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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 April 29, 2000
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 May 27,
2000: 292,502,547
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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
-------------------------------------
April 29, May 1,
2000 1999
------------ -------------
(As Restated)
Net sales $2,108,116 $1,930,506
---------- ----------
Cost of sales, including buying and occupancy costs 1,554,040 1,418,792
Selling, general and administrative expenses 337,957 310,676
Interest expense (income), net 2,753 (734)
---------- ----------
Income before income taxes and cumulative effect
of accounting change 213,366 201,772
Provision for income taxes 82,786 79,498
---------- ----------
Income before cumulative effect of accounting change 130,580 122,274
Cumulative effect of accounting change, net of income taxes - (5,154)
---------- ----------
Net income $ 130,580 $ 117,120
========== ==========
Earnings per share:
Income before cumulative effect of accounting change:
Basic $.44 $ .38
Diluted $.44 $ .38
Net income:
Basic $.44 $ .36
Diluted $.44 $ .36
Cash dividends per common share $.04 $.035
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
April 29, January 29, May 1,
2000 2000 1999
-------------- ----------- ------------
ASSETS (As Restated)
-----------
Current assets:
Cash and cash equivalents $ 236,009 $ 371,759 $ 309,362
Accounts receivable 63,763 55,461 57,341
Merchandise inventories 1,560,315 1,229,587 1,463,962
Prepaid expenses and other current assets 57,305 43,758 50,415
----------- ----------- -----------
Total current assets 1,917,392 1,700,565 1,881,080
----------- ----------- -----------
Property, at cost:
Land and buildings 116,401 116,005 115,512
Leasehold costs and improvements 648,996 622,962 565,675
Furniture, fixtures and equipment 871,234 849,932 735,428
----------- ----------- -----------
1,636,631 1,588,899 1,416,615
Less accumulated depreciation and amortization 792,944 754,314 652,772
----------- ----------- -----------
843,687 834,585 763,843
Other assets 60,350 55,826 43,995
Deferred income taxes 29,021 23,143 27,439
Goodwill and tradename, net of amortization 189,356 190,844 196,918
----------- ----------- -----------
TOTAL ASSETS $ 3,039,806 $ 2,804,963 $ 2,913,275
=========== =========== ===========
LIABILITIES
Current liabilities:
Short-term debt $ 10,241 $ -- $ 10,628
Current installments of long-term debt 100,332 100,359 673
Accounts payable 837,362 615,671 771,730
Accrued expenses and other current liabilities 570,906 607,348 601,396
Federal and state income taxes payable 112,716 42,990 101,741
----------- ----------- -----------
Total current liabilities 1,631,557 1,366,368 1,486,168
----------- ----------- -----------
Long-term debt exclusive of current installments:
Promissory notes 40 73 372
General corporate debt 319,313 319,294 219,915
SHAREHOLDERS' EQUITY
Common stock, authorized 1,200,000,000 shares,
par value $1, issued and outstanding
292,875,338; 299,979,363 and 318,984,079 shares 292,875 299,979 318,984
Accumulated other comprehensive income (loss) (1,547) (1,433) (933)
Additional paid-in capital -- -- --
Retained earnings 797,568 820,682 888,769
----------- ----------- -----------
Total shareholders' equity 1,088,896 1,119,228 1,206,820
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,039,806 $ 2,804,963 $ 2,913,275
=========== =========== ===========
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
THIRTEEN WEEKS ENDED
----------------------
April 29, May 1,
2000 1999
--------- -----------
(As Restated)
Cash flows from operating activities:
Net income $ 130,580 $ 117,120
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Cumulative effect of accounting change -- 5,154
Depreciation and amortization 40,602 37,236
(Gain) on sale of other assets (722) --
Loss on property disposals 386 558
Other, net 4,382 (16,037)
Changes in assets and liabilities:
(Increase) in accounts receivable (8,302) (13,221)
(Increase) in merchandise inventories (330,728) (263,260)
(Increase) in prepaid expenses and other current assets (21,786) (21,967)
(Increase) in deferred income taxes (5,967) (2,475)
Increase in accounts payable 221,691 154,571
(Decrease) in accrued expenses and other
current liabilities (47,672) (36,484)
Increase in income taxes payable 69,726 38,408
--------- ---------
Net cash provided by (used in) operating activities 52,190 (397)
--------- ---------
Cash flows from investing activities:
Property additions (54,484) (43,607)
Issuance of note receivable (2,863) --
Proceeds from sale of other assets 9,183 --
--------- ---------
Net cash (used in) investing activities (48,164) (43,607)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings of short-term debt 10,241 10,628
Principal payments on long-term debt (61) (82)
Cash payments for repurchase of common stock (141,414) (123,727)
Proceeds from sale and issuance of common stock, net 2,099 14,966
Cash dividends paid (10,641) (9,663)
--------- ---------
Net cash (used in) financing activities (139,776) (107,878)
--------- ---------
Net (decrease) in cash and cash equivalents (135,750) (151,882)
Cash and cash equivalents at beginning of year 371,759 461,244
--------- ---------
Cash and cash equivalents at end of period $ 236,009 $ 309,362
========= =========
The accompanying notes are an integral part of the financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the first three 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 February 11, 2000, the Company announced that it had adopted the
provisions of the SEC's Staff Accounting Bulletin No. 101 related to
layaway sales. The accounting change was effective as of January 31, 1999,
and accordingly, the Company restated its earnings for the first three
quarters of the fiscal year ended January 29, 2000. The Company recorded a
one-time, non-cash, after-tax charge of $5.2 million in the first quarter
of fiscal 2000 for the cumulative effect of the accounting change. The
prior period presented in these Financial Statements has been restated and
includes the impact of the accounting change.
4. The Company's cash payments for interest and income taxes are as follows:
THIRTEEN WEEKS ENDED
----------------------------
April 29, May 1,
2000 1999
--------- ---------
(In Thousands)
Cash paid for:
Interest on debt $ 870 $ 1,273
Income taxes $18,213 $34,165
5. In October 1988, the Company completed the sale of its former Zayre Stores
division to Ames Department Stores, Inc. ("Ames"). In April 1990, Ames
filed for protection under Chapter 11 of the Federal Bankruptcy Code and in
December 1992, Ames emerged from bankruptcy under a plan of reorganization.
The Company remains contingently liable for the leases of most of the
former Zayre stores still operated by Ames. The Company believes that the
Company's contingent liability on these leases will not have a material
effect on the Company's financial condition.
The Company is also contingently liable on certain leases of its former
warehouse club operations (BJ's Wholesale Club and HomeBase), which was
spun off by the Company in fiscal 1990 as Waban Inc. During fiscal 1998,
Waban Inc. was renamed HomeBase, Inc. and spun-off its BJ's Wholesale Club
division (BJ's Wholesale Club, Inc.). HomeBase, Inc., and BJ's Wholesale
Club, Inc. are primarily liable on their respective leases and have
indemnified the Company for any amounts the Company may have to pay with
respect to such leases. In addition, HomeBase, Inc., BJ's Wholesale
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Club, Inc. and the Company have entered into agreements under which BJ's
Wholesale Club, Inc. has substantial indemnification responsibility with
respect to such HomeBase, Inc. leases. The Company is also contingently
liable on certain leases of BJ's Wholesale Club, Inc. for which both BJ's
Wholesale Club, Inc. and HomeBase, Inc. remain liable. The Company believes
that its contingent liability on the HomeBase, Inc. and BJ's Wholesale
Club, Inc. leases will not have a material effect on the Company's
financial condition.
The Company is also contingently liable on certain store leases of its
former Hit or Miss division which was sold by the Company in September
1995.
6. The Company's comprehensive income for the periods ended April 29, 2000 and
May 1, 1999 is presented below:
THIRTEEN WEEKS ENDED
-----------------------
April 29, May 1,
2000 1999
--------- ---------
(As Restated)
(Dollars in thousands)
Net income $130,580 $117,120
Other comprehensive income (loss):
Foreign currency translation adjustment,
net of hedging activity (247) 596
Reclassification adjustment of unrealized
loss on marketable securities 133 --
-------- --------
Comprehensive income $130,466 $117,716
======== ========
7. The computation of basic and diluted earnings per share is as follows:
THIRTEEN WEEKS ENDED
--------------------------
April 29, May 1,
2000 1999
------------ -----------
(As Restated)
(Dollars in thousands)
(except per share amounts)
Income from continuing operations before cumulative
effect of accounting change
(Numerator in earnings per share calculation) $ 130,580 $ 122,274
Net income (Numerator in earnings per share calculation) $ 130,580 $ 117,120
Shares for basic and diluted earnings per share calculations:
Average common shares outstanding for basic EPS 298,281,278 321,715,541
Dilutive effect of stock options and awards 1,763,681 3,580,604
------------ ------------
Average common shares outstanding for diluted EPS 300,044,959 325,296,145
============ ============
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Income before cumulative effect of
accounting change:
Basic earnings per share $.44 $.38
Diluted earnings per share $.44 $.38
Net income:
Basic earnings per share $.44 $.36
Diluted earnings per share $.44 $.36
8. During March 2000, the Company completed its $750 million stock repurchase
program and announced its intention to repurchase an additional $1 billion
of common stock over several years. During the first quarter ended April
29, 2000, the Company repurchased 7.4 million shares at a cost of $151.6
million. Since the inception of the $1 billion stock repurchase program,
the Company has repurchased 4.7 million shares at a cost of $98.3 million.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Thirteen Weeks Ended
April 29, 2000
VERSUS THIRTEEN WEEKS ENDED MAY 1, 1999
All reference to earnings per share amounts are diluted earnings per share
unless otherwise indicated. Results for the thirteen weeks ended May 1, 1999
have been restated to reflect the change in accounting for layaway sales.
Net sales from continuing operations for the first quarter were $2,108.1
million, up 9% from $1,930.5 million last year. The increase in sales is
attributable to an increase in same store sales and new stores. Consolidated
same store sales for the first quarter increased 3%. On a divisional basis, same
store sales for the thirteen weeks increased 2% at Marmaxx (T.J. Maxx and
Marshalls), 12% at Winners, 6% at T.K. Maxx, 10% at HomeGoods and 25% at A.J.
Wright. Marmaxx sales results were adversely affected by unseasonably cold
weather in the Northeast and Midwest throughout most of the quarter.
Income before cumulative effect of accounting change for the first quarter was
$130.6 million, or $.44 per share, versus $122.3 million, or $.38 per share.
After a $5.2 million after-tax charge for the cumulative effect of accounting
change, net income for the first quarter ended May 1, 1999 was $117.1 million,
or $.36 per share.
The following table sets forth operating results expressed as a percentage of
net sales:
PERCENTAGE OF NET SALES
THIRTEEN WEEKS ENDED
4/29/00 5/01/99
----------------------
Net sales 100.0% 100.0%
------ ------
Cost of sales, including buying and occupancy costs 73.7 73.5
Selling, general and administrative expenses 16.0 16.1
Interest expense (income), net .1 --
------ ------
Income before income taxes and cumulative
effect of accounting change 10.2% 10.4%
====== ======
The cost of sales including buying and occupancy costs as a percentage of net
sales, increased for the first quarter ended April 29, 2000 as compared to the
comparable period last year. The increase in this ratio is the result of an
increase in percentage of revenue from TJX's newer divisions. Marmaxx's cost of
sales as a percentage of net sales was comparable to the prior year, but the
newer divisions initially operate with a higher expense ratio for its cost of
sales, including buying and occupancy costs.
Selling, general and administrative expenses, as a percentage of net sales,
decreased from the prior year. This slight improvement in the thirteen week
period reflects the sales growth and levering of expenses at the Company's newer
divisions.
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Interest expense, net, includes income of $5.6 million in the first quarter of
the current year, versus $5.5 million of interest income in the first quarter
last year. The increase in interest expense (income), net over the comparable
period last year is due to interest on the $200 million of 7.45% notes issued in
December 1999.
The Company's effective income tax rate is 38.8% and 39.4% for the three months
ended April 29, 2000 and May 1, 1999, respectively. The reduction is primarily
due to higher federal job tax credits this year versus those anticipated last
year as well as a lower effective state income tax rate.
The following table sets forth the operating results of the Company's major
business segments: (unaudited)
THIRTEEN WEEKS ENDED
--------------------------------
April 29, May 1,
2000 1999
----------- -----------
(As Restated)
(In Thousands)
Net sales:
Off-price family apparel stores $ 2,048,983 $ 1,892,233
Off-price home fashion stores 59,133 38,273
----------- -----------
$ 2,108,116 $ 1,930,506
=========== ===========
Operating income (loss):
Off-price family apparel stores $ 225,784 $ 210,652
Off-price home fashion stores 1,088 (666)
----------- -----------
226,872 209,986
General corporate expense 10,100 8,296
Goodwill amortization 653 652
Interest expense (income), net 2,753 (734)
----------- -----------
Income before income taxes and cumulative effect
of accounting change $ 213,366 $ 201,772
=========== ===========
These results reflect strong inventory management and expense control. Some
divisions are aggregated for segment reporting purposes. Presented below is a
summary of additional operating statistics of TJX and its major operating
divisions.
NET SALES OPERATING INCOME OPERATING MARGIN
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED
------------------------- ----------------------- -------------------------
April 29, May 1, April 29, May 1, April 29, May 1,
U.S. DOLLARS IN MILLIONS 2000 1999 2000 1999 2000 1999
- ------------------------ ---------- -------- ---------- ------- ---------- -------
(As Restated) (As Restated) (As Restated)
TJX Consolidated $ 2,108.1 $1,930.5 $ 226.9 $210.0 10.8 % 10.9 %
Marmaxx $ 1,846.4 $1,739.5 $ 218.3 $207.0 11.8 % 11.9%
Winners $ 116.9 $ 91.2 $ 13.1 $ 8.1 11.2 % 8.9%
T.K. Maxx $ 72.5 $ 56.0 $ (1.7) $ (1.6) (2.3)% (2.9)%
HomeGoods $ 59.1 $ 38.3 $ 1.1 $ (.7) 1.8 % (1.7)%
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Stores in operation at the end of the period are as follows:
APRIL 29, 2000 MAY 1, 1999
-------------- -----------
T.J. Maxx 637 613
Marshalls 510 480
Winners 105 90
HomeGoods 55 38
T.K. Maxx 57 42
A.J. Wright 18 10
----- -----
Total stores 1,382 1,273
===== =====
FINANCIAL CONDITION
Cash flows from operating activities for the three months reflect increases in
inventories and accounts payable that are primarily due to normal seasonal
requirements and are largely influenced by the change in inventory from year-end
levels.
Investing activities for the period ended April 29, 2000 includes proceeds of
$9.2 million from the sale of all of the shares of common stock of Manulife
Financial. The shares were received by TJX as part of the demutualization of
Manulife Financial in 1999.
During March 2000, the Company completed its $750 million stock repurchase
program and announced its intentions to repurchase an additional $1 billion of
common stock over several years. The Company had cash expenditures of $141.4
million under its stock repurchase program during the quarter ended April 29,
2000. During the first quarter the Company repurchased 7.4 million shares at a
total cost of $151.6 million. Since the inception of the $1 billion stock
repurchase program, the Company has repurchased 4.7 million shares at a total
cost of $98.3 million.
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PART II. OTHER INFORMATION
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of stockholders on June 6,
2000. The following were voted upon at the Annual Meeting:
ELECTION OF DIRECTORS FOR WITHHELD
Bernard Cammarata 270,075,613 1,755,167
Arthur F. Loewy 270,037,930 1,792,850
Robert F. Shapiro 270,062,041 1,768,739
Fletcher H. Wiley 270,064,846 1,765,934
In addition to those elected, the following are directors whose
term of office continued after the Annual Meeting:
Gary L. Crittenden
Edmond J. English
Dennis F. Hightower
Richard G. Lesser
John M. Nelson
John F. O'Brien
Willow B. Shire
Proposal presented by certain shareholders regarding
implementation of the MacBride Principles:
For 37,018,201
Against 195,981,685
Abstain 10,504,423
Broker non-votes 28,326,471
Item 6(a) EXHIBITS
10.1 The Employment Agreement dated as of April 17, 2000 between Edmond
J. English and the Company is filed herewith.
10.2 The Employment Agreement dated as of April 17, 2000 between
Bernard Cammarata and the Company is filed herewith.
Item 6(b) REPORTS ON FORM 8-K
The Company did not was not required to file a current report on
Form 8-K during the quarter ended April 29, 2000.
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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: June 12, 2000
/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.
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EXHIBIT INDEX
EXH DESCRIPTION
10.1 The Employment Agreement dated as of April 17, 2000 between Edmond J.
English and the Company is filed herewith.
10.2 The Employment Agreement dated as of April 17, 2000 between Bernard
Cammarata and the Company is filed herewith.