e10vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[ x ] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended January 26, 2008
or
[ ] Transition Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period
from to
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Commission file number
1-4908
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THE TJX COMPANIES, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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04-2207613
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(State or other jurisdiction of incorporation or
organization) (IRS
Employer Identification No.)
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770 Cochituate Road
Framingham, Massachusetts
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01701
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(Address of principal executive
offices)
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(Zip Code)
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Registrants telephone number, including area code
(508) 390-1000
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
Common
Stock, par value $1.00 per share
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Name of each exchange
on which registered
New
York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
YES [ x ] NO [ ]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act.
YES [ ] NO [ x ]
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 [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company. See definition of
accelerated filer and large accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
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Large Accelerated Filer [ x ]
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Accelerated Filer [ ]
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Non-Accelerated Filer [ ]
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Smaller Reporting Company [ ]
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Act).
YES [ ] NO [ x ]
The aggregate market value of the voting common stock held by
non-affiliates of the registrant on July 28, 2007 was
$12,085,221,009, based on the closing sale price as reported on
the New York Stock Exchange.
There were 427,949,533 shares of the registrants
common stock, $1.00 par value, outstanding as of
January 26, 2008.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities
and Exchange Commission in connection with the Annual Meeting of
Stockholders to be held on June 3, 2008 (Part III).
TABLE OF CONTENTS
PART I
Business
Overview
We are the leading off-price retailer of apparel and home
fashions in the United States and worldwide. Our T.J. Maxx,
Marshalls and A.J. Wright chains in the United States, our
Winners chain in Canada, and our T.K. Maxx chain in Europe sell
off-price family apparel and home fashions. Our HomeGoods chain
in the United States and our HomeSense chain, operated by
Winners in Canada, sell off-price home fashions. The target
customer for all of our off-price chains, except A.J. Wright, is
the middle-to upper-middle income shopper, with the same profile
as a department or specialty store customer. A.J. Wright targets
the moderate-income customer. Our seven off-price chains are
synergistic in their philosophies and operating platforms. Our
eighth chain, Bobs Stores, was acquired in December 2003
and is a value-oriented, branded apparel chain based in the
Northeastern United States that offers casual, family apparel.
Bobs Stores target customer demographic spans the
moderate-to upper-middle income bracket.
Our off-price mission is to deliver an exciting, fresh and
rapidly changing assortment of brand-name merchandise at
excellent values to our customers. We define value as the
combination of quality, brand, fashion and price. With over 500
buyers, 10,000 vendors worldwide and over 2,500 stores, we
believe we are well positioned to continue accomplishing this
goal. Our key strengths include:
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synergistic businesses with flexible, resilient business models
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history of growth in various types of retail environments
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expertise in off-price buying
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substantial buying power
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track record of successful expansion into new geographies and
merchandise categories
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solid relationships with many manufacturers and other
merchandise suppliers
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deep organization with decades of experience in off-price
retailing as well as other forms of retailing
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inventory management systems and distribution networks specific
to our off-price business model
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financial strength and excellent credit rating
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As an off-price retailer, we offer quality, name brand and
designer family apparel and home fashions every day at
substantial savings to comparable department and specialty store
regular prices. We can offer these everyday savings as a result
of our opportunistic buying strategies, disciplined inventory
management, including rapid inventory turns, and low expense
structure.
In our off-price apparel chains, we purchase the majority of our
inventory opportunistically. Opportunistic purchases are also a
significant factor in our home fashion businesses but to a
lesser extent. In contrast to traditional retailers that order
goods far in advance of the time they appear on the selling
floor, TJX buyers are in the marketplace virtually every week,
buying primarily for the current selling season. By maintaining
a liquid inventory position, our buyers can buy close to need,
enabling them to buy into current market trends and take
advantage of the opportunities in the marketplace. Due to the
unpredictable nature of consumer demand in the highly fragmented
apparel and home fashions marketplace and the mismatch of supply
and demand, we are regularly able to buy the vast majority of
our inventory directly from manufacturers, with some merchandise
coming from other retailers and other sources. We purchase
virtually all of our inventory for our off-price stores at
discounts from initial wholesale prices. Although we generally
purchase merchandise for our off-price chains to sell in the
current season, we purchase a limited quantity of pack away
merchandise that we buy specifically to warehouse and sell in a
future selling season. We are willing to purchase less than a
full assortment of styles and sizes. We pay promptly and do not
ask for typical retail concessions in our off-price chains such
as advertising, promotional and markdown allowances, or delivery
concessions such as drop shipments to stores or delayed
deliveries or return privileges. Our financial strength, strong
reputation and ability to purchase large quantities of
merchandise and sell it through our geographically diverse
network of stores provide us excellent access to leading branded
merchandise. Our opportunistic buying permits us to consistently
offer our customers in our off-price chains a rapidly changing
merchandise assortment at everyday values that are below
department and specialty store regular prices.
We are extremely disciplined in our inventory management, and we
rapidly turn the inventory in our off-price chains. We rely
heavily on sophisticated, internally developed inventory systems
and controls that permit a virtually continuous flow of
merchandise into our stores and an expansive distribution
infrastructure that supports our close-to-need buying by
delivering goods to our stores quickly and efficiently. For
example, highly automated storage and distribution systems
2
track, allocate and deliver an average of approximately 11,000
items per week to each T.J. Maxx and Marshalls store. In
addition, specialized computer inventory planning, purchasing
and monitoring systems, coupled with warehouse storage,
processing, handling and shipping systems, permit a continuous
evaluation and rapid replenishment of store inventory. Pricing,
markdown decisions and store inventory replenishment
requirements are determined centrally, using information
provided by point-of-sale computer terminals and are designed to
move inventory through our stores in a timely and disciplined
manner. These inventory management and distribution systems
allow us to achieve rapid in-store inventory turnover on a vast
array of product and sell substantially all merchandise within
targeted selling periods.
We operate with a low cost structure relative to many other
retailers. Our stores are generally located in community
shopping centers. While we seek to provide a pleasant, easy
shopping environment with an emphasis on customer convenience,
we do not spend heavily on store fixtures. Our selling floor
space is flexible, without walls between departments and largely
free of permanent fixtures, so we can easily expand and contract
departments in response to customer demand, available
merchandise and fashion trends. Also, our large retail presence,
strong financial position and expertise in the real estate
market allow us generally to obtain favorable lease terms. In
our off-price chains, our advertising budget as a percentage of
sales remains low compared to traditional department and
specialty stores. Our high
sales-per-square-foot
productivity and rapid inventory turnover also provide expense
efficiencies.
With all of our off-price chains operating with the same
off-price strategies and systems, we are able to capitalize upon
expertise, best practices, initiatives and new ideas across our
chains, develop associates by transferring them from one chain
to another, and grow our various businesses more efficiently and
effectively.
During the fiscal year ended January 26, 2008, we derived
77% of our sales from the United States, including Puerto Rico
(27% from the Northeast, 13% from the Midwest, 22% from the
South, 1% from the Central Plains, 13% from the West and 1% from
Puerto Rico) and 23% from foreign countries (11% from Canada,
12% from Europe (the United Kingdom, Ireland, and Germany)). By
merchandise category, we derived approximately 63% of our sales
from apparel (including footwear), 25% from home fashions and
12% from jewelry and accessories.
We consider each of our operating divisions to be a segment. The
T.J. Maxx and Marshalls store chains are managed as one
division, referred to as Marmaxx, and are reported as a single
segment. The Winners and HomeSense chains, which operate
exclusively in Canada, are also managed as one division and are
reported as a single segment. Each of our other store chains,
T.K. Maxx, HomeGoods, A.J. Wright, and Bobs Stores is
operated as a division and reported as a separate segment. More
detailed information about our segments, including financial
information for each of the last three fiscal years, can be
found in Note O to the consolidated financial statements.
Unless otherwise indicated, all store information is as of
January 26, 2008, and references to store square footage
are to gross square feet. Fiscal 2006 means the fiscal year
ended January 28, 2006, fiscal 2007 means the fiscal year
ended January 27, 2007, fiscal 2008 means the fiscal year
ended January 26, 2008 and fiscal 2009 means the fiscal
year ending January 31, 2009.
Segment
Overview
MARMAXX
(T.J. MAXX AND MARSHALLS)
Marmaxx operates the largest off-price retailers in the United
States, T.J. Maxx and Marshalls, with 847 T.J. Maxx stores in
48 states and 762 Marshalls stores in 42 states
and 14 in Puerto Rico, at fiscal 2008 year-end. We maintain
the separate identities of the T.J. Maxx and Marshalls stores
through product assortment, in-store initiatives, marketing and
store appearance. This encourages our customers to shop at both
chains.
T.J. Maxx and Marshalls primarily target female shoppers who
have families with middle to upper-middle incomes and who
generally fit the profile of a department or specialty store
customer. These chains operate with a common buying and
merchandising organization and have a consolidated
administrative function, including finance and human resources.
The combined organization, known internally as The Marmaxx
Group, offers us increased leverage to purchase merchandise at
favorable prices and allows us to operate with a lower cost
structure. These advantages are key to our ability to sell
quality, brand name merchandise at substantial discounts from
department and specialty store regular prices.
T.J. Maxx and Marshalls sell quality, brand name and designer
merchandise at prices generally 20%-60% below department and
specialty store regular prices. Both chains offer family
apparel, accessories, giftware, and home fashions. Within these
broad categories, T.J. Maxx offers a shoe assortment for women
and fine jewelry, while Marshalls offers a full-line footwear
department and a larger mens department. We believe these
expanded offerings further differentiate the shopping experience
at T.J. Maxx and Marshalls, driving traffic to both chains.
3
T.J. Maxx and Marshalls stores are generally located in suburban
community shopping centers. T.J. Maxx stores average
approximately 30,000 square feet. Marshalls stores average
approximately 32,000 square feet. We currently expect to
add a net of approximately 45 stores in fiscal 2009. Ultimately,
we believe that T.J. Maxx and Marshalls together can operate
approximately 2,000 stores in the United States and Puerto Rico,
an increase of approximately 200 stores over our previous
estimate.
HOMEGOODS
HomeGoods is our off-price retail chain that sells exclusively
home fashions with a broad array of giftware, home basics,
accent furniture, lamps, rugs, accessories, childrens
furniture, and seasonal merchandise for the home. Many of the
HomeGoods stores are stand-alone stores; however, we also
combine HomeGoods stores with a T.J. Maxx or Marshalls store in
a superstore format, the majority of which are dual-branded,
with both the T.J. Maxx or Marshalls logo and the HomeGoods
logo. In fiscal 2008, we continued to open a different
superstore format, called a combo store, in which a
HomeGoods store is located beside a T.J. Maxx or Marshalls
store, with interior passageways providing access between the
stores. This configuration is also dual-branded with both the
T.J. Maxx or Marshalls logo and the HomeGoods logo.
Stand-alone HomeGoods stores average approximately
27,000 square feet. In superstores, which average
approximately 53,000 square feet, we dedicate an average of
22,000 square feet to HomeGoods. The 289 stores open at the
end of fiscal 2008 include 156 stand-alone stores, 105
superstores and 28 combo stores. In fiscal 2009, we plan to
net 25 additional stores. We believe that the
U.S. market could potentially support approximately 550 to
600 HomeGoods stores in the long term.
WINNERS
AND HOMESENSE
Winners is the leading off-price retailer in Canada, offering
off-price brand name and designer family apparel, accessories,
including fine jewelry, home fashions and giftware. Winners
operates HomeSense, our Canadian off-price home fashions chain,
launched in fiscal 2001. Like our HomeGoods chain, HomeSense
offers a wide and rapidly changing assortment of off-price home
fashions including giftware, home basics, accent furniture,
lamps, rugs, accessories and seasonal merchandise. We operate
HomeSense in a stand-alone format, as well as a superstore
format where a HomeSense store and a Winners store are combined
or operate
side-by-side.
At fiscal 2008 year end, we operated 191 Winners stores,
which averaged approximately 29,000 square feet and 71
HomeSense stores, which averaged approximately
24,000 square feet. We expect to add a net of 16 stores in
Canada in fiscal 2009, in the stand-alone and superstore format
as well as the introduction of a new off-price concept.
Ultimately, we believe the Canadian market can support
approximately 230 Winners stores and approximately 80 HomeSense
stores.
T.K.
MAXX
T.K. Maxx, operating in the United Kingdom, Ireland and Germany,
is the only major off-price retailer in any European country.
T.K. Maxx utilizes the same off-price strategies employed by
T.J. Maxx, Marshalls and Winners and offers the same types of
merchandise. At the end of fiscal 2008, we operated 221 T.K.
Maxx stores in the U.K. and Ireland and 5 in Germany, which
averaged approximately 31,000 square feet. We expect to add
a total of 10 T.K. Maxx stores in the U.K. and Ireland in fiscal
2009 and believe that the U.K. and Ireland can support
approximately 275 stores in the long term. In the fall of fiscal
2008, we opened our first 5 T.K. Maxx stores in Germany, and we
expect to open an additional 5 stores in Germany in fiscal 2009
for a total of 10 stores in that country by the end of the year.
Additionally, T.K. Maxx expects to open its first 5 HomeSense
stores in the U.K. in fiscal 2009, which will mark the launch of
our Canadian HomeSense concept in Europe.
A.J.
WRIGHT
A.J. Wright offers our off-price concept to the moderate income
customer demographic, which differentiates this chain from our
other off-price divisions. A.J. Wright stores offer brand-name
family apparel, including accessories and footwear, as well as
home fashions and giftware, including toys and games, and
special, opportunistic purchases. A.J. Wright stores average
approximately 26,000 square feet. We operated 129 A.J.
Wright stores in the United States at fiscal 2008 year end.
In fiscal 2009, we anticipate opening a net of 5 stores in
existing markets. Although we are continuing to temper the rate
at which we grow this chain, we believe that the customer
demographics of the A.J. Wright concept could ultimately support
approximately 1,000 A.J. Wright stores in the U.S.
BOBS
STORES
Bobs Stores, acquired in late 2003, offers casual, family
apparel and footwear, including workwear, activewear, and
licensed team apparel. Bobs Stores customer
demographics span the moderate to upper-middle income bracket.
Bobs Stores operated 34 stores at the end of fiscal 2008,
with an average size of 46,000 square feet. We do not plan
to open any new stores for this division in fiscal 2009 as we
continue to evaluate this business.
4
Store
Locations
We operated stores in the following locations as of
January 26, 2008:
STORES
LOCATED IN THE UNITED STATES:
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T.J. Maxx*
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Marshalls*
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HomeGoods*
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A. J. Wright
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Bobs Stores
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Alabama
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18
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6
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2
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-
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-
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Arizona
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10
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14
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4
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Arkansas
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8
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1
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California
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73
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103
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31
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7
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-
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Colorado
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11
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7
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3
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-
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Connecticut
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25
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23
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10
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5
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13
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Delaware
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3
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3
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1
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-
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District of Columbia
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1
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-
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1
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Florida
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59
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66
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28
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2
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Georgia
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33
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28
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9
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Idaho
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5
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1
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1
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-
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Illinois
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37
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39
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14
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17
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-
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Indiana
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17
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10
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2
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8
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-
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Iowa
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6
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2
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-
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Kansas
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6
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3
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1
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Kentucky
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9
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4
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3
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2
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-
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Louisiana
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7
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9
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-
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-
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Maine
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7
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4
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3
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-
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-
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Maryland
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11
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23
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7
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5
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-
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Massachusetts
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47
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47
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21
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20
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11
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Michigan
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33
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20
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9
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8
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-
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Minnesota
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12
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12
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8
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-
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-
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Mississippi
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5
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2
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-
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-
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-
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Missouri
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13
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12
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6
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-
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-
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Montana
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3
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-
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-
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-
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-
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Nebraska
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4
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2
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-
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-
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-
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Nevada
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6
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7
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3
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-
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-
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New Hampshire
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14
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9
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5
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1
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3
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New Jersey
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30
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39
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21
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7
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3
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New Mexico
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3
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2
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-
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-
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-
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New York
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47
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57
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19
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17
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3
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North Carolina
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25
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20
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10
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-
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North Dakota
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3
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-
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-
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Ohio
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38
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18
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9
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8
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-
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Oklahoma
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4
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3
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-
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Oregon
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7
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5
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3
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|
|
-
|
|
|
|
-
|
|
Pennsylvania
|
|
|
39
|
|
|
|
30
|
|
|
|
9
|
|
|
|
6
|
|
|
|
-
|
|
Puerto Rico
|
|
|
-
|
|
|
|
14
|
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
Rhode Island
|
|
|
5
|
|
|
|
6
|
|
|
|
4
|
|
|
|
2
|
|
|
|
1
|
|
South Carolina
|
|
|
19
|
|
|
|
9
|
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
South Dakota
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Tennessee
|
|
|
25
|
|
|
|
14
|
|
|
|
6
|
|
|
|
3
|
|
|
|
-
|
|
Texas
|
|
|
38
|
|
|
|
61
|
|
|
|
9
|
|
|
|
-
|
|
|
|
-
|
|
Utah
|
|
|
10
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
Vermont
|
|
|
4
|
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
Virginia
|
|
|
30
|
|
|
|
24
|
|
|
|
7
|
|
|
|
8
|
|
|
|
-
|
|
Washington
|
|
|
15
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
West Virginia
|
|
|
4
|
|
|
|
2
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
Wisconsin
|
|
|
16
|
|
|
|
7
|
|
|
|
6
|
|
|
|
2
|
|
|
|
-
|
|
Wyoming
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Total Stores
|
|
|
847
|
|
|
|
776
|
|
|
|
289
|
|
|
|
129
|
|
|
|
34
|
|
|
|
|
|
|
*
|
|
Includes T.J. Maxx, Marshalls or
HomeGoods portion of a superstore.
|
5
STORES
LOCATED IN CANADA:
|
|
|
|
|
|
|
|
|
|
|
Winners*
|
|
|
HomeSense*
|
|
|
|
|
Alberta
|
|
|
23
|
|
|
|
8
|
|
British Columbia
|
|
|
25
|
|
|
|
12
|
|
Manitoba
|
|
|
6
|
|
|
|
1
|
|
New Brunswick
|
|
|
3
|
|
|
|
2
|
|
Newfoundland
|
|
|
2
|
|
|
|
1
|
|
Nova Scotia
|
|
|
6
|
|
|
|
2
|
|
Ontario
|
|
|
88
|
|
|
|
34
|
|
Prince Edward Island
|
|
|
1
|
|
|
|
-
|
|
Quebec
|
|
|
34
|
|
|
|
10
|
|
Saskatchewan
|
|
|
3
|
|
|
|
1
|
|
|
|
Total Stores
|
|
|
191
|
|
|
|
71
|
|
|
|
|
|
|
*
|
|
Includes Winners or HomeSense
portion of a superstore.
|
STORES
LOCATED IN EUROPE:
|
|
|
|
|
|
|
T.K. Maxx
|
|
|
|
|
United Kingdom
|
|
|
210
|
|
Republic of Ireland
|
|
|
11
|
|
Germany
|
|
|
5
|
|
|
|
Total Stores
|
|
|
226
|
|
|
|
Other
Information
EMPLOYEES
At January 26, 2008, we had approximately
129,000 employees, many of whom work less than
40 hours per week. In addition, we hire temporary employees
during the peak back-to-school and holiday seasons.
CREDIT
Our stores operate primarily on a
cash-and-carry
basis. Each chain accepts credit sales through programs offered
by banks and others. Our co-branded TJX card program for our
domestic divisions offered by a major bank expired
January 31, 2007, as scheduled. We now offer a new
co-branded TJX credit card program, as well as a private label
customer credit card with a different major bank. We do not
maintain customer credit receivables related to either program.
The rewards program associated with these credit cards is
partially funded by TJX.
BUYING
AND DISTRIBUTION
We operate a centralized buying organization that services both
the T.J. Maxx and Marshalls chains, while each of our other
chains has its own centralized buying organization. All of our
chains are serviced through their own distribution networks,
including the use of third party providers at our HomeGoods and
Winners divisions.
TRADEMARKS
We have the right to use our principal trademarks and service
marks, which are T.J. Maxx, Marshalls, HomeGoods, Winners,
HomeSense, T.K. Maxx, A.J. Wright and Bobs Stores, in
relevant countries. Our rights in these trademarks and service
marks endure for as long as they are used.
SEASONALITY
Our business is subject to seasonal influences, which causes us
generally to realize higher levels of sales and income in the
second half of the year. This is common in the apparel retail
business.
COMPETITION
The retail apparel and home fashion business is highly
competitive. We compete on the basis of fashion, quality, price,
value, merchandise selection and freshness, brand name
recognition and, to a lesser degree, store location. We compete
with local, regional, national and international department,
specialty, off-price, discount and outlet stores as well as
other retailers
6
that sell apparel, accessories, home fashions, giftware and
other merchandise that we sell, whether in stores, through
catalogues or media or over the internet. We purchase most of
our inventory opportunistically and compete for that merchandise
with other off-price apparel and outlet retailers. We also
compete with other retailers for associates and for store
locations.
SEC
FILINGS AND CERTIFICATIONS
Copies of our annual reports on
Form 10-K,
proxy statements, quarterly reports on
Form 10-Q
and current reports on
Form 8-K,
and any amendments to those filings pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the Exchange Act), are available
free of charge on our website, www.tjx.com, under SEC
Filings, as soon as reasonably practicable after they are
filed electronically with the Securities and Exchange Commission
(the SEC). They are also available free of charge
from TJX Investor Relations, 770 Cochituate Road, Framingham,
Massachusetts, 01701.
The Annual CEO Certification for the fiscal year ended
January 27, 2007, as required by Section 303A.12(a) of
the Listed Company Manual of the New York Stock Exchange
(NYSE), regarding our compliance with the corporate
governance listing standards of the NYSE, was submitted to the
NYSE on July 3, 2007.
We have filed the Sarbanes-Oxley Act Section 302
Certifications as an exhibit to this
Form 10-K.
ITEM 1A. RISK
FACTORS
The statements in this Section describe the major risks to our
business and should be considered carefully, in connection with
all of the other information set forth in this annual report on
Form 10-K.
In addition, these statements constitute our cautionary
statements under the Private Securities Litigation Reform Act of
1995.
Our disclosure and analysis in this 2007
Form 10-K
and in our 2007 Annual Report to Shareholders contain some
forward-looking statements, including some of the statements
made under Item 1, Business, Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operations, and Item 8,
Financial Statements and Supplementary Data, and in
our 2007 Annual Report to Stockholders under Letter to
Shareholders and Financial Graphs. From time
to time, we also provide forward-looking statements in other
materials we release to the public as well as oral
forward-looking statements. Such statements give our current
expectations or forecasts of future events; they do not relate
strictly to historical or current facts. We have generally
identified such statements by using words such as
anticipate, estimate,
expect, project, intend,
plan, believe, will,
target, forecast and similar expressions
in connection with any discussion of future operating or
financial performance. All statements that address activities,
events or developments that we intend, expect or believe may
occur in the future are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. In
particular, these include statements relating to future actions,
future performance or results of current and anticipated sales,
expenses, interest rates, foreign exchange rates, the outcome of
contingencies, such as legal proceedings, and financial results.
We cannot guarantee that any forward-looking statement will be
realized. Achievement of future results is subject to risks,
uncertainties and potentially inaccurate assumptions. Should
known or unknown risks or uncertainties materialize, or should
underlying assumptions prove inaccurate, actual results could
differ materially from past results and those anticipated,
estimated or projected. You should bear this in mind as you
consider forward-looking statements.
We undertake no obligation to publicly update forward-looking
statements, whether as a result of new information, future
events or otherwise. You are advised, however, to consult any
further disclosures we make on related subjects in our
Form 10-Q
and 8-K
reports to the SEC. The risks that follow, individually or in
the aggregate, are those that we think could cause our actual
results to differ materially from those stated or implied in
forward-looking statements. You should understand that it is not
possible to predict or identify all such factors. Consequently,
you should not consider the following to be a complete
discussion of all potential risks or uncertainties.
Our
revenue growth could be adversely affected if we do not continue
to expand our operations successfully.
We have steadily expanded the number of chains and stores we
operate and our selling square footage. Our revenue growth is
dependent upon our ability to continue to expand successfully
through new store openings as well as our ability to increase
same store sales. Successful store growth requires selection of
store locations in appropriate geographies, availability of
attractive stores or store sites in such locations and
negotiation of acceptable terms. Competition for desirable sites
and increases in real estate, construction and development costs
could limit our growth opportunities.
7
Even if we succeed in opening new stores, these new stores may
not achieve the same sales or profit levels as our existing
stores. Further, expansion places demands upon us to manage
rapid growth, and we may not do so successfully.
Our
quarterly operating results can be subject to significant
fluctuations and may fall short of either a prior quarter or
investors expectations.
Our operating results have fluctuated from quarter to quarter in
the past, and we expect that they will continue to do so in the
future. Our earnings may not continue to grow at rates similar
to the growth rates achieved in recent years and may fall short
of either a prior quarter or investors expectations. If we
fail to meet the expectations of securities analysts or
investors, our share price may decline. Factors that could cause
us not to meet analysts earnings expectations include some
factors that are within our control, such as the execution of
our off-price buying; selection, pricing and mix of merchandise;
and inventory management including flow, markon and markdowns;
and some factors that are not within our control, including
actions of competitors, weather conditions, economic conditions
and consumer confidence, and seasonality. In addition, if we do
not repurchase the number of shares we contemplate pursuant to
our stock repurchase programs, our earnings per share may be
adversely affected. Most of our operating expenses, such as rent
expense and associate salaries, do not vary directly with the
amount of sales and are difficult to adjust in the short term.
As a result, if sales in a particular quarter are below
expectations for that quarter, we may not proportionately reduce
operating expenses for that quarter, and therefore such a sales
shortfall would have a disproportionate effect on our net income
for the quarter. We maintain a forecasting process that seeks to
project sales and align expenses. If we do not correctly
forecast sales or appropriately adjust to actual results, our
financial performance could be adversely affected.
Our
future performance is dependent upon our ability to continue to
expand within our existing markets and to extend our off-price
model in new product lines, chains and geographic
regions.
Our plans for the future require us to continue to expand
rapidly within existing and new markets and geographies. Our
growth strategy includes developing new ways to sell more
merchandise within our existing stores, continued expansion of
our existing chains in our existing markets and countries,
expansion of these chains to new markets and countries, and
development and opening of new concepts, all of which entail
significant risk. Our growth is dependent upon our ability to
successfully extend our off-price retail apparel and home
fashions concepts in these ways. If we are unable to
successfully do so, our future growth or financial performance
could be adversely affected.
If we
fail to execute our opportunistic buying and inventory
management well, our business could be adversely
affected.
We purchase the majority of our inventory opportunistically with
our buyers purchasing close to need. To drive traffic to the
stores and to increase same store sales, the treasure hunt
nature of the off-price buying experience requires continued
replenishment of fresh high quality, attractively priced
merchandise in our stores. While opportunistic buying enables
our buyers to buy at the right time and price, in the quantities
we need and into market trends, it places considerable
discretion in our buyers, subjecting us to risks on the timing,
quantity and nature of inventory flowing to the stores. We rely
on our expansive distribution infrastructure to support
delivering goods to our stores on time. We must effectively and
timely distribute inventory to stores, maintain an appropriate
mix and level of inventory and effectively manage pricing and
markdowns. We regularly change the allocation of floor space
within our stores among product categories in response to
demand. Failure to execute our opportunistic inventory buying
and inventory management well could adversely affect our
performance and our relationship with our customers.
If we do
not implement our marketing, advertising and promotional
programs successfully, or if our competitors are more effective
than we are, our revenue may be adversely affected.
We use marketing and promotional programs as one of the ways we
attract customers to our stores. We use various media for our
promotional efforts, including print, television, database
marketing and direct marketing. Some of our competitors may have
substantially larger marketing budgets, which may provide them
with a competitive advantage. There can be no assurance as to
our continued ability to effectively execute our marketing and
promotional programs, and any failure to do so could have a
material effect on our revenue and results of operations.
8
Our
actual losses arising from the Computer Intrusion could exceed
our reserve for our estimated probable losses, and our
reputation and business could be materially harmed as a result
of any future data breach.
We suffered an unauthorized intrusion or intrusions (such
intrusion or intrusions, collectively, the Computer Intrusion)
into portions of our computer system that process and store
information related to customer transactions, which was
discovered during the fourth quarter of fiscal 2007 and in which
we believe that customer data were stolen. Various litigation
has been or may be filed, and various claims have been or may be
otherwise asserted, against us
and/or our
acquiring banks for which we may be responsible relating to the
Computer Intrusion. We have settled some litigation and claims
and while we intend to defend the remaining litigation and
claims vigorously, we cannot predict the outcome of such
litigation and claims. Various governmental entities are
investigating the actions of the Company with respect to the
Computer Intrusion. Although a number of governmental
investigations have been completed, we cannot predict what
actions the governmental entities in the remaining
investigations will take and what the consequences will be for
us. We have recorded a reserve that reflects our estimation of
probable losses arising from the Computer Intrusion in
accordance with generally accepted accounting principles. While
this reserve represents our best estimation of total, potential
cash liabilities from pending litigation, proceedings,
investigations and other claims, as well as legal and other
costs and expenses, arising from the Computer Intrusion, there
is no assurance that our actual losses will not be greater.
Since discovering the Computer Intrusion, we have taken steps
designed to strengthen the security of our computer systems and
protocols and have instituted an ongoing program with respect to
data security. Nevertheless, there can be no assurance that we
will not suffer a future data compromise. We rely on
commercially available systems, software, tools and monitoring
to provide security for processing, transmission and storage of
confidential customer information, such as payment card and
personal information. Further, the systems currently used for
transmission and approval of payment card transactions, and the
technology utilized in payment cards themselves, all of which
can put payment card data at risk, are determined and controlled
by the payment card industry, not by us. Improper activities by
third parties, advances in computer and software capabilities
and encryption technology, new tools and discoveries and other
events or developments may facilitate or result in a further
compromise or breach of our computer systems. Any such further
compromises or breaches could cause interruptions in our
operations, damage to our reputation and customers
willingness to shop in our stores and subject us to additional
costs and liabilities.
Our
business is subject to seasonal influences and a decrease in
sales or margins during the second half of the year could
adversely affect our operating results.
Our business is subject to seasonal influences; we realize
higher levels of sales and income in the second half of the
year, which includes the back-to-school and year-end holiday
season. Any decrease in sales or margins during this period
could have a disproportionately adverse effect on our financial
condition and results of operations.
If we
fail to anticipate consumer trends and preferences, our
performance could suffer.
Because our success depends on our ability to keep up with
consumer trends, we take steps to address the risk that we will
fail to anticipate consumer preferences. These include, for
example, maintaining extensive contacts with vendors, with other
retailers, as appropriate, and with the National Retail
Federation, comparison shopping and monitoring fashion trends.
Our buying departments and individual buyers monitor consumer
trends and preferences in their respective product categories
and areas. We focus on the demographics associated with the
customer bases of our divisions and we monitor such demographics
in locating new and remodeled stores. Opportunistic buying close
to need helps us respond to consumer preferences and trends.
Nonetheless, we still face the risk that we will fail to
effectively anticipate consumer trends and preferences, which
could adversely affect our results.
We
experience risks associated with our substantial size and
scale.
We operate eight store chains in several countries. Some aspects
of the businesses and operations of the chains are conducted
with relative autonomy. The large size of our operations, our
multiple businesses and the autonomy afforded to the chains
increase the risk that systems and practices will not be
implemented uniformly throughout our Company and that
information will not be appropriately shared across different
chains and countries.
Unseasonable
weather in the markets in which our stores operate could
adversely affect our operating results.
Customers willingness to shop and their demand for the
merchandise in our stores are affected by adverse and
unseasonable weather. Frequent or unusually heavy snow, ice or
rain storms, severe cold or heat or extended periods of
unseasonable temperatures in our markets could adversely affect
our sales and increase markdowns. In addition, natural
9
disasters such as hurricanes, tornadoes and earthquakes, or a
combination of these or other factors, could severely damage or
destroy one or more of our stores or facilities located in the
affected areas, thereby disrupting our business operations.
We
operate in highly competitive markets, and we may not be able to
compete effectively.
The retail business is highly competitive. We compete for
customers, associates, locations, merchandise, services and
other important aspects of our business with many other local,
regional and national retailers. In addition to other retail
stores, we also face competition from other retail distribution
channels such as catalogues, media and internet sites.
Competition is characterized by many factors, including price,
value, quality, brand names, merchandise assortment,
advertising, marketing and promotional activities, service,
location, reputation and credit availability. If we are not able
to compete effectively with regard to these factors, our results
of operations could be adversely affected.
If we do
not attract and retain quality sales, distribution center and
other associates in large numbers as well as experienced buying
and management personnel, our performance could be adversely
affected.
Our performance is dependent on recruiting, developing, training
and retaining quality sales, distribution center and other
associates in large numbers as well as experienced buying and
management personnel. Many of our associates are in entry level
or part-time positions with historically high rates of turnover.
The nature of the workforce in the retail industry subjects us
to the risk of immigration law violations, which risk has
increased in recent years. Our ability to meet our labor needs
while controlling labor costs is subject to external factors
such as unemployment levels, prevailing wage rates, minimum wage
legislation, changing demographics, health and other insurance
costs and state labor and employment requirements. In the event
of increasing wage rates, if we do not increase our wages
competitively, our customer service could suffer because of a
declining quality of our workforce, or our earnings could
decrease if we increase our wage rates. In addition, certain
associates in our distribution centers are members of unions and
therefore subject us to the risk of labor actions. Because of
the distinctive nature of our off-price model, we must do
significant internal training and development. The market for
retail management is highly competitive and, in common with
other retailers, we face challenges in securing sufficient
management talent. Changes that adversely impact our ability to
attract and retain quality associates and management personnel
could adversely affect our performance.
If we
engage in mergers or acquisitions of new businesses, or divest
any of our current businesses, our business will be subject to
additional risks.
We have grown our business in part through mergers and
acquisitions. Integrating new stores and concepts can be a
difficult task. We may consider opportunities to acquire new
businesses or to divest any of our current business segments.
Acquisition or divestiture activities may divert attention of
our executive management team away from the existing businesses.
We may do a less than optimal job of due diligence or evaluation
of target companies. Divestiture also involves risks, such as
the risk of future exposure on lease obligations. Failure to
execute on mergers or divestitures in a satisfactory manner
could have an adverse effect on our future business prospects or
our financial performance in the future.
If we are
unable to operate information systems and implement new
technologies effectively, our business could be disrupted or our
sales or profitability could be reduced.
The efficient operation of our business is dependent on our
information systems, including our ability to operate them
effectively and to successfully implement new technologies,
systems, controls and adequate disaster recovery systems. In
addition, we must protect the confidentiality of data of our
Company, our associates, our customers and other third parties.
The failure of our information systems to perform as designed or
our failure to implement and operate them effectively could
disrupt our business or subject us to liability and thereby harm
our profitability.
We depend
upon strong cash flows from our operations to support new
capital expansion, operations, debt repayment and stock
repurchase program.
Our business is dependent upon our operations generating strong
cash flows to support our capital expansion requirements, our
general operating activities and our stock repurchase programs
and to fund debt repayment and the availability of financing
sources. Our inability to continue to generate sufficient cash
flows to support these activities or the lack of availability of
financing in adequate amounts and on appropriate terms could
adversely affect our financial performance or our earnings per
share growth.
10
Consumer
spending is adversely affected by general economic and other
factors, which are beyond our control, and could adversely
affect our sales and operating results.
Interest rates; recession; inflation; deflation; consumer credit
availability; consumer debt levels; energy costs; tax rates and
policy; unemployment trends; threats or possibilities of war,
terrorism or other global or national unrest; actual or
threatened epidemics; political or financial instability; and
general economic, political and other factors beyond our control
have significant effects on consumer confidence and spending.
Consumer spending can, in turn, affect sales at retailers,
including TJX. These factors beyond our control could adversely
affect our sales and performance.
Issues
with merchandise quality or safety could result in damage to our
reputation, sales or financial results.
Merchandise we sell in our stores is subject to regulation of
and regulatory standards set by various governmental authorities
with respect to quality and safety. Regulations and standards in
this area may change from time to time, and substantial
additional regulations and standards have been proposed. Our
inability to comply on a timely basis with regulatory
requirements could result in significant fines or penalties,
which could have a material adverse effect on our financial
results. Issues with the quality and safety of merchandise we
sell in our stores, regardless of our fault, or customer
concerns about such issues, could result in damage to our
reputation, lost sales, uninsured product liability claims or
losses, merchandise recalls and increased costs, which could
have a material adverse effect on our financial results.
We are
subject to import risks associated with importing merchandise
from abroad.
Many of the products sold in our stores are sourced by our
vendors and to a limited extent by us in many foreign countries.
Imported merchandise is subject to various risks, including
potential disruptions in supply, changes in duties, tariffs,
quotas and voluntary export restrictions on imported
merchandise, strikes and other events affecting delivery;
consumer perceptions of the safety of imported merchandise,
particularly merchandise imported from the Peoples
Republic of China; and economic, political or other problems in
countries from or through which merchandise is imported.
Political or financial instability, trade restrictions, tariffs,
currency exchange rates, transport capacity and costs and other
factors relating to international trade and imported merchandise
are beyond our control and could affect the availability and the
price of our inventory.
Our
expanding international operations expose us to risks inherent
in foreign operations.
We have a significant presence in Canada, the United Kingdom and
Ireland, and have recently expanded into Germany. We may also
seek to expand into other international markets in the future.
Our foreign operations encounter risks similar to those faced by
our U.S. operations, as well as risks inherent in foreign
operations, such as understanding the retail climate and trends,
local customs and competitive conditions in foreign markets,
complying with foreign laws, rules and regulations, and foreign
currency fluctuations, which could have an adverse impact on our
profitability.
Litigation
and changes in laws and regulations and accounting rules and
principles could negatively affect our business operations and
financial performance.
Various aspects of our operations are subject to federal, state
or local laws, rules and regulations, any of which may change
from time to time. Generally accepted accounting principles may
change from time to time, as well. In addition, we are regularly
involved in various litigation matters that arise in the
ordinary course of business. Litigation, regulatory developments
and changes in accounting rules and principles could adversely
affect our business operations and financial performance.
We own
and lease for long periods significant amounts of real estate,
which subjects us to various financial risks.
We lease virtually all of our store locations generally for long
terms and either own or lease other real estate on which our
primary distribution centers and administrative offices are
located. Accordingly, we are subject to all of the risks
associated with owning and leasing real estate. While we have
the right to terminate some of our leases under specified
conditions by making specified payments, we may not be able to
cancel a particular lease. If an existing or future store is not
profitable, and we decide to close it, we may be committed to
perform certain obligations under the applicable lease
including, among other things, paying the rent for the balance
of the lease term. When we assign or sublease leased property,
we can remain liable if the sublessee does not perform. In
addition, as each of the leases expires, we may be unable to
negotiate renewals, either on commercially acceptable terms or
at all, which could cause us to close stores in desirable
locations.
11
Our stock
price may fluctuate based on market expectations.
The public trading of our stock is based in large part on market
expectations that our business will continue to grow and that we
will achieve certain levels of net income. If the securities
analysts that regularly follow our stock lower their rating or
lower their projections for future growth and financial
performance, the market price of our stock is likely to drop. In
addition, if our quarterly financial performance does not meet
the expectations of securities analysts, our stock price would
likely decline. The decrease in the stock price may be
disproportionate to the shortfall in our financial performance.
Our
results may be adversely affected by fluctuations in the price
of oil.
Prices of oil have fluctuated dramatically in the past. These
fluctuations may result in an increase in our transportation
costs for distribution, utility costs for our retail stores and
costs to purchase our products from suppliers. A continued rise
in oil prices could adversely affect consumer spending and
demand for our products and increase our operating costs, both
of which could have an adverse effect on our performance.
ITEM 1B. UNRESOLVED
STAFF COMMENTS
None
ITEM 2. PROPERTIES
We lease virtually all of our store locations, generally for
10 years with options to extend the lease term for one or
more 5-year
periods. We have the right to terminate some of these leases
before the expiration date under specified circumstances and for
specified payments.
The following is a summary of our primary distribution centers
and primary administrative office locations as of
January 26, 2008. Square footage information for the
distribution centers represents total ground cover
of the facility. Square footage information for office space
represents total space occupied:
Distribution
Centers
|
|
|
|
|
T.J. Maxx
|
|
Worcester, Massachusetts Evansville, Indiana Las Vegas, Nevada
Charlotte, North Carolina Pittston Township, Pennsylvania
|
|
(500,000 s.f. owned)
(983,000 s.f. owned)
(713,000 s.f. shared
with Marshalls owned)
(600,000 s.f. owned)
(1,017,000 s.f. owned)
|
Marshalls
|
|
Decatur, Georgia
Woburn, Massachusetts
Bridgewater, Virginia
Philadelphia, Pennsylvania
|
|
(780,000 s.f. owned)
(473,000 s.f. leased)
(562,000 s.f. leased)
(1,001,000 s.f. leased)
|
Winners and HomeSense
|
|
Brampton, Ontario
Mississauga, Ontario
|
|
(506,000 s.f. leased)
(667,000 s.f. leased)
|
HomeGoods
|
|
Brownsburg, Indiana
Bloomfield, Connecticut
|
|
(805,000 s.f. owned)
(803,000 s.f. owned)
|
T.K. Maxx
|
|
Milton Keynes, England
Wakefield, England
Stoke, England
Walsall, England
|
|
(108,000 s.f. leased)
(176,000 s.f. leased)
(261,000 s.f. leased)
(275,000 s.f. leased)
|
A.J. Wright
|
|
Fall River, Massachusetts
South Bend, Indiana
|
|
(501,000 s.f. owned)
(542,000 s.f. owned)
|
Bobs Stores
|
|
Meriden, Connecticut
|
|
(200,000 s.f. leased)
|
Office
Space
|
|
|
|
|
TJX, T.J. Maxx, Marshalls,
HomeGoods, A.J. Wright
|
|
Framingham and Westboro, Massachusetts
|
|
(1,254,000 s.f. leased in
several buildings)
|
Bobs Stores
|
|
Meriden, Connecticut
|
|
(21,000 s.f. leased)
|
Winners and HomeSense
|
|
Mississauga, Ontario
|
|
(141,000 s.f. leased)
|
T.K. Maxx
|
|
Watford, England
|
|
(61,000 s.f. leased)
|
12
The table below indicates the approximate average store size as
well as the gross square footage of stores and distribution
centers, by division, as of January 26, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Square Feet
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
Average
|
|
|
|
|
|
Distribution
|
|
|
|
Store Size
|
|
|
Stores
|
|
|
Centers
|
|
|
|
|
T.J. Maxx
|
|
|
30,000
|
|
|
|
25,225
|
|
|
|
3,813
|
|
Marshalls
|
|
|
32,000
|
|
|
|
24,669
|
|
|
|
2,816
|
|
Winners(1)
|
|
|
29,000
|
|
|
|
5,566
|
|
|
|
1,173
|
|
HomeSense(2)
|
|
|
24,000
|
|
|
|
1,705
|
|
|
|
-
|
|
HomeGoods(3)
|
|
|
25,000
|
|
|
|
7,130
|
|
|
|
1,608
|
|
T.K. Maxx
|
|
|
31,000
|
|
|
|
7,085
|
|
|
|
820
|
|
A.J. Wright
|
|
|
26,000
|
|
|
|
3,312
|
|
|
|
1,043
|
|
Bobs Stores
|
|
|
46,000
|
|
|
|
1,548
|
|
|
|
200
|
|
|
|
Total
|
|
|
|
|
|
|
76,240
|
|
|
|
11,473
|
|
|
|
|
|
|
(1) |
|
Distribution centers currently
service both Winners and HomeSense stores.
|
|
(2) |
|
A HomeSense stand-alone store
averages 28,000 square feet, while the HomeSense portion of
a superstore format averages 23,000 square feet.
|
|
(3) |
|
A HomeGoods stand-alone store
averages 27,000 square feet, while the HomeGoods portion of
a superstore format averages 22,000 square feet.
|
ITEM 3. LEGAL
PROCEEDINGS
Computer Intrusion Related
Litigation. Putative class actions were filed
against TJX and were consolidated in the District of
Massachusetts, In re TJX Companies Retail Security Breach
Litigation, 07-cv-10162, putatively on behalf of customers
in the United States, Puerto Rico and Canada whose transaction
data were allegedly compromised by the Computer Intrusion and
putatively on behalf of all financial institutions that received
alerts from MasterCard or Visa related to the Computer Intrusion
identifying payment cards issued by such financial institutions,
and which thereafter suffered damages from actual reissuance
costs, monitoring expenses or fraud loss. These putative class
actions asserted claims for negligence and related common-law
and/or
statutory causes of action stemming from the Computer Intrusion,
and sought various forms of relief including damages, related
injunctive or equitable remedies, multiple or punitive damages,
and attorneys fees.
On September 21, 2007, TJX entered into a settlement
agreement with respect to the consolidated consumer class
actions, amended November 14, 2007, which remains subject
to various conditions and to final Court approval. A hearing on
final approval has been scheduled for July 2008.
On October 12, 2007, the Court dismissed the
plaintiffs claims in the consolidated financial
institution class action other than claims of negligent
misrepresentation and a state statutory claim based on the same
claims of negligent misrepresentation. On November 29,
2007, the Court denied the plaintiffs motions for class
certification in the consolidated financial institution class
action. Subsequently, the Court dismissed the action for lack of
subject matter jurisdiction and ordered it transferred to
Massachusetts state court. TJX obtained a stay of the transfer
order from the United States Court of Appeals for the First
Circuit and filed a notice of appeal of both the transfer order
and certain other rulings. Plaintiffs filed a notice of appeal
of the Courts denial of their motions for class
certification and other adverse rulings. The two appeals have
been consolidated. TJX and the named plaintiffs other than
AmeriFirstBank entered into a settlement of their claims in this
litigation.
On November 29, 2007, TJX and its acquiring bank entered
into a settlement agreement with Visa U.S.A. Inc. and Visa Inc.
relating to the Computer Intrusion. Financial institutions
representing more than 95% of eligible U.S. Visa accounts
potentially affected by the Computer Intrusion accepted the
settlement provided under this agreement. As part of the
settlement, such issuers released TJX and its U.S. acquiring
bank with regard to all claims, including the putative financial
institutions class action, in connection with any injury or harm
such issuers may have incurred as Visa issuers with respect to
any of identified Visa accounts relating to the Computer
Intrusion.
On January 16, 2008, AmeriFirstBank, one of the plaintiffs
in the consolidated purported financial institution class
action, and an additional plaintiff filed a new action in
Massachusetts state court, AmeriFirstBank et al. v. The
TJX Companies, Inc. et al, Massachusetts Superior Court
08-0229. The
new action raises allegations and claims nearly identical to
those asserted in the purported federal financial institutions
class action (and now on appeal). Plaintiffs indicated in their
complaint that they intend to bring class allegations depending
on pre-trial rulings by the state court. TJX removed the case
13
to federal court, the federal court remanded it back to state
court, and TJX has sought leave to appeal the remand and a stay
of the state court action.
The Arkansas Carpenters Pension Fund, the purported beneficial
holder of 4,500 shares of TJX common stock, commenced an
action in the Delaware Chancery Court under Section 220 of
the Delaware General Corporation Law demanding to inspect
certain of TJXs books and records relating to the Computer
Intrusion and TJXs response to the Computer Intrusion. As
relief, the plaintiff seeks the right to inspect records dating
back to 2003, as well as its attorneys fees and costs.
Other Litigation. Putative class actions have been
filed against TJX and have been consolidated in the United
States District Court for the District of Kansas, In re: The
TJX Companies, Inc. Fair and Accurate Credit Transactions Act
(FACTA) Litigation, MDL Docket No. 1853, putatively on
behalf of persons in the United States to whom TJX provided
credit card or debit card receipts in alleged violation of the
Fair and Accurate Credit Transactions Act, 15 U.S.C.
§ 1681 et seq. The plaintiffs in these actions seek
statutory damages, punitive damages, injunctive relief, and
costs and attorneys fees. Discovery as to class
certification issues has commenced, and TJX has filed a motion
to dismiss these actions.
A putative class action, Mason Lee v. Marshalls of
California, Inc. (Case No. RG07337021), was filed in
Alameda County, California, Superior Court on July 23, 2007
for alleged violations of certain sections of the California
Labor Code, principally Section 212 (prohibiting issuance
of out-of-state paychecks), Section 226.7 (requiring paid
rest periods) and Section 226 (requiring certain
information on paychecks). The Complaint seeks unspecified
actual damages, penalties of $100 for each aggrieved employee
for the initial violation and $200 for each aggrieved employee
for each subsequent violation, together with attorneys
fees and costs.
TJX intends to defend all pending litigation vigorously.
Government Investigations. A multi-state group of
39 state Attorneys General is investigating whether the
Company may have violated their respective state consumer
protection laws with respect to the Computer Intrusion. TJX has
responded to Civil Investigative Demands with respect to this
investigation.
The Federal Trade Commission is investigating whether the
Company may have violated federal law regarding consumer
protection and related matters with respect to the Computer
Intrusion.
|
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
There was no matter submitted to a vote of TJXs security
holders during the fourth quarter of fiscal 2008.
14
PART II
|
|
ITEM 5.
|
MARKET
FOR THE REGISTRANTS COMMON
EQUITY, RELATED SECURITY HOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
|
Price
Range of Common Stock
Our common stock is listed on the New York Stock Exchange
(Symbol: TJX). The quarterly high and low sale prices for the
equity for fiscal 2008 and fiscal 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
Fiscal 2007
|
|
Quarter
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
|
|
First
|
|
$
|
29.84
|
|
|
$
|
25.74
|
|
|
$
|
26.28
|
|
|
$
|
23.81
|
|
Second
|
|
$
|
30.19
|
|
|
$
|
26.34
|
|
|
$
|
25.11
|
|
|
$
|
22.16
|
|
Third
|
|
$
|
32.46
|
|
|
$
|
26.29
|
|
|
$
|
29.74
|
|
|
$
|
24.00
|
|
Fourth
|
|
$
|
31.95
|
|
|
$
|
25.49
|
|
|
$
|
30.24
|
|
|
$
|
26.67
|
|
The approximate number of common shareholders at
January 26, 2008 was 52,000.
We declared four quarterly dividends of $0.09 per share for
fiscal 2008 and $0.07 per share for fiscal 2007. While our
dividend policy is subject to periodic review by our Board of
Directors, we currently intend to continue to pay comparable
dividends in the future.
Information
on Share Repurchases
The number of shares of common stock repurchased by TJX during
the fourth quarter of fiscal 2008 and the average price paid per
share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number
|
|
|
|
|
|
|
|
|
|
|
|
|
(or Approximate
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Dollar Value) of
|
|
|
|
|
|
|
|
|
|
Shares Purchased as
|
|
|
Shares that May Yet
|
|
|
|
|
|
|
|
|
|
Part of a Publicly
|
|
|
be Purchased Under
|
|
|
|
Number of Shares
|
|
|
Average Price Paid
|
|
|
Announced
|
|
|
the Plans or
|
|
|
|
Repurchased
|
|
|
Per
Share(1)
|
|
|
Plan or
Program(2)
|
|
|
Programs
|
|
|
|
|
October 28, 2007 through
November 24, 2007
|
|
|
3,799,900
|
|
|
$
|
28.21
|
|
|
|
3,799,900
|
|
|
$
|
678,592,630
|
|
November 25, 2007
through December 29, 2007
|
|
|
2,840,032
|
|
|
$
|
29.10
|
|
|
|
2,840,032
|
|
|
$
|
595,938,461
|
|
December 30, 2007
through January 26, 2008
|
|
|
3,908,198
|
|
|
$
|
28.14
|
|
|
|
3,908,198
|
|
|
$
|
485,950,068
|
|
Total:
|
|
|
10,548,130
|
|
|
|
|
|
|
|
10,548,130
|
|
|
|
|
|
|
|
|
(1) |
|
Average price paid per share
includes commissions and is rounded to the nearest two decimal
places.
|
|
(2) |
|
Of the $950 million of
repurchases made during fiscal 2008, $436 million completed
a $1 billion stock repurchase program initially authorized
in October 2005, and $514 million were made under a
$1 billion stock repurchase program authorized in January
2007. In February 2008, our Board of Directors authorized an
additional multi-year stock repurchase plan of $1 billion,
which is in addition to the $486 million remaining under
the January 2007 plan as of January 26, 2008.
|
The following table provides certain information as of
January 26, 2008 with respect to our equity compensation
plans:
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
Number of Securities to
|
|
|
Weighted-Average Exercise
|
|
|
Number of Securities Remaining
|
|
|
|
be Issued Upon Exercise
|
|
|
Price of Outstanding
|
|
|
Available for Future Issuance Under
|
|
|
|
of Outstanding Options,
|
|
|
Options, Warrants and
|
|
|
Equity Compensation Plans (Excluding
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Rights
|
|
|
Securities Reflected in Column (a))
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
35,153,205
|
|
|
$
|
22.17
|
|
|
|
16,961,848
|
|
Equity compensation plans not approved by security
holders(1)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
Total
|
|
|
35,153,205
|
|
|
$
|
22.17
|
|
|
|
16,961,848
|
|
|
|
|
|
|
(1) |
|
All equity compensation plans have
been approved by shareholders.
|
For additional information concerning our equity compensation
plans, see Note G to our consolidated financial statements,
on
page F-16.
15
ITEM 6. SELECTED
FINANCIAL DATA
Selected
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in thousands
|
|
Fiscal Year Ended
January(1)
|
|
|
|
|
except per share amounts
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53 Weeks)
|
|
|
|
|
Income statement and per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
18,647,126
|
|
|
$
|
17,404,637
|
|
|
$
|
15,955,943
|
|
|
$
|
14,860,746
|
|
|
$
|
13,300,194
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
771,750
|
|
|
$
|
776,756
|
|
|
$
|
689,834
|
|
|
$
|
610,217
|
|
|
$
|
608,906
|
|
|
|
|
|
Weighted average common shares for diluted earnings per share
calculation
|
|
|
468,046
|
|
|
|
480,045
|
|
|
|
491,500
|
|
|
|
509,661
|
|
|
|
531,301
|
|
|
|
|
|
Diluted earnings per share from continuing operations
|
|
$
|
1.66
|
|
|
$
|
1.63
|
|
|
$
|
1.41
|
|
|
$
|
1.21
|
|
|
$
|
1.16
|
|
|
|
|
|
Cash dividends declared per share
|
|
$
|
0.36
|
|
|
$
|
0.28
|
|
|
$
|
0.24
|
|
|
$
|
0.18
|
|
|
$
|
0.14
|
|
|
|
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
732,612
|
|
|
$
|
856,669
|
|
|
$
|
465,649
|
|
|
$
|
307,187
|
|
|
$
|
246,403
|
|
|
|
|
|
Working capital
|
|
|
1,231,301
|
|
|
|
1,365,833
|
|
|
|
888,276
|
|
|
|
701,008
|
|
|
|
761,228
|
|
|
|
|
|
Total assets
|
|
|
6,599,934
|
|
|
|
6,085,700
|
|
|
|
5,496,305
|
|
|
|
5,075,473
|
|
|
|
4,396,767
|
|
|
|
|
|
Capital expenditures
|
|
|
526,987
|
|
|
|
378,011
|
|
|
|
495,948
|
|
|
|
429,133
|
|
|
|
409,037
|
|
|
|
|
|
Long-term
obligations(2)
|
|
|
853,460
|
|
|
|
808,027
|
|
|
|
807,150
|
|
|
|
598,540
|
|
|
|
692,321
|
|
|
|
|
|
Shareholders equity
|
|
|
2,131,245
|
|
|
|
2,290,121
|
|
|
|
1,892,654
|
|
|
|
1,746,556
|
|
|
|
1,627,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax return (continuing operations) on average
shareholders equity
|
|
|
34.9
|
%
|
|
|
37.1
|
%
|
|
|
37.9
|
%
|
|
|
36.2
|
%
|
|
|
39.5
|
%
|
|
|
|
|
Total debt as a percentage of total
capitalization(3)
|
|
|
28.6
|
%
|
|
|
26.1
|
%
|
|
|
29.9
|
%
|
|
|
28.6
|
%
|
|
|
30.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores in operation at year-end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.J. Maxx
|
|
|
847
|
|
|
|
821
|
|
|
|
799
|
|
|
|
771
|
|
|
|
745
|
|
|
|
|
|
Marshalls
|
|
|
776
|
|
|
|
748
|
|
|
|
715
|
|
|
|
697
|
|
|
|
673
|
|
|
|
|
|
Winners
|
|
|
191
|
|
|
|
184
|
|
|
|
174
|
|
|
|
168
|
|
|
|
160
|
|
|
|
|
|
T.K. Maxx
|
|
|
226
|
|
|
|
210
|
|
|
|
197
|
|
|
|
170
|
|
|
|
147
|
|
|
|
|
|
HomeGoods
|
|
|
289
|
|
|
|
270
|
|
|
|
251
|
|
|
|
216
|
|
|
|
182
|
|
|
|
|
|
A.J.
Wright(4)
|
|
|
129
|
|
|
|
129
|
|
|
|
152
|
|
|
|
130
|
|
|
|
99
|
|
|
|
|
|
HomeSense
|
|
|
71
|
|
|
|
68
|
|
|
|
58
|
|
|
|
40
|
|
|
|
25
|
|
|
|
|
|
Bobs Stores
|
|
|
34
|
|
|
|
36
|
|
|
|
35
|
|
|
|
32
|
|
|
|
31
|
|
|
|
|
|
|
|
Total
|
|
|
2,563
|
|
|
|
2,466
|
|
|
|
2,381
|
|
|
|
2,224
|
|
|
|
2,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling Square Footage at year-end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.J. Maxx
|
|
|
20,025
|
|
|
|
19,390
|
|
|
|
18,781
|
|
|
|
18,033
|
|
|
|
17,385
|
|
|
|
|
|
Marshalls
|
|
|
19,759
|
|
|
|
19,078
|
|
|
|
18,206
|
|
|
|
17,511
|
|
|
|
16,716
|
|
|
|
|
|
Winners
|
|
|
4,389
|
|
|
|
4,214
|
|
|
|
4,012
|
|
|
|
3,811
|
|
|
|
3,576
|
|
|
|
|
|
T.K. Maxx
|
|
|
5,096
|
|
|
|
4,636
|
|
|
|
4,216
|
|
|
|
3,491
|
|
|
|
2,841
|
|
|
|
|
|
HomeGoods
|
|
|
5,569
|
|
|
|
5,181
|
|
|
|
4,859
|
|
|
|
4,159
|
|
|
|
3,548
|
|
|
|
|
|
A.J.
Wright(4)
|
|
|
2,576
|
|
|
|
2,577
|
|
|
|
3,054
|
|
|
|
2,606
|
|
|
|
1,967
|
|
|
|
|
|
HomeSense
|
|
|
1,358
|
|
|
|
1,280
|
|
|
|
1,100
|
|
|
|
747
|
|
|
|
468
|
|
|
|
|
|
Bobs Stores
|
|
|
1,242
|
|
|
|
1,306
|
|
|
|
1,276
|
|
|
|
1,166
|
|
|
|
1,124
|
|
|
|
|
|
|
|
Total
|
|
|
60,014
|
|
|
|
57,662
|
|
|
|
55,504
|
|
|
|
51,524
|
|
|
|
47,625
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Fiscal 2006 and prior fiscal years
have been adjusted to reclassify the operating results of the
A.J. Wright store closings to discontinued operations. See
Note C to the consolidated financial statements. Fiscal
2005 and prior fiscal years have been adjusted to reflect the
effect of adopting Statement of Financial Accounting Standards
No. 123(R). See Note A to the consolidated financial
statements at Stock-Based Compensation.
|
|
(2) |
|
Includes long-term debt, exclusive
of current installments and capital lease obligations, less
portion due within one year.
|
|
(3) |
|
Total capitalization includes
shareholders equity, short-term debt, long-term debt and
capital lease obligation, including current maturities.
|
|
(4) |
|
A.J. Wright stores in operation and
selling square footage for fiscal 2006 and prior fiscal years
include store counts and square footage for the stores that are
part of discontinued operations.
|
16
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The following discussion contains forward-looking information
and should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in
this report. Our actual results could differ materially from the
results contemplated by these forward-looking statements due to
various factors, including those discussed in Item 1A of
this report under the section entitled Risk Factors.
The discussion that follows relates to our fiscal years ended
January 26, 2008 (fiscal 2008), January 27, 2007
(fiscal 2007) and January 28, 2006 (fiscal 2006).
In November 2006, we announced our decision to close 34 A.J.
Wright stores as part of a repositioning of the chain. The
following discussion reviews our results from continuing
operations, which excludes the results of the closed A.J. Wright
stores. The cost to close these stores was recorded as a
discontinued operation in the fourth quarter of fiscal 2007 and
the operating income or loss from these stores is also presented
as a discontinued operation for all periods presented. All
references in the following discussion are to continuing
operations unless otherwise indicated.
We suffered an unauthorized intrusion or intrusions (such
intrusion or intrusions collectively, the Computer
Intrusion) into portions of our computer system, which was
discovered during the fourth quarter of fiscal 2007 and in which
we believe customer data were stolen. See Provision for
Computer Intrusion related costs below and Note B to
the consolidated financial statements.
Results
of Operations
FISCAL
2008 OVERVIEW:
|
|
|
|
|
Net sales for fiscal 2008 were $18.6 billion, a 7% increase
over fiscal 2007.
|
|
|
|
Consolidated same store sales increased 4% in fiscal 2008 over
the prior year. Currency exchange rates favorably impacted same
store sales growth contributing approximately two percentage
points to the increase.
|
|
|
|
We increased both the number of our stores and our selling
square footage by 4% in fiscal 2008. We ended the fiscal year
with 2,563 stores in operation.
|
|
|
|
The fiscal 2008 results reflect pre-tax charges of
$197.0 million with respect to the Computer Intrusion,
including pre-tax costs of $37.8 million we expensed as
incurred in the first six months and a $159.2 million
charge for a pre-tax reserve for estimated losses thereafter.
|
|
|
|
Our pre-tax margin (the ratio of pre-tax income to net sales)
declined from 7.2% in fiscal 2007 to 6.7% in fiscal 2008. The
Provision for Computer Intrusion related costs, which reduced
our pre-tax margin by 1.0% for fiscal 2008, more than offset
what would otherwise have been an increase in our pre-tax margin.
|
|
|
|
Income from continuing operations for fiscal 2008 was
$771.8 million, or $1.66 per diluted share, compared to
$776.8 million, or $1.63 per diluted share, last year.
Fiscal 2008 income from continuing operations was reduced by
$119 million, or $0.25 per share, for the after-tax impact
of the Provision for Computer Intrusion related costs. Fiscal
2007 income from continuing operations was reduced by
$3 million for such costs, which did not change the fiscal
2007 earnings per share.
|
|
|
|
We continued to generate strong cash flows from operations which
allowed us to fund our stock repurchase program as well as our
capital investment needs. During fiscal 2008, we repurchased
33.3 million shares at a cost of $950 million, which
favorably affected our earnings per share.
|
|
|
|
Average per store inventories, including inventory on hand at
our distribution centers, were up 2% at the end of fiscal 2008
as compared to an increase of 7% for the prior year end.
|
The following is a summary of our operating results at the
consolidated level. This discussion is followed by an overview
of operating results by segment. All references to earnings per
share are diluted earnings per share from continuing operations
unless otherwise indicated. All prior periods have been adjusted
to reclassify the operating results of the A.J. Wright store
closings to discontinued operations. See also Note C to our
consolidated financial statements.
Net sales: Net sales for fiscal 2008 totaled
$18.6 billion, a 7% increase over net sales of
$17.4 billion in fiscal 2007. Net sales for fiscal 2007
increased 9% over net sales of $16.0 billion for fiscal
2006. The 7% increase in net sales for fiscal 2008 reflects a 3%
increase from new stores and a 4% increase in same store sales.
The 9% increase in net sales for fiscal 2007 reflects increases
of 5% from new stores and 4% from same store sales.
17
New stores are a major source of sales growth. Our consolidated
store count increased by 4% in both fiscal 2008 and fiscal 2007
over the respective prior year periods, and our selling square
footage increased by 4% in fiscal 2008 and 5% in fiscal 2007. We
expect to add 109 stores (net of store closings) in the fiscal
year ending January 31, 2009 (fiscal 2009), a 4% increase
in our consolidated store base. We also expect to increase our
selling square footage base by 4%.
The 4% increase in same store sales for fiscal 2008 was driven
by a strong performance at our international businesses as well
as the favorable impact of foreign currency exchange rates,
which contributed approximately two percentage points of growth.
At our domestic divisions, sales of dresses, footwear and
accessories were strong, partially offset by softer sales in the
balance of the womens apparel category. Home categories at
Marmaxx, our largest division, were also weak. Same store sales
also benefited from the continued expansion of footwear
departments in Marshalls. During fiscal 2008, we rolled out
expanded footwear departments in approximately 240 Marshalls
stores and plan to continue this expansion in approximately 200
Marshalls stores in fiscal 2009, bringing the total to
approximately 720. Same store sales for fiscal 2008 at our
international businesses were above the consolidated average.
Within the U. S., the strongest regions were the West coast and
the Northeast, while Florida and the Southeast trailed the
U.S. average. Overall transaction volume was slightly down,
more than offset by an increase in the average ticket.
The 4% increase in same store sales for fiscal 2007 was driven
by growth in unit sales and increased transactions as well as
the strong performance at our international businesses
(Winners same store sales increased 5% and T.K. Maxx same
store sales increased 6%, both in local currency). Net sales for
fiscal 2007 reflected growth in both apparel and home fashions.
Within apparel, jewelry, accessories and footwear (combined), as
well as misses sportswear and dresses performed well. As for
home fashions, giftware and home decorative products performed
well while our soft home categories (bedding,
linens, etc.) did not perform to our expectations. Same store
sales also benefited from the continued expansion of footwear
departments in Marshalls. During fiscal 2007, we added 134
expanded footwear departments, bringing the total number of
stores with the expanded footwear departments to 280. These
stores had same store sales growth that exceeded the chain
average. The expansion of jewelry and accessory departments at
T.J. Maxx was substantially completed during fiscal 2007, with
686 out of the total 821 stores having expanded departments at
year end. In the U. S., same store sales increased across almost
all regions, with the Northeast, Southwest and Mid-Atlantic
areas experiencing the strongest growth. Same store sales growth
was favorably impacted by foreign currency exchange rates, which
contributed approximately one percentage point of growth.
We define same store sales to be sales of those stores that have
been in operation for all or a portion of two consecutive fiscal
years, or in other words, stores that are starting their third
fiscal year of operation. We classify a store as a new store
until it meets the same store criteria. We determine which
stores are included in the same store sales calculation at the
beginning of a fiscal year and the classification remains
constant throughout that year, unless a store is closed. We
calculate same store sales results by comparing the current and
prior year weekly periods that are most closely aligned.
Relocated stores and stores that are increased in size are
generally classified in the same way as the original store, and
we believe that the impact of these stores on the consolidated
same store percentage is immaterial. Consolidated and divisional
same store sales are calculated in U.S. dollars. We also
show divisional same store sales in local currency for our
foreign divisions because this removes the effect of changes in
currency exchange rates, and we believe it is a more appropriate
measure of the divisional operating performance.
The following table sets forth our consolidated operating
results as a percentage of net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
Cost of sales, including buying and occupancy costs
|
|
|
75.5
|
|
|
|
75.9
|
|
|
|
76.6
|
|
Selling, general and administrative expenses
|
|
|
16.8
|
|
|
|
16.8
|
|
|
|
16.9
|
|
Provision for Computer Intrusion related costs
|
|
|
1.0
|
|
|
|
-
|
|
|
|
-
|
|
Interest (income) expense, net
|
|
|
-
|
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
Income from continuing operations before provision for income
taxes
|
|
|
6.7
|
%
|
|
|
7.2
|
%
|
|
|
6.3
|
%
|
|
|
Cost of sales, including buying and occupancy
costs: Cost of sales, including buying and occupancy
costs, as a percentage of net sales was 75.5% in fiscal 2008,
75.9% in fiscal 2007 and 76.6% in fiscal 2006. This ratio for
fiscal 2008, as compared to fiscal 2007, reflected an
improvement in our consolidated merchandise margin
(0.5 percentage points), due to improved markon and lower
markdowns. Throughout fiscal 2008, we solidly executed our
off-price fundamentals, buying close to need and taking
advantage of opportunities in the market place. This merchandise
margin improvement was partially
18
offset by a slight increase in occupancy costs as a percentage
of net sales. All other buying and occupancy costs remained
relatively flat as compared to the same period last year.
Cost of sales, including buying and occupancy costs, as a
percentage of net sales for fiscal 2007 as compared with fiscal
2006 reflected an improvement in our consolidated merchandise
margin (0.4 percentage points) as well as expense leverage
due to our cost containment initiatives and the impact of strong
same store sales growth. These improvements in the fiscal 2007
expense ratio were partially offset by increases in some
operating costs as a percentage of net sales, primarily
occupancy costs (0.2 percentage points).
Selling, general and administrative expenses:
Selling, general and administrative expenses as a percentage of
net sales were 16.8% in fiscal 2008 and fiscal 2007 and was
16.9% in fiscal 2006. The fiscal 2008 expense ratio remained
consistent with the prior year with a planned increase in
advertising costs (0.1 percentage point) and a fourth
quarter impairment charge at our Bobs Stores division
(0.1 percentage point) being offset by our continuing cost
containment initiatives. The decrease in fiscal 2007 compared to
fiscal 2006 reflects expense leverage across most categories,
partially offset by a planned increase in marketing expense
(0.1 percentage point).
Provision for Computer Intrusion related costs: We
face potential liabilities and costs as a result of claims,
litigation and investigations with respect to the Computer
Intrusion. During the first six months of fiscal 2008, we
expensed pre-tax costs of $37.8 million for costs we
incurred related to the Computer Intrusion. In the second
quarter of fiscal 2008, we were able to reasonably estimate our
potential losses related to the Computer Intrusion and,
accordingly, established a pre-tax reserve of
$178.1 million and recorded a pre-tax charge in that
amount. Subsequently, as previously disclosed, we settled the
purported customer class actions (subject to final court
approval), settled claims of Visa USA, Visa Inc. and
substantially all U.S. Visa issuers and settled with most of the
named plaintiffs in the purported financial institution class
action. During the fourth quarter of fiscal 2008, we reduced our
reserve and the Provision for Computer Intrusion related costs
by $18.9 million as a result of insurance proceeds with
respect to the Computer Intrusion, which had not previously been
reflected in the reserve, as well as a reduction in our
estimated legal and other fees as we have continued to resolve
outstanding disputes, litigation and investigations. As of
January 26, 2008, our reserve balance was
$117.3 million reflecting amounts paid for settlements
(primarily the Visa settlement), legal and other fees. Our
reserve reflects our current estimation of probable losses in
accordance with generally accepted accounting principles with
respect to the Computer Intrusion and includes our current
estimation of total potential cash liabilities, from pending
litigation, proceedings, investigations and other claims, as
well as legal and other costs and expenses, arising from the
Computer Intrusion. In addition, we expect to record non-cash
costs with respect to the customer class actions settlement, if
finally approved, when incurred, which we do not expect to be
material to our financial statements. As an estimate, our
reserve is subject to uncertainty, and our actual costs may vary
from our current estimate and such variations may be material.
We may decrease or increase the amount of our reserve to adjust
for developments in the course and resolution of litigation,
claims and investigations and related expenses and for other
changes in our estimates.
Interest (income) expense, net: Interest (income)
expense, net amounted to income of $1.6 million for fiscal
2008, expense of $15.6 million for fiscal 2007 and expense
of $29.6 million in fiscal 2006. These changes were the
result of interest income totaling $40.7 million in the
fiscal 2008 versus $23.6 million for fiscal 2007 and
$9.4 million in fiscal 2006. The additional interest income
in fiscal 2008 versus fiscal 2007, as well as fiscal 2007 versus
fiscal 2006, was due to higher cash balances available for
investment, as well as higher interest rates earned on our
investments.
Income taxes: Our effective annual income tax rate
was 37.9% in fiscal 2008, 37.7% in fiscal 2007 and 31.6% in
fiscal 2006. The increase in the tax rate for fiscal 2008 as
compared to fiscal 2007 reflects the absence of some fiscal 2007
one-time benefits as well as an increase due to certain
FIN 48 tax positions, partially offset by the favorable
impact of increased income at our foreign operations and
increased foreign tax credits. During fiscal 2008, we changed
our assertion regarding the undistributed earnings of one of our
Puerto Rican subsidiaries. Beginning in fiscal 2008s third
quarter, we concluded that the undistributed earnings of our
Puerto Rican subsidiary that operates Marshalls stores would not
be permanently reinvested. As a result, we recorded a deferred
tax liability for the effect of the undistributed income and, in
addition, we were able to fully recognize the benefit of
accumulated foreign tax credits that had been earned at the
subsidiary level. The net impact of this change in assertion was
a reduction in our effective income tax rate of
0.4 percentage points. Prior to this period, the earnings
of this Puerto Rican subsidiary were deemed to be indefinitely
reinvested.
The increase in the fiscal 2007 effective income tax rate
reflected the absence of one-time tax benefits recorded in the
fourth quarter of fiscal 2006 (benefit for repatriation of
earnings from our Canadian subsidiary and the correction of
accounting for the tax impact of foreign currency gains on
certain intercompany loans) which favorably impacted the fiscal
2006 effective income tax rate by 6.8 percentage points.
The fiscal 2007 effective income tax rate benefited through
July 20,
19
2006 from the tax treatment of foreign currency gains and losses
on certain intercompany loans between Winners and TJX. This tax
treatment reduced the fiscal 2007 effective income tax rate by
0.2 percentage points. Effective July 20, 2006, we
re-designated one of these intercompany loans and the related
hedge as a net investment in our foreign operations, and gains
and losses on these items after July 20, 2006 are recorded
in other comprehensive income, net of tax effects. In addition,
the fiscal 2007 effective income tax rate was favorably impacted
by increased income at our foreign operations (a portion of
which is taxed at a lower rate than our domestic operations) as
well as settlement of a state tax assessment for less than the
related reserves. Combined, these two items reduced the
effective income tax rate by 0.6 percentage points as
compared to fiscal 2006.
Income from continuing operations: Income from
continuing operations was $771.8 million in fiscal 2008,
$776.8 million in fiscal 2007 and $689.8 million in
fiscal 2006. Income from continuing operations per share was
$1.66 in fiscal 2008, $1.63 in fiscal 2007 and $1.41 in fiscal
2006. Unlike many companies in the retail industry, we did not
have a
53rd
week in fiscal 2007, but will have a
53rd
week in fiscal 2009.
Income from continuing operations for fiscal 2008 was adversely
impacted by the charge relating to the Computer Intrusion of
approximately $119 million, after tax, which reduced
earnings per share by $0.25 per share. Income from continuing
operations for fiscal 2007 was adversely impacted by the charge
relating to the Computer Intrusion of approximately
$3 million, after tax, which reduced fourth quarter
earnings per share by $0.01 per share but did not change full
year earnings per share.
Income from continuing operations for fiscal 2006 was favorably
impacted by a tax benefit of $47 million, or $0.10 per
share, due to the repatriation of foreign earnings as well as a
tax benefit of $22 million, or $0.04 per share, relating to
the correction of a previously established deferred tax
liability. In addition, income from continuing operations for
fiscal 2006 was adversely impacted by approximately
$12 million, or $0.02 per share, due to certain third
quarter events. These third quarter events included the
after-tax cost of executive resignation agreements, primarily
with respect to our former CEO ($5 million),
e-commerce
exit costs and third quarter operating losses ($6 million),
and uninsured losses due to third quarter hurricanes, including
the estimated impact of lost sales ($6 million), all of
which were partially offset by a gain from a VISA/MasterCard
antitrust litigation settlement ($5 million).
Favorable changes in currency exchange rates added approximately
$0.05 to our earnings per share in fiscal 2008 and approximately
$0.03 to our earnings per share in fiscal 2007. In addition, the
change in earnings per share in each fiscal year was favorably
impacted by our share repurchase program. During fiscal 2008, we
repurchased 33.3 million shares of our stock at a cost of
$950 million. In fiscal 2007, we repurchased
22.0 million shares of our stock at a cost of
$557 million, which was less than planned, as we
temporarily suspended our buyback activity in December 2006 as a
result of the discovery and investigation of the Computer
Intrusion. We plan to continue our share repurchase program in
fiscal 2009 with planned purchases of approximately
$900 million.
Discontinued operations and net income: Our
results from continuing operations exclude the results of
operations and the cost of closing 34 A.J. Wright stores. See
Segment Information A.J. Wright below
and Note C to the consolidated financial statements for
more information. Net income, which includes the impact of
discontinued operations, was $771.8 million, or $1.66 per
share for fiscal 2008, $738.0 million, or $1.55 per share
for fiscal 2007 and $690.4 million, or $1.41 per share for
fiscal 2006.
Segment information: The following is a discussion
of the operating results of our business segments. We consider
each of our operating divisions to be a segment. We evaluate the
performance of our segments based on segment profit or
loss, which we define as pre-tax income before general
corporate expense, Provision for Computer Intrusion related
costs and interest. Segment profit or loss as we
define the term may not be comparable to similarly titled
measures used by other entities. In addition, this measure of
performance should not be considered an alternative to net
income or cash flows from
20
operating activities as an indicator of our performance or as a
measure of liquidity. Presented below is selected financial
information related to our business segments (U.S. dollars
in millions):
MARMAXX:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
Dollars in millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Net sales
|
|
$
|
11,966.7
|
|
|
$
|
11,531.8
|
|
|
$
|
10,956.8
|
|
Segment profit
|
|
$
|
1,158.2
|
|
|
$
|
1,079.3
|
|
|
$
|
985.4
|
|
Segment profit as a % of net sales
|
|
|
9.7
|
%
|
|
|
9.4
|
%
|
|
|
9.0
|
%
|
Percent increase in same store sales
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
Stores in operation at end of period
|
|
|
1,623
|
|
|
|
1,569
|
|
|
|
1,514
|
|
Selling square footage at end of period (in thousands)
|
|
|
39,784
|
|
|
|
38,468
|
|
|
|
36,987
|
|
Marmaxx, which operates the T.J. Maxx and Marshalls store
chains, posted a 1% same store sales increase in fiscal 2008
compared to a 2% same store sales increase in fiscal 2007. Sales
at Marmaxx for fiscal 2008 reflected strong same store sales
increases in less weather-sensitive categories such as dresses,
footwear and accessories. During fiscal 2008, we added expanded
footwear departments to approximately 240 Marshalls stores and
plan to add expanded departments to an additional 200 stores in
fiscal 2009, taking the total to approximately 720. Home
categories at Marmaxx underperformed in fiscal 2008 and we have
taken measures to improve in this area of our execution.
Geographically in fiscal 2008, same store sales for the
Northeast, Southwest and West Coast were above the chain
average, while same store sales in Florida and the Midwest were
below the chain average.
Segment profit as a percentage of net sales (segment
margin or segment profit margin) increased to
9.7% in fiscal 2008 from 9.4% in fiscal 2007. Segment margin was
favorably impacted by merchandise margins, which increased
0.4 percentage points (as a percentage of net sales) due to
lower markdowns and a higher markon, as well as some expense
leverage due to our cost containment measures. These
improvements in segment margin were partly offset by an increase
in occupancy costs (0.2 percentage points) and a planned
increase in advertising expense (0.1 percentage point). As
of January 26, 2008, average inventories per store were
down 2% compared to an 8% increase at the prior year end. The
increase at the prior year end was primarily due to our in-stock
position on spring transitional goods and an increase in average
ticket.
Segment margin increased to 9.4% in fiscal 2007 from 9.0% in
fiscal 2006. The increase was largely driven by a
0.2 percentage point improvement in merchandise margin,
primarily due to lower markdowns, and expense leverage across
most categories due to our cost containment initiatives.
Additionally, fiscal 2007 included the favorable impact on
current year casualty insurance and employee medical costs of
favorable claims experience. These improvements in segment
margin were partially offset by an increase in occupancy costs
(0.2 percentage points) and a planned increase in marketing
costs (0.1 percentage point).
We added a net of 54 new stores (T.J. Maxx or Marshalls) in
fiscal 2008, and increased total selling square footage of the
division by 3%. We expect to open approximately 45 new stores
(net of closings) in fiscal 2009, increasing the Marmaxx store
base by 3% and increasing its selling square footage by 2%.
21
WINNERS
AND HOMESENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
U.S. Dollars in millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Net sales
|
|
$
|
2,040.8
|
|
|
$
|
1,740.8
|
|
|
$
|
1,457.7
|
|
Segment profit
|
|
$
|
235.1
|
|
|
$
|
181.9
|
|
|
$
|
120.3
|
|
Segment profit as a % of net sales
|
|
|
11.5
|
%
|
|
|
10.4
|
%
|
|
|
8.3
|
%
|
Percent increase (decrease) in same store sales
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. currency
|
|
|
14
|
%
|
|
|
11
|
%
|
|
|
4
|
%
|
Local currency
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
(3
|
)%
|
Stores in operation at end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners
|
|
|
191
|
|
|
|
184
|
|
|
|
174
|
|
HomeSense
|
|
|
71
|
|
|
|
68
|
|
|
|
58
|
|
Selling square footage at end of period (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners
|
|
|
4,389
|
|
|
|
4,214
|
|
|
|
4,012
|
|
HomeSense
|
|
|
1,358
|
|
|
|
1,280
|
|
|
|
1,100
|
|
Net sales for Winners and HomeSense, our Canadian businesses,
for fiscal 2008 increased by 17% over fiscal 2007, with
approximately one-half of this growth due to currency exchange
rates. Same store sales (in local currency) increased by 5% in
both fiscal 2008 and fiscal 2007. Same store sales for fiscal
2008 were positively impacted by sales of home fashions,
footwear, jewelry and accessories. HomeSense continued to
perform well, favorably impacting same store sales in fiscal
2008 and fiscal 2007.
Segment profit margin for fiscal 2008 increased
1.1 percentage points to 11.5% compared to 10.4% for fiscal
2007. This improvement in segment margin was primarily due to
improved expense ratios (leverage from the 5% same store sales
increase as well as cost containment initiatives). Currency
exchange rates increased segment profit by approximately
$24 million for fiscal 2008. Most of this increase is due
to currency translation, which also impacts sales growth and,
therefore, has no impact on segment margin. The increase in
segment profit due to currency exchange rates also included the
favorable impact of the
mark-to-market
adjustment of inventory hedge contracts which increased segment
margin by 0.3 percentage points. The inventory hedge
contracts are designed to lock in the cost of merchandise
purchases that are denominated in U.S. dollars. The fiscal
2008 segment margin also reflected an increase in merchandise
margin, primarily due to increased markon as well the favorable
impact of cost containment initiatives and strong same store
sales results on expense ratios.
Segment profit margin for fiscal 2007 increased
2.1 percentage points to 10.4% compared to 8.3% for fiscal
2006. This improvement in segment margin was primarily due to a
1.4 percentage point increase in merchandise margins
(improved markon and lower markdowns) combined with improved
expense ratios (leverage from the 5% same store sales increase
as well as cost containment initiatives). These increases were
partially offset by a planned increase in advertising costs
which increased 0.2 percentage points as a percentage of
net sales.
We added a net of 7 Winners stores and 3 HomeSense stores in
fiscal 2008, and expanded selling square footage in Canada by
5%. We expect to add a net of 9 Winners and 4 HomeSense stores
in fiscal 2009. Additionally, we plan to test a new off-price
concept with 3 new stores in Canada in fiscal 2009, which will
bring our total Canadian store base up by 5%, and increase
selling square footage by 6%. The store counts include the
Winners and HomeSense portions of this divisions
superstores, which either combine a Winners store with a
HomeSense store or operates them
side-by-side.
As of January 26, 2008 we operated 30 of these superstores.
T.K.
MAXX:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
U.S. Dollars in millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Net sales
|
|
$
|
2,216.2
|
|
|
$
|
1,864.5
|
|
|
$
|
1,517.1
|
|
Segment profit
|
|
$
|
127.2
|
|
|
$
|
109.3
|
|
|
$
|
69.2
|
|
Segment profit as a % of net sales
|
|
|
5.7
|
%
|
|
|
5.9
|
%
|
|
|
4.6
|
%
|
Percent increase (decrease) in same store sales
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. currency
|
|
|
14
|
%
|
|
|
13
|
%
|
|
|
(1
|
)%
|
Local currency
|
|
|
6
|
%
|
|
|
9
|
%
|
|
|
1
|
%
|
Stores in operation at end of period
|
|
|
226
|
|
|
|
210
|
|
|
|
197
|
|
Selling square footage at end of period (in thousands)
|
|
|
5,096
|
|
|
|
4,636
|
|
|
|
4,216
|
|
22
Net sales for fiscal 2008 for T.K. Maxx, operating in the United
Kingdom, Ireland and Germany, increased by 19% over fiscal 2007,
with approximately 40% of this growth due to currency exchange
rates. T.K. Maxx had a strong same store sales increase of 6%
(in local currency) for fiscal 2008. Same store sales for home
fashions, footwear, accessories and dresses performed above the
chain average, while other apparel categories were generally
below the chain average.
Segment profit for fiscal 2008 increased 16% to
$127.2 million, while segment margin decreased slightly to
5.7% compared to fiscal 2007. Currency exchange rates favorably
impacted segment profit by approximately $10 million in
fiscal 2008, but did not impact the segment profit margin.
During fiscal 2008, T.K. Maxx opened its first 5 stores in
Germany which reduced segment profit for fiscal 2008 by
$11 million and reduced the fiscal 2008 segment margin by
0.6 percentage points. The T.K. Maxx stores in the U.K. and
Ireland increased segment margin for fiscal 2008 by
0.4 percentage points, which reflected a slightly improved
merchandise margin, as well as the favorable impact of same
store sales growth on expense ratios and the divisions
cost containment efforts.
Segment profit margin improved to 5.9% of sales for fiscal 2007
compared to 4.6% for fiscal 2006. The 1.3 percentage point
improvement was due to merchandise margin, which was up
0.9 percentage points (primarily due to lower markdowns),
as well as expense leverage from the 9% same store sales
increase. These improvements were partially offset by an
increase in occupancy expense due to higher costs for rent,
utilities and property taxes and costs associated with store
relocations.
We added a net of 16 T.K. Maxx stores, including 5 in Germany,
in fiscal 2008 and increased the divisions selling square
footage by 10%. In fiscal 2009, we plan to open a net of 15 T.K.
Maxx stores, including another 5 in Germany and expect to
introduce the HomeSense concept in Europe with a planned opening
of 5 such stores. Overall we expect to expand selling square
footage by 9%.
HOMEGOODS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
Dollars in millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Net sales
|
|
$
|
1,480.4
|
|
|
$
|
1,365.1
|
|
|
$
|
1,186.9
|
|
Segment profit
|
|
$
|
76.2
|
|
|
$
|
60.9
|
|
|
$
|
28.4
|
|
Segment profit as a % of net sales
|
|
|
5.1
|
%
|
|
|
4.5
|
%
|
|
|
2.4
|
%
|
Percent increase in same store sales
|
|
|
3
|
%
|
|
|
4
|
%
|
|
|
1
|
%
|
Stores in operation at end of period
|
|
|
289
|
|
|
|
270
|
|
|
|
251
|
|
Selling square footage at end of period (in thousands)
|
|
|
5,569
|
|
|
|
5,181
|
|
|
|
4,859
|
|
HomeGoods net sales for fiscal 2008 increased 8% compared
to fiscal 2007, and same store sales increased 3% in fiscal
2008. Segment margin of 5.1% for fiscal 2008 improved over
fiscal 2007 primarily due to improved merchandise margins and
the leveraging of expenses, particularly occupancy costs. These
segment margin improvements were offset in part by an increase
in advertising expenses as a percentage of net sales. We
attribute this divisions strong performance to solid
execution of off-price buying and flow of product.
HomeGoods same store sales grew 4% in fiscal 2007 due to
strong growth in giftware and home decorative products. Segment
profit increased to $60.9 million from $28.4 million,
and segment profit margin almost doubled to 4.5% of sales. The
increase in segment profit margin resulted primarily from
leveraging expenses across most categories, most notably in
distribution center and occupancy expenses.
We opened a net of 19 HomeGoods stores in fiscal 2008, a 7%
increase, and increased selling square footage of the division
by 7%. In fiscal 2009, we plan to add a net of 25 HomeGoods
stores and increase selling square footage by 9%.
A.J.
WRIGHT*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
Dollars in millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Net sales
|
|
$
|
632.7
|
|
|
$
|
601.8
|
|
|
$
|
549.0
|
|
Segment profit (loss)
|
|
$
|
(1.8
|
)
|
|
$
|
(10.3
|
)
|
|
$
|
(3.2
|
)
|
Segment profit (loss) as a % of net sales
|
|
|
(0.3
|
)%
|
|
|
(1.7
|
)%
|
|
|
(0.6
|
)%
|
Percent increase in same store sales
|
|
|
2
|
%
|
|
|
3
|
%
|
|
|
3
|
%
|
Stores in operation at end of period**
|
|
|
129
|
|
|
|
129
|
|
|
|
119
|
|
Selling square footage at end of period (in thousands)**
|
|
|
2,576
|
|
|
|
2,577
|
|
|
|
2,377
|
|
23
|
|
|
*
|
|
The table above presents A.J.
Wrights operating results from continuing operations. The
operating results of the stores classified as discontinued
operations for fiscal 2007 and fiscal 2006 were immaterial.
|
|
**
|
|
Stores in operation and square
footage for fiscal 2006 have been adjusted for store closings
accounted for as discontinued operations.
|
A.J. Wrights net sales increased 5% for fiscal 2008
compared to fiscal 2007. A.J. Wrights same store sales
increased 2% for fiscal 2008, and segment loss for fiscal 2008
was $1.8 million compared to $10.3 million for fiscal
2007. This improvement was primarily due to stronger merchandise
margin, a reduction in occupancy costs as a percentage of net
sales and the impact of cost containment initiatives.
A.J. Wrights same store sales increased 3% for fiscal
2007, and segment loss for fiscal 2007 increased to
$10.3 million. This decline, compared to fiscal 2006, was
primarily the result of a decrease in merchandise margin
(1.2 percentage points) due to markdowns on below-plan
sales. During the fourth quarter of fiscal 2007, as part of a
plan to reposition this business, we identified 34
underperforming A.J. Wright stores for closing, virtually all of
which were closed by fiscal 2007 year end. The cost to
close these stores and their historical operating results are
presented as discontinued operations. By closing these
marginally profitable stores, we reduced the number of
advertising markets in which A.J. Wright operates enabling
better marketing leverage as well as enabling greater
efficiencies in store operations and logistics. The store
closings also allowed management to focus their attention and
resources on the remaining, better performing stores.
We currently plan to add a net of 5 A.J. Wright stores in fiscal
2009. We continue to believe that A.J. Wright can be a growth
vehicle for TJX, with its very sizable target customer
demographic.
BOBS
STORES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
Dollars in millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Net sales
|
|
$
|
310.4
|
|
|
$
|
300.6
|
|
|
$
|
288.5
|
|
Segment profit (loss)
|
|
$
|
(17.4
|
)
|
|
$
|
(17.4
|
)
|
|
$
|
(28.0
|
)
|
Segment profit (loss) as a % of net sales
|
|
|
(5.6
|
)%
|
|
|
(5.8
|
)%
|
|
|
(9.7
|
)%
|
Percent increase in same store sales
|
|
|
5
|
%
|
|
|
2
|
%
|
|
|
N/A
|
|
Stores in operation at end of period
|
|
|
34
|
|
|
|
36
|
|
|
|
35
|
|
Selling square footage at end of period (in thousands)
|
|
|
1,242
|
|
|
|
1,306
|
|
|
|
1,276
|
|
Bobs Stores net sales increased 3% for fiscal 2008,
and same store sales increased 5%, with footwear performing
well. Bobs Stores segment loss for fiscal 2008 was flat
compared to the prior year. Merchandise margin increases were
driven by improved markon, the result of better buying, which
more than offset increases in promotional markdowns as we
significantly increased the level of promotions in this
division. Additionally, in the fourth quarter of fiscal 2008, we
recorded an impairment charge of approximately $8 million.
The impairment charge related to certain long lived assets and
intangible assets at Bobs Stores and represented the
excess of recorded carrying values over the estimated fair value
of these assets.
For fiscal 2009, we do not plan to open any new stores for this
division as we continue to evaluate this business.
GENERAL
CORPORATE EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
Dollars in millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
General corporate expense
|
|
$
|
139.4
|
|
|
$
|
136.4
|
|
|
$
|
134.1
|
|
General corporate expense for segment reporting purposes are
those costs not specifically related to the operations of our
business segments. This item includes the costs of the corporate
office, including the compensation and benefits (including stock
based compensation) for senior corporate management; payroll and
operating costs of the corporate departments of accounting and
budgeting, internal audit, compliance, treasury, investor
relations, tax, risk management, legal, human resources and
systems; and the occupancy and office maintenance costs
associated with the corporate staff. In addition, general
corporate expense includes the cost of benefits for existing
retirees and non-operating costs and other gains and losses not
attributable to individual divisions. General corporate expense
is included in selling, general and administrative expenses in
the consolidated statements of income.
The comparison of general corporate expense in fiscal 2008
versus fiscal 2007 reflected an increase in corporate support
costs in fiscal 2008 and a $5 million charge in fiscal 2007
relating to the cost of a workforce reduction and other
termination benefits at the corporate level.
In comparing general corporate expense for fiscal 2007 to fiscal
2006, fiscal 2007 included the $5 million charge referred
to above, while fiscal 2006 included costs of $9 million
associated with executive resignation agreements and
$6 million of
24
costs to exit the
e-commerce
business. The increase in other general corporate expenses in
fiscal 2007 over fiscal 2006 also reflected increases in
corporate payroll, corporate marketing and consulting costs,
charitable contributions, and European expansion costs.
LIQUIDITY
AND CAPITAL RESOURCES
Operating activities:
Net cash provided by operating activities was
$1,361.1 million in fiscal 2008, $1,195.0 million in
fiscal 2007 and $1,158.0 million in fiscal 2006. The cash
generated from operating activities in each of these fiscal
years was largely due to operating earnings.
Operating cash flows for fiscal 2008 increased by
$166.1 million. Net income (adjusted for depreciation and
amortization) for fiscal 2008 increased $50.0 million. The
change in inventory, net of accounts payable, from prior
year-end levels was a significant component of operating cash
flows. In fiscal 2008, the change in merchandise inventory, net
of the related change in accounts payable, favorably impacted
operating cash flows by $4.9 million compared to a use of
cash of $151.2 million in fiscal 2007. Additionally, fiscal
2008 operating cash flows were favorably impacted by the change
in income taxes payable. These increases in fiscal 2008
operating cash flows as compared to fiscal 2007 were offset by
the unfavorable cash flow impact of the deferred income tax
provision, changes in accrued expenses and other liabilities and
changes in accounts receivable.
Operating cash flows for fiscal 2007 increased by
$37.0 million compared to fiscal 2006, driven by an
increase in net income (adjusted for depreciation and
amortization) of $86.4 million. In fiscal 2007, the change
in merchandise inventory, net of the related change in accounts
payable, resulted in a use of cash of $151.2 million
compared to a source of cash of $26.2 million in fiscal
2006. Fiscal 2007 operating cash flows were also reduced by
higher income tax payments. These reductions in fiscal 2007
operating cash flows as compared to fiscal 2006 were offset by
the favorable cash flow impact of changes in deferred income
taxes, accounts receivable and prepaid expenses.
The variance in operating cash flows attributable to the change
in the net inventory position over the last three fiscal years
is largely explained by our average per store inventory levels
at each year end period. Average per store inventories at
January 26, 2008, including inventory on hand at our
distribution centers, increased 2% compared to an increase of 7%
at January 27, 2007. This compares to inventories per store
at January 28, 2006 that were down 11% compared to the
prior year.
Discontinued operations reserve: We have a reserve
for future obligations of discontinued operations that relates
primarily to real estate leases associated with 34 of our A.J.
Wright stores (see Note C to the consolidated financial
statements) as well as leases of former TJX businesses. The
balance in the reserve and the activity for the last three
fiscal years is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Balance at beginning of year
|
|
$
|
57,677
|
|
|
$
|
14,981
|
|
|
$
|
12,365
|
|
Additions to the reserve charged to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
A.J. Wright store closings
|
|
|
|
|
|
|
61,968
|
|
|
|
|
|
Other lease related obligations
|
|
|
|
|
|
|
1,555
|
|
|
|
8,509
|
|
Interest accretion
|
|
|
1,820
|
|
|
|
400
|
|
|
|
400
|
|
Charges against the reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease related obligations
|
|
|
(11,214
|
)
|
|
|
(1,696
|
)
|
|
|
(6,111
|
)
|
Fixed asset write-off (non-cash)
|
|
|
|
|
|
|
(18,732
|
)
|
|
|
|
|
Termination benefits and all other
|
|
|
(2,207
|
)
|
|
|
(799
|
)
|
|
|
(182
|
)
|
|
|
Balance at end of year
|
|
$
|
46,076
|
|
|
$
|
57,677
|
|
|
$
|
14,981
|
|
|
|
The exit costs related to 34 of our A.J. Wright stores resulted
in an addition to the reserve of $62 million in fiscal
2007. The other additions to the reserve for lease related
obligations in fiscal 2007 and fiscal 2006 are the result of
periodic adjustments to our estimated lease obligations of our
former businesses and are offset by income from creditor
recoveries of a similar amount. The lease related charges
against the reserve during fiscal 2007 and fiscal 2006 relate
primarily to our former businesses. The fixed asset write-offs
and other charges against the reserve for fiscal 2007 and all
the charges against the reserve in fiscal 2008 relate primarily
to the 34 A.J. Wright closed stores, virtually all of which were
closed at the end of fiscal 2007.
25
Approximately $32 million of the fiscal 2008 reserve
balance and $43 million of the fiscal 2007 reserve balance
relates to the A.J. Wright store closings, primarily our
estimation of lease costs, net of estimated subtenant income.
The remainder of the reserve reflects our estimation of the cost
of claims, updated quarterly, that have been, or we believe are
likely to be, made against us for liability as an original
lessee or guarantor of the leases of former businesses, after
mitigation of the number and cost of lease obligations. At
January 26, 2008, substantially all the leases of former
businesses that were rejected in bankruptcy and for which the
landlords asserted liability against us had been resolved. The
actual net cost of A.J. Wright lease obligations may differ from
our original estimate. Although our actual costs with respect to
the lease obligations of former businesses may exceed amounts
estimated in our reserve, and we may incur costs for leases from
these former businesses that were not terminated or had not
expired, we do not expect to incur any material costs related to
these discontinued operations in excess of the amounts
estimated. We estimate that the majority of the discontinued
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.
We may also be contingently liable on up to 15 leases of
BJs Wholesale Club, a former TJX business, for which
BJs Wholesale Club is primarily liable. Our reserve for
discontinued operations does not reflect these leases, because
we believe that the likelihood of any future liability to us
with respect to these leases is remote due to the current
financial condition of BJs Wholesale Club.
Off-balance sheet liabilities: We have contingent
obligations on leases, for which we were a lessee or guarantor,
which were assigned to third parties without TJX being released
by the landlords. Over many years, we have assigned numerous
leases that we originally leased or guaranteed to a significant
number of third parties. With the exception of leases of our
former businesses discussed above, we have rarely had a claim
with respect to assigned leases, and accordingly, we do not
expect that such leases will have a material adverse effect on
our financial condition, results of operations or cash flows. We
do not generally have sufficient information about these leases
to estimate our potential contingent obligations under them,
which could be triggered in the event that one or more of the
current tenants does not fulfill their obligations related to
one or more of these leases.
We also have contingent obligations in connection with some
assigned or sublet properties that we are able to estimate. We
estimate the undiscounted obligations, not reflected in our
reserves, of leases of closed stores of continuing operations,
BJs Wholesale Club leases discussed above, and properties
of our discontinued operations that we have sublet, if the
subtenants did not fulfill their obligations, to be
approximately $105 million as of January 26, 2008. We
believe that most or all of these contingent obligations will
not revert to us and, to the extent they do, will be resolved
for substantially less due to mitigating factors.
We are a party to various agreements under which we may be
obligated to indemnify the other party with respect to breach of
warranty or losses related to such matters as title to assets
sold, specified environmental matters or certain income taxes.
These obligations are typically limited in time and amount.
There are no amounts reflected in our balance sheets with
respect to these contingent obligations.
Investing activities:
Our cash flows for investing activities include capital
expenditures for the last three years as set forth in the table
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
In millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
New stores
|
|
$
|
120.7
|
|
|
$
|
123.0
|
|
|
$
|
171.9
|
|
Store renovations and improvements
|
|
|
269.8
|
|
|
|
190.2
|
|
|
|
267.1
|
|
Office and distribution centers
|
|
|
136.5
|
|
|
|
64.8
|
|
|
|
56.9
|
|
|
|
Capital expenditures
|
|
$
|
527.0
|
|
|
$
|
378.0
|
|
|
$
|
495.9
|
|
|
|
We expect that capital expenditures will approximate
$575 million for fiscal 2009, which we expect to pay
through internally generated funds. This includes
$140 million for new stores, $288 million for store
renovations, expansions and improvements and $147 million
for our office and distribution centers. The planned increase in
capital expenditures is attributable to increased spending on
renovations and improvements to existing stores, particularly
T.J. Maxx, Marshalls and T.K. Maxx.
Financing activities:
Cash flows from financing activities resulted in net cash
outflows of $952.7 million in fiscal 2008,
$418.0 million in fiscal 2007 and $503.7 million in
fiscal 2006. The majority of this outflow relates to our share
repurchase program.
26
We spent $950.2 million in fiscal 2008, $557.2 million
in fiscal 2007 and $600.0 million in fiscal 2006 under our
stock repurchase programs. We repurchased 33.3 million
shares in fiscal 2008, 22.0 million shares in fiscal 2007
and 25.9 million shares in fiscal 2006. All shares
repurchased were retired. Repurchases were suspended late in the
fourth quarter of fiscal 2007 and for most of the first quarter
of fiscal 2008 as a result of the discovery of the Computer
Intrusion. We record the repurchase of our stock on a cash basis
and the amounts reflected in the financial statements may vary
from the above due to the timing of the settlement of our
repurchases. Of the $950.2 million of repurchases made
during fiscal 2008, $436.2 million completed a
$1 billion stock repurchase program initially authorized in
October 2005 and $514.0 million were made under the
$1 billion stock repurchase program authorized in January
2007. In February 2008, our Board of Directors authorized an
additional multi-year stock repurchase plan of $1 billion.
In January 2006, we entered into a C$235 million term
credit facility (through our Canadian division, Winners) due in
January 2010. This debt is guaranteed by TJX. Interest is
payable on borrowings under this facility at rates equal to or
less than Canadian prime rate. Winners entered into an interest
rate swap agreement which effectively established a fixed
interest rate of approximately 4.5% on this debt. The proceeds
were used to fund the repatriation of earnings from our Canadian
division as well as other general corporate purposes of this
division. Financing activities also included scheduled principal
payments on long-term debt of $100 million in fiscal 2006.
For fiscal 2008 and fiscal 2007, there were no scheduled
principal payments on long-term debt.
We declared quarterly dividends on our common stock which
totaled $0.36 per share in fiscal 2008, $0.28 per share in
fiscal 2007 and $0.24 per share in fiscal 2006. Cash payments
for dividends on our common stock totaled $151.5 million in
fiscal 2008, $122.9 million in fiscal 2007 and
$105.3 million in fiscal 2006. Financing activities also
included proceeds of $134.1 million in fiscal 2008,
$260.2 million in fiscal 2007 and $102.4 million in
fiscal 2006 from the exercise of employee stock options.
We traditionally have funded our seasonal merchandise
requirements through cash generated from operations, short-term
bank borrowings and the issuance of short-term commercial paper.
In fiscal 2007, we amended our $500 million, four-year
revolving credit facility and our $500 million, five-year
revolving credit facility (initially entered into in fiscal
2006), to extend the maturity dates of these agreements until
May 2010 and May 2011, respectively. These agreements have no
compensating balance requirements and have various covenants
including a requirement of a specified ratio of debt to
earnings. We also have a commercial paper program pursuant to
which we issue commercial paper from time to time. The revolving
credit facilities are used as back up to our commercial paper
program. As of January 26, 2008, there were no outstanding
amounts under our credit facilities. There were no borrowings on
our credit facilities during fiscal 2008. The maximum amount of
our U.S. short-term borrowings outstanding was
$205 million during fiscal 2007 and $567 million
during fiscal 2006. The weighted average interest rate on our
U.S. short-term borrowings was 5.35% in fiscal 2007 and
3.69% in fiscal 2006.
As of January 26, 2008 and January 27, 2007, Winners
had two credit lines, one for C$10 million for operating
expenses and one C$10 million letter of credit facility.
The maximum amount outstanding under our Canadian credit line
for operating expenses was C$5.7 million in fiscal 2008,
C$3.8 million in fiscal 2007 and C$4.6 million in
fiscal 2006, and there were no amounts outstanding on either of
these lines at the end of fiscal 2008 or fiscal 2007. As of
January 26, 2008, T.K. Maxx had credit lines totaling
£20 million. The maximum amount outstanding in fiscal
2008 was £16.4 million, and there were no outstanding
borrowings at January 26, 2008 or January 27, 2007.
We believe that internally generated funds and our current
credit facilities are more than adequate to meet our operating
needs for at least the next twelve months. See Note D to
the consolidated financial statements for further information
regarding our long-term debt and available financing sources.
Contractual obligations: As of January 26,
2008, we had payment obligations (including current
installments) under long-term debt arrangements, leases for
property and equipment and purchase obligations that will
require cash outflows as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
1-3
|
|
|
3-5
|
|
|
More Than
|
|
Contractual Obligations
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
|
|
Long-term debt obligations including estimated interest
|
|
$
|
928,130
|
|
|
$
|
26,840
|
|
|
$
|
459,960
|
|
|
$
|
|
|
|
$
|
441,330
|
|
Operating lease commitments
|
|
|
5,661,698
|
|
|
|
943,174
|
|
|
|
1,707,955
|
|
|
|
1,295,248
|
|
|
|
1,715,321
|
|
Capital lease obligations
|
|
|
30,071
|
|
|
|
3,726
|
|
|
|
7,452
|
|
|
|
7,809
|
|
|
|
11,084
|
|
Purchase obligations
|
|
|
2,074,958
|
|
|
|
1,992,773
|
|
|
|
78,335
|
|
|
|
2,150
|
|
|
|
1,700
|
|
|
|
Total Obligations
|
|
$
|
8,694,857
|
|
|
$
|
2,966,513
|
|
|
$
|
2,253,702
|
|
|
$
|
1,305,207
|
|
|
$
|
2,169,435
|
|
|
|
27
The long-term debt obligations above include estimated interest
costs and assume that all holders of the zero coupon convertible
subordinated notes exercise their put options in fiscal 2014. If
none of the put options are exercised and the notes are not
redeemed or converted, the notes will mature in fiscal 2022. The
effect of the interest rate swap agreements was estimated based
on their values as of January 26, 2008.
The lease commitments in the above table are for minimum rent
and do not include costs for insurance, real estate taxes and
common area maintenance costs that we are obligated to pay.
These costs were approximately one-third of the total minimum
rent for the fiscal year ended January 26, 2008.
Our purchase obligations primarily consist of purchase orders
for merchandise; purchase orders for capital expenditures,
supplies and other operating needs; commitments under contracts
for maintenance needs and other services; and commitments under
executive employment and other agreements. We excluded long-term
agreements for services and operating needs that can be
cancelled without penalty.
We also have long-term liabilities which include
$125.4 million for employee compensation and benefits, most
of which will come due beyond five years, derivative contracts
of approximately $143.1 million, the majority of which come
due in fiscal 2010, $150.5 million for accrued rent, the
cash flow requirements of which are included in the lease
commitments in the above table and $269.2 million for
uncertain tax positions for which it is not reasonably possible
to predict when it may be paid.
CRITICAL
ACCOUNTING POLICIES
We must evaluate and select applicable accounting policies. We
consider our most critical accounting policies, involving
management estimates and judgments, to be those relating to the
areas described below. We believe that we have selected the most
appropriate assumptions in each of the following areas and that
the results we would have obtained, had alternative assumptions
been selected, would not be materially different from the
results we have reported.
Inventory valuation: We use the retail method for
valuing inventory on a
first-in
first-out basis. Under the retail method, the cost value of
inventory and gross margins are determined by calculating a
cost-to-retail
ratio and applying it to the retail value of inventory. This
method is widely used in the retail industry and involves
management estimates with regard to such things as markdowns and
inventory shrinkage. A significant factor involves the recording
and timing of permanent markdowns. Under the retail method,
permanent markdowns are reflected in the inventory valuation
when the price of an item is changed. We believe the retail
method results in a more conservative inventory valuation than
other accounting methods. In addition, as a normal business
practice, we have a specific policy as to when markdowns are to
be taken, greatly reducing the need for management estimates.
Inventory shortage involves estimating a shrinkage rate for
interim periods, but is based on a full physical inventory near
the fiscal year end. Thus, the difference between actual and
estimated amounts may cause fluctuations in quarterly results,
but is not a factor in full year results. Overall, we believe
that the retail method, coupled with our disciplined permanent
markdown policy and a full physical inventory taken at each
fiscal year end, results in an inventory valuation that is
fairly stated. Lastly, many retailers have arrangements with
vendors that provide for rebates and allowances under certain
conditions, which ultimately affect the value of the inventory.
Our off-price businesses have historically not entered into such
arrangements with our vendors. Bobs Stores, the
value-oriented retailer we acquired in December 2003, does have
vendor relationships that provide for recovery of advertising
dollars if certain conditions are met. These arrangements may
have some impact on Bobs Stores inventory valuation
but such amounts are immaterial to our consolidated results.
Impairment of long-lived assets: We review the
recoverability of the carrying value of our long-lived assets at
least annually and whenever events or circumstances occur that
would indicate that their carrying amounts are not recoverable.
Significant judgments are involved in projecting the cash flows
of individual stores and our business units and involve a number
of factors including historical trends, recent performance and
general economic assumptions. If it is determined that an
impairment of long-lived assets has occurred, we record an
impairment charge equal to the excess of the carrying value of
the assets over the estimated fair value of the assets.
Retirement obligations: Retirement costs are
accrued over the service life of an employee and represent in
the aggregate obligations that will ultimately be settled far in
the future and are therefore subject to estimates. We are
required to make assumptions regarding variables, such as the
discount rate for valuing pension obligations and the long-term
rate of return assumed to be earned on pension assets, both of
which impact the net periodic pension cost for the period. The
discount rate, which we determine annually based on market
interest rates, and our estimated long-term rate of return,
which can differ considerably from actual returns, are two
factors that can have a considerable impact on the annual cost
of
28
retirement benefits and the funded status of our qualified
pension plan. We have made contributions of $65 million,
which exceeded the minimum required, over the last three years
to largely restore the funded status of our plan.
Casualty insurance: In July 2007 we entered into a
fixed premium program for our casualty insurance. Our casualty
insurance program prior to 2007 requires us to estimate the
total claims we will incur as a component of our annual
insurance cost. The estimated claims are developed, with the
assistance of an actuary, based on historical experience and
other factors. These estimates involve significant judgements
and assumptions and actual results could differ from these
estimates. If our estimate for the claims component of our
casualty insurance expense for fiscal 2008 were to change by
10%, the fiscal 2008 pre-tax cost would increase or decrease by
approximately $2 million. A large portion of these claims
are funded with a non-refundable payment during the policy year,
offsetting our estimated claims accrual. We had a net accrual of
$26.4 million for the unfunded portion of our casualty
insurance program as of January 26, 2008.
Accounting for taxes: Like many large
corporations, we are regularly under audit by United States
federal, state, local or foreign tax authorities in the areas of
income taxes and the remittance of sales and use taxes. In
evaluating the potential exposure associated with the various
tax filing positions, we accrue charges for possible exposures.
Based on the annual evaluations of tax positions, we believe we
have appropriately filed our tax returns and accrued for
possible exposures. To the extent we were to prevail in matters
for which accruals have been established or be required to pay
amounts in excess of reserves, our effective income tax rate in
a given financial period might be materially impacted. The
Internal Revenue Service has examined the fiscal years ended
January 2000 through January 2003 and several refund claims have
been approved by IRS Appeals Office and are awaiting
confirmation by the Congressional Joint Tax Committee. We also
have various state and foreign tax examinations in process.
Reserves for Computer Intrusion related costs and for
discontinued operations: As discussed in Note B and
Note L to the consolidated financial statements and
elsewhere in the managements discussion and analysis, we
have reserves established for probable losses arising out of the
Computer Intrusion and for leases relating to operations
discontinued by us where we were the original lessee or a
guarantor and which have been assigned or sublet to third
parties. The Computer Intrusion reserve requires us to make
numerous estimates and assumptions about the outcome and costs
of claims, litigation and investigations and the related costs
and expenses we will incur. We make these estimates based on our
best judgments of the outcome of such claims, litigation and
investigation and related costs and expenses. The leases
relating to discontinued operations are long-term obligations
and the estimated cost to us involves numerous estimates and
assumptions including whether and for how long we remain
obligated with respect to a particular lease, the extent to
which an assignee or subtenant will assume our obligation under
the leases, amounts of subtenant income, how a particular
obligation may ultimately be settled and what mitigating
factors, including indemnification, may exist with regard to any
liability. We develop these assumptions based on past experience
and by evaluating various probable outcomes and the
circumstances surrounding each situation and location. We
believe that our current reserves are a reasonable estimate of
the most likely outcomes and that the reserves should be
adequate to cover the ultimate cash costs we will incur.
However, actual results may differ from our current estimates,
and such differences could be material. We may decrease or
increase the amount of our reserves to adjust for developments
relating to the underlying assumptions.
Loss Contingencies: Certain conditions may exist
as of the date the financial statements are issued, which may
result in a loss to us but which will not be resolved until one
or more future events occur or fail to occur. Our management,
where relevant, with the assistance of our legal counsel,
assesses such contingent liabilities, and such assessment
inherently involves an exercise of judgment. In assessing loss
contingencies related to legal proceedings that are pending
against us or claims that may result in such proceedings, our
legal counsel assists us in evaluating the perceived merits of
any legal proceedings or claims as well as the perceived merits
of the relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable
that a material loss has been incurred and the amount of the
liability can be estimated, then the estimated liability would
be accrued in the financial statements. If the assessment
indicates that a potentially material loss contingency is not
probable, but is reasonably possible, or is probable but cannot
be estimated, then we will disclose the nature of the contingent
liability, together with an estimate of the range of the
possible loss or a statement that such loss is not estimable.
RECENT
ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS No. 157).
SFAS No. 157 defines fair value, establishes a
framework for measuring fair value and requires enhanced
disclosures about fair value measurements.
SFAS No. 157 requires companies to disclose fair value
measurements according to a fair value hierarchy as defined in
the standard. Additionally, companies are required to provide
enhanced disclosure regarding fair value measurements in one of
the categories (level 3), including a reconciliation of the
beginning and ending balances separately for each major category
29
of assets and liabilities. SFAS No. 157 is effective
for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal
years, and will be applied prospectively. SFAS No. 157
is effective for the Company in the first quarter of fiscal
2009. In February 2008, the FASB issued a Staff Position that
will (1) partially defer the effective date of
SFAS No. 157 for one year for certain nonfinancial
assets and nonfinancial liabilities and (2) remove certain
leasing transactions from the scope of SFAS No. 157.
We believe the adoption of SFAS No. 157 will not have
a material impact on our results of operations or financial
condition.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities including an amendment of FASB Statement
No. 115, (SFAS No. 159).
SFAS No. 159 provides companies with an option to
report selected financial assets and liabilities at fair value
and establishes presentation and disclosure requirements
designed to facilitate comparisons between companies that choose
different fair value measurement attributes for similar types of
assets and liabilities. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007, and interim
periods within those years and will be effective for the Company
in the first quarter of fiscal 2009. We do not believe that
SFAS No. 159 will have a material impact on our
financial statements.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
We do not enter into derivatives for speculative or trading
purposes.
Foreign
Currency Exchange Rate Risk
We are exposed to foreign currency exchange rate risk on our
investment in our Canadian (Winners and HomeSense) and European
(T.K. Maxx) operations. As more fully described in Notes A
and E to the consolidated financial statements, we hedge a
significant portion of our net investment in foreign operations;
intercompany transactions with these operations; and certain
merchandise purchase commitments incurred by these operations;
with derivative financial instruments. We enter into derivative
contracts only when there is an underlying economic exposure. We
utilize currency forward and swap contracts, designed to offset
the gains or losses in the underlying exposures; most of these
gains and losses are recorded directly in shareholders
equity. The contracts are executed with banks we believe are
creditworthy and are denominated in currencies of major
industrial countries. We have performed a sensitivity analysis
assuming a hypothetical 10% adverse movement in foreign currency
exchange rates applied to the hedging contracts and the
underlying exposures described above. As of January 26,
2008, the analysis indicated that such an adverse movement would
not have a material effect on our consolidated financial
position, results of operations or cash flows.
Interest
Rate Risk
Our cash equivalents and short-term investments and certain
lines of credit bear variable interest rates. Changes in
interest rates affect interest earned and paid by TJX. In
addition, changes in the gross amount of our borrowings and
future changes in interest rates will affect our future interest
expense. We occasionally enter into financial instruments to
manage our cost of borrowing; however, we believe that the use
of primarily fixed rate debt minimizes our exposure to market
conditions. We have performed a sensitivity analysis assuming a
hypothetical 10% adverse movement in interest rates applied to
the maximum variable rate debt outstanding during fiscal 2008.
As of January 26, 2008, the analysis indicated that such an
adverse movement would not have a material effect on our
consolidated financial position, results of operations or cash
flows.
Market
Risk
The assets of our qualified pension plan, a large portion of
which is invested in equity securities, are subject to the risks
and uncertainties of the public stock market. We allocate the
pension assets in a manner that attempts to minimize and control
our exposure to these market uncertainties. Investments, in
general, are exposed to various risks, such as interest rate,
credit, and overall market volatility. As such it is reasonably
possible that changes in the values of investments will occur in
the near term and such changes could affect the amounts reported.
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The information required by this item may be found on pages F-1
through F-32 of this Annual Report on
Form 10-K.
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
Not applicable.
30
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
(a) Evaluation of Disclosure Controls and Procedures
We have carried out an evaluation, under the supervision and
with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures, as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange Act, as of the end of the period covered by
this report pursuant to
Rules 13a-15
and 15d-15
of the Exchange Act. Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in ensuring
that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is
(i) recorded, processed, summarized and reported, within
the time periods specified in the SECs rules and forms;
and (ii) accumulated and communicated to our management,
including our principal executive and principal financial
officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosures. Management recognizes that any controls and
procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating
the cost-benefit relationship of implementing possible controls
and procedures.
(b) Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial
reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) during the fourth quarter of fiscal 2008
identified in connection with our Chief Executive Officers
and Chief Financial Officers evaluation that have
materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
(c) Managements Annual Report on Internal Control
Over Financial Reporting
The management of TJX is responsible for establishing and
maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in
Rules 13a-15(f)
and
15d-15(f)
promulgated under the Securities Exchange Act of 1934, as
amended, as a process designed by, or under the supervision of,
TJXs principal executive and principal financial officers,
or persons performing similar functions, and effected by
TJXs board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
|
|
|
|
|
Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the assets of TJX;
|
|
|
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of TJX are being made only in
accordance with authorizations of management and directors of
TJX; and
|
|
|
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
TJXs assets that could have a material effect on the
financial statements.
|
Our internal control system is designed to provide reasonable
assurance to our management and Board of Directors regarding the
preparation and fair presentation of published financial
statements. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of TJXs
management, including its Chief Executive Officer and Chief
Financial Officer, TJX conducted an evaluation of the
effectiveness of its internal control over financial reporting
as of January 26, 2008 based on the framework in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on that evaluation,
management concluded that its internal control over financial
reporting was effective as of January 26, 2008.
(d) Attestation Report of the Independent Registered Public
Accounting Firm
PricewaterhouseCoopers LLP, the independent registered public
accounting firm that audited and reported on our consolidated
financial statements contained herein, has audited the
effectiveness of our internal control over financial reporting
as of January 26, 2008, and has issued an attestation
report on the effectiveness of our internal control over
financial reporting included herein.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
31
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
|
|
|
|
|
|
|
|
|
|
|
Office and Employment
|
Name
|
|
Age
|
|
During Last Five Years
|
|
|
Arnold Barron
|
|
|
60
|
|
|
Senior Executive Vice President, Group President, TJX since
March 2004. Executive Vice President, Chief Operating Officer of
The Marmaxx Group from 2000 to 2004. Senior Vice President,
Group Executive of TJX from 1996 to 2000. Senior Vice President,
General Merchandise Manager of the T.J. Maxx Division from 1993
to 1996; Senior Vice President, Director of Stores, 1984 to
1993; various store operation positions with TJX, 1979 to 1984.
|
Bernard Cammarata
|
|
|
68
|
|
|
Chairman of the Board since 1999. Acting Chief Executive Officer
from September 2005 to January 2007 and Chief Executive Officer
of TJX from 1989 to 2000. President from 1989 to 1999. Chairman
of the T.J. Maxx Division from 1986 to 1995 and of The Marmaxx
Group from 1995 to 2000. Executive Vice President of TJX from
1986 to 1989; President, Chief Executive Officer and a Director
of TJXs former TJX subsidiary from 1987 to 1989 and
President of the T.J. Maxx Division from 1976 to 1986.
|
Donald G. Campbell
|
|
|
56
|
|
|
Vice Chairman since September 2006, Senior Executive Vice
President, Chief Administrative and Business Development Officer
from March 2004 to September 2006. Executive Vice
President Finance from 1996 to 2004 and Chief
Financial Officer of TJX from 1989 to 2004. Senior Vice
President Finance, from 1989 to 1996. Senior
Financial Executive of TJX, 1988 to 1989; Senior Vice
President Finance and Administration, Zayre Stores
Division, 1987 to 1988; Vice President and Corporate Controller
of TJX, 1985 to 1987; various financial positions with TJX, 1973
to 1985.
|
Ernie Herrman
|
|
|
47
|
|
|
Senior Executive Vice President, TJX since January 2007 and
President, Marmaxx since January 2005. Senior Executive Vice
President, Chief Operating Officer, Marmaxx from 2004 to 2005.
Executive Vice President, Merchandising, Marmaxx from 2001 to
2004. Senior Vice President, Merchandising from 1998 to 2001.
Vice President, General Merchandise Manager from 1996 to 1998.
Vice President, Senior Merchandise Manager from 1995 to 1996.
Various merchandising positions with TJX, 1989 to 1995.
|
Carol Meyrowitz
|
|
|
54
|
|
|
Chief Executive Officer of TJX since January 2007, Director
since September 2006 and President since October 2005.
Consultant to TJX from January 2005 to October 2005. Senior
Executive Vice President, TJX from March 2004 to January 2005.
President of The Marmaxx Group from 2001 to January 2005.
Executive Vice President of TJX from 2001 to 2004. Executive
Vice President, Merchandising, The Marmaxx Group from 2000 to
2001 and Senior Vice President, Merchandising from 1999 to 2000.
Executive Vice President, Merchandising, Chadwicks of
Boston, Ltd. from 1996 to 1999; Senior Vice President,
Merchandising from 1991 to 1996 and Vice President,
Merchandising from 1989 to 1991. Vice President,
Division Merchandise Manager, Hit or Miss from 1987 to 1989.
|
Jeffrey G. Naylor
|
|
|
49
|
|
|
Senior Executive Vice President, Chief Administrative and
Business Development Officer, TJX since June 2007. Senior
Executive Vice President, Chief Financial and Administrative
Officer, TJX September 2006 to June 2007. Senior Executive Vice
President, Chief Financial Officer, TJX from March 2004 to
September 2006, Executive Vice President, Chief Financial
Officer of TJX effective February 2, 2004. Senior Vice
President and Chief Financial Officer at Big Lots, Inc. from
2001 to January 2004. Senior Vice President, Chief Financial and
Administrative Officer of Dade Behring, Inc. from 2000 to 2001.
Vice President, Controller of The Limited, Inc., from 1998 to
2000.
|
Jerome Rossi
|
|
|
64
|
|
|
Senior Executive Vice President, Group President, TJX since
January 2007. Senior Executive Vice President, Chief Operating
Officer, Marmaxx from 2005 to January 2007. President,
HomeGoods, from 2000 to 2005. Executive Vice President, Store
Operations, Human Resources and Distribution Services, Marmaxx
from 1996 to 2000.
|
Paul Sweetenham
|
|
|
43
|
|
|
Senior Executive Vice President, Group President, Europe, since
January 2007. President, T.K. Maxx since 2001. Senior Vice
President, Merchandising and Marketing, T.K. Maxx from 1999 to
2001. Various merchandising positions with T.K. Maxx from 1993
to 1999.
|
Nirmal K. Tripathy
|
|
|
49
|
|
|
Executive Vice President, Chief Financial Officer, TJX, since
June 2007. President and Chief Operating Officer at Macys
Florida from 2003 to June 2007. Executive Vice President at
Macys Florida from 2002 to 2003. Previous senior positions
with Limited Brands and PepsiCo.
|
32
All officers hold office until the next annual meeting of the
Board in June 2008 and until their successors are elected, or
appointed, and qualified.
TJX will file with the Securities and Exchange Commission a
definitive proxy statement no later than 120 days after the
close of its fiscal year ended January 26, 2008 (the Proxy
Statement). The information required by this Item and not given
in this Item will appear under the headings Election of
Directors, Corporate Governance, Audit
Committee Report and Section 16(a) Beneficial
Ownership Reporting Compliance in our Proxy Statement,
which sections are incorporated in this item by reference.
TJX has a Code of Ethics for TJX Executives governing our
Chairman, Vice Chairman, Chief Executive Officer, President,
Chief Administrative Officer, Chief Financial Officer, Principal
Accounting Officer and other senior operating, financial and
legal executives. The Code of Ethics for TJX Executives is
designed to ensure integrity in our financial reports and public
disclosures. TJX also has a Code of Conduct and Business Ethics
for Directors which promotes honest and ethical conduct,
compliance with applicable laws, rules and regulations and the
avoidance of conflicts of interest. Both of these codes of
conduct are published on our website at www.tjx.com. We
intend to disclose any future amendments to, or waivers from,
the Code of Ethics for TJX Executives or the Code of Business
Conduct and Ethics for Directors within four business days of
the waiver or amendment through a website posting or by filing a
Current Report on
Form 8-K
with the Securities and Exchange Commission.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
The information required by this Item will appear under the
heading Executive Compensation in our Proxy
Statement, which section is incorporated in this item by
reference.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
The information required by this Item will appear under the
heading Beneficial Ownership in our Proxy Statement,
which section is incorporated in this item by reference.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
The information required by this Item will appear under the
headings Transactions with Related Persons and
Corporate Governance in our Proxy Statement, which
sections are incorporated in this item by reference.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The information required by this Item will appear under the
heading Audit Committee Report in our Proxy
Statement, which section is incorporated in this item by
reference.
33
PART IV
|
|
ITEM 15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
(a) Financial Statement Schedules
For a list of the consolidated financial information included
herein, see Index to the Consolidated Financial Statements on
page F-1.
Schedule II Valuation and Qualifying Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
Amounts
|
|
|
Write-Offs
|
|
|
Balance
|
|
|
|
Beginning
|
|
|
Charged to
|
|
|
Against
|
|
|
End of
|
|
In thousands
|
|
of Period
|
|
|
Net Income
|
|
|
Reserve
|
|
|
Period
|
|
|
|
|
Sales Return Reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 26, 2008
|
|
$
|
14,182
|
|
|
$
|
841,687
|
|
|
$
|
840,571
|
|
|
$
|
15,298
|
|
|
|
Fiscal Year Ended January 27, 2007
|
|
$
|
14,101
|
|
|
$
|
795,941
|
|
|
$
|
795,860
|
|
|
$
|
14,182
|
|
|
|
Fiscal Year Ended January 28, 2006
|
|
$
|
13,162
|
|
|
$
|
823,357
|
|
|
$
|
822,418
|
|
|
$
|
14,101
|
|
|
|
Discontinued Operations Reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 26, 2008
|
|
$
|
57,677
|
|
|
$
|
1,820
|
|
|
$
|
13,421
|
|
|
$
|
46,076
|
|
|
|
Fiscal Year Ended January 27, 2007
|
|
$
|
14,981
|
|
|
$
|
63,923
|
|
|
$
|
21,227
|
|
|
$
|
57,677
|
|
|
|
Fiscal Year Ended January 28, 2006
|
|
$
|
12,365
|
|
|
$
|
8,909
|
|
|
$
|
6,293
|
|
|
$
|
14,981
|
|
|
|
Casualty Insurance Reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 26, 2008
|
|
$
|
31,443
|
|
|
$
|
17,673
|
|
|
$
|
22,743
|
|
|
$
|
26,373
|
|
|
|
Fiscal Year Ended January 27, 2007
|
|
$
|
34,707
|
|
|
$
|
54,429
|
|
|
$
|
57,693
|
|
|
$
|
31,443
|
|
|
|
Fiscal Year Ended January 28, 2006
|
|
$
|
26,434
|
|
|
$
|
62,064
|
|
|
$
|
53,791
|
|
|
$
|
34,707
|
|
|
|
Computer Intrusion Reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 26, 2008
|
|
$
|
|
|
|
$
|
159,200
|
|
|
$
|
41,934
|
|
|
$
|
117,266
|
|
|
|
34
(b) Exhibits
Listed below are all exhibits filed as part of this report. Some
exhibits are filed by the Registrant with the Securities and
Exchange Commission pursuant to
Rule 12b-32
under the Securities Exchange Act of 1934, as amended.
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Exhibit
|
|
|
|
3(i)
|
.1
|
|
Fourth Restated Certificate of Incorporation is incorporated
herein by reference to Exhibit 99.1 to the
Form 8-A/A
filed September 9, 1999. Certificate of Amendment of Fourth
Restated Certificate of Incorporation is incorporated herein by
reference to Exhibit 3(i) to the
Form 10-Q
filed for the quarter ended July 28, 2005.
|
|
3(ii)
|
.1
|
|
The by-laws of TJX, as amended, are incorporated herein by
reference to Exhibit 3(ii) to the
Form 10-Q
filed for the quarter ended July 28, 2005.
|
|
4
|
.1
|
|
Indenture between TJX and The Bank of New York dated as of
February 13, 2001, incorporated by reference to
Exhibit 4.1 of the Registration Statement on
Form S-3
filed on May 9, 2001.
|
|
|
|
|
Each other instrument relates to long-term debt securities the
total amount of which does not exceed 10% of the total assets of
TJX and its subsidiaries on a consolidated basis. TJX agrees to
furnish to the Securities and Exchange Commission copies of each
such instrument not otherwise filed herewith or incorporated
herein by reference.
|
|
10
|
.1
|
|
4-year
Revolving Credit Agreement dated May 5, 2005 among various
financial institutions as lenders, including Bank of America,
N.A., JP Morgan Chase Bank, National Association, The Bank of
New York, Citizens Bank of Massachusetts, Key Bank National
Association and Union Bank of California, N.A., as co-agents is
incorporated herein by reference to Exhibit 10.1 to the
Form 8-K
filed May 6, 2005. The related Amendment No. 1 to the
4-year
Revolving Credit Agreement dated May 12, 2006 is
incorporated herein by reference to Exhibit 10.1 to the
Form 8-K
filed May 17, 2006.
|
|
10
|
.2
|
|
5-year
Revolving Credit Agreement dated May 5, 2005 among various
financial institutions as lenders, including Bank of America,
N.A., JP Morgan Chase Bank, National Association, The Bank of
New York, Citizens Bank of Massachusetts, Key Bank National
Association and Union Bank of California, N.A., as co-agents is
incorporated herein by reference to Exhibit 10.2 to the
Form 8-K
filed May 6, 2005. The related Amendment No. 1 to the
5-year
Revolving Credit Agreement dated May 12, 2006 is
incorporated herein by reference to Exhibit 10.2 to the
Form 8-K
filed May 17, 2006.
|
|
10
|
.3
|
|
The Employment Agreement dated as of June 6, 2006 between
Bernard Cammarata and TJX is incorporated herein by reference to
Exhibit 10.1 to the
Form 8-K
filed June 9, 2006.*
|
|
10
|
.4
|
|
The Employment Agreement dated as of April 5, 2005 with
Donald G. Campbell is incorporated herein by reference to
Exhibit 10.2 to
Form 8-K
filed on April 7, 2005. The Letter Agreement dated
September 7, 2005 with Donald G. Campbell is incorporated
herein by reference to Exhibit 10.7 to the
Form 10-Q
filed for the quarter ended October 29, 2005. The Amendment
dated as of March 7, 2006 to the Employment Agreement dated
as of April 5, 2005 with Donald G. Campbell, as amended, is
incorporated herein by reference to Exhibit 10.4 to the
Form 8-K
filed March 8, 2006. The Letter Agreement dated
September 6, 2006 with Donald G. Campbell is incorporated
herein by reference to Exhibit 10.1 to the
Form 8-K
filed September 7, 2006.*
|
|
10
|
.5
|
|
The Employment Agreement dated as of January 28, 2007 with Carol
Meyrowitz is incorporated herein by reference to
Exhibit 10.1 to the
Form 8-K
filed on April 10, 2007.*
|
|
10
|
.6
|
|
The Employment Agreement dated as of April 5, 2005 with
Arnold Barron is incorporated herein by reference to
Exhibit 10.1 to the
Form 8-K
filed on April 7, 2005. The Letter Agreement dated
September 7, 2005 with Arnold Barron is incorporated herein
by reference to Exhibit 10.6 to the
Form 10-Q
filed for the quarter ended October 29, 2005. The Letter
Agreement dated October 17, 2005 with Arnold Barron is
incorporated herein by reference to Exhibit 10.9 to the
Form 10-Q
filed for the quarter ended October 29, 2005. The Amendment
dated as of March 7, 2006 to the Employment Agreement dated
as of April 5, 2005 with Arnold Barron, as amended, is
incorporated herein by reference to Exhibit 10.3 to the
Form 8-K
filed March 8, 2006.*
|
|
10
|
.7
|
|
The Employment Agreement dated as of April 5, 2005 with
Jeffrey Naylor and the related Amendments dated as of
September 7, 2005, March 7, 2006 and September 6,
2006 to the Employment Agreement dated as of April 5, 2005
with Jeffrey Naylor are included herein by reference to
Exhibit 10.9 to the
Form 10-K
for fiscal year ended January 27, 2007.*
|
|
10
|
.8
|
|
The Employment Agreement dated as of June 11, 2007 with
Nirmal Tripathy is incorporated herein by reference to
Exhibit 10.1 to the
Form 8-K
filed on June 15, 2007.*
|
|
10
|
.9
|
|
The Employment Agreement dated as of September 8, 2006 with
Ernie Herrman is filed herewith.*
|
|
10
|
.10
|
|
The TJX Companies, Inc. Management Incentive Plan, as amended,
is incorporated herein by reference to Exhibit 10.1 to the
Form 10-Q
filed for the quarter ended April 28, 2007.*
|
35
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Exhibit
|
|
|
|
10
|
.11
|
|
The Stock Incentive Plan, as amended and restated through
June 1, 2004, is incorporated herein by reference to
Exhibit 10.1 to the
Form 10-Q
filed for the quarter ended July 31, 2004. The related
First Amendment to The Stock Incentive Plan is incorporated
herein by reference to Exhibit 10.11 to the
Form 10-K
filed for the fiscal year ended January 28, 2006. The Stock
Incentive Plan, as amended through June 5, 2006, is
incorporated herein by reference to Exhibit 10.1 to the
Form 10-Q
filed for the quarter ended July 29, 2006.*
|
|
10
|
.12
|
|
The Form of a Non-Qualified Stock Option Certificate Granted
Under the Stock Incentive Plan is incorporated herein by
reference to Exhibit 10.2 to the
Form 10-Q
filed for the quarter ended July 31, 2004.*
|
|
10
|
.13
|
|
The Form of a Performance-Based Restricted Stock Award Granted
Under Stock Incentive Plan is incorporated herein by reference
to Exhibit 10.3 to the
Form 10-Q
filed for the quarter ended July 31, 2004.*
|
|
10
|
.14
|
|
The Form of a Performance-Based Restricted Stock Award Granted
Under Stock Incentive Plan is incorporated herein by reference
to Exhibit 10.2 to the
Form 8-K
filed November 17, 2005.*
|
|
10
|
.15
|
|
Description of Director Compensation Arrangements is filed
herewith.*
|
|
10
|
.16
|
|
The TJX Companies, Inc. Long Range Performance Incentive Plan,
as amended, is incorporated herein by reference to
Exhibit 10.3 to the
Form 10-Q
filed for the quarter ended July 26, 1997. The Amendment to
The Long Range Performance Incentive Plan adopted on
September 7, 2005 is incorporated herein by reference to
Exhibit 10.2 to the
Form 10-Q
filed for the fiscal quarter ended April 28, 2007.*
|
|
10
|
.17
|
|
The General Deferred Compensation Plan (1998 Restatement) and
related First Amendment, effective January 1, 1999, are
incorporated herein by reference to Exhibit 10.9 to the
Form 10-K
for the fiscal year ended January 30, 1999. The related
Second Amendment, effective January 1, 2000, is
incorporated herein by reference to Exhibit 10.10 to the
Form 10-K
filed for the fiscal year ended January 29, 2000. The
related Third and Fourth Amendments are incorporated herein by
reference to Exhibit 10.17 to the
Form 10-K
for the fiscal year ended January 28, 2006.*
|
|
10
|
.18
|
|
The Supplemental Executive Retirement Plan, as amended, is
incorporated herein by reference to Exhibit 10(l) to the
Form 10-K
filed for the fiscal year ended January 25, 1992. The 2005
Restatement to the Supplemental Executive Retirement Plan is
incorporated herein by reference to Exhibit 10.18 to the
Form 10-K
for the fiscal year ended January 28, 2006.*
|
|
10
|
.19
|
|
The Executive Savings Plan, as amended and restated, effective
January 1, 2008, is filed herewith.*
|
|
10
|
.20
|
|
The Restoration Agreement and related letter agreement regarding
conditional reimbursement dated December 31, 2002 between
TJX and Bernard Cammarata are incorporated herein by reference
to Exhibit 10.17 to the
Form 10-K
filed for the fiscal year ended January 25, 2003.*
|
|
10
|
.21
|
|
The form of Indemnification Agreement between TJX and each of
its officers and directors is incorporated herein by reference
to Exhibit 10(r) to the
Form 10-K
filed for the fiscal year ended January 27, 1990.*
|
|
10
|
.22
|
|
The Trust Agreement dated as of April 8, 1988 between
TJX and State Street Bank and Trust Company is incorporated
herein by reference to Exhibit 10(y) to the
Form 10-K
filed for the fiscal year ended January 30, 1988.*
|
|
10
|
.23
|
|
The Trust Agreement dated as of April 8, 1988 between
TJX and Fleet Bank (formerly Shawmut Bank of Boston, N.A.) is
incorporated herein by reference to Exhibit 10(z) to the
Form 10-K
filed for the fiscal year ended January 30, 1988.*
|
|
10
|
.24
|
|
The Trust Agreement for Executive Savings Plan dated as of
January 1, 2005 between TJX and Wells Fargo Bank, N.A. is
incorporated herein by reference to Exhibit 10.26 to the
Form 10-K
filed for the fiscal year ended January 29, 2005.*
|
|
10
|
.25
|
|
The Distribution Agreement dated as of May 1, 1989 between
TJX and HomeBase, Inc. (formerly Waban Inc.) is incorporated
herein by reference to Exhibit 3 to TJXs Current
Report on
Form 8-K
dated June 21, 1989. The First Amendment to Distribution
Agreement dated as of April 18, 1997 between TJX and
HomeBase, Inc. (formerly Waban Inc.) is incorporated herein by
reference to Exhibit 10.22 to the
Form 10-K
filed for the fiscal year ended January 25, 1997.
|
|
10
|
.26
|
|
The Indemnification Agreement dated as of April 18, 1997 by
and between TJX and BJs Wholesale Club, Inc. is
incorporated herein by reference to Exhibit 10.23 to the
Form 10-K
filed for the fiscal year ended January 25, 1997.
|
|
10
|
.27
|
|
The Settlement Agreement between ACohen Marketing &
Public Relations, LLC, Julie Buckley, Anne Cohen, LaQuita
Kearney, Laura Lerner, Robert Mann, Jitka Parmet, Deborah
Wilson, Kathleen Robinson, Shannon Kidd, and Mary Robb Farley,
individually and on behalf of the Settlement Class, The TJX
Companies, Inc. and Fifth Third Bancorp dated September 21,
2007, is incorporated herein by reference to Exhibit 10.1
to the
Form 8-K
filed on September 21, 2007. The Amended Settlement
Agreement, dated as of November 14, 2007, by and among
ACohen Marketing & Public Relations, LLC, Julie
Buckley, Anne Cohen, LaQuita Kearney, Laura Lerner, Robert Mann,
Jitka Parmet, Deborah Wilson, Kathleen Robinson, Shannon Kidd
and Mary Robb Farley, individually and on behalf of the
Settlement Class, The TJX Companies, Inc. and Fifth Third
Bancorp is incorporated herein by reference to Exhibit 10.1
to the
Form 10-Q
filed for the quarter ended October 27, 2007.
|
36
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Exhibit
|
|
|
|
10
|
.28
|
|
The Settlement Agreement among The TJX Companies, Inc., Visa
U.S.A. Inc. and Visa Inc. and Fifth Third Bank, dated
November 29, 2007 is incorporated herein by reference to
Exhibit 10.1 to the
Form 8-K
filed on November 30, 2007.
|
|
10
|
.29
|
|
The Settlement and Mutual Release Agreement between The TJX
Companies, Inc. and Alexander W. Smith dated March 29, 2007
is incorporated herein by reference to Exhibit 10.1 to the
Form 8-K
filed on April 4, 2007.*
|
|
21
|
|
|
Subsidiaries:
|
|
|
|
|
A list of the Registrants subsidiaries is filed herewith.
|
|
23
|
|
|
Consents of Independent Registered Public Accounting Firm
|
|
|
|
|
The Consent of PricewaterhouseCoopers LLP is filed herewith.
|
|
24
|
|
|
Power of Attorney:
|
|
|
|
|
The Power of Attorney given by the Directors and certain
Executive Officers of TJX is filed herewith.
|
|
31
|
.1
|
|
Certification Statement of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 is filed
herewith.
|
|
31
|
.2
|
|
Certification Statement of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 is filed
herewith.
|
|
32
|
.1
|
|
Certification Statement of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 is filed
herewith.
|
|
32
|
.2
|
|
Certification Statement of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 is filed
herewith.
|
|
|
|
*
|
|
Management contract or compensatory
plan or arrangement.
|
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Nirmal K. Tripathy, Chief Financial Officer, on behalf of
The TJX Companies, Inc. and as Principal Financial and
Accounting Officer of The TJX Companies, Inc.
Dated: March 25, 2008
38
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
date indicated.
|
|
|
/S/ CAROL MEYROWITZ
Carol
Meyrowitz, President and Chief Executive Officer and Director
|
|
/S/ NIRMAL K. TRIPATHY
Nirmal
K. Tripathy, Principal Financial and
Accounting Officer
|
|
|
|
|
|
|
JOSE B. ALVAREZ*
Jose
B. Alvarez, Director
|
|
AMY B. LANE*
Amy
B. Lane, Director
|
|
|
|
|
|
|
ALAN M. BENNETT*
Alan
M. Bennett, Director
|
|
JOHN F. OBRIEN*
John
F. OBrien, Director
|
|
|
|
|
|
|
DAVID A. BRANDON*
David
A. Brandon, Director
|
|
ROBERT F. SHAPIRO*
Robert
F. Shapiro, Director
|
|
|
|
|
|
|
BERNARD CAMMARATA*
Bernard
Cammarata, Chairman of the Board of Directors
|
|
WILLOW B. SHIRE*
Willow
B. Shire, Director
|
|
|
|
|
|
|
DAVID T. CHING*
David
T. Ching, Director
|
|
FLETCHER H. WILEY*
Fletcher
H. Wiley, Director
|
|
|
|
|
|
|
MICHAEL F. HINES*
Michael
F. Hines, Director
|
|
|
|
|
|
|
*BY
|
/S/ NIRMAL K. TRIPATHY
|
Nirmal K. Tripathy
as attorney-in-fact
Dated: March 25, 2008
39
The TJX
Companies, Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
For Fiscal Years Ended January 26, 2008, January 27,
2007 and January 28, 2006
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
F-2
|
Consolidated Financial Statements:
|
|
|
Consolidated Statements of Income for the fiscal years ended
January 26, 2008, January 27, 2007 and
January 28, 2006
|
|
F-3
|
Consolidated Balance Sheets as of January 26, 2008 and
January 27, 2007
|
|
F-4
|
Consolidated Statements of Cash Flows for the fiscal years ended
January 26, 2008, January 27, 2007 and
January 28, 2006
|
|
F-5
|
Consolidated Statements of Shareholders Equity for the
fiscal years ended January 26, 2008, January 27, 2007
and January 28, 2006
|
|
F-6
|
Notes to Consolidated Financial Statements
|
|
F-7
|
Financial Statement Schedules:
|
|
|
Schedule II Valuation and Qualifying Accounts
|
|
34
|
F-1
Report of
Independent Registered Public Accounting Firm
To The Board of Directors and Shareholders
of The TJX Companies, Inc:
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of The TJX Companies, Inc. and its
subsidiaries at January 26, 2008 and January 27, 2007,
and the results of their operations and their cash flows for
each of the three years in the period ended January 26,
2008 in conformity with accounting principles generally accepted
in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the accompanying
index presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of January 26, 2008,
based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in Managements Annual Report
on Internal Control over Financial Reporting appearing under
Item 9A. Our responsibility is to express opinions on these
financial statements, on the financial statement schedule, and
on the Companys internal control over financial reporting
based on our integrated audits. We conducted our audits in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material
misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
As discussed in Note J to the accompanying consolidated
financial statements, the Company changed its method of
accounting for defined benefit pension and other post retirement
obligations as of January 27, 2007. In addition, as
discussed in Note I to the accompanying consolidated
financial statements, the Company changed its method of
accounting for uncertain tax positions as of January 28,
2007.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 25, 2008
F-2
The TJX
Companies, Inc.
Consolidated
Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
Amounts in thousands
|
|
January 26,
|
|
|
January 27,
|
|
|
January 28,
|
|
except per share amounts
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Net sales
|
|
$
|
18,647,126
|
|
|
$
|
17,404,637
|
|
|
$
|
15,955,943
|
|
|
|
Cost of sales, including buying and occupancy costs
|
|
|
14,082,448
|
|
|
|
13,213,703
|
|
|
|
12,214,671
|
|
Selling, general and administrative expenses
|
|
|
3,126,565
|
|
|
|
2,923,560
|
|
|
|
2,703,271
|
|
Provision for Computer Intrusion related costs
|
|
|
197,022
|
|
|
|
4,960
|
|
|
|
|
|
Interest (income) expense, net
|
|
|
(1,598
|
)
|
|
|
15,566
|
|
|
|
29,632
|
|
|
|
Income from continuing operations before provision for income
taxes
|
|
|
1,242,689
|
|
|
|
1,246,848
|
|
|
|
1,008,369
|
|
Provision for income taxes
|
|
|
470,939
|
|
|
|
470,092
|
|
|
|
318,535
|
|
|
|
Income from continuing operations
|
|
|
771,750
|
|
|
|
776,756
|
|
|
|
689,834
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposal of discontinued operations, net of income taxes
|
|
|
|
|
|
|
(38,110
|
)
|
|
|
|
|
Income (loss) of discontinued operations, net of income taxes
|
|
|
|
|
|
|
(607
|
)
|
|
|
589
|
|
|
|
Net income
|
|
$
|
771,750
|
|
|
$
|
738,039
|
|
|
$
|
690,423
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.74
|
|
|
$
|
1.71
|
|
|
$
|
1.48
|
|
(Loss) from discontinued operations, net of income taxes
|
|
$
|
|
|
|
$
|
(0.08
|
)
|
|
$
|
|
|
Net income
|
|
$
|
1.74
|
|
|
$
|
1.63
|
|
|
$
|
1.48
|
|
Weighted average common shares basic
|
|
|
443,050
|
|
|
|
454,044
|
|
|
|
466,537
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.66
|
|
|
$
|
1.63
|
|
|
$
|
1.41
|
|
(Loss) from discontinued operations, net of income taxes
|
|
$
|
|
|
|
$
|
(0.08
|
)
|
|
$
|
|
|
Net income
|
|
$
|
1.66
|
|
|
$
|
1.55
|
|
|
$
|
1.41
|
|
Weighted average common shares diluted
|
|
|
468,046
|
|
|
|
480,045
|
|
|
|
491,500
|
|
Cash dividends declared per share
|
|
$
|
0.36
|
|
|
$
|
0.28
|
|
|
$
|
0.24
|
|
The accompanying notes are an integral part of the financial
statements.
F-3
The TJX
Companies, Inc.
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
|
|
|
January 26,
|
|
|
January 27,
|
|
|
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
732,612
|
|
|
$
|
856,669
|
|
|
|
|
|
Accounts receivable, net
|
|
|
143,289
|
|
|
|
115,245
|
|
|
|
|
|
Merchandise inventories
|
|
|
2,737,378
|
|
|
|
2,581,969
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
215,550
|
|
|
|
159,105
|
|
|
|
|
|
Current deferred income taxes, net
|
|
|
163,465
|
|
|
|
35,825
|
|
|
|
|
|
|
|
Total current assets
|
|
|
3,992,294
|
|
|
|
3,748,813
|
|
|
|
|
|
|
|
Property at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
277,988
|
|
|
|
268,056
|
|
|
|
|
|
Leasehold costs and improvements
|
|
|
1,785,429
|
|
|
|
1,628,867
|
|
|
|
|
|
Furniture, fixtures and equipment
|
|
|
2,675,009
|
|
|
|
2,373,117
|
|
|
|
|
|
|
|
Total property at cost
|
|
|
4,738,426
|
|
|
|
4,270,040
|
|
|
|
|
|
Less accumulated depreciation and amortization
|
|
|
2,520,973
|
|
|
|
2,251,579
|
|
|
|
|
|
|
|
Net property at cost
|
|
|
2,217,453
|
|
|
|
2,018,461
|
|
|
|
|
|
|
|
Property under capital lease, net of accumulated amortization of
$14,890 and $12,657, respectively
|
|
|
17,682
|
|
|
|
19,915
|
|
|
|
|
|
Other assets
|
|
|
190,981
|
|
|
|
115,613
|
|
|
|
|
|
Goodwill and tradename, net of amortization
|
|
|
181,524
|
|
|
|
182,898
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
6,599,934
|
|
|
$
|
6,085,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligation under capital lease due within one year
|
|
$
|
2,008
|
|
|
$
|
1,854
|
|
|
|
|
|
Accounts payable
|
|
|
1,516,754
|
|
|
|
1,372,352
|
|
|
|
|
|
Accrued expenses and other liabilities
|
|
|
1,213,987
|
|
|
|
1,008,774
|
|
|
|
|
|
Federal, foreign and state income taxes payable
|
|
|
28,244
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,760,993
|
|
|
|
2,382,980
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
811,333
|
|
|
|
583,047
|
|
|
|
|
|
Non-current deferred income taxes, net
|
|
|
42,903
|
|
|
|
21,525
|
|
|
|
|
|
Obligation under capital lease, less portion due within one year
|
|
|
20,374
|
|
|
|
22,382
|
|
|
|
|
|
Long-term debt, exclusive of current installments
|
|
|
833,086
|
|
|
|
785,645
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, authorized 1,200,000,000 shares, par value
$1, issued and outstanding 427,949,533 and 453,649,813,
respectively
|
|
|
427,950
|
|
|
|
453,650
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
(28,685
|
)
|
|
|
(33,989
|
)
|
|
|
|
|
Retained earnings
|
|
|
1,731,980
|
|
|
|
1,870,460
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
2,131,245
|
|
|
|
2,290,121
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$
|
6,599,934
|
|
|
$
|
6,085,700
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-4
The TJX
Companies, Inc.
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
|
|
|
January 26,
|
|
|
January 27,
|
|
|
January 28,
|
|
|
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
771,750
|
|
|
$
|
738,039
|
|
|
$
|
690,423
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
369,396
|
|
|
|
353,110
|
|
|
|
314,285
|
|
|
|
|
|
Loss on property disposals
|
|
|
18,318
|
|
|
|
32,743
|
|
|
|
10,600
|
|
|
|
|
|
Asset impairment charge
|
|
|
7,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of stock compensation expense
|
|
|
57,370
|
|
|
|
69,804
|
|
|
|
91,190
|
|
|
|
|
|
Excess tax benefits from stock compensation expense
|
|
|
(6,756
|
)
|
|
|
(3,632
|
)
|
|
|
|
|
|
|
|
|
Deferred income tax (benefit) provision
|
|
|
(101,799
|
)
|
|
|
6,286
|
|
|
|
(88,245
|
)
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
|
|
(25,516
|
)
|
|
|
26,397
|
|
|
|
(20,997
|
)
|
|
|
|
|
(Increase) in merchandise inventories
|
|
|
(112,411
|
)
|
|
|
(201,413
|
)
|
|
|
(8,772
|
)
|
|
|
|
|
(Increase) decrease in prepaid expenses and other current assets
|
|
|
2,144
|
|
|
|
(23,179
|
)
|
|
|
(35,197
|
)
|
|
|
|
|
Increase in accounts payable
|
|
|
117,304
|
|
|
|
50,165
|
|
|
|
35,010
|
|
|
|
|
|
Increase in accrued expenses and other liabilities
|
|
|
202,893
|
|
|
|
170,592
|
|
|
|
163,362
|
|
|
|
|
|
Increase (decrease) in income taxes payable
|
|
|
37,909
|
|
|
|
(42,558
|
)
|
|
|
7,903
|
|
|
|
|
|
Other, net
|
|
|
22,879
|
|
|
|
18,679
|
|
|
|
(1,543
|
)
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
1,361,107
|
|
|
|
1,195,033
|
|
|
|
1,158,019
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property additions
|
|
|
(526,987
|
)
|
|
|
(378,011
|
)
|
|
|
(495,948
|
)
|
|
|
|
|
Proceeds from sale of property
|
|
|
-
|
|
|
|
-
|
|
|
|
9,688
|
|
|
|
|
|
Proceeds from repayments on note receivable
|
|
|
753
|
|
|
|
700
|
|
|
|
652
|
|
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
|
(526,234
|
)
|
|
|
(377,311
|
)
|
|
|
(485,608
|
)
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on long-term debt
|
|
|
-
|
|
|
|
-
|
|
|
|
(100,000
|
)
|
|
|
|
|
Payments on capital lease obligation
|
|
|
(1,854
|
)
|
|
|
(1,712
|
)
|
|
|
(1,580
|
)
|
|
|
|
|
Proceeds from sale and issuance of common stock
|
|
|
134,109
|
|
|
|
260,197
|
|
|
|
102,438
|
|
|
|
|
|
Proceeds from borrowings of long-term debt
|
|
|
|
|
|
|
-
|
|
|
|
204,427
|
|
|
|
|
|
Cash payments for repurchase of common stock
|
|
|
(940,208
|
)
|
|
|
(557,234
|
)
|
|
|
(603,739
|
)
|
|
|
|
|
Excess tax benefits from stock compensation expense
|
|
|
6,756
|
|
|
|
3,632
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
|
|
|
(151,492
|
)
|
|
|
(122,927
|
)
|
|
|
(105,251
|
)
|
|
|
|
|
|
|
Net cash (used in) financing activities
|
|
|
(952,689
|
)
|
|
|
(418,044
|
)
|
|
|
(503,705
|
)
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(6,241
|
)
|
|
|
(8,658
|
)
|
|
|
(10,244
|
)
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(124,057
|
)
|
|
|
391,020
|
|
|
|
158,462
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
856,669
|
|
|
|
465,649
|
|
|
|
307,187
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
732,612
|
|
|
$
|
856,669
|
|
|
$
|
465,649
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-5
The TJX
Companies, Inc.
Consolidated Statements of Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Par Value
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
|
|
|
|
|
In thousands
|
|
Shares
|
|
|
$1
|
|
|
Capital
|
|
|
Income (Loss)
|
|
|
Earnings
|
|
|
Total
|
|
|
|
|
|
|
|
Balance, January 29, 2005
|
|
|
480,699
|
|
|
$
|
480,699
|
|
|
$
|
|
|
|
$
|
(26,245
|
)
|
|
$
|
1,292,102
|
|
|
$
|
1,746,556
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
690,423
|
|
|
|
690,423
|
|
|
|
|
|
(Loss) due to foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,563
|
)
|
|
|
|
|
|
|
(32,563
|
)
|
|
|
|
|
Gain on net investment hedge contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,981
|
|
|
|
|
|
|
|
14,981
|
|
|
|
|
|
(Loss) on cash flow hedge contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,307
|
)
|
|
|
|
|
|
|
(14,307
|
)
|
|
|
|
|
Amount of cash flow hedge reclassified from other comprehensive
income to net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,838
|
|
|
|
|
|
|
|
13,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
672,372
|
|
|
|
|
|
Cash dividends declared on common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(111,278
|
)
|
|
|
(111,278
|
)
|
|
|
|
|
Restricted stock awards granted
|
|
|
377
|
|
|
|
377
|
|
|
|
(377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
91,190
|
|
|
|
|
|
|
|
|
|
|
|
91,190
|
|
|
|
|
|
Issuance of common stock under stock incentive plan and related
tax effect
|
|
|
5,775
|
|
|
|
5,775
|
|
|
|
88,041
|
|
|
|
|
|
|
|
|
|
|
|
93,816
|
|
|
|
|
|
Common stock repurchased
|
|
|
(25,884
|
)
|
|
|
(25,884
|
)
|
|
|
(178,854
|
)
|
|
|
|
|
|
|
(395,264
|
)
|
|
|
(600,002
|
)
|
|
|
|
|
|
|
Balance, January 28, 2006
|
|
|
460,967
|
|
|
|
460,967
|
|
|
|
|
|
|
|
(44,296
|
)
|
|
|
1,475,983
|
|
|
|
1,892,654
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
738,039
|
|
|
|
738,039
|
|
|
|
|
|
Gain due to foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,433
|
|
|
|
|
|
|
|
20,433
|
|
|
|
|
|
(Loss) on net investment hedge contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,626
|
)
|
|
|
|
|
|
|
(5,626
|
)
|
|
|
|
|
(Loss) on cash flow hedge contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,950
|
)
|
|
|
|
|
|
|
(3,950
|
)
|
|
|
|
|
Amount of cash flow hedge reclassified from other comprehensive
income to net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,011
|
|
|
|
|
|
|
|
5,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
753,907
|
|
|
|
|
|
Recognition of unfunded post retirement liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,561
|
)
|
|
|
|
|
|
|
(5,561
|
)
|
|
|
|
|
Cash dividends declared on common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(127,024
|
)
|
|
|
(127,024
|
)
|
|
|
|
|
Restricted stock awards granted
|
|
|
236
|
|
|
|
236
|
|
|
|
(236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
69,804
|
|
|
|
|
|
|
|
|
|
|
|
69,804
|
|
|
|
|
|
Issuance of common stock under stock incentive plan and related
tax effect
|
|
|
14,453
|
|
|
|
14,453
|
|
|
|
249,122
|
|
|
|
|
|
|
|
|
|
|
|
263,575
|
|
|
|
|
|
Common stock repurchased
|
|
|
(22,006
|
)
|
|
|
(22,006
|
)
|
|
|
(318,690
|
)
|
|
|
|
|
|
|
(216,538
|
)
|
|
|
(557,234
|
)
|
|
|
|
|
|
|
Balance, January 27, 2007
|
|
|
453,650
|
|
|
|
453,650
|
|
|
|
|
|
|
|
(33,989
|
)
|
|
|
1,870,460
|
|
|
|
2,290,121
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
771,750
|
|
|
|
771,750
|
|
|
|
|
|
Gain due to foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,998
|
|
|
|
|
|
|
|
20,998
|
|
|
|
|
|
(Loss) on net investment hedge contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,823
|
)
|
|
|
|
|
|
|
(15,823
|
)
|
|
|
|
|
(Loss) on cash flow hedge contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,526
|
)
|
|
|
|
|
|
|
(1,526
|
)
|
|
|
|
|
Recognition of prior service cost and gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,393
|
|
|
|
|
|
|
|
1,393
|
|
|
|
|
|
Amount of cash flow hedge reclassified from other comprehensive
income to net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
429
|
|
|
|
|
|
|
|
429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
777,221
|
|
|
|
|
|
Implementation of FIN 48 (see note I)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,178
|
)
|
|
|
(27,178
|
)
|
|
|
|
|
Implementation of SFAS No. 158 measurement provisions
(see note J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(167
|
)
|
|
|
(1,641
|
)
|
|
|
(1,808
|
)
|
|
|
|
|
Cash dividends declared on common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158,202
|
)
|
|
|
(158,202
|
)
|
|
|
|
|
Restricted stock and other stock awards issued
|
|
|
285
|
|
|
|
285
|
|
|
|
(285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
57,370
|
|
|
|
|
|
|
|
|
|
|
|
57,370
|
|
|
|
|
|
Stock options repurchased by TJX
|
|
|
|
|
|
|
|
|
|
|
(3,266
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,266
|
)
|
|
|
|
|
Issuance of common stock under stock incentive plan and related
tax effect
|
|
|
6,968
|
|
|
|
6,968
|
|
|
|
130,227
|
|
|
|
|
|
|
|
|
|
|
|
137,195
|
|
|
|
|
|
Common stock repurchased
|
|
|
(32,953
|
)
|
|
|
(32,953
|
)
|
|
|
(184,046
|
)
|
|
|
|
|
|
|
(723,209
|
)
|
|
|
(940,208
|
)
|
|
|
|
|
|
|
Balance, January 26, 2008
|
|
|
427,950
|
|
|
$
|
427,950
|
|
|
$
|
|
|
|
$
|
(28,685
|
)
|
|
$
|
1,731,980
|
|
|
$
|
2,131,245
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-6
The TJX
Companies, Inc.
Notes to Consolidated Financial Statements
|
|
A.
|
Summary
of Accounting Policies
|
Basis of Presentation: The consolidated financial
statements of The TJX Companies, Inc. (referred to as
TJX, the Company or we)
include the financial statements of all of TJXs
subsidiaries, all of which are wholly owned. All of TJXs
activities are conducted within TJX or our subsidiaries and are
consolidated in these financial statements. All intercompany
transactions have been eliminated in consolidation.
Fiscal Year: TJXs fiscal year ends on the
last Saturday in January. The fiscal years ended
January 26, 2008 (fiscal 2008),
January 27, 2007 (fiscal 2007) and
January 28, 2006 (fiscal 2006) each included
52 weeks.
Earnings Per Share: All earnings per share amounts
discussed refer to diluted earnings per share unless otherwise
indicated.
Use of Estimates: The preparation of the financial
statements, in conformity with accounting principles generally
accepted in the United States, requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent
liabilities, at the date of the financial statements as well as
the reported amounts of revenues and expenses during the
reporting period. TJX considers the more significant accounting
policies that involve management estimates and judgments to be
those relating to inventory valuation, impairments of long-lived
assets, retirement obligations, casualty insurance, accounting
for taxes, reserves for Computer Intrusion related costs and for
discontinued operations, and loss contingencies. Actual amounts
could differ from those estimates, and such differences could be
material.
Revenue Recognition: TJX records revenue at the
time of sale and receipt of merchandise by the customer, net of
a reserve for estimated returns. We estimate returns based upon
our historical experience. We defer recognition of a layaway
sale and its related profit to the accounting period when the
customer receives the layaway merchandise. Proceeds from the
sale of store cards as well as the value of store cards issued
to customers as a result of a return or exchange, are deferred
until the customer uses the card to acquire merchandise. Based
on historical experience, we estimate the amount of store cards
that will not be redeemed (breakage) and, to the
extent allowed by local law, these amounts are amortized into
income over the redemption period. Revenue recognized from store
card breakage was $10.1 million, $7.6 million and
$6.9 million for fiscal 2008, 2007 and 2006, respectively.
Consolidated Statements of Income Classifications:
Cost of sales, including buying and occupancy costs, include the
cost of merchandise sold and gains and losses on
inventory-related derivative contracts; store occupancy costs
(including real estate taxes, utility and maintenance costs and
fixed asset depreciation); the costs of operating our
distribution centers; payroll, benefits and travel costs
directly associated with buying inventory; and systems costs
related to the buying and tracking of inventory.
Selling, general and administrative expenses include store
payroll and benefit costs; communication costs; credit and check
expenses; advertising; administrative and field management
payroll, benefits and travel costs; corporate administrative
costs and depreciation; gains and losses on non-inventory
related foreign currency exchange contracts; and other
miscellaneous income and expense items.
Cash and Cash Equivalents: TJX generally considers
highly liquid investments with a maturity of three months or
less at the date of purchase to be cash equivalents. Our
investments are primarily high-grade commercial paper,
institutional money market funds and time deposits with major
banks. The fair value of cash equivalents approximates carrying
value.
Merchandise Inventories: Inventories are stated at
the lower of cost or market. TJX uses the retail method for
valuing inventories on the
first-in
first-out basis. We almost exclusively utilize a permanent
markdown strategy and lower the cost value of the inventory that
is subject to markdown at the time the retail prices are lowered
in our stores. We accrue for inventory obligations at the time
inventory is shipped rather than when received and accepted by
TJX. At January 26, 2008 and January 27, 2007,
in-transit inventory included in merchandise inventories was
$362.9 million and $346.2 million, respectively.
Comparable amounts were reflected in accounts payable at those
dates.
Common Stock and Equity: Equity transactions
consist primarily of the repurchase of our common stock under
our stock repurchase programs and the amortization of expense
and issuance of common stock under our stock incentive plan.
Under our stock repurchase programs we repurchase our common
stock on the open market. The par value of the shares
repurchased is charged to common stock with the excess of the
purchase price over par first charged against any available
F-7
additional paid- in capital (APIC) and the balance
charged to retained earnings. Due to the high volume of
repurchases over the past several years, we have no remaining
balance in APIC. All shares repurchased have been retired.
Shares issued under our stock incentive plan are issued from
authorized but unissued shares, and proceeds received are
recorded by increasing common stock for the par value of the
shares with the excess over par added to APIC. Income tax
benefits upon the expensing of options result in the creation of
a deferred tax asset, while income tax benefits due to the
exercise of stock options reduce deferred tax assets to the
extent that an asset for the related grant has been created. Any
tax benefit greater than the deferred tax asset created at the
time of expensing the option is credited to APIC; any deficiency
in the tax benefit is debited to APIC to the extent a
pool for such deficiency exists. In the absence of a
pool any deficiency is realized in the related periods
statements of income through the provision for income taxes. The
excess income tax benefits, if any, are included in cash flows
from financing activities in the statements of cash flows. The
par value of restricted stock awards is also added to common
stock when the stock is issued, generally at grant date. The
fair value of the restricted stock awards in excess of par value
is added to APIC as the award is amortized into earnings over
the related vesting period.
Stock-Based Compensation: TJX adopted the
provisions of Statement of Financial Accounting Standards
No. 123 (revised 2004) Share-Based
Payment (SFAS No. 123(R)) in the fourth
quarter of fiscal 2006. TJX elected the modified retrospective
transition method and accordingly all periods presented reflect
the impact of adopting SFAS No. 123(R). For purposes
of applying the provisions of SFAS No. 123(R), the
fair value of each option granted is estimated on the date of
grant using the Black-Scholes option pricing model. See
Note G for a detailed discussion of stock-based
compensation.
Interest: TJXs interest (income) expense,
net was income of $1.6 million in fiscal 2008, and expense
of $15.6 million and $29.6 million in fiscal 2007 and
2006, respectively. Interest (income) expense is presented as a
net amount. TJX had gross interest income of $40.7 million,
$23.6 million and $9.4 million in fiscal 2008, 2007
and 2006, respectively. We capitalize interest during the active
construction period of major capital projects. Capitalized
interest is added to the cost of the related assets. TJX
capitalized interest of $799,000 in fiscal 2008. No interest was
capitalized in fiscal 2007 or 2006. Debt discount and related
issue expenses are amortized to interest expense over the lives
of the related debt issues or to the first date the holders of
the debt may require TJX to repurchase such debt.
Depreciation and Amortization: For financial
reporting purposes, TJX provides for depreciation and
amortization of property by the use of the straight-line method
over the estimated useful lives of the assets. Buildings are
depreciated over 33 years. Leasehold costs and improvements
are generally amortized over their useful life or the committed
lease term (typically 10 years), whichever is shorter.
Furniture, fixtures and equipment are depreciated over 3 to
10 years. Depreciation and amortization expense for
property was $364.2 million for fiscal 2008,
$347.0 million for fiscal 2007 and $307.7 million for
fiscal 2006. Amortization expense for property held under a
capital lease was $2.2 million in fiscal 2008, 2007 and
2006. Maintenance and repairs are charged to expense as
incurred. Significant costs incurred for internally developed
software are capitalized and amortized over 3 to 10 years.
Upon retirement or sale, the cost of disposed assets and the
related accumulated depreciation are eliminated and any gain or
loss is included in net income. Pre-opening costs, including
rent, are expensed as incurred.
Lease Accounting: TJX records rent expense when it
takes possession of a store, which occurs before the
commencement of the lease term, as specified in the lease, and
generally 30 to 60 days prior to the opening of the store.
This results in an acceleration of the commencement of rent
expense for each lease, as we record rent expense during the
pre-opening period, but a reduction in monthly rent expense, as
the total rent due under the lease is amortized over a greater
number of months.
Goodwill and Tradename: Goodwill is primarily the
excess of the purchase price paid over the carrying value of the
minority interest acquired in fiscal 1990 in TJXs former
83%-owned subsidiary and represents goodwill associated with the
T.J. Maxx chain, which is included in the Marmaxx segment in all
periods presented. In addition, goodwill includes the excess of
cost over the estimated fair market value of the net assets of
Winners acquired by TJX in fiscal 1991.
Goodwill, net of amortization, totaled $72.2 million,
$71.9 million and $72.0 million as of January 26,
2008, January 27, 2007 and January 28, 2006,
respectively. Goodwill is considered to have an indefinite life
and accordingly is no longer amortized. Cumulative amortization
was $33.2 million as of January 26, 2008,
$33.0 million as of January 27, 2007 and
$33.1 million as of January 28, 2006. Changes in
goodwill cost and accumulated amortization are attributable to
the effect of exchange rate changes on Winners reported
goodwill.
Tradenames include the values assigned to the name
Marshalls, acquired by TJX in fiscal 1996 as part of
the acquisition of the Marshalls chain, and to the name
Bobs Stores acquired in fiscal 2004 as part of
the acquisition of substantially all of the assets of Bobs
Stores. These values were determined by the discounted present
value of assumed after-tax royalty payments, offset by a
reduction for their pro-rata share of negative goodwill.
F-8
The Marshalls tradename, net of accumulated amortization, is
carried at a value of $107.7 million, and is considered to
have an indefinite life and, accordingly, is no longer
amortized. The Bobs Stores tradename, pursuant to the
purchase accounting method, was valued at $4.8 million and
is being amortized over 10 years. An impairment charge of
$1.2 million was recorded in the fourth quarter of fiscal
2008 (included in the impairment of long-lived assets charge
discussed below) reducing the carrying value of the tradename to
$3.6 million. Amortization expense of $476,000, $477,000
and $477,000 was recognized in fiscal 2008, 2007 and 2006,
respectively. Cumulative amortization as of January 26,
2008, January 27, 2007 and January 28, 2006 was
$1.9 million, $1.5 million and $993,000, respectively.
TJX occasionally acquires other trademarks in connection with
private label merchandise. Such trademarks are included in other
assets and are amortized to cost of sales, including buying and
occupancy costs, over the term of the agreement, generally from
7 to 10 years. Amortization expense related to trademarks
was $351,000, $499,000 and $492,000 in fiscal 2008, 2007 and
2006, respectively. TJX had $1.4 million, $1.7 million
and $2.2 million in trademarks, net of accumulated
amortization, at January 26, 2008, January 27, 2007
and January 28, 2006, respectively. Trademarks and the
related amortization are included in the related operating
segment for which they were acquired.
Impairment of Long-Lived Assets: TJX periodically
reviews the value of its property and intangible assets in
relation to the current and expected operating results of the
related business segments in order to assess whether there has
been an other than temporary impairment of their carrying
values. An impairment exists when the undiscounted cash flow of
an asset is less than the carrying cost of that asset.
Store-by-store
impairment analysis is performed at a minimum on an annual basis
in the fourth quarter of a fiscal year. An impairment analysis
is also performed for goodwill and tradenames at a minimum on an
annual basis in the fourth quarter of a fiscal year. In the
fourth quarter of fiscal 2008, TJX recorded a pre-tax impairment
charge of $7.6 million ($5.0 million, after tax, or
$.01 per share), related to Bobs Stores, which is
reflected in Bobs Stores segment results. The
impairment charge relates to certain long-lived assets and
intangible assets (specifically the Bobs Stores tradename
discussed above) at Bobs Stores and represents the excess
of recorded carrying values over the estimated fair value of
these assets at fiscal 2008 year end.
Advertising Costs: TJX expenses advertising costs
as incurred. Advertising expense was $284.1 million,
$244.7 million and $203.0 million for fiscal 2008,
2007 and 2006, respectively.
Accumulated Other Comprehensive Income (Loss):
TJXs foreign assets and liabilities are translated at the
fiscal year end exchange rate. Activity of the foreign
operations that affect the statements of income and cash flows
are translated at the average exchange rates prevailing during
the fiscal year. The translation adjustments associated with the
foreign operations are included in shareholders equity as
a component of accumulated other comprehensive income.
Cumulative foreign currency translation adjustments included in
shareholders equity amounted to a gain of
$17.8 million, net of related tax effect of
$23.7 million, as of January 26, 2008; loss of
$3.2 million, net of related tax effect of
$15.8 million, as of January 27, 2007; and a loss of
$23.6 million, net of related tax effect of
$17.7 million, as of January 28, 2006.
TJX enters into financial instruments to manage our cost of
borrowing and to manage its exposure to changes in foreign
currency exchange rates. TJX recognizes all derivative
instruments as either assets or liabilities in the statements of
financial position and measures those instruments at fair value.
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. Cumulative gains and losses on
derivatives that have hedged our net investment in foreign
operations and deferred gains or losses on cash flow hedges that
have been recorded in other comprehensive income amounted to a
loss of $42.1 million, net of related tax effects of
$28.1 million at January 26, 2008; a loss of
$25.2 million, net of related tax effects of
$16.8 million at January 27, 2007; and a loss of
$20.7 million, net of related tax effects of
$13.8 million at January 28, 2006.
The requirement to recognize the funded status of our post
retirement benefit plans in accordance with
SFAS No. 158 (discussed in Note J) resulted
in a loss adjustment to accumulated other comprehensive income
of $5.6 million, net of related tax effects of
$3.7 million at January 27, 2007. The cumulative loss
adjustment at January 26, 2008 was $4.4 million, net
of related tax effects of $3.7 million at January 26,
2008. There was no similar adjustment made in fiscal 2006.
Loss Contingencies: TJX records a reserve for loss
contingencies when it is both probable that a loss has been
incurred and the amount of the loss is reasonably estimable. TJX
reviews pending litigation and other contingencies at least
quarterly and adjusts the reserve for such contingencies for
changes in probable and reasonably estimable losses. TJX
includes an estimate for related legal costs at the time such
costs are both probable and reasonably estimable.
New Accounting Standards: In September 2006, the
Financial Accounting Standards Board (FASB) issued
SFAS No. 157, Fair Value Measurements
(SFAS No. 157). SFAS No. 157 defines fair
value, establishes a framework for
F-9
measuring fair value and requires enhanced disclosures about
fair value measurements. SFAS No. 157 requires
companies to disclose fair value measurements of their financial
instruments according to a fair value hierarchy as defined in
the standard. Additionally, companies are required to provide
enhanced disclosure regarding fair value measurements in one of
the categories (level 3), including a reconciliation of the
beginning and ending balances separately for each major category
of assets and liabilities. SFAS No. 157 is effective
for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal
years, and will be applied prospectively. In February 2008, the
FASB issued a Staff Position that will (1) partially defer
the effective date of SFAS No. 157 for one year for
certain non-financial assets and non-financial liabilities and
(2) remove certain leasing transactions from the scope of
SFAS No. 157. We do not believe the adoption of
SFAS No. 157 will have a material impact on our
results of operations or financial condition.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities including an amendment of FASB Statement
No. 115, (SFAS No. 159).
SFAS No. 159 provides companies with an option to
report selected financial assets and liabilities at fair value
and establishes presentation and disclosure requirements
designed to facilitate comparisons between companies that choose
different fair value measurement attributes for similar types of
assets and liabilities. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007, and interim
periods within those years and will be effective for TJX in the
first quarter of fiscal 2009. We do not believe that
SFAS No. 159 will have a material impact on our
financial statements.
Reclassifications: We have reclassified a line
item on the Consolidated Statements of Income in fiscal 2007 for
Provision for Computer Intrusion related costs for comparative
purposes. This reclassification had no impact on net income as
previously reported.
|
|
B.
|
Provision
for Computer Intrusion related costs
|
TJX suffered an unauthorized intrusion or intrusions (the
intrusion or intrusions, collectively, the Computer
Intrusion) into portions of its computer system, which was
discovered during the fourth quarter of fiscal 2007 and in which
it believes customer data were stolen. We face potential
liabilities and costs as a result of claims, litigation and
investigations with respect to the Computer Intrusion. During
the first six months of fiscal 2008, we expensed pre-tax costs
of $37.8 million for costs we incurred related to the
Computer Intrusion. In the second quarter of fiscal 2008, we
were able to reasonably estimate our potential losses related to
the Computer Intrusion and, accordingly, established a pre-tax
reserve of $178.1 million and recorded a pre-tax charge in
that amount. Subsequently, as previously disclosed we settled
the purported customer class actions (subject to final court
approval), settled claims of Visa USA, Visa Inc. and
substantially all U.S. Visa issuers and settled with most of the
named plaintiffs in the purported financial institution class
action. During the fourth quarter of fiscal 2008, we reduced our
reserve and the Provision for Computer Intrusion related costs
by $18.9 million as a result of insurance proceeds with
respect to the Computer Intrusion, which had not previously been
reflected in the reserve, as well as a reduction in our
estimated legal and other fees as we have continued to resolve
outstanding disputes, litigation and investigations. As of
January 26, 2008, our reserve balance was
$117.3 million reflecting amounts paid for settlements
(primarily the Visa settlement), legal and other fees. Our
reserve reflects our current estimation of probable losses in
accordance with generally accepted accounting principles with
respect to the Computer Intrusion and includes our current
estimation of total potential cash liabilities, from pending
litigation, proceedings, investigations and other claims, as
well as legal and other costs and expenses, arising from the
Computer Intrusion. In addition we expect to record non-cash
costs with respect to the customer class actions settlement, if
finally approved, when incurred, which we do not expect to be
material to our financial statements. As an estimate, our
reserve is subject to uncertainty, and our actual costs may vary
from our current estimate and such variations may be material.
We may decrease or increase the amount of our reserve to adjust
for developments in the course and resolution of litigation,
claims and investigations and related expenses and for other
changes in our estimates.
|
|
C.
|
Discontinued
Operations A.J. Wright store closings
|
During the fourth quarter of fiscal 2007, management developed a
plan to close 34 underperforming A.J. Wright stores. The plan
was approved by the Executive Committee of the Board of
Directors on November 27, 2006, and virtually all of the
stores were closed as of the end of fiscal 2007.
In its continuing effort to improve the performance of A.J.
Wright, management performed an analysis of its store locations
and operating performance. Managements plan for the store
closures was based on several factors, including market
demographics and proximity to other A.J. Wright stores, cash
return, sales volume and productivity, recent comparable store
sales and profit trends and overall market performance. The 34
stores represented approximately 21% of A.J. Wrights store
base, but only 16% of its fiscal 2007 year-to-date sales
and had store profit margins significantly below
F-10
the average of the A.J. Wright chain (see Note L to our
consolidated financial statements regarding discontinued
operations reserves).
We recorded fiscal 2007 fourth quarter pre-tax charges of
approximately $62 million in connection with these A.J.
Wright store closures. A summary of the estimated charges (in
millions) is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash
|
|
|
Cash
|
|
|
Total
|
|
|
|
|
Asset impairments
|
|
$
|
20
|
|
|
$
|
-
|
|
|
$
|
20
|
|
Lease costs, net of estimated sublease income
|
|
|
-
|
|
|
|
38
|
|
|
|
38
|
|
Severance and other costs
|
|
|
-
|
|
|
|
4
|
|
|
|
4
|
|
|
|
Total pre-tax charges
|
|
$
|
20
|
|
|
$
|
42
|
|
|
$
|
62
|
|
|
|
Asset impairments relate primarily to store fixtures and
leasehold improvements. Lease costs include assumptions about
the timing and amount of subtenant income and other expenses and
actual results may cause the lease costs to vary from the above
estimate.
The above charges do not include the cash impact of
$24 million of estimated income tax benefits, which
generally will be realized when lease and severance obligations
are paid or assets are sold or otherwise disposed of. The
after-tax cost of the store closings of $38.1 million, or
$0.08 per share, was recorded as a loss on disposal of
discontinued operations in the fourth quarter of fiscal 2007.
In addition to the above charges, we classified the operating
income (loss) of the 34 closed stores for fiscal 2007, as well
as all prior periods, as a component of discontinued operations.
The operating income or loss for each fiscal year equals the
operating results from store operations, reduced by an
allocation of direct and incremental distribution and
administrative costs relating to the closed stores. No interest
expense was allocated to the discontinued operations. The
following table presents the net sales and segment profit (loss)
of the closed A.J. Wright stores for the fiscal years presented
in which there have been amounts reclassified to discontinued
operations:
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
|
|
|
|
Dollars in millions
|
|
2008
|
|
2007
|
|
|
2006
|
|
|
|
|
Net sales
|
|
$
|
-
|
|
$
|
111.8
|
|
|
$
|
102.0
|
|
|
|
Segment profit (loss)
|
|
|
-
|
|
|
(1.0
|
)
|
|
|
1.0
|
|
|
|
Closed stores in operation during period
|
|
|
-
|
|
|
34
|
|
|
|
33
|
|
|
|
|
|
D.
|
Long-Term
Debt and Credit Lines
|
The table below presents long-term debt, exclusive of current
installments, as of January 26, 2008 and January 27,
2007. All amounts are net of unamortized debt discounts. Capital
lease obligations are separately presented in Note F.
|
|
|
|
|
|
|
|
|
|
|
|
|
January 26,
|
|
January 27,
|
|
|
|
In thousands
|
|
2008
|
|
2007
|
|
|
|
|
|
General corporate debt:
|
|
|
|
|
|
|
|
|
|
|
7.45% unsecured notes, maturing December 15, 2009
(effective interest rate of 7.50% after reduction of unamortized
debt discount of $119 and $183 in fiscal 2008 and 2007,
respectively)
|
|
$
|
199,881
|
|
$
|
199,817
|
|
|
|
|
Market value adjustment to debt hedged with interest rate swap
|
|
|
1,215
|
|
|
(4,370
|
)
|
|
|
|
C$235 term credit facility due January 11, 2010 (interest
rate Canadian Dollar Bankers Acceptance rate plus 0.35%)
|
|
|
233,120
|
|
|
199,186
|
|
|
|
|
|
|
Total general corporate debt
|
|
|
434,216
|
|
|
394,633
|
|
|
|
|
|
|
Subordinated debt:
|
|
|
|
|
|
|
|
|
|
|
Zero coupon convertible subordinated notes due February 13,
2021 (net of reduction of unamortized debt discount of $118,625
and $126,485 in fiscal 2008 and 2007, respectively)
|
|
|
398,870
|
|
|
391,012
|
|
|
|
|
|
|
Total subordinated debt
|
|
|
398,870
|
|
|
391,012
|
|
|
|
|
|
|
Long-term debt, exclusive of current installments
|
|
$
|
833,086
|
|
$
|
785,645
|
|
|
|
|
|
|
F-11
The aggregate maturities of long-term debt, exclusive of current
installments at January 26, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Long-
|
|
|
|
|
In thousands
|
|
Term Debt
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
433,120
|
|
|
|
|
|
2011
|
|
|
-
|
|
|
|
|
|
2012
|
|
|
-
|
|
|
|
|
|
2013
|
|
|
-
|
|
|
|
|
|
Later years
|
|
|
441,330
|
|
|
|
|
|
Less amount representing unamortized debt discount
|
|
|
(42,579
|
)
|
|
|
|
|
Deferred gain on settlement of interest rate swap and fair value
adjustments on hedged debt, net
|
|
|
1,215
|
|
|
|
|
|
|
|
Aggregate maturities of long-term debt, exclusive of current
installments
|
|
$
|
833,086
|
|
|
|
|
|
|
|
The above maturity table assumes that all holders of the zero
coupon convertible subordinated notes exercise their put options
in fiscal 2014. Any of the notes on which put options are not
exercised, redeemed or converted will mature in fiscal 2022.
In January 2006, we entered into a C$235.0 million term
credit facility (through our Canadian division, Winners) due in
January, 2010. This debt is guaranteed by TJX. Interest is
payable on borrowings under this facility at rates equal to or
less than Canadian prime rate. The variable rate on this
facility was 4.88% at January 26, 2008. The proceeds were
used to fund the repatriation of earnings from our Canadian
division as well as other general corporate purposes of this
division.
In February 2001, TJX issued $517.5 million zero coupon
convertible subordinated notes due in February 2021 and raised
gross proceeds of $347.6 million. The issue price of the
notes represented a yield to maturity of 2% per year. Due to the
first put option on February 13, 2002, we amortized the
debt discount assuming a 1.5% yield for fiscal 2002. The notes
are subordinated to all existing and future senior indebtedness
of TJX. The notes are convertible into 16.9 million shares
of common stock of TJX if the sale price of our common stock
reaches specified thresholds, if the credit rating of the notes
is below investment grade, if the notes are called for
redemption or if certain specified corporate transactions occur.
Each holder of the notes has the right to require us to purchase
the notes on February 13, 2013 at original purchase price
plus accrued original issue discount for a total of
$441.3 million for all notes. We may pay the purchase price
in cash, TJX stock or a combination of the two. If the holders
exercise their put options, we expect to fund the payment with
cash, financing from our short-term credit facility, new
long-term borrowings or a combination thereof. There were two
notes put to TJX on February 13, 2007 and three on
February 13, 2004. In addition, if a change in control of
TJX occurs on or before February 13, 2013, each holder may
require TJX to purchase for cash all or a portion of such
holders notes. As of February 13, 2007 we may redeem
for cash all, or a portion of, the notes at any time for the
original purchase price plus accrued original issue discount.
The fair value of our general corporate debt, including current
installments, is estimated by obtaining market value quotes
given the trading levels of other bonds of the same general
issuer type and market perceived credit quality. The fair value
of our zero coupon convertible subordinated notes is estimated
by obtaining market quotes. The fair value of general corporate
debt, including current installments, at January 26, 2008
is $448.5 million versus a carrying value of
$434.2 million. The fair value of the zero coupon
convertible subordinated notes, as of January 26, 2008, is
$541.4 million versus a net of unamortized debt discount
carrying value of $398.9 million. These estimates do not
necessarily reflect certain provisions or restrictions in the
various debt agreements which might affect our ability to settle
these obligations.
In fiscal 2007, we amended our $500 million four-year
revolving credit facility and our $500 million five-year
revolving credit facility (initially entered into in fiscal
2006) to extend the maturity dates of these agreements
until May 2010 and May 2011, respectively. These agreements have
no compensating balance requirements and have various covenants
including a requirement of a specified ratio of debt to
earnings. We also have a commercial paper program pursuant to
which we issue commercial paper from time to time. The revolving
credit facilities are used as backup to our commercial paper
program. As of January 26, 2008 there were no outstanding
amounts under our credit facilities, and we did not borrow under
these credit facilities during fiscal 2008. The maximum amount
of our U.S. short-term borrowings outstanding was
$204.5 million during fiscal 2007 and $566.5 million
during fiscal 2006. The weighted average interest rate on our
U.S. short-term borrowings was 5.35% in fiscal 2007 and
3.69% in fiscal 2006.
As of January 26, 2008 and January 27, 2007, Winners
had two credit lines, one for C$10 million for operating
expenses and one C$10 million letter of credit facility.
The maximum amount outstanding under Winners Canadian credit
line for operating expenses was C$5.7 million in fiscal
2008, C$3.8 million in fiscal 2007 and C$4.6 million
in fiscal 2006. There were
F-12
no amounts outstanding on either of these lines at the end of
fiscal 2008 or fiscal 2007. As of January 26, 2008, T.K.
Maxx had a credit line of £20 million. The maximum
amount outstanding under this line in fiscal 2008 was
£16.4 million, and there were no outstanding
borrowings on this credit line at the end of fiscal 2008 or
fiscal 2007.
TJX enters into financial instruments to manage its cost of
borrowing and to manage its exposure to changes in foreign
currency exchange rates.
Interest Rate Contracts: In December 1999, prior
to the issuance of $200 million ten-year notes, TJX entered
into a rate-lock agreement to hedge the underlying treasury rate
of notes. The cost of this agreement is being amortized to
interest expense over the term of the notes and results in an
effective fixed rate of 7.60% on these notes. During fiscal
2004, TJX entered into interest rate swaps on $100 million
of the $200 million ten-year notes effectively converting
the interest on that portion of the unsecured notes from fixed
to a floating rate of interest indexed to the six-month LIBOR
rate. The maturity dates of the interest rate swaps is the same
as the maturity date of the underlying debt. Under these swaps,
TJX pays a specified variable interest rate and receives the
fixed rate applicable to the underlying debt. The interest
income/expense on the swaps is accrued as earned and recorded as
an adjustment to the interest expense accrued on the fixed-rate
debt. The interest rate swaps are designated as fair value
hedges of the underlying debt. The fair value of the contracts,
excluding the net interest accrual, amounted to an asset of
$1.2 million, a liability of $4.4 million, and a
liability of $4.6 million as of January 26, 2008,
January 27, 2007 and January 28, 2006, respectively.
The valuation of the swaps results in an offsetting fair value
adjustment to the debt hedged; accordingly, long-term debt has
been increased by $1.2 million in fiscal 2008, reduced by
$4.4 million in fiscal 2007 and reduced by
$4.6 million in fiscal 2006. The average effective interest
rate, on the $100 million of the 7.45% unsecured notes,
inclusive of the effect of hedging activity, was approximately
8.77% in fiscal 2008, 9.42% in fiscal 2007 and 8.30% in fiscal
2006.
During fiscal 2006, concurrent with the issuance of the
C$235 million three-year note, TJX entered an interest rate
swap on the principal amount of the note effectively converting
the interest on the note from floating to a fixed rate of
interest. The maturity date of the interest rate swap is January
2009, one year before the maturity date of the underlying debt.
Under this swap, TJX pays a specified fixed interest rate and
receives the floating rate applicable to the underlying debt.
The interest income/expense on the swaps is accrued as earned
and recorded as an adjustment to the interest expense accrued on
the floating-rate debt. The interest rate swap is designated as
cash flow hedge of the underlying debt. The fair value of the
contract, excluding the net interest accrual, amounted to a
liability of $1.1 million (C$1.1 million) as of
January 26, 2008 and an asset of $699,000 (C$825,000) as of
January 27, 2007. The valuation of the swap results in an
adjustment to other comprehensive income of a similar amount.
The average effective interest rate on the note, inclusive of
the effect of hedging activity, was approximately 4.50% in
fiscal 2008. We estimate that all $1.1 million
(C$1.1 million) of losses related to this swap, deferred in
accumulated other comprehensive income will be recognized in
earnings over the next twelve months.
Foreign Currency Contracts: TJX enters into
forward foreign currency exchange contracts to obtain economic
hedges on firm U.S. dollar and Euro merchandise purchase
commitments made by its foreign subsidiaries, T.K. Maxx (United
Kingdom, Ireland and Germany) and Winners (Canada). These
commitments are typically six months or less in duration. The
contracts outstanding at January 26, 2008 covered certain
commitments for the first quarter of fiscal 2009. TJX elected
not to apply hedge accounting rules to these contracts. The
change in the fair value of these contracts resulted in income
of $6.6 million in fiscal 2008, income of $1.2 million
in fiscal 2007 and expense of $2.5 million in fiscal 2006
and is included in current earnings as a component of cost of
sales, including buying and occupancy costs. TJX also enters
into forward foreign currency exchange contracts to obtain
economic hedges on certain foreign intercompany payables,
primarily license fees, for which we elect not to apply hedge
accounting rules. There were no such contracts outstanding at
January 26, 2008 and January 27, 2007 thus there was
no change in fair value of these contracts and no impact to our
statements of financial position. Any gain or loss on this type
of contract is ultimately offset by a similar gain or loss on
the underlying item being hedged.
TJX also enters into foreign currency forward and swap contracts
in both Canadian dollars and British pound sterling and accounts
for them as either a hedge of the net investment in and between
its foreign subsidiaries or (until July 20, 2006 see below)
as a cash flow hedge of certain long-term intercompany debt. We
apply hedge accounting to these hedge contracts of our
investment in foreign operations, and changes in fair value of
these contracts, as well as gains and losses upon settlement,
are recorded in accumulated other comprehensive income,
offsetting changes in the cumulative foreign translation
adjustments of our foreign divisions. The change in fair value
of the contracts designated as a hedge of our investment in
foreign operations resulted in a loss of $15.8 million, net
of income taxes, in fiscal 2008, a loss of $5.6 million,
net of income
F-13
taxes, in fiscal 2007, and a gain of $15.0 million, net of
income taxes, in fiscal 2006. The change in the cumulative
foreign currency translation adjustment resulted in a gain of
$21.0 million, net of income taxes, in fiscal 2008, a gain
of $20.4 million, net of income taxes, in fiscal 2007, and
a loss of $32.6 million, net of income taxes, in fiscal
2006. Amounts included in other comprehensive income relating to
cash flow hedges are reclassified to earnings as the underlying
exposure on the debt impacts earnings. The net loss recognized
in fiscal 2008 related to cash flow contracts was
$1.1 million, net of income taxes. The net loss recognized
in fiscal 2007 related to cash flow contracts was
$5.0 million, net of income taxes. This amount was offset
by a non-taxable gain of $4.6 million, related to the
underlying exposure. The net loss recognized in fiscal 2006
related to cash flow contracts was $13.8 million, net of
income taxes. This amount was offset by a non-taxable gain of
$22.5 million, related to the underlying exposure. On
July 20, 2006 TJX determined that the C$355 million
intercompany loan, due from Winners to TJX, would not be payable
in the foreseeable future due to the capital and cash flow needs
of Winners. As a result, the intercompany loan and the related
currency swap were re-designated as a net investment in a
foreign operation. Accordingly, foreign currency gains or losses
on the intercompany loan and gains or losses on the related
currency swap from re-designation date forward, to the extent
effective, are recorded in other comprehensive income. The
ineffective portion of the currency swap resulted in a pre-tax
charge to the income statement of $9.1 million and
$2.9 million in fiscal 2008 and fiscal 2007, respectively.
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 the statements of income 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 the statement of income. The net impact on
the income statement of hedging activity related to these
intercompany payables was income of $2.5 million in fiscal
2008, and immaterial amounts in both fiscal 2007 and fiscal 2006.
The value of foreign currency exchange contracts relating to
inventory commitments is reported in current earnings as a
component of cost of sales, including buying and occupancy
costs. The income statement impact of all other derivative
contracts and underlying exposures is reported as a component of
selling, general and administrative expenses.
Following is a summary of TJXs derivative financial
instruments and related fair values, outstanding at
January 26, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Blended
|
|
Fair Value Asset
|
|
|
|
|
Currency amounts in thousands
|
|
Pay
|
|
|
Receive
|
|
|
Contract Rate
|
|
(Liability)
|
|
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap fixed to floating on notional of $50,000
|
|
|
LIBOR + 4.17
|
%
|
|
|
7.45
|
%
|
|
|
N/A
|
|
US$
|
300
|
|
|
|
|
|
Interest rate swap fixed to floating on notional of $50,000
|
|
|
LIBOR + 3.42
|
%
|
|
|
7.45
|
%
|
|
|
N/A
|
|
US$
|
1,052
|
|
|
|
|
|
Cash flow hedge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap floating to fixed on notional of C$235,000
|
|
|
4.136
|
%
|
|
|
CAD BA
|
%
|
|
|
N/A
|
|
US$
|
(1,086
|
)
|
|
|
|
|
Net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in and between foreign operations
|
|
C$
|
732,711
|
|
|
US$
|
593,073
|
|
|
|
0.8094
|
|
US$
|
(143,694
|
)
|
|
|
|
|
|
|
£
|
201,000
|
|
|
C$
|
443,429
|
|
|
|
2.2061
|
|
US$
|
45,711
|
|
|
|
|
|
Hedge accounting not elected:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise purchase commitments
|
|
C$
|
170,757
|
|
|
US$
|
175,100
|
|
|
|
1.0254
|
|
US$
|
5,873
|
|
|
|
|
|
|
|
C$
|
2,771
|
|
|
|
1,861
|
|
|
|
0.6716
|
|
US$
|
(15
|
)
|
|
|
|
|
|
|
£
|
18,044
|
|
|
US$
|
35,900
|
|
|
|
1.9896
|
|
US$
|
213
|
|
|
|
|
|
|
|
£
|
29,026
|
|
|
|
39,400
|
|
|
|
1.3574
|
|
US$
|
382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
|
(91,264
|
)
|
|
|
|
|
|
|
F-14
The fair value of the derivatives is classified as assets or
liabilities, current or non-current, based upon valuation
results and settlement dates of the individual contracts.
Following are the balance sheet classifications of the fair
value of our derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 26,
|
|
|
January 27,
|
|
|
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
53,094
|
|
|
$
|
2,798
|
|
|
|
|
|
Non-current assets
|
|
|
-
|
|
|
|
16,688
|
|
|
|
|
|
Current liabilities
|
|
|
(1,267
|
)
|
|
|
(3,382
|
)
|
|
|
|
|
Non-current liabilities
|
|
|
(143,091
|
)
|
|
|
(96,475
|
)
|
|
|
|
|
|
|
Net fair value (liability)
|
|
$
|
(91,264
|
)
|
|
$
|
(80,371
|
)
|
|
|
|
|
|
|
TJXs forward foreign currency exchange and swap contracts
require TJX to make payments of certain foreign currencies or
U.S. dollars for receipt of Canadian dollars,
U.S. dollars or Euros. All of these contracts, except the
contracts relating to our investment in our foreign operations,
mature during fiscal 2009. The British pound sterling investment
hedges mature during fiscal 2009 and the Canadian dollar
investment hedge contracts and interest rate swap contracts have
maturities from fiscal 2009 to fiscal 2010.
The counterparties to the forward exchange contracts and swap
agreements are major international financial institutions and
the contracts contain rights of offset, which minimize our
exposure to credit loss in the event of nonperformance by one of
the counterparties. We do not require counterparties to maintain
collateral for these contracts. We periodically monitor our
position and the credit ratings of the counterparties and do not
anticipate losses resulting from the nonperformance of these
institutions.
TJX is committed under long-term leases related to its
continuing operations for the rental of real estate and fixtures
and equipment. Most of our leases are store operating leases
with a ten-year initial term and options to extend for one or
more five-year periods. Certain Marshalls leases, acquired in
fiscal 1996, had remaining terms ranging up to twenty-five
years. Leases for T.K. Maxx are generally for fifteen to
twenty-five years with ten-year kick-out options. Many of the
leases contain escalation clauses and early termination
penalties. In addition, we are generally required to pay
insurance, real estate taxes and other operating expenses
including, in some cases, rentals based on a percentage of sales
which aggregated to approximately one-third of the total minimum
rent for the fiscal year ended January 26, 2008 and
January 27, 2007, respectively.
Following is a schedule of future minimum lease payments for
continuing operations as of January 26, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
|
|
|
In thousands
|
|
Lease
|
|
|
Leases
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
3,726
|
|
|
$
|
943,174
|
|
|
|
|
|
2010
|
|
|
3,726
|
|
|
|
898,667
|
|
|
|
|
|
2011
|
|
|
3,726
|
|
|
|
809,288
|
|
|
|
|
|
2012
|
|
|
3,897
|
|
|
|
708,300
|
|
|
|
|
|
2013
|
|
|
3,912
|
|
|
|
586,948
|
|
|
|
|
|
Later years
|
|
|
11,084
|
|
|
|
1,715,321
|
|
|
|
|
|
|
|
Total future minimum lease payments
|
|
|
30,071
|
|
|
$
|
5,661,698
|
|
|
|
|
|
|
|
Less amount representing interest
|
|
|
7,689
|
|
|
|
|
|
|
|
|
|
|
|
Net present value of minimum capital lease payments
|
|
$
|
22,382
|
|
|
|
|
|
|
|
|
|
|
|
The capital lease commitment relates to a 283,000-square-foot
addition to TJXs home office facility. Rental payments
commenced June 1, 2001, and we recognized a capital lease
asset and related obligation equal to the present value of the
lease payments of $32.6 million.
Rental expense under operating leases for continuing operations
amounted to $896.6 million, $837.6 million, and
$774.9 million for fiscal 2008, 2007 and 2006,
respectively. Rental expense includes contingent rent and is
reported net of sublease income. Contingent rent paid was
$9.7 million, $9.0 million, and $7.1 million in
fiscal 2008, 2007 and 2006, respectively; and sublease income
was $2.9 million in fiscal 2008; and $3.0 million in
fiscal 2007 and 2006. The total net
F-15
present value of TJXs minimum operating lease obligations
approximates $4,404.6 million as of January 26, 2008.
TJX had outstanding letters of credit totaling
$32.7 million as of January 26, 2008 and
$43.8 million as of January 27, 2007. Letters of
credit are issued by TJX primarily for the purchase of inventory.
|
|
G.
|
Stock
Compensation Plans
|
In November 2005, we adopted SFAS No. 123(R) using the
modified retrospective method. The total
compensation cost related to stock based compensation was
$37.0 million net of income taxes of $20.3 million in
fiscal 2008, $45.1 million net of income taxes of
$24.7 million in fiscal 2007, and $58.9 million net of
income taxes of $32.3 million in fiscal 2006.
As of January 26, 2008, there was $73.5 million of
total unrecognized compensation cost related to nonvested
share-based compensation arrangements granted under the plan.
That cost is expected to be recognized over a weighted-average
period of 2.0 years. The total fair value of shares vested
in fiscal 2008 was $56.6 million.
TJX has a stock incentive plan under which options and other
stock awards may be granted to its directors, officers and key
employees. This plan has been approved by TJXs
shareholders, and all stock compensation awards are made under
this plan. The Stock Incentive Plan, as amended with shareholder
approval, provides for the issuance of up to 145.3 million
shares with 17.0 million shares available for future grants
as of January 26, 2008. TJX issues shares from authorized
but unissued common stock. On December 6, 2005, the Board
of Directors of TJX determined that beginning in fiscal 2007,
non-employee directors would no longer be awarded stock option
grants under the Stock Incentive Plan, and the plan was amended
to eliminate such awards.
Under the Stock Incentive Plan, TJX has granted options for the
purchase of common stock, generally within ten years from the
grant date at option prices of 100% of market price on the grant
date. Most options outstanding vest over a three-year period
starting one year after the grant, and are exercisable in their
entirety three years after the grant date. Options granted to
directors, prior to the amendment eliminating such awards,
became fully exercisable one year after the date of grant.
For purposes of applying the provisions of
SFAS No. 123(R), the fair value of each option granted
during fiscal 2008, 2007 and 2006 is estimated on the date of
grant using the Black-Scholes option pricing model with the
following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
|
|
|
|
|
|
|
January 26,
|
|
|
January 27,
|
|
|
January 28,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
Risk free interest rate
|
|
|
4.00
|
%
|
|
|
4.75
|
%
|
|
|
3.91
|
%
|
|
|
|
|
Dividend yield
|
|
|
1.2
|
%
|
|
|
1.1
|
%
|
|
|
1.0
|
%
|
|
|
|
|
Expected volatility factor
|
|
|
31.0
|
%
|
|
|
32.0
|
%
|
|
|
33.0
|
%
|
|
|
|
|
Expected option life in years
|
|
|
4.5
|
|
|
|
4.5
|
|
|
|
4.5
|
|
|
|
|
|
Weighted average fair value of options issued
|
|
$
|
8.38
|
|
|
$
|
8.35
|
|
|
$
|
6.60
|
|
|
|
|
|
F-16
Expected volatility is based on a combination of implied
volatility from traded options on our stock, and historical
volatility during a term approximating the expected term of the
option granted. We use historical data to estimate option
exercise, employee termination behavior and dividend yield
within the valuation model. Separate employee groups and option
characteristics are considered separately for valuation purposes
when applicable. No such distinctions existed in fiscal 2008 or
2007. See discussion regarding non-employee directors
option awards eliminated in fiscal 2007 above. The expected
option life represents an estimate of the period of time options
are expected to remain outstanding based upon historical
exercise trends. The risk free rate is for periods within the
contractual life of the option based on the U.S. Treasury
yield curve in effect at the time of the grant.
Stock Options Pursuant to the Stock Incentive
Plan: A summary of the status of TJXs stock
options and related Weighted Average Exercise Prices
(WAEP) is presented below (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
|
|
|
|
|
|
|
January 26, 2008
|
|
|
January 27, 2007
|
|
|
January 28, 2006
|
|
|
|
|
|
|
Options
|
|
|
WAEP
|
|
|
Options
|
|
|
WAEP
|
|
|
Options
|
|
|
WAEP
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
|
37,854
|
|
|
$
|
20.50
|
|
|
|
47,902
|
|
|
$
|
18.97
|
|
|
|
48,558
|
|
|
$
|
18.44
|
|
|
|
|
|
Granted
|
|
|
5,716
|
|
|
|
29.23
|
|
|
|
5,788
|
|
|
|
27.03
|
|
|
|
7,003
|
|
|
|
21.44
|
|
|
|
|
|
Exercised and repurchased
|
|
|
(7,473
|
)
|
|
|
18.84
|
|
|
|
(14,524
|
)
|
|
|
17.92
|
|
|
|
(6,010
|
)
|
|
|
17.04
|
|
|
|
|
|
Forfeitures
|
|
|
(944
|
)
|
|
|
24.25
|
|
|
|
(1,312
|
)
|
|
|
21.93
|
|
|
|
(1,649
|
)
|
|
|
20.97
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
35,153
|
|
|
$
|
22.17
|
|
|
|
37,854
|
|
|
$
|
20.50
|
|
|
|
47,902
|
|
|
$
|
18.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at end of year
|
|
|
24,243
|
|
|
$
|
19.88
|
|
|
|
24,848
|
|
|
$
|
18.69
|
|
|
|
30,457
|
|
|
$
|
17.61
|
|
|
|
|
|
|
|
Included in the exercised and repurchased amount in the table
above are approximately 341,000 options repurchased from
optionees by the Company during fiscal 2008. The total intrinsic
value of options exercised was $79.7 million in fiscal
2008, $131.6 million in fiscal 2007 and $37.5 million
in fiscal 2006.
The following table summarizes information about stock options
outstanding that are expected to vest and stock options
outstanding that are exercisable at January 26, 2008.
Options outstanding expected to vest represents total unvested
options of 10.9 million adjusted for anticipated
forfeitures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
Amounts in thousands
|
|
|
|
|
Intrinsic
|
|
|
Contract
|
|
|
Exercise
|
|
|
|
|
except years and per share amounts
|
|
Shares
|
|
|
Value
|
|
|
Life
|
|
|
Price
|
|
|
|
|
|
|
|
Options outstanding expected to vest
|
|
|
10,139
|
|
|
$
|
31,002
|
|
|
|
9.0 years
|
|
|
$
|
27.16
|
|
|
|
|
|
Options exercisable
|
|
|
24,243
|
|
|
$
|
250,589
|
|
|
|
5.5 years
|
|
|
$
|
19.88
|
|
|
|
|
|
|
|
Total outstanding options vested and expected to vest
|
|
|
34,382
|
|
|
$
|
281,591
|
|
|
|
6.5 years
|
|
|
$
|
22.03
|
|
|
|
|
|
|
|
Restricted Stock and Other Awards Pursuant to the Stock
Incentive Plan: TJX has also issued restricted stock and
performance-based restricted stock awards under the Stock
Incentive Plan. Restricted stock awards are issued at no cost to
the recipient of the award, and have service restrictions that
generally lapse over three to four years from date of grant.
Performance-based shares are also issued at no cost to the
recipient of the award and have restrictions that generally
lapse over one to four years when and if specified performance
criteria are met. The grant date fair value of the award is
charged to income ratably over the period during which these
awards vest. The fair value of the awards is determined at date
of grant and assumes that performance goals will be achieved. If
such goals are not met, no compensation cost is recognized and
any recognized compensation cost is reversed.
A combined total of 200,341 shares, 236,000 shares and
377,000 shares for restricted and performance-based awards
were issued in fiscal 2008, 2007 and 2006, respectively.
59,814 shares were forfeited during fiscal 2008,
7,125 shares were forfeited during fiscal 2007 and
18,750 shares were forfeited during fiscal 2006. The
weighted average market value per share of these stock awards at
grant date was $24.90 for fiscal 2008, $27.16 for fiscal 2007
and $21.14 for fiscal 2006.
F-17
A summary of the status of our nonvested restricted stock and
changes during fiscal 2008 is presented below (shares in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Restricted
|
|
|
Grant Date
|
|
|
|
|
|
Stock
|
|
|
Fair Value
|
|
|
|
|
|
|
Nonvested at beginning of year
|
|
|
612
|
|
|
$
|
23.64
|
|
|
|
|
Granted
|
|
|
200
|
|
|
|
28.04
|
|
|
|
|
Vested
|
|
|
(159
|
)
|
|
|
24.29
|
|
|
|
|
Forfeited
|
|
|
(60
|
)
|
|
|
24.9
|
|
|
|
|
|
|
Nonvested at end of year
|
|
|
593
|
|
|
$
|
24.82
|
|
|
|
|
|
|
The fair value of restricted stock vested was $3.9 million
in fiscal 2008, $4.9 million in fiscal 2007 and
$11.9 million in fiscal 2006.
In November 2005, we issued a market based deferred share award
to our acting chief executive officer which was indexed to our
stock price for the
sixty-day
period beginning February 22, 2007 (measurement
period) whereby the executive could earn up to
94,000 shares of TJX stock. The weighted average grant date
fair value of this award was $9.90 per share. In June 2007,
58,750 shares were issued under this award. In September
2007, this officer received a special award of 25,000 shares of
common stock.
TJX also awards deferred shares to its outside directors under
the Stock Incentive Plan. The outside directors are awarded two
annual deferred share awards, each representing shares of TJX
common stock valued at $50,000. One award vests immediately and
is payable with accumulated dividends in stock at the earlier of
separation from service as a director or change of control. The
second award vests based on service as a director until the
annual meeting next following the award and is payable with
accumulated dividends in stock at vesting date, unless an
irrevocable advance election is made whereby it is payable at
the same time as the first award. As of the end of fiscal 2008,
a total of 117,336 deferred shares had been awarded under the
plan. Actual shares will be issued at termination of service or
a change of control.
|
|
H.
|
Capital
Stock and Earnings Per Share
|
Capital Stock: In August 2007, we completed a
$1 billion stock repurchase program begun in fiscal 2006
and initiated another multi-year $1 billion stock
repurchase program that had been approved in January 2007. We
repurchased and retired 33.3 million shares of our common
stock at a cost of $950.2 million during fiscal 2008. TJX
reflects stock repurchases in its financial statements on a
settlement basis. We had cash expenditures under our
repurchase programs of $940.2 million, $557.2 million
and $603.7 million in fiscal 2008, 2007 and 2006,
respectively, funded primarily by cash generated from
operations. The total common shares repurchased amounted to
33.0 million shares in fiscal 2008, 22.0 million
shares in fiscal 2007 and 25.9 million shares in fiscal
2006. As of January 26, 2008, we had repurchased
17.8 million shares of our common stock at a cost of
$514.0 million under the current $1 billion stock
repurchase program. All shares repurchased under our stock
repurchase programs have been retired. In February 2008, our
Board of Directors approved a new $1 billion stock
repurchase program which was in addition to the
$486.0 million remaining under our existing $1 billion
authorization at January 26, 2008.
TJX temporarily suspended buyback activity from the discovery of
the Computer Intrusion (December 2006) until adoption of a
Rule 10b5-1
plan at the end of the first quarter of fiscal 2008.
TJX has authorization to issue up to 5 million shares of
preferred stock, par value $1. There was no preferred stock
issued or outstanding at January 26, 2008.
F-18
Earnings
Per Share:
The following schedule presents the calculation of basic and
diluted earnings per share for income from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in thousands
|
|
January 26,
|
|
January 27,
|
|
January 28,
|
|
|
|
except per share amounts
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
771,750
|
|
$
|
776,756
|
|
$
|
689,834
|
|
|
|
|
|
|
Weighted average common stock outstanding for basic earnings per
share calculation
|
|
|
443,050
|
|
|
454,044
|
|
|
466,537
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.74
|
|
$
|
1.71
|
|
$
|
1.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
771,750
|
|
$
|
776,756
|
|
$
|
689,834
|
|
|
|
|
Add back: Interest expense on zero coupon convertible
subordinated notes, net of income taxes
|
|
|
4,716
|
|
|
4,623
|
|
|
4,532
|
|
|
|
|
|
|
Income from continuing operations used for diluted earnings per
share calculation
|
|
$
|
776,466
|
|
$
|
781,379
|
|
$
|
694,366
|
|
|
|
|
|
|
Weighted average common stock outstanding for basic earnings per
share calculation
|
|
|
443,050
|
|
|
454,044
|
|
|
466,537
|
|
|
|
|
Assumed conversion/exercise of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible subordinated notes
|
|
|
16,905
|
|
|
16,905
|
|
|
16,905
|
|
|
|
|
Stock options and awards
|
|
|
8,091
|
|
|
9,096
|
|
|
8,058
|
|
|
|
|
|
|
Weighted average common stock outstanding for diluted earnings
per share calculation
|
|
|
468,046
|
|
|
480,045
|
|
|
491,500
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.66
|
|
$
|
1.63
|
|
$
|
1.41
|
|
|
|
|
The weighted average common shares for the diluted earnings per
share calculation exclude the incremental effect related to
outstanding stock options, the exercise price of which is in
excess of the related fiscal years average price of
TJXs common stock. Such options are excluded because they
would have an antidilutive effect. There were 5.7 million,
5.7 million and 190,800 such options excluded as of
January 26, 2008, January 27, 2007 and
January 28, 2006, respectively.
The provision for income taxes includes the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
|
|
|
|
|
|
|
January 26,
|
|
|
January 27,
|
|
|
January 28,
|
|
|
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
373,340
|
|
|
$
|
323,821
|
|
|
$
|
317,404
|
|
|
|
|
|
State
|
|
|
94,544
|
|
|
|
57,055
|
|
|
|
41,962
|
|
|
|
|
|
Foreign
|
|
|
87,260
|
|
|
|
60,149
|
|
|
|
47,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(67,636
|
)
|
|
|
27,373
|
|
|
|
(84,771
|
)
|
|
|
|
|
State
|
|
|
(16,499
|
)
|
|
|
13
|
|
|
|
(420
|
)
|
|
|
|
|
Foreign
|
|
|
(70
|
)
|
|
|
1,681
|
|
|
|
(3,222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
470,939
|
|
|
$
|
470,092
|
|
|
$
|
318,535
|
|
|
|
|
|
|
|
F-19
TJX had net deferred tax assets as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
|
|
|
|
|
|
January 26,
|
|
January 27,
|
|
|
|
In thousands
|
|
2008
|
|
2007
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
Foreign tax credit carryforward
|
|
$
|
12,409
|
|
$
|
5,493
|
|
|
|
|
Reserve for discontinued operations
|
|
|
20,264
|
|
|
24,078
|
|
|
|
|
Pension, stock compensation, postretirement and employee benefits
|
|
|
189,619
|
|
|
164,463
|
|
|
|
|
Leases
|
|
|
39,373
|
|
|
38,539
|
|
|
|
|
Foreign currency hedges
|
|
|
36,654
|
|
|
23,041
|
|
|
|
|
Computer Intrusion reserve
|
|
|
46,531
|
|
|
-
|
|
|
|
|
Other
|
|
|
85,199
|
|
|
43,115
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
430,049
|
|
$
|
298,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
$
|
139,396
|
|
$
|
151,632
|
|
|
|
|
Safe harbor leases
|
|
|
7,548
|
|
|
8,718
|
|
|
|
|
Tradename
|
|
|
40,761
|
|
|
41,101
|
|
|
|
|
Undistributed foreign earnings
|
|
|
77,198
|
|
|
42,199
|
|
|
|
|
Other
|
|
|
44,584
|
|
|
40,779
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
309,487
|
|
|
284,429
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
120,562
|
|
$
|
14,300
|
|
|
|
|
|
|
The fiscal 2008 total net deferred tax asset is presented on the
balance sheet as a current asset of $163.5 million and a
non-current liability of $42.9 million. For fiscal 2007,
the net deferred tax asset is presented on the balance sheet as
a current asset of $35.8 million and a non-current
liability of $21.5 million. TJX has provided for deferred
U.S. taxes on all undistributed earnings from its Canadian
subsidiary through January 26, 2008. TJX changed its
assertion during fiscal 2008 regarding the undistributed
earnings of its Marshalls Puerto Rico subsidiary. The earnings
of this subsidiary are no longer considered indefinitely
reinvested. As a result, the Company recognized a
$5.5 million tax benefit after providing for deferred
U.S. taxes for this subsidiary. All earnings of TJXs
other foreign subsidiaries are indefinitely reinvested and no
deferred taxes have been provided on those earnings. The net
deferred tax asset summarized above includes deferred taxes
relating to temporary differences at our foreign operations and
amounted to a $26.7 million net liability as of
January 26, 2008 and a $26.6 million net liability as
of January 27, 2007.
Tax legislation enacted in 2004, allowed companies to repatriate
the undistributed earnings of its foreign operations in fiscal
2006 at an effective U.S. federal income tax rate of 5.25%.
TJX recognized a one-time tax benefit of $47 million, or
$.10 per share, from the repatriation of
U.S. $259.5 million of Canadian earnings during the
fourth quarter of fiscal 2006. In addition, during the fourth
quarter of fiscal 2006, TJX corrected its accounting for the tax
impact of foreign currency gains on certain intercompany loans.
We had previously established a deferred tax liability on these
gains which are not taxable. The impact of correcting for the
tax treatment of these gains results in a tax benefit of
$22 million. The cumulative impact of this adjustment
through the end of the third quarter of fiscal 2006 was
$18.2 million, all of which was recorded in the fourth
quarter of fiscal 2006. Of the $18.2 million,
$10.1 million related to fiscal 2005.
TJXs HomeGoods subsidiary has a Puerto Rico net operating
loss carryforward of approximately $1.1 million that may be
applied against future taxable income of its HomeGoods
operations in Puerto Rico. The future tax benefit of this loss
carryforward, which expires in fiscal 2014, has not been
recognized. In fiscal 2006, TJX utilized a United Kingdom net
operating loss carryforward of approximately $2.4 million.
There have been no United Kingdom net operating losses for
periods subsequent to January 28, 2006. TJXs German
subsidiary, which is treated as a branch for U.S. tax
purposes, incurred a net operating loss of $14.4 million
for tax and financial reporting purposes during fiscal 2008. The
loss was fully utilized to reduce the Companys current
U.S. taxable income. Any future utilization of the loss in
Germany will result in a corresponding amount of taxable income
for U.S. tax purposes. TJXs worldwide effective
income tax rate was 37.9% for fiscal 2008, 37.7%
F-20
for fiscal 2007 and 31.6% for fiscal 2006. The difference
between the U.S. federal statutory income tax rate and
TJXs worldwide effective income tax rate is reconciled
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
|
|
|
|
|
|
|
January 26,
|
|
|
January 27,
|
|
|
January 28,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
U.S. federal statutory income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
|
|
Effective state income tax rate
|
|
|
4.1
|
|
|
|
4.0
|
|
|
|
3.9
|
|
|
|
|
|
Impact of foreign operations
|
|
|
(0.6
|
)
|
|
|
(0.4
|
)
|
|
|
0.5
|
|
|
|
|
|
Impact of repatriation of foreign earnings
|
|
|
(0.4
|
)
|
|
|
-
|
|
|
|
(4.7
|
)
|
|
|
|
|
Impact of tax free currency gains on intercompany loans,
including correction of deferred tax liability
|
|
|
(0.1
|
)
|
|
|
(0.2
|
)
|
|
|
(2.1
|
)
|
|
|
|
|
All other
|
|
|
(0.1
|
)
|
|
|
(0.7
|
)
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
Worldwide effective income tax rate
|
|
|
37.9
|
%
|
|
|
37.7
|
%
|
|
|
31.6
|
%
|
|
|
|
|
|
|
TJX adopted the provisions of FASB Interpretation 48,
Accounting for Uncertainty in Income Taxes
(FIN 48), in the first quarter of fiscal 2008. FIN 48
clarifies the accounting for income taxes by prescribing a
minimum threshold for benefit recognition of a tax position for
financial statement purposes. FIN 48 also establishes tax
accounting rules for measurement, classification, interest and
penalties, disclosure and interim period accounting. As a result
of the implementation, the Company recognized a charge of
approximately $27.2 million to its retained earnings
balance at the beginning of fiscal 2008. The Company had
unrecognized tax benefits of $140.7 million as of
January 26, 2008 and $124.4 million as of
January 28, 2007.
A reconciliation of the beginning and ending gross amount of
unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
Balance at date of implementation
|
|
$
|
188,671
|
|
|
|
|
|
Additions for uncertain tax positions taken in current year
|
|
|
30,811
|
|
|
|
|
|
Additions for uncertain tax positions taken in prior years
|
|
|
52,328
|
|
|
|
|
|
Reductions for uncertain tax positions taken in prior years
|
|
|
(36,474
|
)
|
|
|
|
|
Reductions resulting from lapse of statute of limitation
|
|
|
(307
|
)
|
|
|
|
|
Settlements with tax authorities
|
|
|
(2,170
|
)
|
|
|
|
|
|
|
Balance at January 26, 2008
|
|
$
|
232,859
|
|
|
|
|
|
|
|
Included in the gross amount of unrecognized tax benefits are
items that will not impact future effective tax rates upon
recognition. These items amount to $67.8 million as of
January 26, 2008 and $28.2 million as of
January 28, 2007.
The Company is subject to U.S. federal income tax as well as
income tax in multiple state, local and foreign jurisdictions.
In nearly all jurisdictions, the tax years through fiscal 2001
are no longer subject to examination.
The Companys continuing accounting policy classifies
interest and penalties related to income tax matters as part of
income tax expense. The amount of interest and penalties
expensed was $16.2 million for the year ended
January 26, 2008. The accrued amounts for interest and
penalties are $52.5 million as of January 26, 2008 and
$36.3 million as of January 28, 2007.
Based on the outcome of tax examinations, judicial 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
represented on the financial statements as January 26,
2008. However, based on the status of current audits and the
protocol of finalizing audits, which may include formal legal
proceedings, it is not possible to estimate the impact of such
changes, if any, to previously recorded uncertain tax positions.
|
|
J.
|
Pension
Plans and Other Retirement Benefits
|
Pension: TJX has a funded defined benefit
retirement plan covering the majority of its full-time
U.S. employees. Employees who have attained twenty-one
years of age and have completed one year of service are covered
under the plan. No employee contributions are required and
benefits are based on compensation earned in each year of
service. New employees after February 1, 2006 do not
participate in this plan but are eligible to receive enhanced
employer contributions to their 401(k) plans. This plan
amendment did not have a material impact on fiscal 2008 or
fiscal 2007 pension expense, but is expected to reduce net
periodic pension costs in subsequent years due to a reduction in
participants. Our funded defined benefit retirement plan assets
are invested in domestic and international equity and fixed
income securities, both directly and through investment funds.
The plan does not invest in the securities of TJX. We also have
an unfunded supplemental
F-21
retirement plan which covers key employees and provides for
certain employees additional retirement benefits based on
average compensation.
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement
Plans An amendment of FASB Statements No. 87,
88, 106 and 132 (R) (SFAS No. 158).
SFAS No. 158 requires the recognition of the funded
status of a benefit plan in the balance sheet; the recognition
in other comprehensive income of gains or losses and prior
service costs or credits arising during the period but which are
not included as components of periodic benefit cost; the
measurement of defined benefit plan assets and obligations as of
the balance sheet date (the measurement provisions); and
disclosure of additional information about the effects on
periodic benefit cost for the following fiscal year arising from
delayed recognition in the current period. The recognition of
the funded status of plans on the balance sheet was required for
our fiscal year ended January 27, 2007. The adjustment to
accumulated other comprehensive income of initially applying the
recognition provisions of SFAS No. 158 for our pension
and postretirement plans was a reduction, net of taxes, of
$5.6 million in fiscal 2007. The impact of adopting
SFAS No. 158 on individual line items of the balance
sheet as of January 27, 2007 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
|
|
|
|
|
|
After
|
|
|
|
application of
|
|
|
|
|
|
application of
|
|
In thousands
|
|
SFAS No. 158
|
|
|
Adjustments
|
|
|
SFAS No. 158
|
|
|
|
|
Other assets (Funded prepaid pension)
|
|
$
|
27,573
|
|
|
$
|
(27,573
|
)
|
|
$
|
-
|
|
Total assets
|
|
|
6,113,273
|
|
|
|
(27,573
|
)
|
|
|
6,085,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities (Unfunded pension and postretirement
medical liability)
|
|
$
|
79,812
|
|
|
$
|
(18,304
|
)
|
|
$
|
61,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred income taxes, net
|
|
|
25,233
|
|
|
|
(3,708
|
)
|
|
|
21,525
|
|
Total liabilities
|
|
|
3,817,591
|
|
|
|
(22,012
|
)
|
|
|
3,795,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
$
|
(28,428
|
)
|
|
$
|
(5,561
|
)
|
|
$
|
(33,989
|
)
|
Total shareholders equity
|
|
|
2,295,682
|
|
|
|
(5,561
|
)
|
|
|
2,290,121
|
|
TJX deferred the implementation of the measurement provisions of
SFAS No. 158 until fiscal 2008. The impact of adopting
the measurement provisions was to increase our post retirement
liabilities by $2.7 million and an adjustment to retained
earnings of $1.6 million, net of income taxes of
$1.1 million, which represents the net benefit cost from
January 1, 2007 to January 27, 2007. The valuation
date for both plans in fiscal 2007 was as of December 31,
2006.
Presented below is financial information relating to TJXs
funded defined benefit retirement plan (funded plan) and its
unfunded supplemental pension plan (unfunded plan) for the
fiscal years indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded Plan
|
|
|
Unfunded Plan
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
Fiscal Year Ended
|
|
|
|
|
|
|
|
|
|
|
January 26,
|
|
|
January 27,
|
|
|
January 26,
|
|
|
January 27,
|
|
|
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|