The accompanying notes are an integral part of the unaudited consolidated financial statements.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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 1,
2014 (fiscal 2014).
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 1, 2014 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 January 31,
2015 (fiscal 2015) and is a 52-week fiscal year. Fiscal 2014 was also a 52-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 options awarded and uses the market price on the grant date for performance-based restricted
stock awards. Total share-based compensation expense was $19.8 million for the quarter ended May 3, 2014 and $16.5 million for the quarter ended May 4, 2013. These amounts include stock option expense as well as restricted and deferred
stock amortization. There were options to purchase 1.1 million shares of common stock exercised during the quarter ended May 3, 2014. There were options to purchase 31.4 million shares of common stock outstanding as of May 3,
2014.
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 are classified as either short- or long-term based on their original maturities. Investments with maturities greater than 90 days but less than one year at the date of purchase are included in short-term investments.
These investments are classified as trading securities and are stated at fair value. TJXs investments are primarily high-grade commercial paper, institutional money market funds and time deposits with major banks.
As of May 3, 2014, TJXs cash and cash equivalents held outside the U.S. were $991.8 million, of which $281.9 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 at all of its divisions, except at Sierra Trading Post (STP). The retail method 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 $409.3 million at May 3, 2014, $451.6 million at February 1, 2014 and $433.5 million at May 4, 2013. Comparable amounts were reflected in accounts payable at those dates.
New Accounting Standards:
TJX has reviewed recently issued accounting pronouncements and does not expect their adoption to have a material impact on
the TJXs results of operations, financial position 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 relating to former business
operations it has closed or sold. The reserve activity is presented below:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
In thousands
|
|
May 3,
2014
|
|
|
May 4,
2013
|
|
Balance at beginning of year
|
|
$
|
31,363
|
|
|
$
|
45,229
|
|
Additions (reductions) to the reserve charged to net income:
|
|
|
|
|
|
|
|
|
A.J. Wright closing costs
|
|
|
(1,400
|
)
|
|
|
|
|
Interest accretion
|
|
|
360
|
|
|
|
360
|
|
Charges against the reserve:
|
|
|
|
|
|
|
|
|
Lease-related obligations
|
|
|
(2,079
|
)
|
|
|
(4,775
|
)
|
Termination benefits and all other
|
|
|
(4
|
)
|
|
|
(490
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
28,240
|
|
|
$
|
40,324
|
|
|
|
|
|
|
|
|
|
|
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 two to three 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 11 leases of BJs Wholesale Club, a former TJX
business, and up to 4 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. Accumulated Other Comprehensive Income (Loss)
Amounts included in accumulated other comprehensive income (loss) are recorded net of the related income tax effects. The following table
details the changes in accumulated other comprehensive income (loss) for the related periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in thousands
|
|
Foreign
Currency
Translation
|
|
|
Deferred
Benefit Costs
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Balance, February 1, 2014
|
|
$
|
(76,569
|
)
|
|
$
|
(122,963
|
)
|
|
$
|
(199,532
|
)
|
Foreign currency translation adjustments (net of taxes of $6,144)
|
|
|
36,091
|
|
|
|
|
|
|
|
36,091
|
|
Amortization of deferred benefit costs (net of taxes of $1,079)
|
|
|
|
|
|
|
1,618
|
|
|
|
1,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 3, 2014
|
|
$
|
(40,478
|
)
|
|
$
|
(121,345
|
)
|
|
$
|
(161,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note D. Capital Stock and Earnings Per Share
Capital Stock:
TJX repurchased and retired 6.0 million shares of its common stock at a cost of $360.0 million during the quarter
ended May 3, 2014, on a trade date basis. TJX reflects stock repurchases in its financial statements on a settlement date or cash basis. TJX had cash expenditures under repurchase programs of $360.0 million for the three
months ended May 3, 2014 and $302.6 million for the three months ended May 4, 2013.
In February 2013, TJXs Board of Directors
approved a stock repurchase program that authorized the repurchase of up to an additional $1.5 billion of TJX common stock from time to time. Under this program, on a trade date basis through May 3, 2014, TJX repurchased
14.6 million shares of common stock at a cost of $890.2 million. At May 3, 2014 $609.8 million remained available for purchase under this program.
8
All shares repurchased under the stock repurchase programs have been retired.
In January 2014, TJXs Board of Directors approved an additional repurchase program authorizing the repurchase of up to an additional $2.0 billion of TJX
common stock from time to time.
TJX has five million shares of authorized but unissued preferred stock, $1 par value.
Earnings per share:
The following schedule presents the calculation of basic and diluted earnings per share (EPS) for net income:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
May 3,
2014
|
|
|
May 4,
2013
|
|
In thousands, except per share data
|
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
454,317
|
|
|
$
|
452,890
|
|
Weighted average common shares outstanding for basic EPS
|
|
|
701,027
|
|
|
|
719,528
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.65
|
|
|
$
|
0.63
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
454,317
|
|
|
$
|
452,890
|
|
|
|
|
Shares for basic and diluted earnings per share calculations:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic EPS
|
|
|
701,027
|
|
|
|
719,528
|
|
Assumed exercise/vesting of:
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
11,875
|
|
|
|
13,027
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for diluted EPS
|
|
|
712,902
|
|
|
|
732,555
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.64
|
|
|
$
|
0.62
|
|
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 4.2 million
such options excluded for the thirteen weeks ended May 3, 2014. There were 4.8 million such options excluded for the thirteen weeks ended May 4, 2013.
Note E. 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 rates 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.
9
Diesel Fuel Contracts:
TJX hedges portions of its estimated notional diesel requirements, based on the
diesel fuel expected to be consumed by independent freight carriers transporting TJXs inventory. Independent freight carriers transporting TJXs inventory charge TJX a mileage surcharge for diesel fuel price increases as incurred by the
carrier. The hedge agreements are designed to mitigate the volatility of diesel fuel pricing (and the resulting per mile surcharges payable by TJX) by setting a fixed price per gallon for the period being hedged. During fiscal 2014 and the first
quarter of fiscal 2015, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2015. The hedge agreements outstanding at May 3, 2014 relate to approximately 49% of TJXs estimated notional
diesel requirements for the remainder of fiscal 2015. These diesel fuel hedge agreements will settle throughout fiscal 2015. TJX elected not to apply hedge accounting rules to these contracts.
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 3, 2014 cover a portion of such actual and anticipated merchandise purchases throughout fiscal 2015. TJX elected not to apply hedge accounting rules to these contracts.
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.
10
The following is a summary of TJXs derivative financial instruments, related fair value and balance sheet
classification at May 3, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 3, 2014
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany balances, primarily short-term debt and related interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
zł 87,073
|
|
|
C$
|
30,585
|
|
|
|
0.3513
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
$
|
26
|
|
|
$
|
(651
|
)
|
|
$
|
(625
|
)
|
|
|
|
39,000
|
|
|
£
|
32,369
|
|
|
|
0.8300
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
513
|
|
|
|
(49
|
)
|
|
|
464
|
|
|
|
|
44,850
|
|
|
U.S.$
|
61,842
|
|
|
|
1.3789
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(350
|
)
|
|
|
(350
|
)
|
|
|
|
U.S.$ 90,309
|
|
|
£
|
55,000
|
|
|
|
0.6090
|
|
|
Prepaid Exp
|
|
|
2,248
|
|
|
|
|
|
|
|
2,248
|
|
|
|
|
|
|
|
|
|
Economic hedges for which hedge accounting was not elected:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diesel contracts
|
|
|
Fixed on 1.6M
- 1.8M gal per
month
|
|
|
|
Float on 1.6M
- 1.8M gal per
month
|
|
|
|
N/A
|
|
|
Prepaid Exp
|
|
|
1,001
|
|
|
|
|
|
|
|
1,001
|
|
Merchandise purchase commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C$ 411,075
|
|
|
U.S.$
|
374,675
|
|
|
|
0.9115
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
3,346
|
|
|
|
(2,621
|
)
|
|
|
725
|
|
|
|
|
C$ 15,483
|
|
|
|
10,200
|
|
|
|
0.6588
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
56
|
|
|
|
(8
|
)
|
|
|
48
|
|
|
|
|
£ 145,258
|
|
|
U.S.$
|
236,200
|
|
|
|
1.6261
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(8,698
|
)
|
|
|
(8,698
|
)
|
|
|
|
zł 128,099
|
|
|
£
|
25,079
|
|
|
|
0.1958
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
265
|
|
|
|
(54
|
)
|
|
|
211
|
|
|
|
|
U.S.$ 23,376
|
|
|
|
17,001
|
|
|
|
0.7273
|
|
|
Prepaid Exp /
(Accrued Exp)
|
|
|
207
|
|
|
|
(8
|
)
|
|
|
199
|
|
|
|
|
U.S.$ 844
|
|
|
¥
|
5,138
|
|
|
|
6.0877
|
|
|
(Accrued Exp)
|
|
|
|
|
|
|
(24
|
)
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of financial instruments
|
|
|
|
|
|
|
|
|
$
|
7,662
|
|
|
$
|
(12,463
|
)
|
|
$
|
(4,801
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Presented below is the impact of derivative financial instruments on the statements of income for the periods
shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss)
Recognized in Income by
Derivative
|
|
Amount of Gain (Loss) Recognized
in Income by Derivative
|
|
|
|
|
Thirteen Weeks Ended
|
|
In thousands
|
|
|
May 3, 2014
|
|
|
May 4, 2013
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany balances, primarily short-term debt and related interest
|
|
Selling, general and
administrative expenses
|
|
$
|
(58
|
)
|
|
$
|
6,286
|
|
|
|
|
|
Economic hedges for which hedge accounting was not elected:
|
|
|
|
|
|
|
|
|
|
|
Diesel contracts
|
|
Cost of sales, including buying
and occupancy costs
|
|
|
1,226
|
|
|
|
(2,961
|
)
|
|
|
|
|
Merchandise purchase commitments
|
|
Cost of sales, including buying
and occupancy costs
|
|
|
(12,318
|
)
|
|
|
1,007
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain recognized in income
|
|
|
|
$
|
(11,150
|
)
|
|
$
|
4,332
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the table above are realized gains of $7.2 million in the first quarter of fiscal 2015 and gains of $10.6 million
in the first quarter of fiscal 2014 all of which were largely offset by gains and losses on the underlying hedged item.
13
Note F. 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 3,
2014
|
|
|
February 1,
2014
|
|
|
May 4,
2013
|
|
Level 1
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Savings Plan investments
|
|
$
|
144,587
|
|
|
$
|
131,049
|
|
|
$
|
114,106
|
|
Level 2
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
$
|
259,887
|
|
|
$
|
294,702
|
|
|
$
|
238,043
|
|
Foreign currency exchange contracts
|
|
|
6,661
|
|
|
|
19,482
|
|
|
|
2,910
|
|
Diesel fuel contracts
|
|
|
1,001
|
|
|
|
137
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
$
|
12,463
|
|
|
$
|
6,107
|
|
|
$
|
11,168
|
|
Diesel fuel contracts
|
|
|
|
|
|
|
|
|
|
|
427
|
|
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 at May 3, 2014 was $1.35 billion compared to a carrying
value of $1.27 billion. The fair value of long-term debt as of February 1, 2014 was $1.34 billion compared to a carrying value of $1.27 billion. The fair value of
long-term
debt as of May 4, 2013 was
$1.41 billion compared to a carrying value of $1.27 billion. 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.
14
Note G. Segment Information
TJX operates four main business segments. The Marmaxx segment (T.J. Maxx, Marshalls and tjmaxx.com) and the HomeGoods segment both operate
in the United States, the TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and the TJX Europe segment operates T.K. Maxx, HomeSense and tkmaxx.com in Europe. Late in fiscal 2013 TJX acquired STP, an off-price Internet retailer
in the U.S. The results of STP are included in the Marmaxx segment.
All of TJXs stores, with the exception of HomeGoods and HomeSense, sell family
apparel and home fashions. HomeGoods and HomeSense offer home fashions.
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, net. 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 3,
2014
|
|
|
May 4,
2013
|
|
Net sales:
|
|
|
|
|
|
|
|
|
In the United States:
|
|
|
|
|
|
|
|
|
Marmaxx
|
|
$
|
4,234,755
|
|
|
$
|
4,135,749
|
|
HomeGoods
|
|
|
757,152
|
|
|
|
689,530
|
|
TJX Canada
|
|
|
608,420
|
|
|
|
645,496
|
|
TJX Europe
|
|
|
890,849
|
|
|
|
718,834
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,491,176
|
|
|
$
|
6,189,609
|
|
|
|
|
|
|
|
|
|
|
Segment profit:
|
|
|
|
|
|
|
|
|
In the United States:
|
|
|
|
|
|
|
|
|
Marmaxx
|
|
$
|
623,074
|
|
|
$
|
634,300
|
|
HomeGoods
|
|
|
98,205
|
|
|
|
89,063
|
|
TJX Canada
|
|
|
44,023
|
|
|
|
74,306
|
|
TJX Europe
|
|
|
38,261
|
|
|
|
16,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
803,563
|
|
|
|
814,033
|
|
|
|
|
General corporate expense
|
|
|
63,437
|
|
|
|
76,866
|
|
Interest expense, net
|
|
|
9,595
|
|
|
|
5,282
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
$
|
730,531
|
|
|
$
|
731,885
|
|
|
|
|
|
|
|
|
|
|
15
Note H. Pension Plans and Other Retirement Benefits
Presented below is financial information related to TJXs funded defined benefit pension plan (qualified pension plan or funded plan)
and its unfunded supplemental retirement plan (unfunded plan) for the periods shown.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded Plan
|
|
|
Unfunded Plan
|
|
|
|
Thirteen Weeks Ended
|
|
|
Thirteen Weeks Ended
|
|
In thousands
|
|
May 3,
2014
|
|
|
May 4,
2013
|
|
|
May 3,
2014
|
|
|
May 4,
2013
|
|
Service cost
|
|
$
|
10,123
|
|
|
$
|
11,274
|
|
|
$
|
450
|
|
|
$
|
521
|
|
Interest cost
|
|
|
12,297
|
|
|
|
11,325
|
|
|
|
694
|
|
|
|
593
|
|
Expected return on plan assets
|
|
|
(16,303
|
)
|
|
|
(14,624
|
)
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Recognized actuarial losses
|
|
|
3,257
|
|
|
|
6,918
|
|
|
|
303
|
|
|
|
560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
$
|
9,374
|
|
|
$
|
14,893
|
|
|
$
|
1,448
|
|
|
$
|
1,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2015 for the funded plan. TJX anticipates making payments of $3.4 million to provide current benefits coming due under the unfunded plan in fiscal 2015.
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.
TJX also has an unfunded postretirement
medical plan which was closed to new benefits in fiscal 2006. The liability as of May 3, 2014 is estimated at $1.2 million, all of which is included in non-current liabilities on the balance sheet.
The amendment to the plan benefits in fiscal 2006 resulted in a negative plan amendment which is being amortized to income over the estimated average
remaining life of the active plan participants. Amortization from other comprehensive income to net income was $864,226 for the thirteen weeks ended May 3, 2014 and $862,856 for the thirteen weeks ended May 4, 2013.
Note I. Long-Term Debt and Credit Lines
At May 3, 2014, TJX had outstanding $500 million aggregate principal amount of 2.50% ten-year notes due May 2023, $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 $250 million of the
2.50% notes, 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 2.57% for the 2.50% notes, 7.00% for the 6.95% notes and 4.19% for the 4.20% notes.
At May 3, 2014, TJX had two $500 million
revolving credit facilities, one which matures in June 2017 and one which matures in May 2016. As of May 3, 2014, February 1, 2014 and May 4, 2013 and during the quarters and year then ended, there were no amounts outstanding
under these facilities. At May 3, 2014 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 specified changes in the credit ratings. These agreements have no compensating balance requirements and have various covenants. Each of these facilities requires TJX to
maintain a ratio of funded debt
16
and four-times consolidated rentals to consolidated earnings before interest, taxes, consolidated rentals, depreciation and amortization (EBITDAR) of not more that 2.75 to 1.00 on a
rolling four-quarter basis. TJX was in compliance with all covenants related to its credit facilities at the end of all periods presented.
As of
May 3, 2014, February 1, 2014 and May 4, 2013, 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 3, 2014, February 1, 2014 and May 4, 2013, and during the quarters and year then ended there were no amounts outstanding on the Canadian credit line for operating expenses. As of May 3,
2014, February 1, 2014 and May 4, 2013, TJX Europe had a credit line of £20 million. As of May 3, 2014, February 1, 2014, and May 4, 2013, and during the quarters and year then ended there were no amounts
outstanding on the European credit line.
Note J. Income Taxes
The effective income tax rate was 37.8% for the fiscal 2015 first quarter and 38.1% for last years first quarter. The decrease in the
effective income tax rate for the first quarter of fiscal 2015 was primarily due to the jurisdictional mix of income, partially offset by the expiration of legislation allowing for the U.S. Work Opportunity Tax Credit. The Work Opportunity Tax
Credit expired on December 31, 2013.
TJX had net unrecognized tax benefits, net of federal benefit on state issues of $27.0 million as of
May 3, 2014, $26.2 million as of February 1, 2014 and $124.8 million as of May 4, 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 2006 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 $8.5 million as of May 3, 2014; $8.1 million as of February 1, 2014 and $38.8 million as of May 4, 2013.
Based on the final resolution of tax examinations, judicial or administrative proceedings, changes in facts or law, expirations of statute of limitations in
specific jurisdictions or other resolutions of, or changes in, tax positions, it is reasonably possible that unrecognized tax benefits for certain tax positions taken on previously filed tax returns may change materially from those represented on
the financial statements as of May 3, 2014. During the next twelve months, it is reasonably possible that such circumstances may occur that would have a material effect on previously unrecognized tax benefits. 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 $0 million to $11.0 million.
On
September 13, 2013 the U.S. Department of the Treasury and Internal Revenue Service released final tangible property regulations that provide guidance on the tax treatment regarding the deduction and capitalization of expenditures related to
tangible property. The effective date to implement these regulations is for tax years beginning on or after January 1, 2014. TJX is currently assessing these rules and the impact to its financial statements, if any, but believes adoption of
these regulations will not have a material impact on its consolidated results of operations, cash flows or financial position.
17