e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(mark one)
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þ |
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Quarterly Period Ended October 31, 2009
Or
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o |
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission file number 1-4908
The TJX Companies, Inc.
(Exact name of registrant as specified in its charter)
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DELAWARE
(State or other jurisdiction of incorporation or organization)
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04-2207613
(I.R.S. Employer Identification No.) |
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770 Cochituate Road Framingham, Massachusetts
(Address of principal executive offices)
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01701
(Zip Code) |
(508) 390-1000
(Registrants telephone number, including area code)
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 þ NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). YES
þ NO o
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 þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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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 o NO þ.
The number of shares of registrants common stock outstanding as of October 31, 2009: 419,708,634
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
THE TJX COMPANIES, INC.
STATEMENTS OF INCOME
(UNAUDITED)
AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
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Thirteen Weeks Ended |
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October 31, |
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October 25, |
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2009 |
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2008 |
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Net sales |
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$ |
5,244,946 |
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$ |
4,761,530 |
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Cost of sales, including buying and occupancy costs |
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3,802,179 |
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3,536,990 |
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Selling, general and administrative expenses |
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864,097 |
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807,833 |
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Provision (credit) for Computer Intrusion related costs |
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(7,000 |
) |
Interest expense, net |
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12,665 |
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5,449 |
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Income from continuing operations before provision for
income taxes |
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566,005 |
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418,258 |
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Provision for income taxes |
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218,206 |
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164,141 |
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Income from continuing operations |
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347,799 |
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254,117 |
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(Loss) from discontinued operations, net of income taxes |
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(18,268 |
) |
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Net income |
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$ |
347,799 |
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$ |
235,849 |
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Basic earnings per share: |
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Income from continuing operations |
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$ |
0.82 |
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$ |
0.61 |
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(Loss) from discontinued operations, net of income taxes |
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$ |
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$ |
(0.04 |
) |
Net income |
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$ |
0.82 |
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$ |
0.57 |
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Weighted average common shares basic |
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421,654 |
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417,107 |
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Diluted earnings per share: |
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Income from continuing operations |
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$ |
0.81 |
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$ |
0.58 |
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(Loss) from discontinued operations, net of income taxes |
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$ |
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$ |
(0.04 |
) |
Net income |
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$ |
0.81 |
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$ |
0.54 |
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Weighted average common shares diluted |
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428,092 |
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440,749 |
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Cash dividends declared per share |
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$ |
0.12 |
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$ |
0.11 |
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The accompanying notes are an integral part of the financial statements.
2
THE TJX COMPANIES, INC.
STATEMENTS OF INCOME
(UNAUDITED)
AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
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Thirty-Nine Weeks Ended |
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October 31, |
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October 25, |
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2009 |
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2008 |
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Net sales |
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$ |
14,346,698 |
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$ |
13,619,480 |
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Cost of sales, including buying and occupancy costs |
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10,609,827 |
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10,261,376 |
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Selling, general and administrative expenses |
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2,390,030 |
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2,303,155 |
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Provision (credit) for Computer Intrusion related costs |
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(7,000 |
) |
Interest expense, net |
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28,515 |
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9,764 |
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Income from continuing operations before provision for
income taxes |
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1,318,326 |
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1,052,185 |
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Provision for income taxes |
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499,752 |
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387,995 |
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Income from continuing operations |
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818,574 |
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664,190 |
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(Loss) from discontinued operations, net of income taxes |
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(34,269 |
) |
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Net income |
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$ |
818,574 |
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$ |
629,921 |
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Basic earnings per share: |
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Income from continuing operations |
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$ |
1.95 |
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$ |
1.58 |
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(Loss) from discontinued operations, net of income taxes |
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$ |
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$ |
(0.09 |
) |
Net income |
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$ |
1.95 |
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$ |
1.49 |
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Weighted average common shares basic |
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419,398 |
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421,371 |
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Diluted earnings per share: |
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Income from continuing operations |
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$ |
1.91 |
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$ |
1.50 |
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(Loss) from discontinued operations, net of income taxes |
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$ |
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$ |
(0.08 |
) |
Net income |
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$ |
1.91 |
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$ |
1.42 |
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Weighted average common shares diluted |
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430,136 |
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445,763 |
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Cash dividends declared per share |
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$ |
0.36 |
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$ |
0.33 |
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The accompanying notes are an integral part of the financial statements.
3
THE TJX COMPANIES, INC.
BALANCE SHEETS
IN THOUSANDS, EXCEPT SHARE DATA
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October 31, |
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January 31, |
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October 25, |
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2009 |
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2009 |
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2008 |
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(unaudited) |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
1,445,648 |
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$ |
453,527 |
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$ |
387,351 |
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Short-term investments |
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76,643 |
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Accounts receivable, net |
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163,555 |
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143,500 |
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166,553 |
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Merchandise inventories |
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3,267,667 |
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2,619,336 |
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3,279,305 |
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Prepaid expenses and other current assets |
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259,357 |
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274,091 |
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331,519 |
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Current deferred income taxes, net |
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117,787 |
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135,675 |
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97,706 |
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Total current assets |
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5,330,657 |
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3,626,129 |
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4,262,434 |
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Property at cost: |
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Land and buildings |
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277,586 |
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280,278 |
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279,247 |
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Leasehold costs and improvements |
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1,910,909 |
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1,728,362 |
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1,727,548 |
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Furniture, fixtures and equipment |
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3,019,725 |
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2,784,316 |
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2,718,860 |
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Total property at cost |
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5,208,220 |
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4,792,956 |
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4,725,655 |
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Less accumulated depreciation and amortization |
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2,947,688 |
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2,607,200 |
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2,561,323 |
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Net property at cost |
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2,260,532 |
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2,185,756 |
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2,164,332 |
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Property under capital lease, net of accumulated
amortization of $18,799; $17,124 and $16,565, respectively |
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13,773 |
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15,448 |
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16,007 |
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Other assets |
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198,335 |
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171,381 |
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|
166,184 |
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Goodwill and tradename, net of amortization |
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179,767 |
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179,528 |
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179,459 |
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TOTAL ASSETS |
|
$ |
7,983,064 |
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$ |
6,178,242 |
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$ |
6,788,416 |
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LIABILITIES |
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Current liabilities: |
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Current installments of long-term debt |
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$ |
200,358 |
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$ |
392,852 |
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$ |
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Obligation under capital lease due within one year |
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2,309 |
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|
2,175 |
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|
2,132 |
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Short-term debt |
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105,930 |
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Accounts payable |
|
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1,838,558 |
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1,276,098 |
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|
1,758,242 |
|
Accrued expenses and other liabilities |
|
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1,204,915 |
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1,096,766 |
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1,358,251 |
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Total current liabilities |
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3,246,140 |
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2,767,891 |
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3,224,555 |
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|
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Other long-term liabilities |
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742,594 |
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|
765,004 |
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|
570,290 |
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Non-current deferred income taxes, net |
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|
263,066 |
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|
127,008 |
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|
|
99,795 |
|
Obligation under capital lease, less portion due within one year |
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|
16,451 |
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|
18,199 |
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|
18,759 |
|
Long-term debt, exclusive of current installments |
|
|
774,306 |
|
|
|
365,583 |
|
|
|
748,607 |
|
Commitments and contingencies |
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SHAREHOLDERS EQUITY |
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Common stock, authorized 1,200,000,000 shares,
par value $1, issued and outstanding 419,708,634;
412,821,592 and 416,340,031, respectively |
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|
419,709 |
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|
|
412,822 |
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|
416,340 |
|
Additional paid-in capital |
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|
34,719 |
|
|
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Accumulated other comprehensive (loss) |
|
|
(119,636 |
) |
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|
(217,781 |
) |
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|
(92,102 |
) |
Retained earnings |
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|
2,605,715 |
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|
1,939,516 |
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1,802,172 |
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Total shareholders equity |
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2,940,507 |
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|
2,134,557 |
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|
2,126,410 |
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TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
$ |
7,983,064 |
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$ |
6,178,242 |
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$ |
6,788,416 |
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The accompanying notes are an integral part of the financial statements.
4
THE TJX COMPANIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
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|
Thirty-Nine Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
|
|
2009 |
|
|
2008 |
|
Cash flows from operating activities: |
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|
|
|
|
|
|
|
Net income |
|
$ |
818,574 |
|
|
$ |
629,921 |
|
Adjustments to reconcile net income to net cash
provided by operating activities: |
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Depreciation and amortization |
|
|
318,940 |
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|
301,025 |
|
Assets of discontinued operations disposed, net of cash |
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|
31,328 |
|
Loss on property disposals and impairment charges |
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|
6,764 |
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|
22,504 |
|
Deferred income tax provision |
|
|
130,539 |
|
|
|
26,866 |
|
Amortization of share-based compensation expense |
|
|
40,831 |
|
|
|
38,096 |
|
Excess tax benefits from share-based compensation expense |
|
|
(15,755 |
) |
|
|
(18,971 |
) |
Changes in assets and liabilities: |
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|
|
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|
|
|
(Increase) in accounts receivable |
|
|
(16,466 |
) |
|
|
(33,420 |
) |
(Increase) in merchandise inventories |
|
|
(577,469 |
) |
|
|
(736,768 |
) |
Decrease (increase) in prepaid expenses and other
current assets |
|
|
15,876 |
|
|
|
(24,416 |
) |
Increase in accounts payable |
|
|
522,079 |
|
|
|
349,702 |
|
Increase in accrued expenses and other liabilities |
|
|
82,156 |
|
|
|
157,928 |
|
Other |
|
|
(36,848 |
) |
|
|
(16,960 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
1,289,221 |
|
|
|
726,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Property additions |
|
|
(318,948 |
) |
|
|
(443,008 |
) |
Purchase of short-term investments |
|
|
(199,839 |
) |
|
|
|
|
Sales and maturities of short-term investments |
|
|
126,741 |
|
|
|
|
|
Proceeds from sale of discontinued operations, net of cash sold |
|
|
|
|
|
|
4,804 |
|
Cash payments for costs associated with sale of discontinued
operations |
|
|
|
|
|
|
(5,647 |
) |
Other |
|
|
(5,802 |
) |
|
|
602 |
|
|
|
|
|
|
|
|
Net cash (used in) investing activities |
|
|
(397,848 |
) |
|
|
(443,249 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
774,263 |
|
|
|
|
|
Principal payments on current portion of long-term debt |
|
|
(193,573 |
) |
|
|
|
|
Cash payments for debt issuance expenses |
|
|
(7,202 |
) |
|
|
|
|
Proceeds from borrowing of short-term debt |
|
|
|
|
|
|
105,930 |
|
Payments on capital lease obligation |
|
|
(1,614 |
) |
|
|
(1,491 |
) |
Cash payments for repurchase of common stock |
|
|
(530,501 |
) |
|
|
(667,099 |
) |
Proceeds from sale and issuance of common stock |
|
|
154,095 |
|
|
|
141,133 |
|
Excess tax benefits from share-based compensation expense |
|
|
15,755 |
|
|
|
18,971 |
|
Cash dividends paid |
|
|
(147,403 |
) |
|
|
(131,136 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
63,820 |
|
|
|
(533,692 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
36,928 |
|
|
|
(95,155 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
992,121 |
|
|
|
(345,261 |
) |
Cash and cash equivalents at beginning of fiscal year |
|
|
453,527 |
|
|
|
732,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
1,445,648 |
|
|
$ |
387,351 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
5
THE TJX COMPANIES, INC.
STATEMENT OF SHAREHOLDERS EQUITY
(UNAUDITED)
IN THOUSANDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Additional |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Par Value |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Retained |
|
|
|
|
|
|
Shares |
|
|
$1 |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Total |
|
Balance, January 31, 2009 |
|
|
412,822 |
|
|
$ |
412,822 |
|
|
$ |
|
|
|
$ |
(217,781 |
) |
|
$ |
1,939,516 |
|
|
$ |
2,134,557 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
818,574 |
|
|
|
818,574 |
|
Gain due to foreign currency
translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,187 |
|
|
|
|
|
|
|
94,187 |
|
Recognition of unfunded post
retirement liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,212 |
) |
|
|
|
|
|
|
(1,212 |
) |
Recognition of prior service
cost and deferred gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,170 |
|
|
|
|
|
|
|
5,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
916,719 |
|
Cash dividends declared on common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(152,375 |
) |
|
|
(152,375 |
) |
Restricted stock awards granted |
|
|
466 |
|
|
|
466 |
|
|
|
(466 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of share-based
compensation expense |
|
|
|
|
|
|
|
|
|
|
40,831 |
|
|
|
|
|
|
|
|
|
|
|
40,831 |
|
Issuance of common stock upon
conversion of convertible debt |
|
|
15,094 |
|
|
|
15,094 |
|
|
|
349,994 |
|
|
|
|
|
|
|
|
|
|
|
365,088 |
|
Issuance of common stock under stock
incentive plan and related tax effect |
|
|
7,193 |
|
|
|
7,193 |
|
|
|
158,995 |
|
|
|
|
|
|
|
|
|
|
|
166,188 |
|
Common stock repurchased |
|
|
(15,866 |
) |
|
|
(15,866 |
) |
|
|
(514,635 |
) |
|
|
|
|
|
|
|
|
|
|
(530,501 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2009 |
|
|
419,709 |
|
|
$ |
419,709 |
|
|
$ |
34,719 |
|
|
$ |
(119,636 |
) |
|
$ |
2,605,715 |
|
|
$ |
2,940,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
6
THE TJX COMPANIES, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Note A. Summary of Significant Accounting Policies
Basis of Presentation The consolidated interim financial statements are unaudited and, in the
opinion of management, reflect all normal recurring adjustments, the use of retail statistics, and
accruals and deferrals among periods required to match costs properly with the related revenue or
activity, considered necessary by TJX for a fair presentation of its financial statements for the
periods reported, all in accordance with generally accepted accounting principles consistently
applied. The consolidated interim financial statements should be read in conjunction with the
audited consolidated financial statements, including the related notes, contained in TJXs Annual
Report on Form 10-K for the fiscal year ended January 31, 2009 (fiscal 2009).
The results for the first nine months are not necessarily indicative of results for the full fiscal
year, because TJXs business, in common with the businesses of retailers generally, is subject to
seasonal influences, with higher levels of sales and income generally realized in the second half
of the year.
Share-Based Compensation Total share-based compensation expense was $15.0 million for the quarter
ended October 31, 2009 and $13.4 million for the quarter ended October 25, 2008. Total share-based
compensation expense was $40.8 million for the nine months ended October 31, 2009 and $38.1 million
for the nine months ended October 25, 2008. These amounts include stock option expense as well as
restricted stock amortization. There were options to purchase 3.8 million shares of common stock
exercised during the third quarter and options to purchase 7.3 million shares of common stock
exercised for the nine months ended October 31, 2009. There were options to purchase 28.7 million
shares of common stock outstanding as of October 31, 2009.
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. Investments with maturities
greater than three months but less than a year at the date of purchase are included in short-term
investments. TJXs investments are primarily high-grade commercial paper, government and corporate
bonds, institutional money market funds and time deposits with major banks.
Merchandise Inventories TJX accrues for inventory purchase obligations at the time of shipment by
the vendor. As a result, merchandise inventories on TJXs balance sheet includes an accrual for
in-transit inventory of $451.6 million at October 31, 2009 and $409.9 million at October 25, 2008.
A liability for a comparable amount is included in accounts payable for the respective period.
New Accounting Standards In April 2009, the Financial Accounting Standards Board (FASB) issued
guidance intended to provide additional application guidance and enhance disclosures regarding fair
value measurements and impairments of securities, all of which are effective for interim and annual
periods ending after June 15, 2009. The FASB provided guidelines for making fair value
measurements more consistent with other guidance when the volume and level of activity of an asset
or liability has significantly decreased from normal market activity. The FASB also required
interim reporting of fair value disclosures, provided additional guidance in determining whether a
debt security is other-than-temporarily impaired and expanded the disclosures of
other-than-temporarily impaired debt and equity securities. The adoption of this guidance did not
have a material effect on TJXs financial condition, results of operations or cash flows.
Reclassifications Certain immaterial amounts in the prior period statements of income have been
reclassified from selling, general and administrative expenses to cost of sales, including
buying and occupancy costs to be consistent with the fiscal 2010 presentation.
Note B. Discontinued Operations
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. At October 31, 2009, TJX remained contingently liable on eight Bobs Stores leases.
7
TJX also reclassified the operating results of Bobs Stores for all periods prior to the sale to be
discontinued operations. The following table presents the net sales, segment profit (loss) and
after-tax income (loss) from operations reclassified to discontinued operations for the thirteen
and thirty-nine weeks ended October 25, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Thirteen |
|
|
Thirty-Nine |
|
|
|
Weeks |
|
|
Weeks |
|
Net sales |
|
$ |
20,573 |
|
|
$ |
148,040 |
|
Segment profit (loss) |
|
$ |
1,234 |
|
|
$ |
(25,524 |
) |
After- tax income (loss) from operations |
|
$ |
687 |
|
|
$ |
(15,314 |
) |
Note C. Commitments and Contingencies
Provision for Computer Intrusion related costs TJX has a reserve for its estimate of the total
probable losses arising from 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. The reserve balance was
$25.2 million at October 31, 2009. As an estimate, the reserve is subject to uncertainty, actual
costs may vary from the current estimate and such variations may be material. TJX may decrease or
increase the amount of the reserve to adjust for developments in litigation, claims and related
expenses, insurance proceeds and changes in estimates.
Reserve for Discontinued Operations TJX has a reserve for future obligations of discontinued
operations that relates primarily to real estate leases associated with 34 discontinued A.J. Wright
stores that were closed in the fourth quarter of fiscal 2007, three leases related to the sale of
Bobs Stores and leases of other TJX businesses. The balance in the reserve and the activity for
respective periods are presented below:
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
In thousands |
|
2009 |
|
|
2008 |
|
Balance at beginning of year |
|
$ |
40,564 |
|
|
$ |
46,076 |
|
Additions to the reserve charged to net income: |
|
|
|
|
|
|
|
|
Interest accretion |
|
|
1,321 |
|
|
|
1,365 |
|
Cash charges against the reserve: |
|
|
|
|
|
|
|
|
Lease-related obligations |
|
|
(3,658 |
) |
|
|
(5,873 |
) |
Termination benefits and all other |
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
38,186 |
|
|
$ |
41,568 |
|
|
|
|
|
|
|
|
TJX may also be contingently liable on up to 15 leases of BJs Wholesale Club, a former TJX
business, and on eight additional Bobs Stores leases. The reserve for discontinued operations does
not reflect these leases because TJX does not believe that the likelihood of future liability to
TJX is probable.
8
Note D. Other Comprehensive Income
TJXs comprehensive income information is presented below:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
In thousands |
|
2009 |
|
|
2008 |
|
Net income |
|
$ |
347,799 |
|
|
$ |
235,849 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Loss due to foreign currency translation adjustments, net of
related tax effects |
|
|
(6,113 |
) |
|
|
(146,869 |
) |
Gain on net investment hedge contracts, net of related tax effects |
|
|
|
|
|
|
87,982 |
|
Gain on cash flow hedge contract, net of related tax effects |
|
|
|
|
|
|
530 |
|
Recognition of prior service cost and deferred gains (losses) |
|
|
2,267 |
|
|
|
(92 |
) |
Amount of cash flow hedge reclassified from other comprehensive
income to net income |
|
|
|
|
|
|
(170 |
) |
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
343,953 |
|
|
$ |
177,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
In thousands |
|
2009 |
|
|
2008 |
|
Net income |
|
$ |
818,574 |
|
|
$ |
629,921 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Gain (loss) due to foreign currency translation adjustments, net
of related tax effects |
|
|
94,187 |
|
|
|
(147,841 |
) |
Gain on net investment hedge contracts, net of related tax effects |
|
|
|
|
|
|
84,853 |
|
Gain on cash flow hedge contract, net of related tax effects |
|
|
|
|
|
|
856 |
|
Recognition of unfunded post retirement liabilities |
|
|
(1,212 |
) |
|
|
|
|
Recognition of prior service cost and deferred gains (losses) |
|
|
5,170 |
|
|
|
(905 |
) |
Amount of cash flow hedge reclassified from other comprehensive
income to net income |
|
|
|
|
|
|
(380 |
) |
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
916,719 |
|
|
$ |
566,504 |
|
|
|
|
|
|
|
|
9
Note E. Earnings Per Share and Capital Stock
The computation of TJXs basic and diluted earnings per share (EPS) is as follows:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
In thousands, except per share data |
|
2009 |
|
|
2008 |
|
Basic earnings per share |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
347,799 |
|
|
$ |
254,117 |
|
Weighted average common shares outstanding for basic EPS |
|
|
421,654 |
|
|
|
417,107 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share continuing operations |
|
$ |
0.82 |
|
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
347,799 |
|
|
$ |
254,117 |
|
Add back: Interest expense on zero coupon convertible
subordinated notes, net of income taxes |
|
|
|
|
|
|
1,203 |
|
|
|
|
|
|
|
|
Income from continuing operations used for diluted EPS calculation |
|
$ |
347,799 |
|
|
$ |
255,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares for basic and diluted earnings per share calculations: |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic EPS |
|
|
421,654 |
|
|
|
417,107 |
|
Assumed conversion/exercise/vesting of: |
|
|
|
|
|
|
|
|
Stock options and awards |
|
|
6,438 |
|
|
|
6,788 |
|
Zero coupon convertible subordinated notes |
|
|
|
|
|
|
16,854 |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for diluted EPS |
|
|
428,092 |
|
|
|
440,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share continuing operations |
|
$ |
0.81 |
|
|
$ |
0.58 |
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
In thousands, except per share data |
|
2009 |
|
|
2008 |
|
Basic earnings per share |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
818,574 |
|
|
$ |
664,190 |
|
Weighted average common shares outstanding for basic EPS |
|
|
419,398 |
|
|
|
421,371 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share continuing operations |
|
$ |
1.95 |
|
|
$ |
1.58 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
818,574 |
|
|
$ |
664,190 |
|
Add back: Interest expense on zero coupon convertible
subordinated notes, net of income taxes |
|
|
1,073 |
|
|
|
3,600 |
|
|
|
|
|
|
|
|
Income from continuing operations used for diluted EPS calculation |
|
$ |
819,647 |
|
|
$ |
667,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares for basic and diluted earnings per share calculations: |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic EPS |
|
|
419,398 |
|
|
|
421,371 |
|
Assumed conversion/exercise/vesting of: |
|
|
|
|
|
|
|
|
Stock options and awards |
|
|
5,537 |
|
|
|
7,504 |
|
Zero coupon convertible subordinated notes |
|
|
5,201 |
|
|
|
16,888 |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for diluted EPS |
|
|
430,136 |
|
|
|
445,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share continuing operations |
|
$ |
1.91 |
|
|
$ |
1.50 |
|
10
FASB guidance related to Participating Securities and Two-Class Ordinary (Common) Shares was
applicable for TJX beginning with the first quarter of fiscal 2010. The adoption had no impact on
TJXs financial statements.
Weighted average common shares for diluted earnings per share exclude the incremental effect
related to any outstanding stock options, the exercise prices of which are in excess of the related
fiscal periods average price of TJXs common stock. Such options are excluded because they would
have an antidilutive effect. There were options to purchase 4.8 million shares excluded for the
thirteen weeks and options to purchase 9.6 million shares excluded for the thirty-nine weeks ended
October 31, 2009. There were 5.2 million options excluded for the thirteen and thirty-nine weeks
ended October 25, 2008.
In April 2009, TJX called for the redemption of its zero coupon convertible subordinated notes.
There were 462,057 of such notes with a carrying value of $365.1 million that were converted into 15.1
million shares of TJX common stock at a conversion rate of 32.667 shares per note, most during the
second quarter of fiscal 2010. TJX paid $2.3 million to redeem the remaining 2,886 notes
outstanding that were not converted.
During the quarter ended October 31, 2009, TJX repurchased and retired 8.2 million shares of its
common stock at a cost of $303.9 million. For the nine months ended October 31, 2009, TJX
repurchased and retired 16.1 million shares of its common stock at a cost of $540.6 million. TJX
reflects stock repurchases in its financial statements on a settlement basis. TJX had cash
expenditures under its repurchase programs of $530.5 million for the nine months ended October 31,
2009, and $667.1 million for the nine-month period last year. Repurchases were funded by cash
generated from operations and, in fiscal 2010, the net proceeds from the issuance of $375 million
aggregate principal amount of 6.95% notes. Under the $1 billion stock repurchase program
authorized in February 2008, TJX repurchased 25.0 million shares of common stock at a cost of
$795.7 million through the third quarter of fiscal 2010. All shares repurchased under the stock
repurchase program have been retired. In September 2009, the Board of Directors approved a new $1
billion stock repurchase program, which is in addition to the $204.3 million remaining at October
31, 2009 under the $1 billion plan authorized in February 2008.
Note F. Financial Instruments
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 At October 31, 2009, TJX had interest rate swap agreements outstanding
with a notional amount of $100 million. The agreements entitle TJX to receive biannual payments of
interest at a fixed rate of 7.45% and to pay a floating rate of interest indexed to the six-month
LIBOR rate with no exchange of the underlying notional amounts. The interest rate swap agreements
converted a portion of TJXs long-term debt from a fixed-rate obligation to a floating-rate
obligation. TJX designated the interest rate swap agreements as a fair value hedge of the related
long-term debt. The interest rate swap agreements expire in December 2009.
Diesel Fuel Contracts During fiscal 2009, TJX entered into agreements to hedge approximately 30%
of its notional diesel fuel requirements for fiscal 2010, based on estimated diesel fuel
consumption by independent freight carriers transporting the Companys inventory. These carriers
charge TJX mileage surcharges for diesel fuel price increases as incurred by the freight carrier.
The hedge agreements were 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. 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 Canadian and European operations. The contracts outstanding at October 31, 2009 covered a
portion of the anticipated merchandise purchases for the remainder of fiscal 2010 and into fiscal
2011. TJX elected not to apply hedge accounting rules to these contracts.
TJX also enters into derivative contracts, generally designated as fair value hedges, to hedge
intercompany debt and intercompany interest payable. The changes in fair value of these contracts
are recorded in selling, general and administrative expenses and are offset by marking the
underlying item to fair value in the same period. Upon
11
settlement, the realized gains and losses on these contracts are offset by the realized gains and
losses of the underlying item which is reflected in selling, general and administrative expenses.
Following is a summary of TJXs derivative financial instruments and related fair values
outstanding at October 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Fair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value in |
|
|
|
|
|
|
|
|
|
|
|
|
Blended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$ at |
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
Balance Sheet |
|
|
Asset |
|
|
(Liability) |
|
|
October |
|
In thousands |
|
|
Pay |
|
|
|
Receive |
|
|
|
Rate |
|
|
Location |
|
|
US$ |
|
|
US$ |
|
|
31, 2009 |
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap fixed to floating on notional of $50,000 |
|
LIBOR+4.17 |
% |
|
|
7.45 |
% |
|
|
N/A |
|
|
Prepaid Expense |
|
$ |
650 |
|
|
|
|
|
|
$ |
650 |
|
|
Interest rate swap fixed to floating on notional of $50,000 |
|
|
LIBOR+3.42 |
% |
|
|
7.45 |
% |
|
|
N/A |
|
|
Prepaid Expense |
|
|
840 |
|
|
|
|
|
|
|
840 |
|
|
Intercompany balances, primarily short-term debt and related interest |
|
C$ |
96,450 |
|
|
US$ |
89,161 |
|
|
|
0.9244 |
|
|
Prepaid Expense/ (Accrued Expense) |
|
|
499 |
|
|
$ |
(283 |
) |
|
|
216 |
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diesel contracts |
|
|
Fixed on 750K gal per month |
|
|
Float on 750K gal per month |
|
|
N/A |
|
|
(Accrued Expense) |
|
|
|
|
|
|
(582 |
) |
|
|
(582 |
) |
|
Merchandise purchase commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C$ |
211,650 |
|
|
US$ |
198,601 |
|
|
|
0.9383 |
|
|
Prepaid Expense or Other Assets/ (Accrued Exp) |
|
|
4,605 |
|
|
|
(1,143 |
) |
|
|
3,462 |
|
|
|
C$ |
1,896 |
|
|
|
1,200 |
|
|
|
0.6329 |
|
|
Prepaid Expense |
|
|
18 |
|
|
|
|
|
|
|
18 |
|
|
|
£ |
39,217 |
|
|
US$ |
63,393 |
|
|
|
1.6165 |
|
|
Prepaid Expense/ (Accrued Exp) |
|
|
276 |
|
|
|
(1,411 |
) |
|
|
(1,135 |
) |
|
|
£ |
40,521 |
|
|
|
44,461 |
|
|
|
1.0972 |
|
|
Prepaid Expense/ (Accrued Exp) |
|
|
449 |
|
|
|
(1,748 |
) |
|
|
(1,299 |
) |
|
|
US$ |
863 |
|
|
|
586 |
|
|
|
0.6790 |
|
|
Prepaid Expense/ (Accrued Exp) |
|
|
8 |
|
|
|
(9 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of all financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
The fair values of the derivatives are classified as assets or liabilities, current or non-current,
based upon valuation results and settlement dates of the individual contracts. Following are the
balance sheet classifications of the fair values of TJXs derivatives:
|
|
|
|
|
|
|
October 31, |
|
In thousands |
|
2009 |
|
Current assets |
|
$ |
6,398 |
|
Non-current assets |
|
|
947 |
|
Current liabilities |
|
|
(5,176 |
) |
Non-current liabilities |
|
|
|
|
|
|
|
|
Net fair value asset |
|
$ |
2,169 |
|
|
|
|
|
The impact of derivative financial instruments on statements of income during fiscal 2010 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain |
|
|
|
|
|
|
|
|
|
(Loss) |
|
|
|
Location of Gain (Loss) |
|
|
|
|
|
Recognized in |
|
|
|
Recognized in Income by |
|
|
|
|
|
Income by |
|
In thousands |
|
Derivative |
|
|
|
|
|
Derivative |
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
Fair value hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap fixed to floating on notional of $50,000 |
|
Interest expense, net |
|
|
|
US$ |
892 |
|
|
Interest rate swap fixed to floating on notional of $50,000 |
|
Interest expense, net |
|
|
|
US$ |
1,176 |
|
|
Intercompany balances, primarily short-term debt and related interest |
|
Selling, general and administrative expenses |
|
|
|
|
|
US$ |
(6,491 |
) |
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
Diesel contracts |
|
Cost of sales, including buying and occupancy costs |
|
|
|
US$ |
4,349 |
|
Merchandise purchase commitments |
|
Cost of sales, including buying and occupancy costs |
|
|
|
|
|
US$ |
(3,073 |
) |
|
|
|
|
|
|
|
|
|
|
Loss Recognized in Income |
|
|
|
|
|
|
|
|
(3,147 |
) |
|
|
|
|
|
|
|
|
|
|
The counterparties to the forward exchange contracts and swap agreements are major international
financial institutions, and the contracts contain rights of offset, which help minimize TJXs
exposure to credit loss in the event of nonperformance by one of the counterparties. TJX is not
required by the counterparties, and TJX does not require that the counterparties, maintain
collateral for these contracts. TJX periodically monitors its position and the credit ratings of
the counterparties and does not anticipate losses resulting from the nonperformance of these
institutions.
13
Note G. Segment Information
In the United States, 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 in the TJX Canada segment, and TJXs stores operated in Europe
(T.K. Maxx and HomeSense) are reported in the TJX Europe segment. TJX evaluates the performance of
its segments based on segment profit or loss, which TJX defines as pre-tax income before general
corporate expense and interest. Segment profit or loss as defined by TJX 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 TJXs performance or as a measure of liquidity.
Presented below is financial information on TJXs business segments:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
In thousands |
|
2009 |
|
|
2008 |
|
Net sales: |
|
|
|
|
|
|
|
|
U.S. segments: |
|
|
|
|
|
|
|
|
Marmaxx |
|
$ |
3,380,543 |
|
|
$ |
3,058,207 |
|
HomeGoods |
|
|
452,004 |
|
|
|
382,864 |
|
A.J. Wright |
|
|
197,841 |
|
|
|
163,713 |
|
International segments: |
|
|
|
|
|
|
|
|
TJX Canada |
|
|
611,485 |
|
|
|
576,971 |
|
TJX Europe |
|
|
603,073 |
|
|
|
579,775 |
|
|
|
|
|
|
|
|
|
|
$ |
5,244,946 |
|
|
$ |
4,761,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss): |
|
|
|
|
|
|
|
|
U.S. segments: |
|
|
|
|
|
|
|
|
Marmaxx |
|
$ |
422,754 |
|
|
$ |
278,661 |
|
HomeGoods |
|
|
39,454 |
|
|
|
14,675 |
|
A.J. Wright |
|
|
1,273 |
|
|
|
(788 |
) |
International segments: |
|
|
|
|
|
|
|
|
TJX Canada |
|
|
113,011 |
|
|
|
109,782 |
|
TJX Europe |
|
|
48,790 |
|
|
|
48,212 |
|
|
|
|
|
|
|
|
|
|
|
625,282 |
|
|
|
450,542 |
|
|
|
|
|
|
|
|
|
|
General corporate expenses |
|
|
46,612 |
|
|
|
33,835 |
|
Provision (credit) for Computer Intrusion related costs |
|
|
|
|
|
|
(7,000 |
) |
Interest expense, net |
|
|
12,665 |
|
|
|
5,449 |
|
|
|
|
|
|
|
|
Income from continuing operations before provision for income taxes |
|
$ |
566,005 |
|
|
$ |
418,258 |
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
In thousands |
|
2009 |
|
|
2008 |
|
Net sales: |
|
|
|
|
|
|
|
|
U.S. segments: |
|
|
|
|
|
|
|
|
Marmaxx |
|
$ |
9,464,356 |
|
|
$ |
8,817,687 |
|
HomeGoods |
|
|
1,256,736 |
|
|
|
1,096,726 |
|
A.J. Wright |
|
|
559,162 |
|
|
|
478,432 |
|
International segments: |
|
|
|
|
|
|
|
|
TJX Canada |
|
|
1,531,248 |
|
|
|
1,604,049 |
|
TJX Europe |
|
|
1,535,196 |
|
|
|
1,622,586 |
|
|
|
|
|
|
|
|
|
|
$ |
14,346,698 |
|
|
$ |
13,619,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss): |
|
|
|
|
|
|
|
|
U.S. segments: |
|
|
|
|
|
|
|
|
Marmaxx |
|
$ |
1,111,775 |
|
|
$ |
855,222 |
|
HomeGoods |
|
|
79,559 |
|
|
|
25,738 |
|
A.J. Wright |
|
|
7,057 |
|
|
|
(2,438 |
) |
International segments: |
|
|
|
|
|
|
|
|
TJX Canada |
|
|
180,709 |
|
|
|
211,068 |
|
TJX Europe |
|
|
82,803 |
|
|
|
63,420 |
|
|
|
|
|
|
|
|
|
|
|
1,461,903 |
|
|
|
1,153,010 |
|
|
|
|
|
|
|
|
|
|
General corporate expenses |
|
|
115,062 |
|
|
|
98,061 |
|
Provision (credit) for Computer Intrusion related costs |
|
|
|
|
|
|
(7,000 |
) |
Interest expense, net |
|
|
28,515 |
|
|
|
9,764 |
|
|
|
|
|
|
|
|
Income from continuing operations before provision for income taxes |
|
$ |
1,318,326 |
|
|
$ |
1,052,185 |
|
|
|
|
|
|
|
|
Note H. Pension Plans and Other Retirement Obligations
The following represents TJXs net periodic pension cost and related components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
Pension |
|
|
|
(Funded Plan) |
|
|
(Unfunded Plan) |
|
|
|
Thirteen Weeks Ended |
|
|
Thirteen Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
|
October 31, |
|
|
October 25, |
|
In thousands |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Service cost |
|
$ |
6,406 |
|
|
$ |
7,210 |
|
|
$ |
274 |
|
|
$ |
276 |
|
Interest cost |
|
|
7,708 |
|
|
|
7,757 |
|
|
|
730 |
|
|
|
1,064 |
|
Expected return on plan assets |
|
|
(7,157 |
) |
|
|
(8,594 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
4 |
|
|
|
4 |
|
|
|
31 |
|
|
|
32 |
|
Recognized actuarial losses |
|
|
3,439 |
|
|
|
|
|
|
|
285 |
|
|
|
671 |
|
Settlement cost |
|
|
|
|
|
|
|
|
|
|
579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense |
|
$ |
10,400 |
|
|
$ |
6,377 |
|
|
$ |
1,899 |
|
|
$ |
2,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
Pension |
|
|
|
(Funded Plan) |
|
|
(Unfunded Plan) |
|
|
|
Thirty-Nine Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
|
October 31, |
|
|
October 25, |
|
In thousands |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Service cost |
|
$ |
22,537 |
|
|
$ |
22,804 |
|
|
$ |
821 |
|
|
$ |
801 |
|
Interest cost |
|
|
23,490 |
|
|
|
21,534 |
|
|
|
2,189 |
|
|
|
2,524 |
|
Expected return on plan assets |
|
|
(21,167 |
) |
|
|
(25,777 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
12 |
|
|
|
33 |
|
|
|
94 |
|
|
|
94 |
|
Recognized actuarial losses |
|
|
10,242 |
|
|
|
|
|
|
|
854 |
|
|
|
953 |
|
Settlement cost |
|
|
|
|
|
|
|
|
|
|
1,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense |
|
$ |
35,114 |
|
|
$ |
18,594 |
|
|
$ |
5,695 |
|
|
$ |
4,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2009 the Pension Protection Act (PPA) became effective in the U.S., and TJXs policy is
to fund, at a minimum, the amount required to maintain a funded status of 75% to 80% of the pension
liability as defined by the PPA. During the nine months ended October 31, 2009, TJX has
contributed $58 million to its funded plan and may make additional voluntary contributions during
fiscal 2010. TJX anticipates making contributions of $13.1 million to fund current benefit and
expense payments under the unfunded plan in fiscal 2010.
Note I. Long-Term Debt and Credit Lines
TJX has a $500 million revolving credit facility maturing in May 2010 and a $500 million revolving
credit facility maturing in May 2011. TJX pays six basis points on an annual basis in commitment
fees related to both of these facilities. 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 TJXs commercial paper program. TJX had no
borrowings outstanding at October 31, 2009 and had $105.9 million of commercial paper borrowings
outstanding as of October 25, 2008. The availability under revolving credit facilities was $1
billion at October 31, 2009 and $894.1 million at October 25, 2008.
On April 7, 2009, TJX issued $375 million aggregate principal amount of 6.95% ten-year notes and
shortly thereafter called for the redemption of its zero coupon convertible subordinated notes,
originally due in 2021. Virtually all of the subordinated notes were converted into 15.1 million
shares of TJX common stock by May 8, 2009, at the rate of 32.667 shares per $1,000 note. TJX used
the proceeds from the 6.95% notes offering to repurchase additional common stock under its stock
repurchase program in fiscal 2010.
On July 23, 2009, TJX issued $400 million aggregate principal amount of 4.20% six-year notes. TJX
used a portion of the proceeds from the sale of the notes to refinance its C$235 million term
credit facility on August 10, 2009, prior to its scheduled maturity, and expects to use the
remainder, together with funds from operations, to pay its $200 million 7.45% notes due December
15, 2009 at maturity.
Note J. Income Taxes
TJX had unrecognized tax benefits of $119.9 million as of October 31, 2009 and $136.1 million as of
October 25, 2008.
The effective income tax rate was 38.6% for the fiscal 2010 third quarter compared to 39.2% for
last years third quarter, primarily due to the unfavorable impact last year of foreign currency
gains and losses on certain intercompany loans between TJX and Winners.
The effective income tax rate for the nine months ended October 31, 2009 was 37.9% as compared to
36.9% for last years comparable period as a result of the absence in fiscal 2010 of tax benefits
included in the fiscal 2009 effective rate, partially offset by the favorable impact in the current
year due to the tax treatment of foreign exchange gains on certain intercompany loans. The nine
months ended October 25, 2008 included a $15 million reversal of several
16
uncertain tax positions as a result of federal and state filings and a $4 million benefit due to
revised guidance on the deductibility of performance-based pay for executive officers and on tax
benefits relating to TJXs Puerto Rican subsidiary.
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 classifies interest and penalties related to income tax matters as part of
income tax expense. The accrued amounts for interest and penalties were $50.0 million as of October
31, 2009 and $46.9 million as of October 25, 2008.
Based on the outcome of tax examinations or judicial or administrative proceedings, or as a result
of the expiration of statute of limitations in specific jurisdictions, it is reasonably possible
that unrecognized tax benefits for certain tax positions taken on previously filed tax returns may
change materially from those presented in the financial statements. During the next 12 months, it
is reasonably possible that tax examinations of prior years tax returns or judicial or
administrative proceedings, that reflect such positions taken by TJX, may be finalized. As a
result, the total net amount of unrecognized tax benefits may decrease, which would reduce the
provision for taxes on earnings by a range of $5.0 million to $70.0 million.
Note K. Disclosures about Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date (exit
price). Authoritative guidance 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 less active, or
inputs other than quoted prices that are observable for the asset or liability. |
|
|
|
Level 3:
|
|
Unobservable inputs for the asset or liability. |
17
TJX endeavors to utilize the best available information in measuring fair value. 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 are generally classified within level 1 or level 2 in the fair value hierarchy. The
following table sets forth TJXs financial assets and liabilities that are accounted for at fair
value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, |
|
January 31, |
|
October 25, |
In thousands |
|
2009 |
|
2009 |
|
2008 |
|
Level 1 |
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
830,405 |
|
|
$ |
161,592 |
|
|
$ |
60,893 |
|
Executive savings plan |
|
|
52,981 |
|
|
|
40,636 |
|
|
|
39,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts |
|
$ |
5,855 |
|
|
$ |
9,534 |
|
|
$ |
154,838 |
|
Interest rate swaps |
|
|
1,490 |
|
|
|
1,859 |
|
|
|
1,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts |
|
$ |
4,594 |
|
|
$ |
1,435 |
|
|
$ |
65,777 |
|
Diesel fuel contracts |
|
|
582 |
|
|
|
4,931 |
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
386 |
|
The fair value of TJXs general corporate debt, including current installments, was 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 current installments of long-term
debt at October 31, 2009 was $201.9 million versus a carrying value of $200.4 million. The fair
value of long-term debt at that date was $853.5 million versus a carrying value of $774.3 million.
These estimates do not necessarily reflect provisions or restrictions in the various debt
agreements that might affect TJXs ability to settle these obligations.
Our cash equivalents are stated at cost, which approximates fair value, due to the short maturities
of these instruments.
Our executive savings plan is invested in securities traded in active markets and carried at
unadjusted quoted prices.
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 seeks to manage risks
from interest and foreign currency exchange rate fluctuations through the use of derivative
financial instruments. Derivative financial instruments are not used for trading or other
speculative purposes, and TJX has not used leveraged derivative financial instruments. The forward
foreign currency exchange contracts and interest rate swaps are valued using broker quotations
which include observable market information and, in the instance of one contract, proprietary
models. TJX makes no adjustments to quotes or prices obtained from brokers or pricing services but
assesses the credit risk of counterparties and adjusts final valuations, when appropriate. Where
independent pricing services provide fair values, TJX obtains an understanding of the methods used
in pricing. As such, these derivative instruments are classified within level 2.
18
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended October 31, 2009
Compared to
The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended October 25, 2008
Business Overview
We are the leading off-price retailer of apparel and home fashions in the United States and
worldwide. Our over 2,700 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. We 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 buying synergies of our concepts to enhance
our global relationships with vendors, and develop talent by providing opportunities across our
concepts.
We operate seven principal off-price retail concepts in the U.S., Canada and Europe. T.J. Maxx,
Marshalls and A.J. Wright in the U.S., Winners in Canada, and T.K. Maxx in Europe sell off-price
family apparel and home fashions. HomeGoods in the U.S. and HomeSense in Canada and the U.K.
feature off-price home fashions. The target customer for all of our concepts, except A.J. Wright,
includes the middle- to upper-middle income shopper, with generally the same profile as a
department or specialty store customer. A.J. Wright is oriented toward the moderate-income
customer.
Results of Operations
We entered fiscal 2010 faced with the challenges of a worldwide recession and established a
three-pronged strategy for managing through the challenging economic times: plan same store sales
conservatively, allowing better flow-through to the bottom line if we exceed plans; run with very
lean inventories and buy closer to need than in the past, designed to increase inventory turns and
drive traffic to our stores; and focus on cost cutting measures and controlling expenses.
Implementing this strategy has proven successful and we posted third quarter and year-to-date
results significantly above our expectations and ahead of last year. Highlights of our financial
performance for the third quarter and first nine months of fiscal 2010 include the following:
|
|
|
Consolidated same store sales increased 7% for the third quarter and increased 5% for
the nine-month period over last years comparable periods. Same store sales growth was
driven by significant increases in customer traffic and strong performance by virtually all
of our businesses. |
|
|
|
|
Net sales increased 10% to $5.2 billion for the third quarter and 5% to $14.3 billion
for the nine-month period over last years comparable periods. Stores in operation and
total selling square footage were both up 4% as of October 31, 2009 when compared to the
same period last year. For both the quarter and nine-month periods of fiscal 2010,
increases in consolidated same store sales and the increases in our number of stores in
operation were partially offset by foreign currency exchange rates, which negatively
impacted sales growth. |
|
|
|
|
Our fiscal 2010 third quarter pre-tax margin (the ratio of pre-tax income to net sales)
was 10.8% compared to 8.8% for the same period last year. Year-to-date, our pre-tax margin
was 9.2% compared to 7.7% for the same period last year. The improvement in both the third
quarter and nine-month periods of fiscal 2010 was primarily driven by increased merchandise
margins, which were achieved through well executed buying and faster turning inventories. |
|
|
|
|
Our cost of sales ratios improved in both the third quarter and nine-month periods,
primarily due to improved merchandise margins, partially offset by the negative impact of
the mark-to-market adjustment of our inventory-related hedges. Selling, general and
administrative expense ratios decreased for both the third quarter and nine-month periods,
due to levering of expenses. |
|
|
|
|
Income from continuing operations for the third quarter of fiscal 2010 was $347.8
million, or $0.81 per diluted share compared to $254.1 million, or $0.58 per diluted share,
in last years third quarter. Income
|
19
|
|
|
from continuing operations for the nine months ended October 31, 2009 was $818.6 million, or
$1.91 per diluted share compared to $664.2 million, or $1.50 per diluted share, for the same
period last year. Diluted earnings per share from continuing operations for the nine months
ended last year benefited by $0.02 from tax related reserve adjustments. Both the third
quarter and nine months ended October 25, 2008 benefited by $0.01 for adjustments related to
the provision for costs associated with the Computer Intrusion that was discovered in fiscal
2007. |
|
|
|
|
During the third quarter of fiscal 2010, we repurchased 8.2 million shares of our common
stock at a cost of $304 million, and for the first nine months of fiscal 2010, we
repurchased 16.1 million shares of our common stock at a cost of $541 million. Diluted
earnings per share reflect the benefit of the stock repurchase program. In conjunction
with a $375 million notes offering in our fiscal 2010 first quarter, we called for the
redemption of our zero coupon convertible subordinated notes, originally due in 2021.
Virtually all of the subordinated notes were converted into 15.1 million shares of TJX
common stock. We used the net proceeds from the $375 million notes offering to
repurchase common stock under our stock repurchase program. |
|
|
|
|
Consolidated average per store inventories, including inventory on hand at our
distribution centers, as of October 31, 2009 were down 5% from the prior year and were down
6% as of October 25, 2008 from the comparable prior years quarter end. Excluding the
impact of foreign currency exchange, average per store inventories, including inventory on
hand at our distribution centers, as of October 31, 2009 were down 7% compared to the prior
years quarter end. |
The following is a discussion of our consolidated operating results, followed by a discussion of
our segment operating results. All references to earnings per share are diluted earnings per share
unless otherwise indicated.
Net sales: Consolidated net sales for the quarter ended October 31, 2009 were $5.2 billion, up 10%
from $4.8 billion in last years third quarter. The increase in our fiscal 2010 third quarter
sales reflected a 7% increase in same store sales, and a 4% increase from new stores, partially
offset by a 1% decrease from the negative impact of foreign currency exchange rates. This compares
to sales growth of 2% in last years third quarter which consisted of 1% from same store sales and
a 3% increase in new stores, partially offset by a 2% negative impact from foreign currency
exchange rates.
Consolidated net sales for the nine months ended October 31, 2009 were $14.3 billion, up 5% from
$13.6 billion in last years comparable period. The increase in net sales for the nine months
ended October 31, 2009 reflected a 5% increase in same store sales and a 3% increase from new
stores, offset by 3% decrease from the negative impact of foreign currency exchange rates. This
compares to sales growth of 5% in last years nine-month period which consisted of 2% from same
store sales and 3% from new stores, with no material effect from foreign currency exchange rates.
New stores are a major source of sales growth. Both our consolidated store count and selling
square footage increased by 4% as of October 31, 2009 as compared to October 25, 2008.
The same store sales increases for both the third quarter and nine months ended October 31, 2009
were driven by increased customer traffic across virtually all of our businesses. The increase in
customer traffic has accelerated during the year. Juniors, dresses, childrens apparel, footwear
and accessories performed particularly well in the third quarter and nine-month period. Home
fashions, which had been negatively affected by the weak housing market, recorded strong same store
sales increases in the third quarter. Geographically, same store sales increases in Europe and
Canada trailed the consolidated average. In the U.S., sales were strong throughout the country
with the Midwest, Southeast and West Coast above the average and New England and Florida below the
average.
We define same store sales to be sales of those stores that have been in operation for all or a
portion of two consecutive fiscal years, or in other words, stores that are starting their third
fiscal year of operation. We classify a store as a new store until it meets the same store
criteria. We determine which stores are included in the same store sales calculation as of the
beginning of each fiscal year, and the classification remains constant throughout that year, unless
a store is closed. We calculate same store sales results by comparing the current and prior year
weekly periods that are most closely aligned. Relocated stores and stores that are increased in
size are generally classified in the same way as the original store, and we believe that the impact
of these stores on the consolidated same store percentage is immaterial. Consolidated and
divisional same store sales are calculated on a constant currency basis, which eliminates the
effect of changes in currency exchange rates, and we believe it is a more accurate measure of the
segment performance.
20
The following table sets forth our consolidated operating results expressed as a percentage of net
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Net Sales |
|
Percentage of Net Sales |
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 31, |
|
October 25, |
|
October 31, |
|
October 25, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
Net sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, including buying and
occupancy costs |
|
|
72.5 |
|
|
|
74.3 |
|
|
|
74.0 |
|
|
|
75.3 |
|
Selling, general and administrative expenses |
|
|
16.5 |
|
|
|
17.0 |
|
|
|
16.7 |
|
|
|
16.9 |
|
Provision (credit) for Computer Intrusion
related costs |
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
(0.1 |
) |
Interest expense, net |
|
|
0.2 |
|
|
|
0.1 |
|
|
|
0.2 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before
provision for income taxes* |
|
|
10.8 |
% |
|
|
8.8 |
% |
|
|
9.2 |
% |
|
|
7.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Due to rounding, the individual items may not sum to Income from continuing operations before provision for income taxes. |
Impact of foreign currency exchange rates: Our operating results can be materially affected
by significant changes in foreign currency exchange rates, particularly 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 between 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-related purchase commitment hedges: 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 other than their local currencies
(primarily U.S. dollar purchases). As we have not elected hedge accounting as defined in
generally accepted accounting principles, we record a mark-to-market gain or loss on the hedging
instruments in our results of operations at the end of each reporting period. In subsequent
periods, the income statement impact of these adjustments is effectively offset when the inventory
being hedged 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 during a short
period of time. The mark-to-market adjustment on these hedges does not affect net sales, but it
does affect cost of sales, operating margins and reported earnings.
Cost of sales, including buying and occupancy costs: Cost of sales, including buying and occupancy
costs, as a percentage of net sales, decreased 1.8 percentage points for the third quarter ended
October 31, 2009 as compared to the same period last year. Cost of sales, including buying and
occupancy costs, as a percentage of net sales, decreased 1.3 percentage points for the first nine
months of fiscal 2010. The improvement in both periods was due to improved consolidated
merchandise margin, which increased 2.4 percentage points for the third quarter and increased 1.7
percentage points for the nine-month period. Merchandise margin improvement was due to an increase
in markon along with a reduction in markdowns compared to the prior year. These increases were
partially offset by the negative impact of the mark-to-market adjustments on inventory hedges in
fiscal 2010, which increased this cost ratio by 0.4 percentage points in the third quarter and 0.2
percentage points in the year-to-date period. Additionally, for the periods ending October 31,
2009, buying and occupancy expense leverage was offset by higher accruals for performance-based
benefit and incentive plans that cover many associates across our organization. The higher accruals
are the result of operating performance that is well ahead of our objectives.
Selling, general and administrative expenses: Selling, general and administrative expenses, as a
percentage of net sales, decreased 0.5 percentage points to 16.5% for the third quarter ended
October 31, 2009 and decreased 0.2
21
percentage points to 16.7% for the nine-month period ended October 31, 2009, as compared to the
same periods last year. This improvement in the expense ratio is due to levering of expenses and
savings from our expense reduction initiatives. The improvement in this expense ratio for both the
third quarter and nine-month periods was partially offset by higher incentive and benefit plan
accruals tied to performance, as discussed above. These increased costs reduced this expense ratio
by 0.4 percentage points in the fiscal 2010 third quarter and 0.2 percentage points in the fiscal
2010 year-to-date period. We anticipate a savings of approximately $150 million for fiscal 2010 as
a result of our expense reduction initiatives, some of which will benefit our cost of sales
including buying and occupancy costs.
Interest expense, net: Interest expense, net, amounted to expense of $12.7 million for the third
quarter of fiscal 2010 compared to expense of $5.4 million for the same period last year. Interest
expense, net, amounted to expense of $28.5 million for the nine months ended October 31, 2009
compared to expense of $9.8 million for the same period last year. Net interest expense includes
interest income of $1.9 million for the fiscal 2010 third quarter and $6.6 million for the fiscal
2010 year-to-date period. This compares to interest income of $3.4 million in the third quarter of
fiscal 2009 and $17.6 million in the fiscal 2009 nine-month period. Interest income decreased as a
result of lower interest income rates on investments, more than offsetting an increase in cash
balances available for investment. Gross interest expense for fiscal 2010 increased over last year
for both the third quarter and year-to-date as a result of the incremental interest cost of the
$375 million aggregate principal amount of 6.95% notes issued in April 2009 and the $400 million
aggregate principal amount of 4.20% notes issued in July 2009. The 6.95% notes were issued in
connection with the call for redemption of our zero coupon convertible securities, and we repaid
our C$235 million credit facility prior to its scheduled maturity upon issuance of the 4.20% notes.
The impact of the incremental interest cost on earnings per share of these two debt issues will be partially offset by a
benefit in our earnings per share, as the majority of the incremental shares issued upon redemption
of the convertible notes were repurchased with the net proceeds of the 6.95% notes. For more
information on these note offerings, see the discussion under Liquidity and Capital Resources.
Income taxes: The effective income tax rate was 38.6% for the fiscal 2010 third quarter, compared
to 39.2% for last years third quarter. The decrease in rate for the third quarter was largely
driven by the unfavorable impact in the prior year due to the tax treatment of foreign currency
gains on certain intercompany loans between TJX and Winners.
The effective income tax rate for the nine months ended October 31, 2009 was 37.9% as compared to
36.9% for last years comparable period. The increase in the year-to-date effective income tax
rate is due to the absence of tax benefits included in the fiscal 2009 effective rate, partially
offset by the favorable impact in the current year due to the tax treatment of foreign currency
gains on certain intercompany loans. The nine months ended October 25, 2008 included a $15 million
reversal of several uncertain tax positions as a result of federal and state filings and a $4
million benefit due to revised guidance on the deductibility of performance-based pay for executive
officers and tax benefits relating to TJXs Puerto Rican subsidiary. On a combined basis, these
tax benefits reduced the fiscal 2009 nine-month effective income tax rate by 1.8 percentage points.
Income from continuing operations: Income from continuing operations for the third quarter ended
October 31, 2009 was $347.8 million, or $0.81 per diluted share, versus $254.1 million, or $0.58
per diluted share, in last years third quarter. Changes in foreign currency rates affected the
comparability of results. The net effect of the foreign currency items described above benefited
our fiscal 2010 third quarter earnings by $0.02 per share compared to a $0.05 per share favorable
impact in last years third quarter. In addition, the adjustment to the provision for Computer
Intrusion related costs last year increased earnings by $0.01 per share.
Income from continuing operations for the nine months ended October 31, 2009 was $818.6 million, or
$1.91 per diluted share, versus $664.2 million, or $1.50 per diluted share, for the same period
last year. Foreign currency items reduced our fiscal 2010 year-to-date earnings per share by $0.04
per share as compared to a benefit of $0.04 per share in the same period last year. Additionally,
last years year-to-date period included a $0.02 per share benefit from first quarter tax related
reserve adjustment and a $0.01 per share benefit due to the adjustment to the provision for Computer Intrusion
related costs.
Our share repurchase program also affects the comparability of earnings per share. We repurchased
8.2 million shares of our stock at a cost of $303.9 million in the third quarter of fiscal 2010 and
repurchased 16.1 million shares at a cost of $540.6 million in the first nine months of fiscal
2010. During the third quarter of fiscal 2009, we
22
repurchased 7.2 million shares of our common stock at a cost of $226.0 million, and for the first
nine months of fiscal 2009, we repurchased 21.2 million shares of our common stock at a cost of
$676.1 million.
Discontinued operations and net income: Last years third quarter and year-to-date period include
the loss on sale of the Bobs Stores division in discontinued operations. In addition, the
operating results for Bobs Stores for all periods prior to the sales are included in discontinued
operations. Including the impact of discontinued operations, net income was $347.8 million, or
$0.81 per share, for the third quarter of fiscal 2010, compared to $235.8 million, or $0.54 per
share, for the same period last year. Net income was $818.6 million, or $1.91 per share, for the
nine months ended October 31, 2009, compared to $629.9 million, or $1.42 per share, for the same
period last year.
Segment information: The following is a discussion of the operating results of our business
segments. In the
U.S., we have three segments: 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 TJX Canada segment, and TJXs stores
operated in Europe (T.K. Maxx and HomeSense) are reported as the TJX Europe 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, any 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:
U.S. Segments:
Marmaxx
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
|
October 31, |
|
|
October 25, |
|
Dollars in millions |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
Net sales |
|
$ |
3,380.5 |
|
|
$ |
3,058.2 |
|
|
$ |
9,464.4 |
|
|
$ |
8,817.7 |
|
Segment profit |
|
$ |
422.8 |
|
|
$ |
278.7 |
|
|
$ |
1,111.8 |
|
|
$ |
855.2 |
|
Segment profit as a percentage of net sales |
|
|
12.5 |
% |
|
|
9.1 |
% |
|
|
11.7 |
% |
|
|
9.7 |
% |
Percent increase in same store sales |
|
|
9 |
% |
|
|
|
|
|
|
5 |
% |
|
|
1 |
% |
Stores in operation at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.J. Maxx |
|
|
|
|
|
|
|
|
|
|
889 |
|
|
|
872 |
|
Marshalls |
|
|
|
|
|
|
|
|
|
|
820 |
|
|
|
807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Marmaxx |
|
|
|
|
|
|
|
|
|
|
1,709 |
|
|
|
1,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling square footage at end of period (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.J. Maxx |
|
|
|
|
|
|
|
|
|
|
20,859 |
|
|
|
20,500 |
|
Marshalls |
|
|
|
|
|
|
|
|
|
|
20,658 |
|
|
|
20,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
41,517 |
|
|
|
40,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales for Marmaxx increased 11% for the third quarter and increased 7% for the nine-month
period of fiscal 2010 as compared to the same periods last year. Same store sales for Marmaxx
increased 9% in the third quarter and 5% for the first nine months of fiscal 2010.
Sales at Marmaxx for both the third quarter and nine-month periods reflected increased customer
traffic, partially offset by a decrease in the amount of the average transaction. Categories that
posted strong same store sales increases included juniors, dresses, childrens, and footwear. Home
categories also improved at Marmaxx during the third quarter, bringing same store sales increases
for the category to just below the chain average for the nine-months ended October 31, 2009.
Geographically, there were strong trends throughout the country. Same store sales were strongest
in the Midwest, Southwest and Southeast, while New England and Florida were below the chain average
for both the third quarter and first nine months of fiscal 2010.
Segment profit for the third quarter ended October 31, 2009 grew to $422.8 million, a 52% increase
over segment profit in last years third quarter. Segment profit as a percentage of net sales
(segment profit margin or segment margin) increased to 12.5% from 9.1% last year. Segment
profit for the nine months ended October 31, 2009 increased to $1,111.8 million, up 30% compared to
the same period last year. Segment profit margin was 11.7% for
23
the nine-month period in fiscal 2010 versus 9.7% last year. The increase in segment margin for
both periods was driven by improved merchandise margins, which were up 2.7 percentage points for
the third quarter and 1.9 percentage points for the nine months ended October 31, 2009. Segment
margin also improved due to expense levering on strong same store sales results, primarily
occupancy and store operating costs. The improvement in segment margin for this years third
quarter and nine-month periods was partially offset by an increase in administrative costs as a
percentage of sales, primarily due to higher accruals for performance-based benefit and incentive plans
as a result of operating performance well ahead of objectives.
As of October 31, 2009, Marmaxxs average per store inventories, including inventory on hand at its
distribution centers, were down 6% as compared to these inventory levels at the same time last
year. This compares to average per store inventories at October 25, 2008 that were down 1%
compared to those of the prior year period. As of October 31, 2009 Marmaxx, also had fewer dollars
committed to inventory, as inventory on hand and merchandise on order were down on a per store
basis from the end of last years third quarter.
This segment operates four ShoeMegaShop by Marshalls, a family shoe concept, in a stand-alone
format, which are included in the Marshalls information above.
HomeGoods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 31, |
|
October 25, |
|
October 31, |
|
October 25, |
Dollars in millions |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Net sales |
|
$ |
452.0 |
|
|
$ |
382.9 |
|
|
$ |
1,256.7 |
|
|
$ |
1,096.7 |
|
Segment profit |
|
$ |
39.5 |
|
|
$ |
14.7 |
|
|
$ |
79.6 |
|
|
$ |
25.7 |
|
Segment profit as a percentage of net sales |
|
|
8.7 |
% |
|
|
3.8 |
% |
|
|
6.3 |
% |
|
|
2.3 |
% |
Percent increase (decrease) in same store sales |
|
|
13 |
% |
|
|
(5 |
)% |
|
|
7 |
% |
|
|
(1 |
)% |
Stores in operation at end of period |
|
|
|
|
|
|
|
|
|
|
324 |
|
|
|
315 |
|
Selling square footage at end of period (in thousands) |
|
|
|
|
|
|
|
|
|
|
6,360 |
|
|
|
6,185 |
|
HomeGoods net sales for the third quarter of fiscal 2010 increased 18% compared to the same period
last year, and for the first nine months of fiscal 2010, increased 15% over the same period last
year. Same store sales increased 13% for the third quarter of fiscal 2010, versus a decrease of 5%
for the same period last year. Segment margin for the quarter and nine-month periods was
significantly up from the same periods last year. More than half of the increase in segment margin
was the result of increased merchandise margins, driven by improved inventory management, resulting
in lower markdowns as well as higher markon. The balance of the segment margin improvement was
attributable to the levering of expenses due to strong same store sales, along with the effective
expense control relating primarily to operational efficiencies, partially offset by higher accruals
for performance-based benefit and incentive plans as a result of operating performance well ahead of objectives.
A.J. Wright
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 31, |
|
October 25, |
|
October 31, |
|
October 25, |
Dollars in millions |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Net sales |
|
$ |
197.8 |
|
|
$ |
163.7 |
|
|
$ |
559.2 |
|
|
$ |
478.4 |
|
Segment profit (loss) |
|
$ |
1.3 |
|
|
$ |
(0.8 |
) |
|
$ |
7.1 |
|
|
$ |
(2.4 |
) |
Segment profit (loss) as a percentage of net sales |
|
|
0.6 |
% |
|
|
(0.5 |
)% |
|
|
1.3 |
% |
|
|
(0.5 |
)% |
Percent increase in same store sales |
|
|
11 |
% |
|
|
5 |
% |
|
|
10 |
% |
|
|
6 |
% |
Stores in operation at end of period |
|
|
|
|
|
|
|
|
|
|
148 |
|
|
|
135 |
|
Selling square footage at end of period (in thousands) |
|
|
|
|
|
|
|
|
|
|
2,966 |
|
|
|
2,681 |
|
A.J. Wrights net sales increased 21% for the fiscal 2010 third quarter and 17% for the nine-month
period ending October 31, 2009 as compared to the same periods last year. Segment profit was $1.3
million in the fiscal 2010 third quarter and $7.1 million in the fiscal 2010 nine-month period,
compared to losses in the same periods last year.
24
Segment margin increases in both periods were primarily due to improved merchandise margin. We
believe we have had better merchandising and advertising effectiveness at A.J. Wright due to our improved
understanding of its customers tastes and spending habits.
International Segments:
TJX Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
|
October 31, |
|
|
October 25, |
|
U.S. Dollars in millions |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
Net sales |
|
$ |
611.5 |
|
|
$ |
577.0 |
|
|
$ |
1,531.2 |
|
|
$ |
1,604.0 |
|
Segment profit |
|
$ |
113.0 |
|
|
$ |
109.8 |
|
|
$ |
180.7 |
|
|
$ |
211.1 |
|
Segment profit as a percentage of net sales |
|
|
18.5 |
% |
|
|
19.0 |
% |
|
|
11.8 |
% |
|
|
13.2 |
% |
Percent increase in same store sales |
|
|
1 |
% |
|
|
5 |
% |
|
|
1 |
% |
|
|
5 |
% |
Stores in operation at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners |
|
|
|
|
|
|
|
|
|
|
211 |
|
|
|
201 |
|
HomeSense |
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
290 |
|
|
|
276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling square footage at end of period (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners |
|
|
|
|
|
|
|
|
|
|
4,847 |
|
|
|
4,622 |
|
HomeSense |
|
|
|
|
|
|
|
|
|
|
1,527 |
|
|
|
1,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
6,374 |
|
|
|
6,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales for the Canadian segment (Winners and HomeSense) increased 6% for the third quarter ended
October 31, 2009 versus last years third quarter. Net sales for the Canadian segment decreased 5%
for the nine-month period versus the same period last year. The decrease was primarily due to
foreign currency translation, which reduced nine-month sales by approximately $155 million. Same
store sales were up 1% for both the third quarter and nine-month periods of fiscal 2010.
Segment profit increased slightly to $113 million for the third quarter of fiscal 2010 and
decreased by $30 million for the nine-month period ended October 31, 2009. The impact of foreign
currency translation was immaterial to segment profit for the third quarter but decreased segment
profit by $15 million for the nine-month period of fiscal 2010 compared to the same periods in the
prior year. Since currency translation generally impacts both sales and expenses, it had little or
no impact on segment margin. Segment margin decreased 0.5 percentage points to 18.5% for this
years third quarter and decreased 1.4 percentage points to 11.8% for the nine-month period ended
October 31, 2009. The foreign currency impact of the mark-to-market adjustment on inventory-related
hedges had a significant impact on segment profit and segment margin comparisons in both periods.
The mark-to-market adjustment on inventory related hedges increased segment profit in the fiscal
2010 third quarter by $19 million compared to an increase of $28 million in last years third
quarter. This differential resulted in a reduction in third quarter segment margin comparisons of
1.9 percentage points, more than offsetting improved merchandise margins in the fiscal 2010 third
quarter. For the fiscal 2010 nine-month period, the mark-to-market adjustment on inventory-related
hedges reduced segment profit by $1 million, compared to an increase of $24 million in last years
nine-month period. This differential of $25 million reduced segment margin comparisons on a
year-to-date basis by 1.6 percentage points. In addition for both the quarter and nine-month
period of fiscal 2010, segment margin was unfavorably impacted by
higher accruals for performance-based benefit and incentive plans.
This segment also operates three StyleSense stores, which are included in the Winners information
in the above table.
25
TJX Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
|
|
October 31, |
|
|
October 25, |
|
|
October 31, |
|
|
October 25, |
|
U.S. Dollars in millions |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
Net sales |
|
$ |
603.1 |
|
|
$ |
579.8 |
|
|
$ |
1,535.2 |
|
|
$ |
1,622.6 |
|
Segment profit |
|
$ |
48.8 |
|
|
$ |
48.2 |
|
|
$ |
82.8 |
|
|
$ |
63.4 |
|
Segment profit as a percentage of net sales |
|
|
8.1 |
% |
|
|
8.3 |
% |
|
|
5.4 |
% |
|
|
3.9 |
% |
Percent increase in same store sales |
|
|
1 |
% |
|
|
4 |
% |
|
|
4 |
% |
|
|
5 |
% |
Stores in operation at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.K. Maxx |
|
|
|
|
|
|
|
|
|
|
262 |
|
|
|
235 |
|
HomeSense |
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
276 |
|
|
|
242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling square footage at end of period
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.K. Maxx |
|
|
|
|
|
|
|
|
|
|
6,089 |
|
|
|
5,379 |
|
HomeSense |
|
|
|
|
|
|
|
|
|
|
222 |
|
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
6,311 |
|
|
|
5,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
European net sales increased 4% for the third quarter of fiscal 2010 and decreased 5% for the nine
months ended October 31, 2009 compared to the same periods last year. Currency exchange
translation negatively impacted the fiscal 2010 results for both periods, reducing net sales in the
third quarter by $58 million and reduced net sales in the nine-month period by $320 million. Same
store sales increased 1% for the third quarter of fiscal 2010, compared to a 4% increase in the
same period last year. Same store sales increased 4% for the nine-month period this year compared
to a same store sales increase of 5% for the comparable period last year.
Segment profit increased to $48.8 million for the third quarter ended October 31, 2009 and to $82.8
million for the first nine months of fiscal 2010. Currency exchange translation negatively
affected segment profit by approximately $5 million in the third quarter of fiscal 2010 and $14
million for the nine-month period compared to prior year. Segment margin decreased to 8.1% for the
third quarter of fiscal 2010 and increased to 5.4% for the first nine months of fiscal 2010 as
compared to the same periods last year. Segment margin for the fiscal 2010 third quarter reflected
improved merchandise margins which were more than offset by the impact of the mark-to-market
adjustment on inventory-related hedges and de-levering of expenses, primarily occupancy costs, on
the 1% same store sales increase. The increases in segment margin for the nine months ended
October 31, 2009 reflected improved merchandise margins, as well as expense leverage in
distribution center costs, partially offset by the impact of the mark-to-market adjustment on
inventory-related hedges and expansion costs for European development. In addition, like our other
segments, segment margin was unfavorably impacted by higher accruals for performance-based benefit and
incentive plans.
In the third quarter of fiscal 2010, TJX Europe opened four new stores in Poland.
General corporate expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 31, |
|
October 25, |
|
October 31, |
|
October 25, |
Dollars in millions |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
General corporate expense |
|
$ |
46.6 |
|
|
$ |
33.8 |
|
|
$ |
115.1 |
|
|
$ |
98.1 |
|
General corporate expense for segment reporting purposes refers to those costs not specifically
related to the operations of our business segments and is included in selling, general and
administrative expenses. The increase in general corporate expense in the fiscal 2010 third
quarter and nine-month periods compared to the same periods last year is primarily due to an $8
million contribution to the TJX Foundation in the fiscal 2010 third quarter, as well as higher
performance-based incentive and benefit plan accruals. In addition, the fiscal 2010 year-to-date
period, includes restructuring costs of $3 million related to our expense reduction initiatives.
26
Analysis of Financial Condition
Liquidity and Capital Resources
Net cash provided by operating activities was $1,289 million for the nine months ended October 31,
2009, an increase of $562 million over the $727 million provided for the nine months ended October
25, 2008. Net income, together with the non-cash impact of depreciation and the pre-tax loss from
discontinued operations in fiscal 2009 provided cash of $1,138 million in the first nine months of
fiscal 2010 compared to $962 million last year. The change in deferred income taxes primarily
attributable to accelerated tax depreciation and the funding of our pension plan favorably impacted
cash flows in the first nine months this year by $131 million compared to a benefit of $27 million
last year. Also favorably impacting the comparison of this years cash flow from operations to the
prior years was the change in merchandise inventory, net of the related change in accounts
payable, which resulted in a use of cash in fiscal 2010 that was $332 million less than the prior
year. This years cash flow also benefited from a favorable change of $38 million due to the
timing of our payments of current federal and state income taxes. Partially offsetting the
favorable changes in cash flows was an unfavorable change in accrued expenses and other liabilities
of $76 million due in part to voluntary contributions of $58 million to the Companys defined
benefit plan in fiscal 2010.
Investing activities relate primarily to property additions for new stores, store improvements and
renovations and investment in our distribution network. Cash outlays for property additions
amounted to $319 million in the nine months ended October 31, 2009, compared to $443 million in the
same period last year. We anticipate that capital spending for fiscal 2010 will be approximately
$500 million. Investing activities also reflect the net purchase of $73 million of short-term
investments with an initial maturity in excess of three months, which are not classified as cash on
the balance sheet.
Cash flows from financing activities for the nine months ended October 31, 2009 include the
net proceeds of $774 million from two debt offerings. On April 7, 2009, we issued $375
million aggregate principal amount of 6.95% ten-year notes. Related to this transaction, TJX
called for the redemption of its zero coupon convertible subordinated notes, virtually all of
which converted into 15.1 million shares of common stock by May 8, 2009. We used the proceeds
of the 6.95% notes to repurchase additional shares of common stock under our stock repurchase
program. On July 23, 2009, we issued $400 million aggregate principal amount of 4.20%
six-year notes. We used a portion of the proceeds of this offering to refinance our C$235
million term credit facility on August 10, 2009, prior to its scheduled maturity, and plan to
use the remainder, together with funds from operations, to pay our 7.45% notes due December
15, 2009 at maturity.
We continued our share repurchase program, and during the nine months ended October 31, 2009, we
repurchased and retired 16.1 million shares of our common stock at a cost of $541 million. 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. In the
nine months ended October 25, 2008, we repurchased and retired 21.2 million shares of our common
stock at a cost of $676 million. As of October 31, 2009, $204 million remained available for
purchase under the $1 billion program authorized by the Board of Directors in February 2008,
together with $1 billion under a new stock repurchase program authorized in September 2009 by the
Board of Directors. The timing of repurchases is determined by TJX from time to time based on its
assessment of various factors including excess cash flow, liquidity and market conditions. Lastly,
financing activities included $154 million of proceeds from the exercise of stock options in the
first nine months this year compared to $141 million last year, and dividends paid on common stock
were $147 million for the first nine months this year versus $131 million last year.
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 have served as backup to our commercial paper program. We had no outstanding short-term
borrowings at October 31, 2009 and had $105.9 million of commercial paper borrowings outstanding as
of October 25, 2008. The availability under revolving credit facilities was $1 billion at October
31, 2009 and $894.1 million at October 25, 2008. We believe internally generated funds and our
revolving credit facilities are more than adequate to meet our operating needs.
27
Contractual obligations: Our contractual obligations for long-term debt have changed significantly
since the filing of our Annual Report on Form 10-K on March 31, 2009. As of October 31, 2009, we
had payment obligations (including current installments) under long-term debt arrangements that
will require cash outflows as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
|
|
|
|
Less Than |
|
|
1-3 |
|
|
3-5 |
|
|
More Than |
|
|
|
Total |
|
|
1 Year |
|
|
Years |
|
|
Years |
|
|
5 Years |
|
|
Long-term debt
obligations
including estimated
interest and
current
installments |
|
$ |
1,343,540 |
|
|
$ |
250,671 |
|
|
$ |
85,725 |
|
|
$ |
85,725 |
|
|
$ |
921,419 |
|
The long-term debt obligations above include estimated interest costs.
Provision for Computer Intrusion related costs: In the third quarter of fiscal 2008, we
established a reserve to reflect our estimate of our probable losses in accordance with generally
accepted accounting principles with respect to the Computer Intrusion. As of October 31, 2009, our
reserve balance was $25.2 million, which reflects our current estimate of remaining probable losses
with respect to the Computer Intrusion, including litigation, proceedings 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 as a result of developments in
litigation and claims, related expenses, receipt of insurance proceeds and for other changes.
Recently Issued Accounting Pronouncements
See New Accounting Standards in Note A to our unaudited consolidated financial statements included
in this quarterly report for recently issued accounting standards, including the expected dates of
adoption and estimated effects on our consolidated financial statements.
Forward-looking Statements
Various statements made in this Quarterly Report on Form 10-Q are forward-looking and involve a
number of risks and uncertainties. All statements that address activities, events or developments
that we intend, expect or believe may occur in the future are forward-looking statements.
The following are some of the factors that could cause actual results to differ materially
from the forward-looking statements: effects of the current economic environment; changes in
currency and exchange rates; our ability to successfully implement our opportunistic buying
strategies and to manage our inventories effectively; our ability to successfully expand our store
base and increase comparable store sales; failure to meet market expectations; successful
advertising and promotion; consumer confidence, demand, spending habits and buying preferences;
matters relating to the Computer Intrusion including potential losses that could differ from our
reserve, potential effects on our reputation and sales, compliance with orders, and other
consequences to the value of our Company and related value of our stock; competitive factors;
effects of unseasonable weather; our ability to recruit and retain associates; success of our
acquisition and divestiture activities; our ability to successfully implement technologies and
systems and protect data; our ability to continue to generate adequate cash flows; issues with
merchandise quality and safety; import risks; risks of expansion and costs of contraction; risks
inherent in foreign operations; general economic conditions, including fluctuations in the price of
oil; compliance with and changes in laws and regulations and accounting rules and principles;
availability of store and distribution center locations on suitable terms; factors affecting
expenses; our ability to execute our share repurchase program; availability and cost of financing;
potential disruptions due to wars, natural disasters and other events beyond our control; adverse
outcomes for any significant litigation; adequacy of reserves; asset impairments and other charges;
closing adjustments; and other factors that may be described in our filings with the Securities and
Exchange Commission.
28
We do not undertake to publicly update or revise our forward-looking statements even if experience
or future changes make it clear that any projected results expressed or implied in such statements
will not be realized.
Item 3. Quantitative and Qualitative Disclosures 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 and
European operations on the translation of these foreign operations into the U.S. dollar and on
purchases by our operations of goods in currencies that are not their local currencies. 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 certain merchandise purchase
commitments incurred by these operations with derivative financial instruments. We enter into
derivative contracts only when there is an underlying economic exposure. We utilize currency
forward and swap contracts, designed to offset the gains or losses in the underlying exposures.
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 October 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 the nine months ended October 31, 2009 by
approximately $26 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 periodically 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 October 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.
Equity Price Risk
The assets of our qualified pension plan, a large portion of which are invested in equity
securities, are subject to the risks and uncertainties of the financial markets. We allocate the
pension assets in a manner that attempts to minimize and control our exposure to market
uncertainties. Investments, in general, are exposed to various risks, such as interest rate,
credit, and overall market volatility risks. As a result of the significant decline in the
financial markets in 2009, the value of our pension plan assets decreased, which substantially
increased the unfunded status of our plan, reduced shareholders equity on our balance sheet and
required additional funding to the plan.
Item 4. 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 of October 31, 2009
pursuant to Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the
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 Act is (i) recorded,
processed, summarized and reported, within the time periods specified in the Securities and
Exchange Commissions 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
29
decisions regarding required disclosures. There were no changes in our internal control over
financial reporting, (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the fiscal
quarter ended October 31, 2009 identified in connection with the evaluation by our management,
including our Chief Executive Officer and Chief Financial Officer that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in the Risk Factors
section of our Annual Report on Form 10-K for the year ended January 31, 2009, as filed with the
SEC on March 31, 2009.
30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Information on Share Repurchases
The number of shares of common stock repurchased by TJX during the third quarter of fiscal
2010 and the average price paid per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number (or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate Dollar |
|
|
|
|
|
|
|
|
|
|
Total Number of Shares |
|
Value) of Shares that |
|
|
Total |
|
|
|
|
|
Purchased as Part of a |
|
May Yet be Purchased |
|
|
Number of Shares |
|
Average Price Paid |
|
Publicly Announced |
|
Under the Plans or |
|
|
Repurchased (1) |
|
Per Share (2) |
|
Plan or Program(3) |
|
Programs(3) |
August 2, 2009
through August
29, 2009 |
|
|
1,807,000 |
|
|
$ |
35.69 |
|
|
|
1,807,000 |
|
|
$ |
443,690,304 |
|
|
August 30, 2009
through October
3, 2009 |
|
|
3,168,900 |
|
|
$ |
36.67 |
|
|
|
3,168,900 |
|
|
$ |
1,327,492,872 |
|
|
October 4, 2009
through October
31, 2009 |
|
|
3,194,965 |
|
|
$ |
38.56 |
|
|
|
3,194,965 |
|
|
$ |
1,204,300,070 |
|
|
Total: |
|
|
8,170,865 |
|
|
|
|
|
|
|
8,170,865 |
|
|
|
|
|
|
|
|
(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) |
|
The $304 million in stock repurchases during the fiscal 2010 third quarter were made under
the multi-year stock repurchase plan of $1 billion authorized by TJXs Board of Directors in
February 2008, under which $204 million remained as of October 31, 2009. In September 2009,
TJXs Board of Directors approved a multi-year stock purchase plan of an additional $1 billion,
all of which remained available as of October 31, 2009. Neither stock repurchase plan has an
expiration date. |
31
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits
|
|
|
|
|
|
10.1 |
|
|
Letter Agreement dated as of September 17, 2009 with Ernie Herrman. |
|
|
|
|
|
|
12.1 |
|
|
Form of Non-Qualified Stock Option Certificate Granted under the Stock
Incentive Plan for certain executives. |
|
|
|
|
|
|
12.2 |
|
|
Form of Non-Qualified Stock Option Certificate Granted under the Stock
Incentive Plan for employees. |
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.1 |
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.2 |
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
101 |
|
|
The following materials from The TJX Companies, Inc.s Quarterly
Report on Form 10-Q for the quarter ended October 31, 2009, formatted in XBRL
(Extensible Business Reporting Language): (i) the Consolidated Statements of
Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of
Cash Flows, (iv) the Consolidated Statement of Shareholders Equity, and (v) Notes
to Consolidated Financial Statements, tagged as blocks of text. |
32
SIGNATURE
Pursuant to the requirements 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.
(Registrant)
|
|
|
|
|
|
/s/ Jeffrey G. Naylor |
|
|
Date: December 1, 2009
|
|
Jeffrey G. Naylor, Chief Financial and Administrative Officer
|
|
|
33
EXHIBIT INDEX
|
|
|
Exhibit Number |
|
Description of Exhibit |
|
10.1
|
|
Letter Agreement dated as of
September 17, 2009 with Ernie Herrman. |
|
|
|
12.1
|
|
Form of Non-Qualified Stock Option Certificate Granted under the Stock Incentive Plan for
certain executives. |
|
|
|
12.2
|
|
Form of Non-Qualified Stock Option Certificate Granted under the Stock Incentive Plan for
employees. |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of
2002. |
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes- Oxley Act of
2002. |
|
|
|
101
|
|
The following materials from The TJX Companies, Inc.s Quarterly Report on Form 10-Q for the
quarter ended October 31, 2009, formatted in XBRL (Extensible Business Reporting Language): |
|
|
(i) the Consolidated Statements of Income, (ii) the Consolidated Balance Sheets, (iii) the
Consolidated Statements of Cash Flows, (iv) the Consolidated Statement of Shareholders
Equity, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text. |
34