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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
/X/ Quarterly Report under Section 13 and 15(d)
Of the Securities Exchange Act of 1934
Or
/ / Transition Report Pursuant to Section 13 and 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended October 30, 1999
Commission file number 1-4908
THE TJX COMPANIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2207613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
770 Cochituate Road
Framingham, Massachusetts 01701
(Address of principal executive offices) (Zip Code)
(508) 390-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
----- -----
The number of shares of Registrant's common stock outstanding as of October 30,
1999: 310,080,847
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PART I FINANCIAL INFORMATION
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
Thirteen Weeks Ended
-----------------------------
October 30, October 31,
1999 1998
----------- ----------
Net sales $2,257,094 $ 2,026,578
---------- -----------
Cost of sales, including buying and occupancy costs 1,659,885 1,480,501
Selling, general and administrative expenses 338,319 322,531
Interest expense, net 4,274 1,507
---------- -----------
Income before income taxes 254,616 222,039
Provision for income taxes 97,642 88,372
---------- -----------
Income from continuing operations before extraordinary item 156,974 133,667
(Loss) from discontinued operations, net of income taxes -- (9,048)
---------- -----------
Net income 156,974 124,619
Preferred stock dividends -- 978
---------- -----------
Net income available to common shareholders $ 156,974 $ 123,641
========== ===========
Earnings per share:
Income from continuing operations:
Basic $ .50 $ .42
Diluted $ .50 $ .40
Net income:
Basic $ .50 $ .39
Diluted $ .50 $ .38
Cash dividends per common share $ .035 $ .03
The accompanying notes are an integral part of the financial statements.
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PART I FINANCIAL INFORMATION
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
Thirty-Nine Weeks Ended
----------------------------
October 30, October 31,
1999 1998
----------- -----------
Net sales $6,307,822 $ 5,666,661
---------- -----------
Cost of sales, including buying and occupancy costs 4,674,496 4,229,252
Selling, general and administrative expenses 979,476 925,698
Interest expense, net 5,504 2,890
---------- -----------
Income before income taxes 648,346 508,821
Provision for income taxes 249,031 202,511
---------- -----------
Income from continuing operations before extraordinary item 399,315 306,310
(Loss) from discontinued operations, net of income taxes -- (9,048)
---------- -----------
Net income 399,315 297,262
Preferred stock dividends -- 3,466
---------- -----------
Net income available to common shareholders $ 399,315 $ 293,796
========== ===========
Earnings per share:
Income from continuing operations:
Basic $ 1.26 $ .96
Diluted $ 1.24 $ .91
Net income:
Basic $ 1.26 $ .93
Diluted $ 1.24 $ .88
Cash dividends per common share $ .105 $ .09
The accompanying notes are an integral part of the financial statements.
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THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
IN THOUSANDS
October 30, January 30, October 31,
1999 1999 1998
----------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 24,561 $ 461,244 $ 155,691
Accounts receivable 114,315 67,345 104,392
Merchandise inventories 1,638,764 1,186,068 1,501,362
Prepaid expenses and other current assets 75,001 28,448 58,337
----------- ----------- -----------
Total current assets 1,852,641 1,743,105 1,819,782
----------- ----------- -----------
Property, at cost:
Land and buildings 115,757 115,485 115,726
Leasehold costs and improvements 612,367 547,099 541,426
Furniture, fixtures and equipment 819,213 711,320 677,274
----------- ----------- -----------
1,547,337 1,373,904 1,334,426
Less accumulated depreciation and amortization 723,397 617,302 594,497
----------- ----------- -----------
823,940 756,602 739,929
Other assets 50,335 27,436 20,592
Deferred income taxes 29,850 22,386 7,072
Goodwill and tradename, net of amortization 193,981 198,317 199,742
----------- ----------- -----------
TOTAL ASSETS $ 2,950,747 $ 2,747,846 $ 2,787,117
=========== =========== ===========
LIABILITIES
Current liabilities:
Short-term debt $ 108,000 $ -- $ --
Current installments of long-term debt 100,510 694 22,618
Accounts payable 747,043 617,159 709,302
Accrued expenses and other current liabilities 599,507 624,801 622,731
Federal and state income taxes payable 73,592 64,192 83,134
----------- ----------- -----------
Total current liabilities 1,628,652 1,306,846 1,437,785
----------- ----------- -----------
Long-term debt exclusive of current installments:
Promissory notes 159 433 670
General corporate debt 119,922 219,911 219,908
SHAREHOLDERS' EQUITY
Preferred stock at face value, authorized 5,000,000 shares,
par value $1, issued and outstanding cumulative
convertible stock of 411,790 shares of 7% Series E
at October 31, 1998 -- -- 41,179
Common stock, authorized 1,200,000,000 shares,
par value $1, issued and outstanding
310,080,847; 322,140,770 and 314,181,999 shares 310,081 322,141 314,182
Accumulated other comprehensive income (loss) (1,480) (1,529) (3,146)
Additional paid-in capital -- -- --
Retained earnings 893,413 900,044 776,539
----------- ----------- -----------
Total shareholders' equity 1,202,014 1,220,656 1,128,754
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,950,747 $ 2,747,846 $ 2,787,117
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
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THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
Thirty-Nine Weeks Ended
-----------------------------
October 30, October 31,
1999 1998
----------- ----------
Cash flows from operating activities:
Net income $ 399,315 $ 297,262
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from discontinued operations -- 9,048
Depreciation and amortization 115,811 100,329
Loss on sale of other assets -- 659
Property disposals 5,776 840
Other, net (24,571) 200
Changes in assets and liabilities:
(Increase) in accounts receivable (46,970) (43,657)
(Increase) in merchandise inventories (452,696) (311,192)
(Increase) in prepaid expenses and other current assets (46,650) (30,980)
Increase in accounts payable 129,884 126,511
Increase (decrease) in accrued expenses and other
current liabilities (25,294) 54,057
Increase in income taxes payable 9,400 25,271
(Decrease) in deferred income taxes (7,425) (4,410)
--------- ---------
Net cash provided by operating activities 56,580 223,938
--------- ---------
Cash flows from investing activities:
Property additions (182,470) (152,312)
Proceeds from sale of other assets -- 8,338
--------- ---------
Net cash (used in) investing activities (182,470) (143,974)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings of short-term debt 108,000 --
Principal payments on long-term debt (458) (1,199)
Common stock repurchased (405,584) (304,376)
Proceeds from sale and issuance of common stock, net 20,326 8,869
Cash dividends (33,077) (31,936)
--------- ---------
Net cash (used in) financing activities (310,793) (328,642)
--------- ---------
Net (decrease) in cash and cash equivalents (436,683) (248,678)
Cash and cash equivalents at beginning of year 461,244 404,369
--------- ---------
Cash and cash equivalents at end of period $ 24,561 $ 155,691
========= =========
The accompanying notes are an integral part of the financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the first nine months are not necessarily indicative of
results for the full fiscal year, because the Company's business, in common
with the businesses of retailers generally, is subject to seasonal
influences, with higher levels of sales and income generally realized in
the second half of the year.
2. The preceding data are unaudited and reflect all normal recurring
adjustments, the use of retail statistics, and accruals and deferrals among
periods required to match costs properly with the related revenue or
activity, considered necessary by the Company for a fair presentation of
its financial statements for the periods reported, all in accordance with
generally accepted accounting principles and practices consistently
applied.
3. The Company's cash payments for interest expense and income taxes are as
follows:
Thirty-Nine Weeks Ended
--------------------------------------
October 30, October 31,
1999 1998
----------- --------------
(In Thousands)
Cash paid for:
Interest on debt $ 10,975 $ 13,506
Income taxes $235,812 $185,578
4. In October 1988, the Company completed the sale of its former Zayre Stores
division to Ames Department Stores, Inc. ("Ames"). In April 1990, Ames
filed for protection under Chapter 11 of the Federal Bankruptcy Code and in
December 1992, Ames emerged from bankruptcy under a plan of reorganization.
The Company remains contingently liable for the leases of most of the
former Zayre stores still operated by Ames. The Company believes that the
Company's contingent liability on these leases will not have a material
effect on the Company's financial condition.
The Company is also contingently liable on certain leases of its former
warehouse club operations (BJ's Wholesale Club and HomeBase), which was
spun off by the Company in fiscal 1990 as Waban Inc. During fiscal 1998,
Waban Inc. was renamed HomeBase, Inc. and spun-off its BJ's Wholesale Club
division (BJ's Wholesale Club, Inc.). HomeBase, Inc., and BJ's Wholesale
Club, Inc. are primarily liable on their respective leases and have
indemnified the Company for any amounts the Company may have to pay with
respect to such leases. In addition, HomeBase, Inc., BJ's Wholesale Club,
Inc. and the Company have entered into agreements under which BJ's
Wholesale Club, Inc. has substantial indemnification responsibility with
respect to such HomeBase, Inc. leases. The Company is also contingently
liable on certain leases of BJ's Wholesale Club, Inc. for which both BJ's
Wholesale Club, Inc. and HomeBase, Inc. remain liable. The Company believes
that its contingent liability on the HomeBase, Inc. and BJ's Wholesale
Club, Inc. leases will not have a material effect on the Company's
financial condition.
The Company is also contingently liable on certain store leases of its
former Hit or Miss division which was sold by the Company in September
1995. During the third quarter ended October 31, 1998, the Company
increased its reserve for its discontinued operations by $15 million ($9
million after-tax), primarily for potential lease liabilities relating to
guarantees on leases of its former Hit or Miss
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division. The after-tax cost of $9 million, or $.02 per diluted share, was
recorded as a loss from discontinued operations.
5. On November 18, 1998, all outstanding shares of Series E cumulative
convertible preferred stock were mandatorily converted into common stock in
accordance with its terms.
6. The Company's comprehensive income for the periods ended October 30, 1999
and October 31, 1998 is presented below: (Dollars in thousands)
13 Weeks Ended 39 Weeks Ended
----------------------------- -----------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Net income $ 156,974 $ 124,619 $ 399,315 $ 297,262
Other comprehensive income (loss):
Foreign currency translation adjustment,
net of hedging activity (154) (436) 107 (1,134)
Unrealized gains (losses) on marketable
securities, including reclassification
adjustments (58) (848) (58) (5,328)
--------- --------- --------- ---------
Comprehensive income $ 156,762 $ 123,335 $ 339,364 $ 290,800
========= ========= ========= =========
7. The computation of basic and diluted earnings per share is as follows:
Thirteen Weeks Ended
-------------------------------
October 30, October 31,
1999 1998
----------- -----------
($'s in thousands except per share amounts)
Income from continuing operations
(Numerator in diluted calculation) $ 156,974 $ 133,667
Less preferred dividends -- 978
------------ ------------
Income from continuing operations available to
common shareholders (Numerator in basic calculation) $ 156,974 $ 132,689
============ ============
Net income (Numerator in diluted calculation) $ 156,974 $ 124,619
Less preferred dividends -- 978
------------ ------------
Net income available to common shareholders
(Numerator in basic calculation) $ 156,974 $ 123,641
============ ============
Shares for basic and diluted earnings per share calculations:
Average common shares outstanding for basic EPS 313,297,756 313,930,546
Dilutive effect of stock options and awards 3,015,253 5,098,933
Dilutive effect of convertible preferred stock -- 12,737,200
------------ ------------
Average common shares outstanding for diluted EPS 316,313,009 331,766,679
============ ============
Income from continuing operations:
Basic earnings per share $ .50 $ .42
Diluted earnings per share $ .50 $ .40
Net income:
Basic earnings per share $ .50 $ .39
Diluted earnings per share $ .50 $ .38
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Thirty-Nine Weeks Ended
-------------------------------
October 30, October 31,
1999 1998
----------- -----------
($'s in thousands except per share amounts)
Income from continuing operations
(Numerator in diluted calculation) $ 399,315 $ 306,310
Less preferred dividends -- 3,466
------------ ------------
Income from continuing operations available to
common shareholders (Numerator in basic calculation) $ 399,315 $ 302,844
============ ============
Net income (Numerator in diluted calculation) $ 399,315 $ 297,262
Less preferred dividends -- 3,466
------------ ------------
Net income available to common shareholders
(Numerator in basic calculation) $ 399,315 $ 293,796
============ ============
Shares for basic and diluted earnings per share calculations:
Average common shares outstanding for basic EPS 317,390,461 316,877,003
Dilutive effect of stock options and awards 3,441,890 5,713,233
Dilutive effect of convertible preferred stock -- 14,074,348
------------ ------------
Average common shares outstanding for diluted EPS 320,832,351 336,664,584
============ ============
Income from continuing operations:
Basic earnings per share $ 1.26 $ .96
Diluted earnings per share $ 1.24 $ .91
Net income:
Basic earnings per share $ 1.26 $ .93
Diluted earnings per share $ 1.24 $ .88
8. During October 1998, the Company completed its second $250 million stock
repurchase program and announced its intentions to repurchase an additional
$750 million of common stock over several years. During the nine months
ended October 30, 1999, the Company repurchased 13.4 million shares at a
cost of $405.6 million. Since the inception of the $750 million stock
repurchase program, the Company has repurchased 17.6 million shares at a
cost of $501.1 million.
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9. During the second quarter the Company entered into a new lease agreement
for the expansion of its corporate offices and amended the existing leases
on the same property. The new lease has an initial term, which expires on
December 31, 2015, and the existing lease agreements have been extended
through December 31, 2010. Rental payments on the new expansion are
expected to commence in the first quarter of fiscal 2002, and will be
accounted for as a capital lease.
10. During the third quarter the Company received 693,537 common shares of
Manulife Financial with whom the Company has held a number of life
insurance policies for many years. The shares issued reflect ownership
interest in the demutualized insurer due to policies held by the Company.
These securities were recorded at market value upon receipt resulting in an
$8.5 million pre-tax gain in the third quarter. Subsequent to the receipt
of the shares, unrealized gains and losses are recognized as a component of
comprehensive income (loss), net of income taxes.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Thirty-Nine Weeks Ended
October 30, 1999
VERSUS THIRTY-NINE WEEKS ENDED OCTOBER 31, 1998
All reference to earnings per share amounts are diluted earnings per share
unless otherwise indicated.
Net sales from continuing operations for the third quarter were $2,257.1
million, up 11% from $2,026.6 million last year. For the nine months, net sales
from continuing operations were $6,307.8 million, up 11% from $5,666.7 million
for the same period last year. The increase in sales is attributable to an
increase in same store sales and new stores. Same store sales for the thirteen
weeks increased 5% at Marmaxx (T.J. Maxx and Marshalls), 7% at Winners, 8% at
T.K. Maxx and 17% at HomeGoods. Same store sales for the nine months increased
by 5% at Marmaxx, 8% at Winners, 14% at T.K. Maxx and 14% at HomeGoods.
Income from continuing operations for the third quarter was $157.0 million, or
$.50 per common share, versus $133.7 million, or $.40 per common share. For the
nine months ended October 30, 1999, income from continuing operations was $399.3
million, or $1.24 per common share versus $306.3 million or $.91 per common
share. After a $9 million after-tax charge for contingent lease obligations
relating to discontinued operations, net income for the third quarter and nine
months ended October 31, 1998 was $124.6 million, or $.38 per common share, and
$297.3 million, or $.88 per common share respectively.
The following table sets forth operating results expressed as a percentage of
net sales (continuing operations):
Percentage of Net Sales
----------------------------------------------
13 Weeks Ended 39 Weeks Ended
--------------------- -------------------
10/30/99 10/31/98 10/30/99 10/31/98
-------- -------- -------- --------
Net sales 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Cost of sales, including buying and occupancy costs 73.5 73.1 74.1 74.6
Selling, general and administrative expenses 15.0 15.9 15.5 16.3
Interest expense, net .2 .1 .1 .1
----- ----- ----- -----
Income before income taxes 11.3% 10.9% 10.3% 9.0%
===== ===== ===== =====
The cost of sales including buying and occupancy costs as a percentage of net
sales, increased for the third quarter ended October 1999, but decreased for the
nine months ended October 1999 as compared to the comparable periods last year.
These results are largely due to Marmaxx's merchandise margin which was lower
than the prior year's third quarter, but showed improvement over the prior year
on a year-to-date basis.
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Selling, general and administrative expenses, as a percentage of net sales,
decreased from the prior year. This improvement in both the thirteen and
thirty-nine week periods, primarily reflects the benefits of the Company's sales
growth and a net reduction in certain corporate expenses, as discussed on page
12.
Interest expense, net, includes income of $.5 million in the third quarter and
$8.5 million in the first nine months of the current year, versus $4.1 million
and $15.0 million of interest income in the third quarter and nine months ended
last year.
During the third quarter, the Company and its Chief Executive Officer entered
into an agreement whereby the executive waived his right to benefits under the
Company's Supplemental Executive Retirement Plan (SERP) in exchange for the
Company's funding of a split dollar life insurance policy. During the third
quarter ended October 30, 1999, the Company recognized a pre-tax charge of $1.6
million (recorded in general corporate expense) as well as an increase of $2.2
million in the tax provision to reverse the deferred tax asset associated with
the SERP plan. This after-tax cost of $3.8 million will be offset in future
years by after-tax income associated with the split dollar policy. This benefit
exchange was designed so that the ultimate after-tax cash expenditures by the
Company on the split dollar policy equals the after-tax cash expenditures the
Company would have incurred under the SERP.
The Company's effective income tax rate is 38.3% and 38.4% for the three months
and nine months ended October 30, 1999, versus 39.8% for the comparable periods
last year. The additional third quarter tax cost of $2.2 million associated with
the Chief Executive Officer's benefit exchange (described above) was offset by
additional anticipated tax benefits attributable to the Company's Puerto Rico
net operating loss carry forward. The tax benefit attributable to the Company's
Puerto Rico net operating loss carry forward is the primary reason for the
reduction in the effective income tax rates as compared to the periods ended
October 31, 1998.
The following table sets forth the operating results of the Company's major
business segments: (unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
----------------------------- -----------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
(In Thousands)
Net sales:
Off-price family apparel stores $2,204,140 $ 1,994,782 $6,173,668 $ 5,582,666
Off-price home fashion stores 52,954 31,796 134,154 83,995
---------- ----------- ---------- -----------
$2,257,094 $ 2,026,578 $6,307,822 $ 5,666,661
========== =========== ========== ===========
Operating income (loss):
Off-price family apparel stores $ 261,225 $ 234,040 $ 680,843 $ 558,871
Off-price home fashion stores 2,041 (589) 386 (5,091)
---------- ----------- ---------- -----------
263,266 233,451 681,229 553,780
General corporate expense 3,724 9,253 25,422 40,112
Goodwill amortization 652 652 1,957 1,957
Interest expense, net 4,274 1,507 5,504 2,890
---------- ----------- ---------- -----------
Income before income taxes $ 254,616 $ 222,039 $ 648,346 $ 508,821
========== =========== ========== ===========
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The off-price family apparel stores segment, which includes T.J. Maxx,
Marshalls, Winners, T.K. Maxx and A.J. Wright, significantly increased operating
income over the comparable periods last year. These increases reflect strong
inventory management and strong sales in the current periods on top of strong
gains in the prior year periods. General corporate expense decreased from the
prior year as the periods ended October 1999 include a pre-tax gain of $8.5
million associated with the Company's receipt of common stock resulting from the
demutualization of Manulife while last year's nine month period included a $5.5
million charge for the write-off of the Hit or Miss note receivable. In
addition, last year's nine month period includes a charge of $4 million, versus
$1 million in the same period this year, for charges associated with a deferred
compensation award granted to the Company's Chief Executive Officer in the first
quarter of fiscal 1998. This award, initially denominated in shares of the
Company's common stock, has now been fully allocated to other investment
options, at the election of the executive.
Stores in operation at the end of the period are as follows:
October 30, 1999 October 31, 1998
---------------- ----------------
T.J. Maxx 625 600
Marshalls 498 471
Winners 99 87
HomeGoods 46 31
T.K. Maxx 53 39
A.J. Wright 11 5
----- -----
Total stores 1,332 1,233
===== =====
FINANCIAL CONDITION
Cash flows from operating activities for the nine months reflect increases in
inventories and accounts payable that are primarily due to normal seasonal
requirements and are largely influenced by the change in inventory from year-end
levels. Operating cash flows for the period ending October 30, 1999, reflects
the Company's purchase of investments intended to offset obligations associated
with certain deferred compensation plans and a reduction in accrued expenses
from year-end levels versus an increase in accrued expenses for the same period
last year.
During October 1998, the Company completed its second $250 million stock
repurchase program and announced its intention to repurchase an additional $750
million of common stock over several years. During the nine months ended October
30, 1999, the Company repurchased 13.4 million shares at a cost of $405.6
million. Since the inception of the $750 million stock repurchase program, the
Company has repurchased 17.6 million shares at a cost of $501.1 million. The
stock repurchase activity during the first nine months of the current fiscal
year resulted in the Company borrowing $108 million under its revolving credit
agreement.
THE YEAR 2000 ISSUE
The following paragraphs relating to the Year 2000 issue also are designated a
Year 2000 Readiness Disclosure within the meaning of the Year 2000 Information
and Readiness Disclosure Act.
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The operations of the Company rely on various computer technologies which, as is
true of many companies, may be affected by what is commonly referred to as the
Year 2000 ("Y2K") issue. To address this matter, in October 1995, the Company
began to evaluate whether its computer resources would be able to recognize and
accept date sensitive information before and after the arrival of the Year 2000.
A failure of these technologies to recognize and process such information could
create an adverse impact on the operations of the Company.
In connection with its Y2K evaluation, the Company established a Company-wide
Y2K project team to review and assess the Y2K readiness of its computer
technologies in each business area, and to remediate, validate and, where
necessary, develop contingency plans to enable these technologies to effect a
smooth transition to the Year 2000 and beyond.
These efforts have focused on: (1) the Company's information technology systems
in the form of hardware and software (so-called "IT" systems), such as
mainframes, client/server systems, personal computers, proprietary software and
software purchased or licensed from third parties, upon which the Company relies
for its retail functions, such as merchandise procurement and distribution,
point-of-sale information systems and inventory control; (2) the Company's
embedded computer technologies (so-called "non-IT" systems), such as materials
handling equipment, telephones, elevators, climate control devices and building
security systems; and (3) the IT and non-IT systems of third parties with whom
the Company has commercial relationships to support its daily operations, such
as those of banks, credit card processors, payroll services, telecommunications
services, utilities and merchandise vendors.
THE COMPANY'S STATE OF READINESS
The Company's review and assessment phase is complete with respect to its IT
systems and the Company has identified and inventoried those IT systems which
are critical to its operations. The Company's effort to modify these IT
technologies to address the Y2K issue is essentially complete with minor final
installation and testing to be completed during November and December, 1999. The
Company's mainframe operating system has already been remediated, tested and
determined to be compliant in a simulated Y2K environment. The Company's
proprietary software systems as well as those purchased or licensed from third
parties have been remediated.
With respect to the Company's non-IT systems, the review and assessment phase is
complete and the Company has identified and inventoried such technologies. The
Company has undertaken a program to modify or replace such technologies where
they are related to critical functions of the Company, this portion of the Y2K
project plan is substantially complete.
With respect to the IT and non-IT systems of critical third party providers, the
Company has already communicated with these parties to obtain assurances
regarding their respective Y2K remediation efforts. While the Company expects
such third parties to address the Y2K issue based on the representations it has
received to date, the Company cannot guarantee that these systems will be made
Y2K compliant in a timely manner or that the Company will not experience a
material adverse effect as a result of such non-compliance.
COSTS ASSOCIATED WITH YEAR 2000 ISSUES
As of October 30, 1999, the Company has incurred $12.2 million in costs related
to the Y2K project. The Company currently estimates that the aggregate cost of
the Y2K project will be approximately $12.5 million, which cost is being
expensed as incurred. The Company's Y2K costs are primarily for the cost of
internal and third party programming for remediation and testing. All of these
costs have been or are expected to be funded through operating cash flows. The
Company has not deferred the implementation of any significant IT projects while
addressing the Y2K issue.
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CONTINGENCY PLANS
The Company believes that the IT and non-IT technologies which support its
critical functions will be ready for the transition to the Year 2000. There can
be no assurance, however, that similar unresolved issues for key commercial
partners (including utilities, financial services, building services and
transportation services) will not cause an adverse effect on the Company. To
address these risks, and to address the risk that its own IT and non-IT
technologies may not perform as expected during the Y2K transition, the Company
has established contingency plans to address problems that may affect store
operations, distribution, banking and administration. These plans cannot cover
all situations, but should allow the Company to continue operating if there are
isolated power outages or computer failures due to the year 2000 issue. The
plans include, where appropriate, arrangements for alternative power supplies,
backup computer resources and manual intervention. Although the Company believes
that its efforts to address the Y2K issue will be sufficient to avoid a material
adverse impact on the Company, there can be no assurance that these efforts will
be fully effective.
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PART II. OTHER INFORMATION
Item 6(a) EXHIBITS
10.1 The Agreement and the form of the related Split Dollar Agreements,
dated October 28, 1999, between the Company and Bernard Cammarata
are filed herewith.
Item 6(b) REPORTS ON FORM 8-K
The Company was not required to file a current report on Form 8-K
during the quarter ended October 30, 1999.
16
PAGE 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE TJX COMPANIES, INC.
---------------------------------------------
(Registrant)
Date: November 29, 1999
/s/ Donald G. Campbell
---------------------------------------------
Donald G. Campbell, Executive Vice President -
Finance, on behalf of The TJX Companies, Inc.
and as Principal Financial and Accounting
Officer of The TJX Companies, Inc.
1
AGREEMENT
This Agreement dated this October 28, 1999 by and between The TJX
Companies, Inc. (the "Corporation") and Bernard Cammarata ("Executive").
WHEREAS Executive and the Corporation have agreed to enter into a so-called
"Split dollar" insurance arrangement more particularly described below under
which the Corporation will pay premiums to fund a life insurance policy or
policies to be owned by insurance trusts designated by Executive (the "Trusts");
and
WHEREAS Executive participates in the Corporation's Supplemental Executive
Retirement Plan ("SERP") and continues to accrue a benefit under SERP; and
WHEREAS Executive has agreed to relinquish such rights as he has to
benefits heretofore accrued under SERP and to any future accruals under SERP,
subject to the terms of this Agreement;
NOW, THEREFORE, the parties hereto, intending to be bound hereby, agree as
follows:
1. Executive agrees to relinquish such rights as he has (whether under the
terms of SERP or under the terms of Executive's employment agreement with the
Corporation or otherwise) to any and all benefits heretofore earned by Executive
under SERP and further agrees that he shall forthwith cease to participate in
SERP and shall earn no future benefits thereunder. Nothing in this Agreement
shall affect Executive's rights to other retirement benefits.
2. The Corporation will assist the Trusts in the purchase of split-dollar
life insurance under the terms of separate split-dollar life insurance
agreements in the forms attached hereto as Exhibit A.
3. At the one-year anniversary of Executive's retirement, there shall be
calculated the present value as of October 29, 1999 (the "Present Value"), using
a 6% annual rate of interest as the discount factor between October 29, 1999
and such one-year anniversary, of the sum of (i) the monthly SERP payments that
Executive would (but for this Agreement) have been entitled to receive following
retirement and prior to such one-year anniversary, expressed as a single life
annuity, and (ii) the remaining SERP benefit that Executive would (but for this
Agreement) have been entitled to receive at such one-year anniversary, expressed
as a lump sum, in each case determined under the terms of SERP as then in
effect. If the Present Value is less than $7,370,667, Executive shall promptly
pay the difference to the Corporation in a single cash payment. If the Present
Value is greater than $7,370,667, the Corporation shall promptly pay the
difference, net of applicable tax withholdings, to Executive in a single cash
payment.
2
4. This Agreement shall be binding on Executive, the Corporation, and their
respective heirs and assigns, including any successor to the Corporation or the
Corporation's business by merger or otherwise.
5. Executive acknowledges that he has been separately advised with respect
to the arrangements that are the subject matter of this Agreement and has not
relied upon any advice from the Corporation with respect to the tax treatment of
such arrangements or other matters pertaining thereto. Executive agrees to
indemnify the Corporation for, and hold it harmless against, any and all taxes
(including, without limitation, withholding taxes) and related interest and
penalties that may be asserted against the Corporation with respect to the
arrangements contemplated by this Agreement.
6. This Agreement shall be construed and applied in accordance with the
laws of the Commonwealth of Massachusetts and shall be binding in accordance
with its terms as an agreement under seal.
THE TJX COMPANIES, INC.
/s/ Donald G. Campbell
By:____________________________________________
Donald G. Campbell
Executive Vice President/Chief Financial Officer
ACCEPTED:
/s/ Bernard Cammarata
______________________
Bernard Cammarata
-2-
3
FORM OF
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT made and entered into as of this 28th day of October, 1999,
by and among The TJX Companies, Inc., (the "Corporation"), Bernard Cammarata,
(the "Employee"), and Richard Lesser, Trustee of the Bernard Cammarata 1999-
Irrevocable Insurance Trust dated October 20, 1999 (the "Owner"),
WITNESSETH THAT:
WHEREAS the Employee is employed by the Corporation; and
WHEREAS the Employee and the Corporation have agreed that the Owner will
purchase life insurance policies (together, the "Policies") on the life of the
Employee as described in EXHIBIT A attached hereto and by this reference made a
part of hereof, and which were issued by John Hancock and Security Life of
Denver (the "Insurers"), on the terms described herein; and
WHEREAS the Corporation has agreed to pay a portion of the premiums due on
the Policies pursuant to the Plan on the terms and conditions hereinafter set
forth; and
WHEREAS, except as provided herein, Owner is the owner of the Policies and,
as such, possesses all incidents of ownership in and to the Policies, subject
however to the terms of this Agreement and
WHEREAS the parties hereto have agreed that the Policies shall be
collaterally assigned to the Corporation by the Owner to secure the repayment of
the amounts to which the Corporation is entitled under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto agree as follows:
1. PURCHASE OF POLICIES. The Owner shall purchase the Policies described
in Exhibit A from the Insurer. The parties have taken all necessary action to
cause the Insurers to issue the Policies and shall take any further action which
may be necessary to cause the Policies to conform to the provision of this
Agreement. The parties agree that the Policies shall be subject to the terms and
conditions of this Agreement and of the collateral assignments (the "Collateral
Assignments") filed with the Insurers relating to the Policies.
2. OWNERSHIP OF POLICIES.
a. The Owner shall be owner of the Policies and may exercise all
ownership rights granted to the owner thereof by the terms of the Policies,
subject in the case of each Policy to the Collateral Assignment relating to that
Policy and to the rights of the Corporation under this Agreement.
4
3. PAYMENT OF PREMIUMS WHILE THE SPLIT DOLLAR AGREEMENT REMAINS IN
EFFECT.
a. A portion of the premiums shall be payable by the Corporation
commencing with the premium due for the first "Policy Year", as hereinafter
defined, and for each of the next four (4) Policy Years thereafter, unless this
Agreement sooner terminates with respect to the Employee. The amount of the
premium for the Corporation for each Policy Year (hereinafter referred to as the
"Corporation's Premiums") shall be as set forth in EXHIBIT B which is attached
hereto and by this reference made a part hereof. For purposes of this Agreement,
"Policy Year" shall mean the one year period beginning October 1, 1999, and
ending September 30, 2000, and each succeeding twelve month period that the
Policy is in force.
b. The Owner shall pay that portion of the premium specified as
"Owner's Premium" in Exhibit B.
c. The Corporation shall be responsible only for the payment of the
Corporation's Premium, and is not responsible for ensuring that such payments
are sufficient to maintain the Policy in force.
d. Upon payment of each of the premiums as outlined on Exhibit B,
the Owner shall direct the Insurer(s) to allocate the premiums as outlined by
the Investment Guidelines as set forth in Exhibit C which is attached hereto and
by this reference made a part hereof.
4. COLLATERAL ASSIGNMENT. To secure the repayment to the Corporation of
the aggregate premiums paid by the Corporation, the Owner has, by Collateral
Assignment of the date herewith, assigned each Policy to the Corporation as
collateral. Such repayment shall be made from the cash surrender value of the
Policy (as defined therein) if this Agreement is terminated or if the Owner
surrenders or cancels the Policy, or from the death proceeds of the Policy if
the Employee dies while the Policy and this Agreement remain in force. The
Collateral Assignments shall not be terminated, altered or amended by the Owner
while this Agreement is in effect without the Corporation's written consent. The
parties hereto agree to take all action necessary to cause the Collateral
Assignments to conform to the provisions of this Agreement.
5. LIMITATIONS ON OWNER'S RIGHTS IN POLICY.
a. The Owner shall take no action with respect to the Policies that
would in any way compromise, jeopardize or otherwise adversely affect the
Corporation's rights under this Agreement.
5
6. COLLECTION OF DEATH PROCEEDS.
a. Upon the death of the Employee, the Corporation and the Owner
shall cooperate to take all action necessary to obtain the death benefits
provided under the Policies.
b. The Corporation shall have the unqualified right to receive the
portion of such death benefits equal to the Corporation's Interest in the
Policies. The Corporation's Interest in the Policies is equal to the total
amount of the premiums paid by the Corporation PLUS, if such Interest is not
fully paid to the Corporation prior to October 1, 2014, 4% interest thereon
compounded annually from and after October 1, 2014 until the earlier of (i) the
date on which the Corporation receives full repayment of its Interest from the
death benefit under the Policies, or (ii) the date on which the Corporation
otherwise receives full repayment of its Interest. The balance, if any, of the
death benefits provided under the Policies, shall be paid directly to the
beneficiary or beneficiaries designated by the Owner, in the manner and in the
amount or amounts provided in the beneficiary designation provision of the
Policies. No amount shall be paid from such death benefits to the beneficiary or
beneficiaries designated by the Owner until the full amount due the Corporation
has been paid. The parties hereto agree that the beneficiary designation
provision of the Policies shall conform to the provisions of this Agreement.
c. Notwithstanding any provision to the contrary, in the event that,
for any reason whatsoever, no death benefit is payable under a Policy upon the
death of the Insured and in lieu thereof the Insurer refunds all or any part of
the premiums paid for the Policies, the Corporation shall have the unqualified
right to receive such refunded premiums up to the amount of the total
Corporation's Interest in the Policies and the balance, if any, shall belong to
the Owner.
7. TERMINATION OF AGREEMENT.
a. Subject to b. below, the owner shall have the sole right to
surrender or cancel the Policies, but only if the aggregate net cash surrender
value of the Policies at least equals the Corporation's Interest in the
Policies. Upon surrender or cancellation of the Policies, the Corporation shall
have the unqualified right to receive a portion of the aggregate net cash
surrender value of the Policies equal to the total amount of the Corporation's
Interest in the Policies. The balance, if any, shall be paid to the Owner. Upon
payment to the Corporation of its total Interest in the Policies, this Agreement
shall terminate.
b. If the Insured is living at September 30, 2014, the Owner shall
pay, or shall cause the Insurers to pay from the net cash surrender value under
the Policies, to the
6
Corporation an amount equal to the Corporation's total Interest in the Policies.
Notwithstanding the foregoing, if the net cash surrender value under the
Policies is then less than the Corporation's total Interest in the Policies, the
Corporation may elect to defer receipt of some or all of its Interest in the
Policies. If the Corporation elects to defer receipt of some or all of its
Interest in the Policies pursuant to the preceding sentence, it shall continue
to be entitled to receive the balance of such Interest pursuant to Section 6 of
this Agreement or, at any time or times prior to the death of the Insured, at
the Corporation's election, by requiring the Owner to pay, or to cause the
insurers to pay from the net cash surrender value under the Policies, to the
Corporation such balance or any portion thereof (and if upon any such payment
any balance remains to be paid to the Corporation, the provisions of this
paragraph shall continue to apply to such remaining balance). Upon payment to
the Corporation of its total Interest in the Policies, this Agreement shall
terminate.
c. Upon termination of this Agreement, the Corporation shall release
the Collateral Assignments by the execution and delivery of appropriate
instruments of release. After the Corporation releases to the Owner all of the
Owner's rights and interest in the Policies, the Owner may exercise all options
permitted by the Insurers with respect to the Policies.
8. NAMED FIDUCIARY, DETERMINATION OF BENEFITS, CLAIMS PROCEDURE AND
ADMINISTRATION.
a. The parties hereto acknowledge and intend that this Agreement
shall constitute a welfare benefit plan for purposes of the Employee Retirement
Income Security Act of 1974 as amended. The Corporation is hereby designated as
the named fiduciary under this Agreement. The named fiduciary shall have
authority to control and manage the administration of this Agreement.
b. (1) Claim.
A person who believes that he is being denied a benefit to
which he is entitled under this Agreement (hereinafter referred to as a
"Claimant") may file a written request for such benefit with the Corporation,
setting forth his or her claim. The request must be addressed to the President
of the Corporation at its then principal place of business.
(2) Claim Decision.
Upon receipt of a claim, the Corporation shall advise the
Claimant in writing of its response within ninety (90) days; provided that the
Corporation may, extend the response period for an additional ninety (90) days
for reasonable cause.
7
If the claim is denied in whole or in part, the Corporation
shall state its reasons therefore in writing, using language calculated to be
understood by the Claimant and setting forth: (a) the specific reason or reasons
for such denial; (b) the specific reference to pertinent provisions of this
Agreement on which such denial is based; (c) a description of any additional
material or information necessary for the Claimant to perfect his claim and an
explanation why such material or such information is necessary; (d) appropriate
information as to the steps to be taken if the Claimant wishes to submit the
claim for review; and (e) the time limits for requesting a review under
subsection (3) and for review under subsection (4) hereof. However, if the
Corporation fails to issue a written decision within this time period described
above, the claim shall be deemed denied at the end of such period.
(3) Request for Review
Within sixty (60) days after the receipt by the Claimant of
the written opinion described above, (or within sixty (60) days of any deemed
denial), the Claimant may request in writing that the Secretary of the
Corporation review the determination of the Corporation. Such request must be
addressed to the Secretary of the Corporation at its then principal place of
business. The Claimant or his or her duly authorized representative may, but
need not, review the pertinent documents and submit issues and comments in
writing for consideration by the Corporation. If the Claimant does not request a
review of the Corporation's determination by the Secretary of the Corporation
within such sixty (60) day period, he shall be barred and estopped from
challenging the Corporation's determination.
(4) Review of Decision.
Within sixty (60) days after the Secretary's receipt of a
request for review, he or she will review the Corporation's determination. After
considering all materials presented by the Claimant, the Secretary will render a
written opinion, written in a manner calculated to be understood by the
Claimant, setting forth the specific reasons for the decision and containing
specific references to the pertinent provisions of this Agreement on which the
decision is based. If special circumstances require that the sixty (60) day time
period be extended, the Secretary will so notify the Claimant and will render
the decision as soon as possible, but no later than one hundred twenty (120)
days after receipt of the request for review. If the Secretary fails to issue a
written opinion within the time period described above, the Claimant's appeal
will be deemed denied at the end of such period.
9. AMENDMENT. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
8
10. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns, and the Employee, the
Owner, and their respective successors, assigns, heirs, executors,
administrators and beneficiaries.
11. INSURER NOT A PARTY. The Insurer is not a part of this Agreement.
12. NOTICE. Any notice, consent or demand required or permitted to be
given under the provisions of this Agreement shall be in writing and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address (as shown on the
records of the Corporation, in the case of a notice given by the Corporation).
The date of such mailing shall be deemed the date of notice, consent or demand.
13. GOVERNING LAW. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
triplicate, as of the day and year first above written.
The TJX Companies, Inc.
By:________________________________________________
Donald G. Campbell
Executive Vice President/Chief Financial Officer
Bernard Cammarata 1999- Irrevocable Insurance Trust
By:________________________________________________
Richard Lesser, Trustee
___________________________________________________
Bernard Cammarata
5
9-MOS
JAN-29-2000
JAN-31-1999
OCT-30-1999
24,561,000
0
114,315,000
0
1,638,764,000
1,852,641,000
1,547,337,000
723,397,000
2,950,747,000
1,628,652,000
120,081,000
0
0
310,081,000
891,933,000
2,950,747,000
6,307,822,000
6,307,822,000
4,674,496,000
4,674,496,000
979,476,000
0
5,504,000
648,346,000
249,031,000
399,315,000
0
0
0
399,315,000
1.26
1.24
