Tiffany&co -financial presentation


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  • Founded 1837 when he opened a store in downtown Manhattan The Company has remained in business for over 168 years 3.The Company also has many subsidiaries that they operate through. Little Switzerland is one based in the Caribbean, Iridesse was recently launched in 2004 to expand their market share in pearl jewelry. 4. The company is involved in product design, manufacturing and selling. 5. They have developed a direct-sourcing relationship to ensure an adequate supply of high quality diamonds to meet consumer demands. 6. Tiffany & Company is the main subsidiary of the Company. This subsidiary accounts for 82% of net sales in 2004. They are a jeweler and specialty retailer whose merchandise offerings include:
  • Bowls Candlesticks Fragrances China Stemware (glasses) Stationary
  • Vase Crystal Barware Serving Pieces, sterling Silverware Timepieces Frames Clocks Silver accessories And of course jewelry
  • 1837 - The first store that was opened had every item marked with a non-negotiable price, which was revolutionary at the time, and made headlines. 1865 - During the Civil war the company supplied the Union army with swords, flags, and surgical equipment, as well as jewel encrusted swords for awards. 1885 Tiffany and Co revises the Great Seal of the U.S. which can be seen on the one dollar bill. 1873 - Many different museums contain Tiffany pieces starting in 1873. They’re standards in silver and platinum have been adopted as US standards. 1950/1961 - Truman Capote wrote Breakfast at Tiffany’s in 1950, the movie with Audrey Hepburn was released in 1961. 1967 the company created the first Super Bowl Trophy. 2004 NASCAR gets a trophy designed by Tiffany’s
  • Here is a complete list of The company’s competitors. To just name a few there are Zales, Armani, Blue Nile, Gucci, Rolex, Neiman Marcus etc
  • The Current ratio Number for the Company is a little high, however it is within the 2:1 ratio, therefore it is an acceptable number. However this may mean that the company, if they do not watch themselves, could end up having trouble to pay their current debts with their current assets. Now, when looking at the Quick Ratio it is easily seen that the company is in fact in a better position that what the Current ratio shows. The quick ratio shows that the company is quite able to pay their short term debts with their current assets. Essentially, since the Current ratio was so high but the quick ratio was low, we can deduce that the company just has high inventory levels. Their assets that can be easily converted to cash make it so that they are very capable of paying their current debts, even though they are a little over the industry number.
  • This firms inventory turnover is better than the industry. Tiffany's sells their inventory about 10.5 times per year, while the industry only sells theirs about every 6.5 times per year. In terms of days, Tiffany's sells their inventory about every 36 days and the average industry time to sell inventory is 56 days. Therefore, Tiffany's has good inventory turnover activity. The firm collects their accounts receivable 17 times per year. The industry average to collect accounts receivable is 23 times per year. Therefore, the industry average is slightly better than Tiffany's at collecting their accounts receivable. In terms of days, the average industry time to collect accounts receivable is 13 days while the company's amount of days is 21.5. (Part of the reason is because the company does not lose much money from people who don’t pay their accounts, and any money that they have ever lost has never exceeded expectations. The cash operating cycle for Tiffany’s is 38.5 while the average industry cycle is 39, basically the two are right on track together. All of this information shows that in terms of Activity, Tiffany’s is in pretty good shape. They are quick to sell their inventory, and they do collect their accounts receivable pretty quickly, though not as quickly as the average for their industry.
  • The LT debt to equity ratio shows the amount of debt financing to the amount of equity financing that the firm has. Basically the amount of creditors to the amount of stockholders that the firm has. Tiffany’s has a ratio of .23 which is less than the industry ratio of .30. This means that they should be able to pay the interest on their debts and they should be able to repay the principal amount. Overall, long term solvency for the firm looks good. The Debt to Assets ratio shows how much of Tiffany’s assets are financed by debt. The ratio is .36 indicating that about 36% of the company's assets are financed by debt. This number could be high indicating high debt financing or it could be low. It is impossible to tell because I was unable to find an industry ratios for debt to asset financing.
  • The Cash Interest Ratio shows whether the firms operating activities create enough profit to meet their obligations to pay interest. Tiffany’s ratio when compared to the average industry ratio is a little low. This means that they may have difficulty in meeting their obligations to pay interest. This may be the case. Overall, in terms of Solvency Tiffany’s is in ok shape. They could be doing slightly better, however, they are not in horrible shape either.
  • Earnings per share is used to indicate the growth of the Company. In 2004 Tiffany's EPS were only 2.08 compared to the Industry’s 3.54. However, Between 2003 and 2004 the company EPS grew by about 48%. This indicates that the companies earnings increased between the two years. We look at EPS to assess the company ability to generate future earnings growth. As can be seen, between 2003 and 2004 this occurred. This leads one to believe that the company will continue to grow in the years to come and generate a steady profit
  • Tiffany’s Gross Profit margin is higher than the industry average, their operating margin is slightly below the industry average and their net profit margin is higher than industry average. What this shows is that, in terms of profitability, Tiffany’s is in pretty good shape. Thus, Tiffany’s are making a pretty good profit, and yet their solvency is a little, iffy. This could all be because of the Company’s expansionary policies. They are opening new stores and starting new lines. Therefore, they need more money to finance these operations, thus they are creating more debt. Based on past numbers though, the company is healthy, and should rebound quickly with their numbers. They haven’t really had problems before, and the not so stellar nature of their numbers could be because of their current expansions.
  • Inventory in the U.S. is valued using the LIFO method. The Company’s Foreign Subsidiaries and Japan use Average Cost for Inventory Valuation. Because the Company uses the LIFO method, they must follow the LIFO Conformity rule and use LIFO for the financial statements. While they may be paying less taxes, this rule makes the Company appear as if they are making less money than they actually are. This could give investors the impression that the Company is not doing too great financially, when in fact, they are doing alright. The financial statements could also be affected if LIFO Liquidation occurs. This would increase the profits and the taxes by using inventory prices that are lower than the current year prices. However, that did not happen for Tiffany’s in 2004 or 2003. The use of Average Cost helps the company determine the profits in USD. Depreciation for Assets is calculated using the Straight Line Method. Intangible Asset amortization is also calculated using the Straight Line Method. Any small repairs are charged to an expenditure account and any large repairs or changes are capitalized. The use of Average Cost helps the company determine the profits in USD. By using total costs/total units you come up with one final price that is used to value ending inventory, instead of having several different prices and having to use them to determine ending inventory and then converting all those numbers to USD, There is only one set of numbers that are converted. With WAC you have an average of 7 yen for your merchandise. You sold 1000 objects, so your price is 7,000 yen. However, if you used LIFO or FIFO you could have 200 objects at 4 yen, 200 objects at 6 yen, and 600 objects at 11 yen. You would then multiply out the prices to get 800 yen, 1200 yen and 6600 yen
  • A qualified opinion was issued because the auditing firm, pricewaterhouse coopers llp, wanted to point out that Tiffany’s has adopted a new accounting principle, the SFAS No, 123R.
  • Tiffany’s lease space for such things as offices, warehouses, manufacturing facilities, and retail facilities. These leases expire at various dates, at which time they may or may not be renewed, with a possible increase in the lease price. Renewal of the leases may also include taxes, insurance and maintenance. Plus, there are some contingent rent payments that are based on a percentage of sales exceeding a stipulated amount Management says that the litigation should not affect the Company’s financial position, however, sometimes, cases can exceed their expectations and may end up costing more than they thought.
  • Stock plan, employees can get stock dividends if they do good Pension based on 5 highest income years and number of years of service, Use Actuarial methods to determine the amount to contribute ADDITIONAL PROGRAMS Investor Relations Health and Dependent Care Spending Accounts Long Term Care Medical, Family and Bereavement leave Adoption Assistance Paid Vacation, Holidays and Sick Days Transportation Assistance Education Assistance Employee Assistance Program (financial, legal and family resources) Health and Fitness Program Reimbursement Milestone and Service Recognition Programs Employee Discount Employee Giving Program (company match of donation to qualified charities)
  • I would invest in the Firm because, while some of the numbers are not as great as they could be, the Company seems strong and healthy overall. They are expanding, which could yield greater profits. Overall, their Gross Profit Margin is considerably higher than the Industry average. Net Profit Margin is greater than the Industry Average. Their Solvency and Liquidity are pretty good.. Their Activity is also alright. Employment = yes because they have a lot of employee benefits, making it seem as if they really care about their employee’s and they are expanding their enterprise, which means they would have more opportunity for job openings.
  • Tiffany&co -financial presentation

    1. 1. Tiffany & Co A Financial Presentation By Tiffany jewelry life
    2. 2. contents <ul><li>Background of Tiffany’s </li></ul><ul><li>Financial Analysis </li></ul><ul><ul><li>Liquidity </li></ul></ul><ul><ul><li>Activity </li></ul></ul><ul><ul><li>Leverage </li></ul></ul><ul><ul><li>Profitability </li></ul></ul><ul><li>Accounting Methods </li></ul><ul><li>Auditor’s Report </li></ul><ul><li>Contingencies </li></ul><ul><li>Employee Benefits </li></ul><ul><li>Conclusions </li></ul>
    3. 3. Background <ul><li>Founded in 1837 by Charles Lewis Tiffany </li></ul><ul><li>There are over 150 Tiffany & Co. Stores in 17 countries </li></ul><ul><li>Revenue for the past 12 months is $2,307, 876,000 </li></ul><ul><li>Little Switzerland & Iridesse </li></ul><ul><li>Direct Sourcing relationship </li></ul><ul><li>Design, Manufacture, Sell </li></ul><ul><li>The main Tiffany’s stores accounted for 82% of net sales in 2004. </li></ul>
    4. 4. Background Products
    5. 5. Background Products
    6. 6. Background <ul><li>1837 – Non-negotiable Prices </li></ul><ul><li>1865 - Civil War Supplier </li></ul><ul><li>1873 – Museums </li></ul><ul><li>1885 – Great Seal of the U.S. </li></ul><ul><li>Silver and Platinum Standards </li></ul><ul><li>1950-1961 – Breakfast at Tiffany’s (Book & Movie) </li></ul><ul><li>1967 – Super Bowl </li></ul><ul><li>2004 – NASCAR </li></ul>
    7. 7. Background Competitors <ul><li>A&G ARC International Blue Nile Brown-Forman Bulgari Bulova Cartier Chanel Christie's Elizabeth Arden </li></ul><ul><li>Estée Lauder Fortunoff Armani Gucci H. Stern Hermès </li></ul><ul><li>Inter Parfums L'Oréal Société du Louvre LVMH Rolex Movado Group Neiman Marcus Nordstrom Parlux Fragrances Revlon Richard-Ginori 1735 </li></ul>Richemont Royal Doulton Saks Fifth Avenue Shiseido Signet Union Diamond Van Cleef & Arpels Waterford Wedgwood Yves Saint-Laurent Groupe Zale
    8. 8. Financial Analysis
    9. 9. Financial Analysis
    10. 10. Financial Analysis
    11. 11. Financial Analysis
    12. 12. Financial Analysis
    13. 13. Financial Analysis
    14. 14. Accounting Methods <ul><li>U.S. Inventory Valuation = LIFO method. </li></ul><ul><li>LIFO Conformity Rule </li></ul><ul><li>Foreign Subsidiaries and Japan = Average Cost </li></ul><ul><li>Depreciation = Straight Line Method. </li></ul><ul><li>Amortization of Intangible Asset = Straight Line Method. </li></ul>
    15. 15. Auditor’s Report <ul><li>The Auditing Firm was PricewaterhouseCoopers LLP </li></ul><ul><li>The financial statements were presented fairly and in accordance with the Generally Accepted Accounting Principals. </li></ul><ul><li>Qualified Opinion- SFAS No. 123R “Share Based Payment” </li></ul>
    16. 16. Contingencies <ul><li>Office, warehouse, manufacturing facility, and retail facility Leases. </li></ul><ul><li>Routine Litigation </li></ul>
    17. 17. Employee Benefits <ul><li>HEALTH Medical, Dental, Vision, and Prescription Drug Plan RETIREMENT Retirement Savings [401(k)] Plan (with company match) Pension Plan Employee Stock Ownership Plan DISABILITY BENEFITS Long Term Disability Plan Short Term Disability Plan SURVIVOR PROTECTION Group Term Life Insurance Accidental Death & Dismemberment Insurance Business Travel Accident Insurance Supplemental Group Term Life Insurance </li></ul>
    18. 18. Conclusions <ul><li>I would invest in the Firm. </li></ul><ul><li>Gross Profit Margin is considerably higher than the Industry average. </li></ul><ul><li>Net Profit Margin is greater than the Industry Average. </li></ul><ul><li>I would seek employment in this firm </li></ul>
    19. 19. Recap <ul><li>Background of Tiffany’s (1831) </li></ul><ul><li>Financial Analysis </li></ul><ul><ul><li>Liquidity Good </li></ul></ul><ul><ul><li>Activity Good </li></ul></ul><ul><ul><li>Solvency Good </li></ul></ul><ul><ul><li>Profitability Good </li></ul></ul><ul><li>Accounting Methods </li></ul><ul><ul><li>LIFO and WAC </li></ul></ul><ul><li>Auditor’s Report - PricewaterhouseCoopers LLP </li></ul><ul><ul><li>Unqualified Opinion </li></ul></ul><ul><li>Contingencies </li></ul><ul><ul><li>New Accounting Standards, New Assets, Paying off debts, Accelerated Depreciation, Stopping development </li></ul></ul><ul><li>Employee Benefits </li></ul><ul><ul><li>Health, Retirement, Disability, Survivor Protection </li></ul></ul><ul><li>Conclusions </li></ul><ul><ul><li>Invest Yes </li></ul></ul><ul><ul><li>Job Yes </li></ul></ul>
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