Jessica HowarthACG 2021-080
Executive SummaryTiffany & Co. experienced a modest growth in sales and earnings during 2002.http://www.shareholder.com/tiffany/annual.cfm
Part A. IntroductionCEO: Michael J. KowalskiHome Office: 727 5th Ave, NYCRecent end of Fiscal Year: January 31, 2002Products: fine jewelry (80% of fiscal 2002 sales), timepieces, sterling silverware, china, crystal, stationary, fragrancesAreas of Business: US 59%, Japan 26%, other Asia-Pacific 6%, Europe 5%, other 4% (percentages based on net sales for 2002)
Part A. Audit ReportIndependent Auditors: PricewaterhouseCoopers LLPThe independent auditors for Tiffany & Co. state that all financial information has been presented fairly and is in conformity with generally accepted accounting principles in the US.
Part A. Stock Market InformationMost recent price of stock: $39.6412 month trading range: $19.40-$41.00Dividend per Share: $.16Date of Information: January 31, 2002In my opinion, it would be best for stockholders to sell their stock because at $39.64 per share, the stock is only $.36 away from its 12 month high. The value of the stock is more likely to decrease than increase any substantial amount.
Part B. Industry Situation and Company PlansThe Company Profile lists four key growth strategies:1) expand channels of distribution in important markets around the world2) compliment existing products with active product development programs3) enhance customer awareness of product design, quality, and value offered by Tiffanys through its marketing programs4) provide customer service that ensures a superior shopping experience
The Letter to the Stockholders states that the future of Tiffanys continues to base its confidence in its proven, disciplined approach to long-term development. During 2002, Tiffany & Co. strengthened its infrastructure and building capacity that will enable it to support future growth.
Part C. Income StatementTiffany & Co. uses a Multi-step Income Statement 2003 2002 Gross Margin $1,011,448 $943,447 Operating Income 319,197 309,894 Net Income 189,894 173,587
Gross Margin, Operating Income, and Net Income all increased from 2002 to 2003.
Part C. Balance Sheet Assets = Liabilities + Stockholders Equity2003 $1,923,586 = 715,537 + 1,208,0492002 $1,631,074 = 594,129 + 1,036,945
Part C. Statement of Cash FlowsBoth cash flow from operations and net income have increased since the previous year.The company is growing by expanding its store locations. In 2002, Tiffany & Co. opened and renovated many new stores in the US and in international markets. The companys primary source of financing is through proceeds from issuance of long-term debt. Overall, cash has decreased over the past two years since capital expenditures have exceeded 10% of net sales the last couple of years to fund major products that should increase net sales later.
Part D. Accounting PoliciesFinancial Statements are prepared in accordance to the Generally Accepted Accounting Principles.The equity method of accounting is used for investments in which company has a significant influence.Cash and cash equivalents are stated at cost plus accrued interest.Inventories are valued at the lower of cost or market. Domestic and foreign branch inventory is valued using LIFO, while inventory held by foreign subsidiaries are valued using FIFO.Plant, Property, and Equipment is stated at cost less Accumulated Depreciation, which is calculated using the straight-line method.
Part E. Financial Analysis Liquidity Ratios 2003 2002Working Capital $770,481 $638,709Current Ratio 3.57 times 3.03 timesReceivables Turnover 15.09 times 16.31 timesAvg. Days Sales Uncollected 24.24 days 22.38 daysInventory Turnover .95 times1.08 timesAvg. Days Inventory on Hand 384.4 days 336.7 days
Part E. Financial AnalysisProfitability Ratios 2002 2001Profit Margin 11.1% 10.8%Asset Turnover .96 times 1.01 timesReturn on Assets .11 times .11 timesReturn on Equity .17 times .09 times
Part E. Financial AnalysisSolvency Ratios Debt to Equity
2003 2002 .25 times .30 times
Part E. Financial AnalysisMarket Strength Ratios 2002 2001Price/earnings per share 30.97 times 23.22 times Dividend Yield .4% .6%