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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 July 27, 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
August 24, 1996: 74,463,709.
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
July 27, July 29,
1996 1995
Net sales $1,641,163 $848,945
Cost of sales, including buying and
occupancy costs 1,277,754 657,682
Selling, general and administrative expenses 290,863 166,933
Interest on debt, net 11,319 9,813
Income from continuing operations before
income taxes 61,227 14,517
Provision for income taxes 25,173 6,804
Income from continuing operations 36,054 7,713
Income (loss) from discontinued operations,
net of income taxes - (855)
(Loss) on disposal of discontinued operations,
net of income taxes - (31,700)
Net income (loss) 36,054 (24,842)
Preferred stock dividends 4,260 1,789
Net income (loss) attributable to common
shareholders $ 31,794 $(26,631)
Primary and fully diluted earnings per
common share:
Continuing operations $ .40 $ .08
Discontinued operations - (.45)
Net income $ .40 $ (.37)
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
Twenty-Six Weeks Ended
July 27, July 29,
1996 1995
Net sales $3,245,406 $1,679,375
Cost of sales, including buying and
occupancy costs 2,518,413 1,292,119
Selling, general and administrative expenses 587,895 337,129
Interest on debt, net 26,424 18,312
Income from continuing operations before
income taxes 112,674 31,815
Provision for income taxes 46,534 14,592
Income from continuing operations 66,140 17,223
Income (loss) from discontinued operations,
net of income taxes - (2,300)
(Loss) on the disposal of discontinued
operations, net of income taxes - (31,700)
Net income (loss) 66,140 (16,777)
Preferred stock dividends 8,788 3,578
Net income (loss) attributable to common
shareholders $ 57,352 $ (20,355)
Primary and fully diluted earnings per
common share:
Continuing operations $ .73 $ .19
Discontinued operations - (.47)
Net income $ .73 $ (.28)
Cash dividends per common share $ .14 $ .28
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
July 27, January 27, July 29,
1996 1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 245,342 $ 209,226 $ 19,752
Accounts receivable and income
taxes recoverable 110,006 98,409 48,595
Merchandise inventories 1,437,553 1,343,852 1,092,143
Prepaid expenses 31,510 35,235 29,438
Net current assets of
discontinued operations - - 11,937
Total current assets 1,824,411 1,686,722 1,201,865
Property, at cost:
Land and buildings 141,245 141,009 114,899
Leasehold costs and improvements 443,993 429,715 277,197
Furniture, fixtures and equipment 608,646 580,959 408,049
1,193,884 1,151,683 800,145
Less accumulated depreciation
and amortization 422,256 366,191 328,634
771,628 785,492 471,511
Other assets 35,680 37,325 16,354
Goodwill and tradename,
net of amortization 232,879 236,043 88,639
Net noncurrent assets of
discontinued operations - - 32,528
TOTAL ASSETS $2,864,598 $2,745,582 $1,810,897
LIABILITIES
Current liabilities:
Short-term debt $ 403 $ - $ 65,749
Current installments of
long-term debt 103,211 78,670 33,987
Accounts payable 632,636 473,523 396,133
Accrued expenses and other
current liabilities 628,297 702,132 296,618
Federal and state income taxes
payable - 23,246 3,252
Total current liabilities 1,364,547 1,277,571 795,739
Long-term debt exclusive of
current installments:
Real estate mortgages 24,402 27,241 72,462
Equipment notes 2,662 3,272 3,897
General corporate debt 635,807 660,200 357,193
Deferred income taxes 21,478 12,664 15,716
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 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, authorized 150,000,000
shares, par value $1, issued and
outstanding 74,132,470; 72,485,776
and 72,406,751 shares 74,132 72,486 72,407
Additional paid-in capital 296,496 269,159 267,496
Retained earnings 187,574 140,489 118,487
Total shareholders' equity 815,702 764,634 565,890
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,864,598 $2,745,582 $1,810,897
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
Twenty-Six Weeks Ended
July 27, July 29,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 66,140 $(16,777)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 65,149 37,589
Loss from discontinued operations - 2,300
Loss on disposal of discontinued operations - 31,700
Loss on property disposals 4,361 297
Other (4,873) (3,356)
Changes in assets and liabilities:
(Increase) in accounts receivable and
income taxes recoverable (11,597) (6,846)
(Increase) in merchandise inventories (93,701) (201,550)
(Increase) decrease in prepaid expenses 3,725 (6,557)
Increase (decrease) in accounts payable 159,113 (19,728)
(Decrease) in accrued expenses and other
current liabilities (24,508) (7,322)
Increase (decrease) in income taxes payable (23,246) 3,252
Increase in deferred income taxes 8,814 1,950
Net cash provided by (used in) operating
activities 149,377 (185,048)
Cash flows from investing activities:
Property additions (49,929) (57,518)
Contingent payment for acquisition of Marshalls (49,327) -
Net cash (used in) investing activities (99,256) (57,518)
Cash flows from financing activities:
Proceeds from borrowings of short-term debt 403 45,749
Proceeds from borrowings long-term debt - 199,861
Principal payments on long-term debt (3,305) (3,108)
Proceeds from sale and issuance of common
stock, net 7,952 82
Cash dividends (19,055) (23,850)
Net cash provided by (used in)
financing activities (14,005) 218,734
Net cash provided by (used in) continuing
operations 36,116 (23,832)
Net cash provided by discontinued operations - 2,015
Net increase (decrease) in cash and cash
equivalents 36,116 (21,817)
Cash and cash equivalents at beginning of year 209,226 41,569
Cash and cash equivalents at end of period $245,342 $ 19,752
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 (Second Quarter) and Twenty-Six Weeks Ended July 27, 1996
Versus Thirteen Weeks and Twenty-Six Weeks Ended July 29, 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 second quarter were $1,641.2
million, up 93% from $848.9 million last year. For the six months, net
sales from continuing operations were $3,245.4 million, up 93% from
$1,679.4 million for the same period last year. The increase in sales is
primarily attributable to the acquisition of Marshalls. Same store sales
for the second quarter increased by 4% at T.J. Maxx, 7% at Winners, 13% at
Marshalls and decreased by 1% at HomeGoods. Same store sales for the six
months increased by 5% at T.J. Maxx, 10% at Marshalls, 6% at Winners and 2%
at HomeGoods. Chadwick's experienced a 6% and 10% increase in net sales
for the quarter and six months, respectively.
Income from continuing operations for the second quarter was $36.1 million,
or $.40 per common share versus $7.7 million, or $.08 per common share.
For the six months, income from continuing operations was $66.1 million, or
$.73 per common share versus $17.2 million, or $.19 per common share. For
the periods ended July 1995, after reflecting Hit or Miss as a discontinued
operation, the Company recorded a net loss of $24.8 million or $.37 per
common share for the second quarter and $16.8 million or $.28 per common
share for the six months.
The following table sets forth operating results expressed as a percentage
of net sales (continuing operations):
Percentage of Net Sales
13 Weeks Ended 26 Weeks Ended
7/27/96 7/29/95 7/27/96 7/29/95
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including buying
and occupancy costs 77.9 77.5 77.6 76.9
Selling, general and administrative
expenses 17.7 19.7 18.1 20.1
Interest on debt and capital leases .7 1.1 .8 1.1
Income from continuing operations
before income taxes 3.7% 1.7% 3.5% 1.9%
Cost of sales including buying and occupancy costs as a percent of net
sales increased in both periods from the prior year. This increase is the
result of Chadwick's smaller pro rata share of consolidated results, due to
the Marshalls acquisition, as Chadwick's operates with a lower cost of
sales ratio than the Company's store operations.
PAGE 7
Selling, general and administrative expenses, as a percentage of net sales,
decreased from the prior year in both periods. This improvement is
partially the result of a decrease in Chadwick's pro rata share of
consolidated results, due to the Marshalls acquisition, as Chadwick's
operates at a higher selling, general and administrative expense ratio than
the Company's store operations. This ratio also reflects the benefit of
the increased sales volume due to the Marshalls acquisition.
The increase in interest expense for the second quarter and six months
ended July 1996 versus July 1995 is due to interest on the $200 million of
notes issued in June 1995 and on the $375 million term loan incurred for
the acquisition of Marshalls.
The decrease in the effective income tax rate 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.
The following table sets forth the operating results of the Company's major
business segments: (unaudited)
(In Thousands)
Thirteen Weeks Ended Twenty-Six Weeks Ended
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
Net sales:
Off-price family
apparel stores $1,528,177 $742,032 $2,981,041 $1,442,746
Off-price catalog
operation 92,904 87,602 224,900 204,213
Off-price home fashion
stores 20,082 19,311 39,465 32,416
$1,641,163 $848,945 $3,245,406 $1,679,375
Operating income (loss):
Off-price family
apparel stores $ 82,197 $ 37,229 $ 149,254 $ 70,140
Off-price catalog
operation 4,478 (1,128) 17,409 4,133
Off-price home fashion
stores (3,056) (2,327) (5,626) (3,856)
83,619 33,774 161,037 70,417
General corporate expense(1) 10,419 8,790 20,632 18,983
Goodwill amortization 654 654 1,307 1,307
Interest expense 11,319 9,813 26,424 18,312
Income from continuing
operations before income
taxes $ 61,227 $ 14,517 $ 112,674 $ 31,815
(1) General corporate expense for the periods ended July 27, 1996 include
the net operating results of T.K. Maxx. General corporate expense for
the periods ended July 29, 1995 include the net operating results of
T.K. Maxx and the Cosmopolitan catalog.
PAGE 8
The off-price family apparel stores segment, T.J. Maxx, Marshalls, and
Winners more than doubled its operating profit for the quarter and six
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.
Chadwick's recorded an increase in operating income due to a strong
response to the spring and summer catalogs and its improved ability to meet
customer demand versus last year. HomeGoods results were slightly below
the Company's expectations.
Stores in operation at the end of the period are as follows:
July 27, 1996 July 29, 1995
T.J. Maxx 582 565
Marshalls 464 -
Winners 57 42
HomeGoods 23 22
T.K. Maxx 11 6
Financial Condition
Cash flows from operating and financing activities for the six months
reflect increases in inventories and accounts payable, which are primarily
due to normal seasonal requirements. The improvement in cash provided by
operating activities for the six months ended July 1996 versus July 1995
reflects stronger sales and 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. 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 reserve in this period have
been primarily non-cash items. The Company is in the process of evaluating
Marshalls store closing program and the allocation of the purchase price of
Marshalls. Any adjustments to the initial allocation of purchase price
will be reflected by the end of the current fiscal year.
Cash flow from investing activities reflects a final payment made to
Melville based on the closing balance sheet of Marshalls.
On May 24, 1996, Chadwick's of Boston, Ltd. ("Chadwick's"), a wholly-owned
subsidiary of the Company, filed a registration statement with the
Securities and Exchange Commission for the sale of a majority of the common
stock of Chadwick's. On July 31, 1996, the Company announced a
postponement of the initial public offering of Chadwick's due to weak stock
market conditions. There can be no assurance that the offering reflected
in the Registration Statement will be made or consummated or, if the
offering is consummated, that the terms will be as reflected in the
Registration Statement.
On July 31, 1996, the Company announced that it had called for early
redemption on September 16, 1996, $88.83 million of its 9 1/2% sinking fund
debentures, allowing the Company to take advantage of its strong cash
position. The Company will record a $2.9 million after-tax extraordinary
charge in its third quarter as a result of this redemption.
PAGE 9
On August 13, 1996, the Company announced that it has called for redemption
all outstanding shares of its Series C Convertible Preferred Stock on
September 12, 1996, at a redemption price of $51.875 per share, plus
accrued dividends of $.616 per share through the redemption date. Each
Series C Preferred Share is convertible into TJX Common Stock at a
conversion price of $25.9375 per share of Common Stock (equivalent to a
conversion rate of 1.9277 shares of Common Stock per Series C Preferred
Share). No dividends for the period commencing July 1, 1996 will be paid
on the Series C Preferred shares converted into Common Stock. The Company
has entered into a standby agreement with Salomon Brothers Inc pursuant to
which, subject to certain conditions, Salomon will purchase from the
Company the number of shares of Common Stock that would have been issuable
upon conversion of Series C Preferred Shares that are not converted.
During the second quarter, all of the Company's outstanding Series A
cumulative convertible Preferred Stock was converted into Common Stock
pursuant to a call for redemption. There were 1,190,475 shares of Common
Stock issued upon the conversion of the Series A Preferred Stock.
PAGE 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the first six 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: (in thousands)
Twenty-Six Weeks Ended
July 27, July 29,
1996 1995
Cash paid for:
Interest on debt, net $26,534 $ 17,718
Income taxes 79,619 5,568
4. 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) to members of
Hit or Miss management and outside investors and, thus, Hit or Miss'
operating results for all prior periods have been reclassified to
discontinued operations.
5. 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) for the acquisition 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 TJX convertible Preferred
Stock. The purchase has been accounted for under the purchase method of
accounting.
As a result of the acquisition, the Company announced its intentions 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 July 27,
1996 totalled $215.5 million. The reduction in the reserve to date is
primarily due to inventory markdowns and fixed asset writeoffs. The
Company is in the process of evaluating its store closing program and
the reserves established in the allocation of the Marshalls acquisition
price.
In connection with the purchase of Marshalls, the Company entered into
an $875 million credit facility with a group of banks. The credit
facility consists of a $375 million term loan used for the cash portion
PAGE 11
of the purchase price, and a $500 million revolving credit facility to
meet the Company's ongoing working capital needs.
6. 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 $21.8 million as of July 27, 1996
should be adequate to cover all reasonably expected liabilities
associated with discontinued operations that it may incur.
7. On May 24, 1996, Chadwick's of Boston, Ltd. ("Chadwick's"), a wholly-
owned subsidiary of the Company, filed a registration statement for the
sale of a majority of the common stock of Chadwick's. On July 31, 1996,
the Company announced a postponement of the initial public offering of
Chadwick's due to weak stock market conditions.
8. On July 31, 1996, the Company announced that it had called for early
redemption on September 16, 1996, $88.83 million of its 9 1/2% sinking
fund debentures. The Company will record a $2.9 million after-tax
extraordinary charge in its third quarter as a result of this
redemption.
9. On August 13, 1996, the Company announced that it has called for
redemption all outstanding shares of its Series C Cumulative Convertible
Preferred Stock on September 12, 1996 at a redemption price of $51.875
per share plus accrued dividends through the Redemption Date. Each
Series C Preferred Share is convertible into TJX Common Stock at a
conversion price of $25.9375 per share of Common Stock (equivalent to a
conversion rate of 1.9277 shares of Common Stock per Series C Preferred
Share).
During the second quarter, all of the Company's outstanding Series A
cumulative convertible Preferred Stock was converted into Common Stock
pursuant to a call for redemption. There were 1,190,475 shares of
Common Stock issued upon the conversion of the Series A Preferred Stock.
PAGE 12
PART II. Other Information
Item 4 Submission of Matters to a Vote of Security Holders
Information with respect to matters voted on at the Company's
Annual Meeting of Stockholders on June 4, 1996 (during the
period covered by this report) was provided in the Company's
Quarterly Report on Form 10-Q for the quarter ended April 27,
1996.
Item 6(a) Exhibits
11 Statement re Computation of Per Share Earnings
Item 6(b) Reports on Form 8-K
On June 5, 1996, the Company filed a current report on Form 8-
K dated May 24, 1996 relating to the filing of a Registration
Statement by Chadwick's of Boston, Ltd., a subsidiary of the
Company, and the Company's intention to sell a majority
interest in its Chadwick's division. The Company filed
unaudited pro forma financial statements for the fiscal year
ended January 27, 1996 with the Form 8-K.
On June 20, 1996, the Company filed a current report on Form
8-K dated June 18, 1996 announcing that all outstanding shares
of the Company's Series A Preferred Stock had been converted
into Common Stock of the Company.
PAGE 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: September 10, 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.
EXHIBIT 11
PAGE 1
COMPUTATION OF NET INCOME PER COMMON SHARE
(UNAUDITED)
DOLLARS IN THOUSANDS