Tiffany case
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tiffany_case_1.xlsCopyright
| Tiffany & Co. '93 |
| Harvard Business School Case #295-047 |
| Case Software #XLS084 |
| Copyright © 2010 President and Fellows of Harvard College. No part of this product may be reproduced, stored in a retrieval system or transmitted in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without the permission of Harvard Business School. |
Exhibit 1
| Exhibit 1 Consolidated Income Statements ($000 except per share amounts) | ||
| a. Annual Income Statements | ||
| Years ended January 31, | ||
| 1993 | 1992 | |
| Net sales | $486,396 | $491,906 |
| Cost of goods sold | 249,363 | 248,897 |
| Gross profit | 237,033 | 243,009 |
| Selling, general and administrative expenses | 209,140 | 180,939 |
| Provision for uncollectible accounts | 1,152 | 1,042 |
| Income/(loss) from operations | 26,741 | 61,028 |
| Interest expense and financing costs | 7,231 | 6,337 |
| Other income | 415 | 375 |
| Income/(loss) before income taxes | 19,925 | 55,066 |
| (Benefit)/provision for income taxes | 4,213 | 23,261 |
| Net income/(loss) | $15,712 | $25,470 |
| b. Second Quarter Income Statements ($000 except per share amounts) | ||
| Six months ended July 31, | ||
| 1993* | 1992 | |
| Net sales | $223,714 | $228,068 |
| Product return for Japan realignment | (115,000) | 0 |
| 108,714 | 228,068 | |
| Cost of goods sold | 117,486 | 119,481 |
| Cost related to product return for Japan realignment | (57,500) | 0 |
| Gross profit | 48,728 | 108,587 |
| Selling, general and administrative expenses | 99,792 | 92,578 |
| Provision for uncollectible accounts | 906 | 458 |
| Income/(loss) from operations | (51,970) | 15,551 |
| Other expenses, net | 3,410 | 3,453 |
| Income/(loss) before income taxes | (55,380) | 12,098 |
| (Benefit)/provision for income taxes | (23,867) | 5,106 |
| Net income/(loss) | ($31,513) | $6,992 |
| *Exhibit 1b recognizes the loss in net income for the second fiscal quarter ending July 31, 1993 due to the repurchase. |
Exhibit 2
| Exhibit 2 Consolidated Balance Sheets ($000) | |||
| Years ended January 31, | |||
| July 31, 1993 | 1993 | 1992 | |
| Assets | |||
| Current Assets | |||
| Cash and short-term investments | $6,665 | $6,672 | $3,972 |
| Accounts receivable, less allowances of $4,170 and $7,293 | 51,432 | 51,378 | 51,687 |
| Income tax receivable | 10,630 | - | - |
| Inventories | 247,891 | 224,151 | 213,435 |
| Prepaid expenses | 14,058 | 10,107 | 12,777 |
| Total current assets | 330,676 | 293,408 | 281,871 |
| Property and equipment, net | 96,320 | 94,454 | 88,975 |
| Deferred income taxes | 21,205 | 5,723 | 5,047 |
| Other assets, net | 26,204 | 25,770 | 18,989 |
| Total assets | 474,405 | 418,255 | 394,882 |
| Liabilities and Stockholders’ Equity | |||
| Current Liabilities | |||
| Short-term borrowings | 24,235 | 22,458 | 43,566 |
| Accounts payable and accrued liabilities | 98,497 | 61,919 | 66,781 |
| Income taxes payable | 0 | 2,679 | 7,371 |
| Merchandise and other customer credits | 6,029 | 5,318 | 4,687 |
| Total current liabilities | 128,761 | 92,374 | 122,405 |
| Long-term trade payable | 26,472 | - | - |
| Reserve for product return | 31,768 | - | - |
| Long-term debt | 101,500 | 101,500 | 50,000 |
| Deferred income taxes | 0 | 3,858 | 7,957 |
| Postretirement benefit obligation | 14,510 | 13,560 | 11,960 |
| Other long-term liabilities | 1,921 | 2,157 | 2,521 |
| Shareholders’ equity | |||
| Common stock, $.01 par value; authorized 30,000 shares, issued 15,660 and 15,620 | 157 | 156 | 159 |
| Additional paid-in capital | 69,969 | 69,553 | 67,927 |
| Retained earnings | 107,002 | 140,705 | 129,364 |
| Foreign currency translation adjustmentsa | (7,655) | (5,608) | 2,680 |
| Total stockholders’ equity | 169,473 | 204,806 | 200,039 |
| Total liabilities and shareholders’ equity | $474,405 | $418,255 | $394,882 |
| aThe accounting for foreign exchange translation gains and losses is governed by the Statement of Financial Accounting Standards #52 (FASB #52). Under this accounting method, all foreign assets and liabilities are translated at the exchange rate prevailing on the balance sheet date. Equity accounts are translated at historical rates. Income statement items are translated either at the prevailing rate on the date that a sale or purchase occurred, or a weighted average of exchange rates for the appropriate period. An important provision in FASB #52 is that translation gains and losses are not flowed through the income statement. Instead, they are booked directly to a separate equity account such as “Foreign Currency Translation Adjustments” or “Cumulative Translation Adjustment.” Only if and when an asset is sold or liquidated does the realized translation gain or loss move from the translation adjustment account to flow through the income statement. |
Exhibit 3
| Exhibit 3 Historical Summary ($000 except per share amounts; years ended January 31) | ||||||
| 1993 | 1992 | 1991 | 1990 | 1989 | 1988 | |
| Summary of operations | ||||||
| Net sales | $486,396 | $491,906 | $455,712 | $383,964 | $290,344 | $230,488 |
| Income/(loss) from operations | 26,741 | 61,028 | 67,806 | 60,977 | 44,193 | 33,691 |
| Interest expense and financing costs | 7,231 | 6,337 | 4,475 | 2,578 | 826 | 2,174 |
| Income/(loss) before income taxes | 19,925 | 55,066 | 63,475 | 58,387 | 43,032 | 31,194 |
| Net income/(loss) | $15,712 | $25,470 | $36,661 | $33,305 | $24,901 | $16,176 |
| Capital expenditures | $22,754 | $41,385 | $24,835 | $14,040 | $9,680 | $1,895 |
| Depreciation and amortization | 11,425 | 8,134 | 5,487 | 3,455 | 1,634 | 1,118 |
| Common shares outstanding | 15,620 | 15,870 | 15,670 | 15,560 | 15,370 | 12,570 |
| Income/(loss) per share | $1.00 | $20.1 | $2.34 | $2.13 | $1.62 | $1.17 |
| Cash dividends per share | $0.28 | $0.28 | $0.26 | $0.18 | $0.10 | - |
| Dividend payout (%) | 28.0 | 14.0 | 11.0 | 8.0 | 6.0 | 0.0 |
| Financial position | ||||||
| Net working capitala | $220,813 | $203,032 | $162,265 | $127,074 | $89,082 | $66,772 |
| Inventories | 224,151 | 213,435 | 173,964 | 142,545 | 103,771 | 70,778 |
| Total assets | 419,355 | 394,882 | 307,268 | 237,061 | 162,648 | 126,669 |
| Total debt | 123,958 | 93,566 | 49,272 | 32,565 | 7,253 | - |
| Shareholders’ equity | 204,806 | 200,039 | 176,183 | 135,568 | 99,193 | 71,621 |
| Book value per share | $13.11 | $12.61 | $11.24 | $8.71 | $6.29 | $5.70 |
| Average annual P/E | 34.0 | 24.2 | 16.9 | 19.8 | 14.3 | 14.5 |
| Stock price | ||||||
| High | $52.90 | $57.50 | $53.80 | $61.30 | $29.70 | $27.30 |
| Low | $23.00 | $32.60 | $27.50 | $26.00 | $14.00 | $9.70 |
| Equity beta (β) | 1.35 | |||||
| Selected ratios | ||||||
| Current ratio | 3.2 | 2.3 | 2.3 | 2.5 | 2.5 | 2.4 |
| Net profit margin (%) | 3.2 | 6.5 | 8.0 | 8.7 | 8.6 | 7.3 |
| Return on assets (%) | 4.0 | 8.0 | 12.0 | 14.0 | 15.0 | 13.0 |
| Return on equity (%) | 8.0 | 16.0 | 21.0 | 25.0 | 25.0 | 23.0 |
| Asset turnover | 1.16 | 1.25 | 1.48 | 1.62 | 1.79 | 1.82 |
| Total debt/total capital (%) | 30.0 | 24.0 | 16.0 | 14.0 | 4.0 | 0.0 |
| aExcluding short-term borrowings. |
Exhibit 4
| Exhibit 4 Domestic and Foreign Operations ($000) | ||
| Years ended January 31, | ||
| 1993 | 1992 | |
| Domestic | ||
| Net sales | $414,558 | $439,055 |
| U.S. | 326,828 | 316,282 |
| Export | 87,730 | 122,773 |
| Income/(loss) from operations | 73,559 | 98,229 |
| Identifiable assets | 287,127 | 278,730 |
| Foreign | ||
| Net sales | 71,838 | 52,851 |
| Income/(loss) from operations | 2,381 | 3,888 |
| Identifiable assets | 132,228 | 116,152 |
Exhibit 5
| Exhibit 5 Worldwide Retail Locations | ||||||||
| Tiffany’s Subsidiary Companies | Independent | |||||||
| North America and Europe | Pacific Rim | |||||||
| End of Fiscal | U.S. | Canada | Europe | Japan | Elsewhere | Mitsukoshi | Others | Total |
| 1987 | 8 | 0 | 2 | 0 | 0 | 21 | 0 | 31 |
| 1988 | 9 | 0 | 3 | 0 | 1 | 21 | 0 | 34 |
| 1989 | 9 | 0 | 5 | 0 | 2 | 24 | 0 | 40 |
| 1990 | 12 | 0 | 5 | 0 | 3 | 27 | 0 | 47 |
| 1991 | 13 | 1 | 7 | 0 | 4 | 38 | 2 | 65 |
| 1992 | 16 | 1 | 7 | 7 | 4 | 36 | 4 | 75 |
| 1993 | 16 | 1 | 6 | 37 | 5 | 8 | 6 | 79 |
Exhibit 6
| Exhibit 6 Yen/Dollar Exchange Rates (end of period) | ||||
| Month | Yen/Dollar | Month | Yen/Dollar | |
| 1983 | 231.70 | Jan., 1992 | 125.55 | |
| 1984 | 251.60 | Feb. | 129.15 | |
| 1985 | 200.25 | Mar. | 132.92 | |
| 1986 | 158.30 | Apr. | 133.30 | |
| 1987 | 121.25 | May | 127.75 | |
| 1988 | 125.05 | June | 125.87 | |
| 1989 | 143.80 | July | 127.20 | |
| 1990 | 135.75 | Aug. | 123.08 | |
| Sept. | 120.07 | |||
| Jan., | 1991 | 131.45 | Oct. | 123.45 |
| Feb. | 132.95 | Nov. | 124.75 | |
| Mar. | 140.60 | Dec. | 124.86 | |
| Apr. | 136.38 | |||
| May | 138.45 | Jan., 1993 | 124.73 | |
| June | 137.90 | Feb. | 118.25 | |
| July | 137.42 | Mar. | 114.88 | |
| Aug. | 136.85 | Apr. | 111.05 | |
| Sept. | 132.85 | May | 107.08 | |
| Oct. | 130.60 | June | 106.50 | |
| Nov. | 130.08 | |||
| Dec. | 124.90 |
Exhibit 8a,b
| Exhibit 8 Selected Financial Market Data (end of month) | ||||
| A. Interest Rates | ||||
| 1993 Eurodollar Interest Rates (percentage) | ||||
| One Month | Three Months | Six Months | One Year | |
| January | 3.1250 | 3.2500 | 3.3750 | 3.6875 |
| February | 3.1250 | 3.1250 | 3.2500 | 3.5000 |
| March | 3.1250 | 3.1875 | 3.3125 | 3.5625 |
| April | 3.0625 | 3.1250 | 3.2500 | 3.5000 |
| May | 3.1875 | 3.3125 | 3.4375 | 3.8125 |
| June | 3.1250 | 3.2500 | 3.5000 | 3.6875 |
| 1993 Euroyen Interest Rates (percentage) | ||||
| January | 3.5000 | 3.4375 | 3.3750 | 3.3125 |
| February | 3.2188 | 3.2813 | 3.2188 | 3.2188 |
| March | 3.5313 | 3.4063 | 3.4063 | 3.4063 |
| April | 3.2188 | 3.2188 | 3.2813 | 3.3125 |
| May | 3.2500 | 3.2500 | 3.3438 | 3.4375 |
| June | 3.1875 | 3.1875 | 3.1876 | 3.2501 |
| B. 1993 Yen-Dollar Exchange Rates (yen per dollar) | ||||
| Spot | Forward | |||
| One Month | Three Months | |||
| January | 124.800 | 124.845 | 124.865 | |
| February | 118.000 | 118.015 | 118.025 | |
| March | 116.650 | 116.665 | 116.675 | |
| April | 111.600 | 111.605 | 111.605 | |
| May | 107.250 | 107.255 | 107.230 | |
| June | 106.350 | 106.355 | 106.330 |
Exhibit 8c
| Exhibit 8 Selected Financial Market Data (end of month) (continued) | |||||||
| C. June, 1993 Yen-Dollar Foreign Currency Option Prices (100ths of a cent per yen; each option contract is for ¥6,250,000) | |||||||
| Month of Maturity | Month of Maturity | ||||||
| Strike Price | July | August | September | Strike Price | July | August | September |
| Calls | Puts | ||||||
| 87.0 | 87.0 | 0.36 | |||||
| 89.0 | 89.0 | 0.54 | |||||
| 90.0 | 90.0 | 0.25 | 0.50 | 0.92 | |||
| 91.0 | 3.32 | 91.0 | 1.04 | ||||
| 91.5 | 91.5 | 0.85 | |||||
| 92.0 | 1.54 | 2.52 | 92.0 | 0.57 | 1.07 | 1.44 | |
| 92.5 | 92.5 | 0.94 | 1.12 | 1.63 | |||
| 93.0 | 1.02 | 93.0 | 1.16 | ||||
| 93.5 | 2.22 | 93.5 | 1.02 | 2.06 | |||
| 94.0 | 0.94 | 1.46 | 1.99 | 94.0 | 1.26 | ||
| 94.5 | 0.66 | 1.15 | 94.5 | ||||
| 95.0 | 0.59 | 1.21 | 1.33 | 95.0 | |||
| 96.0 | 0.70 | 0.93 | 96.0 | ||||
| 97.0 | 0.55 | 0.78 | 97.0 | ||||
| 98.0 | 0.59 | 98.0 |
