EXHIBIT 13
Consolidated Statements of Income The TJX Companies, Inc.
January 28, January 29, January 30,
Fiscal Year Ended 1995 1994 1993
(53 Weeks)
Dollars in Thousands Except Per Share Amounts
Net sales $3,842,818 $3,626,604 $3,261,240
Cost of sales, including buying and
occupancy costs 2,927,112 2,722,826 2,467,935
Selling, general and administrative
expenses 748,003 674,055 593,889
Interest on debt and capital leases 25,893 19,041 26,298
Income before income taxes,
extraordinary item and cumulative
effect of accounting changes 141,810 210,682 173,118
Provision for income taxes 59,191 83,636 69,074
Income before extraordinary item and
cumulative effect of accounting changes 82,619 127,046 104,044
Extraordinary (loss), net of income taxes - - (1,198)
Cumulative effect of accounting changes,
net of income taxes - (2,667) -
Net income 82,619 124,379 102,846
Preferred stock dividends (7,156) (7,156) (3,939)
Net income available to common
shareholders $ 75,463 $ 117,223 $ 98,907
Number of common shares for primary
and fully diluted earnings per
share computations 73,467,003 74,192,358 73,873,276
Primary and fully diluted earnings
per common share:
Income before extraordinary item
and cumulative effect of
accounting changes $1.03 $1.62 $1.40
Extraordinary (loss) - - (.02)
Cumulative effect of accounting
changes - (.04) -
Net income $1.03 $1.58 $1.38
Cash dividends per common share $ .56 $ .50 $ .46
The accompanying notes are an integral part of the financial statements.
1
Consolidated Balance Sheets The TJX Companies, Inc.
January 28, January 29,
1995 1994
In Thousands
Assets
Current assets:
Cash and cash equivalents $ 41,569 $ 58,102
Accounts receivable 43,440 30,639
Merchandise inventories 937,729 772,324
Prepaid expenses 23,459 20,791
Total current assets 1,046,197 881,856
Property at cost:
Land and buildings 114,736 110,793
Leasehold costs and improvements 302,844 256,929
Furniture, fixtures and equipment 447,840 398,106
865,420 765,828
Less accumulated depreciation and amortization 377,595 326,685
487,825 439,143
Other assets 14,319 13,744
Goodwill, net of amortization 89,877 92,627
Total Assets $1,638,218 $1,427,370
Liabilities
Current liabilities:
Short-term debt $ 20,000 $ -
Current installments of long-term debt 31,306 5,936
Accounts payable 439,277 340,578
Accrued expenses and other current liabilities 267,682 245,139
Total current liabilities 758,265 591,653
Long-term debt, exclusive of current installments 239,478 210,854
Deferred income taxes 33,523 33,963
Shareholders' Equity
Preferred stock at face value, authorized
5,000,000 shares, par value $1, issued
and outstanding cumulative convertible
stock of:
250,000 shares of 8% Series A 25,000 25,000
1,650,000 shares of 6.25% Series C 82,500 82,500
Common stock, authorized 150,000,000 shares,
par value $1, issued and outstanding
72,401,254 and 73,430,615 shares 72,401 73,431
Additional paid-in capital 267,937 284,744
Retained earnings 159,114 125,225
Total shareholders' equity 606,952 590,900
Total Liabilities and Shareholders' Equity $1,638,218 $1,427,370
The accompanying notes are an integral part of the financial statements.
2
Consolidated Statements of Shareholders' Equity The TJX Companies, Inc.
Preferred Common Additional Retained
Stock, Stock, Par Paid-in Earnings
Face Value Value $1 Capital (Deficit) Total
In Thousands
Balance, January 25, 1992 $ - $69,803 $228,856 $(38,142) $260,517
Net income - - - 102,846 102,846
Cash dividends:
Preferred stock - - - (3,939) (3,939)
Common stock - - (16,070) (16,103) (32,173)
Sale and issuance of
cumulative convertible
preferred stock:
Series A 25,000 - (850) - 24,150
Series C 82,500 - (2,221) - 80,279
Sale and issuance of
common stock, net
of shares repurchased,
under stock
incentive plans - 310 3,157 - 3,467
Conversion of 7 1/4%
convertible subordinated
debentures, net - 3,109 65,474 - 68,583
Other - - 1,454 - 1,454
Balance, January 30, 1993 107,500 73,222 279,800 44,662 505,184
Net income - - - 124,379 124,379
Cash dividends:
Preferred stock - - - (7,156) (7,156)
Common stock - - - (36,660) (36,660)
Sale and issuance of
common stock, net
of shares repurchased,
under stock
incentive plans - 209 4,563 - 4,772
Other - - 381 - 381
Balance, January 29, 1994 107,500 73,431 284,744 125,225 590,900
Net income - - - 82,619 82,619
Cash dividends:
Preferred stock - - - (7,156) (7,156)
Common stock - - - (41,574) (41,574)
Sale and issuance of
common stock, net
of shares repurchased,
under stock
incentive plans - 29 807 - 836
Common stock repurchased - (1,059) (18,202) - (19,261)
Other - - 588 - 588
Balance,January 28, 1995 $107,500 $72,401 $267,937 $159,114 $606,952
The accompanying notes are an integral part of the financial statements.
3
Consolidated Statements of Cash Flows The TJX Companies, Inc.
January 28, January 29, January 30,
Fiscal Year Ended 1995 1994 1993
(53 Weeks)
In Thousands
Cash flows from operating activities:
Net income $ 82,619 $124,379 $102,846
Adjustments to reconcile net income
to net cash provided by operating
activities:
Extraordinary item - - 1,198
Cumulative effect of accounting
changes - 2,667 -
Depreciation and amortization 76,528 67,544 62,933
Loss on property disposals 6,223 1,714 9,527
Other, net 908 (277) 5,518
Changes in assets and liabilities:
(Increase) in accounts receivable (12,801) (6,518) (2,292)
(Increase) in merchandise
inventories (165,405) (99,970) (119,888)
(Increase) in prepaid expenses (2,668) (2,898) (3,189)
Increase in accounts payable 98,699 14,800 64,001
Increase (decrease) in accrued
expenses and other current
liabilities 20,886 (13,993) 25,536
(Decrease) in deferred income taxes (440) (3,000) (7,559)
Net cash provided by operating activities 104,549 84,448 138,631
Cash flows from investing activities:
Property additions (127,826) (125,848) (107,881)
Net cash (used in) investing activities (127,826) (125,848) (107,881)
Cash flows from financing activities:
Proceeds from borrowings of
short-term debt 20,000 - -
Proceeds from borrowings of
long-term debt 65,500 37,000 -
Principal payments on long-term debt (6,057) (4,201) (10,392)
Prepayment of long-term debt (5,449) - -
Defeasance of 8 1/8% promissory notes - - (51,897)
Proceeds from sale and issuance of
Series A and Series C preferred
stock, net - - 104,429
Proceeds from sale and issuance of
common stock, net 741 3,828 3,081
Common stock repurchased (19,261) - -
Cash dividends paid (48,730) (43,816) (36,112)
Other - - (462)
Net cash provided by (used in) financing
activities 6,744 (7,189) 8,647
Net increase (decrease) in cash and
cash equivalents (16,533) (48,589) 39,397
Cash and cash equivalents at beginning
of year 58,102 106,691 67,294
4
Cash and cash equivalents at end of year $ 41,569 $ 58,102 $106,691
The accompanying notes are an integral part of the financial statements.
5
Selected Information By Major Business Segment The TJX Companies, Inc.
January 28, January 29, January 30,
Fiscal Year Ended 1995 1994 1993
(53 Weeks)
In Thousands
Net sales:
Off-price family apparel stores $3,055,573 $2,832,070 $2,588,603
Off-price women's specialty stores 353,672 373,133 381,979
Off-price catalog operation 433,573 421,401 290,658
$3,842,818 $3,626,604 $3,261,240
Operating income (loss):
Off-price family apparel stores $ 208,648 $ 236,988 $ 216,726
Off-price women's specialty stores (4,523) 5,013 (5,548)
Off-price catalog operation 6,056 24,651 22,967
210,181 266,652 234,145
General corporate expense* 39,864 34,312 32,108
Goodwill amortization 2,614 2,617 2,621
Interest expense 25,893 19,041 26,298
Income before income taxes,
extraordinary item and cumulative
effect of accounting changes $ 141,810 $ 210,682 $ 173,118
Identifiable assets:
Off-price family apparel stores $1,154,258 $ 963,750 $ 848,987
Off-price women's specialty stores 89,008 98,351 97,956
Off-price catalog operation 179,752 162,424 126,842
Corporate, primarily cash and goodwill 215,200 202,845 231,311
$1,638,218 $1,427,370 $1,305,096
Capital expenditures excluding
capitalized leases:
Off-price family apparel stores $ 91,801 $ 91,723 $ 68,504
Off-price women's specialty stores 8,151 7,902 6,258
Off-price catalog operation 11,311 16,676 19,350
Corporate 16,563 9,547 13,769
$ 127,826 $ 125,848 $ 107,881
Depreciation and amortization:
Off-price family apparel stores $ 53,601 $ 47,369 $ 44,237
Off-price women's specialty stores 10,553 10,726 11,535
Off-price catalog operation 6,280 5,055 3,665
Corporate, including goodwill 6,094 4,394 3,496
$ 76,528 $ 67,544 $ 62,933
* The fiscal years ended January 28, 1995 and January 29, 1994 include the net
operating results of HomeGoods and the Company's United Kingdom venture,
T.K. Maxx. The fiscal year ended January 30, 1993 includes the net
operating results of HomeGoods, costs associated with the former Value Mart
operation and a reserve for the Hit or Miss real estate repositioning.
6
Notes to Consolidated Financial Statements The TJX Companies, Inc.
Summary of Accounting Policies
Fiscal Year: The Company's fiscal year ends on the last Saturday in
January. The fiscal years ended January 28, 1995 and January 29, 1994 each
included 52 weeks. The fiscal year ended January 30, 1993 included 53
weeks.
Basis of Presentation: The consolidated financial statements of The TJX
Companies, Inc. include the financial statements of all the Company's
wholly-owned subsidiaries, including its foreign owned subsidiaries.
Accounting Changes: The cumulative effect of accounting changes for the
fiscal year ended January 29, 1994 is the net effect of implementing
Statement of Financial Accounting Standards (SFAS) No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and SFAS No.
109 "Accounting for Income Taxes." See Notes E and F for further
information.
Cash Equivalents: The Company generally considers highly liquid
investments with an initial maturity of three months or less to be cash
equivalents. The Company's investments are primarily high grade commercial
paper or time deposits with major banks. Fair value of cash equivalents
approximates carrying value.
Merchandise Inventories: Inventories are stated at the lower of cost or
market. The Company primarily uses the retail method for valuing
inventories on the first-in first-out basis.
Depreciation and Amortization: For financial reporting purposes, the
Company provides for depreciation and amortization of property principally
by the use of the straight-line method, over the estimated useful lives of
the assets. Leasehold costs and improvements are generally amortized over
the lease term or their estimated useful life, whichever is shorter.
Maintenance and repairs are charged to expense as incurred. Upon
retirement or sale, the cost of disposed assets and the related
depreciation are eliminated and any gain or loss is included in net income.
Debt discount and related issue expenses are amortized over the lives of
the related debt issues. Pre-opening costs are charged to operations
within the fiscal year that a new store or facility opens.
Goodwill: Goodwill is primarily the excess of the purchase price incurred
over the carrying value of the minority interest in the Company's former
83%-owned subsidiary. The minority interest was acquired pursuant to the
Company's fiscal 1990 restructuring. In addition, goodwill includes the
excess of cost over the estimated fair market value of the net assets of
Winners Apparel Ltd., acquired by the Company effective May 31, 1990.
Goodwill is being amortized over 40 years. Annual amortization of goodwill
was $2.6 million in fiscal years 1995, 1994 and 1993. Cumulative
amortization as of January 28, 1995 and January 29, 1994 was $14.7 million
and $12.0 million, respectively. The Company periodically reviews the
carrying value of goodwill in relation to the current and expected
7
operating results of the related business segments in order to assess
whether there has been a permanent impairment of goodwill.
Capitalized Interest: The Company capitalizes interest related to the
development of real estate locations. Interest in the amount of $347,000,
$171,000 and $317,000 was capitalized in fiscal years 1995, 1994 and 1993,
respectively.
Net Income Per Common Share: Primary and fully diluted net income per
common share is based upon the weighted average number of common and common
equivalent shares and other dilutive securities outstanding in each year
after adjusting net income for preferred stock dividends of $7.2 million in
fiscal years 1995 and 1994, respectively, and $3.9 million in fiscal 1993.
Foreign Currency Translation: The assets and liabilities of the Company's
foreign operations are translated at the year-end exchange rate and the
income statement items are translated at the average exchange rates
prevailing during the year. Cumulative foreign currency translation losses
were $1.6 million as of January 28, 1995 and January 29, 1994 and are
recorded as a component of additional paid-in capital.
Other: Certain amounts in prior years' financial statements have been
reclassified for comparative purposes.
8
A. Long-Term Debt and Credit Lines
At January 28, 1995 and January 29, 1994, long-term debt, exclusive of
current installments, consisted of the following (information as to
interest rates and maturity dates as of January 28, 1995 only):
January 28, January 29,
1995 1994
In Thousands
Real estate mortgages, interest at 8.25% to
10.4% maturing February 1, 1997 to
December 30, 2004 $ 77,550 $ 42,823
Equipment notes, interest at 11% to 11.25%
maturing December 12, 2000 to
December 30, 2001 4,598 6,031
General corporate debt:
9 1/2% sinking fund debentures, maturing
May 1, 2016 with $4,400,000 annual sinking
fund requirement beginning May 1, 1997 99,830 100,000
9.2% senior unsecured notes, maturing
November 30, 1995 - 25,000
Medium term notes, interest at 4.53% to
7.97%, maturing October 21, 1996 to
September 20, 2004 57,500 37,000
Total general corporate debt 157,330 162,000
Long-term debt, exclusive of current installments $239,478 $210,854
The aggregate maturities of long-term debt, exclusive of current
installments, outstanding at January 28, 1995 are as follows:
Real Estate General
Mortgages and Corporate
Fiscal Year Equipment Notes Debt Total
In Thousands
1997 $11,631 $ 22,000 $ 33,631
1998 11,033 19,730 30,763
1999 28,356 4,400 32,756
2000 5,695 4,400 10,095
Later years 25,433 106,800 132,233
Aggregate maturities
of long-term debt $82,148 $157,330 $239,478
Real estate mortgages are collateralized by land and buildings. While the
parent company is not directly obligated with respect to the real estate
mortgages, it or a wholly-owned subsidiary has either guaranteed the debt
9
or has guaranteed a lease, if applicable, which has been assigned as
collateral for such debt.
On December 30, 1994, the Company secured a $45 million real estate
mortgage on its Chadwick's fulfillment center. The notes require semi-
annual principal payments of $2.5 million beginning June 1996, maturing in
December 2004, and carry an annual interest rate of 8.73%. The proceeds
were used to prepay the $5.4 million outstanding mortgage on the Chadwick's
facility, with the balance of the proceeds used for general corporate
purposes. Costs for the early retirement of the $5.4 million mortgage were
immaterial.
In October 1993, the Company filed a shelf registration statement with the
Securities and Exchange Commission which provides for the issuance of up to
$75 million of Medium Term Notes (MTN). The borrowings under this program
are to support the Company's international and domestic new business
development and capital expenditures. On October 21, 1993, the Company
issued an aggregate of $37 million of Series A notes under the MTN program
via three separate pricing supplements. On September 19, 1994, the Company
issued an additional $20.5 million of Series A notes via two pricing
supplements. The interest rate and maturity information of the Series A
notes issued are as follows:
Interest Maturity
Series A Notes: Issue Date Principal Rate Date
In Thousands
Supplement No. 1 10/21/93 $15,000 5.87% 10/21/03
Supplement No. 2 10/21/93 12,000 4.53% 10/21/96
Supplement No. 3 10/21/93 10,000 4.55% 10/21/96
Supplement No. 4 09/19/94 15,500 6.97% 09/19/97
Supplement No. 5 09/19/94 5,000 7.97% 09/20/04
To date the aggregate borrowings of $57.5 million have been used entirely
to fund the Company's investment in its Canadian and United Kingdom
operations. To hedge the Company's investment in its foreign subsidiaries,
it entered into foreign currency swap agreements in both Canadian dollars
and British pounds sterling, in amounts equivalent to the MTN borrowings.
The interest rate payable on the foreign currency is slightly higher than
the interest received on the currency exchanged, resulting in deferred
charges of $4.4 million as of January 28, 1995, which are being amortized
to interest expense over the related terms of the swap agreements. See
Note B for further information on these transactions.
In May 1992, the Company completed an "in-substance defeasance" of its
outstanding $50 million 8 1/8% promissory notes due May 1, 1993. The net
proceeds of the Series A preferred stock offering (see Note D) were applied
towards the purchase of $51.9 million of U. S. Treasury Bonds which were
placed in trust. The U. S. Treasury Bonds, which have all matured, had
scheduled maturities sufficient to fund the Company's interest and
principal payments due on the promissory notes from May 1, 1992 through the
final maturity date of May 1, 1993. The Company incurred an after-tax
extraordinary loss of $1.2 million, or $.02 per common share, for the early
extinguishment of this debt.
10
On December 30, 1992, the Company called for the redemption of its 7 1/4%
convertible subordinated debentures, pursuant to a standby agreement with
an underwriter. As a result, virtually all of the $69.8 million of
outstanding debentures were converted into common stock, with the balance
redeemed. This transaction resulted in the issuance of 3,108,755 shares
of common stock, and increased shareholders' equity by $68.6 million. The
standby fee paid to the underwriter, as well as other expenses associated
with the transaction, were charged to additional paid-in capital.
As of January 28, 1995, the Company had unsecured committed lines of credit
with its banks in the amount of $300 million, and uncommitted lines of $115
million, with interest payable at rates equal to or less than prime.
Actual short-term borrowings during the fiscal year ended January 28, 1995
were at rates below prime. The committed lines are used as backup to the
Company's commercial paper program. At January 28, 1995, all of the
committed lines were available for use as well as $95 million of the
uncommitted lines. The weighted average interest rate on the Company's
short-term bank lines was 4.86%, 3.41% and 4.00% in fiscal 1995, 1994 and
1993, respectively. The weighted average interest rate on the Company's
commercial paper was 5.08%, 3.34% and 3.80% in fiscal 1995, 1994 and 1993,
respectively. The Company does not have any compensating balance
requirements under these arrangements but is required to pay a fee on the
credit lines and must maintain a minimum net worth.
B. Financial Instruments
The Company enters into foreign currency exchange contracts to reduce
exposure to foreign currency exchange risk.
At January 28, 1995, the Company had $4.7 million of forward foreign
exchange contracts to hedge firm U.S. dollar merchandise purchase
commitments made by its Canadian subsidiary. The contracts cover
commitments for the first quarter of fiscal 1996 and any gain or loss on
the contract will ultimately be reflected in the cost of the merchandise.
Deferred gains and losses on the contracts as of January 28, 1995 were
immaterial.
The Company also has entered into foreign currency swap agreements in both
Canadian dollars and British pounds sterling in amounts equivalent to
borrowings under the Company's MTN program. The aggregate borrowings of
$57.5 million under the MTN program approximated the Company's combined
investment in its United Kingdom and Canadian operations at the time of the
borrowings. As of January 28, 1995, the Company had swap agreements
whereby it exchanged $20.0 million for Canadian dollars and $37.5 million
for British pounds sterling. The swap agreements are accounted for as a
hedge against the Company's investment in foreign subsidiaries and thus
foreign exchange gains and losses on the agreements are recognized in
shareholders' equity, offsetting translation adjustments associated with
the Company's investment in foreign operations. The swap agreements
contain rights of offset which minimize the Company's exposure to credit
loss in the event of nonperformance by one of the counterparties.
The counterparties to the exchange contracts and swap agreements are major
international financial institutions. The Company periodically monitors
11
its position and the credit ratings of the counterparties and does not
anticipate losses resulting from the nonperformance of these institutions.
Pursuant to SFAS No. 107 "Disclosures About Fair Value of Financial
Instruments," the Company has estimated the fair value of its long-term
debt, including current installments. The fair value of the Company's
long-term debt was estimated by using the quoted market price, if
available, or by using discounted cash flow analysis based upon the
Company's current incremental borrowing rates for similar types of
borrowing arrangements. The fair value of long-term debt, including
current installments at January 28, 1995 is estimated to be $269.7 million
versus a carrying value of $270.8 million. These estimates do not
necessarily reflect certain provisions or restrictions in the various debt
agreements which might affect the Company's ability to settle these
obligations. The fair value of all other financial instruments of the
Company, including cash equivalents and the swap agreements, approximate
carrying value.
C. Commitments
The Company is committed under long-term leases related to its continuing
operations for the rental of real estate and fixtures and equipment, some
of which meet the SFAS No. 13 definition of capital leases. Leases are
generally for a 10 year initial term with options to extend for one or more
5 year periods. In addition, the Company is generally required to pay
insurance, real estate taxes and other operating expenses and in some cases
rentals based on a percentage of sales.
The following is a schedule of future minimum lease payments for continuing
operations as of January 28, 1995:
Capital Operating
Fiscal Years Leases Leases
In Thousands
1996 $ 997 $ 155,335
1997 997 149,094
1998 117 136,517
1999 - 122,502
2000 - 107,953
Later years - 351,983
Total minimum lease payments 2,111 $1,023,384
Less amount representing interest (166)
Present value of net minimum capital
lease payments $1,945
The present value of net minimum capital lease payments is included in
accrued expenses and other current liabilities and property under capital
leases is included in furniture, fixtures and equipment on the balance
sheets.
The rental expense under operating leases for continuing operations
amounted to $149.1 million, $126.3 million and $112.4 million for fiscal
years 1995, 1994 and 1993, respectively. The present value of the
Company's operating lease obligations is $712.7 million as of January 28,
1995, including $92.5 million payable in fiscal 1996.
12
In fiscal 1990, the Company distributed to shareholders the common stock of
Waban Inc., its former warehouse club division. Subsequent to the
distribution, the Company continued to provide Waban with certain services,
primarily data processing for an agreed upon fee. Waban has elected to
continue data processing services through January 1998. In addition, the
Company is contingently liable on a number of Waban leases. The Company
believes that in view of the nature of the leases and the fact that Waban
is primarily liable, the Company's contingent liability on the Waban leases
will not have a material effect on the Company's financial condition. For
information on leases acquired by Ames Department Stores, Inc., see Note I.
The Company had outstanding letters of credit in the amount of $53.7
million as of January 28, 1995. The letters of credit are issued for the
purchase of inventory.
D. Stock Options, Stock Purchase Plans and Capital Stock
Under its stock option plan the Company has granted certain officers and
key employees options for the purchase of common stock generally within ten
years from the grant date at option prices of 100% of market price on the
grant date. Most options outstanding are exercisable at various
percentages starting one year after the grant, while certain options are
exercisable in their entirety three years after the grant date. There were
approximately 1,490,000 shares exercisable under the option plans as of
January 28, 1995.
During June 1993, the Company amended its 1986 Stock Incentive Plan to
increase shares issuable under the plan by 3,000,000 and to extend the
period during which awards may be made under the plan through April 7,
2003.
On April 8, 1993, the Company adopted a stock option plan for non-employee
directors. Pursuant to the plan, each continuing or newly elected director
who is not a present or former employee of the Company will receive an
option to purchase 1,000 shares of common stock. On the date of each
subsequent annual meeting, each continuing non-employee director will be
granted an option to acquire an additional 500 shares of common stock and
newly elected directors will each receive an option to purchase 1,000
shares of common stock. The exercise price of the options will be the fair
market value of the common stock on the date of grant. The option will
expire ten years after the date of grant and will become fully exercisable
one year after the date of grant. The plan will expire after five years,
but options outstanding will continue in effect according to their terms.
A total of 50,000 shares have been reserved for issuance under this plan
subject to adjustment by stock split and similar events.
13
Option activity during the past three fiscal years was as follows:
Shares Reserved for
Options Future
Option Prices Granted Grants
Outstanding at January 25, 1992 $10.250-$29.000 1,701,035 962,815
Options or other stock awards
granted 16.750- 21.250 512,650 (641,583)
Options exercised 10.250- 18.875 (215,612) -
Cancellations 10.250- 29.000 (85,608) 85,960
Outstanding at January 30, 1993 10.250- 29.000 1,912,465 407,192
Additional options authorized
under 1986 plan - 3,000,000
Authorized under 1993 stock
option plan for non-employee
directors - 50,000
Options or other stock awards
granted 25.250- 32.875 566,790 (569,290)
Options exercised 10.250- 24.500 (249,719) -
Cancellations 10.250- 28.000 (46,568) 3,300
Outstanding at January 29, 1994 10.250- 32.875 2,182,968 2,891,202
Options or other stock awards
granted 13.250- 26.875 631,940 (631,940)
Options exercised 10.250- 21.250 (50,498) -
Cancellations 10.250- 25.250 (69,955) 29,000
Outstanding at January 28, 1995 10.250- 32.875 2,694,455 2,288,262
The shares reserved for future grants have been reduced by restricted stock
awards issued under the 1986 Stock Incentive Plan, net of certain shares
forfeited, which are returned to the Company. Through fiscal 1995, there
have been a total of 486,001 shares issued and 80,625 shares forfeited.
The shares were issued at par value, or at no cost, and have restrictions
which generally lapse over three to five years from date of grant, with the
exception of performance accelerated shares. These shares have
restrictions which generally lapse equally over four to eight years, with a
provision for accelerated vesting depending upon the Company's earnings, or
other specified criteria. The market price in excess of cost is charged to
income ratably over the period during which the restrictions lapse. Such
pre-tax charges amounted to $0.6 million, $1.7 million and $1.9 million in
fiscal years 1995, 1994 and 1993, respectively.
On August 16, 1994, the Company authorized the repurchase of up to $100
million of TJX common stock. During fiscal 1995, the Company repurchased
1.1 million of its common shares, totalling $19.3 million, representing
approximately 1.5% of the Company's outstanding common shares. It is the
Company's intention to repurchase additional shares over time through open
market purchases or through other transactions.
In April 1992, the Company issued 250,000 shares of Series A cumulative
convertible preferred stock in a private offering. The shares have a face
value of $100 per share and are convertible into common stock at a price
14
per common share of $21. There are 1,190,476 common shares reserved for
the conversion of the Series A preferred stock. The net proceeds of $24.1
million were applied towards the Company's defeasance of its $50 million 8
1/8% promissory notes (see Note A). Starting April 1, 1995, the Company
may redeem the Series A stock for a price of $104.80 per share, declining
by $.80 per share each April 1 thereafter to $100 per share on April 1,
2001. The liquidation preference for Series A preferred stock is currently
$105.60 per share and also declines $.80 per share each April 1 to $100 per
share on April 1, 2001.
In August 1992, the Company issued 1,650,000 shares of Series C cumulative
convertible preferred stock in a public offering. The shares have a face
value of $50 per share and are convertible into common stock at a price per
common share of $25.9375. There are 3,180,723 common shares reserved for
the conversion of the Series C preferred stock. The net proceeds of $80.3
million were used to support the Company's capital expenditure program and
for other general corporate purposes. The Series C preferred stock is not
redeemable prior to September 1, 1995. Starting September 1, 1995, the
Company may redeem the stock for $52.1875 per share, declining by $.3125
per share each September 1 thereafter to $50 per share on September 1,
2002. The liquidation preference for the Series C preferred stock is $50
per share.
Dividends on both the Series A and Series C preferred stock are payable
quarterly on the first business day of each calendar quarter and accrue
from date of issuance. The Company accrues the dividends evenly throughout
the year. In fiscal years 1995 and 1994, the Company recorded $2.0 million
of dividends on the Series A preferred and $5.2 million on the Series C
preferred. In fiscal 1993, the Company recorded $1.6 million of dividends
on Series A preferred and $2.3 million on the Series C preferred. The
preferred dividends reduce net income to arrive at net income available to
common shareholders.
The Series A and Series C preferred stock rank in parity with each other
and both are senior to all other capital stock of the Company with respect
to payment of dividends and upon liquidation. There are no voting rights
for either preferred stock unless dividends are in arrears for a specified
number of periods.
During fiscal 1995, the Company's shareholder rights plan was redeemed at a
price of $.01 per common share. This redemption cost of $0.7 million is
included with common stock dividends as a direct reduction to shareholders'
equity.
E. Income Taxes
The provisions for income taxes were calculated according to SFAS No. 109
in fiscal years 1995 and 1994 and according to Accounting Principles Board
Opinion No. 11 in fiscal 1993. The retroactive impact of implementing SFAS
No. 109 as of January 31, 1993 reduced deferred income taxes by $3,478,000
which was recorded as a gain due to the cumulative effect of an accounting
change.
15
The provision for income taxes includes the following:
Fiscal Year Ended January 1995 1994 1993
In Thousands
Current:
Federal $50,093 $70,523 $58,582
State 8,053 16,632 18,647
Foreign 1,425 90 -
Deferred:
Federal (1,944) (2,870) (4,820)
State 27 (739) (3,335)
Foreign 1,537 - -
Provision for income taxes $59,191 $83,636 $69,074
The fiscal 1994 deferred provision above reflects a $1.1 million benefit
from a Canadian net operating loss carryforward as well as a charge of $0.4
million for the adjustment of the Company's net deferred tax liability due
to the increase in the statutory federal income tax rate enacted during the
year.
The Company had a net deferred tax liability as follows:
January 28, January 29,
1995 1994
In Thousands
Deferred tax assets:
Capital loss carryforward $49,107 $49,568
Foreign net operating loss carryforward 4,191 2,075
Reserves for discontinued operations 6,054 8,877
Insurance costs not currently deductible
for tax purposes 14,782 15,025
Pension, postretirement and employee benefits 15,950 15,427
Leases 4,961 4,318
Other 11,906 12,159
Valuation allowance (53,968) (51,241)
Total deferred tax assets 52,983 56,208
Deferred tax liabilities:
Property, plant and equipment 26,072 27,337
Safe harbor leases 51,386 54,817
Other 9,048 8,017
Total deferred tax liabilities 86,506 90,171
Net deferred tax liability $33,523 $33,963
The capital loss carryforward tax asset relates to the surrendering of the
Ames preferred stock upon consummation of the Ames reorganization plan.
Utilization of this pre-tax capital loss of $140.3 million is only
available to the extent of future capital gains and thus this deferred tax
asset is fully reserved for in the valuation allowance.
16
The change in the valuation allowance during the year is the result of
changes in foreign net operating loss carryforwards and utilization of a
portion of the capital loss carryforward.
The Company does not provide for U.S. deferred income taxes on the
undistributed earnings its foreign subsidiaries, as the earnings are
considered to be permanently reinvested. The undistributed earnings of its
foreign subsidiaries as of January 28, 1995 were immaterial.
The Company has a United Kingdom net operating loss carryforward of
approximately $12 million for both tax and financial reporting purposes.
Future utilization of this operating loss carryforward is dependent upon
future earnings of the Company's United Kingdom subsidiary. The United
Kingdom operating loss does not expire under current United Kingdom tax
law.
The Company's worldwide effective tax rate was 42% for the fiscal year
ended January 28, 1995 and 40% for the fiscal years ended January 29, 1994
and January 30, 1993. The difference between the U.S. federal statutory
income tax rate and the Company's worldwide effective income tax rate is
summarized as follows:
Fiscal Year Ended January 1995 1994 1993
U.S. federal statutory income tax rate 35% 35% 34%
Effective state income tax rate 5 5 6
Impact of foreign operations 3 - -
All other (1) - -
Worldwide effective income tax rate 42% 40% 40%
In fiscal 1994, the benefit of the Canadian net operating loss carryforward
was offset by the impact of the Company's entry into the United Kingdom.
F. Pension Plans and Other Retirement Benefits
The Company has a non-contributory defined benefit retirement plan covering
the majority of full-time employees. Employees who have attained twenty-
one years of age and have completed one year of service are covered under
the plan. Benefits are based on compensation earned in each year of
service. The Company also has an unfunded supplemental retirement plan
which covers certain key employees of the Company and provides additional
retirement benefits based on average compensation.
17
Net periodic pension cost of the Company's plans includes the following
components:
Fiscal Year Ended January 1995 1994 1993
In Thousands
Service cost $ 4,554 $ 3,375 $ 2,650
Interest cost on projected benefit
obligation 6,526 5,995 5,466
Actual return on assets 4,545 (12,188) (10,828)
Net amortization and deferrals (11,600) 5,760 5,031
Net periodic pension cost $ 4,025 $ 2,942 $ 2,319
The following table sets forth the funded status of the Company's pension
plans and the amounts recognized in the Company's statements of financial
position:
January 28, January 29,
1995 1994
In Thousands
Accumulated benefit obligation, including
vested benefits of $71,592 and $78,588 $77,256 $84,049
Projected benefit obligation $82,297 $90,092
Plan assets at fair market value 66,454 75,378
Projected benefit obligation in excess of
plan assets 15,843 14,714
Unrecognized net gain (loss) from past experience
different from that assumed and
effects of changes in assumptions (1,897) (4,584)
Prior service cost not yet recognized in net
periodic pension cost (1,127) (1,218)
Unrecognized net asset (obligation) as of initial
date of application of SFAS No. 87 (568) (138)
Accrued pension cost included in accrued expenses $12,251 $ 8,774
The projected benefit obligation in excess of plan assets is primarily
attributable to the Company's unfunded supplemental retirement plan.
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 8.25% and 7.0% for
fiscal years 1995 and 1994, respectively. The rate of increase on future
compensation levels was 4.5% and 5% in fiscal years 1995 and 1994,
respectively, and the expected long-term rate of return on assets was 9.5%
in fiscal years 1995 and 1994. The Company's funding policy is to
contribute annually an amount allowable for federal income tax purposes.
Pension plan assets consist primarily of fixed income and equity
securities.
Effective January 31, 1993, the Company adopted the Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This standard requires accrual for the cost
18
of postretirement health care and life insurance benefits during the years
that an employee provides services to the Company. The Company elected to
recognize the transition obligation in full as of January 31, 1993, and
accordingly recorded a one-time implementation charge of $6,145,000, net of
a tax benefit of $3,937,000, as a cumulative effect of an accounting
change. The Company's cash flows are not impacted by the new accounting.
The Company's postretirement benefit plan is unfunded and provides limited
postretirement medical and life insurance benefits to associates who
participate in the Company's retirement plan and who retire at age 55 or
older with 10 years or more of service.
Net periodic postretirement benefit cost of the Company's plan includes the
following components:
Fiscal Year Ended January 1995 1994
In Thousands
Service cost $ 952 $ 476
Interest cost on accumulated
benefit obligation 963 820
Net amortization 88 -
Net periodic postretirement benefit cost $2,003 $1,296
The components of the accumulated postretirement benefit obligation and the
amount recognized in the Company's statements of financial position are as
follows:
January 28, January 29,
1995 1994
In Thousands
Accumulated postretirement obligation:
Retired associates $ 6,394 $ 7,038
Fully eligible active associates 712 302
Other active associates 5,168 4,565
Accumulated postretirement obligation 12,274 11,905
Unrecognized net gain (loss) due to change
in assumptions (149) (1,140)
Accrued postretirement benefits included in
accrued expenses $12,125 $10,765
Assumptions used in determining the actuarial present value of the
accumulated postretirement obligation include a discount rate of 8.25% at
January 28, 1995 and 7.0% at January 29, 1994. A medical inflation rate of
5% was assumed in both periods for all future years. Due to the nature of
the plan, the Company's exposure to medical inflation is primarily limited
to increases in the Medicare deductible. A 1% increase in the medical
inflation assumption would increase the postretirement benefit cost for
fiscal 1995 by $0.2 million and the accumulated postretirement obligation
as of January 28, 1995 by approximately $1.1 million.
The Company sponsors an employee savings plan under Section 401(k) of the
Internal Revenue Code for eligible employees. Employees may contribute up
19
to 15% of eligible pay. The Company matches employee contributions up to
5% of eligible pay at rates ranging from 25% to 50% based upon Company
performance. The Company contributed $2.2 million in fiscal 1995, $2.2
million in fiscal 1994 and $1.9 million in fiscal 1993.
G. Accrued Expenses and Other Current Liabilities
The major components of accrued expenses and other current liabilities are
as follows:
January 28, January 29,
1995 1994
In Thousands
Employee compensation and benefits $ 64,210 $ 59,296
Reserves associated with discontinued
operations 13,085 17,618
Insurance, rent, utilities, advertising
and other 190,387 168,225
Accrued expenses and other current liabilities $267,682 $245,139
H. Supplemental Cash Flow Information
The Company's cash payments for interest expense and income taxes,
including discontinued operations, and its non-cash investing and financing
activities for the past three years are as follows:
January 28, January 29, January 30,
Fiscal Year Ended 1995 1994 1993
In Thousands
Cash paid for:
Interest, net of amounts
capitalized $25,051 $18,573 $28,166
Income taxes 68,940 94,580 65,040
Non-cash investing and financing
activities:
Conversion of 7 1/4% convertible
debentures into common stock - - $69,031
Capital lease additions - - 4,069
I. Ames Department Stores, Inc. and Related Contingent Liabilities
In October 1988, the Company completed the sale of its former Zayre Stores
division to Ames Department Stores, Inc. ("Ames"). The Company received
$431.4 million in cash, a 12%-16% ten year $200 million increasing rate
note receivable (the "Ames Note"), which was paid on May 24, 1989, and
400,000 shares of 6% cumulative convertible senior preferred stock of Ames
then valued at $140 million.
20
In its results for the fiscal year ended January 27, 1990, the Company
provided a $185 million ($172.1 million after-tax) reserve against its
preferred stock investment in Ames Department Stores, Inc., and for
contingent lease and other liabilities associated with the sale of the
former Zayre Stores division to Ames in fiscal 1989. On April 25, 1990,
Ames filed for protection under Chapter 11 of the Federal Bankruptcy Code.
The Company continued to monitor the adequacy of its reserves since the
April 1990 bankruptcy filing of Ames and in the fourth quarter of the
fiscal year ended January 25, 1992 increased its reserves by recording a
charge of $50 million, net of tax benefits of $27 million, to discontinued
operations.
On December 30, 1992, Ames emerged from bankruptcy via its Third Amended
and Restated Plan of Reorganization. Upon consummation of the plan, the
Company received $23 million in cash, 4% of the voting stock of the new
Ames, which the Company has subsequently sold, and the right to receive up
to an additional $7 million in cash based on Ames exceeding its cash flow
projections for future years by varying amounts. The Company also
surrendered the Ames preferred stock it received in the sale of the Zayre
Stores division. Ames also released all claims (including any fraudulent
conveyance and preference claim) that it might have had against the
Company. The Company is liable for certain amounts to be distributed under
the plan for certain unassigned landlord claims under certain former Zayre
store leases on which Zayre Corp. was liable as of the date of acquisition
and which Ames has rejected.
As of January 28, 1995, the Company has available reserves of $13.1 million
for lease and other contingent liabilities associated with the sale of the
Zayre stores to Ames and believes these reserves should be adequate to
cover all reasonably expected liabilities that it may incur as a result of
the Ames bankruptcy.
The Company remains contingently liable for the leases of most of the
former Zayre stores still operated by Ames. The Company also has the
potential of recognizing tax benefits, subject to federal income tax
considerations, related to the $140.3 million capital loss carryforward
created by surrendering the Ames preferred stock.
J. Segment Information
For data on business segments for fiscal 1995, 1994 and 1993 see page 20.
21
Selected Financial Data (Continuing Operations)
Fiscal Year Ended January 1995 1994 1993 1992 1991
Dollars in Thousands Except Per Share Amounts
Income statement and
per common share data:
Net sales $3,842,818 $3,626,604 $3,261,240 $2,757,715 $2,446,279
Income from
continuing
operations
before extra-
ordinary item and
cumulative effect
of accounting
changes 82,619 127,046 104,044 70,114 74,128
Number of common
shares for
primary and fully
diluted earnings
per common share
computations 73,467,003 74,192,358 73,873,276 70,050,835 72,924,288
Earnings per common
share from continuing
operations before
extraordinary item
and cumulative effect
of accounting changes $1.03 $1.62 $1.40 $1.00 $1.06
Dividends per common
share .56 .50 .46 .46 .46
Balance sheet data:
Working capital $ 287,932 $ 290,203 $ 245,312 $ 171,611 $ 230,444
Total assets 1,638,218 1,427,370 1,305,096 1,105,319 1,047,301
Capital expenditures,
excluding
capitalized
leases 127,826 125,848 107,881 89,532 79,019
Long-term debt 239,478 210,854 179,787 307,385 308,593
Shareholders' equity 606,952 590,900 505,184 260,517 270,507
Stores in operation end
of year:
T.J. Maxx 551 512 479 437 393
Hit or Miss 490 493 505 576 574
Winners 37 27 15 9 5
HomeGoods 15 10 6 - -
T.K. Maxx 5 - - - -
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF The TJX Companies, Inc.
RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS
RESULTS OF OPERATIONS
Income Before Extraordinary Item and Cumulative Effect of Accounting
Changes: Income before extraordinary item and cumulative effect of
accounting changes was $82.6 million for fiscal 1995 versus $127.0 million
and $104.0 million in fiscal 1994 and 1993, respectively. On a fully
diluted earnings per common share basis, income before extraordinary item
and cumulative effect of accounting changes was $1.03 in fiscal 1995 versus
$1.62 in fiscal 1994 and $1.40 in fiscal 1993. These results are prior to
a net after-tax charge for the cumulative effect of accounting changes of
$2.7 million, or $.04 per common share, in fiscal 1994 and an extraordinary
charge of $1.2 million, or $.02 per common share, for the early retirement
of debt, in fiscal 1993.
These results reflect a decline in the operating income of the Company's
three major business segments of 21.2% in fiscal 1995 versus an increase of
13.9% in operating income in fiscal 1994. The fiscal 1995 performance
reflects a weak U.S. apparel environment, due largely to a lack of new
fashion, an increased emphasis on casual dress, and shifting consumer
emphasis from apparel to home furnishings. Fiscal 1995 also experienced a
highly promotional U.S. retail environment and unseasonably warm weather in
the fall and winter months. The proliferation of apparel stores in the
U.S. was a continuing challenge for the Company in fiscal 1995. In
addition to these external factors, there were areas within the Company
where execution was below par, primarily at our Chadwick's division as
discussed later. The off-price family apparel store segment, comprised of
T.J. Maxx and Winners, recorded a decline of 12.0% in operating income in
fiscal 1995 versus an increase of 9.3% in fiscal 1994. Winners, although a
relatively small part of the segment, doubled its operating income for
fiscal 1995 as Canada did not face the same difficult apparel environment
as the U.S. The Company's off-price women's specialty stores, comprised of
the Hit or Miss division, recorded an operating loss for fiscal 1995 of
$4.5 million versus operating income of $5.0 million in fiscal 1994. Hit
or Miss was more directly affected by the weak U.S. apparel environment as
it is narrowly focused on women's apparel. The Company's off-price catalog
operation, Chadwick's of Boston, recorded operating income of $6.1 million
in fiscal 1995 versus $24.7 million in fiscal 1994. The U.S. apparel
cycle, combined with operational problems, contributed to the decline in
Chadwick's profits.
Net Sales: Net sales for fiscal 1995 increased 6.0% to $3.84 billion from
$3.63 billion in 1994. Fiscal 1994 net sales increased 11.2% to $3.63
billion from $3.26 billion in fiscal 1993. Same store sales, on a
consolidated basis, decreased 1% in fiscal 1995 versus a 2% increase in
fiscal 1994. Lack of U.S. consumer interest in apparel throughout fiscal
1995, the highly promotional retail environment and unseasonably warm
weather in the fall and winter months were all factors affecting sales
results for 1995.
T.J. Maxx same store sales were flat in fiscal 1995 versus a 2% increase in
fiscal 1994. Although apparel categories were weak throughout the year,
23
the non-apparel categories recorded solid same store sales gains in fiscal
1995. Winners achieved same store sales increases of 10% in fiscal 1995
and 7% in fiscal 1994. Hit or Miss recorded a 7% decrease in same store
sales in fiscal 1995 versus a 4% increase in fiscal 1994. The Hit or Miss
division, which is based exclusively on the sale of apparel merchandise,
was more affected than the Company's other divisions by the weak U.S.
apparel environment. Hit or Miss' total sales have declined over the last
two fiscal years due to a net reduction in the number of stores operated by
the chain. Chadwick's sales increased 3% in fiscal 1995 after an increase
of 45% in fiscal 1994. In addition to the weak apparel cycle, the rapid
growth of this division over the last several years put a strain on
operations, which had a negative impact on this division's ability to
service its customers.
[A pie chart is included in the discussion of Net Sales entitled
"Divisional Net Sales" and includes the following data:]
Divisional Net Sales
$ in Millions FYE 1/95
T.J. Maxx $2,932
Chadwick's 434
Hit or Miss 354
Winners (U.S. $) 124
Cost of Sales, Including Buying and Occupancy Costs: The cost of sales,
including buying and occupancy costs, as a percentage of net sales was
76.2%, 75.1% and 75.7% in fiscal 1995, 1994 and 1993, respectively. T.J.
Maxx and Hit or Miss experienced a decline in gross margin in fiscal 1995
versus an increase in gross margin in fiscal 1994. The decrease in fiscal
1995 is due to weak sales performance and higher-than-planned markdowns.
The increase in fiscal 1994 is attributable to same store sales growth and
good inventory control. Chadwick's experienced a slight increase in its
gross margin in fiscal 1995. Although this division did incur additional
costs to liquidate merchandise in fiscal 1995, these costs were offset by
savings in the net cost of shipping merchandise. In fiscal 1994,
Chadwick's experienced a decline in gross margin as the division absorbed
costs to liquidate residual inventory from several of its catalogs.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses as a percentage of net sales were 19.5%, 18.6%, and
18.2% in fiscal 1995, 1994 and 1993, respectively. T.J. Maxx and Hit or
Miss experienced an increase in this expense ratio in fiscal 1995 primarily
due to weak sales results. In fiscal 1994, T.J. Maxx's expense ratio
remained constant with the prior year while Hit or Miss experienced a
slight expense ratio decrease. Chadwick's had an expense ratio increase in
fiscal 1995 primarily due to increased production and postage costs of its
catalogs and order processing costs, while maintaining a fairly constant
rate in fiscal 1994 with that of the prior year. Also, the operating
results of T.K. Maxx, the Company's United Kingdom venture, and HomeGoods,
are factors increasing this ratio in both fiscal 1995 and fiscal 1994, as
the net results of both these divisions are included in selling, general
and administrative expenses.
24
Interest Expense: Interest expense was $25.9 million in fiscal 1995, $19.0
million in fiscal 1994 and $26.3 million in fiscal 1993. The increase in
fiscal 1995 is attributable to increased borrowings and an increase in
borrowing rates. In addition, fiscal 1994 includes interest income of $2.0
million recorded in the fourth quarter, associated with a federal tax
refund. The overall decrease in interest for fiscal 1994 as compared to
fiscal 1993, in addition to the interest income mentioned above, is
attributable to lower borrowing rates, and the conversion to equity of the
Company's 7 1/4% convertible subordinated debentures in December 1992.
Income Taxes: The Company's worldwide effective income tax rate was 42% in
fiscal 1995 and 40% in fiscal 1994 and fiscal 1993. The increase in the
rate in fiscal 1995 is attributable to the Company's entry into the United
Kingdom where a net operating loss carryforward has been incurred. In
fiscal 1994, increases in the tax rate associated with the new U.S. tax law
passed in August 1993, as well as the impact of the Company's entry into
the United Kingdom, were offset by a lower effective state income tax rate
and the benefit of a Canadian net operating loss carryforward. The
difference between the U.S. federal statutory tax rate and the Company's
worldwide effective income tax rate in each fiscal year is primarily
attributable to the effective state income tax rate, with the additional
impact in fiscal 1995 of the aforementioned net operating loss carryforward
attributable to the Company's entry into the United Kingdom.
During the first quarter of fiscal 1994, the Company implemented Statement
of Financial Accounting Standards No. 109 (SFAS No. 109) "Accounting for
Income Taxes" which resulted in an after-tax gain of $3.5 million due to
the cumulative effect of implementing this accounting change.
CAPITAL SOURCES AND LIQUIDITY
[A bar graph entitled "Long-Term Capitalization" is included in the Capital
Sources and Liquidity section of this discussion. Each bar shows total
long-term capitalization with the bottom portion of the bar representing
the percent comprised of equity and the top portion of the bar representing
the percent comprised of long-term debt. The graph includes the following
data:]
Total Long-Term
Fiscal Year Ended Capitalization Percent Percent
January ($'s in Millions) Equity Long-Term Debt
1991 579 47% 53%
1992 568 46% 54%
1993 685 74% 26%
1994 802 74% 26%
1995 846 72% 28%
Operating Activities: Net cash provided by operating activities was $104.5
million, $84.4 million and $138.6 million in fiscal 1995, 1994 and 1993,
respectively. Cash provided by operations increased in fiscal 1995 despite
reduced net income. The impact of the lower net income was offset by an
increase in the consolidated accounts payable to merchandise inventory
ratio, and lower payments against the Ames reserve. The reduction in cash
provided by operations in fiscal 1994 versus 1993 was due to a decrease in
25
the consolidated accounts payable to merchandise inventory ratio, the
impact of the receipt of the Ames cash settlement in fiscal 1993 and
additional taxes, paid in fiscal 1994, on the Ames cash settlement.
Inventories as a percentage of net sales were 24.4% in fiscal 1995, 21.3%
in fiscal 1994 and 20.6% in fiscal 1993. The increase in the percentage in
fiscal 1995 was attributable to T.J. Maxx's higher warehouse inventory
related to opportunistic merchandise purchases and a larger percentage of
spring merchandise on hand at the end of fiscal 1995 than in fiscal 1994.
The increase in the percentage in fiscal 1994 reflected growth in
Chadwick's which maintains a higher inventory as a percentage of net sales
than the other divisions, as well as the impact of Winners as its ratio of
inventory to net sales moved closer to that of the T.J. Maxx division.
Working capital was $287.9 million in fiscal 1995, $290.2 million in fiscal
1994 and $245.3 million in fiscal 1993.
Investing Activities: The principal investing activities of the Company
are for capital expenditures. Total capital expenditures for the last two
years are set forth in the table below:
Fiscal Year Ended January 1995 1994
In Millions
New stores $ 58.1 $ 45.8
Store renovations and improvements 42.1 25.3
Office and distribution centers 27.6 54.7
Capital expenditures, excluding
capitalized leases $127.8 $125.8
Fiscal 1995 capital expenditures emphasized new stores and store
renovations. The fiscal 1994 capital expenditures include costs associated
with T.J. Maxx's new distribution center in Charlotte, NC as well as costs
associated with the expansion of Chadwick's fulfillment center.
The Company expects that capital expenditures will approximate $125 million
for fiscal 1996, including approximately $52 million for new stores,
primarily T.J. Maxx; $40 million for improvements to existing stores,
primarily T.J. Maxx; and approximately $33 million for office and
distribution centers.
Financing Activities: During fiscal 1995, the Company borrowed $20.5
million under its $75 million Medium Term Note program. In fiscal 1994,
the Company borrowed $37 million under this program. The borrowings are to
support the Company's international and domestic new business development
and capital expenditures. The aggregate borrowings of $57.5 million to
date have been entirely for the funding of the Company's investment in its
Canadian and United Kingdom operations. To hedge the Company's investment
in its foreign subsidiaries, the Company entered into foreign currency swap
agreements in both Canadian dollars and British pounds sterling, in total
amounts equivalent to its medium term note borrowings. See Notes A and B
to the consolidated financial statements for further information. Also,
during fiscal 1995, the Company borrowed $45 million under a mortgage of
its Chadwick's fulfillment center. The mortgage has a ten year term, with
interest payable at 8.73% per year, and with semi-annual principal payments
of $2.5 million beginning in June 1996. Proceeds of this loan were used to
26
repay the outstanding $5.4 million real estate mortgage, assumed by the
Company upon the purchase of the Chadwick's fulfillment center, with the
balance used for general corporate purposes.
The Company declared quarterly dividends on its common stock of $.14 per
share in fiscal 1995 and $.125 per share in fiscal 1994. Annual dividends
on common stock totalled $41.6 million in fiscal 1995 and $36.7 million in
fiscal 1994. In addition, in fiscal 1995 and 1994, the Company recorded
dividends on its Series A and Series C preferred stock, totalling $7.2
million in each year. During fiscal 1995, the Company announced a stock
buy-back program for up to $100 million and purchased 1.1 million shares at
a cost of $19.3 million, which represents approximately 1.5% of the
Company's outstanding common shares. The Company's intentions are to
purchase additional shares over time. The Company's shareholders' equity
as a percentage of total long-term capitalization (defined as long-term
debt plus shareholders' equity) has been in excess of 70% in each of the
last three fiscal years.
The Company has traditionally funded its seasonal merchandise requirements
through short-term bank borrowings and the issuance of short-term
commercial paper. The Company has unsecured committed short-term credit
lines totalling $300 million, all of which were available for use as of
January 28, 1995. These lines, when needed, are drawn upon or used to
backup the Company's commercial paper program. The Company also has
uncommitted lines totalling $115 million of which $20 million was
outstanding as of January 28, 1995. The maximum amount of short-term
borrowings outstanding during fiscal 1995, 1994 and 1993 was $181.5
million, $133.0 million and $104.3 million, respectively. Management
believes that the Company's internally generated funds along with available
short-term credit lines and ability to access external financing sources,
are adequate to meet its needs. For further information regarding the
Company's long-term debt and capital stock transactions, see Notes A and D
to the consolidated financial statements.
Ames Department Stores, Inc. and Related Contingent Liabilities: In
October 1988, the Company completed the sale of its former Zayre Stores
division to Ames Department Stores, Inc. ("Ames"). Ames filed for
protection under Chapter 11 of the Federal Bankruptcy Code in 1990 and
emerged from bankruptcy on December 30, 1992.
As of January 28, 1995, the Company has available reserves of $13.1 million
for lease and other contingent liabilities associated with the sale of the
Zayre stores to Ames and believes these reserves should be adequate to
cover all reasonably expected liabilities that it may incur as a result of
the Ames bankruptcy.
The Company remains contingently liable for the leases of most of the
former Zayre stores still operated by Ames. The Company also has the
potential for recognizing tax benefits, subject to federal income tax
considerations, related to a $140.3 million capital loss carryforward. The
capital loss carryforward was created when the Company, as part of the Ames
reorganization plan, surrendered the Ames preferred stock it initially
received as partial consideration for the sale of the Zayre Stores
division.
27
Report of Independent Accountants
COOPERS & LYBRAND L.L.P.
To the Board of Directors of The TJX Companies, Inc.:
We have audited the accompanying consolidated balance sheets of The TJX
Companies, Inc. and subsidiaries as of January 28, 1995 and January 29,
1994 and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three fiscal years in the period
ended January 28, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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 consolidated financial position of
The TJX Companies, Inc. and subsidiaries as of January 28, 1995 and January
29, 1994 and the consolidated results of their operations and their cash
flows for each of the three fiscal years in the period ended January 28,
1995 in conformity with generally accepted accounting principles.
Boston, Massachusetts
March 1, 1995 COOPERS & LYBRAND L.L.P.
28
Report of Management
The financial statements and related financial information in this annual
report have been prepared by management which is responsible for their
integrity, objectivity and consistency. The financial statements were
prepared in accordance with generally accepted accounting principles and
necessarily include amounts which are based upon judgments and estimates
made by management.
The Company maintains a system of internal controls designed to
provide, at appropriate cost, reasonable assurance that assets are
safeguarded, transactions are executed in accordance with management's
authorization and the accounting records may be relied upon for the
preparation of financial statements. The system of controls includes the
careful selection and training of associates, and the communication and
application of formal policies and procedures that are consistent with high
standards of accounting and administrative practices. The accounting and
control systems are continually reviewed, evaluated and where appropriate,
modified to accommodate changing business conditions and the
recommendations of the Company's internal auditors and the independent
public accountants.
An Audit Committee, comprised of members of the Board of Directors who
are neither officers nor employees of the Company, meets periodically with
management, internal auditors and the independent public accountants to
review matters relating to the Company's financial reporting, the adequacy
of internal accounting controls and the scope and results of audit work.
The Committee is responsible for reporting the results of its activities
and for recommending the selection of independent auditors to the full
Board of Directors. The internal auditors and the independent public
accountants have free access to the Committee and the Board of Directors.
The financial statements have been examined by Coopers & Lybrand
L.L.P., whose report appears separately. Their report expresses an opinion
as to the fair presentation of the consolidated financial statements and is
based on an independent examination performed in accordance with generally
accepted auditing standards.
Bernard Cammarata Donald G. Campbell
President and Chief Executive Officer Senior Vice President - Finance and
Chief Financial Officer
March 1, 1995
29
Selected Quarterly Financial Data (Unaudited) The TJX Companies, Inc.
First Second Third Fourth
Quarter Quarter Quarter Quarter
In Thousands Except Per Share Amounts
Fiscal year ended January 28, 1995
Net sales $851,736 $866,689 $1,011,879 $1,112,514
Gross earnings* 216,022 210,100 260,952 228,632
Net income 19,369 18,796 32,788 11,666
Per common share, fully diluted .24 .23 .42 .14
Fiscal year ended January 29, 1994
Net sales $785,637 $841,054 $ 959,683 $1,040,230
Gross earnings* 200,231 204,550 262,342 236,655
Income before extraordinary
item and cumulative effect
of accounting changes 22,657 25,985 47,721 30,683
Per common share, fully diluted .28 .33 .61 .39
Net income 19,990 25,985 47,721 30,683
Per common share, fully diluted .25 .33 .61 .39
* Gross earnings equals net sales less cost of sales, including buying and
occupancy costs.
Price Range of Common Stock
The common stock of the Company is listed on the New York Stock Exchange
(Symbol:TJX). The quarterly high and low stock prices for fiscal 1995 and
fiscal 1994 are as follows:
Fiscal 1995 Fiscal 1994
Quarter High Low High Low
First $29 3/8 $22 7/8 $33 1/4 $27
Second 24 7/8 18 1/8 34 1/4 26
Third 23 1/4 15 5/8 33 3/8 24 1/2
Fourth 16 1/4 13 3/16 34 1/4 25 3/8
The approximate number of common shareholders at January 28, 1995 was
18,500.
The Company declared four quarterly dividends of $.14 and $.125 per common
share for fiscal years 1995 and 1994, respectively.
30
Shareholder Information
Transfer Agent and Registrar,
Common and Series C Preferred Stock
State Street Bank and Trust Company
Boston, Massachusetts
1-800-426-5523
Trustees
Public Debentures
9 1/2% Sinking Fund Debentures
Chase Manhattan Bank
New York, New York
Auditors
Coopers & Lybrand L.L.P.
Independent Counsel
Ropes & Gray
Form 10-K
Information concerning the Company's
operations and financial position is provided
in this report and in the Form 10-K Report
filed with the Securities and Exchange
Commission. A copy of the 10-K Report may be
obtained without charge by writing or
calling:
The TJX Companies, Inc.
Investor Relations
770 Cochituate Road
Framingham, Massachusetts 01701
(508)390-2323
Annual Meeting
The 1995 annual meeting will be held at 11:00
a.m. on Tuesday, June 6, 1995 in the
Enterprise Room, 5th Floor at State Street
Bank, 225 Franklin Street, Boston,
Massachusetts.
Executive Offices
Framingham, Massachusetts 01701
31