1
PAGE 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] Quarterly Report Under Section 13 and 15(d)
of the Securities Exchange Act of 1934
or
[ ] Transition Report Pursuant to Section 13 and 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended October 31, 1998
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 November 28,
1998: 323,170,700
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PAGE 2
PART I FINANCIAL INFORMATION
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
Thirteen Weeks Ended
-------------------------------
October 31, October 25,
1998 1997
----------- -----------
Net sales $ 2,026,578 $ 1,887,698
----------- -----------
Cost of sales, including buying and
occupancy costs 1,480,501 1,414,336
Selling, general and administrative expenses 322,531 287,205
Interest expense, net 1,507 3,654
----------- -----------
Income from continuing operations before
income taxes and extraordinary item 222,039 182,503
Provision for income taxes 88,372 75,561
----------- -----------
Income from continuing operations before
extraordinary item 133,667 106,942
(Loss) from discontinued operations,
net of income taxes (9,048) -
----------- -----------
Income before extraordinary item 124,619 106,942
Extraordinary (charge), net of income taxes - (1,777)
----------- -----------
Net income 124,619 105,165
Preferred stock dividends 978 3,443
----------- -----------
Net income available to common shareholders $ 123,641 $ 101,722
=========== ===========
Earnings per share
Income from continuing operations:
Basic $ .42 $ .32
Diluted $ .40 $ .31
Net income:
Basic $ .39 $ .31
Diluted $ .38 $ .30
Cash dividends per common share $ .03 $ .025
The accompanying notes are an integral part of the financial statements.
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PAGE 3
PART I FINANCIAL INFORMATION
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
Thirty-Nine Weeks Ended
-------------------------------
October 31, October 25,
1998 1997
----------- -----------
Net sales $ 5,666,661 $ 5,146,220
----------- -----------
Cost of sales, including buying and
occupancy costs 4,229,252 3,940,216
Selling, general and administrative expenses 925,698 844,731
Interest expense, net 2,890 6,054
----------- -----------
Income from continuing operations before
income taxes and extraordinary item 508,821 355,219
Provision for income taxes 202,511 147,238
----------- -----------
Income from continuing operations before
extraordinary item 306,310 207,981
(Loss) from discontinued operations, net
of income taxes (9,048) -
----------- -----------
Income before extraordinary item 297,262 207,981
Extraordinary (charge), net of income taxes - (1,777)
----------- -----------
Net income 297,262 206,204
Preferred stock dividends 3,466 10,669
----------- -----------
Net income available to common shareholders $ 293,796 $ 195,535
=========== ===========
Earnings per share
Income from continuing operations:
Basic $ .96 $ .61
Diluted $ .91 $ .59
Net income:
Basic $ .93 $ .61
Diluted $ .88 $ .59
Cash dividends per common share $ .09 $ .075
The accompanying notes are an integral part of the financial statements.
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PAGE 4
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
IN THOUSANDS
October 31, January 31, October 25,
1998 1998 1997
----------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 155,691 $ 404,369 $ 143,602
Accounts receivable 104,392 60,735 110,117
Merchandise inventories 1,501,362 1,190,170 1,459,607
Prepaid expenses 58,337 27,357 29,409
---------- ---------- ----------
Total current assets 1,819,782 1,682,631 1,742,735
---------- ---------- ----------
Property, at cost:
Land and buildings 115,726 108,729 104,098
Leasehold costs and improvements 541,426 480,964 484,057
Furniture, fixtures and equipment 677,274 611,470 599,494
---------- ---------- ----------
1,334,426 1,201,163 1,187,649
Less accumulated depreciation
and amortization 594,497 515,027 494,847
---------- ---------- ----------
739,929 686,136 692,802
Other assets 20,592 36,645 34,203
Deferred income taxes 7,072 - -
Goodwill and tradename,
net of amortization 199,742 204,220 211,568
---------- ---------- ----------
TOTAL ASSETS $2,787,117 $2,609,632 $2,681,308
========== ========== ==========
LIABILITIES
Current liabilities:
Current installments of
long-term debt $ 22,618 $ 23,360 $ 2,199
Accounts payable 709,302 582,791 646,906
Accrued expenses and other
current liabilities 622,731 553,643 588,830
Federal and state income taxes
payable 83,134 57,863 57,107
---------- ---------- ----------
Total current liabilities 1,437,785 1,217,657 1,295,042
---------- ---------- ----------
Long-term debt exclusive of current installments:
Real estate mortgages - - 21,827
Equipment notes 670 1,127 1,456
General corporate debt 219,908 219,897 219,894
Deferred income taxes - 6,859 14,035
SHAREHOLDERS' EQUITY
Preferred stock at face value,
authorized 5,000,000 shares, par
value $1, issued and outstanding
411,790; 727,300 and 727,700
shares of Series E cumulative
convertible stock 41,179 72,730 72,770
Common stock, authorized 600,000,000
shares, par value $1, issued and
outstanding 314,181,999; 159,901,247
and 161,751,535 shares 314,182 159,901 161,752
Additional paid-in capital - 202,053 254,588
Retained earnings 773,393 729,408 639,944
---------- ---------- ----------
Total shareholders' equity 1,128,754 1,164,092 1,129,054
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,787,117 $2,609,632 $2,681,308
========== ========== ==========
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 31, October 25,
1998 1997
----------- -----------
Cash flows from operating activities:
Net income $ 297,262 $ 206,204
Adjustments to reconcile net income
to net cash provided by operating activities:
Loss from discontinued operations 9,048 -
Extraordinary charge - 1,777
Depreciation and amortization 100,329 92,463
Loss (gain) on sale of other assets 659 (5,992)
Property disposals 840 7,181
Other 200 671
Changes in assets and liabilities:
(Increase) in accounts receivable (43,657) (52,842)
(Increase) in merchandise inventories (311,192) (400,102)
(Increase) in prepaid expenses (30,980) (13,030)
Increase in accounts payable 126,511 112,961
Increase in accrued expenses and
other current liabilities 54,057 44,974
Increase in income taxes payable 25,271 14,126
Increase (decrease) in deferred income taxes (4,410) 4,095
--------- ---------
Net cash provided by operating activities 223,938 12,486
--------- ---------
Cash flows from investing activities:
Property additions (152,312) (145,065)
Proceeds from sale of other assets 8,338 15,697
Proceeds adjustment for sale of Chadwick's - (33,190)
--------- ---------
Net cash (used in) investing activities (143,974) (162,558)
--------- ---------
Cash flows from financing activities:
Principal payments on long-term debt (1,199) (26,184)
Common stock repurchased (304,376) (182,413)
Proceeds from sale and issuance of common
stock, net 8,869 7,441
Cash dividends (31,936) (34,353)
--------- ---------
Net cash (used in) financing activities (328,642) (235,509)
--------- ---------
Net cash (used in) continuing operations (248,678) (385,581)
Net cash provided by discontinued operations - 54,451
--------- ---------
Net (decrease) in cash and cash
equivalents (248,678) (331,130)
Cash and cash equivalents at beginning of year 404,369 474,732
--------- ---------
Cash and cash equivalents at end of period $ 155,691 $ 143,602
========= =========
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 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. Certain amounts in prior period financial statements have been
reclassified for comparative purposes.
3. The Company's cash payments for interest expense and income taxes are as
follows: (in thousands)
39 Weeks Ended
------------------------------
October 31, October 25,
1998 1997
----------- -----------
Cash paid for:
Interest $ 13,506 $ 16,791
Income taxes $185,578 $129,171
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.
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PAGE 7
The Company is also contingently liable on approximately 50 store leases
and the office and warehouse 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 division. The after tax cost of $9 million, or $.02
per diluted share, was recorded as a loss from discontinued operations,
in the third quarter ended October 31, 1998.
5. In October 1998, the Company completed its $250 million stock buyback
program, initiated in February 1998, and announced its intentions to
repurchase an additional $750 million of the Company's common stock.
During the nine months ended October 31, 1998, the Company repurchased a
combined total of 14,008,000 shares (adjusted for the June 1998 stock
split) at a cost of $304.4 million.
6. On April 8, 1998, the Company approved a two-for-one stock split to be
effected in the form of a 100% stock dividend which was subject to
approval by the shareholders of an increase in the number of authorized
shares of the Company's common stock. On June 2, 1998, the Company's
shareholders approved the increase making the two-for-one stock split
effective. The split was distributed on June 25, 1998 to shareholders of
record on June 11, 1998 and resulted in the issuance of 158.9 million
shares of common stock. All historical earnings per share amounts have
been restated to reflect the two-for-one stock split as well as the
two-for-one stock split distributed in June 1997.
7. The computation of basic and diluted earnings per share is as follows:
For The Thirteen Weeks Ended October 31, October 25,
---------------------------- ----------- -----------
1998 1997
($'s in thousands except per share amounts)
Income from continuing operations
(Numerator in diluted calculation) $ 133,667 $ 106,942
Less preferred dividends 978 3,443
------------ ------------
Income from continuing operations
available to common shareholders
(Numerator in basic calculation) $ 132,689 $ 103,499
============ ============
Net income (Numerator in diluted calculation) $ 124,619 $ 105,165
Less preferred dividends 978 3,443
------------ ------------
Net income available to common shareholders
(Numerator in basic calculation) $ 123,641 $ 101,722
============ ============
Shares for basic and diluted earnings per share calculations:
Average common shares outstanding for
basic EPS 313,930,546 326,340,208
Dilutive effect of stock options and awards 5,098,933 4,402,644
Dilutive effect of convertible
preferred stock 12,737,200 16,822,676
------------ ------------
Average common shares outstanding
for diluted EPS 331,766,679 347,565,528
============ ============
Income from continuing operations:
Basic earnings per share $ 0.42 $ 0.32
Diluted earnings per share $ 0.40 $ 0.31
Net Income:
Basic earnings per share $ 0.39 $ 0.31
Diluted earnings per share $ 0.38 $ 0.30
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PAGE 8
For The Thirty-Nine Weeks Ended October 31, October 25,
------------------------------- 1998 1997
----------- -----------
($'s in thousands except per share amounts)
Income from continuing operations
(Numerator in diluted calculation) $ 306,310 $ 207,981
Less preferred dividends 3,466 10,669
------------ ------------
Income from continuing operations
available to common shareholders
(Numerator in basic calculation) $ 302,844 $ 197,312
============ ============
Net income (Numerator in diluted calculation) $ 297,262 $ 206,204
Less preferred dividends 3,466 10,669
------------ ------------
Net income available to common shareholders
(Numerator in basic calculation) $ 293,796 $ 195,535
============ ============
Shares for basic and diluted earnings per
share calculations:
Average common shares outstanding for
basic EPS 316,877,003 321,419,436
Dilutive effect of stock options and awards 5,713,233 3,803,914
Dilutive effect of convertible
preferred stock 14,074,348 27,022,042
------------ ------------
Average common shares outstanding
for diluted EPS 336,664,584 352,245,392
============ ============
Income from continuing operations:
Basic earnings per share $ 0.96 $ 0.61
Diluted earnings per share $ 0.91 $ 0.59
Net income:
Basic earnings per share $ 0.93 $ 0.61
Diluted earnings per share $ 0.88 $ 0.59
8. The Company adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income (SFAS No. 130), in the first quarter ended
May 2, 1998. The components of other comprehensive income for the Company
generally include foreign currency translation adjustments of its foreign
subsidiaries (including related hedging activity) and unrealized gains and
losses on marketable securities. Restatement of prior period information is
required. The computation of comprehensive income follows: (In Thousands)
13 Weeks Ended 39 Weeks Ended
--------------------------- ----------------------------
October 31, October 25, October 31, October 25,
1998 1997 1998 1997
----------- ----------- ----------- -----------
Net income $ 124,619 $105,165 $ 297,262 $206,204
Other comprehensive
income (loss) net of
reclassification
adjustments (1,284) 7,915 (6,462) 4,091
--------- -------- --------- --------
Total comprehensive income $ 123,335 $113,080 $ 290,800 $210,295
========= ======== ========= ========
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Page 9
Cumulative other comprehensive income (loss) is as follows: (In Thousands)
October 31, January 31, October 25,
1998 1998 1997
----------- ----------- -----------
Cumulative other comprehensive
income (loss) $(3,146) $3,316 $3,051
======= ====== ======
Cumulative comprehensive income (loss) has historically been included as a
component of additional paid-in capital. As a result of equity transactions
during the second quarter, which have eliminated the balance of additional
paid-in capital, cumulative comprehensive income (loss) was reclassified to
retained earnings.
9. As of November 18, 1998, the outstanding 370,000 shares of Series E
preferred stock was mandatorily converted into 7,989,204 shares of common
stock in accordance with its terms. During the current fiscal year, prior
to November 18, 1998, shareholders voluntarily converted 357,300 shares of
Series E preferred stock into 7,714,973 shares of common stock (adjusted
for the June 1998 stock split).
10. During 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting for
Derivative Instruments and Hedging Activities". This Statement established
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. This statement requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company believes
that the impact of implementation of this new standard will be immaterial.
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PAGE 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
-------------------------------------
Thirteen Weeks (Third Quarter) and Thirty-Nine Weeks Ended October 31, 1998
Versus Thirteen Weeks and Thirty-nine Weeks Ended October 25, 1997
------------------------------------------------------------------
Net sales from continuing operations for the third quarter were $2,026.6
million, up 7% from $1,887.7 million last year. For the nine months, net sales
from continuing operations were $5,666.7 million, up 10% from $5,146.2 million
for the same period last year. The increase in sales is primarily attributable
to an increase in same store sales and new stores. Same store sales for the
third quarter increased by 1% at T.J. Maxx, 1% at Marshalls, 10% at Winners, 10%
at HomeGoods and 12% at T.K. Maxx. Same store sales for the nine months
increased by 4% at T.J. Maxx, 5% at Marshalls, 13% at Winners, 8% at HomeGoods
and 11% at T.K. Maxx.
Income from continuing operations for the third quarter was $133.7 million, or
$.40 per common share (diluted) versus $106.9 million, or $.31 per common share.
For the nine months ended October 31, 1998, income from continuing operations
was $306.3 million, or $.91 per common share versus $208.0 million, or $.59 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. After
a $1.8 million extraordinary charge for the early retirement of the Company's
revolving credit agreement, net income for the third quarter and nine months
ended October 25, 1997 was $105.2 million, or $.30 per common share, and $206.2
million, or $.59 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
--------------------- ---------------------
10/31/98 10/25/97 10/31/98 10/25/97
-------- -------- -------- --------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including
buying and occupancy costs 73.1 74.9 74.6 76.6
Selling, general and
administrative expenses 15.9 15.2 16.3 16.4
Interest expense, net .1 .2 .1 .1
----- ----- ----- -----
Income from continuing
operations before income
taxes and extraordinary item 10.9% 9.7% 9.0% 6.9%
===== ===== ===== =====
Cost of sales, including buying and occupancy costs as a percent of net sales,
decreased in both periods from the prior year. The improvement in both periods
reflects improved merchandise margins, particularly at T.J. Maxx and Marshalls,
resulting from strong inventory management. In addition, for the year-to-date
period, the improvement in this ratio reflects strong sales growth.
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PAGE 11
Prior year selling, general and administrative expenses for the quarter and nine
months have been reduced by a pre-tax gain of $6 million relating to the sale of
Brylane Inc. common stock. After adjusting for this gain, selling, general and
administrative expenses, as a percentage of net sales, increased in the quarter
and decreased year-to-date. The improvement in this ratio for the nine months is
primarily due to the strong sales performance. In the third quarter, this ratio
increased reflecting the impact of higher store payroll costs.
Interest expense, net, includes income of $4.1 million in the third quarter and
$15.0 million in the first nine months of the current year, versus interest
income of $2.8 million and $14.3 million for the quarter and nine months ended
last year. Gross interest expense decreased due to the early write-off of
deferred financing costs associated with the Company's replacement, in September
1997, of its former revolving credit agreement, as well as the benefit of
reduced fees associated with the new agreement.
The Company's effective income tax rate is 39.8% for the quarter and nine months
ended October 31, 1998 versus 41.4% for the third quarter and nine months ended
last year. This reduction is due to a lower effective state income tax rate, the
impact of foreign operations and a favorable tax benefit associated with a
charitable donation of appreciated property.
The following table sets forth the operating results of the Company's major
business segments: (unaudited)
(In Thousands)
13 Weeks Ended 39 Weeks Ended
------------------------------ ------------------------------
October 31, October 25, October 31, October 25,
1998 1997 1998 1997
----------- ----------- ----------- -----------
Net sales:
Off-price family
apparel stores $ 1,994,782 $ 1,864,480 $ 5,582,666 $ 5,081,271
Off-price home fashion
stores 31,796 23,218 83,995 64,949
----------- ----------- ----------- -----------
$ 2,026,578 $ 1,887,698 $ 5,666,661 $ 5,146,220
=========== =========== =========== ===========
Operating income (loss):
Off-price family
apparel stores $ 234,040 $ 193,608 $ 558,871 $ 410,180
Off-price home fashion
stores (589) (1,917) (5,091) (8,456)
----------- ----------- ----------- -----------
233,451 191,691 553,780 401,724
General corporate expense 9,253 4,880 40,112 38,490
Goodwill amortization 652 654 1,957 1,961
Interest expense, net 1,507 3,654 2,890 6,054
----------- ----------- ----------- -----------
Income from continuing oper-
ations before income taxes
and extraordinary item $ 222,039 $ 182,503 $ 508,821 $ 355,219
=========== =========== =========== ===========
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PAGE 12
The off-price family apparel stores segment significantly increased its
operating income for both the third quarter and nine months. This segment's
increased operating results reflect strong inventory management in both periods
and the strong sales performance for the year-to-date period. General corporate
expense for the periods ended October 25, 1997, includes the pre-tax gain of $6
million relating to the sale of Brylane Inc. common stock. After adjusting for
this gain, general corporate expenses for both periods ended October 31, 1998,
decreased from the prior year primarily due to higher charges in the prior year
associated with a deferred compensation award (initially denominated in shares
of the Company's common stock), granted to the Company's Chief Executive Officer
in the first quarter of fiscal 1998.
Stores in operation at the end of the period are as follows:
October 31, 1998 October 25, 1997
---------------- ----------------
T.J. Maxx 600 582
Marshalls 471 460
Winners 87 75
HomeGoods 31 24
T.K. Maxx 39 29
A.J. Wright 5 -
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.
In October 1998, the Company announced it had completed its $250 million stock
buyback program initiated in February 1998, and that it had approved the
purchase of an additional $750 million of the Company's common stock. During the
nine months ended October 31, 1998, the Company repurchased a combined total of
14,008,000 shares (adjusted for the June 1998 stock split) at a cost of $304.4
million.
On April 8, 1998, the Company approved a two-for-one stock split to be effected
in the form of a 100% stock dividend which was subject to approval by the
shareholders of an increase in the number of authorized shares of the Company's
common stock. On June 2, 1998, the Company's shareholders approved the increase
making the two-for-one stock split effective. The split was distributed on June
25, 1998 to shareholders of record on June 11, 1998 and resulted in the issuance
of 158.9 million shares of common stock. All historical earnings per share
amounts have been restated to reflect the two-for-one stock split as well as the
two-for-one stock split distributed in June 1997.
During the quarter ended October 1997, the Company converted a portion of the
Brylane note into 352,908 shares of Brylane, Inc., common stock which it sold
for $15.7 million. This sale resulted in an after-tax gain of $3.6 million, or
$.01 per share.
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PAGE 13
The following table (unaudited) sets forth the shareholders' equity transactions
for the nine months ended October 31, 1998: (Dollars In Millions)
Prfd Common
Stock Stock Add'l
Face Par Paid-In Retained
Value Value Capital Earnings Total
-------- -------- -------- -------- --------
Balance, January 31, 1998 $ 72.7 $ 159.9 $ 202.0 $ 729.4 $1,164.0
Net income - - - 297.3 297.3
Cash dividends:
Preferred - - - (3.5) (3.5)
Common - - - (28.5) (28.5)
Conversion of Series E
cumulative convertible
preferred stock into
common (31.5) 5.8 25.7 - -
Common stock repurchased - (11.4) (137.2) (155.8) (304.4)
Stock split - 158.9 (96.5) (62.4) -
Issuance of common
stock under stock
incentive plan - 1.0 9.3 - 10.3
Comprehensive income (loss) - - (3.3) (3.1) (6.4)
-------- -------- -------- -------- --------
Balance, October 31, 1998 $ 41.2 $ 314.2 $ - $ 773.4 $1,128.8
======== ======== ======== ======== ========
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.
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.
14
PAGE 14
These efforts have focused, and will continue to focus, 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 substantially complete with respect
to its IT systems and the Company has identified and inventoried those IT
systems which are critical to its operations. As of October 31, 1998, the
Company's effort to modify these IT technologies to address the Y2K issue is
progressing on schedule, with an estimated target completion date of June 1999.
The Company's mainframe operating system has already been remediated, tested and
determined to be compliant in a simulated Y2K environment. Ongoing validation
testing of this system will be performed during 1999. The Company's proprietary
software systems as well as those purchased or licensed from third parties are
undergoing remediation and validation testing and such testing will continue
during 1999. The remaining non-compliant IT technologies which have been
identified as being critical to the Company's operations are scheduled for
remediation, validation testing and, where necessary, contingency planning.
With respect to the Company's non-IT systems, the review and assessment phase is
in progress and the process of identifying and inventorying such technologies
continues on an ongoing basis. The Company has undertaken a program to modify or
replace such technologies where they are related to critical functions of the
Company and has estimated a target completion date of October 1999 for this
portion of the Y2K project plan.
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.
15
PAGE 15
COSTS ASSOCIATED WITH YEAR 2000 ISSUES
As of October 31, 1998, the Company has incurred approximately $7.2 million in
costs related to the Y2K project. The Company currently estimates that the
aggregate cost of the Y2K project will be approximately $13 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 aggregate cost estimate is based on the current assessment of the Y2K
project and is subject to change as the project progresses. The Company has not
deferred the implementation of any significant IT projects while addressing the
Y2K issue.
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 will not perform as expected during the Y2K transition, the Company
has begun to develop appropriate Y2K contingency plans, which plans will be
established and then revised as necessary during the course of 1999. 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.
FORWARD-LOOKING INFORMATION
- ---------------------------
Certain statements contained in this Report are forward-looking and involve a
number of risks and uncertainties. Among the factors that could cause actual
results to differ materially are the following: general economic conditions and
consumer demand and consumer preferences and weather patterns in the U.S.,
Canada and Europe, particularly the United Kingdom; competitive factors,
including continuing pressure from pricing and promotional activities of major
competitors; impact of excess retail capacity and the availability of desirable
store locations on suitable terms; the availability, selection and purchasing of
attractive merchandise on favorable terms; import risks, including potential
disruptions and duties, tariffs and quotas on imported merchandise, including
economic and political problems in countries from which merchandise is imported;
currency and exchange rate factors in the Company's foreign operations; risks in
the development of new businesses and application of the Company's off-price
strategies in foreign countries; acquisition and divestment activities; risks
and uncertainties relating to the Year 2000 issue described above; and other
factors that may be described in the Company's filings with the Securities and
Exchange Commission. The Company does not undertake to publicly update or revise
its forward-looking statements even if experience or future changes make it
clear that any projected results expressed or implied therein will not be
realized.
16
PAGE 16
PART II. Other Information
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 31, 1998.
17
PAGE 17
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: December 15, 1998
/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.
5
9-MOS
JAN-30-1999
OCT-31-1998
155,691,000
0
104,392,000
0
1,501,362,000
1,819,782,000
1,334,426,000
594,497,000
2,787,117,000
1,437,785,000
220,578,000
41,179,000
0
314,182,000
773,393,000
2,787,117,000
5,666,661,000
5,666,661,000
4,229,252,000
4,229,252,000
925,698,000
0
2,890,000
508,821,000
202,511,000
306,310,000
(9,048,000)
0
0
297,262,000
.93
.88
