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 July 29, 2000 Commission file number 1-4908 THE TJX COMPANIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-2207613 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 770 Cochituate Road Framingham, Massachusetts 01701 (Address of principal executive offices) (Zip Code) (508) 390-1000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . The number of shares of Registrant's common stock outstanding as of August 26, 2000: 281,276,898
2 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 29, JULY 31, 2000 1999 -------- -------- (As Restated) Net sales $2,258,174 $2,102,851 ---------- ---------- Cost of sales, including buying and occupancy costs 1,702,298 1,585,248 Selling, general and administrative expenses 364,474 330,481 Interest expense, net 5,074 1,964 ---------- ---------- Income before income taxes 186,328 185,158 Provision for income taxes 72,295 69,277 ---------- ---------- Net income $ 114,033 $ 115,881 ========== ========== Earnings per share: Net income: Basic $.39 $.37 Diluted $.39 $.36 Cash dividends declared per share $.04 $.035 The accompanying notes are an integral part of the financial statements.
3 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 29, JULY 31, 2000 1999 ---------- ------------ (As Restated) Net sales $4,366,290 $4,033,357 ---------- ---------- Cost of sales, including buying and occupancy costs 3,256,338 3,004,040 Selling, general and administrative expenses 702,431 641,157 Interest expense, net 7,827 1,230 ---------- ---------- Income before income taxes and cumulative effect of accounting change 399,694 386,930 Provision for income taxes 155,081 148,775 ---------- ---------- Income before cumulative effect of accounting change 244,613 238,155 Cumulative effect of accounting change, net of income taxes -- (5,154) ---------- ---------- Net income $ 244,613 $ 233,001 ========== ========== Earnings per share: Income before cumulative effect of accounting change: Basic $.83 $.75 Diluted $.83 $.74 Net income: Basic $.83 $.73 Diluted $.83 $.72 Cash dividends declared per share $.08 $.07 The accompanying notes are an integral part of the financial statements.
4 PAGE 4 THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES BALANCE SHEETS (UNAUDITED) IN THOUSANDS JULY 29, JANUARY 29, JULY 31, 2000 2000 1999 ----------- ----------- ----------- ASSETS (As Restated) - ------ Current assets: Cash and cash equivalents $ 39,400 $ 371,759 $ 47,187 Accounts receivable 57,411 55,461 54,370 Merchandise inventories 1,690,933 1,229,587 1,603,339 Prepaid expenses and other current assets 80,264 43,758 70,821 ----------- ----------- ----------- Total current assets 1,868,008 1,700,565 1,775,717 ----------- ----------- ----------- Property at cost: Land and buildings 121,705 116,005 115,064 Leasehold costs and improvements 672,476 622,962 590,641 Furniture, fixtures and equipment 899,156 849,932 775,443 ----------- ----------- ----------- 1,693,337 1,588,899 1,481,148 Less accumulated depreciation and amortization 834,223 754,314 685,967 ----------- ----------- ----------- 859,114 834,585 795,181 ----------- ----------- ----------- Other assets 70,372 55,826 47,273 Deferred income taxes, net 34,988 23,143 29,914 Goodwill and tradename, net of amortization 187,912 190,844 195,402 ----------- ----------- ----------- TOTAL ASSETS $ 3,020,394 $ 2,804,963 $ 2,843,487 =========== =========== =========== LIABILITIES Current liabilities: Short-term debt $ 297,384 $ -- $ 59,563 Current installments of long-term debt 185 100,359 100,535 Accounts payable 767,008 615,671 740,941 Accrued expenses and other current liabilities 617,073 607,348 582,828 Federal and state income taxes payable 21,449 42,990 22,056 ----------- ----------- ----------- Total current liabilities 1,703,099 1,366,368 1,505,923 ----------- ----------- ----------- Long-term debt exclusive of current installments: Promissory notes 19 73 203 General corporate debt 319,333 319,294 119,918 Commitments and contingencies SHAREHOLDERS' EQUITY Common stock, authorized 1,200,000,000 shares, par value $1, issued and outstanding 281,973,618; 299,979,363 and 315,989,375 shares 281,974 299,979 315,989 Accumulated other comprehensive income (loss) (1,943) (1,433) (1,268) Additional paid-in capital -- -- -- Retained earnings 717,912 820,682 902,722 ----------- ----------- ----------- Total shareholders' equity 997,943 1,119,228 1,217,443 ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,020,394 $ 2,804,963 $ 2,843,487 =========== =========== =========== The accompanying notes are an integral part of the financial statements.
5 PAGE 5 THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CASH FLOWS (UNAUDITED) IN THOUSANDS TWENTY-SIX WEEKS ENDED ------------------------ JULY 29, JULY 31, 2000 1999 ---------- ---------- (As Restated) Cash flows from operating activities: Net income $ 244,613 $ 233,001 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Cumulative effect of accounting change -- 5,154 Depreciation and amortization 82,825 75,962 (Gain) on sale of other assets (722) -- Loss on property disposals 475 4,717 Other, net 7,061 (19,579) Changes in assets and liabilities: (Increase) in accounts receivable (1,950) (10,250) (Increase) in merchandise inventories (461,346) (402,637) (Increase) in prepaid expenses and other current assets (44,745) (42,373) (Increase) in deferred income taxes (11,934) (4,950) Increase in accounts payable 151,337 123,782 (Decrease) in accrued expenses and other current liabilities (39,401) (30,794) (Decrease) in income taxes payable (21,541) (41,277) --------- --------- Net cash (used in) operating activities (95,328) (109,244) --------- --------- Cash flows from investing activities: Property additions (114,554) (116,242) Issuance of note receivable (11,602) -- Proceeds from sale of other assets 9,183 -- --------- --------- Net cash (used in) investing activities (116,973) (116,242) --------- --------- Cash flows from financing activities: Proceeds from borrowings of short-term debt 297,384 59,563 Principal payments on long-term debt (100,228) (389) Cash payments for repurchase of common stock (298,663) (244,794) Proceeds from sale and issuance of common stock, net 3,672 17,877 Cash dividends paid (22,223) (20,828) --------- --------- Net cash (used in) financing activities (120,058) (188,571) --------- --------- Net (decrease) in cash and cash equivalents (332,359) (414,057) Cash and cash equivalents at beginning of year 371,759 461,244 --------- --------- Cash and cash equivalents at end of period $ 39,400 $ 47,187 ========= ========= The accompanying notes are an integral part of the financial statements.
6 PAGE 6 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. On February 11, 2000, the Company adopted the provisions of the SEC's Staff Accounting Bulletin No. 101 related to layaway sales effective as of January 31, 1999. Accordingly, the Company restated its earnings for the first three quarters of the fiscal year ended January 29, 2000. The Company recorded a one-time, non-cash, after-tax charge of $5.2 million in the first quarter of fiscal 2000 for the cumulative effect of the accounting change. The prior periods presented in these Financial Statements have been restated and include the impact of the accounting change. 4. The Company's cash payments for interest and income taxes are as follows: TWENTY-SIX WEEKS ENDED ------------------------------- JULY 29, JULY 31, 2000 1999 -------- -------- (In Thousands) Cash paid for: Interest on debt $ 16,083 $ 8,893 Income taxes $186,564 $184,027 5. In October 1988, the Company completed the sale of its former Zayre Stores division to Ames Department Stores, Inc. ("Ames"). In April 1990, Ames filed for protection under Chapter 11 of the Federal Bankruptcy Code and in December 1992, Ames emerged from bankruptcy under a plan of reorganization. The Company remains contingently liable for the leases of most of the former Zayre stores still operated by Ames. The Company believes that the Company's contingent liability on these leases will not have a material effect on the Company's financial condition. The Company is also contingently liable on certain leases of its former warehouse club operations (BJ's Wholesale Club and HomeBase), which was spun off by the Company in fiscal 1990 as Waban Inc. During fiscal 1998, Waban Inc. was renamed HomeBase, Inc. and spun-off its BJ's Wholesale Club division (BJ's Wholesale Club, Inc.). HomeBase, Inc. and BJ's Wholesale Club, Inc. are primarily liable on their respective leases and have indemnified the Company for any amounts the Company may have to pay with respect to such leases. In addition, HomeBase, Inc., BJ's Wholesale Club, Inc. and the Company have entered into agreements under which BJ's Wholesale Club, Inc. has
7 PAGE 7 substantial indemnification responsibility with respect to such HomeBase, Inc. leases. The Company is also contingently liable on certain leases of BJ's Wholesale Club, Inc. for which both BJ's Wholesale Club, Inc. and HomeBase, Inc. remain liable. The Company believes that its contingent liability on the HomeBase, Inc. and BJ's Wholesale Club, Inc. leases will not have a material effect on the Company's financial condition. The Company is also contingently liable on certain store leases of its former Hit or Miss division which was sold by the Company in September 1995. 6. The Company's comprehensive income for the periods ended July 29, 2000 and July 31, 1999 is presented below: THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED ---------------------- ---------------------------- JULY 29, JULY 31, JULY 29, JULY 31, 2000 1999 2000 1999 ---------- ---------- -------- -------- (As Restated) (As Restated) (In Thousands) (In Thousands) Net income $ 114,033 $ 115,881 $ 244,613 $ 233,001 Other comprehensive income (loss): Foreign currency translation adjustment, net of hedging activity (396) (335) (643) 261 Reclassification adjustment of unrealized loss on marketable securities -- -- 133 -- --------- --------- --------- --------- Comprehensive income $ 113,637 $ 115,546 $ 244,103 $ 233,262 ========= ========= ========= ========= 7. The computation of basic and diluted earnings per share is as follows: THIRTEEN WEEKS ENDED ---------------------------- JULY 29, JULY 31, 2000 1999 -------- -------- (As Restated) (Dollars in thousands) (except per share amounts) Net income (Numerator in earnings per share calculation) $ 114,033 $ 115,881 Shares for basic and diluted earnings per share calculations: Average common shares outstanding for basic EPS 290,885,089 317,158,089 Dilutive effect of stock options and awards 1,780,567 3,292,786 ------------ ------------ Average common shares outstanding for diluted EPS 292,665,656 320,450,875 ============ ============ Net income: Basic earnings per share $ .39 $ .37 Diluted earnings per share $ .39 $ .36
8 PAGE 8 TWENTY-SIX WEEKS ENDED ---------------------------------- JULY 29, JULY 31, 2000 1999 -------- -------- (As Restated) (Dollars in thousands) (except per share amounts) Income before cumulative effect of accounting change (Numerator in earnings per share calculation) $ 244,613 $ 238,155 Net income (Numerator in earnings per share calculation) $ 244,613 $ 233,001 Shares for basic and diluted earnings per share calculations: Average common shares outstanding for basic EPS 294,583,185 319,436,817 Dilutive effect of stock options and awards 1,801,979 3,519,324 ------------ ------------ Average common shares outstanding for diluted EPS 296,385,164 322,956,141 ============ ============ Income before cumulative effect of accounting change: Basic earnings per share $ .83 $ .75 Diluted earnings per share $ .83 $ .74 Net income: Basic earnings per share $ .83 $ .73 Diluted earnings per share $ .83 $ .72 8. During March 2000, the Company completed its $750 million stock repurchase program and announced its intention to repurchase an additional $1 billion of common stock over several years. During the six months ended July 29, 2000, the Company repurchased 18.4 million shares at a cost of $346.7 million. Since the inception of the $1 billion stock repurchase program, the Company has repurchased 15.7 million shares at a cost of $293.5 million. 9. During July 2000 the Company entered into a $250 million, 364-day revolving credit agreement. This is in addition to the Company's existing $500 million revolving credit facility. The terms of the new agreement are substantially the same as those of the existing agreement, as amended. The additional facility will be available for general corporate purposes, including the Company's stock repurchase program.
9 PAGE 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION TWENTY-SIX WEEKS ENDED JULY 29, 2000 VERSUS TWENTY-SIX WEEKS ENDED JULY 31, 1999 All reference to earnings per share amounts are diluted earnings per share unless otherwise indicated. Results for the twenty-six weeks ended July 31, 1999 have been restated to reflect the change in accounting for layaway sales. Net sales for the second quarter were $2,258.2 million, up 7% from $2,102.8 million for the second quarter last year. For the twenty-six week period net sales were $4,366.3 million, up 8% from $4,033.4 for the same period last year. The increase in sales for both periods is attributable to an increase in same store sales and new stores. Same store sales for the thirteen weeks were flat at Marmaxx (T.J. Maxx and Marshalls), increased 8% at Winners, 9% at T.K. Maxx, 5% at HomeGoods and 19% at A.J. Wright. Same store sales for the twenty-six week period increased 1% at Marmaxx, 10% at Winners, 8% at T.K. Maxx, 7% at HomeGoods and 22% at A.J. Wright. Consolidated same store sales increased 1% and 2% for the thirteen and twenty-six week periods ended July 29, 2000, respectively. Unseasonably cold weather in the Northeast and Midwest throughout most of the six month period this year, most significantly in May and June, had a negative impact on the apparel sales of Marmaxx. Net income for the second quarter was $114.0 million, or $.39 per common share, versus $115.9 million, or $.36 per common share last year. For the twenty-six week period, income before cumulative effect of accounting change was $244.6 million, or $.83 per common share, versus $238.2 million, or $.74 per common share. After a $5.2 million after-tax charge for the cumulative effect of accounting change, net income for the twenty-six weeks ended July 31, 1999 was $233.0 million or $.72 per share. The following table sets forth operating results expressed as a percentage of net sales: PERCENTAGE OF NET SALES ----------------------- THIRTEEN TWENTY-SIX WEEKS ENDED WEEKS ENDED ------------------ ------------------ JULY 29, JULY 31, JULY 29, JULY 31, 2000 1999 2000 1999 -------- -------- -------- -------- (As Restated) (As Restated) Net sales 100.0% 100.0% 100.0% 100.0% ----- ----- ----- ----- Cost of sales, including buying and occupancy costs 75.4 75.4 74.6 74.5 Selling, general and administrative expenses 16.1 15.7 16.1 15.9 Interest expense, net .2 .1 .1 -- ----- ----- ----- ----- Income before income taxes and cumulative effect of accounting change 8.3% 8.8% 9.2% 9.6% ===== ===== ===== ===== Cost of sales including buying and occupancy costs as a percentage of net sales, remained constant for the quarter and increased slightly for the year-to-date period as compared to the comparable periods last year.
10 PAGE 10 Marmaxx's cost of sales, as a percentage of net sales remained constant with last year in both periods, reflecting good inventory management. Selling, general and administrative expenses as a percentage of net sales has increased over the comparable periods last year. This increase is primarily due to increased store payroll costs at Marmaxx as well as a moderation of the sales growth at this division. Interest expense, net, for the twenty-six weeks ended this year includes interest income of $8.2 million versus $8.0 million of interest income last year. For the thirteen weeks ended, interest income was $3.4 million this year versus $3.5 million last year. The increase in interest expense, net over the comparable period last year is due to interest on the $200 million of 7.45% notes issued in December 1999. The Company's effective income tax rate is 38.8% for both the three months and the six months ended July 29, 2000 versus 37.4% and 38.4% for comparable periods last year. Last year's effective tax rate included tax benefits associated with the TJX's Puerto Rico net operating loss carryforward. The following table sets forth the operating results of the TJX's major business segments: (unaudited) THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED -------------------------- ------------------------- JULY 29, JULY 31, JULY 29, JULY 31, 2000 1999 2000 1999 ---------- ----------- ----------- ----------- (As Restated) (As Restated) (In Thousands) (In Thousands) Net sales: Off-price family apparel stores $ 2,191,020 $ 2,059,924 $ 4,240,003 $ 3,952,157 Off-price home fashion stores 67,154 42,927 126,287 81,200 ----------- ----------- ----------- ----------- $ 2,258,174 $ 2,102,851 $ 4,366,290 $ 4,033,357 =========== =========== =========== =========== Operating income (loss): Off-price family apparel stores $ 203,515 $ 202,166 $ 429,299 $ 412,818 Off-price home fashion stores (445) (989) 643 (1,655) ----------- ----------- ----------- ----------- 203,070 201,177 429,942 411,163 General corporate expense 11,016 13,402 21,116 21,698 Goodwill amortization 652 653 1,305 1,305 Interest expense, net 5,074 1,964 7,827 1,230 ----------- ----------- ----------- ----------- Income before income taxes and cumulative effect of accounting change $ 186,328 $ 185,158 $ 399,694 $ 386,930 =========== =========== =========== =========== Some divisions are aggregated for segment reporting purposes. Presented below is a summary of additional operating statistics of TJX and its operating divisions:
11 PAGE 11 NET SALES OPERATING INCOME OPERATING MARGIN THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED ------------------------ ------------------------ --------------------------- JULY 29, JULY 31, JULY 29, JULY 31, JULY 29, JULY 31, U.S. DOLLARS IN MILLIONS 2000 1999 2000 1999 2000 1999 - ------------------------ -------- -------- -------- -------- -------- -------- (As Restated) (As Restated) (As Restated) TJX Consolidated $2,258.2 $2,102.8 $203.1 $201.2 9.0% 9.6% Marmaxx $1,955.5 $1,880.6 $191.0 $194.3 9.8% 10.3% Winners $ 131.4 $ 107.0 $ 15.4 $ 12.7 11.7% 11.9% T.K. Maxx $ 85.5 $ 61.7 $ .7 $ (1.0) .8% (1.6)% A.J. Wright $ 18.6 $ 10.6 $ (3.6) $ (3.8) (19.4)% (35.8)% HomeGoods $ 67.2 $ 42.9 $ (.4) $ (1.0) (.6)% (2.3)% NET SALES OPERATING INCOME OPERATING MARGIN TWENTY-SIX WEEKS ENDED TWENTY-SIX WEEKS ENDED TWENTY-SIX WEEKS ENDED ---------------------- ---------------------- ---------------------- JULY 29, JULY 31, JULY 29, JULY 31, JULY 29, JULY 31, U.S. DOLLARS IN MILLIONS 2000 1999 2000 1999 2000 1999 - ------------------------ -------- -------- -------- -------- -------- -------- (As Restated) (As Restated) (As Restated) TJX Consolidated $4,366.3 $4,033.4 $429.9 $411.2 9.8% 10.2% Marmaxx $3,801.9 $3,620.1 $409.3 $401.3 10.8% 11.1% Winners $ 248.4 $ 198.2 $ 28.5 $ 20.8 11.5% 10.5% T.K. Maxx $ 158.0 $ 117.8 $ (1.0) $ (2.6) (.6)% (2.2)% A.J. Wright $ 31.7 $ 16.1 $ (7.5) $ (6.7) (23.7)% (41.6)% HomeGoods $ 126.3 $ 81.2 $ .6 $ (1.6) .5% (2.0)% Stores in operation at the end of the period are as follows: JULY 29, 2000 JULY 31, 1999 ------------- ------------- T.J. Maxx 639 617 Marshalls 519 487 Winners 106 91 HomeGoods 60 39 T.K. Maxx 64 43 A.J. Wright 19 11 ----- ----- Total stores 1,407 1,288 ===== ===== FINANCIAL CONDITION Cash flows from operating activities for the six months reflect increases in inventories and accounts payable that are primarily due to normal seasonal requirements and are largely influenced by the change in inventory from year-end levels. Investing activities for the twenty-six weeks ended July 29, 2000 includes proceeds of $9.2 million from the sale of all of the shares of common stock of Manulife Financial. The shares were received by TJX as part of the demutualization of Manulife Financial in 1999. Investing activities also includes $11.6 million of advances under a construction loan agreement in connection with the expansion of TJX's leased home office facility.
12 PAGE 12 During July 2000 TJX entered into a $250 million 364-day revolving credit agreement. This is in addition to our existing $500 million revolving credit agreement. The additional credit facility will be available for general corporate purposes, including our stock repurchase program. As of July 29, 2000, we had aggregate short-term borrowings of $297.4 million under all of our credit lines, including $3.4 million from our Canadian facility. Financing activities also include principal payments of $100 million due to the maturity of the 6 5/8% unsecured notes. During March 2000, we completed our $750 million stock repurchase program and announced our intention to repurchase an additional $1 billion of common stock over several years. During the six months ended July 29, 2000, TJX repurchased 18.4 million shares at a total cost of $346.7 million. Since the inception of the $1 billion stock repurchase program, we have repurchased 15.7 million shares at a total cost of $293.5 million.
13 PAGE 13 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 6, 2000 (during the period covered by this report) was provided in the Company's Quarterly Report on Form 10-Q for the quarter ended April 29, 2000. Item 6(a) EXHIBITS 10.1 Amendment No. 2 (entered into as of June 23, 2000) to the Credit Agreement dated as of September 18, 1997 is filed herewith. Item 6(b) REPORTS ON FORM 8-K The Company did not file a current report on Form 8-K during the quarter ended July 29, 2000.
14 PAGE 14 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 11, 2000 /s/ Donald G. Campbell ---------------------------------- Donald G. Campbell, Executive Vice President - Finance, on behalf of The TJX Companies, Inc. and as Principal Financial and Accounting Officer of The TJX Companies, Inc.
15 EXHIBIT INDEX EXH. DESCRIPTION - ---- ----------- 10.1 Amendment No. 2 (entered into as of June 23, 2000) to the Credit Agreement dated as of September 18, 1997 is filed herewith.
1 Exhibit 10.1 CONFORMED COPY AMENDMENT NO. 2 TO CREDIT AGREEMENT This Amendment No. 2 (this "Amendment") is entered into as of June 23, 2000 by and among THE TJX COMPANIES, INC., a Delaware corporation (the "Borrower"), the financial institutions named herein (collectively, the "Lenders") and BANK ONE, NA (formerly The First National Bank of Chicago), as one of the Lenders and in its capacity as administrative agent (the "Administrative Agent") on behalf of itself and the other Lenders. RECITALS: WHEREAS, the Borrower, the Lenders and the Administrative Agent entered into that certain Credit Agreement dated as of September 18, 1997 among the Borrower, the financial institutions named therein, The First National Bank of Chicago (n/k/a Bank One, NA), as Administrative Agent, and the other agents and co-agents thereunder, as amended by that certain Amendment and Waiver No.1 dated as of December 17, 1997 (as previously amended and as further amended, modified, supplemented or restated, the "Credit Agreement"); WHEREAS, the Borrower has requested that the Administrative Agent and the Required Lenders amend the Credit Agreement as provided herein; and WHEREAS, the Required Lenders and the Administrative Agent are willing to amend the Credit Agreement as provided herein on the terms and conditions set forth herein, it being expressly understood that this Amendment shall in no event constitute a waiver by the Lenders or the Administrative Agent of any breach of the Credit Agreement or any of the Lenders' or the Administrative Agent's rights or remedies with respect thereto; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. DEFINED TERMS. Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to such terms in the Credit Agreement. 2. AMENDMENT TO CREDIT AGREEMENT. Upon the effectiveness of this Amendment in accordance with the provisions of SECTION 4 below, the Credit Agreement is hereby amended as follows: SECTION 6.16 of the Credit Agreement is hereby deleted in its entirety and replaced by the following: 6.16 MAXIMUM LEVERAGE RATIO. The Borrower shall not permit its Leverage Ratio to be greater than 75% as at the end of each fiscal quarter. The Leverage Ratio shall be calculated, in each case, determined as of the last day of each fiscal quarter based upon (A) for Funded Debt and Consolidated Net Worth, Funded Debt and Consolidated Net Worth as of the last day of each fiscal quarter
2 and (B) for Consolidated Rentals, the actual amount for the four-quarter period ending on such day. 3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as previously executed and as amended hereby, constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms. (b) Upon the effectiveness of this Amendment and after giving effect hereto, (i) the Borrower hereby reaffirms all covenants, representations and warranties made in the Credit Agreement as amended hereby, and agrees that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment and (ii) no Default or Unmatured Default has occurred and is continuing. 4. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective and be deemed effective as of the date hereof (the "Effective Date") if, and only if, the Administrative Agent shall have received each of the following: (a) duly executed originals of this Amendment from the Borrower and the Required Lenders; (b) such other documents, instruments and agreements as the Agent may reasonably request. 5. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT. (a) Upon the effectiveness of this Amendment pursuant to SECTION 4 hereof, on and after the Effective Date each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import and each reference to the Credit Agreement in each Loan Document shall mean and be a reference to the Credit Agreement as modified hereby. (b) Except as specifically waived or amended herein, all of the terms, conditions and covenants of the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of (a) any right, power or remedy of any Lender or the Administrative Agent under the Credit Agreement or any of the Loan Documents, or (b) any Default or Unmatured Default under the Credit Agreement. 6. CHOICE OF LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING 735 ILCS 105/5-1 ET SEQ. BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF 2
3 THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 7. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original and all of which taken together shall constitute one and the same agreement. 8. HEADINGS. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK] 3
4 IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders have executed this Amendment No. 2 as of the date first above written. THE TJX COMPANIES, INC. By: /s/ Mary B. Reynolds ------------------------------- Name: Mary B. Reynolds Title: Vice President - Finance Treasurer BANK ONE, NA (Main Office Chicago) (formerly The First National Bank of Chicago), as a Lender, as Administrative Agent, as Swing Line Lender and as an Issuing Lender By: /s/ John Runger ------------------------------- Name: John Runger Title: Senior Vice President FIRSTAR BANK, N.A. By: /s/ Kirk A. Porter ------------------------------- Name: Kirk A. Porter Title: Senior Vice President STANDARD CHARTERED BANK By: ------------------------------- Name: Title: Signature Page to Amendment No. 2 to Credit Agreement
5 CIBC WORLD MARKETS, CORP. By: /s/ Dominic Sorresso ------------------------------- Name: Dominic Sorresso Title: Executive Director AMSOUTH BANK By: /s/ Seth Butler ------------------------------- Name: Seth Butler Title: Corporate Bank Officer ABN AMRO BANK N.V. By: /s/ Cameron D. Gateman ------------------------------- Name: Cameron D. Gateman Title: Group Vice President By: /s/ Donald Sutton ------------------------------- Name: Donald Sutton Title: Vice President BANK OF AMERICA, N.A. By: /s/ Timothy H. Spanos ------------------------------- Name: Timothy H. Spanos Title: Managing Director FLEET NATIONAL BANK (formerly known as BankBoston, N.A.) By: /s/ Susan L. Pardus-Galland ------------------------------- Name: Susan L. Pardus-Galland Title: Director Signature Page to Amendment No. 2 to Credit Agreement
6 KEYBANK NATIONAL ASSOCIATION By: /s/ Francis W. Lutz, Jr. ------------------------------- Name: Francis W. Lutz, Jr. Title: Portfolio Officer MELLON BANK, N.A. By: /s/ Richard T. Schaich ------------------------------- Name: Richard J. Schaich Title: Vice President THE BANK OF NEW YORK By: /s/ Howard F. Bascom, Jr. ------------------------------- Name: Howard F. Bascom, Jr. Title: Vice President UNION BANK OF CALIFORNIA, N.A. By: /s/ Theresa L. Rocha ------------------------------- Name: Theresa L. Rocha Title: Vice President PNC BANK, N.A. By: /s/ Donald V. Davis ------------------------------- Name: Donald V. Davis Title: Vice President CITIZENS BANK OF MASSACHUSETTS By: Name: Title: Signature Page to Amendment No. 2 Credit Agreement
7 NATIONAL WESTMINSTER BANK PLC By: /s/ Andrew D. Hallett ------------------------------- Name: Andrew D. Hallett Title: Senior Corporate Manager THE CHASE MANHATTAN BANK By: /s/ Thomas F. Bundy, Jr. ------------------------------- Name: Thomas F. Bundy, Jr. Title: Vice President Signature Page to Amendment No. 2 Credit Agreement
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.5 6-MOS JAN-27-2001 JAN-30-2000 JUL-29-2000 1 39,400,000 0 57,411,000 0 1,690,933,000 1,868,008,000 1,693,337,000 834,223,000 3,020,394,000 1,703,099,000 319,352,000 0 0 281,974,000 715,969,000 3,020,394,000 4,366,290,000 4,366,290,000 3,256,338,000 3,256,338,000 702,431,000 0 7,827,000 399,694,000 155,081,000 244,613,000 0 0 0 244,613,000 0.83 0.83