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 31, 2009
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)
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(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 the definitions of
large accelerated filer, accelerated
filer and smaller reporting company 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 26, 2008 was
$13,553,030,893, based on the closing sale price as reported on
the New York Stock Exchange.
There were 412,821,592 shares of the registrants
common stock, $1.00 par value, outstanding as of
January 31, 2009.
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 2, 2009 (Part III).
Cautionary
Note Regarding Forward-Looking Statements
Our disclosure and analysis in this
Form 10-K
and in our 2008 Annual Report to Shareholders contain
forward-looking statements, within the meaning of
the Private Securities Litigation Reform Act of 1995, including
some of the statements in this
Form 10-K
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 2008 Annual Report to Shareholders under Letter to
Shareholders and Financial Graphs.
Forward-looking statements are inherently subject to risks,
uncertainties and potentially inaccurate assumptions. 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, believe,
could, estimate, expect,
forecast, intend, looking
forward, may, plan,
potential, project, should,
target, will and would or
any variations of these words or other words with similar
meanings. 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, as amended and
Section 21E of the Securities Exchange Act of 1934, as
amended, or Exchange Act. These forward looking
statements may relate to such matters as our future
actions, future performance or results of current and
anticipated sales, expenses, interest rates, foreign exchange
rates and the outcome of contingencies such as legal
proceedings, and financial results.
We cannot guarantee that the results and other expectations
expressed, anticipated or implied in any forward-looking
statement will be realized. The risks set forth under
Item 1A of this
Form 10-K
describe major risks to our business. A variety of factors
including these risks could cause our actual results and other
expectations to differ materially from the anticipated results
or other expectations expressed, anticipated or implied in our
forward-looking statements. Should known or unknown risks
materialize, or should our underlying assumptions prove
inaccurate, actual results could differ materially from past
results and those anticipated, estimated or projected in the
forward looking statements. You should bear this in mind
as you consider forward-looking statements.
Our forward-looking statements speak only as of the dates on
which they are made, and we do not undertake any obligation to
update any forward-looking statement, whether to reflect new
information, future events or otherwise. You are advised,
however, to consult any further disclosures we may make in our
future reports to the SEC or otherwise.
2
TABLE OF CONTENTS
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Part I. |
ITEM 1. BUSINESS |
ITEM 1A. RISK FACTORS |
ITEM 1B. UNRESOLVED STAFF COMMENTS |
ITEM 2. PROPERTIES |
ITEM 3. LEGAL PROCEEDINGS |
Part II. |
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED SECURITY HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
ITEM 6. SELECTED FINANCIAL DATA |
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. CONTROLS AND PROCEDURES |
ITEM 9B. OTHER INFORMATION |
Part III |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. EXECUTIVE COMPENSATION |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Part IV |
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
SIGNATURES |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |
Ex-10.5 The Letter Agreement dated as of January 31, 2009 with Carol Meyrowitz |
Ex-10.8 The Letter Agreement dated as of January 28, 2009 with Nirmal Tripathy |
Ex-10.9 The Form of 409A Amendment to Employment Agreements for the named executive officers |
Ex-10.10 The TJX Companies, Inc. Management Incentive Plan |
Ex-10.16 The TJX Companies, Inc. Long Range Performance Incentive Plan |
Ex-10.17 The General Deferred Compensation Plan (1998 Restatement) and related First Amendment |
Ex-10.18 The Supplemental Executive Retirement Plan |
Ex-10.19 The Executive Savings Plan, as amended and restated, effective January 1, 2008 |
Ex-21 Subsidiaries |
Ex-23 The Consent of PricewaterhouseCoopers LLP |
Ex-24 Power of Attorney |
Ex-31.1 Section 302 Certification of the Chief Executive Officer |
Ex-31.2 Section 302 Certification of the Chief Financial Officer |
Ex-32.1 Section 906 Certification of the Chief Executive Officer |
Ex-32.2 Section 906 Certification of the Chief Financial Officer |
Part I.
BUSINESS
OVERVIEW
The TJX Companies, Inc. (TJX) is the leading off-price apparel
and home fashions retailer in the United States and worldwide.
Our over 2,600 stores offer a rapidly changing assortment of
quality, brand-name and designer merchandise at prices generally
20% to 60% below department and specialty store regular prices
every day.
Retail Concepts. We operate seven off-price retail
concepts in the U.S., Canada and Europe and are known for our
treasure hunt shopping experience and excellent values. The
operating platforms and strategies of all of our retail concepts
are synergistic. Therefore, we capitalize on our off-price
expertise and systems throughout our business, leverage best
practices, initiatives and new ideas across our concepts,
utilize the substantial buying power of our businesses to
leverage our global relationships with vendors, and develop
talent by providing opportunities across our concepts.
In the United States:
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T.J. MAXX and MARSHALLS: T.J. Maxx and Marshalls
are the largest off-price retailers in the United States with
1,680 stores. We founded T.J. Maxx in 1976 and acquired
Marshalls in 1995. Both chains sell family apparel (including
footwear and accessories), home fashions (including home basics,
accent furniture, lamps, rugs, wall décor, decorative
accessories and giftware) and other merchandise, primarily
targeting the middle to upper-middle income customer
demographic. We maintain the separate identities of T.J. Maxx
and Marshalls through different product assortment (including an
expanded assortment of fine jewelry and accessories at T.J. Maxx
and a full line of footwear and broader mens and
juniors offerings at Marshalls), in-store initiatives,
marketing and store appearance. The differentiated shopping
experience at T.J. Maxx and Marshalls encourages our customers
to shop both chains.
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HOMEGOODS: HomeGoods, introduced in 1992, is
an off-price retailer of home fashions in the U.S. Through
318 stores, it sells a broad array of home basics, giftware,
accent furniture, lamps, rugs, wall décor, decorative
accessories, childrens furniture, seasonal merchandise and
other fashions for the home.
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A.J. WRIGHT: Launched in 1998, A.J. Wright, like
T.J. Maxx and Marshalls, sells off-price family apparel, home
fashions and other merchandise. Catering to the entire family,
key apparel categories for A.J. Wrights 135 stores include
basics, childrens, womens plus sizes, juniors, young
mens and footwear. Different from all of our other chains,
A.J. Wright primarily targets the moderate-income customer
demographic.
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In Canada:
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WINNERS: Acquired in 1990, Winners is the
leading off-price apparel and home fashions retailer in Canada.
The merchandise offering at its 202 stores across Canada is
similar to T.J. Maxx and Marshalls. In 2008, Winners began
testing StyleSense, a new concept that offers family footwear
and accessories.
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HOMESENSE: HomeSense introduced the home
fashions off-price concept to Canada in 2001. The chain has 75
stores offering a merchandise mix of home fashions similar to
HomeGoods.
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In Europe:
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T.K. MAXX: Launched in 1994, T.K. Maxx introduced
off-price to the U.K. and is Europes only major off-price
retailer of apparel and home fashions. With 235 stores, T.K.
Maxx operates in the U.K. and Ireland and expanded to Germany in
2007. T.K. Maxx offers a merchandise mix similar to T.J. Maxx
and Marshalls in the U.S. and Winners in Canada.
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HOMESENSE: HomeSense introduced the home
fashions off-price concept to the U.K. in 2008 and its seven
stores offer a merchandise mix of home fashions in the U.K. like
that of HomeGoods in the U.S. and HomeSense in Canada.
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Flexible Business Model: Our off-price business
model is flexible, particularly for a company of our size,
allowing us to react to market trends. Our opportunistic buying
and inventory management strategies give us flexibility to
adjust the merchandise in our stores more frequently than
traditional retailers, and our stores and distribution centers
are built to support this flexibility. By maintaining a liquid
inventory position, our merchants can buy close to need,
enabling them to buy into current market trends and take
advantage of opportunities in the marketplace. Buying close to
need gives us the ability to turn our inventory more rapidly and
adjust our pricing to the current market more frequently than
conventional retailers. 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. Our distribution facilities are designed to accommodate
our methods of receiving and shipping both small and large
quantities of product to our large store base quickly and
efficiently.
Opportunistic Buying: We are distinguished from
traditional retailers by our opportunistic buying of brand name,
fashionable merchandise. We purchase the majority of the
inventory for our apparel chains and a significant portion of
the inventory for our home fashion chains opportunistically. Our
merchant organization numbers over 600. In contrast to
traditional retailers, which typically order goods far in
advance of the time the product appears on the selling floor,
our merchants are in the marketplace virtually every week,
buying primarily for the current selling season, and to a
limited extent, for a future selling season.
Due to the unpredictable nature of supply and consumer demand in
the highly fragmented apparel and home fashions marketplace, we
are able to buy the vast majority of our opportunistic inventory
directly from manufacturers, with some coming from other
retailers and sources. We source from a vendor universe of over
10,000 vendors a year and purchase virtually all of our
inventory at discounts from initial wholesale prices. A small
percentage of the merchandise we sell is private label
merchandise produced specifically for us by third party
manufacturers.
We believe a number of factors make us an attractive outlet for
the vendor community and provide us excellent access on an
ongoing basis to leading branded merchandise. We are willing to
purchase less-than-full assortments of items, styles and sizes,
pay promptly and do not ask for typical retail concessions (such
as advertising, promotional and markdown allowances), delivery
concessions (such as drop shipments to stores or delayed
deliveries) or return privileges. We are able to purchase
quantities of inventory that range from small to very large and
we have the ability to sell product through a geographically
diverse network of stores. Importantly, in TJX, we offer vendors
an outlet with financial strength and an excellent credit rating.
Inventory Management: We offer our customers a
rapidly changing selection of merchandise to create a
treasure hunt experience in our stores. To achieve
this, we seek to rapidly turn the inventory in our stores,
regularly offering fresh selections of apparel and home fashions
at excellent values. Our specialized inventory planning,
purchasing, monitoring and markdown systems, coupled with
distribution center storage, processing, handling and shipping
systems, enable us to tailor the merchandise in our stores to
local preferences, achieve rapid in-store inventory turnover on
a vast array of products and sell substantially all merchandise
within targeted selling periods. Pricing and markdown decisions
and store inventory replenishment are determined centrally,
using information provided by specialized computer systems, and
are designed to move inventory through our stores in a timely
and disciplined manner. We do not generally engage in
promotional pricing activity.
Low Cost Operations: We operate with a low cost
structure compared to many other traditional retailers. We focus
aggressively on expenses throughout our business, including
merchandise and non-merchandise procurement. Our advertising
budget as a percentage of sales is low compared to traditional
retailers. We design our stores, generally located in community
shopping centers, to provide a pleasant, convenient shopping
environment but do not spend heavily on store fixtures.
Additionally, our distribution network is designed to run cost
effectively.
4
Customer Service: While we offer a self-service
format, we train our store associates to provide friendly and
helpful customer service. We also have customer-friendly return
policies. We accept a variety of payment methods including cash,
credit cards and debit cards. In the U.S., we offer a co-branded
TJX credit card and a private label credit card, both through a
major bank, but do not maintain customer credit receivables
related to either program.
Distribution: We operate 13 distribution centers
in the U.S., 2 in Canada and 4 in the U.K. Our distribution
centers encompass approximately 11 million square feet. We
ship substantially all of our merchandise to our stores through
these distribution centers, which are large, highly automated
and built to suit our specific, off-price business model, as
well as warehouses operated by third parties. We shipped
approximately 1.5 billion units to our stores during fiscal
2009.
Store Growth: Expansion of our business through
the addition of new stores is an important part of our strategy
for TJX as a global, off-price, value company. The following
table provides information on the growth and potential growth of
each of our chains:
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Approximate
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Number of Stores at Year End
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Estimated
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Average Store
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Fiscal 2010
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Ultimate Number
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Size (square feet)
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Fiscal 2008
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Fiscal 2009
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(estimated)
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of Stores
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In the United States:
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T.J. Maxx
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30,000
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847
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874
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Marshalls
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32,000
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776
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806
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Marmaxx
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1,623
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1,680
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1,697
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2,000
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HomeGoods
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25,000
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289
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318
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322
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550-600
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A.J. Wright
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26,000
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129
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135
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148
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500
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In Canada:
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Winners
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29,000
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191
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202
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211
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230
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HomeSense
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24,000
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71
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75
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79
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80
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In Europe:
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T.K. Maxx
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32,000
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226
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235
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249
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525-575
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HomeSense
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19,000
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7
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10
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100-150
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2,529
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2,652
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2,716
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3,985-4,135
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Represents estimated number of
stores for U.K., Germany and Ireland only.
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In addition, Marshalls opened 2 free-standing ShoeMegaShop by
Marshalls stores in the U.S. in fiscal 2009, which sell
family footwear, and Winners opened 2 StyleSense stores in
Canada in fiscal 2009, which sell family footwear and
accessories. Some of our HomeGoods and HomeSense stores are
co-located with one of our apparel stores in a superstore
format. We count each of the stores in the superstore format as
a separate store.
Revenue Information: The percentages of our
consolidated revenues by geography for the last three fiscal
years were as follows:
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Fiscal 2007
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Fiscal 2008
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Fiscal 2009
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United States
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79%
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77%
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77%
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Northeast
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27%
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26%
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26%
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Midwest
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14%
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13%
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13%
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South (including Puerto Rico)
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25%
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25%
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25%
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West
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13%
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13%
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13%
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Canada
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10%
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11%
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11%
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Europe
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11%
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12%
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12%
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Total
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100%
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100%
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100%
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5
The percentages of our consolidated revenues by major product
category for the last three fiscal years were as follows:
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Fiscal 2007
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Fiscal 2008
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Fiscal 2009
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Clothing including footwear
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63
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%
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62
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%
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62
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%
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Home fashions
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25
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%
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26
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%
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25
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%
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Jewelry and accessories
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12
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%
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12
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%
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13
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%
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Total
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100
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%
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100
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%
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100
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%
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Segment Overview: We operate five business
segments: three in the U.S. and one in each of Canada and
Europe. Each of our segments has its own administrative, buying
and merchandising organization and distribution network. Of our
U.S.-based
stores, T.J. Maxx and Marshalls, referred to as Marmaxx, are
managed together and reported as a single segment, and A.J.
Wright and HomeGoods each is reported as a separate segment.
Outside the U.S., our chains in Canada are managed together and
our chains in Europe are managed together. Thus, Canada is
reported as a segment and Europe is reported as a segment. More
detailed information about our segments, including financial
information for each of the last three fiscal years, can be
found in Note P to the consolidated financial statements.
6
STORE
LOCATIONS
We operated stores in the following locations as of
January 31, 2009:
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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Alabama
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18
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5
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2
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Arizona
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11
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16
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6
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Arkansas
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8
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1
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California
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76
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111
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34
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7
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Colorado
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11
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7
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4
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Connecticut
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25
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23
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11
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6
|
|
Delaware
|
|
|
3
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
District of Columbia
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Florida
|
|
|
65
|
|
|
|
70
|
|
|
|
33
|
|
|
|
3
|
|
Georgia
|
|
|
36
|
|
|
|
27
|
|
|
|
10
|
|
|
|
|
|
Idaho
|
|
|
5
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
Illinois
|
|
|
37
|
|
|
|
40
|
|
|
|
15
|
|
|
|
18
|
|
Indiana
|
|
|
17
|
|
|
|
10
|
|
|
|
2
|
|
|
|
8
|
|
Iowa
|
|
|
6
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Kansas
|
|
|
6
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
Kentucky
|
|
|
9
|
|
|
|
4
|
|
|
|
3
|
|
|
|
2
|
|
Louisiana
|
|
|
8
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
Maine
|
|
|
8
|
|
|
|
4
|
|
|
|
3
|
|
|
|
|
|
Maryland
|
|
|
11
|
|
|
|
23
|
|
|
|
7
|
|
|
|
6
|
|
Massachusetts
|
|
|
47
|
|
|
|
48
|
|
|
|
21
|
|
|
|
20
|
|
Michigan
|
|
|
33
|
|
|
|
20
|
|
|
|
11
|
|
|
|
8
|
|
Minnesota
|
|
|
12
|
|
|
|
12
|
|
|
|
8
|
|
|
|
|
|
Mississippi
|
|
|
5
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Missouri
|
|
|
13
|
|
|
|
12
|
|
|
|
6
|
|
|
|
|
|
Montana
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nebraska
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Nevada
|
|
|
6
|
|
|
|
7
|
|
|
|
3
|
|
|
|
|
|
New Hampshire
|
|
|
14
|
|
|
|
8
|
|
|
|
5
|
|
|
|
1
|
|
New Jersey
|
|
|
31
|
|
|
|
40
|
|
|
|
22
|
|
|
|
7
|
|
New Mexico
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
New York
|
|
|
47
|
|
|
|
59
|
|
|
|
23
|
|
|
|
19
|
|
North Carolina
|
|
|
28
|
|
|
|
21
|
|
|
|
10
|
|
|
|
|
|
North Dakota
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ohio
|
|
|
38
|
|
|
|
18
|
|
|
|
9
|
|
|
|
8
|
|
Oklahoma
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
Oregon
|
|
|
8
|
|
|
|
5
|
|
|
|
3
|
|
|
|
|
|
Pennsylvania
|
|
|
39
|
|
|
|
31
|
|
|
|
12
|
|
|
|
6
|
|
Puerto Rico
|
|
|
|
|
|
|
14
|
|
|
|
6
|
|
|
|
|
|
Rhode Island
|
|
|
5
|
|
|
|
6
|
|
|
|
4
|
|
|
|
2
|
|
South Carolina
|
|
|
19
|
|
|
|
9
|
|
|
|
4
|
|
|
|
|
|
South Dakota
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tennessee
|
|
|
25
|
|
|
|
14
|
|
|
|
6
|
|
|
|
3
|
|
Texas
|
|
|
42
|
|
|
|
66
|
|
|
|
14
|
|
|
|
|
|
Utah
|
|
|
10
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Vermont
|
|
|
4
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
Virginia
|
|
|
31
|
|
|
|
25
|
|
|
|
7
|
|
|
|
8
|
|
Washington
|
|
|
15
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
West Virginia
|
|
|
5
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
Wisconsin
|
|
|
16
|
|
|
|
7
|
|
|
|
6
|
|
|
|
2
|
|
Wyoming
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stores
|
|
|
874
|
|
|
|
806
|
|
|
|
318
|
|
|
|
135
|
|
|
|
|
|
|
*
|
|
Includes T.J. Maxx, Marshalls or
HomeGoods portion of a superstore.
|
7
Stores
Located In Canada:
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners*
|
|
|
HomeSense*
|
|
|
|
|
Alberta
|
|
|
23
|
|
|
|
8
|
|
British Columbia
|
|
|
26
|
|
|
|
14
|
|
Manitoba
|
|
|
6
|
|
|
|
1
|
|
New Brunswick
|
|
|
3
|
|
|
|
2
|
|
Newfoundland
|
|
|
2
|
|
|
|
1
|
|
Nova Scotia
|
|
|
6
|
|
|
|
2
|
|
Ontario
|
|
|
95
|
|
|
|
35
|
|
Prince Edward Island
|
|
|
1
|
|
|
|
|
|
Quebec
|
|
|
37
|
|
|
|
11
|
|
Saskatchewan
|
|
|
3
|
|
|
|
1
|
|
|
|
Total Stores
|
|
|
202
|
|
|
|
75
|
|
|
|
|
|
|
*
|
|
Includes Winners or HomeSense
portion of a superstore.
|
Stores
Located In Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
T.K. Maxx
|
|
|
HomeSense
|
|
|
|
|
United Kingdom
|
|
|
211
|
|
|
|
7
|
|
Republic of Ireland
|
|
|
15
|
|
|
|
|
|
Germany
|
|
|
9
|
|
|
|
|
|
|
|
Total Stores
|
|
|
235
|
|
|
|
7
|
|
|
|
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, service, reputation and store location. We compete
with local, regional, national and international department,
specialty, off-price, discount, warehouse and outlet stores as
well as other retailers that sell apparel, home fashions and
other merchandise that we sell, whether in stores, through
catalogues or media or over the internet.
Employees
At January 31, 2009, we had approximately
133,000 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.
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 and A.J. Wright, 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. In the second
half of the year, which includes the back-to-school and holiday
seasons, we generally realize higher levels of sales and income.
Sale of
Bobs Stores
In fiscal 2009, we sold Bobs Stores, a value-oriented,
branded apparel chain we acquired in fiscal 2004. The loss on
the sale and historical results of operations have been
accounted for as discontinued operations.
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
filed with or furnished to the Securities and Exchange
Commission, or SEC, and any
8
amendments to those documents, are available free of charge on
our website, www.tjx.com, under SEC Filings, as soon
as reasonably practicable after they are electronically filed
with or furnished to the SEC. They are also available free of
charge from TJX Investor Relations, 770 Cochituate Road,
Framingham, Massachusetts, 01701. The public can read and copy
materials at the SECs Public Reference Room at
100 F Street, NE, Washington, DC 20549,
1-800-SEC-0330.
The SEC maintains a website containing all reports, proxies,
information statements, and all other information regarding
issuers that file electronically
(http://www.sec.gov).
The Annual CEO Certification for the fiscal year ended
January 26, 2008, as required by the New York Stock
Exchange, regarding our compliance with the corporate governance
listing standards of the NYSE, was submitted to the NYSE on
June 23, 2008.
Unless otherwise indicated, all store information in this
Item 1 is as of January 31, 2009, and references to
store square footage are to gross square feet. Fiscal 2007 means
the fiscal year ended January 27, 2007, fiscal 2008 means
the fiscal year ended January 26, 2008, fiscal 2009 means
the fiscal year ended January 31, 2009 and fiscal 2010
means the fiscal year ending January 30, 2010.
Unless otherwise stated or the context otherwise requires,
references in this
Form 10-K
to TJX, we, us and
our refer to The TJX Companies, Inc. and its
subsidiaries.
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.
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.
The
adverse changes in global economic conditions and in financial
and credit markets have adversely affected and could continue to
adversely affect our financial performance.
As widely reported, economies worldwide are in crisis, and
global financial markets have been experiencing extreme
volatility, disruption and credit contraction. The current
volatility and disruption to the capital markets have reached
unprecedented levels and have significantly adversely impacted
global economic conditions and may continue to do so, resulting
in additional significant recessionary pressures and declines in
employment levels, disposable income and actual and perceived
wealth. Adverse economic conditions continue to affect consumer
confidence and discretionary consumer spending and have
adversely affected and may continue to adversely affect our
sales, cash flows and results of operations. Additionally,
adverse conditions in the financial and credit markets could
adversely affect our costs of capital and the sources of
liquidity available to us and have increased and could in the
future increase our pension funding requirements. Finally, the
effects and consequences of the current global economic crisis
may not yet be known, which could potentially have a material
adverse effect on our liquidity and capital resources, or
otherwise negatively affect our business and financial results.
Fluctuations
in foreign currency exchange rates may lead to lower revenues
and earnings.
In addition to our U.S. businesses, we operate stores in
Canada, the U.K., Ireland and Germany. Sales made by our stores
outside the United States are denominated in the currency of the
country in which the store is located, and changes in foreign
exchange rates affect the translation of the sales and earnings
of these businesses into U.S. dollars for financial
reporting purposes. Because of this, movements in exchange rates
have had and are expected to continue to have a significant
impact on our net sales and earnings.
Additionally, we routinely enter into inventory-related hedging
instruments to mitigate the impact of foreign exchange on
merchandise margins of merchandise purchased by our
international segments that is denominated in currencies other
than their local currencies. In accordance with generally
accepted accounting principles, we evaluate the fair value of
these hedging instruments and make mark-to-market adjustments at
the end of an accounting period. These adjustments are of a much
greater magnitude when there is significant volatility in
currency exchange rates and may have a significant impact on our
earnings.
9
In addition, changes in foreign exchange rates can increase the
cost of inventory purchases by one of our businesses that are
denominated in a currency other than the local currency of that
business. When these changes occur suddenly, it can be difficult
for us to adjust retail prices accordingly, and gross margin can
be adversely affected. We expect that such changes may
materially affect the gross margins of our Canada segment.
Although we implement foreign currency hedging and risk
management strategies to reduce our exposure to fluctuations in
earnings and cash flows associated with changes in foreign
exchange rates, we expect that foreign currency fluctuations
could have a material adverse effect on our net sales and
results of operations.
Failure
to execute our opportunistic buying and inventory management
could adversely affect our business.
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 opportune times and prices, in the
quantities we need and into market trends, it places
considerable discretion in our buyers, subjecting us to risks on
the timing, pricing, quantity and nature of inventory flowing to
the stores. In addition, we base our purchases of inventory, in
part, on sales forecasts. If our sales forecasts do not match
customer demand, we may experience higher inventory levels and
decreased profit margins if we have excess or slow-moving
inventory, or we may have insufficient inventory to meet
customer demand, either of which could adversely affect our
financial performance. In addition to acquiring inventory, we
must properly execute our inventory management strategies
through effectively allocating merchandise among our stores,
timely and efficiently distributing inventory to stores,
maintaining an appropriate mix and level of inventory in stores,
appropriately changing the allocation of floor space of stores
among product categories to respond to customer demand and
effectively managing pricing and markdowns. Failure to execute
our opportunistic inventory buying and inventory management well
could adversely affect our performance and our relationship with
our customers.
Failure
to continue to expand our operations successfully could
adversely affect our financial results.
We have steadily expanded the number of concepts and stores we
operate. Our revenue growth is dependent, among other things,
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 acquisition and
development of appropriate real estate including 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, increases in real estate, construction and development
costs and availability and costs of capital could limit our
ability to open new stores in desirable locations in the future
or adversely affect the economics of new stores. When we open
stores in new markets, we may encounter difficulties in
attracting customers due to a lack of customer familiarity with
our brand, our lack of familiarity with local customer
preferences, and seasonal differences in the market. New stores
may not achieve the same sales or profit levels as our existing
stores and may be adversely affected by the sales and
profitability of existing stores in their market areas. Further,
expansion places significant demands on the administrative,
merchandising, store operations, distribution and other
organizations in our businesses to manage rapid growth, and we
may not do so successfully.
Failure
to successfully identify customer trends and preferences to meet
customer demand could negatively impact our
performance.
Because our success depends on our ability to meet customer
demand, we take various steps to keep up with consumer trends
and preferences including contacts with vendors, monitoring
product category and fashion trends and comparison shopping and
actively monitoring fashion trends. Our opportunistic buying
model allows us to buy close to need and in response to consumer
preferences and trends. However, identifying consumer trends and
preferences and successfully meeting customer demand is
challenging, and these steps and our off-price buying may be
insufficient to do so, which could adversely affect our results.
10
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 at
points in the past, and they may 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 program, 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 strategy is to continue to expand within existing markets
and to expand to new markets and geographies. This growth
strategy includes developing new ways to sell more or different
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 chains, 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. Unsuccessful extension of our
model could adversely affect future growth or financial
performance.
Failure
to implement our marketing, advertising and promotional programs
successfully, or if our competitors are more effective with
their programs than we are, may adversely affect our
revenue.
We use marketing, advertising and promotional programs to
attract customers to our stores. We use various media for these
programs, including print, television, database marketing and
direct marketing. Some of our competitors may have substantially
larger expenditures for their programs, which may provide them
with a competitive advantage. There can be no assurance that we
will be able to continue to effectively execute our marketing,
advertising and promotional programs, and any failure to do so
could have a material adverse effect on our revenue and results
of operations.
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 late in fiscal 2007 and in which we believe
that customer data were stolen. As a result we faced and
continue to face litigation, claims and investigations. 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 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 further strengthen the security of our computer
system 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,
11
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 system. Any such further
compromises or breaches could cause interruptions in our
operations, damage to our reputation and customers
willingness to shop in our stores, violation of applicable laws,
regulations, orders and agreements, and subject us to additional
costs and liabilities which could be material.
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 generally
realize higher levels of sales and income in the second half of
the year, which includes the back-to-school and year-end holiday
seasons. Any decrease in sales or margins during this period
could have a disproportionately adverse effect on our financial
condition and results of operations.
We
experience risks associated with our substantial size and
scale.
We operate seven retail concepts in several countries. Some
aspects of the businesses and operations of the concepts are
conducted with relative autonomy. The large size of our
operations, our multiple businesses and the autonomy afforded to
the concepts 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
concepts and countries.
Unseasonable weather in the markets in which our stores operate
or our distribution centers are located could adversely affect
our operating results.
Adverse and unseasonable weather affects customers
willingness to shop and their demand for the merchandise in our
stores. 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 disasters such as
hurricanes, tornadoes, floods and earthquakes could severely
damage or destroy one or more of our stores or distribution
facilities located in the affected areas or result in the
suspension of business in the affected areas or in areas served
by the affected distribution center, 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 with many
other local, regional, national and international retailers that
sell apparel, home fashions and other merchandise that we sell,
whether in stores, through catalogs or media or over the
internet. We compete on the basis of quality, price, value,
merchandise selection and freshness, brand name recognition,
service, reputation and store location. Other competitive
factors that influence the demand for the merchandise we sell
include our advertising, marketing and promotional activities
and the name recognition and reputation of our chains. If we
fail to compete effectively, our sales and results of operations
could be adversely affected.
Failure
to attract and retain quality sales, distribution center and
other associates in appropriate numbers as well as experienced
buying and management personnel could adversely affect our
performance.
Our performance depends 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 governmental labor and employment requirements. In the
event of increasing wage rates, if we fail to increase our wages
competitively, the quality of our workforce could decline,
causing our customer service to suffer, while increasing our
wages could cause our earnings to decrease. 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,
12
we must do significant internal training and development for a
substantial number of our associates. 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. We may consider opportunities to acquire new
businesses or to divest current businesses. Acquisition or
divestiture activities may divert attention of management from
operating the existing businesses. We may do a less-than-optimal
job of evaluating target companies and their risks and benefits,
and integration of acquisitions can be difficult and
time-consuming. Acquisitions may not meet our expectations or
may expose us to unexpected or greater-than-expected
liabilities. Divestiture also involves risks, such as the risks
of exposure on lease obligations, obligations undertaken in the
disposition and potential liabilities that may arise under law
as a result of the disposition or the subsequent failure of the
acquirer. Failure to execute on mergers or divestitures in a
satisfactory manner could adversely affect our future results of
operations and financial condition.
Failure
to operate information systems and implement new technologies
effectively could disrupt our business or reduce our sales or
profitability.
The efficient operation of our business depends on our
information systems, including our ability to operate them
effectively and to successfully select and implement new
technologies, systems, controls and adequate disaster recovery
systems. We must operate and implement these systems and
technologies such that we 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, stock repurchase
program and dividends.
Our business depends upon our operations to generate strong cash
flows and upon the availability of financing sources to support
our capital expansion requirements, general operating
activities, stock repurchase program and dividends and to fund
debt repayment. 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.
General
economic and other factors adversely affect consumer spending,
which 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, in turn, affects sales at retailers, which
could include TJX. These factors could adversely affect our
sales and performance if we do not successfully implement
strategies to mitigate them.
Issues
with merchandise quality or safety could damage our reputation,
sales or financial results.
Various governmental authorities regulate the quality and safety
of the merchandise we sell in our stores. Regulations and
standards in this area, including those related to the recently
enacted Consumer Product Safety Improvement Act of 2008 in the
United States, may change from time to time. 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 cause damage to our reputation, lost sales, uninsured
product liability claims or losses, merchandise recalls and
increased costs, and regulatory, civil or criminal fines or
penalties, which could have a material adverse effect on our
financial results.
13
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.
As a result, we are subject to the various risks of doing
business in foreign markets and importing merchandise from
abroad, such as:
|
|
|
|
|
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
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 retail presence in Canada, the United
Kingdom and Ireland, and have recently expanded into Germany.
Our goal is to continue 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.
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.
Changes
in laws and regulations and outcomes of litigation and
proceedings could negatively affect our business operations and
financial performance.
We are subject to federal, state, provincial or local laws,
rules and regulations in the United States and abroad, any of
which may change from time to time in ways which could
materially adversely affect our operations and our financial
results and condition. We are from time to time involved in
litigation and proceedings, the outcomes of which if determined
adversely to us could materially adversely affect our operations
and our financial results and condition. In addition,
U.S. generally accepted accounting principles in accordance
with which we prepare our financial statements may change from
time to time, and these changes could have material effects on
our reported financial results and condition.
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 for long periods our primary
distribution centers and administrative offices. Accordingly, we
are subject to 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 terminate a particular lease if or when we would
like to do so. If an existing or future store is not profitable,
and we decide to close it, we may be committed to perform
obligations under the applicable lease, including, among other
things, paying rent and operating expenses for the balance of
the lease term, or exercising rights to terminate, and the
performance of any of these obligations may be expensive. When
we assign or sublease leased property, we can remain liable on
the lease obligations if the assignee or sublessee does not
perform. In
14
addition, when leases expire, we may be unable to negotiate
renewals, either on commercially acceptable terms or at all,
which could cause us to close stores.
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.
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
None.
15
ITEM 2. PROPERTIES
We lease virtually all of our over 2,600 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
some with specified payments.
The following is a summary of our primary distribution centers
and primary administrative office locations by segment as of
January 31, 2009. 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
|
|
|
|
|
Marmaxx:
|
|
|
|
|
T.J. Maxx
|
|
Worcester, Massachusetts
|
|
500,000 s.f.owned
|
|
|
Evansville, Indiana
|
|
983,000 s.f.owned
|
|
|
Las Vegas, Nevada
|
|
713,000 s.f. shared with
|
|
|
|
|
Marshallsowned
|
|
|
Charlotte, North Carolina
|
|
600,000 s.f.owned
|
|
|
Pittston Township, Pennsylvania
|
|
1,017,000 s.f.owned
|
Marshalls
|
|
Decatur, Georgia
|
|
780,000 s.f.owned
|
|
|
Woburn, Massachusetts
|
|
473,000 s.f.leased
|
|
|
Bridgewater, Virginia
|
|
562,000 s.f.leased
|
|
|
Philadelphia, Pennsylvania
|
|
1,001,000 s.f.leased
|
HomeGoods
|
|
Brownsburg, Indiana
|
|
805,000 s.f.owned
|
|
|
Bloomfield, Connecticut
|
|
803,000 s.f.owned
|
A.J. Wright
|
|
Fall River, Massachusetts
|
|
501,000 s.f.owned
|
|
|
South Bend, Indiana
|
|
542,000 s.f.owned
|
Canada
|
|
Brampton, Ontario
|
|
507,000 s.f.leased
|
|
|
Mississauga, Ontario
|
|
669,000 s.f.leased
|
Europe
|
|
Milton Keynes, England
|
|
108,000 s.f.leased
|
|
|
Wakefield, England
|
|
176,000 s.f.leased
|
|
|
Stoke, England
|
|
261,000 s.f.leased
|
|
|
Walsall, England
|
|
275,000 s.f.leased
|
OFFICE
SPACE
|
|
|
|
|
Corporate, Marmaxx, HomeGoods, A.J. Wright
|
|
Framingham and Westboro, Massachusetts
|
|
1,254,000 s.f.leased in several buildings
|
Canada
|
|
Mississauga, Ontario
|
|
140,000 s.f.leased
|
Europe
|
|
Watford, England
|
|
61,000 s.f.leased
|
|
|
Dusseldorf, Germany
|
|
14,000 s.f.leased
|
16
ITEM 3. LEGAL
PROCEEDINGS
Putative class actions consolidated in the United States
District Court for the District of Massachusetts, In re TJX
Companies Retail Security Breach Litigation, 07-cv-10162,
were filed against TJX (i) putatively on behalf of
customers in the United States, Puerto Rico and Canada whose
transaction data were allegedly compromised by the Computer
Intrusion (Customer Track)and (ii) putatively
on behalf of financial institutions that received alerts from
MasterCard or Visa related to the Computer Intrusion identifying
payment cards issued by such financial institutions and that
thereafter suffered damages from actual reissuance costs,
monitoring expenses or fraud loss (Financial Institutions
Track). 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.
|
|
|
|
|
Customer Track. On December 30, 2008, the
District Court judgment in the Customer Track approving the
Amended Settlement Agreement, dated as of November 14,
2007, among TJX, its acquiring bank and the named plaintiffs,
individually and on behalf of the settlement class, became final.
|
|
|
|
Financial Institutions Track. On
October 12, 2007, the District Court dismissed the
plaintiffs claims in the Financial Institutions Track,
other than their claims of negligent misrepresentation and
violation of the Massachusetts consumer protection statute
(Chapter 93A) based on negligent misrepresentation, and denied
the plaintiffs motion for class certification of the
non-dismissed claims. Subsequently, the District Court dismissed
the Financial Institutions Track of the action for lack of
subject matter jurisdiction and ordered the case transferred to
state court in Massachusetts. On March 30, 2009, the United
States Court of Appeals for the First Circuit affirmed the
dismissal of the plaintiffs claims for negligence and
breach of contract, affirmed the denial of the plaintiffs
motion for leave to amend their complaint to add a count for
conversion, and vacated the order transferring the case to state
court in Massachusetts. The First Circuit further upheld the
decision not to dismiss plaintiffs claims for negligent
misrepresentation and for violation of Chapter 93A based on
negligent misrepresentation (but in so doing noted that the
plaintiffs had not appealed from the lower courts denial
of class certification of such claims) and reversed the
dismissal of the plaintiffs claim for breach of
Chapter 93A based on an unfairness theory. Finally, the
First Circuit remanded to the District Court for further
proceedings on those claims that the First Circuit ruled were
not subject to dismissal, noting that during such further
proceedings TJX will have an opportunity to move for summary
judgment on all such claims and to challenge class certification
of the plaintiffs claim for breach of Chapter 93A
based on an unfairness theory.
|
Those financial institutions that (for themselves and, in the
case of MasterCard issuers, on behalf of their affiliated and
their sponsored issuers) accepted the settlement offer under the
Settlement Agreement among TJX, Visa U.S.A. Inc. and Visa Inc.
and TJXs acquiring bank dated as of November 29, 2007
or the Settlement Agreement between TJX and MasterCard
International Incorporated dated as of April 2, 2008,
released and indemnified TJX and its acquiring banks with
respect to any claims of such issuers as Visa issuers or
MasterCard issuers, respectively, with respect to any claims by
reason of any matter, occurrence, or event pertaining to the
Computer Intrusion, including but not limited to claims in the
Financial Institution Track and state court case described
below. In addition, the named plaintiffs in the Financial
Institutions Track other than AmeriFirst Bank previously settled
with TJX.
On January 16, 2008, AmeriFirstBank and an additional
plaintiff filed an action in Massachusetts state court,
AmeriFirstBank et al. v. The TJX Companies, Inc. et
al, Massachusetts Superior Court
08-0229,
raising allegations and claims nearly identical to those
asserted in the Financial Institutions Track of the purported
federal class action. The complaint stated plaintiffs
intention to bring class allegations depending on pre-trial
rulings by the state court. The state court stayed the state
action pending adjudication by the federal court of the appeals
in the Financial Institutions Track. On March 30, 2009, the
First Circuit issued the opinion described above on those
appeals.
17
A multi-state group of 41 state Attorneys General is
investigating whether TJX 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.
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 2009.
18
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 2009 and fiscal 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009
|
|
|
Fiscal 2008
|
|
Quarter
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
|
|
First
|
|
$
|
34.93
|
|
|
$
|
29.44
|
|
|
$
|
29.84
|
|
|
$
|
25.74
|
|
Second
|
|
$
|
36.44
|
|
|
$
|
30.32
|
|
|
$
|
30.19
|
|
|
$
|
26.34
|
|
Third
|
|
$
|
37.52
|
|
|
$
|
23.20
|
|
|
$
|
32.46
|
|
|
$
|
26.29
|
|
Fourth
|
|
$
|
28.01
|
|
|
$
|
17.80
|
|
|
$
|
31.95
|
|
|
$
|
25.49
|
|
|
|
The approximate number of common shareholders at
January 31, 2009 was 54,000.
We declared four quarterly dividends of $0.11 per share for
fiscal 2009 and $0.09 per share for fiscal 2008. 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 2009 and the average price paid per
share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number
|
|
|
|
|
|
|
|
|
|
|
|
|
(or Approximate
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar Value) of
|
|
|
|
|
|
|
|
|
|
Total Number of Shares
|
|
|
Shares that May Yet
|
|
|
|
Total
|
|
|
Average Price Paid
|
|
|
Purchased as Part of a
|
|
|
be Purchased Under
|
|
|
|
Number of Shares
|
|
|
Per
|
|
|
Publicly Announced
|
|
|
the Plans or
|
|
Period
|
|
Repurchased(1)
|
|
|
Share(2)
|
|
|
Plan or
Program(3)
|
|
|
Programs
|
|
|
|
|
October 26, 2008 through
November 22, 2008
|
|
|
2,736,300
|
|
|
$
|
23.75
|
|
|
|
2,736,300
|
|
|
$
|
744,893,130
|
|
November 23, 2008 through
December 27, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
744,893,130
|
|
December 28, 2008 through
January 31, 2009
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
744,893,130
|
|
|
|
Total:
|
|
|
2,736,300
|
|
|
|
|
|
|
|
2,736,300
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
All shares were purchased as part
of publicly announced plans.
|
(2)
|
|
Average price paid per share
includes commissions and is rounded to the nearest two decimal
places.
|
(3)
|
|
Our fiscal 2009 repurchases
completed the $1 billion stock repurchase program approved
by the Board of Directors and announced in February 2007 and
included the repurchase of 8.9 million shares at a cost of
$255 million under the $1 billion stock repurchase
program approved by the Board of Directors and announced in
February 2008. As of January 31, 2009, $745 million
remained available for purchase under the current
$1 billion program.
|
19
The following table provides certain information as of
January 31, 2009 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
|
|
|
31,772,628
|
|
|
$
|
24.83
|
|
|
|
12,409,505
|
|
Equity compensation plans not approved by security
holders(1)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
Total
|
|
|
31,772,628
|
|
|
$
|
24.83
|
|
|
|
12,409,505
|
|
|
|
|
|
|
(1)
|
|
All equity compensation plans have
been approved by shareholders.
|
For additional information concerning our equity compensation
plans, see Note H to our consolidated financial statements.
20
ITEM 6. SELECTED
FINANCIAL DATA
SELECTED
FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
January(1)
|
|
Amounts in thousands except per share amounts
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
(53 Weeks)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement and per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
18,999,505
|
|
|
$
|
18,336,726
|
|
|
$
|
17,104,013
|
|
|
$
|
15,667,463
|
|
|
$
|
14,570,189
|
|
Income from continuing operations
|
|
$
|
914,886
|
|
|
$
|
782,432
|
|
|
$
|
787,172
|
|
|
$
|
706,653
|
|
|
$
|
620,838
|
|
Weighted average common shares for diluted earnings per share
calculation
|
|
|
442,255
|
|
|
|
468,046
|
|
|
|
480,045
|
|
|
|
491,500
|
|
|
|
509,661
|
|
Diluted earnings per share from continuing operations
|
|
$
|
2.08
|
|
|
$
|
1.68
|
|
|
$
|
1.65
|
|
|
$
|
1.45
|
|
|
$
|
1.23
|
|
Cash dividends declared per share
|
|
$
|
0.44
|
|
|
$
|
0.36
|
|
|
$
|
0.28
|
|
|
$
|
0.24
|
|
|
$
|
0.18
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
453,527
|
|
|
$
|
732,612
|
|
|
$
|
856,669
|
|
|
$
|
465,649
|
|
|
$
|
307,187
|
|
Working capital
|
|
$
|
858,238
|
|
|
$
|
1,231,301
|
|
|
$
|
1,365,833
|
|
|
$
|
888,276
|
|
|
$
|
701,008
|
|
Total assets
|
|
$
|
6,178,242
|
|
|
$
|
6,599,934
|
|
|
$
|
6,085,700
|
|
|
$
|
5,496,305
|
|
|
$
|
5,075,473
|
|
Capital expenditures
|
|
$
|
582,932
|
|
|
$
|
526,987
|
|
|
$
|
378,011
|
|
|
$
|
495,948
|
|
|
$
|
429,133
|
|
Long-term
obligations(2)
|
|
$
|
383,782
|
|
|
$
|
853,460
|
|
|
$
|
808,027
|
|
|
$
|
807,150
|
|
|
$
|
598,540
|
|
Shareholders equity
|
|
$
|
2,134,557
|
|
|
$
|
2,131,245
|
|
|
$
|
2,290,121
|
|
|
$
|
1,892,654
|
|
|
$
|
1,746,556
|
|
Other financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax return (continuing operations) on average
shareholders equity
|
|
|
42.9
|
%
|
|
|
35.4
|
%
|
|
|
37.6
|
%
|
|
|
38.8
|
%
|
|
|
36.8
|
%
|
Total debt as a percentage of total
capitalization(3)
|
|
|
26.7
|
%
|
|
|
28.6
|
%
|
|
|
26.1
|
%
|
|
|
29.9
|
%
|
|
|
28.6
|
%
|
Stores in operation at year-end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the United States:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.J. Maxx
|
|
|
874
|
|
|
|
847
|
|
|
|
821
|
|
|
|
799
|
|
|
|
771
|
|
Marshalls
|
|
|
806
|
|
|
|
776
|
|
|
|
748
|
|
|
|
715
|
|
|
|
697
|
|
HomeGoods
|
|
|
318
|
|
|
|
289
|
|
|
|
270
|
|
|
|
251
|
|
|
|
216
|
|
A.J.
Wright(4)
|
|
|
135
|
|
|
|
129
|
|
|
|
129
|
|
|
|
152
|
|
|
|
130
|
|
In Canada:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners
|
|
|
202
|
|
|
|
191
|
|
|
|
184
|
|
|
|
174
|
|
|
|
168
|
|
HomeSense
|
|
|
75
|
|
|
|
71
|
|
|
|
68
|
|
|
|
58
|
|
|
|
40
|
|
In Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.K. Maxx
|
|
|
235
|
|
|
|
226
|
|
|
|
210
|
|
|
|
197
|
|
|
|
170
|
|
HomeSense
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,652
|
|
|
|
2,529
|
|
|
|
2,430
|
|
|
|
2,346
|
|
|
|
2,192
|
|
|
|
Selling Square Footage at year-end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the United States:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.J. Maxx
|
|
|
20,543
|
|
|
|
20,025
|
|
|
|
19,390
|
|
|
|
18,781
|
|
|
|
18,033
|
|
Marshalls
|
|
|
20,388
|
|
|
|
19,759
|
|
|
|
19,078
|
|
|
|
18,206
|
|
|
|
17,511
|
|
HomeGoods
|
|
|
6,248
|
|
|
|
5,569
|
|
|
|
5,181
|
|
|
|
4,859
|
|
|
|
4,159
|
|
A.J.
Wright(4)
|
|
|
2,680
|
|
|
|
2,576
|
|
|
|
2,577
|
|
|
|
3,054
|
|
|
|
2,606
|
|
In Canada:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners
|
|
|
4,647
|
|
|
|
4,389
|
|
|
|
4,214
|
|
|
|
4,012
|
|
|
|
3,811
|
|
HomeSense
|
|
|
1,437
|
|
|
|
1,358
|
|
|
|
1,280
|
|
|
|
1,100
|
|
|
|
747
|
|
In Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.K. Maxx
|
|
|
5,404
|
|
|
|
5,096
|
|
|
|
4,636
|
|
|
|
4,216
|
|
|
|
3,491
|
|
HomeSense
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
61,454
|
|
|
|
58,772
|
|
|
|
56,356
|
|
|
|
54,228
|
|
|
|
50,358
|
|
|
|
|
|
|
(1)
|
|
Fiscal 2008 and prior fiscal years
have been adjusted to reclassify the operating results of
Bobs Stores to discontinued operations. 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 has been adjusted to reflect
the effect of adopting Statement of Financial Accounting
Standards No. 123 (R) in fiscal 2006.
|
(2)
|
|
Includes long-term debt, exclusive
of current installments and capital lease obligation, 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.
|
21
ITEM 7. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The discussion that follows relates to our 53-week fiscal year
ended January 31, 2009 (fiscal 2009), and the fiscal years
ended January 26, 2008 (fiscal 2008) and
January 27, 2007 (fiscal 2007), each of which included
52 weeks.
Our results reflect two discontinued operations: Bobs
Stores, sold in fiscal 2009 and 34 A.J. Wright stores closed in
fiscal 2007 as part of a repositioning of the chain. See
Note C to the consolidated financial statements. All
references in the following discussion are to continuing
operations unless otherwise indicated.
Our results reflect the costs of the unauthorized intrusion or
intrusions (collectively, the Computer Intrusion)
into portions of our computer system, which was discovered in
late fiscal 2007 and in which we believe customer data were
stolen. See Provision for Computer Intrusion related
costs below.
RESULTS
OF OPERATIONS
Our fiscal 2009 performance was adversely affected in the second
half of the year by two macroeconomic factors: the worldwide
recession which adversely affected consumer spending and retail
sales at TJX and generally and the significant strengthening of
the U.S. dollar against the Canadian dollar and the British
pound, which adversely affected the translation of the operating
results of our Canadian and European businesses. With the
flexibility of our off-price business model, in fiscal 2009 we
increased our inventory turns and maintained the value
proposition of our merchandise by buying closer to need and
operating with leaner-than-usual inventories. We also continued
a focus on tight expense control during fiscal 2009. Despite the
challenging environment, customer traffic in fiscal 2009 was up
across virtually all of our divisions, and merchandise margins
remained strong. Highlights of our financial performance for
fiscal 2009 include the following:
|
|
|
|
|
Net sales for fiscal 2009 were $19.0 billion, a 4% increase
over fiscal 2008. The 53rd week in fiscal 2009 increased
net sales by approximately 1%, which was more than offset by a
2% decline in net sales due to the impact of foreign currency
exchange rates. We continued to grow our business, with both
stores in operation and selling square footage up 5% at the end
of fiscal 2009 compared to last fiscal year end.
|
|
|
|
Same store sales on a 52-week basis for fiscal 2009 increased 1%
over the prior year.
|
|
|
|
Our cost of sales ratio for fiscal 2009 increased
0.3 percentage points, as an increase in merchandise
margins and the benefit of the
53rd week
were more than offset by buying and occupancy expense deleverage
on a 1% same store sales increase. Selling, general and
administrative expenses as a percentage of net sales for fiscal
2009 increased by 0.1 percentage points compared to the
prior year, primarily due to deleverage on the 1% same store
sales increase.
|
|
|
|
Our fiscal 2009 pre-tax margin (the ratio of pre-tax income to
net sales) was 7.6% compared to 6.9% for fiscal 2008. The
comparison of pre-tax margins for fiscal 2009 to fiscal 2008 was
affected by the Provision for Computer Intrusion related costs
in each year. Fiscal 2009 included a $31 million credit
(pre-tax) to the provision, which increased pre-tax margin by
0.2 percentage points, while fiscal 2008 included a pre-tax
charge of $197 million, which reduced the fiscal 2008
pre-tax margin by 1.1 percentage points.
|
|
|
|
Income from continuing operations was $914.9 million, or
$2.08 per diluted share, for fiscal 2009 compared to
$782.4 million, or $1.68 per diluted share, last year. The
fiscal 2009 credit to the Provision for Computer Intrusion
related costs increased fiscal 2009 income from continuing
operations by $18 million, or $0.04 per diluted share,
while the fiscal 2008 charge for the Provision for Computer
Intrusion related costs reduced fiscal 2008 income from
continuing operations by $119 million, or $0.25 per diluted
share.
|
|
|
|
During fiscal 2009, we repurchased 24.0 million shares of
our common stock at a cost of $741 million. Our diluted
earnings per share reflect the benefit of our stock repurchase
program.
|
|
|
|
Consolidated average per store inventories of our continuing
operations, including inventory on hand at our distribution
centers, were down 6% at the end of fiscal 2009 as compared to
an increase of 2% at the prior year
|
22
|
|
|
|
|
end. On a comparable basis, adjusting for currency and a
calendar shift due to the 53rd week in fiscal 2009, average
per store inventories, including inventory on hand at our
distribution centers, were down 4% in fiscal 2009 as compared to
fiscal 2008 and were essentially flat in fiscal 2008 as compared
to fiscal 2007.
|
We have implemented steps to position ourselves for the fiscal
year ending January 30, 2010 (fiscal 2010) in light of
the ongoing worldwide recession including:
|
|
|
|
|
We have planned our consolidated same store sales
conservatively, setting our inventory and expense plans around
negative low single digit comparable store sales.
|
|
|
|
We plan to continue to operate with historically lean
inventories and to buy closer to need than in the past, designed
to increase inventory turns and drive traffic to our stores.
|
|
|
|
We are taking measures designed to reduce expenses in fiscal
2010 by up to $150 million including further savings in
non-merchandise procurement, implementing processes to more
efficiently manage payroll in our store and distribution
centers, reducing marketing expenditures while increasing
penetration, eliminating open positions, eliminating merit pay
increases across the majority of the organization, restructuring
certain areas to improve productivity and efficiency and
offering a voluntary retirement program for certain employees.
|
The following is a discussion of our consolidated operating
results, followed by a discussion of our segment operating
results.
Net sales: Consolidated net sales for fiscal 2009
totaled $19.0 billion, a 4% increase over net sales of
$18.3 billion in fiscal 2008. The increase reflected a 4%
increase from new stores, a 1% increase from the 53rd week
and a 1% increase in same store sales, offset by a 2% decline
from the negative impact of foreign currency exchange rates.
Consolidated net sales for fiscal 2008 increased 7% over net
sales of $17.1 billion for fiscal 2007. The increase
reflected increases of 3% from new stores, 2% from same store
sales and a 2% favorable impact due to foreign currency exchange
rates.
New stores have been a significant source of sales growth. Both
our consolidated store count and our selling square footage
increased by 5% in fiscal 2009 and by 4% in fiscal 2008 over the
respective prior year periods. As a result of economic
conditions, we have planned store openings more conservatively
and expect to add 64 stores (net of store closings) in fiscal
2010, a 2% increase in our consolidated store base and an
increase of 2% in our selling square footage.
The 1% same store sales increase in fiscal 2009 reflected a
strong first half performance, especially at our international
segments, partially offset by same store sales decreases in the
second half of the year largely due to the economic recession.
Customer traffic increased at virtually all of our businesses in
fiscal 2009, even in the third and fourth quarters, which was
partially offset by a reduction in the value of the average
transaction. As for merchandise categories, shoes, accessories
and dresses were the strongest performers, while home fashions
were adversely affected by the weak housing market and economic
conditions. Geographically, same store sales in Canada and the
United Kingdom were above the consolidated average for fiscal
2009, while in the U.S., same store sales in the West Coast and
Florida trailed the consolidated average.
The 2% increase in same store sales for fiscal 2008 was driven
by a strong performance at our international segments. In the
U.S., sales of dresses, footwear and accessories were strong,
partially offset by softer sales in the balance of the
womens apparel category. At Marmaxx, our largest business,
home categories were also weak. Same store sales increases
benefited from the continued expansion of footwear departments
in Marshalls. During fiscal 2008, we opened expanded footwear
departments in approximately 240 additional Marshalls stores.
Same store sales for fiscal 2008 at our international segments
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 in fiscal 2008, more than
offset by an increase in the value of the average transaction.
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 sales 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
23
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. Same store
sales of our foreign divisions are calculated on a constant
currency basis, which removes the effect of changes in currency
exchange rates, and we believe it is a more accurate 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
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
Cost of sales, including buying and occupancy costs
|
|
|
75.8
|
|
|
|
75.5
|
|
|
|
75.8
|
|
Selling, general and administrative expenses
|
|
|
16.7
|
|
|
|
16.6
|
|
|
|
16.7
|
|
Provision for Computer Intrusion related costs
|
|
|
(0.2
|
)
|
|
|
1.1
|
|
|
|
|
|
Interest (income) expense, net
|
|
|
0.1
|
|
|
|
|
|
|
|
0.1
|
|
|
|
Income from
continuing operations before provision for income
taxes*
|
|
|
7.6
|
%
|
|
|
6.9
|
%
|
|
|
7.4
|
%
|
|
|
|
|
|
*
|
|
Due to rounding, the individual
items may not foot to Income from continuing operations before
provision for income taxes.
|
Impact of foreign currency exchange rates: Our
operating results can be adversely affected by foreign currency
exchange rates as a result of significant changes in the value
of the U.S. dollar in relation to other currencies. Two of
the more significant ways in which foreign currency impacts us
are as follows:
Translation of foreign operating results into
U.S. dollars: In our financial statements, we translate
the operations of our stores in Canada and Europe from local
currencies into U.S. dollars using currency rates in effect
at different points in time. Significant changes in foreign
exchange rates from comparable prior periods can result in
meaningful variations in consolidated net sales, income from
continuing operations and earnings per share growth as well as
the net sales and operating results of our Canadian and European
segments. Currency translation generally does not affect
operating margins, as sales and expenses of the foreign
operations are translated at essentially the same rates each
period.
Inventory hedges: Additionally, we routinely enter into
inventory-related hedging instruments to mitigate the impact of
foreign currency exchange rates on merchandise margins when our
international divisions purchase goods in currencies that are
not their local currencies, primarily U.S. dollar
purchases. As we have not elected hedge accounting
as defined by SFAS No. 133 (Accounting for Derivative
Instruments and Hedging Activities), under generally
accepted accounting principles we record a mark-to-market
adjustment on the hedging instruments in our results of
operations at the end of each reporting period, prior to the
currency gain or loss being recorded on the items being hedged.
In subsequent periods, the income statement impact of the hedges
are effectively offset when the related inventory is sold. While
these effects occur every reporting period, they are of much
greater magnitude when there are sudden and significant changes
in currency exchange rates, as there were in the third and
fourth quarters of fiscal 2009. Historically, the impact on a
full-year basis has not been material. Since the mark-to-market
adjustment on these hedges has no impact on net sales, it
affects both our operating margins and earnings growth.
Cost of sales, including buying and occupancy
costs: Cost of sales, including buying and occupancy
costs, as a percentage of net sales was 75.8% in fiscal 2009,
75.5% in fiscal 2008 and 75.8% in fiscal 2007. This ratio for
fiscal 2009, as compared to fiscal 2008, increased
0.3 percentage points primarily due to deleverage of buying
and occupancy costs on the 1% same store sales increase. This
deleverage more than offset a benefit to this expense ratio due
to the 53rd week (estimated at approximately
0.2 percentage points) as well as an improvement in our
consolidated merchandise margin of 0.2 percentage points.
Throughout fiscal 2009, we solidly executed our off-price
fundamentals, buying close to need, operating with leaner
inventories and taking advantage of opportunities in the market
place.
Cost of sales, including buying and occupancy costs, as a
percentage of net sales for fiscal 2008, as compared to fiscal
2007, reflected an improvement in our consolidated merchandise
margin (0.4 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
24
partially 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 in the
prior year.
Selling, general and administrative expenses:
Selling, general and administrative expenses as a percentage of
net sales were 16.7% in fiscal 2009, 16.6% in fiscal 2008 and
16.7% in fiscal 2007. The increase in fiscal 2009 compared to
fiscal 2008 reflects deleverage from the low same store sales
increase, primarily in store payroll and field costs, partially
offset by savings from cost containment initiatives. Advertising
costs as a percentage of net sales in fiscal 2009 were
essentially flat to the prior year.
The fiscal 2008 expense ratio was slightly down compared to the
prior year with a planned increase in advertising costs
(0.1 percentage point) being offset by cost containment
initiatives.
Provision for Computer Intrusion related costs:
From the time of the discovery of the Computer Intrusion late in
fiscal 2007, through the end of fiscal 2009, we cumulatively
expensed $171.5 million (pre-tax) with respect to the
Computer Intrusion, including a net charge of
$159.2 million in fiscal 2008 to reserve for probable
losses, costs of $42.8 million incurred prior to
establishment of the reserve ($5 million of which was
recorded in fiscal 2007) and a $30.5 million reduction
in the reserve in fiscal 2009 as a result of negotiations,
settlements, insurance proceeds and adjustments in our estimated
losses. Costs relating to the Computer Intrusion incurred and
paid after establishment of the reserve were charged against the
reserve, which is included in accrued expenses and other
liabilities on our balance sheet.
As of January 31, 2009, our reserve balance was
$42.2 million, which reflects our current estimation of
remaining probable losses (in accordance with
U.S. generally accepted accounting principles) with respect
to the Computer Intrusion, including litigation, proceedings,
investigations and other claims, as well as legal, monitoring,
reporting and other costs. As an estimate, our reserve is
subject to uncertainty, 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 receipt of insurance
proceeds and for other changes.
Interest (income) expense, net: Interest (income)
expense, net amounted to expense of $14.3 million for
fiscal 2009, income of $1.6 million for fiscal 2008 and
expense of $15.6 million for fiscal 2007. The changes from
year to year relate primarily to interest income which totaled
$22.2 million in fiscal 2009, $40.7 million in fiscal
2008 and $23.6 million in fiscal 2007. In fiscal 2008, we
generated more interest income 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 36.9% in fiscal 2009, 37.9% in fiscal 2008 and 37.7% in
fiscal 2007. The decrease in the tax rate for fiscal 2009 as
compared to fiscal 2008 reflects the favorable impact of a
$19 million reduction in the FIN 48 tax liability,
which reduced the annual effective income tax rate for fiscal
2009 by 1.3 percentage points. This improvement in the
annual income tax rate in fiscal 2009 was offset by the absence
of a fiscal 2008 favorable tax benefit of 0.4 percentage
points relating to the tax treatment of our Puerto Rico
subsidiary. See Note J to the consolidated financial
statements.
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 relating to the tax treatment of our Puerto Rico
subsidiary.
Income from continuing operations: Income from
continuing operations was $914.9 million in fiscal 2009,
$782.4 million in fiscal 2008 and $787.2 million in
fiscal 2007. Income from continuing operations per share was
$2.08 in fiscal 2009, $1.68 in fiscal 2008 and $1.65 in fiscal
2007. Unlike many companies in the retail industry, we did not
have a
53rd week
in fiscal 2007, but did have a
53rd week
in fiscal 2009. We estimate the
53rd week
in fiscal 2009 favorably affected earnings per share by $0.09
per share.
25
The reduction in the Provision for Computer Intrusion related
costs in fiscal 2009 benefited income from continuing operations
by approximately $18 million, after-tax, or $0.04 per
share. The charge relating to the Computer Intrusion related
costs in fiscal 2008, adversely affected income from continuing
operations by approximately $119 million, after tax, or
$0.25 per share.
Changes in foreign currency exchange rates also affected the
comparability of our results. Changes in currency rates reduced
earnings per share by $0.05 per share in fiscal 2009 as compared
to an increase of $0.01 per share in fiscal 2008. Changes in
foreign currency exchange rates increased fiscal 2008 earnings
per share by $0.05 per share in comparison to fiscal 2007.
In addition, our share repurchase program affects the
comparability of earnings per share. We repurchased
24.0 million shares of our stock at a cost of
$741 million in fiscal 2009; we repurchased
33.3 million shares at a cost of $950 million in
fiscal 2008; and we repurchased 22.0 million shares at a
cost of $557 million in fiscal 2007.
Discontinued operations and net income: All
historical income statements have been adjusted to reflect the
sale of Bobs Stores in fiscal 2009 and the closure of 34
A.J. Wright stores in fiscal 2007 as discontinued operations.
Including the impact of discontinued operations, net income was
$880.6 million, or $2.00 per share, for fiscal 2009,
$771.8 million, or $1.66 per share, for fiscal 2008 and
$738.0 million, or $1.55 per share, for fiscal 2007.
Segment information: The following is a discussion
of the operating results of our business segments. In the
United States, our T.J. Maxx and Marshalls stores are
aggregated as the Marmaxx segment, and HomeGoods and
A.J. Wright each is reported as a separate segment.
TJXs stores operated in Canada (Winners and HomeSense) are
reported as the Canadian segment, and TJXs stores operated
in Europe (T.K. Maxx and HomeSense) are reported as the European
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 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:
Marmaxx:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
Dollars in millions
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Net sales
|
|
$
|
12,362.1
|
|
|
$
|
11,966.7
|
|
|
$
|
11,531.8
|
|
Segment profit
|
|
$
|
1,155.8
|
|
|
$
|
1,158.2
|
|
|
$
|
1,079.3
|
|
Segment profit as a percentage of net sales
|
|
|
9.3
|
%
|
|
|
9.7
|
%
|
|
|
9.4
|
%
|
Percent increase in same store sales
|
|
|
0
|
%
|
|
|
1
|
%
|
|
|
2
|
%
|
Stores in operation at end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
T.J. Maxx
|
|
|
874
|
|
|
|
847
|
|
|
|
821
|
|
Marshalls
|
|
|
806
|
|
|
|
776
|
|
|
|
748
|
|
|
|
Total Marmaxx
|
|
|
1,680
|
|
|
|
1,623
|
|
|
|
1,569
|
|
|
|
Selling square footage at end of period (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
T.J. Maxx
|
|
|
20,543
|
|
|
|
20,025
|
|
|
|
19,390
|
|
Marshalls
|
|
|
20,388
|
|
|
|
19,759
|
|
|
|
19,078
|
|
|
|
Total Marmaxx
|
|
|
40,931
|
|
|
|
39,784
|
|
|
|
38,468
|
|
|
|
Net sales at Marmaxx increased 3% in fiscal 2009 as compared to
fiscal 2008. Same store sales for Marmaxx were flat in fiscal
2009 compared to a 1% same store sales increase in fiscal 2008.
Sales at Marmaxx for fiscal 2009 reflected increased customer
traffic offset by a decrease in the value of the average
transaction. Categories that posted same store sales increases
included footwear and accessories, childrens clothing and
dresses. During fiscal 2009, we added expanded footwear
departments to approximately 220 Marshalls stores, which nearly
completes the expansion of footwear departments at Marshalls.
Home categories at Marmaxx reported same
26
store sales decreases in fiscal 2009. Geographically in fiscal
2009, same store sales in the Northeast, Midwest and
Mid-Atlantic regions were above the chain average, while same
store sales in the West Coast, Florida and the Southeast were
below the chain average.
Segment profit as a percentage of net sales (segment
margin or segment profit margin) decreased to
9.3% in fiscal 2009 from 9.7% in fiscal 2008. Segment margin was
negatively impacted by an increase in occupancy costs as a
percentage of net sales (0.5 percentage points) due to
deleverage on the flat same store sales. This decrease was
partially offset by an increase in merchandise margin
(0.1 percentage point) due to increased markon. As of
January 31, 2009, average per store inventories, including
inventory on hand at distribution centers, were down 4% compared
to a 2% decrease at the prior year end. The decreases in average
inventories were primarily due to continued focus on maintaining
a liquid inventory position.
Segment margin for fiscal 2008 increased to 9.7% compared to
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 and a planned
increase in advertising expense.
We expect to open approximately 17 new stores (net of closings)
in fiscal 2010, increasing the Marmaxx store base by 1% and
increasing its selling square footage by 1%.
Canada:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
U.S. Dollars in millions
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Net sales
|
|
$
|
2,139.4
|
|
|
$
|
2,040.8
|
|
|
$
|
1,740.8
|
|
Segment profit
|
|
$
|
236.1
|
|
|
$
|
235.1
|
|
|
$
|
181.9
|
|
Segment profit as a percentage of net sales
|
|
|
11.0
|
%
|
|
|
11.5
|
%
|
|
|
10.4
|
%
|
Percent increase in same store sales
|
|
|
3
|
%
|
|
|
5
|
%
|
|
|
5
|
%
|
Stores in operation at end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners
|
|
|
202
|
|
|
|
191
|
|
|
|
184
|
|
HomeSense
|
|
|
75
|
|
|
|
71
|
|
|
|
68
|
|
|
|
Total
|
|
|
277
|
|
|
|
262
|
|
|
|
252
|
|
|
|
Selling square footage at end of period (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners
|
|
|
4,647
|
|
|
|
4,389
|
|
|
|
4,214
|
|
HomeSense
|
|
|
1,437
|
|
|
|
1,358
|
|
|
|
1,280
|
|
|
|
Total
|
|
|
6,084
|
|
|
|
5,747
|
|
|
|
5,494
|
|
|
|
Net sales for the Canadian segment for fiscal 2009 increased by
5% over fiscal 2008. Currency exchange translation reduced
fiscal 2009 sales by approximately $68 million. Same store
sales increased 3% in fiscal 2009 compared to a strong increase
of 5% in fiscal 2008. Same store sales of outerwear, footwear,
jewelry and accessories were above the segment average, while
HomeSense same store sales were below the segment average for
fiscal 2009.
Segment profit for fiscal 2009 increased slightly to
$236 million compared to $235 million in fiscal 2008,
while segment margin decreased 0.5 percentage points to
11.0%. Currency exchange translation reduced segment profit by
$11 million for fiscal 2009, as compared to fiscal 2008.
However, because currency translation impacts both sales and
expenses, it has little or no impact on segment margin. In
addition, the mark-to-market adjustment of inventory related
hedges reduced segment profit in fiscal 2009 by $1 million,
in contrast to a $5 million benefit of the mark-to-market
adjustment of inventory related hedges in fiscal 2008 which
adversely impacted segment margin comparisons by
0.3 percentage points. Segment margin for fiscal 2009,
reflected increases in distribution center costs and store
payroll costs as a percentage of net sales, partially offset by
an increase in merchandise margins. In the third quarter of
fiscal 2009, Winners opened 2 StyleSense stores, a new concept
that offers family footwear and accessories. We anticipate that
merchandise margins in the Canadian segment will also decline in
fiscal 2010 as a result of foreign
27
currency exchange, due to the high volume of merchandise
purchases by the Canadian segment denominated in
U.S. dollars.
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, as compared to fiscal 2007.
Most of this increase was due to currency translation, and as a
result, it had no impact on segment margin. The increase in
segment profit in fiscal 2008 also included the favorable impact
of a mark-to-market adjustment of inventory hedge contracts,
which increased segment margin by 0.3 percentage points.
The fiscal 2008 segment margin also reflected an increase in
merchandise margin, primarily due to increased markon as well as
the favorable impact of cost containment initiatives and strong
same store sales results on expense ratios.
We expect to add a net of 13 stores in Canada in fiscal 2010,
which is an increase of 5% and will increase selling square
footage by 5%.
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
U.S. Dollars in millions
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Net sales
|
|
$
|
2,242.1
|
|
|
$
|
2,216.2
|
|
|
$
|
1,864.5
|
|
Segment profit
|
|
$
|
137.6
|
|
|
$
|
127.2
|
|
|
$
|
109.3
|
|
Segment profit as a percentage of net sales
|
|
|
6.1
|
%
|
|
|
5.7
|
%
|
|
|
5.9
|
%
|
Percent increase in same store sales
|
|
|
4
|
%
|
|
|
6
|
%
|
|
|
9
|
%
|
Stores in operation at end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
T.K. Maxx
|
|
|
235
|
|
|
|
226
|
|
|
|
210
|
|
HomeSense
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
242
|
|
|
|
226
|
|
|
|
210
|
|
|
|
Selling square footage at end of period (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
T.K. Maxx
|
|
|
5,404
|
|
|
|
5,096
|
|
|
|
4,636
|
|
HomeSense
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,511
|
|
|
|
5,096
|
|
|
|
4,636
|
|
|
|
European net sales for fiscal 2009 increased 1% to
$2.2 billion compared to fiscal 2008. Currency exchange
rate translation negatively affected fiscal 2009 sales by
approximately $282 million. Same store sales increased 4%
for fiscal 2009 compared to a 6% increase last year. Same store
sales for footwear and accessories and most other womens
apparel categories performed above the chain average, while home
fashions were below the chain average.
Segment profit for fiscal 2009 increased 8% to
$137.6 million, and segment margin increased
0.4 percentage points to 6.1% compared to last year.
Currency exchange rate translation negatively affected segment
profit by approximately $26 million in fiscal 2009. The
increase in segment margin reflects improved merchandise
margins, partially offset by an increase in occupancy costs as a
percentage of sales and the cost of operations in Germany. We
are encouraged by the performance of our German stores but as
they are new stores, they reduce the segment margin generated by
the more established stores in the U.K. and Ireland. During
fiscal 2009, T.K. Maxx added 4 more stores in Germany, following
the opening of its first 5 stores in Germany in fiscal 2008.
T.K. Maxx also introduced the HomeSense concept into the U.K.
with 7 new stores.
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 rate translation
favorably impacted segment profit by approximately
$10 million in fiscal 2008, but did not impact the segment
profit margin. The opening of 5 stores in Germany reduced
segment profit for fiscal 2008 by $11 million and reduced
the fiscal 2008 segment margin by 0.6 percentage points,
offsetting the slightly improved merchandise margin in the
remainder of the segment, as well as the favorable impact of
same store sales growth on expense ratios and the segments
cost containment initiatives.
28
In fiscal 2010, we plan to open a net of 17 T.K. Maxx stores,
including 10 in Germany and 3 HomeSense stores in the U.K. and
to expand selling square footage by 8%.
HomeGoods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
Dollars in millions
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Net sales
|
|
$
|
1,578.3
|
|
|
$
|
1,480.4
|
|
|
$
|
1,365.1
|
|
Segment profit
|
|
$
|
42.4
|
|
|
$
|
76.2
|
|
|
$
|
60.9
|
|
Segment profit as a percentage of net sales
|
|
|
2.7
|
%
|
|
|
5.1
|
%
|
|
|
4.5
|
%
|
Percent (decrease) increase in same store sales
|
|
|
(3
|
)%
|
|
|
3
|
%
|
|
|
4
|
%
|
Stores in operation at end of period
|
|
|
318
|
|
|
|
289
|
|
|
|
270
|
|
Selling square footage at end of period (in thousands)
|
|
|
6,248
|
|
|
|
5,569
|
|
|
|
5,181
|
|
|
|
HomeGoods net sales for fiscal 2009 increased 7% compared
to fiscal 2008, and same store sales decreased 3% in fiscal
2009. Sales of home fashions have been particularly impacted by
the weak housing market and recession. Segment margin of 2.7%
was down from 5.1% for fiscal 2008. Merchandise margins declined
in fiscal 2009, primarily due to increased markdowns. In
addition, HomeGoods experienced deleverage on operating costs as
a result of the decline in same store sales. We are seeking to
address the difficult home environment by operating with very
lean inventories and focusing on merchandise categories that we
believe will resonate with consumers in these difficult times.
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.
In fiscal 2010, we plan to add a net of 4 HomeGoods stores and
increase selling square footage by 1%.
A.J.
Wright:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
Dollars in millions
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Net sales
|
|
$
|
677.6
|
|
|
$
|
632.7
|
|
|
$
|
601.8
|
|
Segment profit (loss)
|
|
$
|
2.9
|
|
|
$
|
(1.8
|
)
|
|
$
|
(10.3
|
)
|
Segment profit (loss) as a percentage of net sales
|
|
|
0.4
|
%
|
|
|
(0.3
|
)%
|
|
|
(1.7
|
)%
|
Percent increase in same store sales
|
|
|
4
|
%
|
|
|
2
|
%
|
|
|
3
|
%
|
Stores in operation at end of period
|
|
|
135
|
|
|
|
129
|
|
|
|
129
|
|
Selling square footage at end of period (in thousands)
|
|
|
2,680
|
|
|
|
2,576
|
|
|
|
2,577
|
|
|
|
A.J. Wrights net sales increased 7% for fiscal 2009
compared to fiscal 2008, and segment profit increased to
$2.9 million compared to a loss of $1.8 million in
fiscal 2008. Same store sales increased 4% for fiscal 2009 and
A.J. Wright recorded its first segment profit in fiscal
2009 compared to losses in the prior years. We believe A.J.
Wright has improved its results through better merchandising and
advertising effectiveness, as a result of our improved
understanding of A.J. Wrights customer tastes and spending
habits.
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.
As a result of A.J. Wrights improved results, we plan to
increase the rate of store openings for this chain for fiscal
2010, currently planning to add a net of 13 A.J. Wright stores
and increase selling square footage by 10%.
29
General
Corporate Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
Dollars in millions
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
General corporate expense
|
|
$
|
140.0
|
|
|
$
|
139.4
|
|
|
$
|
136.4
|
|
|
|
General corporate expense for segment reporting purposes is
those costs not specifically related to the operations of our
business segments and is included in selling, general and
administrative expenses.
General corporate expense in fiscal 2009 versus fiscal 2008 was
virtually flat.
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.
LIQUIDITY
AND CAPITAL RESOURCES
Operating
Activities:
Net cash provided by operating activities was
$1,155 million in fiscal 2009, $1,375 million in
fiscal 2008, and $1,213 million in fiscal 2007. The cash
generated from operating activities in each of these fiscal
years was largely due to operating earnings.
Operating cash flows for fiscal 2009 decreased by
$220 million as compared to the prior year. Net income,
after adjusting for the non-cash impact of depreciation and the
sale of Bobs Stores assets of $31 million in fiscal
2009 (including the benefit of the 53rd week), provided
cash of $1,314 million, an increase of $173 million
from the adjusted $1,141 million in fiscal 2008. The change
in deferred income taxes favorably impacted cash flows in fiscal
2009 by $132 million, while last years deferred
income taxes reduced cash flows by $102 million. Deferred
taxes in fiscal 2008 reflected the non-cash tax benefit of
$47 million relating to the establishment of the Computer
Intrusion reserve. The favorable impact on deferred income taxes
in fiscal 2009 reflected the tax treatment of payments against
the Computer Intrusion reserve and favorable impact of tax
depreciation. The change in merchandise inventory, net of the
related change in accounts payable offset the favorable changes
in cash flows in fiscal 2009, as it resulted in a use of cash of
$210 million in fiscal 2009, compared to a source of cash
of $5 million last year. The change in merchandise
inventories and accounts payable in fiscal 2009 was primarily
driven by a timing difference in the payment of our accounts
payable due to change in our buying pattern. The change in
accrued expenses and other liabilities resulted in a use of cash
of $35 million in fiscal 2009 versus a source of cash of
$203 million in fiscal 2008. Last year, the increase in
accrued expenses and other liabilities reflected
$117 million for the pre-tax reserve established for the
Computer Intrusion, which favorably impacted cash flows, while
fiscal 2009s cash flows were reduced by $75 million
for payments against and adjustments to the reserve. Changes in
current income taxes payable/recoverable reduced cash in fiscal
2009 by $49 million compared to an increase of
$56 million in fiscal 2008 and the change in prepaid
expenses reduced fiscal 2009 operating cash flows by an
additional $65 million, primarily due to the timing of
February rental payments.
Operating cash flows for fiscal 2008 increased by
$162 million over the prior year. Net income, after
adjusting for the non-cash impact of depreciation, for fiscal
2008 increased $50 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
$5 million compared to a use of cash of $151 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.
Discontinued operations reserve: We have a reserve
for future obligations of discontinued operations that relates
primarily to real estate leases associated with the closure of
34 A.J. Wright stores as well as leases of former TJX
businesses. In fiscal 2009, we reserved an additional
$3 million for 2 Bobs Stores locations, which the
buyer of Bobs
30
Stores has the right to put back to us and which we consider
probable. This was offset by a comparable amount due to
favorable settlements on several A.J. Wright locations. The
balance in the reserve and the activity for the last three
fiscal years is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Balance at beginning of year
|
|
$
|
46,076
|
|
|
$
|
57,677
|
|
|
$
|
14,981
|
|
Additions to the reserve charged to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
A.J. Wright store closings
|
|
|
(2,908
|
)
|
|
|
|
|
|
|
61,968
|
|
Other lease related obligations
|
|
|
2,908
|
|
|
|
|
|
|
|
1,555
|
|
Interest accretion
|
|
|
1,820
|
|
|
|
1,820
|
|
|
|
400
|
|
Charges against the reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease related obligations
|
|
|
(7,323
|
)
|
|
|
(11,214
|
)
|
|
|
(1,696
|
)
|
Fixed asset write-off (non-cash)
|
|
|
|
|
|
|
|
|
|
|
(18,732
|
)
|
Termination benefits and all other
|
|
|
(9
|
)
|
|
|
(2,207
|
)
|
|
|
(799
|
)
|
|
|
Balance at end of year
|
|
$
|
40,564
|
|
|
$
|
46,076
|
|
|
$
|
57,677
|
|
|
|
We added $62 million in fiscal 2007 for the exit costs
related to the closing of 34 A.J. Wright stores (see Note C
to our consolidated financial statements). The additions to the
reserve for other lease related obligations in fiscal 2007 were
the result of periodic adjustments to the estimated lease
obligations of our former businesses and were offset by income
from creditor recoveries of a similar amount. The lease related
charges against the reserve during fiscal 2007 related primarily
to our former businesses. The fixed asset write-offs and other
charges against the reserve for fiscal 2007 and all of the
charges against the reserve in fiscal 2008 and fiscal 2009,
related primarily to the 34 A.J. Wright closed stores.
Approximately $25 million of the fiscal 2009 reserve
balance relates to the A.J. Wright store closings, primarily our
estimation of lease costs, net of estimated subtenant income.
Approximately $3 million of the reserve at fiscal 2009
relates to 2 Bobs Stores locations which are considered
probable for being put back to TJX by the buyer. 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 these lease obligations. At
January 31, 2009, 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 these 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, and 8
additional Bobs Stores leases. Our reserve for
discontinued operations does not reflect these leases because we
do not believe that the likelihood of any future liability to us
is probable.
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.
31
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 and Bobs Stores leases discussed
above, and properties of our discontinued operations that we
have sublet, if the subtenants did not fulfill their
obligations, to be approximately $100 million as of
January 31, 2009. 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 other parties 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
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
New stores
|
|
$
|
147.6
|
|
|
$
|
120.7
|
|
|
$
|
123.0
|
|
Store renovations and improvements
|
|
|
264.3
|
|
|
|
269.8
|
|
|
|
190.2
|
|
Office and distribution centers
|
|
|
171.0
|
|
|
|
136.5
|
|
|
|
64.8
|
|
|
|
Capital expenditures
|
|
$
|
582.9
|
|
|
$
|
527.0
|
|
|
$
|
378.0
|
|
|
|
We expect that capital expenditures will approximate
$450 million for fiscal 2010, which we expect to fund
through internally generated funds. This includes
$153 million for new stores, $182 million for store
renovations, expansions and improvements and $115 million
for our office and distribution centers. The planned decrease in
capital expenditures is attributable to fewer planned store
openings and reduced spending on renovations and improvements to
existing stores.
Investing activities also include cash flows associated with our
net investment hedges. During fiscal 2009, we suspended our
policy of hedging the net investment in our foreign subsidiaries
and settled such hedges during the fourth quarter. The net cash
received on net investment hedges during fiscal 2009 amounted to
$14.4 million versus net cash payments of
$13.7 million in fiscal 2008 and $17.7 million in
fiscal 2007.
Financing
Activities:
Cash flows from financing activities resulted in net cash
outflows of $769 million in fiscal 2009, $953 million
in fiscal 2008 and $418 million in fiscal 2007. The
majority of this outflow relates to our share repurchase program.
We spent $741 million in fiscal 2009, $950 million in
fiscal 2008 and $557 million in fiscal 2007 under our stock
repurchase programs. We repurchased 24.0 million shares in
fiscal 2009, 33.3 million shares in fiscal 2008 and
22.0 million shares in fiscal 2007. All shares repurchased
were retired. 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. Our fiscal 2009 repurchases completed the
$1 billion stock repurchase program approved by the Board
of Directors in January 2007 and included the repurchase of
8.9 million shares at a cost of $255 million under the
$1 billion stock repurchase program approved by the Board
of Directors in February 2008. As of January 31, 2009,
$745 million remained available for purchase under the
current program. The timing of purchases under this program is
determined by TJX from time to time based on its assessment of
various factors including excess cash flow, liquidity and market
conditions. We are taking a more conservative approach to our
stock repurchase program and currently plan to repurchase up to
approximately $250 million of our stock in fiscal 2010.
This timing and amount of these purchases are subject to change
depending upon the economic environment and other factors.
The $464.9 million aggregate principal amount outstanding
of our zero coupon convertible subordinated notes (which are due
in February 2021) are convertible into 15.2 million
shares of common stock under certain conditions,
32
including if the closing sale price of our common stock reaches
specified trigger prices. The trigger price was met during a
portion of fiscal 2009 and 52,552 notes were converted during
fiscal 2009, resulting in the issuance of 1.7 million
shares of common stock. The notes were not convertible during
the fourth quarter of fiscal 2009 because our stock price did
not meet the trigger prices during relevant periods. The trigger
prices will have to be met during applicable future periods for
the notes to be convertible in future quarters.
We declared quarterly dividends on our common stock which
totaled $0.44 per share in fiscal 2009, $0.36 per share in
fiscal 2008 and $0.28 per share in fiscal 2007. Cash payments
for dividends on our common stock totaled $177 million in
fiscal 2009, $151 million in fiscal 2008 and
$123 million in fiscal 2007. Financing activities also
included proceeds of $142 million in fiscal 2009,
$134 million in fiscal 2008 and $260 million in fiscal
2007 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.
We have a $500 million revolving credit facility maturing
in May 2010 and a $500 million revolving credit facility
maturing in May 2011. These agreements have no compensating
balance requirements and have various covenants including a
requirement of a specified ratio of debt to earnings. These
agreements serve as backup to our commercial paper program. As
of January 31, 2009 there were no outstanding amounts under
our credit facilities. The maximum amount of our
U.S. short-term borrowings outstanding was
$222 million during fiscal 2009. The weighted average
interest rate on our U.S. short-term borrowings was 3.92%
in fiscal 2009. There were no borrowings on our credit
facilities during fiscal 2008.
As of January 31, 2009 and January 26, 2008, Winners
had two credit lines, one for C$10 million for operating
expenses and one C$10 million letter of credit facility.
Winners did not borrow under the credit line for operating
expenses in fiscal 2009. The maximum amount outstanding under
our Canadian credit line for operating expenses was
C$5.7 million in fiscal 2008 and C$3.8 million in
fiscal 2007. There were no amounts outstanding on this line at
the end of fiscal 2009 or fiscal 2008. As of January 31,
2009, T.K. Maxx had a credit line of £20 million. The
maximum amount outstanding was £6.1 million in fiscal
2009 and £16.4 million in fiscal 2008. There were no
outstanding borrowings on this credit line at the end of fiscal
2009 or fiscal 2008.
We believe that internally generated funds and our current
credit facilities are more than adequate to meet our operating,
debt and capital 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 other financing
sources.
Contractual obligations: As of January 31,
2009, 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
|
|
Tabular Disclosure of Contractual Obligations
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
|
|
Long-term debt obligations including estimated interest and
current installments
|
|
$
|
806,654
|
|
|
$
|
410,125
|
|
|
$
|
|
|
|
$
|
396,529
|
|
|
$
|
|
|
Operating lease commitments
|
|
|
5,071,283
|
|
|
|
913,446
|
|
|
|
1,582,397
|
|
|
|
1,137,941
|
|
|
|
1,437,499
|
|
Capital lease obligation
|
|
|
26,671
|
|
|
|
3,726
|
|
|
|
7,623
|
|
|
|
7,824
|
|
|
|
7,498
|
|
Purchase obligations
|
|
|
1,922,537
|
|
|
|
1,803,500
|
|
|
|
112,204
|
|
|
|
4,635
|
|
|
|
2,198
|
|
|
|
Total Obligations
|
|
$
|
7,827,145
|
|
|
$
|
3,130,797
|
|
|
$
|
1,702,224
|
|
|
$
|
1,546,929
|
|
|
$
|
1,447,195
|
|
|
|
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 31, 2009.
33
The lease commitments in the above table are for minimum rent
and do not include costs for insurance, real estate taxes, other
operating expenses and, in some cases, rentals based on a
percentage of sales, which together were approximately one-third
of the total minimum rent for the fiscal year ended
January 31, 2009.
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
$272.9 million for employee compensation and benefits, the
majority of which will come due beyond five years,
$137.9 million for accrued rent, the cash flow requirements
of which are included in the lease commitments in the above
table and $240.6 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 significant
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.
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 retirement benefits and the funded status of our qualified
pension plan. The market performance on plan assets during
fiscal 2009 was considerably worse than our expected return and
as a result the
34
unfunded status of our qualified plan increased significantly.
Despite this we were not required to fund our plan during fiscal
2009, primarily due to voluntary funding in prior years. As of
the date of this report we have funded $50 million into the
qualified pension plan and may make additional voluntary
contributions during fiscal 2010.
Share based compensation: In accordance with
SFAS No. 123 (revised 2004) Share-Based
Payment (SFAS No. 123R) TJX
estimates the fair value of stock awards issued to employees and
directors under its stock incentive plan. The fair value of the
awards is amortized as stock compensation cost over
the vesting periods during which the recipients are required to
provide service. We use the Black Scholes method for determining
the fair value of stock options granted which requires
management to make significant judgments and estimates. The use
of different assumptions and estimates could have a material
impact on the estimated fair value of stock option grants and
the related expense.
Casualty insurance: In July 2007, we entered into
a fixed premium program for our casualty insurance. Our casualty
insurance program prior to 2007 required 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 judgments and
assumptions and actual results could differ from these
estimates. If our estimate for the claims component of our
casualty insurance expense for fiscal 2009 were to change by
10%, the fiscal 2009 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
$20.8 million for the unfunded portion of our casualty
insurance program as of January 31, 2009.
Income taxes: Like many large
corporations, our income tax returns are regularly audited by
federal, state and local tax authorities in the United States
and in foreign countries where we operate. Such authorities may
challenge positions we take, and we are engaged in various
proceedings with such authorities with respect to assessments,
claims, deficiencies and refunds. In accordance with generally
accepted accounting principles, we evaluate uncertain tax
positions based on our evaluation of the facts, circumstances
and information available at the reporting date and we accrue
for exposures when we believe that it is more likely than not,
based on the technical merits, that the positions will not be
sustained upon examination. However, it is possible that the
actual results of proceedings with tax authorities and in
courts, changes in facts, expiration of statutes of limitations
or other resolutions of tax positions will differ from the
amounts we have accrued in either a positive or a negative
manner, which could materially affect our effective income tax
rate in a given financial period, the amount of taxes we are
required to pay and our results of operations.
Reserves for Computer Intrusion related costs and for
discontinued operations: As discussed in Note B and
Note M 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
estimates and assumptions about the outcome and costs of claims,
litigation and investigations and 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 the
amount of such 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 obligations under the leases, amounts
of subtenant income, how a particular obligation may ultimately
be settled and what mitigating factors, including
indemnification, may exist 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.
35
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
See Note A to our consolidated financial statements
included in this annual report for recently issued accounting
standards, including the expected dates of adoption and
estimated effects on our consolidated 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 RISK
We are exposed to foreign currency exchange rate risk on our
investment in our Canadian (Winners and HomeSense) and European
(T.K. Maxx and HomeSense) operations and on the translation of
these foreign operations into the U. S. dollar. As more fully
described in Notes A and E to the consolidated financial
statements to the Annual Report on
Form 10-K
for the fiscal year ended January 31, 2009, we hedge a
significant portion of our intercompany transactions with
foreign operations and certain merchandise purchase commitments
incurred by these operations, with derivative financial
instruments. During fiscal 2009 we ceased hedging our net
investment position in our foreign operations. 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. 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 well as the translation
of our foreign operations into our reporting currency. As of
January 31, 2009, the analysis indicated that such an
adverse movement would not have a material effect on our
consolidated financial position but could have reduced our
pre-tax income from continuing operations for fiscal 2009 by
approximately $37 million.
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 us. 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. As of
January 31, 2009, 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.
36
EQUITY
PRICE 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 a result of the
significant decline in the capital markets in 2009 the value of
our pension plan assets decreased substantially increasing the
unfunded status of our plan and reducing shareholders
equity on our balance sheet.
ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item may be found on pages F-1
through F-34 of this Annual Report on
Form 10-K.
ITEM 9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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 2009
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
Our management 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 Exchange Act as a process designed by, or
under the supervision of, our principal executive and principal
financial officers, or persons performing similar functions, and
effected by our 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;
|
37
|
|
|
|
|
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 our
management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting
as of January 31, 2009 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 31, 2009.
(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 31, 2009, and has issued an attestation
report on the effectiveness of our internal control over
financial reporting included herein.
ITEM 9B. OTHER
INFORMATION
None.
38
Part III
ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following are the Executive Officers of TJX as of
March 31, 2009:
|
|
|
|
|
Name
|
|
Age
|
|
Office and Employment During Last Five Years
|
|
|
Bernard Cammarata
|
|
69
|
|
Chairman of the Board since 1999. Acting Chief Executive Officer
from September 2005 to January 2007 and Chief Executive Officer
from 1989 to 2000. Led TJX and its former TJX subsidiary and
T.J. Maxx Division from the organization of the business in 1976
until 2000, including serving as Chief Executive Officer and
President of TJX, Chairman and President of TJXs T.J. Maxx
Division, and Chairman of The Marmaxx Group.
|
Donald G. Campbell
|
|
57
|
|
Vice Chairman since September 2006, Senior Executive Vice
President, Chief Administrative and Business Development Officer
from March 2004 to September 2006. Executive Vice
PresidentFinance from 1996 to 2004 and Chief Financial
Officer of TJX from 1989 to 2004. Senior Vice
PresidentFinance, from 1989 to 1996. Various financial
positions with TJX and its predecessors since joining in 1973.
|
Ernie Herrman
|
|
48
|
|
Senior Executive Vice President, Group President Since
August 2008. Senior Executive Vice President since January
2007 and President, Marmaxx from January 2005 to
August 2008. Senior Executive Vice President, Chief
Operating Officer, Marmaxx from 2004 to 2005. Executive Vice
President, Merchandising, Marmaxx from 2001 to 2004. Various
merchandising positions with TJX since joining in 1989.
|
Carol Meyrowitz
|
|
55
|
|
Chief Executive Officer 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 from March 2004 to January 2005. President of Marmaxx
from 2001 to January 2005. Executive Vice President of TJX from
2001 to 2004.
|
Jeffrey G. Naylor
|
|
50
|
|
Senior Executive Vice President, Chief Financial and
Administrative Officer since February 2009. Senior Executive
Vice President, Chief Administrative and Business Development
Officer, June 2007 to February 2009. Chief Financial and
Administrative Officer, September 2006 to June 2007. Senior
Executive Vice President, Chief Financial Officer, from March
2004 to September 2006, Executive Vice President, Chief
Financial Officer effective February 2004.
|
Jerome Rossi
|
|
65
|
|
Senior Executive Vice President, Group President, 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
|
|
44
|
|
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.
|
All officers hold office until the next annual meeting of the
Board in June 2009 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 31, 2009 (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.
39
TJX has a Code of Ethics for TJX Executives governing its
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 its 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 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.
40
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 IIValuation 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 31, 2009
|
|
$
|
15,298
|
|
|
$
|
866,757
|
|
|
$
|
868,049
|
|
|
$
|
14,006
|
|
|
|
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
|
|
|
|
Discontinued Operations Reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, 2009
|
|
$
|
46,076
|
|
|
$
|
1,820
|
|
|
$
|
7,332
|
|
|
$
|
40,564
|
|
|
|
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
|
|
|
|
Casualty Insurance Reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, 2009
|
|
$
|
26,373
|
|
|
$
|
1,232
|
|
|
$
|
6,846
|
|
|
$
|
20,759
|
|
|
|
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
|
|
|
|
Computer Intrusion Reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, 2009
|
|
$
|
117,266
|
|
|
$
|
(13,000
|
)
|
|
$
|
62,055
|
|
|
$
|
42,211
|
|
|
|
Fiscal Year Ended January 26, 2008
|
|
$
|
|
|
|
$
|
159,200
|
|
|
$
|
41,934
|
|
|
$
|
117,266
|
|
|
|
41
(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 Exchange Act.
|
|
|
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
|
|
By-laws of TJX, as amended, are incorporated herein by reference
to Exhibit 3.1 to the
Form 8-K
filed on December 8, 2008.
|
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.
|
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 June 6, 2008 with
Donald G. Campbell is incorporated herein by reference to
Exhibit 10.1 to
Form 8-K filed on
June 6,
2008.*
|
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. The Letter Agreement dated as of
January 31, 2009 with Carol Meyrowitz is filed
herewith.*
|
10.6
|
|
The Employment Agreement dated as of April 5, 2008 with
Jeffrey Naylor is incorporated herein by reference to
Exhibit 10.1 to the
Form 8-K filed on
April 7,
2008.*
|
10.7
|
|
The Employment Agreement dated as of September 8, 2006 with
Ernie Herrman is incorporated herein by reference to
Exhibit 10.9 to the
Form 10-K for the
fiscal year ended January 26,
2008.*
|
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. The
Letter Agreement dated as of January 28, 2009 with Nirmal
Tripathy is filed
herewith.*
|
10.9
|
|
The Form of 409A Amendment to Employment Agreements for the
named executive officers 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. The 409A Amendment to
the Management Incentive Plan, effective as of January 1,
2008 is filed
herewith.*
|
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.*
|
42
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Exhibit
|
|
|
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
incorporated herein by reference to Exhibit 10.15 to the
Form 10-K for the
fiscal year ended January 26,
2008.*
|
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. The 409A
Amendment to the Long Range Performance Incentive Plan,
effective as of January 1, 2008 is filed
herewith.*
|
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. The related Fifth
Amendment, effective January 1, 2008 is filed
herewith.*
|
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. The 2008 Restatement to
the Supplemental Executive Retirement Plan is filed
herewith.*
|
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.
|
43
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Exhibit
|
|
|
10.27
|
|
The Amended Settlement Agreement, dated as of November 14,
2007, by and among the named plaintiffs, 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.
|
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.
|
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.
|
44
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.
Jeffrey G. Naylor, Chief Financial and Administrative Officer,
on behalf of The TJX Companies, Inc.
Dated: March 31, 2009
45
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
|
|
JEFFREY G.
NAYLOR* Jeffrey
G. Naylor, Chief 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/ JEFFREY G. NAYLOR
|
Jeffrey G. Naylor
for himself and as attorney-in-fact
Dated: March 31, 2009
46
The TJX
Companies, Inc.
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
For Fiscal
Years Ended January 31, 2009, January 26, 2008 and
January 27, 2007
|
|
|
|
|
F-2
|
Consolidated Financial Statements:
|
|
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7
|
Financial Statement
Schedules:
|
|
|
|
|
41
|
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 (the Company) as of January 31,
2009 and January 26, 2008, and the results of their
operations and their cash flows for each of the three years in
the period ended January 31, 2009 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 31, 2009, based on criteria
established in Internal ControlIntegrated 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 K 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 J 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.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 31, 2009
F-2
The TJX
Companies, Inc.
Consolidated
Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
|
|
Amounts in thousands
|
|
January 31,
|
|
|
January 26,
|
|
|
January 27,
|
|
except per share amounts
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
(53 weeks)
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
18,999,505
|
|
|
$
|
18,336,726
|
|
|
$
|
17,104,013
|
|
|
|
Cost of sales, including buying and occupancy costs
|
|
|
14,394,756
|
|
|
|
13,841,695
|
|
|
|
12,969,996
|
|
Selling, general and administrative expenses
|
|
|
3,170,018
|
|
|
|
3,039,520
|
|
|
|
2,849,283
|
|
Provision for Computer Intrusion related costs
|
|
|
(30,500
|
)
|
|
|
197,022
|
|
|
|
4,960
|
|
Interest (income) expense, net
|
|
|
14,291
|
|
|
|
(1,598
|
)
|
|
|
15,566
|
|
|
|
Income from continuing operations before provision for income
taxes
|
|
|
1,450,940
|
|
|
|
1,260,087
|
|
|
|
1,264,208
|
|
Provision for income taxes
|
|
|
536,054
|
|
|
|
477,655
|
|
|
|
477,036
|
|
|
|
Income from continuing operations
|
|
|
914,886
|
|
|
|
782,432
|
|
|
|
787,172
|
|
(Loss) from discontinued operations, net of income taxes
|
|
|
(34,269
|
)
|
|
|
(10,682
|
)
|
|
|
(49,133
|
)
|
|
|
Net income
|
|
$
|
880,617
|
|
|
$
|
771,750
|
|
|
$
|
738,039
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
2.18
|
|
|
$
|
1.77
|
|
|
$
|
1.73
|
|
(Loss) from discontinued operations, net of income taxes
|
|
$
|
(0.08
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.10
|
)
|
Net income
|
|
$
|
2.10
|
|
|
$
|
1.74
|
|
|
$
|
1.63
|
|
Weighted average common sharesbasic
|
|
|
419,076
|
|
|
|
443,050
|
|
|
|
454,044
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
2.08
|
|
|
$
|
1.68
|
|
|
$
|
1.65
|
|
(Loss) from discontinued operations, net of income taxes
|
|
$
|
(0.08
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.10
|
)
|
Net income
|
|
$
|
2.00
|
|
|
$
|
1.66
|
|
|
$
|
1.55
|
|
Weighted average common sharesdiluted
|
|
|
442,255
|
|
|
|
468,046
|
|
|
|
480,045
|
|
Cash dividends declared per share
|
|
$
|
0.44
|
|
|
$
|
0.36
|
|
|
$
|
0.28
|
|
The accompanying notes are an integral part of the financial
statements.
F-3
The TJX
Companies, Inc.
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
|
|
|
|
January 31,
|
|
|
January 26,
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
453,527
|
|
|
$
|
732,612
|
|
Accounts receivable, net
|
|
|
143,500
|
|
|
|
143,289
|
|
Merchandise inventories
|
|
|
2,619,336
|
|
|
|
2,737,378
|
|
Prepaid expenses and other current assets
|
|
|
274,091
|
|
|
|
215,550
|
|
Current deferred income taxes, net
|
|
|
135,675
|
|
|
|
163,465
|
|
|
|
Total current assets
|
|
|
3,626,129
|
|
|
|
3,992,294
|
|
|
|
Property at cost:
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
280,278
|
|
|
|
277,988
|
|
Leasehold costs and improvements
|
|
|
1,728,362
|
|
|
|
1,785,429
|
|
Furniture, fixtures and equipment
|
|
|
2,784,316
|
|
|
|
2,675,009
|
|
|
|
Total property at cost
|
|
|
4,792,956
|
|
|
|
4,738,426
|
|
Less accumulated depreciation and amortization
|
|
|
2,607,200
|
|
|
|
2,520,973
|
|
|
|
Net property at cost
|
|
|
2,185,756
|
|
|
|
2,217,453
|
|
|
|
Property under capital lease, net of accumulated amortization of
$17,124 and $14,890, respectively
|
|
|
15,448
|
|
|
|
17,682
|
|
Other assets
|
|
|
171,381
|
|
|
|
190,981
|
|
Goodwill and tradename, net of amortization
|
|
|
179,528
|
|
|
|
181,524
|
|
|
|
TOTAL ASSETS
|
|
$
|
6,178,242
|
|
|
$
|
6,599,934
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current installments of long-term debt
|
|
$
|
392,852
|
|
|
$
|
|
|
Obligation under capital lease due within one year
|
|
|
2,175
|
|
|
|
2,008
|
|
Accounts payable
|
|
|
1,276,098
|
|
|
|
1,516,754
|
|
Accrued expenses and other current liabilities
|
|
|
1,096,766
|
|
|
|
1,213,987
|
|
Federal, foreign and state income taxes payable
|
|
|
|
|
|
|
28,244
|
|
|
|
Total current liabilities
|
|
|
2,767,891
|
|
|
|
2,760,993
|
|
|
|
Other long-term liabilities
|
|
|
765,004
|
|
|
|
811,333
|
|
Non-current deferred income taxes, net
|
|
|
127,008
|
|
|
|
42,903
|
|
Obligation under capital lease, less portion due within one year
|
|
|
18,199
|
|
|
|
20,374
|
|
Long-term debt, exclusive of current installments
|
|
|
365,583
|
|
|
|
833,086
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Common stock, authorized 1,200,000,000 shares, par value
$1, issued and outstanding 412,821,592 and 427,949,533,
respectively
|
|
|
412,822
|
|
|
|
427,950
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
(217,781
|
)
|
|
|
(28,685
|
)
|
Retained earnings
|
|
|
1,939,516
|
|
|
|
1,731,980
|
|
|
|
Total shareholders equity
|
|
|
2,134,557
|
|
|
|
2,131,245
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$
|
6,178,242
|
|
|
$
|
6,599,934
|
|
|
|
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 31,
|
|
|
January 26,
|
|
|
January 27,
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
(53 weeks)
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
880,617
|
|
|
$
|
771,750
|
|
|
$
|
738,039
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
401,707
|
|
|
|
369,396
|
|
|
|
353,110
|
|
Assets of discontinued operation sold
|
|
|
31,328
|
|
|
|
|
|
|
|
|
|
Loss on property disposals and impairment charges
|
|
|
23,903
|
|
|
|
25,944
|
|
|
|
32,743
|
|
Amortization of share based compensation expense
|
|
|
51,229
|
|
|
|
57,370
|
|
|
|
69,804
|
|
Excess tax benefits from stock compensation expense
|
|
|
(18,879
|
)
|
|
|
(6,756
|
)
|
|
|
(3,632
|
)
|
Deferred income tax (benefit) provision
|
|
|
132,480
|
|
|
|
(101,799
|
)
|
|
|
6,286
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
|
|
(8,245
|
)
|
|
|
(25,516
|
)
|
|
|
26,397
|
|
(Increase) in merchandise inventories
|
|
|
(68,489
|
)
|
|
|
(112,411
|
)
|
|
|
(201,413
|
)
|
(Increase) decrease in prepaid expenses and other current assets
|
|
|
(118,830
|
)
|
|
|
2,144
|
|
|
|
(23,179
|
)
|
Increase (decrease) in accounts payable
|
|
|
(141,580
|
)
|
|
|
117,304
|
|
|
|
50,165
|
|
Increase (decrease) in accrued expenses and other liabilities
|
|
|
(34,525
|
)
|
|
|
202,893
|
|
|
|
170,592
|
|
Increase (decrease) in income taxes payable
|
|
|
(10,488
|
)
|
|
|
37,909
|
|
|
|
(42,558
|
)
|
Other, net
|
|
|
34,344
|
|
|
|
36,546
|
|
|
|
36,392
|
|
|
|
Net cash provided by operating activities
|
|
|
1,154,572
|
|
|
|
1,374,774
|
|
|
|
1,212,746
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property additions
|
|
|
(582,932
|
)
|
|
|
(526,987
|
)
|
|
|
(378,011
|
)
|
Proceeds (payments) to settle net investment hedges
|
|
|
14,379
|
|
|
|
(13,667
|
)
|
|
|
(17,713
|
)
|
Other
|
|
|
(34
|
)
|
|
|
753
|
|
|
|
700
|
|
|
|
Net cash (used in) investing activities
|
|
|
(568,587
|
)
|
|
|
(539,901
|
)
|
|
|
(395,024
|
)
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on capital lease obligation
|
|
|
(2,008
|
)
|
|
|
(1,854
|
)
|
|
|
(1,712
|
)
|
Proceeds from sale and issuance of common stock
|
|
|
142,154
|
|
|
|
134,109
|
|
|
|
260,197
|
|
Cash payments for repurchase of common stock
|
|
|
(751,097
|
)
|
|
|
(940,208
|
)
|
|
|
(557,234
|
)
|
Excess tax benefits from stock compensation expense
|
|
|
18,879
|
|
|
|
6,756
|
|
|
|
3,632
|
|
Cash dividends paid
|
|
|
(176,749
|
)
|
|
|
(151,492
|
)
|
|
|
(122,927
|
)
|
|
|
Net cash (used in) financing activities
|
|
|
(768,821
|
)
|
|
|
(952,689
|
)
|
|
|
(418,044
|
)
|
|
|
Effect of exchange rate changes on cash
|
|
|
(96,249
|
)
|
|
|
(6,241
|
)
|
|
|
(8,658
|
)
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(279,085
|
)
|
|
|
(124,057
|
)
|
|
|
391,020
|
|
Cash and cash equivalents at beginning of year
|
|
|
732,612
|
|
|
|
856,669
|
|
|
|
465,649
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
453,527
|
|
|
$
|
732,612
|
|
|
$
|
856,669
|
|
|
|
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 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
|
)
|
Performance based 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 J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,178
|
)
|
|
|
(27,178
|
)
|
Implementation of SFAS No. 158 measurement provisions
(see note K)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(167
|
)
|
|
|
(1,641
|
)
|
|
|
(1,808
|
)
|
Cash dividends declared on common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158,202
|
)
|
|
|
(158,202
|
)
|
Performance based 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
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
880,617
|
|
|
|
880,617
|
|
(Loss) due to foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(171,225
|
)
|
|
|
|
|
|
|
(171,225
|
)
|
Gain on net investment hedge contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,816
|
|
|
|
|
|
|
|
68,816
|
|
Recognition of prior service cost and gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,206
|
)
|
|
|
|
|
|
|
(1,206
|
)
|
Recognition of unfunded post retirement liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86,158
|
)
|
|
|
|
|
|
|
(86,158
|
)
|
Amount of cash flow hedge reclassified from other comprehensive
income to net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
677
|
|
|
|
|
|
|
|
677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
691,521
|
|
Cash dividends declared on common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(183,694
|
)
|
|
|
(183,694
|
)
|
Performance based restricted stock and other stock awards issued
|
|
|
170
|
|
|
|
170
|
|
|
|
(170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
51,229
|
|
|
|
|
|
|
|
|
|
|
|
51,229
|
|
Issuance of common stock upon conversion of convertible debt
|
|
|
1,717
|
|
|
|
1,717
|
|
|
|
39,326
|
|
|
|
|
|
|
|
|
|
|
|
41,043
|
|
Stock options repurchased by TJX
|
|
|
|
|
|
|
|
|
|
|
(987
|
)
|
|
|
|
|
|
|
|
|
|
|
(987
|
)
|
Issuance of common stock under stock incentive plan and related
tax effect
|
|
|
7,269
|
|
|
|
7,269
|
|
|
|
148,028
|
|
|
|
|
|
|
|
|
|
|
|
155,297
|
|
Common stock repurchased
|
|
|
(24,284
|
)
|
|
|
(24,284
|
)
|
|
|
(237,426
|
)
|
|
|
|
|
|
|
(489,387
|
)
|
|
|
(751,097
|
)
|
|
|
Balance, January 31, 2009
|
|
|
412,822
|
|
|
$
|
412,822
|
|
|
$
|
|
|
|
$
|
(217,781
|
)
|
|
$
|
1,939,516
|
|
|
$
|
2,134,557
|
|
|
|
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 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 its 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 year ended January 31,
2009 (fiscal 2009) included 53 weeks, while the
fiscal years ended January 26, 2008 (fiscal
2008) and January 27, 2007 (fiscal 2007)
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 of America, 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, share based compensation,
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 customers use the cards 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 $10.7 million in fiscal 2009,
$10.1 million in fiscal 2008 and $7.6 million in
fiscal 2007.
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 and
fuel-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.
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.
F-7
At January 31, 2009 and January 26, 2008, in-transit
inventory included in merchandise inventories was
$329.9 million and $362.9 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
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 in any of the years presented. All shares
repurchased have been retired.
Shares issued under TJXs 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
deficiencies in the tax benefit is debited to APIC to the extent
a pool for such deficiencies exists. In the absence
of a pool any deficiencies are 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.
Share Based Compensation: TJX accounts for share
based compensation under the provisions of Statement of
Financial Accounting Standards No. 123 (revised
2004) Share-Based Payment
(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 H for a detailed
discussion of share based compensation.
Interest: TJXs interest (income) expense,
net was expense of $14.3 million in fiscal 2009, income of
$1.6 million in fiscal 2008 and expense of
$15.6 million in fiscal 2007. Interest (income) expense is
presented as a net amount. TJX had gross interest income of
$22.2 million, $40.7 million and $23.6 million in
fiscal 2009, 2008 and 2007, 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 $1.6 million in fiscal 2009 and
$799,000 in fiscal 2008. No interest was capitalized in fiscal
2007. Debt discount and related issue expenses are amortized to
interest expense using the effective interest method 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 $398.0 million for fiscal 2009,
$364.2 million for fiscal 2008 and $347.0 million for
fiscal 2007. Amortization expense for property held under a
capital lease was $2.2 million in fiscal 2009, 2008 and
2007. 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.
F-8
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 totaled $71.8 million as of January 31, 2009,
$72.2 million as of January 26, 2008 and
$71.9 million as of January 27, 2007. Goodwill is
considered to have an indefinite life and accordingly is not
amortized. Changes in goodwill are attributable to the effect of
exchange rate changes on Winners reported goodwill.
Tradename is the value assigned to the name
Marshalls, acquired by TJX in fiscal 1996 as part of
the acquisition of the Marshalls chain. The value of the
tradename was determined by the discounted present value of
assumed after-tax royalty payments, offset by a reduction for
their pro-rata share of negative goodwill acquired. The
Marshalls tradename is carried at a value of
$107.7 million, and is considered to have an indefinite
life.
TJX occasionally acquires or licenses other trademarks to be
used 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 their
useful life, generally from 7 to 10 years. Trademarks and
the related amortization are included in the operating segment
for which they were acquired.
Impairment of Long-Lived Assets, Goodwill and
Tradename: TJX evaluates its long-lived assets and
assets with indefinite lives (other than Goodwill and Tradename)
for indicators of impairment whenever events or changes in
circumstances indicate their carrying amounts may not be
recoverable, and at least annually in the fourth quarter of a
fiscal year. The evaluation for long-lived assets is performed
at the lowest level of identifiable cash flows, which is
generally at the individual store level. If indicators of
impairment are identified, an undiscounted cash flow analysis is
performed to determine if an impairment exists. The store by
store evaluations did not indicate any recoverability issues
(for any of our continuing operations) during the past three
fiscal years. An impairment exists when the undiscounted cash
flow of an asset or asset group is less than the carrying cost
of that asset or asset group.
Goodwill is tested for impairment whenever events or changes in
circumstances indicate that the carrying amount of Goodwill may
exceed its fair value and at least annually in the fourth
quarter of a fiscal year, by comparing the carrying value of the
related reporting unit to its fair value. An impairment exists
when this analysis shows that the fair value is less than its
carrying cost. The fair value of our reporting units, using
typical valuation models such as the discounted cash flow
method, is considerably higher than the book values and no
impairment has occurred in the last three fiscal years.
Tradename is also tested for impairment whenever events or
changes in circumstances indicate that the carrying amount of
the Tradename may exceed its fair value and at least annually in
the fourth quarter of a fiscal year. Testing is performed by
comparing the discounted present value of assumed after-tax
royalty payments to the carrying value of the Tradename. No
impairment has occurred in the last three fiscal years.
Advertising Costs: TJX expenses advertising costs
as incurred. Advertising expense was $254.0 million,
$255.0 million and $221.0 million for fiscal 2009,
2008 and 2007, 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 affects the statements of income and cash flows
is 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 loss of
$152.9 million, net of related tax effect of
$2.6 million, as of January 31, 2009; a gain of
$17.8 million, net of related tax effect of
$23.7 million, as of January 26, 2008; and a loss of
$3.2 million, net of related tax effect of
$15.8 million, as of January 27, 2007.
F-9
TJX enters into financial instruments to manage our cost of
borrowing and to manage our 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 hedged our net investment in foreign operations
and deferred gains and losses on cash flow hedges that have been
recorded in other comprehensive income amounted to a gain of
$27.3 million, net of related tax effects of
$18.2 million at January 31, 2009; a loss of
$42.1 million, net of related tax effects of
$28.1 million at January 26, 2008; and a loss of
$25.2 million, net of related tax effects of
$16.8 million at January 27, 2007.
The requirement to recognize the funded status of TJXs
post retirement benefit plans in accordance with
SFAS No. 158 (discussed in Note K) resulted
in a loss adjustment to accumulated other comprehensive income
of $92.2 million, net of related tax effects of
$61.5 million at January 31, 2009. The cumulative loss
adjustment at January 26, 2008 was $4.4 million, net
of related tax effects of $3.7 million and was
$5.6 million, net of related tax effects of
$3.7 million at January 27, 2007.
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 December 2008, the
Financial Accounting Standards Board, or FASB, issued FASB Staff
Position (FSP) No. FAS 132(R)-1 Employers
Disclosures about Postretirement Benefit Plan Assets which is
effective for fiscal years ending after December 15, 2009.
This FSP requires additional disclosures such as the investment
allocation decision making process; the fair value of each major
category of plan assets; inputs and valuation techniques used to
measure the fair value of plan assets and significant
concentrations of risk within plan assets. We are in the process
of assessing the impact of FSP No. FAS 132(R)-1 on our
financial statement disclosures.
In December 2007, the FASB issued SFAS No. 141
(revised 2007) Business Combinations
(SFAS 141R). SFAS 141R establishes principles and
requirements for how the acquirer of a business recognizes and
measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree. SFAS 141R also provides guidance
for recognizing and measuring the goodwill acquired in business
combinations and what information to disclose to enable users of
the financial statements to evaluate the nature and financial
effects of the business combination. SFAS 141R is effective
for financial statements issued for fiscal years beginning after
December 15, 2008 and is to be applied prospectively. TJX
will consider the potential impact, if any, of the adoption of
SFAS 141R on its future business combinations.
In April 2008, the FASB issued
FSP 142-3,
which amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful
life of a recognized intangible.
FSP 142-3
is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods
within those fiscal years. As this guidance applies only to
assets we may acquire in the future, we are not able to predict
its impact, if any, on our consolidated financial statements.
At its June 2008 meeting the FASB ratified Emerging Issues Task
Force (EITF) issue
08-03:
Accounting by Lessees for Maintenance Deposits, which clarifies
how a lessee shall account for a maintenance deposit under an
arrangement accounted for as a lease.
EITF 08-03
is effective for us in the first quarter of fiscal 2010. We are
in the process of assessing the impact of
EITF 08-03
and do not believe it will have a material impact on our results
of operations or financial condition.
In March 2008, the FASB issued SFAS 161, which requires
disclosures of how and why an entity uses derivative
instruments, how derivative instruments and related hedged items
are accounted for and how derivative instruments
F-10
and related hedged items affect an entitys financial
position, financial performance, and cash flows. SFAS 161
is effective for TJX in the first quarter of fiscal 2010. We are
in the process of assessing the impact of SFAS 161 on our
financial statement disclosures.
Reclassifications: For comparative purposes we
reclassified activity on the Consolidated Statements of Cash
Flows in fiscal 2008 and 2007 for Proceeds (payments) to
settle net investment hedges from operating activities to
investing activities. This reclassification had no impact on net
income or total cash flows as previously reported.
|
|
B.
|
Provision
for Computer Intrusion related costs
|
TJX has incurred losses as a result of an unauthorized intrusion
or intrusions (the intrusion or intrusions, collectively, the
Computer Intrusion) into portions of its computer
system, which was discovered late in fiscal 2007 and in which
TJX believes customer data were stolen. 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 established
a pre-tax reserve of $178.1 million to reflect our
estimation of probable losses in accordance with generally
accepted accounting principles with respect to the Computer
Intrusion and recorded a pre-tax charge in that amount. We
reduced the Provision for Computer Intrusion related costs by
$30.5 million in fiscal 2009 and $18.9 million in
fiscal 2008 as a result of negotiations, settlements, insurance
proceeds and adjustments in our estimated losses. Our reserve of
$42.2 million at January 31, 2009 includes our current
estimation of total potential cash liabilities, from pending
litigation, proceedings, investigations and other claims, as
well as legal, ongoing monitoring and other costs and expenses,
arising from the Computer Intrusion. 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, insurance proceeds and
changes in our estimates.
|
|
C.
|
Discontinued
Operations
|
Sale of Bobs Stores: In fiscal 2009, TJX
sold Bobs Stores and recorded as a component of
discontinued operations a loss on disposal (including expenses
relating to the sale) of $19.0 million, net of tax benefits
of $13.0 million. The net carrying value of Bobs
Stores assets sold was $33 million, which consisted
primarily of merchandise inventory of $56 million, offset
by merchandise payable of $21 million. The loss on disposal
reflects sales proceeds of $7.2 million as well as expenses
relating to the sale of $5.8 million. TJX remains
contingently liable on several of the Bobs Stores leases
which are discussed in Note M to the consolidated financial
statements.
TJX also reclassified the operating results of Bobs Stores
for all periods prior to the sale as a component of discontinued
operations. The following table presents the net sales, segment
profit (loss) and after-tax loss from operations reclassified to
discontinued operations for all periods prior to the sale of
Bobs Stores:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Net sales
|
|
$
|
148,040
|
|
|
$
|
310,400
|
|
|
$
|
300,624
|
|
Segment profit (loss)
|
|
|
(25,524
|
)
|
|
|
(17,398
|
)
|
|
|
(17,360
|
)
|
After-tax loss from operations
|
|
|
(15,314
|
)
|
|
|
(10,682
|
)
|
|
|
(10,416
|
)
|
|
|
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. 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.
TJX also 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 loss of the
closed stores for fiscal 2007 included in discontinued
operations was $1.0 million.
F-11
The table below summarizes the pre-tax and after-tax loss from
all discontinued operations for the last three fiscal years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
(Loss) from discontinued operations before provision for income
taxes
|
|
$
|
(56,980
|
)
|
|
$
|
(17,398
|
)
|
|
$
|
(81,888
|
)
|
Tax benefits
|
|
|
22,711
|
|
|
|
6,716
|
|
|
|
32,755
|
|
|
|
(Loss) from discontinued operations, net of income taxes
|
|
$
|
(34,269
|
)
|
|
$
|
(10,682
|
)
|
|
$
|
(49,133
|
)
|
|
|
|
|
D.
|
Long-Term
Debt and Credit Lines
|
The table below presents long-term debt, exclusive of current
installments, as of January 31, 2009 and January 26,
2008. All amounts are net of unamortized debt discounts. Capital
lease obligations are separately presented in Note G.
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
January 26,
|
In thousands
|
|
2009
|
|
2008
|
|
|
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 in fiscal 2008)
|
|
$
|
|
|
$
|
199,881
|
Market value adjustment to debt hedged with interest rate swap
|
|
|
|
|
|
1,215
|
C$235 term credit facility due January 11, 2010 (interest
rate Canadian Dollar Bankers Acceptance rate plus 0.35%)
|
|
|
|
|
|
233,120
|
|
|
Total general corporate debt
|
|
|
|
|
|
434,216
|
|
|
Subordinated debt:
|
|
|
|
|
|
|
Zero coupon convertible subordinated notes due February 13,
2021 (net of reduction of unamortized debt discount of $99,360
and $118,625 in fiscal 2009 and 2008, respectively)
|
|
|
365,583
|
|
|
398,870
|
|
|
Total subordinated debt
|
|
|
365,583
|
|
|
398,870
|
|
|
Long-term debt, exclusive of current installments
|
|
$
|
365,583
|
|
$
|
833,086
|
|
|
The aggregate maturities of long-term debt, exclusive of current
installments at January 31, 2009 are as follows:
|
|
|
|
|
In thousands
|
|
Long-Term Debt
|
|
|
|
|
Fiscal Year
|
|
|
|
|
2011
|
|
$
|
|
|
2012
|
|
|
|
|
2013
|
|
|
|
|
2014
|
|
|
396,529
|
|
Later years
|
|
|
|
|
Less amount representing unamortized debt discount
|
|
|
(30,946
|
)
|
|
|
Aggregate maturities of long-term debt, exclusive of current
installments
|
|
$
|
365,583
|
|
|
|
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, TJX entered into a C$235.0 million term
credit facility (through our Canadian subsidiary, 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 1.69% at January 31, 2009. The proceeds were
used to fund the repatriation of earnings from Winners as well
as other general corporate purposes of Winners.
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.
F-12
The notes are subordinated to all existing and future senior
indebtedness of TJX. The outstanding notes are convertible into
15.2 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 $396.5 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. A total of 52,552 notes were converted into common
shares in fiscal 2009. 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 TJX can redeem for cash all, or a portion
of, the notes at any time for the original purchase price plus
accrued original issue discount.
Included in current installments of long-term debt are the fair
value of interest rate swaps of $1.6 million;
$199.9 million of 7.45% unsecured notes (net of debt
discount of $55,000) which mature in December 2009 and a term
credit facility of $191.3 million (C$235.0 million)
which matures in January 2010.
TJX has a $500 million revolving credit facility maturing
May 2010 and a $500 million revolving credit facility
maturing May 2011. These agreements have no compensating balance
requirements and have various covenants including a requirement
of a specified ratio of debt to earnings. These agreements serve
as back up to TJXs commercial paper program. As of
January 31, 2009, there were no outstanding amounts under
our credit facilities, and the maximum amount of our
U.S. short-term borrowings outstanding was
$222.0 million during fiscal 2009. The weighted average
interest rate on our U.S. short-term borrowings was 3.92%
in fiscal 2009. We did not borrow under these credit facilities
during fiscal 2008, and the maximum amount of our
U.S. short-term borrowings outstanding was
$204.5 million during fiscal 2007.
As of January 31, 2009 and January 26, 2008, Winners
had two credit lines, one for C$10 million for operating
expenses and one C$10 million letter of credit facility.
Winners did not borrow under the credit line for operating
expenses in fiscal 2009. The maximum amount outstanding under
Winners Canadian credit line for operating expenses was
C$5.7 million in fiscal 2008 and C$3.8 million in
fiscal 2007. There were no amounts outstanding on this line at
the end of fiscal 2009 or fiscal 2008. As of January 31,
2009, T.K. Maxx had a credit line of £20 million. The
maximum amount outstanding under this line was
£6.1 million in fiscal 2009 and
£16.4 million in fiscal 2008. There were no
outstanding borrowings on this credit line at the end of fiscal
2009 or fiscal 2008.
TJX enters into financial instruments to manage its cost of
borrowing and to manage its exposure to changes in fuel costs
and 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 the 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 are 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
$1.6 million as of January 31, 2009, an asset of
$1.2 million at January 26, 2008, and a liability of
$4.4 million, as of January 27, 2007. The valuation of
the swaps results in an offsetting fair value adjustment to the
debt hedged. Accordingly, current installments of long-term debt
has been increased by $1.6 million in fiscal 2009. The
long-term debt has been increased by $1.2 million in fiscal
2008 and reduced by $4.4 million in fiscal 2007. The
average effective interest rate on
F-13
$100 million of the 7.45% unsecured notes, inclusive of the
effect of hedging activity, was approximately 6.54% in fiscal
2009, 8.77% in fiscal 2008 and 9.42% in fiscal 2007.
Concurrent with the issuance of the C$235 million
three-year note in fiscal 2006, 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. In
January 2009 this interest rate swap settled, one year before
the maturity date of the underlying debt which was extended one
year to January 2010. Under this swap TJX paid a specified fixed
interest rate and received the floating rate applicable to the
underlying debt. The interest income/expense on the swap was
accrued as earned and recorded as an adjustment to the interest
expense accrued on the floating-rate debt. The interest rate
swap was designated as a cash flow hedge of the underlying debt.
The fair value of the interest rate swap, excluding the net
interest accrual, amounted to an asset 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 resulted 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 both fiscal 2009 and 2008.
Diesel Fuel Contracts: During fiscal 2009, TJX
entered into three agreements to hedge approximately 30% of its
notional diesel fuel requirements for fiscal 2010, based on the
diesel fuel consumed by independent freight carriers
transporting the Companys inventory. These carriers charge
TJX a mileage surcharge for diesel fuel price increases as
incurred by the freight carrier. The hedge agreements are
designed to mitigate the volatility of diesel fuel pricing (and
the resulting per mile surcharges payable by TJX) by setting a
fixed price per gallon for the year. TJX elected not to apply
hedge accounting rules to these contracts. The change in the
market value of the hedge agreements resulted in a
$4.9 million loss in fiscal 2009, which is reflected in
cost of sales, including buying and occupancy costs. All of the
diesel fuel hedge agreements expire in February 2010.
Foreign Currency Contracts: TJX enters into
forward foreign currency exchange contracts to obtain economic
hedges on firm U.S. dollar and Euro denominated 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 31, 2009 covered
certain commitments for the first quarter of fiscal 2010. TJX
elected not to apply hedge accounting rules to these contracts.
The change in the fair value of these contracts resulted in a
loss of $2.3 million in fiscal 2009, income of
$6.6 million in fiscal 2008 and income of $1.2 million
in fiscal 2007 and is included in earnings as a component of
cost of sales, including buying and occupancy costs.
Effective in the fourth quarter of fiscal 2009, TJX no longer
entered into contracts to hedge its net investments in foreign
subsidiaries and settled all existing contracts. As a result,
there were no net investment contracts as of January 31,
2009. Until the fourth quarter of fiscal 2009, TJX entered into
foreign currency forward and swap contracts in both Canadian
dollars and British pound sterling and accounted for them as
hedges of the net investment in and between foreign subsidiaries
or cash flow hedges of Winners long-term intercompany debt.
TJX applied hedge accounting to these hedge contracts of our
investment in foreign subsidiaries, and changes in fair value of
these contracts, as well as gains and losses upon settlement,
were recorded in accumulated other comprehensive income,
offsetting changes in the cumulative foreign translation
adjustments of the foreign subsidiaries. The change in fair
value of the contracts designated as hedges of the investment in
foreign subsidiaries resulted in a gain of $68.8 million,
net of income taxes, in fiscal 2009, a loss of
$15.8 million, net of income taxes, in fiscal 2008, and a
loss of $5.6 million, net of income taxes, in fiscal 2007.
The change in the cumulative foreign currency translation
adjustment resulted in a gain of $171.2 million, net of
income taxes, in fiscal 2009, a gain of $21.0 million, net
of income taxes, in fiscal 2008, and a gain of
$20.4 million, net of income taxes, in fiscal 2007. Amounts
included in other comprehensive income relating to cash flow
hedges were reclassified to earnings as the underlying exposure
on the debt had an impact on earnings. The net amount
reclassified from other comprehensive income to the income
statement in fiscal 2009 related to cash flow hedges was
$677,368, net of income taxes. The net loss recognized in fiscal
2008 related to cash flow hedges was $1.1 million, net of
income taxes. The net loss recognized in fiscal 2007 related to
F-14
cash flow hedges was $5.0 million, net of income taxes,
which was offset by a non-taxable gain of $4.6 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, that intercompany loan and the related
currency swap that had been designated as a cash flow hedge of
long-term intercompany debt 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 to date of
settlement in the fourth quarter of fiscal 2009, to the extent
effective, have been recorded in other comprehensive income. The
ineffective portion of the currency swap resulted in pre-tax
charges to the income statement of $2.2 million in fiscal
2009, $9.1 million in fiscal 2008 and $2.9 million in
fiscal 2007.
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 immaterial.
The value of foreign currency exchange contracts relating to
inventory commitments is reported in earnings as a component of
cost of sales, including buying and occupancy costs. The income
statement impact of all other foreign currency 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 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $50,000
|
|
|
LIBOR + 4.17%
|
|
|
|
7.45%
|
|
|
|
N/A
|
|
US$
|
766
|
|
Interest rate swap fixed to floating on notional of $50,000
|
|
|
LIBOR + 3.42%
|
|
|
|
7.45%
|
|
|
|
N/A
|
|
US$
|
1,093
|
|
Intercompany balance hedges, primarily short-term debt and
related interest
|
|
C$
|
37,795
|
|
|
US$
|
33,826
|
|
|
|
0.8950
|
|
US$
|
3,051
|
|
|
|
US$
|
114,990
|
|
|
C$
|
143,051
|
|
|
|
0.8038
|
|
US$
|
1,300
|
|
|
|
US$
|
39,997
|
|
|
|
30,936
|
|
|
|
1.2929
|
|
US$
|
(370
|
)
|
Hedge accounting not elected:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diesel contract hedges
|
|
|
Fixed on 750K gal
|
|
|
|
Float on 750K gal
|
|
|
|
N/A
|
|
US$
|
(4,931
|
)
|
Merchandise purchase commitment hedges
|
|
C$
|
206,109
|
|
|
US$
|
172,500
|
|
|
|
0.8369
|
|
US$
|
4,837
|
|
|
|
C$
|
4,828
|
|
|
|
2,950
|
|
|
|
0.6110
|
|
US$
|
(149
|
)
|
|
|
£
|
19,394
|
|
|
US$
|
28,000
|
|
|
|
1.4437
|
|
US$
|
(204
|
)
|
|
|
£
|
7,273
|
|
|
|
8,000
|
|
|
|
1.1000
|
|
US$
|
(343
|
)
|
|
|
US$
|
441
|
|
|
|
327
|
|
|
|
1.3486
|
|
US$
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
|
5,027
|
|
|
|
F-15
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 31,
|
|
|
January 26,
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
|
|
Current assets
|
|
$
|
11,772
|
|
|
$
|
53,094
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
(6,745
|
)
|
|
|
(1,267
|
)
|
Non-current liabilities
|
|
|
|
|
|
|
(143,091
|
)
|
|
|
Net fair value asset (liability)
|
|
$
|
5,027
|
|
|
$
|
(91,264
|
)
|
|
|
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 the contracts outstanding at
January 31, 2009 mature during 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.
|
|
F.
|
Disclosures
about Fair Value of Financial Instruments
|
In September 2006, the FASB issued Statement of Financial
Accounting Standard No. 157, Fair Value
Measurements (SFAS 157). SFAS 157 establishes a
common definition for fair value to be applied to U.S. GAAP
requiring use of fair value, establishes a framework for
measuring fair value, and expands disclosure about such fair
value measurements. SFAS 157 was effective for financial
assets and financial liabilities for fiscal years beginning
after November 15, 2007. Issued in February 2008,
FSP 157-1
Application of FASB Statement No. 157 to FASB
Statement No. 13 and Other Accounting Pronouncements That
Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13 removed
leasing transactions accounted for under FASB Statement
No. 13 and related guidance from the scope of
SFAS 157.
FSP 157-2
Partial Deferral of the Effective Date of Statement
157, deferred the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities except for
those that are recognized or disclosed at fair value on a
recurring basis (at least annually) to fiscal years beginning
after November 15, 2008.
The implementation of SFAS 157 for financial assets and
financial liabilities, effective January 27, 2008 for TJX,
did not have a material impact on its consolidated financial
position and results of operations. TJX is currently assessing
the impact of SFAS 157 for nonfinancial assets and
nonfinancial liabilities on its consolidated financial position
and results of operations.
SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date (exit price). SFAS 157 classifies the
inputs used to measure fair value into the following hierarchy:
Level 1: Unadjusted quoted prices in active markets for
identical assets or liabilities.
Level 2: Unadjusted quoted prices in active markets for
similar assets or liabilities, or unadjusted quoted prices for
identical or similar assets or liabilities in markets that are
not active, or inputs other than quoted prices that are
observable for the asset or liability.
Level 3: Unobservable inputs for the asset or liability.
Financial assets and liabilities are classified in their
entirety based on the lowest level of input that is significant
to the fair value measurement. TJX has determined that its
financial assets and liabilities at January 31, 2009 were
generally
F-16
classified within level 1 or level 2 in the fair value
hierarchy. The following table sets forth TJXs financial
assets and liabilities that were accounted for at fair value on
a recurring basis:
|
|
|
|
|
|
|
As of
|
|
|
January 31,
|
In thousands
|
|
2009
|
|
|
Level 1
|
|
|
|
Assets:
|
|
|
|
Cash equivalents
|
|
$
|
161,592
|
Executive savings plan assets
|
|
|
40,636
|
Level 2
|
|
|
|
Assets:
|
|
|
|
Foreign currency exchange contract hedges
|
|
$
|
9,534
|
Interest rate swaps
|
|
|
1,859
|
Liabilities:
|
|
|
|
Foreign currency exchange contract hedges
|
|
$
|
1,435
|
Diesel fuel contract hedges
|
|
|
4,931
|
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 the zero coupon convertible subordinated notes is estimated
by obtaining market quotes. The fair value of the current
installments of long-term debt at January 31, 2009 is
$399.9 million versus a carrying value of
$392.9 million. The fair value of the zero coupon
convertible subordinated notes as of January 31, 2009, is
$358.3 million versus a carrying value of
$365.6 million. These estimates do not necessarily reflect
provisions or restrictions in the various debt agreements that
might affect our ability to settle these obligations.
As a result of its international operating and financing
activities, TJX is exposed to market risks from changes in
interest and foreign currency exchange rates, which may
adversely affect its operating results and financial position.
When it deems appropriate, TJX minimizes risks from interest and
foreign currency exchange rate fluctuations through the use of
derivative financial instruments. Derivative financial
instruments are used to manage risk and are not used for trading
or other speculative purposes and TJX does not use leveraged
derivative financial instruments. The forward foreign currency
exchange contracts and interest rate swaps are valued using
broker quotations which include observable market information.
TJX makes no adjustments to quotes or prices obtained from
brokers or pricing services but does assess the credit risk of
counterparties and will adjust final valuations when
appropriate. Where independent pricing services provide fair
values, TJX obtained an understanding of the methods used in
pricing. As such, these derivative instruments are classified
within level 2.
In February 2007, the FASB issued SFAS 159, The Fair
Value Option for Financial Assets and Financial
Liabilitiesincluding an amendment of FASB Statement
No. 115 (SFAS 159). SFAS 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 159 is effective for fiscal years beginning after
November 15, 2007, and interim periods within those years
and was adopted by TJX in the first quarter of fiscal 2009. Upon
adoption, TJX elected not to adjust any financial assets or
liabilities not previously recorded at fair value and therefore,
the adoption of SFAS 159 did not have an impact on
TJXs consolidated balance sheet or statement of operations.
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 then remaining terms ranging up to twenty-five
years. T.K. Maxx leases are generally for fifteen to twenty-five
years with ten-year kick-out options. Many of our 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
F-17
sales. These expenses in the aggregate were approximately
one-third of the total minimum rent for the fiscal year ended
January 31, 2009, the fiscal year ended January 26,
2008 and the fiscal year ended January 27, 2007.
Following is a schedule of future minimum lease payments for
continuing operations as of January 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
In thousands
|
|
Lease
|
|
|
Leases
|
|
|
|
|
Fiscal Year
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
3,726
|
|
|
$
|
913,446
|
|
2011
|
|
|
3,726
|
|
|
|
840,457
|
|
2012
|
|
|
3,897
|
|
|
|
741,940
|
|
2013
|
|
|
3,912
|
|
|
|
624,872
|
|
2014
|
|
|
3,912
|
|
|
|
513,069
|
|
Later years
|
|
|
7,498
|
|
|
|
1,437,499
|
|
|
|
Total future minimum lease payments
|
|
|
26,671
|
|
|
$
|
5,071,283
|
|
|
|
Less amount representing interest
|
|
|
6,297
|
|
|
|
|
|
|
|
Net present value of minimum capital lease payments
|
|
$
|
20,374
|
|
|
|
|
|
|
|
The capital lease 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 $936.6 million for fiscal 2009,
$875.6 million for fiscal 2008 and $816.4 million for
fiscal 2007. Rental expense includes contingent rent and is
reported net of sublease income. Contingent rent paid was
$8.3 million in fiscal 2009, $9.7 million in fiscal
2008 and $9.0 million in fiscal 2007. Sublease income was
$2.1 million in fiscal 2009, $2.9 million in fiscal
2008, and $3.0 million in fiscal 2007. The total net
present value of TJXs minimum operating lease obligations
approximated $3,962.2 million as of January 31, 2009.
TJX had outstanding letters of credit totaling
$32.0 million as of January 31, 2009 and
$32.7 million as of January 26, 2008. Letters of
credit are issued by TJX primarily for the purchase of inventory.
Total compensation cost related to share based compensation was
$31.2 million net of income taxes of $20.1 million in
fiscal 2009, $37.0 million net of income taxes of
$20.3 million in fiscal 2008 and $45.1 million net of
income taxes of $24.7 million in fiscal 2007.
As of January 31, 2009, there was $77.5 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.
TJX has a stock incentive plan under which options and other
share based 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 12.4 million shares available for future grants
as of January 31, 2009. TJX issues shares from authorized
but unissued common stock.
Options for the purchase of common stock have been granted at
100% of market price on the grant date and generally vest in
thirds over a three-year period starting one year after the
grant, and have a ten year term. For purposes
F-18
of applying the provisions of SFAS No. 123(R), the
fair value of options is estimated as of the date of grant using
the Black-Scholes option pricing model with the following
weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
January 31,
|
|
|
January 26,
|
|
|
January 27,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Risk free interest rate
|
|
|
2.96
|
%
|
|
|
4.00
|
%
|
|
|
4.75
|
%
|
Dividend yield
|
|
|
1.3
|
%
|
|
|
1.2
|
%
|
|
|
1.1
|
%
|
Expected volatility factor
|
|
|
33.9
|
%
|
|
|
31.0
|
%
|
|
|
32.0
|
%
|
Expected option life in years
|
|
|
4.8
|
|
|
|
4.5
|
|
|
|
4.5
|
|
Weighted average fair value of options issued
|
|
$
|
10.46
|
|
|
$
|
8.38
|
|
|
$
|
8.35
|
|
|
|
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 during the fiscal
years presented. 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: 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 31, 2009
|
|
|
January 26, 2008
|
|
|
January 27, 2007
|
|
|
|
Options
|
|
|
WAEP
|
|
|
Options
|
|
|
WAEP
|
|
|
Options
|
|
|
WAEP
|
|
|
|
|
Outstanding at beginning of year
|
|
|
35,153
|
|
|
$
|
22.17
|
|
|
|
37,854
|
|
|
$
|
20.50
|
|
|
|
47,902
|
|
|
$
|
18.97
|
|
Granted
|
|
|
5,199
|
|
|
|
35.02
|
|
|
|
5,716
|
|
|
|
29.23
|
|
|
|
5,788
|
|
|
|
27.03
|
|
Exercised and repurchased
|
|
|
(7,533
|
)
|
|
|
19.08
|
|
|
|
(7,473
|
)
|
|
|
18.84
|
|
|
|
(14,524
|
)
|
|
|
17.92
|
|
Forfeitures
|
|
|
(1,046
|
)
|
|
|
27.59
|
|
|
|
(944
|
)
|
|
|
24.25
|
|
|
|
(1,312
|
)
|
|
|
21.93
|
|
|
|
Outstanding at end of year
|
|
|
31,773
|
|
|
$
|
24.83
|
|
|
|
35,153
|
|
|
$
|
22.17
|
|
|
|
37,854
|
|
|
$
|
20.50
|
|
|
|
Options exercisable at end of year
|
|
|
21,664
|
|
|
$
|
21.56
|
|
|
|
24,243
|
|
|
$
|
19.88
|
|
|
|
24,848
|
|
|
$
|
18.69
|
|
|
|
Included in the exercised and repurchased amount in the table
above are approximately 77,000 options repurchased from
optionees by TJX during fiscal 2009 and 341,000 options
repurchased during fiscal 2008. Cash paid for such repurchased
options amounted to $659,305 in fiscal 2009 and
$2.3 million in fiscal 2008. The total intrinsic value of
options exercised was $108.1 million in fiscal 2009,
$79.7 million in fiscal 2008 and $131.6 million in
fiscal 2007.
The following table summarizes information about stock options
outstanding that are expected to vest and stock options
outstanding that are exercisable at January 31, 2009.
Options outstanding expected to vest represents total unvested
options of 10.1 million adjusted for anticipated
forfeitures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
|
Aggregate
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
|
Intrinsic
|
|
|
Contract
|
|
|
Exercise
|
|
In thousands except years and per share amounts
|
|
Shares
|
|
|
Value
|
|
|
Life
|
|
|
Price
|
|
|
|
|
Options outstanding expected to vest
|
|
|
9,396
|
|
|
$
|
0
|
|
|
|
8.9 years
|
|
|
$
|
31.71
|
|
Options exercisable
|
|
|
21,664
|
|
|
$
|
0
|
|
|
|
5.4 years
|
|
|
$
|
21.56
|
|
|
|
Total outstanding options vested and expected to vest
|
|
|
31,060
|
|
|
$
|
0
|
|
|
|
6.5 years
|
|
|
$
|
24.63
|
|
|
|
Performance Based Restricted Stock and Other
Awards: TJX has issued performance-based restricted
stock awards under the Stock Incentive Plan. Performance-based
restricted stock awards are issued at no cost to the recipient
of the award, and have restrictions that generally lapse over
one to four years from date of grant when and if specified
F-19
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 summary of the status of our nonvested performance-based
restricted stock and changes during fiscal 2009 is presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
Weighted
|
|
|
|
Based
|
|
|
Average
|
|
|
|
Restricted
|
|
|
Grant Date
|
|
Shares in thousands
|
|
Stock
|
|
|
Fair Value
|
|
|
|
|
Nonvested at beginning of year
|
|
|
593
|
|
|
$
|
24.82
|
|
Granted
|
|
|
173
|
|
|
|
33.49
|
|
Vested
|
|
|
(251
|
)
|
|
|
23.49
|
|
Forfeited
|
|
|
(73
|
)
|
|
|
28.35
|
|
|
|
Nonvested at end of year
|
|
|
442
|
|
|
$
|
28.37
|
|
|
|
There were 173,000 shares of performance-based restricted
stock, with a weighted average grant date fair value of $33.49,
granted in fiscal 2009; 200,000 shares with a weighted
average grant date fair value of $28.04 were granted in fiscal
2008 and 236,000 shares with a weighted average grant date fair
value of $27.16 were granted in fiscal 2007. The fair value of
performance-based restricted stock that vested was
$5.9 million in fiscal 2009, $3.9 million in fiscal
2008 and $4.9 million in fiscal 2007.
In November 2005, TJX issued a market-based deferred share award
for up to 94,000 shares to its acting chief executive
officer which was indexed to TJXs stock price for the
sixty-day
period beginning February 22, 2007 (measurement
period). 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 2009,
a total of 144,588 deferred shares were outstanding under the
plan.
|
|
I.
|
Capital
Stock and Earnings Per Share
|
Capital Stock: In August 2008, we completed a
$1 billion stock repurchase program begun in fiscal 2007
and initiated another multi-year $1 billion stock
repurchase program that had been approved in February 2008. We
repurchased and retired 24.0 million shares of our common
stock at a cost of $741.1 million during fiscal 2009. TJX
reflects stock repurchases in its financial statements on a
settlement basis. We had cash expenditures under our
repurchase programs of $751.1 million in fiscal 2009,
$940.2 million in fiscal 2008 and $557.2 million in
fiscal 2007, funded primarily by cash generated from operations.
The total common shares repurchased amounted to
24.3 million shares in fiscal 2009, 33.0 million
shares in fiscal 2008 and 22.0 million shares in fiscal
2007. As of January 31, 2009, we had repurchased
8.9 million shares of our common stock at a cost of
$255.1 million under the current $1 billion stock
repurchase program. All shares repurchased under our stock
repurchase programs have been retired.
TJX has 5 million shares of authorized but unissued
preferred stock, $1 par value.
F-20
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 31,
|
|
January 26,
|
|
January 27,
|
except per share amounts
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
(53 weeks)
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
914,886
|
|
$
|
782,432
|
|
$
|
787,172
|
|
|
Weighted average common stock outstanding for basic earnings per
share calculation
|
|
|
419,076
|
|
|
443,050
|
|
|
454,044
|
Basic earnings per share
|
|
$
|
2.18
|
|
$
|
1.77
|
|
$
|
1.73
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
914,886
|
|
$
|
782,432
|
|
$
|
787,172
|
Add back: Interest expense on zero coupon convertible
subordinated notes, net of income taxes
|
|
|
4,653
|
|
|
4,716
|
|
|
4,623
|
|
|
Income from continuing operations used for diluted earnings per
share calculation
|
|
$
|
919,539
|
|
$
|
787,148
|
|
$
|
791,795
|
|
|
Weighted average common stock outstanding for basic earnings per
share calculation
|
|
|
419,076
|
|
|
443,050
|
|
|
454,044
|
Assumed conversion/exercise of:
|
|
|
|
|
|
|
|
|
|
Convertible subordinated notes
|
|
|
16,434
|
|
|
16,905
|
|
|
16,905
|
Stock options and awards
|
|
|
6,745
|
|
|
8,091
|
|
|
9,096
|
|
|
Weighted average common stock outstanding for diluted earnings
per share calculation
|
|
|
442,255
|
|
|
468,046
|
|
|
480,045
|
|
|
Diluted earnings per share
|
|
$
|
2.08
|
|
$
|
1.68
|
|
$
|
1.65
|
|
|
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 5.2 million
such options excluded as of January 31, 2009 and
5.7 million excluded at both January 26, 2008 and
January 27, 2007.
The provision for income taxes includes the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
January 31,
|
|
|
January 26,
|
|
|
January 27,
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
(53 weeks)
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
259,857
|
|
|
$
|
375,799
|
|
|
$
|
327,716
|
|
State
|
|
|
27,376
|
|
|
|
94,727
|
|
|
|
58,170
|
|
Foreign
|
|
|
97,976
|
|
|
|
87,260
|
|
|
|
60,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
126,816
|
|
|
|
(64,363
|
)
|
|
|
28,923
|
|
State
|
|
|
23,955
|
|
|
|
(15,698
|
)
|
|
|
397
|
|
Foreign
|
|
|
74
|
|
|
|
(70
|
)
|
|
|
1,681
|
|
|
|
Provision for income taxes
|
|
$
|
536,054
|
|
|
$
|
477,655
|
|
|
$
|
477,036
|
|
|
|
F-21
TJX had net deferred tax assets as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
January 31,
|
|
|
January 26,
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Foreign tax credit carryforward
|
|
$
|
37,611
|
|
|
$
|
12,409
|
|
Reserve for discontinued operations
|
|
|
14,859
|
|
|
|
20,264
|
|
Pension, stock compensation, postretirement and employee benefits
|
|
|
238,557
|
|
|
|
189,619
|
|
Leases
|
|
|
38,889
|
|
|
|
39,373
|
|
Foreign currency hedges
|
|
|
4,571
|
|
|
|
36,654
|
|
Computer Intrusion reserve
|
|
|
16,749
|
|
|
|
46,531
|
|
Other
|
|
|
83,483
|
|
|
|
85,199
|
|
|
|
Total deferred tax assets
|
|
$
|
434,719
|
|
|
$
|
430,049
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
$
|
203,829
|
|
|
$
|
139,396
|
|
Safe harbor leases
|
|
|
6,521
|
|
|
|
7,548
|
|
Tradename
|
|
|
42,873
|
|
|
|
40,761
|
|
Undistributed foreign earnings
|
|
|
111,506
|
|
|
|
77,198
|
|
Other
|
|
|
61,323
|
|
|
|
44,584
|
|
|
|
Total deferred tax liabilities
|
|
|
426,052
|
|
|
|
309,487
|
|
|
|
Net deferred tax asset
|
|
$
|
8,667
|
|
|
$
|
120,562
|
|
|
|
The fiscal 2009 net deferred tax asset is presented on the
balance sheet as a current asset of $135.7 million and a
non-current liability of $127.0 million. For fiscal 2008,
the 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. TJX changed its assertion
during fiscal 2008 regarding the undistributed earnings of its
Marshalls Puerto Rico subsidiary and therefore the earnings of
this subsidiary are no longer considered indefinitely
reinvested. As a result, TJX recognized a $5.5 million tax
benefit in fiscal 2008 after providing for deferred
U.S. taxes for this subsidiary. TJX has provided for
deferred U.S. taxes on all undistributed earnings from its
Winners Canadian subsidiary and its Marshalls Puerto Rico
subsidiary through January 31, 2009. All earnings of
TJXs other foreign subsidiaries are considered
indefinitely reinvested and no U.S. 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
$19.9 million net liability as of January 31, 2009 and
a $26.7 million net liability as of January 26, 2008.
In fiscal 2009, TJXs HomeGoods subsidiary utilized a
Puerto Rico net operating loss carryforward of approximately
$1.1 million which had not been previously recognized.
There are no further Puerto Rico net operating losses as of the
fiscal year ended January 31, 2009. TJXs German
subsidiary, which is treated as a branch for U.S. tax
purposes, incurred net operating losses of $15.0 million in
fiscal 2009 and $14.4 million in fiscal 2008 for tax and
financial reporting purposes. The losses were fully utilized in
each year to reduce TJXs current U.S. taxable income.
Any future utilization of the losses in Germany will result in a
corresponding amount of taxable income for U.S. tax
purposes.
TJX established valuation allowances against certain deferred
tax assets which may not be realized in future years. The amount
of the valuation allowances was $6.2 million as of
January 31, 2009 and $4.0 million as of
January 26, 2008.
F-22
TJXs worldwide effective income tax rate was 36.9% for
fiscal 2009, 37.9% for fiscal 2008 and 37.7% for fiscal 2007.
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 31,
|
|
|
January 26,
|
|
|
January 27,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
U.S. federal statutory income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Effective state income tax rate
|
|
|
2.8
|
|
|
|
4.1
|
|
|
|
4.0
|
|
Impact of foreign operations
|
|
|
(0.1
|
)
|
|
|
(0.6
|
)
|
|
|
(0.4
|
)
|
Impact of repatriation of foreign earnings
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
Impact of tax free currency (gains) losses on intercompany loans
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
|
|
(0.2
|
)
|
All other
|
|
|
(0.9
|
)
|
|
|
(0.1
|
)
|
|
|
(0.7
|
)
|
|
|
Worldwide effective income tax rate
|
|
|
36.9
|
%
|
|
|
37.9
|
%
|
|
|
37.7
|
%
|
|
|
The decrease in TJXs effective state income tax rate for
fiscal 2009 as compared to fiscal 2008 is primarily attributed
to the settlement of several state tax audits and the resulting
reduction to FIN 48 reserves for uncertain tax positions.
TJX adopted the provisions of FASB Interpretation No. 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, TJX recognized a charge of approximately
$27.2 million to its retained earnings balance at the
beginning of fiscal 2008. TJX had net unrecognized tax benefits
of $129.9 million as of January 31, 2009,
$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:
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
January 26,
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
|
|
Balance at beginning of year or date of implementation
|
|
$
|
232,859
|
|
|
$
|
188,671
|
|
Additions for uncertain tax positions taken in current year
|
|
|
59,807
|
|
|
|
30,811
|
|
Additions for uncertain tax positions taken in prior years
|
|
|
1,848
|
|
|
|
52,328
|
|
Reductions for uncertain tax positions taken in prior years
|
|
|
(80,959
|
)
|
|
|
(36,474
|
)
|
Reductions resulting from lapse of statute of limitation
|
|
|
(2,002
|
)
|
|
|
(307
|
)
|
Settlements with tax authorities
|
|
|
(9,010
|
)
|
|
|
(2,170
|
)
|
|
|
Balance at end of year
|
|
$
|
202,543
|
|
|
$
|
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 $49.3 million as of
January 31, 2009 and $67.8 million as of
January 26, 2008.
TJX 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.
TJXs accounting policy is to classify interest and
penalties related to income tax matters as part of income tax
expense. The amount of interest and penalties expensed was
$15.3 million for the year ended January 31, 2009 and
$16.2 million for the year ended January 26, 2008. The
accrued amounts for interest and penalties are
$51.1 million as of January 31, 2009 and
$52.5 million as of January 26, 2008.
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 of January 31,
2009. During the next 12 months, it is reasonably possible
that such circumstances may occur that would have a material
effect on previously unrecognized tax benefits. As a result, the
total net amount of unrecognized tax
F-23
benefits may decrease, which would reduce the provision for
taxes on earnings by a range estimated at $2.0 million to
$70.0 million.
|
|
K.
|
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. As a result of an amendment to the plan, employees
hired 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 pension expense for the last three fiscal
years, but is expected to gradually 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. TJX also has an
unfunded supplemental retirement plan which covers key employees
and provides for additional retirement benefits based on average
compensation for certain employees.
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement
PlansAn 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.
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 31,
|
|
|
January 26,
|
|
|
January 31,
|
|
|
January 26,
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
(53 weeks)
|
|
|
|
|
|
(53 weeks)
|
|
|
|
|
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year
|
|
$
|
447,684
|
|
|
$
|
417,436
|
|
|
$
|
51,588
|
|
|
$
|
53,109
|
|
Effect of change in measurement date
|
|
|
|
|
|
|
4,395
|
|
|
|
|
|
|
|
152
|
|
Service cost
|
|
|
30,406
|
|
|
|
34,704
|
|
|
|
1,069
|
|
|
|
992
|
|
Interest cost
|
|
|
28,711
|
|
|
|
24,632
|
|
|
|
3,366
|
|
|
|
2,867
|
|
Actuarial (gains) losses
|
|
|
(1,411
|
)
|
|
|
(21,673
|
)
|
|
|
2,252
|
|
|
|
(3,420
|
)
|
Settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special termination benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168
|
|
Benefits paid
|
|
|
(10,713
|
)
|
|
|
(9,586
|
)
|
|
|
(2,812
|
)
|
|
|
(2,280
|
)
|
Expenses paid
|
|
|
(2,264
|
)
|
|
|
(2,224
|
)
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of year
|
|
$
|
492,413
|
|
|
$
|
447,684
|
|
|
$
|
55,463
|
|
|
$
|
51,588
|
|
|
|
Accumulated benefit obligation at end of year
|
|
$
|
451,260
|
|
|
$
|
408,437
|
|
|
$
|
42,560
|
|
|
$
|
46,023
|
|
|
|
F-24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded Plan
|
|
|
Unfunded Plan
|
|
|
|
Fiscal Year Ended
|
|
|
Fiscal Year Ended
|
|
|
|
January 31,
|
|
|
January 26,
|
|
|
January 31,
|
|
|
January 26,
|
|
In thousands
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
(53 weeks)
|
|
|
|
|
|
(53 weeks)
|
|
|
|
|
|
Change |