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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 May 2, 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 May
30, 1998; 158,581,150.
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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
May 2, April 26,
1998 1997
Net sales $1,775,847 $1,560,150
Cost of sales, including buying and
occupancy costs 1,330,261 1,202,619
Selling, general and administrative expenses 299,835 273,738
Interest expense (income), net (42) 855
Income before income taxes 145,793 82,938
Provision for income taxes 58,026 34,477
Net income 87,767 48,461
Preferred stock dividends 1,250 2,625
Net income available to common shareholders $ 86,517 $ 45,836
Earnings per share:
Basic $ .54 $ .29
Diluted .52 .27
Cash dividends per common share $ .06 $ .05
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
May 2, January 31, April 26,
1998 1998 1997
ASSETS
Current assets:
Cash and cash equivalents $ 327,391 $ 404,369 $ 397,127
Accounts receivable 90,691 60,735 91,528
Merchandise inventories 1,381,321 1,190,170 1,384,397
Prepaid expenses 47,707 27,357 16,486
Total current assets 1,847,110 1,682,631 1,889,538
Property, at cost:
Land and buildings 113,099 108,729 103,067
Leasehold costs and improvements 494,072 480,964 436,692
Furniture, fixtures and equipment 633,526 611,470 548,903
1,240,697 1,201,163 1,088,662
Less accumulated depreciation
and amortization 545,821 515,027 445,415
694,876 686,136 643,247
Other assets 22,845 36,645 41,186
Goodwill and tradename,
net of amortization 202,785 204,220 214,560
TOTAL ASSETS $2,767,616 $2,609,632 $2,788,531
LIABILITIES
Current liabilities:
Short-term debt $ 6,972 $ - $ 2,632
Current installments of
long-term debt 22,779 23,360 26,234
Accounts payable 739,880 582,791 713,699
Accrued expenses and other
current liabilities 547,995 553,643 581,972
Federal and state income taxes
payable 85,098 57,863 43,051
Total current liabilities 1,402,724 1,217,657 1,367,588
Long-term debt exclusive of
current installments
Real estate mortgages - - 22,391
Promissory notes 1,045 1,127 1,985
General corporate debt 219,901 219,897 219,887
Deferred income taxes 2,670 6,859 8,685
SHAREHOLDERS' EQUITYPreferred stock at face value,
authorized 5,000,000 shares, par
value $1, issued and outstanding
cumulative convertible stock of:
670,900 shares of 7% Series E 67,090 72,730 150,000
Common stock, authorized 300,000,000
shares, par value $1, issued and
outstanding 158,728,677;
159,901,247 and 79,720,729 shares 158,729 159,901 79,720
Additional paid-in capital 109,070 202,053 431,825
Retained earnings 806,387 729,408 506,450
Total shareholders' equity 1,141,276 1,164,092 1,167,995
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,767,616 $2,609,632 $2,788,531
The accompanying notes are an integral part of the financial statements.
PAGE 4
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
Thirteen Weeks Ended
May 2, April 26,
1998 1997
Cash flows from operating activities:
Net income $ 87,767 $ 48,461
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 32,573 29,899
Property disposals 405 2,615
Other (829) 1,942
Changes in assets and liabilities:
(Increase) in accounts receivable (29,956) (34,253)
(Increase) in merchandise inventories (191,151) (324,892)
(Increase) in prepaid expenses (20,350) (107)
Increase in accounts payable 157,089 179,754
Increase (decrease) in accrued expenses
and other current liabilities (5,648) 4,926
Increase (decrease) in income taxes payable 27,235 (1,114)
Increase (decrease) in deferred income
taxes (1,469) 1,365
Net cash provided by (used in) operating
activities 55,666 (91,404)
Cash flows from investing activities:
Property additions (39,341) (33,763)
Proceeds from sale of other assets 8,338 -
Net cash (used in) investing activities (31,003) (33,763)
Cash flows from financing activities:
Proceeds from borrowings of short-term debt 6,972 2,632
Principal payments on long-term debt (663) (1,056)
Common stock repurchased (103,329) -
Proceeds from sale and issuance of common
stock, net 6,167 2,139
Cash dividends (10,788) (10,604)
Net cash (used in) financing activities (101,641) (6,889)
Net cash (used in) continuing operations (76,978) (132,056)
Net cash provided by discontinued operations - 54,451
Net (decrease) in cash and cash equivalents (76,978) (77,605)
Cash and cash equivalents at beginning of year 404,369 474,732
Cash and cash equivalents at end of period $ 327,391 $ 397,127
The accompanying notes are an integral part of the financial statements.
PAGE 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Thirteen Weeks Ended May 2, 1998
Versus Thirteen Weeks Ended April 26, 1997
Historical earnings per share amounts have been restated to reflect the
June 1997 two-for-one stock split. All reference to earnings per share
amounts are diluted earnings per share unless otherwise indicated.
Net sales from continuing operations for the first quarter were $1,775.8
million, up 14% from $1,560.2 million last year. The increase in sales is
attributable to an increase in same store sales, new stores and also the
benefit associated with a shift in the Company's fiscal reporting period as
last year's first quarter reporting period ended one week earlier than this
year's first quarter reporting period. Same store sales, on a comparable
13 week basis, increased 6% at T.J. Maxx, 9% at Marshalls, 12% at Winners,
8% at T.K. Maxx and 8% at HomeGoods.
Net income for the first quarter was $87.8 million, or $.52 per common
share, versus $48.5 million, or $.27 per common share last year.
The following table sets forth operating results expressed as a percentage
of net sales (continuing operations):
Percentage of Net Sales
13 Weeks Ended
5/2/98 4/26/97
Net sales 100.0% 100.0%
Cost of sales, including buying
and occupancy costs 74.9 77.1
Selling, general and administrative
expenses 16.9 17.5
Interest expense (income), net - .1
Income before income taxes 8.2% 5.3%
Cost of sales including buying and occupancy costs as a percent of net
sales decreased from the prior year. This improvement reflects improved
merchandise margins at T.J. Maxx and Marshalls, strong inventory management
and the strong growth in sales.
Selling, general and administrative expenses, as a percentage of net sales,
decreased from the prior year. The improvement in this ratio is primarily
due to the strong sales performance.
Interest expense (income), net, includes $5.9 million of interest income
this year versus $6.2 million last year. Gross interest expenses decreased
PAGE 6
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 first quarter of
fiscal 1999 versus 41.6% in the first quarter 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)
Thirteen Weeks Ended
May 2, April 26,
1998 1997
(In Thousands)
Net sales:
Off-price family apparel stores $1,750,465 $1,539,757
Off-price home fashion stores 25,382 20,393
$1,775,847 $1,560,150
Operating income (loss):
Off-price family apparel stores $ 167,361 $ 106,203
Off-price home fashion stores (2,256) (2,833)
165,105 103,370
General corporate expense 18,701 18,924
Goodwill amortization 653 653
Interest expense (income), net (42) 855
Income before income taxes $ 145,793 $ 82,938
The off-price family apparel stores segment, T.J. Maxx, Marshalls, Winners,
T.K. Maxx and A.J. Wright significantly increased its operating income.
These results reflect strong inventory management and the strong sales
performance on top of strong gains in the prior year. General corporate
expense includes a charge of $4 million this year versus $10 million last
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:
May 2, 1998 April 26, 1997
T.J. Maxx 587 577
Marshalls 462 457
Winners 79 68
HomeGoods 25 21
T.K. Maxx 31 20
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Financial Condition
Cash flows from operating activities for the three 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. Cash generated from operations has allowed the
Company to maintain a strong cash position.
In February 1998, the Company completed its $250 million stock buyback
program initiated in June 1997, and announced its intention to purchase an
additional $250 million of the Company's common stock. During the first
quarter ended May 2, 1998, the Company repurchased a combined total of 2.4
million shares at a cost of $103.3 million.
On April 8, 1998, the Company approved a second 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 shareholders
approved a proposed increase in the number of authorized shares of common
stock making the two-for-one stock split effective. The split will be paid
on June 25, 1998 to shareholders of record June 11, 1998. During the
Company's second quarter reporting period, the Company will reflect the
issuance of the new shares and all historical earnings per share amounts
will be restated to reflect the June 1998 two-for-one stock split.
Earnings per share amounts presented in these financial statements are
presented on a pre-June 1998 stock split basis.
The Company has developed plans to address issues related to the impact on
its computer systems of the year 2000. Financial and operational systems
have been assessed and plans have been developed to address systems
modification requirements. The Company expects to spend the aggregate of
approximately $10 million on conversion costs, primarily in fiscal years
1998 and 1999. There can be no guarantee that a failure to resolve a year
2000 issue by the Company or a third party whose systems may interface with
the Company, would not have a material effect on the Company.
PAGE 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the first three 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:
Thirteen Weeks Ended
May 2, April 26,
1998 1997
(In Thousands)
Cash paid for:
Interest on debt $ 2,699 $ 3,079
Income taxes 32,908 34,226
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. In addition, the Company is
contingently liable on a number of leases of the Hit or Miss division,
the Company's former off-price women's specialty stores, sold on
September 30, 1995. The Company believes that 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
PAGE 9
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.
5. In June 1997, the Company distributed a two-for-one stock split. All
historical earnings per share have been restated to reflect the June
1997 stock split.
6. The computation of basic and diluted earnings per share is as follows:
13 Weeks Ended
May 2, April 26,
1998 1997
($'s in thousands except per share amounts)
Net income (Numerator in diluted calculation) $87,767 $48,461
Less preferred dividends 1,250 2,625
Net income available to common shareholders
(Numerator in basic calculation) $86,517 $45,836
Shares for basic and diluted earnings per
share calculations:
Average common shares outstanding for
basic EPS 159,666,683 159,272,616
Dilutive effect of stock options and awards 2,768,659 1,699,268
Dilutive effect of convertible
preferred stock 7,719,831 16,195,546
Average common shares outstanding
for diluted EPS 170,155,173 177,167,430
Basic earnings per share $0.54 $0.29
Diluted earnings per share $0.52 $0.27
7. 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:
May 2, April 26,
1998 1997
(In Thousands)
Net income $87,767 $48,461
Other comprehensive income (loss) net of
reclassification adjustments (3,806) (268)
Total comprehensive income $83,961 $48,193
PAGE 10
Cumulative other comprehensive income, included as a component of
additional paid in capital, is as follows:
May 2, January 31, April 26,
1998 1998 1997
(In Thousands)
Cumulative other comprehensive
income (loss) $(490) $3,316 $(1,308)
PAGE 11
PART II. Other Information
Item 4 Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on June 2,
1998. The following were voted upon at the Annual Meeting:
Election of Directors For Withheld
Richard G. Lesser 140,838,986 1,785,450
John M. Nelson 140,843,145 1,781,291
In addition to those elected, the following are directors
whose term of office continued after the Annual Meeting:
Bernard Cammarata
Phyllis B. Davis
Dennis F. Hightower
Arthur F. Loewy
John F. O'Brien
Robert F. Shapiro
Willow B. Shire
Fletcher H. Wiley
Proposal for the approval to amend Article Fourth of the
Company's Third Restated Certificate of Incorporation to
increase the number of authorized shares of the Company's
common stock from 300,000,000 to 600,000,000.
For 138,209,564
Against 4,198,054
Abstain 216,818
Broker non-votes 0
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 May 2, 1998.
PAGE 12
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: June 16, 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.