PAGE 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
/X/ Quarterly Report Under Section 13 and 15(d)
of the Securities Exchange Act of 1934
or
/ / Transition Report Pursuant to Section 13 and 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended October 28, 1995
Commission file number 1-4908
The TJX Companies, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2207613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
770 Cochituate Road
Framingham, Massachusetts 01701
(Address of principal executive offices) (Zip Code)
(508)390-1000
(Registrant's telephone number, including area code)
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 .
The number of shares of Registrant's common stock outstanding as of
November 25, 1995: 72,430,059
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PART I FINANCIAL INFORMATION
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
Thirteen Weeks Ended
October 28, October 29,
1995 1994
Net sales $1,012,672 $ 924,606
Cost of sales, including buying and
occupancy costs 748,005 680,365
Selling, general and administrative expenses 196,950 178,001
Interest on debt and capital leases 11,250 7,257
Income from continuing operations before
income taxes 56,467 58,983
Provision for income taxes 22,590 24,387
Income from continuing operations 33,877 34,596
Discontinued operations:
Income (loss) from discontinued operations,
net of income taxes - (1,808)
(Loss) on the disposal of discontinued
operations, net of income taxes - -
Net income 33,877 32,788
Preferred stock dividends 1,789 1,789
Net income available to common shareholders $ 32,088 $ 30,999
Primary and fully diluted earnings per
common share:
Continuing operations $ .44 $ .44
Discontinued operations - (.02)
Net income $ .44 $ .42
Cash dividends per common share $ .14 $ .14
The accompanying notes are an integral part of the financial statements.
PAGE 3
PART I FINANCIAL INFORMATION
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
Thirty-Nine Weeks Ended
October 28, October 29,
1995 1994
Net sales $2,692,047 $2,462,106
Cost of sales, including buying and
occupancy costs 2,040,124 1,829,799
Selling, general and administrative
expenses 534,079 488,429
Interest on debt and capital leases 29,562 17,831
Income from continuing operations before
income taxes 88,282 126,047
Provision for income taxes 37,182 52,188
Income from continuing operations 51,100 73,859
Discontinued operations:
Income (loss) from discontinued
operations, net of income taxes (2,300) (2,906)
(Loss) on the disposal of discontinued
operations, net of income taxes (31,700) -
Net income 17,100 70,953
Preferred stock dividends 5,367 5,367
Net income available to common shareholders $ 11,733 $ 65,586
Primary and fully diluted earnings per
common share:
Continuing operations $ .63 $ .93
Discontinued operations (.47) (.04)
Net income $ .16 $ .89
Cash dividends per common share $ .42 $ .42
The accompanying notes are an integral part of the financial statements.
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THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
IN THOUSANDS
ASSETS October 28, January 28, October 29,
1995 1995 1994
Current assets:
Cash and cash equivalents $ 26,902 $ 41,569 $ 26,247
Accounts receivable 135,901 41,749 65,297
Merchandise inventories 1,111,651 890,593 1,014,448
Prepaid expenses 31,367 22,881 24,426
Net current assets of discontinued
operations - 10,731 11,282
Total current assets 1,305,821 1,007,523 1,141,700
Property, at cost:
Land and buildings 115,226 114,736 114,423
Leasehold costs and improvements 287,888 251,387 241,312
Furniture, fixtures and equipment 421,493 380,806 373,401
824,607 746,929 729,136
Less accumulated depreciation 342,722 297,019 291,440
481,885 449,910 437,696
Other assets 27,580 14,244 16,532
Goodwill, net of amortization 87,993 89,877 90,624
Net noncurrent assets of discontinued
operations - 37,990 39,132
TOTAL ASSETS $1,903,279 $1,599,544 $1,725,684
LIABILITIES
Current liabilities:
Short-term debt $ 97,699 $ 20,000 $ 118,970
Current installments of
long-term debt 56,048 31,306 6,175
Accounts payable 407,778 415,861 452,964
Accrued expenses and other
current liabilities 306,240 252,424 266,393
Federal and state income taxes
payable 2,068 - 20,456
Total current liabilities 869,833 719,591 864,958
Long-term debt exclusive of current
installments:
Real estate mortgages 71,569 77,550 39,614
Equipment notes 3,801 4,598 5,244
General corporate debt 335,196 157,330 182,330
Deferred income taxes 34,780 33,523 27,993
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 25,000
- 1,650,000 shares of 6.25% Series C 82,500 82,500 82,500
Common stock, par value $1, authorized
150,000,000 shares, issued and
outstanding 72,418,517; 72,401,254
and 72,409,433 shares 72,419 72,401 72,409
Additional paid-in capital 267,743 267,937 266,412
Retained earnings 140,438 159,114 159,224
Total shareholders' equity 588,100 606,952 605,545
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,903,279 $1,599,544 $1,725,684
The accompanying notes are an integral part of the financial statements.
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THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
Thirty-Nine Weeks Ended
October 28, October 29,
1995 1994
Cash flows from operating activities:
Income before cumulative effect of
accounting changes $ 17,100 $ 70,953
Adjustments to reconcile income before
cumulative effect of accounting changes
to net cash (used in) operating activities:
Depreciation and amortization 57,039 48,686
Loss from discontinued operations 2,300 2,906
Loss on disposal of discontinued operations 31,700 -
Loss on property disposals 719 2,834
Other (4,718) (2,656)
Changes in assets and liabilities:
(Increase) in accounts receivable (94,152) (36,658)
(Increase) in merchandise inventories (221,058) (294,206)
(Increase) in prepaid expenses (8,486) (4,464)
Increase (decrease) in accounts payable (8,083) 144,299
Increase in accrued expenses and
other current liabilities 32,203 37,839
Increase in income taxes payable 11,520 20,456
Increase (decrease) in deferred
income taxes 7,973 (5,970)
Net cash (used in) operating activities (175,943) (15,981)
Cash flows from investing activities:
Property additions (86,759) (88,853)
Proceeds from sale of discontinued operations 3,000 -
Net cash (used in) investing activities (83,759) (88,853)
Cash flows from financing activities:
Proceeds from borrowings of short-term debt 77,699 118,970
Proceeds from borrowings of long-term debt 199,861 20,500
Principal payments on long-term debt (4,036) (3,927)
Proceeds from sale and issuance of common
stock, net 121 720
Common stock repurchased - (19,261)
Cash dividends (35,776) (36,954)
Net cash provided by financing activities 237,869 80,048
Net cash (used in) continuing operations (21,833) (24,786)
Net cash provided by (used in) discontinued
operations 7,166 (7,069)
Net (decrease) in cash and cash equivalents (14,667) (31,855)
Cash and cash equivalents at beginning of year 41,569 58,102
Cash and cash equivalents at end of period $ 26,902 $ 26,247
The accompanying notes are an integral part of the financial statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Thirteen Weeks (Third Quarter) and Thirty-Nine Weeks Ended October 28, 1995
Versus Thirteen Weeks and Thirty-Nine Weeks Ended October 29, 1994
Effective September 30, 1995, the Company sold its women's specialty
division, Hit or Miss, to an entity owned by a group of outside investors
and management of that division. As a result of this transaction, the
operating results of Hit or Miss for the current period and all prior
periods are presented as discontinued operations for comparative purposes.
The impact of the sale of the division, estimated to be an after-tax loss
of $31.7 million (net of tax benefits of $19.8 million), is reflected as
loss on disposal of discontinued operations. The loss on disposal includes
the operating results of Hit or Miss from July 30, 1995 through the closing
date of the transaction.
Net sales from continuing operations for the third quarter were $1,012.7
million, up 10% from $924.6 million last year. For the nine months, net
sales from continuing operations were $2,692.0 million, up 9% from $2,462.1
million for the same period last year. The sales increase is primarily
attributable to new stores and, to a lesser extent, the inclusion of
HomeGoods in this year's consolidated net sales. Same store sales for the
quarter decreased 4% and 1% for T.J. Maxx and Winners, respectively. For
the nine months, same store sales decreased 2% for T.J. Maxx and increased
6% for Winners. Chadwick's experienced an increase in sales of 25% and 13%
for the quarter and nine months, respectively. In general, sales were
impacted in both periods by the continuing general softness, industrywide,
in U.S. apparel sales, continued promotional activity of other retailers
and unusual weather.
Income from continuing operations for the third quarter was $33.9 million,
or $.44 per common share, versus last year's $34.6 million, or $.44 per
common share. For the nine months, income from continuing operations was
$51.1 million, or $.63 per common share versus last year's $73.9 million or
$.93 per common share. Net income for the nine months after reflecting Hit
or Miss as discontinued operations was $17.1 million, or $.16 per common
share.
The following table sets forth operating results expressed as a percentage
of net sales (continuing operations):
Percentage of Net Sales
13 Weeks Ended 39 Weeks Ended
10/28/95 10/29/94 10/28/95 10/29/94
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including
buying and occupancy costs 73.9 73.6 75.8 74.3
Selling, general and
administrative expenses 19.4 19.3 19.8 19.8
Interest on debt and capital
leases 1.1 .7 1.1 .8
Income from continuing
operations before
income taxes 5.6% 6.4% 3.3% 5.1%
PAGE 7
Consolidated cost of sales, including buying and occupancy costs, as a
percentage of net sales increased for the nine months as compared to last
year primarily due to higher markdowns taken at T.J. Maxx. For the
quarter, the increase in this ratio is primarily due to the decrease in
same store sales.
Interest on debt and capital leases increased in both periods over the
prior year due to additional borrowings under the Company's medium term
note program in September 1994, a $45 million real estate mortgage placed
on the Chadwick's fulfillment center in December 1994, and $200 million of
long-term notes issued in June 1995. In addition, interest expense
reflects an increase in short-term borrowings, prior to receipt of the $200
million borrowed in June.
The increase in the effective income tax rate for the nine months reflects
the impact of foreign operating losses for which tax benefits have not been
recognized. The decrease in the effective income tax rate in the quarter
reflects the tax benefit on foreign operating losses realizable due to a
third quarter corporate restructuring of certain foreign subsidiaries.
The following table sets forth the operating results of the Company's major
business segments: (unaudited)
(In Thousands)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
Net sales:
Off-price family
apparel stores $ 840,675 $ 803,653 $2,283,421 $2,146,930
Off-price catalog
operation 151,458 120,953 355,671 315,176
Off-price home
fashion stores 20,539 - 52,955 -
$1,012,672 $ 924,606 $2,692,047 $2,462,106
Operating income (loss):
Off-price family
apparel stores $ 65,899 $ 71,377 $ 136,039 $ 164,980
Off-price catalog
operation 13,905 3,798 18,038 8,881
Off-price home
fashion stores (2,211) - (6,067) -
77,593 75,175 148,010 173,861
General corporate expense* 9,223 8,282 28,206 28,023
Goodwill amortization 653 653 1,960 1,960
Interest expense 11,250 7,257 29,562 17,831
Income from continuing
operations before
income taxes $ 56,467 $ 58,983 $ 88,282 $ 126,047
* General corporate expense for the periods ended October 28, 1995 include
the net operating results of T.K. Maxx and the Cosmopolitan catalog.
General corporate expense for the periods ended October 29, 1994 include
the net operating results of HomeGoods and T.K. Maxx.
PAGE 8
The off-price family apparel stores segment, T.J. Maxx and Winners,
recorded a decrease in operating profit of 8% and 18% for the third quarter
and nine months, respectively. These results are attributable to weak
apparel sales in both periods, as well as increased markdowns at T.J. Maxx
for the nine months ended October 1995. Winners operating income increased
in both periods. Chadwick's recorded an increase in operating income in
both periods due to high demand from the winter and holiday catalogs. This
division has made operational improvements leading to improved customer
service.
Stores in operation at the end of the period are as follows:
October 28, 1995 October 29, 1994
T.J. Maxx 581 539
Winners 49 34
HomeGoods 24 12
T.K. Maxx 8 4
Financial Condition
Cash flows from operating and financing activities for the nine months
reflect increases in inventory and short-term borrowings, which are
primarily due to normal seasonal requirements. In addition, cash flows
from operating activities for the nine months ended October 1995 reflects
an increase in opportunistic purchases at T.J. Maxx. The increase in
short-term borrowings also reflects an increase in accounts receivable due
to a deferred customer billing program at Chadwick's. The increase in
long-term debt is due to the Company's borrowing of $100 million of 5-year
notes at 6 5/8% and $100 million of 10-year notes at 7%. Proceeds of these
two notes, initially used in part to reduce short-term borrowings, will be
used for the repayment of scheduled maturities of outstanding long-term
debt, for new stores and for other capital expenditures and for other
general corporate purposes. Overall long-term borrowing levels have
increased primarily due to lower than anticipated earnings in fiscal 1995
and the first nine months of fiscal 1996.
On November 17, 1995, the Company completed its acquisition of Marshalls,
the off-price family apparel retailer, from Melville Corporation. The
Company paid $375 million in cash and $175 million in junior convertible
preferred stock for the Marshalls division. The acquisition will be
accounted for under the purchase method of accounting.
Simultaneously, the Company entered into an unsecured $875 million bank
credit agreement under which the Company borrowed $375 million on a term
loan basis to fund the cash portion of the Marshalls purchase price and may
borrow up to an additional $500 million on a revolving loan basis to fund
the working capital needs of the Company. The Company cancelled its former
committed U.S. short-term credit lines, effective November 17, 1995. The
new agreement has certain financial covenants which include a minimum net
worth requirement, and certain leverage and fixed charge ratios.
PAGE 9
In connection with the acquisition, the Company reduced its annual common
dividend from $.56 per common share to $.28 per common share effective with
the dividend declared on December 7, 1995. The common dividend paid on
November 30, 1995 was unaffected. The Company also eliminated its share
repurchase program.
PAGE 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the first nine months are not necessarily indicative of
results for the full fiscal year, because the Company's business, in
common with the businesses of retailers generally, is subject to
seasonal influences, with higher levels of sales and income generally
realized in the second half of the year.
2. The preceding data are unaudited and reflect all normal recurring
adjustments, the use of retail statistics, and accruals and deferrals
among periods required to match costs properly with the related revenue
or activity, considered necessary by the Company for a fair presentation
of its financial statements for the periods reported, all in accordance
with generally accepted accounting principles and practices consistently
applied.
3. The Company has available reserves for lease and other contingent
liabilities associated with the 1988 sale of the Company's former Zayre
Stores division to Ames Department Stores, Inc. and the Company believes
that these reserves should be adequate to cover all reasonably expected
liabilities that it may incur as a result of the Ames bankruptcy. On
December 30, 1992, Ames emerged from bankruptcy pursuant to a plan of
reorganization.
4. The Company's cash payments for interest expense and income taxes are as
follows: (in thousands)
Thirty-Nine Weeks Ended
October 28, October 29,
1995 1994
Cash paid for:
Interest on debt and capital leases $20,097 $14,242
Income taxes 10,513 43,841
5. Effective September 30, 1995, the Company sold its Hit or Miss division
to members of management and outside investors. The Company received $3
million in cash and a 7-year, $10 million note with interest at 10%.
Interest payable prior to October 2, 1997 may be paid-in-kind at the
election of Hit or Miss. In addition, the Company is responsible for
the cost of closing 69 stores.
As a result of this transaction, the operating results of Hit or Miss,
as well as the loss on the sale of the division, are presented as
discontinued operations. The Company's results for the nine months
includes an after-tax loss from discontinued operations of $2.3 million.
The operating results of Hit or Miss for all prior periods have been
reclassified as "Income (loss) from discontinued operations" for
comparative purposes. The impact of the sale of the division, estimated
to be an after-tax loss of $31.7 million (net of tax benefits of $19.8
million), is reflected as "Loss on disposal of discontinued operations."
The loss on the disposal includes operating results of Hit or Miss
through the closing date.
PAGE 11
6. In June 1995, the Company filed a shelf registration statement with the
Securities and Exchange Commission which provides for the issuance of up
to $250,000,000 of long-term debt. In June 1995,, the Company issued
$200 million of long-term notes under the registration statement. A
summary of the notes issued is as follows:
Principal Term Interest Rate
Note A $100 Million 5 Years 6 5/8%
Note B 100 Million 10 Years 7%
The proceeds, initially used in part to repay short-term borrowings,
will be used by the Company for the repayment of scheduled maturities of
outstanding long-term debt, for new store and other capital expenditures
and for general corporate purposes.
7. On November 17, 1995, the Company completed its acquisition of
Marshalls, the off-price family apparel retailer, from Melville
Corporation. The Company paid $375 million in cash and $175 million in
junior convertible preferred stock for the Marshalls division. The
acquisition will be accounted for under the purchase method of
accounting.
Simultaneously, the Company entered into an unsecured $875 million bank
credit agreement under which the Company borrowed $375 million on a term
loan basis to fund the cash portion of the Marshalls purchase price and
may borrow up to an additional $500 million on a revolving loan basis to
fund the working capital needs of the Company. Interest payable on
borrowings are at rates equal to or less than prime. The term loan
matures on November 17, 2000 and the revolving loan feature expires on
November 17, 1998. The Company cancelled its former committed U.S.
short-term credit lines, effective November 17, 1995. The new agreement
has certain financial covenants which include a minimum net worth
requirement, and certain leverage and fixed charge ratios.
In connection with the acquisition, the Company reduced its annual
common dividend from $.56 per common share to $.28 per common share
effective with the dividend declared on December 7, 1995. The common
dividend, paid on November 30, 1995, was unaffected. The Company also
eliminated its share repurchase program.
The preferred stock issued to Melville was issued in two separate
series, both of which are convertible into shares of common stock. The
common shares issuable on conversion will vary depending on the market
price of the common stock at time of conversion. A summary of certain
provisions of the preferred issuances follows:
Preferred Common Shares
Shares Face Annual Issuable at
Issued Value Dividend Conversion
Series D 250,000 $ 25 million $1.81/share 1.3 million-2.0 million
Series E 1,500,000 $150 million $7.00/share 8.1 million-9.7 million
PAGE 12
The Series D is mandatorily converted into common stock on November 17,
1996 unless redeemed for cash or converted earlier. The Series E is
mandatorily converted into common shares on November 17, 1998 unless
converted earlier. The Series D and Series E have an aggregate
liquidation preference of $175,000,000. Dividends are cumulative and
are payable quarterly, in arrears.
PAGE 13
PART II. Other Information
Item 6(a) Exhibits
(2.2) Stock Purchase Agreement dated as of October 14, 1995 between
the Company and Melville Corporation is incorporated by
reference to the Form 8-K dated October 14, 1995.
(11) Statement re Computation of Per Share Earnings
Item 6(g) Reports on Form 8-K
The Company did not file any reports on Form 8-K with the
Securities and Exchange Commission during the quarter ended
October 28, 1995.
On November 7, 1995, the Company filed a Form 8-K dated
October 14, 1995 relating to the Stock Purchase Agreement
entered into by the Company and Melville Corporation
("Melville") whereby the Company agreed to purchase the
capital stock of Marshalls of Roseville, Minn., Inc.
("Marshalls") from Melville.
On December 1, 1995, the Company filed a Form 8-K dated
November 17, 1995 relating to the Company's completed
acquisition of Marshalls from Melville.
PAGE 14
SIGNATURE
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.
THE TJX COMPANIES, INC.
(Registrant)
Date: December 12, 1995
/s/ Donald G. Campbell
Donald G. Campbell, Senior Vice
President - Finance, on behalf
of The TJX Companies, Inc. and as
Principal Financial and Accounting
Officer of The TJX Companies, Inc.