PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On November 17, 1995, The TJX Companies, Inc., (the Company)
acquired the stock of Marshalls of Roseville, Minn., Inc.
(Marshalls) from Melville Corporation. Marshalls and its wholly
owned subsidiaries, operate the chain of Marshalls off-price
apparel retail stores. On November 17, 1995, the Company paid $550
million ($375 million in cash and $175 million in junior
convertible preferred stock), and assumed certain liabilities,
based on an estimated October 31, 1995 balance sheet of the
Marshalls division. The final purchase price, before acquisition
costs, is subject to change based on the actual balance sheet of
Marshalls as of November 17, 1995, but cannot exceed $600 million.
The Company expects the actual purchase price, before acquisition
costs, based on Marshalls actual balance sheet as of November 17
will approximate $600 million.
The pro forma condensed consolidated financial statements assume
the pro forma purchase price is based on Marshalls historical
balance sheet as of September 30, 1995. Marshalls net assets as of
September 30, 1995 are less than those of November 17, 1995 due to
seasonal working capital requirements and accordingly the pro forma
condensed consolidated financial statements reflect a lower
purchase price for pro forma purposes of $536 million, including
acquisition costs.
The pro forma condensed consolidated balance sheet as of October
28, 1995, assumes the acquisition took place on that date, and is
based on the unaudited historical balance sheet of the Company as
of October 28, 1995 and the unaudited historical balance sheet of
Marshalls as of September 30, 1995, a copy of which is included
with this filing (the Company's fiscal year ends one month later
than that of Marshalls). The pro forma adjustments eliminate the
Marshalls assets and liabilities not acquired, record the pro forma
purchase price of $536 million and allocate the pro forma purchase
price to the assets acquired and the liabilities assumed based on
their fair market value on date of acquisition. The Company
believes the final allocation of purchase price will not differ
significantly from the estimates included in the pro forma
condensed consolidated financial statements. The acquisition has
been accounted for under the purchase method of accounting.
The pro forma condensed consolidated statement of income for the
nine months ended October 28, 1995 includes the unaudited
historical statement of income of the Company as reported on Form
10Q for the quarter ended October 28, 1995 and the unaudited
historical statement of operations for Marshalls for the nine
months ended September 30, 1995 (copy included with this filing)
adjusted for one month to present seasonal operating results
comparable with that of the Company (see Note 2(a)). The pro forma
condensed consolidated statement of income for the year ended
January 26, 1995 includes the audited historical results of the
Company as reported on Form 10-K for the year ended January 26,
1995, restated to reflect the Company's September 1995 sale of its
Hit or Miss division as a discontinued operation, and includes
Marshalls historical audited statement of operations for the year
ended December 31, 1994 (copy included with this filing) adjusted
for one month to present a comparable period with that of the
Company (see Note 2(a)). The pro forma adjustments to both income
statements reflect the impact of the transaction as if it occurred
on January 30, 1994.
These pro forma condensed consolidated financial statements have
been prepared for information purposes only and do not purport to
indicate what necessarily would have occurred had the entities been
combined since the applicable date or what results may be in the
future. The accompanying pro forma condensed consolidated
financial statements should be read in conjunction with the
historical financial statements of the Company and the historical
financial statements of Marshalls included with this filing.
THE TJX COMPANIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 28, 1995
(UNAUDITED)
(In Thousands)
Historical
The TJX Pro Forma Pro Forma
Companies, Inc. Marshalls Adjustments Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 26,902 $ 15,077 $ (13,077) (1) $ 28,902
Accounts receivable 135,901 45,058 (24,578) (1) 156,381
Merchandise inventories 1,111,651 607,429 24,381 (1) 1,743,461
Prepaid expenses 31,367 9,004 (5,052) (1) 35,319
Income tax receivable - 18,714 (18,714) (1) -
Total current assets 1,305,821 695,282 (37,040) 1,964,063
Property, net 481,885 444,359 (114,485) (1) 811,759
Other assets 27,580 21,354 (21,354) (1) 27,580
Goodwill and trademarks,
net of amortization 87,993 28,652 107,608 (1) 224,253
TOTAL ASSETS $1,903,279 $1,189,647 $ (65,271) $3,027,655
LIABILITIES
Current liabilities:
Short-term debt $ 97,699 $ - $ (14,388) (1) $ 83,311
Current installments of
long-term debt 56,048 - - 56,048
Accounts payable 407,778 243,688 - 651,466
Accrued expenses and other
current liabilities 308,308 137,981 207,095 (1) 653,384
Due to Parent - 154,582 (154,582) (1) -
Total current liabilities 869,833 536,251 38,125 1,444,209
Long-term debt exclusive of
current installments 410,566 - 375,000 (1) 785,566
Deferred income taxes 34,780 19,259 (19,259) (1) 34,780Other long-term liabilities
SHAREHOLDERS' EQUITY
Convertible preferred stock
at face value 107,500 - 175,000 (1) 282,500
Common stock 72,419 352 (352) (1) 72,419
Additional paid-in capital 267,743 152,839 (152,839) (1) 267,743
Retained earnings 140,438 467,358 (467,358) (1) 140,438
Total shareholders' equity 588,100 620,549 (445,549) 763,100
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,903,279 $1,189,647 $ (65,271) $3,027,655
See notes to the unaudited pro forma condensed consolidated financial
statements.
THE TJX COMPANIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED OCTOBER 28, 1995
(UNAUDITED)
($'s In Thousands Except Per Share Amounts)
Historical
The TJX Pro Forma Pro Forma
Companies, Inc. Marshalls Adjustments Consolidated
Net sales $2,692,047 $1,852,245 $ 74,164 (2a) $4,618,456
Cost of sales, including 34,641 (2a)
buying and occupancy costs 2,040,124 1,561,382 (7,575) (2c) 3,628,572
Selling, general and 8,448 (2a)
administrative expenses 534,079 355,867 2,018 (2d) 900,412
18 (2a)
Interest expense, net 29,562 6,030 22,088 (2b) 57,698
Income (loss) from continuing
operations before income taxes 88,282 (71,034) 14,526 31,774
Provision (benefit) for
income taxes 37,182 (28,369) 5,810 (2e) 14,623
Income (loss) from continuing
operations 51,100 (42,665) 8,716 17,151
Preferred stock dividends (5,367) - (7,875) (2f) (13,242)
Income (loss) from continuing
operations available to
common shareholders $ 45,733 $ (42,665) $ 841 $ 3,909
Income from continuing
operations per share $ .63 $ .05
Number of common shares for
per share computations 72,484,535 2,024,292 (2g) 74,508,827
See notes to the unaudited pro forma condensed consolidated financial
statements.
THE TJX COMPANIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDING JANUARY 28, 1995
(UNAUDITED)
($'s In Thousands Except Per Share Amounts)
Historical
The TJX Pro Forma Pro Forma
Companies, Inc. Marshalls Adjustments Consolidated
Net sales $3,489,146 $2,774,851 $ 5,080 (2a) $6,269,077
Cost of sales, including 19,459 (2a)
buying and occupancy costs 2,643,323 2,139,817 (10,100) (2c) 4,792,499
Selling, general and 2,648 (2a)
administrative expenses 673,187 495,254 2,690 (2d) 1,173,779
Realignment charge (credit) - (7,200) - (7,200)
584 (2a)
Interest expense, net 24,484 1,778 29,450 (2b) 56,296
Income (loss) from continuing
operations before income taxes 148,152 145,202 (39,651) 253,703
Provision (benefit) for
income taxes 61,573 55,351 (15,860) (2e) 101,064
Income (loss) from continuing
operations 82,579 89,851 (23,791) 152,639
Preferred stock dividends (7,156) - (10,953) (2f) (18,109)
Income from continuing operations
available to common
shareholders $ 79,423 $ 89,851 $ (34,744) $ 134,530
Income from continuing operations
per share $1.08 $1.70
Number of common shares for per
share computations 73,467,003 16,112,090 (2g) 89,579,093
See notes to the unaudited pro forma condensed consolidated financial
statements.
THE TJX COMPANIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In Thousands)
NOTE 1
The pro forma adjustments to the condensed consolidated balance sheet
reflect the purchase of Marshalls, the elimination of assets and
liabilities not acquired and the allocation of the pro forma purchase price
to the assets acquired and liabilities assumed based on the fair market
value at date of acquisition. The pro forma adjustments include the impact
of conforming Marshalls accounting policies to those of the Company.
Pro Forma
Balances Not Purchase Price
Acquired Allocation Total
ASSETS
Cash & cash equivalents $ (13,077) $ - $ (13,077)
Accounts receivable (23,813) (765)(b) (24,578)
Merchandise inventories 3,599 20,782 (b) 24,381
Prepaid expenses (1,610) (3,442)(b) (5,052)
Income tax receivable (18,714) - (18,714)
Property, net - (114,485)(b) (114,485)
Other assets (4,285) (17,069)(b) (21,354)
Goodwill & trademarks - 107,608 (b) 107,608
(57,900) (7,371) (65,271)
LIABILITIES & EQUITY
Short-term debt - (14,388)(a) (14,388)
Accrued expenses (43,548) 250,643 (b) 207,095
Due to Parent (154,582) - (154,582)
Long-term debt - 375,000 (a) 375,000
Deferred income taxes (19,259) - (19,259)
Other long-term liabilities (4,167) (9,421)(b) (13,588)
Preferred stock - 175,000 (a) 175,000
Common stock (352) - (352)
Additional paid in capital (152,839) - (152,839)
Retained earnings (467,358) - (467,358)
(842,105) 776,834 (65,271)
TOTAL $(784,205) $ 784,205 $ 0
(a) The pro forma purchase price of $536 million is assumed to be
paid from the proceeds of the $375 million five year bank term
loan, obtained to finance the cash portion of the purchase price,
and the issuance of $175 million junior convertible preferred
stock. The pro forma condensed consolidated financial statements
assumes the amount borrowed in excess of the cash portion of the
pro forma purchase price would have been used to reduce short-
term debt.
(b) Adjustment to reflect the fair value of assets acquired and
liabilities assumed including negative goodwill of approximately
$57 million which was allocated pro rata to long-term assets.
The following summarizes major balance sheet classifications.
- Merchandise inventories - Valued based on an estimate of net
realizable value of inventory purchased using the retail method.
- Property, net - The net adjustment includes a write down of fixtures
and leasehold improvements to fair value, partially offset by value
assigned to leases purchased. The adjustment reflects the
anticipated closing of approximately 170 Marshalls stores and
includes a reduction for a portion of negative goodwill.
- Goodwill and trademarks - Adjustment reflects the value assigned to
the "Marshalls" tradename, offset by the elimination of goodwill
recorded by Marshalls in a prior acquisition. The net adjustment
includes a reduction for a portion of negative goodwill.
- Other assets - Adjustment is to eliminate deferred charges
associated with leases acquired.
- Accrued expenses - Reflects a reserve for the anticipated closing of
approximately 170 Marshalls stores, the closing of certain
facilities, a reserve for inventory markdowns and the accrual of
other liabilities associated with the purchase.
The difference between the values assigned to assets and liabilities for
book purposes versus tax purposes result in offsetting deferred tax assets
and liabilities at the date of acquisition.
NOTE 2
The pro forma condensed consolidated statement of income reflects the
following adjustments:
(a) To adjust Marshalls fiscal reporting periods to be comparable with the
reporting periods of the Company.
Nine Months Ended October 28, 1995
Marshalls Marshalls
Nine Months Ended Pro Forma Nine Months Ended
9/30/95* Adjustment 10/28/95
Net Sales $1,852,245 $74,164 $1,926,409
Cost of sales,
including buying and
occupancy costs 1,561,382 34,641 1,596,023
Selling, general and
administrative expenses 355,867 8,448 364,315
Interest expense, net 6,030 18 6,048
Income (loss) from
continuing operations
before income taxes $ (71,034) $31,057 $ (39,977)
Fiscal Year Ended January 28, 1995
Marshalls Marshalls
Fiscal Year Ended Pro Forma Fiscal Year Ended
12/31/94* Adjustment 1/28/95
Net sales $2,774,851 $5,080 $2,779,931
Cost of sales,
including buying and
occupancy costs 2,139,817 19,459 2,159,276
Selling, general and
administrative
expenses 495,254 2,648 497,902
Realignment credit (7,200) - (7,200)
Interest expense, net 1,778 584 2,362
Income (loss) from
continuing operations
before income taxes $ 145,202 $(17,611) $ 127,591
* Includes reclassification of certain amounts to conform with the
historical presentation of the Company.
(b) To record additional interest costs related to the new bank agreement
entered into as a result of the purchase of Marshalls. The interest
on the $375 million term loan is adjusted periodically in relation to
Eurodollar market and currently approximates 7%. Deferred financing
charges of $13 million associated with the term loan and the $500
million revolving credit facility are amortized into interest expense
at $3.2 million annually.
Nine Months Fiscal Year
Ended 10/28/95 Ended 1/28/95
Interest expense $22,088 $ 29,450
(c) To reflect reduced depreciation expense due to the net write down of
property to fair value.
Nine Months Fiscal Year
Ended 10/28/95 Ended 1/28/95
- Cost of sales including
buying and occupancy (7,575) (10,100)
(d) To record amortization of "Marshalls" trade name over estimated life
of 40 years, net of reduction in amortization due to elimination of
goodwill from prior acquisitions.
Nine Months Fiscal Year
Ended 10/28/95 Ended 1/28/95
- Selling, general and
administrative expenses 2,018 2,690
(e) To record the income tax provision (benefit) associated with the pro
forma adjustments at the marginal tax rate of 40%.
Nine Months Fiscal Year
Ended 10/28/95 Ended 1/28/95
- Provision (benefit) for
income taxes 5,810 (15,860)
(f) To reflect preferred dividends payable on the convertible preferred
stock issued in the transaction.
Nine Months Fiscal Year
Ended 10/28/95 Ended 1/28/95
Series D, 250,000 shares with
face value of $25 million;
annual dividend $1.8138/share $ - $ 453
Series E, 1,500,000 shares with
face value of $150 million;
annual dividend of $7.00/share 7,875 10,500
$7,875 $10,953
The Series D is automatically convertible into common stock one year
after it is issued and thus the pro forma condensed consolidated
financial statements assume conversion into common stock at the
maximum number of shares (see 2(g)) at the end of the fiscal year
1/28/95.
(g) To adjust shares outstanding for dilutive impact of assumed conversion
of the Company's Series A and Series C preferred stock and for the pro
forma impact of the preferred stock issued for the purchase of
Marshalls (Series D and E).
Nine Months Fiscal Year
Ended 10/28/95 Ended 1/28/95
Series A - 1,190,476
Series C - 3,180,723
Series D 2,024,292 2,024,292
Series E - 9,716,599
Total 2,024,292 16,112,090
The Series D and Series E preferred stock are convertible into an
aggregate of 9.4 million to 11.7 million shares of common stock,
depending on the market value of the common stock at time of
conversion. The pro forma adjustments with regard to Series D and
Series E above assume the maximum number of common shares are issued.
NOTE 3
The following should be noted in reviewing the pro forma condensed
consolidated income statements.
- - The Company anticipates closing approximately 170 Marshalls stores,
certain costs of which have been reserved for in the pro forma
condensed consolidated balance sheet. The pro forma condensed
consolidated income statement has not been adjusted to reflect the
impact the closing of these stores will have on ongoing operations.
- - The Company anticipates closing approximately 30 T.J. Maxx stores and
expects to record a pre-tax charge of $35 million in the fourth
quarter of its fiscal year ending January 27, 1996. This charge will
reduce income from continuing operations by approximately $.29 per
share. Neither the T.J. Maxx closing reserve, nor the impact the
closings will have on ongoing operations, have been reflected in the
pro forma condensed consolidated financial statements.
- - Savings the Company may generate by consolidating responsibilities and
reducing overhead have not been factored into the pro forma condensed
consolidated financial statements.