NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Note A. Summary of Significant Accounting Policies
Basis of Presentation:
The consolidated interim financial statements are unaudited and, in the opinion of management, 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 TJX Companies, Inc. (together with its
subsidiaries, TJX) for a fair statement of its financial statements for the periods reported, all in conformity with accounting principles generally accepted in the United States of America (GAAP) consistently applied. The
consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements, including the related notes, contained in TJXs Annual Report on Form 10-K for the fiscal year ended February 2,
2013 (fiscal 2013).
These interim results are not necessarily indicative of results for the full fiscal year, because TJXs
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.
The February 2, 2013 balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.
Fiscal Year:
TJXs fiscal year ends on the Saturday nearest to the last day of January of each year. The current fiscal year ends February 1, 2014 (fiscal 2014) and is a
52-week fiscal year. Fiscal 2013 was a 53-week fiscal year.
Share-Based Compensation:
TJX accounts for share-based compensation by
estimating the fair value of each award on the date of grant. TJX uses the Black-Scholes option pricing model for stock option awards and the market price on the date of the award for performance-based restricted stock awards. Total share-based
compensation expense was $16.5 million for the quarter ended May 4, 2013 and $14.3 million for the quarter ended April 28, 2012. These amounts include stock option expense as well as restricted and deferred stock amortization. There were
options to purchase 2.2 million shares of common stock exercised during the quarter ended May 4, 2013, leaving options to purchase 34.2 million shares of common stock outstanding as of May 4, 2013.
Cash and Cash Equivalents
: TJX generally considers highly liquid investments with a maturity of 90 days or less at the date of purchase to be cash
equivalents. Investments with maturities greater than 90 days but less than one year at the date of purchase are included in short-term investments. TJXs investments are primarily high-grade commercial paper, institutional money market funds
and time deposits with major banks.
As of May 4, 2013, TJXs cash and cash equivalents held outside the U.S. were $822.5 million,
of which $276.2 million was held in countries where TJX has the intention to reinvest any undistributed earnings indefinitely.
Merchandise
Inventories
: Inventories are stated at the lower of cost or market. TJX uses the retail method for valuing inventories which results in a weighted average cost. TJX utilizes a permanent markdown strategy and lowers the cost value of the
inventory that is subject to markdown at the time the retail prices are lowered in the stores. TJX accrues for inventory obligations at the time inventory is shipped. As a result, merchandise inventories on TJXs balance sheet include an
accrual for in-transit inventory of $433.5 million at May 4, 2013, $418.3 million at February 2, 2013 and $401.1 million at April 28, 2012. Comparable amounts were reflected in accounts payable at those dates.
New Accounting Standards:
There were no new accounting standards issued during the three-month period ended May 4, 2013 that are expected to
have a material impact on TJXs financial condition, results of operations or cash flows.
7
Note B. Reserves related to Former Operations
Reserves Related to Former Operations:
TJX has a reserve for its estimate of future obligations of former business operations
that TJX has either closed or sold. The reserve activity is presented below:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
In thousands
|
|
May 4,
2013
|
|
|
April 28,
2012
|
|
|
|
|
Balance at beginning of year
|
|
$
|
45,229
|
|
|
$
|
45,381
|
|
Additions to the reserve charged to net income:
|
|
|
|
|
|
|
|
|
Interest accretion
|
|
|
360
|
|
|
|
215
|
|
Charges against the reserve:
|
|
|
|
|
|
|
|
|
Lease-related obligations
|
|
|
(4,775
|
)
|
|
|
(3,516
|
)
|
Termination benefits and all other
|
|
|
(490
|
)
|
|
|
(1,047
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
40,324
|
|
|
$
|
41,033
|
|
|
|
|
|
|
|
|
|
|
The lease-related obligations included in the reserve reflect TJXs estimation of lease costs, net of estimated
subtenant income, and the cost of probable claims against TJX for liability, as an original lessee or guarantor of the leases of A.J. Wright and other former TJX businesses, after mitigation of the number and cost of these lease obligations. The
actual net cost of these lease-related obligations may differ from TJXs estimate. TJX estimates that the majority of the former operations reserve will be paid in the next three to five years. The actual timing of cash outflows will vary
depending on how the remaining lease obligations are actually settled.
TJX may also be contingently liable on up to 12 leases of BJs
Wholesale Club, a former TJX business, and up to four leases of Bobs Stores, also a former TJX business, in addition to leases included in the reserve. The reserve for former operations does not reflect these leases because TJX believes that
the likelihood of future liability to TJX is remote.
Note C. Capital Stock and Earnings Per Share
Capital Stock:
During the quarter ended May 4, 2013, TJX repurchased and retired 6.5 million shares of its common
stock at a cost of $300.0 million. TJX reflects stock repurchases in its financial statements on a settlement basis. TJX had cash expenditures under its stock repurchase programs of $302.6 million for the thirteen weeks ended May 4,
2013 and $297.3 million for the thirteen weeks ended April 28, 2012. These expenditures were funded primarily by cash generated from operations. In February 2012, TJXs Board of Directors approved a stock repurchase program that authorized
the repurchase of up to $2 billion of TJX common stock from time to time. As of May 4, 2013, $624.7 million remained available for repurchase under this program. In the first quarter of fiscal 2014, TJXs Board of Directors approved a new
stock repurchase program that authorizes the repurchase of up to an additional $1.5 billion of TJX common stock from time to time, all of which remains available for repurchase at May 4, 2013.
All shares repurchased under the stock repurchase programs have been retired.
TJX has five million shares of authorized but unissued preferred stock, $1 par value.
8
Earnings per share:
The following schedule presents the calculation of basic and diluted earnings per
share (EPS) for net income:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
In thousands, except per share data
|
|
May 4,
2013
|
|
|
April 28,
2012
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
452,890
|
|
|
$
|
419,200
|
|
Weighted average common shares outstanding for basic EPS
|
|
|
719,528
|
|
|
|
742,233
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.63
|
|
|
$
|
0.56
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
452,890
|
|
|
$
|
419,200
|
|
|
|
|
Shares for basic and diluted earnings per share calculations:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic EPS
|
|
|
719,528
|
|
|
|
742,233
|
|
Assumed exercise/vesting of:
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
13,027
|
|
|
|
13,783
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for diluted EPS
|
|
|
732,555
|
|
|
|
756,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.62
|
|
|
$
|
0.55
|
|
The weighted average common shares for the diluted earnings per share calculation excludes the impact of outstanding
stock options if the assumed proceeds per share of the option is in excess of the related fiscal periods average price of TJXs common stock. Such options are excluded because they would have an antidilutive effect. There were
4.8 million such options excluded for the thirteen weeks ended May 4, 2013. There were no such options excluded for the thirteen weeks ended April 28, 2012.
Note D. Financial Instruments
As a result of its operating and financing activities, TJX is exposed to market risks from changes in interest and foreign currency
exchange rates and fuel costs. These market risks may adversely affect TJXs operating results and financial position. When and to the extent deemed appropriate, TJX seeks to minimize risk from changes in interest and foreign currency exchange
rates and fuel costs through the use of derivative financial instruments. TJX does not use derivative financial instruments for trading or other speculative purposes and does not use any leveraged derivative financial instruments. TJX recognizes all
derivative instruments as either assets or liabilities in the statements of financial position and measures those instruments at fair value. The fair values of the derivatives are classified as assets or liabilities, current or non-current, based
upon valuation results and settlement dates of the individual contracts. Changes to the fair value of derivative contracts that do not qualify for hedge accounting are reported in earnings in the period of the change. For derivatives that qualify
for hedge accounting, changes in the fair value of the derivatives are either recorded in shareholders equity as a component of other comprehensive income or are recognized currently in earnings, along with an offsetting adjustment against the
basis of the item being hedged. TJX does not hedge its net investments in foreign subsidiaries.
Diesel Fuel Contracts:
During fiscal 2013 and the first quarter of fiscal 2014, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2014, based on the diesel fuel expected to be consumed by independent freight
carriers transporting the Companys inventory. The hedge agreements outstanding at May 4, 2013 relate to approximately 50% of TJXs estimated notional diesel requirements for the remainder of fiscal 2014. These diesel fuel hedge
agreements will settle throughout fiscal 2014.
Foreign Currency Contracts:
TJX enters into forward foreign currency exchange
contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by TJX Europe (United Kingdom, Ireland, Germany and Poland), TJX Canada (Canada), Marmaxx (U.S.) and HomeGoods (U.S.) in currencies other than
their respective functional currencies. These contracts typically have a term of twelve months or less. The contracts outstanding at May 4, 2013 cover a portion of such actual and anticipated merchandise purchases throughout the remainder of
fiscal 2014. TJX elected not to apply hedge accounting rules to these contracts.
9
TJX also enters into derivative contracts, generally designated as fair value hedges, to hedge intercompany
debt and intercompany interest payable. The changes in fair value of these contracts are recorded in selling, general and administrative expenses and are offset by marking the underlying item to fair value in the same period. Upon settlement, the
realized gains and losses on these contracts are offset by the realized gains and losses of the underlying item in selling, general and administrative expenses.
The following is a summary of TJXs derivative financial instruments, related fair value and balance sheet classification at May 4, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands
|
|
Pay
|
|
|
Receive
|
|
|
Blended
Contract
Rate
|
|
|
Balance Sheet
Location
|
|
Current Asset
U.S.$
|
|
|
Current
(Liability)
U.S.$
|
|
|
Net Fair
Value in
U.S.$
at
May 4,
2013
|
|
|
|
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany balances, primarily short-term debt and related interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
zł
|
141,500
|
|
|
C$
|
44,551
|
|
|
|
0.3148
|
|
|
(Accrued Exp)
|
|
$
|
|
|
|
$
|
(604
|
)
|
|
$
|
(604
|
)
|
|
|
|
|
|
|
|
|
|
|
£
|
25,000
|
|
|
C$
|
38,946
|
|
|
|
1.5578
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(475
|
)
|
|
|
(475
|
)
|
|
|
|
|
|
|
|
|
|
|
|
44,281
|
|
|
£
|
35,781
|
|
|
|
0.8080
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(2,537
|
)
|
|
|
(2,537
|
)
|
|
|
|
|
|
|
|
|
|
|
|
90,292
|
|
|
U.S.$
|
118,511
|
|
|
|
1.3125
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(111
|
)
|
|
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
|
U.S.$
|
87,117
|
|
|
£
|
55,000
|
|
|
|
0.6313
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(1,572
|
)
|
|
|
(1,572
|
)
|
|
|
|
|
|
|
|
|
Economic hedges for which hedge accounting was not elected:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diesel contracts
|
|
|
Fixed on 1.5M
- 1.7M gal
per
month
|
|
|
|
Float on 1.5M
- 1.7M gal per
month
|
|
|
|
N/A
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(427
|
)
|
|
|
(427
|
)
|
Merchandise purchase commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C$
|
323,489
|
|
|
U.S.$
|
319,678
|
|
|
|
0.9882
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
1,954
|
|
|
|
(2,757
|
)
|
|
|
(803
|
)
|
|
|
|
|
|
|
|
|
|
|
C$
|
8,149
|
|
|
|
6,100
|
|
|
|
0.7486
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(79
|
)
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
£
|
111,217
|
|
|
U.S.$
|
171,000
|
|
|
|
1.5375
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
717
|
|
|
|
(2,875
|
)
|
|
|
(2,158
|
)
|
|
|
|
|
|
|
|
|
|
|
£
|
4,289
|
|
|
|
5,000
|
|
|
|
1.1658
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(123
|
)
|
|
|
(123
|
)
|
|
|
|
|
|
|
|
|
|
|
£
|
12,823
|
|
|
zł
|
62,813
|
|
|
|
4.8985
|
|
|
Prepaid Exp
|
|
|
168
|
|
|
|
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
U.S.$
|
9,907
|
|
|
|
7,580
|
|
|
|
0.7651
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
71
|
|
|
|
(35
|
)
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,910
|
|
|
$
|
(11,595
|
)
|
|
$
|
(8,685
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
The following is a summary of TJXs derivative financial instruments, related fair value and balance
sheet classification at April 28, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands
|
|
Pay
|
|
|
Receive
|
|
|
Blended
Contract
Rate
|
|
|
Balance Sheet
Location
|
|
Current Asset
U.S.$
|
|
|
Current
(Liability)
U.S.$
|
|
|
Net Fair
Value in
U.S.$ at
April 28,
2012
|
|
|
|
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany balances, primarily short-term debt and related interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£
|
40,000
|
|
|
C$
|
63,330
|
|
|
|
1.5833
|
|
|
(Accrued Exp)
|
|
$
|
|
|
|
$
|
(883
|
)
|
|
$
|
(883
|
)
|
|
|
|
|
|
|
|
|
|
|
zł
|
80,000
|
|
|
C$
|
23,874
|
|
|
|
0.2984
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
135
|
|
|
|
(762
|
)
|
|
|
(627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
£
|
21,335
|
|
|
|
0.8534
|
|
|
Prepaid Exp
|
|
|
1,427
|
|
|
|
|
|
|
|
1,427
|
|
|
|
|
|
|
|
|
|
|
|
|
100,292
|
|
|
U.S.$
|
134,506
|
|
|
|
1.3411
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
1,411
|
|
|
|
(138
|
)
|
|
|
1,273
|
|
|
|
|
|
|
|
|
|
|
|
U.S.$
|
85,389
|
|
|
£
|
55,000
|
|
|
|
0.6441
|
|
|
Prepaid Exp
|
|
|
3,874
|
|
|
|
|
|
|
|
3,874
|
|
|
|
|
|
|
|
|
|
Economic hedges for which hedge accounting was not elected:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diesel contracts
|
|
|
Fixed on 615K
- 1.4M gal
per
month
|
|
|
|
Float on 615K
- 1.4M gal
per
month
|
|
|
|
N/A
|
|
|
Prepaid Exp
|
|
|
3,216
|
|
|
|
|
|
|
|
3,216
|
|
Merchandise purchase commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C$
|
321,256
|
|
|
U.S.$
|
324,247
|
|
|
|
1.0093
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
807
|
|
|
|
(3,504
|
)
|
|
|
(2,697
|
)
|
|
|
|
|
|
|
|
|
|
|
C$
|
7,850
|
|
|
|
6,000
|
|
|
|
0.7643
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
5
|
|
|
|
(54
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
£
|
71,404
|
|
|
U.S.$
|
113,000
|
|
|
|
1.5825
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(3,109
|
)
|
|
|
(3,109
|
)
|
|
|
|
|
|
|
|
|
|
|
£
|
36,475
|
|
|
|
44,000
|
|
|
|
1.2063
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(965
|
)
|
|
|
(965
|
)
|
|
|
|
|
|
|
|
|
|
|
U.S.$
|
5,719
|
|
|
|
4,349
|
|
|
|
0.7604
|
|
|
Prepaid Exp
|
|
|
45
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,920
|
|
|
$
|
(9,415
|
)
|
|
$
|
1,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
The impact of derivative financial instruments on the statements of income during the first quarter of
fiscal 2014 and the first quarter of fiscal 2013 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Recognized
in Income by Derivative
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
In thousands
|
|
Location of Gain (Loss)
Recognized in Income by
Derivative
|
|
May 4, 2013
|
|
|
April 28, 2012
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany balances, primarily short-term debt and related interest
|
|
Selling, general and administrative expenses
|
|
$
|
6,286
|
|
|
$
|
3,652
|
|
|
|
|
|
Economic hedges for which hedge accounting was not elected:
|
|
|
|
|
|
|
|
|
|
|
Diesel fuel contracts
|
|
Cost of sales, including buying and occupancy costs
|
|
|
(2,961
|
)
|
|
|
2,550
|
|
|
|
|
|
Merchandise purchase commitments
|
|
Cost of sales, including buying and occupancy costs
|
|
|
1,007
|
|
|
|
(10,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in income
|
|
|
|
$
|
4,332
|
|
|
$
|
(4,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Note E. Disclosures about Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date or exit price. The inputs used to measure fair value are generally classified into the following hierarchy:
|
|
|
Level 1:
|
|
Unadjusted quoted prices in active markets for identical assets or liabilities
|
|
|
Level 2:
|
|
Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not
active, or inputs other than quoted prices that are observable for the asset or liability
|
|
|
Level 3:
|
|
Unobservable inputs for the asset or liability
|
The following table sets forth TJXs financial assets and liabilities that are accounted for at fair value on a
recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands
|
|
May 4,
2013
|
|
|
February 2,
2013
|
|
|
April 28,
2012
|
|
Level 1
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Savings Plan investments
|
|
$
|
114,106
|
|
|
$
|
101,903
|
|
|
$
|
91,391
|
|
|
|
|
|
Level 2
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
$
|
238,043
|
|
|
$
|
235,853
|
|
|
$
|
174,872
|
|
Foreign currency exchange contracts
|
|
|
2,910
|
|
|
|
5,980
|
|
|
|
7,704
|
|
Diesel fuel contracts
|
|
|
|
|
|
|
3,372
|
|
|
|
3,216
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
$
|
11,168
|
|
|
$
|
11,874
|
|
|
$
|
9,415
|
|
Diesel fuel contracts
|
|
|
427
|
|
|
|
|
|
|
|
|
|
12
The fair value of TJXs general corporate debt, including current installments, was estimated by
obtaining market quotes given the trading levels of other bonds of the same general issuer type and market perceived credit quality. These inputs are considered to be Level 2. The fair value of long-term debt as of May 4, 2013 was $1.4 billion
compared to a carrying value of $1.3 billion. The fair value of long-term debt as of February 2, 2013 was $911.0 million compared to a carrying value of $774.6 million. The fair value of long-term debt as of April 28, 2012 was $927.2
million compared to a carrying value of $774.5 million. These estimates do not necessarily reflect provisions or restrictions in the various debt agreements that might affect TJXs ability to settle these obligations.
TJXs cash equivalents are stated at cost, which approximates fair value, due to the short maturities of these instruments.
Investments designed to meet obligations under the Executive Savings Plan are invested in securities traded in active markets and are recorded at
unadjusted quoted prices.
Short-term investments, foreign currency exchange contracts and diesel fuel contracts are valued using broker
quotations which include observable market information. TJX does not make adjustments to quotes or prices obtained from brokers or pricing services but does assess the credit risk of counterparties and will adjust final valuations when appropriate.
Where independent pricing services provide fair values, TJX obtains an understanding of the methods used in pricing. As such, these instruments are classified within Level 2.
13
Note F. Segment Information
TJX operates four main business segments. The Marmaxx segment (T.J. Maxx and Marshalls) and the HomeGoods segment both operate stores
in the United States, the TJX Canada segment operates stores in Canada (Winners, HomeSense and Marshalls), and the TJX Europe segment operates stores in Europe (T.K. Maxx and HomeSense). Late in fiscal 2013 we acquired Sierra Trading Post (STP), an
off-price internet retailer. The results of STP have been included with our Marmaxx segment.
TJX evaluates the performance of its segments
based on segment profit or loss, which it defines as pre-tax income or loss before general corporate expense and interest expense. Segment profit or loss, as defined by TJX, may not be comparable to similarly titled measures
used by other entities. The terms segment margin or segment profit margin are used to describe segment profit or loss as a percentage of net sales. These measures of performance should not be considered alternatives to net
income or cash flows from operating activities as an indicator of TJXs performance or as a measure of liquidity.
Presented below is
financial information with respect to TJXs business segments:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
In thousands
|
|
May 4,
2013
|
|
|
April 28,
2012
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
In the United States:
|
|
|
|
|
|
|
|
|
Marmaxx
|
|
$
|
4,135,749
|
|
|
$
|
3,889,058
|
|
HomeGoods
|
|
|
689,530
|
|
|
|
595,722
|
|
TJX Canada
|
|
|
645,496
|
|
|
|
640,209
|
|
TJX Europe
|
|
|
718,834
|
|
|
|
673,097
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,189,609
|
|
|
$
|
5,798,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit:
|
|
|
|
|
|
|
|
|
In the United States:
|
|
|
|
|
|
|
|
|
Marmaxx
|
|
$
|
634,300
|
|
|
$
|
604,628
|
|
HomeGoods
|
|
|
89,063
|
|
|
|
69,433
|
|
TJX Canada
|
|
|
74,306
|
|
|
|
71,065
|
|
TJX Europe
|
|
|
16,364
|
|
|
|
11,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
814,033
|
|
|
|
756,855
|
|
|
|
|
General corporate expense
|
|
|
76,866
|
|
|
|
66,623
|
|
Interest expense, net
|
|
|
5,282
|
|
|
|
8,827
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
$
|
731,885
|
|
|
$
|
681,405
|
|
|
|
|
|
|
|
|
|
|
14
Note G. Pension Plans and Other Retirement Benefits
Presented below is financial information related to TJXs funded defined benefit retirement plan (funded plan) and its unfunded
supplemental pension plan (unfunded plan) for the periods shown.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded Plan
|
|
|
Unfunded Plan
|
|
|
|
Thirteen Weeks Ended
|
|
|
Thirteen Weeks Ended
|
|
In thousands
|
|
May 4,
2013
|
|
|
April 28,
2012
|
|
|
May 4,
2013
|
|
|
April 28,
2012
|
|
|
|
|
|
|
Service cost
|
|
$
|
11,274
|
|
|
$
|
9,825
|
|
|
$
|
521
|
|
|
$
|
339
|
|
Interest cost
|
|
|
11,325
|
|
|
|
10,263
|
|
|
|
593
|
|
|
|
570
|
|
Expected return on plan assets
|
|
|
(14,624
|
)
|
|
|
(13,926
|
)
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Recognized actuarial losses
|
|
|
6,918
|
|
|
|
7,097
|
|
|
|
560
|
|
|
|
475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
$
|
14,893
|
|
|
$
|
13,259
|
|
|
$
|
1,675
|
|
|
$
|
1,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TJXs policy with respect to the funded plan is to fund, at a minimum, the amount required to maintain a funded
status of 80% of the applicable pension liability (the funding target pursuant to the Internal Revenue Code section 430) or such other amount sufficient to avoid restrictions with respect to the funding of TJXs nonqualified plans under the
Internal Revenue Code. TJX does not anticipate any required funding in fiscal 2014 for the funded plan. TJX anticipates making payments of $3.5 million to provide current benefits coming due under the unfunded plan in fiscal 2014.
The amounts included in amortization of prior service cost and recognized actuarial losses in the table above have been reclassified in their entirety
from other comprehensive income to the statements of income, net of related tax effects, for both periods presented.
15
Note H. Long-Term Debt and Credit Lines
On May 2, 2013 TJX issued $500 million of 2.50% ten year notes, all of which was outstanding at May 4, 2013. The Company
intends to use the proceeds from the notes offering for working capital and other general corporate purposes. TJX entered into rate-lock agreements to hedge $250 million of the 2.50% notes prior to their issuance. The costs of these agreements are
being amortized to interest expense over the term of the notes, resulting in an effective fixed interest rate of 2.57%.
At May 4, 2013,
TJX also had outstanding $375 million aggregate principal amount of 6.95% ten-year notes due April 2019 and $400 million aggregate principal amount of 4.20% six-year notes due August 2015. TJX entered into rate-lock agreements to hedge the
underlying treasury rate of all of the 6.95% notes and $250 million of the 4.20% notes prior to the issuance of the notes. The costs of these agreements are being amortized to interest expense over the term of the respective notes, resulting in an
effective fixed interest rate of 7.00% for the 6.95% notes and 4.19% for the 4.20% notes.
At May 4, 2013, TJX had two $500 million
revolving credit facilities, one which matures in June 2017 and one which matures in May 2016. As of May 4, 2013, February 2, 2013 and April 28, 2012 and during the quarters and year then ended, there were no amounts outstanding
under these facilities. At May 4, 2013 the agreements require quarterly payments on the unused committed amounts of 8.0 basis points for the agreement maturing in 2017 and 12.5 basis points for the agreement maturing in 2016. These rates are
based on the credit ratings of TJXs long-term debt and would vary with changes in the credit ratings. These agreements have no compensating balance requirements and have various covenants including a requirement of a specified ratio of debt to
earnings.
As of May 4, 2013 and April 28, 2012, TJXs foreign subsidiaries had uncommitted credit facilities. TJX Canada had
two credit lines, a C$10 million facility for operating expenses and a C$10 million letter of credit facility. As of May 4, 2013 and April 28, 2012, and during the quarters then ended there were no amounts outstanding on the Canadian
credit line for operating expenses. As of May 4, 2013 and April 28, 2012, TJX Europe had a credit line of £20 million. As of May 4, 2013 and April 28, 2012, and during the quarters then ended there were no amounts
outstanding on the European credit line.
Note I. Income Taxes
TJX had net unrecognized tax benefits of $124.8 million as of May 4, 2013, $125.3 million as of February 2, 2013 and $118.0
million as of April 28, 2012. The effective income tax rate was 38.1% for the fiscal 2014 first quarter and 38.5% for last years first quarter. The decrease in the effective income tax rate for the first quarter of fiscal 2014 was
primarily due to the extension of legislation allowing for the U.S. Work Opportunity Tax Credit, in addition to favorable audit settlements in this years first quarter. The Work Opportunity Tax Credit had expired as of the first quarter last
year and was not extended until the fourth quarter of fiscal 2013.
TJX is subject to U.S. federal income tax as well as income tax in
multiple states, local and foreign jurisdictions. In nearly all jurisdictions, the tax years through fiscal 2005 are no longer subject to examination.
TJXs accounting policy classifies interest and penalties related to income tax matters as part of income tax expense. The total accrued amount on the balance sheets for interest and penalties was
$38.8 million as of May 4, 2013; $38.6 million as of February 2, 2013 and $34.0 million as of April 28, 2012.
Based on the
outcome of tax examinations or judicial or administrative proceedings, or as a result of the expiration of statute of limitations in specific jurisdictions, it is reasonably possible that unrecognized tax benefits for certain tax positions taken on
previously filed tax returns may change materially from those presented in the financial statements. During the next 12 months, it is reasonably possible that tax examinations of prior years tax returns or judicial or administrative
proceedings that reflect such positions taken by TJX may be finalized. As a result, the total net amount of unrecognized tax benefits may decrease, which would reduce the provision for taxes on earnings, by a range of $1.0 million to $50.0 million.
16