31/16
1/31/17
1/31/18
$ 100.00
$ 128.74
$ 136.13
$ 102.24
$ 129.23
$ 178.67
100.00
121.52
138.80
137.88
165.51
209.22
100.00
127.37
143.94
155.13
180.69
233.09
TIFFANY & CO.
K-23
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 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.
In 2017, a dividend of $0.45 per share of Common Stock was paid on April 10, 2017. On May 25, 2017, the
Company announced an 11% increase in its regular quarterly dividend rate to a new rate of $0.50 per share of
Common Stock which was paid on July 10, 2017, October 10, 2017 and January 10, 2018.
Issuer Purchases of Equity Securities
In January 2016, the Registrant's Board of Directors approved a new share repurchase program (the "2016
Program") and terminated 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"). 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. As of January 31, 2018, $211.2 million remained available for repurchase under the 2016
Program.
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The following table contains the Company's purchases of equity securities in the fourth quarter of 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)
141,881
$ 93.18
141,881
128,020
$ 98.32
128,020
122,985
$ 107.53
392,886
$ 99.35
122,985
392,886
$ 237.1
$ 224.5
$ 211.2
$ 211.2
Period
November 1, 2017 to
November 30, 2017
December 1, 2017 to
December 31, 2017
January 1, 2018 to
January 31, 2018
TOTAL
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 2013-2017, which ended on January 31 of the following calendar
year:
(in millions, except per share amounts,
percentages, ratios, stores and employees)
2017 a
2016 b
2015 c
2014 d
2013 e
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
$
4,169.8
$
4,001.8
$
4,104.9
$
4,249.9
$
4,031.1
2,604.7
1,810.2
370.1
2.96
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
125.1
125.5
129.1
129.9
128.9
Total assets
$
5,468.1
$
5,097.6
$
5,121.6
$
5,171.8
$
4,745.1
Cash and cash equivalents
970.7
928.0
843.6
730.0
345.8
Inventories, net
2,253.5
2,157.6
2,225.0
2,362.1
2,326.6
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
1,003.5
3,248.2
3,258.5
932.2
239.3
26.10
1.95
1,107.1
3,028.4
2,940.8
705.7
222.8
24.33
1.75
1,095.8
2,929.5
2,778.5
817.4
252.7
23.10
1.58
1,107.8
2,850.7
2,850.8
633.5
247.4
22.04
1.48
996.3
2,734.0
2,431.1
174.1
221.4
21.31
1.34
62.5%
43.4%
19.1%
8.9%
5.7%
7.0%
11.8%
30.9%
65.5%
315
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
Number of employees
13,100
11,900
12,200
12,000
10,600
* The Company adopted ASU No. 2016-09 – Compensation - Stock Compensation: Improvements to Employee Share-Based
Payment Accounting, as of February 1, 2017. Accordingly, cash payments made to taxing authorities on employees' behalf for
shares withheld for taxes were reclassified retrospectively from operating activities to financing activities on the Consolidated
Statements of Cash Flows in each of the years presented. Additionally, the Company elected to classify excess tax benefits as
an operating activity instead of as a financing activity on the Consolidated Statements of Cash Flows and such amounts were
reclassified retrospectively in each of the years presented. See "Item 8. Financial Statements and Supplementary Data - Note
B. Summary of Significant Accounting Policies" for additional information.
TIFFANY & CO.
K-25
NOTES TO SELECTED FINANCIAL DATA
a. Financial information and ratios for 2017 include $146.2 million, or $1.17 per diluted share, of net tax expense
related to the enactment of the 2017 U.S. Tax Cuts and Jobs Act. See "Item 8. Financial Statements and
Supplementary Data - Note O. Income Taxes" for additional information.
b. Financial information and ratios for 2016 include the following amounts, totaling $38.0 million of pre-tax
expense ($24.0 million after tax expense, or $0.19 per diluted share):
• $25.4 million of pre-tax expense ($16.0 million 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 pre-tax expense ($8.0 million 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.
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c. Financial information and ratios for 2015 include the following amounts, totaling $46.7 million of pre-tax
expense ($29.9 million after tax expense, or $0.24 per diluted share):
• $37.9 million of pre-tax expense ($24.3 million 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 B. Summary of Significant Accounting Policies" for additional
information; and
• $8.8 million of pre-tax expense ($5.6 million 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.
d. 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.
e. 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.
KEY STRATEGIC PRIORITIES
The Company's key strategic priorities are to:
• Amplify an evolved brand message.
The Brand is the single most important asset of Tiffany and, indirectly, of the Company. Management
intends to increasingly invest in and evolve marketing and public relations programs through a variety of
media designed to build awareness of the Brand, its heritage and its products, as well as to enhance the
Brand's association with quality and luxury by consumers.
• Renew the Company's product offerings and enhance in-store presentations.
The Company's product development strategy is to accelerate the introduction of new design collections,
primarily in jewelry, but also in non-jewelry products, and/or expand certain existing collections annually, all
of which are intended to appeal to existing and new customers.
To ensure a superior shopping experience, the Company is focused 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.
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• Deliver an exciting omnichannel customer experience.
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 closing 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. In addition, the Company employs highly qualified
sales and customer service professionals and is focused on developing effective omnichannel relationships
with its customers.
• Strengthen the Company's competitive position and lead in key markets.
The global jewelry industry is competitively fragmented. While the Company enjoys a strong reputation and
large customer base, it encounters significant competition in all product categories and geographies. By
focusing on enhanced marketing communications, product development and optimization of its store base
and digital capabilities, the Company's objective is to be an industry leader in key markets.
• Cultivate a more efficient operating model.
The Company is focused on improving its business operations through new systems, more effective processes
and cost restraint, to drive margin growth. This includes realizing greater efficiencies in its product supply
chain and other operations, and enhancing its global procurement capabilities. The Company has developed
a substantial product supply infrastructure for the procurement and processing of diamonds and 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.
•
Inspire an aligned and agile organization to win.
The Company's success depends upon its people and their effective execution of the Company's strategic
priorities. The Company's management strives to motivate and develop employees with the core
competencies and adaptability needed to achieve its objectives.
TIFFANY & CO.
K-27
By pursuing these key strategic priorities, management is committed to the following long-term financial objectives:
• To achieve sustainable sales growth.
Management's objective is to generate mid-single-digit percentage worldwide sales increases, primarily
through comparable store sales growth, as well as through modest square footage growth.
• To increase retail productivity and profitability.
Management is focused on increasing the frequency of store and website visits and the percentage of store
and website visitors who make a purchase, as well as optimal utilization of store square footage, to grow
sales and sales per square foot.
• 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 improve inventory and other asset productivity and cash flow.
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 through dividends and share
repurchases.
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2017 SUMMARY
• Worldwide net sales increased 4% to $4.2 billion, reflecting sales growth in most reportable segments.
Comparable store sales were unchanged from the prior year. There was no significant impact from currency
translation (see "Non-GAAP Measures").
• The Company added a net of two TIFFANY & CO. stores (opening five in Asia-Pacific, three in Europe and
one in the Americas, while closing three in Asia-Pacific, two in the Americas and one each in Japan and the
Emerging Markets and relocating seven stores), resulting in a 3% net increase in gross retail square footage.
• The Company expanded its product offerings, including by introducing the new TIFFANY HARDWEAR jewelry
collection, through additions to several existing jewelry collections, such as the TIFFANY T collection, and by
introducing its new Home and Accessories collection, new watch designs and a new fragrance.
• Earnings from operations as a percentage of net sales ("operating margin") increased 110 basis points,
which includes the impact of certain impairment charges recorded in 2016, as described below under "Non-
GAAP Measures". Excluding these charges, operating margin increased 10 basis points.
• Net earnings decreased 17% to $370.1 million, or $2.96 per diluted share. However, net earnings in 2017
included a net charge of $146.2 million, or $1.17 per diluted share related to the enactment of the 2017
U.S. Tax Cuts and Jobs Act (the "2017 Tax Act") (see "Non-GAAP Measures"). Net earnings in 2016 included
impairment charges of $0.19 per diluted share (see "Non-GAAP Measures"). Excluding these charges, net
earnings per diluted share increased 10% to $4.13.
TIFFANY & CO.
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•
Inventories, net increased 4%, with the majority of the increase attributed to currency translation.
• Cash flow from operating activities was $932.2 million in 2017, compared with $705.7 million in 2016.
Free cash flow (see "Non-GAAP Measures") was $692.9 million in 2017, compared with $482.9 million in
2016.
• The Company returned capital to shareholders by paying regular quarterly dividends (which were increased
11% effective July 2017 to $0.50 per share, or an annualized rate of $2.00 per share) and by repurchasing
1.0 million shares of its Common Stock for $99.2 million.
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.
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TIFFANY & CO.
K-29
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 currency 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:
Net Sales:
Worldwide
Americas
Asia-Pacific
Japan
Europe
Other
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Comparable Store Sales:
Worldwide
Americas
Asia-Pacific
Japan
Europe
Other
2017
2016
GAAP
Reported
Translation
Effect
Constant-
Exchange-
Rate Basis
GAAP
Reported
Translation
Effect
Constant-
Exchange-
Rate Basis
4%
—%
4%
(3)%
—%
(3)%
2
10
(1)
6
26
1
2
(2)
3
—
1
8
1
3
26
(5)
—
12
(10)
(8)
—
(1)
12
(7)
—
(5)
1
—
(3)
(8)
—%
—%
—%
(5)%
—%
(5)%
1
(1)
(1)
(2)
2
1
1
(3)
2
—
—
(2)
2
(4)
2
(6)
(9)
16
(14)
(15)
(1)
(2)
11
(5)
—
(5)
(7)
5
(9)
(15)
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, 2018
Provision for income taxes
Effective income tax rate
Net earnings
Diluted earnings per share*
GAAP
Charges related to
the 2017 Tax Act a
Non-GAAP
$
390.4
$
(146.2)
$
51.3%
(19.2)%
370.1
2.96
146.2
1.17
244.2
32.1%
516.3
4.13
a Net expense recognized in 2017 related to the estimated impact of the 2017 Tax Act. See "Provision for Income
Taxes" and "Item 8. Financial Statements and Supplementary Data - Note O. Income Taxes" for additional
information.
TIFFANY & CO.
K-30
(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 c
Net earnings
Diluted earnings per share*
*Amounts may not add due to rounding.
b Expenses associated with the following:
GAAP
Impairment
charges b
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 pre-tax expense ($16.0 million 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 pre-tax expense ($8.0 million 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").
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c 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 d
Specific cost-
reduction
initiatives e
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 c
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
d Expenses associated with impairment charges related to a financing arrangement with Koidu Limited (see
"Financing Arrangements with Diamond Mining and Exploration Companies").
e 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-31
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
$
932.2 $
Less: Capital expenditures
Free cash flow a
(239.3)
$
692.9 $
2016
705.7
(222.8)
482.9
a Net cash provided by operating activities and free cash flow in 2017 reflected more effective management and
timing of payables and reduced payments for income taxes, partly offset by increased inventory purchases.
Additionally, net cash provided by operating activities and free cash flow in 2017 and 2016 reflected a voluntary
cash contribution of $15.0 million and $120.0 million, respectively, 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.
F
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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:
% of
Total
Net
Sales
% of
Total
Net
Sales
2016
2017
% of
Total
Net
Sales
2017 vs
2016
% Change
in Net
Sales
2016 vs
2015
% Change
in Net
Sales
2015
$ 1,870.9
45% $ 1,841.9
46% $ 1,947.0
47%
2%
(5)%
(in millions)
Americas
Asia-Pacific
1,095.0
Japan
Europe
Other
596.3
482.9
124.7
26
14
12
3
999.1
604.4
457.6
98.8
25
15
11
3
1,003.1
541.3
505.7
107.8
24
13
12
4
10
(1)
6
26
—
12
(10)
(8)
$ 4,169.8
$ 4,001.8
$ 4,104.9
4%
(3)%
TIFFANY & CO.
K-32
Net Sales — 2017 compared with 2016. In 2017, worldwide net sales increased $168.0 million, or 4%, reflecting
an increase in net sales in most reportable segments. There was no impact from foreign currency translation on
worldwide net sales.
In 2017, jewelry sales represented 91% of worldwide net sales. Changes in jewelry sales by product category relative
to the prior year were as follows:
(in millions)
Jewelry collections
Engagement jewelry
Designer jewelry
$ Change
% Change
$
149.3
(56.6)
22.1
7%
(5)
4
The increase in net sales of Jewelry collections was driven primarily by the Tiffany HardWear and Tiffany T
collections, while the Engagement jewelry category reflected decreases across the category. The Designer jewelry
category reflected increases across the category.
The Jewelry collections category reflects the combination of the previously reported high, fine & solitaire jewelry and
fashion jewelry categories. Additionally, jewelry bearing the name of and attributed to Jean Schlumberger, which was
previously reported within the high, fine & solitaire jewelry category, has been reclassified into the Designer jewelry
category. Such changes or reclassifications have been made to conform with management's current internal analysis
of product sales.
Changes in net sales by reportable segment were as follows:
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F
(in millions)
Americas
Asia-Pacific
Japan
Europe
Comparable Store
Sales
Non-comparable
Store Sales
Wholesale/
E-Commerce/
Other
$
8.3 $
(0.8) $
21.5 $
(8.0)
(5.1)
(6.3)
38.8
(2.5)
22.1
65.1
(0.5)
9.5
Total
29.0
95.9
(8.1)
25.3
In 2017, jewelry sales represented 89%, 99%, 91% and 97% of total net 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
(4)%
(11)
—
2
—%
1
(3)
2
5%
21
(3)
4
Americas. In 2017, total net sales increased $29.0 million, or 2%, which included comparable store sales
increasing $8.3 million, or 1%. The total net sales increase was primarily due to increased e-commerce sales growth
in the U.S. and comparable store sales growth. Management attributed performance in this region to an increase in
spending by local customers. On a constant-exchange-rate basis, total net sales increased 1% and comparable store
sales were unchanged.
The increase in the number of jewelry units sold reflected increases in the Jewelry collections and Designer jewelry
categories. The decrease in average price per jewelry unit sold reflected decreases across all categories.
TIFFANY & CO.
K-33
Asia-Pacific. In 2017, total net sales increased $95.9 million, or 10%, which included comparable store sales
decreasing $8.0 million, or 1%. Total net sales growth was due to increased wholesale sales, primarily in Korea, and
the effect of new stores, while comparable store sales reflected growth in mainland China offset by declines in most
other countries. Management attributed the declines in other Asia-Pacific countries partly to lower spending by
Chinese tourists. On a constant-exchange-rate basis, total net sales increased 8% and comparable store sales
decreased 2%.
The increase in the number of jewelry units sold reflected increases in Jewelry collections and the Designer jewelry
categories. Management attributed the decrease in the average price per jewelry unit sold to a shift in sales mix to
the Jewelry collections and Designer jewelry categories that partly resulted from the increase in wholesale sales noted
above.
Japan. In 2017, total net sales decreased $8.1 million, or 1%, which included comparable store sales decreasing
$5.1 million, or 1%. The sales declines reflected the negative effect of currency translation. On a constant-
exchange-rate basis, total net sales increased 1% and comparable store sales increased 2%.
The decrease in the number of jewelry units sold primarily reflected decreases in the Jewelry collections and the
Designer jewelry categories, partly offset by increases in the Engagement jewelry category
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Europe. In 2017, total net sales increased $25.3 million, or 6%, which included comparable store sales decreasing
$6.3 million, or 2%, each benefiting from the positive effect of currency translation. Total net sales growth also
reflected the effect of new stores and e-commerce sales growth. Management attributed retail sales growth to higher
spending by local customers. On a constant-exchange-rate basis, total net sales increased 3% while comparable
store sales decreased 4%, due to similar trends noted above.
The increase in the number of jewelry units sold reflected increases across all categories. Management attributed the
increase in average price per unit sold to the positive effect of currency translation.
Other. In 2017, total net sales increased $25.9 million, or 26%, primarily due to an increase in wholesale sales of
diamonds.
Net Sales — 2016 compared with 2015. In 2016, worldwide net sales decreased $103.1 million, or 3%, reflecting
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, 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)
Jewelry collections
Engagement jewelry
Designer jewelry
$ Change
% Change
$
(85.3)
(20.2)
2.7
(4)%
(2)
1
The decrease in sales in the Jewelry collections category reflected declines across the category, while the
Engagement jewelry category decreased due to a shift in sales mix towards wedding bands.
The Jewelry collections category reflects the combination of the previously reported high, fine & solitaire jewelry and
fashion jewelry categories. Additionally, jewelry bearing the name of and attributed to Jean Schlumberger, which was
previously reported within the high, fine & solitaire jewelry category, has been reclassified into the Designer jewelry
category. Such changes or reclassifications have been made to conform with management's current internal analysis
of product sales.
TIFFANY & CO.
K-34
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/
E-commerce/
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 net 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)
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1
M
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F
(6)%
4
13
(9)
Americas. In 2016, total net 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 net sales and comparable store sales decreased 5%.
The decrease in the number of jewelry units sold reflected declines across all categories.
Asia-Pacific. In 2016, total net 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, total net sales growth included 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 net sales increased 1% and comparable store sales decreased 7%.
The increase in the number of jewelry units sold reflected increases in the Jewelry collections category and in
wedding bands within the Engagement jewelry category. Management attributed the decrease in the average price
per jewelry unit sold to a shift in mix within the Jewelry collections category and within the Engagement jewelry
category toward wedding bands.
Japan. In 2016, total net sales increased $63.1 million, or 12%, and comparable store sales increased $78.8
million, or 16%. On a constant-exchange-rate basis, total net 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 reflected increases across all categories. Management attributed the
decrease in the average price per jewelry unit sold to a shift in sales mix to the Designer jewelry category, as well as
a shift in sales mix within the Jewelry collections category.
Europe. In 2016, total net 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 net sales decreased 3% and comparable store sales
TIFFANY & CO.
K-35
decreased 9%, as 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. 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 category.
Other. In 2016, total net 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.
Store Data. In 2017, the Company increased gross retail square footage by 3%, net, through store openings, closings
and relocations. The Company opened nine stores and closed seven: opening five in Asia-Pacific (two in China, two
in Australia and one in Korea), three in Europe (one each in Italy, Russia and the U.K.) and one in the Americas (in
the U.S.) while closing three stores in Asia-Pacific (one each in China, Korea and Taiwan), two stores in the Americas
(in the U.S.) and one each in Japan and the Emerging Markets. In addition, the Company relocated seven existing
stores.
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 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.
Sales per gross square foot generated by all company-operated stores were approximately $2,700 in 2017, $2,700
in 2016 and $2,900 in 2015. The decline in 2016 reflected the effects of decreased sales and growth in retail
square footage.
Excluded from the store counts and sales per gross square foot amounts above are pop-up stores (stores with lease
terms of 24 months or less).
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Gross Margin
(in millions)
Gross profit
2017
2016
2015
$
2,604.7
$
2,490.3
$
2,491.3
Gross profit as a percentage of net sales
62.5%
62.2%
60.7%
Gross margin (gross profit as a percentage of net sales) increased 30 basis points in 2017 due to favorable product
input costs, partly offset by the dilutive effects from increases in sales for wholesale distribution (merchandise sold
to independent distributors for resale) and in wholesale sales of diamonds, as well as increases in certain product-
related costs, including inventory reserves and distribution and logistics.
Gross margin increased 150 basis 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.
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 2017 and 2016 across most geographic regions and product categories, some of
which were intended to mitigate foreign currency fluctuations.
TIFFANY & CO.
K-36
Selling, General and Administrative Expenses
(in millions)
As reported:
SG&A expenses
SG&A expenses as a percentage of net sales ("SG&A
expense ratio")
Excluding other operating expenses*:
SG&A expenses
SG&A expense ratio
2017
2016
2015
$
$
1,810.2
$
1,769.1
$
1,731.2
43.4%
44.2%
42.2%
1,810.2
$
1,731.1
$
1,684.5
43.4%
43.3%
41.0%
*See "Non-GAAP Measures" above for a description of such excluded operating expenses.
SG&A expenses increased $41.1 million, or 2%, in 2017 and $37.9 million, or 2%, in 2016. SG&A expenses in 2016
and 2015 included certain other operating expenses. See "Non-GAAP Measures" for further details.
SG&A expenses in 2017 increased $79.1 million, or 5%, compared to 2016 (excluding the 2016 items noted in
"Non-GAAP Measures"), largely reflecting increased labor and incentive compensation costs, store occupancy and
depreciation expenses and marketing costs. There was no significant effect on SG&A expense changes from foreign
currency translation.
SG&A expenses in 2016 increased $46.6 million, or 3%, compared to 2015 (excluding the 2016 and 2015 items
noted in "Non-GAAP Measures"), 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.
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The Company's SG&A expenses are largely fixed or controllable in nature (including, but not limited to, marketing
costs, employees' salaries and benefits, fixed store rent and depreciation expenses), with the total of such costs
representing approximately 80 - 85% of total SG&A expenses, and the remainder comprised of variable items
(including, but not limited to, variable store rent, sales commissions and fees paid to credit card companies).
(dollars in millions)
As reported:
Earnings from operations
Operating margin
Basis point change from prior year
Excluding other operating expenses*:
Earnings from operations
Operating margin
Basis point change from prior year
Earnings from Operations
2017
2016
2015
$
$
794.5
$
721.2
$
760.1
19.1%
110
18.0%
(50)
18.5%
(250)
794.5
$
759.2
$
806.8
19.1%
10
19.0%
(70)
19.7%
(130)
*See "Non-GAAP Measures" above for a description of such excluded operating expenses.
The increase in operating margin in 2017 reflected impairment charges recorded in 2016 (see "Non-GAAP
Measures"). When excluding such charges, the slight increase in 2017 resulted from a higher gross margin partly
offset by an increase in the SG&A expense ratio. The decline in operating margin in 2016 resulted from sales
deleveraging of SG&A expenses, which were only partly offset by higher gross margins.
TIFFANY & CO.
K-37
Results by segment are as follows:
(in millions)
Earnings from operations*:
2017
% of Net
Sales
2016
% of Net
Sales
2015
% of Net
Sales
Americas
Asia-Pacific
Japan
Europe
Other
Unallocated corporate
expenses
Earnings from operations
before other operating
expenses
$
390.3
286.1
207.3
86.3
6.3
976.3
20.9 % $
26.1
34.8
17.9
5.1
373.0
256.0
204.6
81.6
5.9
921.1
20.3 % $
25.6
33.9
17.8
6.0
20.1 %
26.4
36.9
19.3
6.0
390.8
264.4
199.9
97.4
6.4
958.9
(181.8)
(4.4)%
(161.9)
(4.0)%
(152.1)
(3.7)%
794.5
19.1 %
759.2
19.0 %
806.8
19.7 %
F
O
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1
0
-
K
Other operating expenses
—
(38.0)
(46.7)
Earnings from operations
$
794.5
19.1 % $
721.2
18.0 % $
760.1
18.5 %
* 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 2017 compared with
2016 was as follows:
• Americas – the ratio increased 60 basis points due to an improvement in gross margin, partly offset by
sales deleverage on operating expenses;
• Asia-Pacific – the ratio increased 50 basis points due to sales leverage on operating expenses, partly
offset by a decrease in gross margin, both attributable to increased wholesale sales in the region;
•
Japan – the ratio increased 90 basis points due to an increase in gross margin (which includes the
effect of changes in foreign currency exchange rates on inventory purchases), partly offset by sales
deleverage on operating expenses; and
• Europe – the ratio increased 10 basis points due to an increase in gross margin, largely offset by a
sales deleverage on operating expenses.
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 20 basis points 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;
• Asia-Pacific – the ratio decreased 80 basis points 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 300 basis 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 150 basis 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.
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 $19.9 million in 2017 due
TIFFANY & CO.
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to an increase in charitable donations to the Tiffany & Co. Foundation, a private foundation organized to support
501(c)(3) charitable organizations, increased costs associated with upgrades to the Company's information
technology systems and higher severance costs associated with changes in corporate management. Such expenses
increased $9.8 million in 2016, 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.
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 (see "Item 8. Financial Statements
and Supplementary Data - Note B. Summary of Significant Accounting Policies") 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 decreased $4.0 million, or 9%, in 2017 and $3.0 million, or 6%, in 2016.
Interest Expense and Financing Costs
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Other (Income) Expense, Net
Other (income) expense, net includes interest income as well as gains/losses on investment activities and foreign
currency transactions. Net other income of $8.0 million in 2017 compared with net other income of $1.4 million in
2016. The $6.6 million increase in 2017 was primarily due to gains on sales of marketable securities and an
increase in interest income. Net other income of $1.4 million in 2016 compared with net other expense of $1.2
million in 2015. The $2.6 million change was primarily due to reduced foreign currency transaction losses.
Provision for Income Taxes
On December 22, 2017, the 2017 Tax Act was enacted in the U.S. This enactment resulted in a number of
significant changes to U.S. federal income tax law for U.S. taxpayers. On the same date, the SEC issued Staff
Accounting Bulletin No. 118 ("SAB 118"), which addresses the application of U.S. GAAP in situations in which a
registrant does not have necessary information available, prepared, or analyzed (including computations) in
reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. Changes in tax law
are accounted for in the period of enactment. As such, the 2017 consolidated financial statements reflect the
estimated immediate tax effect of the 2017 Tax Act. See "Item 8. Financial Statements and Supplementary Data -
Note O. Income Taxes" for additional information on the provisions and impacts of the 2017 Tax Act and SAB 118.
The effective income tax rate was 51.3% in 2017 compared with 34.1% in 2016 and 34.7% in 2015. The effective
income tax rate in 2017 reflected the impact of a $146.2 million net charge, or $1.17 per diluted share, related to
the enactment of the 2017 Tax Act in December 2017. The net charge recorded includes:
• Estimated tax expense of $94.8 million, or $0.76 per diluted share, for the impact of the reduction in the
U.S. tax rate on the Company’s deferred tax assets and liabilities,
• Estimated tax expense of $56.0 million, or $0.45 per diluted share, for the one-time transition tax effected
via a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits ("Transition
Tax"), and
• A tax benefit of $4.6 million, or $0.04 per diluted share, resulting from the effect of the 21% statutory tax
rate for the month of January 2018 on the Company’s annual statutory tax rate for the year ended January
TIFFANY & CO.
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31, 2018. Because the Company’s fiscal year ended on January 31, 2018, the Company’s statutory tax rate
for fiscal 2017 is 33.8%, rather than 35.0%.
Excluding this net charge, the effective income tax rate was 32.1% (see "Non-GAAP Measures"). This differs from
the effective tax rate in 2016 of 34.1% primarily due to an increase in the domestic manufacturing deduction, the
implementation of ASU 2016-09, which now requires excess tax benefits and/or shortfalls related to exercises and
vesting of share-based compensation to be recorded in the provision for income taxes rather than in additional paid-
in capital and lower state taxes, partially offset by the impact of a change in uncertain tax positions primarily
attributable to the conclusion of a tax examination during the first quarter of 2016.
In connection with the implementation of ASU 2016-09, the Company recognized an income tax benefit of $6.8
million, or $0.05 per diluted share, in 2017. In connection with the conclusion of the tax examination during the
first quarter of 2016, the Company recognized an income tax benefit of $6.6 million, or $0.05 per diluted share.
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 priorities. 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.
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At January 31, 2018, the Company's cash and cash equivalents totaled $970.7 million, of which approximately
25% was held in locations outside the U.S. where, prior to the enactment of the 2017 Tax Act, the Company had
asserted to indefinitely reinvest any undistributed earnings to support its continued expansion and investments in
such foreign locations. As a result of the 2017 Tax Act, the Company is currently evaluating such assertion. This
evaluation is incomplete and will be completed during the measurement period allowed for under SAB 118. If the
Company's assertion to indefinitely reinvest earnings is maintained, such cash balances would not be available to
fund U.S. cash requirements unless the Company were to decide to repatriate such funds and incur applicable tax
charges. The applicable tax charges may include withholding taxes and tax on foreign currency gains and losses. The
Company believes it 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. See "Item 8. Financial Statements and Supplementary Data -
Note O. Income Taxes" for additional information. In addition, the Company had Short-term investments of $320.5
million at January 31, 2018 compared with $57.8 million at January 31, 2017.
The following table summarizes cash flows from operating, investing and financing activities:
(in millions)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rates on cash and cash equivalents
2017
2016
2015
$
932.2 $
705.7 $
(481.1)
(421.1)
12.7
(236.8)
(386.4)
1.9
817.4
(278.2)
(426.1)
0.5
113.6
Net increase in cash and cash equivalents
$
42.7 $
84.4 $
TIFFANY & CO.
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Operating Activities
The Company had net cash inflows from operating activities of $932.2 million in 2017, $705.7 million in 2016 and
$817.4 million in 2015. The increase in 2017 compared to 2016 reflected more effective management and timing
of payables and reduced payments for income taxes, partly offset by increased inventory purchases. Additionally, the
Company made a $15.0 million voluntary cash contribution to its U.S. pension plan in the third quarter of 2017.
The decrease in 2016 compared to 2015 was primarily due to a $120.0 million voluntary contribution made by the
Company to its U.S. pension plan in 2016.
Working Capital. Working capital (current assets less current liabilities) increased to $3.3 billion at January 31,
2018 from $2.9 billion at January 31, 2017. The increase in 2017 was due to an increase in Short-term
investments and a decrease in Short-term borrowings.
Accounts receivable, less allowances at January 31, 2018 were 2% higher than at January 31, 2017. Currency
translation had the effect of increasing accounts receivable, less allowances by 4% from January 31, 2017.
Inventories, net at January 31, 2018 were 4% higher than at January 31, 2017, which reflected similar increases in
both finished goods inventories and combined raw material and work-in-process inventories. Currency translation had
the effect of increasing inventories, net by 3% from January 31, 2017.
Accounts payable and accrued liabilities at January 31, 2018 were 40% higher than at January 31, 2017, which
reflected more effective management of payables, as well as the timing of payments.
Investing Activities
The Company had net cash outflows from investing activities of $481.1 million in 2017, $236.8 million in 2016
and $278.2 million in 2015. The increase in net cash outflows in 2017 compared to 2016 was driven by increased
net purchases of marketable securities and short-term investments. The decrease in net cash outflows in 2016
compared to 2015 was driven by decreased capital expenditures as well as reduced net 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 $246.6 million of net purchases of marketable securities
and short-term investments during 2017, compared with $15.7 million during 2016 and $26.4 million during
2015.
Capital Expenditures. Capital expenditures are typically related to the opening, renovation and/or relocation of stores
(which represented approximately 60%, 60% and 50% of capital expenditures in 2017, 2016 and 2015,
respectively), as well as distribution and manufacturing facilities and ongoing investments in information technology.
Capital expenditures were $239.3 million in 2017, $222.8 million in 2016 and $252.7 million in 2015,
representing 6% of worldwide net sales in each year.
Financing Activities
The Company had net cash outflows from financing activities of $421.1 million in 2017, $386.4 million in 2016 and
$426.1 million in 2015.
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Recent Borrowings. The Company had net (repayments of) proceeds from short-term and long-term borrowings as
follows:
(in millions)
Short-term borrowings:
(Repayments of) proceeds from credit facility
borrowings, net
Proceeds from other credit facility borrowings
Repayments of other credit facility borrowings
Net (repayments of) proceeds from short-term borrowings
Long-term borrowings:
Proceeds from the issuance of long-term debt
Repayment of long-term debt
Net proceeds from long-term borrowings
2017
2016
2015
$
(67.8) $
14.2 $
39.2
(96.1)
(124.7)
—
—
—
76.8
(83.1)
7.9
98.1
(97.1)
1.0
(11.3)
24.8
(16.0)
(2.5)
—
—
—
Net (repayments of) proceeds from total borrowings
$
(124.7) $
8.9 $
(2.5)
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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.
Commercial Paper. In August 2017, the Registrant and one of its wholly owned subsidiaries established a
commercial paper program (the "Commercial Paper Program") for the issuance of commercial paper in the form of
short-term promissory notes in an aggregate principal amount not to exceed $750.0 million. Borrowings under the
Commercial Paper Program are used for general corporate purposes. The aggregate amount of borrowings that the
Company is currently authorized to have outstanding under the Commercial Paper Program and the Credit Facilities
is $750.0 million. The Registrant guarantees the obligations of its wholly owned subsidiary under the Commercial
Paper Program. Maturities of commercial paper notes may vary, but cannot exceed 397 days from the date of
issuance. Notes issued under the Commercial Paper Program rank equally with the Registrant's present and future
unsecured and unsubordinated indebtedness.
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 ($156.5 million at January 31, 2018) and matures in July 2019.
Under all of the Company's credit facilities and the Commercial Paper Program, at January 31, 2018, there were
$120.6 million of borrowings outstanding, $6.8 million of letters of credit issued but not outstanding and $918.1
million available for borrowing. 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. The weighted-
average interest rate for borrowings outstanding was 4.35% at January 31, 2018 and 2.71% at January 31, 2017.
Senior Notes. In August 2016, the Registrant issued ¥10.0 billion ($91.9 million at January 31, 2018) 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.
The ratio of total debt (short-term borrowings and long-term debt) to stockholders' equity was 31% at January 31,
2018 and 37% at 2017.
At January 31, 2018, the Company was in compliance with all debt covenants.
TIFFANY & CO.
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For additional information regarding all of the Company's credit facilities, senior note issuances and other
outstanding indebtedness, see "Item 8. Financial Statements and Supplementary Data - Note G. Debt."
Share Repurchases. In March 2014, the Company's Board of Directors approved a share repurchase program (the
"2014 Program"), which authorized the Company to repurchase up to $300.0 million of its Common Stock through
open market transactions. The 2014 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.
In January 2016, the Company's Board of Directors approved a new share repurchase program (the "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.
At January 31, 2018, $211.2 million remained available for repurchase under the 2016 Program.
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
$
$
2017
99.2 $
1.0
2016
183.6 $
2.8
94.86 $
65.24 $
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2015
220.4
2.8
78.40
Proceeds from exercised stock options. The Company's proceeds from exercised stock options were $54.6 million,
$15.3 million and $2.0 million in 2017, 2016 and 2015, respectively.
Dividends. The cash dividend on the Company's Common Stock was increased once in each of 2017, 2016 and
2015. The Company's Board of Directors declared quarterly dividends which totaled $1.95, $1.75 and $1.58 per
common share in 2017, 2016 and 2015, respectively, with cash dividends paid of $242.6 million, $218.8 million
and $203.4 million in those respective years. The dividend payout ratio (dividends as a percentage of net earnings)
was 66%, 49% and 44% in 2017, 2016 and 2015, respectively. Dividends as a percentage of adjusted net
earnings (see "Non-GAAP Measures") were 47%, 47% and 41% in 2017, 2016 and 2015, respectively.
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 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, 2017, there was $43.8 million of principal
outstanding under a financing arrangement (the "Loan") with Koidu Limited (previously Koidu Holdings S.A.)
("Koidu"). However, the Company recorded impairment charges totaling $4.2 million and $37.9 million during the
fiscal years ended January 31, 2017 and 2016, respectively, related to the Loan and ceased accruing interest
income on the loan as of July 2015, resulting in a net carrying amount of the Loan of $1.7 million at January 31,
2017. In 2017, the Company sold its interest in the Loan to Koidu's largest creditor for $1.7 million. Additionally,
the Company and Koidu entered into an agreement to terminate the supply agreement between the parties, pursuant
to which Laurelton Diamonds, Inc., a wholly owned subsidiary of the Company, had previously been required to
purchase at fair market value certain diamonds recovered from the mine operated by Koidu that met Laurelton's
quality standards.
The Company also recorded an impairment charge 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.
TIFFANY & CO.
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Impairment charges recorded on such arrangements were not significant during the fiscal year ended January 31,
2018.
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. In 2016, the Company completed an assessment of the
replacement system that was 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 fourth
quarter of 2016, 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
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
related 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 fourth quarter of 2016. 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, 2018:
(in millions)
Total
2018
2019-2020
2021-2022
Thereafter
Unrecorded contractual obligations:
Operating leases a
$
1,685.7 $
313.6 $
458.9 $
349.4 $
563.8
Inventory purchase obligations b
Interest on debt c
Other contractual obligations d
Recorded contractual obligations:
Short-term borrowings
Long-term debt e
2017 Tax Act - Transition Tax
liability f
268.4
629.2
86.6
120.6
891.9
56.5
268.4
35.9
58.1
120.6
—
5.9
—
71.8
17.8
—
—
8.8
—
70.7
4.1
—
50.0
8.8
—
450.8
6.6
—
841.9
33.0
$
3,738.9 $
802.5 $
557.3 $
483.0 $
1,896.1
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, 2018
totaled $32.7 million. See "Item 8. Financial Statements and Supplementary Data - Note J. Commitments 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 $45.0 million for 2018 and are included in this table. Purchases beyond 2018 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.
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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.
f) Under the 2017 Tax Act, the Company recorded estimated income tax expense of $56.0 million in respect of the
Transition Tax and a related income tax liability, which is payable over eight years, and of which $5.9 million is
current and $50.6 million is non-current, as of January 31, 2018. See "Item 8. Financial Statements and
Supplementary Data - Note O. Income Taxes" for additional information.
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 its U.S. pension 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
2017, and none is required in 2018, 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 voluntary cash contributions of $15.0
million in 2017 and $120.0 million in 2016, but currently does not expect to make such contributions in
2018. 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 will
not be significant in 2018.
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• Unrecognized tax benefits at January 31, 2018 of $10.1 million and accrued interest and penalties of
$10.3 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.
The following is a summary of the Company's outstanding borrowings and available capacity under its credit facilities
at January 31, 2018:
(in millions)
Four-year revolving credit facility a, c
Five-year revolving credit facility b, c
Other credit facilities d
a) Matures in October 2019.
b) Matures in October 2020.
Total
Capacity
Borrowings
Outstanding
Letters of
Credit Issued
Available
Capacity
$
$
375.0 $
8.7 $
— $
375.0
295.5
24.8
87.1
6.8
—
1,045.5 $
120.6 $
6.8 $
366.3
343.4
208.4
918.1
c) In August 2017, the Registrant and one of its wholly owned subsidiaries established a commercial paper
program (the "Commercial Paper Program") for the issuance of commercial paper in the form of short-term
promissory notes in an aggregate principal amount not to exceed $750.0 million. The aggregate amount of
borrowings that the Company is currently authorized to have outstanding under the Commercial Paper Program
and the Credit Facilities is $750.0 million. As of January 31, 2018, there were no borrowings outstanding under
the Commercial Paper Program.
d) Maturities through 2019.
In addition, the Company has other available letters of credit and financial guarantees of $81.2 million, of which
$22.6 million was outstanding at January 31, 2018. Of those available letters of credit and financial guarantees,
$60.1 million expires within one year.
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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.
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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 net realizable value, and is based on assumptions about
future demand and market conditions. Net realizable value is the estimated selling prices in the ordinary course of
business, less reasonably predictable costs of completion, disposal and transportation. 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, 2018, a 10% change in the reserve for discontinued and slow-
moving products would have resulted in a change of $7.5 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
2017, the Company recorded aggregate impairment charges of $10.0 million related to property, plant and
equipment. In 2016, the Company recorded an 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 Policies and Note E. Property, Plant and Equipment" for additional information). The Company did not
record any significant impairment charges in 2015.
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 2017, 2016 and 2015 evaluations resulted in no impairment charges.
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
TIFFANY & CO.
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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, 2018, total unrecognized tax benefits were $10.1 million
of which approximately $1.1 million, if recognized, would affect the effective income tax rate. As of January 31,
2018, 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.
Following the enactment of the 2017 Tax Act on December 22, 2017, the SEC issued SAB 118 to address the
application of U.S. GAAP in situations when a registrant does not have the necessary information available,
prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income
tax effects of the 2017 Tax Act. Specifically, SAB 118 provides a measurement period for companies to evaluate the
impacts of the 2017 Tax Act on their financial statements. This measurement period begins in the reporting period
that includes the enactment date and ends when an entity has obtained, prepared and analyzed the information that
was needed in order to complete the accounting requirements, and cannot exceed one year. The Company has
adopted the provisions of SAB 118 with respect to the impact of the 2017 Tax Act on its consolidated financial
statements.
Consistent with SAB 118, the Company calculated and recorded reasonable estimates for the impact of the
Transition Tax and the remeasurement of its deferred tax assets and deferred tax liabilities, as set forth above. The
Company also adopted the provisions of SAB 118 as it relates to the assertion of the indefinite reinvestment of
foreign earnings and profits. The charges associated with the Transition Tax and the remeasurement of the
Company's deferred tax assets and deferred tax liabilities, as a result of applying the 2017 Tax Act, represent
provisional amounts for which the Company’s analysis is incomplete but a reasonable estimate could be determined
and recorded during the fourth quarter of 2017. Further, the impact of the 2017 Tax Act on the Company's assertion
to indefinitely reinvest foreign earnings is incomplete as the Company is analyzing the relevant provisions of the
2017 Tax Act and related accounting guidance. Therefore, a provisional estimate has not been recorded or disclosed
as it relates to the potential tax consequences of an actual repatriation of unremitted foreign earnings.
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As the Company refines its provisional estimate calculations, further analyzes provisions of the 2017 Tax Act and any
subsequent guidance related thereto, these provisional estimates could be affected, which could have a material
impact on the Company's future financial results, including its fiscal 2018 results (see "Item 7. Management's
Discussion and Analysis - 2018 Outlook"). Additionally, further regulatory or GAAP accounting guidance regarding
the 2017 Tax Act could also materially affect the Company's future financial results.
For additional information, see "Item 8. Financial Statements and Supplementary Data - Note O. Income Taxes".
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 a discount rate of 4.25% to determine 2017 expense for its U.S. Qualified Plan, its
postretirement plans and its Excess Plan/SRIP. Holding all other assumptions constant, a 0.5% increase in the
discount rates would have decreased 2017 pension and postretirement expenses by $5.8 million and $0.5 million. A
decrease of 0.5% in the discount rates would have increased the 2017 pension and postretirement expenses by
$6.5 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 2017
pension expense. Holding all other assumptions constant, a 0.5% change in the long-term rate of return would have
changed the 2017 pension expense by approximately $2.4 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 2018. 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,
2018 or aggregate service and interest cost components of the 2017 postretirement expense.
2018 Outlook
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For the fiscal year ending January 31, 2019 ("fiscal 2018"), management's guidance includes: (i) worldwide net
sales increasing by a mid-single-digit percentage over the prior year both as reported and on a constant-exchange-
rate basis; (ii) earnings before income taxes equal to or slightly below the prior year; (iii) net earnings increasing to a
range of $4.25 – $4.45 per diluted share and (iv) net earnings and EPS increasing in the first quarter with
subsequent quarters' earnings over the balance of the year affected by the amount and timing of anticipated higher
investment spending. These expectations are approximations and are based on the Company's plans and
assumptions for the full year, including: (i) low-to-mid-single-digit comparable sales growth (which, beginning in
2018, will include Company-operated stores, e-commerce and catalog sales for the periods that are presented), with
varying degrees of growth in all regions; (ii) worldwide gross retail square footage increasing 2%, net through nine
store openings, two closings and at least 15 relocations; (iii) operating margin below the prior year as a result of
SG&A expense growth (affected by higher investment spending in technology, marketing communications, visual
merchandising, digital and store presentations) at a higher rate than sales growth, partly offset by a higher gross
margin; (iv) interest and other expenses, net in line with the prior year; (v) an effective income tax rate in the high
20's; (vi) no meaningful effect in fiscal 2018 from the U.S. dollar versus foreign currencies on a year-over-year basis;
and (vii) minimal benefit to net earnings per diluted share from share repurchases.
Management also expects: (i) net cash provided by operating activities of $660 million and (ii) free cash flow (see
"Non-GAAP Measures") of $380 million. These expectations are approximations and are based on the Company’s
plans and assumptions for the full year, including: (i) net inventories increasing approximately in line with sales
growth, (ii) capital expenditures of $280 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, 2018 is 12 months. At January 31,
2018 and 2017, the aggregate fair value of the Company's outstanding foreign exchange forwards was a net liability
of $5.1 million and a net asset of $7.1 million, respectively.
The Company entered into cross-currency swaps to hedge the foreign currency 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, 2018, the notional amounts of cross-currency swaps accounted for as cash flow
hedges and the respective maturity dates were as follows:
Cross-Currency Swap
Effective Date
July 2016
March 2017
May 2017
Maturity Date
October 1, 2024
April 1, 2027
April 1, 2027
Notional Amount
(in billions)
(in millions)
¥
10.6 $
100.0
11.0
5.6
96.1
50.0
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At January 31, 2018, the aggregate fair value of the Company's outstanding cross-currency swaps was a net liability
of $20.2 million.
At January 31, 2018, for all of the contracts and swaps noted above, a 10% decrease in the hedged foreign currency
exchange rates from the prevailing market rates would have resulted in a liability with a fair value of approximately
$90.0 million.
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. 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 and collars as of January 31, 2018 is 17 months. At
January 31, 2018 and 2017, the aggregate fair value of the Company's outstanding precious metal derivative
instruments was a net asset of $1.7 million and a net liability of $1.7 million, respectively. At January 31, 2018, a
10% decrease in precious metal prices from the prevailing market rates would have resulted in a liability with a fair
value of approximately $9.0 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.:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Tiffany & Co. and its subsidiaries as of January
31, 2018 and 2017, and the related consolidated statements of earnings, of comprehensive earnings, of
stockholders’ equity, and of cash flows for each of the three years in the period ended January 31, 2018, including
the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively
referred to as the “consolidated financial statements”). We also have audited the Company's internal control over
financial reporting as of January 31, 2018 based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of January 31, 2018 and 2017, and the results of their operations and their
cash flows for each of the three years in the period ended January 31, 2018 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of January 31, 2018, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the COSO.
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Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our
responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's
internal control over financial reporting based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. 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.
Definition and Limitations of Internal Control over Financial Reporting
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
TIFFANY & CO.
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transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 16, 2018
We have served as the Company’s auditor since 1984.
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TIFFANY & CO.
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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 $17.2 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
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 124.5
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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2018
January 31,
2017
$
970.7 $
320.5
231.2
2,253.5
207.4
3,983.3
990.5
188.2
306.1
928.0
57.8
226.8
2,157.6
203.4
3,573.6
931.8
301.8
290.4
5,468.1 $
5,097.6
$
$
120.6 $
437.4
89.4
77.4
724.8
882.9
287.4
40.5
284.3
—
1.2
1,256.0
2,114.2
(138.0)
3,233.4
14.8
3,248.2
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
5,097.6
$
5,468.1 $
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
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.
Years Ended January 31,
2018
2017
$
4,169.8 $
4,001.8 $
1,565.1
2,604.7
1,810.2
794.5
42.0
(8.0)
760.5
390.4
1,511.5
2,490.3
1,769.1
721.2
46.0
(1.4)
676.6
230.5
$
$
$
370.1 $
446.1 $
2.97 $
2.96 $
3.57 $
3.55 $
124.5
125.1
125.1
125.5
2016
4,104.9
1,613.6
2,491.3
1,731.2
760.1
49.0
1.2
709.9
246.0
463.9
3.61
3.59
128.6
129.1
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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 (loss) gain on marketable securities
Unrealized (loss) gain on hedging instruments
Unrealized gain on benefit plans
Total other comprehensive earnings, net of tax
Years Ended January 31,
2018
2017
$
370.1 $
446.1 $
95.7
(2.6)
(6.8)
31.9
118.2
(8.4)
1.8
10.7
17.8
21.9
2016
463.9
(59.0)
(2.9)
(21.4)
95.7
12.4
Comprehensive earnings
$
488.3 $
468.0 $
476.3
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, 2015
$
2,850.7 $
1,950.7 $
(290.5)
129.3 $
1.3
$
1,173.6 $
15.6
Exercise of stock options and
vesting of restricted stock units
("RSUs")
Tax effect of exercise of stock
options and vesting of RSUs
Share-based compensation expense
Purchase and retirement of
Common Stock
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
Exercise of stock options and
vesting of RSUs
Shares withheld related to net share
settlement of share-based
compensation
Share-based compensation expense
Purchase and retirement of
Common Stock
Cash dividends on Common Stock
Accrued dividends on share-based
awards
Other comprehensive earnings, net
of tax
Net earnings
Non-controlling interests
54.6
(8.6)
28.2
—
—
—
(99.2)
(242.6)
(90.8)
(242.6)
(0.8)
(0.8)
118.2
370.1
(0.1)
—
370.1
—
—
—
—
—
—
—
118.2
—
—
1.1
(0.1)
—
(1.0)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
54.6
(8.6)
28.2
(8.4)
—
—
—
—
—
Balance at January 31, 2018
$
3,248.2 $
2,114.2 $
(138.0)
124.5 $
1.2
$
1,256.0 $
—
—
—
—
—
—
—
1.2
1.3
18.1
—
—
—
—
—
—
—
(3.2)
14.9
—
—
—
—
—
—
—
—
(0.1)
14.8
See notes to consolidated financial statements.
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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:
2018
Years Ended January 31,
2017
2016
$
370.1
$
446.1
$
463.9
Depreciation and amortization
Amortization of gain on sale-leasebacks
Provision for inventories
Deferred income taxes
Provision for pension/postretirement benefits
Share-based compensation expense
Loan impairment charges
Asset impairment charges
Gains on sales of marketable securities
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
Other, net
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayment of) proceeds from 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
Repurchase of Common Stock
Proceeds from exercised stock options
Payments related to tax withholding for 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.
206.9
(8.2)
28.9
96.8
35.0
28.0
3.0
10.0
(3.5)
7.0
(52.9)
(28.8)
(3.7)
98.8
149.7
6.2
(11.1)
932.2
(598.0)
351.4
(239.3)
4.8
(481.1)
(67.8)
39.2
(96.1)
—
—
(99.2)
54.6
(8.7)
(242.6)
(0.5)
—
(421.1)
12.7
42.7
928.0
970.7
$
208.5
(8.5)
19.2
46.1
45.4
24.3
12.6
25.4
—
(19.2)
54.8
33.6
0.8
(21.7)
(39.3)
1.5
(123.9)
705.7
(125.5)
109.8
(222.8)
1.7
(236.8)
14.2
76.8
(83.1)
98.1
(97.1)
(183.6)
15.3
(2.9)
(218.8)
(3.8)
(1.5)
(386.4)
1.9
84.4
843.6
928.0
$
202.5
(8.3)
25.4
(1.9)
65.8
24.5
37.9
—
—
(16.7)
63.7
1.1
(17.5)
(13.7)
3.1
3.0
(15.4)
817.4
(100.0)
73.6
(252.7)
0.9
(278.2)
(11.3)
24.8
(16.0)
—
—
(220.4)
2.0
(1.6)
(203.4)
—
(0.2)
(426.1)
0.5
113.6
730.0
843.6
$
TIFFANY & CO.
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A.
NATURE OF BUSINESS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tiffany & Co. (the "Registrant") is a holding company that operates through Tiffany and Company ("Tiffany") and the
Registrant's other subsidiary companies (collectively, the "Company"). The Registrant, through its subsidiaries,
designs and manufactures products and operates TIFFANY & CO. retail stores worldwide, and also sells its products
through Internet, catalog, business-to-business and wholesale distribution. The Company's principal merchandise
offering is jewelry (representing 91% of worldwide net sales in 2017); it also sells timepieces, leather goods, sterling
silver goods (other than jewelry), china, crystal, stationery, eyewear, fragrances and other 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 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. In connection with
the adoption of ASU No. 2016-09 – Compensation - Stock Compensation: Improvements to Employee Share-Based
Payment Accounting, certain items have been reclassified on the consolidated statement of cash flows for the years
ended January 31, 2017 and 2016. See "Recently Adopted Accounting Standards" below for additional information.
TIFFANY & CO.
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Use of Estimates
These financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP"); these principles require management to make certain estimates and
assumptions that affect amounts reported and disclosed in the consolidated financial statements and related notes
to the consolidated financial statements. Actual results could differ from these estimates and the differences could
be material. Periodically, the Company reviews all significant estimates and assumptions affecting the consolidated
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, 2018 and
2017, 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
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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 outstanding accounts receivable. 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 must be received by the Company. For all Credit
Receivables, 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, 2018 and
2017, the carrying amount of the Credit Receivables (recorded in Accounts receivable, net) was $67.1 million and
$71.9 million, of which 95% and 97% were considered current, respectively. The allowance for doubtful accounts
for estimated losses associated with the Credit Receivables ($1.3 million at January 31, 2018 and $1.1 million at
January 31, 2017) was determined based on the factors discussed above. Finance charges earned on Credit
Receivables accounts were not significant.
Financing Arrangements. The Company 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 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"). However, the Company recorded impairment charges totaling $4.2
million and $37.9 million during the fiscal years ended January 31, 2017 and 2016, respectively, related to the
Loan and ceased accruing interest income on the loan as of July 2015, resulting in a net carrying amount of $1.7
TIFFANY & CO.
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million as of January 31, 2017. In 2017, the Company sold its interest in the Loan to Koidu's largest creditor
for $1.7 million. Additionally, the Company and Koidu entered into an agreement to terminate the supply agreement
between the parties, pursuant to which Laurelton Diamonds, Inc., a wholly owned subsidiary of the Company, had
previously been required to purchase at fair market value certain diamonds recovered from the mine operated by
Koidu that met Laurelton's quality standards.
The Company also recorded an impairment charge 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, the current portion of the carrying amount of financing arrangements including accrued
interest was $4.6 million and was recorded in Prepaid expenses and other current assets. At January 31, 2017, the
non-current portion of the carrying amount of all such financing arrangements including accrued interest was $4.4
million and was included in Other assets, net. At January 31, 2018, the carrying amount of financing arrangements
was not significant. Impairment charges recorded on such arrangements were not significant during 2017.
Inventories
Inventories are valued at the lower of cost or net realizable value 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
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Buildings
Machinery and equipment
Office equipment
Software
Furniture and fixtures
39 years
5-15 years
3-8 years
5-10 years
3-10 years
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 2017, 2016 or 2015.
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.
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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.
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
Trademarks
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January 31, 2017
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
$
$
48.9 $
(13.5) $
48.9 $
36.8
2.5
(5.5)
(2.5)
31.9
2.5
88.2 $
(21.5) $
83.3 $
(11.0)
(4.1)
(2.5)
(17.6)
Amortization of intangible assets and key money for the years ended January 31, 2018, 2017 and 2016 was $3.4
million, $3.4 million and $3.7 million, respectively. Amortization expense is estimated to be approximately $3.6
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, 2018 and 2017, goodwill, included in Other assets, net, consisted of the
following by reportable segment:
(in millions)
Americas
Asia-Pacific
Japan
Europe
Other
Total
January 31, 2016
$
12.2 $
0.3 $
1.1 $
1.0 $
23.9 $
Translation
January 31, 2017
Translation
(0.1)
12.1
0.1
—
0.3
—
(0.1)
1.0
—
0.1
1.1
—
—
23.9
0.6
January 31, 2018
$
12.2 $
0.3 $
1.0 $
1.1 $
24.5 $
38.5
(0.1)
38.4
0.7
39.1
The Company recorded no impairment charges related to goodwill in 2017, 2016 or 2015.
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 its 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
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asset and the loss is recognized during that period. In 2017, the Company recorded aggregate impairment charges of
$10.0 million related to property, plant and equipment. In 2016, the Company recorded an 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.
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. Gross unrealized gains
and gross unrealized losses recorded within Accumulated other comprehensive loss, net of tax as of January 31,
2018 and 2017 were not significant.
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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 during 2017, 2016 or 2015.
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.
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Additionally, outside of the U.S., the Company operates certain TIFFANY & CO. stores within various department
stores. Sales transacted at these store locations are recognized at the "point of sale." The Company and these
department store operators have distinct responsibilities and risks in the operation of such TIFFANY & CO. stores.
The Company (i) owns and manages the merchandise; (ii) establishes retail prices; (iii) has merchandising,
marketing and display responsibilities; and (iv) in almost all locations provides retail staff and bears the risk of
inventory loss. The department store operators (i) provide and maintain store facilities; (ii) in almost all locations
assume retail credit and certain other risks; and (iii) act for the Company in the sale of merchandise. In return for
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
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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 2017, 2016 and 2015,
these costs totaled $314.9 million, $299.0 million and $302.0 million, respectively, representing 7.6%, 7.5% and
7.4% of worldwide net sales, respectively. Media and production costs for print and digital advertising are expensed
as incurred, while catalog costs are expensed upon first distribution.
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 units, are measured at fair value and recognized as compensation expense over the requisite service period.
Compensation expense recognized reflects an estimate of the number of awards expected to vest and incorporates an
estimate of award forfeitures based on actual experience. Compensation expense is recognized on a straight-line
basis over the requisite service period, which is generally the vesting period required to obtain full vesting.
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 Accumulated other comprehensive loss, net of tax within
stockholders' equity. The Company also recognizes gains and losses associated with transactions that are
denominated in foreign currencies. The Company recorded net losses resulting from foreign currency transactions of
$5.3 million, $4.8 million and $9.8 million within Other (income) expense, net in 2017, 2016 and 2015,
respectively.
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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.
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 results. 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 amounts, 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 Registrant, its U.S. subsidiaries and the foreign branches of its U.S. subsidiaries file a consolidated Federal
income tax return.
The Company accounts for the impact of changes in tax legislation in the period in which the legislation is enacted.
The 2017 U.S. Tax Cuts and Jobs Act (the "2017 Tax Act") was enacted on December 22, 2017 in the U.S. On that
date, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 118 ("SAB 118"),
which addresses the application of U.S. GAAP in situations in which a registrant does not have necessary information
available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain
income tax effects of the 2017 Tax Act. The Company has accounted for the 2017 Tax Act in accordance with the
provisions of SAB 118. See "Note O. Income Taxes" for additional information on the provisions and impacts of the
2017 Tax Act and SAB 118.
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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
2018
2017
$
370.1 $
446.1 $
124.5
125.1
Incremental shares based upon the assumed exercise of stock
options and unvested restricted stock units
Weighted-average shares for diluted EPS
0.6
125.1
0.4
125.5
2016
463.9
128.6
0.5
129.1
Years Ended January 31,
For the years ended January 31, 2018, 2017 and 2016, there were 0.6 million, 1.3 million and 0.8 million stock
options and restricted stock units excluded from the computations of earnings per diluted share due to their
antidilutive effect, respectively.
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
New Accounting Standards
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common revenue recognition guidance between U.S. 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 ASC 605 – Revenue Recognition. 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 was 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 continues to
evaluate. The effective date and transition requirements for these amendments are the same as ASU 2014-09, as
amended by ASU 2015-14. Management expects the impact of the adoption of ASU 2014-09 on the Company's
consolidated financial statements will be as follows:
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• The Company's revenue is primarily generated from the sale of finished products to customers
(primarily through the retail, e-commerce or wholesale channels). The Company's performance
obligations underlying such sales, and the timing of revenue recognition related thereto, will
remain substantially unchanged following the adoption of this ASU.
• The Company will now recognize gift card breakage income based on the historical pattern of
gift card redemptions.
• The adoption of this ASU will result in a reclassification within the consolidated balance sheet of
the portion of the Company's sales return reserve attributable to cost of sales from Accounts
receivable, net to Other current assets beginning with the quarter ending April 30, 2018.
• Management will adopt the guidance in this ASU beginning on February 1, 2018 using the
modified retrospective transition approach, with the related adjustment to retained earnings
reflecting the cumulative impact of applying this guidance as of the adoption date. Under this
modified retrospective approach, the prior period financial statements presented are not restated.
Management does not believe the adoption of this ASU will have a significant impact to the
consolidated financial statements and related disclosures.
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
currently must be adopted using a modified retrospective approach. Management continues to evaluate 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's implementation project team has completed the assessment
phase of the project, during which the project team compiled information to evaluate the Company's real estate,
personal property and other arrangements that may meet the definition of a lease under this ASU and identified
areas that may require the development of additional processes and policies. The Company's implementation project
team is in the solution development phase of the project, which includes the development and implementation of
any such additional processes and policies, collection of key data for each leased asset to be utilized throughout this
phase of the project and selection of the practical expedients permitted under the ASU.
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 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 continues to evaluate the impact of this ASU on the
consolidated financial statements.
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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 was
permitted and the amendments should be applied using a retrospective method. Management will adopt this ASU
beginning on February 1, 2018 using the retrospective method. Management does not believe the adoption of this
ASU will have a significant impact to the consolidated statements of cash flows and related disclosures.
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
the transfer occurs. This ASU is effective for interim and annual reporting periods beginning after December 15,
2017. Early adoption was permitted as of the first interim period of 2017 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 will adopt this ASU beginning on February 1, 2018 using the
modified retrospective method. Management does not believe the adoption of this ASU will have a significant impact
on the consolidated financial statements.
In March 2017, the FASB issued ASU 2017-07 - Compensation - Retirement Benefits: Improving the Presentation
of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Under this ASU, only the service cost
component of the net periodic benefit cost will be presented in the same income statement line item as other
employee compensation costs arising from services rendered during the period, while the non-service cost
components of net periodic benefit cost are required to be presented in the income statement separate from
Earnings from operations. In addition, only the service cost component will be eligible for capitalization in assets.
This ASU is effective for interim and annual reporting periods beginning after December 15, 2017. The
amendments in this ASU will be applied retrospectively for the presentation of the components of net periodic
benefit cost other than service cost in the statement of earnings, and prospectively for the capitalization of the
service cost component. Management will adopt this ASU beginning on February 1, 2018. This ASU will be
applied retrospectively using the practical expedient permitted by this ASU and will require the reclassification of
the non-service cost components of the net periodic benefit cost from within Earnings from operations to Interest
and other expenses, net. This will increase Earnings from operations for the years ended January 31, 2018 and
2017 by $14.9 million (with $6.0 million reclassified from Cost of sales and $8.9 million reclassified from SG&A
expenses) and $25.2 million (with $8.7 million reclassified from Cost of sales and $16.5 million reclassified from
SG&A expenses), respectively, but will have no impact on Net earnings for those periods. The requirement set forth
under this ASU that allows only the service cost component of net periodic benefit cost to be capitalized is not
expected to have a significant impact on the Company’s results of operations.
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In May 2017, the FASB issued ASU 2017-09 - Compensation-Stock Compensation: Scope of Modification
Accounting, clarifying when a change to the terms or conditions of a share-based payment award must be
accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting
condition or the classification of the award is not the same immediately before and after a change to the terms and
conditions of the award. This ASU is effective prospectively for annual periods beginning after December 15, 2017
and early adoption was permitted. Accordingly, management will adopt this ASU beginning on February 1, 2018
and will apply this ASU prospectively to any share-based payment awards modified on or after February 1, 2018.
In August 2017, the FASB issued ASU 2017-12 - Derivatives and Hedging: Targeted Improvements to Accounting
for Hedging Activities, which expands and refines hedge accounting for both financial and non-financial risk
components, aligns the recognition and presentation of the effects of hedging instruments and hedged items in the
financial statements, and includes certain targeted improvements to ease the application of current guidance
related to the assessment of hedge effectiveness. This ASU is effective for fiscal years beginning after December
15, 2018, and interim periods within those fiscal years, with early adoption permitted. The amendments in this
ASU should be applied on a modified retrospective basis, while presentation and disclosure requirements set forth
under this ASU are required prospectively in all interim periods and fiscal years ending after the date of adoption.
Management is currently evaluating the impact of this ASU on the consolidated financial statements. The
simplifications to the application of hedge accounting may result in management's expanding the use of hedge
accounting in future periods.
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Recently Adopted Accounting Standards
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 in the statement of cash flows. The Company adopted this ASU beginning on
February 1, 2017 as follows:
• As required upon the adoption of this new guidance, on a prospective basis, the Company recognized
excess tax benefits of $6.8 million (resulting from an increase in the fair value of an award from
grant date to the vesting or exercise date) in the provision for income taxes as a discrete item during
the year ended January 31, 2018. This amount may not be indicative of future amounts that may
be recognized, as any excess tax benefits and/or shortfalls recognized in future periods will be
dependent on future stock price, employee exercise behavior and applicable tax rates. Prior to
February 1, 2017, excess tax benefits were recognized in stockholders' equity.
• The ASU also clarified that cash payments made to taxing authorities on the employees’ behalf for
shares withheld for taxes should be presented as a financing activity. This aspect of the guidance
was adopted retrospectively, as required; accordingly, the Company reclassified $2.9 million and
$1.6 million of such payments from operating activities to financing activities in the consolidated
statement of cash flows for the years ended January 31, 2017 and 2016, respectively.
• As permitted, the Company elected to classify excess tax benefits as an operating activity in the
consolidated statement of cash flows, instead of as a financing activity, and adopted this portion of
the ASU retrospectively, reclassifying $0.7 million and $2.2 million to operating activities from
financing activities for the years ended January 31, 2017 and 2016, respectively.
• As permitted, the Company has elected to continue to estimate the impact of forfeitures when
determining the amount of compensation cost to be recognized each period, rather than account for
such forfeitures as they occur.
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C.
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
(in millions)
2018
2017
Interest, net of interest capitalization
$
41.5 $
40.6 $
2016
42.5
Income taxes
$
156.2 $
213.9 $
237.5
Years Ended January 31,
Supplemental noncash investing and financing activities:
(in millions)
2018
2017
Accrued capital expenditures
$
20.1 $
10.7 $
2016
8.2
January 31,
TIFFANY & CO.
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D.
INVENTORIES
(in millions)
Finished goods
Raw materials
Work-in-process
Inventories, net
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
2018
January 31,
2017
$
1,314.6 $
1,249.4
821.4
117.5
806.3
101.9
$
2,253.5 $
2,157.6
2018
$
41.8 $
123.0
1,328.6
267.4
353.2
311.6
187.4
105.1
2,718.1
(1,727.6)
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January 31,
2017
41.8
122.5
1,195.8
245.7
312.4
281.2
177.7
78.6
2,455.7
(1,523.9)
$
990.5 $
931.8
Depreciation and amortization expense for the years ended January 31, 2018, 2017 and 2016 was $200.8 million,
$202.5 million and $196.3 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. In
2016, the Company completed an assessment of the replacement system that was 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 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 related 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.
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F.
ACCOUNTS PAYABLE AND ACCRUED LIABILTIES
(in millions)
Accounts payable - trade
Accrued compensation and commissions
Accrued sales, withholding and other taxes
Other
G.
DEBT
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(in millions)
Short-term borrowings:
Credit Facilities
Other credit facilities
Long-term debt:
Unsecured Senior Notes:
2018
$
201.5 $
110.0
24.6
101.3
$
437.4 $
January 31,
2017
108.6
96.3
26.7
81.2
312.8
2018
January 31,
2017
$
33.5 $
87.1
$
120.6 $
93.0
135.7
228.7
250.0
250.0
300.0
88.0
888.0
9.6
878.4
2012 4.40% Series B Notes, due July 2042 a
$
250.0 $
2014 3.80% Senior Notes, due October 2024 b, c
2014 4.90% Senior Notes, due October 2044 b, c
2016 0.78% Senior Notes, due August 2026 b, d
Less unamortized discounts and debt issuance costs
250.0
300.0
91.9
891.9
9.0
$
882.9 $
a The agreements governing these Senior Notes require repayments of $50.0 million in aggregate every five years
beginning in July 2022.
b These agreements require lump sum repayments upon maturity.
c These Senior Notes were issued at a discount, which will be amortized until the debt maturity.
d These Senior Notes were issued at par, ¥10.0 billion.
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. The Credit Facilities are available for
working capital and other corporate purposes. Borrowings under the 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 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 Credit Facilities. The Credit Facilities also require payment to the lenders of a facility fee
TIFFANY & CO.
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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 Credit Facilities. Voluntary prepayments of the loans and voluntary
reductions of the unutilized portion of the commitments under the Credit Facilities are permissible without penalty,
subject to certain conditions pertaining to minimum notice and minimum reduction amounts.
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.
At January 31, 2018, there were $33.5 million of borrowings outstanding, $6.8 million of letters of credit issued but
not outstanding and $709.7 million available for borrowing under the Credit Facilities. 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 borrowings. The weighted-average interest rate for borrowings outstanding was 1.10% at
January 31, 2018 and 1.72% at January 31, 2017.
Commercial Paper
In August 2017, the Registrant and one of its wholly owned subsidiaries established a commercial paper program
(the "Commercial Paper Program") for the issuance of commercial paper in the form of short-term promissory notes
in an aggregate principal amount not to exceed $750.0 million. Borrowings under the Commercial Paper Program
are used for general corporate purposes. The aggregate amount of borrowings that the Company is currently
authorized to have outstanding under the Commercial Paper Program and the Credit Facilities is $750.0 million. The
Registrant guarantees the obligations of its wholly owned subsidiary under the Commercial Paper Program. Maturities
of commercial paper notes may vary, but cannot exceed 397 days from the date of issuance. Notes issued under the
Commercial Paper Program rank equally with the Registrant's present and future unsecured and unsubordinated
indebtedness. At January 31, 2018, there were no borrowings outstanding under the Commercial Paper Program.
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Other Credit Facilities
Tiffany-Shanghai Credit Agreement. In July 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 ($156.5 million at January 31, 2018). 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, the Registrant entered into a Guaranty Agreement by and
between the Registrant and the facility agent under the Tiffany-Shanghai Credit Agreement (the "Guaranty"). At
January 31, 2018, there was $112.7 million available to be borrowed under the Tiffany-Shanghai Credit Agreement
and $43.8 million was outstanding at a weighted-average interest rate of 4.35%. 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%.
Other. The Company has various other revolving credit facilities, primarily in Japan and China. At January 31, 2018,
the facilities totaled $139.0 million and $43.3 million was outstanding at a weighted-average interest rate of
6.87%. 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%.
Senior Notes
2016 Senior Notes. In August 2016, the Registrant issued ¥10.0 billion ($91.9 million at January 31, 2018) 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 the Registrant'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. the Registrant may redeem all or part of the Yen Notes
TIFFANY & CO.
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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.
Debt Covenants
The agreements governing the Credit Facilities include specific financial covenants, as well as other covenants that
limit the ability of the Registrant 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 Registrant and
its subsidiaries' assets, in addition to other requirements and "Events of Default" (as defined in the agreements
governing the Credit Facilities) customary to such borrowings.
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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 the
Registrant of specific financial covenants and ratios, in addition to other requirements and limitations customary to
such borrowings.
The indenture governing the 2014 3.80% Senior Notes and 2014 4.90% Senior Notes, as amended and
supplemented in respect of each such series of Notes (the "Indenture"), contains covenants that, among other things,
limit the ability of the Registrant and its subsidiaries under certain circumstances to create liens and impose
conditions on the Registrant’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 the Registrant and its
subsidiaries and the general nature of the business, in addition to other requirements customary to such borrowings.
At January 31, 2018, 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 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.
Aggregate maturities of long-term debt as of January 31, 2018 are as follows:
Long-Term Debt Maturities
Years Ending January 31,
2019
2020
2021
2022
2023
Thereafter
a
Amounts exclude any unamortized discount or premium.
TIFFANY & CO.
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$
$
Amount a
(in millions)
—
—
—
—
50.0
841.9
891.9
The Company has available letters of credit and financial guarantees of $81.2 million, of which $22.6 million was
outstanding at January 31, 2018. Of those available letters of credit and financial guarantees, $60.1 million expires
within one year. These amounts do not include letters of credit issued under the Credit Facilities.
Letters of Credit
H.
HEDGING INSTRUMENTS
Background Information
The Company uses derivative financial instruments, including interest rate swaps, cross-currency swaps, forward
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 exchange rates 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 other 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.
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• 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 is reported as other comprehensive income ("OCI") and is 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
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 gains or losses on undesignated foreign exchange forward
contracts substantially offset foreign exchange losses or gains on the underlying liabilities or transactions being
hedged.
The Company does not use derivative financial instruments for trading or speculative purposes.
Types of Derivative Instruments
Interest Rate Swaps – 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. The Company settled the interest rate swap in 2012 and recorded an unrealized loss
within accumulated other comprehensive loss. As of January 31, 2018, $18.5 million remains recorded as an
TIFFANY & CO.
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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 in
September 2014. The Company accounted for the forward-starting interest rate swaps as cash flow hedges. The
Company settled the interest rate swap in 2014 and recorded an unrealized loss within accumulated other
comprehensive loss. As of January 31, 2018, $3.7 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.
Cross-currency Swaps – In 2016 and 2017, the Company entered into cross-currency swaps to hedge the foreign
currency 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, 2018, the notional amounts of cross-currency
swaps accounted for as cash flow hedges and the respective maturity dates were as follows:
Cross-Currency Swap
Effective Date
July 2016
March 2017
May 2017
Maturity Date
October 1, 2024
April 1, 2027
April 1, 2027
Notional Amount
(in billions)
(in millions)
¥
10.6 $
100.0
11.0
5.6
96.1
50.0
Foreign Exchange Forward Contracts – The Company uses foreign exchange forward 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
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.
As of January 31, 2018, the notional amounts of foreign exchange forward contracts were as follows:
(in millions)
Notional Amount
USD Equivalent
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Derivatives designated as hedging instruments:
Japanese yen
British pound
Derivatives not designated as hedging instruments:
U.S. dollar
Euro
Australian Dollar
British pound
Czech koruna
Japanese yen
Mexican peso
New Zealand dollar
Singapore dollar
Swiss franc
¥
£
$
€
AU$
£
CZK
¥
NZ$
S$
Fr.
16,996.8
$
$
14.4
39.8
13.3
16.8
5.2
123.7
876.0
100.4
11.3
29.2
6.2
154.9
19.3
39.8
15.9
13.3
7.0
5.8
8.0
5.2
8.2
21.9
6.4
The maximum term of the Company's outstanding foreign exchange forward contracts as of January 31, 2018 is 12
months.
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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, 2018, the maximum term over which
the Company is hedging its exposure to the variability of future cash flows for all forecasted precious metals
transactions is 17 months. As of January 31, 2018, there were precious metal derivative instruments outstanding for
approximately 45,000 ounces of platinum, 900,000 ounces of silver and 37,200 ounces of gold.
Information on the location and amounts of derivative gains and losses in the consolidated financial statements is as
follows:
Years Ended January 31,
2018
2017
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
$
(6.3) $
0.1 $
(1.5) $
Precious metal collars a
Precious metal forward contracts a
Cross-currency swaps b
Forward-starting interest rate swaps c
1.0
4.2
(19.9)
—
0.3
(0.9)
(11.1)
(1.4)
—
14.0
(0.4)
—
$
(21.0) $
(13.0) $
12.1 $
(1.5)
—
(8.5)
6.6
(1.5)
(4.9)
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 Other (income) expenses, net.
The gain or loss recognized in earnings is included within Interest expense and financing costs.
The pre-tax gains (losses) on derivatives not designated as hedging instruments were not significant in the year
ended January 31, 2018. The Company had pre-tax losses of $9.2 million on such instruments in the year ended
January 31, 2017 and were included in Other (income) expense, net. There was no material ineffectiveness related
to the Company's hedging instruments for the periods ended January 31, 2018 and 2017. The Company expects
approximately $0.5 million of net pre-tax derivative gains included in accumulated other comprehensive loss at
January 31, 2018 will be reclassified into earnings within the next 12 months. The actual amount reclassified 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 (an investment grade credit rating 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.
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Financial assets
Marketable securities a
Time deposits b
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, which 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, which require the most judgment.
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. 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, 2018 are classified in the table below in one of
the three categories described above:
Estimated Fair Value
Level 1
Level 2
Level 3
Total Fair
Value
$
22.5 $
320.5
— $
—
— $
—
—
—
—
22.5
320.5
3.6
0.1
1.0
Derivatives designated as hedging instruments:
Precious metal forward contracts c
Foreign exchange forward contracts c
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts c
—
—
—
3.6
0.1
1.0
Total financial assets
$
343.0 $
4.7 $
— $
347.7
(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
$
— $
1.9 $
— $
Foreign exchange forward contracts d
Cross-currency swaps d
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts d
—
—
—
4.8
20.2
1.4
—
—
—
Total financial liabilities
$
— $
28.3 $
— $
1.9
4.8
20.2
1.4
28.3
TIFFANY & CO.
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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 collar contracts c
Foreign exchange forward contracts c
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts c
—
—
—
—
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
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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
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 based on the maturity of the
contract.
Included within Accounts payable and accrued liabilities or Other long-term liabilities based on the maturity of
the contract.
The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities
approximate their carrying values due to the short-term maturities of these assets and liabilities and as such are
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 $1.0 billion and $1.1 billion at January 31, 2018
and 2017 and the corresponding fair value was $1.0 billion and $1.1 billion, respectively.
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
TIFFANY & CO.
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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
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, 2018, $40.5 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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(in millions)
Minimum rent for retail locations
Contingent rent based on sales
Office, distribution and manufacturing facilities
and equipment
$
$
Years Ended January 31,
2018
198.7 $
32.7
40.0
2017
184.1 $
32.4
40.0
271.4 $
256.5 $
2016
172.2
34.9
37.0
244.1
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 $118.9 million, $117.9 million and $109.4 million in
2017, 2016 and 2015, respectively, 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)
2019
2020
2021
2022
2023
Thereafter
$
313.6
249.4
209.5
185.8
163.6
563.8
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
$45.0 million of rough diamonds in 2018. Purchases beyond 2018 that are contingent upon mine production at
TIFFANY & CO.
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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.
Contractual Cash Obligations and Contingent Funding Commitments
At January 31, 2018, the Company's contractual cash obligations and contingent funding commitments were for
inventory purchases of $268.4 million (which includes the $45.0 million obligation discussed in Diamond Sourcing
Activities above), as well as for other contractual obligations of $86.6 million (primarily for construction-in-progress,
technology licensing and service contracts, advertising and media agreements and fixed royalty commitments).
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.
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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 $78.0 million
at January 31, 2018) (based on its alleged wasted investment) to CHF 3.8 billion (or approximately $4.1 billion at
January 31, 2018) (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
$129.0 million at January 31, 2018) (based on its wasted investment) to approximately CHF 540.0 million (or
approximately $578.0 million at January 31, 2018) (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.
TIFFANY & CO.
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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 was set aside. However, the
Swatch Parties took action in the Dutch courts to appeal the District Court's decision, and a three-judge panel of the
Appellate Court of Amsterdam presided over an appellate hearing in respect of the annulment, and the related claim
by the Tiffany Parties for the return of the Arbitration Damages and related costs, on June 29, 2016. The Appellate
Court issued its decision on April 25, 2017, finding in favor of the Swatch Parties and ordering the Tiffany Parties to
reimburse the Swatch Parties EUR 6,340 in legal costs. The Tiffany Parties have taken action to appeal the decision
of the Appellate Court to the Supreme Court of the Netherlands. As such, the Arbitration Award may ultimately be set
aside by the Supreme Court. Registrant's management believes it is likely that the Supreme Court will issue its
decision during Registrant's fiscal year ending January 31, 2019. However, it is possible that such decision could be
later issued or that such decision could require the Appellate Court to reconsider certain elements of the dispute
and, as such, the annulment action may not be ultimately resolved until, at the earliest, Registrant's fiscal year
ending January 31, 2020.
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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 a 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.
Management has not established any accrual in the Company's consolidated financial statements for the year ended
January 31, 2018 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.
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 such as
those 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
TIFFANY & CO.
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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 was not final, as it was subject
to post-verdict motion practice and ultimately to adjustment by the Court. On August 14, 2017, the Court issued its
ruling, finding that the Tiffany plaintiffs are entitled to recover (i) $11.1 million in respect of Costco's profits on the
sale of the infringing rings (which amount is three times the amount of such profits, as determined by the Court), (ii)
prejudgment interest on such amount (calculated at the applicable statutory rate) from February 15, 2013 through
August 14, 2017, (iii) an additional $8.25 million in punitive damages, and (iv) Tiffany's reasonable attorneys' fees
(which will be determined at a later date), and, on August 24, 2017, the Court entered judgment in the amount of
$21.0 million in favor of the Tiffany plaintiffs (reflecting items (i) through (iii) above). Costco has filed an appeal
from the judgment, as well as a motion in the Court for a new trial. The appeal has been automatically stayed
pending determination of the Court motion. Costco has also filed an appeal bond to secure the amount of the
judgment entered by the Court pending appeal, so the Tiffany plaintiffs will be unable to enforce the judgment while
the motion for a new trial and the appeal are pending. As such, the Company has not recorded any amount in its
consolidated financial statements related to this gain contingency as of January 31, 2018, and expects that this
matter will not ultimately be resolved until, at the earliest, the Company's fiscal year ending January 31, 2019.
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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 and may also enter into settlement agreements pursuant to
an allocation process.
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 nonetheless remained in the CPG until October 24, 2017. 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.
TIFFANY & CO.
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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
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. On March
30, 2017, the EPA issued offers related to the settlement option to 20 parties; while the Company was not one of
the parties receiving such an offer, the EPA has indicated that the settlement option may be made available to
additional parties beyond those notified on March 30, 2017. Although the EPA must determine which additional
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.
Unrelated to the settlement option, the EPA also announced, in October 2016, 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"). That company has waived any rights to collect contribution for those costs from the Company.
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 CPG member companies 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.
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 in 2016, the
Company identified a potential breach of its sourcing and quality standards applicable to third party vendors. The
Company assessed the composition of certain of its gold products manufactured primarily by certain U.S. third-party
vendors, which contained gold solder manufactured by other U.S. vendors, to determine whether such products were
in compliance with applicable consumer products requirements and regulations. Following this assessment,
management determined that no liability was required to be recorded.
TIFFANY & CO.
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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
A director of the Company who previously served as Chief Executive Officer until April 1, 2015, 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 Credit Facilities, provides other general banking services and serves as the trustee for the Company's pension
plan. Fees paid to the bank for services rendered and interest on debt amounted to $0.7 million in 2015.
L.
STOCKHOLDERS' EQUITY
Accumulated Other Comprehensive Loss
(in millions)
Accumulated other comprehensive (loss) earnings, net of tax:
Foreign currency translation adjustments
Unrealized (loss) gain on marketable securities
Deferred hedging loss
Net unrealized loss on benefit plans
2018
(48.0) $
(1.8)
(22.9)
(65.3)
(138.0) $
$
$
January 31,
2017
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(143.7)
0.8
(16.1)
(97.2)
(256.2)
TIFFANY & CO.
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Additions to and reclassifications out of accumulated other comprehensive earnings (loss) were as follows:
Years Ended January 31,
(in millions)
2018
2017
Foreign currency translation adjustments
$
97.9 $
8.3 $
Income tax (expense) benefit
Foreign currency translation adjustments, net of tax
Unrealized gain (loss) on marketable securities
Reclassification for gain included in net earnings a
Income tax benefit (expense)
Unrealized (loss) gain on marketable securities, net of tax
Unrealized (loss) gain on hedging instruments
Reclassification adjustment for loss (gain) included in
net earnings b
Income tax benefit (expense)
Unrealized (loss) gain on hedging instruments, net of tax
Net actuarial gain
Amortization of net loss included in net earnings c
Amortization of prior service credit included in net earnings c
Income tax expense
Net unrealized gain on benefit plans, net of tax
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(2.2)
95.7
0.2
(3.5)
0.7
(2.6)
(21.0)
13.0
1.2
(6.8)
30.6
13.3
(0.5)
(11.5)
31.9
(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
Total other comprehensive earnings, net of tax
$
118.2 $
21.9 $
2016
(59.9)
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
12.4
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 losses (gains) are included in the computation of net periodic pension costs (see "Note N. Employee
Benefit Plans" for additional details).
Stock Repurchase Program
In January 2016, the Registrant's Board of Directors approved a new share repurchase program (the "2016
Program") and terminated 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"). 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. As of January 31, 2018, $211.2 million remained available for repurchase under the 2016
Program.
TIFFANY & CO.
K-82
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,
2018
2017
99.2 $
183.6 $
1.0
2.8
2016
220.4
2.8
94.86 $
65.24 $
78.40
$
$
Cash Dividends
The Company's Board of Directors declared quarterly dividends which, on an annual basis, totaled $1.95, $1.75
and $1.58 per share of Common Stock in 2017, 2016 and 2015, respectively.
On February 15, 2018, the Company's Board of Directors declared a quarterly dividend of $0.50 per share of
Common Stock. This dividend will be paid on April 10, 2018 to stockholders of record on March 20, 2018.
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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 Company's stockholders. No award
may be made under the Employee Incentive Plan after May 22, 2024 or under the Directors Equity Compensation
Plan after May 25, 2027.
Under the Employee Incentive Plan, the maximum number of common shares authorized for issuance is 8.7 million.
Awards may be made to employees of the Company 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 vest at the end of a three-year period. Vesting of all PSUs is contingent on the
Company's performance against 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 (aside from fractional dividend equivalents, which are settled in cash). Compensation
expense is recognized using the fair market value of the award 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 PSUs or RSUs granted prior to January 2017 or on unvested stock options. PSUs and RSUs
granted in or after January 2017 accrue dividend equivalents that may only be paid or delivered upon vesting of the
underlying stock units.
Under the Directors Equity Compensation Plan, the maximum number of shares of Common Stock authorized for
issuance is 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 $750,000 of 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; provided, however, that this limitation shall not apply to
a non-executive chairperson of the Board. 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. Director options
vest immediately. Director RSUs vest at the end of a one-year period.
The Company uses newly issued shares to satisfy stock option exercises and the vesting of PSUs and RSUs.
TIFFANY & CO.
K-83
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.
Dividend yield
Expected volatility
Risk-free interest rate
Expected term in years
2018
1.8%
22.0%
2.2%
5
Years Ended January 31,
2017
2.0%
23.8%
1.8%
5
2016
1.9%
28.1%
1.5%
5
A summary of the Company's stock option activity is presented below:
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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, 2017
2.3 $
70.72
7.50 $
23.8
Granted
Exercised
Forfeited/canceled
Outstanding at January 31, 2018
Exercisable at January 31, 2018
0.7
(0.8)
(0.5)
100.25
65.72
74.15
1.7 $
84.25
0.7 $
73.46
7.87 $
5.99 $
41.1
23.6
The weighted-average grant-date fair value of options granted for the years ended January 31, 2018, 2017 and
2016 was $18.33, $14.36 and $14.42, respectively. The total intrinsic value (market value on date of exercise less
grant price) of options exercised during the years ended January 31, 2018, 2017 and 2016 was $31.2 million,
$4.5 million and $2.4 million, respectively.
A summary of the Company's RSU activity is presented below:
Number of Shares
(in millions)
Weighted-Average
Grant-Date Fair Value
Non-vested at January 31, 2017
0.6 $
Granted
Vested
Forfeited
0.3
(0.2)
(0.1)
Non-vested at January 31, 2018
0.6 $
73.33
91.69
92.95
78.58
81.12
TIFFANY & CO.
K-84
A summary of the Company's PSU activity is presented below:
Non-vested at January 31, 2017
Granted
Vested
Forfeited/canceled
Non-vested at January 31, 2018
Number of Shares
(in millions)
Weighted-Average
Grant-Date Fair Value
0.7 $
73.52
0.2
—
(0.4)
0.5 $
108.99
83.45
72.49
84.85
The weighted-average grant-date fair value of RSUs granted for the years ended January 31, 2017 and 2016 was
$67.46 and $80.44, respectively. The weighted-average grant-date fair value of PSUs granted for the years ended
January 31, 2017 and 2016 was $79.23 and $58.09, respectively.
As of January 31, 2018, there was $69.4 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 2.7 years. The total
fair value of RSUs vested during the years ended January 31, 2018, 2017 and 2016 was $22.2 million, $13.6
million and $18.0 million, respectively. The total fair value of PSUs vested during the years ended January 31,
2018, 2017 and 2016 was $3.4 million, $6.3 million and $4.1 million, respectively.
Total compensation cost for stock-based compensation awards recognized in income and the related income tax
benefit was $28.0 million and $8.5 million for the year ended January 31, 2018, $24.3 million and $7.7 million
for the year ended January 31, 2017 and $24.5 million and $7.9 million for the year ended January 31, 2016.
Total stock-based compensation cost capitalized in inventory was not significant.
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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. The normal retirement age under
the Qualified Plan is age 65; however, participants who retire with at least 10 years of service may elect to receive
reduced retirement benefits starting at age 55. 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
2017 and none is required in 2018 to meet the minimum funding requirements of the Employee Retirement Income
Security Act. However, the Company periodically evaluates whether to make discretionary cash contributions to the
Qualified Plan and made voluntary cash contributions of $15.0 million in 2017 and $120.0 million in 2016, but
currently does not expect to make such contributions in 2018. 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
TIFFANY & CO.
K-85
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. Under the Excess Plan, participants who retire
with at least 10 years of service may elect to receive reduced retirement benefits starting at age 55.
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.
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.
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TIFFANY & CO.
K-86
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
2018
2017
2018
2017
Projected benefit obligation at beginning of year
$
783.7 $
742.6 $
72.5 $
78.4
Service cost
Interest cost
Participants' contributions
MMA retiree drug subsidy
Actuarial loss (gain)
Benefits paid
Translation
Projected benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Participants' contributions
MMA retiree drug subsidy
Benefits paid
Fair value of plan assets at end of year
17.3
32.0
—
—
21.1
(59.4)
0.9
795.6
530.1
86.1
21.3
—
—
(59.4)
578.1
17.4
31.6
—
—
15.9
(24.3)
0.5
783.7
385.8
42.9
125.7
—
—
(24.3)
530.1
2.8
3.0
1.0
0.2
1.5
(2.5)
—
78.5
—
—
1.3
1.0
0.2
(2.5)
—
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2.8
3.1
1.2
—
(10.5)
(2.5)
—
72.5
—
—
1.3
1.2
—
(2.5)
—
Funded status at end of year
$
(217.5) $
(253.6) $
(78.5) $
(72.5)
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
662.0 $
578.1
(83.9) $
600.2 $
112.6 $
—
(112.6) $
98.5 $
$
$
$
January 31, 2018
Other
21.0 $
—
(21.0) $
19.3 $
Total
795.6
578.1
(217.5)
718.0
TIFFANY & CO.
K-87
(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
At January 31, 2018, the Company had a current liability of $8.6 million and a non-current liability of $287.4
million for pension and other postretirement benefits. 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.
Amounts recognized in accumulated other comprehensive loss consist of:
(in millions)
Net actuarial loss (gain)
Prior service cost (credit)
Total before tax
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January 31,
Pension Benefits
Other Postretirement Benefits
2018
2017
2018
$
$
116.5 $
161.8 $
0.6
0.8
117.1 $
162.6 $
1.3 $
(1.7)
(0.4) $
2017
(0.1)
(2.4)
(2.5)
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
$
13.2 $
0.1
$
13.3 $
0.1
(0.7)
(0.6)
TIFFANY & CO.
K-88
Components of Net Periodic Benefit Cost and
Other Amounts Recognized in Other Comprehensive Earnings
(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
Net actuarial (gain) loss
Recognized actuarial loss
Recognized prior service (cost)
credit
Total recognized in other
comprehensive earnings
Total recognized in net periodic
benefit cost and other
comprehensive earnings
Pension Benefits
Other Postretirement Benefits
2018
2017
2016
2018
2017
2016
Years Ended January 31,
$
17.3 $
17.4 $
22.6
$
2.8 $
2.8 $
32.0
(32.9)
—
0.2
13.2
29.8
(32.1)
(13.2)
31.6
(23.5)
—
—
14.7
40.2
30.6
(24.7)
0.2
—
28.9
57.6
(3.6)
(102.1)
(14.7)
(28.9)
(0.2)
—
(0.1)
(45.5)
(18.3)
(131.1)
3.0
—
—
(0.7)
0.1
5.2
1.5
(0.1)
0.7
2.1
3.1
—
—
(0.7)
—
5.2
(10.5)
—
0.7
4.2
3.2
—
—
(0.7)
1.5
8.2
(20.4)
(1.5)
0.7
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(9.8)
(21.2)
$
(15.7) $
21.9 $
(73.5) $
7.3 $
(4.6) $
(13.0)
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
2018
4.00%
3.75%
0.83%
4.00%
3.00%
4.25%
6.50%
1.13%
January 31,
2017
4.25%
4.25%
0.81%
4.25%
3.00%
4.25%
6.50%
1.12%
TIFFANY & CO.
K-89
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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
2018
2017
2016
Years Ended January 31,
4.25%
4.25%
1.49%
4.25%
7.00%
3.00%
4.25%
6.50%
1.38%
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%
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 2018. 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, 2018 or
aggregate service and interest cost components of the 2017 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, 2018 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-90
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The fair value of the Qualified Plan's assets at January 31, 2018 and 2017 by asset category is as follows:
(in millions)
Equity securities:
Fair Value at
Fair Value Measurements
Using Inputs Considered as*
January 31, 2018
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
74.3 $
44.7
74.3 $
44.7
— $
—
79.0
115.2
2.3
49.6
365.1
213.0
77.3
—
2.3
49.6
248.2
1.7
115.2
—
—
116.9
Plan assets at fair value
$
578.1 $
248.2 $
116.9 $
(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 $
* 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-91
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 Qualified 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 NAV of
shares held by the Qualified Plan as reported by the investment advisor. The NAV 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.
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The Company estimates the following future benefit payments to be paid:
Benefit Payments
Years Ending January 31,
Pension Benefits
(in millions)
Other Postretirement Benefits
(in millions)
2019
2020
2021
2022
2023
2024-2028
$
27.1 $
27.4
28.5
29.8
30.6
175.1
1.9
2.0
2.1
2.2
2.4
14.8
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 related expense of $3.9 million in 2017, $2.3 million in
2016 and no expense in 2015. 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 related expense of $8.2 million, $7.5 million and $7.3 million in 2017, 2016 and 2015,
respectively. Contributions to both features of the EPSRS Plan are made in the following year.
Under the profit-sharing feature of the EPSRS Plan, contributions are made in cash and are allocated within the
respective participant's account based on investment elections made 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, employees may invest their
contributions and the related matching contribution to their accounts in a similar manner. Under both the profit-
sharing and retirement savings feature, employees may elect to invest a portion of the contributions to their accounts
in Company stock. At January 31, 2018, investments in Company stock represented 20% of total EPSRS Plan
assets.
TIFFANY & CO.
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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 profit-sharing and retirement savings portions of the
EPSRS Plan (except that DCRB contributions may not be invested in Company stock). The Company recorded related
expense of $5.2 million, $4.6 million and $3.2 million in 2017, 2016 and 2015, respectively.
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 contributions 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
$28.9 million and $26.5 million at January 31, 2018 and 2017, respectively, 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
U.S. Federal Income Tax Reform
On December 22, 2017, the 2017 Tax Act was enacted in the U.S. This enactment resulted in a number of
significant changes to U.S. federal income tax law for U.S. taxpayers. Changes in tax law are accounted for in the
period of enactment. As such, the 2017 consolidated financial statements reflect the estimated immediate tax effect
of the 2017 Tax Act. The 2017 Tax Act contains a number of key provisions, including, among other items:
• The reduction of the statutory U.S. federal corporate income tax rate from 35.0% to 21.0% effective
January 1, 2018;
• A one-time transition tax via a mandatory deemed repatriation of post-1986 undistributed foreign earnings
and profits (the "Transition Tax");
• The introduction of a deduction for Foreign Derived Intangible Income ("FDII") for tax years beginning after
December 31, 2017;
• The introduction of a tax on global intangible low-taxed income ("GILTI") for tax years beginning after
December 31, 2017;
• A limitation on net interest expense deductions to 30% of adjusted taxable income for tax years beginning
after December 31, 2017;
• Broader limitations on the deductibility of compensation of certain highly compensated employees;
• The ability to elect to accelerate tax depreciation on certain qualified assets;
• The introduction of a territorial tax system providing a 100% dividends received deduction on certain
qualified dividends from foreign subsidiaries for tax years beginning after December 31, 2017;
• The introduction of the Base Erosion and Anti-Abuse Tax ("BEAT") for tax years beginning after December
31, 2017; and
• Changes in the application of the U.S. foreign tax credit regulations for tax years beginning after December
31, 2017.
Additionally, on December 22, 2017, the SEC issued SAB 118 to address the application of U.S. GAAP in situations
when a registrant does not have the necessary information available, prepared, or analyzed (including computations)
in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. Specifically, SAB
118 provides a measurement period for companies to evaluate the impacts of the 2017 Tax Act on their financial
statements. This measurement period begins in the reporting period that includes the enactment date and ends
when an entity has obtained, prepared and analyzed the information that was needed in order to complete the
accounting requirements, and cannot exceed one year. The Company has adopted the provisions of SAB 118 with
respect to the impact of the 2017 Tax Act on its consolidated financial statements.
TIFFANY & CO.
K-93
The Company has recorded an estimated net tax expense of $146.2 million as a result of the effects of the 2017 Tax
Act. The tax effects recorded include:
• Estimated tax expense of $94.8 million for the impact of the reduction in the U.S. statutory tax rate on the
Company’s deferred tax assets and liabilities;
• Estimated tax expense of $56.0 million for the Transition Tax; and
• A tax benefit of $4.6 million resulting from the effect of the 21% statutory tax rate for the month of January
2018 on the Company’s annual statutory tax rate for the year ended January 31, 2018. Because the
Company’s fiscal year ended on January 31, 2018, the Company’s statutory tax rate for fiscal 2017 is
33.8% rather than 35.0%.
Consistent with SAB 118, the Company calculated and recorded reasonable estimates for the impact of the
Transition Tax and the remeasurement of its deferred tax assets and deferred tax liabilities, as set forth above. The
Company also adopted the provisions of SAB 118 as it relates to the assertion of the indefinite reinvestment of
foreign earnings and profits. The charges associated with the Transition Tax and the remeasurement of the
Company's deferred tax assets and deferred tax liabilities, as a result of applying the 2017 Tax Act, represent
provisional amounts for which the Company’s analysis is incomplete but a reasonable estimate could be determined
and recorded during the fourth quarter of 2017. Further, the impact of the 2017 Tax Act on the Company's assertion
to indefinitely reinvest foreign earnings is incomplete as the Company is analyzing the relevant provisions of the
2017 Tax Act and related accounting guidance. Therefore, a provisional estimate has not been recorded or disclosed
as it relates to the potential tax consequences of an actual repatriation of unremitted foreign earnings. The Company
expects to account for the tax on GILTI as a period cost and thus has not adjusted any of the deferred tax assets and
liabilities of its foreign subsidiaries in connection with the 2017 Tax Act. While the Company's provisional estimate
for GILTI in 2017 is zero, the Company continues to evaluate this position in accordance with SAB 118 as it awaits
further regulatory and accounting guidance. As the Company refines its provisional estimate calculations, further
analyzes provisions of the 2017 Tax Act and any subsequent guidance related thereto, these provisional estimates
could be affected, which could have a material impact on the Company's future financial results. Additionally,
further regulatory or GAAP accounting guidance regarding the 2017 Tax Act could also materially affect the
Company's future financial results.
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Earnings from operations before income taxes consisted of the following:
Income Taxes
(in millions)
United States
Foreign
Years Ended January 31,
2018
597.1 $
163.4
760.5 $
2017
478.2 $
198.4
676.6 $
2016
502.5
207.4
709.9
$
$
TIFFANY & CO.
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Components of the provision for income taxes were as follows:
(in millions)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Years Ended January 31,
2018
2017
$
227.9 $
125.5 $
16.7
49.0
293.6
94.1
1.1
1.6
96.8
15.4
43.5
184.4
36.7
7.1
2.3
46.1
$
390.4 $
230.5 $
2016
175.8
22.3
49.8
247.9
(15.4)
3.9
9.6
(1.9)
246.0
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
Foreign tax rate differences
Net change in uncertain tax positions
Domestic manufacturing deduction
2017 Tax Act
Other
2018
33.8%
1.5
0.2
(1.4)
0.2
(1.8)
19.8
(1.0)
Years Ended January 31,
2017
35.0%
2.2
0.2
(2.3)
(0.7)
(0.9)
—
0.6
2016
35.0%
2.4
—
(2.5)
0.5
(1.3)
—
0.6
51.3%
34.1%
34.7%
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Deferred tax assets (liabilities) consisted of the following:
(in millions)
Deferred tax assets:
Pension/postretirement benefits
$
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
$
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81.2 $
22.9
7.2
0.6
6.4
9.2
17.2
35.8
8.4
7.7
25.1
221.7
(9.6)
212.1
(24.9)
187.2 $
January 31,
2017
124.7
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
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
which no benefit is expected to be realized. Tax loss carryforwards of approximately $32.7 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 2025.
The following table reconciles the unrecognized tax benefits:
Years ended January 31,
(in millions)
Unrecognized tax benefits at beginning of year
$
2018
7.2 $
2017
14.0 $
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
3.2
(0.9)
0.6
—
—
0.9
(5.0)
0.3
(3.0)
—
Unrecognized tax benefits at end of year
$
10.1 $
7.2 $
2016
12.1
1.0
(0.4)
1.4
—
(0.1)
14.0
Included in the balance of unrecognized tax benefits at January 31, 2018, 2017 and 2016 are $1.1 million, $1.0
million and $9.1 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. The Company recognized expense of $2.0 million and $1.7 million for interest and penalties during
TIFFANY & CO.
K-96
2017 and 2015, respectively. No expense for interest and penalties was recognized in 2016. Accrued interest and
penalties are included within Accounts payable and accrued liabilities and Other long-term liabilities, and were
$10.3 million and $8.3 million at January 31, 2018 and 2017, respectively.
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. As of January 31, 2018,
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 "Note B. Summary of Significant Accounting Policies."
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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
Years Ended January 31,
2018
2017
2016
$
1,870.9 $
1,841.9 $
1,095.0
596.3
482.9
4,045.1
124.7
999.1
604.4
457.6
3,903.0
98.8
$
$
4,169.8 $
4,001.8 $
390.3 $
373.0 $
286.1
207.3
86.3
970.0
6.3
256.0
204.6
81.6
915.2
5.9
$
976.3 $
921.1 $
1,947.0
1,003.1
541.3
505.7
3,997.1
107.8
4,104.9
390.8
264.4
199.9
97.4
952.5
6.4
958.9
* Represents earnings from operations before (i) unallocated corporate expenses, (ii) interest expense, financing
costs and other (income) expense, net, and (iii) other operating expenses.
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.
TIFFANY & CO.
K-97
The following table sets forth a reconciliation of the segments' earnings from operations to the Company's
consolidated earnings from operations before income taxes:
(in millions)
Earnings from operations for segments
$
Unallocated corporate expenses
Interest expense, financing costs and other
(income) expense, net
Other operating expenses
2018
976.3 $
(181.8)
(34.0)
—
2017
921.1 $
(161.9)
(44.6)
(38.0)
Earnings from operations before income taxes
$
760.5 $
676.6 $
2016
958.9
(152.1)
(50.2)
(46.7)
709.9
Years Ended January 31,
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.
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Other operating expenses in the year ended January 31, 2017 represent 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 financing arrangements with diamond mining
and exploration companies. See "Note B. Summary of Significant Accounting Policies" and "Note E. Property, Plant
and Equipment" for additional details on the asset impairment and "Note B. Summary of Significant Accounting
Policies" 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 B. Summary of
Significant Accounting Policies" for additional details on the impairment charges and "Note J. Commitments and
Contingencies" for additional details related to the specific cost-reduction initiatives.
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
2018
2017
2016
Years Ended January 31,
1,739.0 $
1,691.4 $
596.3
1,834.5
604.4
1,706.0
4,169.8 $
4,001.8 $
724.5 $
691.3 $
21.4
301.4
21.7
269.0
1,047.3 $
982.0 $
1,795.5
541.3
1,768.1
4,104.9
706.9
20.6
256.7
984.2
$
$
$
$
TIFFANY & CO.
K-98
(in millions)
Net sales:
Jewelry collections
Engagement jewelry
Designer jewelry
All other
Classes of Similar Products
2018
2017
2016
Years Ended January 31,
$
$
2,193.2 $
1,065.4
551.2
360.0
2,043.9 $
1,122.0
529.1
306.8
2,129.2
1,142.2
526.4
307.1
4,169.8 $
4,001.8 $
4,104.9
The Jewelry collections category reflects the combination of the previously reported high, fine & solitaire jewelry and
fashion jewelry categories. Additionally, jewelry bearing the name of and attributed to Jean Schlumberger, which was
previously reported within the high, fine & solitaire jewelry category, has been reclassified into the Designer jewelry
category. Such changes or reclassifications have been made to conform with management's current internal analysis
of product sales and are reflected for each of the periods presented in the table above.
Q.
QUARTERLY FINANCIAL DATA (UNAUDITED)
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2017 Quarters Ended*
(in millions, except per share amounts)
April 30
July 31
October 31
January 31 a
Net sales
Gross profit
Earnings from operations
Net earnings
Net earnings per share:
Basic
Diluted
$
899.6 $
959.7 $
976.2 $
1,334.3
557.6
145.6
92.9
598.2
181.3
115.0
598.4
160.3
100.2
$
$
0.75 $
0.74 $
0.92 $
0.92 $
0.81 $
0.80 $
850.6
307.2
61.9
0.50
0.50
a
For the quarter ended January 31, 2018, includes net tax expense of $146.2 million, or $1.17 per diluted
share, related to the estimated impact of the 2017 Tax Act (see "Note O. Income Taxes").
(in millions, except per share amounts)
April 30
July 31
October 31
January 31 b
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
b On a pre-tax basis, includes charges for the quarter ended January 31, 2017 of:
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
TIFFANY & CO.
K-99
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").
* 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.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
NONE
Item 9A. Controls and Procedures.
DISCLOSURE CONTROLS AND PROCEDURES
Based on their evaluation of 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-101
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.
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The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm. Their report is shown on page K-50. The Audit Committee of the Board of Directors, which is
composed solely of independent directors, reviewed and discussed with the Company's management and the
independent registered public accounting firm, as appropriate, specific accounting, financial reporting and internal
control matters. Both the independent registered public accounting firm and the internal auditors have full and free
access to the Audit Committee. Each year the Audit Committee selects the firm that is to perform audit services for
the Company.
Management'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, 2018 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, 2018 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which is shown on page K-50.
/s/ Alessandro Bogliolo
Chief Executive Officer
/s/ Mark J. Erceg
Executive Vice President and Chief Financial Officer
Item 9B. Other Information.
NONE
TIFFANY & CO.
K-102
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 6, 2018.
CODE OF ETHICS AND OTHER CORPORATE GOVERNANCE DISCLOSURES
Registrant has adopted a Code of Business and Ethical Conduct for its Directors, Chief Executive Officer, Chief
Financial Officer and all other officers of the Registrant. A copy of this Code is posted on the corporate governance
section of the Registrant's website, http://investor.tiffany.com/governance.cfm; go to "Code of Conduct." The
Registrant will also provide a copy of the Code of Business and Ethical Conduct to stockholders upon request.
See Registrant's Proxy Statement dated April 6, 2018, for additional information within the section titled "Business
Conduct Policy and Code of Ethics."
Item 11. Executive Compensation.
Incorporated by reference from the sections titled "Board of Directors and Corporate Governance" and "Compensation
of the CEO and Other Executive Officers" in Registrant's Proxy Statement dated April 6, 2018.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Incorporated by reference from the sections titled "Ownership of the Company" and "Compensation of the CEO and
Other Executive Officers" in Registrant's Proxy Statement dated April 6, 2018.
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 6, 2018.
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 6, 2018.
TIFFANY & CO.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) List of Documents Filed As Part of This Report:
1. Financial Statements
Report of Independent Registered Public Accounting Firm.
Consolidated Balance Sheets as of January 31, 2018 and 2017.
Consolidated Statements of Earnings for the years ended January 31, 2018, 2017 and 2016.
Consolidated Statements of Comprehensive Earnings for the years ended January 31, 2018, 2017 and 2016.
Consolidated Statements of Stockholders' Equity for the years ended January 31, 2018, 2017 and 2016.
Consolidated Statements of Cash Flows for the years ended January 31, 2018, 2017 and 2016.
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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.
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Exhibit Table (numbered in accordance with Item 601 of Regulation S-K)
EXHIBIT INDEX
Exhibit No.
Description
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.
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Restated By-laws of Registrant, as last amended January 18, 2018. Incorporated by reference
from Exhibit 3.2 to Registrant’s Report on Form 8-K dated January 19, 2018.
Indenture, dated September 25, 2014, between Registrant, as issuer, and The Bank of New York
Mellon Trust Company, N.A., 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, N.A., 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, N.A., as trustee. Incorporated by reference from Exhibit 4.7 to Registrant’s Report on
Form 8-K dated September 26, 2014.
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-105
Exhibit No.
Description
F
O
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1
0
-
K
10.5
10.6
10.6a
10.7
10.7a
10.8
10.9
10.10
10.11
10.12
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.
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.
Guaranty Agreement dated as of July 11, 2016, with respect to the Credit Agreement (see Exhibit
10.9 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.
12.1
Ratio of Earnings to Fixed Charges.
TIFFANY & CO.
K-106
Exhibit No.
Description
14.1
21.1
23.1
31.1
31.2
32.1
32.2
101
Code of Business and Ethical Conduct. Incorporated by reference from Exhibit 14.1 filed with
Registrant’s Report on Form 8-K dated September 27, 2017.
Subsidiaries of Registrant.
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
The following financial information from Registrant’s Annual Report on Form 10-K for the fiscal
year ended January 31, 2018, 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.
K
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Executive Compensation Plans and Arrangements
Exhibit No.
Description
10.13
10.14
10.15
10.16
10.17
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.
TIFFANY & CO.
K-107
Exhibit No.
Description
F
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K
10.18
10.19
10.19a
10.19b
10.19c
10.20
10.21
10.22
10.22a
10.22b
10.22c
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 Annual Report on Form 10-K for the Fiscal
Year ended January 31, 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 Annual
Report on Form 10-K for the Fiscal Year ended January 31, 2013.
Individual Disability Insurance Policy issued by Provident Life and Casualty Insurance Company.
Incorporated by reference from Exhibit 10.24b filed with Registrant’s Annual Report on Form 10-
K for the Fiscal Year ended January 31, 2013.
Individual Disability Insurance Policy issued by Lloyd’s of London. Incorporated by reference from
Exhibit 10.24c filed with Registrant’s Annual Report on Form 10-K for the Fiscal Year ended
January 31, 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 November 16, 2017.
Incorporated by reference from Exhibit 10.22 filed with Registrant’s Report on Form 8-K dated
November 21, 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 Annual Report on Form 10-
K for the Fiscal Year ended January 31, 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.
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.
TIFFANY & CO.
K-108
Exhibit No.
Description
10.22d
10.22e
10.22f
10.22g
10.22h
10.22i
10.22j
10.22k
10.23
10.23a
10.23b
10.23c
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.
K
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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 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 Annual Report on Form 10-K for the Fiscal Year ended January 31, 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.
TIFFANY & CO.
K-109
Exhibit No.
Description
F
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1
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10.23d
10.23e
10.24
10.24a
10.24b
10.25
10.25a
10.25b
10.25c
10.25d
10.25e
10.25f
10.25g
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant’s 2008
Directors Equity Compensation Plan, effective March 16, 2017. Incorporated by reference from
Exhibit 10.25d filed with Registrant’s Annual Report on Form 10-K for the Fiscal Year ended
January 31 2017.
Terms of Restricted Stock Unit Grant under Registrant’s 2008 Directors Equity Compensation
Plan, effective March 16, 2017. Incorporated by reference from Exhibit 10.25e filed with
Registrant’s Annual Report on Form 10-K for the Fiscal Year ended January 31, 2017.
Registrant’s 2017 Directors Equity Compensation Plan. Incorporated by reference from Exhibit
10.38 filed with Registrant's Report on Form 8-K dated June 1, 2017.
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant's 2017
Directors Equity Compensation Plan, effective November 16, 2017. Incorporated by reference
from Exhibit 10.38a filed with Registrant’s Report on Form 8-K dated November 21, 2017.
Terms of Restricted Stock Unit Grant under Registrant's 2017 Directors Equity Compensation
Plan, effective November 16, 2017. Incorporated by reference from Exhibit 10.38b filed with
Registrant’s Report on Form 8-K dated November 21, 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.
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. Incorporated by reference from Exhibit 10.26e filed with Registrant's Annual
Report on Form 10-K for the Fiscal Year ended January 31, 2017.
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.
TIFFANY & CO.
K-110
Exhibit No.
Description
10.25h
10.25i
10.25j
10.25k
10.25l
10.25m
10.25n
10.25o
10.25p
10.25q
10.25r
10.25s
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.
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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.
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.
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant's 2014
Employee Incentive Plan, approved March 16, 2017.
Terms of Restricted Stock Unit Grant (Non-Transferable) under Registrant's 2014 Employee
Incentive Plan, approved March 16, 2017.
Terms of Restricted Stock Unit Grant (Non-Transferable) under Registrant's 2014 Employee
Incentive Plan, as revised January 17, 2018. Incorporated by reference from Exhibit 10.26q filed
with Registrant’s Report on Form 8-K dated January 19, 2018.
TIFFANY & CO.
K-111
Exhibit No.
Description
F
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10.25t
10.25u
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
Terms of Performance-Based Restricted Stock Unit Grant (Non-Transferable) to executive officers
under Registrant's 2014 Employee Incentive Plan, as revised January 17, 2018. Incorporated by
reference from Exhibit 10.26r filed with Registrant’s Report on Form 8-K dated January 19,
2018.
Terms of Stock Option Award (Transferable Non-Qualified Option) under Registrant's 2014
Employee Incentive Plan, as revised January 17, 2018. Incorporated by reference from Exhibit
10.26s filed with Registrant’s Report on Form 8-K dated January 19, 2018.
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 September 7, 2016, between Mark J. Erceg and Tiffany and
Company. Incorporated by reference from Exhibit 10.29 filed with Registrant’s Annual Report on
Form 10-K for the Fiscal Year ended January 31, 2017.
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 June 15, 2015, between Philippe Galtie and Tiffany and
Company. Incorporated by reference from Exhibit 10.32 filed with Registrant’s Annual Report on
Form 10-K for the Fiscal Year ended January 31, 2017.
Employment offer letter, dated as of July 12, 2017, by and among Alessandro Bogliolo,
Registrant and Tiffany and Company. Incorporated by reference from Exhibit 10.39 filed with
Registrant's Report on Form 8-K dated July 12, 2017.
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 15, 2017. Incorporated by reference from Exhibit 10.34 filed with Registrant’s
Report on Form 8-K dated November 21, 2017.
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. Incorporated by reference from Exhibit 10.36 filed with Registrant's Annual Report on
Form 10-K for the Fiscal Year ended January 31, 2017.
10.35
Corporate Governance Principles, amended and restated effective October 2, 2017.
TIFFANY & CO.
K-112
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 16, 2018
TIFFANY & CO.
(Registrant)
By: /s/ Alessandro Bogliolo
Alessandro Bogliolo
Chief Executive Officer
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TIFFANY & CO.
K-113
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/ Alessandro Bogliolo
Alessandro Bogliolo
Chief Executive Officer
(Principal Executive Officer) (Director)
By:
/s/ Michael Rinaldo
Michael Rinaldo
Vice President, Controller
(Principal Accounting Officer)
By:
/s/ Mark J. Erceg
Mark J. Erceg
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
By:
/s/ Rose Marie Bravo
Rose Marie Bravo
Director
F
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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/ Michael J. Kowalski
By:
/s/ James E. Lillie
Michael J. Kowalski
Director
James E. Lillie
Director
By:
/s/ Charles K. Marquis
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 16, 2018
Francesco Trapani
Director
TIFFANY & CO.
K-114
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, 2018:
Reserves deducted from assets:
Accounts receivable allowances:
Doubtful accounts
$
1.9 $
3.3 $
— $
Sales returns
Allowance for inventory liquidation
and obsolescence
Allowance for inventory shrinkage
Deferred tax valuation allowance
a) Uncollectible accounts written off.
9.6
65.4
1.0
24.1
7.5
28.9
1.1
2.3
—
—
—
—
3.0 a $
2.1 b
19.3 c
1.4 d
16.8 e
2.2
15.0
75.0
0.7
9.6
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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-115
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
8.3
2.5
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0
-
K
Allowance for inventory liquidation
and obsolescence
Allowance for inventory shrinkage
Deferred tax valuation allowance
a) Uncollectible accounts written off.
59.2
1.2
19.5
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
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-116
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
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
b) Adjustment related to sales returns previously provided for.
c) Liquidation of inventory previously written down to market.
d) Physical inventory losses.
—
—
—
—
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
K
-
0
1
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e) Reversal of deferred tax valuation allowance and utilization of deferred tax loss carryforward.
TIFFANY & CO.
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2018 Annual Meeting of Shareholders
PROXY STATEMENT
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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 24, 2018
9:30 a.m.
The Rubin Museum of Art
150 West 17th Street
New York, New York
Record Date
March 26, 2018
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 2018 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 2018 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 2018 Annual Meeting.
Beneficial owners of shares held in street name must contact their broker before the 2018 Annual
Meeting to obtain a legal proxy and bring the legal proxy with them to the meeting.
There are three matters scheduled to be voted on at the 2018 Annual Meeting:
MATTERS TO BE VOTED ON AT 2018 ANNUAL MEETING
Matter
Item No. 1: Election of the Board;
Board Recommended
Vote
Required Vote
Broker Discretionary
Vote Allowed
"FOR" the election
of all 10 nominees
for director
Majority of votes cast
"for" or "against" the
nominee
No
Yes
No
Item No. 2: Ratification of the selection of the
independent registered public accounting firm
to audit our Fiscal 2018 financial statements;
and
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").
"FOR"
"FOR"
Majority of shares
present and entitled to
vote
Majority of shares
present and entitled to
vote
TIFFANY & CO.
PS-2
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ELECTION OF THE BOARD
The following table provides summary information about each director nominee. Each director is elected annually by a
majority of votes cast "for" or "against" his or her candidacy. See "Item 1. Election of the Board" at PS-17 for more
information.
Compensation
Committee
& Stock
Option Sub-
Committee
Corporate
Social
Responsibility
Committee
Audit
Committee
Dividend
Committee
Finance
Committee
Nominating/
Corporate
Governance
Committee
Other
Public
Company
Boards
Name
Alessandro
Bogliolo
Rose Marie
Bravo
Roger N.
Farah
Lawrence K.
Fish
Director
Since
Age
52
2017
Principal Occupation
Independent
Chief Executive Officer
("CEO") of Tiffany & Co.
67
1997 Retired CEO of Burberry
Limited
65
2017
Former co-CEO of Tory
Burch LLC
73
2008 Retired Chairman and
Abby F.
Kohnstamm
64
2001
James E.
Lillie
56
2017
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
Chair
William A.
Shutzer
Robert S.
Singer
Francesco
Trapani
Annie
Young-
Scrivner
71
1984
Senior Managing Director
of Evercore Partners
66
2012
Former CEO of Barilla
Holding S.p.A
61
2017
Executive Deputy
Chairman of Tages
Holding S.p.A.
49
—
CEO of Godiva
Chocolatier
Chair
Chair
Each director who served on the Company's Board of Directors (the "Board") during all or part of the period from
February 1, 2017 to January 31, 2018 ("Fiscal 2017") attended at least 81% of the aggregate number of meetings
of the Board and those committees on which he or she served.
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 the period from February 1, 2018 to January 31, 2019 ("Fiscal 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
2018 Financial Statements" at PS-36 and "Relationship with Independent Registered Public Accounting Firm" at
PS-38 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-40
for more information.
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TIFFANY & CO.
PS-3
BUSINESS HIGHLIGHTS
Key highlights of Fiscal 2017 performance were as follows:
Sales:
Profitability:
Worldwide net sales increased 4% to $4.2 billion, reflecting sales growth in most reportable
segments. Comparable store sales were unchanged from the prior year. There was no
significant impact from currency translation (see Appendix I at PS-112).
Net earnings decreased 17% to $370.1 million, or $2.96 per diluted share. However, net
earnings in 2017 included a net charge of $1.17 per diluted share related to the enactment
of the 2017 U.S. Tax Cuts and Jobs Act (see Appendix I at PS-112). Net earnings in 2016
included impairment charges of $0.19 per diluted share (see Appendix I at PS-112).
Excluding these charges, net earnings per diluted share increased 10% to $4.13 (see
Appendix I at PS-112).
Store Expansion:
The Company added a net of two TIFFANY & CO. stores, resulting in a 3% net increase in
gross retail square footage.
Product Introductions:
Cash Flow:
The Company expanded its product offerings, including by introducing the new TIFFANY
HARDWEAR jewelry collection, through additions to several existing jewelry collections,
such as the TIFFANY T collection, and by introducing its new Home and Accessories
collection, new watch designs and a new fragrance.
Cash flow from operating activities was $932.2 million in 2017, compared with $705.7
million in 2016. Free cash flow (see Appendix I at PS-112) was $692.9 million in 2017,
compared with $482.9 million in 2016.
Returning Capital to
Shareholders:
The Company returned capital to shareholders by paying regular quarterly dividends (which
were increased 11% effective July 2017 to $0.50 per share, or an annualized rate of $2.00
per share) and by repurchasing 1.0 million shares of its Common Stock for $99.2 million.
EXECUTIVE COMPENSATION HIGHLIGHTS
The Board's continued commitment to pay for performance, and other leading compensation practices, was
demonstrated in Fiscal 2017 by the following highlights:
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• 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 (86.7% for the CEO and 65.7%
for the other named executive officers, on average), with significant emphasis on long-term incentives.
• Long-term and short-term incentive awards granted for Fiscal 2017 and Fiscal 2018 are payable contingent
on key performance measures, including operating earnings, 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 ("Constant Currency Sales Growth," see Appendix I at PS-112), net earnings per diluted share, and
operating cash flow.
• Short-term incentive awards for Fiscal 2017 were paid out to the named executive officers at 103.8% of
target, based on achievement of operating earnings and Constant Currency Sales Growth goals for the year
relative to target and individual performance factors.
• For the performance period beginning February 1, 2015 and ending January 31, 2018 (Fiscal 2015 to
Fiscal 2017), performance-based restricted stock units ("PSUs") vested at 53.4% of target shares (26.7% of
maximum shares), based on achievement of net earnings per diluted share and return on assets, relative to
pre-established targets.
•
Incentive-based compensation (such as cash incentive awards and PSUs, but excluding stock options and
time-vesting restricted stock units ("RSUs")) 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").
TIFFANY & CO.
PS-4
• The Compensation Committee of the Board retains an independent compensation consultant to advise on
the executive compensation program and practices.
2019 ANNUAL MEETING
If you wish to nominate a candidate for election as a director to be included in the Company's Proxy Statement for
our 2019 Annual Meeting, we must receive notice of such nomination no earlier than November 6, 2018 and no
later than December 6, 2018. If you wish to submit a proposal of other business to be included in the Company's
Proxy Statement for our 2019 Annual Meeting, we must receive such proposal no later than December 6, 2018.
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).
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, but do not intend for such nomination or proposal to be included in the
Company's Proxy Statement for the 2019 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 2019 Annual Meeting, but not intended to be included in the Company's Proxy
Statement, must be received by the Company no earlier than January 24, 2019 and no later than February 23,
2019.
Except as required by applicable law, the Company will consider only proposals that are received by the Company
within the applicable time frames set forth above, and that meet the applicable requirements of the Securities and
Exchange Commission (the "SEC") and our By-laws.
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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 6, 2018, in connection with the
2018 Annual Meeting of the shareholders of the Company to be held on Thursday, May 24, 2018, 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 2018 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 26, 2018, 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 2018
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 2017.
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:
www.proxyvote.com
2) By Telephone:
1-800-579-1639
3) By E-Mail*:
sendmaterial@proxyvote.com
*
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 10, 2018 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.com. By clicking "Investors" at the bottom of the page,
you will find additional information concerning some of the subjects addressed in this document.
Important Notice Regarding Internet Availability of Proxy Materials for the Shareholder Meeting to
be Held on May 24, 2018
The Proxy Statement and Annual Report on Form 10-K are available to shareholders at
www.proxyvote.com
TIFFANY & CO.
PS-6
WHAT MATTERS WILL BE VOTED ON AT THE 2018 ANNUAL MEETING?
There are three matters scheduled to be voted on at the 2018 Annual Meeting:
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 2018 financial statements; and
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").
In addition, such other business as may properly come before the 2018 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 and 3.
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 26,
2018, 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 2018
Annual Meeting is indicated on the enclosed proxy card or notice.
HOW DO I VOTE MY SHARES?
You can vote your shares at the 2018 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:
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 2018 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.
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HOW DO I VOTE MY SHARES BEFORE THE 2018 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 2018 Annual Meeting vote your shares for
you. These individuals are called "proxies," and using them to cast your ballot at the 2018 Annual Meeting is called
voting "by proxy."
Proxies will extend to, and be voted at, any adjournment or postponement of the 2018 Annual Meeting.
If you vote by proxy, you will have designated three officers of the Company to act as your proxies at the 2018
Annual Meeting. One of them will then vote your shares at the 2018 Annual Meeting in accordance with the
TIFFANY & CO.
PS-7
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 2018 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.
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 2018 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 2018 Annual Meeting and vote in person.
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HOW DO I VOTE MY SHARES BEFORE THE 2018 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.
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
TIFFANY & CO.
PS-8
the proposal being voted upon. With respect to voting on the election of the Board and Say on Pay, 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 2018 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 2018 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 10 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 2018 financial statements; and
FOR approval of the compensation paid to the Company's named executive officers in Fiscal 2017.
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.
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No. You may authorize your shares to be voted by following the instructions presented in the notice, proxy card or
voting instruction form.
IF I WISH TO ATTEND THE 2018 ANNUAL MEETING AND VOTE IN PERSON, WHAT DO I NEED TO DO?
To attend the 2018 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 2018 Annual Meeting.
To vote in person at the 2018 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 2018 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 2018 Annual Meeting for a valid vote. For
the 2018 Annual Meeting, a majority of shares issued and outstanding on the record date and entitled to vote at the
Annual Meeting must be present.
TIFFANY & CO.
PS-9
The number of shares issued and outstanding at the close of business on March 26, 2018, the record date, was
124,504,359. Therefore, 62,252,180 shares must be present at the 2018 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 2018 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 2018 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 2018 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 2018
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.
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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 2018 will be decided by the affirmative vote of the majority
of shares present in person or represented by proxy at the 2018 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 2018 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 2018 Annual Meeting and entitled to
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 2018 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
current directors standing for re-election 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.
TIFFANY & CO.
PS-10
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 a 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 2018
Annual Meeting.
WHERE CAN I FIND THE VOTING RESULTS OF THE 2018 ANNUAL MEETING?
The Company will announce preliminary voting results at the 2018 Annual Meeting and publish final results in a
Form 8-K filed with the SEC within four business days after the 2018 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 19, 2018. 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
The Vanguard Group
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
Qatar Investment Authority
Ooredoo Tower
Diplomatic Area Street, West Bay
P.O. Box 23224, Doha, State of Qatar
BlackRock, Inc.
55 East 52nd Street
New York, New York 10055
Amount and
Nature of Beneficial
Ownership (a)
Percentage of
Class
12,314,123 (b)
9.89%
11,822,436 (c)
9.49%
6,923,749 (d)
5.56%
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) The Vanguard Group, Inc. reported such beneficial ownership to the SEC on its Schedule 13G/A as of February 9,
2018 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 149,647 shares of the Company's common stock, shared power to
vote 24,315 shares, sole power to dispose or direct the disposition of 12,140,623 shares, and shared power to
dispose or direct the disposition of 173,500 shares.
c) Qatar Investment Authority, a citizen of Qatar, reported such beneficial ownership to the SEC on its Schedule
13G/A as of September 14, 2017 and stated that it had sole voting and disposition power with respect to all such
shares.
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d) Blackrock, Inc. reported such beneficial ownership to the SEC on its Schedule 13G/A as of January 23, 2018 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 5,814,858
shares of the Company's common stock and sole power to dispose or direct the disposition of 6,923,749 shares.
OWNERSHIP BY DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
The following table shows the number of shares of the Company's common stock beneficially owned as of March 19,
2018 by: those persons who are director nominees or who were directors on such date; the principal executive
officers and the principal financial officer during Fiscal 2017; the three next most highly compensated executive
officers of the Company as of the end of Fiscal 2017; and the directors and executive officers on March 19, 2018
(see "Executive Officers of the Company" at PS-15) as a group. In the notes to the table below, "Vested Stock
TIFFANY & CO.
PS-12
Options" refer to stock options that are exercisable as of March 19, 2018 or will become exercisable within 60 days
of that date.
Name
Directors
Alessandro Bogliolo (CEO, effective October 2, 2017)
Rose Marie Bravo
Gary E. Costley
Roger N. Farah
Lawrence K. Fish
Abby F. Kohnstamm
Michael J. Kowalski (Interim CEO from February 5, 2017 to
October 2, 2017)
James E. Lillie
Charles K. Marquis
William A. Shutzer
Robert S. Singer
Francesco Trapani
Annie Young-Scrivner
Executive Officers
Frederic Cumenal (CEO through February 5, 2017)
Mark J. Erceg
Pamela H. Cloud
Philippe Galtie
Leigh M. Harlan
All executive officers and
directors as a group (20 persons):
Amount and Nature of
Beneficial Ownership
Percentage
of Class a
—
33,956 b
21,741 c
16,749 d
68,702 e
65,702 f
121,945 g
17,749 h
163,685 i
351,320 j
37,747 k
381,749 l
—
49,595 m
69,489 n
129,296 o
3,539
46,055 p
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
1,632,274 q
1.3%
a) An asterisk (*) is used to indicate less than 1% of the class outstanding.
b) Includes 29,956 shares issuable upon the exercise of Vested Stock Options.
c) Includes 20,741 shares issuable upon the exercise of Vested Stock Options. Dr. Costley will not stand for re-
election at the 2018 Annual Meeting.
d) Includes 6,749 shares issuable upon the exercise of Vested Stock Options.
e) Includes 26,096 shares issuable upon the exercise of Vested Stock Options.
f)
Includes 34,673 shares issuable upon the exercise of Vested Stock Options.
g) Includes 12,763 shares issuable upon the exercise of Vested Stock Options, 7,000 shares held by the Kowalski
Family Foundation and 30,585 shares held in trust of which Mr. Kowalski is the sole trustee. Mr. Kowalski was
named Interim CEO effective February 5, 2017 and stepped down from that position effective October 2, 2017.
Mr. Kowalski will not stand for re-election at the 2018 Annual Meeting.
h) Includes 6,749 shares issuable upon the exercise of Vested Stock Options.
i)
Includes 29,956 shares issuable upon the exercise of Vested Stock Options, 29,729 shares held in the Charles
and Cynthia Marquis Joint Revocable Trust dated December 8, 2003 and 56,000 shares held in the Marquis
2012 Children's Trust, as Trustee. Mr. Marquis disclaims beneficial ownership of Company shares held by the
Marquis 2012 Children's Trust. Mr. Marquis will not stand for re-election at the 2018 Annual Meeting.
j)
Includes 34,673 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;
TIFFANY & CO.
PS-13
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32,210 shares held in trust for one adult child of which trust Mr. Shutzer's wife is sole trustee; and 176,937
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.
k) Includes 23,619 shares issuable upon the exercise of Vested Stock Options.
l)
Includes 375,000 shares held by Argenta Holdings Sarl, of which Mr. Trapani owns 100% of the equity interests
and 6,749 shares issuable upon the exercise of Vested Stock Options. Pursuant to the Schedule 13D filed jointly
with the SEC on February 22, 2017 by Mr. Trapani and JANA Partners LLC ("JANA"), as of February 14, 2017,
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. From and after February 20, 2017, the date
of the Cooperation Agreement (as defined below) and the Trapani Cooperation Agreement (as defined below), 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 ceased working together for any purpose effective
February 20, 2017, and believe they should no longer be deemed to be a "group" as of such date. As a result, Mr.
Trapani expressly disclaims beneficial ownership of the shares beneficially owned by JANA. For more information
regarding the Cooperation Agreement and the Trapani Cooperation Agreement see "Item 1. Election of the Board"
at PS-17.
m) Includes 12,815 shares issuable upon the vesting of PSUs on March 21, 2018 and 36,780 shares reported as
directly owned on Mr. Cumenal's Form 4 filed with the SEC on March 8, 2017. Mr. Cumenal stepped down from
his position as CEO effective February 5, 2017 and resigned as a director effective February 10, 2017.
n) Includes 65,231 shares issuable upon the exercise of Vested Stock Options.
o) Includes 97,556 shares issuable upon the exercise of Vested Stock Options, 3,471 shares issuable upon the
vesting of PSUs on March 21, 2018 and 523 shares held in Ms. Cloud's account under the 401K Plan.
p) Includes 39,596 shares issuable upon the exercise of Vested Stock Options, 2,297 shares issuable upon the
vesting of PSUs on March 21, 2018 and 12 shares held in Ms. Harlan's account under the 401K Plan.
q) Includes 499,381 shares issuable upon the exercise of Vested Stock Options; 11,429 shares issuable upon the
vesting of PSUs on March 21, 2018; 2,192 shares held in accounts under the 401K Plan; and three shares held
in the Tiffany Employee Stock Purchase Plan.
See "Equity Ownership by Executive Officers and Non-Executive Directors," beginning at PS-67 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 2017, 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, except that one filing was made
one day late. Specifically, on October 13, 2017, Gary E. Costley filed a Form 4 to report the accrual of six dividend
equivalent units on October 10, 2017 in respect of vested restricted stock units granted to him in May 2016.
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TIFFANY & CO.
PS-14
The executive officers of the Company are:
EXECUTIVE OFFICERS OF THE COMPANY
Name
Alessandro Bogliolo
Mark J. Erceg
Philippe Galtie
Pamela H. Cloud
Andrea C. Davey
Leigh M. Harlan
Andrew W. Hart
Gretchen Koback-Pursel
Caroline D. Naggiar
Age
Position
52
49
57
48
49
41
50
45
60
Chief Executive Officer
Executive Vice President – Chief Financial Officer
Executive Vice President – Global Sales
Senior Vice President – Chief Merchandising Officer
Senior Vice President – Global Marketing
Senior Vice President – Secretary & General Counsel
Senior Vice President – Diamond & Jewelry Supply
Senior Vice President – Chief Human Resources Officer
Senior Vice President – Chief Brand Officer
Year Joined
Tiffany
2017
2016
2015
1994
2013
2012
1999
1997
1997
Alessandro Bogliolo. Mr. Bogliolo joined Tiffany on October 2, 2017 as CEO, and was appointed as a director of
Tiffany & Co. effective on that same date. Prior to joining Tiffany, Mr. Bogliolo served as CEO of Diesel SpA, a global
apparel and accessories company, from 2013 to 2017. Previously, he was Chief Operating Officer, North America,
at Sephora USA Inc. from 2012 to 2013. Mr. Bogliolo also spent 16 years at Bulgari SpA from 1996 to 2012,
serving in various management roles, including as Chief Operating Officer and Executive Vice President, Jewelry,
Watches & Accessories.
Mark J. Erceg. Mr. Erceg joined Tiffany in October 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.
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 January 2017 he also assumed responsibility for global
customer and sales service. Effective August 4, 2017, Mr. Galtie's responsibilities were further expanded to include
the Americas. Following this change, he was responsible for sales channels in every region, as well as global store
planning, global sales operations, global customer and omnichannel management and global customer and sales
service. Effective February 1, 2018, Mr. Galtie was promoted to Executive Vice President – Global Sales. 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.
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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. Her current title
is Senior Vice President – Chief Merchandising Officer.
Andrea C. Davey. Ms. Davey joined Tiffany in May 2013 as Vice President – Marketing for Northern America, and in
2014 was named Vice President – Global Marketing, with responsibility for marketing brand management, marketing
production and consumer insights. In 2016, Ms. Davey was named Divisional Vice President – Jewelry Collections,
where she was responsible for overseeing the management of Tiffany's various jewelry collections. She was promoted
to Senior Vice President – Global Marketing effective February 1, 2018. Prior to joining Tiffany, Ms. Davey held
TIFFANY & CO.
PS-15
marketing and brand management positions of increasing responsibility at The Procter & Gamble Company from
1996 to 2013.
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. In
2017, Ms. Harlan's responsibilities were expanded to include global compliance. 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.
Gretchen Koback-Pursel. Ms. Koback-Pursel joined Tiffany in 1997 as a Human Resources Representative and
advanced through positions of increasing management responsibility. In 2012, she was promoted to Vice President –
Global Human Resources, serving as the primary human resources business partner for the Tiffany & Co. executive
team and the Company's creative and operational corporate groups. Effective June 1, 2017, Ms. Koback-Pursel was
promoted to Senior Vice President – Chief Human Resources Officer.
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, with responsibility for
establishing the strategic vision for the TIFFANY & CO. brand, managing brand equity, global brand management and
global public relations. Ms. Naggiar will be retiring from Tiffany effective January 31, 2019. Following April 30,
2018, she will no longer be an executive officer of the Company, but will rather focus on assisting in the transition of
her employment duties.
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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.
At the 2018 Annual Meeting, 10 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. Gary E. Costley and Charles K.
Marquis, who are each age 74 or older, and Michael J. Kowalski will not stand for re-election at the 2018 Annual
Meeting, and the Board thanks them for their 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 2018 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
2018 Annual Meeting.
Why the Nominees were Chosen to Serve. Each of the 10 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 Annie Young-Scrivner, 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) Roger N. Farah, James E. Lillie and Francesco Trapani to the Board and (ii) Mr. Trapani to the
Nominating/Corporate Governance and Search Committees, in each case no later than 10 business days after the
date of the Cooperation Agreement. Mr. Farah, Mr. Lillie and Mr. 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 Mr. Farah, Mr. Lillie and Mr. Trapani
for election to the Board at the 2017 Annual Meeting. Mr. Farah, Mr. Lillie and Mr. Trapani were so nominated, and
were each subsequently elected as directors by the Company's shareholders at the Company's 2017 Annual Meeting.
On December 5, 2017, the Company delivered notice to JANA that the Board had determined to include each of Mr.
Farah, Mr. Lillie and Mr. Trapani on the Company's slate of directors for the 2018 Annual Meeting, and on December
8, 2017 JANA agreed to such inclusion. As a result, the Standstill Period (as defined in the Cooperation Agreement)
has been extended, on and subject to the terms set forth in the Cooperation Agreement, to the date that is 30 days
prior to the expiration of the Company’s advance notice period for the nomination of directors at the 2019 Annual
Meeting.
Mr. Farah, Mr. Lillie and Mr. 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, during the Standstill Period, they will vote their respective shares in favor of
the election of each of Mr. Farah, Mr. Lillie and Mr. 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, Dr. Costley and Mr.
Marquis 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.
TIFFANY & CO.
PS-17
The specific experience and qualifications of each director nominee are 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."
Information concerning each of the nominees of the Board is set forth below:
Alessandro
Bogliolo
Rose Marie Bravo
Roger N. Farah
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Lawrence K. Fish
Mr. Bogliolo, 52, became a director of Tiffany & Co. on October 2, 2017, the same date on
which he commenced employment as CEO. Prior to joining Tiffany, Mr. Bogliolo served as
CEO of global apparel and accessories company Diesel SpA from 2013 to 2017.
Previously, he was Chief Operating Officer, North America, at Sephora USA Inc. from 2012
to 2013. Mr. Bogliolo also spent 16 years at Bulgari SpA from 1996 to 2012, serving in
various management roles, including as Chief Operating Officer and Executive Vice
President, Jewelry, Watches & Accessories.
Key Skills: retail and luxury brand management, product development, merchandising,
marketing, global management and strategic planning.
Ms. Bravo, CBE, 67, 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.
Mr. Farah, 65, became a director of Tiffany & Co. in March 2017 and was elected
Chairman of the Board effective October 2, 2017. He served as the Co-CEO of Tory Burch
LLC from 2014 to March 2017, when he transitioned to the role of Executive Director,
which he held through December 2017. He also served as a member of the Board of
Directors of Tory Burch LLC from 2014 to 2017. 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.
Mr. Fish, 73, 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. He 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.
TIFFANY & CO.
PS-18
Abby F. Kohnstamm
James E. Lillie
William A. Shutzer
Ms. Kohnstamm, 64, 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.
Mr. Lillie, 56, became a director of Tiffany & Co. in March 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 J2 Acquisition Limited and Nomad Foods Limited,
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.
Mr. Shutzer, 71, 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.
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PS-19
Robert S. Singer
Francesco Trapani
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Annie Young-
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Mr. Singer, 66, 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 Coty Inc., and served on
the Board of Directors of the following public companies during the past five years: Mead
Johnson Nutrition Company 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, 61, became a director of Tiffany & Co. in March 2017. From 1984 until 2012,
Mr. Trapani served as CEO of Bulgari S.p.A. ("Bulgari"), 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. While he
remained a director of Bulgari following 2012, he resigned such role on February 20,
2017. Mr. Trapani was named as a defendant, in his capacity as CEO of Bulgari and along
with other directors and managers thereof, in a pending criminal proceeding in Italy related
to an alleged violation of the Italian tax laws resulting from the tax treatment of certain
intercompany dividend payments made to Bulgari beginning in 2008. The tax treatment of
such dividend payments was determined based on the advice of Bulgari's tax advisors and
auditors, after analysis of all applicable rules, regulations and related interpretations.
Further, the tax treatment of such dividend payments was previously reviewed, in a separate
administrative proceeding, by the Italian Revenue Agency who deemed them to be in
compliance with applicable Italian tax laws. From 2011 to 2014, Mr. Trapani also served
as Chairman and CEO of the LVMH Watches and Jewelry Division and on the Board of
Directors of LVMH; following 2014, he continued to serve on the LVMH Board and as a
senior advisor to the LVMH CEO until 2016. 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. In 2016, Mr. Trapani became the
Executive Deputy Chairman and a partner of Tages Holding S.p.A., an asset management
firm. Mr. Trapani holds a degree in business administration from the University of Naples.
Key Skills: luxury brand management, finance, strategic planning and global management.
Ms. Young-Scrivner, 49, is CEO of Godiva Chocolatier ("Godiva"). Prior to joining Godiva in
August 2017, Ms. Young-Scrivner held senior positions at Starbucks Corporation
("Starbucks") beginning in 2009, including as Global Chief Marketing Officer & President
of Tazo Tea from 2009 to 2012, President of Starbucks Canada from 2012 to 2014,
President, Teavana & Executive Vice President of Global Tea from 2014 to 2015, and
Executive Vice President, Global Digital & Loyalty Development from 2015 until her
departure in April 2017. Prior to joining Starbucks, Ms. Young-Scrivner held senior
leadership positions at PepsiCo, Inc. in sales, marketing and general management,
including her role as Region President of PepsiCo Foods Greater China from 2006 to 2008.
Ms. Young-Scrivner holds a B.A. from the Foster School of Business, University of
Washington and an Executive M.B.A. from the Carlson School of Business, University of
Minnesota. Ms. Young-Scrivner also served on the Board of Directors of the following public
company during the past five years: Macy's Inc.
Key Skills: omnichannel brand management, digital marketing, global management,
consumer insights and data analytics, and strategic planning.
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 such
director standing for re-election 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
TIFFANY & CO.
PS-20
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.com, 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 10 NOMINEES FOR DIRECTOR.
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PS-21
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:
•
Independent Chairman – Roger N. Farah, an independent director, was elected as Chairman of the Board
effective October 2, 2017;
• 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 current directors standing for re-election 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 – 8 of the Company's 10 directors up for election are independent;
• Proxy access by-law – adopted by the Board during Fiscal 2017;
• 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 non-management 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 by the full Board;
Long-standing policies governing business and ethical conduct;
•
• Commitment to corporate social responsibility; and
•
Leading compensation practices – see "Corporate Governance Best Practices" at PS-47.
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 limited exceptions) during the Standstill
Period. The Board intends to take action, effective as of the date of the 2018 Annual Meeting, to establish the
number of directors constituting the full Board at 10.
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.com, 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;
• Monitoring of performance in comparison to the annual operating plan;
• Review and approval of the Company's multi-year strategic plan prepared by management;
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PS-22
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• 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, who served as the Company's Interim CEO from February 5, 2017 to October 2, 2017 and its
CEO from 1999 until March 31, 2015, held the position of Chairman of the Board from the end of Fiscal 2002 until
October 2, 2017. As such, the role of Chairman of the Board and the office of CEO were held by the same individual
for much of the Company's recent history. However, in February 2017, Mr. Kowalski announced that, following the
transition of his responsibilities as Interim CEO to the Company's next CEO, he also planned to relinquish his
responsibilities as Chairman of the Board. Effective October 2, 2017, and concurrent with Alessandro Bogliolo
becoming the Company's CEO, Mr. Kowalski resigned from his position as Chairman of the Board.
Pursuant to the Company's Corporate Governance Principles, it is the responsibility of the Board to determine
whether the offices of Chairman of the Board and CEO shall be held by one person or by separate persons, and to
further determine whether the person holding the office of Chairman of the Board shall be "independent." Further, in
determining which director is elected to serve as Chairman of the Board, the Board broadly considers all relevant
facts and circumstances, as well as candidates' business experience, specific areas of expertise and skill set,
including their ability to effectively moderate discussions during Board meetings and their responsiveness to the
Board's suggestions for agenda items and information to be provided by management to the Board.
Following Mr. Kowalski's February 2017 announcement, the Board, with the assistance of its Nominating/Corporate
Governance Committee, assessed the Board’s leadership structure. The Board determined that having an
independent, non-executive Chairman would be in the best interest of the Company and its shareholders in light of
the recent CEO transition, the ongoing Board refreshment initiatives and the continuing strategic evolution of the
Company. The Board believes that a clear division of responsibilities between the leadership of the Board and the
executive responsible for the day-to-day operation of the Company's business will best enable Mr. Bogliolo to focus
his time and attention on managing the Company, and allow Mr. Farah to dedicate his efforts to Board governance
matters and to leading the Board in its fundamental role of providing oversight and guidance regarding the business,
operations and strategy of the Company. The Board believes the non-executive Chairman role is also important to
provide additional independent oversight of the Company's management and to serve in an advisory capacity to the
CEO. In addition, the existence of an independent, non-executive Chairman facilitates communication among the
Company's other directors, or between any of them, as well as communication between shareholders and the
Company's independent and other non-management directors.
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Effective October 2, 2017, the Board elected Roger N. Farah, an independent director who joined the Board in
March 2017, as the non-executive Chairman of the Board. Consistent with the Company's Corporate Governance
Principles, upon Mr. Farah's election as Chairman, the Board ceased to have a "presiding independent director", a
role previously held by Charles K. Marquis in his capacity as chairman of the Nominating/Corporate Governance
Committee. The Board considered Mr. Farah's extensive experience as an executive in the luxury retail industry,
noting that his in-depth understanding of the industry, consumer behavior and the competitive environment in which
the Company operates will be invaluable in advising the CEO and in guiding the Board through key matters within its
purview, including the strategic planning process. Additionally, the Board focused on Mr. Farah's service as a
director and an executive of multiple U.S. public companies with global operations, noting that such experience has
enabled him to develop knowledge of public company governance, compensation, investor relations, regulatory and
reporting matters. The Board also noted the expertise Mr. Farah had demonstrated and the insights he had provided
during his tenure on the Company's Board to date.
TIFFANY & CO.
PS-23
As non-executive Chairman of the Board, Mr. Farah works closely with the CEO, providing advice to the CEO on
operational, strategic, organizational and executive management matters. In this capacity, he facilitates
communications between the directors and the Company's management. Mr. Farah also approves the schedule of
Board meetings, sets the agenda for each Board meeting, after consideration of any items submitted for inclusion by
the other directors and Company management, and consults with management regarding the materials to be
presented to the Board to ensure such materials are responsive to the Board's requests and needs. As non-executive
Chairman, Mr. Farah presides over meetings of the Board as well as meetings of the non-management and
independent directors, and has the authority to call such meetings. Both in and outside of Board meetings, Mr.
Farah facilitates communication among the directors. Consistent with this role, Mr. Farah works closely with the
chair of the Nominating/Corporate Governance Committee to evaluate the performance of the Board and its
committees and to provide oversight with respect to the Board's compliance with corporate governance requirements
and best practices.
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
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.
SHAREHOLDER ENGAGEMENT AND COMMUNICATION WITH NON-MANAGEMENT DIRECTORS
The Company's Board and management are strongly committed to proactive and ongoing communications with
current, potential and former shareholders. The Company's approach to shareholder engagement revolves around
providing informative, candid, credible and consistent communications to shareholders, as well as soliciting their
feedback. The Company's CEO, Chief Financial Officer ("CFO") and Vice President – Investor Relations, regularly
communicate with Company shareholders through one-on-one and group meetings and in conferences in an effort to
remain informed regarding shareholder perspectives on strategic, operational and governance matters (including with
respect to executive compensation) and to address any questions or concerns from shareholders.
Through the foregoing shareholder engagement practices, the Company's management serves as a liaison between
shareholders and the Board. However, shareholders and other interested persons may also contact the Board directly
by sending written communications to the entire Board or to any of the non-management directors by addressing
their concerns to Roger N. Farah, Chairman of the Board, 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, Robert S. Singer, Francesco Trapani and Annie Young-Scrivner.
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 Mr. Singer, Mr. Fish, Ms. Kohnstamm, Mr. Marquis and Mr.
Trapani meet the additional, heightened independence criteria applicable to audit committee members under the
New York Stock Exchange rules.
TIFFANY & CO.
PS-24
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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 Mr. Farah
and Mr. 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 "Additional Compensation from JANA Partners LLC" at PS-108 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.
BOARD AND COMMITTEE MEETINGS AND ATTENDANCE DURING FISCAL 2017
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
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. Eight of the Company's 10 directors up for election at
the 2018 Annual Meeting attended the 2017 Annual Meeting (the two non-attending directors were not on the
Board in May 2017). Gary E. Costley, Michael J. Kowalski and Charles K. Marquis, who will not stand for re-election
at the 2018 Annual Meeting, also attended the 2017 Annual Meeting.
Each director who served on the Board during Fiscal 2017 attended at least 81% 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 regular meetings and nine special meetings. Attendance averaged 94% amongst all
members.
• The Audit Committee held nine meetings. Attendance averaged 91% amongst all members.
• The Compensation Committee and its Stock Option Subcommittee held nine meetings. All members
attended all meetings.
• The Nominating/Corporate Governance Committee held seven meetings. All members attended all meetings.
• The Finance Committee held six meetings. Attendance averaged 96% amongst all members.
• The Corporate Social Responsibility Committee held three meetings. Attendance averaged 92% amongst all
members.
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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 19, 2018:
Director
Audit*
Compensation
Committee &
Stock Option Sub-
committee*
Corporate
Social
Responsibility
Dividend
Finance
Nominating/
Corporate
Governance*
Alessandro Bogliolo
Rose Marie Bravo
Gary E. Costley
Roger N. Farah
Lawrence K. Fish
Abby F. Kohnstamm
Michael J. Kowalski
James E. Lillie
Charles K. Marquis
William A. Shutzer
Chair
Chair
Chair
Chair
Robert S. Singer
Chair
Francesco Trapani
* Composed solely of independent directors.
Given that Dr. Costley, Mr. Kowalski and Mr. Marquis will not stand for re-election at the 2018 Annual Meeting, the
Board intends to make certain changes to committee composition and chairmanships at its May 24, 2018 meeting.
Audit Committee
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The Company's Audit Committee is an "audit committee" established in accordance with Section 3(a)(58)(A) of the
Exchange Act. The primary purpose of the Audit Committee is to assist the Board in fulfilling its oversight
responsibilities with respect to the (i) integrity of the Company's financial statements, (ii) Company's compliance
with legal and regulatory requirements, (iii) Company's process to assess, monitor and control major financial risk
exposures, (iv) independent auditor's qualifications and independence, and (v) performance of the Company's
internal audit function and independent auditor. The Audit Committee operates under a charter adopted by the
Board; that charter may be viewed on the Company's website, www.tiffany.com, by clicking "Investors" at the bottom
of the page and then selecting "Corporate Governance" from the left-hand column. Under its charter, the Audit
Committee's responsibilities and related oversight processes 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;
• Reviewing and evaluating the lead partner of the independent auditor;
• Approving in advance all audit and non-audit services to be rendered by the independent registered public
accounting firm;
• Reviewing and discussing the Company's financial statements and audit findings, including the impact of
significant events, transactions or changes in accounting principles thereon, with management and the
independent auditor in advance of filing;
• Reviewing and discussing significant proposed changes in the Company's auditing and accounting
principles, policies, controls, procedures and practices with management and the independent auditor;
• Discussing the Company's earnings press releases in advance of filing, as well as financial information and
earnings guidance provided to analysts and rating agencies;
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PS-26
• Reviewing the adequacy of the Company's system of internal accounting and financial controls;
• Discussing guidelines and policies with respect to risk assessment and risk management, including the steps
management has taken to monitor and control major risk exposures in the following areas: financial and
financial reporting risks, risks related to litigation or other legal or compliance matters, employee safety
risks, global security risks, information security and technology risks, and data privacy and data protection
risks;
• Meeting separately, periodically, with management, the Company's internal audit function and the
independent auditor;
• Discussing with the Company's internal audit function and the independent auditor the overall scope and
plans for their respective audit work;
• Discussing with management, the Company's internal audit function and, as appropriate, the independent
auditor the adequacy and effectiveness of the Company’s financial reporting process and system for
monitoring and managing business risk and legal compliance programs;
• 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
• Reviewing the responsibilities, budget and staffing of the Company's internal audit function, as well as the
compensation and performance of the person responsible for that function.
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., Mead Johnson Nutrition
Company and Jimmy Choo PLC. The Board also considered Mr. Singer's role as Chairman of the audit committee for
Coty Inc. The Board has determined that Mr. Singer's simultaneous service on the audit committee of one other
public company will not impair his ability to effectively serve on the Company's Audit Committee. See "Report of the
Audit Committee" at PS-37.
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-38.
Compensation Committee
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The primary function of the Compensation Committee is to assist the Board in compensation matters. The
Compensation Committee operates under its charter which may be viewed on the Company's website,
www.tiffany.com, by clicking "Investors" at the bottom of the page, and then selecting "Corporate Governance" from
the left-hand column.
Under its charter, the Compensation Committee's responsibilities include:
• 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;
• Where Board action is required, making recommendations to the Board with respect to the compensation of
our other executive officers, including compensation under incentive and equity-based plans;
• 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
TIFFANY & CO.
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• 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 "Competitive Compensation Analysis - No Benchmarks" at PS-52);
• providing information on trends and regulatory developments affecting executive compensation;
•
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.
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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 Compensation 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
Evaluation Process" at PS-51 and "Report of the Compensation Committee" at PS-73.
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.
Compensation Committee Interlocks and Insider Participation
During 2017, the members of the Compensation Committee and its Stock Option Subcommittee were Rose Marie
Bravo, Gary E. Costley, Roger N. Farah, Abby F. Kohnstamm, Charles K. Marquis, Peter W. May and Robert S. Singer.
Mr. May did not stand for re-election at the Company's 2017 Annual Meeting. No director serving on the
Compensation Committee or its Stock Option Subcommittee during any part of Fiscal 2017 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
TIFFANY & CO.
PS-28
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
be viewed on the Company's website, www.tiffany.com, by clicking "Investors" at the bottom of the page, and then
selecting "Corporate Governance" from the left-hand column. Under its charter, the role of the Nominating/Corporate
Governance Committee includes recommending to the Board:
• 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;
• The optimal number of directors constituting the entire Board;
• Corporate governance principles applicable to the Company;
• Non-management director compensation; and
• Management performance and succession planning.
Submitting Candidate Names
If you would like to submit the name of a candidate for the Nominating/Corporate Governance Committee to consider
as a nominee of the Board for director, you may send your submission at any time to the Nominating/Corporate
Governance Committee, c/o 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.com, and may be viewed 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.
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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 leading third party search firm in 2015 to assist the
Committee in the identification of certain non-employee 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. While the Nominating/Corporate Governance Committee engaged a
new third party search firm to replace the prior one in November 2017, the Company's Board refreshment process
has been consistently ongoing since 2015. 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 in personal and
professional experience, perspective, ways of thinking, education, skill and other individual qualities and attributes
that contribute to a more diversified mindset among the directors. In addition, one of the factors that the Board
TIFFANY & CO.
PS-29
considers during its annual self-evaluation is whether the membership of the Board provides an appropriate mix of
skills, experience and backgrounds.
Roger N. Farah, James E. Lillie and Francesco Trapani were originally appointed to the Board pursuant to the
Cooperation Agreement, as discussed under "Item 1. Election of the Board" above.
Corporate Social Responsibility Committee
The Corporate Social Responsibility Committee assists the Board in its oversight of the Company's initiatives, plans
and practices with respect to corporate social responsibility matters of significance to the Company and the
communities in which it operates. These matters are presently defined as ethical and sustainable sourcing, human
rights, the environment, supplier conduct, labor conditions, climate change, diversity in employment, charitable
giving, government relations and political spending. The Corporate Social Responsibility Committee operates under
the charter adopted by the Board. The charter may be viewed on the Company's website, www.tiffany.com, by
clicking "Investors" at the bottom of the page, and then selecting "Corporate Governance" from the left-hand column.
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.com, by clicking "Investors" at the bottom of the page, and then selecting "Corporate Governance" from
the left-hand column. Alessandro Bogliolo 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 schedule of, and
strategy with respect to, insurance coverage, 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 adopted by the Board. The
charter may be viewed on the Company's website, www.tiffany.com, by clicking "Investors" at the bottom of the page,
and then selecting "Corporate Governance" from the left-hand column.
Search Committee
The Board formed the Search Committee in February 2017 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. Pursuant to the charter of the Search Committee, which was adopted by the
Board, the Search Committee dissolved automatically upon Alessandro Bogliolo's appointment as the Company's
CEO.
BOARD SELF-EVALUATION
Annually, each non-management 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 results of such self-
assessments are then discussed by the full Board.
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. As a result of this requirement, Gary E. Costley and
Charles K. Marquis will not stand for re-election at the 2018 Annual Meeting.
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In light of upcoming retirements at the 2017 and 2018 Annual Meetings, in 2015 the Board engaged a leading
search firm to assist in its search for new director candidates. In March 2017, after working collaboratively with
JANA Partners LLC in connection with the Board's refreshment objectives, the Board appointed three new
independent directors as contemplated by the Cooperation Agreement. Alessandro Bogliolo then joined the Board in
October 2017. In November 2017, the Nominating/Corporate Governance Committee engaged a new third party
search firm to replace the prior one and, in March 2018, the Board nominated Annie Young-Scrivner for election at
the 2018 Annual Meeting. Pursuant to the mandatory retirement age provision in the Company's By-laws, the Board
expects that Lawrence K. Fish will not stand for re-election at the 2019 Annual Meeting. As such, the Nominating/
Corporate Governance Committee is continuing to work with its engaged search firm to evaluate additional
candidates for election to the Board. The Board carefully considers its decisions with respect to its optimal size and
the selection, nomination and election of individuals to serve as directors; as such, notwithstanding its ongoing
Board refreshment efforts, the Board may or may not nominate additional individuals to serve as directors in the
near- to mid-term.
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. If the Nominating/Corporate Governance Committee does not accept such
resignation within 10 days of receipt, the resignation will not be effective.
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 Michael J. Kowalski as Interim CEO
and formed the Search Committee to identify potential candidates for the CEO position. Following the Search
Committee's assessment, and the full Board's consideration, of candidates, the Board appointed Alessandro Bogliolo
as the Company's CEO effective October 2, 2017.
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The Board will, at least annually, evaluate Mr. Bogliolo's performance in connection with a self-assessment
performed by Mr. Bogliolo. 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; an annual enterprise risk assessment
process; annual operating planning; strategic planning; and nurturing a corporate culture that encourages and
rewards ethical behavior and supports the TIFFANY & CO. brand image. This approach to risk management reflects
TIFFANY & CO.
PS-31
these goals: that every risk should, when possible and practicable, be identified, quantified as to impact, assigned a
probability factor, and properly delegated to the appropriate member of management for a response. This approach
helps to ensure that the Company's enterprise risk management process informs the Company's approach to strategic
planning, as well as to managing the day-to-day operations of the business. Operational risks so categorized are also
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 specifically 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 strategic, operational and brand risks inherent
in the plans.
Each year, the Board reviews and approves the annual operating plan and the strategic plan. The Board also annually
reviews management's enterprise risk management assessment and results. In addition, as part of its general
oversight role, the Board has responsibility for assessing material risks that arise in the Company's operations as
identified by management and reviews mitigation plans for addressing such risks. These risk areas include, for
example, risks related to competition, competitive brand positioning and execution on the Company's strategic
initiatives, as well as sourcing, distribution 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 risks related to employee safety, global security, fraud, litigation and other legal and
compliance matters, and data privacy and data protection. The Audit Committee more generally reviews any litigation
or other legal or compliance matters that could have a significant impact on the Company's financial results, as well
as the status of the Company's income tax returns, any government audits related thereto, and the Company's overall
tax strategy. The Audit Committee is further responsible for reviewing and discussing the Company's cybersecurity,
data privacy and data security programs and regularly engages with management to monitor the risks related to this
complex and evolving area.
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The Compensation Committee is responsible for assessing, on an annual basis, potential material risks to the
Company from its compensation programs and plans.
The Nominating/Corporate Governance Committee concerns itself principally with the Company's risks related to
corporate governance, as well as succession planning for executive officers and directors.
The Finance Committee concerns itself principally with liquidity risk, including risks related to foreign currency
exchange rates. The Finance Committee also annually reviews the Company's schedule of, and strategy with respect
to, insurance coverage, as part of the Company's risk mitigation initiatives.
The Corporate Social Responsibility Committee assists the Board in its oversight of management's evaluation of risks
and opportunities related to ethical and sustainable sourcing, human rights, the environment, supplier conduct,
labor conditions, climate change, diversity in employment, charitable giving, government relations and political
spending.
The Company has not designated an overall risk management officer and has no formal policy for coordination of risk
management oversight amongst the Board committees involved. However, the full Board does approve the duties,
responsibilities and procedures with respect to the areas of risk oversight specified in the charter of each committee.
Each committee also shares the minutes of its meetings with the Board and reports regularly to the Board, to the
extent the full Board is not otherwise present for such meetings. All committee meetings are open to all directors,
and most directors regularly attend all committee meetings because such meetings are scheduled on the day of, or
the day preceding, Board meetings. The practices and processes set forth in this paragraph represent the Board's
approach to coordinating the risk management oversight function. The committee structure of the Board was not
organized specifically for the purpose of risk management oversight.
TIFFANY & CO.
PS-32
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,
unauthorized disposition 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.
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 financial, accounting, internal
controls or auditing matters, as well as incidents of potential or suspected corruption and other legal and regulatory
non-compliance. 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 CFO 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.com, and may be
viewed 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.com, by clicking "Investors" at the bottom of the
page, and then selecting "Corporate Governance" from the left-hand column.
In accordance with the Principles Governing Corporate Political Spending, the Company reported the following
expenses for Fiscal 2017: 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, public lands conservation 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 also seeks to understand whether any membership dues the Company
and its affiliates pay to major trade associations (defined to include those trade associations to which the Company
and its affiliates pay at least $25,000 in annual dues) were used by such trade associations for political
expenditures. The major trade associations to which the Company and its affiliates paid annual dues in Fiscal 2017
have advised the Company that none of the Company's dues were used by such trade associations for political
expenditures in Fiscal 2017. Additionally, the Company and its affiliates did not make any political expenditures
during Fiscal 2017.
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PS-33
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-30 for more information.
The Company publicly discloses information regarding its corporate social responsibility strategy, programs and
performance at www.tiffany.com/CSR.
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
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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 or will have 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.
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 2017. None of the
independent directors serve as an executive officer of these charities:
TIFFANY & CO.
PS-34
• 92nd Street Y: merchandise grants of $1,500 (Peter W. May, who served as a director of the Company during
Fiscal 2017 but did not stand for re-election at the 2017 Annual Meeting, is an Honorary Director).
• Fish Family Foundation: $10,000 cash contribution and merchandise grants of $450 to support the
Japanese Women's Leadership Initiative (Lawrence K. Fish is a Trustee).
• Partnership for New York City: $15,000 annual dues contributions (Mr. May is a member of the Executive
Committee).
• Prep for Prep: merchandise grants of $2,615 (William A. Shutzer is a Trustee).
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ITEM 2. RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO AUDIT OUR
FISCAL 2018 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 2018. 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 2018 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 2018.
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REPORT OF THE AUDIT COMMITTEE
The primary purpose of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities with
respect to the (i) integrity of the Company's financial statements, (ii) Company's compliance with legal and regulatory
requirements, (iii) Company's process to assess, monitor and control major financial risk exposures, (iv) independent
auditor's qualifications and independence, and (v) performance of the Company's internal audit function and
independent auditor. The Audit Committee operates under a charter adopted by the Board; that charter may be
viewed on the Company's website, www.tiffany.com, by clicking "Investors" at the bottom of the page and then
selecting "Corporate Governance" from the left-hand column. 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, 2018 and 2017, 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, 2018. 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, not just acceptability, 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 also 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. 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, 2019, the Audit Committee considered the quality and efficiency of the services provided by PwC,
including PwC's technical expertise and knowledge of the Company's business operations, accounting policies and
internal control over financial reporting. The Audit Committee also considered whether the provision by PwC of the
tax consultation, tax compliance and other non-audit-related services disclosed below under "Relationship with
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.
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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, 2018.
Signed:
Robert S. Singer, Chair
Lawrence K. Fish
Abby F. Kohnstamm
Charles K. Marquis
Francesco Trapani
Members of the Audit Committee
TIFFANY & CO.
PS-37
RELATIONSHIP WITH INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
As noted under "Audit Committee" at PS-26, 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 further ensures the rotation of the audit partner responsible for reviewing such audit, in each case as
required by law. The Audit Committee also considers whether the audit and non-audit services provided by the
Company's independent registered public accounting firm are compatible with maintaining that firm's independence,
and periodically considers whether, in order to assure continuing auditor independence, there should be regular
rotation of such firm. These processes enable the Audit Committee to ensure the continuing independence of the
Company’s independent registered public accounting firm. The Audit Committee also evaluates the quality and
efficiency of the services provided by such firm, including that firm's technical expertise and knowledge of the
Company's business operations, accounting policies and internal control over financial reporting, in determining
whether to appoint or retain such firm.
On the basis of its Fiscal 2017 review of these independence, quality and efficiency considerations, 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, 2019.
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, 2018 and 2017, 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 a
All Other Fees b
Total Fees
January 31, 2018
January 31, 2017
$
3,645,100
$
3,345,400
493,300
4,138,400
1,702,100
177,400
163,300
3,508,700
2,003,900
195,400
$
6,017,900
$
5,708,000
a) Tax fees consist of fees for tax compliance and tax consulting services. These fees include tax compliance fees of
$1,637,400 for the year ended January 31, 2018 and $947,300 for the year ended January 31, 2017.
b) All other fees consist primarily of the Sustainability Assurance, Kimberley Process Agreed Upon Procedures and
costs for research software for the years ended January 31, 2018 and January 31, 2017.
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TIFFANY & CO.
PS-38
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 2018 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 (Alessandro Bogliolo, Frederic
Cumenal, Michael J. Kowalski, Mark J. Erceg, Pamela H. Cloud, Philippe Galtie, and Leigh M. Harlan) for which your
approval is sought may be found at PS-41 through PS-104 inclusive of this Proxy Statement.
At the 2017 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 fiscal year ended January 31, 2017
("Fiscal 2016"). The Company's Say on Pay proposal passed with 97.2% 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 2017.
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TIFFANY & CO.
PS-39
COMPENSATION OF THE CEO AND OTHER EXECUTIVE OFFICERS
Contents
Compensation Discussion and Analysis
Report of the Compensation Committee
Summary Compensation Table - Fiscal 2017, 2016 and 2015
Grants of Plan-Based Awards Table – Fiscal 2017
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 2017
Pension Benefits Table
Nonqualified Deferred Compensation Table
Potential Payments on Termination or Change in Control
CEO Pay Ratio
Director Compensation Table – Fiscal 2017
Equity Compensation Plan Information
Page PS-41
Page PS-73
Page PS-74
Page PS-80
Page PS-84
Page PS-89
Page PS-93
Page PS-93
Page PS-97
Page PS-99
Page PS-104
Page PS-105
Page PS-109
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TIFFANY & CO.
PS-40
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 2017.
The Company's NEOs for Fiscal 2017 were as follows:
NAMED EXECUTIVE OFFICERS
Alessandro Bogliolo
Chief Executive Officer, appointment effective October 2, 2017
Frederic Cumenal
Chief Executive Officer, departure effective February 5, 2017
Michael J. Kowalski
Interim Chief Executive Officer, February 5, 2017 to October 2, 2017
Mark J. Erceg
Executive Vice President – Chief Financial Officer
Pamela H. Cloud
Senior Vice President – Chief Merchandising Officer
Philippe Galtie
Executive Vice President – Global Sales
Leigh M. Harlan
Senior Vice President – Secretary & General Counsel
2017 Overview
EXECUTIVE SUMMARY
In October 2017, Alessandro Bogliolo was appointed CEO, following the departure of Frederic
Cumenal in February 2017. Compensation provided to the NEOs during Fiscal 2017 — which
included short- and long-term incentives linked to key performance measures, as well as certain one-
time payments and grants — was intended to serve the objectives of recruiting a new CEO and
motivating and retaining executive talent during the transition period, while continuing to reward
achievement of short- and long-term financial goals and link management and shareholder interests.
Short-term incentive awards for Fiscal 2017 paid out at 103.8% of target based on achievement of
operating earnings, Constant Currency Sales Growth and individual performance targets. This payout
reflected net sales growth of 4%, Constant Currency Sales Growth of 4% (see Appendix I at PS-112)
and operating earnings of $794.5 million for Fiscal 2017. PSUs granted for the three-year
performance period beginning on February 1, 2015 and ending on January 31, 2018 vested at
53.4% of target shares and 26.7% of maximum shares, based on net earnings and return on assets,
as compared to pre-established goals.
Target direct compensation established for the NEOs for Fiscal 2018 remained unchanged from the
end of Fiscal 2017 (aside from an increase for one executive that accompanied a promotion). The
design of the short-term and long-term incentive programs was also unchanged from Fiscal 2017.
The performance goals approved for short- and long-term incentive compensation awarded for Fiscal
2018 were informed by the annual operating plan and three-year strategic plan approved by the
Board in March 2018. These plans reflect, among other factors, increased investment spending in a
number of areas in Fiscal 2018, which management and the Board believe is necessary to achieve
longer-term financial objectives. (For information concerning the Company’s Fiscal 2018 outlook and
underlying assumptions, see K-48 of the Company’s Annual Report on Form 10-K.) The performance
goals established for Fiscal 2018 incentive compensation are likewise intended to balance near-term
financial objectives with brand stewardship and sustainable growth.
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TIFFANY & CO.
PS-41
2017 Company Performance
Reflected below are key highlights for Fiscal 2017:
Stock Price at
January 31, 2018
Stock Price at
January 31, 2017
Total Dividends Paid
Per Share
Total Shareholder
Return
$106.65
$78.72
$1.95
38%
(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 2017
Fiscal 2016
Percentage
Increase/
(Decrease)
$
794.5 $
794.5
370.1
516.3
2.96
4.13
721.2
759.2
446.1
470.1
3.55
3.75
10 %
5 %
(17)%
10 %
(17)%
10 %
*See Appendix I at PS-112 for Non-GAAP reconciliation.
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Sales:
Profitability:
Worldwide net sales increased 4% to $4.2 billion, reflecting sales growth in most
reportable segments. Comparable store sales were unchanged from the prior year.
There was no significant impact from currency translation (see Appendix I at PS-112).
Net earnings decreased 17% to $370.1 million, or $2.96 per diluted share. However,
net earnings in 2017 included a net charge of $1.17 per diluted share related to the
enactment of the 2017 U.S. Tax Cuts and Jobs Act (see Appendix I at PS-112). Net
earnings in 2016 included impairment charges of $0.19 per diluted share (see
Appendix I at PS-112). Excluding these charges, net earnings per diluted share
increased 10% to $4.13 (see Appendix I at PS-112).
Store Expansion:
The Company added a net of two TIFFANY & CO. stores, resulting in a 3% net
increase in gross retail square footage.
Product Introductions: The Company expanded its product offerings, including by introducing the new
TIFFANY HARDWEAR jewelry collection, through additions to several existing jewelry
collections, such as the TIFFANY T collection, and by introducing its new Home and
Accessories collection, new watch designs and a new fragrance.
Cash Flow:
Cash flow from operating activities was $932.2 million in 2017, compared with
$705.7 million in 2016. Free cash flow (see Appendix I at PS-112) was $692.9
million in 2017, compared with $482.9 million in 2016.
Returning Capital to
Shareholders:
The Company returned capital to shareholders by paying regular quarterly dividends
(which were increased 11% effective July 2017 to $0.50 per share, or an annualized
rate of $2.00 per share) and by repurchasing 1.0 million shares of its Common Stock
for $99.2 million.
Chief Executive Officer Transition
At the beginning of Fiscal 2017, on February 5, 2017, Frederic Cumenal stepped down as CEO, and
Michael J. Kowalski, then the Chairman of the Board of Directors, was appointed as Interim CEO. Mr.
Kowalski had previously served as CEO from 1999 until his retirement effective March 31, 2015. For
transition purposes, Mr. Cumenal remained employed by the Company until February 10, 2017.
TIFFANY & CO.
PS-42
On October 2, 2017, Alessandro Bogliolo was appointed CEO, succeeding Mr. Kowalski. On the same
date, Mr. Kowalski also resigned as Chairman of the Board of Directors but remained a director of the
Company.
Alessandro Bogliolo Appointment as Chief Executive Officer
In connection with his recruitment, Mr. Bogliolo was provided the following compensation, pursuant
to an offer letter by Tiffany and the Company, dated July 12, 2017:
• Annual base salary of $1,350,000 per year;
• Annual short-term incentive award in the target amount of 150% of base salary, with the
actual amount of the Fiscal 2017 award to be calculated on a pro-rata basis to reflect Mr.
Bogliolo's actual service during Fiscal 2017;
• Annual long-term incentive award (for which Mr. Bogliolo will first be eligible beginning with
Fiscal 2018) with a target value of 500% of base salary;
• One-time sign-on awards of: (i) stock options with a grant date value of $1,400,000, (ii) RSUs
with a grant date value of $1,400,000, in each case to vest in equal installments on the first
three anniversaries of the date Mr. Bogliolo commenced employment, and (iii) $2,800,000 in
cash, payable in a lump sum in January 2018, and subject to partial recoupment in the event
of termination for cause or resignation without good reason prior to October 2, 2019 (the
second anniversary of his commencement date). These awards were intended to replace
amounts forfeited at his prior employer and to provide further inducement to join the
Company; and
• A one-time payment of $500,000 to reimburse Mr. Bogliolo's expenses in relocating to the
United States, as well as reimbursement of certain expenses for tax and legal advice. The
relocation payment is also subject to partial recoupment in the event of termination for cause
or resignation without good reason prior to October 2, 2019.
Mr. Bogliolo's offer letter also provides for certain severance benefits in the event his employment is
involuntarily terminated without cause or he resigns with good reason prior to October 2, 2020. For a
description of these benefits, see "Alessandro Bogliolo Offer Letter" at PS-70. The foregoing summary
of Mr. Bogliolo’s offer letter is not complete and is subject to, and qualified by reference to, the full
text of the document filed as Exhibit 10.39 to the Company’s Current Report on Form 8-K filed with
the SEC on July 13, 2017.
Frederic Cumenal Departure
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 provided for by his employment agreement:
• Cash severance in the amount of $1,909,387;
• Cash payment in the amount of $1,631,250, in respect of the payout of his short-term
incentive award for Fiscal 2016, based on actual performance of the Company, as determined
by the Compensation Committee ("Committee") of the Board in accordance with the targets
and guidelines established at the beginning of the performance period; 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), Mr. Cumenal received (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:
TIFFANY & CO.
PS-43
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• 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 —
remained exercisable until February 10, 2018 (the one-year anniversary of his termination of
employment);
• The unvested portions of stock option awards previously granted to Mr. Cumenal that had been
scheduled to vest in Fiscal 2017, and that ordinarily would have been forfeited upon the
termination of his employment, vested as of March 14, 2017, and remained exercisable until
February 10, 2018; and
• PSUs granted to Mr. Cumenal in January 2015, which otherwise would have been forfeited
upon the termination of his employment, continued to vest according to their terms. The
payout of this award remained contingent upon pre-established performance goals, and was
pro-rated to reflect Mr. Cumenal's employment during the performance period. The Committee
was only permitted to exercise its discretion to reduce the amount of the award to be vested if
the reduction applied to the executive officers generally. For information concerning the
payout of this award, see below under "2017 Incentive Compensation - Performance-Based
Restricted Stock Units" at PS-45.
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 is entitled to
recover or revoke the additional consideration described above in the event it reasonably determines
that Mr. Cumenal has breached 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 Service as Interim Chief Executive Officer
In connection with his appointment as Interim CEO, 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 vested in its entirety on the first anniversary
of the grant date. As an executive, Mr. Kowalski was eligible to participate in certain executive
benefits programs, but did not participate in the Company's 2014 Employee Incentive Plan (aside
from the stock options noted above), any cash bonus program or any Company severance program,
plan or arrangement.
While serving as Interim CEO, Mr. Kowalski remained a director of the Company but received no
compensation for his service in such position. Following his relinquishment of the role of Interim CEO
in October 2017, on November 16, 2017, Mr. Kowalski was granted 571 RSUs and 3,334 stock
options with a grant date fair value of $51,938 and $53,084, respectively. The grant was made
pursuant to the 2017 Directors Equity Compensation Plan and was calculated to be a pro-rata share
of non-employee director equity compensation for the 2017 compensation year, based on Mr.
Kowalski's dates of service as a non-employee director.
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TIFFANY & CO.
PS-44
Other Named Executive Officer Changes
Effective August 4, 2017, Philippe Galtie, then the Senior Vice President - International, expanded
his responsibilities to include the Americas. Following the change, he was responsible for sales
channels in every region, as well as global store planning, global sales operations, global customer
and omnichannel management, and global customer and sales service. Adjustments to his
compensation were made at that time, as detailed below under "Base Salary" at PS-55 and "Short-
Term Incentives" at PS-56. On January 17, 2018, Mr. Galtie was promoted to the role of Executive
Vice President - Global Sales.
2017 Incentive Compensation
Short-Term Incentive Award
Under the targets and guidelines established by the Committee at the start of Fiscal 2017, 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 2017 short-term incentive awards were paid out as follows:
Potential Payout
Based on
Achievement of
Operating
Earnings Target
(120% of
Target)
Potential
Payout Based
on
Achievement
of Constant
Currency
Sales Growth
Target (40%
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
(103.8% of
Target)
Target Annual
Incentive Award
Alessandro
Bogliolo
Mark J.
Erceg
Pamela H.
Cloud
Philippe
Galtie
Leigh M.
Harlan
$
$
$
$
$
676,849 $
812,219 $
270,740 $
270,740 $ 1,353,699 $
702,570
680,000 $
816,000 $
272,000 $
272,000 $ 1,360,000 $
705,840
390,000 $
468,000 $
156,000 $
156,000 $
780,000 $
404,820
563,123 $
675,748 $
225,249 $
225,249 $ 1,126,247 $
584,522
345,000 $
414,000 $
138,000 $
138,000 $
690,000 $
358,110
In accordance with the offer letter provided to Mr. Bogliolo, the target annual incentive award shown
above for Mr. Bogliolo is a pro-rated amount that takes into account his appointment in October
2017. The target annual incentive award shown above for Mr. Galtie takes into account adjustments
made to his base salary and target annual incentive that became effective in August 2017. For
information about these adjustments, see "Short-Term Incentives" at PS-56. Neither Frederic
Cumenal nor Michael J. Kowalski was eligible to receive payment of a short-term incentive award for
Fiscal 2017.
Performance-Based Restricted Stock Units
The PSUs awarded to executive officers in January 2015 for the three-year period ended January 31,
2018, vested at 53.4% of target shares (26.7% of maximum shares). This was based on diluted
earnings per share ("EPS") of $11.71 for the three-year performance period (taking into account
adjustments permitted under the 2014 Employee Incentive Plan, see "Vesting of Performance-Based
Restricted Stock Units for the February 2015 - January 2018 Performance Period" at PS-85),
compared to the EPS threshold, target and maximum of $10.38, $13.89 and $15.76, respectively,
for the three-year performance period; and average return on assets ("ROA") of 9.5% for the three-
year performance period, compared to the ROA target of 10.6%, resulting in no ROA modifier being
applied.
TIFFANY & CO.
PS-45
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Mr. Cumenal, Ms. Cloud and Ms. Harlan were the only NEOs granted PSUs for the three-year
performance period ended January 31, 2018. The extent to which goals were achieved resulted in
payouts as follows:
Potential Performance-Based
Restricted Stock Units under
January 2015 Award
(200% of target)
Actual Performance-Based Restricted
Stock Units to Vest under January
2015 Award, in accordance with
achievement of pre-established goals
Frederic Cumenal
Pamela H. Cloud
Leigh M. Harlan
47,996
13,000
8,600
12,815
3,471
2,297
Pursuant to Mr. Cumenal's separation agreement, payout of the above PSU grant was subject to pro-
rating to reflect his employment during the performance period. The amounts reported in both
columns above for Mr. Cumenal have been pro-rated in this manner.
Target Compensation for Named Executive Officers in Fiscal 2018
At its January 2018 meeting, the Committee approved the target direct compensation for Fiscal 2018
shown below:
Annual Base
Salary
Alessandro Bogliolo
$1,350,000
Mark J. Erceg
$850,000
Pamela H. Cloud
$650,000
Philippe Galtie
$800,000
Leigh M. Harlan
$575,000
Target Short-
Term Incentive
Award (% of
base salary)
$2,025,000
(150%)
Target Long-Term
Incentive Award (%
of base salary)
Total Target
Direct
Compensation
$6,750,000
(500%) $10,125,000
Change in total
target direct
compensation
from Fiscal 2017
appointed in
October 2017
$680,000
(80%)
$390,000
(60%)
$640,000
(80%)
$345,000
(60%)
$2,125,000
(250%)
$1,105,000
(170%)
$1,600,000
(200%)
$862,500
(150%)
$3,655,000
$2,145,000
$3,040,000
—%
—%
15%
$1,782,500
not an NEO
The change in target direct compensation shown above for Mr. Galtie represents the change from the
total target direct compensation in effect at the end of Fiscal 2017, after taking into account certain
adjustments made in August 2017 in connection with his assumption of additional responsibilities.
For information on these adjustments, see "Base Salary" and "Short-Term Incentives" at PS-55 and
PS-56, respectively.
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TIFFANY & CO.
PS-46
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 DO
WHAT WE DON'T DO
Pay for performance: 86.7% of CEO
compensation and, on average, 65.7% of other
NEO compensation, is tied to the Company's
financial performance and/or the performance of
the stock price (that is, is awarded in the form of
cash incentives, stock options or PSUs).
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.
Limited use of employment agreements:
Employment agreements and formal severance
arrangements are used only as necessary to
attract newly recruited executives.
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.
Repricing of underwater stock options without
shareholder approval: The Company's
shareholder-approved employee and director
incentive plans do not permit repricing of
underwater stock options without shareholder
approval.
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 Company's shareholder-approved
employee and 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.
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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-executive 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 and the surviving entity does not
assume the obligations in question.
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, but
excluding stock options and RSUs) are subject
to recoupment in the event of an accounting
restatement due to material noncompliance with
financial reporting requirements.
TIFFANY & CO.
PS-47
Say on Pay
In May 2017, the Company's Say on Pay proposal passed with 97.2% 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. The Company's
CEO, CFO and Vice President – Investor Relations regularly communicate with shareholders through
one-on-one and group meetings and in conferences in an effort to remain informed regarding
shareholder perspectives on a range of topics.
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TIFFANY & CO.
PS-48
OVERVIEW OF COMPENSATION COMPONENTS
The Committee has established an executive compensation program that contains the following key
components:
Base Salary - 25.1%
Short-Term Incentives - 19.4%
Long-Term Incentives - 55.5%
Base salary provides cash
compensation that is not "at
risk" so as to provide a stable
source of income and financial
security.
Short-term incentives
motivate achievement of annual
financial targets and individual
demonstration of strategic
leadership.
Designed to attract and
retain executives by providing
reasonable and market-
competitive level of fixed
compensation.
Cash payments are
dependent on the degree of
achievement of annual operating
earnings, Constant Currency
Sales Growth and individual
performance targets. The
Committee retains discretion to
reduce awards.
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Long-term incentives align
management interests with
those of shareholders, motivate
achievement of long-term
financial targets and promote
retention.
Provided in the form of 50%
stock options/50% PSUs for the
CEO and Executive Vice
Presidents ("EVPs"); 25% stock
options/25% RSUs/50% PSUs
for other NEOs.
PSUs vest upon achievement
of financial goals over a three-
year performance period. The
Committee retains discretion to
reduce awards.
Stock options and RSUs
granted each January vest
ratably over four years.
The above chart reflects the average percentage contribution of key compensation components awarded
to the CEO (Alessandro Bogliolo) and the other NEOs in January 2018. See charts of "CEO Target Pay
Mix" and "Other Named Executive Officers Target Pay Mix" under "Relative Values of Key Compensation
Components" at PS-55.
TIFFANY & CO.
PS-49
The Company also offers the following compensation components, in addition to the annual
compensation program described above:
Special time-vesting
restricted stock unit
grants
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.
Benefits
Used to attract and retain executives. Includes a comprehensive program of
benefits that includes retirement benefits and life insurance benefits that build
cash value.
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 to the Board:
• 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). As part of the development process, management
discusses preliminary versions of the plans with the Board and makes revisions as necessary to
incorporate the Board's feedback. The plans are generally finalized and approved at the Board's
March meeting.
"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, craftsmanship, 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.
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TIFFANY & CO.
PS-50
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 Company's shareholders.
The total executive compensation program includes base salary, short- and long-term incentives,
special grants of RSUs and benefits.
SETTING EXECUTIVE COMPENSATION
The Committee determines remuneration arrangements for executive officers and makes awards to
executive officers under the Company's incentive and equity-based plans (currently, the 2014
Employee Incentive Plan), 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.
COMPENSATION EVALUATION PROCESS
The following are key components of the Committee's evaluation process.
Consideration of Say on Pay
The Committee weighs the level of shareholder support for the compensation program as
demonstrated by the Say on Pay vote.
Independent Compensation 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. See "Role of Compensation Consultants" at PS-28 for discussion of the
selection process for FW Cook, inclusive of an independence analysis.
Tally 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 factors 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 and
skill set, capacity for growth, expected contributions, breadth, scope and complexity of role,
demonstrated success and desirability to other employers.
Coordination with Financial Results and Annual Operating and Strategic Planning Process
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
TIFFANY & CO.
PS-51
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incentives on that basis. Final calculations are reviewed and approved at the Committee's 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 fiscal 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 fiscal 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
preliminary drafts of 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 approved by the Board and 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;
•
•
•
•
•
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.
TIFFANY & CO.
PS-52
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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.
Peer Group
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 2017 consists of the 18
companies shown below:
Financial Data
Common Factors
Multi-
Channel
Retailing
Mfg.
Operations
Significant
Foreign
Sales
Similar
Products/
Customers
Tiffany & Co.
Burberry
Coach
Coty
Fossil
Hanesbrands
Kate Spade
L Brands
Revenue
(in millions)
Net Income
(in millions)
Market Cap
(in millions)
$
$
$
$
$
$
$
4,010 $
452 $ 10,839
3,464 $
359 $
7,893
4,509 $
521 $ 12,991
6,485 $
-148 $ 14,160
2,964 $
25 $
522
6,189 $
530 $
7,520
1,378 $
143 $
2,369
$ 12,397 $
1,100 $ 14,696
Estee Lauder
$ 11,576 $
1,114 $ 34,628
Lululemon Athletica
Michael Kors
Nordstrom
Pier 1 Imports
PVH
Ralph Lauren
$
$
2,369 $
289 $
6,613
4,494 $
553 $
5,171
$ 14,862 $
371 $
6,941
$
$
$
1,828 $
30 $
416
8,274 $
388 $
8,265
6,653 $
-99 $
5,491
Restoration Hardware $
2,241 $
16 $
1,856
Signet Jewelers
$
6,517 $
475 $
3,290
VF Corporation
$ 11,966 $
1,023 $ 21,545
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 July 19, 2017; market capitalization based on the most recent publicly available data as of May 31,
2017.
5,098 $
305 $
4,228
$
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 2017, target total direct compensation was between the median and 75th percentile for
Alessandro Bogliolo and at the median for Mark J. Erceg, Pamela H. Cloud and Philippe Galtie. Target
total compensation, which includes the value of pension accruals and all other compensation, was at
the median for Mr. Bogliolo, Mr. Galtie and Ms. Cloud, and between the median and 75th percentile
for Mr. Erceg. Leigh M. Harlan's compensation was compared solely to third party survey data and
was not compared to the peer group, as she was not an NEO prior to Fiscal 2017.
TIFFANY & CO.
PS-53
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Survey 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 75th percentile for Philippe
Galtie, and above the 75th percentile for the other NEOs.
RELATIVE VALUES OF KEY COMPENSATION COMPONENTS
In January 2018, 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 executive officers with the title of EVP (currently
Mark J. Erceg and Philippe Galtie), the Committee awarded 50% of target long-term incentives in the
form of PSUs (valued at target) and stock options. The Committee believes that executives in these
positions have the greatest direct influence on achievement of financial performance metrics. For the
remaining NEOs, the Committee awarded 50% of target long-term incentives in the form of PSUs
(valued at target), 25% in the form of stock options and 25% in the form of RSUs. For purposes of
calculating these awards, the grant date value of PSUs, stock options and RSUs is determined in the
manner described below under "Types of Equity Awards" at PS-61.
Executive
Position
Target
Short-Term Incentive
as a Percentage of
Salary
Target
Long-Term Incentive
as a Percentage of
Salary
Alessandro Bogliolo Chief Executive Officer
150%
Mark J. Erceg
Pamela H. Cloud
Philippe Galtie
Leigh M. Harlan
Executive Vice President –
Chief Financial Officer
Senior Vice President –
Chief Merchandising Officer
Executive Vice President –
Global Sales
Senior Vice President –
Secretary & General
Counsel
80%
60%
80%
60%
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500%
250%
170%
200%
150%
The Committee believes that a minimum of 60% of the target total direct compensation of the CEO
and of approximately 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 financial and stock price performance.
TIFFANY & CO.
PS-54
Based on target levels for incentive compensation granted in January 2018, the mix of pay for the CEO
and other NEOs, on average, is shown below:
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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 2018, the Committee reviewed base salaries for all executive officers. Base salaries for
Fiscal 2018 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 2017 Say on Pay vote. The Committee did not increase the base salaries for any
of the NEOs in January 2018.
TIFFANY & CO.
PS-55
Executive
Position
Alessandro
Bogliolo
Mark J. Erceg
Pamela H.
Cloud
Chief Executive Officer
Executive Vice President –
Chief Financial Officer
Senior Vice President –
Chief Merchandising
Officer
Philippe Galtie
Executive Vice President –
Global Sales
Leigh M. Harlan Senior Vice President –
Secretary & General
Counsel
$
$
$
$
$
Fiscal 2017
Base Salary
Fiscal 2018
Base Salary
1,350,000 $
1,350,000
850,000 $
850,000
650,000 $
650,000
800,000 $
800,000
575,000 $
575,000
Percentage
Increase from
Fiscal 2017 to
Fiscal 2018
—%
—%
—%
—%
—%
The Fiscal 2017 base salary shown above for Mr. Bogliolo commenced upon his appointment in October
2017.
Effective August 4, 2017, Mr. Galtie's base salary for Fiscal 2017 was increased from $650,000 to
$800,000 to reflect his assumption of additional responsibilities. The base salary for Fiscal 2017
shown above reflects his base salary as of the end of Fiscal 2017.
SHORT-TERM INCENTIVES
The Committee uses short-term incentive opportunities, which are typically established 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 2017, the Committee determined a portion of the awards based
on the following individual performance 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 2018.
In January 2018, the Committee established target short-term incentive opportunities for Fiscal 2018
for the executive officers. The target short-term incentive opportunities provided to the NEOs for
Fiscal 2018, as compared to the target short-term incentive opportunities provided for Fiscal 2017,
are shown in the following chart. The maximum short-term incentive established by the Committee for
each of the NEOs is equal to twice the target.
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TIFFANY & CO.
PS-56
Fiscal 2017 Target
Short-Term Incentive
As Percentage of
Base Salary
Fiscal 2018 Target
Short-Term Incentive
As Percentage of
Base Salary
Percentage Increase
from Fiscal 2017 to
Fiscal 2018
150%
80%
150%
80%
60%
60%
80%
60%
80%
60%
-%
-%
-%
-%
-%
Executive
Position
Alessandro
Bogliolo
Chief Executive
Officer
Mark J. Erceg
Pamela H.
Cloud
Executive Vice
President – Chief
Financial Officer
Senior Vice
President – Chief
Merchandising
Officer
Philippe Galtie Executive Vice
Leigh M.
Harlan
President – Global
Sales
Senior Vice
President –
Secretary &
General Counsel
As provided in his offer letter, the short-term incentive paid to Mr. Bogliolo for Fiscal 2017 was pro-
rated to reflect his appointment in October 2017. The target short-term incentive shown above for
Fiscal 2017 does not take into account this pro-rating.
In connection with his assumption of additional responsibilities, effective August 4, 2017, Mr.
Galtie's target short-term incentive was increased from 75% to 80% of base salary. In conjunction
with the adjustment to his base salary that was made at the same time (see above under "Base
Salary" at PS-55), this adjustment resulted in a target short-term incentive of $487,500 for the
period of February 1, 2017 to August 3, 2017, and a target short-term incentive of $640,000 for the
period of August 3, 2017 to January 31, 2018. The target short-term incentive shown above for
Fiscal 2017 reflects the target short-term incentive amount in effect for Mr. Galtie at the end of
Fiscal 2017.
Fiscal 2017
Company Performance Goals for Fiscal 2017 Short-Term Incentives
In January 2017, the Committee determined that payment of short-term incentives for Fiscal 2017
would be wholly contingent on the Company meeting an operating earnings threshold (the "Base
Threshold"). The Committee provided guidance to the executive officers indicating that, if the Base
Threshold was not met, then no short-term incentive would be paid, regardless of the extent to which
other performance might have been achieved. The Committee further indicated in the guidance that,
if the Base Threshold was met, then the Committee intended 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 achievement related to the individual performance factors described
at PS-56. Thus, full achievement of operating earnings goals, Constant Currency Sales Growth goals
and individual goals, each at the maximum goal levels, would 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 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 was met.
The use of operating earnings as a performance metric for short-term incentive awards is intended to
reward increased profitability through sales growth and margin expansion. Constant Currency Sales
Growth was added as a performance metric for the Fiscal 2017 awards to incentivize sales growth
through effective brand positioning and customer engagement initiatives.
TIFFANY & CO.
PS-57
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In March 2017, the Committee established $469 million of operating earnings (subject to permitted
adjustments) as the Base Threshold. For the purpose of evaluating performance once the Base
Threshold was achieved, the Committee also established threshold, target and maximum performance
goals for operating earnings and Constant Currency Sales Growth. In recognition of the challenges of
setting precise target amounts, and to avoid windfalls or deficits resulting from slight variances from
target, the target goals were expressed as ranges. The performance goals established, and the
corresponding percentage of target short-term incentives eligible to be paid out based on corporate
and individual performance, are shown in the chart below.
Operating Earnings
Constant Currency Sales Growth
Operating
earnings
(millions)
Percentage of
target short-term
incentive that may
be paid:*
Threshold
Target
Maximum
Less than or equal
to $626
Within the range
of $774 to $790
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:*
0%
20%
40%
Individual
Performance
Up to 40% of the
target short-term
incentive may be
paid based on
achievement of
individual
performance
factors
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.
Actual Payout of Fiscal 2017 Short-Term Incentives
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In March 2018, the Committee determined that Fiscal 2017 operating earnings equaled $794.5
million, net sales growth equaled 4% and Constant Currency Sales Growth equaled 4% (see Appendix
I at PS-112).
The Committee also evaluated the individual performance of the other NEOs, taking into account the
CEO's views. The Committee independently evaluated the performance of the CEO. In these
evaluations, the individual performance of each NEO eligible for payment of a Fiscal 2017 short-term
incentive award was discussed with reference to the individual performance factors described on
PS-56, which were set at the beginning of Fiscal 2017. The Committee determined to pay each NEO
who was eligible to receive a short-term incentive for Fiscal 2017 20% of his or her target award
based on individual performance.
TIFFANY & CO.
PS-58
Based on the determinations described above, the NEOs eligible for payment of a short-term
incentive award for Fiscal 2017 were paid the percentage shown below of their target awards.
Operating Earnings
Constant Currency Sales Growth
Fiscal 2017
operating earnings
(millions)
Percentage of target
short-term incentive
paid:
Fiscal 2017 net
sales growth/
Constant Currency
Sales Growth*
Percentage of target
short-term incentive
paid:
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Performance
Percentage of target
short-term incentive
paid based on
achievement of
individual
performance factors:
$794.5
63.8%
4%/4%
20%
20%
Total percentage of target annual incentive paid out: 103.8%
* See Appendix I at PS-112.
Fiscal 2018
For Fiscal 2018, the Committee retained the short-term incentive structure from Fiscal 2017. As
such, in January 2018, the Committee established target and maximum short-term incentive amounts
for the NEOs, with the maximum amount equal to 200% of the target amount. The target short-term
incentives established for Fiscal 2018 for the NEOs are shown above under "Relative Values Of Key
Compensation Components" at PS-54.
In March 2018, the Committee established $482 million of operating earnings (subject to permitted
adjustments) as the Base Threshold necessary for a payout of the Fiscal 2018 short-term incentive
awards. Payment of any short-term incentive awarded for Fiscal 2018 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
achievement of the individual performance factors described at PS-56. 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, in
March 2018, also established 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.
Corporate and Individual Performance Goals
The operating earnings and Constant Currency Sales Growth goals for the Fiscal 2018 grants, 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
factors, are shown below. In evaluating achievement of performance goals, the Committee is
permitted under the 2014 Employee Incentive Plan to exclude certain events. See "Permissible
Adjustments to Evaluation of Performance" at PS-60.
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PS-59
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 $643
Target
Within the range
of $796 to $812
Maximum
Equal to or
greater than
$884
0%
60%
120%
Constant
Currency Sales
Growth
Less than or
equal to -6%
Within the range
of 3% to 5%
Equal to or
greater than 9%
Percentage of
target short-term
incentive that
may be paid:* Up to 40% of the
target short-term
incentive may be
paid based on
achievement of
individual
performance
factors
20%
0%
40%
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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.
Five-Year History of Short-Term Incentive Payouts
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):
Fiscal Year
2017
2016
2015
2014
2013
Five-Year Average
Total Payout as a
Percentage of Target
Short-Term Incentive
Award
104%
98%
75%
101%
124%
100%
Permissible Adjustments 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) unusual or
infrequently occurring items as described in the Annual Report for the applicable year, (vi)
acquisitions or divestitures, (vii) any other specific unusual or nonrecurring events, or objectively
determinable category thereto, (viii) foreign exchange gains and losses and (ix) a change in the
Company's fiscal year.
LONG-TERM INCENTIVES
The Committee uses long-term incentives to align management interests 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.
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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. The ratio of long-term incentive target to base salary is reviewed annually
at the same time that base salaries are reviewed. The long-term incentives established for Fiscal
2018 for each of the NEOs are shown above under "Relative Values of Key Compensation
Components" at PS-54.
Alessandro Bogliolo was not granted long-term incentive awards for Fiscal 2017 due to his
appointment in October 2017. Pursuant to the offer letter provided to him, Mr. Bogliolo was provided
long-term incentives for Fiscal 2018 with a target value of 500% of base salary. Philippe Galtie's
target long-term incentive opportunity was increased from 150% of base salary in Fiscal 2017 to
200% of base salary in Fiscal 2018. For the remaining NEOs, the Fiscal 2018 target long-term
incentive opportunities as a percentage of base salary remained unchanged from Fiscal 2017.
Types of Equity 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.
• RSUs support talent attraction and retention objectives. Together with stock options, RSUs
also balance an inherent challenge associated with PSUs, as non-controllable and highly
variable external factors may affect the Company's three-year performance period.
Prior to Fiscal 2017, all executive officers were provided long-term incentives divided equally
between PSUs and stock options. 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.
Starting in Fiscal 2017, executive officers other than the CEO and those with the title of EVP have
been granted 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. The CEO and executive officers with the title of EVP
(currently, Mark J. Erceg and Philippe Galtie) continue to receive 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 value on the grant date.
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Performance-Based Restricted Stock Unit Grants
Performance-Based Restricted Stock Units Granted for Fiscal 2018 and 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 2018 and 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 of PSUs 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 interests,
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.
• For the Fiscal 2018 PSUs, 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 "Permissible Adjustments to Evaluation of Performance" at PS-60.
EPS
Operating Cash Flow
EPS
Percentage of target
shares earned*
Operating Cash Flow
(millions)
Percentage of target
shares earned:*
Below Threshold
Less than $10.77
Threshold
Equal to $10.77
Target
Equal to $14.36
Maximum
Equal to or greater
than $15.43
0%
20%
80%
160%
Less than $1,798
Equal to $1,798
Within the range of
$2,202 to $2,270
Equal to or greater
than $2,359
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.
• Payout of the Fiscal 2017 PSUs is determined using the same chart shown above, based on
the threshold, target and maximum performance goals established at the start of the
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performance period and shown in the chart below under "Comparison of Performance Goals"
at PS-64.
• 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.
Performance-Based Restricted Stock Units Granted for Fiscal 2016 and 2015
Vesting of the PSUs granted in January 2016 and 2015 is dependent upon the achievement of an
EPS threshold. If the EPS threshold is not met, no PSUs will vest. The Committee provided guidance
to the executive officers indicating that, if the EPS threshold is met, it intends to calculate the
number 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 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%
+10%
0% to 9% upward
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%
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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 2016 and 2015 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.
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Comparison of Performance Goals
The performance goals established for the PSUs granted in January 2018, 2017, 2016 and 2015 are
shown below. In each case, the goals are subject to adjustment as permitted under the 2014
Employee Incentive Plan.
For
Performance
Period:
February
2015 -
January 2018
February
2016 -
January 2019
February
2017 -
January 2020
February
2018 -
January 2021
EPS
ROA
Operating Cash Flow
(millions)
Threshold
Target
Maximum
Target
Threshold
Target
Maximum
$10.38
$13.89
$15.76
10.6%
Not applicable
$8.80
$11.79
$12.58
9.2%
Not applicable
$9.55
$12.80
$13.66
$10.77
$14.36
$15.43
Replaced
with
operating
cash flow
$1,997
$1,798
Within the
range of
$2,447 to
$2,547
Within the
range of
$2,202 to
$2,270
$2,746
$2,359
The performance goals established for the PSU awards granted in January 2018 are informed by the
three-year strategic plan approved by the Board in March 2018. The EPS goals reflect increased
investment spending in a number of areas in Fiscal 2018, which management and the Board believe
is necessary to achieve longer-term financial objectives. The operating cash flow goals reflect plans
and assumptions for Fiscal 2018 concerning the timing of payables and taxes and increases in net
inventories. (For information concerning the Company’s Fiscal 2018 outlook and underlying
assumptions, see K-48 of the Company’s Annual Report on Form 10-K.) Both sets of goals are
intended to incorporate financial performance goals that are both challenging and realistic, as well as
to balance near-term financial objectives with brand stewardship and sustainable growth.
Vesting of Performance-Based Restricted Stock Units Granted for Fiscal 2015
In March 2018, the PSU awards granted in January 2015, for the three-year period ended January
31, 2018, vested at 53.4% of target shares (26.7% of maximum shares). This was based on
cumulative EPS of $11.71 for the three-year period ended January 31, 2018 (taking into account
adjustments permitted under the 2014 Employee Incentive Plan, see "Vesting of Performance-Based
Restricted Stock Units for the February 2015 - January 2018 Performance Period" at PS-85), against
the EPS target of $13.89 for such three-year period, and without an ROA modifier based on ROA of
9.5% compared to the ROA target of 10.6%.
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 "Performance-Based Restricted Stock Units" at PS-84.
Stock Option 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 require the exercise price
of each option to be established by the Committee (or determined by a formula established by the
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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 the grant date or (ii) the closing price on such
Exchange on the grant date. The incentive plan does not permit repricing of underwater options at a
later date without shareholder approval.
For more information about stock options see "Stock Options" at PS-85.
Time-Vesting Restricted Stock Unit Awards
The RSUs granted to certain NEOs in January 2018 vest ratably over four years. For additional
information about the RSUs, see "Time-Vesting Restricted Stock Units" at PS-86. Special grants of
RSUs may be made from time to time in connection with promotions and new hires, and for
recognition purposes.
Other Grants of Long-Term Incentive Awards in Fiscal 2017
In addition to the annual grants of PSUs, RSUs and stock options provided to executives in January
2018, the Committee made the following grants to NEOs during Fiscal 2017:
• On February 15, 2017, in connection with his appointment as Interim CEO, Michael J.
Kowalski was granted 43,615 stock options, all of which vested on the first anniversary of the
grant date.
• On March 16, 2017, in recognition of her contributions in connection with the CEO transition
and other matters, and in furtherance of the goals of motivating and retaining talent, Leigh
M. Harlan was granted 30,396 stock options and 5,544 RSUs, in each case to vest in equal
installments on the first three anniversaries of the grant date.
• On July 19, 2017, in connection with his assumption of additional responsibilities, Philippe
Galtie was granted 33,312 stock options and 5,444 RSUs, in each case to vest in equal
installments on the first four anniversaries of the grant date.
• On November 16, 2017, following his relinquishment of the role of Interim CEO, Mr.
Kowalski was granted 571 restricted stock units, to vest in a single installment on the first
anniversary of the grant date, and 3,334 stock options, to vest the day following the grant
date. The grant was made pursuant to the 2017 Directors Equity Compensation Plan and was
calculated to be a pro-rata share of non-employee director equity compensation for the 2017
compensation year, based on Mr. Kowalski's dates of service as a non-employee director.
• On January 17, 2018, in connection with his recruitment, and as provided for in his offer
letter, Alessandro Bogliolo was granted 70,143 stock options and 12,846 RSUs, in each
case to vest in equal installments on the first three anniversaries of his commencement date.
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 Michael J. Kowalski and Pamela H. Cloud, a defined contribution retirement
benefit ("DCRB") is available through the 401K Plan. Excess defined contribution retirement benefit
contributions ("Excess DCRB Contributions") are credited to the Tiffany and Company Executive
Deferral Plan ("Deferral Plan"). Employer contributions credited to the Deferral Plan are calculated to
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compensate executives for pay amounts limited by reason of the Internal Revenue Code. Mark J.
Erceg, Philippe Galtie and Leigh M. Harlan are eligible to receive Excess DCRB Contributions.
Frederic Cumenal became entitled to distribution of his vested Excess DCRB Contributions upon his
departure from the Company, and forfeited the unvested portion of his Excess DCRB Contributions.
See Note (b) to the Nonqualified Deferred Compensation Table at PS-97.
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
"Frederic Cumenal Employment Agreement and Separation Agreement" at PS-86. Upon his departure,
the balance of this account became payable in ten annual installments, beginning within 30 days of
February 10, 2018 (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
"Philippe Galtie Compensatory Arrangement" at PS-87.
Traditional Pension Retirement Benefit
Ms. Cloud participates in the Tiffany and Company Pension Plan ("Pension Plan"), 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").
Mr. Kowalski also participated in the Pension Plan, the Excess Plan and the Supplemental Plan prior
to his retirement from the Company in March 2015. See the Pension Benefits Table at PS-93.
The Excess Plan credits base salary and short-term incentive payments 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 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 "Features of the Pension
Benefit Plans" at PS-94.
Equity Grants - Retirement Provisions
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 and thereafter provide for
continued vesting upon retirement (defined as resignation after reaching age 65, or age 55 following
ten years of service), 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.
PSUs awarded in January 2015 and 2016 provide for continued vesting beyond retirement (defined
as resignation after age 65, or age 55 pursuant to Tiffany's retirement practices). 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 period of time worked during the performance period, and
contingent on the satisfaction of pre-determined performance goals. PSUs awarded in January 2017
and thereafter also provide for continued vesting beyond retirement (as defined above with respect to
stock options awarded in January 2017 and thereafter), but without pro-rating based on length of
time worked during the performance period, provided that the grant was awarded at least six months
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prior to the retirement date, and subject to continued compliance with post-employment restrictive
covenants.
The changes made in January 2017 to the retirement terms applicable to stock options and PSUs
were intended to advance the Company's goals of attracting and retaining talent and ensuring
executives remain focused on the Company's long-term performance. None of the NEOs currently
serving as executive officers have met the age and service requirements that must be satisfied to be
eligible for retirement treatment under these terms.
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 "Life
Insurance Benefits" at PS-86.) Life insurance premiums are taxable to the executives, and no gross-
up is paid.
DISABILITY INSURANCE BENEFITS
The Company provides executive officers special disability insurance benefits to take into account the
income replacement limits of the Company's standard disability insurance policies. These special
disability benefits maintain the relationship established for employees compensated below the IRS
limit between annual cash compensation and disability benefits. Disability insurance premiums are
taxable to the executives, and no gross-up is paid.
EQUITY OWNERSHIP BY EXECUTIVE OFFICERS AND 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 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 Director
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
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Equity Used to Meet Stock Ownership Guidelines
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.
RSUs issued, and the corresponding dividend
equivalent units credited, under the Company's 2008
Directors Equity Compensation Plan and the 2017
Directors Equity Compensation Plan that have vested
but will not be delivered until retirement of the
applicable director from the Board.
Rights to acquire shares of the Company's common
stock through derivative securities, including stock
options or the vesting of restricted stock units.
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.
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.
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, 2018, one NEO held a Significant Portfolio. The remaining NEOs were all
appointed to their current positions in Fiscal 2014 or later, and they remain subject to the share
disposal restrictions described above that are intended to ensure continued progress towards share
ownership goals. All the non-executive directors held Significant Portfolios as of January 31, 2018.
HEDGING NOT PERMITTED
The Company maintains a worldwide policy on insider information, applicable to all employees,
officers and directors. The policy, which was adopted by the Board, 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.
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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 has entered into retention agreements
with each of the current executive officers, which provide financial incentives for them to remain in
place during any such times. For a description of the retention agreements, see "Explanation of
Potential Payments on Termination Following a Change in Control–Severance Arrangements" at
PS-102. For a description of Frederic 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.
Dual Triggers
The retention agreements are "dual-trigger" arrangements in that they provide no benefits unless two
events occur: (i) a Change in Control followed by (ii) a loss of employment.
Definition of "Change in Control"
For a description of events that constitute a "Change in Control" for purposes of the retention
agreements, see "Definition of a Change in Control" at PS-103.
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, although the Company is permitted to
provide such benefits if it deems appropriate to do so.
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Under his employment agreement with Tiffany, Frederic 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, Alessandro Bogliolo and Mark J. Erceg 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.
Alessandro Bogliolo Offer Letter
In connection with his employment, Mr. Bogliolo was provided an offer letter by Tiffany and the
Company, dated July 12, 2017. In addition to the compensatory terms described above under
"Alessandro Bogliolo Appointment as Chief Executive Officer" at PS-43, the offer letter provides for
the following severance benefits, absent a Change in Control, in the event of termination of
employment without Cause or resignation for Good Reason prior to October 2, 2020 (the third
anniversary of his appointment):
• Lump sum payment equal to 24 months of then-current annual base salary;
• Prorated portion of the annual incentive award for the fiscal year in which the termination occurs
(to be calculated based on actual performance);
• Payment of any earned but unpaid annual incentive award for the prior fiscal year;
• Reimbursement of the cost of continued health care coverage for up to 18 months; and
• Amendment of equity grants to provide for continued vesting of stock options and RSUs that
would have vested during the 24-month period following the termination date, with the options
remaining exercisable for 12 months following the vesting date, and for continued vesting of
PSUs, with the payout based on actual performance and calculated on a pro-rata basis to reflect
his employment during the applicable performance period.
The above benefits are subject to the execution of a release and compliance with cooperation, non-
disparagement, non-competition, non-solicitation, no-hire and confidentiality covenants. The offer
letter further provides that, in the event of termination of employment following a Change in Control,
Mr. Bogliolo will be provided the severance benefits described above under "Retention Agreements" at
PS-69. "Change in Control," "Cause" and "Good Reason" are defined in the offer letter.
Frederic Cumenal Employment Agreement
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 provided for the following severance benefits:
• 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;
• 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 a description of other key terms of the employment agreement, including provisions relating to
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initial base salary, short-term and long-term incentives and certain sign-on awards, see "Frederic
Cumenal Employment Agreement and Separation Agreement" at PS-86. For a discussion of benefits
provided to Mr. Cumenal upon his departure in February 2017, pursuant to the employment
agreement and otherwise, see "Frederic Cumenal Departure" at PS-43.
Offer Letters Extended to Other NEOs
Offer letters were also extended to Mark J. Erceg and Philippe 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, sign-on awards and, in Mr. Galtie's case, payments to certain
retirement schemes. Mr. Erceg is also entitled to severance benefits in the event of certain
terminations absent a change in control of the Company. For a more detailed discussion of these
arrangements, see "Mark J. Erceg Compensatory Arrangement" and "Philippe Galtie Compensatory
Arrangement" beginning at PS-87.
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 "Explanation of Potential Payments on Termination Following a
Change in Control" at PS-102.
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, RSUs will not vest if
termination for cause occurs before the vesting date provided for in the award.
RESTRICTIVE COVENANTS
Frederic Cumenal's employment agreement provided for certain post-employment restrictions (as
modified by his separation agreement). See "Frederic Cumenal Departure" at PS-43.
The remaining NEOs (other than Michael J. Kowalski) are subject to 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, customers,
vendors, business partners and suppliers, and a no-hire restriction with respect to employees and
others engaged by the Company or its affiliates.
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 180 days 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
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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.
COMPENSATION RISK ASSESSMENT
The Committee annually reviews 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 are 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 are identified in each of these respective areas. As a result of the
Committee's Fiscal 2017 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.
LIMITATION UNDER SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of
compensation expense a company can deduct in calculating its federal income taxes in any one year
with respect to compensation paid to certain executive officers. 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.
Previously the limit in Section 162(m) was subject to an exception for "performance-based
compensation." This performance-based exception has been repealed, effective for tax years
beginning after December 31, 2017, such that no compensation paid to covered executive officers in
excess of $1 million will be deductible unless it qualifies for transition relief applicable to certain
arrangements in place as of November 2, 2017. Because of uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain
scope of transition relief, no assurance can be given that compensation that was intended to satisfy
the requirements for exemption from Section 162(m) when granted will in fact be exempted from the
Section 162(m) limits on deductibility. Further, the Committee may decide, in the course of
exercising its business judgment, to adjust payouts or otherwise modify compensation elements that
were initially intended to be exempt from Section 162(m) if it determines that doing so is consistent
with the Company's business needs.
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REPORT OF THE COMPENSATION COMMITTEE
We have reviewed and discussed the Compensation Discussion and Analysis section of this Proxy Statement with the
management of Tiffany & Co. Based on our review and discussions, we recommend to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the
Annual Report on Form 10-K for the fiscal year ended January 31, 2018.
Compensation Committee and its Stock Option Subcommittee:
Gary E. Costley, Chair
Rose Marie Bravo
Roger N. Farah
Abby F. Kohnstamm
Charles K. Marquis
Robert S. Singer
March 14, 2018
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SUMMARY COMPENSATION TABLE
Fiscal 2017, Fiscal 2016 and Fiscal 2015
Name and
Principal Position
Year
Salary
($) (a)
Bonus
($)
Stock
Awards
($) (b)
Option
Awards
($) (c)
Non-
Equity
Incentive
Plan
Compensation
($) (d)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) (e)
All
Other
Compensation
($) (f)
Total
($)
Alessandro Bogliolo
Chief Executive Officer1
Frederic Cumenal
Chief Executive Officer2
2017 $ 414,269 $
— $ 4,775,179 $ 4,771,638 $
702,570 $
— $ 3,312,762 $13,976,418
2017 $
71,922 $
— $ 2,089,266 $ 2,859,100 $
— $
— $ 2,824,812 $ 7,845,100
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
Michael J. Kowalski
Interim Chief Executive Officer3 2017 $ 470,116 $
— $
51,938 $
678,479 $
— $
2,042,668 $
33,187 $ 3,276,388
2016 $
— $
— $
78,005 $
79,492 $
2015 $ 184,119 $
— $ 3,931,166 $
80,142 $
— $
— $
783,771 $
110,000 $ 1,051,268
496,393 $
466,748 $ 5,158,568
Mark J. Erceg
Executive Vice President -
Chief Financial Officer4
Pamela H. Cloud
Senior Vice President - Chief
Merchandising Officer
Philippe Galtie
Executive Vice President -
Global Sales5
Leigh M. Harlan
Senior Vice President -
Secretary & General Counsel6
2017 $ 847,718 $
— $ 1,062,544 $ 1,061,734 $
705,840 $
— $ 1,056,423 $ 4,734,259
2016 $ 224,971 $
— $ 2,979,811 $ 3,065,962 $
— $
— $
815,104 $ 7,085,848
2017 $ 646,912 $
— $ 828,978 $
276,124 $
404,820 $
572,832 $
53,920 $ 2,783,586
2016 $ 597,909 $
— $ 828,904 $
276,630 $
356,400 $
170,297 $
53,920 $ 2,284,060
2015 $ 572,977 $
— $ 484,952 $
526,151 $
258,750 $
— $
64,667 $ 1,907,497
2017 $ 715,286 $
— $ 1,300,236 $ 1,299,994 $
584,522 $
— $
255,182 $ 4,155,220
2016 $ 572,018 $
— $ 731,531 $
244,044 $
341,550 $
— $
278,773 $ 2,167,916
2017 $ 571,892 $
— $ 1,147,086 $
715,744 $
358,110 $
— $
86,257 $ 2,879,089
1 Mr. Bogliolo assumed responsibilities as CEO on October 2, 2017.
2 Mr. Cumenal held the role of CEO from April 1, 2015 to February 5, 2017.
3 Mr. Kowalski held the role of Interim CEO from February 5, 2017 to October 2, 2017, having previously served as CEO from 1999 until March 31, 2015. He was an
NEO for the fiscal year ended January 31, 2016 ("Fiscal 2015"), but was not an NEO for Fiscal 2016.
4 Mr. Erceg assumed responsibilities as Executive Vice President - Chief Financial Officer on October 18, 2016.
5 Mr. Galtie assumed responsibilities as an executive officer of the Company on August 17, 2015, and was not an NEO for Fiscal 2015.
6 Ms. Harlan assumed responsibilities as Senior Vice President - Secretary & General Counsel on May 22, 2014, and was not an NEO for Fiscal 2015 or Fiscal 2016.
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-97.
(b) 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 2017 include grants of PSUs
and RSUs, in each case where applicable, made in January 2018, 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 be met at 100%. The amounts further reflect that the PSU and
RSU grants made beginning in January 2017 provide for dividend equivalent units, while prior awards do not.
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PS-74
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. No amounts
are shown for Mr. Kowalski in the chart below as he was not awarded PSUs in any of the years presented.
For Mr. Cumenal, the amount reported for Fiscal 2017 in the table above reflects the fair value of PSUs granted
in January 2015 as of March 14, 2017, the date the terms of that award were amended 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 "Payments and Other Benefits Provided to
Frederic Cumenal" at PS-100. The maximum value of this 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 in the column headed "2017." The actual number of PSUs vested in connection with
this grant is described under "Performance-Based Restricted Stock Units" at PS-45. The amounts reported in the
table above for Fiscal 2016 and 2015 (which represent PSUs granted in January 2017 and January 2016,
respectively) were forfeited upon Mr. Cumenal's departure in February 2017.
For Mr. Kowalski, the Fiscal 2017 amount reflects the grant date fair value of RSUs granted to him in
connection with his service, beginning in October 2017, as a non-employee director. See the Director
Compensation Table at PS-105. The Fiscal 2016 amount reflects the grant date fair value of RSUs granted to
him in connection with his service as a non-employee director. The Fiscal 2015 amount reflects (i) the grant
date fair value of RSUs granted to him in connection with his service as a non-employee director ($78,957), and
(ii) the fair value of PSUs awarded in January 2013 and January 2014 on the date the terms of those awards
were amended in March 2015 to permit continued vesting, subject to the other terms and conditions previously
established for those awards. The fair value on that date of the January 2013 award and the January 2014 award
was $1,997,534 and $1,854,675, respectively.
For Mr. Bogliolo, the Fiscal 2017 amount reflects the grant date fair value of (i) an annual grant of PSUs for
Fiscal 2018 awarded to him on January 17, 2018 ($3,375,093), at the same time annual PSU grants were
made to the other executive officers, and (ii) a one-time grant of RSUs awarded to him on the same date in
connection with his recruitment ($1,400,086).
For Mr. Erceg, the Fiscal 2016 amount reflects the grant date fair value of (i) PSUs awarded on January 19,
2017 ($1,062,554), and (ii) a one-time award of RSUs granted to him on November 16, 2016 in connection
with his recruitment ($1,917,257).
For Mr. Galtie, the Fiscal 2017 amount reflects the grant date fair value of (i) PSUs awarded on January 17,
2018 ($800,096), and (ii) a one-time promotional award of RSUs granted to him on July 19, 2017 ($500,140).
For Ms. Harlan, the Fiscal 2017 amount reflects the grant date fair value of (i) PSUs awarded on January 17,
2018 ($431,273), (ii) RSUs awarded on January 17, 2018 ($215,800) and (iii) a one-time recognition award of
RSUs granted to her on March 16, 2017 ($500,013).
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Maximum Value of Stock Awards at Grant Date Value
Executive
Frederic Cumenal
Alessandro Bogliolo
Mark J. Erceg
Pamela H. Cloud
Philippe Galtie
Leigh M. Harlan
$
$
$
$
$
$
2017
2016
4,178,532 $
6,250,138 $
2015
5,772,729
6,750,187 Not a named executive officer Not a named executive officer
2,125,087 $
1,105,159 $
1,600,191 $
4,042,364 Not a named executive officer
1,381,454 $
969,903
1,219,033 Not a named executive officer
862,547 Not a named executive officer Not a named executive officer
(c) Option Awards. Amounts shown represent the dollar amount of the grant date fair value of the stock option award
(which includes the grants made in January 2018) 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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PS-75
For Mr. Cumenal, the amount reported for Fiscal 2017 is the fair value of previously granted stock option awards
as of March 14, 2017, the date the terms of those awards were amended (i) to permit stock options that were
scheduled to vest in Fiscal 2017 (including, among other grants, 57,743 stock options included in the grants
reported for Fiscal 2015) to vest on the amendment date, and (ii) to provide that the foregoing options, as well
as others that were vested but unexercised as of the date of Mr. Cumenal's departure from the Company, would
remain exercisable until February 10, 2018. See "Payments and Other Benefits Provided to Frederic Cumenal" at
PS-100. The remaining unvested portion of the stock option grants included in the amounts reported for Fiscal
2015, and the stock option grants reported for Fiscal 2016, were forfeited upon Mr. Cumenal's departure in
February 2017.
For Mr. Kowalski, the Fiscal 2017 amount is the grant date fair value of (i) a one-time award of stock options
granted to him on February 15, 2017, in connection with his appointment as Interim CEO ($625,395) and (ii)
stock options granted to him on November 16, 2017, in connection with his service, beginning in October 2017,
as a non-employee director ($53,084). See "Michael J. Kowalski Service as Interim Chief Executive Officer" at
PS-44 and the Director Compensation Table at PS-105. The Fiscal 2016 and Fiscal 2015 amounts are the grant
date fair value of options granted to him in connection with his service as a non-employee director.
For Mr. Bogliolo, the Fiscal 2017 amount is the grant date fair value of (i) stock options awarded on January 17,
2018 ($3,372,608) and (ii) a one-time award of stock options granted to him on the same date in connection
with his recruitment to the Company ($1,399,030).
For Mr. Erceg, the Fiscal 2016 amount is the grant date fair value of (i) stock options awarded on January 19,
2017 ($1,063,808) and (ii) a one-time award of stock options granted to him on November 16, 2016 in
connection with his recruitment to the Company ($2,002,154).
For Mr. Galtie, the Fiscal 2017 amount is the grant date fair value of (i) stock options awarded on January 17,
2018 ($799,491) and (ii) a one-time promotional award of stock options granted to him on July 19, 2017
($500,503).
For Ms. Harlan, the Fiscal 2017 amount is the grant date fair value of (i) stock options awarded on January 17,
2018 ($215,490) and (ii) a one-time recognition award of stock options granted to her on March 16, 2017
($500,254).
(d) Non-Equity Incentive Plan Compensation. This column reflects cash short-term incentive awards under the 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-84.) 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.
(e) 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.
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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 2017
Fiscal 2016
Fiscal 2015
Fiscal 2014
4.00%
4.25%
4.50%
3.75%
3.75%
4.25%
4.25%
3.75%
For additional information, see "Assumptions Used in Calculating the Present Value of the Accumulated
Benefits" at PS-93.
The change in pension value for Fiscal 2017, Fiscal 2016 and Fiscal 2015 for Mr. Kowalski reflects the changes
in applicable discount rates shown above, his chosen form of payment of a 100% joint and survivor annuity with
a reduction for commencement prior to age 65, and pension payments made to him following his retirement in
March 2015. For information on payments made during Fiscal 2017, see the Pension Benefits Table at PS-93.
The Fiscal 2015 change in pension value was a negative amount for Ms. Cloud (-$82,253) due to the change in
applicable discount rates between Fiscal 2014 and Fiscal 2015 shown above.
(f) All Other Compensation. The table below shows a detailed description of all other compensation paid to the NEOs.
In addition to the payments reported below, executive officers are from time to time permitted to borrow
merchandise for their personal use to support the Company's marketing efforts.
Leadership Benefits
Broad-Based Retirement Benefits
Other ($)
Notes
Total ($)
Premium on
Additional
Disability
Insurance
($)
8,301
650
Premium on
Life
Insurance
($)
2,581
—
13,194
276,513
12,475
178,671
—
—
650
—
—
—
10,714
168,352
6,578
9,366
9,366
9,366
1,540
36,604
36,604
47,001
13,662
124,457
10,043
106,103
3,900
55,991
Year
2017
2017
2016
2015
2017
2016
2015
2017
2016
2017
2016
2015
2017
2016
2017
Name
Alessandro Bogliolo
Frederic Cumenal
Michael J. Kowalski
Mark J. Erceg
Pamela H. Cloud
Philippe Galtie
Leigh M. Harlan
Defined
Contribution
Retirement
Benefit ($)
(i)
Excess
Defined
Contribution
Retirement
Benefit ($)
(ii)
401(k) Plan
Company
Match ($)
—
7,950
7,950
7,800
—
—
7,800
6,749
—
7,950
7,950
7,800
7,950
7,950
7,950
—
9,275
9,275
7,800
—
—
—
3,994
—
—
—
7,950
5,466
6,625
— 3,301,880 (iii)
3,312,762
83,401
2,723,536 (iv)
2,824,812
72,952
46,294
561,802 (v)
941,686
505,600 (vi)
758,640
—
—
—
—
—
—
—
33,187 (vii)
33,187
110,000 (viii)
110,000
458,298 (ix)
466,748
866,614 (x)
1,056,423
806,986 (xi)
815,104
—
—
500 (xii)
53,920
53,920
64,667
11,700
89,463 (xiii)
255,182
—
149,211 (xiv)
278,773
11,341
450 (xv)
86,257
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(i)
The amount shown in this column reflects the benefit paid in the year listed for the prior plan year under the
DCRB feature of the 401(k) Plan. See "Defined Contribution Retirement Benefit" at PS-65. Mr. Cumenal
forfeited a portion of these benefits upon his departure from the Company.
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(ii) The amount shown in this column reflects the benefit paid in the year listed for the prior plan year under the
Excess DCRB feature of the Deferral Plan. See "Defined Contribution Retirement Benefit" at PS-65. Mr.
Cumenal forfeited a portion of these benefits upon his departure from the Company. See Note (b) under "Note
to Nonqualified Deferred Compensation Table" at PS-97.
(iii) For Mr. Bogliolo, the amount reported as "other compensation" for Fiscal 2017 is a cash sign-on bonus
($2,800,000), a payment to reimburse relocation costs ($500,000) and payment towards tax consultation
services ($1,880), each of which was contemplated in the offer letter extended to him. For a more detailed
discussion of Mr. Bogliolo's compensatory arrangements, see "Alessandro Bogliolo Appointment as Chief
Executive Officer" at PS-43.
(iv) For Mr. Cumenal, the amount reported as "other compensation" for Fiscal 2017 reflects: (i) cash severance
($1,909,387), payment for accrued but unused vacation time and in lieu of notice ($89,042) and the cost of
one year of continued health coverage ($23,572), in each case as required by his employment agreement and
separation agreement, (ii) an additional cash amount of $690,613 paid pursuant to his separation agreement,
(see "Frederic Cumenal Departure" at PS-43), (iii) defined contribution to certain French social security and
pension schemes ($9,835), as provided for in his employment agreement, and (iv) payment towards tax
consultation services ($1,087).
(v) 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). See
the discussion of Mr. Cumenal's employment agreement and compensation paid thereunder under "Frederic
Cumenal Employment Agreement and Separation Agreement" at PS-86.
(vi) 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 account ($407,688).
(vii) For Mr. Kowalski, the amount reported as "other compensation" for Fiscal 2017 is the retainer paid to him in
connection with his service, beginning in October 2017, as a non-employee director. See the Director
Compensation Table at PS-105.
(viii) For Mr. Kowalski, the amount reported as “other compensation” for Fiscal 2016 is the retainer paid to him in
connection with his service as a non-employee director.
(ix) For Mr. Kowalski, the amount reported as "other compensation" for Fiscal 2015 is a distribution paid under the
Excess Plan ($352,315), a payment of accrued but unused vacation time as of Mr. Kowalski's retirement from
the role of CEO in March 2015 ($15,983) and the retainer paid to him in connection with his service as a
non-employee director ($90,000).
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(x) For Mr. Erceg, the amount reported as "other compensation" for Fiscal 2017 is a cash sign-on bonus
($750,000), payment towards reimbursement of moving costs ($114,664) and payment towards tax
consultation services ($1,950), each of which was contemplated in the offer letter extended to him. For a
more detailed discussion of Mr. Erceg's compensatory arrangements, see "Mark J. Erceg Compensatory
Arrangement" at PS-87.
(xi) For Mr. Erceg, the amount reported as "other compensation" for Fiscal 2016 represents relocation expenses
($56,986), and a one-time cash payment ($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.
(xii) For Ms. Cloud, the amount reported as "other compensation" for Fiscal 2015 reflects a payment made
pursuant to a Company travel policy.
(xiii) For Mr. Galtie, the amount reported as "other compensation" for Fiscal 2017 represents: defined contribution
to certain French social security and pension schemes ($87,113), as provided for in the offer letter extended
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PS-78
to him, and payment towards tax consultation services ($2,350). For a more detailed discussion of Mr. Galtie's
compensatory arrangements, see "Philippe Galtie Compensatory Arrangement" at PS-87.
(xiv) 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 Mr. Galtie ($42,857).
(xv) For Ms. Harlan, the amount reported as "other compensation" for Fiscal 2017 is a reimbursement of certain
health and fitness expenses.
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GRANTS OF PLAN-BASED AWARDS
Fiscal 2017
2014 Employee Incentive Plan (a)
Name
Award
Type
Grant
Date
Estimated Future/Possible Payouts
Under Non-Equity
Incentive Plan Awards (b)
Alessandro
Bogliolo
Fiscal 2017
Annual
Incentive
Fiscal 2018
Annual
Incentive
Sign-On
Stock Option
Threshold
($)
Target
($)
Maximum
($)
7/12/2017 $
— $ 676,849 $ 1,353,699
1/17/2018 $
— $2,025,000 $ 4,050,000
1/17/2018
Stock Option
1/17/2018
Sign-On
RSU
1/17/2018
PSU
1/17/2018
Stock Option
3/14/2017
PSU
3/14/2017
Frederic
Cumenal
Michael J.
Kowalski
Stock Option
2/15/2017
Stock Option 11/16/2017
RSU
11/16/2017
All Other
Option/
Stock
Awards:
Number of
Securities
Underlying
Options/
Awards
(#) (d)
Exercise
or Base
Price of
Option
Awards
($/Sh)
(e)
Grant Date
Fair Value
of Equity
Awards
(f)
Estimated Future/Possible
Payouts
Under Equity Incentive
Plan Awards (c)
Threshold
Number of
Shares
Target
Number of
Shares
Maximum
Number of
Shares
70,143 $ 108.99 $ 1,399,030
169,092 $ 108.99 $ 3,372,608
12,846
$ 1,400,086
6,194 30,967
61,934
$ 3,375,093
417,927 $ 72.70 $ 2,859,100
6,000 23,998
47,996
$ 2,089,266
43,615 $ 83.23 $
625,395
3,334 $ 92.94 $
53,084
571
$
51,938
Mark J.
Erceg
Annual
Incentive
1/17/2018 $
— $ 680,000 $ 1,360,000
Stock Option
1/17/2018
PSU
1/17/2018
1,950
9,749
19,498
$ 1,062,544
53,232 $ 108.99 $ 1,061,734
Pamela H.
Cloud
Annual
Incentive
1/17/2018 $
— $ 390,000 $
780,000
Stock Option
1/17/2018
PSU
RSU
1/17/2018
1/17/2018
1,014
5,070
10,140
13,844 $ 108.99 $
276,124
2,536
$
$
552,579
276,399
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PS-80
Estimated Future/Possible
Payouts
Under Equity Incentive
Plan Awards (c)
Threshold
Number of
Shares
Target
Number of
Shares
Maximum
Number of
Shares
Name
Award
Type
Grant
Date
Estimated Future/Possible Payouts
Under Non-Equity
Incentive Plan Awards (b)
Philippe
Galtie
Fiscal 2017
Annual
Incentive
Threshold
($)
Target
($)
Maximum
($)
7/19/2017 $
— $ 317,370 $
634,740
Stock Option
7/19/2017
RSU
7/19/2017
Fiscal 2018
Annual
Incentive
1/17/2018 $
— $ 640,000 $ 1,280,000
All Other
Option/
Stock
Awards:
Number of
Securities
Underlying
Options/
Awards
(#) (d)
Exercise
or Base
Price of
Option
Awards
($/Sh)
(e)
Grant Date
Fair Value
of Equity
Awards
(f)
33,312 $ 91.87 $
500,503
5,498
$
500,140
Leigh M.
Harlan
Stock Option
1/17/2018
PSU
1/17/2018
Stock Option
3/16/2017
RSU
3/16/2017
1,469
7,341
14,682
$
800,096
40,084 $ 108.99 $
799,491
30,396 $ 90.19 $
500,254
5,657
$
500,013
Annual
Incentive
1/17/2018 $
— $ 345,000 $
690,000
Stock Option
1/17/2018
PSU
RSU
1/17/2018
1/17/2018
792
3,957
7,914
10,804 $ 108.99 $
215,490
1,980
$
$
431,273
215,800
Notes to Grants of Plan-Based Awards Table
(a) The stock options and RSUs granted to Mr. Kowalski on November 16, 2017, in connection with his service as a
non-employee director were granted pursuant to the 2017 Directors Equity Compensation Plan. The remaining
awards shown were granted pursuant to the 2014 Employee Incentive Plan.
(b) For Mr. Bogliolo, the grant shown as a "Fiscal 2017 Annual Incentive" is a short-term incentive award for Fiscal
2017 granted on July 12, 2017 in connection with his recruitment, the payout of which was subject to pro-
rating to reflect his employment during the performance period. See "Short-Term Incentive Award" at PS-45.
The amounts reported in the "Threshold," "Target" and "Maximum" columns reflect estimated possible payouts for
this award, taking into account such pro-rating. The actual payout amount for this award is shown in the
Summary Compensation Table at PS-74 under the column headed "Non-Equity Incentive Plan Compensation."
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For Mr. Galtie, the grant shown as a "Fiscal 2017 Annual Incentive" is a short-term incentive award granted on
July 19, 2017 for the portion of Fiscal 2017 beginning on August 4, 2017 and ending on January 31, 2018, in
connection with his assumption of additional responsibilities. See "Short-Term Incentives" at PS-56. The
amounts reported in the "Threshold," "Target" and "Maximum" columns reflect estimated possible payouts for this
award, taking into account the applicable period. The actual payout amount for this award is included in the
amount shown in the Summary Compensation Table at PS-74 under the column headed "Non-Equity Incentive
Plan Compensation."
The remaining grants shown in this column reflect annual incentives granted to the NEOs in respect of Fiscal
2018. The amounts reported in the "Threshold," "Target" and "Maximum" columns reflect estimated future
payouts under these awards.
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PS-81
(c) For Mr. Cumenal, the PSU award shown with a grant date of March 14, 2017 reflects PSUs granted to him in
January 2015 and amended in March 2017 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. The amounts reported in the "Threshold," "Target" and "Maximum" columns reflect
estimated possible payouts for this award, taking into account such pro-rating. See "Payments and Other
Benefits Provided to Frederic Cumenal" at PS-100. For information concerning the actual payout of this award,
see "Vesting of Performance-based Restricted Stock Units Granted for Fiscal 2015" at PS-64.
The remaining grants shown in this column reflect PSUs granted in January 2018 in respect of Fiscal 2018. For
these grants, 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 PSUs 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 $10.77
Threshold
Equal to $10.77
Target
Equal to $14.36
Maximum
Equal to or greater
than $15.43
0%
20%
80%
160%
Less than $1,798
Equal to $1,798
Within the range of
$2,202 to $2,270
Equal to or greater
than $2,359
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 "Target Number of Shares" reflect 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. Bogliolo - 24,774 shares, Mr. Erceg - 7,800 shares, Ms. Cloud -
4,056 shares, Mr. Galtie - 5,873 shares and Ms. Harlan - 3,166 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. Bogliolo - 6,194 shares, Mr. Erceg - 1,950 shares, Ms. Cloud -
1,014 shares, Mr. Galtie - 1,469 shares and Ms. Harlan - 792 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.
(d) For Mr. Cumenal, the amount reported in this column reflects the number of stock options previously granted to
him for which the terms were amended on March 14, 2017 to permit stock options that were scheduled to vest
in Fiscal 2017 to vest on the amendment date, and to provide that such stock options, as well as others that
were vested but unexercised as of the date of Mr. Cumenal's departure from the Company, would remain
exercisable until February 10, 2018. See "Payments and Other Benefits Provided to Frederic Cumenal" at
PS-100.
For Mr. Kowalski, the amount reported in this column reflects stock options granted on February 15, 2017, in
connection with his appointment as Interim CEO, which vested on February 15, 2018; stock options granted to
him on November 16, 2017, in respect of his service as a non-employee director, which vested the first business
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PS-82
day following the grant date; and RSUs granted to him on the same day, also in respect of his service as a non-
employee director, which will vest on November 16, 2018.
For Ms. Harlan, the amount reported in this column reflects, in addition to the stock options and RSUs
referenced in the paragraph below, stock options and RSUs granted as a one-time recognition award on March
16, 2017, which will vest in equal installments on the first three anniversaries of the grant date.
The remaining RSUs and stock options shown in this column reflect RSUs and stock options granted in January
2018 in respect of Fiscal 2018. These RSUs and stock options will vest in equal installments on the first,
second, third and fourth anniversaries of the grant date. The amount reported in this column includes whole
dividend equivalent units (if any) credited as of January 31, 2018 with respect to the RSU grants shown.
(e) The exercise price for the options shown for Mr. Cumenal represent the weighted-average exercise price of all
stock options amended on March 14, 2017 as described in note (d) above. The exercise price of all remaining
options was the higher of the (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 and (ii) the closing price on such Exchange on
the grant date.
(f) The amount reported for Mr. Cumenal reflects the fair value of the PSU grant and stock option grants shown on
March 14, 2017, the date those grants were amended as described above in notes (c) and (d), calculated in
accordance with Codification Topic 718 as of the amendment date. The fair value of the amended PSU grant
was computed assuming that the EPS target was reached at 100% but not exceeded and the ROA target was not
met (so no ROA adjustment was applied), resulting in vesting of the target number of PSUs.
The fair value of each remaining stock option and PSU award was computed as of the grant date 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 fair value of the PSU awards was computed assuming
that the EPS target and operating cash flow target were each met at 100% but not exceeded, resulting in vesting
of the target number of PSUs. For additional information regarding PSU awards, see the table titled "Outstanding
Equity Awards at Fiscal Year-End" at PS-89. The amount reported for the RSUs shown represents the grant date
fair value of those grants.
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PS-83
DISCUSSION OF SUMMARY COMPENSATION TABLE
AND GRANTS OF PLAN-BASED AWARDS
NON-EQUITY INCENTIVE PLAN AWARDS
Fiscal 2017 Grants - Performance and Payout
Payout amounts for the short-term incentive awards granted for Fiscal 2017 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 and
individual portions, see "Short-Term Incentives–Fiscal 2017" at PS-57.
In March 2018, the Committee determined that the operating earnings threshold of $469 million had been met. The
Committee further determined that the payout percentage for the corporate portions of the award would be 83.8% of
the overall target award, based on Fiscal 2017 operating earnings of $794.5 million, net sales growth of 4%, and
Constant Currency Sales Growth of 4% (see Appendix I at PS-112).
Based on achievement of individual goals, the Committee determined that the payout percentage of the Individual
Portion would be 20% of the overall target award for the NEOs.
As a result of the determinations described above, each of the NEOs eligible for a short-term incentive for Fiscal
2017 was paid 103.8% of his or her overall target award.
Fiscal 2016 and Fiscal 2015 Grants
In Fiscal 2016 and 2015, short-term incentive awards were paid out to the executive officers as follows:
•
•
In Fiscal 2016, the Company's consolidated operating earnings exceeded the threshold established by the
Committee, and short-term incentive awards were paid out at 98% of the target amount, on average.
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.
EQUITY INCENTIVE PLAN AWARDS – PERFORMANCE-BASED RESTRICTED STOCK UNITS
The PSUs awarded in January 2018 are reflected in the Grants of Plan-Based Awards table under the column headed
"Estimated Future/Possible 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 2018 and 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 2016 and 2015 similarly continue to vest
upon retirement, but on a pro-rated basis reflecting the portion of the performance period worked.
•
In the event of an executive's involuntary termination without cause following at least 10 years of service,
PSUs granted in January 2018 and 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 applicable restrictive covenants. PSUs granted in January 2016 and 2015 are
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PS-84
forfeited upon involuntary termination without cause, subject to the Committee's discretion to permit
continued vesting as provided by the applicable terms.
• Dividends are not paid on PSUs. However, PSUs granted in January 2018 and 2017 accrue dividend
equivalent units that will only be paid out upon vesting of the underlying Units, if any. Whole dividend
equivalent units are paid out in shares, and fractional dividend equivalent units are paid out cash. No
dividend equivalent units are paid or accrued on PSUs granted prior to January 2017.
• 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 2018, 2017, 2016 and 2015, including the performance
goals established at the start of each performance period, see "Performance-Based Restricted Stock Unit Grants" at
PS-62 to PS-64.
Vesting of Performance-Based Restricted Stock Units for the February 2015 - January 2018 Performance Period
In March 2018, for the three-year performance period ending January 31, 2018, it was determined that a
cumulative EPS of $11.71 per diluted share was achieved, compared to the EPS target of $13.89 and, based on
ROA of 9.5% compared to the ROA target of 10.6%, no ROA modifier was applied. As a result, vesting of 53.4% of
target shares (26.7% of the maximum shares granted) occurred.
As permitted under 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, 2018:
• 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.
• The EPS considered for Fiscal 2017 excluded a net charge of $146.2 million related to the enactment of
the 2017 U.S. Tax Cuts and Jobs Act.
EQUITY INCENTIVE PLAN AWARDS – STOCK OPTIONS
Stock options typically vest (become exercisable) in four equal annual installments. Vesting of each installment is
typically 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 or after January 2017, retirement or involuntary
termination without cause following at least 10 years of service, provided certain conditions are met. See
"Explanation of Potential Payments on Termination Following a Change in Control" at PS-102. 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 "Stock
Option Grants" at PS-64.
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 or after January 2017, five years after retirement provided certain
circumstances are met; for prior grants, two years after retirement);
•
Involuntary termination without cause (for stock options granted in or after January 2017, five years after
termination provided the executive has accrued 10 years of service as a senior executive and other
circumstances are met; otherwise, and for prior grants, three months after termination); or
• Death or disability (two years after the event).
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PS-85
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EQUITY INCENTIVE PLAN AWARDS – TIME-VESTING RESTRICTED STOCK UNITS
The annual awards of RSUs granted in January 2018 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. Dividends are not paid on RSUs. However, RSUs granted in
January 2017 and later accrue dividend equivalent units that will only be paid out upon vesting of the underlying
RSUs, with whole dividend equivalent units to be paid out in shares, and fractional dividend equivalent units to be
paid out in cash.
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 pre-retirement 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 average of the executive officer's annual base salary and target
short-term incentive award for his or her final three years;
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.
See the table shown under note (f) to the Summary Compensation Table at PS-74 for information concerning life
insurance premiums paid for the benefit of certain NEOs.
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ALESSANDRO BOGLIOLO COMPENSATORY ARRANGEMENT
Elements of Mr. Bogliolo's compensation disclosed in the Summary Compensation Table are provided pursuant to the
offer letter extended to him in connection with his recruitment. For terms of the offer letter, see "Alessandro Bogliolo
Appointment as Chief Executive Officer" and "Alessandro Bogliolo Offer Letter" at PS-43 and PS-70, respectively.
The offer letter has been filed with the SEC as Exhibit 10.39 to the Company's Current Report on Form 8-K filed
with the SEC on July 13, 2017.
FREDERIC CUMENAL EMPLOYMENT AGREEMENT AND SEPARATION 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, and the separation agreement, entered into by the same parties, in March 2017. The
employment agreement included the following 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;
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PS-86
• 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; and
• Severance benefits following certain terminations of employment, as described under "Frederic Cumenal
Employment Agreement" at PS-70.
The employment agreement has been filed with the SEC as Exhibit 10.154 to the Company's Report on Form 8-K
dated March 21, 2011. As the Summary Compensation Table reflects, after being hired in Fiscal 2011, Mr. Cumenal
received various compensation increases and promotions outside of the original terms of the above agreement. See
PS-74. For a description of the benefits provided to Mr. Cumenal pursuant to his separation agreement, see "Frederic
Cumenal Departure" at PS-43. The separation agreement has been filed with the SEC as Exhibit 10.41 to the
Company's Current Report on Form 8-K filed with the SEC on March 7, 2017.
MARK J. ERCEG COMPENSATORY ARRANGEMENT
Elements of Mr. Erceg's compensation disclosed in the Summary Compensation Table are provided pursuant to the
offer letter extended to him in connection with his recruitment. 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 with a grant date value of $2,000,000, to vest in equal installments on
the first, second and third anniversary of the grant date; (ii) stock options with a grant date value of
$2,000,000, to vest in equal installments on the first, second and third anniversary of the grant date; and
(iii) a $750,000 cash 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; 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);
plus reimbursement of continued health coverage for one year.
The offer letter incorporates definitions of "Change in Control," "Cause" and "Good Reason," and has been filed with
the SEC as Exhibit 10.29 to the Company’s Annual Report on Form 10-K dated March 17, 2017.
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 with a grant date value of $375,000, to vest in equal installments on
the first, second, third and fourth anniversary of the grant date; and (ii) stock options with a grant date value
of $375,000, to vest in equal installments on the first, second, third and fourth anniversary of the grant date;
TIFFANY & CO.
PS-87
• French pension scheme payments: payment of contributions for the benefit of Mr. Galtie's account with
certain French social security and pension schemes. This payment is intended to avoid loss of Mr. Galtie's
accrual under such schemes; and
• Certain relocation costs.
The offer letter has been filed with the Securities and Exchange Commission as Exhibit 10.32 to the Company's
Annual Report on Form 10-K dated March 17, 2017.
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PS-88
Name
Alessandro Bogliolo
Frederic Cumenal
Michael J. Kowalski
Mark J. Erceg
Pamela H. Cloud
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
January 31, 2018
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Option
Exercise
Price
($)
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 ($)
—
—
169,092 $ 108.99
1/17/2028
70,143 $ 108.99
1/17/2028
6,194/61,934 (c) $
660,590 (d)
12,846/12,846 (e) $
1,370,026 (f)
12,815/47,996 (g) $
1,366,720 (h)
3,409
6,020
— $
94.63
5/28/2025
— $
63.38
5/26/2026
—
43,615 $
83.23
2/15/2027
3,334
— $
92.94 11/16/2027
46,949
18,282
93,898 $
76.19 11/16/2026
54,846 $
79.23
1/19/2027
—
53,232 $ 108.99
1/17/2028
18,000
18,000
17,900
19,500
19,402
4,754
— $
60.54
1/18/2022
— $
63.76
1/16/2023
— $
88.77
1/16/2024
6,500 $
86.74
1/14/2025
19,402 $
61.80
1/20/2026
14,262 $
79.23
1/19/2027
—
13,844 $ 108.99
1/17/2028
571/571 (i)
$
60,897 (f)
2,737/27,370 (j)
$
291,901 (k)
1,950/19,498 (c) $
207,968 (d)
17,502/17,502 (l)
$
1,866,588 (f)
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3,471/13,000 (g) $
370,182 (h)
2,124/16,992 (m) $
226,525 (n)
1,423/14,233 (j)
$
151,763 (k)
1,014/10,140 (c) $
108,143 (d)
2,669/2,669 (o) $
284,649 (f)
2,536/2,536 (p) $
270,464 (f)
TIFFANY & CO.
PS-89
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Option
Exercise
Price
($)
Option
Expiration
Date (a)
Equity Incentive
Plan Awards
Number of
Unearned
Shares, Units, or
Other Rights
That Have Not
Vested (#) (b)
Equity Incentive
Plan Awards
Market or Payout
Value of
Unearned Shares,
Units, or Other
Rights That Have
Not Vested ($)
—
—
—
—
—
9,704 $
81.44
9/16/2025
15,938 $
61.80
1/20/2026
12,582 $
79.23
1/19/2027
33,312 $
91.87
7/19/2027
40,084 $ 108.99
1/17/2028
5,996
8,500
9,260
3,710
—
—
1,998 $
92.79
3/19/2024
4,250 $
86.74
1/14/2025
13,860 $
61.80
1/20/2026
11,130 $
79.23
1/19/2027
30,396 $
90.19
3/16/2027
10,804 $ 108.99
1/17/2028
1,745/13,958 (m) $
186,104 (n)
1,255/12,557 (j)
$
133,846 (k)
1,469/14,682 (c) $
156,669 (d)
2,302/2,302 (q) $
245,508 (f)
2,357/2,357 (o) $
251,374 (f)
5,498/5,498 (r)
$
586,362 (f)
2,297/8,600 (g) $
244,975 (h)
1,517/12,136 (m) $
161,788 (n)
1,111/11,110 (j)
$
118,488 (k)
792/7,914 (c) $
84,467 (d)
108/108 (s) $
11,518 (f)
2,084/2,084 (o) $
222,259 (f)
5,657/5,657 (t)
$
603,319 (f)
1,980/1,980 (p) $
211,167 (f)
Name
Philippe Galtie
Leigh M. Harlan
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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 the grant date, other than (i) the option grants expiring
November 16, 2026 (granted to Mr. Erceg) and March 16, 2027 (granted to Ms. Harlan), both of which vest
in three equal installments on the respective anniversaries of the grant date, (ii) the option grant expiring on
February 15, 2027 (granted to Mr. Kowalski), which vested on February 15, 2018, (iii) the option grants
expiring on May 28, 2025, May 26, 2026 and November 16, 2027 (also granted to Mr. Kowalski), which
vested on the first business day following the grant date, and (iv) the option grant expiring on January 17,
2028 (granted to Mr. Bogliolo), which will vest in three equal installments over a three-year period ending on
October 2, 2020.
TIFFANY & CO.
PS-90
(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 (c), (d), (g), (h), (j), (k), (m) and (n) below.
The number to the right of the slash mark indicates the total number of shares that would vest upon
attainment of all performance objectives at the maximum goal level over the three-year performance period.
For PSUs and RSUs granted in January 2017 and later, both numbers include whole dividend equivalent
units accrued as of January 31, 2018.
(c) This January 2018 grant of PSUs will vest three business days following the date on which the Company's
audited financial results for the fiscal year ending January 31, 2021 ("Fiscal 2020") are publicly reported.
(d) 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 for the performance period of Fiscal 2018 through Fiscal 2020. The
resulting value was computed on the basis of the closing stock price of $106.65 on January 31, 2018. 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. Bogliolo - 30,967 shares, Mr.
Erceg - 9,749 shares, Ms. Cloud - 5,070 shares, Mr. Galtie - 7,341 shares and Ms. Harlan - 3,957 shares.
(e) This one-time RSU award, granted to Mr. Bogliolo in January 2018 in connection with his recruitment, vests
in equal installments over a three-year period ending October 2, 2020. The number of shares shown is the
portion of the award that had not vested as of January 31, 2018.
(f) The value was computed on the basis of the Company's closing stock price of $106.65 on January 31, 2018.
(g) This January 2015 grant of PSUs vested three business days following the date on which the Company's
audited financial results for Fiscal 2017 were publicly reported. For Mr. Cumenal, the terms of the grants
shown, which ordinarily would have been forfeited upon his departure in February 2017, were amended in
March 2017 to provide for continued vesting following his departure. Payout of this award remained
contingent upon pre-established performance goals, was calculated on a pro-rata basis to reflect his
employment during the performance period, and was only subject to reduction at the Committee's discretion
if the reduction applied to the executive officers generally. See "Frederic Cumenal Departure" at PS-43.
(h) This value has been computed at 26.7% of maximum based on Company EPS and ROA performance in Fiscal
2015, Fiscal 2016 and Fiscal 2017. The resulting value was computed on the basis of the closing stock
price of $106.65 on January 31, 2018.
(i) This RSU award, granted to Mr. Kowalski in November 2017 in connection with his service as a non-employee
director, will vest in one installment on November 16, 2018.
(j) This January 2017 grant of PSUs will vest three business days following the date on which the Company's
audited financial results for the fiscal year ending January 31, 2020 ("Fiscal 2019") are publicly reported.
(k) 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 for the performance period of Fiscal 2017 through Fiscal 2019. The
resulting value was computed on the basis of the closing stock price of $106.65 on January 31, 2018. 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 - 13,685 shares, Ms. Cloud
- 7,116 shares, Mr. Galtie - 6,278 shares and Ms. Harlan - 5,555 shares.
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(l) 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, 2018.
(m) 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.
(n) 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
TIFFANY & CO.
PS-91
of $106.65 on January 31, 2018. 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: Ms. Cloud - 8,496 shares, Mr. Galtie - 6,979 and
Ms. Harlan - 6,068 shares.
(o) 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, 2018.
(p) This January 2018 grant of RSUs will vest in equal installments over a four-year period ending January 17,
2022. The number of shares shown is the portion of the award that had not vested as of January 31, 2018.
(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, 2018.
(r) This one-time RSU award, granted to Mr. Galtie in July 2017 in connection with his assumption of additional
responsibilities, vests in equal installments over a four-year period ending July 19, 2021. The number of
shares shown is the portion of the award that had not vested as of January 31, 2018.
(s) This RSU award was an annual incentive grant provided to Ms. Harlan in March 2014, in connection with the
position she held before assuming her current role. This award vests in equal installments over a four-year
period ending March 19, 2018. The number of shares shown is the portion of the award that had not vested
as of January 31, 2018.
(t) This one-time RSU award, granted to Ms. Harlan in March 2017 in furtherance of recognition and retention
goals, vests in equal installments over a three-year period ending March 16, 2020. The number of shares
shown is the portion of the award that had not vested as of January 31, 2018.
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PS-92
OPTION EXERCISES AND STOCK VESTED
Fiscal 2017
Option Awards
Stock Awards
Number of
Shares
Acquired on
Exercise
(#)
Value
Realized
on Exercise
($)
Number of
Shares
Acquired
on Vesting
(#)
Value
Realized
on Vesting
($)
—
—
—
—
417,927 (a) $
14,750,844
12,419 $
1,013,390
—
—
—
—
12,357 $
1,164,585
8,751
813,274
37,000 (b) $
1,606,768
4,278 $
415,035
29,838 (c) $
1,163,522
1,921 $
186,799
8,850 (d) $
322,343
2,117 $
208,694
Name
Alessandro Bogliolo
Frederic Cumenal
Michael J. Kowalski
Mark J. Erceg
Pamela H. Cloud
Philippe Galtie
Leigh M. Harlan
(a) Weighted-average holding period for options exercised: 3.7 years
(b) Weighted-average holding period for options exercised: 7.2 years
(c) Weighted-average holding period for options exercised: 2.0 years
(d) Weighted-average holding period for options exercised: 2.5 years
PENSION BENEFITS TABLE
Name (a)
Michael J. Kowalski
Pamela H. Cloud
Plan Name (b)
Pension Plan
Excess Plan
Supplemental Plan
Pension Plan
Excess Plan
Supplemental Plan
Number of
Years of
Credited
Service (c)
36.9
23.5
Actuarial Present
Value of Accumulated
Benefits
Payments During
Last Fiscal Year
$
$
$
$
$
$
1,652,831 $
18,898,647 $
1,484,204 $
615,150 $
1,871,081 $
688,842 $
31,979
1,065,104
83,648
—
—
—
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Notes to Pension Benefits Table
(a) Only executive officers hired prior to January 1, 2006 are eligible for participation in the Pension Plan, Excess
Plan, and Supplemental Plan. Frederic Cumenal, Alessandro Bogliolo, Mark J. Erceg, Philippe Galtie and Leigh
M. Harlan accordingly do not participate in these plans.
(b) The formal names of the plans are: the Tiffany and Company 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.
(c) The credited service shown for Mr. Kowalski is as of his original retirement date in March 2015.
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-2017; and a discount rate of 4.00% for
TIFFANY & CO.
PS-93
the Pension Plan and 3.75% for the Excess and Supplemental Plans. All assumptions were consistent with those
used to prepare the financial statements for Fiscal 2017, except for the retirement age assumption, which
represents the normal retirement age under these plans.
Features of the Pension Benefit 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. Michael J. Kowalski and Pamela H. Cloud are eligible
to receive benefits under these 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.
In general, compensation reported in the Summary Compensation Table at PS-74 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;
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• 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.
Example: 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:
•
•
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);
TIFFANY & CO.
PS-94
•
•
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;
•
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 (but will vest earlier on a termination from employment following a Change in Control, see
"Explanation of Potential Payments on Termination Following a Change in Control" at PS-102);
• 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.
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As its name implies, the Supplemental Plan supplements payments under the Pension Plan, the Excess Plan and
from Social Security so that total benefits equal a variable percentage of the participant's average final
compensation.
TIFFANY & CO.
PS-95
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.
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 Deferral Plan" at PS-98.
Alessandro Bogliolo, Mark J. Erceg, Pamela H. Cloud, Philippe Galtie and Leigh M. Harlan are eligible to receive
Excess DCRB Contributions. Upon his departure, Frederic Cumenal became entitled to distribution of his vested
Excess DCRB Contributions in the form he elected, and forfeited the unvested portion of his Excess DCRB
Contributions. See Note (b) to the Nonqualified Deferred Compensation Table at PS-97 for further information
concerning his 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 "Frederic
Cumenal Employment Agreement and Separation Agreement" at PS-86 and "Philippe Galtie Compensatory
Arrangement" at PS-87.
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PS-96
NONQUALIFIED DEFERRED COMPENSATION TABLE
(Fiscal 2017)
Executive
Contribution
In
Last Fiscal
Year (a)
($)
Registrant
Contribution
In
Last Fiscal
Year (b)
($)
Aggregate
Earnings
In
Last Fiscal
Year (c)
($)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance
At
Last Fiscal
Year End (d)
($)
$
— $
— $
—
83,401 $
718,504 $
20,294 $ 4,153,851
—
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
34,155 $
11,700 $
— $
11,341 $
7,364 $
5,296 $
Note to Nonqualified Deferred Compensation Table
— $
— $
— $
— $
— $
—
—
—
53,220
47,399
Name
Alessandro Bogliolo
Frederic Cumenal
Michael J. Kowalski
Mark J. Erceg
Pamela H. Cloud
Philippe Galtie
Leigh M. Harlan
$
$
$
$
$
$
$
(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-74.
(b) The amounts shown in this column, which reflect Excess DCRB Contributions made in Fiscal 2017 for plan year
2016, are also included in the column headed "All Other Compensation" in the Summary Compensation Table at
PS-74. For more information concerning Excess DCRB Contributions, see "Defined Contribution Retirement
Benefit" at PS-65 and "Excess DCRB Feature of the Deferral Plan" below. At the time of his departure, Mr.
Cumenal was vested in 80% of the total Excess DCRB Contributions credited to him, based on his years of
service; following his departure, the vested amount of his aggregate Excess DCRB contributions, totaling
$216,886 following the contribution for plan year 2016 and including accumulated earnings, became payable
to him in accordance with the form of payment he elected, and the remainder was forfeited. Mr. Galtie and Ms.
Harlan are vested 20% and 80%, respectively, in the total Excess DCRB Contributions credited to them.
(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 or the Company 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;
TIFFANY & CO.
PS-97
• The value in the participant's account depends on the return on investments in various mutual funds that may
be selected by the participant;
• 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;
• Termination of 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.
Alessandro Bogliolo, Mark J. Erceg, Philippe Galtie and Leigh M. Harlan are eligible for benefits under the Excess
DCRB feature of the Deferral Plan. Upon his departure, Frederic Cumenal became entitled to distribution of his
vested Excess DCRB Contributions, and forfeited the unvested portion. 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 Percentage
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%
TIFFANY & CO.
PS-98
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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, 2018. An "involuntary termination"
does not include a termination for cause, but does include a resignation for good reason.
No information is shown for Frederic Cumenal or Michael J. Kowalski on the following table because their departures
from the role of CEO and Interim CEO, respectively, were prior to the date of the assumed involuntary termination.
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 Frederic Cumenal” below. Mr. Kowalski was not provided
payments or other benefits when his service as Interim CEO ended. However, in November 2017, he was provided a
pro-rata portion of the retainer fee, RSUs and stock options provided to non-employee directors for 2017, to reflect
his service as a non-employee director beginning in October 2017. See "Michael J. Kowalski Service as Interim CEO"
at PS-44.
Involuntary Terminations Absent a Change in
Control
Involuntary Terminations Following a Change in Control
Cash
Severance
Payment
(a)
Welfare
Benefit (a)
Early
Vesting of
Equity
Awards
Early Vesting
of
Supplemental
Plan (b)
Cash
Severance
Payment (c)
Welfare
Benefits
(d)
Total
Early
Vesting
of
Stock
Options (e)
Early Vesting
of Restricted
Stock Units
(f)
Total
$3,396,858 $
35,690 $
— $3,432,548 $
— $ 6,750,000 $ 47,592 $
— $ 1,370,026 $ 8,167,618
$1,553,906 $
23,789 $
— $1,577,695 $
— $ 3,060,000 $ 47,592 $ 4,364,010 $ 3,472,071 $ 10,943,673
$
$
$
— $
— $
— $
— $
719,176 $ 2,020,000 $ 47,592 $ 1,390,659 $ 2,706,965 $ 6,884,392
— $
— $
— $
— $
— $ 2,726,250 $ 34,931 $ 1,796,807 $ 2,638,619 $ 7,196,607
— $
— $
— $
— $
— $ 1,840,000 $ 47,592 $ 1,539,434 $ 2,623,696 $ 6,050,722
Name
Alessandro
Bogliolo
Mark J.
Erceg
Pamela H.
Cloud
Philippe
Galtie
Leigh M.
Harlan
Notes to Potential Payments on Termination or Change in Control Table
(a)
(b)
(c)
(d)
(e)
Mr. Bogliolo and Mr. Erceg are entitled to certain cash and welfare benefits in the event of involuntary
termination, without cause, in the absence of a change in control. For a summary of these arrangements, see
"Alessandro Bogliolo Offer Letter" at PS-70 and "Mark J. Erceg Compensatory Arrangement" at PS-87.
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, 2018, reduced
for early retirement.
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.
The amounts shown in this column represent two years of health care coverage determined on the basis of
the Company's "COBRA" rates for post-employment continuation coverage. Such rates are available to all
participating employees who terminate from employment and were determined on the basis of the coverage
elections made by the executive officer.
The value of early vesting of annual stock option grants made in January 2015, 2016, 2017 and 2018 was
determined using $106.65, the closing value of the Company's common stock on January 31, 2018. In the
event of a Change in Control that is not a Terminating Transaction (as defined below), the unvested portion of
TIFFANY & CO.
PS-99
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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 one-time stock option
grants awarded to Mr. Bogliolo in January 2018 in connection with his appointment (70,143 outstanding),
to Mr. Erceg upon his hire in November 2016 (93,898 outstanding), to Mr. Galtie upon his hire in
September 2015 (9,704 outstanding) and his assumption of new responsibilities in July 2017 (33,312
outstanding) and to Ms. Harlan upon her appointment to her current role in March 2014 (1,998
outstanding) and as a recognition award in March 2017 (30,396 outstanding).
(f)
The value of early vesting of annual PSU grants made in January 2015, 2016, 2017 and 2018, and of
annual RSU grants made in January 2017 and 2018, was determined using $106.65, the closing value of
the Company's common stock on January 31, 2018. 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
23.1% of the total number of PSUs granted in 2015; early vesting of 55% of the PSUs granted in 2016 and
2017; and no early vesting of PSUs granted in 2018. In addition to assuming early vesting of certain annual
PSU and RSU grants, this column also assumes early vesting of 100% of the outstanding portions of the
RSUs granted to Mr. Bogliolo in January 2018 (12,846 outstanding), to Mr. Erceg in November 2016
(17,502 outstanding), to Mr. Galtie in September 2015 (2,302 outstanding) and in July 2017 (5,498
outstanding) and to Ms. Harlan in March 2014 (108 outstanding) and March 2017 (5,657 outstanding).
Payments and Other Benefits Provided to Frederic 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;
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• Payment of his short-term incentive award for Fiscal 2016. Based on achievement of corporate goals and
individual performance factors, Mr. Cumenal was paid $1,631,250, less applicable withholdings; 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 "Frederic Cumenal
Employment Agreement" at PS-70. For a discussion of his separation agreement, see "Frederic Cumenal Departure"
at PS-43.
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, remained exercisable until February 10, 2018. The aggregate fair
value of the amended 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, continued to vest in accordance with their terms. The payout of
TIFFANY & CO.
PS-100
this award to Mr. Cumenal remained contingent upon pre-established performance goals, was pro-rated to
reflect Mr. Cumenal's employment during the performance period, and was only subject to reduction in the
Committee's discretion if the reduction applied 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 was reached but not
exceeded and the ROA target was not met (resulting in no ROA adjustment) for the performance period of
Fiscal 2015 through Fiscal 2017). For information concerning the payout of this award, see PS-46.
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 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-97 and "Defined Contribution
Retirement Benefit" at PS-65, respectively.
Explanation of Potential Payments on a Termination Absent a Change in Control
Cash Severance Benefits
Alessandro Bogliolo and Mark J. Erceg are entitled to cash severance benefits in the event of an involuntary
termination in the absence of a Change in Control, as was Frederic Cumenal prior to his departure from the Company.
For a full discussion of these arrangements, see "Alessandro Bogliolo Offer Letter" at PS-70, "Mark J. Erceg
Compensatory Arrangement" at PS-87, and "Frederic Cumenal Employment Agreement" at PS-70. Aside from these
individuals, the Company is not obligated to pay cash severance benefits to any other NEO upon termination absent a
Change in Control, although the Company is permitted to provide such benefits if it deems it appropriate to do so.
Equity Awards Granted to Mr. Bogliolo
In addition to providing for certain cash severance payments, the offer letter provided to Mr. Bogliolo specifies that,
in the event of an involuntary termination without cause absent a change in control prior to October 2, 2020, equity
grants provided to him will be amended to permit (i) continued vesting of stock options and RSUs that would have
vested during the 24-month period following his termination date, (ii) stock options so vested to remain exercisable
for 12 months following the vesting date, and (iii) continued vesting of all outstanding PSUs, with the final payout to
be based on actual performance, as determined in accordance with the applicable terms and in the same manner as
PSUs provided for other executives, and pro-rated to reflect his employment during the applicable performance
period. Because these provisions call for continued vesting rather than accelerated vesting, the amounts reported
above for Mr. Bogliolo do not include any stock options, RSUs or PSUs vested in this manner.
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Other Equity Awards
The terms applicable to PSUs 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 amounts
reported assume no units were vested in this manner.
In addition, the terms applicable to stock options and PSUs granted in January 2017 and later 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 that such grants were made at least six months prior to termination, and
subject to compliance with applicable restrictive covenants. Stock options vested in this manner will remain
TIFFANY & CO.
PS-101
exercisable for five years after the termination date. In addition, the terms of the stock options and RSUs granted to
Leigh M. Harlan in March 2017 provide for continued vesting in the event of involuntary termination without cause,
absent a change in control, subject to compliance with restrictive covenants, with the options remaining exercisable
for three years following the termination date. Because all of these provisions call for continued rather than
accelerated vesting, the amounts reported do not include any stock options, PSUs or RSUs vested in this manner.
Explanation of Potential Payments on Termination Following a Change in Control
Severance Arrangements
The Company and Tiffany entered into retention agreements with each of the executive officers (other than Frederic
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:
• Target short-term incentive award for the pending fiscal year, to be calculated on a pro-rata basis to reflect the
executive's service during such year;
• 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.
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Vesting of Options and Restricted Stock Units on an Involuntary Termination Following a Change in Control
Stock Option 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.
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;
ii. 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 January 2015 and 2016, the ROA
target will be disregarded for these purposes.
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 all outstanding PSU grants, 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.
TIFFANY & CO.
PS-102
An assumed Change of Control on January 31, 2018, would occur in the third year of the performance period of the
PSUs granted in 2015. Actual results for the first and second years of the performance period, compared to pro-
rated performance goals, would result in 23.1% of the total number 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 2016 and 2017 PSUs, resulting in 55% of each of those grants converting to time-vesting restricted stock units.
For the grants awarded in January 2018, the three-year performance period began on February 1, 2018; because the
Change in Control is assumed to have taken place before that date, no portion of the January 2018 grants are
reflected as vested as a result of the assumed Change in Control.
Time-Vesting Restricted Stock Unit Grants
Outstanding RSUs 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), RSUs will vest in full if the executive is
involuntarily terminated following the Change in Control event.
Supplemental Retirement Benefits Vest on a Change in Control
Pamela H. 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 employed as of January 31, 2018 was a
participant in these retirement plans.
Definition of a Change in Control
For purposes of the Supplemental Plan, unvested equity awards made to the NEOs, and the retention agreements,
the term "Change in Control" means that one of the following events has occurred:
• A person or group of persons acting in concert (a "person" being an individual or organization) is or becomes
the beneficial owner of Company stock representing 35% or more of the combined voting power of the
Company's then-outstanding stock (subject to certain exceptions such as in the case of a trustee of a
Company employee benefit plan);
• A majority of the Board is, for any reason, not made up of individuals who are currently on the Board or who
are incumbent directors. Incumbent directors are defined for purposes of the Supplemental Plan, the
retention agreements and certain unvested equity awards as directors approved by a majority of the current
directors or directors who were themselves approved by a majority of the current directors. The terms of other
unvested equity awards use the same definition, but with the proviso that incumbent directors do not include
a director who joined the board after having been designated to do so pursuant to an agreement between the
Company and another person to effect a transaction that would otherwise constitute a Change in Control;
• 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 combined voting power of the surviving entity; or
• 50% or more of the consolidated assets of the Company and its subsidiaries are sold, liquidated or
distributed, unless the shareholders of the Company continue to own those assets in the same proportion as
their ownership of Company stock prior to the sale, liquidation or distribution (in the case of the Supplemental
Plan, the retention agreements and certain unvested 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 unvested equity awards).
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Certain Change in Control events will be considered "Terminating Transactions," provided the acquirer does not
arrange to assume or replace the grant. Terminating Transactions include (i) the dissolution of the Company, or (ii) if
the Company comes under the substantial ownership (80%) of another person.
Non-Competition Covenants Affected by Change 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 the Change in Control. In the table at PS-99, no value
has been assigned to a potential reduction.
TIFFANY & CO.
PS-103
Death or Disability
Other Terminations
If any of the NEOs had died or become disabled on January 31, 2018, 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-99. Further,
RSUs and certain PSUs would have vested under the terms of the outstanding awards at the following values:
Alessandro Bogliolo, $1,370,026; Mark J. Erceg, $2,362,828; Pamela H. Cloud, $1,429,338; Philippe Galtie,
$1,817,104; and Leigh M. Harlan, $1,689,864.
CEO PAY RATIO
The SEC has adopted a rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that
requires the disclosure of the ratio of (i) the median annual total compensation for all employees of the Company and
its subsidiaries other than the CEO, to (ii) the annual total compensation of the CEO.
To determine the median annual total compensation for all employees other than the CEO, a median employee was
identified from the population of all employees of the Company and its subsidiaries worldwide as of January 31,
2018 (including all seasonal and part-time employees, as well as all full-time employees), using annual cash
compensation as of December 31, 2017. For these purposes, annual cash compensation was calculated using base
salary, cash bonuses and all other elements of cash compensation, such as overtime pay and commissions. Equity
awards, the value of retirement benefits and other elements of non-cash compensation were not included. Once the
median employee was identified, the median employee's total compensation for Fiscal 2017 was determined in the
same manner that total compensation was determined for the CEO in the Summary Compensation Table that appears
on PS-74.
For purposes of the pay ratio, CEO compensation was calculated as the aggregate of the total compensation reported
in the Summary Compensation Table for Alessandro Bogliolo, Frederic Cumenal, and Michael J. Kowalski, each of
whom served as CEO during a portion of Fiscal 2017. This aggregate figure includes one-time payments such as
severance payments provided to Mr. Cumenal and sign-on awards provided to Mr. Bogliolo.
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On the basis described above, we determined that the median annual compensation for all employees, excluding the
executives who served as CEO, was $32,055, and the annual combined compensation of Mr. Bogliolo, Mr. Cumenal
and Mr. Kowalski was $25,097,905. Accordingly, the ratio of the two amounts is 783 to 1. Because the annual CEO
compensation used in calculating this ratio includes the combined compensation of three executives who served as
CEO, as well as certain one-time transition payments, the Company’s pay ratio for Fiscal 2017 may not be
comparable to its pay ratio in other years. For example, if the target direct compensation established for Mr. Bogliolo
for Fiscal 2018 had been used in place of the combined compensation of Mr. Bogliolo, Mr. Cumenal and Mr.
Kowalski for Fiscal 2017, the Company's pay ratio would have been 316 to 1. See "Target Compensation for Named
Executive Officers in Fiscal 2018" at PS-46. For the same reason, the Company's pay ratio may not be comparable
to the pay ratios of other companies. Other companies may also, as permitted by the SEC rule, adopt different
methodologies, rely on different estimates or assumptions or, unlike the Company, make adjustments in calculating
their pay ratios.
TIFFANY & CO.
PS-104
DIRECTOR COMPENSATION TABLE
Fiscal 2017
Fees
Earned or
Paid in
Cash
($) (a)
Option
Awards
($) (b) (c)
Stock
Awards
($)
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings (d)
All Other
Compensation
($)
Total
($)
Name
Rose Marie Bravo
$
80,000 $
80,049 $
78,400 $
22,839 $
— $ 261,288
Gary E. Costley
Roger N. Farah
Lawrence K. Fish
Abby F. Kohnstamm
Michael J. Kowalski
James E. Lillie
Charles K. Marquis
Peter W. May (e)
William A. Shutzer
$
$
$
$
$
$
$
$
$ 100,000 $
80,049 $
78,400
98,959 $
99,129 $
97,139
95,000 $
80,049 $
78,400
80,000 $
80,049 $
78,400
33,187 $
53,084 $
51,938
79,068 $
99,129 $
97,139
95,000 $
80,049 $
78,400 $
20,000 $
— $
—
N/A $
N/A $
N/A $
N/A $
N/A $
N/A $
— $
N/A $
— $ 258,449
— $ 295,227
— $ 253,449
— $ 238,449
— $ 138,209
— $ 275,336
— $ 253,449
— $
20,000
95,000 $
80,049 $
78,400 $
2,798 $
— $ 256,247
Robert S. Singer
$ 100,000 $
80,049 $
78,400
Francesco Trapani (f)
$
59,068 $
99,129 $
97,139
N/A $
N/A $
— $ 258,449
— $ 255,336
(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 2017. 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 Fiscal 2017. See "Note M. Stock Compensation
Plans," in Notes to Consolidated Financial Statements, under Item 8. Financial Statements and
Supplementary Data.
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TIFFANY & CO.
PS-105
(c) Supplementary Table: Outstanding Director Option Awards at Fiscal Year End:
Name
Rose Marie Bravo
Gary E. Costley
Roger N. Farah
Lawrence K. Fish
Abby F. Kohnstamm
Michael J. Kowalski
James E. Lillie
Charles K. Marquis
Peter W. May
William A. Shutzer
Robert S. Singer
Francesco Trapani
Aggregate Number of Option
Awards Outstanding at Fiscal Year End
(number of underlying shares)
29,956
20,741
6,749
26,096
34,673
12,763
6,749
29,956
49,223
34,673
23,619
6,749
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-employee director and does not include awards granted
to him in connection with his employment with Tiffany.
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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-2017; discount rate of 3.75%; and assumed
retirement age of 65 (if the director is over age 65, the director is assumed to retire on January 31, 2018).
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 Mr. Marquis declined by
$2,882. 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.
(e) Mr. May did not stand for re-election at the 2017 Annual Meeting. The amount reported above for Mr. May is
a retainer fee for the final quarter of the director compensation year ending May 31, 2017, which was paid in
March 2017.
(f) For administrative reasons, a portion of the fees ($20,000) payable to Mr. Trapani with respect to his service
for the director compensation year ending on May 31, 2018 will be paid in Fiscal 2018, and is therefore not
reflected in the amount reported above.
TIFFANY & CO.
PS-106
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-53. For Fiscal 2017, compensation of the Company's directors was between the median and 75th
percentile of the Company's peer group.
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 $38,000, payable at the later of age 65 or
the retirement date. This benefit is payable quarterly and continues for a period of time equal to the director's length
of service on the Board, including periods served as an employee director, or until death, if earlier. Directors Bravo,
Marquis and Shutzer are the only directors entitled to participate in this benefit plan.
Under the Deferral Plan, directors may defer up to one hundred percent (100%) of their cash compensation and
invest the amounts they defer in various accounts and funds established under the plan. However, the Company does
not guarantee any return on said investments. The following table provides data concerning director participation in
this plan:
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Director
Contribution
In Last
Fiscal Year
($)
Registrant
Contribution
In Last
Fiscal Year
($)
Aggregate
Earnings/
(Losses)
In Last
Fiscal Year
($)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance
At Last
Fiscal Year End
($)
$
$
$
$
— $
86,685 $
— $
— $
— $
— $
— $
— $
25,704 $
12,274 $
112,110 $
316,781 $
— $
— $
— $
135,183
98,959
825,266
— $
1,878,060
Name
Gary E. Costley
Roger N. Farah
Charles K. Marquis
William A. Shutzer
Frederic Cumenal and Alessandro Bogliolo, as employees during Fiscal 2017, received no separate compensation for
service as directors during Fiscal 2017.
TIFFANY & CO.
PS-107
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, Francesco 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 received from JANA:
• $100,000 in cash paid by JANA within three business days of the date of the Nomination Agreement;
• $150,000 in cash 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.
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.
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TIFFANY & CO.
PS-108
EQUITY COMPENSATION PLAN INFORMATION
(As of Fiscal Year 2017)
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)
1,285,177 a $
88.87
6,418,302 b
—
—
—
Plan category
Equity compensation plans approved by
security holders
Equity compensation plans not approved
by security holders
Total
1,285,177 a $
88.87
6,418,302 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 2017 Directors Equity Plan (the
"Directors Plan"). They do not include 1,109,580 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 154,469 and 28,213
shares, respectively, or the Company's 2008 Directors Equity Plan, which total 284,950 and 31,443 shares,
respectively. All amounts shown take into account accrued dividend equivalent units where applicable.
(b) Shares indicated are the aggregate of those available for grant under the 2014 Plan and the Directors Plan.
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PS-109
Shareholder Proposals for Inclusion in the Proxy Statement for the 2019 Annual Meeting
OTHER MATTERS
If you wish to nominate a candidate for election as a director to be included in the Company's Proxy Statement for
our 2019 Annual Meeting, we must receive notice of such nomination no earlier than November 6, 2018 and no
later than December 6, 2018. If you wish to submit a proposal of other business to be included in the Company's
Proxy Statement for our 2019 Annual Meeting, we must receive such proposal no later than December 6, 2018.
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).
Other Proposals
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, but do not intend for such nomination or proposal to be included in the
Company's Proxy Statement for the 2019 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 2019 Annual Meeting, but not intended to be included in the Company's Proxy
Statement, must be received by the Company no earlier than January 24, 2019 and no later than February 23,
2019.
Except as required by applicable law, the Company will consider only proposals that are received by the Company
within the applicable time frames set forth above, and that meet 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 obtain a copy of the proxy statement and annual report from the Company's website
www.tiffany.com, by clicking "Investors" at the bottom of the page, and selecting "Financial Information" from the
left-hand column. 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.
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TIFFANY & CO.
PS-110
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
Leigh M. Harlan
Secretary
New York, New York
April 6, 2018
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PS-111
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 currency 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:
2017
GAAP
Reported
Translation
Effect
Constant-
Exchange-
Rate Basis
4%
—%
4%
2
10
(1)
6
26
1
2
(2)
3
—
1
8
1
3
26
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, 2018
Charges related to
the 2017 Tax
Acta)
Non-GAAP
Provision for income taxes
$
390.4
$
(146.2)
$
Effective income tax rate
Net earnings
Diluted earnings per share*
51.3%
(19.2)%
370.1
2.96
146.2
1.17
244.2
32.1%
516.3
4.13
(a) Net expense recognized in 2017 related to the estimated impact of the 2017 U.S. Tax Cuts and Jobs
Act (the "2017 Tax Act"). See "Item 8. Financial Statements and Supplementary Data - Note O. Income
Taxes" in our Annual Report on Form 10-K, filed with the SEC on March 16, 2018, for further
information.
TIFFANY & CO.
PS-112
(in millions, except per share amounts)
GAAP
Year Ended January 31, 2017
Impairment
charges (b)
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 (c)
Net earnings
Diluted earnings per share *
*Amounts may not add due to rounding.
(b) 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 pre-tax expense ($16.0 million 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 16, 2018, for further information; and
• $12.6 million of pre-tax expense ($8.0 million 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 7. Management's Discussion and Analysis–Financing Arrangements
with Diamond Mining and Exploration Companies" in our Annual Report on Form 10-K, filed with the
SEC on March 16, 2018, for further information.
(c) 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.
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:
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(in millions)
2017
Net cash provided by operating activities
$
932.2 $
Less: Capital expenditures
Free cash flow a
(239.3)
$
692.9 $
2016
705.7
(222.8)
482.9
a Net cash provided by operating activities and free cash flow in 2017 reflected more effective
management and timing of payables and reduced payments for income taxes, partly offset by increased
inventory purchases. Additionally, net cash provided by operating activities and free cash flow in 2017
and 2016 reflected a voluntary cash contribution of $15.0 million and $120.0 million, respectively,
made by the Company to its U.S. pension plan. See "Item 8. Financial Statements and Supplementary
Data–Note N. Employee Benefit Plans" in our Annual Report on Form 10-K, filed with the SEC on March
16, 2018, for further information.
TIFFANY & CO.
PS-113
CORPORATE INFORMATION
ALESSANDRO BOGLIOLO
Chief Executive Officer,
Tiffany & Co.
(2017) 5 and 6
ROSE MARIE BRAVO, CBE
Chief Executive Officer (Retired),
Burberry Limited
(1997) 2 and 3
GARY E. COSTLEY, Ph. D.
Chairman and Chief Executive Officer (Retired),
International Multifoods Corporation
(2007) 2*, 3 and 5
ROGER N. FARAH
Chairman of the Board,
Tiffany & Co.
Former Co-Chief Executive Officer,
Tory Burch LLC
(2017) 2 and 5
LAWRENCE K. FISH
Chairman and Chief Executive Officer (Retired),
Citizens Financial Group, Inc.
(2008) 1, 3, 4 and 5*
ABBY F. KOHNSTAMM
BOARD OF DIRECTORS
JAMES E. LILLIE
Former Chief Executive Officer,
Jarden Corporation
(2017) 3 and 4
CHARLES K. MARQUIS
Senior Advisor (Retired),
Investcorp International, Inc.
(1984) 1, 2 and 3*
WILLIAM A. SHUTZER
Senior Managing Director,
Evercore Partners
(1984) 4*
ROBERT S. SINGER
Former Chief Executive Officer,
Barilla Holding SpA
(2012) 1*, 2 and 4
FRANCESCO TRAPANI
Former Chief Executive Officer,
Bulgari
(2017) 1 and 3
(Year joined Board)
Member of (* indicates Committee Chair):
(1) Audit Committee
Executive Vice President and Chief Marketing Officer,
(2) Compensation Committee and Stock Option Subcommittee
Pitney Bowes Inc.
(2001) 1, 2, 3 and 5
MICHAEL J. KOWALSKI
Former Chairman and Chief Executive Officer,
Tiffany & Co.
(1995) 5
(3) Nominating/Corporate Governance Committee
(4) Finance Committee
(5) Corporate Social Responsibility Committee
(6) Dividend Committee
EXECUTIVE OFFICERS OF TIFFANY & CO.
ALESSANDRO BOGLIOLO
Chief Executive Officer
MARK J. ERCEG
LEIGH M. HARLAN
Senior Vice President – Secretary and General Counsel
ANDREW W. HART
Executive Vice President – Chief Financial Officer
Senior Vice President – Diamond and Jewelry Supply
PHILIPPE GALTIE
Executive Vice President – Global Sales
GRETCHEN KOBACK-PURSEL
Senior Vice President – Chief Human Resources Officer
PAMELA H. CLOUD
CAROLINE D. NAGGIAR
Senior Vice President – Chief Merchandising Officer
Senior Vice President – Chief Brand Officer
ANDREA C. DAVEY
Senior Vice President – Global Marketing
TIFFANY & CO.
C-1
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 24, 2018, 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 505000, Louisville, KY 40233-5000 (by regular mail) or
462 South 4th Street, Suite 1600, Louisville, KY 40202 (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
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.
TIFFANY & CO.
C-2
Stock Price and Dividend Information
Stock price at end of fiscal year
$ 106.65 $ 78.72 $ 63.84 $ 86.64 $ 83.19
2017
2016
2015
2014
2013
Price Ranges of Tiffany & Co. Common Stock
2017
Close
High
Low
2016
Close
High
Low
Cash Dividends
Per Share
2017
2016
$ 97.29 $ 77.52 $ 91.65 $ 74.06 $ 59.75 $ 71.35
$ 0.45 $ 0.40
96.94
84.15
95.51
72.18
56.99
64.52
97.10
86.15
93.62
74.81
58.77
73.42
111.44
90.46
106.65
85.44
71.86
78.72
0.50
0.50
0.50
0.45
0.45
0.45
Quarter
First
Second
Third
Fourth
On March 19, 2018, the closing price of Tiffany & Co. Common Stock was $97.62 and there were 13,766 holders of
record of the Company's Common Stock.
Certifications
Alessandro Bogliolo 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, 2018.
As required by the New York Stock Exchange ("NYSE"), on June 21, 2017, Michael J. Kowalski, then interim 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 AND WORD MARK TIFFANY BLUE, THE TIFFANY
BLUE BOX AND OTHERS ARE TRADEMARKS OF TIFFANY (NJ) LLC. AND TIFFANY AND COMPANY.
© 2018 TIFFANY & CO.
TIFFANY & CO.
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CLOCKWISE, FROM TOP LEFT: Sterling silver paper cup. Tiffany HardWear wrap bracelet. Tiffany Keys pendants. Handwoven sterling silver bird’s nest with Tiffany Blue®
porcelain eggs and ring in platinum with an aquamarine and diamonds. Earrings in platinum with diamonds. The Tiffany Fragrance.