Edgar Filing: TIFFANY & CO

10-Q

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 July 31, 2007.


		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 Ave. 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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One).


Large Accelerated filer X		Accelerated filer		Non-Accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes . No X .

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: Common Stock, $.01 par value, 136,722,420 shares outstanding at the close of business on July 31, 2007.

TIFFANY & CO. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JULY 31, 2007


PART I - FINANCIAL INFORMATION		PAGE

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets - July 31, 2007, January 31, 2007 and July 31, 2006 (Unaudited)		3

	Condensed Consolidated Statements of Earnings - for the three and six months ended July 31, 2007 and 2006 (Unaudited)		4

	Condensed Consolidated Statements of Stockholders’ Equity - for the six months ended July 31, 2007 and Comprehensive Earnings - for the three and six months ended July 31, 2007 and 2006 (Unaudited)		5

	Condensed Consolidated Statements of Cash Flows - for the six months ended July 31, 2007 and 2006 (Unaudited)		6

	Notes to Condensed Consolidated Financial Statements (Unaudited)		7-12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13-20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		21

Item 4.	Controls and Procedures		22


PART II - OTHER INFORMATION


Item 1A.	Risk Factors		23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		24

Item 4.	Submission of Matters to a Vote of Security Holders		25

Item 6.	Exhibits		26

	(a) Exhibits

PART I. Financial Information
Item 1. Financial Statements

TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except per share amounts)


	July 31,			January 31,			July 31,
	2007			2007			2006
ASSETS

Current assets:
Cash and cash equivalents	$	129,027		$	175,008		$	144,868
Short-term investments		-			15,500			-
Accounts receivable, less allowances of $6,133, $7,900 and $7,095		152,353			165,594			141,724
Inventories, net		1,253,657			1,146,674			1,174,319
Deferred income taxes		104,185			72,934			79,882
Prepaid expenses and other current assets		79,816			57,460			60,936
Assets held for sale		48,900			73,474			68,467


Total current assets		1,767,938			1,706,644			1,670,196

Property, plant and equipment, net		945,280			912,143			888,249
Deferred income taxes		51,100			37,368			28,072
Other assets, net		168,180			156,097			164,180
Assets held for sale - noncurrent		-			33,258			36,329


	$	2,932,498		$	2,845,510		$	2,787,026


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Short-term borrowings	$	130,995		$	106,681		$	142,215
Current portion of long-term debt		5,455			5,398			6,272
Accounts payable and accrued liabilities		164,164			198,471			185,312
Income taxes payable		28,147			62,979			31,333
Merchandise and other customer credits		64,600			61,511			57,577
Liabilities held for sale		14,544			17,631			14,123


Total current liabilities		407,905			452,671			436,832

Long-term debt		400,643			406,383			423,819
Pension/postretirement benefit obligations		95,204			84,466			75,825
Other long-term liabilities		132,858			92,718			85,812
Liabilities held for sale - noncurrent		-			4,377			4,187

Commitments and contingencies

Stockholders’ equity:
Preferred Stock, $0.01 par value; authorized 2,000 shares, none issued and outstanding		-			-			-
Common Stock, $0.01 par value; authorized 240,000 shares, issued and outstanding 136,722, 135,875 and 138,139		1,368			1,358			1,381
Additional paid-in capital		619,456			536,187			504,678
Retained earnings		1,265,992			1,269,940			1,237,237
Accumulated other comprehensive gain (loss), net of tax:
Foreign currency translation adjustments		24,802			11,846			16,050
Deferred hedging gain		92			2,046			655
Unrealized gain on marketable securities		155			178			550
Net unrealized losses on benefit plans		(15,977	)		(16,660	)		-


Total stockholders’ equity		1,895,888			1,804,895			1,760,551


	$	2,932,498		$	2,845,510		$	2,787,026

See notes to condensed consolidated financial statements.

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


	Three Months Ended						Six Months Ended
	July 31,						July 31,
	2007			2006			2007			2006

Net sales	$	662,562		$	554,657		$	1,258,291		$	1,070,013

Cost of sales		296,449			244,214			564,850			468,443


Gross profit		366,113			310,443			693,441			601,570

Selling, general and administrative expenses		259,119			233,565			505,160			449,758


Earnings from continuing operations		106,994			76,878			188,281			151,812

Other expenses, net		2,748			5,214			5,833			9,143


Earnings from continuing operations before income taxes		104,246			71,664			182,448			142,669

Provision for income taxes		41,027			26,950			69,824			54,471


Net earnings from continuing operations		63,219			44,714			112,624			88,198

Loss from discontinued operations, net of tax benefits		(26,246	)		(3,570	)		(25,992	)		(3,912	)


Net earnings	$	36,973		$	41,144		$	86,632		$	84,286



Earnings per share:

Basic
Net earnings from continuing operations	$	0.46		$	0.32		$	0.82		$	0.63
Loss from discontinued operations		(0.19	)		(0.02	)		(0.19	)		(0.03	)

Net earnings	$	0.27		$	0.30		$	0.63		$	0.60


Diluted
Net earnings from continuing operations	$	0.45		$	0.32		$	0.80		$	0.62
Loss from discontinued operations		(0.19	)		(0.03	)		(0.18	)		(0.03	)

Net earnings	$	0.26		$	0.29		$	0.62		$	0.59


Weighted-average number of common shares:
Basic		136,743			139,170			136,616			140,556
Diluted		140,325			141,177			140,100			142,896

See notes to condensed consolidated financial statements.

TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE EARNINGS
(Unaudited)
(in thousands)


							Accumulated
	Total						Other									Additional
	Stockholders’			Retained			Comprehensive			Common Stock						Paid-in
	Equity			Earnings			Gain (Loss		)	Shares			Amount			Capital

Balances, January 31, 2007	$	1,804,895		$	1,269,940		$	(2,590	)		135,875		$	1,358		$	536,187
Implementation effect of FIN No. 48		(4,299	)		(4,299	)		-			-			-			-

Balances, February 1, 2007		1,800,596			1,265,641			(2,590	)		135,875			1,358			536,187

Exercise of stock options and vesting of restricted stock units (“RSUs”)		54,032			-			-			1,977			21			54,011
Tax benefit from exercise of stock options and vesting of RSUs		11,033			-			-			-			-			11,033
Share-based compensation expense		18,723			-			-			-			-			18,723
Issuance of Common Stock under Employee Profit Sharing and Retirement Savings Plan		2,450			-			-			52			1			2,449
Purchase and retirement of Common Stock		(59,197	)		(56,238	)		-			(1,182	)		(12	)		(2,947	)
Cash dividends on Common Stock		(30,043	)		(30,043	)		-			-			-			-
Deferred hedging loss, net of tax		(1,954	)		-			(1,954	)		-			-			-
Unrealized loss on marketable securities, net of tax		(23	)		-			(23	)		-			-			-
Foreign currency translation adjustments, net of tax		12,956			-			12,956			-			-			-
Amortization of net losses on benefit plans, net of tax		683			-			683			-			-			-
Net earnings		86,632			86,632			-			-			-			-


Balances, July 31, 2007	$	1,895,888		$	1,265,992		$	9,072			136,722		$	1,368		$	619,456


	Three Months Ended						Six Months Ended
	July 31,						July 31,
	2007			2006			2007			2006
Comprehensive earnings are as follows:
Net earnings	$	36,973		$	41,144		$	86,632		$	84,286
Other comprehensive gain (loss), net of tax:
Deferred hedging (loss) gain		(850	)		984			(1,954	)		(2,592	)
Foreign currency translation adjustments		3,441			1,857			12,956			10,769
Unrealized loss on marketable securities		(283	)		(164	)		(23	)		(129	)
Amortization of net losses on benefit plans		335			-			683			-

Comprehensive earnings	$	39,616		$	43,821		$	98,294		$	92,334

See notes to condensed consolidated financial statements.

TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)


	Six Months Ended
	July 31,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	86,632		$	84,286
Loss from discontinued operations, net of tax		(25,992	)		(3,912	)

Net earnings from continuing operations		112,624			88,198

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		61,730			56,754
Excess tax benefits from share-based payment arrangements		(9,897	)		(721	)
Provision for inventories		7,195			4,937
Deferred income taxes		(706	)		(13,067	)
Provision for pension/postretirement benefits		13,402			13,353
Share-based compensation expense		18,481			16,423
Changes in assets and liabilities:
Accounts receivable		18,456			2,450
Inventories		(100,911	)		(170,681	)
Prepaid expenses and other current assets		(18,014	)		(31,511	)
Other assets, net		(9,270	)		(638	)
Accounts payable and accrued liabilities		(23,858	)		3,361
Income taxes payable		(24,342	)		(28,309	)
Merchandise and other customer credits		2,845			1,008
Other long-term liabilities		3,024			(6,234	)

Net cash provided by (used in) operating activities		50,759			(64,677	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities and short-term investments		(217,861	)		(122,529	)
Proceeds from sales of marketable securities and short-term investments		231,919			122,215
Capital expenditures		(87,779	)		(85,978	)
Notes receivable funded		(2,172	)		-
Acquisitions, net of cash acquired		(400	)		-
Other		1,799			(286	)

Net cash used in investing activities		(74,494	)		(86,578	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings, net		17,330			102,933
Repayment of long-term debt		(10,082	)		(5,807	)
Repurchase of Common Stock		(59,197	)		(163,589	)
Proceeds from exercise of stock options		54,032			3,978
Excess tax benefits from share-based payment arrangements		9,897			721
Cash dividends on Common Stock		(30,043	)		(25,398	)

Net cash used in financing activities		(18,063	)		(87,162	)


Effect of exchange rate changes on cash and cash equivalents		3,817			2,159


CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities		(7,168	)		(8,048	)
Investing activities		(858	)		(2,361	)

Net cash used in discontinued operations		(8,026	)		(10,409	)


Net decrease in cash and cash equivalents		(46,007	)		(246,667	)
Cash and cash equivalents at beginning of year		175,008			391,594
Decrease (increase) in cash and cash equivalents of discontinued operations		26			(59	)

Cash and cash equivalents at end of six months	$	129,027		$	144,868

See notes to condensed consolidated financial statements.

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. and all majority-owned domestic and foreign subsidiaries (the “Company”). Intercompany accounts, transactions and profits have been eliminated in consolidation. The interim statements are unaudited and, in the opinion of management, include all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position as of July 31, 2007 and 2006 and the results of its operations and cash flows for the interim periods presented. The condensed consolidated balance sheet data for January 31, 2007 is derived from the audited financial statements, which are included in the Company’s Report on Form 10-K and should be read in connection with these financial statements. In accordance with 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, with a higher proportion of sales and earnings generated in the fourth quarter of the fiscal year and, therefore, the results of its operations for the three and six months ended July 31, 2007 and 2006 are not necessarily indicative of the results of the entire fiscal year.

2.		NEW ACCOUNTING STANDARDS

		In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” which establishes a framework for measuring fair value of assets and liabilities and expands disclosures about fair value measurements. The changes to current practice resulting from the application of SFAS No. 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the effect that the adoption of this Statement will have on the Company’s financial position and earnings.

		In July 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” which clarifies the accounting for uncertainty in income tax positions by prescribing a more-likely-than-not recognition threshold for income tax positions taken or expected to be taken in a tax return. FIN No. 48 is effective for fiscal years beginning after December 15, 2006 with the cumulative effect of the change in accounting principle recorded as an adjustment to retained earnings at the beginning of the year. The Company has adopted FIN No. 48 as of February 1, 2007 which resulted in a charge of $4,299,000 to retained earnings as a cumulative effect of an accounting change (see Note 5).

3.		DISCONTINUED OPERATIONS

		Management has concluded that Little Switzerland Inc.’s (“Little Switzerland”) operations do not demonstrate the potential to generate a return on investment consistent with management’s objectives and therefore, during the second quarter of 2007 the Company’s Board of Directors authorized the sale of Little Switzerland. On July 31, 2007, the Company entered into an agreement with NXP Corporation (“NXP”) by which NXP would purchase 100% of the stock of Little Switzerland, Inc. The transaction is expected to close in third quarter of 2007 for proceeds of approximately $35,000,000 which excludes payments for existing trade payables owed to the Company by Little Switzerland. The purchase price is subject to customary post-closing adjustments. The Company has agreed to continue to distribute TIFFANY & CO merchandise through TIFFANY & CO. boutiques maintained in certain LITTLE SWITZERLAND stores post-closing. In addition, the Company has agreed to provide warehousing services to Little Switzerland for a transition period.

		The Company has determined that the continuing cash flows from Little Switzerland operations were not significant. Therefore, the results of Little Switzerland are presented as a discontinued operation in the consolidated financial statements for all periods presented. Prior to the reclassification, Little Switzerland’s results were included within the non-reportable segment Other.

3.		DISCONTINUED OPERATIONS (continued)

		The loss before income taxes of Little Switzerland includes a $54,861,000 pre-tax impairment charge ($23,583,000 after-tax) reflecting the difference between Little Switzerland’s carrying value and its estimated fair value, less costs to dispose. The tax benefit recorded in connection with the impairment charge included the effect of basis differences in the investment in Little Switzerland.

		Summarized statement of earnings data for Little Switzerland is as follows:


	Three Months Ended						Six Months Ended
	July 31,						July 31,
(in thousands)	2007			2006			2007			2006


Net revenues	$	18,294		$	20,283		$	43,439		$	44,168


Loss before income taxes	$	(58,404	)	$	(4,335	)	$	(58,369	)	$	(5,068	)
Benefit from income taxes		(32,158	)		(765	)		(32,377	)		(1,156	)

Loss from discontinued operations, net of tax	$	(26,246	)	$	(3,570	)	$	(25,992	)	$	(3,912	)

Summarized balance sheet data for Little Switzerland is as follows:


	July 31,			January 31,		July 31,
(in thousands)	2007			2007		2006

Assets held for sale
Inventories, net	$	66,728		$	67,948	$	62,676
Other current assets		5,026			5,526		5,791
Property, plant and equipment, net		19,307			20,246		16,231
Other assets		12,700			13,012		20,098
Impairment charge		(54,861	)		-		-

Total assets held for sale	$	48,900		$	106,732	$	104,796

Liabilities held for sale
Current liabilities	$	9,268		$	17,631	$	14,123
Other liabilities		5,276			4,377		4,187

Total liabilities held for sale	$	14,544		$	22,008	$	18,310

INVENTORIES


	July 31,		January 31,		July 31,
(in thousands)	2007		2007		2006

Finished goods	$	840,479	$	772,102	$	785,102
Raw materials		339,964		316,206		318,095
Work-in-process		73,214		58,366		71,122

Inventories, net	$	1,253,657	$	1,146,674	$	1,174,319

LIFO-based inventories at July 31, 2007, January 31, 2007 and July 31, 2006 represented 71%, 72% and 75% of inventories, net, with the current cost exceeding the LIFO inventory value by $120,940,000, $108,501,000 and $85,091,000 at the end of each period.

5.		INCOME TAXES

		The Company adopted FIN No. 48 on February 1, 2007. As a result, the Company recorded a non-cash cumulative transition charge of $4,299,000 as a reduction to the opening retained earnings balance. As of February 1, 2007, the gross amount of unrecognized tax benefits was approximately $40,000,000, which includes interest and penalties of approximately $8,000,000. The total amount of unrecognized tax benefits that, if recognized, would have affected the effective tax rate was approximately $22,500,000. The Company recognizes interest expense and penalties related to the above unrecognized tax benefits within income tax expense.

		During the six months ended July 31, 2007, there were no material changes to the unrecognized tax liability as a result of state audit settlements or the expiration of the statute of limitations. The change in accrued interest and penalties during the six months ended July 31, 2007 was not material.

		The Company files income tax returns in the U.S. federal jurisdiction as well as various state and foreign locations. As a matter of course, various taxing authorities regularly audit the Company. The Company’s tax filings are currently being examined by tax authorities in jurisdictions where its subsidiaries have a material presence, including U.S. Federal (tax years 2003-2004), Japan (tax years 2003-2005), New York State and New York City (tax years 1999-2002). Tax years from 2003-present are open to examination in various other state and foreign taxing jurisdictions. The Company believes that its tax positions comply with applicable tax law and that it has adequately provided for these matters. However, the audits may result in proposed assessments where the ultimate resolution may result in the Company owing additional taxes. Ongoing audits are in various stages of completion and while the Company does not anticipate any material changes in unrecognized income tax benefits over the next 12 months it is possible that developments in the audit process could impact this assessment.

6.		EARNINGS PER SHARE

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

		The following table summarizes the reconciliation of the numerators and denominators for the basic and diluted earnings per share (“EPS”) computations:


	Three Months Ended					Six Months Ended
	July 31, 2007					July 31, 2006
(in thousands)	2007		2006		2007		2006


Net earnings for basic and diluted EPS	$	36,973	$	41,144	$	86,632	$	84,286


Weighted average shares for basic EPS		136,743		139,170		136,616		140,556

Incremental shares based upon the assumed exercise of stock options and restricted stock units		3,582		2,007		3,484		2,340


Weighted average shares for diluted EPS		140,325		141,177		140,100		142,896

For the three months ended July 31, 2007 and 2006, there were 388,000 and 6,672,000 stock options and restricted stock units excluded from the computations of earnings per diluted share due to their antidilutive effect. For the six months ended July 31, 2007 and 2006, there were 388,000 and 5,221,000 stock options and restricted stock units excluded from the computations of earnings per diluted share due to their antidilutive effect.

7.		EMPLOYEE BENEFIT PLANS

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

		Net periodic pension and other postretirement benefit expense included the following components:


	Three Months Ended July 31,
							Other
	Pension Benefits						Postretirement Benefits
(in thousands)	2007			2006			2007			2006

Service cost	$	4,613		$	4,140		$	317		$	376
Interest cost		4,014			3,550			470			429
Expected return on plan assets		(3,429	)		(2,944	)		-			-
Amortization of prior service cost		320			178			(224	)		(293	)
Amortization of net loss		729			1,161			10			85

Net expense	$	6,247		$	6,085		$	573		$	597


	Six Months Ended July 31,
							Other
	Pension Benefits						Postretirement Benefits
(in thousands)	2007			2006			2007			2006

Service cost	$	9,160		$	8,271		$	635		$	752
Interest cost		7,942			7,098			940			858
Expected return on plan assets		(6,858	)		(5,888	)		-			-
Amortization of prior service cost		641			356			(447	)		(586	)
Amortization of net loss		1,369			2,322			20			170

Net expense	$	12,254		$	12,159		$	1,148		$	1,194

8.		SEGMENT INFORMATION

		The Company’s reportable segments are: U.S. Retail, International Retail and Direct Marketing. These reportable segments represent channels of distribution that offer similar merchandise and service and have similar marketing and distribution strategies. The Other channel of distribution includes all non-reportable segments which consist of worldwide sales of businesses operated under trademarks or tradenames other than TIFFANY & CO. Other also includes wholesale sales of diamonds obtained through bulk purchases that are subsequently deemed not suitable for the Company’s needs. In deciding how to allocate resources and assess performance, the Company’s Executive Officers regularly evaluate the performance of its reportable segments on the basis of net sales and earnings from operations, after the elimination of inter-segment sales and transfers.

		Reclassifications were made to the prior year’s segment amounts to conform to the current year presentation and to reflect the revised manner in which management evaluates the performance of segments. Effective with the first quarter of 2007, the Company revised certain allocations of operating expenses between unallocated corporate expenses and earnings (losses) from continuing operations for segments.

8.		SEGMENT INFORMATION (continued)

		Certain information relating to the Company’s segments is set forth below:


	Three Months Ended						Six Months Ended
	July 31,						July 31,
(in thousands)	2007			2006			2007			2006

Net sales:
U.S. Retail	$	345,336		$	288,556		$	644,019		$	549,136
International Retail		259,023			223,153			507,030			438,317
Direct Marketing		40,103			35,742			73,399			65,699

Total reportable segments		644,462			547,451			1,224,448			1,053,152
Other		18,100			7,206			33,843			16,861

	$	662,562		$	554,657		$	1,258,291		$	1,070,013


Earnings (losses) from continuing operations*:
U.S. Retail	$	64,611		$	43,974		$	108,215		$	86,115
International Retail		61,652			51,769			122,183			105,220
Direct Marketing		13,379			10,149			21,635			17,266

Total reportable segments		139,642			105,892			252,033			208,601
Other		(4,796	)		(3,331	)		(9,292	)		(6,218	)

	$	134,846		$	102,561		$	242,741		$	202,383

		*Represents earnings (losses) from operations before unallocated corporate expenses and other expenses, net.

		The following table sets forth a reconciliation of the segments’ earnings from continuing operations to the Company’s consolidated earnings before income taxes:


	Three Months Ended						Six Months Ended
	July 31,						July 31,
(in thousands)	2007			2006			2007			2006

Earnings from continuing operations for
segments	$	134,846		$	102,561		$	242,741		$	202,383

Unallocated corporate
expenses		(27,852	)		(25,683	)		(54,460	)		(50,571	)

Other expenses, net		(2,748	)		(5,214	)		(5,833	)		(9,143	)


Earnings from continuing operations before income taxes	$	104,246		$	71,664		$	182,448		$	142,669

9.		SUBSEQUENT EVENTS

		In August 2007, the Company’s Board of Directors declared a 25% increase in the quarterly rate on its Common Stock, increasing it from $0.12 per share to $0.15 per share. This dividend will be paid on October 10, 2007 to stockholders of record on September 20, 2007.

		In August 2007, the Company entered into a sale-leaseback arrangement for the land and building housing the TIFFANY & CO. Flagship store in Tokyo’s Ginza shopping district. The Company is leasing back only the portion of the property that it currently occupies. In the third quarter of 2007, the Company received proceeds of $328,000,000 (yen 38,050,000,000) and the transaction is expected to result in a pre-tax gain of approximately $104,000,000, and a deferred gain of approximately $75,000,000 which will be amortized over a 15-year period. The pre-tax gain represents the profit on the sale of the property in excess of the present value of the minimum lease payments. The lease will be accounted for as an operating lease. The lease expires in 2032, however, the Company has the option to terminate the lease in 2022 and 2027 without penalty.


PART I.		Financial Information
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Tiffany & Co. is a holding company that operates through its subsidiary companies (the “Company”). The Company’s principal subsidiary, Tiffany and Company, is a jeweler and specialty retailer whose principal merchandise offerings are an extensive selection of fine jewelry. It also sells timepieces, sterling silverware, china, crystal, stationery, fragrances and accessories. Through Tiffany and Company and other subsidiaries, the Company is engaged in product design, manufacturing and retailing activities.

The Company’s channels of distribution are as follows:

•		U.S. Retail includes sales in TIFFANY & CO. stores in the U.S., as well as sales of TIFFANY & CO. products through business-to-business direct selling operations in the U.S.;

•		International Retail includes sales in TIFFANY & CO. stores and department store boutiques outside the U.S., as well as business-to-business, Internet and wholesale sales of TIFFANY & CO. products outside the U.S.;

•		Direct Marketing includes Internet and catalog sales of TIFFANY & CO. products in the U.S.; and

•		Other includes worldwide sales of businesses operated under trademarks or tradenames other than TIFFANY & CO. (“specialty retail”). Other also includes wholesale sales of diamonds obtained through bulk purchases that are subsequently deemed not suitable for the Company’s needs.

All references to years relate to fiscal years ended or ending on January 31 of the following calendar year.

Highlights

•		Net sales increased 19% in the three months (“second quarter”) ended July 31, 2007 and 18% in the six months (“first half”) ended July 31, 2007 due to growth in all channels of distribution.

•		Worldwide comparable store sales increased 13% in the second quarter and 11% in the first half on a constant-exchange-rate basis (see Non-GAAP Measures). Comparable TIFFANY & CO. store sales in the U.S. increased 17% in the second quarter and 15% in the first half. Comparable international store sales increased 7% in the second quarter and 6% in the first half as growth in most countries more than offset declines in Japan.

•		Net earnings from continuing operations rose 41% in the second quarter and 28% in the first half. Net earnings declined 10% in the second quarter and rose 3% in the first half.

•		In July 2007, the Company entered into an agreement to sell 100% of the stock of Little Switzerland, Inc. The Company recorded an after-tax impairment charge of $23,583,000 reflecting the difference between Little Switzerland’s carrying value and its estimated fair value, less costs to dispose. The results of Little Switzerland (including the impairment charge) are presented in discontinued operations in the consolidated financial statements for all periods presented.

•		The Company repurchased and retired 0.7 million and 1.2 million shares of its Common Stock during the second quarter and first half of 2007.

•		In May 2007, the Board of Directors increased the annual divided rate by 20%.

NON-GAAP MEASURES

The Company’s reported sales reflect either a translation-related benefit from strengthening foreign currencies or a detriment from a strengthening U.S. dollar.

The Company reports information in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Internally, management monitors its international sales performance on a non-GAAP basis that eliminates the positive or negative effects that result from translating international sales into U.S. dollars (“constant-exchange-rate basis”). Management believes this constant-exchange-rate measure provides a more representative assessment of the sales performance and provides better comparability between reporting periods.

The Company’s management does not, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The

Company presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company’s operating results. The following table reconciles sales percentage increases (decreases) from the GAAP to the non-GAAP basis:


	Second Quarter 2007 vs. 2006			First Half 2007 vs. 2006
		Trans-	Constant-		Trans-	Constant-
	GAAP	lation	Exchange-	GAAP	lation	Exchange-
	Reported	Effect	Rate Basis	Reported	Effect	Rate Basis

Net Sales:

Worldwide	19%	(1)%	20%	18%	1%	17%

U.S. Retail	20%	-	20%	17%	-	17%

International Retail	16%	(1)%	17%	16%	1%	15%

Japan Retail	(7)%	(6)%	(1)%	(5)%	(4)%	(1)%

Other Asia-Pacific	42%	4%	38%	38%	3%	35%

Europe	43%	9%	34%	35%	10%	25%

Comparable Store Sales:

Worldwide	13%	-	13%	11%	-	11%

U.S. Retail	17%	-	17%	15%	-	15%

International Retail	6%	(1)%	7%	6%	-	6%

Japan Retail	(12)%	(6)%	(6)%	(10)%	(4)%	(6)%

Other Asia-Pacific	27%	3%	24%	27%	3%	24%

Europe	31%	8%	23%	28%	11%	17%

RESULTS OF OPERATIONS

Certain operating data as a percentage of net sales were as follows:


	Second Quarter						First Half
	2007			2006			2007			2006

Net sales		100.0	%		100.0	%		100.0	%		100.0	%

Cost of sales		44.7			44.0			44.9			43.8


Gross profit		55.3			56.0			55.1			56.2

Selling, general and administrative expenses		39.1			42.1			40.1			42.0


Earnings from continuing operations		16.2			13.9			15.0			14.2

Other expenses, net		0.5			1.0			0.5			0.9


Earnings from continuing operations		15.7			12.9			14.5			13.3
before income taxes

Provision for income taxes		6.2			4.8			5.5			5.1


Net earnings from continuing operations		9.5			8.1			9.0			8.2

Loss from discontinued operations, net of tax benefits		3.9			0.7			2.1			0.3


Net earnings		5.6	%		7.4	%		6.9	%		7.9	%

Net Sales
Net sales by channel of distribution were as follows:


	Second Quarter
(in thousands)	2007		2006		Increase


U.S. Retail	$	345,336	$	288,556		20	%

International Retail		259,023		223,153		16	%

Direct Marketing		40,103		35,742		12	%

Other		18,100		7,206		151	%


	$	662,562	$	554,657		19	%


	First Half
(in thousands)	2007		2006		Increase

U.S. Retail	$	644,019	$	549,136		17	%

International Retail		507,030		438,317		16	%

Direct Marketing		73,399		65,699		12	%

Other		33,843		16,861		101	%


	$	1,258,291	$	1,070,013		18	%

A store’s sales are included in “comparable store sales” when the store has been open for more than 12 months. In markets except Japan, sales for relocated stores are included in comparable store sales if the relocation occurs within the same geographical market. In Japan, sales for a new store or boutique are not included if the store was relocated from one department store to another or from a department store to a free-standing location. In all markets, the results of a store in which the square footage has been expanded or reduced remain in the comparable store base.

U.S. Retail sales increased 20% in the second quarter and 17% in the first half as a result of comparable store sales growth of 17% and 15% in those periods and the opening of new stores. In the second quarter and first half, the New York Flagship store’s sales increased 31% and 29%, and comparable branch store sales increased 14% and 12%. Comparable store sales growth resulted primarily from increases in the average sales amount per transaction. The increased amount per transaction reflected strong sales of diamond jewelry. In addition, the New York Flagship store benefited from higher levels of sales to foreign visitors. Management currently expects a low double-digit percentage increase in full year 2007 U.S. comparable store sales.

International Retail sales, on a constant-exchange-rate basis, increased 17% in the second quarter and 15% in the first half. Comparable store sales rose 7% and 6% for those periods.

In Japan (which represents slightly less than half of International Retail sales), on a constant-exchange-rate basis, total retail sales declined 1% in both the second quarter and first half due to a decrease in unit volume partly offset by an increase in the average transaction size. Comparable store sales on a constant-exchange-rate basis declined 6% in both the second quarter and first half. Despite the sales decline the Company continues to make progress on expanding and furthering developing relationships with key customers, introducing new products, with particular focus in the silver jewelry category and by enhancing retail branches through renovation, expansion and relocation.

In the Asia-Pacific region outside Japan, comparable store sales on a constant-exchange-rate basis increased 24% in both the second quarter and in the first half due to growth in most markets.

In Europe, comparable store sales on a constant-exchange-rate basis increased 23% in the second quarter and 17% in the first half due to growth in London (which represents more than half of Europe’s sales) and all Continental European markets.

Management currently expects a high single-digit percentage increase on a constant-exchange-rate basis in full year 2007 International Retail comparable store sales.

Direct Marketing sales rose 12% in both the second quarter and first half due to growth both in the number of orders shipped and in the average order size. Management continues to expect a mid-teens percentage increase in full year 2007 Direct Marketing sales.

Other sales increased in the second quarter and in the first half primarily due to increased wholesale sales of diamonds, which increased from $5,525,000 in the prior year second quarter to $15,636,000 in the second quarter of 2007 and increased from $13,927,000 in prior year first half to $29,274,000 in the first half of 2007. IRIDESSE store sales increased largely due to an increased store base, as well as comparable store sales growth. Management currently expects an approximately 40% increase in full year 2007 sales within the Other channel of distribution.

Management expects to increase the number of Company-operated TIFFANY & CO. stores and boutiques by approximately 10% (net) in 2007. Management’s announced openings and closings of TIFFANY & CO. stores are shown below:


	Actual Openings	Expected
Location	(Closings) 2007	Openings 2007
Americas:
Austin, Texas	First Quarter
New York-Wall Street, New York		Third Quarter
Las Vegas – Forum Shops, Nevada		Third Quarter
Natick, Massachusetts		Third Quarter
Red Bank, New Jersey		Fourth Quarter
Providence, Rhode Island		Fourth Quarter
Santa Barbara, California		Fourth Quarter
Mexico City, Mexico		Third Quarter
Japan:
Tokyo-Shibuya, Japan	First Quarter
Tokyo-Shinjuku, Japan	First Quarter
Hiroshima, Japan	First Quarter
Hoshigaoka, Japan	(First Quarter)
Okinawa, Japan	(First Quarter)
Nagoya, Japan		Third Quarter
Other Asia-Pacific:
Changi Airport, Singapore	First Quarter
Seoul, Korea	First Quarter
Kuala Lumpur, Malaysia		Third Quarter
Kowloon Station, Hong Kong		Third Quarter
Macau, China		Third Quarter
Europe:
Hamburg, Germany	Second Quarter
London-Selfridges, England		Third Quarter
Bologna, Italy		Fourth Quarter

Gross Margin
Gross margin (gross profit as a percentage of net sales) declined in the second quarter by 0.7 percentage points. The primary components of the net decline were: (i) a 1.0 percentage point decline due to increased low-margin wholesale sales of diamonds; and (ii) a 0.4 percentage point decline due to a shift in geographic mix partly offset by (iii) a 0.6 percentage point increase due to the leverage effect of fixed product-related costs, which includes costs associated with merchandising and distribution. Gross margin declined in the first half by 1.1 percentage points. The primary components of the net decline were: (i) a 0.7 percentage point decline due to increased low-margin wholesale sales of diamonds; (ii) a 0.5 percentage point decline due to increased product costs and changes in sales mix; and (iii) a 0.4 percentage decline due to a shift in geographic mix partly offset by (iv) a 0.5 percentage point increase due to the leverage effect of fixed product-related costs.

Management’s objective is to improve gross margin through greater product manufacturing/sourcing efficiencies (including increased direct rough-diamond sourcing and internal manufacturing), increased use of distribution center capacity, and selective price adjustments to address higher product costs. Management currently expects a slight decline in full year 2007 gross margin.

Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses increased $25,554,000, or 11%, in the second quarter largely due to increased labor and benefit costs of $9,316,000 and increased depreciation and occupancy expenses of $7,492,000, (both of which are largely

due to new and existing stores), as well as an increase of $3,227,000 in marketing expenses. SG&A expenses increased $55,402,000, or 12%, in the first half largely due to increased labor and benefit costs of $21,800,000 and increased depreciation and occupancy expenses of $15,283,000, (both of which are largely due to new and existing stores), as well as an increase of $8,390,000 in marketing expenses. SG&A expenses as a percentage of net sales improved by 3.0 percentage points to 39.1% in the second quarter and by 1.9 percentage points to 40.1% in the first half of 2007. Strong sales growth in the second quarter provided for significant leveraging of fixed costs.

Management’s objective is to improve the ratio of SG&A expenses to net sales by controlling expenses so that sales growth can result in a higher rate of earnings growth (leveraging of operating expenses). Management continues to expect an improvement in the expense ratio for the full year 2007.

Earnings from Continuing Operations
Reclassifications were made to prior year’s earnings (losses) from continuing operations by segment to conform to the current year presentation and to reflect the revised manner in which management now evaluates the performance of the segments. Effective with the first quarter of 2007, the Company revised certain allocations of operating expenses between unallocated corporate expenses and earnings (losses) from continuing operations for segments.


	Second Quarter			% of Net			Second Quarter			% of Net
(in thousands)	2007			Sales*			2006			Sales*

Earnings (losses) from continuing operations:

U.S. Retail	$	64,611			19	%	$	43,974			15	%

International Retail		61,652			24	%		51,769			23	%

Direct Marketing		13,379			33	%		10,149			28	%

Other		(4,796	)		(26	%)		(3,331	)		(46	%)

		134,846						102,561

Unallocated corporate expenses		(27,852	)					(25,683	)

Earnings from continuing operations	$	106,994					$	76,878

* Percentages represent earnings (losses) from continuing operations as a percentage of each segment’s net sales.

Earnings from continuing operations increased 39% in the second quarter. On a segment basis, the ratio of earnings (losses) from continuing operations (before the effect of unallocated corporate expenses and other expenses, net) to each segment’s net sales in the second quarter of 2007 and 2006 was as follows:

•		U.S. Retail increased 4 percentage points primarily due to the leveraging of operating expenses which benefited from increased sales growth;

•		International Retail increased 1 percentage point primarily due the leveraging of operating expenses which benefited from increased sales growth;

•		Direct Marketing increased 5 percentage points primarily due to an increase in gross margin (due to the leverage effect of fixed product-related costs) and the leveraging of operating expenses; and

•		Other improved 20 percentage points primarily due to sales growth.


	First Half			% of			First Half			% of
(in thousands)	2007			Sales*			2006			Sales*

Earnings (losses) from continuing operations:

U.S. Retail	$	108,215			17	%	$	86,115			16	%

International Retail		122,183			24	%		105,220			24	%

Direct Marketing		21,635			29	%		17,266			26	%

Other		(9,292	)		(27	%)		(6,218	)		(37	%)

		242,741						202,383

Unallocated corporate expenses		(54,460	)					(50,571	)


Earnings from continuing operations	$	188,281					$	151,812

* Percentages represent earnings (losses) from continuing operations as a percentage of each segment’s net sales.

Earnings from continuing operations rose 24% in the first half. On a segment basis, the ratio of earnings (losses) from continuing operations (before the effect of unallocated corporate expenses and other expenses, net) to each segment’s net sales in the first half of 2007 and 2006 was as follows:

•

U.S. Retail increased 1 percentage point primarily due to the leveraging of operating expenses which benefited from increased sales growth partly offset by a decline in gross margin (due to changes in product mix and higher product costs);

•

International Retail was consistent with prior year;

•

Direct Marketing increased 3 percentage points primarily due to the leveraging of operating expenses which benefited from increased sales growth and an increase in gross margin (due to the leverage effect of fixed product-related costs); and

•

Other improved 10 percentage points primarily due to sales growth.

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 information technology, finance, legal and human resources. Unallocated corporate expenses increased 8% in both the second quarter and first half due primarily to incremental labor costs.

Other Expenses, net
Other expenses, net decreased in the second quarter and first half primarily due to increased foreign currency transaction net gains.

Provision for Income Taxes
The effective income tax rates for the second quarter and first half of 2007 were 39.4% and 38.3%, versus 37.6% and 38.2% in the prior year. Management currently expects the effective tax rate to be approximately 37% for full year 2007.

Loss from discontinued operations, net of tax benefits
The loss from discontinued operations, net of tax benefits included an after-tax impairment charge of $23,583,000 reflecting the difference between Little Switzerland’s carrying value and its estimated fair value, less costs to dispose. See note 3 to condensed consolidated financial statements for additional information.

New Accounting Standards
See note 2 to condensed consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s liquidity needs have been, and are expected to remain, primarily a function of its seasonal and expansion-related working capital and capital expenditures needs. The ratio of total debt (short-term borrowings, current portion of long-term debt and long-term debt) to stockholders’ equity was 28% at July 31, 2007, 29% at January 31, 2007, and 33% at July 31, 2006.

The following table summarizes cash flows from operating, investing and financing activities:


	First Half
(in thousands)	2007			2006

Net cash provided by (used in):
Operating activities	$	50,759		$	(64,677	)
Investing activities		(74,494	)		(86,578	)
Financing activities		(18,063	)		(87,162	)
Effect of exchange rates on cash and cash equivalents		3,817			2,159
Net cash used in discontinued operations		(8,026	)		(10,409	)

Net decrease in cash and cash equivalents	$	(46,007	)	$	(246,667	)

Operating Activities
The Company’s net cash inflow from operating activities of $50,759,000 in the first half of 2007 compared with an outflow of $64,677,000 in the first half of 2006. The cash inflow in the first half of 2007 resulted primarily from smaller growth in inventories and increased net earnings from continuing operations.

Working Capital. Working capital (current assets less current liabilities) and the corresponding current ratio (current assets divided by current liabilities) were $1,360,033,000 and 4.3 at July 31, 2007, compared with $1,253,973,000 and 3.8 at January 31, 2007 and $1,233,364,000 and 3.8 at July 31, 2006.

Accounts receivable, less allowances at July 31, 2007 were 8% lower than at January 31, 2007 primarily due to a decrease in reimbursements from landlords related to new store build-outs and were 7% higher than at July 31, 2006 primarily due to sales growth.

Inventories, net at July 31, 2007 were 9% above January 31, 2007 and 7% above July 31, 2006. Combined raw material and work-in-process inventories increased 10% over January 31, 2007 and 6% over July 31, 2006 due to increased precious metal costs and diamond quantities needed to support internal jewelry manufacturing. Finished goods inventories increased 9% over January 31, 2007, and 7% over July 31, 2006, reflecting new store openings, increased product costs as well as broadened product assortments. Changes in foreign currency exchange rates did not have a significant effect on the changes in inventory balances.

Management continues to expect a high-single-digit percentage increase in inventories, net in 2007.

Investing Activities
The Company’s net cash outflow from investing activities of $74,494,000 in the first half of 2007 compared with an outflow of $86,578,000 in the first half of 2006. The reduction was primarily due to higher net proceeds from the sale of marketable securities and short-term investments in 2007.

Capital Expenditures. Capital expenditures were $87,779,000 in the first half of 2007 compared with $85,978,000 in the first half of 2006. Management estimates that capital expenditures will be approximately $180,000,000 in 2007 (compared with approximately $175,000,000 in the prior year) due to costs related to the opening and renovation of stores and to ongoing investments in new systems.

Financing Activities
The Company’s net cash outflow from financing activities of $18,063,000 in the first half of 2007 compared with an outflow of $87,162,000 in the first half of 2006. The reduced cash outflow was primarily due to reduced share repurchases as well as greater proceeds from the exercise of employees’ stock options partly offset by a reduction in proceeds from short-term borrowings, net.

Share Repurchases. The Company’s stock repurchase activity was as follows:


	Second Quarter
(in thousands, except per share amounts)	2007		2006

Cost of repurchases	$	34,200	$	83,839
Shares repurchased and retired		662		2,525
Average cost per share	$	51.69	$	33.20


	First Half
(in thousands, except per share amounts)	2007		2006

Cost of repurchases	$	59,197	$	163,589
Shares repurchased and retired		1,182		4,704
Average cost per share	$	50.07	$	34.77

At July 31, 2007, there remained $636,217,000 of authorization for future repurchases. The Company’s stock repurchase program expires in December 2009. The timing of repurchases and the actual number of shares to be repurchased depend on a variety of discretionary factors such as price and other market conditions.

Borrowings. The Company’s current sources of working capital are internally-generated cash flows and borrowings available under a revolving credit facility.

At July 31, 2007, the Company was in compliance with all loan covenants.

Contractual Obligations
The Company’s contractual cash obligations and commercial commitments at July 31, 2007 and the effects such obligations and commitments are expected to have on the Company’s liquidity and cash flows in future periods have not significantly changed since January 31, 2007.

The Company adopted the provisions of Financial Accounting Standards Board Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes – an amendment of FASB Statement No. 109” on February 1, 2007. During the six months ended July 31, 2007, there were no material changes to the unrecognized tax liability as a result of state audit settlements or the expiration of the statute of limitations. The change in accrued interest and penalties during the six months ended July 31, 2007 was not material. The final outcome of tax uncertainties is dependent upon various matters including tax examinations, interpretation of those tax laws or expiration of statutes of limitations. The Company believes that its tax positions comply with applicable tax law and that it has adequately provided for these matters. However, the audits may result in proposed assessments where the ultimate resolution may result in the Company owing additional taxes. Ongoing audits are in various stages of completion and while the Company does not anticipate any material changes in unrecognized income tax benefits over the next 12 months it is possible that developments in the audit process could impact this assessment.

Based on the Company’s financial position at July 31, 2007, management anticipates that cash on hand, internally-generated cash flows and the funds available under its revolving credit facility will be sufficient to support the Company’s planned worldwide business expansion, share repurchases, debt service and seasonal working capital increases for the foreseeable future.

Seasonality
As a jeweler and specialty retailer, the Company’s business is seasonal in nature, with the fourth quarter typically representing a proportionally greater percentage of annual sales, earnings from operations and cash flow. Management expects such seasonality to continue.

Forward-Looking Statements
This document contains certain “forward-looking statements” concerning the Company’s objectives and expectations with respect to store openings, sales, retail prices, gross margin, expenses, inventory performance, capital expenditures and cash flow. In addition, management makes other forward-looking statements from time to time concerning objectives and expectations. Statements beginning with such words as “believes”, “intends”, “plans”, and “expects” include forward-looking statements that are based on management’s expectations given facts as currently known by management on the date this quarterly report was filed with the Securities and Exchange Commission. All forward-looking statements involve risks, uncertainties and assumptions that, if they never materialize or prove incorrect, could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

The statements in this quarterly report are made as of the date this report was filed with the Securities and Exchange Commission and the Company undertakes no obligation to update any of the forward-looking information included in this document, whether as a result of new information, future events, changes in expectations or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk


PART I.		Financial Information
Item 3.		Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from fluctuations in foreign currency exchange rates, interest rates and precious metal prices, 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, and does not maintain such instruments that may expose the Company to significant market risk.

In Japan, the Company uses yen put options to minimize the effect of a weakening yen on U.S. dollar-denominated transactions. To a lesser extent, the Company uses foreign-exchange forward contracts to protect against changes in local currencies. Gains or losses on these instruments substantially offset losses or gains on the assets, liabilities and transactions being hedged. Management neither foresees nor expects significant changes in foreign currency exposure in the near future.

The Company uses interest-rate swap contracts related to certain debt arrangements to manage its net exposure to interest rate changes. The interest-rate swap contracts effectively convert fixed-rate obligations to floating-rate instruments. Additionally, since the fair value of the Company’s fixed-rate long-term debt is sensitive to interest rate changes, the interest-rate swap contracts serve as a hedge to changes in the fair value of these debt instruments. Management does not expect significant changes in exposure to interest rate fluctuations, nor in market risk-management practices.

Beginning in the first quarter of 2007, the Company began using a combination of call and put option contracts in a net-zero cost collar arrangement (“collars”), as hedges of forecasted purchases of precious metals. The Company accounts for its collars as cash-flow hedges. The Company assesses hedge effectiveness based on the total changes in the collars’ cash flows. The effective portion of unrealized gains and losses associated with the value of the collars is deferred as a component of other comprehensive gain (loss) and is recognized as a component of cost of sales on the Company’s condensed consolidated statement of earnings when the inventory is sold. The fair value of the outstanding collars at July 31, 2007 was not significant. The fair value was determined using quoted market prices for these instruments. Management neither foresees nor expects significant changes in exposure to fluctuations in precious metal prices.

Item 4. Controls and Procedures


PART I.		Financial Information
Item 4.		Controls and Procedures

Disclosure Controls and Procedures

Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), Registrant’s chief executive officer and chief financial officer concluded that, as of the end of the period covered by this report, Registrant’s disclosure controls and procedures are effective to ensure that information required to be disclosed by Registrant in the reports that it files or submits under the Securities Exchange Act of 1934 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 chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

In the ordinary course of business, 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 Registrant maintains an effective internal control environment. Changes may include such activities as implementing new, more efficient systems and automating manual processes.

Registrant’s chief executive officer and chief financial officer have determined that there have been no changes in Registrant’s internal control over financial reporting during the period covered by this report identified in connection with the evaluation described above that have materially affected, or are reasonably likely to materially affect, Registrant’s internal control over financial reporting.

Registrant’s management, including its chief executive officer and chief 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 chief executive officer and our chief financial officer have concluded that Registrant’s disclosure controls and procedures are (i) designed to provide such reasonable assurance and (ii) are effective at that reasonable assurance level.

Item 1A. Risk Factors


PART II.		Other Information
Item 1A.		Risk Factors

As a jeweler and specialty retailer, the Company’s success in achieving its objectives and expectations is partially dependent upon economic conditions, competitive developments and consumer attitudes, including changes in consumer preferences for certain jewelry styles and materials. However, certain assumptions are specific to the Company and/or the markets in which it operates.

The following assumptions, among others, are “risk factors” which could affect the likelihood that the Company will achieve the objectives and expectations communicated by management:

(i) that low or negative growth in the economy or in the financial markets, particularly in the U.S. and Japan, will not occur and reduce discretionary spending on goods that are, or are perceived to be, “luxuries”;

(ii) that consumer spending does not decline substantially during the fourth quarter of any year;

(iii) that unsettled regional and/or global conflicts or crises do not result in military, terrorist or other conditions creating disruptions or disincentives to, or changes in the pattern, practice or frequency of, tourist travel to the various regions where the Company operates retail stores nor to the Company’s continuing ability to operate in those regions;

(iv) that sales in Japan will not decline substantially;

(v) that there will not be a substantial adverse change in the exchange relationship between the Japanese yen and the U.S. dollar;

(vi) that Mitsukoshi and other department store operators in Japan, in the face of declining or stagnant department store sales, will not close or consolidate stores which have TIFFANY & CO. retail locations;

(vii) that Mitsukoshi will continue as a leading department store operator in Japan;

(viii) that existing product supply arrangements, including license arrangements with third-party designers Elsa Peretti and Paloma Picasso, will continue;

(ix) that the wholesale and retail market for high-quality rough and cut diamonds will provide continuity of supply and pricing within the quality grades, colors and sizes that customers demand;

(x) that the Company’s diamond supply initiatives achieve their financial and strategic objectives;

(xi) that the Company’s gross margins in Japan and for diamond products can be maintained in the face of increased competition from traditional and e-commerce retailers;

(xii) that the Company is able to pass on higher costs of raw materials to consumers through price increases;

(xiii) that the sale of counterfeit products does not significantly undermine the value of the Company’s trademarks and demand for the Company’s products;

(xiv) that new and existing stores and other sales locations can be leased, re-leased or otherwise obtained on suitable terms in desired markets and that construction can be completed on a timely basis;

(xv) that the Company can achieve satisfactory results from any current and future businesses into which it enters that are operated under trademarks or tradenames other than TIFFANY & CO.; and

(xvi) that the Company’s expansion plans for retail and direct selling operations and merchandise development, production and management can continue to be executed without meaningfully diminishing the distinctive appeal of the TIFFANY & CO. brand.

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


PART II.		Other Information
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

This table provides information with respect to the Company’s purchases of shares of its Common Stock during the second fiscal quarter of 2007:



					(c)Total Number
					of Shares		(d)Approximate
	(a)Total				Purchased Under		Dollar Value of
	Number of		(b)Average		all Publicly		Shares that May Yet
	Shares		Price Paid Per		Announced		be Purchased Under
Period	Purchased		Share		Programs*		the Programs*

May 1, 2007 through May 31, 2007		93,901		$48.18		93,901		$665,893,000

June 1, 2007 through June 30, 2007		264,400		$50.21		264,400		$652,617,000

July 1, 2007 through July 31, 2007		303,300		$54.07		303,300		$636,217,000

Total		661,601		$51.69		661,601		$636,217,000

* In August 2006, the Company’s Board of Directors extended the expiration date of the program to December 2009 and increased the authorization to $813,000,000.

PART II. OTHER INFORMATION

ITEM 4. Submission of Matters to a Vote of Security Holders.

At Registrant’s Annual Meeting of Stockholders held on May 17, 2007 each of the nominees listed below was elected a director of Registrant to hold office until the next annual meeting of the stockholders and until his or her respective successor has been elected and qualified. All directors are elected at each annual meeting. Tabulated with the name of each of the nominees elected is the number of Common shares cast for each nominee and the number of Common shares withholding authority to vote for each nominee. There were no broker non-votes with respect to the election of directors.


				Number of

				Shares

Nominee	Voted For	Voted Against		Abstaining



Michael J. Kowalski	116,084,761		6,222,331		790,560


Rose Marie Bravo	119,581,300		2,742,676		773,676


William R. Chaney	116,076,945		6,244,078		776,629


Gary E. Costley	119,172,469		3,131,172		794,011


Abby F. Kohnstamm	119,342,608		2,945,807		809,237


Charles K. Marquis	119,185,869		3,104,606		807,177


J. Thomas Presby	113,242,473		9,066,377		788,802


James E. Quinn	116,045,760		6,247,877		804,015


William A. Shutzer	111,633,757		10,650,048		813,847

At such meeting, the stockholders approved the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm to examine the Company’s fiscal 2007 financial statements. With respect to such appointment, 121,375,371 shares were voted to approve, 918,657 were voted against, and 803,624 shares abstained from voting. There were no broker non-votes with respect to the approval of the appointment of PricewaterhouseCoopers LLP.

ITEM 6 Exhibits


ITEM 6	Exhibits

(a)	Exhibits:

	31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.


		TIFFANY & CO.
		(Registrant)

Date: August 30, 2007	By:	/s/ James N. Fernandez


		James N. Fernandez
		Executive Vice President and
		Chief Financial Officer
		(principal financial officer)

Exhibit Index


31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.