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 April 28, 2001
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 26,
2001: 277,421,688
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
-----------------------------------
April 28, April 29,
2001 2000
---------- ----------
Net sales $2,270,895 $2,108,116
---------- ----------
Cost of sales, including buying and occupancy costs 1,686,616 1,554,040
Selling, general and administrative expenses 380,271 337,957
Interest expense, net 4,216 2,753
---------- ----------
Income before provision for income taxes 199,792 213,366
Provision for income taxes 76,121 82,786
---------- ----------
Net income $ 123,671 $ 130,580
=========== ===========
Earnings per share:
Net income:
Basic $.44 $.44
Diluted $.44 $.44
Cash dividends declared per share $.045 $.04
The accompanying notes are an integral part of the financial statements.
2
3
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
IN THOUSANDS
April 28, January 27, April 29,
2001 2001 2000
----------- ----------- -----------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 304,687 $ 132,535 $ 236,009
Accounts receivable 73,638 61,845 63,763
Merchandise inventories 1,642,749 1,452,877 1,560,315
Prepaid expenses and other current assets 96,761 74,690 57,305
---------- ---------- ----------
Total current assets 2,117,835 1,721,947 1,917,392
---------- ---------- ----------
Property at cost:
Land and buildings 137,260 133,714 116,401
Leasehold costs and improvements 726,909 704,011 648,996
Furniture, fixtures and equipment 1,018,565 984,848 871,234
---------- ---------- ----------
1,882,734 1,822,573 1,636,631
Less accumulated depreciation and amortization 957,135 914,590 792,944
---------- ---------- ----------
925,599 907,983 843,687
Other assets 76,966 69,976 60,350
Deferred income taxes, net 48,450 47,391 29,021
Goodwill and tradename, net of amortization 183,502 184,986 189,356
---------- ---------- ----------
TOTAL ASSETS $3,352,352 $2,932,283 $3,039,806
========== ========== ==========
LIABILITIES
- -----------
Current liabilities:
Current installments of long-term debt $ 41 $ 73 $ 100,332
Short-term debt 13,682 39,000 10,241
Accounts payable 745,050 645,672 837,362
Accrued expenses and other current liabilities 447,320 501,822 388,066
Federal and state income taxes payable 97,514 42,192 112,716
---------- ---------- ----------
Total current liabilities 1,303,607 1,228,759 1,448,717
---------- ---------- ----------
Other long-term liabilities 166,698 165,440 182,840
Long-term debt, exclusive of current installments 668,055 319,372 319,353
Commitments and contingencies - - -
SHAREHOLDERS' EQUITY
- --------------------
Common stock, authorized 1,200,000,000 shares,
par value $1, issued and outstanding 276,956,560;
280,378,675 and 292,875,338 shares, respectively 276,957 280,379 292,875
Additional paid-in capital - - -
Accumulated other comprehensive income (loss) (4,059) (3,288) (1,547)
Retained earnings 941,094 941,621 797,568
---------- ---------- ----------
Total shareholders' equity 1,213,992 1,218,712 1,088,896
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,352,352 $2,932,283 $3,039,806
========== ========== ==========
The accompanying notes are an integral part of the financial statements.
3
4
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
Thirteen Weeks Ended
-------------------------------------
April 28, April 29,
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $123,671 $130,580
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 48,716 40,623
(Gain) on sale of other assets - (722)
Property disposals 594 386
Deferred income tax (benefit) (1,059) (5,967)
Changes in assets and liabilities:
(Increase) in accounts receivable (11,887) (8,232)
(Increase) in merchandise inventories (193,610) (326,635)
(Increase) in prepaid expenses and other current assets (22,268) (21,521)
Increase in accounts payable 101,408 219,648
(Decrease) in accrued expenses and other
current liabilities (56,471) (49,320)
Increase in income taxes payable 55,492 69,677
Other, net 2,154 3,080
-------- --------
Net cash provided by operating activities 46,740 51,597
-------- --------
Cash flows from investing activities:
Property additions (65,315) (54,484)
Issuance of note receivable (2,981) (2,863)
Proceeds from sale of other assets - 9,183
-------- --------
Net cash (used in) investing activities (68,296) (48,164)
-------- --------
Cash flows from financing activities:
Proceeds from current year borrowings of short-term debt, net 13,682 10,241
Payments on short-term debt outstanding from prior year (39,000) -
Proceeds from borrowing of long-term debt 347,579 -
Principal payments on long-term debt (32) (61)
Cash payments for repurchase of common stock (127,882) (141,414)
Proceeds from sale and issuance of common stock, net 10,903 2,099
Cash dividends paid (11,223) (10,641)
-------- --------
Net cash provided by (used in) financing activities 194,027 (139,776)
-------- --------
Effect of exchange rate changes on cash (319) 593
-------- --------
Net increase (decrease) in cash and cash equivalents 172,152 (135,750)
Cash and cash equivalents at beginning of year 132,535 371,759
-------- --------
Cash and cash equivalents at end of period $304,687 $236,009
======== ========
The accompanying notes are an integral part of the financial statements.
4
5
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 TJX'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 TJX 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. TJX's cash payments for interest and income taxes are as follows:
Thirteen Weeks Ended
-------------------------------------
April 28, April 29,
2001 2000
---------- ----------
(In Thousands)
Cash paid for:
Interest on debt $ 2,149 $ 870
Income taxes $15,291 $18,213
4. In October 1988, TJX 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.
TJX remains contingently liable for the leases of most of the former Zayre
stores still operated by Ames. TJX believes that its contingent liability
on these leases will not have a material effect on its financial condition.
TJX is also contingently liable on certain leases of its former warehouse
club operations (BJ's Wholesale Club and HomeBase) which was spun off by
TJX in fiscal 1990 as Waban Inc. During fiscal 1998, Waban Inc. was renamed
HomeBase, Inc. and spun-off its BJ's Wholesale Club division as BJ's
Wholesale Club, Inc. HomeBase, Inc., and BJ's Wholesale Club, Inc. are
primarily liable on their respective leases and have indemnified TJX for
any amounts it may have to pay with respect to such leases. In addition,
HomeBase, Inc., BJ's Wholesale Club, Inc. and TJX have entered into
agreements under which BJ's Wholesale Club, Inc. has substantial
indemnification responsibility with respect to such HomeBase, Inc. leases.
TJX 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. TJX believes that its contingent liability on the HomeBase, Inc.
and BJ's Wholesale Club, Inc. leases will not have a material effect on its
financial condition.
TJX is also contingently liable on certain store leases of its former Hit
or Miss division. In November 2000, the Hit or Miss store chain filed for
bankruptcy and subsequently announced that it is in the process of
liquidating its assets under Chapter 11 of the Federal Bankruptcy Code. TJX
believes that its contingent liability on these leases will not have a
material effect on its financial condition.
5
6
5. Effective January 28, 2001, TJX implemented Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement requires that all derivatives be
recorded on the balance sheet at fair value. TJX enters derivative
contracts to hedge its net investment in foreign operations, and to hedge
certain foreign denominated merchandise commitments and intercompany
payables. The fair value of all its contracts as of January 28, 2001, most
of which were net investment hedge contracts, amounted to a net asset of
$10.0 million, as compared to a carrying value of $11.6 million. This
resulted in a reduction to accumulated other comprehensive income for the
cumulative effect of an accounting change of $1.6 million.
As of April 28, 2001, TJX recorded all of its hedge contracts at fair
value. The change in fair value relates primarily to the contracts
designated as a hedge of the net investment in foreign operations. A gain
on these contracts was credited to other comprehensive income to offset
losses of the translation adjustment of its foreign operations. The
remainder of TJX's hedge contracts were either designated as a fair value
hedge or hedge accounting was not elected. Thus the change in fair value of
these contracts, which is immaterial, is reflected in current period
earnings.
6. TJX's comprehensive income for the periods ended April 28, 2001 and April
29, 2000 is presented below:
Thirteen Weeks Ended
----------------------------
April 28, April 29,
2001 2000
--------- ---------
(Dollars in thousands)
Net income $123,671 $130,580
Other comprehensive income (loss):
Cumulative effect of accounting change (SFAS 133) (1,572) -
Loss due to foreign currency translation adjustments (2,314) (5,370)
Gain on net investment hedge contracts 2,864 5,123
Amounts reclassified from other comprehensive
income to net income 251 133
-------- --------
Comprehensive income $122,900 $130,466
======== ========
7. The computation of basic and diluted earnings per share is as follows:
Thirteen Weeks Ended
-------------------------------------
April 28, April 29,
2001 2000
--------- ---------
(Dollars in thousands)
(except per share amounts)
Net income $123,671 $130,580
Shares for basic and diluted earnings per share calculations:
Average common shares outstanding for basic EPS 279,287,524 298,281,278
Dilutive effect of stock options and awards 2,840,970 1,763,681
----------- -----------
Average common shares outstanding for diluted EPS 282,128,494 300,044,959
=========== ===========
Net income:
Basic earnings per share $.44 $.44
Diluted earnings per share $.44 $.44
6
7
8. During the first quarter ended April 28, 2001, TJX repurchased 4.5 million
shares of its common stock under its $1 billion stock repurchase program at
a cost of $132.7 million. Since the inception of the $1 billion stock
repurchase program, through April 28, 2001, TJX has repurchased 24.1
million shares at a cost of $514.3 million.
9. On February 13, 2001, TJX issued $517.5 million zero coupon convertible
subordinated notes due February 2021 and raised gross proceeds of $347.6
million. The issue price of the notes represents a yield to maturity of 2%
per year. The notes are convertible into 8.5 million shares of common stock
if specified conditions are met. The holders of the notes have the right to
require TJX to purchase the notes at the end of the first, third, sixth and
twelfth year following the issuance date. TJX incurred approximately $8
million of expenses associated with the offering. Due to the option the
holders have to require TJX to purchase the notes after one year, the debt
expenses are being amortized over twelve months. TJX intends to use the
proceeds to fund an accelerated store roll-out program, investment in its
distribution network, its common stock repurchase program and for general
corporate purposes.
10. TJX evaluates the performance of its segments based on pre-tax income
before general corporate expense, goodwill amortization and interest,
(operating income). Presented below is financial information on TJX's
business segments.
Thirteen Weeks Ended
-------------------------------------
April 28, April 29,
2001 2000
---------- ----------
Net sales:
Marmaxx $1,923,359 $1,846,404
Winners * 127,398 116,941
T.K. Maxx 95,532 72,476
HomeGoods 99,610 59,133
A.J. Wright 24,996 13,162
---------- ----------
$2,270,895 $2,108,116
========== ==========
Operating income (loss):
Marmaxx $ 209,408 $ 218,273
Winners * 10,168 13,134
T.K. Maxx 1,272 (1,672)
HomeGoods 118 1,088
A.J. Wright (4,099) (3,951)
---------- ----------
216,867 226,872
General corporate expense 12,207 10,100
Goodwill amortization 652 653
Interest expense, net 4,216 2,753
---------- ----------
Income before provision for income taxes $ 199,792 $ 213,366
=========== ===========
* Includes the operating results of the new HomeSense stores.
11. Certain amounts in the financial statements of the prior period have been
reclassified for comparative purposes.
7
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Thirteen Weeks Ended
April 28, 2001
Versus Thirteen Weeks Ended April 29, 2000
All reference to earnings per share amounts are diluted earnings per share
unless otherwise indicated.
Net sales from continuing operations for the first quarter were $2,270.9
million, up 8% from $2,108.1 million last year. The increase in sales is
attributable mainly to an increase in new stores. Consolidated same store sales
for the first quarter were flat. Sales results were adversely affected by the
unseasonable and harsh weather throughout much of the United States and Canada
in February and March.
Net income for the first quarter was $123.7 million, or $.44 per share, versus
$130.6 million, or $.44 per share last year.
The following table sets forth operating results expressed as a percentage of
net sales:
Percentage of Net Sales
---------------------------
Thirteen Weeks Ended
---------------------------
April 28, April 29,
2001 2000
--------- ---------
Net sales 100.0% 100.0%
----- -----
Cost of sales, including buying and occupancy costs 74.3 73.7
Selling, general and administrative expenses 16.7 16.0
Interest expense, net .2 .1
----- -----
Income before provision for income taxes 8.8% 10.2%
===== =====
The cost of sales including buying and occupancy costs as a percentage of net
sales increased for the first quarter ended April 28, 2001 as compared to the
comparable period last year. The increase in this ratio reflects the effect of
less than planned growth in sales and an increase in distribution costs. TJX
expects an increase in distribution costs in the short term due to the increased
investment in our distribution center network.
Selling, general and administrative expenses, as a percentage of net sales,
increased from the prior year. The increase in this ratio is due to higher store
payroll costs, primarily at Marmaxx, as well as the effect of less than planned
growth in sales. The increase in store payroll costs is due to higher labor
costs.
The increase in interest expense, net over the comparable period last year is
due to amortization of the debt discount and debt expenses relating to the zero
coupon convertible notes issued in February 2001. (See Note 9 of the Notes to
Consolidated Financial Statements for more information). Interest expense, net
includes interest income of $5.4 million in the first quarter of the current
year versus $5.6 million of interest income in the first quarter last year.
Our effective income tax rate is 38.1% for the three months ended April 28, 2001
and 38.8% for the three months ended April 29, 2000. The reduction in the income
tax rate is attributable to tax benefits associated with our United Kingdom
operations.
8
9
The following is a summary of key operating statistics of our business segments:
Thirteen Weeks Ended
----------------------------
April 28, April 29,
2001 2000
---------- ----------
U.S. Dollars in millions
MARMAXX
Net sales $ 1,923.4 $ 1,846.4
Operating income $ 209.4 $ 218.3
Operating margin 10.9% 11.8%
Percent increase in same store sales 0% 2%
Stores in operation at end of period 1,211 1,147
WINNERS
Net sales $ 127.4 $ 116.9
Operating income $ 10.2 $ 13.1
Operating margin 8.0% 11.2%
Percent increase in same store sales (local currency) 3% 12%
Stores in operation at end of period - Winners 123 105
HomeSense 4 --
T.K. MAXX
Net sales $ 95.5 $ 72.5
Operating income (loss) $ 1.3 $ (1.7)
Operating margin 1.3% (2.3)%
Percent increase in same store sales (local currency) 8% 6 %
Stores in operation at end of period 76 57
HOMEGOODS
Net sales $ 99.6 $ 59.1
Operating income $ 0.1 $ 1.1
Operating margin 0.1% 1.8%
Percent increase in same store sales 4% 10%
Stores in operation at end of period 93 55
A.J. WRIGHT
Net sales $ 25.0 $ 13.2
Operating (loss) $ (4.1) $ (4.0)
Operating margin (16.4)% (30.0)%
Percent increase in same store sales 22% 25%
Stores in operation at end of period 28 18
Marmaxx and Winners sales results for the thirteen weeks ended April 28, 2001,
were adversely affected by the unseasonable weather in much of the United States
and Canada during February and March. The lower than expected sales growth at
Marmaxx along with higher store payroll costs are the prime reasons for the
reduction in Marmaxx's operating income and operating margin as compared to last
year. Likewise,
9
10
at Winners, the lower than planned sales growth along with start-up costs
associated with the opening of the new HomeSense stores were the prime reasons
for the reduction in Winners operating income as compared to last year.
HomeGoods same store sales gains were aided by progress we have made in dealing
with the distribution issues that plagued HomeGoods in the second half of last
year. HomeGoods operating income for the thirteen weeks ended April 28, 2001,
reflects an increase in distribution costs as compared to last year. The sales
performance of both T.K. Maxx and A.J. Wright were above expectations which led
to higher than expected operating results.
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 relate primarily to TJX's property additions which are
higher than the comparable period last year due to TJX's accelerated store
roll-out program and investment in its distribution center network. 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
received as part of its demutualization in 1999.
We had cash expenditures of $127.9 million under our $1 billion stock repurchase
program during the quarter ended April 28, 2001. During the first quarter of
fiscal 2002 we repurchased 4.5 million shares at a total cost of $132.7 million.
Since the inception of the $1 billion stock repurchase program, through April
28, 2001, we have repurchased 24.1 million shares at a total cost of $514.3
million.
Financing activities for the period ending April 28, 2001 includes the payment
of $39 million of short-term debt outstanding at the end of the fiscal year
ended January 27, 2001. Financing activities for the period ended April 28, 2001
also include proceeds of $347.6 million from the February 2001 issue of $517.5
million zero coupon convertible subordinated notes due 2021. The issue price of
the notes represents a yield to maturity of 2% per year. The notes are
convertible into 8.5 million shares of our common stock if its value reaches
specified thresholds, and upon the occurrence of other specified events. The
holders may require us to purchase the notes at specified prices on the first,
third, sixth and twelfth anniversary of their issuance. We may pay the purchase
price in cash, our stock, or a combination of the two. TJX intends to use the
proceeds to fund an accelerated store roll-out program, investment in its
distribution network, its common stock repurchase program and for general
corporate purposes.
10
11
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 5,
2001. The following actions were taken at the Annual Meeting:
ELECTION OF DIRECTORS FOR WITHHELD
--------------------- --- --------
Gary L. Crittenden 250,368,013 1,179,920
Edmond J. English 250,392,311 1,155,622
Richard G. Lesser 250,379,732 1,168,201
In addition to those elected, the following are directors whose term
of office continued after the Annual Meeting:
Bernard Cammarata
Gail Deegan
Dennis F. Hightower
John F. O'Brien
Robert F. Shapiro
Willow B. Shire
Fletcher H. Wiley
PROPOSAL 2
----------
Approval of amendments to the Stock Incentive Plan.
For 234,797,951
Against 15,407,199
Abstain 1,296,065
Broker non-votes 46,718
PROPOSAL 3
----------
Proposal presented by certain shareholders regarding implementation
of the MacBride Principles:
For 35,661,796
Against 181,639,727
Abstain 12,617,827
Broker non-votes 21,628,583
Item 6(a) EXHIBITS
--------
10.1 The Employment Agreement dated as of January 28, 2001,
between Carol Meyrowitz and TJX, is filed herewith.
10.2 The Agreement dated as of January 28, 2001, between Carol
Meyrowitz and TJX, is filed herewith.
11
12
10.3 The Amended and Restated Employment Agreement, dated as of
January 28, 2001, between Donald G. Campbell and TJX, is
filed herewith.
Item 6(b) REPORTS ON FORM 8-K
-------------------
The Company filed a current report on Form 8-K, dated February 6,
2001, relating to the offering of 20 year convertible zero coupon
subordinated notes.
12
13
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, 2001
/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.
13