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 26, 1996
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
October 26, 1996: 77,724,715
PAGE 2
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 26, October 28,
1996 1995
Net sales $1,722,429 $ 861,214
Cost of sales, including buying and
occupancy costs 1,305,271 661,618
Selling, general and administrative expenses 266,918 145,644
Interest expense, net 10,344 9,568
Income from continuing operations before
income taxes and extraordinary item 139,896 44,384
Provision for income taxes 58,306 17,724
Income from continuing operations before
extraordinary item 81,590 26,660
Income from discontinued operations,
net of income taxes 8,805 7,217
Income before extraordinary item 90,395 33,877
Extraordinary (charge), net of income taxes (2,885) -
Net income 87,510 33,877
Preferred stock dividends 2,308 1,789
Net income attributable to common
shareholders $ 85,202 $ 32,088
Primary and fully diluted earnings per
common share:
Income from continuing operations $ .90 $ .35
Income before extraordinary item $1.00 $ .44
Net income $ .97 $ .44
Cash dividends per common share $ .07 $ .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 26, October 28,
1996 1995
Net sales $4,742,935 $2,336,376
Cost of sales, including buying and
occupancy costs 3,694,820 1,828,638
Selling, general and administrative expenses 775,983 407,571
Interest expense, net 35,674 24,430
Income from continuing operations before
income taxes and extraordinary item 236,458 75,737
Provision for income taxes 98,154 32,130
Income from continuing operations before
extraordinary item 138,304 43,607
Income from discontinued operations, net
of income taxes 18,231 5,193
(Loss) on the disposal of discontinued
operations, net of income taxes - (31,700)
Income before extraordinary item 156,535 17,100
Extraordinary (charge), net of income taxes (2,885) -
Net income 153,650 17,100
Preferred stock dividends 11,096 5,367
Net income attributable to common
shareholders $ 142,554 $ 11,733
Primary and fully diluted earnings per
common share:
Income from continuing operations $1.53 $ .53
Income before extraordinary item $1.73 $ .16
Net income $1.70 $ .16
Cash dividends per common share $ .21 $ .42
The accompanying notes are an integral part of the financial statements.
PAGE 4
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
IN THOUSANDS
October 26, January 27, October 28,
1996 1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 236,035 $ 209,226 $ 26,902
Accounts receivable 90,695 55,144 47,492
Merchandise inventories 1,335,099 1,258,488 1,013,471
Prepaid expenses 19,054 16,406 15,732
Net current assets of
discontinued operations 116,009 76,287 117,350
Total current assets 1,796,892 1,615,551 1,220,947
Property, at cost:
Land and buildings 110,496 110,446 85,265
Leasehold costs and improvements 448,636 423,842 282,332
Furniture, fixtures and equipment 585,684 539,504 381,184
1,144,816 1,073,792 748,781
Less accumulated depreciation
and amortization 420,506 340,599 318,783
724,310 733,193 429,998
Other assets 36,432 37,325 27,127
Goodwill and tradename,
net of amortization 231,335 236,043 87,993
Net noncurrent assets of
discontinued operations 48,627 52,299 9,840
TOTAL ASSETS $2,837,596 $2,674,411 $1,775,905
LIABILITIES
Current liabilities:
Short-term debt $ - $ - $ 97,699
Current installments of
long-term debt 94,708 78,670 53,548
Accounts payable 616,200 436,634 375,701
Accrued expenses and other
current liabilities 653,780 691,096 258,011
Total current liabilities 1,364,688 1,206,400 784,959
Long-term debt exclusive of
current installments:
Real estate mortgages 22,926 27,241 29,069
Equipment notes 2,556 3,272 3,801
General corporate debt 514,880 660,200 335,196
Deferred income taxes 25,885 12,664 34,780
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
250,000 shares of 1.81% Series D 25,000 25,000 -
1,500,000 shares of 7% Series E 150,000 150,000 -
Common stock, par value $1, authorized
150,000,000 shares, issued and
outstanding 77,724,715; 72,485,776
and 72,418,517 shares 77,725 72,486 72,419
Additional paid-in capital 386,600 269,159 267,743
Retained earnings 267,336 140,489 140,438
Total shareholders' equity 906,661 764,634 588,100
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,837,596 $2,674,411 $1,775,905
The accompanying notes are an integral part of the financial statements.
PAGE 5
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
Thirty-Nine Weeks Ended
October 26, October 28,
1996 1995
Cash flows from operating activities:
Net income $ 153,650 $ 17,100
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
(Income) from discontinued operations (18,231) (5,193)
Loss on disposal of discontinued operations - 31,700
Extraordinary charge 2,885 -
Depreciation and amortization 94,228 51,987
Loss on property disposals 6,291 719
Other (3,282) (4,265)
Changes in assets and liabilities:
(Increase) in accounts receivable (35,551) (15,960)
(Increase) in merchandise inventories (76,611) (226,900)
(Increase) in prepaid expenses (2,648) (2,350)
Increase in accounts payable 179,566 1,801
Increase in accrued expenses and
other current liabilities 12,573 38,648
Increase in deferred income taxes 13,221 7,973
Net cash provided by (used in) operating
activities 326,091 (104,740)
Cash flows from investing activities:
Property additions (83,025) (82,914)
Proceeds from sale of discontinued operations - 3,000
Contingent payment for acquisition of Marshalls (49,327) -
Net cash (used in) investing activities (132,352) (79,941)
Cash flows from financing activities:
Proceeds from borrowings of short-term debt - 77,699
Proceeds from borrowings long-term debt - 199,861
Principal payments on long-term debt (45,493) (4,036)
Prepayment of long-term debt (92,459) -
Proceeds from sale and issuance of common
stock, net 15,644 121
Cash dividends (26,803) (35,776)
Net cash provided by (used in) financing
activities (149,111) 237,869
Net cash provided by continuing operations 44,628 53,188
Net cash (used in) discontinued operations (17,819) (67,855)
Net increase (decrease) in cash and cash
equivalents 26,809 (14,667)
Cash and cash equivalents at beginning of year 209,226 41,569
Cash and cash equivalents at end of period $ 236,035 $ 26,902
The accompanying notes are an integral part of the financial statements.
PAGE 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Thirteen Weeks (Third Quarter) and Thirty-Nine Weeks Ended October 26, 1996
Versus Thirteen Weeks and Thirty-Nine Weeks Ended October 28, 1995
On October 18, 1996, the Company announced it had entered into an agreement
with Brylane, L.P. to sell its Chadwick's of Boston catalog division. As a
result of this transaction, the impact of Chadwick's on the consolidated
financial statements for the current and all prior periods have been
classified as discontinued operations. In addition, periods prior to
October 28, 1995 reflect the Hit or Miss division as a discontinued
operation as a result of the sale of that division on September 30, 1995.
On November 17, 1995, the Company acquired the Marshalls off-price family
apparel chain from Melville Corporation. Under the purchase method of
accounting, the assets and liabilities and results of operations associated
with the acquired business are included in the Company's financial position
and results of operations from the date of acquisition.
Net sales from continuing operations for the third quarter were $1,722.4
million, up 100% from $861.2 million last year. For the nine months, net
sales from continuing operations were $4,742.9 million, up 103% from
$2,336.4 million for the same period last year. The increase in sales is
primarily attributable to the acquisition of Marshalls. Same store sales
for the third quarter increased by 7% at T.J. Maxx, 9% at Marshalls and 22%
at Winners and decreased by 5% at HomeGoods. Same store sales for the nine
months increased by 6% at T.J. Maxx, 10% at Marshalls and 12% at Winners
and were flat at HomeGoods.
Income from continuing operations for the third quarter was $81.6 million,
or $.90 per common share, versus $26.7 million, or $.35 per common share in
the prior year. For the nine months, income from continuing operations was
$138.3 million, or $1.53 per common share, versus $43.6 million, or $.53
per common share, in the prior year. Including Chadwick's of Boston as a
discontinued operation, net income before extraordinary item was $90.4
million, or $1.00 per common share, for the quarter ended October 26, 1996
and $156.5 million, or $1.73 per common share, for the nine months ended
October 26, 1996. After the extraordinary charge of $2.9 million, or $.03
per common share, for the early retirement of $89 million of the Company's
9 1/2% sinking fund debentures, net income was $87.5 million, or $.97 per
common share, for the quarter ended October 26, 1996 versus $33.9 million,
or $.44 per common share, last year and $153.7 million, or $1.70 per common
share, for nine months ended October 26, 1996 versus $17.1 million, or $.16
per common share, in the prior year.
PAGE 7
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
10/26/96 10/28/95 10/26/96 10/28/95
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including
buying and occupancy costs 75.8 76.8 77.9 78.3
Selling, general and
administrative expenses 15.5 16.9 16.4 17.4
Interest expense, net .6 1.1 .7 1.1
Income from continuing
operations before income
taxes and extraordinary item 8.1% 5.2% 5.0% 3.2%
Cost of sales, including buying and occupancy costs, as a percentage of net
sales, decreased in both periods from the prior year. Both periods reflect
the benefit of the Marshalls acquisition. Merchandise margin has improved,
reflecting the enhanced purchasing power of the combined T.J. Maxx and
Marshalls entity, as well as tight inventory controls.
Selling, general and administrative expenses, as a percentage of net sales,
decreased from the prior year in both periods. This ratio reflects the
benefit of the increased sales volume due to the Marshalls acquisition as
well as cost savings due to the synergies of the combined T.J. Maxx and
Marshalls entity.
The increase in interest expense for the third quarter ended October 1996
versus October 1995 is due to interest on the $375 million term loan
incurred for the acquisition of Marshalls. The increase in interest
expense for the nine months also includes the interest on the $200 million
of notes issued in June 1995. Interest expense, as a percentage of net
sales, has declined as a result of the increased sales volume from the
Marshalls acquisition.
The decrease in the effective income tax rate for the nine months reflects
the tax benefits on foreign operating losses realizable due to a corporate
restructuring of certain foreign subsidiaries that took place in the second
half of fiscal 1996.
PAGE 8
The following table sets forth the operating results of the Company's major
business segments after presenting Chadwick's as a discontinued operation:
(unaudited)
(In Thousands)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 26, October 28, October 26, October 28,
1996 1995 1996 1995
Net sales:
Off-price family
apparel stores $1,702,818 $ 840,675 $4,683,859 $2,283,421
Off-price home fashion
stores 19,611 20,539 59,076 52,955
$1,722,429 $ 861,214 $4,742,935 $2,336,376
Operating income (loss):
Off-price family
apparel stores $ 161,830 $ 65,899 $ 311,084 $ 136,039
Off-price home fashion
stores (2,908) (2,211) (8,534) (6,067)
158,922 63,688 302,550 129,972
General corporate expense(1) 8,029 9,083 28,458 27,845
Goodwill amortization 653 653 1,960 1,960
Interest expense, net 10,344 9,568 35,674 24,430
Income from continuing
operations before income
taxes and extraordinary
item $ 139,896 $ 44,384 $ 236,458 $ 75,737
(1) General corporate expense for the periods ended October 26, 1996
include the net operating results of T.K. Maxx. General corporate
expense for the periods ended October 28, 1995 include the net
operating results of T.K. Maxx and the Cosmopolitan catalog.
The off-price family apparel stores segment, T.J. Maxx, Marshalls and
Winners, more than doubled its operating profit for the quarter and nine
months primarily due to the benefits of the Marshalls acquisition. This
segment's operating results reflect its strong sales performance, aided by
its aggressive markdown policy, along with tight inventory control.
HomeGoods results were slightly below the Company's expectations.
Stores in operation at the end of the period are as follows:
October 26, 1996 October 28, 1995
T.J. Maxx 589 581
Marshalls 463 -
Winners 63 49
HomeGoods 23 24
T.K. Maxx 18 8
PAGE 9
Financial Condition
Cash flows from operating and financing activities for the nine months
reflect increases in inventories and accounts payable, which are largely
due to normal seasonal requirements. The improvement in cash provided by
operating activities for the nine months ended October 1996 versus October
1995 reflects stronger sales and earnings and the benefit of tight
inventory controls. The decrease in short-term borrowings from last year
is a result of the strong cash position at the end of fiscal 1996, which
reflected the benefits from the timing of the Marshalls acquisition and the
resulting favorable cash flow of the holiday selling season, as well as the
cash generated from operating activities this year. Future operating cash
flows will be impacted by the T.J. Maxx store closing reserve and the
reserves established (primarily for store closings) in the allocation of
the purchase price of Marshalls. Reductions in the reserves for the nine
months ended October 26, 1996 have been primarily non-cash items. The
Company is in the process of evaluating the Marshalls store closing program
and the allocation of the purchase price of Marshalls. Due to the improved
operating performance of certain stores initially targeted for closing, the
Company anticipates fewer Marshalls store closings than initially planned.
Adjustments to the reserve and the initial allocation of the purchase price
of Marshalls will be reflected by the end of the current fiscal year.
Cash flows from investing activities reflect a final payment made to
Melville based on the closing balance sheet of Marshalls.
On October 18, 1996, the Company announced it had entered into an agreement
with Brylane, L.P. to sell its Chadwick's of Boston catalog division.
Total proceeds from the sale are estimated at $300 million and include
cash, a $20 million Convertible Subordinated Note and Chadwick's consumer
credit card receivables. The Company expects to report an estimated after-
tax gain on the sale of Chadwick's of $125 million, or $1.39 per share, in
its fourth quarter reporting period. The impact of Chadwick's on the
consolidated financial statements for the current and all prior periods
have been classified as discontinued operations.
On November 18, 1996, the Company, pursuant to its credit agreement, gave
notification of its intention to exercise an early prepayment option and to
prepay $200 million of the outstanding term loan from available cash
balances of the Company. The remaining outstanding portion of the term
loan ($160 million) will be repaid with proceeds from the sale of
Chadwick's, pursuant to the terms of the credit agreement, if not prepaid
prior to the closing of the Chadwick's sale. The Company expects to
record a fourth quarter after-tax charge of $2.7 million, or $.03 per
common share, relating to the early retirement of the term loan.
On September 16, 1996, pursuant to a call for redemption, the Company
prepaid $88.83 million of its 9 1/2% sinking fund debentures. The Company
recorded a $2.9 million after-tax extraordinary charge related to the early
retirement of this debt. The principal payments on long-term debt for the
nine months ended October 26, 1996 include $22 million of medium-term notes
and $15 million of the $375 million term loan, paid pursuant to scheduled
maturities. Proceeds from sale and issuance of common stock relate to the
exercise of stock options under the Company's stock incentive plan.
PAGE 10
As of September 12, 1996, pursuant to a call for redemption, the Series C
Cumulative Convertible Preferred Stock was converted into 3,177,844 shares
of common stock. As of June 18, 1996, pursuant to a call for redemption,
the Series A Cumulative Convertible Preferred Stock was converted into
1,190,475 shares of common stock. As of November 17, 1996, the Series D
Preferred Stock automatically converted into 1,349,527 shares of common
stock.
PAGE 11
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. On October 18, 1996, the Company announced it had entered into an
agreement with Brylane, L.P. to sell its Chadwick's of Boston catalog
division. Total proceeds for the sale are estimated at $300 million and
include cash, a $20 million Convertible Subordinated Note and Chadwick's
consumer credit card receivables. The Company expects to report an
estimated after-tax gain on the sale of Chadwick's of $125 million, or
$1.39 per share, in its fourth quarter reporting period. The impact of
Chadwick's on the consolidated financial statements for the current and
all prior periods have been classified as discontinued operations.
Under the Company's credit agreement, the Company is required to apply
certain proceeds from specified asset sales towards the outstanding
balance of the term loan. See Note 7 for further information.
4. The Company's cash payments for interest expense and income taxes are as
follows: (in thousands)
Thirty-Nine Weeks Ended
October 26, October 28,
1996 1995
Cash paid for:
Interest on debt, net $35,284 $20,097
Income taxes 90,089 10,513
5. As of July 29, 1995, the Company reflected the loss on the sale of its
Hit or Miss division (completed as of September 30, 1995); thus, Hit or
Miss' operating results for all periods prior to the sale have been
reclassified to discontinued operations.
6. On November 17, 1995, the Company completed its acquisition of the
Marshalls off-price family apparel chain from Melville Corporation. The
purchase price (before expenses) was $599.3 million, consisting of $375
million in cash, before closing adjustments, plus an additional $49.3
million (paid on April 30, 1996) based on the final closing balance
sheet, plus $175 million in junior convertible preferred stock of TJX.
The acquisition has been accounted for under the purchase method of
accounting.
PAGE 12
As a result of the acquisition, the Company announced its intention to
close a total of 170 Marshalls stores and 30 T.J. Maxx stores, in
operation at the date of acquisition. The Company established a $244.1
million reserve in the allocation of the purchase price of Marshalls,
primarily relating to the Marshalls store closings, and recorded a pre-
tax charge of $35 million relating to the T.J. Maxx store closings. The
Company's total store closing and restructuring reserve as of October
26, 1996 totalled $202.3 million. The reduction in the reserve to date
is primarily due to inventory markdowns and fixed asset write-offs. The
Company is in the process of evaluating its store closing program and
the reserves established in the allocation of the Marshalls acquisition
price. Due to the improved operating performance of certain stores
initially targeted for closing, the Company anticipates fewer Marshalls
store closings than initially planned.
In connection with the purchase of Marshalls, the Company entered into
an unsecured $875 million credit agreement with a group of banks. The
credit facility included a $375 million term loan used for the cash
portion of the Marshalls purchase price, and a $500 million revolving
credit facility under which the Company may borrow to meet the Company's
ongoing working capital needs.
7. On November 18, 1996, the Company, pursuant to its credit agreement,
gave notification of its intention to exercise an early prepayment
option and to prepay $200 million of the outstanding term loan from
available cash balances of the Company. The remaining outstanding
portion of the term loan ($160 million) will be repaid with proceeds
from the sale of Chadwick's, pursuant to the terms of the credit
agreement, if not prepaid prior to the closing of the Chadwick's sale.
The Company expects to record a fourth quarter after-tax charge of $2.7
million, or $.03 per share, relating to the early retirement of the term
loan.
8. In October 1988, the Company completed the sale of its former Zayre
stores division to Ames Department Stores, Inc. ("Ames"). On April 25,
1990, Ames filed for protection under Chapter 11 of the Federal
Bankruptcy Code and on December 30, 1992, Ames emerged from bankruptcy
under a plan of reorganization. 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.
The Company remains contingently liable for the leases of most of the
former Zayre stores still operated by Ames. In addition, the Company is
contingently liable on a number of leases of Waban Inc., a division
spun-off in fiscal 1990, and of the Hit or Miss division, the Company's
former off-price women's specialty stores, sold on September 30, 1995.
The Company believes that in view of the nature of the leases and the
fact that Ames, Waban and Hit or Miss are primarily liable, the
Company's contingent liability on these leases will not have a material
effect on the Company's financial condition. Accordingly, the Company
believes its available reserves of $19.7 million as of October 26, 1996
should be adequate to cover all reasonably expected liabilities
associated with discontinued operations that it may incur.
PAGE 13
9. On September 16, 1996, pursuant to a call for redemption, the Company
prepaid $88.83 million of its 9 1/2% sinking fund debentures. The
Company recorded an after-tax extraordinary charge of $2.9 million, or
$.03 per common share, related to the early retirement of this debt.
10. As of September 12, 1996, pursuant to a call for redemption, the Series
C Cumulative Convertible Preferred stock was converted into 3,177,844
shares of common stock. As of June 18, 1996, pursuant to a call for
redemption, the Series A Cumulative Convertible Preferred stock was
converted into 1,190,475 shares of common stock. As of November 17,
1996, the Series D Preferred Stock automatically converted into
1,349,527 shares of common stock.
PAGE 14
PART II. Other Information
Item 1 Legal Proceedings
Reference is made to the action described in "Item 3. Legal
Proceedings" of the Company's Annual Report on Form 10-K for
the fiscal year ended January 27, 1996. On August 19, 1996,
the court approved the settlement of the case. The amount of
the Company's contribution to the settlement was not material.
Item 5 Other Information
On October 18, 1996, the Company announced it had entered into
an agreement with Brylane, L.P. to sell its Chadwick's of
Boston catalog operation. Pro forma financial statements of
the Company giving effect to the proposed sale are included on
pages F-1 through F-8 of this report.
Item 6(a) Exhibits
11 Statement re Computation of Per Share Earnings
Item 6(b) Reports on Form 8-K
On August 13, 1996, the Company filed a Current Report on Form
8-K relating to a Standby Agreement between the Company and
Salomon Brothers Inc and the Company's call for redemption of
its Series C Cumulative Convertible Preferred Stock.
The Company is filing a Form 8-K relating to the agreement to
sell its Chadwick's division, a press release issued by the
Company on November 12, 1996 and cautionary factors relating to
forward-looking information.
PAGE 15
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: November 19, 1996
/s/ Donald G. Campbell
Donald G. Campbell, Executive Vice
President - Finance, on behalf
of The TJX Companies, Inc. and as
Principal Financial and Accounting
Officer of The TJX Companies, Inc.
THE TJX COMPANIES, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On October 18, 1996, the Company announced that it had reached an
agreement with Brylane, L.P. to sell its Chadwick's of Boston
catalog operation (Chadwick's). The purchase price includes $222.8
million in cash and a $20 million convertible subordinated note.
The cash purchase price is subject to adjustment based on the
actual closing balance sheet of Chadwick's. In addition, the
Company will retain Chadwick's consumer credit card receivables.
The Company anticipates consummating the sale in late November or
early December, 1996.
The pro forma condensed consolidated balance sheet as of October
26, 1996 is based on the unaudited historical balance sheet of the
Company as of October 26, 1996, which reflects the Chadwick's
division as a discontinued operation. The pro forma condensed
consolidated balance sheet as of October 26, 1996 assumes the sale
of the division took place on that date and includes the following
pro forma adjustments: a) receipt of cash proceeds and note
receivable from Brylane, L.P., elimination of the net assets of
Chadwick's sold and recognition of the estimated net gain on the
sale of the division; b) the conversion of the Company's Series D
preferred stock into common stock following a required call for
redemption as a result of the sale; and c) the impact of the
prepayment of a portion of the $375 million term loan incurred to
acquire Marshalls from the cash proceeds from the sale of
Chadwick's. The remaining net assets from discontinued operations
represents the consumer credit receivables retained by TJX that
will be collected subsequent to the balance sheet date. The
Company anticipates using available cash balances and/or proceeds
from the Chadwick's sale to fully retire the term loan in the
Company's fourth quarter period ending January 25, 1997, which is
only partially reflected in these pro formas.
The pro forma condensed consolidated statement of income for the
twelve months ended January 27, 1996 is based on the audited
historical statement of income of the Company as reported on Form
10-K for the year ended January 27, 1996 which includes Marshalls
operating results since its acquisition by the Company on November
17, 1995. (See the Company's filing on Form 8-K dated as of
November 17, 1995 and subsequent amendment.) These historical
results will be restated to present Chadwick's as a discontinued
operation in future filings that include this period. The
elimination of Chadwick's from continuing operations is presented
here as a pro forma adjustment. The pro forma condensed
consolidated statement of income for the nine months ended October
26, 1996 is based on the unaudited historical statement of income
of the Company filed with the Company's Form 10-Q, which already
reflects the operating results of Chadwick's as a discontinued
operation.
F-1
The historical results of the Company for the twelve months ended
January 27, 1996 have first been adjusted to reflect the
acquisition of Marshalls as if it had occurred on the first day of
the fiscal year. The pro forma adjustments include the historical
results of Marshalls from January 29, 1995 through the acquisition
date as well as adjustments for the impact of the purchase
accounting method and the impact of the preferred stock issued and
debt incurred as a result of the acquisition.
The pro forma results reflecting the acquisition of Marshalls for
the twelve months ended January 27, 1996 and the historical results
for the nine months ended October 26, 1996 are adjusted to reflect
the sale of the Chadwick's division as if it also occurred on the
first day of the fiscal year ended January 27, 1996. In addition
to the pro forma adjustment to eliminate Chadwick's from continuing
operations for the fiscal year ended January 27, 1996, the pro
forma adjustments to both periods to reflect the sale of Chadwick's
include a reduction in interest expense due to the prepayment of
debt from the cash proceeds received, and the recognition of
interest income on the convertible subordinated note receivable.
The pro forma statements of income exclude the non-recurring gain
of approximately $125 million the Company will recognize upon the
sale of the division and exclude a non-recurring charge of
approximately $1.6 million for the partial prepayment of debt.
These pro forma condensed consolidated financial statements have
been prepared for information purposes only and do not necessarily
indicate what would have occurred had the acquisition of Marshalls
and the sale of Chadwick's taken place on the dates indicated.
Specifically, the pro forma condensed consolidated statement of
income for the twelve months ended January 27, 1996 includes the
historical results of Marshalls which is not necessarily indicative
of current results. Thus, the pro forma statement of income for
the twelve months ended January 27, 1996 does not fully reflect the
impact that Marshalls has had on the Company's results, nor is it
necessarily indicative of the impact that Marshalls may have on
future results of the Company. In addition, the pro forma
condensed consolidated financial statements do not reflect the
final allocation of the purchase price for Marshalls and do not
reflect benefit of the full prepayment of the $375 million term
loan anticipated to take place in the Company's fourth quarter
period ending January 25, 1997. The accompanying pro forma
condensed consolidated financial statements should be read in
conjunction with the historical financial statements of the
Company, the Company's Form 8-K dated November 17, 1995 (and
subsequent amendment) relating to the Marshalls acquisition and the
Company's Form 8-K dated October 18, 1996 relating to the agreement
to sell the Chadwick's division.
F-2
THE TJX COMPANIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 26, 1996
(UNAUDITED)
(IN THOUSANDS)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
Assets
Current assets:
Cash and cash equivalents $ 236,035 ${ 207,300 (1a) $ 236,035
{(207,300) (1c)
Accounts receivable 90,695 90,695
Merchandise inventories 1,335,099 1,335,099
Prepaid expenses 19,054 19,054
Net current assets of
discontinued operations 116,009 (26,009) (1a) 90,000
Total current assets 1,796,892 1,770,883
Property, net 724,310 724,310
{20,000 (1a)
Other assets 36,432 {(2,700) (1c) 53,732
Goodwill and tradename,
net of amortization 231,335 231,335
Net noncurrent assets of
discontinued operations 48,627 (48,627) (1a) -
Total Assets $2,837,596 $2,780,260
Liabilities
Current liabilities:
Short-term debt $ - $ -
Current installments of
long-term debt 94,708 (37,400) (1c) 57,308
Accounts payable 616,200 616,200
Accrued expenses and other {27,664 (1a)
current liabilities 653,780 {(1,100) (1c) 680,344
Total current liabilities 1,364,688 1,353,852
Long-term debt, exclusive of
current installments 540,362 (169,900) (1c) 370,462
Deferred income taxes 25,885 25,885
Shareholders' Equity
Preferred stock at face value 175,000 (25,000) (1b) 150,000
Common stock 77,725 1,349 (1b) 79,074
Additional paid-in capital 386,600 23,651 (1b) 410,251
{125,000 (1a)
Retained earnings 267,336 { (1,600) (1c) 390,736
Total shareholders' equity 906,661 1,030,061
Total Liabilities and
Shareholders' Equity $2,837,596 $2,780,260
The accompanying notes are an integral part of the unaudited pro forma
condensed consolidated balance sheet.
F-3
THE TJX COMPANIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED JANUARY 27, 1996
(UNAUDITED)
PRO FORMA
PRO FORMA ADJUSTMENTS FOR
ADJUSTMENTS FOR PRO FORMA SALE OF
HISTORICAL MARSHALLS ACQUISITION SUBTOTAL CHADWICK'S PRO FORMA
Dollars In Thousands Except Per Share Amounts
(C>
Net sales $4,447,549 $2,110,394 (2a) $6,557,943 $(472,434) (3a) $6,085,509
Cost of sales, including buying
and occupancy costs 3,429,401 { (10,500) (2c) 5,187,537 (286,144) (3a) 4,901,393
{1,768,636 (2a)
Selling, general and administrative
expenses 830,019 { 2,264 (2d) 1,209,488 (160,143) (3a) 1,049,345
{ 377,205 (2a)
Store closing costs 35,000 - 35,000 35,000
Interest expense, net 44,226 { 6,258 (2a) 72,572 { (6,040) (3a)
{22,088 (2b) {(14,260) (3b)
{ (1,200) (3c) 51,072
Income from continuing operations
before income taxes 108,903 53,346 48,699
Provision for income taxes 45,304 {(16,637) (2a) 23,126 {(8,110) (3a)
{ (5,541) (2e) { 6,184 (3d) 21,200
Income from continuing operations 63,599 30,220 27,499
Deduct dilutive preferred stock
dividends 9,314 8,342 (2f) 17,656 17,656
Income from continuing operations
for earnings per share computations $ 54,285 $ 12,564 $ 9,843
Number of common shares for
earnings per share computations 73,133,349 1,625,057 (2g) 74,758,406 74,758,406
Income from continuing operations
per common share $ .74 $ .17 $ .13
The accompanying notes are an integral part of the unaudited pro forma
condensed consolidated statement of income.
F-4
THE TJX COMPANIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED OCTOBER 26, 1996
(UNAUDITED)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
In Thousands Except Per Share Amounts
Net sales $4,742,935 $4,742,935
Cost of sales, including
buying and occupancy costs 3,694,820 3,694,820
Selling, general and
administrative expenses 775,983 775,983
Interest expense,, net 35,674 {(10,708) (3b)
{ (1,050) (3c) 23,916
Income from continuing
operations before income taxes 236,458 248,216
Provision for income taxes 98,154 4,703 (3d) 102,857
Income from continuing operations 138,304 145,359
Deduct dilutive preferred stock
dividends 0 0
Income from continuing operations
for earnings per share
computations $ 138,304 $ 145,359
Number of common shares for
primary and fully diluted
earnings per share
computations 90,574,029 90,574,029
Income from continuing
operations per common share $1.53 $1.60
The accompanying notes are an integral part of the unaudited pro forma
condensed consolidated statement of income.
F-5
THE TJX COMPANIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
IN THOUSANDS
Note 1
The pro forma condensed consolidated balance sheet reflects the
following adjustments:
(a) To record an estimated net gain of $125 million on the sale
of Chadwick's by recording the consideration received, which
includes a $20 million convertible subordinated note and
cash of $207.3 million adjusted under the terms of the
agreement for an assumed October 26, 1996 closing, recording
the write-off of the net assets of discontinued operations
sold, except for $90 million for net consumer credit card
receivables retained by the Company and recording an
estimated liability for expenses, taxes and other costs
associated with the sale. The estimated net gain includes
the benefit from full utilization of the Company's $139
million capital loss carryforward.
(b) The Company is required to redeem its outstanding Series D
preferred stock from the proceeds of certain asset sales.
It is assumed the Company calls the Series D for redemption
and that the holders of the Series D preferred stock elect
their conversion rights and convert into common stock.
(c) To record the prepayment of long-term debt (including
current installments) of $207.3 million from cash proceeds
received from the sale and an after-tax charge of $1.6
million for the write-off of deferred financing charges of
$2.7 million associated with the debt. The Company
anticipates full prepayment of this debt in its fourth
quarter reporting period for the fiscal year ending January
25, 1997.
Note 2
The pro forma condensed consolidated statement of income reflects the
following adjustments relating to the acquisition of Marshalls:
(a) To record Marshalls historical results for the period
January 29, 1995 through November 17, 1995, the period prior
to the Company's acquisition of Marshalls.
Net sales $2,110,394
Cost of sales including
buying and occupancy costs 1,768,636
Selling, general and
administrative expenses 377,205
Interest expense, net 6,258
Provision (benefit) for income taxes (16,637)
F-6
(b) To record additional interest expense and amortization of
deferred financing costs for the period January 29, 1995
through November 17, 1995.
(c) To reflect a reduction in depreciation expense due to the
net write down of property to fair value for the period
January 29, 1995 through November 17, 1995.
(d) To record amortization of "Marshalls" tradename, net of
reduction in amortization due to elimination of goodwill
from prior acquisitions, for period January 29, 1995 through
November 17, 1995.
(e) To record the income tax (benefit) associated with pro forma
adjustments (b), (c) and (d) at a marginal tax rate of 40%.
(f) To adjust preferred stock dividends for dilutive effect of
additional dividends on preferred stock issued for
acquisition of Marshalls.
(g) To adjust weighted average shares outstanding for earnings
per share calculations shares for dilutive effect of
preferred stock issued for acquisition of Marshalls.
Note 3
The pro forma condensed consolidated statement of income reflects the
following adjustments for sale of the Chadwick's division.
(a) To restate continuing operations for the twelve months ended
January 27, 1996 by eliminating the net sales, expenses and
tax provision relating to Chadwick's operating results.
(b) To reflect a reduction in interest expense as a result of
the repayment of a portion of the term loan incurred from
the acquisition of Marshalls for the periods indicated.
Twelve Months Nine Months
Ended Ended
January 27, 1996 October 26, 1996
(In Thousands)
Interest expense, net $(14,260) $(10,708)
(c) To reduce interest expense for interest income on the $20
million note receivable received as partial consideration
for the sale of Chadwick's. Interest income of 6% per annum
assumed for the twelve months ended January 27, 1996 and 7%
per annum for the nine months ended October 26, 1996.
Twelve Months Nine Months
Ended Ended
January 27, 1996 October 26, 1996
(In Thousands)
Interest expense, net $(1,200) $(1,050)
F-7
(d) To record additional tax provision related to items (b) and
(c) at a marginal tax rate of 40%.
Twelve Months Nine Months
Ended Ended
January 27, 1996 October 26, 1996
(In Thousands)
Provision for income taxes $6,184 $4,703
F-8