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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 2003
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 NO. 1-9494
TIFFANY & CO.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3228013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
727 FIFTH AVENUE, NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 755-8000
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Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $.01 par value per share New York Stock Exchange
Stock Purchase Rights New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]
As of July 31, 2002 the aggregate market value of the registrant's voting
and non-voting stock held by non-affiliates of the registrant was approximately
$3,546,038,810 using the closing sales price on this day of $24.64. See Item 5.
Market for Registrant's Common Equity and Related Stockholder Matters below.
As of March 25, 2003, the registrant had outstanding 144,832,574 shares of
its common stock, $.01 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE.
The following documents are incorporated by reference into this Annual
Report on Form 10-K: Registrant's Annual Report to Stockholders for the Fiscal
Year Ended January 31, 2003 (Parts I, II and IV) and Registrant's Proxy
Statement Dated April 8, 2003 (Part III).
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, and the documents which are
incorporated by reference, contain certain "forward-looking statements"
concerning the Registrant's objectives and expectations regarding store
openings, retail prices, gross profit, expenses, inventory performance, capital
expenditures and cash flow. In addition, management makes other forward-looking
statements from time to time concerning objectives and expectations. As a
jeweler and specialty retailer, the Registrant's success in achieving its
objectives and expectations is partially dependent upon economic conditions,
competitive developments and consumer attitudes. However, certain assumptions
are specific to the Registrant and/or the markets in which it operates. The
following assumptions, among others, are "risk factors" which could affect the
likelihood that the Registrant will achieve the objectives and expectations
communicated by management: (i) that low or negative growth in the economy or in
the financial markets, particularly in the U.S. and Japan, will not occur and
reduce discretionary spending on goods that are, or are perceived to be,
"luxuries"; (ii) that consumer spending does not decline substantially during
the fourth quarter of any year; (iii) that unsettled regional and/or global
conflicts do not result in military and/or terrorist activities creating long-or
short-term disruptions to, or changes in the pattern, practice or frequency of
tourist travel to the various regions where the Registrant operates retail
stores nor to the Registrant's ability to operate in those regions; (iv) that
sales in Japan will not decline substantially; (v) that there will not be a
substantial adverse change in the exchange relationship between the Japanese yen
and the U.S. dollar; (vi) that Mitsukoshi Ltd. of Japan and other department
store operators in Japan, in the face of declining or stagnant department store
sales, will not close or consolidate stores in which TIFFANY & CO. retail
locations are located; (vii) that Mitsukoshi's ability to continue as a leading
department store operator in Japan will continue; (viii) that existing product
supply arrangements, including license arrangements with third-party designers
Elsa Peretti and Paloma Picasso, will continue; (ix) that the wholesale market
for high-quality cut diamonds will provide continuity of supply and pricing; (x)
that the investment in Aber Diamond Corporation achieves its financial and
strategic objectives; (xi) that new systems, particularly for inventory
management, can be successfully integrated into the Registrant's operations;
(xii) that warehousing and distribution productivity and capacity can be further
improved to support the Registrant's worldwide distribution requirements; (xiii)
that new stores and other sales locations can be leased or otherwise obtained on
suitable terms in desired markets and that construction can be completed on a
timely basis; (xiv) that the Registrant can successfully improve the results of
Little Switzerland, Inc. and achieve satisfactory results from any future
ventures into which it enters that are operated under non-TIFFANY & CO.
trademarks or trade names; and (xv) that the Registrant's expansion plans for
retail and direct selling operations and merchandise development, production and
management can continue to be executed without meaningfully diminishing the
distinctive appeal of the TIFFANY & CO. brand.
The Registrant disclaims any obligation to publicly update or revise
any of its forward-looking statements to reflect subsequent events or
circumstances.
- -PAGE 2- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
The Registrant maintains a website at www.tiffany.com where investors
and other interested parties may obtain financial and other important
information, including the Registrant's periodic reports to the SEC.
PART I
ITEM 1. BUSINESS
(a) General history of business.
Registrant (also referred to as the "Company") is the parent
corporation of Tiffany and Company ("Tiffany"). Charles Lewis Tiffany founded
Tiffany's business in 1837. He incorporated Tiffany in New York in 1868.
Registrant acquired Tiffany in 1984 and completed the initial public offering of
Registrant's Common Stock in 1987.
(b) Financial information about industry segments.
Registrant's segment information for the fiscal years ended January 31,
2003, 2002 and 2001 is incorporated by reference from Registrant's Annual Report
to Stockholders for the Fiscal Year ended January 31, 2003 (Note R. "Segment
Information"). Executive Officers of the Company evaluate the performance of the
Company's assets on a consolidated basis. Therefore, separate financial
information for the Company's assets on a segment basis is not available.
(c) Narrative description of business.
As used below, the terms "Fiscal 2000", "Fiscal 2001" and "Fiscal 2002"
refer to the fiscal years ended on January 31, 2001, 2002 and 2003,
respectively. Registrant is a holding company, and conducts all business through
its subsidiary corporations.
Products
Registrant's principal product categories are fine jewelry, timepieces,
sterling silver goods, china, crystal, stationery, fragrances and personal
accessories.
Registrant offers an extensive selection of TIFFANY & CO. brand jewelry
at a wide range of prices. In Fiscal 2000, 2001 and 2002, approximately 78%, 79%
and 80%, respectively, of Registrant's net sales were attributable to jewelry.
See Merchandise Purchasing, Manufacturing and Raw Materials below. Designs are
developed by employees, suppliers, independent designers and independent "name"
designers. See Designer Licenses below.
In addition to jewelry, the Company sells TIFFANY & CO. brand
merchandise in the following categories: timepieces and clocks; sterling silver
merchandise, including flatware, hollowware (tea and coffee services, bowls,
cups and trays), trophies, key holders, picture frames and desk accessories;
stainless steel flatware; crystal, glassware, china and other tableware; custom
- -PAGE 3- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
engraved stationery; writing instruments; and fashion accessories. Fragrance
products are sold under the trademarks TIFFANY, PURE TIFFANY and TIFFANY FOR
MEN. Tiffany also sells other brands of timepieces and tableware in its U.S.
stores.
Distribution and Marketing
Channels of Distribution
For financial reporting purposes, Registrant categorizes its sales as
follows:
U.S. Retail consists of retail sales transacted in
Tiffany-operated stores in the United States(1) (see U.S.
Retail below);
Direct Marketing consists of U.S. business-to-business, direct
mail catalog and Internet sales (see Direct Marketing below);
International Retail consists of both retail and wholesale
sales to customers located outside the United States, as well
as a limited amount of business-to-business sales and Internet
sales (see International Retail below); and
Specialty Retail consists of retail sales transacted in Little
Switzerland, Inc. stores and through other existing or future
ventures involving sales of merchandise under non-TIFFANY
trademarks and trade names.
U.S. Retail
Fifth Avenue Store
Tiffany's Fifth Avenue store in New York accounts for a significant
portion of the Company's sales and is the focal point for marketing and public
relations efforts. Approximately 12%, 11% and 10% of total Company net sales for
Fiscal 2000, 2001 and 2002, respectively, were attributable to the New York
store's retail sales. In Fiscal 2000, the Company commenced a multiyear
renovation and reconfiguration project to increase the store's selling space and
provide additional floor space for customer service and special exhibitions. An
additional selling floor was opened in November 2001 and, over the next three
years, renovations of other existing selling space will be completed.
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(1) By the first quarter of Fiscal 2000 the Company had discontinued its
wholesale sales of jewelry, tabletop product and fragrances to third party
retailers in the United States. This change has not had a significant impact on
sales or profits and has enabled the Company to better manage the TIFFANY & CO.
brand and to focus management efforts on Tiffany-operated stores in the U.S.
- -PAGE 4- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
U.S. Branch Stores
At January 31, 2003, in addition to its New York Fifth Avenue store,
Tiffany had 46 branch stores in the United States. The following table
identifies the location and year of opening of each U.S. branch store:
U.S. BRANCH STORE OPENINGS
YEAR YEAR
STORE LOCATION OPENED STORE LOCATION OPENED
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San Francisco, California 1963 Chestnut Hill, Massachusetts 1997
Houston, Texas 1963 Cincinnati, Ohio 1997
Beverly Hills, California 1964 Palo Alto, California 1997
Chicago, Illinois 1966 Denver, Colorado 1998
Atlanta, Georgia 1969 Las Vegas, Nevada 1998
Dallas, Texas 1982 Manhasset, New York 1998
Boston, Massachusetts 1984 Seattle, Washington 1998
Costa Mesa, California 1988 Scottsdale, Arizona 1998
Philadelphia, Pennsylvania 1990 Century City, California 1999
Vienna, Virginia 1990 Dallas (NorthPark), Texas 1999
Palm Beach, Florida 1991 Boca Raton, Florida 1999
Honolulu, Hawaii (Ala Moana) 1992 Tamuning, Guam + 1999
San Diego, California 1992 Old Orchard, (Skokie) Illinois 2000
Troy, Michigan 1992 Maui, Hawaii (Wailea) 2000
Bal Harbour, Florida 1993 Greenwich, Connecticut 2000
Maui, Hawaii 1994 Portland, Oregon 2000
Oak Brook, Illinois 1994 Tampa, Florida 2001
King of Prussia, Pennsylvania 1995 Santa Clara (San Jose), California 2001
Short Hills, New Jersey 1995 Honolulu, Hawaii (Waikiki)++ 2002
White Plains, New York 1995 Bellevue, Washington 2002
Hackensack, New Jersey 1996 East Hampton, New York 2002
Chevy Chase, Maryland 1996 St. Louis, Missouri 2002
Charlotte, North Carolina 1997 Orlando, Florida 2002
+ Operated by Mitsukoshi (U.S.A.), Inc. until March 1999.
++ Replaced two previously existing Honolulu locations.
Most of Tiffany's U.S. branch stores display a representative selection
of merchandise, but none of them maintains the extensive selection carried by
the New York store. Management currently contemplates the opening of new TIFFANY
& CO. branch stores in the United States at the rate of approximately three to
five per year. Management regularly evaluates potential markets for new TIFFANY
& CO. stores with a view to the demographics of the area to be served, consumer
demand and the proximity of other luxury brands and existing TIFFANY & CO.
locations, recognizing that over saturation of that market could diminish the
distinctive appeal of the TIFFANY & CO. brand. However, management believes that
there are a significant number of
- -PAGE 5- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
locations remaining in the United States that meet the requirements of a TIFFANY
& CO. location, particularly given a new smaller store format. Tiffany has
entered into lease agreements to open additional branches in 2003 in Walnut
Creek, California, Coral Gables, Florida and Tamuning, Guam. See Item 2.
Properties below for further information concerning U.S. Retail store leases.
U.S. TIFFANY & CO. branch stores range in size from approximately 1,500 to
16,000 gross square feet and total approximately 370,000 gross square feet.
Prior to 1993, an average of approximately 45% of the floor space in each branch
store was devoted to retail selling. Newer stores generally range from
approximately 4,000 to 7,000 gross square feet and are designed to devote
approximately 60-70% of total floor space to retail selling. Branch stores
opened after 2001 feature a store design format of approximately 5,000 square
feet in size and display primarily fine jewelry, with a select assortment of
china and crystal giftware. The East Hampton location is approximately 3,000
square feet in size and represents the first "resort" store.
Direct Marketing
Business Sales Division
Business Sales Division sales executives call on business clients
throughout the United States, selling products drawn from the retail product
line and items specially developed or sourced for the business market, including
trophies and items designed for the particular customer. Price allowances are
given to business account holders for certain purchases. Business Sales Division
customers have typically purchased for business gift giving, employee service
and achievement recognition awards, customer incentives and other purposes.
During Fiscal 2002, the Company announced that it would discontinue its service
award programs once existing customer commitments are satisfied.(2) Products and
services are marketed through an organization of approximately 127 persons
through advertising in newspapers and business periodicals and through the
publication of special catalogs. Business account holders may also make gift
purchases through the Company's Web site at www.tiffany.com.
Catalogs
Tiffany also distributes catalogs of selected merchandise to its
proprietary list of retail mail and telephone customers and to mailing lists
rented from third parties. SELECTIONS(R) catalogs are published, supplemented by
COLLECTIONS and other catalogs.
Internet
The Company distributes a selection of more than 2,000 products through
its Web site at www.tiffany.com. The Company expects to continue its expansion
of merchandise selection and services on the site based on customer needs.
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(2) Service award programs represented approximately 14% of Direct Marketing
Sales in Fiscal 2002.
- -PAGE 6- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
The following table sets forth certain data with respect to mail,
telephone and Internet order operations for the periods indicated:
Fiscal Year
2000 2001 2002
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Number of names on catalog mailing and Internet lists at
year-end (consists of customers who purchased by mail,
telephone or Internet prior to the applicable date)*: 1,254,000 1,497,407 1,788,008
Total catalog mailings during fiscal year (in millions): 24.7 25.9 24.0
Total mail, telephone or Internet orders received during 406,680 492,538 614,610
fiscal year*:
*Fiscal 2000 has been restated to include orders received from e-commerce
customers, which commenced in November 1999.
International Retail
Stores and boutiques included in the International Retail channel of
distribution are listed on the following page.
- -PAGE 7- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
International Locations
LOCATIONS OPERATED BY REGISTRANT'S SUBSIDIARIES
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JAPAN ASIA-PACIFIC EXCLUDING JAPAN
* Operated by Registrant's Subsidiaries with
Mitsukoshi, Ltd.
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Abeno, Kintetsu Department Store Australia: Melbourne, Collins Street
Chiba, Mitsukoshi Department Store * Australia: Sydney, Chifley Plaza
Fukuoka, Mitsukoshi * China, Beijing, The Palace Hotel
Fukuoka, Mitsukoshi Department Store * Hong Kong: Causeway Bay, Lee Gardens
Ginza, Mitsukoshi Department Store * Hong Kong: Landmark Center
Hiroshima, Mitsukoshi Department Store * Hong Kong: Pacific Place
Ikebukuro, Mitsukoshi Department Store * Hong Kong: Peninsula Hotel
Ikebukuro, Tobu Department Store (Opened 3/03) Hong Kong: Sogo Department Store
Kagoshima, Mitsukoshi Department Store * Korea: Seoul, Galleria Department Store
Kanazawa, Mitsukoshi * Korea: Seoul, Hyundai Department Store
Kashiwa, Takashimaya Department Store Korea: Seoul, Hyundai Coex Department Store
Kawasaki, Saikaya Department Store Korea: Seoul, Lotte Downtown Department Store
Kobe, Daimaru Department Store Korea: Pusan, Paradise Hotel
Kobe, Mitsukoshi Department Store * Malaysia: Suria KLCC
Kochi, Daimaru Department Store Singapore: Ngee Ann City
Kokura, Izutsuya Department Store Singapore: Raffles Hotel
Koriyama, Usui Department Store Taiwan: Kaohsiung, Hanshin Department Store
Kumamoto, Tsuruya Department Store Taiwan: Taipei, Regent Hotel
Kurashiki, Mitsukoshi Department Store * Taiwan: Taipei, Sogo Department Store
Kyoto, Daimaru Department Store Taiwan: Taichung, Sogo Department Store
Kyoto, Takashimaya Department Store ----------------------------------------------
Matsuyama, Mitsukoshi Department Store * EUROPE
Nagano, Mitsukoshi * ----------------------------------------------
Nagoya Hoshigaoka, Mitsukoshi Dept. Store * England: London, Old Bond Street
Nagoya, Mitsukoshi *(Opened 2/03) England: London, The Royal Exchange
Nagoya Sakae, Mitsukoshi Dept. Store *(Closed 2/03) England: London, Harrod's Department Store
Nagoya, Takashimaya Department Store France: Paris
Nihonbashi, Mitsukoshi Department Store * France: Paris, LePrintemps Department Store
Niigata, Mitsukoshi Department Store * Germany: Frankfurt
Oita, Tokiwa Department Store Germany: Munich
Okayama, Tenmaya Department Store Italy: Florence
Okinawa, Mitsukoshi Department Store * Italy: Milan
Osaka, Mitsukoshi Department Store * Italy: Rome
Osaka, Takashimaya Department Store Switzerland: Zurich
Sagamihara, Isetan Department Store ----------------------------------------------
Sapporo, Mitsukoshi Department Store * CANADA AND CENTRAL/SOUTH AMERICA
Sapporo, Daimaru Dept. Store (Opened 3/03) ----------------------------------------------
Sendai, Mitsukoshi Department Store * Canada: Toronto
Shinjuku, Isetan Department Store Mexico: Mexico City, Palacio Store, Polanco
Shinjuku, Mitsukoshi Department Store * Mexico: Mexico City, Palacio Store, Perisur
Shinsaibashi, Daimaru Department Store Mexico: Mexico City, Masaryk
Shizuoka, Matsuzakaya Department Store Brazil: Sao Paulo, Iguatemi Shopping Center
Tachikawa, Isetan Department Store
Takamatsu, Mitsukoshi Department Store *
Tokyo Bay, Ikspiari *
Tokyo, Ginza Flagship Store *
Tottori, Daimaru Department Store
Umeda, Daimaru Department Store
Utsunomiya, Tobu Department Store
Yokohama, Landmark Plaza, Mitsukoshi *
Yokohama, Mitsukoshi Department Store *
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- -PAGE 8- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
Business with Mitsukoshi
On August 1, 2001, Registrant's wholly-owned subsidiary, Tiffany & Co.
Japan Inc. ("Tiffany-Japan") entered into agreements with Mitsukoshi Ltd. of
Japan ("Mitsukoshi"). These agreements continue long-standing commercial
relationships that Registrant and its affiliated companies have had with
Mitsukoshi.
In the fiscal years ended January 31, 2001, 2002 and 2003,
respectively, total Japan sales represented 28%, 28% and 26% of Registrant's net
sales. Sales made in TIFFANY & CO. boutiques located in Mitsukoshi's stores
constituted 16%, 15% and 13% of Registrant's net sales in those years.
(Historical Background)
On June 12, 1993, Registrant, through its affiliated companies, entered
into a distribution agreement (the "93 Agreement") with Mitsukoshi. The 93
Agreement significantly changed the way Registrant and Mitsukoshi had done
business in Japan, which, from 1972 until that time, had consisted of sales to
Mitsukoshi for resale. As a consequence of the 93 Agreement, Tiffany-Japan
commenced retail sales operations in Japan.
(The 93 Agreement and the 2001 Agreement)
On August 1, 2001, Tiffany-Japan and Mitsukoshi entered into an
agreement (the "2001 Agreement"). The 2001 Agreement replaced the 93 Agreement,
which remained in effect until November 1, 2001. The 2001 Agreement will expire
on January 31, 2007.
Under the 93 and 2001 Agreements Tiffany-Japan had and has
merchandising and marketing responsibilities in the operation of TIFFANY & CO.
boutiques in Mitsukoshi's stores and other locations throughout Japan.
Mitsukoshi acts for Tiffany-Japan in the sale of merchandise owned by
Tiffany-Japan and Registrant recognizes as revenues the retail price charged to
the ultimate consumer in Japan. Tiffany-Japan holds inventories for sale,
establishes retail prices, bears the risk of currency fluctuations, provides one
or more brand managers in each boutique, controls merchandising and displays
within the boutiques, manages inventory and controls and funds all advertising
and publicity programs with respect to TIFFANY & CO. merchandise. Mitsukoshi
provides and maintains boutique facilities and assumes retail credit and certain
other risks.
Mitsukoshi provides retail staff in "Standard Boutiques" and
Tiffany-Japan provides retail staff in "Concession Boutiques." At present, there
are 16 Standard Boutiques and 10 Concession Boutiques. Over the remaining term
of the 2001 Agreement, one existing boutique is to close and five will be
converted from Standard to Concession Boutiques. Risk of inventory loss varies
depending on whether the boutique is a Standard Boutique or a Concession
Boutique. Mitsukoshi bears responsibility for loss or damage to the merchandise
in Standard Boutiques and Tiffany-Japan bears the risk in Concession Boutiques.
Under the 93 Agreement, Mitsukoshi retained a portion (the "basic
portion") of the net retail sales made in TIFFANY & CO. Boutiques. The basic
portion varied depending on the type
- -PAGE 9- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
of Boutique and the retail price of the merchandise involved. Generally,
however, Mitsukoshi's basic portion was 27% in Standard Boutiques and 20% in
Concession Boutiques. These basic portions remained in effect under the 2001
Agreement through January 31, 2003.
From February 1, 2003 through the expiration of the 2001 Agreement,
Mitsukoshi's basic portion will be reduced by four percent in each category and
increased by a factor that varies between zero and three percent depending upon
the historic sales performance of the individual boutique in question. Thus,
Registrant expects that the highest basic portion available to Mitsukoshi in any
Standard Boutique during this time period will be 26% and for any Concession
Boutique, not less than 17%.
Under the 93 Agreement, Tiffany-Japan also paid Mitsukoshi an incentive
fee of five percent of the amount by which boutique sales increased
year-to-year, calculated on a per-boutique basis. Under the 2001 Agreement, the
five-percent incentive fee is calculated only upon the increase above "Target
Sales." Target Sales means a year-to-year increase that is greater than the
lesser of (i) 10% or (ii) a sales goal set by Tiffany-Japan.
Under the 93 Agreement, Mitsukoshi had the following exclusive rights
in Tokyo: TIFFANY & CO. boutiques could be established only in Mitsukoshi's
stores and TIFFANY & CO. brand jewelry could be sold only in such boutiques, or
in the "Flagship Store" (see below). Outside Tokyo, Registrant was not
restricted in its right to establish TIFFANY & CO. boutiques or sell TIFFANY &
CO. merchandise.
Under the 2001 Agreement, Registrant is free to establish TIFFANY & CO.
boutiques and sell TIFFANY & CO. merchandise throughout Japan, including in
Tokyo.
(The FSS Agreement and the 2001 FSS Agreement)
Mitsukoshi, Tiffany-Japan and Tiffany entered into an Agreement dated
February 23, 1996 (the "FSS Agreement") governing the operation of a 7,700
square foot TIFFANY & CO. store in premises (the "Premises") located in Tokyo's
Ginza shopping district (the "Flagship Store"). Tiffany-Japan completed, at its
cost, all necessary improvements to prepare the Premises and delivered the
Premises to Mitsukoshi in May 1996. In June 1999, by Supplemental Agreement to
the FSS Agreement, the parties expanded the Premises to approximately 12,000
square feet. The Premises are leased by a third party landlord to Tiffany-Japan
for a fixed annual rental. Tiffany-Japan has paid a lease deposit of
approximately $8 million to lease the Premises. That deposit is an unsecured
indebtedness owed to Tiffany-Japan.
On August 1, 2001, Mitsukoshi and Tiffany-Japan entered into the "2001
FSS Agreement" which replaced the FSS Agreement.
Under both the FSS Agreement and the 2001 FSS Agreement, the Premises
are subleased by Tiffany-Japan to Mitsukoshi on a percentage-of-sales basis (the
"Sublease"). Tiffany-Japan bears all costs of operating the Premises.
Tiffany-Japan selects and furnishes merchandise for display in the Flagship
Store, prices the merchandise for retail sale, bears all risk of loss until the
merchandise is sold to a customer and determines all issues of display,
packaging, signage and advertising. Mitsukoshi acts for Tiffany-Japan in the
sale of the merchandise, collects and holds the sales proceeds, makes credit
available to customers, bears all credit losses and provides its point-of-sale
transaction processing system (the "POS System"). Tiffany-Japan provides all
- -PAGE 10- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
necessary staff other than employees provided by Mitsukoshi in connection with
the POS System. Management of the Flagship Store, other than with respect to the
POS System, is the responsibility of Tiffany-Japan.
After compensating Tiffany-Japan on a percentage-of-sales basis for
Sublease rent and staffing, Mitsukoshi is allocated a percentage of net sales.
Under the FSS Agreement, Mitsukoshi's percentage allocation was 8.3%. Under the
2001 FSS Agreement, Mitsukoshi's percentage allocation is 3%.
The 2001 FSS Agreement is scheduled to expire on September 30, 2005,
but will be extended until September 30, 2007, subject to renewal of the lease
for the Premises by Tiffany-Japan and the landlord for the Premises.
(Other Transactions with Mitsukoshi)
On February 2, 1998, Tiffany purchased, as a going concern, the TIFFANY
& CO. business operated on the island of Oahu, Hawaii, by an affiliate of
Mitsukoshi under agreement with Tiffany. The transaction was structured as a
purchase of assets. Tiffany paid a cash price of $8.1 million and agreed to make
contingent payments equal to 3.75% of certain sales made by Tiffany on the
island of Oahu after the date of the purchase through January 31, 2003. On March
19, 1999, Tiffany purchased, as a going concern, the TIFFANY & CO. business
operated in Guam by an affiliate of Mitsukoshi under agreement with Tiffany. The
transaction was structured as a cash-for-stock purchase of the affiliate, under
which Tiffany assumed all of the assets and liabilities of the affiliate.
Tiffany paid a total cash price of $7.0 million.
From 1989 through January 1999, Mitsukoshi Limited of Japan and its
affiliated companies held a significant portion of the Registrant's Common
Stock. As of January 31, 1999, Mitsukoshi's holdings represented 12.3% of
Registrant's outstanding shares. In February 1999, Mitsukoshi sold all of its
holdings of Registrant's Common Stock through a public offering.
International Wholesale Distribution
Selected TIFFANY & CO. merchandise is sold to independent distributors
for resale in markets in Central/Latin/South American, Caribbean, Canadian,
Asia-Pacific, Russian and Middle Eastern regions. Such sales represented 1.6% of
total sales in Fiscal 2002.(3)
Management anticipates continued expansion of international wholesale
distribution in Central/Latin/South American, Caribbean and Asia-Pacific regions
as markets are developed.
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(3) In fiscal years 2000 and 2001 the Company discontinued wholesale sales
of jewelry and fragrance in Europe. This change has not had a significant impact
on sales or profits and has enabled the Company to better manage the TIFFANY &
CO. brand and to focus management efforts on Company-operated stores in Europe.
- -PAGE 11- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
Expansion of Worldwide Retail Operations
Registrant expects to continue to open stores in locations outside the
United States. However, the timing and success of this program will depend upon
many factors, including Registrant's ability to obtain suitable retail space on
satisfactory economic terms and the extent of consumer demand for TIFFANY & CO.
products in overseas markets. Such demand varies from market to market.
The Company's commercial relationship with Mitsukoshi and Mitsukoshi's
ability to continue as a leading department store operator have been and will
continue to be substantial factors in the Company's continued success in Japan.
Presently, TIFFANY & CO. boutiques are located in 26 Mitsukoshi department
stores and other retail locations operated with Mitsukoshi in Japan. The Company
also operates 24 boutiques primarily in department stores other than Mitsukoshi,
in locations within Japan but outside of Tokyo, and plans to open more.
In recent years, the Japanese department store industry has, in
general, suffered declining sales. There is a risk that such financial
difficulties will force consolidations or store closings. Should one or more
Japanese department store operators, such as Mitsukoshi, elect or be required to
close one or more stores now housing a TIFFANY & CO. boutique, the Company's
sales and earnings would be reduced while alternate premises are being obtained.
Tiffany began its ongoing program of international expansion through
proprietary retail stores in 1986 with the establishment of the London store.
Company-operated international TIFFANY & CO. stores and boutiques range in size
from approximately 400 to 14,000 gross square feet and total approximately
232,000 gross square feet devoted to retail purposes. The following chart
details the growth in the Company's stores and boutiques since Fiscal 1987 on a
worldwide basis:
- -PAGE 12- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
Worldwide TIFFANY & CO. Retail Locations Operated by Registrant's Subsidiary
Companies
=======================================================================================================================
Americas and Europe Asia-Pacific
- -----------------------------------------------------------------------------------------------------------------------
Canada,
Central/Latin
End of /South
Fiscal: U.S. Americas Europe Japan Elsewhere Total
- -----------------------------------------------------------------------------------------------------------------------
1987 8 0 2 0 0 10
1988 9 0 3 0 1 13
1989 9 0 5 0 2 16
1990 12 0 5 0 3 20
1991 13 1 7 0 4 25
1992 16 1 7 7 4 35
1993 16 1 6 37** 5 65
1994 18 1 6 37 7 69
1995 21 1 6 38 9 75
1996 23 1 6 39 12 81
1997 28 2 7 42 17 96
1998 34 2 7 44 17 104
1999 38 3 8 44 17 110
2000 42 4 8 44 21 119
2001 44 5 10 47 20 126
2002 47 5 11 48 20 131
=======================================================================================================================
**Prior to July 1993, many TIFFANY & CO. boutiques in Japan were operated by
Mitsukoshi (ranging from 21 in 1987 to 29 in 1993). See Business with Mitsukoshi
above.
Specialty Retail
In Fiscal 2002, the Company established this new channel of
distribution to include the consolidated results of retail sales transactions in
Little Switzerland, Inc. stores and the results of other existing or future
ventures involving sales of merchandise under non-TIFFANY trademarks and trade
names. Specialty retail sales accounted for 1.4 % of net sales in Fiscal 2002.
Little Switzerland, Inc.
In October 2002, the Company, through a subsidiary, completed the
acquisition of all the shares of Little Switzerland, Inc., a specialty retailer
of brand name watches, jewelry, china, crystal and giftware. Little Switzerland
stores are located on five Caribbean islands (St. Thomas (3); St. Maarten/St.
Martin (2); Aruba (6); Curacao (1); and Barbados (1)) and in Florida (Key West
(3))
- -PAGE 13- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
and Alaska (Skagway (2); Juneau (1); and Ketchikan (1)), and appeal primarily to
tourists from the United States. Little Switzerland sells primarily non-TIFFANY
brand products, but certain stores carry selected TIFFANY & CO. merchandise.
Advertising and Promotion
Tiffany regularly advertises primarily in newspapers and magazines and
periodically conducts product promotional events. In Fiscal 2000, 2001 and 2002,
Tiffany spent approximately $84.2 million, $86.4 million, and $101.9 million,
respectively, on worldwide advertising, which include media, production,
catalogs, promotional events and other related costs.
Public Relations (promotional) activity is also a significant aspect of
Registrant's business. Management believes that Tiffany's image is enhanced by a
program of charity sponsorships, grants and merchandise donations. Donations are
also made to The Tiffany & Co. Foundation, a private foundation organized to
support other 501(c)(3) charitable organizations with efforts concentrated in
the education and preservation of the arts and environmental conservation. The
Company also engages in a program of retail promotions and media activities to
maintain consumer awareness of the Company and its products. Each year, Tiffany
publishes its well-known Blue Book which showcases fine jewelry and other
merchandise. Tiffany's window displays are another important aspect of Tiffany's
promotional efforts. John Loring, Tiffany's Design Director, is the author of
numerous books featuring TIFFANY & CO. products. Registrant considers these and
other promotional efforts important in maintaining Tiffany's image as an arbiter
of taste and style.
Trademarks
The designations TIFFANY(R) and TIFFANY & CO.(R) are the principal
trademarks of Tiffany, as well as serving as trade names. Through its
subsidiaries, the Company has obtained and is the proprietor of trademark
registrations for TIFFANY and TIFFANY & CO., as well as the TIFFANY BLUE BOX(R)
and the color TIFFANY BLUE(R) for a variety of product categories in the United
States and in other countries. Over the years, Tiffany has maintained a program
to protect its trademarks and has instituted legal action where necessary to
prevent others either from registering or using marks which are considered to
create a likelihood of confusion with the Company or its products. Tiffany has
been generally successful in such actions and management considers that its
United States trademark rights in TIFFANY and TIFFANY & CO. are strong. However,
use of the designation TIFFANY by third parties (often small companies) on
unrelated goods or services, frequently transient in nature, may not come to the
attention of Tiffany or may not rise to a level of concern warranting legal
action. Despite the general fame of the TIFFANY and TIFFANY & CO. name and mark
for the Company's products and services, Tiffany is not the sole person entitled
to use the name TIFFANY in every category in every country of the world; third
parties have registered the name TIFFANY in the United States in the food
services category, and in a number of foreign countries in respect of certain
product categories (including, in a few countries, the categories of fragrance,
cosmetics, jewelry, eyeglass frames, clothing and tobacco products) under
circumstances where Tiffany's rights were not sufficiently clear under local
law, and/or where management concluded that Tiffany's foreseeable business
interests did not warrant the expense of litigation.
- -PAGE 14- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
Designer Licenses
Tiffany has been the sole licensee for jewelry designed by Elsa
Peretti, Paloma Picasso and the late Jean Schlumberger since 1974, 1980 and
1956, respectively. In 1992, Tiffany acquired trademark and other rights
necessary to sell the designs of the late Mr. Schlumberger under the
TIFFANY-SCHLUMBERGER trademark. Ms. Peretti and Ms. Picasso retain ownership of
copyrights for their designs and of their trademarks and exercise approval
rights with respect to important aspects of the promotion, display, manufacture
and merchandising of their designs. Tiffany is required by contract to devote a
portion of its advertising budget to the promotion of their respective products;
each is paid a royalty by Tiffany for jewelry and other items designed by them
and sold under their respective names. Written agreements exist between Ms.
Peretti and Tiffany and between Ms. Picasso and Tiffany but may be terminated by
either party following six months notice to the other party. Tiffany is the sole
retail source for merchandise designed by Ms. Peretti worldwide; however, she
has reserved by contract the right to appoint other distributors in markets
outside the United States, Canada, Japan, Singapore, Australia, Italy, the
United Kingdom, Switzerland and Germany.
The designs of Ms. Peretti accounted for 15% of the Company's net sales
in Fiscal 2000, 2001 and 2002. Merchandise designed by Ms. Picasso accounted for
3%, 3% and 4% of the Company's net sales in Fiscal 2000, 2001 and 2002.
Registrant's operating results could be adversely affected were it to
cease to be a licensee of either of these designers or should its degree of
exclusivity in respect of their designs be diminished.
Merchandise Purchasing, Manufacturing and Raw Materials
Merchandise offered for sale by the Company is supplied from Tiffany's
jewelry and silver goods manufacturing facility in Cumberland, Rhode Island and
Tiffany's workshops in New York City and Pelham, New York; Parsippany, New
Jersey; Salem, West Virginia; and Paris, France and through purchases and
consignments from others. It is Registrant's long-term objective to continue its
expansion of Tiffany's internal manufacturing operations. However, it is not
expected that Tiffany will ever manufacture all of its needs. Factors to be
considered in its decision to outsource manufacturing include product quality,
gross margin improvement, access to or mastery of various jewelry-making skills
and technology, support for alternative capacity and the cost of capital
investments. The following table shows Tiffany's sources of jewelry merchandise,
based on cost, for the periods indicated:
Fiscal Years
Jewelry Merchandise 2000 2001 2002
-------- -------- --------
Produced by Tiffany 52% 49% 52%
Purchased from others 48 51 48
-------- -------- --------
Total 100% 100% 100%
======== ======== ========
A substantial majority of non-jewelry merchandise is purchased from
others.
- -PAGE 15- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
Gems and precious metals used in making Tiffany's jewelry may be
purchased from a variety of sources. For the most part, purchases of such
materials are from suppliers with which Tiffany enjoys long-standing
relationships.
Products containing one or more diamonds of varying sizes, including
diamonds used as accents, side-stones and center-stones, accounted for
approximately 40%, 38% and 36% of Tiffany's net sales in Fiscal 2000, 2001 and
2002, respectively. Products containing one or more diamonds of one carat or
larger accounted for less than 10% of net sales in each of those years. Tiffany
purchases cut diamonds principally from four key vendors. Were trade relations
between Tiffany and one or more of these vendors to be disrupted, the Company's
sales would be adversely affected in the short term until alternative supply
arrangements could be established. Diamonds of one carat or greater of the
quality the Company demands are, on a relative basis, more difficult to acquire
than smaller diamonds. Established sources for smaller stones would be more
easily replaced in the event of a disruption in supply than would established
sources for larger-sized stones.
Except as noted above, Tiffany believes that there are numerous
alternative sources for gems and precious metals and that the loss of any single
supplier would not have a material adverse effect on its operations.
In 1999, the Company made a 14.7% equity investment ($71 million) in
Aber Diamond Corporation ("Aber"), a publicly-traded company headquartered in
Canada, by purchasing 8 million unregistered shares of its common stock. Aber
holds a 40% interest in the Diavik Diamonds Project in Northwest Canada. Under
the Company's diamond purchase agreement with Aber, the Company is obligated to
purchase at least $50 million in diamonds annually (in assortments of diamonds
expected to cut/polish to the Company's quality standards) during the next 10
years. It is expected that Tiffany's alliance with Aber will enable the Company
to secure a significant portion of its future diamond needs and start-up is
expected in the first quarter of Fiscal 2003.
Presently, the supply and price of rough (uncut and unpolished)
diamonds in the principal world markets have been and continue to be
significantly influenced by a single entity, the Diamond Trading Corporation
(the "DTC") of De Beers Centenary AG, a Swiss corporation. The DTC continues to
supply a significant portion of the world market for rough, gem-quality
diamonds, notwithstanding that its historical ability to control supplies has
been somewhat diminished due to changing politics in diamond-producing countries
and revised contractual arrangements with independent mine operators. The DTC
continues to exert a significant influence on the demand for polished diamonds
through advertising and marketing efforts throughout the world and through the
requirements it imposes on those who purchase rough diamonds from the DTC
("sight-holders").
Historically, Tiffany has not purchased rough diamonds; in consequence,
Tiffany has not purchased directly from the DTC. Some, but not all, of Tiffany's
suppliers are DTC sight-holders, and it is estimated that 50% of the diamonds
that Tiffany has purchased have had their source with the DTC.
Tiffany expects to purchase rough diamonds from Aber and other sellers
through its affiliated companies beginning in Fiscal 2003. In preparation,
Tiffany has, through its affiliated companies, invested in building a diamond
sorting and processing facility in Antwerp, Belgium and a diamond
cutting/polishing facility in Yellowknife, The Northwest Territories of Canada.
Rough diamonds will be exported to Belgium, where they will be sorted and
evaluated for cutting. Some diamonds will be sent to Canada for
cutting/polishing in Tiffany's facility. Other diamonds will be
- -PAGE 16- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
provided to contractors for cutting and return. In conducting these activities,
it is Tiffany's intention to supply its own needs for cut/polished diamonds and
hopes to minimize the number of rough or cut stones that prove unsatisfactory
and must be sold to third parties. However, some such sales will be inevitable.
The availability and price of diamonds to the DTC and Tiffany's
suppliers may be, to some extent, dependent on the political situation in
diamond-producing countries, the opening of new mines and the continuance of the
prevailing supply and marketing arrangements for rough diamonds. Sustained
interruption in the supply of rough diamonds, an over-abundance of supply or a
substantial change in the marketing arrangements described above could adversely
affect Tiffany and the retail jewelry industry as a whole. Changes in the
marketing and advertising policies of DTC and its direct purchasers could affect
consumer demand for diamonds. Additionally, an affiliate of the DTC has formed a
joint venture with an affiliate of a major luxury goods retailer for the purpose
of retailing diamond jewelry. This joint venture has become a competitor of
Tiffany. Further, the DTC has encouraged its sight-holders to engage in diamond
brand development, which may also increase demand for diamonds and affect the
supply of diamonds in certain categories.
Increasing attention has been focused within the last few years on the
issue of "conflict" diamonds. Conflict diamonds are extracted from war-torn
regions and sold by rebel forces to fund insurrection. Allegations have been
made in the press that diamonds are used as a source to further terrorist
activities. Concerned participants in the diamond trade, including Tiffany and
non-government organizations, seek to exclude such diamonds, which represent a
small fraction of the world's supply, from legitimate trade through an
international system of certification and legislative initiatives. It is
expected that such efforts will not substantially affect the supply of diamonds.
However, in the near term, efforts by these non-governmental organizations to
increase consumer awareness of the issue and encourage legislative response
could affect consumer demand for diamonds.
Finished jewelry is purchased from approximately 85 manufacturers, most
of which have long-standing relationships with Tiffany. Tiffany believes that
there are alternative sources for most jewelry items; however, due to the
craftsmanship involved in certain designs, Tiffany would have difficulty in
finding readily available alternatives in the short term.
TIFFANY & CO. brand clocks and components for timepieces are
manufactured and assembled by third parties. Approximately 53% of net watch
sales during Fiscal 2002 were attributable to a single manufacturer. Nearly all
movements for Tiffany's new MARK line of watches are purchased from a single
manufacturer. The loss of this manufacturer could result in the unavailability
of timepieces during the period necessary for Tiffany to arrange for new
production.
- -PAGE 17- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
Competition
Registrant encounters significant competition in all of its product
lines from other third-party providers, some of which specialize in just one
area in which the Company is active. Many of the Company's competitors have
established reputations for style and expertise similar to that of the Company
and compete on the basis of value. Other jewelers and retailers compete
primarily through advertised price promotion. The Company competes on the basis
of reputation for high quality products, brand recognition, and distinctive
value-priced merchandise and does not engage in price promotional advertising.
See Merchandise Purchasing, Manufacturing and Raw Materials above.
Competition for engagement jewelry sales is particularly fierce and
becoming more so. The rise of the Internet and increased use of diamond
condition reports issued by independent gemological associations have given rise
to the mistaken impression amongst certain consumers that diamonds are commodity
items and that significant quality differences do not exist. Tiffany's price for
diamonds reflects the rarity of the stones it offers and the rigid parameters it
exercises with respect to the cut, clarity and other quality factors which
increase the beauty of Tiffany diamonds, but also increase Tiffany's cost.
Tiffany competes in this market by stressing quality, while some competitors
offer inferior diamonds claiming they are comparable, but at lesser prices.
The international marketplace for the Company's products is highly
competitive. Although the Company believes that the name TIFFANY & CO. is known
internationally, and although Tiffany did operate retail stores in London and
Paris prior to World War II, the Company did not have a retail presence in
Europe in the post-war era until 1986. Accordingly, consumer awareness of
Tiffany & Co. and its products is not as strong in Europe as in the U.S. or in
Japan, where Tiffany has distributed its products for many years. The Company
expects that its overseas stores will continue to experience intense competition
from established retailers in international cities where TIFFANY & CO. stores
are or may eventually be located.
Registrant also faces increasing competition in the area of direct
marketing. A growing number of direct sellers compete for access to the same
mailing lists of known purchasers of luxury goods. In marketing recognition
awards and business gifts to corporations and other organizations, the Company
faces numerous competitors who sell a wide variety of products at a greater
price range than the Company, which has chosen to offer a more limited selection
in order to adhere to its established quality standards. Tiffany currently
distributes selected merchandise through its Web site at www.tiffany.com and
anticipates continuing competition in this area as the technology evolves.
Tiffany does not currently offer diamond engagement jewelry through its Web
site, while certain of Tiffany's competitors do. Nonetheless, Tiffany will seek
to maintain and improve its position in the Internet marketplace by refining and
expanding its merchandise selection and services.
Seasonality
As a jeweler and specialty retailer, the Company's business is seasonal
in nature, with the fourth quarter typically representing a proportionally
greater percentage of annual sales, earnings from operations and cash flow.
Management expects such seasonality to continue.
- -PAGE 18- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
Employees
As of January 31, 2003, the Registrant's subsidiary corporations
employed an aggregate of approximately 6,431 full-time and part-time persons. Of
those employees, 4,870 are employed in the United States. Of Tiffany's total
employees, approximately 2,602 persons are salaried employees, 745 are engaged
in manufacturing and 3,449 are retail store personnel. None of the Company's
employees is represented by a union. Registrant believes that relations with its
employees are good.
ITEM 2. PROPERTIES
Registrant both owns and leases its principal operating facilities and
occupies its various store premises under lease arrangements that are generally
on a two to ten-year basis.
New York Store
In November 1999, Tiffany repurchased the land and building housing its
flagship store at 727 Fifth Avenue in New York City. Prior to its repurchase,
Tiffany had leased the building since 1984. Constructed for Tiffany in 1940, the
building was designed to be a retail store for the Company and is believed to be
well located for this function. Currently, approximately 40,000 gross square
feet of this 124,000 square foot building are devoted to retail sales, with the
balance devoted to administrative offices, certain product services, jewelry
manufacturing and storage. In Fiscal 2000, the Company commenced a multiyear
renovation and reconfiguration project to increase the store's selling space and
provide additional floor space for customer service and special exhibitions. An
additional selling floor was opened in November 2001 and, over the next three
years, renovations of other existing selling space will be completed.
London Flagship Store
In October 2002, Registrant purchased through a subsidiary the building
housing its flagship European store at 25/25A Old Bond Street in London and the
adjacent building at 15 Albermarle Street. The London store had been leased
since 1986 and was expanded to its current 15,200 square feet in 1991. A
renovation and reconfiguration of the store's interior selling space is
scheduled to commence in 2003 and will occur in several phases through the
second half of 2004.
Customer Service Center
In 1995, Tiffany entered into a lease of undeveloped property in
Parsippany, New Jersey, in order to construct and occupy a new distribution
facility. In April 1997, construction of the "Customer Service Center" ("CSC")
on that property was completed and Tiffany commenced operations. The CSC is a
combined warehouse, distribution, light manufacturing, computing and office
center. To meet increased demand, the computer and office center areas were
expanded during Fiscal 2001. In January 2001, Tiffany exercised its right under
the lease to purchase the CSC for a scheduled purchase price. This capital lease
buyout was completed on January 31, 2002. Registrant believes that the CSC has
been properly designed to handle worldwide
- -PAGE 19- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
distribution functions and that it is suitable for that purpose. The CSC
currently comprises approximately 370,000 square feet, of which approximately
186,000 square feet are devoted to office and computer operations use, with the
balance devoted to warehousing, shipping, receiving, light manufacturing,
merchandise processing and other distribution functions.
In anticipation of growth in sales volume and company-operated stores,
in Fiscal 2001 Tiffany entered into a ground lease of undeveloped property in
Hanover Township, New Jersey in order to construct and occupy an additional
facility to manage the warehousing and processing of direct-to-customer orders
and to perform other distribution functions. Construction of the facility is
near completion and occupancy is expected in the second half of Fiscal 2003,
assuming the landlord has completed certain corrective work to the site. In the
event of a delay in occupancy of the facility, management believes that its
current distribution facility, supplemented by outside distribution resources,
will be sufficient to handle distribution functions through Fiscal 2003. The
proposed facility will be approximately 266,000 square feet, of which
approximately 34,500 square feet will be devoted to office use, the balance to
warehousing, shipping, receiving, merchandise processing and other warehouse
functions. When the new facility becomes operational, the CSC will be devoted to
store replenishment and wholesale support activities.
Manufacturing Facility - Cumberland, Rhode Island
In January 2000 Tiffany entered into a purchase agreement for the
purchase of undeveloped property in Cumberland, Providence County, Rhode Island
in order to construct and occupy a 100,000 square foot jewelry and silver goods
manufacturing facility. In May 2001, construction of the facility was completed
and Tiffany commenced operations.
Manufacturing Facility - Cranston, Rhode Island
On January 31, 2003 Tiffany purchased a warehouse facility and land
located in Cranston, Rhode Island. During Fiscal 2003, the 75,000 square foot
building will be renovated to process metals for raw material use.
- -PAGE 20- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
'
Branch and Subsidiary Retail Store Leases
Set forth below is the expiration date for each of Tiffany's existing
branch and subsidiary retail store leases (and, where applicable, optional
renewal terms):
- --------------------------------------------------------------------------------------------------------------------------------
U.S. BRANCH STORE LEASES
- --------------------------------------------------------------------------------------------------------------------------------
CITY STATE/TERR. LOCATION EXPIRATION DATE RENEWAL OPTIONS
- --------------------------------------------------------------------------------------------------------------------------------
Atlanta GA Phipps Plaza Shopping Center July 31, 2010
Bal Harbour FL Bal Harbour Shops May 31, 2003 In negotiation
Bellevue WA Bellevue Square May 31, 2017
Beverly Hills CA Two Rodeo Drive October 7, 2005 Two five-year terms
Boca Raton FL Town Center at Boca January 31, 2010 One five-year term
Boston MA Copley Place July 31, 2009 Two five-year terms
Century City CA Century City Shopping Center June 30, 2009
Charlotte NC SouthPark Mall December 31, 2007 One five-year term
Chestnut Hill MA The Atrium at Chestnut Hill January 31, 2008 One five-year term
Chevy Chase MD 5500 Wisconsin Avenue January 31, 2006
Chicago IL 730 North Michigan Avenue October 20, 2012 Two five-year terms
Cincinnati OH Fountain Place November 30, 2012 Two five-year terms
Costa Mesa CA South Coast Plaza January 31, 2019
Dallas TX The Galleria May 31, 2009
Dallas TX NorthPark Center May 31, 2009 One five-year term
Denver CO Cherry Creek Shopping Center January 31, 2008 One five-year term
East Hampton NY 53 Main Street February 29, 2012 Two five-year terms
Greenwich CT 140 Greenwich Avenue July 31, 2010 Two five-year terms
Hackensack NJ Riverside Square Mall September 30, 2006
Honolulu HI Ala Moana Center January 31, 2011
Honolulu HI 2100 Kalakaua Avenue October 31, 2017 Two five-year terms
Houston TX The Galleria September 30, 2006
King of Prussia PA The Plaza at King of Prussia November 30, 2005 One five-year term
Las Vegas NV Bellagio March 1, 2008 One ten-year term
Manhasset NY Americana Shopping Center June 9, 2008
Maui HI Whalers Village July 31, 2004
Maui HI The Shops at Wailea November 30, 2010 One five-year term
Oak Brook IL Oakbrook Center April 30, 2009 Two five-year terms
Old Orchard IL Old Orchard Shopping Center April 30, 2010 One five-year term
Orlando FL The Mall at Millenia December 31, 2012 One five-year term
Palm Beach FL 259 Worth Avenue May 31, 2007 Two five-year terms
Palo Alto CA Stanford Shopping Center May 31, 2007
Philadelphia PA The Bellevue June 30, 2010 One five-year term
Portland OR Pioneer Place December 31, 2010 One five-year term
San Diego CA Fashion Valley Shopping Center December 31, 2007 One five-year term
San Francisco CA Union Square November 1, 2010 One ten-year term
Santa Clara (San Jose) CA Westfield Shoppingtown Valley Fair January 31, 2012
Scottsdale AZ Scottsdale Fashion Square December 31, 2008 One five-year term
Seattle WA Pacific Place October 28, 2008 Two five-year terms
Short Hills NJ The Mall at Short Hills January 31, 2005 One five-year term
St. Louis MO Plaza Frontenac September 26, 2012 One five-year term
Tampa FL International Plaza January 31, 2011 One five-year term
Tamuning Guam Tumon Sands Plaza September 30, 2003
Troy MI The Somerset Collection September 30, 2007
Vienna VA Fairfax Square March 31, 2010 One five-year term
White Plains NY The Westchester March 31, 2005 One five-year term
- -PAGE 21- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
- --------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL BRANCH STORE LEASES
- --------------------------------------------------------------------------------------------------------------------------------
COUNTRY CITY LOCATION EXPIRATION DATE RENEWAL OPTIONS
- --------------------------------------------------------------------------------------------------------------------------------
Australia Sydney Chifley Tower October 18, 2004 One five-year term
Australia Melbourne 267 Collins Street October 31, 2005 Three five-year terms
Brazil Sao Paulo Shopping Center Iguatemi January 1, 2006 Two five-year terms
Canada Toronto 85 Bloor Street West August 31, 2006 One seven-year term
England London The Royal Exchange August 31, 2016 Three five-year terms
France Paris 6 Rue de la Paix April 1, 2011
Germany Frankfurt 20 Goethestrasse January 31, 2011 One ten-year term
Germany Munich Residenzstrasse 11 January 31, 2004 One five-year term
Hong Kong Causeway Bay Lee Gardens June 30, 2003
Hong Kong The Landmark May 31, 2005
Hong Kong Kowloon The Peninsula February 29, 2004
Hong Kong Pacific Place October 31, 2003
Italy Florence Via Tornabuoni December 31, 2007 One six-year term
Italy Milan Via della Spiga October 31, 2005 One six-year term
Italy Rome Via Del Babuino December 31, 2007 One six-year term+
Japan Tokyo Ginza October 24, 2005 One three-year term
Korea Pusan Paradise Hotel September 20, 2003 One two-year option
Malaysia Kuala Lumpur Suria KL City Centre November 30, 2005 One three-year term
Mexico Mexico City Masaryk May 31, 2004 Two three-year terms
Singapore Raffles Hotel September 15, 2003
Singapore Ngee Ann City September 14, 2005 One one-year term
Switzerland Zurich Bahnhofstrasse 14 September 30, 2005
Taiwan Taipei Regent Hotel April 30, 2006
+ Renewal subject to conditions imposed by Italian law, including right of
landlord to occupy premises for its own use.
New Store Leases
In addition to the U.S. leases described herein on page 21, Tiffany has
entered into the following new leases for domestic stores expected to open in
2003: a 10-year lease for a 6,800 square foot store at 1119 S. Main Street,
Walnut Creek, California, a 10-year lease for a 5,600 square foot store at the
Village of Merrick Park in Coral Gables, Florida, and a five-year lease for a
1,330 square foot boutique at 1296 Pale San Vitores Road (Tuman Bay Galleria),
Tamuning, Guam.
ITEM 3. LEGAL AND ENVIRONMENTAL PROCEEDINGS
Registrant and Tiffany are from time to time involved in routine
litigation incidental to the conduct of Tiffany's business, including
proceedings to protect its trademark rights, litigation with parties claiming
infringement of their intellectual property rights by Tiffany, litigation
instituted by persons alleged to have been injured upon premises within
Registrant's control and litigation with present and former employees. Although
litigation with present and former employees is routine and incidental to the
conduct of Tiffany's business, as well as for any business employing significant
numbers of U.S.-based employees, such litigation can result in large monetary
awards when a civil jury is allowed to determine compensatory and/or punitive
damages for actions claiming discrimination on the basis of age, gender, race,
religion, disability or other legally protected characteristic or for
termination of employment that is wrongful or in violation of implied contracts.
However, Registrant believes that no litigation currently pending to which it or
Tiffany is a party or to which its properties are subject will have a material
adverse effect on its financial position, earnings or cash flows.
- -PAGE 22- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended January 31, 2003.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Registrant are:
NAME AGE POSITION YEAR JOINED TIFFANY
Michael J. Kowalski 51 Chairman of the Board of Directors and 1983
Chief Executive Officer
James E. Quinn 51 President 1986
Beth O. Canavan 48 Executive Vice President 1987
James N. Fernandez 47 Executive Vice President and 1983
Chief Financial Officer
Victoria Berger-Gross 47 Senior Vice President - Human Resources 2001
Patrick B. Dorsey 52 Senior Vice President - General Counsel 1985
and Secretary
Fernanda M. Kellogg 56 Senior Vice President - Public Relations 1984
Jon M. King 46 Senior Vice President - Merchandising 1990
Caroline D. Naggiar 45 Senior Vice President - Marketing 1997
John S. Petterson 44 Senior Vice President - Operations 1988
Michael J. Kowalski. Mr. Kowalski assumed the role of Chairman of the Board on
January 31, 2003, following the retirement of William R. Chaney. He has served
as the Registrant's Chief Executive Officer since February 1999 and on the
Registrant's Board of Directors since January 1995. Since joining Tiffany in
1983 as Director of Financial Planning, Mr. Kowalski held a variety of
merchandising management positions and served as Executive Vice President from
1992 to 1996 with overall responsibility in the areas of merchandising,
marketing, advertising, public relations and product design until his election
as President in 1997. Mr. Kowalski is awaiting confirmation of his appointment
to the Board of Directors of the Bank of New York.
James E. Quinn. Mr. Quinn was appointed President effective January 31, 2003. He
had served as Vice Chairman since 1998. After joining Tiffany in July 1986 as
Vice President of branch sales for the Company's business-to-business sales
operations, Mr. Quinn had various responsibilities for sales management and
operations. He was promoted to Executive Vice President on March 19,
- -PAGE 23- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
1992 and assumed responsibility for retail and corporate sales for the Americas
in 1994. In January 1995 he became a member of Registrant's Board of Directors.
He has responsibility for worldwide sales. Mr. Quinn is a member of the board of
directors of BNY Hamilton Funds, Inc. and Mutual of America Capital Management.
Beth O. Canavan. Ms. Canavan joined Tiffany in May 1987 as Director of New Store
Development. She later held the positions of Vice President, Retail Sales
Development in 1990, Vice President and General Manager of the New York Store in
1992 and Eastern Regional Vice President in 1994. In 1997, she assumed the
position of Senior Vice President for U.S. Retail. In January 2000, she was
promoted to Executive Vice President responsible for retail sales activities in
the U.S. and Canada and retail store expansion. In May 2001, Ms. Canavan also
assumed responsibility for direct sales and business sales activities in the
U.S. and Canada.
James N. Fernandez. Mr. Fernandez joined Tiffany in October 1983 and has held
various positions in financial planning and management prior to his appointment
as Senior Vice President-Chief Financial Officer in April 1989. In January 1998,
he was promoted to Executive Vice President-Chief Financial Officer. Presently,
he has responsibility for accounting, treasury, investor relations, information
technology, financial planning, business development and diamond operations, and
overall responsibility for distribution, manufacturing, customer service and
security. At the request of the Registrant, Mr. Fernandez serves on the board of
directors of Aber Diamond Corporation, a publicly-traded company in which the
Registrant holds a 14.7% equity interest. Aber is a 40% participant in the
Diavik Diamonds Project in Northwest Canada.
Victoria Berger-Gross. Dr. Berger-Gross joined Tiffany in February 2001 as
Senior Vice President - Human Resources. Prior to joining Tiffany, she served as
Senior Vice President & Director of Human Resources at Lehman Brothers from May
2000, Senior Director - Human Resources at Bertelsmann A.G.'s BMG Entertainment
from March 1998, and Vice President - Organizational Effectiveness at Personnel
Decisions International from January 1990.
Patrick B. Dorsey. Mr. Dorsey joined Tiffany in July 1985 as General Counsel and
Secretary.
Fernanda M. Kellogg. Ms. Kellogg joined Tiffany in October 1984 as Director of
Retail Marketing. She assumed her current responsibilities in January 1990.
Jon M. King. Mr. King joined Tiffany in 1990 as a jewelry buyer and has held
various positions in the Merchandising Division, assuming responsibility for
product development in 2002 as group vice president. He assumed his current
responsibilities on March 24, 2003.
Caroline D. Naggiar. Ms. Naggiar joined Tiffany in June 1997 as Vice
President-Marketing Communications. She assumed her current responsibilities in
February 1998.
John S. Petterson. Mr. Petterson joined Tiffany in 1988 as a management
associate. He was promoted to Senior Vice President - Corporate Sales in May
1995 and in February 2000 his responsibilities were expanded to include Direct
Mail and the E-Commerce business. In May 2001, Mr. Petterson assumed the new
role of Senior Vice President - Operations, with responsibility for worldwide
distribution, customer service and security activities. His responsibilities
were expanded in February 2003 to include manufacturing operations.
- -PAGE 24- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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 Fiscal 2001 were:
Fiscal 2001 High Low
- ----------- ---- ---
First Fiscal Quarter $37.16 $25.12
Second Fiscal Quarter $38.25 $31.55
Third Fiscal Quarter $36.60 $19.90
Fourth Fiscal Quarter $36.59 $22.86
In consolidated trading, the high and low selling prices per share for
shares of such Common Stock for Fiscal 2002 were:
Fiscal 2002 High Low
- ----------- ---- ---
First Fiscal Quarter $41.00 $31.75
Second Fiscal Quarter $40.50 $21.07
Third Fiscal Quarter $28.00 $19.40
Fourth Fiscal Quarter $30.70 $22.55
On March 25, 2003, the high and low selling prices quoted on such
exchange were $26.46 and $25.53, respectively. On March 25, 2003 there were
4,111 record holders of Registrant's Common Stock.
It is Registrant's policy to pay a quarterly dividend of $0.04 per
share of Common Stock, subject to declaration by Registrant's Board of
Directors. In Fiscal 2001, dividends of $0.04 per share of Common Stock were
paid on April 10, 2001, July 10, 2001, October 10, 2001 and January 10, 2002. In
Fiscal 2002, dividends of $0.04 per share of Common Stock were paid on April 10,
2002, July 10, 2002, October 10, 2002 and January 10, 2003.
In calculating the aggregate market value of the voting stock held by
non-affiliates of the Registrant shown on the cover page of this Report on Form
10-K, 1,524,976 shares of Registrant's Common Stock beneficially owned by the
executive officers and directors of the Registrant (exclusive of shares which
may be acquired on exercise of employee stock options) were excluded, on the
assumption that certain of those persons could be considered "affiliates" under
the provisions of Rule 405 promulgated under the Securities Act of 1933.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from Registrant's Annual Report to Stockholders for
the Fiscal Year ended January 31, 2003, page 20.
- -PAGE 25- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference from Registrant's Annual Report to Stockholders for
the Fiscal Year ended January 31, 2003, pages 21-32.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated by reference from Registrant's Annual Report to Stockholders for
the Fiscal Year ended January 31, 2003, page 31.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from Registrant's Annual Report to Stockholders for
the Fiscal Year ended January 31, 2003, pages 33-58.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from Registrant's Proxy Statement dated April 8, 2003,
pages 5-8 and 27-30.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from Registrant's Proxy Statement dated April 8, 2003,
pages 13-25.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Incorporated by reference from Registrant's Proxy Statement dated April 8, 2003,
pages 5-8.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from Registrant's Proxy Statement dated April 8, 2003,
pages 19 and 27-30.
ITEM 14. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Based on their evaluation
of our disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934) as of a date within 90 days
of the filing date of this Annual Report on Form 10-K, our chief executive
officer and chief financial officer have concluded that our disclosure controls
and
- -PAGE 26- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
procedures are (i) designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms and (ii) operating in an effective manner.
(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their most recent evaluation.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) List of Documents Filed As Part of This Report:
1. Financial Statements:
Data incorporated by reference from
the 2002 Annual Report to Stockholders
of Tiffany & Co. and Subsidiaries:
Report of Independent Accountants
(following this Form 10-K)
Consolidated Balance Sheets
as of January 31, 2003 and 2002
Consolidated Statements of Earnings
for the years ended January 31, 2003, 2002, and 2001
Consolidated Statements of Stockholders' Equity and Comprehensive Earnings for
the years ended January 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows
for the years ended January 31, 2003, 2002 and 2001
Notes to consolidated financial statements
2. Financial Statement Schedules:
The following financial statement schedule should be read in
conjunction with the consolidated financial statements incorporated by reference
herein:
II. Valuation and qualifying accounts and reserves.
All other schedules have been omitted since they are neither applicable
nor required, or because the information required is included in the
consolidated financial statements and notes thereto.
- -PAGE 27- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
3. Exhibits:
The following exhibits have been filed with the Securities and Exchange
Commission but are not attached to copies of this Form 10-K other than complete
copies filed with said Commission and the New York Stock Exchange:
Exhibit Description
3.1 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.
3.1a Amendment to Certificate of Incorporation of Registrant. Incorporated
by reference from Exhibit 3.1 to Registrant's Report on Form 8-K dated
May 20, 1999.
3.1b Amendment to Certificate of Incorporation of Registrant dated May 18,
2000. Incorporated by reference from Exhibit 3.1b to Registrant's
Report on Form 10-K for the Fiscal Year ended January 31, 2001.
3.2 By-Laws of Registrant (as last amended July 19, 2001). Incorporated by
reference from Exhibit 3.2 to Registrant's Report on Form 10-K for the
Fiscal Year ended January 31, 2002.
4.1 Amended and Restated Rights Agreement dated as of September 22, 1998 by
and between Registrant and ChaseMellon Shareholder Services L.L.C., as
Rights Agent. Incorporated by reference from Exhibit 4.1 to
Registrant's Report on Form 8-A/A dated September 24, 1998.
10.5 Designer Agreement between Tiffany and Paloma Picasso dated April 4,
1985. Incorporated by reference from Exhibit 10.5 filed with
Registrant's Registration Statement on Form S-1, Registration No.
33-12818 (the "Registration Statement").
10.122 Agreement dated as of April 3, 1996 among American Family Life
Assurance Company of Columbus, Japan Branch, Tiffany & Co. Japan, Inc.,
Japan Branch, and Registrant, as Guarantor, for yen 5,000,000,000 Loan
Due 2011. Incorporated by reference from Exhibit 10.122 filed with
Registrant's Report on Form 10-Q for the Fiscal quarter ended April 30,
1996.
10.122a Amendment No. 1 to the Agreement referred to in Exhibit 10.122 above
dated November 18, 1998. Incorporated by reference from Exhibit 10.122a
filed with Registrant's Report on Form 10-K for the Fiscal Year ended
January 31, 1999.
10.122b Guarantee by Tiffany & Co. of the obligations under the Agreement
referred to in Exhibit 10.122 above dated April 3, 1996. Incorporated
by reference from Exhibit 10.122b filed with Registrant's Report on
Form 8-K dated August 2, 2002.
10.122c Amendment No. 2 to Guarantee referred to in Exhibit 10.122b above,
dated October 15, 1999. Incorporated by reference from Exhibit 10.122c
filed with Registrant's Report on Form 8-K dated August 2, 2002.
- -PAGE 28- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
10.122d Amendment No. 3 to Guarantee referred to in Exhibit 10.122b above,
dated July 16, 2002. Incorporated by reference from Exhibit 10.122d
filed with Registrant's Report on Form 8-K dated August 2, 2002.
10.123 Agreement made effective as of February 1, 1997 by and between Tiffany
and Elsa Peretti. Incorporated by reference from Exhibit 10.123 to
Registrant's Report on Form 10-K for the Fiscal Year ended January 31,
1997.
10.126 Form of Note Purchase Agreement between Registrant and various
institutional note purchasers with Schedules B, 5.14 and 5.15 and
Exhibits 1A, 1B, and 4.7 thereto, dated as of December 30, 1998 in
respect of Registrant's $60 million principal amount 6.90% Series A
Senior Notes due December 30, 2008 and $40 million principal amount
7.05% Series B Senior Notes due December 30, 2010. Incorporated by
reference from Exhibit 10.126 filed with Registrant's Report on Form
10-K for the Fiscal Year ended January 31, 1999.
10.126a First Amendment and Waiver Agreement to Form of Note Purchase Agreement
referred to in previously filed Exhibit 10.126, dated May 16, 2002.
Incorporated by reference from Exhibit 126a filed with Registrant's
Report on Form 8-K dated June 10, 2002.
10.128 Translation of Loan Agreement between Tiffany & Co. Japan Inc. and the
Fuji Bank, Ltd., Hong Kong Branch dated 22 October 1999, Guaranty
issued in connection therewith by the Registrant and Agreement on Bank
Transactions referenced in the aforesaid Loan Agreement; Schedule to
Master Agreement dated as of October 18, 1999 between The Chase
Manhattan Bank and Tiffany & Co. Japan Inc. (made with reference to
International Swap Dealers Association, Inc. Master Agreement form
copyrighted 1992), Guaranty dated October 18, 1999 issued in connection
with such Master Agreement by Tiffany and Company, Tiffany & Co.
International and Registrant in favor of The Chase Manhattan Bank and
Confirmation issued October 29, 1999 by The Chase Manhattan Bank.
Incorporated by reference from Exhibit 10.128 filed with Registrant's
Report on Form 10-Q for the Fiscal quarter ended October 31, 1999.
10.129 Agreement made the 1st day of August 2001 by and between Tiffany & Co.
Japan Inc. and Mitsukoshi Limited. Incorporated by reference from
Exhibit 10.128 filed with Registrant's Report on Form 8-K dated August
1, 2001.
10.130 Credit Agreement dated as of November 5, 2001, by and among Registrant,
Tiffany and Company, Tiffany & Co. International, each other Subsidiary
of Registrant that is a Borrower and is a signatory thereto and The
Bank of New York, as the Swing Line Lender, as the Issuing Bank, as a
Lender, and as Administrative Agent, ABN AMRO Bank N.V., The Chase
Manhattan Bank, The Dai-ichi Kangyo Bank Ltd., Firstar Bank, NA, and
Fleet National Bank, Fleet Precious Metals Inc. (collectively, as a
Lender). Incorporated by reference from Exhibit 10.130 filed with
Registrant's Report on Form 10-Q for the Fiscal quarter ended October
31, 2001.
- -PAGE 29- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
10.130a Amendment No. 1 to Credit Agreement referred to in previously filed
Exhibit 10.130, dated April 12, 2002. Incorporated by reference from
Exhibit 10.130a filed with Registrant's Report on Form 10-Q for the
Fiscal quarter ended April 30, 2002.
10.131 Guaranty Agreement dated as of November 5, 2001, with respect to the
Credit Agreement (see Exhibit 10.129 above) by and among Registrant,
Tiffany and Company, Tiffany & Co. International, and Tiffany & Co.
Japan Inc. and The Bank of New York, as Administrative Agent.
Incorporated by reference from Exhibit 10.131 filed with Registrant's
Report on Form 10-Q for the Fiscal quarter ended October 31, 2001.
10.132 Form of Note Purchase Agreement between Registrant and various
institutional note purchasers with Schedules B, 5.14 and 5.15 and
Exhibits 1A, 1B and 4.7 thereto, dated as of July 18, 2002 in respect
of Registrant's $40,000,000 principal amount 6.15% Series C Notes due
July 18, 2009 and $60,000,000 principal amount 6.56% Series D Notes due
July 18, 2012. Incorporated by reference from Exhibit 10.132 filed with
Registrant's Report on Form 8-K dated August 2, 2002.
10.133 Guaranty Agreement dated July 18, 2002 with respect to the Note
Purchase Agreements (see Exhibit 10.132 above) by Tiffany and Company,
Tiffany & Co. International and Tiffany & Co. Japan Inc. in favor of
each of the note purchasers. Incorporated by reference from Exhibit
10.133 filed with Registrant's Report on Form 8-K dated August 2, 2002.
13.1 Annual Report to Stockholders for Fiscal Year Ended January 31, 2003
(pages 20-58 of such Annual Report have been filed in electronic
format).
21.1 Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
99.1 Certification of Michael J. Kowalski Required by 18 U.S.C. Section
1350.
99.2 Certification of James N. Fernandez Required by 18 U.S.C. Section 1350.
Executive Compensation Plans and Arrangements
Exhibit Description
4.3 Registrant's Amended and Restated 1998 Employee Incentive Plan and
standard terms of stock option award (transferable and
non-transferable).
4.3a Standard terms of stock option award (transferable and
non-transferable) under Registrant's 1998 Employee Incentive Plan, as
revised January 21, 1999. Incorporated by reference from Exhibit 4.3a
filed with Registrant's Report on Form 10-K for the Fiscal Year ended
January 31, 1999.
- -PAGE 30- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
4.4 Registrant's 1998 Directors Option Plan. Incorporated by reference from
Exhibit 4.3 to Registrant's Registration Statement on Form S-8, file
number 333-67725, filed November 23, 1998.
4.4a Standard terms of stock option award (transferable non-qualified
option) under Registrant's 1998 Directors Option Plan, as revised
January 21, 1999. Incorporated by reference from Exhibit 4.4a filed
with Registrant's Report on Form 10-K for the Fiscal Year ended January
31, 1999.
10.3 Registrant's 1986 Stock Option Plan and terms of stock option
agreement, as last amended on July 16, 1998. Incorporated by reference
from Exhibit 10.3 filed with Registrant's Report on Form 10-K for the
Fiscal Year ended January 31, 1999.
10.25 Amended and Restated Deferred Compensation Agreement originally made
effective December 31, 1989 by and between William R. Chaney and
Tiffany and Company, and subsequently amended February 8, 1999.
Incorporated by reference from Exhibit 10.25 filed with Registrant's
Report on Form 10-K for the Fiscal Year ended January 31, 1999.
10.49 Form of Indemnity Agreement, approved by the Board of Directors on
March 19, 1987. Incorporated by reference from Exhibit 10.49 to the
Registration Statement.
10.60 Registrant's 1988 Director Stock Option Plan and form of Stock Option
agreement, as last amended on November 21, 1996. Incorporated by
reference from Exhibit 10.60 to Registrant's Report on Form 10-K for
the Fiscal Year ended January 31, 1997.
10.106 Amended and Restated Tiffany and Company Executive Deferral Plan
originally made effective October 1, 1989, as amended effective January
1, 2003. Incorporated by reference from Exhibit 10.106 filed with
Registrant's Report on Form 10-Q for the Fiscal Quarter ended October
31, 2002.
10.108 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 Report on Form 10-K for the Fiscal Year ended January
31, 1999.
10.109 Summary of informal incentive cash bonus plan for managerial employees.
Incorporated by reference from Exhibit 10.109 filed with Registrant's
Report on Form 10-K for the Fiscal Year ended January 31, 1993.
10.113 Tiffany and Company Pension Plan, as last amended effective December
21, 1998. Incorporated by reference from Exhibit 10.113 filed with
Registrant's Report on Form 10-K for the Fiscal Year ended January 31,
1999.
10.114 1994 Tiffany and Company Supplemental Retirement Income Plan.
Incorporated by reference from Exhibit 10.114 filed with Registrant's
Report on Form 10-K for the Fiscal Year ended January 31, 1994.
10.115 1994 Form of Split Dollar Life Insurance Agreement entered into by
Tiffany and Company and certain Executive Officers including form of
Assignment of Life
- -PAGE 31- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
Insurance Policy as Collateral and Rider No. 1 to 1994 Form of Split
Dollar Life Insurance Agreement entered into by Tiffany and Company and
certain Executive Officers. Incorporated by reference from Exhibit
10.115 filed with Registrant's Report on Form 10-K for the Fiscal Year
ended January 31, 1995.
10.115a Riders Nos. 2 and 3, dated October 18, 1998 and March 20, 1999,
respectively to Split Dollar Life Insurance Agreements between and
among William R. Chaney and Tiffany and Company, and respectively, the
1994 Chaney Family Trust u/a 2/23/94 and the Babette C. Chaney et al.
Trust u/a 2/23/94. Incorporated by reference from Exhibit 10.115a filed
with Registrant's Report on Form 10-K for the Fiscal Year ended January
31, 1999.
10.127 Retention Agreements dated March 30, 1999 between and among Registrant
and Tiffany and, respectively, each of the following executive
officers: Michael J. Kowalski, James E. Quinn, James N. Fernandez and
Patrick B. Dorsey and Appendices I to III to each of those Agreements.
Incorporated by reference from Exhibit 10.127 filed with Registrant's
Report on Form 10-K for the Fiscal Year ended January 31, 1999.
10.127a Retention Agreements dated March 13, 2001 between and among Registrant
and Tiffany and, respectively, each of the following executive
officers: Beth O. Canavan, Fernanda M. Kellogg, Caroline D. Naggiar,
John S. Petterson and Victoria Berger-Gross and Appendices I to III to
each of those Agreements. Incorporated by reference from Exhibit
10.127a filed with Registrant's Report on Form 10-K for the Fiscal Year
ended January 31, 2001.
10.127b Form of Retention Agreement between and among Registrant and Tiffany
and each of its executive officers and Appendices I to III to the
Agreement.
10.128 Group Long Term Disability Insurance Policy issued by UnumProvident.
Policy No. 533717 001.
REGISTRANT WILL FURNISH COPIES OF ANY OF THE FOREGOING EXHIBITS TO ANY
REGISTERED HOLDER OF THE REGISTRANT'S COMMON STOCK UPON PAYMENT OF A FEE OF $.15
PER PAGE FURNISHED, WHICH FEE REPRESENTS REGISTRANT'S EXPENSES IN FURNISHING
SUCH EXHIBIT.
- -PAGE 32- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
(b) Reports on Form 8-K.
On November 6, 2002, Registrant filed a Report on Form 8-K announcing
the resignation of the Company's Senior Vice President of Merchandising.
On November 13, 2002, Registrant filed a Report on Form 8-K reporting
sales and earnings for the three-month period ended October 31, 2002.
On December 12, 2002, Registrant filed a Report on Form 8-K furnishing
the written statements of executive officers pursuant to 18 U.S.C. Sec. 1350.
On January 7, 2003, Registrant filed a Report on Form 8-K reporting the
issuance of a press release announcing preliminary unaudited sales figures for
the two-month period ended December 31, 2002.
On January 16, 2003, Registrant filed a Report on Form 8-K announcing
the election of Michael J. Kowalski as Chairman of the Registrant's Board of
Directors upon the retirement of William R. Chaney.
- -PAGE 33- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TIFFANY & CO.
(Registrant)
Date: April 8, 2003 By: /s/ Michael J. Kowalski
----------------------------
Michael J. Kowalski
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
By: /s/ Michael J. Kowalski By: /s/ James N. Fernandez
------------------------------------ ----------------------
Michael J. Kowalski James N. Fernandez
Chairman and Chief Executive Officer Executive Vice President
(principal executive officer)(director) (principal financial officer)
By: /s/ James E. Quinn By: /s/ Warren S. Feld
------------------------------------ ----------------------
James E. Quinn Warren S. Feld
President Vice President
(director) (principal accounting officer)
By: /s/ William R. Chaney By: /s/ Rose Marie Bravo
------------------------------------ ----------------------
William R. Chaney Rose Marie Bravo
Director Director
By: /s/ Samuel L. Hayes III By: /s/ William A. Shutzer
------------------------------------ ----------------------
Samuel L. Hayes, III William A. Shutzer
Director Director
By: /s/ Charles K. Marquis By: /s/ Abby F. Kohnstamm
------------------------------------ ----------------------
Charles K. Marquis Abby F. Kohnstamm
Director Director
April 8, 2003
- -PAGE 34- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
CERTIFICATIONS
I, Michael J. Kowalski, certify that:
1. I have reviewed this annual report on Form 10-K of Tiffany & Co.;
2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: April 8, 2003
/s/ Michael J. Kowalski
________________________________________
Chairman and Chief Executive Officer
(principal executive officer)
- -PAGE 35- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
CERTIFICATIONS
I, James N. Fernandez, certify that:
1. I have reviewed this annual report on Form 10-K of Tiffany & Co.;
2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: April 8, 2003
/s/ James N. Fernandez
________________________________________________
Executive Vice President and Chief Financial
Officer (principal financial officer)
- -PAGE 36- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
PRICEWATERHOUSECOOPERS LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of Tiffany & Co.
Our audits of the consolidated financial statements referred to in our report
dated February 25, 2003 appearing in the fiscal 2002 Annual Report to
Shareholders of Tiffany & Co. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in Item
15(a)(2) of this Form 10-K. In our opinion, the financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 25, 2003
- -PAGE 37- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
EXHIBIT INDEX
SEE PAGES 28 THROUGH 32 FOR A COMPLETE LIST OF EXHIBITS FILED, INCLUDING
EXHIBITS INCORPORATED BY REFERENCE FROM PREVIOUSLY FILED DOCUMENTS.
EXHIBIT DESCRIPTION
13.1 Annual Report to Stockholders for Fiscal Year Ended January 31, 2003
(pages 20-58 of such Annual Report have been filed in electronic
format).
21.1 Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
99.1 Certification of Michael J. Kowalski Required by 18 U.S.C. Section
1350.
99.2 Certification of James N. Fernandez Required by 18 U.S.C. Section 1350.
4.3 Registrant's Amended and Restated 1998 Employee Incentive Plan and
standard terms of stock option award (transferable and
non-transferable).
10.127b Form of Retention Agreement between and among Registrant and Tiffany
and each of its executive officers and Appendices I to III to the
Agreement.
10.128 Group Long Term Disability Insurance Policy issued by UnumProvident.
Policy No. 533717 001.
- -PAGE 38- TIFFANY & CO. REPORT ON FORM 10-K FY 2002
TIFFANY & CO. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- -----------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- -----------------------------------------------------------------------------------------------------------------
Additions
-----------------------------
Balance at Charged to
beginning costs and Charged to Balance at end
Description of period expenses other accounts Deductions of period
- -----------------------------------------------------------------------------------------------------------------
Year Ended
January 31, 2003:
Reserves deducted from
assets:
Accounts receivable allowances:
Doubtful accounts $ 2,795,400 $ 828,794 $ 120,083(d) $1,614,625(a) $ 2,129,652
Sales returns 4,082,816 2,045,795 -- -- 6,128,611
Allowance for inventory
liquidation and
obsolescence 18,833,164 12,258,231 1,436,131(d) 9,498,072(b) 23,029,454
Allowance for inventory
shrinkage 3,518,845 1,555,388 70,676(d) 783,431(c) 4,361,478
LIFO reserve 18,970,581 1,164,862 -- -- 20,135,443
- ------------------
(a) Uncollectible accounts written off.
(b) Liquidation of inventory previously written down to market.
(c) Physical inventory losses.
(d) Amounts established or assumed in connection with a business acquisition.
TIFFANY & CO. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ----------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ----------------------------------------------------------------------------------------------------------------------------------
Additions
-----------------------------
Balance at Charged to
beginning costs and Charged to Balance at end
Description of period expenses other accounts Deductions of period
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended
January 31, 2002:
Reserves deducted from
assets:
Accounts receivable allowances:
Doubtful accounts $ 3,890,470 $ 1,694,924 -- $ 2,789,994(a) $ 2,795,400
Sales returns 4,082,816 -- -- -- 4,082,816
Allowance for inventory
liquidation and
obsolescence 18,394,815 10,084,907 -- 9,646,558(b) 18,833,164
Allowance for inventory
shrinkage 3,013,949 3,797,454 -- 3,292,558(c) 3,518,845
LIFO reserve 15,942,286 3,028,295 -- -- 18,970,581
- -------------------
(a) Uncollectible accounts written off.
(b) Liquidation of inventory previously written down to market.
(c) Physical inventory losses.
TIFFANY & CO. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ----------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ----------------------------------------------------------------------------------------------------------------------------
Additions
-----------------------------
Balance at Charged to
beginning costs and Charged to Balance at end
Description of period expenses other accounts Deductions of period
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
January 31, 2001:
Reserves deducted from
assets:
Accounts receivable allowances:
Doubtful accounts $ 5,137,719 $ 1,210,547 -- $ 2,457,796(a) $ 3,890,470
Sales returns 4,578,657 -- -- 495,841 4,082,816
Allowance for inventory
liquidation and
obsolescence 14,160,281 17,665,831 -- 13,431,297(b) 18,394,815
Allowance for inventory
shrinkage 2,625,788 3,052,347 -- 2,664,186(c) 3,013,949
LIFO reserve 13,492,173 2,450,113 -- -- 15,942,286
- --------------------
(a) Uncollectible accounts written off.
(b) Liquidation of inventory previously written down to market.
(c) Physical inventory losses.