e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(mark one)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended October 30, 2010
Or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from to
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Commission file number 1-4908 |
The TJX Companies, Inc.
(Exact name of registrant as specified in its charter)
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DELAWARE
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04-2207613 |
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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770 Cochituate Road Framingham, Massachusetts
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01701 |
(Address of principal executive offices)
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(Zip Code)
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(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 [X] NO [ ]
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
[X] NO [ ]
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:
Large Accelerated Filer [X] Accelerated Filer [ ]
Non-Accelerated Filer [ ] (Do not check if a smaller reporting company) Smaller Reporting Company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
YES [ ] NO [ X ].
The number of shares of registrants common stock outstanding as of October 30, 2010: 395,802,044
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 30, |
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October 31, |
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2010 |
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2009 |
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Net sales |
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$ 5,525,847 |
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$ 5,244,946 |
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Cost of sales, including buying and occupancy costs |
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4,006,404 |
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3,802,179 |
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Selling, general and administrative expenses |
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912,808 |
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864,097 |
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Provision (credit) for Computer Intrusion related costs |
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- |
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- |
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Interest expense, net |
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9,518 |
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12,665 |
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Income before provision for income taxes |
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597,117 |
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566,005 |
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Provision for income taxes |
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224,808 |
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218,206 |
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Net income |
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$ 372,309 |
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$ 347,799 |
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Basic earnings per share: |
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Net income |
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$ 0.94 |
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$ 0.82 |
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Weighted average common shares basic |
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397,217 |
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421,654 |
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Diluted earnings per share: |
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Net income |
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$ 0.92 |
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$ 0.81 |
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Weighted average common shares diluted |
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403,040 |
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428,092 |
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Cash dividends declared per share |
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$ 0.15 |
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$ 0.12 |
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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 30, |
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October 31, |
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2010 |
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2009 |
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Net sales |
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$15,610,467 |
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$14,346,698 |
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Cost of sales, including buying and occupancy costs |
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11,374,288 |
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10,609,827 |
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Selling, general and administrative expenses |
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2,587,972 |
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2,390,030 |
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Provision (credit) for Computer Intrusion related costs |
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(11,550 |
) |
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- |
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Interest expense, net |
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29,992 |
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28,515 |
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Income before provision for income taxes |
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1,629,765 |
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1,318,326 |
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Provision for income taxes |
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621,038 |
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499,752 |
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Net income |
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$ 1,008,727 |
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$ 818,574 |
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Basic earnings per share: |
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Net income |
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$ 2.50 |
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$ 1.95 |
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Weighted average common shares basic |
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402,969 |
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419,398 |
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Diluted earnings per share: |
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Net income |
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$ 2.46 |
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$ 1.91 |
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Weighted average common shares diluted |
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409,284 |
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430,136 |
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Cash dividends declared per share |
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$ 0.45 |
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$ 0.36 |
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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 30, |
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January 30, |
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October 31, |
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2010 |
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2010 |
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2009 |
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(unaudited) |
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(unaudited) |
ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ 1,339,065 |
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$ 1,614,607 |
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$ 1,445,648 |
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Short-term investments |
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129,967 |
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130,636 |
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76,643 |
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Accounts receivable, net |
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229,318 |
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148,126 |
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163,555 |
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Merchandise inventories |
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3,272,960 |
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2,532,318 |
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3,267,667 |
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Prepaid expenses and other current assets |
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290,465 |
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255,707 |
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259,357 |
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Current deferred income taxes, net |
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34,867 |
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122,462 |
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117,787 |
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Total current assets |
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5,296,642 |
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4,803,856 |
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5,330,657 |
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Property at cost: |
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Land and buildings |
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289,158 |
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281,527 |
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277,586 |
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Leasehold costs and improvements |
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2,121,958 |
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1,930,977 |
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1,910,909 |
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Furniture, fixtures and equipment |
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3,345,501 |
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3,087,419 |
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3,019,725 |
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Total property at cost |
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5,756,617 |
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5,299,923 |
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5,208,220 |
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Less accumulated depreciation and amortization |
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3,286,189 |
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3,026,041 |
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2,947,688 |
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Net property at cost |
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2,470,428 |
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2,273,882 |
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2,260,532 |
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Property under capital lease, net of accumulated
amortization of $21,032; $19,357 and $18,799, respectively |
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11,540 |
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13,215 |
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13,773 |
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Other assets |
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223,641 |
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193,230 |
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198,335 |
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Goodwill and tradename, net of amortization |
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179,897 |
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179,794 |
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179,767 |
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TOTAL ASSETS |
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$ 8,182,148 |
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$ 7,463,977 |
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$ 7,983,064 |
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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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$ - |
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$ - |
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$ 200,358 |
|
Obligation under capital lease due within one year |
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|
2,627 |
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|
2,355 |
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|
2,309 |
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Accounts payable |
|
|
1,974,272 |
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|
1,507,892 |
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|
1,838,558 |
|
Accrued expenses and other liabilities |
|
|
1,253,053 |
|
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|
1,248,002 |
|
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|
1,187,294 |
|
Federal, foreign and state income taxes payable |
|
|
- |
|
|
|
136,737 |
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|
17,621 |
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|
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|
|
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Total current liabilities |
|
|
3,229,952 |
|
|
|
2,894,986 |
|
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|
3,246,140 |
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|
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|
|
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Other long-term liabilities |
|
|
746,860 |
|
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|
697,099 |
|
|
|
742,594 |
|
Non-current deferred income taxes, net |
|
|
307,810 |
|
|
|
192,447 |
|
|
|
263,066 |
|
Obligation under capital lease, less portion due within one year |
|
|
13,823 |
|
|
|
15,844 |
|
|
|
16,451 |
|
Long-term debt, exclusive of current installments |
|
|
774,381 |
|
|
|
774,325 |
|
|
|
774,306 |
|
Commitments and contingencies |
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|
- |
|
|
|
- |
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|
|
- |
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|
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|
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|
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SHAREHOLDERS EQUITY |
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Common stock, authorized 1,200,000,000 shares,
par value $1, issued and outstanding 395,802,044;
409,386,126 and 419,708,634, respectively |
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|
395,802 |
|
|
|
409,386 |
|
|
|
419,709 |
|
Additional paid-in capital |
|
|
- |
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|
|
- |
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|
|
34,719 |
|
Accumulated other comprehensive income (loss) |
|
|
(101,494 |
) |
|
|
(134,124 |
) |
|
|
(119,636 |
) |
Retained earnings |
|
|
2,815,014 |
|
|
|
2,614,014 |
|
|
|
2,605,715 |
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Total shareholders equity |
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|
3,109,322 |
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|
2,889,276 |
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|
2,940,507 |
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TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
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|
$ 8,182,148 |
|
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$ 7,463,977 |
|
|
|
$ 7,983,064 |
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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 30, |
|
October 31, |
|
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
|
$1,008,727 |
|
|
|
$ 818,574 |
|
Adjustments to reconcile net income to net cash
provided by operating activities: |
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|
|
|
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|
Depreciation and amortization |
|
|
341,069 |
|
|
|
318,940 |
|
Loss on property disposals |
|
|
6,991 |
|
|
|
6,764 |
|
Deferred income tax provision |
|
|
142,607 |
|
|
|
130,539 |
|
Amortization of share-based compensation expense |
|
|
44,913 |
|
|
|
40,831 |
|
Excess tax benefits from share-based compensation expense |
|
|
(23,410 |
) |
|
|
(15,755 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
(Increase) in accounts receivable |
|
|
(43,943 |
) |
|
|
(16,466 |
) |
(Increase) in merchandise inventories |
|
|
(719,710 |
) |
|
|
(577,469 |
) |
(Increase) decrease in prepaid expenses and other current
assets |
|
|
(41,536 |
) |
|
|
15,876 |
|
Increase in accounts payable |
|
|
454,738 |
|
|
|
522,079 |
|
(Decrease) increase in accrued expenses and other liabilities |
|
|
(81,030 |
) |
|
|
82,156 |
|
Other |
|
|
9,776 |
|
|
|
(36,848 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
1,099,192 |
|
|
|
1,289,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Property additions |
|
|
(540,351 |
) |
|
|
(318,948 |
) |
Purchase of short-term investments |
|
|
(102,879 |
) |
|
|
(199,839 |
) |
Sales and maturities of short-term investments |
|
|
108,844 |
|
|
|
126,741 |
|
Other |
|
|
695 |
|
|
|
(5,802 |
) |
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities |
|
|
(533,691 |
) |
|
|
(397,848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
(3,089 |
) |
|
|
(7,202 |
) |
Payments on capital lease obligation |
|
|
(1,749 |
) |
|
|
(1,614 |
) |
Cash payments for repurchase of common stock |
|
|
(845,522 |
) |
|
|
(530,501 |
) |
Proceeds from issuance of common stock |
|
|
141,880 |
|
|
|
154,095 |
|
Excess tax benefits from share-based compensation expense |
|
|
23,410 |
|
|
|
15,755 |
|
Cash dividends paid |
|
|
(170,042 |
) |
|
|
(147,403 |
) |
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(855,112 |
) |
|
|
63,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
14,069 |
|
|
|
36,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(275,542 |
) |
|
|
992,121 |
|
Cash and cash equivalents at beginning of year |
|
|
1,614,607 |
|
|
|
453,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
|
$1,339,065 |
|
|
|
$1,445,648 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
5
THE TJX COMPANIES, INC.
STATEMENT OF SHAREHOLDERS EQUITY
(UNAUDITED)
IN THOUSANDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Accumulated |
|
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|
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|
|
Common Stock |
|
|
Additional |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Par Value |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Retained |
|
|
|
|
|
|
Shares |
|
|
$1 |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Total |
|
|
|
Balance, January 30, 2010 |
|
|
409,386 |
|
|
|
$ 409,386 |
|
|
$ |
- |
|
|
|
$ (134,124 |
) |
|
|
$2,614,014 |
|
|
|
$2,889,276 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,008,727 |
|
|
|
1,008,727 |
|
Foreign currency translation adjustments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
28,716 |
|
|
|
- |
|
|
|
28,716 |
|
Recognition of prior service cost and
deferred gains |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,914 |
|
|
|
- |
|
|
|
3,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,041,357 |
|
Cash dividends declared on common stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(180,558 |
) |
|
|
(180,558 |
) |
Amortization of share-based compensation expense |
|
|
- |
|
|
|
- |
|
|
|
44,913 |
|
|
|
- |
|
|
|
- |
|
|
|
44,913 |
|
Issuance of common stock under stock incentive
plan and related tax effect |
|
|
6,141 |
|
|
|
6,141 |
|
|
|
153,715 |
|
|
|
- |
|
|
|
- |
|
|
|
159,856 |
|
Common stock repurchased |
|
|
(19,725 |
) |
|
|
(19,725 |
) |
|
|
(198,628 |
) |
|
|
- |
|
|
|
(627,169 |
) |
|
|
(845,522 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 30, 2010 |
|
|
395,802 |
|
|
|
$ 395,802 |
|
|
|
$ - |
|
|
|
$ (101,494 |
) |
|
|
$2,815,014 |
|
|
|
$3,109,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 The TJX Companies, Inc. (together with its subsidiaries, TJX)
for a fair presentation of its financial statements for the periods reported, all in conformity
with accounting principles generally accepted in the United States of America (U.S. GAAP)
consistently applied. The consolidated interim financial statements should be read in conjunction
with the audited consolidated financial statements, including the related notes, contained in TJXs
Annual Report on Form 10-K for the fiscal year ended January 30, 2010 (fiscal 2010).
These interim results are not necessarily indicative of results for the full fiscal year, because
TJXs business, in common with the businesses of retailers generally, is subject to seasonal
influences, with higher levels of sales and income generally realized in the second half of the
year.
Share-Based Compensation - Total share-based compensation expense was $16.9 million for the quarter
ended October 30, 2010 and $15.0 million for the quarter ended October 31, 2009. Total share-based
compensation expense was $44.9 million for the nine months ended October 30, 2010 and $40.8 million
for the nine months ended October 31, 2009. These amounts include stock option expense as well as
restricted and deferred stock amortization. There were options to purchase 1.6 million shares of
common stock exercised during the third quarter ended October 30, 2010 and options to purchase 6.0
million shares of common stock exercised during the nine months ended October 30, 2010. There were
options to purchase 26.5 million shares of common stock outstanding as of October 30, 2010.
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 include an accrual for
in-transit inventory of $493.8 million at October 30, 2010, $396.8 million at January 30, 2010 and
$451.6 million at October 31, 2009. A liability for a comparable amount is included in accounts
payable for the respective periods.
New Accounting Standards - There were no new accounting standards issued during the third quarter
ended October 30, 2010 that are expected to have a material impact on TJXs financial condition,
results of operations or cash flows.
Note B. Commitments and Contingencies
Provision (credit) 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. TJX reduced
the Provision for Computer Intrusion related costs by $11.6 million during the second quarter ended
July 31, 2010 primarily as a result of insurance proceeds and adjustments to our remaining reserve.
The reserve balance was $18.8 million at October 30, 2010. 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, in the future, decrease or increase the amount of the reserve to adjust for
matters such as developments in litigation, claims and related expenses, insurance proceeds and
changes in the estimate.
7
Reserve for Discontinued
Operations - TJX has a reserve for the remaining future obligations of
discontinued operations that relates primarily to real estate leases associated with former TJX
businesses. The reserve balance was $31.2 million at October 30, 2010 and $38.2 million at October
31, 2009.
TJX may also be contingently liable on up to 14 leases of BJs Wholesale Club, a former TJX
business, and up to seven leases of Bobs Stores, also a former TJX business, in addition to those
included in the reserve. 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.
Note C. Other Comprehensive Income
TJXs comprehensive income information, net of related tax effects, is presented below:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
October 30, |
|
October 31, |
In thousands |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
$ 372,309 |
|
|
|
$ 347,799 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
30,399 |
|
|
|
(6,113 |
) |
Recognition of unfunded post retirement obligations |
|
|
- |
|
|
|
- |
|
Recognition of prior service cost and deferred gains |
|
|
840 |
|
|
|
2,267 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
$ 403,548 |
|
|
|
$ 343,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
October 31, |
In thousands |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
$ 1,008,727 |
|
|
|
$ 818,574 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
28,716 |
|
|
|
94,187 |
|
Recognition of unfunded post retirement obligations |
|
|
- |
|
|
|
(1,212 |
) |
Recognition of prior service cost and deferred gains |
|
|
3,914 |
|
|
|
5,170 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
$ 1,041,357 |
|
|
|
$ 916,719 |
|
|
|
|
|
|
|
|
|
|
8
Note D. Capital Stock and Earnings Per Share
Capital Stock - During the quarter ended October 30, 2010, TJX repurchased and retired 6.0 million
shares of its common stock at a cost of $255.8 million. For the nine months ended October 30,
2010, TJX repurchased and retired 19.7 million shares of its common stock at a cost of $845.3
million. TJX reflects stock repurchases in its financial statements on a settlement basis.
TJXs cash expenditures for its repurchase programs were $845.5 million for the nine months ended
October 30, 2010 and $530.5 million for the nine months ended October 31, 2009. These expenditures
were funded primarily by cash generated from operations together, in 2009, with the proceeds of a
debt issuance. In October 2010, TJX completed the $1 billion stock repurchase program authorized
in September 2009 under which TJX repurchased 24.1 million shares of common stock. In February
2010, TJXs Board of Directors approved another stock repurchase program that authorizes the
repurchase of up to an additional $1 billion of TJX common stock from time to time. Under this
plan, TJX repurchased 1.1 million shares of common stock at a cost of $50.4 million through the
third quarter of fiscal 2011 and $949.6 million remained available at October 30, 2010. All shares
repurchased under the stock repurchase programs have been retired.
TJX has five million shares of authorized but unissued preferred stock, par value $1 per share.
Earnings per share - The following schedule presents the calculation of basic and diluted earnings
per share (EPS) for net income:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
October 30, |
|
October 31, |
In thousands, except per share data |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
|
|
|
|
|
|
Net income |
|
|
$ 372,309 |
|
|
|
$ 347,799 |
|
Weighted average common shares outstanding for basic EPS |
|
|
397,217 |
|
|
|
421,654 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share continuing operations |
|
|
$ 0.94 |
|
|
|
$ 0.82 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
Net income |
|
|
$ 372,309 |
|
|
|
$ 347,799 |
|
Add back: Interest expense on zero coupon convertible
subordinated
notes, net of income taxes |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net income used for diluted EPS calculation |
|
|
$ 372,309 |
|
|
|
$ 347,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares for basic and diluted earnings per share calculations: |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic EPS |
|
|
397,217 |
|
|
|
421,654 |
|
Assumed conversion/exercise/vesting of: |
|
|
|
|
|
|
|
|
Stock options and awards |
|
|
5,823 |
|
|
|
6,438 |
|
Zero coupon convertible subordinated notes |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for diluted EPS |
|
|
403,040 |
|
|
|
428,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
$ 0.92 |
|
|
|
$ 0.81 |
|
9
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
October 31, |
In thousands, except per share data |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
|
|
|
|
|
|
Net income |
|
|
$ 1,008,727 |
|
|
|
$ 818,574 |
|
Weighted average common shares outstanding for basic EPS |
|
|
402,969 |
|
|
|
419,398 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share continuing operations |
|
|
$ 2.50 |
|
|
|
$ 1.95 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
Net income |
|
|
$ 1,008,727 |
|
|
|
$ 818,574 |
|
Add back: Interest expense on zero coupon convertible
subordinated
notes, net of income taxes |
|
|
- |
|
|
|
1,073 |
|
|
|
|
|
|
|
|
|
|
Net income used for diluted EPS calculation |
|
|
$ 1,008,727 |
|
|
|
$ 819,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares for basic and diluted earnings per share calculations: |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic EPS |
|
|
402,969 |
|
|
|
419,398 |
|
Assumed conversion/exercise/vesting of: |
|
|
|
|
|
|
|
|
Stock options and awards |
|
|
6,315 |
|
|
|
5,537 |
|
Zero coupon convertible subordinated notes |
|
|
- |
|
|
|
5,201 |
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for diluted EPS |
|
|
409,284 |
|
|
|
430,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
$ 2.46 |
|
|
|
$ 1.91 |
|
In April 2009, TJX called for the redemption of its zero coupon convertible subordinated notes.
There were 462,057 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. TJX paid $2.3 million to redeem the remaining 2,886 notes
outstanding that were not converted.
The weighted average common shares for the diluted earnings per share calculation excludes the
impact of outstanding stock options if the assumed proceeds per share of the option is in excess of
the related fiscal periods average price of TJXs common stock. Such options are excluded because
they would have an antidilutive effect. No such options were excluded for the thirteen weeks or
for the thirty-nine weeks ended October 30, 2010. There were 4.8 million options excluded for the
thirteen weeks ended October 31, 2009 and 9.6 million options excluded for the thirty-nine weeks
ended October 31, 2009.
10
Note E. 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. TJX recognizes all derivative
instruments as either assets or liabilities in the statements of financial position and measures
those instruments at fair value. The fair values of the derivatives are classified as assets or
liabilities, current or non-current, based upon valuation results and settlement dates of the
individual contracts. Changes to the fair value of derivative contracts that do not qualify for
hedge accounting are reported in earnings in the period of the change. For derivatives that
qualify for hedge accounting, changes in the fair value of the derivatives are either recorded in
shareholders equity as a component of other comprehensive income or are recognized currently in
earnings, along with an offsetting adjustment against the basis of the item being hedged.
Interest Rate Contracts - During fiscal 2004, TJX entered into interest rate swaps with respect to
$100 million of the $200 million ten-year notes outstanding at that time. Under those interest
rate swaps, which settled in December 2009, TJX paid a specific variable interest rate indexed to
the six-month LIBOR rate and received a fixed rate applicable to the underlying debt, effectively
converting the interest on a portion of the notes from fixed to a floating rate of interest. The
interest income/expense on those swaps was accrued as earned and recorded as an adjustment to the
interest expense accrued on the fixed-rate debt. The interest rate swaps were designated as fair
value hedges on the underlying debt.
Diesel Fuel Contracts - During the fourth quarter of fiscal 2010 and the second quarter of
fiscal 2011, TJX entered into agreements to hedge a portion of its notional
diesel requirements for fiscal 2011 based on the diesel fuel consumed by independent freight
carriers transporting the Companys inventory. These economic hedges at October 30, 2010 relate to
50% of TJXs notional diesel requirements in the fourth quarter of fiscal 2011. These
diesel fuel hedge agreements will settle during the last quarter of fiscal 2011 and expire in
February 2011. During fiscal 2009, TJX entered into agreements to hedge approximately 30% of its
notional diesel fuel requirements for fiscal 2010, which settled throughout the year and terminated
in February 2010. Independent freight carriers transporting the Companys inventory charge TJX a
mileage surcharge for diesel fuel price increases as incurred by the carrier. The hedge agreements
are designed to mitigate the volatility of diesel fuel pricing (and the resulting per mile
surcharges payable by TJX) by setting a fixed price per gallon for the year. TJX elected not to
apply hedge accounting rules to these contracts.
Foreign Currency Contracts - TJX enters into forward foreign currency exchange contracts to obtain
economic hedges on portions of merchandise purchases made and anticipated to be made in currencies
other than the functional currency of TJX Europe (operating in the United Kingdom, Ireland, Germany
and Poland), TJX Canada (Canada) and Marmaxx (U.S.). These contracts are typically twelve months
or less in duration. The contracts outstanding at October 30, 2010 covered a portion of the
anticipated merchandise purchases for the remainder of fiscal 2011 and into fiscal 2012. TJX
elected not to apply hedge accounting rules to these contracts.
TJX also enters into derivative contracts, generally designated as fair value hedges, to hedge
intercompany debt and intercompany interest payable. The changes in fair value of these contracts
are recorded in selling, general and administrative expenses and are offset by marking the
underlying item to fair value in the same period. Upon settlement, the realized gains and losses
on these contracts are offset by the realized gains and losses of the underlying item in selling,
general and administrative expenses.
11
Following is a summary of TJXs derivative financial instruments, related fair value and balance
sheet classification at October 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Fair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value in |
|
|
|
|
|
|
|
|
|
|
|
Blended |
|
|
|
|
|
|
Current |
|
|
Current |
|
|
US$ at |
|
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
Balance Sheet |
|
|
Asset |
|
|
(Liability) |
|
|
October |
|
In thousands |
|
Pay |
|
|
Receive |
|
|
Rate |
|
|
Location |
|
|
US$ |
|
|
US$ |
|
|
30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany balances,
primarily short-term
debt and related interest |
|
C$ |
21,208 |
|
|
US$ |
20,004 |
|
|
|
0.9432 |
|
|
(Accrued Exp) |
|
$ |
1 |
|
|
$ |
(766 |
) |
|
$ |
(765 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,175 |
|
|
US$ |
89,682 |
|
|
|
1.3760 |
|
|
(Accrued Exp) |
|
|
- |
|
|
|
(1,177 |
) |
|
|
(1,177 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic
hedges for which hedge accounting not elected: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diesel contracts |
|
Fixed on 1.3M gal
per month |
|
Float on 1.3M gal
per month |
|
|
N/A |
|
|
Prepaid Exp |
|
|
221 |
|
|
|
- |
|
|
|
221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise purchase commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid Exp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C$ |
309,142 |
|
|
US$ |
302,239 |
|
|
|
0.9777 |
|
|
Assets / |
|
|
1,283 |
|
|
|
(1,538 |
) |
|
|
(255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Accrued Exp) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C$ |
3,828 |
|
|
|
2,900 |
|
|
|
0.7576 |
|
|
Prepaid Exp |
|
|
289 |
|
|
|
- |
|
|
|
289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ |
45,009 |
|
|
US$ |
69,697 |
|
|
|
1.5485 |
|
|
(Accrued Exp) |
|
|
- |
|
|
|
(2,475 |
) |
|
|
(2,475 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ |
41,192 |
|
|
|
47,542 |
|
|
|
1.1542 |
|
|
Prepaid |
|
|
902 |
|
|
|
(715 |
) |
|
|
187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exp/(Accrued Exp) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,623 |
|
|
£ |
30,152 |
|
|
|
0.8464 |
|
|
Prepaid Exp/(Accrued |
|
|
102 |
|
|
|
(1,424 |
) |
|
|
(1,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exp) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,236 |
|
|
US$ |
8,301 |
|
|
|
1.3311 |
|
|
(Accrued Exp) |
|
|
- |
|
|
|
(393 |
) |
|
|
(393 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$ |
1,160 |
|
|
|
873 |
|
|
|
1.3288 |
|
|
Prepaid Exp |
|
|
57 |
|
|
|
- |
|
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of all financial instruments |
|
|
|
|
|
|
|
|
|
|
$ 2,855 |
|
|
$ |
(8,488 |
) |
|
$ |
(5,633 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Following is a summary of TJXs derivative financial instruments, related fair value and
balance sheet classification at October 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Fair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value in |
|
|
|
|
|
|
|
|
|
|
Blended |
|
|
|
|
|
Current |
|
Current |
|
US$ at |
|
|
|
|
|
|
|
|
|
|
Contract |
|
Balance Sheet |
|
Asset |
|
(Liability) |
|
October |
In thousands |
|
Pay |
|
Receive |
|
Rate |
|
Location |
|
US$ |
|
US$ |
|
31, 2009 |
|
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap fixed to floating on notional of $50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIBOR + 4.17% |
|
|
|
7.45 |
% |
|
|
N/A |
|
|
Prepaid Exp |
|
$ |
650 |
|
|
$ |
- |
|
|
$ |
650 |
|
|
Interest rate swap fixed to floating on notional of $50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIBOR + 3.42% |
|
|
|
7.45 |
% |
|
|
N/A |
|
|
Prepaid Exp |
|
|
840 |
|
|
|
- |
|
|
|
840 |
|
Intercompany balance hedges primarily short-term debt and related interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C$ |
96,450 |
|
|
US$ |
89,161 |
|
|
|
0.9244 |
|
|
Prepaid Exp / (Accrued Exp) |
|
|
499 |
|
|
|
(283 |
) |
|
|
216 |
|
Economic hedges for which hedge accounting not elected: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diesel contracts |
|
Fixed on 750K gal per month |
|
Float on 750K gal per month
|
|
|
N/A |
|
|
(Accrued Exp) |
|
|
- |
|
|
|
(582 |
) |
|
|
(582 |
) |
Merchandise purchase commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C$ |
211,650 |
|
|
US$ |
198,601 |
|
|
|
0.9383 |
|
|
Prepaid Exp or Other Assets / (Accrued Exp) |
|
|
4,605 |
|
|
|
(1,143 |
) |
|
|
3,462 |
|
|
|
C$ |
1,896 |
|
|
|
1,200 |
|
|
|
0.6329 |
|
|
Prepaid Exp |
|
|
18 |
|
|
|
- |
|
|
|
18 |
|
|
|
£ |
39,217 |
|
|
US$ |
63,393 |
|
|
|
1.6165 |
|
|
Prepaid Exp / (Accrued Exp) |
|
|
276 |
|
|
|
(1,411 |
) |
|
|
(1,135 |
) |
|
|
£ |
40,521 |
|
|
|
44,461 |
|
|
|
1.0972 |
|
|
Prepaid Exp / (Accrued Exp) |
|
|
449 |
|
|
|
(1,748 |
) |
|
|
(1,299 |
) |
|
|
US$ |
863 |
|
|
|
586 |
|
|
|
0.6790 |
|
|
Prepaid Exp / (Accrued Exp) |
|
|
8 |
|
|
|
(9 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of all financial instruments |
|
|
|
|
|
|
|
|
|
$ |
7,345 |
|
|
$ |
(5,176 |
) |
|
$ |
2,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
The impact of derivative financial instruments on the statements of income during the third
quarter of fiscal 2011 and fiscal 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss) |
|
|
|
|
|
|
Recognized in Income by |
|
|
Amount of Gain (Loss) Recognized |
|
|
Derivative |
|
|
in Income by Derivative |
|
In thousands |
|
|
|
|
|
October 30, |
|
October 31, |
|
|
|
|
|
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap fixed to floating on notional of
$50,000 |
|
Interest expense, net |
|
$ |
- |
|
|
$ |
351 |
|
Interest rate swap fixed to floating on notional of
$50,000 |
|
Interest expense, net |
|
|
- |
|
|
|
446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany
balances, primarily short-term debt and related interest |
|
Selling, general &
administrative expenses |
|
|
2,005 |
|
|
|
532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic hedges for which hedge accounting not elected: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diesel contracts |
|
Cost of sales, including buying
and occupancy costs |
|
|
57 |
|
|
|
635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise purchase commitments |
|
Cost of sales, including buying
and occupancy costs |
|
|
1,373 |
|
|
|
18,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in income |
|
|
|
|
|
$ |
3,435 |
|
|
$ |
20,066 |
|
|
|
|
|
|
|
|
The impact of derivative financial instruments on the statements of income during the first
nine months of fiscal 2011 and fiscal 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss) |
|
|
|
|
|
|
Recognized in Income by |
|
|
Amount of Gain (Loss) Recognized |
|
|
Derivative |
|
|
in Income by Derivative |
|
In thousands |
|
|
|
|
|
October 30, |
|
October 31, |
|
|
|
|
|
|
2010 |
|
2009 |
|
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap fixed to floating on notional of
$50,000 |
|
Interest expense, net |
|
$ |
- |
|
|
$ |
892 |
|
Interest rate swap fixed to floating on notional of
$50,000 |
|
Interest expense, net |
|
|
- |
|
|
|
1,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany
balances, primarily short-term debt and related interest |
|
Selling, general &
administrative expenses |
|
|
2,005 |
|
|
|
(6,491 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic hedges for which hedge accounting not elected: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diesel contracts |
|
Cost of sales, including buying
and occupancy costs |
|
|
663 |
|
|
|
4,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise purchase commitments |
|
Cost of sales, including buying
and occupancy costs |
|
|
(8,524 |
) |
|
|
(3,073 |
) |
|
|
|
|
|
|
|
|
Gain (loss) recognized in income |
|
|
|
|
|
$ |
(5,856 |
) |
|
$ |
(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 are designed
to minimize TJXs exposure to credit loss in the event of nonperformance by one of the
counterparties. TJX is not required by counterparties to maintain, and
14
TJX does not require that
counterparties maintain collateral for these contracts. TJX monitors its position and the credit
ratings of the counterparties on an ongoing basis and does not anticipate losses resulting from
potential nonperformance of these institutions.
Note F. Disclosures about Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date (exit
price). U.S. GAAP classifies the inputs used to measure fair value into the following hierarchy:
|
Level 1: |
|
Unadjusted quoted prices in active markets for identical assets or liabilities. |
|
|
Level 2: |
|
Unadjusted quoted prices in active markets for similar assets or liabilities, or
unadjusted quoted prices for identical or similar assets or liabilities in markets
that are not active,
or inputs other than quoted prices that are observable for the
asset or liability. |
|
|
Level 3: |
|
Unobservable inputs for the asset or liability. |
TJX endeavors to utilize the best available information in measuring fair value and classifies
financial assets and liabilities 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 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 30, |
|
|
January 30, |
|
|
October 31, |
|
In thousands |
|
2010 |
|
|
2010 |
|
|
2009 |
|
|
Level 1 |
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Executive savings plan |
|
$ |
68,579 |
|
|
$ |
55,404 |
|
|
$ |
52,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
129,967 |
|
|
$ |
130,636 |
|
|
$ |
76,643 |
|
Foreign currency exchange contracts |
|
|
2,634 |
|
|
|
5,642 |
|
|
|
5,855 |
|
Diesel fuel contracts |
|
|
221 |
|
|
|
- |
|
|
|
- |
|
Interest rate swaps |
|
|
- |
|
|
|
- |
|
|
|
1,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts |
|
$ |
8,488 |
|
|
$ |
1,029 |
|
|
$ |
4,594 |
|
Diesel fuel contracts |
|
|
- |
|
|
|
442 |
|
|
|
582 |
|
The fair value of TJXs general corporate debt, including current installments, was estimated by
obtaining market quotes given the trading levels of other bonds of the same general issuer type and
market perceived credit quality. The fair value of the zero coupon convertible subordinated notes
was estimated by obtaining market quotes. The fair value of long-term debt at October 30, 2010 was
$920.9 million compared to a carrying value of $774.4 million. The fair value of the current
installments of long-term debt at October 31, 2009 was $201.9 million compared to a carrying value
of $200.4 million. The fair value of long-term debt as of October 31, 2009 was $853.5 million
compared to 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.
TJXs cash equivalents are stated at cost, which approximates fair value, due to the short
maturities of these instruments.
Investments designed to meet obligations under the executive savings plan are invested in
securities traded in active markets and are recorded at unadjusted quoted prices.
15
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 deemed appropriate, TJX seeks to minimize risk 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. TJX does not use leveraged derivative financial instruments. The forward foreign
currency exchange contracts and interest rate swaps are valued using broker quotations which
include observable market information. TJX does not make adjustments to quotes or prices obtained
from brokers or pricing services but does assess the credit risk of counterparties and will adjust
final valuations when appropriate. Where independent pricing services provide fair values, TJX
obtains an understanding of the methods used in pricing. As such, these derivative instruments are
classified within level 2.
16
Note G. Segment Information
TJX operates five business segments, three in the United States and one each in Canada and Europe.
Each of TJXs segments has its own administrative, buying and merchandising organization and
distribution network. Of the U.S. based chains, T.J. Maxx and Marshalls, referred to as Marmaxx,
are managed together and reported as a single segment and A.J. Wright and HomeGoods each is
reported as a separate segment. Outside the U.S., chains in Canada (Winners, HomeSense and
StyleSense) are under common management and reported as the TJX Canada segment, and chains in
Europe (T.K. Maxx and HomeSense) are also under common management and reported as the TJX Europe
segment.
TJX evaluates the performance of its segments based on segment profit or loss, which it defines
as pre-tax income before general corporate expense, provision (credit) for Computer Intrusion
related costs, and interest expense. 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 our performance or as a measure of liquidity.
Presented below is financial information on TJXs business segments:
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
October 30, |
|
|
October 31, |
|
In thousands |
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
U.S. segments: |
|
|
|
|
|
|
|
|
Marmaxx |
|
$ |
3,502,670 |
|
|
$ |
3,380,543 |
|
HomeGoods |
|
|
479,859 |
|
|
|
452,004 |
|
A.J. Wright |
|
|
204,824 |
|
|
|
197,841 |
|
International segments: |
|
|
|
|
|
|
|
|
TJX Canada |
|
|
666,799 |
|
|
|
611,485 |
|
TJX Europe |
|
|
671,695 |
|
|
|
603,073 |
|
|
|
|
|
|
|
|
|
|
$ |
5,525,847 |
|
|
$ |
5,244,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss): |
|
|
|
|
|
|
|
|
U.S. segments: |
|
|
|
|
|
|
|
|
Marmaxx |
|
$ |
453,720 |
|
|
$ |
422,754 |
|
HomeGoods |
|
|
44,545 |
|
|
|
39,454 |
|
A.J. Wright |
|
|
(1,183 |
) |
|
|
1,273 |
|
International segments: |
|
|
|
|
|
|
|
|
TJX Canada |
|
|
113,844 |
|
|
|
113,011 |
|
TJX Europe |
|
|
41,214 |
|
|
|
48,790 |
|
|
|
|
|
|
|
|
|
|
|
652,140 |
|
|
|
625,282 |
|
|
|
|
|
|
|
|
|
|
General corporate expenses |
|
|
45,505 |
|
|
|
46,612 |
|
Interest expense, net |
|
|
9,518 |
|
|
|
12,665 |
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
$ |
597,117 |
|
|
$ |
566,005 |
|
|
|
|
|
|
|
|
17
Financial information on TJXs business segments (continued):
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
|
October 31, |
|
In thousands |
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
U.S. segments: |
|
|
|
|
|
|
|
|
Marmaxx |
|
$ |
10,090,083 |
|
|
$ |
9,464,356 |
|
HomeGoods |
|
|
1,392,603 |
|
|
|
1,256,736 |
|
A.J. Wright |
|
|
609,422 |
|
|
|
559,162 |
|
International segments: |
|
|
|
|
|
|
|
|
TJX Canada |
|
|
1,803,244 |
|
|
|
1,531,248 |
|
TJX Europe |
|
|
1,715,115 |
|
|
|
1,535,196 |
|
|
|
|
|
|
|
|
|
|
$ |
15,610,467 |
|
|
$ |
14,346,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit: |
|
|
|
|
|
|
|
|
U.S. segments: |
|
|
|
|
|
|
|
|
Marmaxx |
|
$ |
1,338,455 |
|
|
$ |
1,111,775 |
|
HomeGoods |
|
|
120,314 |
|
|
|
79,559 |
|
A.J. Wright |
|
|
10,615 |
|
|
|
7,057 |
|
International segments: |
|
|
|
|
|
|
|
|
TJX Canada |
|
|
249,925 |
|
|
|
180,709 |
|
TJX Europe |
|
|
49,178 |
|
|
|
82,803 |
|
|
|
|
|
|
|
|
|
|
|
1,768,487 |
|
|
|
1,461,903 |
|
|
|
|
|
|
|
|
|
|
General corporate expenses |
|
|
120,280 |
|
|
|
115,062 |
|
Provision (credit) for Computer Intrusion related costs |
|
|
(11,550 |
) |
|
|
- |
|
Interest expense, net |
|
|
29,992 |
|
|
|
28,515 |
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
$ |
1,629,765 |
|
|
$ |
1,318,326 |
|
|
|
|
|
|
|
|
18
Note H. Pension Plans and Other Retirement Obligations
Presented below is financial information related to TJXs funded defined benefit retirement plan
(funded plan) and its unfunded supplemental pension plan (unfunded plan) for the periods shown.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
Pension |
|
|
|
(Funded Plan) |
|
|
|
(Unfunded Plan) |
|
|
Thirteen Weeks Ended |
|
Thirteen Weeks Ended |
|
|
October 30, |
|
|
October 31, |
|
|
|
October 30, |
|
|
October 31, |
|
In thousands |
|
2010 |
|
|
2009 |
|
|
|
2010 |
|
|
2009 |
|
|
|
Service cost |
|
$ |
8,607 |
|
|
$ |
6,406 |
|
|
|
$ |
491 |
|
|
$ |
274 |
|
Interest cost |
|
|
7,784 |
|
|
|
7,708 |
|
|
|
|
554 |
|
|
|
730 |
|
Expected return on plan assets |
|
|
(10,051 |
) |
|
|
(7,157 |
) |
|
|
|
- |
|
|
|
- |
|
Amortization of prior service cost |
|
|
- |
|
|
|
4 |
|
|
|
|
20 |
|
|
|
31 |
|
Recognized actuarial losses (gains) |
|
|
2,935 |
|
|
|
3,439 |
|
|
|
|
(682 |
) |
|
|
285 |
|
Settlement cost |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense |
|
$ |
9,275 |
|
|
$ |
10,400 |
|
|
|
$ |
383 |
|
|
$ |
1,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
Pension |
|
|
|
(Funded Plan) |
|
|
|
(Unfunded Plan) |
|
|
Thirty-Nine Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
|
October 31, |
|
|
|
October 30, |
|
|
October 31, |
|
In thousands |
|
2010 |
|
|
2009 |
|
|
|
2010 |
|
|
2009 |
|
|
|
Service cost |
|
$ |
24,106 |
|
|
$ |
22,537 |
|
|
|
$ |
902 |
|
|
$ |
821 |
|
Interest cost |
|
|
25,822 |
|
|
|
23,490 |
|
|
|
|
2,011 |
|
|
|
2,189 |
|
Expected return on plan assets |
|
|
(30,032 |
) |
|
|
(21,167 |
) |
|
|
|
- |
|
|
|
- |
|
Amortization of prior service cost |
|
|
- |
|
|
|
12 |
|
|
|
|
61 |
|
|
|
94 |
|
Recognized actuarial losses |
|
|
8,379 |
|
|
|
10,242 |
|
|
|
|
706 |
|
|
|
854 |
|
Settlement cost |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
1,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense |
|
$ |
28,275 |
|
|
$ |
35,114 |
|
|
|
$ |
3,680 |
|
|
$ |
5,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. As a result of funding in fiscal 2010, TJX does not anticipate
any required funding in fiscal 2011 for the defined benefit retirement plan. TJX anticipates $3.8
million in cash expenditures to pay benefits under the unfunded plan in fiscal 2011.
Note I. Long-Term Debt and Credit Lines
On April 7, 2009, TJX issued $375 million aggregate principal amount of 6.95% ten-year notes and
used the proceeds from the 6.95% notes offering to repurchase additional common stock under its
stock repurchase program in fiscal 2010. Also in April 2009, prior to the issuance of the 6.95%
notes, TJX entered into a rate-lock agreement to hedge the underlying treasury rate of those notes.
The cost of this agreement is being amortized to interest expense over the term of the 6.95% notes
and results in an effective fixed rate of 7.00% on those notes.
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 used the remainder,
together with funds from operations, to repay its $200 million 7.45% notes due December 15, 2009,
at maturity. Also in July 2009, prior to the issuance of the 4.20% notes, TJX entered into a
rate-lock agreement to hedge the underlying treasury rate on $250 million of those notes.
19
The cost of this agreement is being amortized to interest expense over the term of the 4.20% notes
and results in an effective fixed rate of 4.19% on the notes.
In February 2001, TJX issued $517.5 million zero coupon convertible subordinated notes due in
February 2021 and raised gross proceeds of $347.6 million. The issue price of the notes
represented a yield to maturity of 2% per year. During fiscal 2010, TJX called for the redemption
of these notes at the original issue price plus accrued original issue discount, and 462,057 notes
with a carrying value of $365.1 million were converted into 15.1 million shares of TJX common stock
at a rate of 32.667 shares per note. TJX paid $2.3 million to redeem the remaining 2,886 notes
outstanding that were not converted. Prior to fiscal 2010, a total of 52,557 notes were either
converted into common shares of TJX or put back to TJX.
In May 2010, TJX entered into a $500 million three-year revolving credit facility with similar
terms and provisions as the $500 million facility it replaced, updated for market pricing. As of
October 30, 2010, TJX also had a $500 million revolving credit facility maturing May 2011. The
three-year agreement requires the payment of 17.5 basis points annually on the committed amounts.
The agreement maturing in May 2011 requires the payment of six basis points annually on the
committed amount. Both of these agreements have no compensating balance requirements, have various
covenants including a requirement of a specified ratio of debt to earnings, and serve as back up to
TJXs commercial paper program. There were no outstanding amounts under these credit facilities as
of October 30, 2010 or October 31, 2009.
As of October 30, 2010 and October 31, 2009, TJXs foreign subsidiaries had uncommitted credit
facilities. TJX Canada had two credit lines, a C$10 million facility for operating expenses and a
C$10 million letter of credit facility. As of October 30, 2010 and October 31, 2009, there were no
amounts outstanding on the Canadian credit line for operating expenses. As of October 30, 2010,
TJX Europe had a credit line of £20 million. There were no outstanding borrowings on this U.K.
credit line as of October 30, 2010 or October 31, 2009.
Note J. Income Taxes
The effective income tax rate was 37.6% for the fiscal 2011 third quarter, compared to 38.6% for
last years third quarter. The decrease in the rate for the third quarter was largely driven by
the finalization of an Advance Pricing Agreement between Canada and the United States, a favorable
Canadian Court ruling regarding withholding taxes on cross-border inter-company payments, approval
of a change in tax accounting request by the IRS partly offset by the anticipated repatriation of
cash from Europe and strengthening of a state tax reserve. The net reduction for these items in
the quarter is $4 million or 0.7% rate reduction.
The effective income tax rate for the nine months ended October 30, 2010 was 38.1% as compared to
37.9% for last years comparable period. The increase in the effective income tax rate
is due to the decrease this year of the
favorable impact of the tax treatment of foreign currency gains on certain intercompany loans in
fiscal 2011 and a higher percentage of U.S. profits compared to worldwide profits in fiscal
2011 than fiscal 2010, partially offset by the favorable impact of the fiscal 2011 third quarter
adjustments mentioned above.
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.
TJX had unrecognized tax benefits of $119.4 million as of October 30, 2010 and $119.9 million as of
October 31, 2009.
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 $34.1 million as of
October 30, 2010 and $50.0 million as of October 31, 2009.
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 recorded in the financial statements. During the next 12 months, it
is reasonably possible that tax examinations of prior years tax returns, or
20
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 up to $44 million.
Note K. Supplemental Cash Flows Information
TJXs non-cash investing and financing activities are as follows:
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
|
October 31, |
|
In thousands |
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
Conversion of zero coupon convertible notes |
|
$ |
- |
|
|
$ |
365,088 |
|
21
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 30, 2010
Compared to
The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended October 31, 2009
Business Overview
We are the leading off-price apparel and home fashions retailer in the United States and worldwide.
Our over 2,800 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 operate eight off-price retail chains in the U.S., Canada and Europe and are known for our
treasure hunt shopping experience and excellent values on brand-name merchandise. We turn our
inventories rapidly compared to traditional retailers to create a sense of urgency and excitement
for our customers, to encourage frequent customer visits and to drive merchandise margins. Our
flexible no walls business model allows us to expand and contract merchandise categories quickly
in response to consumers changing tastes. The values we offer appeal to a broad range of
customers across demographic groups and income levels. The operating platforms and strategies of
all of our retail concepts are synergistic. As a result, we capitalize on our off-price expertise
and systems throughout our business, leveraging best practices, initiatives and new ideas and
developing talent across our concepts. We also leverage the substantial buying power of our
businesses and the geographic scope and depth of our merchant organization to develop our global
relationships with vendors.
Results of Operations
Highlights of our financial performance for the third quarter and nine months ended October 30,
2010 include the following:
|
|
|
Same store sales increased 1% for the fiscal 2011 third quarter over a 7% increase in
the same period last year. Same store sales increased 4% for the nine-month period ending
October 30, 2010 over last years 5% increase in the nine months ended October 31, 2009.
Same store sales growth was driven by increases in customer traffic over significant
increases in customer traffic last year, as we continued to attract new customers and
retain existing customers across a broad span of income levels. |
|
|
|
|
Net sales increased 5% to $5.5 billion for the fiscal 2011 third quarter and 9% to $15.6
billion for the nine-month period over last years comparable periods. At October 30,
2010, stores in operation increased 5% and total selling square footage was up 4% when
compared to the end of last years third quarter. The movement in foreign currency
exchange rates had an immaterial impact on net sales in the third quarter of fiscal 2011
and had a 1 percentage point favorable impact on net sales in the nine months ended October
30, 2010. |
|
|
|
|
Our fiscal 2011 third quarter pre-tax margin (the ratio of pre-tax income to net sales)
was flat to the prior year at 10.8%. For the nine months ended October 30, 2010, our
pre-tax margin was 10.4% compared to 9.2% for the same period last year. The improvement
in the nine-month period of fiscal 2011 was primarily driven by the growth in merchandise
margins, on top of significant increases last year, which was achieved as a result of
managing the business with substantially lower levels of inventory (resulting in faster
inventory turns), expense leverage from the strong same store sales growth and our
continued cost reduction programs. |
|
|
|
|
Our cost of sales ratio for the fiscal 2011 third quarter was flat to last year and
improved by 1.1 percentage points for the nine-month period. The flat cost of sales ratio
for the third quarter reflects slight improvements in merchandise margins and buying and
occupancy costs, offset by the impact of the mark-to-market adjustments on our
inventory-related hedges. The improvement in the nine-month period of fiscal 2011 was
primarily due to improved merchandise margins and the leverage of buying and occupancy
costs on strong same store sales. Selling, general and administrative expense as a
percentage of net sales for the third quarter of fiscal 2011 was also flat to last year.
For the nine months ended October 30, 2010, selling, general and administrative expense as
a percentage of net sales decreased 0.1 percentage points compared to the same period last
year due to |
22
|
|
|
leverage on the 4% increase in same store sales and our cost reduction programs, partially
offset by increased costs associated with opening more stores this year
than last year and European investment. |
|
|
|
|
Net income for the third quarter of fiscal 2011 was $372.3 million, or $0.92 per diluted
share, compared to $347.8 million, or $0.81 per diluted share, in last years third
quarter. Foreign currency negatively impacted third quarter earnings per share comparisons
by $0.02 per share, which was offset by reduced interest costs and a lower effective income
tax rate. Net income for the nine months ended October 30, 2010 was $1.0 billion, or $2.46
per diluted share, compared to $818.6 million, or $1.91 per diluted share in the same
period last year. The credit to the Provision for Computer Intrusion related costs
increased earnings per share by $0.01 per share in the current fiscal years nine-month
period. |
|
|
|
|
During the third quarter of fiscal 2011, we repurchased 6.0 million shares of our common
stock at a cost of $255.8 million. For the first nine months of fiscal 2011, we
repurchased 19.7 million shares of our common stock at a cost of $845.3 million. Diluted
earnings per share reflect the benefit of the stock repurchase programs. |
|
|
|
|
Consolidated per store inventories, including inventory on hand at our distribution
centers, were down 6% at the end of the third quarter of fiscal 2011 from the prior year as
compared to a decrease of 5% at the end of the third quarter of fiscal 2010 from the prior
years third quarter end. We continue to operate with lower inventories which are turning
faster, which enables us to take advantage of opportunities in the marketplace and make
buying decisions with more visibility into market trends. This leads
to higher markon and reduced markdowns
and, therefore, stronger merchandise margins. |
The following is a discussion of our consolidated operating results, followed by a discussion of
our segment operating results.
Net sales: Consolidated net sales for the third quarter ended October 30, 2010 totaled $5.5
billion, a 5% increase over net sales of $5.2 billion in the fiscal 2010 third quarter. The
increase reflected a 4% increase from new stores and a 1% increase in same store sales. Foreign
currency exchange rates had an immaterial impact on fiscal 2011 third quarter sales. This compares
to sales growth of 10% in last years third quarter, which consisted of a 7% increase in same store
sales and a 4% increase from new stores, partially offset by a 1% decline from the negative
impact of foreign currency exchange rates.
Consolidated net sales for the nine months ended October 30, 2010 totaled $15.6 billion, a 9%
increase over net sales of $14.3 billion in last years comparable period. The increase reflected
a 4% increase in same store sales, a 4% increase from new stores and a 1% increase from the impact
of foreign currency exchange rates. This compares to sales growth of 5% in last years nine-month
period, which consisted of a 5% increase in same store sales and a 3% increase from new stores,
offset by a 3% decline from the negative impact of foreign currency exchange rates.
New stores are a major source of sales growth. At October 30, 2010, our consolidated store count
increased by 5% and our selling square footage increased by 4% as compared to October 31, 2009.
The same store sales increases for both the third quarter and nine months ended October 30, 2010
were driven by significant increases in customer traffic at virtually all of our businesses. Home
fashions and other less weather-sensitive categories performed particularly well in the third
quarter of fiscal 2011. For the third quarter of fiscal 2011, geographically, same store sales
increases in Canada were above the consolidated average while European same store sales declined.
In the U.S., same store sales increases in the Southwest and Pacific regions were above the
consolidated average, while New England was below the consolidated average.
For the nine-month period of fiscal 2011, both apparel categories (particularly juniors) and home
fashions drove year-to-date sales increases. Geographically, same store sales increases in Canada
were above the consolidated average of 4%, while same store sales in Europe declined. In the U.S.,
same store sales increases were strong across most regions, particularly the Southwest.
23
In the fourth quarter of fiscal 2011, we face challenging comparisons, as we recorded a 12% same
store sales increase in the fiscal 2010 fourth quarter. As a result,
we have allocated a larger than
normal portion of our advertising budget for the remainder of fiscal 2011.
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 in at least their third
fiscal year of operation. We classify a store as a new store until it meets the same store sales
criteria. We determine which stores are included in the same store sales calculation at the
beginning of a fiscal year and the classification remains constant throughout that year, unless a
store is 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 have increased in
size are generally classified in the same way as the original store, and we believe that the impact
of these stores on the consolidated same store percentage is immaterial. Same store sales of our
foreign divisions are calculated on a constant currency basis, meaning we translate the current
years same store sales of our foreign divisions at the same exchange rates used in the prior year.
This removes the effect of changes in currency exchange rates, which we believe is a more accurate
measure of divisional operating performance.
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 30, |
|
October 31, |
|
October 30, |
|
October 31, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
Net sales
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, including buying and occupancy costs
|
|
|
72.5 |
|
|
|
72.5 |
|
|
|
72.9 |
|
|
|
74.0 |
|
Selling,
general and administrative expenses
|
|
|
16.5 |
|
|
|
16.5 |
|
|
|
16.6 |
|
|
|
16.7 |
|
Provision (credit) for Computer Intrusion related costs
|
|
|
- |
|
|
|
- |
|
|
|
(0.1 |
) |
|
|
- |
|
Interest expense, net
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes*
|
|
|
10.8 |
% |
|
|
10.8 |
% |
|
|
10.4 |
% |
|
|
9.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Due to rounding, the individual items may not foot to Income before provision for income taxes. |
Impact of foreign currency exchange rates: Our operating results can be affected by foreign
currency exchange rates as a result of changes in the value of the U.S. dollar in relation to other
currencies. Two ways in which foreign currency affects our reported results are as follows:
Translation
of foreign operating results into U.S. dollars: In our financial statements we
translate the operations of our segments 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, net income 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 within a given period.
Inventory hedges: We routinely enter into inventory-related hedging instruments to mitigate the
impact of foreign currency exchange rates on merchandise margins when
our divisions, principally in
Europe and Canada, purchase goods in currencies other than their local currencies. As we have not
elected hedge accounting as defined by U.S. GAAP, 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 the
mark-to-market adjustment 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, were flat at 72.5% for the third quarter ended October 30,
2010 as compared to the same period
24
last year. The flat cost of sales ratio for the third quarter reflects slight improvements in
merchandise margins and buying and occupancy costs, offset by the impact of the mark-to-market
adjustments on our inventory-related hedges. Cost of sales, including buying and
occupancy costs, as a percentage of net sales, decreased 1.1 percentage points for the first nine
months of fiscal 2011. The improvement in the nine-month period ended October 30, 2010 was due to
improved consolidated merchandise margin, which increased 0.9 percentage points. Merchandise margin
improvement was driven by our strategy of operating with leaner inventories and buying closer to
need, which resulted in a reduction in markdowns, as well as improvement in markon, compared to the
third quarter and nine-month periods of fiscal 2010.
Selling, general and administrative expenses: Selling, general and administrative expenses, as a
percentage of net sales, was flat at 16.5% for the quarter ended October 30, 2010 and decreased 0.1
percentage points to 16.6% for the nine-month period ended October 30, 2010, as compared to the
same periods last year. The improvement in the nine-month period was due to levering of expenses on
the 4% same store sales increase, lower incentive compensation expense, and our cost reduction
programs, partially offset by increased costs associated with more
new store openings this year than last year and European investment.
Interest expense, net: Interest expense, net amounted to expense of $9.5 million for the third
quarter of fiscal 2011 compared to expense of $12.7 million for the same period last year, and
expense of $30.0 million for the nine-month period ended October 30, 2010 compared to expense of
$28.5 million for the same period last year. The components of interest expense, net are
summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
October 31, |
|
October 30, |
|
October 31, |
Dollars in millions |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
$ 12,505 |
|
|
|
$ 14,734 |
|
|
|
$ 36,643 |
|
|
|
$ 35,715 |
|
Capitalized interest |
|
|
- |
|
|
|
(178 |
) |
|
|
- |
|
|
|
(616 |
) |
Interest (income) |
|
|
(2,987 |
) |
|
|
(1,891 |
) |
|
|
(6,651 |
) |
|
|
(6,584 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
$ 9,518 |
|
|
|
$ 12,665 |
|
|
|
$ 29,992 |
|
|
|
$ 28,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reduction in interest expense in the third quarter of fiscal 2011 as compared to the prior
years third quarter was a result of the payment of the 7.45% notes that matured on December 15,
2009. For the first nine months of fiscal 2011, incremental interest
expense of the $375 million
6.95% notes issued in April 2009 over the interest expense of the zero coupon convertible debentures
(redeemed as a result of this debt issuance) was largely offset by the lower interest expense of the
$400 million 4.20% notes issued in July 2009, as compared to the interest expense of the long-term
debt retired in fiscal 2010.
Income taxes: The effective income tax rate was 37.6% for the fiscal 2011 third quarter, compared
to 38.6% for last years third quarter. The decrease in the rate for the third quarter was largely
driven by the finalization of an Advance Pricing Agreement between Canada and the U.S., a
favorable Canadian Court ruling regarding withholding taxes on cross-border intercompany payments,
approval of a change in tax accounting request by the IRS, partly offset by the anticipated
repatriation of cash from Europe and strengthening of a state tax reserve. The net reduction for
these items in the third quarter was $4 million or 0.7% rate reduction.
The
effective income tax rate for the nine months ended October 30, 2010 was 38.1%, compared to
37.9% for last years comparable period. The increase in the effective income tax rate compared to
last years effective income tax rate is due to the decrease
in
fiscal 2011 of the favorable impact of
the tax treatment of foreign currency gains on certain intercompany loans and a
higher percentage of U.S. profits compared to worldwide profits in fiscal 2011 than in fiscal 2010,
partially offset by the favorable impact of the fiscal 2011 third quarter adjustments mentioned
above.
Net income and net income per share: Net income for the third quarter ended October 30, 2010 was
$372.3 million, or $0.92 per diluted share, compared to $347.8 million, or $0.81 per diluted share,
in last years third quarter. Net income for the nine months ended October 30, 2010 was $1.0
billion, or $2.46 per diluted share, compared to $818.6 million, or $1.91 per diluted share, in the
same period last year. Diluted earnings per share for the nine-month period ended October 30, 2010
benefited by $0.01 from the $7.1 million after-tax effect of the credit to our Provision for
Computer Intrusion related costs. Changes in foreign currency
exchange rates also affected the comparability
of our results. For
25
the third quarter of fiscal 2011, changes in foreign currency rates benefited earnings per share by
$0.01 compared to a $0.03 benefit in the fiscal 2010 earnings per share for the same period. For
the nine-month period ended October 30, 2010, changes in foreign
currency exchange rates benefited earnings
per share by $0.02, compared with an immaterial impact for the same period in fiscal 2010.
In addition, our weighted average diluted shares outstanding affect the comparability of earnings
per share. Our stock repurchase programs benefit our earnings per share. We repurchased 6.0
million shares of our stock at a cost of $255.8 million in the third quarter of fiscal 2011 and we
repurchased 19.7 million shares at a cost of $845.3 million in the first nine months of fiscal
2011. During the third quarter of fiscal 2010, we repurchased 8.2 million shares at a cost of
$303.9 million, and for the first nine months of fiscal 2010, we repurchased 16.1 million shares at
a cost of $540.6 million.
Segment information: The following is a discussion of the operating results of our business
segments. In the United States, our T.J. Maxx and Marshalls stores are aggregated as the Marmaxx
segment, and HomeGoods and A.J. Wright are each reported as a separate segment. TJXs stores
operated in Canada (Winners, HomeSense and StyleSense) 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 expenses, Provision (credit) for Computer Intrusion related
costs, and interest expense. 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 30, |
|
|
October 31, |
|
|
October 30, |
|
|
October 31, |
|
Dollars in millions |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
3,502.7 |
|
|
$ |
3,380.5 |
|
|
$ |
10,090.1 |
|
|
$ |
9,464.4 |
|
Segment profit |
|
$ |
453.7 |
|
|
$ |
422.8 |
|
|
$ |
1,338.5 |
|
|
$ |
1,111.8 |
|
Segment profit as a percentage of net sales |
|
|
13.0% |
|
|
12.5% |
|
|
13.3% |
|
|
11.7% |
Percent increase in same store sales |
|
|
1 |
% |
|
|
9 |
% |
|
|
5 |
% |
|
|
5 |
% |
Stores in operation at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.J. Maxx |
|
|
|
|
|
|
|
|
|
|
919 |
|
|
|
889 |
|
Marshalls |
|
|
|
|
|
|
|
|
|
|
832 |
|
|
|
820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Marmaxx |
|
|
|
|
|
|
|
|
|
|
1,751 |
|
|
|
1,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling square footage at end of period (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.J. Maxx |
|
|
|
|
|
|
|
|
|
|
21,527 |
|
|
|
20,859 |
|
Marshalls |
|
|
|
|
|
|
|
|
|
|
20,954 |
|
|
|
20,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Marmaxx |
|
|
|
|
|
|
|
|
|
|
42,481 |
|
|
|
41,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales for Marmaxx increased 4% for the third quarter of fiscal 2011 and increased 7% for
the nine-month period of fiscal 2011 as compared to the same periods last year. Same store sales
for Marmaxx increased 1% in the third quarter and 5% for the first nine months of fiscal 2011. We
executed the fundamentals of our off-price business model at Marmaxx during the third quarter and
first nine months of fiscal 2011 by maintaining a lean inventory position, buying close to need and
offering customers excellent values, which led to improved merchandise margins.
Sales at Marmaxx for both the third quarter and nine-month periods ended October 30, 2010 were
driven by significant increases in customer traffic. Categories that posted particularly strong
same store sales increases included juniors and home fashions. Geographically, same store sales
increases were strongest in the Southwest and the Pacific regions for both the quarter and
nine-month periods. In the fiscal 2011 third quarter, New England and the Midwest trailed the
chain average reflecting the unfavorable impact of unseasonably warm weather in September and
October. During fiscal 2011, we continued our renovation program for existing Marmaxx stores, and now have
approximately 700 stores in our new prototype. We also intend to accelerate square footage growth
at Marmaxx in fiscal 2012.
26
Segment profit for the third quarter ended October 30, 2010 was $453.7 million, a 7% increase
compared to the third quarter of fiscal 2010. Segment profit as a percentage of net sales
(segment profit margin or segment margin) for the third quarter of fiscal 2011 increased to
13.0% from 12.5% for the same period last year. Segment profit for the nine months ended October
30, 2010 increased to $1.3 billion, up 20% compared to the same period last year. Segment profit
margin was 13.3% for the nine-month period in fiscal 2011 versus 11.7% last year. The increase in
segment margin for both periods was driven by strong merchandise margins, which increased 0.4
percentage points for the third quarter and 1.0 percentage points for the nine months ended October
30, 2010. Additionally, we saw improvement in expense ratios for both the quarter and year-to-date
periods, which also benefited segment profit margin. This was due to cost containment programs, as
well as, in the case of our year-to-date results, expense leverage on strong same store sales.
As of October 30, 2010, Marmaxxs per store inventories, including inventory on hand at its
distribution centers, were down 7% as compared to those inventory levels at the same time last
year. Per store inventories at October 31, 2009 were down 6% compared to those of the prior year
period.
HomeGoods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
October 31, |
|
October 30, |
|
October 31, |
Dollars in millions |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
$ 479.9 |
|
|
|
$ 452.0 |
|
|
|
$1,392.6 |
|
|
|
$1,256.7 |
|
Segment profit |
|
|
$ 44.5 |
|
|
|
$ 39.5 |
|
|
|
$ 120.3 |
|
|
|
$ 79.6 |
|
Segment profit as a percentage of net sales |
|
|
9.3% |
|
|
8.7% |
|
|
8.6% |
|
|
6.3% |
Percent increase in same store sales |
|
|
3 |
% |
|
|
13 |
% |
|
|
8 |
% |
|
|
7 |
% |
Stores in operation at end of period |
|
|
|
|
|
|
|
|
|
|
336 |
|
|
|
324 |
|
Selling square footage at end of period (in thousands) |
|
|
|
|
|
|
|
|
|
|
6,619 |
|
|
|
6,360 |
|
HomeGoods continued to post strong results, with net sales for the third quarter of fiscal 2011
increasing 6% compared to the same period last year, and for the first nine months of fiscal 2011
increasing 11% over the same period last year. Same store sales increased 3% for the third quarter
of fiscal 2011 and increased 8% for the nine-month period of fiscal 2011, over strong increases in
the comparable periods of fiscal 2010. Sales growth was driven by significantly increased customer
traffic, reflecting continued effective execution of our off-price merchandising strategies at
HomeGoods. Segment margin for the fiscal 2011 third quarter and nine-month periods was up from the
same periods last year due to improved merchandise margins, the levering of expenses due to the
strong same store sales increase as well as operational efficiencies. The improvement in
merchandise margins accounted for more than half of the growth in the third quarter segment margin
and approximately one-half of the nine-month growth in segment margin. The levering of expenses,
particularly occupancy costs, on strong same store sales growth also contributed to the increase in
segment margin in both periods.
A.J. Wright
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
October 31, |
|
October 30, |
|
October 31, |
Dollars in millions |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
Net sales |
|
|
$ 204.8 |
|
|
|
$ 197.8 |
|
|
|
$ 609.4 |
|
|
|
$ 559.2 |
|
Segment (loss) profit |
|
|
$ (1.2 |
) |
|
|
$ 1.3 |
|
|
|
$ 10.6 |
|
|
|
$ 7.1 |
|
Segment (loss) profit as a percentage of net sales |
|
|
(0.6 |
)% |
|
|
0.6 |
% |
|
|
1.7 |
% |
|
|
1.3 |
% |
Percent (decrease) increase in same store sales |
|
|
(2 |
)% |
|
|
11 |
% |
|
|
2 |
% |
|
|
10 |
% |
Stores in operation at end of period |
|
|
|
|
|
|
|
|
|
|
161 |
|
|
|
148 |
|
Selling square footage at end of period (in thousands) |
|
|
|
|
|
|
|
|
|
|
3,265 |
|
|
|
2,966 |
|
A.J. Wrights net sales increased 4% for the fiscal 2011 third quarter and 9% for the nine-month
period ending October 30, 2010 as compared to the same periods last year. Same store sales were
down 2% for the third quarter of fiscal 2011 and up 2% for the nine months ended October 30, 2010
compared to double-digit same store sales growth by A.J. Wright in both of the prior-year periods. A.J.
Wright recorded a segment loss of $1.2 million in the third
27
quarter of fiscal 2011 which we believe was largely due to the impact of weather. A.J Wright has a
heavy concentration of stores in the Northeast and the warm weather in September and October in
that area negatively impacted weather-sensitive categories, resulting in increased markdowns.
Despite this, for the nine-month period, segment profit and segment margin increased over the prior
year period, driven by improved merchandise margins.
International Segments:
TJX Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
October 31, |
|
October 30, |
|
October 31, |
U.S. Dollars in millions |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
$ 666.8 |
|
|
|
$ 611.5 |
|
|
|
$1,803.2 |
|
|
|
$1,531.2 |
|
Segment profit |
|
|
$ 113.8 |
|
|
|
$ 113.0 |
|
|
|
$ 249.9 |
|
|
|
$ 180.7 |
|
Segment profit as a percentage of net sales |
|
|
17.1% |
|
|
18.5% |
|
|
13.9% |
|
|
11.8% |
Percent increase in same store sales |
|
|
3 |
% |
|
|
1 |
% |
|
|
5 |
% |
|
|
1 |
% |
Stores in operation at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners |
|
|
|
|
|
|
|
|
|
|
215 |
|
|
|
211 |
|
HomeSense |
|
|
|
|
|
|
|
|
|
|
82 |
|
|
|
79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
297 |
|
|
|
290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling square footage at end of period (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Winners |
|
|
|
|
|
|
|
|
|
|
4,965 |
|
|
|
4,847 |
|
HomeSense |
|
|
|
|
|
|
|
|
|
|
1,595 |
|
|
|
1,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
6,560 |
|
|
|
6,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales for TJX Canada (which includes Winners and HomeSense) increased 9% for the third quarter
and increased 18% for the nine-month period ended October 30, 2010 compared to the same periods
last year. Currency translation benefited third quarter sales growth by approximately 4
percentage points and benefited nine-month sales growth by approximately 11 percentage points, as
compared to the same periods last year. Same store sales increased 3% for the fiscal 2011 third
quarter and 5% for the first nine months of fiscal 2011.
Segment profit increased to $113.8 million for the third quarter ended October 30, 2010 and increased 38% to
$249.9 million for the fiscal 2011 nine-month period. The impact of foreign currency translation
increased segment profit by $5 million in the third quarter of fiscal 2011 and $20 million in the
nine months ended October 30, 2010 as compared to the same periods last year. The foreign currency
impact of the mark-to-market adjustment on inventory-related hedges impacted segment profit and
segment margin comparisons in both periods. The mark-to-market adjustment on inventory-related
hedges reduced segment profit in the fiscal 2011 third quarter by $2 million compared to an
increase of $19 million in last years third quarter. For the year-to-date fiscal 2011 period, the
mark-to-market adjustment on inventory-related hedges reduced segment profit by $5 million,
compared to a reduction of $1 million in last years nine-month period. The unfavorable change in
the mark-to-market adjustment of our inventory hedges accounted for 3.3 percentage points of the
decrease in third quarter segment margin. The increase in segment margin for the nine month period
of fiscal 2011 was attributable to improved merchandise margin, slightly offset by the unfavorable
change in the mark-to-market adjustment of our inventory-related hedges. Merchandise margin
improvement was favorably impacted by a reduction in the cost of merchandise denominated in U.S.
dollars due to the change in currency rates year-over-year.
As of the end of the third quarter of fiscal 2011, we operated three StyleSense stores which are
included in the Winners totals in the above table. As we recently disclosed, we intend to bring
the Marshalls chain to Canada, with six stores scheduled to open in fiscal 2012. We believe that
Canada can ultimately support 90 to 100 Marshalls stores.
28
TJX Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
October 31, |
|
October 30, |
|
October 31, |
U.S. Dollars in millions |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
$ 671.7 |
|
|
|
$ 603.1 |
|
|
|
$1,715.1 |
|
|
|
$1,535.2 |
|
Segment profit |
|
|
$ 41.2 |
|
|
|
$ 48.8 |
|
|
|
$ 49.2 |
|
|
|
$ 82.8 |
|
Segment profit as a percentage of net sales |
|
|
6.1% |
|
|
8.1% |
|
|
2.9% |
|
|
5.4% |
Percent (decrease) increase in same store sales |
|
|
(3 |
)% |
|
|
1 |
% |
|
|
(2 |
)% |
|
|
4 |
% |
Stores in operation at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.K. Maxx |
|
|
|
|
|
|
|
|
|
|
304 |
|
|
|
262 |
|
HomeSense |
|
|
|
|
|
|
|
|
|
|
24 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
328 |
|
|
|
276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling square footage at end of period (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.K. Maxx |
|
|
|
|
|
|
|
|
|
|
6,962 |
|
|
|
6,089 |
|
HomeSense |
|
|
|
|
|
|
|
|
|
|
402 |
|
|
|
222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
7,364 |
|
|
|
6,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales for TJX Europe increased 11% for the third quarter of fiscal 2011 and increased 12% for
the nine months ended October 30, 2010 compared to the same periods last year. Currency translation negatively impacted the fiscal 2011 results for both periods, reducing net sales
in the third quarter by $33 million and in the nine-month period by $52 million. Same store sales
were down 3% for the third quarter of fiscal 2011 and down 2% for the nine-month period compared to
increases in both of the prior-year periods.
Segment profit decreased to $41.2 million for the third quarter ended October 30, 2010 and to $49.2
million for the first nine months of fiscal 2011. Although unseasonably warm weather and the
effects of economic uncertainty in the U.K. and Ireland on consumer confidence affected sales, we
believe that execution issues in the U.K. and Ireland were the primary reasons for below-plan
sales and segment profit. Segment profit and margin were also negatively impacted by the expansion of T.K. Maxx in
Germany and Poland, and HomeSense in the U.K. We continue to be encouraged by the performance of
these stores, but as newer operations, they reduce segment margin generated by the more established
T.K. Maxx stores in the U.K. and Ireland. In aggregate these newer businesses had only a slight loss
in the third quarter, and we expect them to be profitable in the fourth quarter of fiscal 2011. We
intend to slow square footage growth for TJX Europe next year. We also invested in
strengthening the shared services infrastructure for our ongoing European expansion in the first
quarter of fiscal 2011, which negatively impacted segment profit for the nine-month period ended
October 30, 2010. Merchandise margins were down for both the quarter and nine-month periods,
primarily due to increased markdowns.
Currency translation reduced segment profit in both the fiscal 2011 third quarter and
nine-month periods by $1 million. The impact of the mark-to-market adjustment on inventory-related
hedges increased segment profit by $3 million in the fiscal 2011 third quarter compared to a
decrease of $1 million in the same period last year. For the nine months ended October 30, 2010,
the mark-to-market adjustment on inventory-related hedges decreased segment profit by $4 million
this year versus a decrease of $2 million last year.
General corporate expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 30, |
|
October 31, |
|
October 30, |
|
October 31, |
Dollars in millions |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
General corporate expense |
|
|
$ 45.5 |
|
|
|
$ 46.6 |
|
|
|
$ 120.3 |
|
|
|
$ 115.1 |
|
General corporate expense for segment reporting purposes represents those costs not specifically
related to the operations of our business segments and is included in selling, general and
administrative expenses, except for the mark-to-market adjustment on diesel fuel hedges, which is
included in cost of sales. General corporate expense for the
29
third quarter of fiscal 2011 was down slightly compared to the fiscal 2010 third quarter, but was
up for the nine-month period compared to the prior year.
Analysis of Financial Condition
Liquidity and Capital Resources
Net cash provided by operating activities was $1,099 million for the nine months ended October 30,
2010, a decrease of $190 million compared to the $1,289 million provided for the nine months ended
October 31, 2009. Net income provided cash of $1,009 million in the first nine months of fiscal
2011, an increase of $190 million over net income of $819 million in the same period last year.
The change in merchandise inventory, net of the related change in accounts payable, resulted in a
use of cash of $265 million in fiscal 2011 compared to a use of cash of $55 million in fiscal 2010.
Additionally, net cash provided by operations was reduced by $212 million this year as compared
to last year due to the change in current income taxes payable/recoverable which decreased cash and
cash equivalents by $141 million in the first nine months of fiscal 2011 compared to an increase of
$71 million in the same period last year.
Investing activities related primarily to property additions for new stores, store improvements and
renovations, and investment in our distribution network. Cash outlays for property additions
amounted to $540 million in the nine months ended October 30, 2010, compared to $319 million in the
same period last year. We anticipate that capital spending for fiscal 2011 will be approximately
$750 million, which includes our planned increase in new store openings and store renovations. We
also purchased short-term investments that had initial maturities in excess of 90 days and
which, per our policy, were not classified as cash on the balance
sheets presented. In the first nine months
of fiscal 2011, we purchased $103 million of short-term investments, compared to $200 million in
the same period in fiscal 2010. Additionally, $109 million of short-term investments were sold or
matured during the first nine months of fiscal 2011 compared to $127 million in the same period
last year.
Cash
flows from financing activities resulted in cash outflows of $855 million in the first
nine months of fiscal 2011, compared to cash inflows of $64 million in the same period last
year. The first nine months of last year included $774 million of net proceeds from two debt
offerings. In April 2009, we issued $375 million 6.95% ten-year notes and shortly thereafter
called for the redemption of our zero coupon convertible subordinated notes. Virtually all of
these notes were converted into 15.1 million shares of TJX common stock. We used the proceeds
from the notes offering to repurchase TJX common stock under our stock repurchase program. In
July 2009, we issued $400 million of 4.20% six-year notes. We used the proceeds of this
offering to refinance substantially all of our C$235 million term credit facility, which was
repaid on August 10, 2009, and used the remainder, together with funds from operations, to
repay our 7.45% notes at maturity (December 15, 2009).
We spent $845 million to repurchase and retire 19.7 million shares of our common stock in the first
nine months of fiscal 2011 and $541 million to repurchase and retire 16.1 million shares in the
first nine months of fiscal 2010 under our stock repurchase programs. We record the purchase 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. During the third quarter of fiscal
2011, we completed the $1 billion stock repurchase program approved in September 2009 and initiated
another $1 billion stock repurchase program approved in February 2010. As of October 30, 2010,
$950 million remained available for purchase under that program. We now anticipate repurchasing
approximately $1 billion to $1.2 billion of stock under our stock repurchase programs in fiscal
2011, more than we originally planned. We determine the timing and amount of repurchases made
directly and under Rule 10b5-1 plans from time to time based on our assessment of various factors
including anticipated excess cash flow, liquidity, market conditions, the economic environment and
prospects for the business, and other factors, and the timing and amount of these purchases may
change. Lastly, financing activities included $142 million of proceeds from the exercise of stock
options in the first nine months of fiscal 2011 versus $154 million in the first nine months of
fiscal 2010, and dividends paid on common stock in the first nine months of fiscal 2011 of $170
million versus $147 million in the same period 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. As of
October 30, 2010, we had a $500 million revolving credit facility maturing May 2013 and a $500
million revolving credit facility maturing May 2011. The three-year agreement maturing in May 2013
was entered into in May 2010 to replace a similar agreement that
30
matured at that time. The three-year agreement requires the payment of 17.5 basis points annually
on the committed amount. The agreement maturing in May 2011 requires the payment of six basis
points annually on the committed amount. Both of these agreements have no compensating balance
requirements, have various covenants including a requirement of a specified ratio of debt to
earnings, and serve as back up to TJXs commercial paper program. The availability under our
revolving credit facilities was $1 billion at October 30, 2010 and October 31, 2009, and we had no
borrowings outstanding at those dates under these agreements. We believe existing cash balances,
internally generated funds and our revolving credit facilities are more than adequate to meet our
operating needs.
Provision (credit) for Computer Intrusion related costs: We have a reserve for our estimate of the
total probable losses arising from the Computer Intrusion. We reduced the Provision for Computer
Intrusion related costs by $11.6 million during the second quarter of fiscal 2011, primarily as a
result of insurance proceeds and adjustments to our remaining reserve. The reserve balance was
$18.8 million at October 30, 2010. As an estimate, the reserve is subject to uncertainty, actual
costs may vary from the current estimate and such variations may be material. We may decrease or
increase the amount of the reserve to adjust for matters such as developments in litigation, claims
and related expenses, insurance proceeds and changes in the estimate.
Recently Issued Accounting Pronouncements
There were no new accounting standards issued during the third quarter ended October 30, 2010 that
are expected to have a material impact on TJXs financial condition, results of operations or cash
flows.
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: global economies and credit and financial markets; foreign
currency exchange rates; buying and inventory management; market, geographic and category
expansion; customer trends and preferences; quarterly operating results; marketing, advertising and
promotional programs; data security; seasonal influences; large size and scale; unseasonable
weather; serious disruptions and catastrophic events; competition; personnel recruitment and
retention; acquisitions and divestitures; information systems and technology; cash flows; consumer
spending; merchandise quality and safety; merchandise importing; international operations; oil
prices; compliance with laws, regulations and orders; changes in laws and regulations; outcomes of
litigation and proceedings; real estate leasing; market expectations; tax matters and other factors
that may be described in our filings with the Securities and Exchange Commission. 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.
31
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 Note E to our consolidated financial statements to the Annual Report on Form
10-K for the fiscal year ended January 30, 2010, we hedge a portion of our intercompany
transactions with foreign operations and certain merchandise purchase commitments incurred by these
operations with derivative financial instruments. We enter into derivative contracts only when
there is an underlying economic exposure. We utilize currency forward and swap contracts, designed
to offset the gains or losses in the underlying exposures. 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 30, 2010, 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 for the
nine months ended October 30, 2010 by approximately $30 million.
Interest Rate Risk
Our cash equivalents, 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, and to cash and cash
equivalents and short-term investments held as of October 30, 2010. The analysis indicated that such an
adverse movement as of that date would not have had 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 equity securities, are
subject to the risks and uncertainties of the financial markets. We invest 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. The significant decline in the financial markets over the last several years adversely
affected the value of our pension plan assets and the funded status of our pension plan has, and
can result in, increased contributions to the plan.
32
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 30, 2010
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 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 30, 2010 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 30, 2010, as filed with the SEC on March
30, 2010.
33
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
2011 and the average price paid per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 1, 2010 through
August 28, 2010 |
|
|
2,028,311 |
|
|
|
$ 41.40 |
|
|
|
2,028,311 |
|
|
|
$ 1,121,427,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 29, 2010 through
October 2, 2010 |
|
|
2,230,212 |
|
|
|
$ 41.22 |
|
|
|
2,230,212 |
|
|
|
$ 1,029,504,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 3, 2010 through
October 30, 2010 |
|
|
1,782,554 |
|
|
|
$ 44.81 |
|
|
|
1,782,554 |
|
|
|
$ 949,628,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
6,041,077 |
|
|
|
|
|
|
|
6,041,077 |
|
|
|
|
|
(1) All shares were purchased as part of publicly announced plans or programs.
(2) Average price paid per share includes commissions and is rounded to the nearest two decimal
places.
(3) During the third quarter of fiscal 2011, we completed a $1 billion stock repurchase program
that was approved in September 2009 and initiated another multi-year $1 billion stock repurchase
program, approved in February 2010. As of October 30, 2010, $950 million remained available for
purchase under that program.
34
Item 6. Exhibits.
|
10.1 |
|
4-year Revolving Credit Agreement dated May 5, 2005 among various
financial institutions as lenders, including Bank of America, N.A., JP Morgan Chase
Bank, National Association, The Bank of New York, Citizens Bank of Massachusetts,
Key Bank National Association and Union Bank of California, N.A., as co-agents. The
related Amendment No. 1 to the 4-year Revolving Credit Agreement dated May 12, 2006
is incorporated herein by reference to Exhibit 10.1 to the Form 8-K filed May 17,
2006.* |
|
|
10.2 |
|
Form of Non-Qualified Stock Option Certificate Granted under the Stock
Incentive Plan (as of September 9, 2010). ± |
|
|
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 30, 2010, 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. |
* Portions of certain exhibits to this agreement have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission. Such information has been
filed separately with the Securities and Exchange Commission.
± Management contract or compensatory plan or arrangement.
35
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)
|
|
Date: November 24, 2010 |
By: /s/ Jeffrey G. Naylor |
|
Jeffrey G. Naylor, Chief Financial and Administrative Officer |
|
(Principal Financial and Accounting Officer) |
|
36
EXHIBIT INDEX
|
|
|
|
Exhibit Number |
|
Description of Exhibit |
|
|
|
|
10.1
|
|
4-year Revolving Credit Agreement dated May 5, 2005 among various financial
institutions as lenders, including Bank of America, N.A., JP Morgan Chase Bank, National
Association, The Bank of New York, Citizens Bank of Massachusetts, Key Bank National Association
and Union Bank of California, N.A., as co-agents. The related Amendment No. 1 to the 4-year
Revolving Credit Agreement dated May 12, 2006 is incorporated herein by reference to Exhibit 10.1
to the Form 8-K filed May 17, 2006.* |
|
|
|
10.2
|
|
Form of Non-Qualified Stock Option Certificate Granted under the Stock Incentive Plan (as of
September 9, 2010). ± |
|
|
|
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 30, 2010, 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. |
* Portions of certain exhibits to this agreement have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission. Such information has been
filed separately with the Securities and Exchange Commission.
± Management contract or compensatory plan or arrangement.
37