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1 9 9 8 A n n u a l R e p o r t
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J. S u p p l e m e n t a l C a s h F l o w s I n f o r m a t i o n
The Company classifies the cash flows associated with the operating results of its discontinued operations through the date of sale, as “net cash provided by discontinued operations.” The following is a reconciliation of the “income from discontinued operations, net of income taxes” to the “net cash provided by discontinued operations” for the fiscal years indicated. No cash flows from the operating results of the Company’s discontinued operations were received during the year ended January 30, 1999.
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| January 31, | January 25, | ||
| In Thousands | 1998 | 1997 | |
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(53 weeks)
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| Income from discontinued operations, net of income taxes | $ - |
$ 29,361 | |
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| Decrease in net assets of discontinued operations during the period: | |||
| Net assets of discontinued operations - beginning of period | 54,451 | 128,586 | |
| Less: | |||
| Net assets of discontinued operations - sold during period | - | 54,083 | |
| Net assets of discontinued operations - end of period | - | 54,451 | |
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| Decrease in net assets of discontinued operations | 54,451 | 20,052 | |
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| Net cash provided by discontinued operations | $54,451 | $ 49,413 | |
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The Company is also responsible for certain leases related to, and other obligations arising from, the sale of these operations, for which reserves have been provided in its reserve for discontinued operations, and is included in accrued expenses. The cash flow impact of these obligations is reflected as a component of cash provided by operating activities in the statements of cash flows.
The Company’s cash payments for interest expense and income taxes, including discontinued operations, and its non-cash investing and financing activities are as follows:
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| January 30, | January 31, | January 25, | |
| In Thousands | 1999 | 1998 | 1997 |
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| Cash paid for: | |||
| Interest | $ 22,542 | $ 26,359 | $ 44,288 |
| Income taxes | 275,538 | 199,025 | 159,245 |
| Non-cash investing and financing activities: | |||
| Conversion of cumulative convertible preferred | |||
| stock into common stock | |||
| Series A | $- |
$- |
$ 25,000 |
| Series C | - | - | 82,500 |
| Series D | - | - | 25,000 |
| Series E | 72,730 | 77,020 | - |
| Distribution of two-for-one stock split | 158,954 | 79,823 | - |
| Note receivable from sale of Chadwick's of Boston | - | - | 20,000 |
K. D i s c o n t i n u e d O p e r a t i o n s a n d R e l a t e d C o n t i n g e n t L i a b i l i t i e s
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 from 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 approximately 50 store leases and the office and warehouse leases of its former Hit or Miss division which was sold by the Company in September 1995. During the third quarter ended October 31, 1998, the Company increased its reserve for its discontinued operations by $15 million ($9 million after tax), primarily for potential lease liabilities relating to guarantees on leases of its former Hit or Miss division. The after tax cost of $9 million or, $.02 per diluted share, was recorded as a loss on disposal of discontinued operations.
L. S e g m e n t I n f o r m a t i o n
During 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 131, “Disclosure about Segments of an Enterprise and Related Information.” This new standard did not result in any changes to the Company’s reportable segments or in the information disclosed about its segments.
The Company has two reportable segments. It’s off-price family apparel segment includes the T.J. Maxx, Marshalls and A.J. Wright domestic store chains and the Company’s foreign store chains, Winners and T.K. Maxx. The Company manages the results of its T.J. Maxx and Marshalls chains on a combined basis. The other chains, whose operating results are managed separately, sell similar product categories and share similar economic and other characteristics of the T.J. Maxx and Marshalls operations and are aggregated with the off-price family apparel segment. This segment generated 7.8% of its fiscal 1999 revenue from its foreign operations. All of these stores offer apparel for the entire family with limited offerings of domestic goods. The Company’s other segment, the off-price home fashions stores is made up of the Company’s HomeGoods stores which offer a wide variety of home furnishings.
The Company evaluates the performance of its segments based on pre-tax income before interest and general corporate expenses. For data on business segments for fiscal years 1999, 1998 and 1997, see page 22.