UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  
 
FORM 10-Q
 
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2018
OR
¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 1-9494
TIFFANY & CO.
(Exact name of registrant as specified in its charter)
Delaware
 
13-3228013
(State of incorporation)
 
(I.R.S. Employer Identification No.)
 
 
727 Fifth Avenue, New York, NY
 
10022
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (212) 755-8000
Former name, former address and former fiscal year, if changed since last report                     
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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
 
Accelerated filer
 
¨

Non-accelerated filer
 
¨

(Do not check if a smaller reporting company)
Smaller reporting company
 
¨

 
 
 
 
Emerging growth company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ¨   No   x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value, 124,241,267 shares outstanding at the close of business on April 30, 2018


Table of Contents

TIFFANY & CO. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED APRIL 30, 2018
 
 
Page
 
Item 1.
 
 

 
 
 
 

 
Item 2.
Item 3.
Item 4.
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 6.




Table of Contents

PART I. Financial Information
Item 1. Financial Statements
TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
( in millions, except per share amounts )
 
April 30, 2018
 
January 31, 2018
 
April 30, 2017
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
999.2

 
$
970.7

 
$
838.8

Short-term investments
212.7

 
320.5

 
121.2

Accounts receivable, net
227.7

 
231.2

 
233.1

Inventories, net
2,317.6

 
2,253.5

 
2,197.4

Prepaid expenses and other current assets
223.0

 
207.4

 
204.0

Total current assets
3,980.2

 
3,983.3

 
3,594.5

Property, plant and equipment, net
965.6

 
990.5

 
920.8

Deferred income taxes
187.3

 
188.2

 
296.9

Other assets, net
317.5

 
306.1

 
294.0

 
$
5,450.6

 
$
5,468.1

 
$
5,106.2

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Short-term borrowings
$
96.7

 
$
120.6

 
$
190.6

Accounts payable and accrued liabilities
380.6

 
437.4

 
281.4

Income taxes payable
124.3

 
89.4

 
35.3

Merchandise credits and deferred revenue
82.7

 
77.4

 
75.2

Total current liabilities
684.3

 
724.8

 
582.5

Long-term debt
882.9

 
882.9

 
880.5

Pension/postretirement benefit obligations
290.7

 
287.4

 
322.8

Deferred gains on sale-leasebacks
38.0

 
40.5

 
44.9

Other long-term liabilities
286.1

 
284.3

 
200.8

Commitments and contingencies


 


 

Stockholders' equity:
 
 
 
 
 
Preferred Stock, $0.01 par value; authorized 2.0 shares, none issued and outstanding

 

 

Common Stock, $0.01 par value; authorized 240.0 shares, issued and outstanding 124.2, 124.5, 124.7
1.2

 
1.2

 
1.2

Additional paid-in capital
1,259.6

 
1,256.0

 
1,196.5

Retained earnings
2,159.0

 
2,114.2

 
2,104.6

Accumulated other comprehensive loss, net of tax
(166.1
)
 
(138.0
)
 
(242.8
)
Total Tiffany & Co. stockholders' equity
3,253.7

 
3,233.4

 
3,059.5

Non-controlling interests
14.9

 
14.8

 
15.2

Total stockholders' equity
3,268.6

 
3,248.2

 
3,074.7

 
$
5,450.6

 
$
5,468.1

 
$
5,106.2

See notes to condensed consolidated financial statements.

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Table of Contents

TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in millions, except per share amounts)

 
Three Months Ended April 30,
 
2018
 
2017
Net sales
$
1,033.2

 
$
899.6

Cost of sales
382.3

 
340.5

Gross profit
650.9

 
559.1

Selling, general and administrative expenses
446.6

 
409.5

Earnings from operations
204.3

 
149.6

Interest expense and financing costs
9.9

 
10.6

Other expense, net
3.9

 
2.9

Earnings from operations before income taxes
190.5

 
136.1

Provision for income taxes
48.2

 
43.2

Net earnings
$
142.3

 
$
92.9

Net earnings per share:
 
 
 
Basic
$
1.14

 
$
0.75

Diluted
$
1.14

 
$
0.74

Weighted-average number of common shares:
 
 
 
Basic
124.4

 
124.6

Diluted
125.0

 
125.3


See notes to condensed consolidated financial statements.


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Table of Contents

TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Unaudited)
(in millions)

 
Three Months Ended April 30,
 
2018
 
2017
Net earnings
    $
142.3

 
    $
92.9

Other comprehensive (loss) earnings, net of tax
 
 
 
Foreign currency translation adjustments
(25.0
)
 
12.1

Unrealized gain on marketable securities

 
0.1

Unrealized loss on hedging instruments
(7.3
)
 
(1.0
)
Unrealized gain on benefit plans
2.4

 
2.2

Total other comprehensive (loss) earnings, net of tax
(29.9
)
 
13.4

Comprehensive earnings
    $
112.4

 
    $
106.3


See notes to condensed consolidated financial statements.


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Table of Contents

TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
( in millions )

 
Total
Stockholders'
Equity
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Common Stock
 
Additional
Paid-In
Capital
 
Non-
Controlling
Interests
Shares
 
Amount
Balance at January 31, 2018
$
3,248.2

 
$
2,114.2

 
$
(138.0
)
 
124.5

 
$
1.2

 
$
1,256.0

 
$
14.8

Exercise of stock options and vesting of restricted stock units
4.5

 

 

 
0.2

 

 
4.5

 

Shares withheld related to net share settlement of share-based compensation

(6.5
)
 

 

 
(0.1
)
 

 
(6.5
)
 

Share-based compensation expense
9.0

 

 

 

 

 
9.0

 

Purchase and retirement of Common Stock
(40.5
)
 
(37.1
)
 

 
(0.4
)
 

 
(3.4
)
 

Cash dividends on Common Stock
(62.2
)
 
(62.2
)
 

 

 

 

 

Accrued dividends on share-based awards
(0.3
)
 
(0.3
)
 

 

 

 

 

Other comprehensive loss, net of tax
(29.9
)
 

 
(29.9
)
 

 

 

 

Cumulative effect adjustment from adoption of new accounting standards
3.9

 
2.1

 
1.8

 

 

 

 

Net earnings
142.3

 
142.3

 

 

 

 

 

Non-controlling interests
0.1

 

 

 

 

 

 
0.1

Balance at April 30, 2018
$
3,268.6

 
$
2,159.0

 
$
(166.1
)
 
124.2

 
$
1.2

 
$
1,259.6

 
$
14.9


See notes to condensed consolidated financial statements.


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Table of Contents

TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
 
Three Months Ended April 30,
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net earnings
   $
142.3

 
   $
92.9

Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
53.8

 
50.9

Amortization of gain on sale-leasebacks
(2.2
)
 
(2.0
)
Provision for inventories
11.2

 
4.8

Deferred income taxes
1.5

 
2.9

Provision for pension/postretirement benefits
8.4

 
9.4

Share-based compensation expense
9.0

 
7.5

Changes in assets and liabilities:
 
 
 
Accounts receivable
(11.8
)
 
(6.3
)
Inventories
(93.7
)
 
(33.1
)
Prepaid expenses and other current assets
(1.8
)
 
(15.4
)
Accounts payable and accrued liabilities
(54.1
)
 
(38.4
)
Income taxes payable
25.3

 
36.3

Merchandise credits and deferred revenue
11.5

 
7.9

Other, net
0.4

 
(3.7
)
Net cash provided by operating activities
99.8

 
113.7

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of marketable securities and short-term investments
(15.9
)
 
(75.7
)
Proceeds from sales of marketable securities and short-term investments
107.7

 
12.9

Capital expenditures
(36.9
)
 
(35.3
)
Other, net

 
1.8

Net cash provided by (used in) investing activities
54.9

 
(96.3
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
(Repayments of) proceeds from credit facility borrowings, net
(6.8
)
 
1.6

Repayment of other credit facility borrowings
(14.5
)
 
(39.2
)
Repurchase of Common Stock
(40.5
)
 
(11.5
)
Proceeds from exercised stock options
4.3

 
6.4

Payments related to tax withholding for share-based payment arrangements
(6.3
)
 
(6.8
)
Cash dividends on Common Stock
(62.2
)
 
(56.1
)
Net cash used in financing activities
(126.0
)
 
(105.6
)
Effect of exchange rate changes on cash and cash equivalents
(0.2
)
 
(1.0
)
Net increase (decrease) in cash and cash equivalents
28.5

 
(89.2
)
Cash and cash equivalents at beginning of year
970.7

 
928.0

Cash and cash equivalents at end of three months
   $
999.2

 
   $
838.8

See notes to condensed consolidated financial statements.

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Table of Contents

TIFFANY & CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements include the accounts of Tiffany & Co. (also referred to as the "Registrant") and its subsidiaries (the "Company") in which a controlling interest is maintained. Controlling interest is determined by majority ownership interest and the absence of substantive third-party participating rights or, in the case of variable interest entities ("VIEs"), if the Company has the power to significantly direct the activities of a VIE, as well as the obligation to absorb significant losses of or the right to receive significant benefits from the VIE. Intercompany accounts, transactions and profits have been eliminated in consolidation. The interim financial statements are unaudited and, in the opinion of management, include all adjustments (which represent normal recurring adjustments) necessary to fairly state the Company's financial position as of April 30, 2018 and 2017 and the results of its operations and cash flows for the interim periods presented. The condensed consolidated balance sheet data for January 31, 2018 are derived from the audited financial statements, which are included in the Company's Annual Report on Form 10-K and should be read in connection with these financial statements. As permitted by the rules of the Securities and Exchange Commission, these financial statements do not include all disclosures required by generally accepted accounting principles.

The Company's business is seasonal in nature, with the fourth quarter typically representing approximately one-third of annual net sales and a higher percentage of annual net earnings. Therefore, the results of its operations for the three months ended April 30, 2018 and 2017 are not necessarily indicative of the results of the entire fiscal year.

Certain prior year amounts have been reclassified to conform with the current year presentation. The Company adopted Accounting Standards Update ("ASU") 2017-07 - Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost , on February 1, 2018. Certain provisions of this ASU require retrospective application and, as a result, non-service cost components of the net periodic benefit cost for the three months ended April 30, 2017 were reclassified within the Condensed Consolidated Statement of Earnings. See "Note 2. New Accounting Standards" for additional information.

2.    NEW ACCOUNTING STANDARDS

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02 –  Leases , which requires an entity that leases assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Leases will be classified as either financing or operating, similar to current accounting requirements, with the applicable classification determining the pattern of expense recognition in the statement of earnings. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 and must be adopted using a modified retrospective approach, which currently requires lessees and lessors to recognize and measure all leases within the scope of this ASU as of the beginning of the earliest comparative period presented in the Company's financial statements. Management continues to evaluate the impact of this ASU on the consolidated financial statements, but expects that adoption will result in a significant increase in the Company's assets and liabilities. The Company's implementation project team has completed the assessment phase of the project, during which the project team compiled information to evaluate the Company's real estate, personal property and other arrangements that may meet the definition of a lease under this ASU and identified areas that may require the development of additional processes and policies. The Company's implementation project team is continuing the solution development phase of the project, which includes the development and implementation of any such additional processes and policies, collection of key data for each leased asset to be utilized throughout this phase of the project and selection of the practical expedients permitted under the ASU.


TIFFANY & CO.
7


In June 2016, the FASB issued ASU 2016-13 – Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments . ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses. The new standard applies to financial assets measured at amortized cost basis, including receivables that result from revenue transactions and held-to-maturity debt securities. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, and early adoption is permitted for fiscal years beginning after December 15, 2018. Management continues to evaluate the impact of this ASU on the consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12 - Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities , which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedged items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The amendments in this ASU must be applied on a modified retrospective basis, while presentation and disclosure requirements set forth under this ASU are required prospectively in all interim periods and fiscal years ending after the date of adoption. Management is currently evaluating the impact of this ASU on the consolidated financial statements. The simplifications to the application of hedge accounting may result in management's expanding the use of hedge accounting in future periods.

In February 2018, the FASB issued ASU 2018-02,  Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax effects from Accumulated Other Comprehensive Income , which allows for the reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for the tax effects on deferred tax items included within AOCI (referred to in the ASU as "stranded tax effects") resulting from the reduction of the U.S. federal statutory income tax rate to 21% from 35% that was effected by the 2017 U.S. Tax Cuts and Jobs Act (the "2017 Tax Act"). ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The adoption of ASU 2018-02 will result in a reclassification from AOCI to retained earnings, and will have no impact on the Company's results of operations, financial position or cash flows. Management is currently evaluating the impact of this ASU on the consolidated financial statements.

Recently Adopted Accounting Standards

In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers , to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. The core principle of the guidance is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies need to use more judgment and make more estimates than under previous guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In August 2015, the FASB issued ASU 2015-14 – Revenue from Contracts with Customers: Deferral of the Effective Date , deferring the effective date of ASU 2014-09 for one year to interim and annual reporting periods beginning after December 15, 2017. Early adoption was also permitted as of the original effective date (interim and annual periods beginning after December 15, 2016) and full or modified retrospective application was permitted. Subsequently, the FASB issued a number of ASU's amending ASU 2014-09 and providing further guidance related to revenue recognition, which management evaluated. The effective date and transition requirements for these amendments are the same as ASU 2014-09, as amended by ASU 2015-14. Management adopted this guidance on February 1, 2018 using the modified retrospective approach. The impact of the adoption of ASU 2014-09 on the Company's condensed consolidated financial statements is as follows:

The Company's revenue is primarily generated from the sale of finished products to customers (primarily through the retail, e-commerce or wholesale channels). The Company's performance obligations underlying such sales, and the timing of revenue recognition related thereto, remain substantially unchanged following the adoption of this ASU.


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8


The Company now recognizes breakage income on gift cards and merchandise credits (which represents income recognized from the customer's unexercised right to receive merchandise through the redemption of such gift cards and merchandise credits) based on the historical pattern of gift card and merchandise credit redemptions. Breakage income recognized during the three months ended April 30, 2018 was not significant.

This ASU requires sales returns reserves to be presented on a gross basis on the condensed consolidated balance sheet, with the asset related to inventory expected to be returned recorded outside of Accounts receivable, net. Prior to the adoption of this ASU, sales returns reserves were recorded on a net basis within Accounts receivable, net.

The impact of the adoption of ASU 2014-09 on the Company's condensed consolidated balance sheet was as follows:
 
April 30, 2018
(in millions)
As Reported
 
Balances Without Adoption of ASC 606
 
Effect of Adoption Increase/(Decrease)
Assets
 
 
 
 
 
Accounts receivable, net
          $
227.7

 
          $
241.0

 
          $
(13.3
)
Prepaid expenses and other current assets
223.0

 
209.7

 
13.3


There was no significant impact from the adoption of ASU 2014-09 on the Company's condensed consolidated statement of earnings or condensed consolidated statement of cash flows.

In August 2016, the FASB issued ASU 2016-15 – Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments , which provides guidance on eight specific cash flow issues in an effort to reduce diversity in practice in how certain transactions are classified within the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption was permitted and the amendments are applied using a retrospective method. Management adopted this ASU on February 1, 2018. The adoption of this ASU did not have any impact on the condensed consolidated statements of cash flows and related disclosures.

In October 2016, the FASB issued ASU 2016-16 – Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory . This ASU eliminates the requirement to defer the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. Therefore, under the new guidance, an entity recognizes the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption was permitted as of the first interim period of 2017. The amendments in this ASU are applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Management adopted this ASU on February 1, 2018. The adoption of this ASU did not have any impact on the condensed consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07 - Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . Under this ASU, only the service cost component of the net periodic benefit cost is presented in the same income statement line item as other employee compensation costs arising from services rendered during the period, while the non-service cost components of net periodic benefit cost are required to be presented in the income statement separate from Earnings from operations. In addition, only the service cost component is eligible for capitalization in assets. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The amendments in this ASU are applied retrospectively for the presentation of the components of net periodic benefit cost other than service cost in the statement of earnings, and prospectively for the capitalization of the service cost component. Management adopted this ASU on February 1, 2018 using the practical expedient permitted by this ASU and reclassified the non-service cost components of the net periodic benefit cost from within Earnings

TIFFANY & CO.
9


from operations to Other expenses, net. This increased Earnings from operations for the three months ended April 30, 2017 by $4.0 million (with $1.5 million reclassified from Cost of sales and $2.5 million reclassified from Selling, general and administrative expenses), but had no impact on Net earnings. The requirement set forth under this ASU that allows only the service cost component of net periodic benefit cost to be capitalized did not have a significant impact on the Company's results of operations.

In May 2017, the FASB issued ASU 2017-09 - Compensation-Stock Compensation: Scope of Modification Accounting , clarifying when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. This ASU is effective prospectively for annual periods beginning after December 15, 2017 and early adoption was permitted. Management adopted this ASU on February 1, 2018 and will apply the provisions of this ASU to any share-based payment awards modified on or after February 1, 2018.

3.
RECEIVABLES AND REVENUE RECOGNITION

Receivables. The Company's Accounts receivable, net primarily consists of amounts due from Credit Receivables (defined below), department store operators that host TIFFANY & CO. boutiques in their stores, third-party credit card issuers and wholesale customers. The Company maintains an allowance for doubtful accounts for estimated losses associated with outstanding accounts receivable. The allowance is determined based on a combination of factors including, but not limited to, the length of time that the receivables are past due, management's knowledge of the customer, economic and market conditions and historical write-off experiences.

For the receivables associated with Tiffany & Co. credit cards ("Credit Card Receivables"), management uses various indicators to determine whether to extend credit to customers and the amount of credit. Such indicators include reviewing prior experience with the customer, including sales and collection history, and using applicants' credit reports and scores provided by credit rating agencies. Certain customers may be granted payment terms which permit purchases above a minimum amount to be paid for in equal monthly installments over a period not to exceed 12 months (together with Credit Card Receivables, "Credit Receivables"). Credit Receivables require minimum balance payments. An account is classified as overdue if a minimum balance payment has not been received within the allotted time frame (generally 30 days), after which internal collection efforts commence. In order for the account to return to current status, full payment on all past due amounts must be received by the Company. For all Credit Receivables, once all internal collection efforts have been exhausted and management has reviewed the account, the account balance is written off and may be sent for external collection or legal action. At April 30, 2018 and 2017, the carrying amount of the Credit Receivables (recorded in Accounts receivable, net) was $72.8 million and $76.0 million , respectively, of which 97% was considered current in both periods. The allowance for doubtful accounts for estimated losses associated with the Credit Receivables ( $1.3 million at April 30, 2018 and $1.1 million at April 30, 2017 ) was determined based on the factors discussed above. Finance charges earned on Credit Receivables were not significant.

At April 30, 2018 , accounts receivable allowances totaled $29.9 million compared to $17.2 million at January 31, 2018 and $12.7 million at April 30, 2017 , with $13.3 million of the increase at April 30, 2018 due to the adoption of ASU 2014-09, which requires sales returns reserves to be presented on a gross basis on the condensed consolidated balance sheet, with the asset related to inventory expected to be returned recorded outside of Accounts receivable, net.


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10


Revenue Recognition . The following table disaggregates the Company's net sales by major source:
 
Three Months Ended April 30,
(in millions)
2018
 
2017
Net sales*:
 
 
 
Jewelry collections
$
529.3

 
$
449.9

Engagement jewelry
294.5

 
264.6

Designer jewelry
128.4

 
115.4

All other
81.0

 
69.7

 
$
1,033.2

 
$
899.6

*Certain reclassifications within the jewelry categories have been made to the prior year amounts to conform to the current year category presentation.

The Company's performance obligations consist primarily of transferring control of merchandise to customers. Sales are recognized upon transfer of control, which occurs when merchandise is taken in an "over-the-counter" transaction or upon receipt by a customer in a shipped transaction, such as through the Internet and catalog channels. Sales are reported net of returns, sales tax and other similar taxes. The Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority and collected by the entity from a customer.

Shipping and handling fees billed to customers are recognized in net sales when control of the underlying merchandise is transferred to the customer. The related shipping and handling charges incurred by the Company are included in Cost of sales.

The Company maintains a reserve for potential product returns and records (as a reduction to sales and cost of sales) its provision for estimated product returns, which is determined based on historical experience.

As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component when management expects, at contract inception, that the period between the transfer of a product to a customer and when the customer pays for that product is one year or less.

Additionally, outside of the U.S., the Company operates certain TIFFANY & CO. stores within various department stores. Sales transacted at these store locations are recognized upon transfer of control, which occurs when merchandise is taken in an "over-the-counter" transaction. The Company and these department store operators have distinct responsibilities and risks in the operation of such TIFFANY & CO. stores. The Company (i) owns and manages the merchandise; (ii) establishes retail prices; (iii) has merchandising, marketing and display responsibilities; and (iv) in almost all locations provides retail staff and bears the risk of inventory loss. The department store operators (i) provide and maintain store facilities; (ii) in almost all locations assume retail credit and certain other risks; and (iii) act for the Company in the sale of merchandise. In return for their services and use of their facilities, the department store operators retain a portion of net retail sales made in TIFFANY & CO. stores which is recorded as commission expense within Selling, general and administrative expenses.

Merchandise Credits and Deferred Revenue . Merchandise credits and deferred revenue primarily represent outstanding gift cards sold to customers and outstanding credits issued to customers for returned merchandise. All such outstanding items may be tendered for future merchandise purchases. A gift card liability is established when the gift card is sold. A merchandise credit liability is established when a merchandise credit is issued to a customer for a returned item and the original sale is reversed. These liabilities are relieved when revenue is recognized for transactions in which a merchandise credit or gift card is used as a form of payment.

If merchandise credits or gift cards are not redeemed over an extended period of time (for example, approximately three to five years in the U.S.), the value associated with the merchandise credits or gift cards may be subject to remittance to the applicable jurisdiction in accordance with unclaimed property laws. The

TIFFANY & CO.
11


Company determines the amount of breakage income to be recognized on gift cards and merchandise credits using historical experience to estimate amounts that will ultimately not be redeemed. The Company recognizes such breakage income in proportion to redemption rates of the overall population of gift cards and merchandise credits.

In the three months ended April 30, 2018, the Company recognized net sales of approximately $17.0 million related to the Merchandise credits and deferred revenue balance that existed at January 31, 2018.

4.    INVENTORIES

(in millions)
April 30, 2018
 
January 31, 2018
 
April 30, 2017
Finished goods
          $
1,309.9

 
          $
1,314.6

 
          $
1,269.8

Raw materials
871.7

 
821.4

 
831.7

Work-in-process
136.0

 
117.5

 
95.9

Inventories, net
          $
2,317.6

 
          $
2,253.5

 
          $
2,197.4


5.    INCOME TAXES

In December 2017, the 2017 Tax Act was enacted in the U.S. This enactment resulted in a number of significant changes to U.S. federal income tax law for U.S. taxpayers, including a reduction of the statutory U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018. Changes in tax law are accounted for in the period of enactment. As such, the Company's consolidated financial statements for its fiscal year ended January 31, 2018 reflected the estimated immediate tax effect of the 2017 Tax Act, which included an estimated net tax expense of $146.2 million consisting of:
Estimated tax expense of $94.8 million for the impact of the reduction in the U.S statutory tax rate on the Company's deferred tax assets and liabilities;
Estimated tax expense of $56.0 million for the one-time transition tax via a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits (the "Transition Tax"); and
A tax benefit of $4.6 million resulting from the effect of the 21% statutory tax rate for the month of January 2018 on the Company's annual statutory tax rate for the year ended January 31, 2018.

Additionally, in December 2017, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. SAB 118 also provides a measurement period for companies to evaluate the impacts of the 2017 Tax Act on their financial statements. This measurement period begins in the reporting period that includes the enactment date and ends when an entity has obtained, prepared and analyzed the information that was needed in order to complete the accounting requirements, and cannot exceed one year. The Company adopted the provisions of SAB 118 in the fourth quarter of fiscal 2017.

Consistent with SAB 118, for the year ended January 31, 2018 , the Company calculated and recorded reasonable estimates for the impact of the Transition Tax and the remeasurement of its deferred tax assets and deferred tax liabilities, as set forth above. The resulting charges represented provisional amounts for which the Company's analysis was incomplete but a reasonable estimate could be determined and recorded during the fourth quarter of 2017.

During the three months ended April 30, 2018 , on the basis of additional guidance that became available, the Company recognized a measurement-period adjustment to decrease the estimated Transition Tax obligation by $3.2 million , with a corresponding offset to the Provision for income taxes, resulting in a total estimated Transition Tax obligation recognized to date of $52.8 million . However, the Company is continuing to gather additional information and refine its analysis to more precisely compute the amount of the Transition Tax and, as a result, the Company's accounting for this item is not yet complete.


TIFFANY & CO.
12


The Company also adopted the provisions of SAB 118 as it relates to the assertion of the indefinite reinvestment of foreign earnings and profits. The impact of the 2017 Tax Act on the Company's assertion to indefinitely reinvest foreign earnings remains incomplete as the Company continues to analyze the relevant provisions of the 2017 Tax Act and related accounting guidance. Therefore, a provisional estimate has not been recorded or disclosed as it relates to the potential tax consequences of an actual repatriation of unremitted foreign earnings. The Company will account for the tax on global intangible low-taxed income ("GILTI") as a period cost and thus has not adjusted any of the deferred tax assets and liabilities of its foreign subsidiaries in connection with the 2017 Tax Act. As the Company refines its provisional estimate calculations, further analyzes provisions of the 2017 Tax Act and any subsequent guidance related thereto, these provisional estimates could be affected, which could have a material impact on the Company's future financial results. Additionally, further regulatory or GAAP accounting guidance regarding the 2017 Tax Act could also materially affect the Company's future financial results.

The effective income tax rate for the three months ended April 30, 2018 was 25.3% compared to 31.7% in the prior year. The effective income tax rate for the three months ended April 30, 2018 was reduced by 170 basis points due to the recognition of an income tax benefit of $3.2 million related to a reduction in the estimated obligation for the Transition Tax. The effective income tax rate for the three months ended April 30, 2017 was reduced by 180 basis points due to an income tax benefit of $2.4 million resulting from the implementation of ASU 2016-09, which requires excess tax benefits and/or shortfalls related to exercises and vesting of share-based compensation to be recorded in the provision for income taxes rather than in additional paid in capital. The remaining decrease in the effective income tax rate for the three months ended April 30, 2018 compared to the prior year is primarily due to the enactment of 2017 Tax Act, including the reduction in the statutory U.S. federal corporate income tax rate and the introduction of the foreign derived intangible income deduction, which are partly offset by the GILTI inclusion.

During the  three months ended April 30, 2018 , the change in the gross amount of unrecognized tax benefits and accrued interest and penalties was not significant.

The Company conducts business globally, and, as a result, is subject to taxation in the U.S. and various state and foreign jurisdictions. As a matter of course, tax authorities regularly audit the Company. The Company's tax filings are currently being examined by a number of tax authorities in several jurisdictions, both in the U.S. and in foreign jurisdictions. Ongoing audits where subsidiaries have a material presence include New York City (tax years 2011 2013 ) and New York State (tax years 2012 2014 ). Tax years from 2010 –present are open to examination in the U.S. Federal jurisdiction and 2006 –present are open in various state, local and foreign jurisdictions. As part of these audits, the Company engages in discussions with taxing authorities regarding tax positions. As of April 30, 2018, unrecognized tax benefits are not expected to change significantly in the next 12 months. Future developments may result in a change in this assessment.

6.    EARNINGS PER SHARE

Basic earnings per share ("EPS") is computed as net earnings divided by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the dilutive effect of the assumed exercise of stock options and unvested restricted stock units.

The following table summarizes the reconciliation of the numerators and denominators for the basic and diluted EPS computations:
 
Three Months Ended April 30,
(in millions)
2018
 
2017
Net earnings for basic and diluted EPS
$
142.3

 
$
92.9

Weighted-average shares for basic EPS
124.4

 
124.6

Incremental shares based upon the assumed exercise of stock options and unvested restricted stock units
0.6

 
0.7

Weighted-average shares for diluted EPS
125.0

 
125.3



TIFFANY & CO.
13


For the three months ended April 30, 2018 and 2017 , there were 0.9 million stock options and restricted stock units in each period that were excluded from the computations of earnings per diluted share due to their antidilutive effect.

7.
DEBT

(in millions)
April 30, 2018
 
January 31, 2018
 
April 30, 2017
Short-term borrowings:
 
 
 
 
 
Credit Facilities
$
26.1

 
$
33.5

 
$
93.6

Other credit facilities
70.6

 
87.1

 
97.0

 
$
96.7

 
$
120.6

 
$
190.6

Long-term debt:
 
 
 
 
 
Unsecured Senior Notes:
 
 
 
 
 
2012 4.40% Series B Senior Notes, due July 2042 a
$
250.0

 
$
250.0

 
$
250.0

2014 3.80% Senior Notes, due October 2024 b, c
250.0

 
250.0

 
250.0

2014 4.90% Senior Notes, due October 2044 b, c
300.0

 
300.0

 
300.0

2016 0.78% Senior Notes, due August 2026 b, d
91.7

 
91.9

 
89.9

 
891.7

 
891.9

 
889.9

Less unamortized discounts and debt issuance costs
8.8

 
9.0

 
9.4

 
$
882.9

 
$
882.9

 
$
880.5

a  
The agreements governing these Senior Notes require repayments of $50.0 million in aggregate every five years beginning in 2022.
b  
These agreements require lump sum repayments upon maturity.
c  
These Senior Notes were issued at a discount, which will be amortized until the debt maturity.
d  
These Senior Notes were issued at par, ¥10.0 billion .

At April 30, 2018 , the Company was in compliance with all debt covenants.

8.    HEDGING INSTRUMENTS

Background Information

The Company uses derivative financial instruments, including interest rate swaps, cross-currency swaps, forward contracts and net-zero-cost collar arrangements (combination of call and put option contracts) to mitigate a portion of its exposures to changes in interest rates, foreign currency exchange rates and precious metal prices.

Derivative Instruments Designated as Hedging Instruments. If a derivative instrument meets certain hedge accounting criteria, it is recorded on the condensed consolidated balance sheet at its fair value, as either an asset or a liability, with an offset to current or other comprehensive earnings, depending on whether the hedge is designated as one of the following on the date it is entered into:

Fair Value Hedge – A hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment. For fair value hedge transactions, both the effective and ineffective portions of the changes in the fair value of the derivative and changes in the fair value of the item being hedged are recorded in current earnings.


TIFFANY & CO.
14


Cash Flow Hedge – A hedge of the exposure to variability in the cash flows of a recognized asset, liability or a forecasted transaction. For cash flow hedge transactions, the effective portion of the changes in fair value of derivatives is reported as other comprehensive income ("OCI") and is recognized in current earnings in the period or periods during which the hedged transaction affects current earnings. Amounts excluded from the effectiveness calculation and any ineffective portions of the change in fair value of the derivative are recognized in current earnings.

The Company formally documents the nature of and relationships between the hedging instruments and hedged items for a derivative to qualify as a hedge at inception and throughout the hedged period. The Company also documents its risk management objectives, strategies for undertaking the various hedge transactions and method of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, the significant characteristics and expected terms of a forecasted transaction must be identified, and it must be probable that each forecasted transaction will occur. If it were deemed probable that the forecasted transaction would not occur, the gain or loss on the derivative financial instrument would be recognized in current earnings. Derivative financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedge instrument and the item being hedged, both at inception and throughout the hedged period.

Derivative Instruments Not Designated as Hedging Instruments. Derivative instruments which do not meet the criteria to be designated as a hedge are recorded on the condensed consolidated balance sheet at their fair values, as either assets or liabilities, with an offset to current earnings. The gains or losses on undesignated foreign exchange forward contracts substantially offset foreign exchange losses or gains on the underlying liabilities or transactions being hedged.

The Company does not use derivative financial instruments for trading or speculative purposes.

Types of Derivative Instruments

Interest Rate Swaps – In 2012, the Company entered into forward-starting interest rate swaps to hedge the impact of interest rate volatility on future interest payments associated with the anticipated incurrence of $250.0 million of additional debt which was incurred in July 2012. The Company accounted for the forward-starting interest rate swaps as cash flow hedges. The Company settled the interest rate swap in 2012 and recorded an unrealized loss within accumulated other comprehensive loss. As of April 30, 2018 , $18.2 million remains recorded as an unrealized loss in accumulated other comprehensive loss, which is being amortized over the term of the 2042 Notes to which the interest rate swaps related.

In 2014, the Company entered into forward-starting interest rate swaps to hedge the impact of interest rate volatility on future interest payments associated with the anticipated incurrence of long-term debt which was incurred in September 2014. The Company accounted for the forward-starting interest rate swaps as cash flow hedges. The Company settled the interest rate swap in 2014 and recorded an unrealized loss within accumulated other comprehensive loss. As of April 30, 2018 , $3.6 million remains recorded as an unrealized loss in accumulated other comprehensive loss, which is being amortized over the terms of the respective 2024 Notes or 2044 Notes to which the interest rate swaps related.

Cross-currency Swaps – The Company entered into cross-currency swaps to hedge the foreign currency exchange risk associated with Japanese yen-denominated intercompany loans. These cross-currency swaps are designated and accounted for as cash flow hedges. As of April 30, 2018 , the notional amounts of cross-currency swaps accounted for as cash flow hedges and the respective maturity dates were as follows:
Cross-Currency Swap
 
Notional Amount
Effective Date
Maturity Date
(in billions)
(in millions)
July 2016
October 1, 2024
¥
10.6

$
100.0

March 2017
April 1, 2027
11.0

96.1

May 2017
April 1, 2027
5.6

50.0



TIFFANY & CO.
15


Foreign Exchange Forward Contracts – The Company uses foreign exchange forward contracts to offset a portion of the foreign currency exchange risks associated with foreign currency-denominated liabilities, intercompany transactions and forecasted purchases of merchandise between entities with differing functional currencies. The Company assesses hedge effectiveness based on the total changes in the foreign exchange forward contracts' cash flows. These foreign exchange forward contracts are designated and accounted for as either cash flow hedges or economic hedges that are not designated as hedging instruments.

As of April 30, 2018 , the notional amounts of foreign exchange forward contracts were as follows:
(in millions)
 
Notional Amount
 
USD Equivalent
Derivatives designated as hedging instruments:
 
 
 
 
Japanese yen
¥
16,124.5

$
148.7

British pound
£
12.7

 
17.4

Derivatives not designated as hedging instruments:
 
 
 
 
U.S. dollar
$
59.3

$
59.3

Euro
10.1

 
13.9

Australian dollar
AU$
23.7

 
18.4

British pound
£
7.4

 
10.5

Czech koruna
CZK
124.6

 
6.1

Chinese yuan
CNY
18.1

 
2.9

Hong Kong dollar
HKD
39.0

 
5.0

Japanese yen
¥
1,080.7

 
10.0

Korean won
20,498.4

 
19.2

New Zealand dollar
NZ$
11.7

 
8.6

Singapore dollar
S$
29.9

 
22.8


The maximum term of the Company's outstanding foreign exchange forward contracts as of April 30, 2018 is 12 months.

Precious Metal Collars and Forward Contracts – The Company periodically hedges a portion of its forecasted purchases of precious metals for use in its internal manufacturing operations in order to manage the effect of volatility in precious metal prices. The Company may use either a combination of call and put option contracts in net-zero-cost collar arrangements ("precious metal collars") or forward contracts. For precious metal collars, if the price of the precious metal at the time of the expiration of the precious metal collar is within the call and put price, the precious metal collar expires at no cost to the Company. The Company accounts for its precious metal collars and forward contracts as cash flow hedges. The Company assesses hedge effectiveness based on the total changes in the precious metal collars and forward contracts' cash flows. As of April 30, 2018 , the maximum term over which the Company is hedging its exposure to the variability of future cash flows for all forecasted precious metals transactions is 14 months. As of April 30, 2018 , there were precious metal derivative instruments outstanding for approximately 36,000 ounces of platinum, 720,000 ounces of silver and 28,800 ounces of gold.


TIFFANY & CO.
16


Information on the location and amounts of derivative gains and losses in the condensed consolidated financial statements is as follows:
 
Three Months Ended April 30,
 
2018
 
2017
(in millions)
Pre-Tax Gain
(Loss) Recognized
in OCI
(Effective Portion)
 
Pre-Tax Gain (Loss) Reclassified
from Accumulated
OCI into Earnings
(Effective Portion)
 
Pre-Tax Gain
(Loss) Recognized
in OCI
(Effective Portion)
 
Pre-Tax Gain (Loss) Reclassified
from Accumulated
OCI into Earnings
(Effective Portion)
Derivatives in Cash Flow Hedging
   Relationships:
 
 
 
 
 
 
 
Foreign exchange forward contracts a  
$
1.8

 
$
1.6

 
$
(3.2
)
 
$
(2.8
)
Precious metal collars a

 
0.1

 
0.1

 

Precious metal forward contracts a  
(5.6
)
 
0.4

 
0.3

 
(0.9
)
Cross-currency swaps b
(3.4
)
 
0.6

 
(7.5
)
 
(4.9
)
Forward-starting interest rate swaps c

 
(0.4
)
 

 
(0.4
)
 
$
(7.2
)
 
$
2.3

 
$
(10.3
)
 
$
(9.0
)
a The gain or loss recognized in earnings is included within Cost of sales.
b The gain or loss recognized in earnings is included within Other expense, net.
c The gain or loss recognized in earnings is included within Interest expense and financing costs.

The pre-tax gains (losses) on derivatives not designated as hedging instruments were not significant in the three months ended April 30, 2018 and 2017. There was no material ineffectiveness related to the Company's hedging instruments for the three months ended April 30, 2018 and 2017 . The Company expects approximately $3.4 million of net pre-tax derivative losses included in accumulated other comprehensive loss at April 30, 2018 will be reclassified into earnings within the next 12 months. The actual amount reclassified will vary due to fluctuations in foreign currency exchange rates and precious metal prices.

For information regarding the location and amount of the derivative instruments in the Condensed Consolidated Balance Sheet, see "Note 9. Fair Value of Financial Instruments."

Concentration of Credit Risk

A number of major international financial institutions are counterparties to the Company's derivative financial instruments. The Company enters into derivative financial instrument agreements only with counterparties meeting certain credit standards (an investment grade credit rating at the time of the agreement) and limits the amount of agreements or contracts it enters into with any one party. The Company may be exposed to credit losses in the event of nonperformance by individual counterparties or the entire group of counterparties.

9.    FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal market for the asset or liability in an orderly transaction between market participants on the measurement date. U.S. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. U.S. GAAP prescribes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities, which are considered to be most reliable.

Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data.


TIFFANY & CO.
17


Level 3 – Unobservable inputs reflecting the reporting entity's own assumptions, which require the most judgment.

The Company's derivative instruments are considered Level 2 instruments for the purposes of determining fair value. The Company's foreign exchange forward contracts, as well as its put option contracts and cross-currency swaps, are primarily valued using the appropriate foreign exchange spot rates. The Company's precious metal forward contracts and collars are primarily valued using the relevant precious metal spot rate. For further information on the Company's hedging instruments and program, see "Note 8. Hedging Instruments."

Financial assets and liabilities carried at fair value at April 30, 2018 are classified in the table below in one of the three categories described above: 
 
Estimated Fair Value
 
Total Fair
Value
(in millions)
Level 1
 
Level 2
 
Level 3
 
Financial assets
 
 
 
 
 
 
 
Marketable securities a
$
37.1

 
$

 
$

 
$
37.1

Time deposits b
212.7

 

 

 
212.7

Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Precious metal forward contracts c

 
1.8

 

 
1.8

Foreign exchange forward contracts c

 
0.9

 

 
0.9

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Foreign exchange forward contracts  c

 
1.4

 

 
1.4

Total financial assets
$
249.8

 
$
4.1

 
$

 
$
253.9

 
Estimated Fair Value
 
Total Fair
Value
(in millions)
Level 1
 
Level 2
 
Level 3
 
Financial liabilities
 
 
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Precious metal forward contracts d
$

 
$
5.0

 
$

 
$
5.0

Foreign exchange forward contracts d

 
2.4

 

 
2.4

Cross-currency swaps  d

 
23.6

 

 
23.6

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Foreign exchange forward contracts d

 
0.8

 

 
0.8

Total financial liabilities
$

 
$
31.8

 
$

 
$
31.8



TIFFANY & CO.
18


Financial assets and liabilities carried at fair value at January 31, 2018 are classified in the table below in one of the three categories described above: 
 
Estimated Fair Value
 
Total Fair
Value
(in millions)
Level 1
 
Level 2
 
Level 3
 
Financial assets
 
 
 
 
 
 
 
Marketable securities a
$
22.5

 
$

 
$

 
$
22.5

Time deposits b
320.5

 

 

 
320.5

Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Precious metal forward contracts c

 
3.6

 

 
3.6

Foreign exchange forward contracts c

 
0.1

 

 
0.1

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Foreign exchange forward contracts  c

 
1.0

 

 
1.0

Total financial assets
$
343.0

 
$
4.7

 
$

 
$
347.7


 
Estimated Fair Value
 
Total Fair
Value
(in millions)
Level 1
 
Level 2
 
Level 3
 
Financial liabilities
 
 
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Precious metal forward contracts d
$

 
$
1.9

 
$

 
$
1.9

Foreign exchange forward contracts d

 
4.8

 

 
4.8

Cross-currency swaps  d

 
20.2

 

 
20.2

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Foreign exchange forward contracts d

 
1.4

 

 
1.4

Total financial liabilities
$

 
$
28.3

 
$

 
$
28.3


Financial assets and liabilities carried at fair value at April 30, 2017 are classified in the table below in one of the three categories described above:
 
Estimated Fair Value
 
Total Fair
Value
(in millions)
Level 1
 
Level 2
 
Level 3
 
Financial assets
 
 
 
 
 
 
 
Marketable securities a
$
36.9

 
$

 
$

 
$
36.9

Time deposits  b
121.2

 

 

 
121.2

Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Precious metal forward contracts c

 
3.9

 

 
3.9

Precious metal collars c

 
0.5

 

 
0.5

Foreign exchange forward contracts c

 
6.6

 

 
6.6

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Foreign exchange forward contracts c

 
1.8

 

 
1.8

Total financial assets
$
158.1

 
$
12.8

 
$

 
$
170.9


TIFFANY & CO.
19


 
Estimated Fair Value
 
Total Fair
Value
(in millions)
Level 1
 
Level 2
 
Level 3
 
Financial liabilities
 
 
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Precious metal forward contracts d
$

 
$
5.7

 
$

 
$
5.7

Precious metal collars d

 
0.4

 

 
0.4

Foreign exchange forward contracts d

 
1.7

 

 
1.7

Cross-currency swaps d

 
7.9

 

 
7.9

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Foreign exchange forward contracts d

 
0.4

 

 
0.4

Total financial liabilities
$

 
$
16.1

 
$

 
$
16.1

a  
Included within Other assets, net.
b  
Included within Short-term investments.
c  
Included within Prepaid expenses and other current assets or Other assets, net based on the maturity of the contract.
d  
Included within Accounts payable and accrued liabilities or Other long-term liabilities based on the maturity of the contract.

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying values due to the short-term maturities of these assets and liabilities and as such are measured using Level 1 inputs. The fair value of debt with variable interest rates approximates carrying value and is measured using Level 2 inputs. The fair value of debt with fixed interest rates was determined using the quoted market prices of debt instruments with similar terms and maturities, which are considered Level 2 inputs. The total carrying value of short-term borrowings and long-term debt was $1.0 billion and $1.1 billion at April 30, 2018 and 2017 and the corresponding fair value was $1.0 billion and $1.1 billion, respectively.

10.    COMMITMENTS AND CONTINGENCIES

Arbitration Award. On December 21, 2013, an award was issued (the "Arbitration Award") in favor of The Swatch Group Ltd. ("Swatch") and its wholly-owned subsidiary Tiffany Watch Co. ("Watch Company"; Swatch and Watch Company, together, the "Swatch Parties") in an arbitration proceeding (the "Arbitration") between the Registrant and its wholly-owned subsidiaries, Tiffany and Company and Tiffany (NJ) Inc. (the Registrant and such subsidiaries, together, the "Tiffany Parties") and the Swatch Parties.
 
The Arbitration was initiated in June 2011 by the Swatch Parties, who sought damages for alleged breach of agreements entered into by and among the Swatch Parties and the Tiffany Parties in December 2007 (the "Agreements"). The Agreements pertained to the development and commercialization of a watch business and, among other things, contained various licensing and governance provisions and approval requirements relating to business, marketing and branding plans and provisions allocating profits relating to sales of the watch business between the Swatch Parties and the Tiffany Parties.

In general terms, the Swatch Parties alleged that the Tiffany Parties breached the Agreements by obstructing and delaying development of Watch Company’s business and otherwise failing to proceed in good faith. The Swatch Parties sought damages based on alternate theories ranging from CHF 73.0 million (or approximately $74.0 million at April 30, 2018 ) (based on its alleged wasted investment) to CHF 3.8 billion (or approximately $3.8 billion at April 30, 2018 ) (calculated based on alleged future lost profits of the Swatch Parties and their affiliates over the entire term of the Agreements).

The Registrant believes that the claims of the Swatch Parties are without merit. In the Arbitration, the Tiffany Parties defended against the Swatch Parties’ claims vigorously, disputing both the merits of the claims and the calculation of the alleged damages. The Tiffany Parties also asserted counterclaims for damages attributable to breach by the Swatch Parties, stemming from the Swatch Parties’ September 12,

TIFFANY & CO.
20


2011 public issuance of a Notice of Termination purporting to terminate the Agreements due to alleged material breach by the Tiffany Parties, and for termination due to such breach. In general terms, the Tiffany Parties alleged that the Swatch Parties did not have grounds for termination, failed to meet the high standard for proving material breach set forth in the Agreements and failed to provide appropriate management, distribution, marketing and other resources for TIFFANY & CO. brand watches and to honor their contractual obligations to the Tiffany Parties regarding brand management. The Tiffany Parties’ counterclaims sought damages based on alternate theories ranging from CHF 120.0 million (or approximately $121.0 million at April 30, 2018 ) (based on its wasted investment) to approximately CHF 540.0 million (or approximately $547.0 million at April 30, 2018 ) (calculated based on alleged future lost profits of the Tiffany Parties).

The Arbitration hearing was held in October 2012 before a three-member arbitral panel convened in the Netherlands pursuant to the Arbitration Rules of the Netherlands Arbitration Institute (the "Rules"), and the Arbitration record was completed in February 2013.

Under the terms of the Arbitration Award, and at the request of the Swatch Parties and the Tiffany Parties, the Agreements were deemed terminated. The Arbitration Award stated that the effective date of termination was March 1, 2013. Pursuant to the Arbitration Award, the Tiffany Parties were ordered to pay the Swatch Parties damages of CHF 402.7 million (the "Arbitration Damages"), as well as interest from June 30, 2012 to the date of payment, two-thirds of the cost of the Arbitration and two-thirds of the Swatch Parties' legal fees, expenses and costs. These amounts were paid in full in January 2014.

Prior to the ruling of the arbitral panel, no accrual was established in the Company's consolidated financial statements because management did not believe the likelihood of an award of damages to the Swatch Parties was probable. As a result of the ruling, in the fourth quarter of 2013, the Company recorded a charge of $480.2 million, which included the damages, interest, and other costs associated with the ruling and which was classified as Arbitration award expense in the consolidated statement of earnings.

On March 31, 2014, the Tiffany Parties took action in the District Court of Amsterdam to annul the Arbitration Award. Generally, arbitration awards are final; however, Dutch law does provide for limited grounds on which arbitral awards may be set aside. The Tiffany Parties petitioned to annul the Arbitration Award on these statutory grounds. These grounds include, for example, that the arbitral tribunal violated its mandate by changing the express terms of the Agreements.

A three-judge panel presided over the annulment hearing on January 19, 2015, and, on March 4, 2015, issued a decision in favor of the Tiffany Parties. Under this decision, the Arbitration Award was set aside. However, the Swatch Parties took action in the Dutch courts to appeal the District Court's decision, and a three-judge panel of the Appellate Court of Amsterdam presided over an appellate hearing in respect of the annulment, and the related claim by the Tiffany Parties for the return of the Arbitration Damages and related costs, on June 29, 2016. The Appellate Court issued its decision on April 25, 2017, finding in favor of the Swatch Parties and ordering the Tiffany Parties to reimburse the Swatch Parties EUR 6,340 in legal costs. The Tiffany Parties have taken action to appeal the decision of the Appellate Court to the Supreme Court of the Netherlands. As such, the Arbitration Award may ultimately be set aside by the Supreme Court. Registrant's management believes it is likely that the Supreme Court will issue its decision at a future date during Registrant's fiscal year ending January 31, 2019. However, it is possible that such decision could be later issued or that such decision could require the Appellate Court to reconsider certain elements of the dispute and, as such, the annulment action may not be ultimately resolved until, at the earliest, Registrant's fiscal year ending January 31, 2020.

If the Arbitration Award is finally annulled, management anticipates that the claims and counterclaims that formed the basis of the Arbitration, and potentially additional claims and counterclaims, will be litigated in court proceedings between and among the Swatch Parties and the Tiffany Parties. The identity and location of the courts that would hear such actions have not been determined at this time.

In any litigation regarding the claims and counterclaims that formed the basis of the arbitration, issues of liability and damages will be pled and determined without regard to the findings of the arbitral panel. As such, it is possible that a court could find that the Swatch Parties were in material breach of their obligations under the Agreements, that the Tiffany Parties were in material breach of their obligations under

TIFFANY & CO.
21


the Agreements or that neither the Swatch Parties nor the Tiffany Parties were in material breach. If the Swatch Parties’ claims of liability were accepted by the court, the damages award cannot be reasonably estimated at this time, but could exceed the Arbitration Damages and could have a material adverse effect on the Registrant’s consolidated financial statements or liquidity.

Management has not established any accrual in the Company's condensed consolidated financial statements for the month ended April 30, 2018 related to the annulment process or any potential subsequent litigation because it does not believe that the final annulment of the Arbitration Award and a subsequent award of damages exceeding the Arbitration Damages is probable.

Other Litigation Matters. The Company is from time to time involved in routine litigation incidental to the conduct of its business, including proceedings to protect its trademark rights, litigation with parties claiming infringement of patents and other intellectual property rights by the Company, litigation instituted by persons alleged to have been injured upon premises under the Company's control and litigation with present and former employees and customers. Although litigation with present and former employees is routine and incidental to the conduct of the Company's business, as well as for any business employing significant numbers of employees, such litigation can result in large monetary awards when a civil jury is allowed to determine compensatory and/or punitive damages for actions such as those claiming discrimination on the basis of age, gender, race, religion, disability or other legally-protected characteristic or for termination of employment that is wrongful or in violation of implied contracts. However, the Company believes that all such litigation currently pending to which it is a party or to which its properties are subject will be resolved without any material adverse effect on the Company's financial position, earnings or cash flows.

Gain Contingency. On February 14, 2013, Tiffany and Company and Tiffany (NJ) LLC (collectively, the "Tiffany plaintiffs") initiated a lawsuit against Costco Wholesale Corp. ("Costco") for trademark infringement, false designation of origin and unfair competition, trademark dilution and trademark counterfeiting (the "Costco Litigation"). The Tiffany plaintiffs sought injunctive relief, monetary recovery and statutory damages on account of Costco's use of "Tiffany" on signs in the jewelry cases at Costco stores used to describe certain diamond engagement rings that were not manufactured by Tiffany. Costco filed a counterclaim arguing that the TIFFANY trademark was a generic term for multi-pronged ring settings and seeking to have the trademark invalidated, modified or partially canceled in that respect. On September 8, 2015, the U.S. District Court for the Southern District of New York (the "Court") granted the Tiffany plaintiffs' motion for summary judgment of liability in its entirety, dismissing Costco's genericism counterclaim and finding that Costco was liable for trademark infringement, trademark counterfeiting and unfair competition under New York law in its use of "Tiffany" on the above-referenced signs. On September 29, 2016, a civil jury rendered its verdict, finding that Costco's profits on the sale of the infringing rings should be awarded at $5.5 million , and further finding that an award of punitive damages was warranted. On October 5, 2016, the jury awarded $8.25 million in punitive damages. The aggregate award of $13.75 million was not final, as it was subject to post-verdict motion practice and ultimately to adjustment by the Court. On August 14, 2017, the Court issued its ruling, finding that the Tiffany plaintiffs are entitled to recover (i) $11.1 million in respect of Costco's profits on the sale of the infringing rings (which amount is three times the amount of such profits, as determined by the Court), (ii) prejudgment interest on such amount (calculated at the applicable statutory rate) from February 15, 2013 through August 14, 2017, (iii) an additional $8.25 million in punitive damages, and (iv) Tiffany's reasonable attorneys' fees (which will be determined at a later date), and, on August 24, 2017, the Court entered judgment in the amount of $21.0 million in favor of the Tiffany plaintiffs (reflecting items (i) through (iii) above). Costco has filed an appeal from the judgment, as well as a motion in the Court for a new trial. The appeal has been automatically stayed pending determination of the Court motion. Costco has also filed an appeal bond to secure the amount of the judgment entered by the Court pending appeal, so the Tiffany plaintiffs will be unable to enforce the judgment while the motion for a new trial and the appeal are pending. As such, the Company has not recorded any amount in its condensed consolidated financial statements related to this gain contingency as of April 30, 2018 , and expects that this matter will not ultimately be resolved until, at the earliest, a future date during the Company's fiscal year ending January 31, 2019.

Environmental Matter . In 2005, the U.S. Environmental Protection Agency ("EPA") designated a 17-mile stretch of the Passaic River (the "River") part of the Diamond Alkali "Superfund" site. This designation resulted from the detection of hazardous substances emanating from the site, which was previously home to the Diamond Shamrock Corporation, a manufacturer of pesticides and herbicides. Under the Superfund law,

TIFFANY & CO.
22


the EPA will negotiate with potentially responsible parties to agree on remediation approaches and may also enter into settlement agreements pursuant to an allocation process.

The Company, which operated a silverware manufacturing facility near a tributary of the River from approximately 1897 to 1985, is one of more than 300 parties (the "Potentially Responsible Parties") designated in litigation as potentially responsible parties with respect to the River. The EPA issued general notice letters to 125 of these parties. The Company, along with approximately 70 other Potentially Responsible Parties (collectively, the "Cooperating Parties Group" or "CPG") voluntarily entered into an Administrative Settlement Agreement and Order on Consent ("AOC") with the EPA in May 2007 to perform a Remedial Investigation/Feasibility Study (the "RI/FS") of the lower 17 miles of the River. In June 2012, most of the CPG voluntarily entered into a second AOC related to focused remediation actions at Mile 10.9 of the River. The actions under the Mile 10.9 AOC are complete (except for continued monitoring), the Remedial Investigation ("RI") portion of the RI/FS was submitted to the EPA on February 19, 2015, and the Feasibility Study ("FS") portion of the RI/FS was submitted to the EPA on April 30, 2015. The Company nonetheless remained in the CPG until October 24, 2017. The Company has accrued for its financial obligations under both AOCs, which have not been material to its financial position or results of operations in previous financial periods or on a cumulative basis.

The FS presented and evaluated three options for remediating the lower 17 miles of the River, including the approach recommended by the EPA in its Focused Feasibility Study discussed below, as well as a fourth option of taking no action, and recommended an approach for a targeted remediation of the entire 17-mile stretch of the River. The estimated cost of the approach recommended by the CPG in the FS is approximately $483.0 million . The RI and FS are being reviewed by the EPA and other governmental agencies and stakeholders. Ultimately, the Company expects that the EPA will identify and negotiate with any or all of the potentially responsible parties regarding any remediation action that may be necessary, and issue a Record of Decision with a proposed approach to remediating the entire lower 17-mile stretch of the River.

Separately, on April 11, 2014, the EPA issued a proposed plan for remediating the lower eight miles of the River, which is supported by a Focused Feasibility Study (the "FFS"). The FFS evaluated three remediation options, as well as a fourth option of taking no action. Following a public review and comment period and the EPA's review of comments received, the EPA issued a Record of Decision on March 4, 2016 that set forth a remediation plan for the lower eight miles of the River (the "RoD Remediation"). The RoD Remediation is estimated by the EPA to cost $1.38 billion . The Record of Decision did not identify any party or parties as being responsible for the design of the remediation or for the remediation itself. The EPA did note that it estimates the design of the necessary remediation activities will take three to four years, with the remediation to follow, which is estimated to take an additional six years to complete.

On March 31, 2016, the EPA issued a letter to approximately 100 companies (including the Company) (collectively, the "notified companies") notifying them of potential liability for the RoD Remediation and of the EPA’s planned approach to addressing the cost of the RoD Remediation, which included the possibility of a de-minimis cash-out settlement (the "settlement option") for certain parties. In April of 2016, the Company notified the EPA of its interest in pursuing the settlement option, and accordingly recorded an immaterial liability representing its best estimate of its minimum liability for the RoD Remediation, which reflects the possibility of a de-minimis settlement. On March 30, 2017, the EPA issued offers related to the settlement option to 20 parties; while the Company was not one of the parties receiving such an offer, the EPA has indicated that the settlement option may be made available to additional parties beyond those notified on March 30, 2017. Although the EPA must determine which additional parties are eligible for the settlement option, the Company does not expect any settlement amount that it might agree with the EPA to be material to its financial position, results of operations or cash flows.

Unrelated to the settlement option, the EPA also announced, in October 2016, that it entered into a legal agreement with one of the notified companies, pursuant to which such company agreed to spend $165.0 million to perform the engineering and design work required in advance of the clean-up contemplated by the RoD Remediation (the "RoD Design Phase"). That company has waived any rights to collect contribution for those costs from the Company.


TIFFANY & CO.
23


In the absence of a viable settlement option, the Company is unable to determine its participation in the overall RoD Remediation (of which the RoD Design Phase is only a part), if any, relative to the other potentially responsible parties or the allocation of the estimated cost thereof among the potentially responsible parties, until such time as the EPA reaches an agreement with any potentially responsible party or parties to fund the overall RoD Remediation (or pursues legal or administrative action to require any potentially responsible party or parties to perform, or pay for, the overall RoD Remediation). With respect to the RI/FS (which is distinct from the RoD Remediation), until a Record of Decision is issued with respect to the RI/FS, neither the ultimate remedial approach for the remaining upper nine miles of the relevant 17-mile stretch of the River and its cost, nor the Company's participation, if any, relative to the other potentially responsible parties in this approach and cost, can be determined.

As such, the Company's liability, if any, beyond that already recorded for (1) its obligations under the 2007 AOC and the Mile 10.9 AOC, and (2) its estimate related to a de-minimis cash-out settlement for the RoD Remediation, cannot be determined at this time. However, the Company does not expect that its ultimate liability related to the relevant 17-mile stretch of the River will be material to its financial position, in light of the number of companies that have previously been identified as Potentially Responsible Parties (i.e., the more than 300 parties that were initially designated in litigation as potentially responsible parties), which includes, but goes well beyond those approximately 70 CPG member companies that participated in the 2007 AOC and the Mile 10.9 AOC, and the Company's relative participation in the costs related to the 2007 AOC and Mile 10.9 AOC. It is nonetheless possible that any resulting liability when the uncertainties discussed above are resolved could be material to the Company's results of operations or cash flows in the period in which such uncertainties are resolved.

11.    STOCKHOLDERS' EQUITY

Accumulated Other Comprehensive Loss
(in millions)
April 30, 2018
 
January 31, 2018
 
April 30, 2017
Accumulated other comprehensive (loss) earnings, net of tax:
 
 
 
 
 
Foreign currency translation adjustments
$
(73.0
)
 
$
(48.0
)
 
$
(131.6
)
Unrealized (loss) gain on marketable securities  a

 
(1.8
)
 
0.9

Deferred hedging loss
(30.2
)
 
(22.9
)
 
(17.1
)
Net unrealized loss on benefit plans
(62.9
)
 
(65.3
)
 
(95.0
)
 
$
(166.1
)
 
$
(138.0
)
 
$
(242.8
)

a  
The Company adopted ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , on February 1, 2018 using the modified retrospective method. Under ASU 2016-01, the Company recognizes both realized and unrealized gains and losses on marketable securities in Other expense, net. Previously, unrealized gains and losses were recorded as a separate component of stockholders' equity.


TIFFANY & CO.
24


Additions to and reclassifications out of accumulated other comprehensive earnings (loss) were as follows:
 
Three Months Ended April 30,
( in millions )

2018
 
2017
Foreign currency translation adjustments
$
(25.4
)
 
$
12.4

Income tax benefit (expense)
0.4

 
(0.3
)
Foreign currency translation adjustments, net of tax
(25.0
)
 
12.1

Unrealized gain on marketable securities

 
0.4

Income tax expense

 
(0.3
)
Unrealized gain on marketable securities, net of tax

 
0.1

Unrealized loss on hedging instruments
(7.2
)
 
(10.3
)
Reclassification adjustment for (gain) loss included in
net earnings a
(2.3
)
 
9.0

Income tax benefit
2.2

 
0.3

Unrealized loss on hedging instruments, net of tax
(7.3
)
 
(1.0
)
Amortization of net loss included in net earnings b
3.3

 
3.5

Amortization of prior service credit included in net earnings b
(0.2
)
 
(0.1
)
Income tax expense
(0.7
)
 
(1.2
)
Net unrealized gain on benefit plans, net of tax
2.4

 
2.2

Total other comprehensive (loss) earnings, net of tax
$
(29.9
)
 
$
13.4

a
These (gains) losses are reclassified into Cost of Sales, Interest expense and financing costs and Other expense, net (see "Note 8. Hedging Instruments" for additional details).
b
These accumulated other comprehensive income components are included in the computation of net periodic pension costs (see "Note 12. Employee Benefit Plans" for additional details).

Share Repurchase Program. In January 2016, the Registrant's Board of Directors approved a share repurchase program (the "2016 Program") which authorizes the Company to repurchase up to  $500.0 million of its Common Stock through open market transactions, block trades or privately negotiated transactions. Purchases under the 2016 Program have been executed under a written plan for trading securities as specified under Rule 10b5-1 promulgated under the Securities and Exchange Act of 1934, as amended, the terms of which are within the Company's discretion, subject to applicable securities laws, and are based on market conditions and the Company's liquidity needs. As of April 30, 2018 , $170.8 million remained available for share repurchases under the 2016 Program. The 2016 Program was originally scheduled to expire on January 31, 2019. However, on May 22, 2018, the Registrant's Board of Directors approved a new share repurchase program, which will replace the 2016 Program. Approximately $160.0 million remained available for repurchase under the 2016 Program at May 22, 2018. See "Note 14. Subsequent Events" for additional information regarding the new share repurchase program.

The Company's share repurchase activity was as follows:
 
Three Months Ended April 30,
(in millions, except per share amounts)
2018
 
2017
Cost of repurchases
$
40.5

 
$
11.5

Shares repurchased and retired
0.4

 
0.1

Average cost per share
$
99.48

 
$
93.48


Cash Dividends . The Company's Board of Directors declared quarterly dividends of $0.50 and $0.45 per share of Common Stock in the three months ended April 30, 2018 and 2017 , respectively.


TIFFANY & CO.
25


Cumulative effect adjustment from adoption of new accounting standards . The amounts presented within this line item on the condensed consolidated statement of stockholders' equity represent the effects of the Company's adoption, on a modified retrospective basis, of ASU 2014-09, Revenue from Contracts with Customers (as discussed in "Note 2. New Accounting Standards") and ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (as discussed above).

12.    EMPLOYEE BENEFIT PLANS

The Company maintains several pension and retirement plans and provides certain health-care and life insurance benefits.

Net periodic pension and other postretirement benefit expense included the following components:
 
 
Three Months Ended April 30,
 
 
Pension Benefits
 
Other
Postretirement Benefits
(in millions)
 
2018
 
2017
 
2018
 
2017
Net Periodic Benefit Cost:
 
 
 
 
 
 
 
 
Service cost
 
$
4.5

 
$
4.7

 
$
0.7

 
$
0.7

Interest cost
 
7.6

 
8.0

 
0.8

 
0.8

Expected return on plan assets
 
(8.3
)
 
(8.2
)
 

 

Amortization of prior service cost (credit)
 

 
0.1

 
(0.2
)
 
(0.2
)
Amortization of net loss
 
3.3

 
3.5

 

 

Net expense
 
$
7.1

 
$
8.1

 
$
1.3

 
$
1.3


The components of net periodic benefit cost other than the service cost component are included in Other expense, net on the condensed consolidated statements of earnings.

13.    SEGMENT INFORMATION

The Company's reportable segments are as follows:

Americas includes sales in Company-operated TIFFANY & CO. stores in the United States, Canada and Latin America, as well as sales of TIFFANY & CO. products in certain markets through Internet, catalog, business-to-business and wholesale operations;

Asia-Pacific includes sales in Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY & CO. products in certain markets through Internet and wholesale operations;

Japan includes sales in Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY & CO. products through Internet, business-to-business and wholesale operations;

Europe includes sales in Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY & CO. products in certain markets through Internet and wholesale operations; and

Other consists of all non-reportable segments. Other includes the Emerging Markets region, which includes sales in Company-operated TIFFANY & CO. stores and wholesale operations in the Middle East. In addition, Other includes wholesale sales of diamonds, as well as earnings received from third-party licensing agreements.


TIFFANY & CO.
26


Certain information relating to the Company's segments is set forth below:
 
Three Months Ended April 30,
(in millions)
2018
 
2017
Net sales:
 
 
 
Americas
$
425.3

 
$
391.7

Asia-Pacific
328.6

 
257.3

Japan
150.6

 
128.4

Europe
107.0

 
94.6

Total reportable segments
1,011.5

 
872.0

Other
21.7

 
27.6

 
$
1,033.2

 
$
899.6

Earnings from operations*:
 
 
 
Americas
$
74.9

 
$
62.4

Asia-Pacific
100.1

 
73.1

Japan
58.3

 
42.8

Europe
14.2

 
13.6

Total reportable segments
247.5

 
191.9

Other
2.3

 
3.1

 
$
249.8

 
$
195.0

* Represents earnings from operations before (i) unallocated corporate expenses, (ii) Interest expense and financing costs and (iii) Other expense, net.

The following table sets forth a reconciliation of the segments' earnings from operations to the Company's consolidated earnings from operations before income taxes:
 
Three Months Ended April 30,
(in millions)
2018
 
2017
Earnings from operations for segments
$
249.8

 
$
195.0

Unallocated corporate expenses
(45.5
)
 
(45.4
)
Interest expense and financing costs
(9.9
)
 
(10.6
)
Other expenses, net
(3.9
)
 
(2.9
)
Earnings from operations before income taxes
$
190.5

 
$
136.1


Unallocated corporate expenses include certain costs related to administrative support functions which the Company does not allocate to its segments. Such unallocated costs include those for centralized information technology, finance, legal and human resources departments.


TIFFANY & CO.
27


14.
Subsequent Event

On May 22, 2018, the Registrant's Board of Directors approved a new share repurchase program. This new program, which is effective June 1, 2018 and expires on January 31, 2022, authorizes the Company to repurchase up to $1.0 billion of its Common Stock through open market transactions, including through Rule 10b5-1 plans and one or more accelerated share repurchase or other structured repurchase transactions, and/or privately negotiated transactions. Purchases under this new program are discretionary and will be made from time to time based on market conditions and the Company's liquidity needs. This new program will replace the Company's 2016 Program announced in January 2016 (see "Note 11. Stockholders' Equity").

Under this new program, the Registrant's Board of Directors also approved the repurchase of $250.0 million of the Company's Common Stock through an accelerated share repurchase transaction, which the Company expects to enter into during its fiscal quarter ending July 31, 2018, subject to market conditions.

TIFFANY & CO.
28


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Tiffany & Co. (the "Registrant") is a holding company that operates through Tiffany and Company ("Tiffany") and the Registrant's other subsidiary companies (collectively, the "Company"). The Registrant, through its subsidiaries, designs and manufactures products and operates TIFFANY & CO. retail stores worldwide, and also sells its products through Internet, catalog, business-to-business and wholesale operations. The Company's principal merchandise offering is jewelry (representing 91% of worldwide net sales in the fiscal year ended January 31, 2018); it also sells timepieces, leather goods, sterling silverware (other than jewelry), china, crystal, stationery, eyewear, fragrances and other accessories.

The Company's reportable segments are as follows:

Americas includes sales in 123 Company-operated TIFFANY & CO. stores in the United States ("U.S."), Canada and Latin America, as well as sales of TIFFANY & CO. products in certain markets through Internet, catalog, business-to-business and wholesale operations;

Asia-Pacific includes sales in 87 Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY & CO. products in certain markets through Internet and wholesale operations;

Japan includes sales in 54 Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY & CO. products through Internet, business-to-business and wholesale operations;

Europe includes sales in 46 Company-operated TIFFANY & CO. stores, as well as sales of TIFFANY & CO. products in certain markets through Internet and wholesale operations; and

Other consists of all non-reportable segments. Other includes the Emerging Markets region, which includes sales in four Company-operated TIFFANY & CO. stores and wholesale operations in the Middle East. In addition, Other includes wholesale sales of diamonds, as well as earnings received from third-party licensing agreements.

SUMMARY OF FIRST QUARTER RESULTS

Worldwide net sales increased 15% to $1,033.2 million in the three months ("first quarter") ended April 30, 2018, reflecting geographically broad-based sales growth; comparable sales increased 10% . On a constant-exchange-rate basis (see "Non-GAAP Measures" below), worldwide net sales increased 11% in the first quarter and comparable sales increased 7% .

Earnings from operations as a percentage of net sales ("operating margin") increased 320 basis points due to sales leverage on selling, general and administrative ("SG&A") expenses and an increase in gross margin.

Net earnings increased 53% to $142.3 million , or $1.14 per diluted share, from $92.9 million , or $0.74 per diluted share, in the prior year due to the above factors and a lower effective income tax rate.

Inventories, net increased  5% from April 30, 2017.

TIFFANY & CO.
29

Table of Contents

RESULTS OF OPERATIONS

Non-GAAP Measures

The Company reports information in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Internally, management also monitors and measures its performance using certain sales and earnings measures that include or exclude amounts, or are subject to adjustments that have the effect of including or excluding amounts, from the most directly comparable GAAP measure ("non-GAAP financial measures"). The Company presents such non-GAAP financial measures in reporting its financial results to provide investors with useful supplemental information that will allow them to evaluate the Company's operating results using the same measures that management uses to monitor and measure its performance. The Company's management does not, nor does it suggest that investors should, consider non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures presented here may not be comparable to similarly-titled measures used by other companies.

Net Sales . The Company's reported net sales reflect either a translation-related benefit from strengthening foreign currencies or a detriment from a strengthening U.S. dollar. Internally, management monitors and measures its sales performance on a non-GAAP basis that eliminates the positive or negative effects that result from translating sales made outside the U.S. into U.S. dollars ("constant-exchange-rate basis"). Sales on a constant-exchange-rate basis are calculated by taking the current year's sales in local currencies and translating them into U.S. dollars using the prior year's foreign currency exchange rates. Management believes this constant-exchange-rate basis provides a useful supplemental basis for the assessment of sales performance and of comparability between reporting periods. The following table reconciles the sales percentage increases (decreases) from the GAAP to the non-GAAP basis versus the previous year:
 
First Quarter 2018 vs. 2017
 
GAAP 
Reported
 
Translation
Effect
 
Constant-
Exchange-
Rate Basis
Net Sales:
 
 
 
 
 
Worldwide
15
 %
 
4
%
 
11
 %
Americas
9

 
1

 
8

Asia-Pacific
28

 
5

 
23

Japan
17

 
5

 
12

Europe
13

 
12

 
1

Other
(21
)
 

 
(21
)
 
 
 
 
 
 
Comparable Sales:
 
 
 
 
 
Worldwide
10
 %
 
3
%
 
7
 %
Americas
9

 

 
9

Asia-Pacific
14

 
5

 
9

Japan
14

 
5

 
9

Europe
2

 
11

 
(9
)
Other
(7
)
 

 
(7
)


TIFFANY & CO.
30

Table of Contents

Beginning in the first quarter of 2018, the Company revised its definition of comparable sales (see "Comparable Sales" below) to include e-commerce and catalog sales, in addition to sales transacted in Company-operated stores open for more than 12 months. The following table reconciles the comparable sales percentage increases (decreases) from the GAAP to the non-GAAP basis versus the previous year for the first quarter of 2017:
 
First Quarter 2017 vs. 2016
As Revised
 
First Quarter 2017 vs. 2016
As Previously Reported
 
GAAP 
Reported
 
Translation
Effect
 
Constant-
Exchange-
Rate Basis
 
GAAP 
Reported
 
Translation
Effect
 
Constant-
Exchange-
Rate Basis
Comparable Sales:
 
 
 
 
 
 
 
 
 
 
 
Worldwide
(3
)%
 
(1
)%
 
(2
)%
 
(3
)%
 
(1
)%
 
(2
)%
Americas
(4
)
 

 
(4
)
 
(4
)
 

 
(4
)
Asia-Pacific
(3
)
 
(1
)
 
(2
)
 
(3
)
 
(1
)
 
(2
)
Japan
(1
)
 

 
(1
)
 
(1
)
 

 
(1
)
Europe
(4
)
 
(7
)
 
3

 
(3
)
 
(6
)
 
3

Other
1

 

 
1

 
1

 

 
1


Free Cash Flow. Internally, management monitors its cash flow on a non-GAAP basis. Free cash flow is calculated by deducting capital expenditures from net cash provided by operating activities. The ability to generate free cash flow demonstrates how much cash the Company has available for discretionary and non-discretionary purposes after deduction of capital expenditures. The Company's operations require regular capital expenditures for the opening, renovation and expansion of stores and distribution and manufacturing facilities as well as ongoing investments in information technology. Management believes this provides a useful supplemental basis for assessing the Company's operating cash flows.

Comparable Sales

Comparable sales include sales transacted in Company-operated stores open for more than 12 months. Sales from e-commerce sites are included in comparable sales for those sites that have been operating for more than 12 months. Sales for relocated stores are included in comparable sales if the relocation occurs within the same geographical market. In all markets, the results of a store in which the square footage has been expanded or reduced remain in the comparable sales base.

Net Sales

Net sales by segment were as follows:
 
First Quarter
 
 
(in millions)
2018
 
2017
 
Increase/(Decrease)
Americas
$
425.3

 
$
391.7

 
9
 %
Asia-Pacific
328.6

 
257.3

 
28

Japan
150.6

 
128.4

 
17

Europe
107.0

 
94.6

 
13

Other
21.7

 
27.6

 
(21
)
 
$
1,033.2

 
$
899.6

 
15


Worldwide net sales increased $133.6 million , or 15% , in the first quarter of 2018, reflecting geographically broad-based sales growth. On a constant-exchange-rate basis, worldwide net sales increased 11% .


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Jewelry sales by product category relative to the prior year were as follows:
 
First Quarter
 
 
 
 
(in millions)
2018
 
2017
 
$ Change
 
% Change
Jewelry collections
$
529.3

 
$
449.9

 
$
79.4

 
18
%
Engagement jewelry
294.5

 
264.6

 
29.9

 
11

Designer jewelry
128.4

 
115.4

 
13.0

 
11


The increase in net sales in the Jewelry collections category was due to growth primarily in the Tiffany T and Tiffany HardWear collections, and to a lesser extent other collections, while the Engagement jewelry and Designer jewelry categories reflected increases across the categories.

Certain reclassifications within the jewelry categories have been made to the prior year amounts to conform to the current year category presentation.

Changes in net sales by reportable segment were as follows:
(in millions)
Comparable Sales
 
Non-comparable Sales
 
Wholesale/Other
 
Total
Americas
$
34.7

 
$
0.9

 
$
(2.0
)
 
$
33.6

Asia-Pacific
30.6

 
19.1

 
21.6

 
71.3

Japan
17.5

 
(0.3
)
 
5.0

 
22.2

Europe
2.2

 
8.6

 
1.6

 
12.4


Changes in jewelry sales relative to the prior year by reportable segment were as follows:
 
Average Price per Unit Sold
 
 
 
As Reported
 
Impact of Currency Translation
 
Number of
Units Sold
Change in Jewelry Sales
 
 
 
 
 
Americas
(4
)%
 
%
 
10
%
Asia-Pacific
16

 
5

 
11

Japan
6

 
5

 
10

Europe
5

 
12

 
7


Americas . Total sales increased $33.6 million , or 9% , which included comparable sales increasing $34.7 million , or 9% . Management attributed the growth to increased sales across the region and to higher spending by both local customers and foreign tourists. On a constant-exchange-rate basis, total sales increased 8% and comparable sales increased 9% .

The increase in the number of jewelry units sold reflected increases across all product categories. Management attributed the decrease in the average price per jewelry unit sold to a shift in sales mix.

Asia-Pacific. Total sales increased $71.3 million , or 28% , which included comparable sales increasing $30.6 million , or 14% . Management attributed the growth to increased retail sales in Greater China and in most other markets across the region and to higher spending by both local customers and foreign tourists, as well as higher wholesale sales in Korea. On a constant-exchange-rate basis, total sales increased by 23% and comparable sales increased 9% .

The increase in the number of jewelry units sold reflected increases across all product categories. Management attributed the increase in the average price per jewelry unit sold to a shift in sales mix.

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Japan. Total sales increased $22.2 million , or 17% , which included comparable sales increasing $17.5 million , or 14% . Management attributed the sales increases to higher spending by local customers, as well as foreign tourists. On a constant-exchange-rate basis, total sales increased 12% and comparable sales increased 9% .

The increase in the number of jewelry units sold reflected increases in the Jewelry collections and Engagement jewelry categories. Management attributed the increase in the average price per jewelry unit sold primarily to the positive effect of currency translation.

Europe. Total sales increased $12.4 million , or 13% , which included comparable sales increasing $2.2 million , or 2% , each benefiting primarily from the positive effect of currency translation. Total sales growth also reflected the effect of new stores. On a constant-exchange-rate basis, total sales increased 1% and comparable sales decreased 9% , due to softness across much of the region, which management attributed to lower spending by foreign tourists. Comparable sales also reflected the negative effects from new stores on existing store sales.

The increase in the number of jewelry units sold reflected increases across all product categories. Management attributed the increase in the average price per jewelry unit sold to the positive effect of currency translation.

Other. Other sales decreased by $5.9 million , or 21% , primarily due to a decrease in wholesale sales of diamonds.

Store Data . In the first quarter of 2018 , the Company opened one Company-operated store in Asia-Pacific and closed one Company-operated store each in the Americas and Asia-Pacific.

Gross Margin
 
First Quarter
(dollars in millions)
2018
 
2017
Gross profit
$
650.9

 
$
559.1

Gross profit as a percentage of net sales
63.0
%
 
62.1
%

Gross margin (gross profit as a percentage of net sales) increased 90 basis points in the first quarter of 2018 largely due to sales leverage on fixed costs and the favorable effect from a decrease in wholesale sales of diamonds, which was partly offset by increases in product-related costs, such as inventory reserves.

Management periodically reviews and adjusts its retail prices when appropriate to address product input cost increases, specific market conditions and changes in foreign currencies/U.S. dollar relationships. Its long-term strategy is to continue that approach, although significant increases in product input costs or weakening foreign currencies can affect gross margin negatively over the short-term until management makes necessary price adjustments. Among the market conditions that management considers are consumer demand for the product category involved, which may be influenced by consumer confidence and competitive pricing conditions. Management uses derivative instruments to mitigate certain foreign exchange and precious metal price exposures (see "Item 1. Notes to Condensed Consolidated Financial Statements – Note 8. Hedging Instruments"). Management increased retail prices in the first quarter of 2018 and 2017 across most geographic regions and product categories, some of which were intended to mitigate foreign currency fluctuations.

Selling, General and Administrative ("SG&A") Expenses
 
First Quarter
(dollars in millions)
2018
 
2017
SG&A expenses
$
446.6

 
$
409.5

SG&A expenses as a percentage of net sales
43.2
%
 
45.5
%
SG&A expenses increased $37.1 million , or 9% , in the first quarter of 2018 , largely reflecting increased labor and incentive compensation costs and store occupancy and depreciation expenses. SG&A expenses as a percentage of net sales decreased 230 basis points due to sales leverage on operating expenses. Changes in foreign currency exchange rates had the effect of increasing SG&A expenses by 3% as compared with the prior year.


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Earnings from Operations
 
First Quarter
(in millions)
2018
 
2017
Earnings from operations
$
204.3

 
$
149.6

Operating margin
19.8
%
 
16.6
%

Earnings from operations increased $ 54.7 million , or 37% , in the first quarter of 2018 and operating margin increased 320 basis points, reflecting sales leverage on SG&A expenses and the increase in gross margin.

Results by segment are as follows:
(in millions)
First Quarter 2018
 
% of Net
Sales
 
First Quarter 2017
 
% of Net
Sales
Earnings from operations*:
 
 
 
 
 
 
Americas
$
74.9

 
17.6
 %
 
$
62.4

 
15.9
 %
Asia-Pacific
100.1

 
30.5

 
73.1

 
28.4

Japan
58.3

 
38.7

 
42.8

 
33.4

Europe
14.2

 
13.3

 
13.6

 
14.4

Other
2.3

 
10.7

 
3.1

 
11.1

 
249.8

 
 
 
195.0

 
 
Unallocated corporate
expenses
(45.5
)
 
(4.4
)%
 
(45.4
)
 
(5.1
)%
Earnings from operations
$
204.3

 
19.8
 %
 
$
149.6

 
16.6
 %
*
Percentages represent earnings from operations as a percentage of each segment's net sales.
On a segment basis, the ratio of earnings from operations to each segment's net sales in the first quarter of 2018 compared with 2017 was as follows:
Americas – the ratio increased 170 basis points primarily due to sales leverage on operating expenses;
Asia-Pacific – the ratio increased 210 basis points due to sales leverage on operating expenses, partly offset by a decrease in gross margin, both partly attributable to increased wholesale sales in the region;
Japan – the ratio increased 530 basis points due an increase in gross margin (which includes the effect of changes in foreign currency exchange rates on inventory purchases) and sales leverage on operating expenses; and
Europe – the ratio decreased 110 basis points due to sales deleverage on operating expenses, partly offset by an increase in gross margin.

Unallocated corporate expenses include costs related to administrative support functions which the Company does not allocate to its segments. Such unallocated costs include those for centralized information technology, finance, legal and human resources departments. Unallocated corporate expenses in the first quarter of 2018 were approximately unchanged from the prior year.

Interest Expense and Financing Costs

Interest expense and financing costs decreased $0.7 million , or 7% , in the first quarter of 2018.

Other Expenses, net

Other expenses, net increased $1.0 million , or 41% , in the first quarter of 2018 .

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Provision for Income Taxes

The effective income tax rate for the first quarter of 2018 was 25.3% compared to 31.7% in the prior year. The effective income tax rate for the first quarter of 2018 was reduced by 170 basis points due to the recognition of an income tax benefit of $3.2 million related to a reduction in the estimated obligation for the Transition Tax (see "Item 1. Notes to Condensed Consolidated Financial Statements - Note 5. Income Taxes" for additional information). The effective income tax rate for the first quarter of 2017 was reduced by 180 basis points due to an income tax benefit of $2.4 million resulting from the implementation of ASU 2016-09, which requires excess tax benefits and/or shortfalls related to exercises and vesting of share-based compensation to be recorded in the provision for income taxes rather than in additional paid in capital. The remaining decrease in the effective income tax rate for the first quarter of 2018 compared to the prior year is primarily due to the enactment of 2017 Tax Act, including the reduction in the statutory U.S. federal corporate income tax rate and the introduction of the foreign derived intangible income deduction, which are partly offset by the GILTI inclusion.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs have been, and are expected to remain, primarily a function of its ongoing, seasonal and expansion-related working capital requirements and capital expenditure needs. Over the long term, the Company manages its cash and capital structure to maintain a strong financial position that provides flexibility to pursue strategic initiatives. Management regularly assesses its working capital needs, capital expenditure requirements, debt service, dividend payouts, share repurchases and future investments. Management believes that cash on hand, internally-generated cash flows, the funds available under its revolving credit facilities and the ability to access the debt and capital markets are sufficient to support the Company's liquidity and capital requirements for the foreseeable future.

At April 30, 2018 , the Company's cash and cash equivalents totaled $999.2 million , of which approximately one-third was held in locations outside the U.S. where, prior to the enactment of the 2017 Tax Act, the Company had asserted to indefinitely reinvest any undistributed earnings to support its continued expansion and investments in such foreign locations. As a result of the 2017 Tax Act, the Company is currently evaluating such assertion. This evaluation is incomplete and will be completed during the measurement period allowed for under SAB 118. If the Company's assertion to indefinitely reinvest earnings is maintained, such cash balances would not be available to fund U.S. cash requirements unless the Company were to decide to repatriate such funds and incur applicable tax charges. The applicable tax charges may include withholding taxes and tax on foreign currency gains and losses. The Company believes it has sufficient sources of cash in the U.S. to fund its U.S. operations without the need to repatriate any of those funds held outside the U.S. See "Item 1. Notes to Condensed Consolidated Financial Statements - Note 5. Income Taxes" for additional information. In addition, the Company had Short-term investments of $212.7 million at April 30, 2018 .

The following table summarizes cash flows from operating, investing and financing activities:
 
First Quarter
(in millions)
2018
 
2017
Net cash provided by (used in):
 
 
 
Operating activities
$
99.8

 
$
113.7

Investing activities
54.9

 
(96.3
)
Financing activities
(126.0
)
 
(105.6
)
Effect of exchange rates on cash and cash equivalents
(0.2
)
 
(1.0
)
Net increase (decrease) in cash and cash equivalents
$
28.5

 
$
(89.2
)

Operating Activities

The Company had net cash inflows from operating activities of $99.8 million in the first quarter of 2018 compared with $113.7 million in the first quarter of 2017 . The variance was primarily due to increased inventory purchases partly offset by growth in net earnings.


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Working Capital. Working capital (current assets less current liabilities) was $3.3 billion at April 30, 2018 , compared with $3.3 billion at January 31, 2018 and $3.0 billion at April 30, 2017 . The increase in first quarter of 2018 compared with the first quarter of 2017 was due to an increase in Cash and cash equivalents and Inventories, net.
 
Accounts receivable, net at April 30, 2018 were 2% lower than at January 31, 2018 and April 30, 2017 . The decrease in Accounts receivable, net at April 30, 2018 reflected the adoption of ASU 2014-09, which requires sales returns reserves to be presented on a gross basis on the condensed consolidated balance sheet, with the asset related to inventory expected to be returned recorded outside of Accounts receivable, net. See "Item 1. Notes to Condensed Consolidated Financial Statements - Note 2. New Accounting Standards" for additional information. Currency translation had the effect of increasing Accounts receivable, net by 2% compared to April 30, 2017 , but did not have a significant effect on the change from January 31, 2018 .

Inventories, net at April 30, 2018 were 3% higher than at January 31, 2018 and 5% higher than April 30, 2017 , which reflected increases in raw material and work-in-process inventories compared to both periods, as well as an increase in finished goods inventories when compared to April 30, 2017. Currency translation had the effect of increasing Inventories, net by 2% compared to April 30, 2017 , but did not have a significant effect on the change from January 31, 2018 .

Accounts payable and accrued liabilities at April 30, 2018 were 13% lower than at January 31, 2018 and 35% higher than at April 30, 2017 . The increase compared to April 30, 2017 reflected more effective management of payables, as well as the timing of payments.

Investing Activities

The Company had net cash inflows from investing activities of $54.9 million in the first quarter of 2018 compared with net cash outflows of $96.3 million in the first quarter of 2017. The increase was driven by net activity related to sales and purchases of marketable securities and short-term investments.

Marketable Securities and Short-Term Investments. The Company invests a portion of its cash in marketable securities and short-term investments. The Company had net proceeds from the sales of marketable securities and short-term investments of $91.8 million during the first quarter of 2018 compared with net purchases of marketable securities and short-term investments of $62.8 million during the first quarter of 2017.

Financing Activities

The Company had net cash outflows from financing activities of $126.0 million in the first quarter of 2018 compared with $105.6 million in the first quarter of 2017 . Year-over-year changes in cash flows from financing activities were largely driven by increased share repurchases and cash dividends paid on the Company's Common Stock, partly offset by changes in borrowings.

Recent Borrowings. The Company had net repayments of borrowings as follows:
 
First Quarter
(in millions)
2018
 
2017
Short-term borrowings:
 
 
 
(Repayments of) proceeds from credit facility borrowings, net
$
(6.8
)
 
$
1.6

Repayments of other credit facility borrowings
(14.5
)
 
(39.2
)
Net repayments of total borrowings
$
(21.3
)
 
$
(37.6
)

Under all of the Company's credit facilities, at April 30, 2018 , there were $96.7 million of borrowings outstanding, $6.6 million of letters of credit issued but not outstanding and $939.8 million available for borrowing. At April 30, 2017 , there were $190.6 million of borrowings outstanding, $4.8 million of letters of credit issued but not outstanding and $835.3 million available for borrowing. The weighted-average interest rate for the amount outstanding at April 30, 2018 was 4.49% compared with 2.69% at April 30, 2017 .


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The ratio of total debt (short-term borrowings and long-term debt) to stockholders' equity was 30% at April 30, 2018 , 31% at January 31, 2018 and 35% at April 30, 2017 .

At April 30, 2018 , the Company was in compliance with all debt covenants.

Share Repurchases. In January 2016, the Registrant's Board of Directors approved a share repurchase program (the "2016 Program"), which authorizes the Company to repurchase up to $500.0 million of its Common Stock through open market transactions, block trades or privately negotiated transactions. Purchases under the 2016 Program have been executed under a written plan for trading securities as specified under Rule 10b5-1 promulgated under the Securities and Exchange Act of 1934, as amended, the terms of which are within the Company's discretion, subject to applicable securities laws, and are based on market conditions and the Company's liquidity needs. At April 30, 2018 , $170.8 million remained available for repurchase under the 2016 Program. The 2016 Program was originally scheduled to expire on January 31, 2019. However, on May 22, 2018, the Registrants's Board of Directors approved a new share repurchase program (the "2018 Program"), which will replace the 2016 Program. Approximately $160.0 million remained available for repurchase under the 2016 Program at May 22, 2018. The 2018 Program, which is effective June 1, 2018 and expires on January 31, 2022, authorizes the Company to repurchase up to $1.0 billion of its Common Stock through open market transactions, including through Rule 10b5-1 plans and one or more accelerated share repurchase or other structured repurchase transactions, and/or privately negotiated transactions. Purchases under the 2018 Program are discretionary and will be made from time to time based on market conditions and the Company's liquidity needs. The Company may fund any repurchases under the 2018 Program from existing cash at such time or from proceeds of any existing borrowing facilities at such time and/or the issuance of new debt.

Under this new program, the Registrant's Board of Directors also approved the repurchase of $250.0 million of the Company's Common Stock through an accelerated share repurchase transaction, which the Company expects to enter into during its fiscal quarter ending July 31, 2018, subject to market conditions. The repurchases under this accelerated share repurchase transaction will be funded from available cash on hand.
The Company's share repurchase activity during the first quarter of 2018 and 2017 was as follows:
 
First Quarter
(in millions, except per share amounts)
2018
 
2017
Cost of repurchases
$
40.5

 
$
11.5

Shares repurchased and retired
0.4

 
0.1

Average cost per share
$
99.48

 
$
93.48


Contractual Obligations

The Company’s contractual cash obligations and commercial commitments at April 30, 2018  and the effects such obligations and commitments are expected to have on the Company’s liquidity and cash flows in future periods have not changed significantly since January 31, 2018 .

Seasonality

As a jeweler and specialty retailer, the Company's business is seasonal in nature, with the fourth quarter typically representing approximately one-third of annual net sales and a higher percentage of annual net earnings. Management expects such seasonality to continue.

2018 Outlook

For the fiscal year ending January 31, 2019 ("fiscal 2018"), management's guidance includes: (i) worldwide net sales increasing by a high-single-digit percentage over the prior year both as reported and on a constant-exchange-rate basis; and (ii) net earnings increasing to a range of $4.50 – $4.70 per diluted share. These expectations are approximations and are based on the Company's plans and assumptions for the full year, including: (i) mid-to-high-single-digit comparable sales growth, with varying degrees of growth in all regions; (ii) worldwide gross retail square footage increasing 2%, net through eight store openings, two closings and at least 15 relocations; (iii) operating margin below the prior year as a result of significant SG&A expense growth (affected by anticipated higher

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investment spending in technology, marketing communications, visual merchandising, digital and store presentations) at a higher rate than sales growth for the remainder of the year, partly offset by a higher gross margin; (iv) interest and other expenses, net in line with the prior year; (v) an effective income tax rate in the high 20's; (vi) net earnings and EPS over the balance of the year affected by the amount and timing of the anticipated higher investment spending; (vii) no meaningful effect in fiscal 2018 from the U.S. dollar versus foreign currencies on a year-over-year basis; and (viii) some benefit to net earnings per diluted share from share repurchases.

Management also expects: (i) net cash provided by operating activities of approximately $700 million and (ii) free cash flow (see "Non-GAAP Measures") of at least $400 million. These expectations are approximations and are based on the Company’s plans and assumptions for the full year, including: (i) net inventories increasing at or below the rate of sales growth, (ii) capital expenditures of $280 million and (iii) net earnings in line with management's expectations, as described above.

Forward-Looking Statements

The historical trends and results reported in this quarterly report on Form 10-Q should not be considered an indication of future performance. Further, statements contained in this quarterly report on Form 10-Q that are not statements of historical fact, including those that refer to plans, assumptions and expectations for future periods, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, the statements under "2018 Outlook" as well as statements that can be identified by the use of words such as 'expects,' 'projects,' 'anticipates,' 'assumes,' 'forecasts,' 'plans,' 'believes,' 'intends,' 'estimates,' 'pursues,' 'scheduled,' 'continues,' 'outlook,' 'may,' 'will,' 'can,' 'should' and variations of such words and similar expressions. Examples of forward-looking statements include, but are not limited to, statements we make regarding the Company's plans, assumptions, expectations, beliefs and objectives with respect to store openings and closings; product introductions; sales; sales growth; sales trends; store traffic; the Company's strategy and initiatives and the pace of execution thereon; the amount and timing of investment spending; the Company's objectives to compete in the global luxury market and to improve financial performance; retail prices; gross margin; operating margin; expenses; interest expense and financing costs; effective income tax rate; the nature, amount or scope of charges resulting from recent revisions to the U.S. tax code; net earnings and net earnings per share; share count; inventories; capital expenditures; cash flow; liquidity; currency translation; macroeconomic and geopolitical conditions; growth opportunities; litigation outcomes and recovery related thereto; contributions to Company pension plans; and certain ongoing or planned real estate, product, marketing, retail, customer experience, manufacturing, supply chain, information systems development, upgrades and replacement, and other operational initiatives and strategic priorities.

These forward-looking statements are based upon the current views and plans of management, speak only as of the date on which they are made and are subject to a number of risks and uncertainties, many of which are outside of our control. Actual results could therefore differ materially from the planned, assumed or expected results expressed in, or implied by, these forward-looking statements. While we cannot predict all of the factors that could form the basis of such differences, key factors include, but are not limited to: global macroeconomic and geopolitical developments; changes in interest and foreign currency rates; changes in taxation policies and regulations (including changes effected by the recent revisions to the U.S. tax code) or changes in the guidance related to, or interpretation of, such policies and regulations; shifting tourism trends; regional instability; violence (including terrorist activities); political activities or events; weather conditions that may affect local and tourist consumer spending; changes in consumer confidence, preferences and shopping patterns, as well as our ability to accurately predict and timely respond to such changes; shifts in the Company's product and geographic sales mix; variations in the cost and availability of diamonds, gemstones and precious metals; adverse publicity regarding the Company and its products, the Company's third-party vendors or the diamond or jewelry industry more generally; any non-compliance by third-party vendors and suppliers with the Company's sourcing and quality standards, codes of conduct, or contractual requirements as well as applicable laws and regulations; changes in our competitive landscape; disruptions impacting the Company's business and operations; failure to successfully implement or make changes to the Company's information systems; gains or losses in the trading value of the Company's stock, which may impact the amount of stock repurchased through open market transactions, including through Rule 10b5-1 plans and accelerated share repurchase or other structured repurchase transactions, and/or privately negotiated transactions; and the Company's ability to successfully control costs and execute on, and achieve the expected benefits from, the operational initiatives and strategic priorities referenced above. Developments relating to these and other factors may also warrant changes to the Company's operating and strategic plans, including with respect to store openings, closings and renovations, capital expenditures, information systems development, inventory management, and

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continuing execution on, or timing of, the aforementioned initiatives and priorities. Such changes could also cause actual results to differ materially from the expected results expressed in, or implied by, the forward-looking statements.

Additional information about potential risks and uncertainties that could affect the Company’s business and financial results is included under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2018 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this quarterly report on Form 10-Q. Readers of this quarterly report on Form 10-Q should consider the risks, uncertainties and factors outlined above and in the Form 10-K in evaluating, and are cautioned not to place undue reliance on, the forward-looking statements contained herein. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by applicable law or regulation.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from fluctuations in foreign currency exchange rates, precious metal prices and interest rates, which could affect its consolidated financial position, earnings and cash flows. The Company manages its exposure to market risk through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company uses derivative financial instruments as risk management tools and not for trading or speculative purposes.

Foreign Currency Risk

The Company uses foreign exchange forward contracts to offset a portion of the foreign currency exchange risks associated with foreign currency-denominated liabilities, intercompany transactions and forecasted purchases of merchandise between entities with differing functional currencies. The maximum term of the Company's outstanding foreign exchange forward contracts as of April 30, 2018 is 12 months.

The Company entered into cross-currency swaps to hedge the foreign currency exchange risk associated with Japanese yen-denominated intercompany loans. As of April 30, 2018 , the notional amounts of cross-currency swaps accounted for as cash flow hedges and the respective maturity dates were as follows:
Cross-Currency Swap
 
Notional Amount
Effective Date
Maturity Date
(in billions)
(in millions)
July 2016
October 1, 2024
¥
10.6

$
100.0

March 2017
April 1, 2027
11.0

96.1

May 2017
April 1, 2027
5.6

50.0


Precious Metal Price Risk

The Company periodically hedges a portion of its forecasted purchases of precious metals for use in its internal manufacturing operations in order to manage the effect of volatility in precious metal prices. The Company may use a combination of call and put option contracts in net-zero-cost collar arrangements ("precious metal collars") or forward contracts. If the price of the precious metal at the time of the expiration of the precious metal collar is within the call and put price, the precious metal collar would expire at no cost to the Company. The maximum term of the Company's outstanding precious metal collars and forward contracts as of April 30, 2018 is 14 months.


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Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Based on their evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), the Registrant's principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Registrant's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Registrant in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

In the ordinary course of business, the Registrant reviews its system of internal control over financial reporting and makes changes to its systems and processes to improve controls and increase efficiency, while ensuring that the Registrant maintains an effective internal control environment. Changes may include activities such as implementing new, more efficient systems and automating manual processes.

The Registrant's principal executive officer and principal financial officer have determined that there have been no changes in the Registrant's internal control over financial reporting during the most recently completed fiscal quarter covered by this report identified in connection with the evaluation described above that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

The Registrant's management, including its principal executive officer and principal financial officer, necessarily applied their judgment in assessing the costs and benefits of such controls and procedures. By their nature, such controls and procedures cannot provide absolute certainty, but can provide reasonable assurance regarding management's control objectives. Our principal executive officer and our principal financial officer have concluded that the Registrant's disclosure controls and procedures are (i) designed to provide such reasonable assurance and (ii) are effective at that reasonable assurance level.


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PART II. Other Information

Item 1. Legal Proceedings.

Arbitration Award. On December 21, 2013, an award was issued (the "Arbitration Award") in favor of The Swatch Group Ltd. ("Swatch") and its wholly owned subsidiary Tiffany Watch Co. ("Watch Company"; Swatch and Watch Company, together, the "Swatch Parties") in an arbitration proceeding (the "Arbitration") between the Registrant and its wholly owned subsidiaries, Tiffany and Company and Tiffany (NJ) Inc. (the Registrant and such subsidiaries, together, the "Tiffany Parties") and the Swatch Parties.

The Arbitration was initiated in June 2011 by the Swatch Parties, who sought damages for alleged breach of agreements entered into by and among the Swatch Parties and the Tiffany Parties in December 2007 (the "Agreements"). The Agreements pertained to the development and commercialization of a watch business and, among other things, contained various licensing and governance provisions and approval requirements relating to business, marketing and branding plans and provisions allocating profits relating to sales of the watch business between the Swatch Parties and the Tiffany Parties.

In general terms, the Swatch Parties alleged that the Tiffany Parties breached the Agreements by obstructing and delaying development of Watch Company’s business and otherwise failing to proceed in good faith. The Swatch Parties sought damages based on alternate theories ranging from CHF 73.0 million (or approximately $74.0 million at April 30, 2018 ) (based on its alleged wasted investment) to CHF 3.8 billion (or approximately $3.8 billion at April 30, 2018 ) (calculated based on alleged future lost profits of the Swatch Parties and their affiliates over the entire term of the Agreements).

The Registrant believes that the claims of the Swatch Parties are without merit. In the Arbitration, the Tiffany Parties defended against the Swatch Parties’ claims vigorously, disputing both the merits of the claims and the calculation of the alleged damages. The Tiffany Parties also asserted counterclaims for damages attributable to breach by the Swatch Parties, stemming from the Swatch Parties’ September 12, 2011 public issuance of a Notice of Termination purporting to terminate the Agreements due to alleged material breach by the Tiffany Parties, and for termination due to such breach. In general terms, the Tiffany Parties alleged that the Swatch Parties did not have grounds for termination, failed to meet the high standard for proving material breach set forth in the Agreements and failed to provide appropriate management, distribution, marketing and other resources for TIFFANY & CO. brand watches and to honor their contractual obligations to the Tiffany Parties regarding brand management. The Tiffany Parties’ counterclaims sought damages based on alternate theories ranging from CHF 120.0 million (or approximately $121.0 million at April 30, 2018 ) (based on its wasted investment) to approximately CHF 540.0 million (or approximately $547.0 million at April 30, 2018 ) (calculated based on alleged future lost profits of the Tiffany Parties).

The Arbitration hearing was held in October 2012 before a three-member arbitral panel convened in the Netherlands pursuant to the Arbitration Rules of the Netherlands Arbitration Institute (the "Rules"), and the Arbitration record was completed in February 2013.

Under the terms of the Arbitration Award, and at the request of the Swatch Parties and the Tiffany Parties, the Agreements were deemed terminated. The Arbitration Award stated that the effective date of termination was March 1, 2013. Pursuant to the Arbitration Award, the Tiffany Parties were ordered to pay the Swatch Parties damages of CHF 402.7 million (the "Arbitration Damages"), as well as interest from June 30, 2012 to the date of payment, two-thirds of the cost of the Arbitration and two-thirds of the Swatch Parties' legal fees, expenses and costs. These amounts were paid in full in January 2014.

Prior to the ruling of the arbitral panel, no accrual was established in the Company's consolidated financial statements because management did not believe the likelihood of an award of damages to the Swatch Parties was probable. As a result of the ruling, in the fourth quarter of 2013, the Company recorded a charge of $480.2 million, which included the damages, interest, and other costs associated with the ruling and which was classified as Arbitration award expense in the condensed consolidated statement of earnings.

On March 31, 2014, the Tiffany Parties took action in the District Court of Amsterdam to annul the Arbitration Award. Generally, arbitration awards are final; however, Dutch law does provide for limited grounds on which arbitral awards may be set aside. The Tiffany Parties petitioned to annul the Arbitration Award on these statutory grounds.

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These grounds include, for example, that the arbitral tribunal violated its mandate by changing the express terms of the Agreements.

A three-judge panel presided over the annulment hearing on January 19, 2015, and, on March 4, 2015, issued a decision in favor of the Tiffany Parties. Under this decision, the Arbitration Award was set aside. However, the Swatch Parties took action in the Dutch courts to appeal the District Court's decision, and a three-judge panel of the Appellate Court of Amsterdam presided over an appellate hearing in respect of the annulment, and the related claim by the Tiffany Parties for the return of the Arbitration Damages and related costs, on June 29, 2016. The Appellate Court issued its decision on April 25, 2017, finding in favor of the Swatch Parties and ordering the Tiffany Parties to reimburse the Swatch Parties EUR 6,340 in legal costs. The Tiffany Parties have taken action to appeal the decision of the Appellate Court to the Supreme Court of the Netherlands. As such, the Arbitration Award may ultimately be set aside by the Supreme Court. Registrant's management believes it is likely that the Supreme Court will issue its decision at a future date during Registrant's fiscal year ending January 31, 2019. However, it is possible that such decision could be later issued or that such decision could require the Appellate Court to reconsider certain elements of the dispute and, as such, the annulment action may not be ultimately resolved until, at the earliest, Registrant's fiscal year ending January 31, 2020.

If the Arbitration Award is finally annulled, management anticipates that the claims and counterclaims that formed the basis of the Arbitration, and potentially additional claims and counterclaims, will be litigated in court proceedings between and among the Swatch Parties and the Tiffany Parties. The identity and location of the courts that would hear such actions have not been determined at this time. In any litigation regarding the claims and counterclaims that formed the basis of the arbitration, issues of liability and damages will be pled and determined without regard to the findings of the arbitral panel. As such, it is possible that a court could find that the Swatch Parties were in material breach of their obligations under the Agreements, that the Tiffany Parties were in material breach of their obligations under the Agreements or that neither the Swatch Parties nor the Tiffany Parties were in material breach. If the Swatch Parties’ claims of liability were accepted by the court, the damages award cannot be reasonably estimated at this time, but could exceed the Arbitration Damages and could have a material adverse effect on the Registrant’s consolidated financial statements or liquidity.

Management has not established any accrual in the Company's condensed consolidated financial statements for the first quarter of 2018 related to the annulment process or any potential subsequent litigation because it does not believe that the final annulment of the Arbitration Award and a subsequent award of damages exceeding the Arbitration Damages is probable.

Other Litigation Matters. The Company is from time to time involved in routine litigation incidental to the conduct of its business, including proceedings to protect its trademark rights, litigation with parties claiming infringement of patents and other intellectual property rights by the Company, litigation instituted by persons alleged to have been injured upon premises under the Company's control and litigation with present and former employees and customers. Although litigation with present and former employees is routine and incidental to the conduct of the Company's business, as well as for any business employing significant numbers of employees, such litigation can result in large monetary awards when a civil jury is allowed to determine compensatory and/or punitive damages for actions such as those claiming discrimination on the basis of age, gender, race, religion, disability or other legally-protected characteristic or for termination of employment that is wrongful or in violation of implied contracts. However, the Company believes that all such litigation currently pending to which it is a party or to which its properties are subject will be resolved without any material adverse effect on the Company's financial position, earnings or cash flows.

Gain Contingency. On February 14, 2013, Tiffany and Company and Tiffany (NJ) LLC (collectively, the "Tiffany plaintiffs") initiated a lawsuit against Costco Wholesale Corp. ("Costco") for trademark infringement, false designation of origin and unfair competition, trademark dilution and trademark counterfeiting (the "Costco Litigation"). The Tiffany plaintiffs sought injunctive relief, monetary recovery and statutory damages on account of Costco's use of "Tiffany" on signs in the jewelry cases at Costco stores used to describe certain diamond engagement rings that were not manufactured by Tiffany. Costco filed a counterclaim arguing that the TIFFANY trademark was a generic term for multi-pronged ring settings and seeking to have the trademark invalidated, modified or partially canceled in that respect. On September 8, 2015, the U.S. District Court for the Southern District of New York (the "Court") granted the Tiffany plaintiffs' motion for summary judgment of liability in its entirety, dismissing Costco's genericism counterclaim and finding that Costco was liable for trademark infringement, trademark counterfeiting and unfair competition under New York law in its use of "Tiffany" on the above-referenced signs. On September 29, 2016, a civil jury rendered its verdict, finding that Costco's profits on the sale of the infringing rings should be awarded at

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$5.5 million, and further finding that an award of punitive damages was warranted. On October 5, 2016, the jury awarded $8.25 million in punitive damages. The aggregate award of $13.75 million was not final, as it was subject to post-verdict motion practice and ultimately to adjustment by the Court. On August 14, 2017, the Court issued its ruling, finding that the Tiffany plaintiffs are entitled to recover (i) $11.1 million in respect of Costco's profits on the sale of the infringing rings (which amount is three times the amount of such profits, as determined by the Court), (ii) prejudgment interest on such amount (calculated at the applicable statutory rate) from February 15, 2013 through August 14, 2017, (iii) an additional $8.25 million in punitive damages, and (iv) Tiffany's reasonable attorneys' fees (which will be determined at a later date), and, on August 24, 2017, the Court entered judgment in the amount of $21.0 million in favor of the Tiffany plaintiffs (reflecting items (i) through (iii) above). Costco has filed an appeal from the judgment, as well as a motion in the Court for a new trial. The appeal has been automatically stayed pending determination of the Court motion. Costco has also filed an appeal bond to secure the amount of the judgment entered by the Court pending appeal, so the Tiffany plaintiffs will be unable to enforce the judgment while the motion for a new trial and the appeal are pending. As such, the Company has not recorded any amount in its condensed consolidated financial statements related to this gain contingency as of April 30, 2018 , and expects that this matter will not ultimately be resolved until, at the earliest, a future date during the Company's fiscal year ending January 31, 2019.

Item 1A. Risk Factors.

For information regarding risk factors, please refer to Part I, Item 1A in the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2018.


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Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

In January 2016, the Registrant's Board of Directors approved a share repurchase program (the "2016 Program") which authorizes the Company to repurchase up to $500.0 million of its Common Stock through open market transactions, block trades or privately negotiated transactions. Purchases under the 2016 Program have been executed under a written plan for trading securities as specified under Rule 10b5-1 promulgated under the Securities and Exchange Act of 1934, as amended, the terms of which are within the Company's discretion, subject to applicable securities laws, and are based on market conditions and the Company's liquidity needs. The 2016 Program was originally scheduled to expire on January 31, 2019. However, on May 22, 2018, the Registrant's Board of Directors approved a new share repurchase program (the "2018 Program"), which will replace the 2016 Program. Approximately $160.0 million remained available for repurchase under the 2016 Program at May 22, 2018. The 2018 Program, which is effective June 1, 2018 and expires on January 31, 2022, authorizes the Company to repurchase up to $1.0 billion of its Common Stock through open market transactions, including through Rule 10b5-1 plans and one or more accelerated share repurchase or other structured repurchase transactions, and/or privately negotiated transactions. Purchases under the 2018 Program are discretionary and will be made from time to time based on market conditions and the Company's liquidity needs. The Company may fund any repurchases under the 2018 Program from existing cash at such time or from proceeds of any existing borrowing facilities at such time and/or the issuance of new debt.

Under this new program, the Registrant's Board of Directors also approved the repurchase of $250.0 million of the Company's Common Stock through an accelerated share repurchase transaction, which the Company expects to enter into during its fiscal quarter ending July 31, 2018, subject to market conditions. The repurchases under this accelerated share repurchase transaction will be funded from available cash on hand.
The following table contains the Company's purchases of equity securities in the first quarter of 2018:
Period
(a) Total Number of Shares (or Units) Purchased

(b) Average Price Paid per Share (or Unit)

(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs

(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
(in millions)

February 1, 2018 to
February 28, 2018
77,721

$ 103.51

77,721

$ 203.2

March 1, 2018 to
March 31, 2018
121,042

$ 98.96

121,042

$ 191.2

April 1, 2018 to
April 30, 2018
207,982

$ 98.27

207,982

$ 170.8

TOTAL
406,745

$ 99.48

406,745

$ 170.8




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Item 6. Exhibits


Exhibit Table (numbered in accordance with Item 601 of Regulation S-K)

Exhibit No.
Description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101
The following financial information from Tiffany & Co.’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2018, filed with the SEC, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Comprehensive Earnings; (iv) the Condensed Consolidated Statement of Stockholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to the Condensed Consolidated Financial Statements.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
Date: May 23, 2018
 
TIFFANY & CO.
 
 
(Registrant)
 
 
 
 
By: /s/ Mark J. Erceg
 
 
Mark J. Erceg
 
 
Executive Vice President
 
 
Chief Financial Officer
 
 
(Principal Financial Officer)

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Exhibit 10.13
INDEMNITY AGREEMENT
This Agreement is made as of the _______ day of _____________, 2018, between TIFFANY & CO., a Delaware corporation (the “Corporation”) and the undersigned (the “Indemnitee”), with reference to the following facts:
A.     The Indemnitee is currently serving as a director and/or has in the past served as, is currently serving as or in the future may serve as an officer, director, partner, employee, agent, trustee or fiduciary (a “Company Agent”) of (i) the Corporation, (ii) one or more corporations, limited liability companies, partnerships or joint ventures now or hereafter owned, whether wholly or partially, directly or indirectly, by the Corporation (hereinafter referred to collectively as “Subsidiaries”), (iii) one or more employee benefit plans, pension plans or trusts (hereinafter referred to collectively as “Plans”) sponsored or maintained by the Corporation or any of the Subsidiaries for the benefit of its or their employees and/or (iv) the other corporations, limited liability companies, partnerships, joint ventures, associations, enterprises or organizations listed on Schedule A (which Schedule may be amended from time to time by agreement of the parties hereto) hereto (hereinafter an “Other Enterprise”). In each such case with respect to service to a Subsidiary, Plan or Other Enterprise, the Indemnitee is so serving at the request of the Corporation.
B.     The By-Laws of the Corporation require indemnification of directors and officers of the Corporation and such directors and officers who, at the request of the Corporation, serve as Company Agents of another corporation, partnership, joint venture, limited liability company, trust or other enterprise to the fullest extent permitted by the laws of the State of Delaware.
C.     The indemnification provisions of Section 145 of the Delaware General Corporation Law and of the By-Laws of the Corporation specifically provide that they are not exclusive and thereby contemplate that agreements may be entered into between the Corporation and Company Agents with respect to the indemnification of such persons, and the Board of Directors of the Corporation (the “Board”) has authorized the Corporation to enter into such indemnification agreements.
D.     In addition to the indemnification to which the Indemnitee may be entitled pursuant to the Certificate of Incorporation or By-Laws of the Corporation or this Agreement, and as additional consideration for the Indemnitee's service, the Corporation furnishes at its expense directors' and officers' liability insurance (“D&O Insurance”) protecting the Indemnitee in connection with such service.
E.     Recent developments with respect to the cost, terms and availability of D&O Insurance and with respect to the application, amendment and enforcement of statutory and by-law indemnification provisions generally have raised questions concerning the adequacy and reliability of the protection afforded thereby.
F.     In recent years, litigation seeking to impose liability on directors and officers of corporations, particularly publicly held corporations, has become commonplace. Such litigation is extremely expensive to defend, with defense costs frequently amounting to hundreds of thousands, and sometimes millions, of dollars. In many cases, costs of defense far exceed the




means of individual defendants, even if they are ultimately vindicated on the issue of individual liability or wrongdoing. In addition, in view of the costs and uncertainties of litigation, it is often prudent to settle such claims. While settlements are frequently for only a small fraction of the amount claimed, they may nonetheless exceed the financial resources of individual defendants. Finally, the specter of possible liability for millions of dollars based on novel or unforeseen interpretations of law can be a significant deterrent to persons accepting positions of responsibility with a public corporation.
G.     The Corporation desires that the Indemnitee remain free in his or her service to the Corporation, or to any Subsidiary, Plan or Other Enterprise, to exercise his or her best judgment in the performance of his or her duties without undue concern for litigation claims for damages arising out of or related to the performance of such duties and expenses related thereto.
NOW THEREFORE, in order to induce the Indemnitee to continue to serve at the request of the Corporation as a Company Agent of the Corporation or any Subsidiary, Plan or Other Enterprise, and, in consideration for his or her continued service, the Corporation hereby agrees to indemnify the Indemnitee as follows:
1.     Indemnification of the Indemnitee.
1.1     General Indemnity Obligation. The Corporation hereby agrees to hold harmless and indemnify the Indemnitee, subject to Sections 1.3 and 2 hereof, for any amount which the Indemnitee is or becomes legally obligated to pay in connection with any claim or claims made against him or her, arising out of any act, omission or neglect or breach of duty, including, without limitation, any actual or alleged error or any misstatement or misleading statement, which the Indemnitee commits, suffers or permits to occur while acting in any capacity as a Company Agent of the Corporation or any Subsidiary, Plan or Other Enterprise, in any such case, whether the basis of such Proceeding, as such term is hereinafter defined, is alleged action or inaction in an official capacity as such Company Agent or in any other capacity while serving as a Company Agent and, also in any such case, whether or not the Indemnitee is acting or serving in such Capacity at the date hereof, at the time liability is incurred or at the time the claim is asserted. The payments which the Corporation shall be obligated to make hereunder shall include, inter alia, all damages, liabilities, losses, costs, charges, expenses (including fees and disbursements of attorneys, accountants and other experts), judgments, penalties, fines, excise taxes (including excise taxes arising under the Employment Retirement Income Security Act (“ERISA”)), costs of attachment or similar bonds, amounts paid or to be paid in settlement and such other amounts that are reasonably incurred by the Indemnitee in connection with the investigation, defense, settlement or satisfaction of any threatened, pending or completed action, suit, claim, investigation, inquiry, arbitration, alternative dispute mechanism or proceeding (whether civil, criminal, administrative or investigative and whether before a court or arbitrator or before or involving a governmental, administrative or private entity), including without limitation an action by or in the right of the Corporation, and appeals therefrom (a “Proceeding”).
1.2     Indemnification for Serving as Witness. Notwithstanding any other provision of this Agreement, the Corporation shall indemnify the Indemnitee against all costs, charges and expenses (including fees and disbursements of attorneys, accountants and other experts)




reasonably incurred by the Indemnitee in connection with the preparation to serve or service as a witness in any Proceeding to which the Indemnitee is not a party if such actual or proposed service as a witness arose by reason of the Indemnitee serving, or having served, as a Company Agent of the Corporation or any Subsidiary, Plan or Other Enterprise.
1.3     Affirmative Actions By the Indemnitee. Notwithstanding anything herein to the contrary, except as provided in Section 6 with respect to Proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify the Indemnitee in connection with a Proceeding (or a part thereof) initiated by the Indemnitee only if such Proceeding (or part thereof) was authorized or is later ratified by the Board.
1.4     Payment of Indemnification. The Corporation will from time to time pay to the Indemnitee amounts to which he or she is entitled under the terms of this Agreement notwithstanding the fact that the Indemnitee is entitled to be indemnified pursuant to any D&O Insurance purchased and maintained by the Corporation or by any Subsidiary, Plan or Other Enterprise for the benefit of the Indemnitee or is otherwise entitled to indemnification from any other source, provided the Indemnitee complies with Sections 4 and 5 hereof.
2.     Limitations of the Indemnity
(a)     No indemnity shall be paid by the Corporation pursuant to the provisions of this Agreement if, prior to the date of payment thereof, a final determination that such indemnification is not lawful shall have been made pursuant to Section 6 hereof. Additionally, any payment to which any Indemnitee would otherwise be entitled under this Agreement shall be offset by the amount of any payments made to the Indemnitee in respect of the indemnifiable claim pursuant to D&O Insurance or by the Corporation or by any Subsidiary, Plan or Other Enterprise other than pursuant to this Agreement.
(b)    In addition, no indemnity shall be paid by the Corporation pursuant to
Section 1.1 or 6 hereof:
(i)     in respect of a claim based upon or attributable to the Indemnitee gaining in fact any personal profit or advantage to which he or she was not legally entitled;
(ii)     for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Corporation within the meaning of Section 16(b) of the Securities Exchange Act of 1934;
(iii)     on account of the Indemnitee's conduct if and only if it has been finally determined pursuant to Section 6 hereof that (A) the Indemnitee committed acts of active and deliberate dishonesty with actual dishonest purpose and intent and (B) such acts are material or were material to the cause of action against the Indemnitee with respect to which indemnification is sought hereunder; or
(iv)     in respect of a claim based upon or attributable to any action or omission by the Company Indemnitee for which the Company Indemnitee would be liable under Section 174 of the Delaware General Corporation Law.




3.     Advancement and Repayment of Expenses. Costs, charges and expenses (including fees and disbursements of attorneys, accountants and other experts) reasonably incurred by the Indemnitee (i) in defending or investigating a Proceeding as set forth in Section 1.1 hereof, (ii) in preparing to serve or serving as a witness in any Proceeding under Section 1.2 hereof, (iii) in connection with any Action (as defined below) initiated pursuant to Section 6 hereof or (iv) in connection with any cooperation provided by Indemnitee pursuant to Section 6.6(c) or 7.4 hereof, shall be paid by the Corporation promptly following written notice to the Corporation in accordance with Section 6(a) and, in any event, no later than 20 calendar days after receipt of such notice, notwithstanding that such notice is provided in advance of the final disposition of such matter, provided the Indemnitee shall undertake in writing to repay any such advances (other than advances in respect of costs, charges and expenses incurred under Sections 6.6(c) or 7.4 hereof and, in the case of costs, charges or expenses incurred in connection with an Action initiated pursuant to Section 6 hereof, solely to the extent that such costs, charges and expenses may be required to be repaid to the Corporation as set forth in such Section) in the event that a final determination pursuant to Section 6 hereof is made that the Indemnitee is not entitled to indemnification under this Agreement.
4.     Subrogation. In the event of any payment under this Agreement to or on behalf of the Indemnitee, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee against any person other than the Corporation or the Indemnitee in respect of the claim giving rise to such payment and the Indemnitee shall execute all papers reasonably required and shall do every thing reasonably necessary to secure such rights, including the execution of such documents reasonably necessary to enable the Corporation effectively to bring suit to enforce such rights.
5.     Notification and Defense of Claim. The Indemnitee shall give to the Corporation notice in writing as soon as practicable of any claim made against him or her for which indemnity will or could be sought under this Agreement. Notice to the Corporation shall be directed to Tiffany & Co., 200 Fifth Avenue, New York, New York 10010, attention: General Counsel (or such other address as the Corporation shall designate in writing to the Indemnitee). Failure of the Indemnitee to give such notice shall not relieve the Corporation of its obligations hereunder, except to the extent the Corporation is actually damaged as a result thereof.
With respect to a Proceeding of which the Corporation is so notified:
(a)     the Corporation will be entitled to participate therein at its own expense; and
(b)     except as otherwise provided below in this Section 5, the Corporation will be entitled to assume the defense thereof, with legal counsel reasonably acceptable to the Indemnitee.
After notice from the Corporation to the Indemnitee of its election to so assume such defense, the Corporation shall not be liable to the Indemnitee under this Agreement for any legal or other expenses subsequently incurred by the Indemnitee in connection with such Proceeding, other than reasonable costs of investigation or as otherwise provided below in this Section 5 or in Section 6(c) or Section 7.4. The Indemnitee shall have the right to employ his or her own counsel in such Proceeding but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee




unless (i) the employment of counsel by the Indemnitee has been authorized by the Corporation in writing, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the Indemnitee in the conduct of the defense of such action, or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Agreement. The Corporation shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in (ii) above.
6.     Determination of Right to Indemnification.
(a)     To receive indemnification under this Agreement, including for the payment of expenses under Section 3 hereof, the Indemnitee shall submit a written request to the Corporation’s Secretary. Such request shall include the documentation or information that is reasonably available to the Indemnitee and is reasonably necessary for the Corporation to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Corporation shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that the Indemnitee has requested indemnification.
(b)     Upon receipt by the Corporation of a written request by the Indemnitee for indemnification pursuant to Section 1.1, the entitlement of the Indemnitee to indemnification pursuant to such Section shall be determined by the following person or persons who shall be empowered to make such determination: (i) the Board by a majority vote of Disinterested Directors (as defined below), whether or not such majority constitutes a quorum; (ii) a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, whether or not such majority constitutes a quorum; (iii) if (A) there are no Disinterested Directors, or (B) the Disinterested Directors so direct, Independent Counsel (as defined below) in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee; or (iv) in the event that a Change in Control (as defined below) has occurred, Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee. For any determination that is to be made by Independent Counsel pursuant to clause (iii) of the immediately preceding sentence, such Independent Counsel shall be selected by the Board and identified in a written notice to the Indemnitee, provided that the Indemnitee may, within 10 calendar days after the date of such written notice, deliver to the Corporation a written objection to such selection, which objection may only be asserted on the grounds that the Independent Counsel fails to meet the requirements of “Independent Counsel” as defined below. For any determination that is to be made by Independent Counsel pursuant to clause (iv) of the first sentence of this paragraph, Independent Counsel shall be selected by the Indemnitee. Upon (i) any failure of the Board or, in the case of a Change in Control, the Indemnitee, to select Independent Counsel or (ii) any disagreement between the parties with respect to the appointment of Independent Counsel, such Independent Counsel shall be selected upon application to a court of competent jurisdiction. The determination that is to be made pursuant to the first sentence of this Section 6(b) shall be made, if reasonably possible, not later than 60 calendar days after receipt by the Corporation from the Indemnitee of a written request for indemnification or, if such timing is not reasonably practicable, as soon as reasonably practicable after such date.




(c)     If it is determined in accordance with Section 6(b) that indemnification shall be made under Section 1.1, such indemnification shall be paid in full by the Corporation not later than 15 calendar days after the date of determination. If the person making such determination shall determine that the Indemnitee is entitled to indemnification as to part (but not all) of the application for indemnification, such person shall reasonably prorate such partial indemnification among the claims, issues, or matters at issue at the time of the determination. Notwithstanding Section 3, any reasonable expenses incurred by the Indemnitee in cooperating with the person making such determination shall be advanced by the Corporation (irrespective of the determination as to the Indemnitee’s entitlement to indemnification) and the Corporation shall be liable to indemnify and hold the Indemnitee harmless therefrom. All expenses of the person making such determination shall be borne by the Corporation (irrespective of the determination as to the Indemnitee’s entitlement to indemnification).
(d)     If (i) a claim for indemnification pursuant to Section 1.1 of this Agreement is not paid in full by the Corporation within 75 calendar days after the written claim (together with any required reimbursement undertaking) has been received by the Corporation, (ii) a claim for indemnification pursuant to any other Section of this Agreement (including, for the avoidance of doubt, Sections 1.2, 6(c) and 7.4 of this Agreement) is not paid in full by the Corporation within 20 calendar days after written request therefor has been received by the Corporation or (iii) a claim for an advancement of expenses hereunder (including, for the avoidance of doubt, pursuant to Sections 3 and 6.6(c), and with respect to any Action, as provided for in this Section 6.6(d), of this Agreement) is not paid in full by the Corporation within 20 calendar days after written request therefor has been received by the Corporation (together, in the case of this clause (iii), with any required written reimbursement undertaking), the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. In any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that such indemnification or advancement of expenses is not lawful or is not permitted by the provisions of Section 2 of this Agreement. Further, in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final determination that such indemnification or advancement of expenses is not lawful or is not permitted by the provisions of Section 2 of this Agreement. Neither the failure of the Corporation (including its Board or Independent Counsel) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances, nor an actual determination by the Corporation (including its Board or Independent Counsel) that indemnification is not lawful or is not permitted hereunder, shall create a presumption, be considered a final determination for purposes of Section 2(a) above or otherwise be considered as an indication, that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking (in either case, an “Action”), the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section or otherwise, shall be on the Corporation. The Corporation and Indemnitee agree that the Indemnitee shall be entitled to be paid, and that the Corporation shall hold harmless and indemnify the Indemnitee for, all costs, charges and expenses (including any fees and disbursements of attorneys, accountants and other experts) reasonably incurred by Indemnitee in




connection with any Action unless a court of competent jurisdiction over such Action makes a final determination that the material claims and/or defenses of the Indemnitee as a party to such Action were frivolous or were not made in good faith. The Corporation and Indemnitee agree that any Action shall be brought only in the Court of Chancery of the State of Delaware, which shall be the sole jurisdiction and venue therefor; and each of the parties hereby waives any objection thereto. A decision of such court will constitute a final determination for purposes of this Agreement when such decision has become final and is no longer subject to appeal.
(e)     For purposes of this Agreement, a “Change of Control” will be deemed to have occurred if the individuals who, as of March 15, 2017, constitute the Board (such individuals, the “Incumbent Board”) cease for any reason to constitute a majority of the Board, provided that any person becoming a director subsequent to such date whose election, or nomination for election by the Corporation’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such person were a member of the Incumbent Board.
(f)     For purposes of this Agreement, “Disinterested Director” means a director of the Corporation who is not and was not a party to the Proceeding in respect of which indemnification is sought by the Indemnitee.
(g)     For purposes of this Agreement, “Independent Counsel” means a law firm or a member of a law firm that neither is presently nor in the past five years has been retained to represent (i) the Corporation, its Subsidiaries or the Indemnitee in any matter material to any such party or (ii) any other party to the Proceeding giving rise to a request for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Corporation or the Indemnitee in an Action to determine the Indemnitee’s right to indemnification under this Agreement.
7.     Miscellaneous Provisions.
7.1     Successors and Assigns. This Agreement shall be binding upon all successors and assigns of the Corporation (including any transferee of all or substantially all of its assets and any successor by merger or operation of law) and shall inure to the benefit of the heirs, personal representatives, executors, administrators or assigns of the Indemnitee.
7.2     Savings Clause; Prior Indemnity Agreements. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, this Agreement shall be deemed to be modified to the least extent possible to make it valid and enforceable and the Corporation shall nevertheless indemnify the Indemnitee to the fullest extent permitted by any applicable portion of this Agreement that shall not have been invalidated and to the fullest extent permitted by applicable law. This Agreement shall supersede and replace any prior indemnity agreements entered into by and between the Corporation and/or any of its Subsidiaries and the Indemnitee and any such prior agreements shall be terminated upon execution of this Agreement.




7.3     Rights Not Exclusive; Discharge of Indemnitee; Continuation of Right of Indemnification. Nothing herein shall be deemed to diminish or otherwise restrict the Indemnitee's rights to indemnification under any provision of the Certificate of Incorporation or By-Laws (or equivalent governing documents) of the Corporation or any Subsidiary, Plan or Other Enterprise, or any agreement, vote of stockholders or of Disinterested Directors, applicable law or otherwise. However, this Agreement shall not be deemed an employment contract between the Corporation and any Indemnitee who is an officer of the Corporation, and, if the Indemnitee is an officer of the Corporation, the Indemnitee specifically acknowledges that the Indemnitee may be discharged at any time for any reason, with or without cause, and with or without severance compensation, except as may be otherwise provided in a separate written contract between Indemnitee and the Corporation. This Agreement shall continue until and terminate upon the later of (i) the tenth anniversary after the Indemnitee has ceased to occupy any of the positions or have any of the relationships described in Recital A of this Agreement or (ii) the final termination or resolution of all proceedings with respect to the Indemnitee commenced during such 10 year period.
7.4     Obligations of Indemnitee to Cooperate. The Indemnitee shall cooperate with the Corporation with respect to any Proceeding that is the subject of a claim for indemnification hereunder as the Corporation may reasonably require and with any person or entity making a determination of the Indemnitee's entitlement to indemnification pursuant to Section 6 hereof. The Indemnitee shall, upon reasonable advance request, provide to the Corporation or the person or entity responsible for making such Section 6 determination any documentation or information reasonably available to the Indemnitee and necessary to (i) the Corporation with respect to any Proceeding or claim by the Indemnitee for indemnification or (ii) the person or entity responsible for making such Section 6 determination with respect to such determination, as the case may be. Any costs, charges or expenses (including fees and disbursements of attorneys, accountants and other experts) reasonably incurred by the Indemnitee in so cooperating with the Corporation or with the person or entity making such determination or in cooperating with the Corporation under Section 4 hereof shall be borne by the Corporation (irrespective of the determination as to the Indemnitee's entitlement to indemnification under this Agreement) and the Corporation hereby agrees to indemnify and hold harmless the Indemnitee therefrom.
7.5     Contributions. In order to provide for just and equitable contribution in circumstances in which the Indemnitee is entitled to indemnification under this Agreement, and the indemnification provided for herein is held by a court of competent jurisdiction to be unavailable to the Indemnitee in whole or in part, the parties agree that, in such event, the Corporation shall, in lieu of indemnifying the Indemnitee, contribute to payment of the Indemnitee's damages, losses, liabilities, costs, charges, expenses (including fees and disbursements of attorneys, accountants and other experts), judgments, penalties, fines, excise taxes (including excise taxes arising under ERISA), costs of attachment or similar bonds, amounts paid or to be paid in settlement and such other amounts that are reasonably incurred by the Indemnitee in connection with the investigation, defense, settlement or satisfaction of any threatened, pending or completed action, suit, claim, investigation, inquiry, arbitration, alternative dispute mechanism or proceeding (whether civil, criminal, administrative or investigative and whether before a court or arbitrator or before or involving a governmental, administrative or private entity), including without limitation an action by or in the right of the Corporation, and appeals therefrom, in an amount that is just and equitable in the circumstances, taking into account, among other things,




contributions by other directors and officers of the Corporation pursuant to Indemnity Agreements or otherwise. The Corporation and the Indemnitee agree that, except for such amounts incurred by an Indemnitee attributable to conduct on the part of the Indemnitee described in Section 2(b), it would not be just and equitable for the Indemnitee to contribute to the payment of such amounts arising out of any Proceeding in an amount greater than: (i) in a case where the Indemnitee is a director of the Corporation, but not an officer of the Corporation, an amount equal to five (5) times the amount of fees paid to the Indemnitee for serving as a director during the 12 months preceding the commencement of such Proceeding; or (ii) in a case where the Indemnitee is a director and an officer of the Corporation, the amount set forth in clause (i) plus 25% of the aggregate cash compensation paid to the Indemnitee for service in such office(s) during said 12 months; or (iii) in all other cases, 25% of the aggregate cash compensation paid to the Indemnitee by the Corporation or its applicable Subsidiary during said 12 months. The Corporation shall contribute to the payment of the foregoing amounts to the extent not payable by the Indemnitee pursuant to the contribution provisions set forth in the preceding sentence.
7.6     Subsequent Amendment. No amendment, termination or repeal of Article VI of the Corporation's Restated By-Laws (as amended), Article EIGHTH of the Corporation's Restated Certificate of Incorporation (as amended), or any successor Articles thereto, or of any relevant provision of the Delaware General Corporation Law or any other applicable laws shall affect or diminish in any way the rights of the Indemnitee to indemnification or the obligations of the Corporation arising under this Agreement whether the alleged actions or conduct of the Indemnitee giving rise to the necessity of such indemnification arose before or after any such amendment, termination or repeal.
7.7     Governing Law. This Agreement shall be governed by and construed in accordance with Delaware Law.
7.8     Headings. The headings of the Sections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement or to affect the construction thereof.
7.9     Identical Counterparts. This Agreement may be executed in any number of counterparts all of which taken together shall constitute one instrument.
7.10     Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.





IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and signed as of the day and year first above written.
TIFFANY & CO.
 
By: _____________________
Leigh M. Harlan
Senior Vice President, Secretary and General Counsel
 
INDEMNITEE
 
_____________________



            





SCHEDULE A

Other Enterprises





Exhibit 12.1

TIFFANY & CO.

STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

 
Three Months Ended April 30,
(dollars in millions)
2018
2017
 
 
 
Earnings from operations before income taxes
$
190.5

$
136.1

Fixed charges, less capitalized interest
32.7

31.0

Total earnings as defined
$
223.2

$
167.1

 
 
 
Fixed Charges:
 
 
Interest expense before capitalization of interest a
$
9.1

$
9.9

Estimated interest portion of rent expense
23.8

21.2

Total fixed charges b
$
32.9

$
31.1

 
 
 
Ratio of Earnings to Fixed Charges
6.8
x
5.4
x

a  
Interest expense does not include interest related to uncertain tax positions and other non-third party indebtedness.

b  
Fixed charges represent interest expense (before interest is capitalized), amortization of deferred financing costs and an appropriate interest factor on operating leases.





Exhibit 31.1

CERTIFICATION

I, Alessandro Bogliolo, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Tiffany & Co.;

2.
Based on my knowledge, this report does not contain any untrue statement 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 report;

3.
Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: May 23, 2018
 
/s/ Alessandro Bogliolo
Chief Executive Officer
(principal executive officer)





Exhibit 31.2


CERTIFICATION
I, Mark J. Erceg, certify that:     

1.
I have reviewed this quarterly report on Form 10-Q of Tiffany & Co.;

2.
Based on my knowledge, this report does not contain any untrue statement 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 report;

3.
Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: May 23, 2018
    
/s/ Mark J. Erceg
Executive Vice President
Chief Financial Officer
(principal financial officer)




Exhibit 32.1



CERTIFICATION

Pursuant to 18 U.S.C. 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Tiffany & Co. (the “Company”) on Form 10-Q for the period ended April 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alessandro Bogliolo, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: May 23, 2018
/s/ Alessandro Bogliolo
Chief Executive Officer
(principal executive officer)





Exhibit 32.2



CERTIFICATION

Pursuant to 18 U.S.C. 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Tiffany & Co. (the “Company”) on Form 10-Q for the period ended April 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark J. Erceg, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: May 23, 2018
/s/ Mark J. Erceg
Executive Vice President
Chief Financial Officer
(principal financial officer)