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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 October 30, 1999
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 30,
1999: 310,080,847
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PART I FINANCIAL INFORMATION
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
Thirteen Weeks Ended
-----------------------------
October 30, October 31,
1999 1998
----------- ----------
Net sales $2,257,094 $ 2,026,578
---------- -----------
Cost of sales, including buying and occupancy costs 1,659,885 1,480,501
Selling, general and administrative expenses 338,319 322,531
Interest expense, net 4,274 1,507
---------- -----------
Income before income taxes 254,616 222,039
Provision for income taxes 97,642 88,372
---------- -----------
Income from continuing operations before extraordinary item 156,974 133,667
(Loss) from discontinued operations, net of income taxes -- (9,048)
---------- -----------
Net income 156,974 124,619
Preferred stock dividends -- 978
---------- -----------
Net income available to common shareholders $ 156,974 $ 123,641
========== ===========
Earnings per share:
Income from continuing operations:
Basic $ .50 $ .42
Diluted $ .50 $ .40
Net income:
Basic $ .50 $ .39
Diluted $ .50 $ .38
Cash dividends per common share $ .035 $ .03
The accompanying notes are an integral part of the financial statements.
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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
Thirty-Nine Weeks Ended
----------------------------
October 30, October 31,
1999 1998
----------- -----------
Net sales $6,307,822 $ 5,666,661
---------- -----------
Cost of sales, including buying and occupancy costs 4,674,496 4,229,252
Selling, general and administrative expenses 979,476 925,698
Interest expense, net 5,504 2,890
---------- -----------
Income before income taxes 648,346 508,821
Provision for income taxes 249,031 202,511
---------- -----------
Income from continuing operations before extraordinary item 399,315 306,310
(Loss) from discontinued operations, net of income taxes -- (9,048)
---------- -----------
Net income 399,315 297,262
Preferred stock dividends -- 3,466
---------- -----------
Net income available to common shareholders $ 399,315 $ 293,796
========== ===========
Earnings per share:
Income from continuing operations:
Basic $ 1.26 $ .96
Diluted $ 1.24 $ .91
Net income:
Basic $ 1.26 $ .93
Diluted $ 1.24 $ .88
Cash dividends per common share $ .105 $ .09
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
October 30, January 30, October 31,
1999 1999 1998
----------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 24,561 $ 461,244 $ 155,691
Accounts receivable 114,315 67,345 104,392
Merchandise inventories 1,638,764 1,186,068 1,501,362
Prepaid expenses and other current assets 75,001 28,448 58,337
----------- ----------- -----------
Total current assets 1,852,641 1,743,105 1,819,782
----------- ----------- -----------
Property, at cost:
Land and buildings 115,757 115,485 115,726
Leasehold costs and improvements 612,367 547,099 541,426
Furniture, fixtures and equipment 819,213 711,320 677,274
----------- ----------- -----------
1,547,337 1,373,904 1,334,426
Less accumulated depreciation and amortization 723,397 617,302 594,497
----------- ----------- -----------
823,940 756,602 739,929
Other assets 50,335 27,436 20,592
Deferred income taxes 29,850 22,386 7,072
Goodwill and tradename, net of amortization 193,981 198,317 199,742
----------- ----------- -----------
TOTAL ASSETS $ 2,950,747 $ 2,747,846 $ 2,787,117
=========== =========== ===========
LIABILITIES
Current liabilities:
Short-term debt $ 108,000 $ -- $ --
Current installments of long-term debt 100,510 694 22,618
Accounts payable 747,043 617,159 709,302
Accrued expenses and other current liabilities 599,507 624,801 622,731
Federal and state income taxes payable 73,592 64,192 83,134
----------- ----------- -----------
Total current liabilities 1,628,652 1,306,846 1,437,785
----------- ----------- -----------
Long-term debt exclusive of current installments:
Promissory notes 159 433 670
General corporate debt 119,922 219,911 219,908
SHAREHOLDERS' EQUITY
Preferred stock at face value, authorized 5,000,000 shares,
par value $1, issued and outstanding cumulative
convertible stock of 411,790 shares of 7% Series E
at October 31, 1998 -- -- 41,179
Common stock, authorized 1,200,000,000 shares,
par value $1, issued and outstanding
310,080,847; 322,140,770 and 314,181,999 shares 310,081 322,141 314,182
Accumulated other comprehensive income (loss) (1,480) (1,529) (3,146)
Additional paid-in capital -- -- --
Retained earnings 893,413 900,044 776,539
----------- ----------- -----------
Total shareholders' equity 1,202,014 1,220,656 1,128,754
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,950,747 $ 2,747,846 $ 2,787,117
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
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THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
Thirty-Nine Weeks Ended
-----------------------------
October 30, October 31,
1999 1998
----------- ----------
Cash flows from operating activities:
Net income $ 399,315 $ 297,262
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from discontinued operations -- 9,048
Depreciation and amortization 115,811 100,329
Loss on sale of other assets -- 659
Property disposals 5,776 840
Other, net (24,571) 200
Changes in assets and liabilities:
(Increase) in accounts receivable (46,970) (43,657)
(Increase) in merchandise inventories (452,696) (311,192)
(Increase) in prepaid expenses and other current assets (46,650) (30,980)
Increase in accounts payable 129,884 126,511
Increase (decrease) in accrued expenses and other
current liabilities (25,294) 54,057
Increase in income taxes payable 9,400 25,271
(Decrease) in deferred income taxes (7,425) (4,410)
--------- ---------
Net cash provided by operating activities 56,580 223,938
--------- ---------
Cash flows from investing activities:
Property additions (182,470) (152,312)
Proceeds from sale of other assets -- 8,338
--------- ---------
Net cash (used in) investing activities (182,470) (143,974)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings of short-term debt 108,000 --
Principal payments on long-term debt (458) (1,199)
Common stock repurchased (405,584) (304,376)
Proceeds from sale and issuance of common stock, net 20,326 8,869
Cash dividends (33,077) (31,936)
--------- ---------
Net cash (used in) financing activities (310,793) (328,642)
--------- ---------
Net (decrease) in cash and cash equivalents (436,683) (248,678)
Cash and cash equivalents at beginning of year 461,244 404,369
--------- ---------
Cash and cash equivalents at end of period $ 24,561 $ 155,691
========= =========
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 nine months are not necessarily indicative of
results for the full fiscal year, because the Company's business, in common
with the businesses of retailers generally, is subject to seasonal
influences, with higher levels of sales and income generally realized in
the second half of the year.
2. The preceding data are unaudited and reflect all normal recurring
adjustments, the use of retail statistics, and accruals and deferrals among
periods required to match costs properly with the related revenue or
activity, considered necessary by the Company for a fair presentation of
its financial statements for the periods reported, all in accordance with
generally accepted accounting principles and practices consistently
applied.
3. The Company's cash payments for interest expense and income taxes are as
follows:
Thirty-Nine Weeks Ended
--------------------------------------
October 30, October 31,
1999 1998
----------- --------------
(In Thousands)
Cash paid for:
Interest on debt $ 10,975 $ 13,506
Income taxes $235,812 $185,578
4. 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 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. During the third quarter ended October 31, 1998, the Company
increased its reserve for its discontinued operations by $15 million ($9
million after-tax), primarily for potential lease liabilities relating to
guarantees on leases of its former Hit or Miss
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division. The after-tax cost of $9 million, or $.02 per diluted share, was
recorded as a loss from discontinued operations.
5. On November 18, 1998, all outstanding shares of Series E cumulative
convertible preferred stock were mandatorily converted into common stock in
accordance with its terms.
6. The Company's comprehensive income for the periods ended October 30, 1999
and October 31, 1998 is presented below: (Dollars in thousands)
13 Weeks Ended 39 Weeks Ended
----------------------------- -----------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Net income $ 156,974 $ 124,619 $ 399,315 $ 297,262
Other comprehensive income (loss):
Foreign currency translation adjustment,
net of hedging activity (154) (436) 107 (1,134)
Unrealized gains (losses) on marketable
securities, including reclassification
adjustments (58) (848) (58) (5,328)
--------- --------- --------- ---------
Comprehensive income $ 156,762 $ 123,335 $ 339,364 $ 290,800
========= ========= ========= =========
7. The computation of basic and diluted earnings per share is as follows:
Thirteen Weeks Ended
-------------------------------
October 30, October 31,
1999 1998
----------- -----------
($'s in thousands except per share amounts)
Income from continuing operations
(Numerator in diluted calculation) $ 156,974 $ 133,667
Less preferred dividends -- 978
------------ ------------
Income from continuing operations available to
common shareholders (Numerator in basic calculation) $ 156,974 $ 132,689
============ ============
Net income (Numerator in diluted calculation) $ 156,974 $ 124,619
Less preferred dividends -- 978
------------ ------------
Net income available to common shareholders
(Numerator in basic calculation) $ 156,974 $ 123,641
============ ============
Shares for basic and diluted earnings per share calculations:
Average common shares outstanding for basic EPS 313,297,756 313,930,546
Dilutive effect of stock options and awards 3,015,253 5,098,933
Dilutive effect of convertible preferred stock -- 12,737,200
------------ ------------
Average common shares outstanding for diluted EPS 316,313,009 331,766,679
============ ============
Income from continuing operations:
Basic earnings per share $ .50 $ .42
Diluted earnings per share $ .50 $ .40
Net income:
Basic earnings per share $ .50 $ .39
Diluted earnings per share $ .50 $ .38
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Thirty-Nine Weeks Ended
-------------------------------
October 30, October 31,
1999 1998
----------- -----------
($'s in thousands except per share amounts)
Income from continuing operations
(Numerator in diluted calculation) $ 399,315 $ 306,310
Less preferred dividends -- 3,466
------------ ------------
Income from continuing operations available to
common shareholders (Numerator in basic calculation) $ 399,315 $ 302,844
============ ============
Net income (Numerator in diluted calculation) $ 399,315 $ 297,262
Less preferred dividends -- 3,466
------------ ------------
Net income available to common shareholders
(Numerator in basic calculation) $ 399,315 $ 293,796
============ ============
Shares for basic and diluted earnings per share calculations:
Average common shares outstanding for basic EPS 317,390,461 316,877,003
Dilutive effect of stock options and awards 3,441,890 5,713,233
Dilutive effect of convertible preferred stock -- 14,074,348
------------ ------------
Average common shares outstanding for diluted EPS 320,832,351 336,664,584
============ ============
Income from continuing operations:
Basic earnings per share $ 1.26 $ .96
Diluted earnings per share $ 1.24 $ .91
Net income:
Basic earnings per share $ 1.26 $ .93
Diluted earnings per share $ 1.24 $ .88
8. During October 1998, the Company completed its second $250 million stock
repurchase program and announced its intentions to repurchase an additional
$750 million of common stock over several years. During the nine months
ended October 30, 1999, the Company repurchased 13.4 million shares at a
cost of $405.6 million. Since the inception of the $750 million stock
repurchase program, the Company has repurchased 17.6 million shares at a
cost of $501.1 million.
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9. During the second quarter the Company entered into a new lease agreement
for the expansion of its corporate offices and amended the existing leases
on the same property. The new lease has an initial term, which expires on
December 31, 2015, and the existing lease agreements have been extended
through December 31, 2010. Rental payments on the new expansion are
expected to commence in the first quarter of fiscal 2002, and will be
accounted for as a capital lease.
10. During the third quarter the Company received 693,537 common shares of
Manulife Financial with whom the Company has held a number of life
insurance policies for many years. The shares issued reflect ownership
interest in the demutualized insurer due to policies held by the Company.
These securities were recorded at market value upon receipt resulting in an
$8.5 million pre-tax gain in the third quarter. Subsequent to the receipt
of the shares, unrealized gains and losses are recognized as a component of
comprehensive income (loss), net of income taxes.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Thirty-Nine Weeks Ended
October 30, 1999
VERSUS THIRTY-NINE WEEKS ENDED OCTOBER 31, 1998
All reference to earnings per share amounts are diluted earnings per share
unless otherwise indicated.
Net sales from continuing operations for the third quarter were $2,257.1
million, up 11% from $2,026.6 million last year. For the nine months, net sales
from continuing operations were $6,307.8 million, up 11% from $5,666.7 million
for the same period last year. The increase in sales is attributable to an
increase in same store sales and new stores. Same store sales for the thirteen
weeks increased 5% at Marmaxx (T.J. Maxx and Marshalls), 7% at Winners, 8% at
T.K. Maxx and 17% at HomeGoods. Same store sales for the nine months increased
by 5% at Marmaxx, 8% at Winners, 14% at T.K. Maxx and 14% at HomeGoods.
Income from continuing operations for the third quarter was $157.0 million, or
$.50 per common share, versus $133.7 million, or $.40 per common share. For the
nine months ended October 30, 1999, income from continuing operations was $399.3
million, or $1.24 per common share versus $306.3 million or $.91 per common
share. After a $9 million after-tax charge for contingent lease obligations
relating to discontinued operations, net income for the third quarter and nine
months ended October 31, 1998 was $124.6 million, or $.38 per common share, and
$297.3 million, or $.88 per common share respectively.
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
--------------------- -------------------
10/30/99 10/31/98 10/30/99 10/31/98
-------- -------- -------- --------
Net sales 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Cost of sales, including buying and occupancy costs 73.5 73.1 74.1 74.6
Selling, general and administrative expenses 15.0 15.9 15.5 16.3
Interest expense, net .2 .1 .1 .1
----- ----- ----- -----
Income before income taxes 11.3% 10.9% 10.3% 9.0%
===== ===== ===== =====
The cost of sales including buying and occupancy costs as a percentage of net
sales, increased for the third quarter ended October 1999, but decreased for the
nine months ended October 1999 as compared to the comparable periods last year.
These results are largely due to Marmaxx's merchandise margin which was lower
than the prior year's third quarter, but showed improvement over the prior year
on a year-to-date basis.
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Selling, general and administrative expenses, as a percentage of net sales,
decreased from the prior year. This improvement in both the thirteen and
thirty-nine week periods, primarily reflects the benefits of the Company's sales
growth and a net reduction in certain corporate expenses, as discussed on page
12.
Interest expense, net, includes income of $.5 million in the third quarter and
$8.5 million in the first nine months of the current year, versus $4.1 million
and $15.0 million of interest income in the third quarter and nine months ended
last year.
During the third quarter, the Company and its Chief Executive Officer entered
into an agreement whereby the executive waived his right to benefits under the
Company's Supplemental Executive Retirement Plan (SERP) in exchange for the
Company's funding of a split dollar life insurance policy. During the third
quarter ended October 30, 1999, the Company recognized a pre-tax charge of $1.6
million (recorded in general corporate expense) as well as an increase of $2.2
million in the tax provision to reverse the deferred tax asset associated with
the SERP plan. This after-tax cost of $3.8 million will be offset in future
years by after-tax income associated with the split dollar policy. This benefit
exchange was designed so that the ultimate after-tax cash expenditures by the
Company on the split dollar policy equals the after-tax cash expenditures the
Company would have incurred under the SERP.
The Company's effective income tax rate is 38.3% and 38.4% for the three months
and nine months ended October 30, 1999, versus 39.8% for the comparable periods
last year. The additional third quarter tax cost of $2.2 million associated with
the Chief Executive Officer's benefit exchange (described above) was offset by
additional anticipated tax benefits attributable to the Company's Puerto Rico
net operating loss carry forward. The tax benefit attributable to the Company's
Puerto Rico net operating loss carry forward is the primary reason for the
reduction in the effective income tax rates as compared to the periods ended
October 31, 1998.
The following table sets forth the operating results of the Company's major
business segments: (unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
----------------------------- -----------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
(In Thousands)
Net sales:
Off-price family apparel stores $2,204,140 $ 1,994,782 $6,173,668 $ 5,582,666
Off-price home fashion stores 52,954 31,796 134,154 83,995
---------- ----------- ---------- -----------
$2,257,094 $ 2,026,578 $6,307,822 $ 5,666,661
========== =========== ========== ===========
Operating income (loss):
Off-price family apparel stores $ 261,225 $ 234,040 $ 680,843 $ 558,871
Off-price home fashion stores 2,041 (589) 386 (5,091)
---------- ----------- ---------- -----------
263,266 233,451 681,229 553,780
General corporate expense 3,724 9,253 25,422 40,112
Goodwill amortization 652 652 1,957 1,957
Interest expense, net 4,274 1,507 5,504 2,890
---------- ----------- ---------- -----------
Income before income taxes $ 254,616 $ 222,039 $ 648,346 $ 508,821
========== =========== ========== ===========
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The off-price family apparel stores segment, which includes T.J. Maxx,
Marshalls, Winners, T.K. Maxx and A.J. Wright, significantly increased operating
income over the comparable periods last year. These increases reflect strong
inventory management and strong sales in the current periods on top of strong
gains in the prior year periods. General corporate expense decreased from the
prior year as the periods ended October 1999 include a pre-tax gain of $8.5
million associated with the Company's receipt of common stock resulting from the
demutualization of Manulife while last year's nine month period included a $5.5
million charge for the write-off of the Hit or Miss note receivable. In
addition, last year's nine month period includes a charge of $4 million, versus
$1 million in the same period this year, for charges associated with a deferred
compensation award granted to the Company's Chief Executive Officer in the first
quarter of fiscal 1998. This award, initially denominated in shares of the
Company's common stock, has now been fully allocated to other investment
options, at the election of the executive.
Stores in operation at the end of the period are as follows:
October 30, 1999 October 31, 1998
---------------- ----------------
T.J. Maxx 625 600
Marshalls 498 471
Winners 99 87
HomeGoods 46 31
T.K. Maxx 53 39
A.J. Wright 11 5
----- -----
Total stores 1,332 1,233
===== =====
FINANCIAL CONDITION
Cash flows from operating activities for the nine 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. Operating cash flows for the period ending October 30, 1999, reflects
the Company's purchase of investments intended to offset obligations associated
with certain deferred compensation plans and a reduction in accrued expenses
from year-end levels versus an increase in accrued expenses for the same period
last year.
During October 1998, the Company completed its second $250 million stock
repurchase program and announced its intention to repurchase an additional $750
million of common stock over several years. During the nine months ended October
30, 1999, the Company repurchased 13.4 million shares at a cost of $405.6
million. Since the inception of the $750 million stock repurchase program, the
Company has repurchased 17.6 million shares at a cost of $501.1 million. The
stock repurchase activity during the first nine months of the current fiscal
year resulted in the Company borrowing $108 million under its revolving credit
agreement.
THE YEAR 2000 ISSUE
The following paragraphs relating to the Year 2000 issue also are designated a
Year 2000 Readiness Disclosure within the meaning of the Year 2000 Information
and Readiness Disclosure Act.
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The operations of the Company rely on various computer technologies which, as is
true of many companies, may be affected by what is commonly referred to as the
Year 2000 ("Y2K") issue. To address this matter, in October 1995, the Company
began to evaluate whether its computer resources would be able to recognize and
accept date sensitive information before and after the arrival of the Year 2000.
A failure of these technologies to recognize and process such information could
create an adverse impact on the operations of the Company.
In connection with its Y2K evaluation, the Company established a Company-wide
Y2K project team to review and assess the Y2K readiness of its computer
technologies in each business area, and to remediate, validate and, where
necessary, develop contingency plans to enable these technologies to effect a
smooth transition to the Year 2000 and beyond.
These efforts have focused on: (1) the Company's information technology systems
in the form of hardware and software (so-called "IT" systems), such as
mainframes, client/server systems, personal computers, proprietary software and
software purchased or licensed from third parties, upon which the Company relies
for its retail functions, such as merchandise procurement and distribution,
point-of-sale information systems and inventory control; (2) the Company's
embedded computer technologies (so-called "non-IT" systems), such as materials
handling equipment, telephones, elevators, climate control devices and building
security systems; and (3) the IT and non-IT systems of third parties with whom
the Company has commercial relationships to support its daily operations, such
as those of banks, credit card processors, payroll services, telecommunications
services, utilities and merchandise vendors.
THE COMPANY'S STATE OF READINESS
The Company's review and assessment phase is complete with respect to its IT
systems and the Company has identified and inventoried those IT systems which
are critical to its operations. The Company's effort to modify these IT
technologies to address the Y2K issue is essentially complete with minor final
installation and testing to be completed during November and December, 1999. The
Company's mainframe operating system has already been remediated, tested and
determined to be compliant in a simulated Y2K environment. The Company's
proprietary software systems as well as those purchased or licensed from third
parties have been remediated.
With respect to the Company's non-IT systems, the review and assessment phase is
complete and the Company has identified and inventoried such technologies. The
Company has undertaken a program to modify or replace such technologies where
they are related to critical functions of the Company, this portion of the Y2K
project plan is substantially complete.
With respect to the IT and non-IT systems of critical third party providers, the
Company has already communicated with these parties to obtain assurances
regarding their respective Y2K remediation efforts. While the Company expects
such third parties to address the Y2K issue based on the representations it has
received to date, the Company cannot guarantee that these systems will be made
Y2K compliant in a timely manner or that the Company will not experience a
material adverse effect as a result of such non-compliance.
COSTS ASSOCIATED WITH YEAR 2000 ISSUES
As of October 30, 1999, the Company has incurred $12.2 million in costs related
to the Y2K project. The Company currently estimates that the aggregate cost of
the Y2K project will be approximately $12.5 million, which cost is being
expensed as incurred. The Company's Y2K costs are primarily for the cost of
internal and third party programming for remediation and testing. All of these
costs have been or are expected to be funded through operating cash flows. The
Company has not deferred the implementation of any significant IT projects while
addressing the Y2K issue.
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CONTINGENCY PLANS
The Company believes that the IT and non-IT technologies which support its
critical functions will be ready for the transition to the Year 2000. There can
be no assurance, however, that similar unresolved issues for key commercial
partners (including utilities, financial services, building services and
transportation services) will not cause an adverse effect on the Company. To
address these risks, and to address the risk that its own IT and non-IT
technologies may not perform as expected during the Y2K transition, the Company
has established contingency plans to address problems that may affect store
operations, distribution, banking and administration. These plans cannot cover
all situations, but should allow the Company to continue operating if there are
isolated power outages or computer failures due to the year 2000 issue. The
plans include, where appropriate, arrangements for alternative power supplies,
backup computer resources and manual intervention. Although the Company believes
that its efforts to address the Y2K issue will be sufficient to avoid a material
adverse impact on the Company, there can be no assurance that these efforts will
be fully effective.
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PART II. OTHER INFORMATION
Item 6(a) EXHIBITS
10.1 The Agreement and the form of the related Split Dollar Agreements,
dated October 28, 1999, between the Company and Bernard Cammarata
are filed herewith.
Item 6(b) REPORTS ON FORM 8-K
The Company was not required to file a current report on Form 8-K
during the quarter ended October 30, 1999.
16
PAGE 16
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 29, 1999
/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.