Annual Report of an Employee Stock Purchase, Savings or Similar Plan — Form 11-K Filing Table of Contents
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* All other schedules required by Section 2520.103-10 of the Department of Labor's Rules and Regulations for Reporting and Disclosures under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Participants of
Tiffany and Company Employee Profit Sharing
and Retirement Savings Plan
We
have audited the accompanying statements of net assets available for benefits of Tiffany and Company Employee Profit Sharing and Retirement Savings Plan (the "Plan") as of January 31, 2014 and 2013, and the related statement of changes in net assets available for benefits for the year ended January 31, 2014. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not
required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets
available for benefits of Tiffany and Company Employee Profit Sharing and Retirement Savings Plan as of January 31, 2014 and 2013, and the changes in net assets available for benefits for the year ended January 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) as of January 31, 2014 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
EMPLOYEE PROFIT SHARING AND RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
A. DESCRIPTION OF PLAN
The
following description of the Tiffany and Company Employee Profit Sharing and Retirement Savings Plan (the “Plan”) is provided for general informational purposes only. Participants should refer to the Summary Plan Description or the Plan document for complete information.
General
The Plan is a defined contribution plan covering all eligible employees of Tiffany & Co. and its U.S. subsidiaries and has an employee profit-sharing feature (“ESOP”). Effective February 1, 2006, the Plan was amended to provide a defined contribution retirement benefit (the “DCRB”) to eligible employees hired on or after January
1, 2006. Effective February 1, 2014, Tiffany and Company (the "Company"), a subsidiary of Tiffany & Co., assumed sponsorship of the Plan, and the Plan was amended to reflect the change in sponsorship of the Plan from Tiffany & Co.
The assets of the Plan are maintained and transactions therein are executed by DWS Trust Company, Inc., the trustee of the Plan (“Trustee”), an affiliate of Deutsche Bank, Inc. The Plan record keeper is ADP Retirement Services. The Plan is administered by the Employee Profit Sharing and Retirement Savings Plan Committee (the “Plan Committee”) appointed by the Board of Directors of the Company. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”).
Eligibility
Employees automatically become participants in the ESOP feature of the Plan on the February 1st immediately following their initial date of employment. Employees become eligible and are automatically enrolled in the 401(k) feature 60 days after their initial date of employment provided the employee is scheduled to work thirty-five or more hours per week on a non-temporary basis. All other employees are enrolled 60 days after completing one year of service. Employees may opt out of 401(k) participation at any time. All employees hired on or after January 1, 2006 automatically become participants in the DCRB feature of the Plan on
their date of hire. Officers of Tiffany & Co. (those subject to Section 16 of the Securities Exchange Act of 1934) do not share in contributions made under the ESOP feature of the Plan.
Contributions
The ESOP feature of the Plan is non-contributory on the part of participating employees and is funded by Tiffany & Co. contributions of shares of Tiffany & Co. common stock. Each employee who has two or more years of service can diversify his or her ESOP contribution into other investment options provided under the Plan. Tiffany & Co. contributions to the ESOP, if any, are based upon the achievement by Tiffany & Co. of certain targeted earnings objectives as established by the Board of Directors of Tiffany & Co. in accordance with, and subject to, the terms and limitations
of the Plan. Employees must be employed by the Company on the last day of the Plan year and have at least 1,000 hours of employment during the Plan year to receive the ESOP contribution. As of January 31, 2014, Tiffany & Co. had an ESOP contribution payable of $3,924,999, of which $341,932 was considered non-participant directed. As of January 31, 2013, Tiffany & Co. did not have an ESOP contribution payable. Effective February 1, 2014, the ESOP feature of the Plan was frozen by the Company and, beginning in 2014, eligible employees will participate in a yearly cash profit sharing award and will no longer be eligible to receive shares under the ESOP
feature. See subsequent events disclosure in "Note B. Summary of Significant Accounting Policies" for additional information.
The 401(k) feature of the Plan is funded by both employee and employer contributions. With respect to employee contributions, participants may elect, in one percent increments, to have an amount of between one (1) and fifty (50) percent of their annual compensation, not to exceed $17,500 in 2013 (or $23,000 for individuals over 50 years of age), subject to annual inflation adjustments in future years, contributed to the 401(k) feature of the Plan as a tax deferred contribution, and subject to certain limitations applicable to highly compensated employees.
Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans.
With respect to employer contributions, following the end of each Plan year, a matching contribution may be made at the discretion of the Plan sponsor to the account of each employee who was a participant in the 401(k) feature of the Plan as of the end of such Plan year. Such contribution for the Plan years ended on January 31, 2014 and 2013 is equal to up to fifty percent (50%) of such participant's total elective contributions to his or her account during that year, up to a maximum of six percent (6%) of such participant's compensation
over that same year. Employer contributions to a participant's account are allocated among the various investment options in the same proportion as the participant's own contributions.
Under certain circumstances, employee contributions and employer matching contributions may be limited in the case of highly compensated employees.
The DCRB feature of the Plan is non-contributory on the part of participating employees and is funded by employer contributions, following the end of each Plan year, to be invested in a manner similar to the 401(k) retirement savings portion of the Plan. Employer contributions are determined by a formula using the participant’s eligible compensation, age and years of service.
Participant
Accounts
Each participant's 401(k) and DCRB account is credited with the participant's contribution, if applicable, employer contributions, and an allocation of each selected fund's earnings, including interest, dividends and net realized and unrealized appreciation in the fair value of investments. Each participant’s account is also charged an allocation of net realized and unrealized depreciation in the fair value of investments and investment-related expenses. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account balance. Allocations are based on participant account balances.
Tiffany & Co.'s contribution for each Plan year under the ESOP feature of the Plan is allocated to participants' accounts on an equal basis.
Vesting
All amounts contributed by employees under the 401(k) feature of the Plan and earnings thereon are immediately 100% vested and non-forfeitable at all times. Employer contributions under the 401(k) feature of the Plan become 100% vested and non-forfeitable after the participant has completed two years of service. Employer contributions under the DCRB feature of the Plan become vested based on the following schedule:
Years of Service
Vested Percentage
Less
than 2 years
0%
2 years or more
20%
3 years or more
40%
4 years or more
60%
5 years or more
80%
6 years or more
100%
A
participant also becomes vested in his or her DCRB employer contributions upon termination of employment by reason of death or if employment with the Company ends at or after age 65. Contributions to participant accounts associated with the ESOP feature of the Plan become 100% vested and non-forfeitable when the participant has completed two years of service. A participant also becomes vested in his or her ESOP account and employer matching contributions upon termination of employment by reason of death, retirement or disability. For purposes of the Plan, retirement is defined as termination of employment after age 65.
In the event a participant leaves the Company prior to becoming fully vested, the participant will
forfeit the shares in his or her ESOP account and such shares will remain in the Plan to be reallocated ratably amongst the remaining participants in the Plan's ESOP feature within the DWS Trust Co. Money Market Prime Series. Forfeitures relating to the ESOP feature of the Plan totaled $4,764 and $54,694 at January 31, 2014 and 2013, respectively, and were
subsequently reallocated. The participant will also forfeit any assets in his or her 401(k) or DCRB account representing unvested employer contributions and such assets will be made available
to offset future employer matching contributions to other participants’ accounts. Forfeitures of contributions in the 401(k) and DCRB portion of the Plan totaled $758,821 and $692,018 at January 31, 2014 and 2013, respectively. Forfeitures of $575,689 and $525,280 were used to reduce employer contributions, which are made in the following year, for the years ended January 31, 2014 and 2013, respectively.
Administrative Expenses
The Plan accrues a percentage of the fair value of the Plan assets which is transferred into a holding account to pay recordkeeping fees and other administrative expenses
as they come due. The Company must pay any expenses which exceed amounts accumulated in the holding account.
Notes Receivable from Participants and Withdrawals
Participants may borrow from their 401(k) accounts up to a maximum amount of no more than $50,000 or fifty percent (50%) of their total vested 401(k) account balance, including employer matching contributions. The Plan permits each participant to undertake up to two loans simultaneously. All loans must be repaid within five years unless they are used by the participant to purchase a primary residence. Loans are collaterized by the balance in the participant’s account and bear interest at rates commensurate with prevailing market rates as determined
by the Plan administrator. Interest rates currently range from 4.25 percent to 9.25 percent. Principal and interest is paid ratably through payroll deductions.
Participants may also obtain a cash withdrawal of all or a portion of the value of their 401(k) account contributions (excluding employer matching contributions and earnings on contributions) and their rollover contributions, if any, on the basis of hardship as permitted under the Plan.
Payment of Benefits
Distributions of the participant’s account may be made upon retirement, death or disability, or upon termination of employment. Participants will receive the full vested balance of their Plan account in a lump sum cash distribution, except
with respect to the DCRB account which may be received in the form of either a lump sum or ten substantially equal annual installments and with respect to whole shares held in the ESOP feature of the Plan that are distributed in the form of stock certificates. The balance of the participant's Tiffany & Co. common stock fund account may also be distributed in the form of stock certificates for whole shares if the participant so elects. Subject to certain mandatory distribution provisions, in the event of retirement, a participant may elect to defer his/her distribution until the next Plan year thereby entitling the participant to his or her proportionate share of Tiffany & Co.'s contribution to the ESOP feature of the Plan for the Plan year in which the participant retired. In the event of a participant's death, the distribution of the participant's account balance will be made to the participant's designated beneficiary or the participant's estate, if no beneficiary
has been so designated.
Voting Rights
Each participant is entitled to exercise voting rights attributable to the shares of Tiffany & Co. Common Stock allocated to his or her account and is notified by the Trustee prior to the time that such rights are to be exercised. The Trustee is not permitted to vote any allocated share for which instructions have not been given by a participant.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The
Plan's financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Payment of Benefits
Benefit payments to participants are recorded upon distribution.
Investments in mutual
funds are stated at fair value as determined by quoted market prices based on the net asset value of shares held by the Plan at year-end. Investments in Tiffany & Co. common stock are stated at fair value as determined by quoted market prices as of the last day of the Plan year. Investments in common and collective trusts are valued based on the net asset values (“NAV”) reported by the Trustee of the funds which are based on the value of the underlying assets owned by the fund, minus its liabilities and then divided by the number of shares outstanding. The NAV is used as a practical expedient to estimate fair value.
The Plan presents, in the statement of changes in net assets available for benefits, the net appreciation/(depreciation) in the fair value of its investments, which consists of the realized gains or losses and the unrealized appreciation/(depreciation)
on those investments.
Income Recognition
Purchases and sales of investments are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded when earned. Cost of securities sold is determined by specific identification method.
Notes Receivable from Participants
Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are reclassified as distributions based upon the terms of the Plan document. Therefore, no allowance for credit losses has been recorded as of January
31, 2014 or 2013.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Subsequent Events
Effective February 1, 2014, the ESOP feature of the Plan was frozen
by the Company. Beginning in 2014, employees will participate in a yearly cash profit sharing award based on profitability goals approved by the Board of Directors of Tiffany & Co. and will no longer be eligible to receive shares under the ESOP feature. Contributions will be deposited into the 401(k) feature of the Plan according to each eligible employee's selected investment allocations. For those employees who have not selected investment allocations, the contribution will be directed to a qualified default investment alternative. Additionally, effective February 1, 2014, the Company, a subsidiary of Tiffany & Co., assumed sponsorship of the Plan, and the Plan was amended to reflect the change in sponsorship of the Plan from Tiffany & Co.
C.
INVESTMENTS
Investments that were equal to or exceeded 5% of the current value of the Plan’s net assets available for benefits at January 31, 2014 or 2013 were as follows:
As
of January 31, 2014 and 2013, there were 904 shares totaling $75,245 and 958 shares totaling $63,005, respectively, of Tiffany & Co. common stock that were non-participant directed.
The net appreciation in the fair value of investments for the year ended January 31, 2014 was as follows:
Common and collective trusts
$
9,823,447
Mutual
funds
11,867,264
Tiffany & Co. Common Stock
26,368,620
Tiffany & Co. Common Stock (ESOP)*
17,152
Net appreciation in the fair value of investments
$
48,076,483
*
Non-participant directed.
D. FAIR VALUE MEASUREMENTS
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. Level 1 inputs are considered to carry the most weight within the fair value hierarchy due to the low levels of judgment required in determining fair values.
Level 2 - Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 - Unobservable inputs reflecting the reporting entity’s own assumptions. Level 3 inputs are considered to carry the least weight within the fair value hierarchy due to substantial levels of judgment required in determining fair value.
Refer to Note B for the valuation methods used to fair value Plan assets.
Certain Plan investments include common and collective trusts and mutual funds managed
by DWS Trust Company, Inc., the Plan Trustee. Therefore, investment transactions in such common and collective trusts and mutual funds are considered to be exempt party-in-interest transactions under the Department of Labor's rules and regulations. Additionally, investments of the Plan include common stock of Tiffany & Co., the parent company of the Plan sponsor.
G. TAX STATUS
The Internal Revenue Service (“IRS”) has determined and informed Tiffany & Co. by a letter dated January 12, 2012, that the Plan was designed and in conformity with the applicable requirements of the Internal Revenue
Code. The Plan has since been amended. However, it is the belief of the Plan administrator and the Plan's tax counsel that the Plan is currently designed and is being operated in compliance with the applicable requirements of the Internal Revenue Code. Accordingly, no provision for Federal income taxes has been made in the accompanying financial statements.
The Plan is subject to routine audits by taxing jurisdictions. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2010.
H. CONCENTRATIONS OF CREDIT AND MARKET RISK
The Plan provides for various investment
options in any one or a combination of Tiffany & Co. common stock, common and collective trusts and mutual funds that invest in a variety of stocks, bonds, fixed income securities and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participants' account balances and the amounts reported in the statements of net assets available for benefits and the statement of changes in net assets available for benefits.
I. PLAN TERMINATION
Although
it has not expressed any intent to do so, the Company reserves the right to change, amend or terminate the Plan at any time at its discretion, subject to the provisions of ERISA. In the event the Plan is terminated, participants will become 100% vested in their accounts. In addition, in the event of the dissolution, merger, consolidation or reorganization of the Company, unless the Plan is continued by a successor to the Company, the Plan will automatically terminate and the Plan's assets will be liquidated.
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the Trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Tiffany and Company Employee Profit Sharing and Retirement Savings Plan
