10-Q 1 d568425d10q.htm FORM 10-Q Form 10-Q

 

 

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 August 3, 2013

OR

 

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             

Commission file number 1-4908

 

 

The TJX Companies, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   04-2207613

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

770 Cochituate Road
Framingham, Massachusetts
  01701
(Address of principal executive offices)   (Zip Code)

(508) 390-1000

(Registrant’s 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 registrant’s common stock outstanding as of August 3, 2013: 715,235,621

 

 

 


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

IN THOUSANDS EXCEPT PER SHARE AMOUNTS

 

     Thirteen Weeks Ended  
     August 3,      July 28,  
     2013      2012  

Net sales

   $ 6,442,424       $ 5,945,559   
  

 

 

    

 

 

 

Cost of sales, including buying and occupancy costs

     4,586,739         4,275,073   

Selling, general and administrative expenses

     1,074,320         978,514   

Interest expense, net

     8,919         9,182   
  

 

 

    

 

 

 

Income before provision for income taxes

     772,446         682,790   

Provision for income taxes

     292,887         261,698   
  

 

 

    

 

 

 

Net income

   $ 479,559       $ 421,092   
  

 

 

    

 

 

 

Basic earnings per share:

     

Net income

   $ 0.67       $ 0.57   

Weighted average common shares – basic

     715,706         736,830   

Diluted earnings per share:

     

Net income

   $ 0.66       $ 0.56   

Weighted average common shares – diluted

     728,599         751,243   

Cash dividends declared per share

   $ 0.145       $ 0.115   

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

2


THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

IN THOUSANDS EXCEPT PER SHARE AMOUNTS

 

     Twenty-Six Weeks Ended  
     August 3,      July 28,  
     2013      2012  

Net sales

   $ 12,632,033       $ 11,743,645   
  

 

 

    

 

 

 

Cost of sales, including buying and occupancy costs

     9,020,272         8,440,801   

Selling, general and administrative expenses

     2,093,229         1,920,640   

Interest expense, net

     14,201         18,009   
  

 

 

    

 

 

 

Income before provision for income taxes

     1,504,331         1,364,195   

Provision for income taxes

     571,882         523,903   
  

 

 

    

 

 

 

Net income

   $ 932,449       $ 840,292   
  

 

 

    

 

 

 

Basic earnings per share:

  

Net income

   $ 1.30       $ 1.14   

Weighted average common shares – basic

     717,754         739,531   

Diluted earnings per share:

  

Net income

   $ 1.28       $ 1.11   

Weighted average common shares – diluted

     730,750         753,721   

Cash dividends declared per share

   $ 0.29       $ 0.23   

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

3


THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

IN THOUSANDS

 

     Thirteen Weeks Ended  
     August 3,     July 28,  
     2013     2012  

Net income

   $ 479,559      $ 421,092   

Other comprehensive income (loss), net of related tax benefits of $7,934 in fiscal 2014 and tax provision of $9,072 in fiscal 2013:

    

Foreign currency translation adjustments

     (34,805     (49,711

Amortization of actuarial losses

     3,950        4,025   
  

 

 

   

 

 

 

Total comprehensive income

   $ 448,704      $ 375,406   
  

 

 

   

 

 

 
     Twenty-Six Weeks Ended  
     August 3,     July 28,  
     2013     2012  

Net income

   $ 932,449      $ 840,292   

Other comprehensive income (loss), net of related tax benefits of $8,839 in fiscal 2014 and tax provision of $15,778 in fiscal 2013:

    

Foreign currency translation adjustments

     (54,632     (14,456

Amortization of actuarial losses

     7,921        8,050   
  

 

 

   

 

 

 

Total comprehensive income

   $ 885,738      $ 833,886   
  

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

4


THE TJX COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

IN THOUSANDS, EXCEPT SHARE DATA

 

     August 3,     February 2,     July 28,  
     2013     2013     2012  

ASSETS

      

Current assets:

      

Cash and cash equivalents

   $ 1,858,798      $ 1,811,957      $ 1,620,402   

Short-term investments

     231,213        235,853        176,295   

Accounts receivable, net

     221,164        222,788        202,140   

Merchandise inventories

     3,188,489        3,014,214        3,007,731   

Prepaid expenses and other current assets

     359,021        330,512        250,694   

Current deferred income taxes, net

     91,559        96,219        83,528   
  

 

 

   

 

 

   

 

 

 

Total current assets

     5,950,244        5,711,543        5,340,790   
  

 

 

   

 

 

   

 

 

 

Property at cost:

      

Land and buildings

     660,933        607,759        406,517   

Leasehold costs and improvements

     2,587,988        2,514,998        2,406,264   

Furniture, fixtures and equipment

     4,005,100        3,771,999        3,612,550   
  

 

 

   

 

 

   

 

 

 

Total property at cost

     7,254,021        6,894,756        6,425,331   

Less accumulated depreciation and amortization

     3,876,182        3,671,514        3,577,135   
  

 

 

   

 

 

   

 

 

 

Net property at cost

     3,377,839        3,223,242        2,848,196   
  

 

 

   

 

 

   

 

 

 

Property under capital lease, net of accumulated amortization of $24,941 at July 28, 2012

     —          —          7,631   

Other assets

     283,847        260,801        260,092   

Goodwill and tradename, net of amortization

     314,113        316,269        179,932   
  

 

 

   

 

 

   

 

 

 

TOTAL ASSETS

   $ 9,926,043      $ 9,511,855      $ 8,636,641   
  

 

 

   

 

 

   

 

 

 

LIABILITIES

      

Current liabilities:

      

Obligation under capital lease due within one year

   $ —        $ —        $ 11,662   

Accounts payable

     1,940,245        1,930,568        1,863,108   

Accrued expenses and other current liabilities

     1,481,204        1,666,216        1,337,959   

Federal, foreign and state income taxes payable

     21,432        163,812        12,760   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     3,442,881        3,760,596        3,225,489   
  

 

 

   

 

 

   

 

 

 

Other long-term liabilities

     983,515        961,284        860,139   

Non-current deferred income taxes, net

     375,352        349,486        386,482   

Long-term debt, exclusive of current installments

     1,274,156        774,552        774,514   

SHAREHOLDERS’ EQUITY

      

Common stock, authorized 1,200,000,000 shares, par value $1, issued and outstanding 715,235,621; 723,902,001 and 736,100,493, respectively

     715,236        723,902        736,100   

Additional paid-in capital

     —          —          —     

Accumulated other comprehensive income (loss)

     (260,103     (213,392     (198,981

Retained earnings

     3,395,006        3,155,427        2,852,898   
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     3,850,139        3,665,937        3,390,017   
  

 

 

   

 

 

   

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

   $ 9,926,043      $ 9,511,855      $ 8,636,641   
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

5


THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

IN THOUSANDS

 

     Twenty-Six Weeks Ended  
     August 3,     July 28,  
     2013     2012  

Cash flows from operating activities:

    

Net income

   $ 932,449      $ 840,292   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     265,970        246,461   

Loss on property disposals

     5,666        1,009   

Deferred income tax provision

     42,818        30,750   

Share-based compensation

     35,679        29,879   

Excess tax benefits from share-based compensation

     (36,449     (27,319

Changes in assets and liabilities:

    

Decrease in accounts receivable

     238        1,952   

(Increase) in merchandise inventories

     (198,447     (59,688

(Increase) decrease in prepaid expenses and other current assets

     (34,399     30,619   

Increase in accounts payable

     24,312        218,646   

(Decrease) in accrued expenses and other liabilities

     (226,602     (10,670

Other

     44        5,809   
  

 

 

   

 

 

 

Net cash provided by operating activities

     811,279        1,307,740   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Property additions

     (497,014     (438,913

Purchase of short-term investments

     (196,205     (136,613

Sales and maturities of short-term investments

     189,441        53,966   

Proceeds from repayments on note receivable

     —          530   

Other

     2,653        —     
  

 

 

   

 

 

 

Net cash (used in) investing activities

     (501,125     (521,030
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of long-term debt

     499,555        —     

Cash payments for repurchase of common stock

     (627,574     (596,971

Cash payments for debt issuance expenses

     (4,288     (1,316

Payments on capital lease obligation

     —          (1,456

Proceeds from issuance of common stock

     64,310        61,266   

Excess tax benefits from share-based compensation

     36,449        27,319   

Cash dividends paid

     (187,264     (155,713

Other

     (3,250     —     
  

 

 

   

 

 

 

Net cash (used in) financing activities

     (222,062     (666,871
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (41,251     (6,549
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     46,841        113,290   

Cash and cash equivalents at beginning of year

     1,811,957        1,507,112   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,858,798      $ 1,620,402   
  

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

6


THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

IN THOUSANDS

 

     Common Stock     Additional     Accumulated
Other
             
     Shares     Par Value
$1
    Paid-In
Capital
    Comprehensive
Income (Loss)
    Retained
Earnings
    Total  

Balance, February 2, 2013

     723,902      $ 723,902      $ —        $ (213,392   $ 3,155,427      $ 3,665,937   

Comprehensive income

     —          —          —          (46,711     932,449        885,738   

Cash dividends declared on common stock

     —          —          —          —          (208,387     (208,387

Recognition of share-based compensation

     —          —          35,679        —          —          35,679   

Issuance of common stock under stock incentive plan and related tax effect

     4,341        4,341        94,405        —          —          98,746   

Common stock repurchased

     (13,007     (13,007     (130,084     —          (484,483     (627,574
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, August 3, 2013

     715,236      $ 715,236      $ —        $ (260,103   $ 3,395,006      $ 3,850,139   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

7


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 statement of its financial statements for the periods reported, all in conformity with accounting principles generally accepted in the United States of America (“GAAP”) consistently applied. The consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements, including the related notes, contained in TJX’s Annual Report on Form 10-K for the fiscal year ended February 2, 2013 (“fiscal 2013”).

These interim results are not necessarily indicative of results for the full fiscal year, because TJX’s business, in common with the businesses of retailers generally, is subject to seasonal influences, with higher levels of sales and income generally realized in the second half of the year.

The February 2, 2013 balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

Fiscal Year: TJX’s fiscal year ends on the Saturday nearest to the last day of January of each year. The current fiscal year ends February 1, 2014 (“fiscal 2014”) and is a 52-week fiscal year. Fiscal 2013 was a 53-week fiscal year.

Share-Based Compensation: TJX accounts for share-based compensation by estimating the fair value of each award on the date of grant. TJX uses the Black-Scholes option pricing model for stock option awards and the market price on the date of the award for performance-based restricted stock awards. Total share-based compensation expense was $19.2 million for the quarter ended August 3, 2013 and $15.6 million for the quarter ended July 28, 2012. Total share-based compensation expense was $35.7 million for the six months ended August 3, 2013 and $29.9 million for the six months ended July 28, 2012. These amounts include stock option expense as well as restricted and deferred stock amortization. There were options to purchase 1.9 million shares of common stock exercised during the quarter ended August 3, 2013 and options to purchase 4.1 million shares during the six months ended August 3, 2013, leaving options to purchase 32.1 million shares of common stock outstanding as of August 3, 2013.

Cash and Cash Equivalents: TJX generally considers highly liquid investments with a maturity of 90 days or less at the date of purchase to be cash equivalents. Investments with maturities greater than 90 days but less than one year at the date of purchase are included in short-term investments. TJX’s investments are primarily high-grade commercial paper, institutional money market funds and time deposits with major banks.

As of August 3, 2013, TJX’s cash and cash equivalents held outside the U.S. were $844.6 million, of which $236.6 million was held in countries where TJX has the intention to reinvest any undistributed earnings indefinitely.

Merchandise Inventories: Inventories are stated at the lower of cost or market. TJX uses the retail method for valuing inventories which results in a weighted average cost. TJX utilizes a permanent markdown strategy and lowers the cost value of the inventory that is subject to markdown at the time the retail prices are lowered in the stores. TJX accrues for inventory obligations at the time inventory is shipped. As a result, merchandise inventories on TJX’s balance sheet include an accrual for in-transit inventory of $467.2 million at August 3, 2013, $418.3 million at February 2, 2013 and $382.0 million at July 28, 2012. Comparable amounts were reflected in accounts payable at those dates.

New Accounting Standards: There were no new accounting standards issued during the second quarter ended August 3, 2013 that are expected to have a material impact on TJX’s financial condition, results of operations or cash flows.

 

8


Note B. Reserves related to Former Operations

Reserves Related to Former Operations: TJX has a reserve for its estimate of future obligations of former business operations that TJX has either closed or sold. The reserve activity is presented below:

 

     Twenty-Six Weeks Ended  
     August 3,     July 28,  

In thousands

   2013     2012  

Balance at beginning of year

   $ 45,229      $ 45,381   

Additions to the reserve charged to net income:

    

Interest accretion

     720        356   

Charges against the reserve:

    

Lease-related obligations

     (7,814     (6,929

Termination benefits and all other

     (504     (1,153
  

 

 

   

 

 

 

Balance at end of period

   $ 37,631      $ 37,655   
  

 

 

   

 

 

 

The lease-related obligations included in the reserve reflect TJX’s estimation of lease costs, net of estimated subtenant income, and the cost of probable claims against TJX for liability, as an original lessee or guarantor of the leases of A.J. Wright and other former TJX businesses, after mitigation of the number and cost of these lease obligations. The actual net cost of these lease-related obligations may differ from TJX’s estimate. TJX estimates that the majority of the former operations reserve will be paid in the next three years. The actual timing of cash outflows will vary depending on how the remaining lease obligations are actually settled.

TJX may also be contingently liable on up to 12 leases of BJ’s Wholesale Club, a former TJX business, and up to four leases of Bob’s Stores, also a former TJX business, in addition to leases included in the reserve. The reserve for former operations does not reflect these leases because TJX believes that the likelihood of future liability to TJX is remote.

Note C. Capital Stock and Earnings Per Share

Capital Stock: During the quarter ended August 3, 2013, TJX repurchased and retired 6.4 million shares of its common stock at a cost of $325.0 million. For the six months ended August 3, 2013, TJX repurchased and retired 12.9 million shares of its common stock at a cost of $625.0 million. TJX reflects stock repurchases in its financial statements on a “settlement” basis. TJX had cash expenditures under its stock repurchase programs of $627.6 million for the six months ended August 3, 2013 and $597.0 million for the six months ended July 28, 2012. In February 2012, TJX’s Board of Directors approved a stock repurchase program that authorized the repurchase of up to $2 billion of TJX common stock from time to time. As of August 3, 2013, $299.7 million remained available for repurchase under this program. In the first quarter of fiscal 2014, TJX’s Board of Directors approved a new stock repurchase program that authorizes the repurchase of up to an additional $1.5 billion of TJX common stock from time to time, all of which remained available for repurchase at August 3, 2013.

All shares repurchased under the stock repurchase programs have been retired.

TJX has five million shares of authorized but unissued preferred stock, $1 par value.

 

9


Earnings per share: The following schedule presents the calculation of basic and diluted earnings per share (“EPS”) for net income:

 

     Thirteen Weeks Ended  
     August 3,      July 28,  

In thousands, except per share data

   2013      2012  

Basic earnings per share

     

Net income

   $ 479,559       $ 421,092   

Weighted average common shares outstanding for basic EPS

     715,706         736,830   

Basic earnings per share

   $ 0.67       $ 0.57   

Diluted earnings per share

     

Net income

   $ 479,559       $ 421,092   

Shares for basic and diluted earnings per share calculations:

     

Weighted average common shares outstanding for basic EPS

     715,706         736,830   

Assumed exercise/vesting of:

     

Stock options and awards

     12,893         14,413   
  

 

 

    

 

 

 

Weighted average common shares outstanding for diluted EPS

     728,599         751,243   
  

 

 

    

 

 

 

Diluted earnings per share

   $ 0.66       $ 0.56   
     Twenty-Six Weeks Ended  
     August 3,      July 28,  

In thousands, except per share data

   2013      2012  

Basic earnings per share

     

Net income

   $ 932,449       $ 840,292   

Weighted average common shares outstanding for basic EPS

     717,754         739,531   

Basic earnings per share

   $ 1.30       $ 1.14   

Diluted earnings per share

     

Net income

   $ 932,449       $ 840,292   

Shares for basic and diluted earnings per share calculations:

     

Weighted average common shares outstanding for basic EPS

     717,754         739,531   

Assumed exercise/vesting of:

     

Stock options and awards

     12,996         14,190   
  

 

 

    

 

 

 

Weighted average common shares outstanding for diluted EPS

     730,750         753,721   
  

 

 

    

 

 

 

Diluted earnings per share

   $ 1.28       $ 1.11   

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 period’s average price of TJX’s common stock. Such options are excluded because they would have an antidilutive effect. There were no such options excluded for the thirteen weeks or the twenty-six weeks ended August 3, 2013 and July 28, 2012.

 

10


Note D. Financial Instruments

As a result of its operating and financing activities, TJX is exposed to market risks from changes in interest and foreign currency exchange rates and fuel costs. These market risks may adversely affect TJX’s operating results and financial position. When and to the extent deemed appropriate, TJX seeks to minimize risk from changes in interest, foreign currency exchange rates and fuel costs through the use of derivative financial instruments. TJX does not use derivative financial instruments for trading or other speculative purposes and does not use any leveraged derivative financial instruments. TJX recognizes all derivative instruments as either assets or liabilities in the statements of financial position and measures those instruments at fair value. The fair values of the derivatives are classified as assets or liabilities, current or non-current, based upon valuation results and settlement dates of the individual contracts. Changes to the fair value of derivative contracts that do not qualify for hedge accounting are reported in earnings in the period of the change. For derivatives that qualify for hedge accounting, changes in the fair value of the derivatives are either recorded in shareholders’ equity as a component of other comprehensive income or are recognized currently in earnings, along with an offsetting adjustment against the basis of the item being hedged. TJX does not hedge its net investments in foreign subsidiaries.

Diesel Fuel Contracts: During fiscal 2013 and the first half of fiscal 2014, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2014, based on the diesel fuel expected to be consumed by independent freight carriers transporting the Company’s inventory. The hedge agreements outstanding at August 3, 2013 relate to approximately 50% of TJX’s estimated notional diesel requirements for the remainder of fiscal 2014 and approximately 10% of TJX’s estimated notional diesel requirements for the first quarter of fiscal 2015. These diesel fuel hedge agreements will settle throughout the second half of fiscal 2014 and the first quarter of fiscal 2015. TJX elected not to apply hedge accounting rules to these contracts.

Foreign Currency Contracts: TJX enters into forward foreign currency exchange contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by TJX Europe (United Kingdom, Ireland, Germany and Poland), TJX Canada (Canada), Marmaxx (U.S.) and HomeGoods (U.S.) in currencies other than their respective functional currencies. These contracts typically have a term of twelve months or less. The contracts outstanding at August 3, 2013 cover a portion of such actual and anticipated merchandise purchases throughout the remainder of fiscal 2014. 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


The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at August 3, 2013:

 

In thousands

   Pay      Receive      Blended
Contract
Rate
     Balance Sheet
Location
    Current Asset
U.S.$
     Current
(Liability)
U.S.$
    Net Fair
Value in
U.S.$ at

August 3,
2013
 

Fair value hedges:

                  

Intercompany balances, primarily short-term debt and related interest

  

         
   94,073       C$ 29,598         0.3146         (Accrued Exp   $ —         $ (930   $ (930
   £ 25,000       C$ 38,946         1.5578         (Accrued Exp     —           (859     (859
   44,281       £ 35,781         0.8080         (Accrued Exp     —           (4,191     (4,191
   44,850       U.S.$ 59,273         1.3216        
 
Prepaid Exp /
(Accrued Exp)
  
  
    1,112         (1,424     (312
   U.S.$ 87,117       £ 55,000         0.6313         (Accrued Exp     —           (3,095     (3,095

Economic hedges for which hedge accounting was not elected:

  

         

Diesel contracts

    

 

 

 

Fixed on

350K - 1.9M

gal per

month

  

  

  

  

    

 

 

 

Float on

350K - 1.9M

gal per

month

  

  

  

  

     N/A         Prepaid Exp        1,443         —          1,443   

Merchandise purchase commitments

  

               
   C$ 351,970       U.S.$  340,731         0.9681        

 

Prepaid Exp /

(Accrued Exp)

  

  

    3,459         (921     2,538   
   C$ 7,234       5,350         0.7396         Prepaid Exp        141         —          141   
   £ 99,797       U.S.$ 152,500         1.5281        

 

Prepaid Exp /

(Accrued Exp)

  

  

    838         (920     (82
   £ 27,346       135,214         4.9446         (Accrued Exp)        —           (432     (432
   U.S.$ 19,497       14,917         0.7651        

 

Prepaid Exp /

(Accrued Exp)

  

  

    314         (6     308   
             

 

 

    

 

 

   

 

 

 

Total fair value of financial instruments

  

        $ 7,307       $ (12,778   $ (5,471
             

 

 

    

 

 

   

 

 

 

 

12


The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at July 28, 2012:

 

In thousands

   Pay      Receive      Blended
Contract
Rate
     Balance Sheet
Location
     Current Asset
U.S.$
     Current
(Liability)
U.S.$
    Net Fair
Value in
U.S.$ at
July 28,
2012
 

Fair value hedges:

                   

Intercompany balances, primarily short-term debt and related interest

  

          
   £ 40,000       C$ 63,330         1.5833         (Accrued Exp)       $ —         $ (167   $ (167
   91,500       C$ 27,247         0.2978        

 

Prepaid Exp /

(Accrued Exp)

  

  

     344         (178     166   
   25,000       £ 21,335         0.8534         Prepaid Exp         2,722         —          2,722   
   102,002       U.S.$ 136,656         1.3397         Prepaid Exp         10,746         —          10,746   
   U.S.$ 85,389       £ 55,000         0.6441         Prepaid Exp         1,191         —          1,191   

Economic hedges for which hedge accounting was not elected:

  

             

Diesel contracts

    

 

 

 

Fixed on

430K - 1.7M

gal per

month

  

  

  

  

    

 
 

 

Float on

430K - 1.7M
gal per

month

  

  
  

  

     N/A         (Accrued Exp)         —           (4     (4

Merchandise purchase commitments

  

                
   C$ 277,963       U.S.$  277,245         0.9974        

 

Prepaid Exp /

(Accrued Exp)

  

  

     2,053         (1,559     494   
   C$ 6,425       5,050         0.7860        

 

Prepaid Exp /

(Accrued Exp)

  

  

     3         (179     (176
   £ 81,860       U.S.$ 129,500         1.5820        

 

Prepaid Exp /

(Accrued Exp)

  

  

     1,129         (553     576   
   £ 31,094       38,000         1.2221        

 

Prepaid Exp /

(Accrued Exp)

  

  

     220         (2,367     (2,147
   U.S.$ 15,197       12,166         0.8006        

 

Prepaid Exp /

(Accrued Exp)

  

  

     67         (264     (197
              

 

 

    

 

 

   

 

 

 

Total fair value of financial instruments

               $ 18,475       $ (5,271   $ 13,204   
              

 

 

    

 

 

   

 

 

 

 

13


The impact of derivative financial instruments on the statements of income during the second quarter of fiscal 2014 and the second quarter of fiscal 2013 is as follows:

 

          Amount of Gain (Loss)  Recognized
in Income by Derivative
 
          Thirteen Weeks Ended  

In thousands

   Location of Gain (Loss)
Recognized in  Income by
Derivative
   August 3, 2013     July 28, 2012  

Fair value hedges:

       

Intercompany balances, primarily short-term debt and related interest

   Selling, general and
administrative expenses
   $ (4,423   $ 9,613   

Economic hedges for which hedge accounting was not elected:

       

Diesel fuel contracts

   Cost of sales, including buying
and occupancy costs
     2,206        (3,218

Merchandise purchase commitments

   Cost of sales, including buying

and occupancy costs

     11,796        8,917   
     

 

 

   

 

 

 

Gain recognized in income

      $ 9,579      $ 15,312   
     

 

 

   

 

 

 
          Amount of Gain (Loss)  Recognized
in Income by Derivative
 
          Twenty-Six Weeks Ended  

In thousands

   Location of Gain (Loss)
Recognized in Income by
Derivative
   August 3, 2013     July 28, 2012  

Fair value hedges:

       

Intercompany balances, primarily short-term debt and related interest

   Selling, general and
administrative expenses
   $ 1,863      $ 13,265   

Economic hedges for which hedge accounting was not elected:

       

Diesel fuel contracts

   Cost of sales, including buying
and occupancy costs
     (755     (668

Merchandise purchase commitments

   Cost of sales, including buying
and occupancy costs
     12,803        (1,486
     

 

 

   

 

 

 

Gain recognized in income

      $ 13,911      $ 11,111   
     

 

 

   

 

 

 

 

14


Note E. Disclosures about Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date or “exit price.” The inputs used to measure fair value are generally classified into the following hierarchy:

 

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
Level 3: Unobservable inputs for the asset or liability

The following table sets forth TJX’s financial assets and liabilities that are accounted for at fair value on a recurring basis:

 

In thousands

   August 3,
2013
     February 2,
2013
     July 28,
2012
 

Level 1

        

Assets:

        

Executive Savings Plan investments

   $ 122,359       $ 101,903       $ 89,479   

Level 2

        

Assets:

        

Short-term investments

   $ 231,213       $ 235,853       $ 176,295   

Foreign currency exchange contracts

     5,864         5,980         18,475   

Diesel fuel contracts

     1,443         3,372         —     

Liabilities:

        

Foreign currency exchange contracts

   $ 12,778       $ 11,874       $ 5,267   

Diesel fuel contracts

     —           —           4   

The fair value of TJX’s general corporate debt, including current installments, was estimated by obtaining market quotes given the trading levels of other bonds of the same general issuer type and market perceived credit quality. These inputs are considered to be Level 2. The fair value of long-term debt as of August 3, 2013 was $1.4 billion compared to a carrying value of $1.3 billion. The fair value of long-term debt as of February 2, 2013 was $911.0 million compared to a carrying value of $774.6 million. The fair value of long-term debt as of July 28, 2012 was $935.4 million compared to a carrying value of $774.5 million. These estimates do not necessarily reflect provisions or restrictions in the various debt agreements that might affect TJX’s ability to settle these obligations.

TJX’s cash equivalents are stated at cost, which approximates fair value, due to the short maturities of these instruments.

Investments designed to meet obligations under the Executive Savings Plan are invested in securities traded in active markets and are recorded at unadjusted quoted prices.

Short-term investments, foreign currency exchange contracts and diesel fuel contracts are valued using broker quotations which include observable market information. TJX does not make adjustments to quotes or prices obtained from brokers or pricing services but does assess the credit risk of counterparties and will adjust final valuations when appropriate. Where independent pricing services provide fair values, TJX obtains an understanding of the methods used in pricing. As such, these instruments are classified within Level 2.

 

15


Note F. Segment Information

TJX operates four main business segments. The Marmaxx segment (T.J. Maxx and Marshalls) and the HomeGoods segment both operate stores in the United States, the TJX Canada segment operates stores in Canada (Winners, HomeSense and Marshalls), and the TJX Europe segment operates stores in Europe (T.K. Maxx and HomeSense). Late in fiscal 2013 TJX acquired Sierra Trading Post (STP), an off-price internet retailer. The results of STP have been included with the Marmaxx segment.

TJX evaluates the performance of its segments based on “segment profit or loss,” which it defines as pre-tax income or loss before general corporate expense and interest expense. “Segment profit or loss,” as defined by TJX, may not be comparable to similarly titled measures used by other entities. The terms “segment margin” or “segment profit margin” are used to describe segment profit or loss as a percentage of net sales. These measures of performance should not be considered alternatives to net income or cash flows from operating activities as an indicator of TJX’s performance or as a measure of liquidity.

Presented below is financial information with respect to TJX’s business segments:

 

     Thirteen Weeks Ended  
     August 3,      July 28,  

In thousands

   2013      2012  

Net sales:

     

In the United States:

     

Marmaxx

   $ 4,295,346       $ 3,976,051   

HomeGoods

     690,123         597,714   

TJX Canada

     679,364         660,703   

TJX Europe

     777,591         711,091   
  

 

 

    

 

 

 
   $ 6,442,424       $ 5,945,559   
  

 

 

    

 

 

 

Segment profit:

     

In the United States:

     

Marmaxx

   $ 647,978       $ 581,379   

HomeGoods

     81,170         60,531   

TJX Canada

     90,776         92,661   

TJX Europe

     40,529         24,724   
  

 

 

    

 

 

 
     860,453         759,295   

General corporate expense

     79,088         67,323   

Interest expense, net

     8,919         9,182   
  

 

 

    

 

 

 

Income before provision for income taxes

   $ 772,446       $ 682,790   
  

 

 

    

 

 

 

 

16


     Twenty-Six Weeks Ended  
     August 3,      July 28,  

In thousands

   2013      2012  

Net sales:

     

In the United States:

     

Marmaxx

   $ 8,431,095       $ 7,865,109   

HomeGoods

     1,379,653         1,193,436   

TJX Canada

     1,324,860         1,300,912   

TJX Europe

     1,496,425         1,384,188   
  

 

 

    

 

 

 
   $ 12,632,033       $ 11,743,645   
  

 

 

    

 

 

 

Segment profit:

     

In the United States:

     

Marmaxx

   $ 1,282,278       $ 1,186,007   

HomeGoods

     170,233         129,964   

TJX Canada

     165,082         163,726   

TJX Europe

     56,893         36,453   
  

 

 

    

 

 

 
     1,674,486         1,516,150   

General corporate expense

     155,954         133,946   

Interest expense, net

     14,201         18,009   
  

 

 

    

 

 

 

Income before provision for income taxes

   $ 1,504,331       $ 1,364,195   
  

 

 

    

 

 

 

Note G. Pension Plans and Other Retirement Benefits

Presented below is financial information related to TJX’s funded defined benefit retirement plan (funded plan) and its unfunded supplemental pension plan (unfunded plan) for the periods shown.

 

                                                                           
     Funded Plan     Unfunded Plan  
     Thirteen Weeks Ended     Thirteen Weeks Ended  
     August 3,     July 28,     August 3,      July 28,  

In thousands

   2013     2012     2013      2012  

Service cost

   $ 11,274      $ 9,825      $ 521       $ 339   

Interest cost

     11,325        10,263        593         570   

Expected return on plan assets

     (14,624     (13,926     —           —     

Amortization of prior service cost

     —          —          1         1   

Recognized actuarial losses

     6,919        7,097        560         475   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total expense

   $ 14,894      $ 13,259      $ 1,675       $ 1,385   
  

 

 

   

 

 

   

 

 

    

 

 

 
     Funded Plan     Unfunded Plan  
     Twenty-Six Weeks Ended     Twenty-Six Weeks Ended  
     August 3,     July 28,     August 3,      July 28,  

In thousands

   2013     2012     2013      2012  

Service cost

   $ 22,548      $ 19,651      $ 1,042       $ 679   

Interest cost

     22,650        20,525        1,186         1,140   

Expected return on plan assets

     (29,247     (27,853     —           —     

Amortization of prior service cost

     —          —          2         2   

Recognized actuarial losses

     13,837        14,195        1,120         950   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total expense

   $ 29,788      $ 26,518      $ 3,350       $ 2,771   
  

 

 

   

 

 

   

 

 

    

 

 

 

 

17


TJX’s policy with respect to the funded plan is to fund, at a minimum, the amount required to maintain a funded status of 80% of the applicable pension liability (the funding target pursuant to the Internal Revenue Code section 430) or such other amount sufficient to avoid restrictions with respect to the funding of TJX’s nonqualified plans under the Internal Revenue Code. TJX does not anticipate any required funding in fiscal 2014 for the funded plan. TJX anticipates making payments of $3.5 million to provide current benefits coming due under the unfunded plan in fiscal 2014.

The amounts included in amortization of prior service cost and recognized actuarial losses in the table above have been reclassified in their entirety from other comprehensive income to the statements of income, net of related tax effects, for both periods presented.

Note H. Long-Term Debt and Credit Lines

On May 2, 2013 TJX issued $500 million of 2.50% ten-year notes, all of which was outstanding at August 3, 2013. The Company intends to use the proceeds from the notes offering for working capital and other general corporate purposes. TJX entered into rate-lock agreements to hedge $250 million of the 2.50% notes prior to their issuance. The costs of these agreements are being amortized to interest expense over the term of the notes, resulting in an effective fixed interest rate of 2.57%.

At August 3, 2013, TJX also had outstanding $375 million aggregate principal amount of 6.95% ten-year notes due April 2019 and $400 million aggregate principal amount of 4.20% six-year notes due August 2015. TJX entered into rate-lock agreements to hedge the underlying treasury rate of all of the 6.95% notes and $250 million of the 4.20% notes prior to the issuance of the notes. The costs of these agreements are being amortized to interest expense over the term of the respective notes, resulting in an effective fixed interest rate of 7.00% for the 6.95% notes and 4.19% for the 4.20% notes.

At August 3, 2013, TJX had two $500 million revolving credit facilities, one which matures in June 2017 and one which matures in May 2016. As of August 3, 2013, February 2, 2013 and July 28, 2012 and during the quarters and year then ended, there were no amounts outstanding under these facilities. At August 3, 2013 the agreements require quarterly payments on the unused committed amounts of 8.0 basis points for the agreement maturing in 2017 and 12.5 basis points for the agreement maturing in 2016. These rates are based on the credit ratings of TJX’s long-term debt and would vary with changes in the credit ratings. These agreements have no compensating balance requirements and have various covenants including a requirement of a specified ratio of debt to earnings.

As of August 3, 2013 and July 28, 2012, TJX’s 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 August 3, 2013 and July 28, 2012, and during the quarters then ended there were no amounts outstanding on the Canadian credit line for operating expenses. As of August 3, 2013 and July 28, 2012, TJX Europe had a credit line of £20 million. As of August 3, 2013 and July 28, 2012, and during the quarters then ended there were no amounts outstanding on the European credit line.

Note I. Income Taxes

TJX had net unrecognized tax benefits of $127.8 million as of August 3, 2013, $125.3 million as of February 2, 2013 and $119.5 million as of July 28, 2012. The effective income tax rate was 37.9% for the fiscal 2014 second quarter and 38.3% for last year’s second quarter. The effective income tax rate for the six months ended August 3, 2013 was 38.0% as compared to 38.4% for last year’s comparable period. The decrease in the effective income tax rate for both periods was primarily due to an increase in foreign earnings, which are taxed at lower rates, and the extension of legislation allowing for the U.S. Work Opportunity Tax Credit. The Work Opportunity Tax Credit had expired as of the beginning of last year and was not extended until the fourth quarter of fiscal 2013.

TJX is subject to U.S. federal income tax as well as income tax in multiple states, local and foreign jurisdictions. In nearly all jurisdictions, the tax years through fiscal 2005 are no longer subject to examination.

 

18


TJX’s accounting policy classifies interest and penalties related to income tax matters as part of income tax expense. The total accrued amount on the balance sheets for interest and penalties was $40.1 million as of August 3, 2013; $38.6 million as of February 2, 2013 and $35.1 million as of July 28, 2012.

Based on the outcome of tax examinations or judicial or administrative proceedings, or as a result of the expiration of statute of limitations in specific jurisdictions, it is reasonably possible that unrecognized tax benefits for certain tax positions taken on previously filed tax returns may change materially from those presented in the financial statements. During the next 12 months, it is reasonably possible that tax examinations of prior years’ tax returns or judicial or administrative proceedings that reflect such positions taken by TJX may be finalized. As a result, the total net amount of unrecognized tax benefits may decrease, which would reduce the provision for taxes on earnings, by a range of $1.0 million to $50.0 million.

 

19


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Thirteen Weeks (second quarter) and Twenty-Six Weeks (six months) Ended August 3, 2013

Compared to

The Thirteen Weeks (second quarter) and Twenty-Six Weeks (six months) Ended July 28, 2012

Overview

We are the largest off-price retailer of apparel and home fashions in the U.S. and worldwide. We sell a rapidly changing assortment of apparel, home fashions and other merchandise at prices generally 20% to 60% below department and specialty store regular prices, every day. We operate over 3,000 stores through our four segments: in the U.S., Marmaxx (which operates T.J. Maxx and Marshalls) and HomeGoods; TJX Canada (which operates Winners, HomeSense and Marshalls in Canada); and TJX Europe (which operates T.K. Maxx and HomeSense in Europe).

Results of Operations

We reported strong same store sales gains and strong earnings per share growth for the second quarter and first six months of fiscal 2014. These results were obtained over a very strong second quarter last year, which continues several quarters of strong year-over-year second quarter comparisons. We achieved these results in a generally challenging retail environment, focusing on execution and capitalizing on the flexibility of our business model. During the quarter, we also continued to invest in our systems, talent and e-commerce businesses and returned cash to our shareholders. Highlights of our financial performance for the second quarter and six months ended August 3, 2013 include the following:

 

   

Same store sales increased 4% in the second quarter of fiscal 2014 over an increase of 7% in the fiscal 2013 second quarter. Same store sales increased 3% in the six-month period ending August 3, 2013 over last year’s 8% increase in the six months ended July 28, 2012. The fiscal 2014 increases were driven by an increase in the value of the average ticket (average unit retail) along with an increase in customer traffic.

 

   

Net sales increased 8% to $6.4 billion for the fiscal 2014 second quarter and increased 8% to $12.6 billion for the six-month period over last year’s comparable periods. At August 3, 2013, stores in operation increased 5% and selling square footage was up 4% compared to the same period in fiscal 2013. We performed well in both apparel and home fashion categories.

 

   

Diluted earnings per share for the second quarter of fiscal 2014 were $0.66, up 18% compared to $0.56 in fiscal 2013. Diluted earnings per share for the six-month period ended August 3, 2013 were $1.28, up 15% compared to $1.11 in the same period in fiscal 2013.

 

   

Our pre-tax margin (the ratio of pre-tax income to net sales) for the second quarter of fiscal 2014 was 12.0%, a 0.5 percentage point increase from 11.5% for the same period last year. For the six months ended August 3, 2013, our pre-tax margin was 11.9%, a 0.3 percentage point increase from 11.6% for the same period last year.

 

   

Our cost of sales ratio for the second quarter of fiscal 2014 was 71.2%, a 0.7 percentage point improvement over the second quarter last year. Our cost of sales ratio for the six-month period ended August 3, 2013 was 71.4%, a 0.5 percentage point improvement over the same period last year. The improvements over last year were primarily due to increased merchandise margins and buying and occupancy expense leverage on same store sales growth.

 

   

Our selling, general and administrative expense ratio for the second quarter of fiscal 2014 increased 0.2 percentage points to 16.7%. For the six months ended August 3, 2013, the selling, general and administrative expense ratio increased 0.2 percentage points to 16.6%. The increases over last year were primarily driven by increased marketing spend and the impact of our e-commerce businesses.

 

20


   

Our consolidated average per store inventories, including inventory on hand at our distribution centers, but excluding our e-commerce businesses, were down 5% at the end of the second quarter of fiscal 2014 as compared to the prior year.

 

   

During the second quarter of fiscal 2014, we repurchased 6.4 million shares of our common stock at a cost of $325 million. For the six months ended August 3, 2013 we repurchased 12.9 million shares of our common stock at a cost of $625 million. Earnings per share reflect the benefit of our stock repurchase programs. We expect to repurchase a total of approximately $1.3 to $1.4 billion of our common stock under these programs in fiscal 2014.

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 second quarter ended August 3, 2013 totaled $6.4 billion, an 8% increase over consolidated net sales of $5.9 billion in the fiscal 2013 second quarter. The increase reflected a 5% increase in new store sales and a 4% increase in same store sales, offset by a 1% decrease from the negative impact of foreign currency exchange rates. This increase compares to sales growth of 9% in last year’s second quarter, which reflected a 7% increase in same store sales and a 3% increase in new store sales, offset by a 1% decrease from the negative impact of foreign currency exchange rates.

Consolidated net sales for the six months ended August 3, 2013 totaled $12.6 billion, an 8% increase over $11.7 billion in last year’s comparable period. The increase reflected a 5% increase in new store sales and a 3% increase in same store sales. Foreign currency exchange had a neutral impact on the fiscal 2014 sales. This compares to sales growth of 10% in the six-month period of fiscal 2013, which reflected an 8% increase in same store sales and a 3% increase in new store sales, offset by a 1% decrease from the negative impact of foreign currency exchange rates.

As of August 3, 2013, our consolidated store count increased 5% and selling square footage increased 4% as compared to the end of the second quarter last year.

The same store sales increases for both the second quarter and six months ended August 3, 2013 were driven by an increase in the value of the average ticket along with an increase in customer traffic. In the U.S., same store sales in most regions were near the consolidated average, with Florida and the West Coast particularly strong. In Europe, same store sales were above the consolidated average and in Canada same store sales were below the consolidated average.

We define same store sales to be sales of those stores that have been in operation for all or a portion of two consecutive fiscal years, or in other words, stores that are starting their third fiscal year of operation. We classify a store as a new store until it meets the same store 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 segments are calculated on a constant currency basis, meaning we translate the current year’s same store sales of our foreign segments 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 segment operating performance. We define customer traffic to be the number of transactions in stores included in the same store sales calculation and use average ticket to mean the average retail price of the units sold.

 

21


The following table sets forth certain information about our consolidated operating results from continued operations as a percentage of net sales:

 

     Percentage of Net Sales
Thirteen Weeks Ended
August 3, 2013
    Percentage of Net Sales
Thirteen Weeks Ended
July 28, 2012
 

Net sales

     100.0     100.0
  

 

 

   

 

 

 

Cost of sales, including buying and occupancy costs

     71.2        71.9   

Selling, general and administrative expenses

     16.7        16.5   

Interest expense, net

     0.1        0.2   
  

 

 

   

 

 

 

Income before provision for income taxes*

     12.0     11.5
  

 

 

   

 

 

 
     Percentage of Net Sales
Twenty-Six Weeks Ended
August 3, 2013
    Percentage of Net Sales
Twenty-Six Weeks Ended
July 28, 2012
 

Net sales

     100.0     100.0
  

 

 

   

 

 

 

Cost of sales, including buying and occupancy costs

     71.4        71.9   

Selling, general and administrative expenses

     16.6        16.4   

Interest expense, net

     0.1        0.2   
  

 

 

   

 

 

 

Income before provision for income taxes*

     11.9     11.6
  

 

 

   

 

 

 

 

  * Figures may not foot due to rounding

Impact of foreign currency exchange rates: Our operating results are 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 exchange rates affect our reported results are as follows:

 

   

Translation of foreign operating results into U.S. dollars: In our financial statements we translate the operations of TJX Canada and TJX 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 these segments. Currency translation generally does not affect operating margins, or affects them only slightly, 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 income statement impact of changes in foreign currency exchange rates on merchandise purchases denominated in currencies other than the local currencies of our divisions, principally TJX Europe and TJX Canada. As we have not elected “hedge accounting” for these instruments as defined by U.S. generally accepted accounting principles (GAAP), we record a mark-to-market gain or loss on the derivative 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 paid for. 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 derivatives does not affect net sales, but it does affect the cost of sales, operating margins and earnings we report.

Cost of sales, including buying and occupancy costs: Cost of sales, including buying and occupancy costs, as a percentage of net sales improved 0.7 percentage points to 71.2% for the second quarter of fiscal 2014 as compared to the same period last year. Cost of sales, including buying and occupancy costs, as a percentage of net sales improved 0.5 percentage points to 71.4% for the six months ended August 3, 2013 as compared to the same period last year. The improvements in this ratio for both fiscal 2014 periods were primarily driven by increased merchandise margins and buying and occupancy expense leverage on same store sales growth. We believe our strong merchandise margins continued in part due to our lean, fast-turning inventory and flow of fresh merchandise.

 

22


Selling, general and administrative expenses: Selling, general and administrative expenses, as a percentage of net sales, were 16.7% in the second quarter of fiscal 2014, a 0.2 percentage point increase over last year’s ratio. Selling, general and administrative expenses, as a percentage of net sales, increased 0.2 percentage points to 16.6% for the six months ended August 3, 2013 as compared to the same period last year. The increase in our selling, general and administrative expense ratio for both periods was primarily due to increased investments in marketing and the impact of our e-commerce businesses. Additionally, in the second quarter of fiscal 2014 this expense ratio also reflects our contribution to The TJX Foundation.

Interest expense, net: The components of interest expense, net are summarized below:

 

     Thirteen Weeks Ended     Twenty-Six Weeks Ended  
     August 3,     July 28,     August 3,     July 28,  

Dollars in thousands

   2013     2012     2013     2012  

Interest expense

   $ 15,111      $ 13,062      $ 26,905      $ 25,397   

Capitalized interest

     (3,272     (988     (6,717     (1,731

Interest (income)

     (2,920     (2,892     (5,987     (5,657
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

   $ 8,919      $ 9,182      $ 14,201      $ 18,009   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense for both the second quarter and first six months reflects the interest cost on the $500 million of 2.5% ten year notes. The reduction in net interest expense for the six months ended August 3, 2013 was primarily due to capitalized interest costs on major capital projects not yet placed in service.

Income taxes: The effective income tax rate was 37.9% for the second quarter this year, compared to 38.3% for last year’s second quarter. The effective income tax rate for the six months ended August 3, 2013 was 38.0% as compared to 38.4% for last year’s comparable period. The decrease in the effective income tax rate for both periods was primarily due to an increase in foreign earnings, which are taxed at lower rates, and the extension of legislation allowing for the U.S. Work Opportunity Tax Credit. The Work Opportunity Tax Credit had expired as of the beginning of last year and was not extended until the fourth quarter of fiscal 2013.

Net income and net income per share: Net income for the second quarter of fiscal 2014 was $479.6 million, or $0.66 per diluted share, versus $421.1 million, or $0.56 per diluted share, in last year’s second quarter. Foreign currency had a neutral impact on earnings per share in the second quarter of fiscal 2014 as well as in the second quarter of fiscal 2013. Net income for the six months ended August 3, 2013 was $932.4 million, or $1.28 per diluted share, versus $840.3 million, or $1.11 per diluted share, in the same period last year. The impact of foreign currency exchange rates reduced diluted earnings per share by $0.01 per diluted share in fiscal 2014, compared to a neutral impact in the same period last year.

Our weighted average diluted shares outstanding affect the comparability of earnings per share. Our stock repurchases benefit our earnings per share. During the second quarter of fiscal 2014, we repurchased 6.4 million shares of our common stock at a cost of $325 million. For the first six months of fiscal 2014, we repurchased 12.9 million shares of our common stock at a cost of $625 million.

Segment information: We operate four main business segments. Marmaxx (T.J. Maxx and Marshalls) and HomeGoods both operate stores in the United States. Our TJX Canada segment operates our stores in Canada (Winners, HomeSense and Marshalls), and our TJX Europe segment operates our stores in Europe (T.K. Maxx and HomeSense). Late in fiscal 2013 we acquired Sierra Trading Post (STP), an off-price internet retailer. The results of STP have been included with our Marmaxx segment. We evaluate the performance of our segments based on “segment profit or loss,” which we define as pre-tax income or loss before general corporate expense and interest expense. “Segment profit or loss,” as we define the term, may not be comparable to similarly titled measures used by other entities. The terms “segment margin” or “segment profit margin” are used to describe segment profit or loss as a percentage of net sales. These measures of performance should not be considered an alternative to net income or cash flows from operating activities as an indicator of our performance or as a measure of liquidity.

 

23


Presented below is selected financial information related to our business segments:

U.S. Segments:

Marmaxx

 

     Thirteen Weeks Ended     Twenty-Six Weeks Ended  
     August 3,     July 28,     August 3,     July 28,  

Dollars in millions

   2013     2012     2013     2012  

Net sales

   $ 4,295.3      $ 3,976.1      $ 8,431.1      $ 7,865.1   

Segment profit

   $ 648.0      $ 581.4      $ 1,282.3      $ 1,186.0   

Segment profit as a percentage of net sales

     15.1     14.6     15.2     15.1

Percent increase in same store sales

     4     7     2     7

Stores in operation at end of period

        

T.J. Maxx

         1,052        1,005   

Marshalls

         914        891   

Sierra Trading Post

         4        —     
      

 

 

   

 

 

 

Total

         1,970        1,896   
      

 

 

   

 

 

 

Selling square footage at end of period (in thousands)

        

T.J. Maxx

         24,187        23,311   

Marshalls

         22,561        22,091   

Sierra Trading Post

         83        —     
      

 

 

   

 

 

 

Total

         46,831        45,402   
      

 

 

   

 

 

 

Net sales for Marmaxx increased 8% for the second quarter of fiscal 2014 and increased 7% for the six-month period as compared to the same periods last year. Same store sales for Marmaxx were up 4% in the second quarter of fiscal 2014 and up 2% for the first six months of fiscal 2014, on top of a 7% increase for both comparable periods last year.

Same store sales growth at Marmaxx for both the second quarter and six-months ended August 3, 2013 were driven by increases in the value of the average ticket. Geographically, same store sales were generally strong across the U.S., with Florida and the West Coast outperforming the chain average. Our apparel and home fashion categories both performed well.

Segment profit margin increased to 15.1% for the second quarter of fiscal 2014 compared to 14.6% for the same period last year. This improvement reflects an increase in merchandise margin of 0.5 percentage points as well as expense leverage on the strong same store sales growth, particularly in occupancy costs, partially offset by the impact of our e-commerce businesses. Segment margin increased to 15.2% for the six months ended August 3, 2013 compared to 15.1% for the same period last year. The six-month segment margin improvement was due to increased merchandise margins of 0.4 percentage points, partially offset by the impact of our e-commerce businesses.

 

24


HomeGoods

 

     Thirteen Weeks Ended     Twenty-Six Weeks Ended  
     August 3,     July 28,     August 3,     July 28,  

Dollars in millions

   2013     2012     2013     2012  

Net sales

   $ 690.1      $ 597.7      $ 1,379.7      $ 1,193.4   

Segment profit

   $ 81.2      $ 60.5      $ 170.2      $ 130.0   

Segment profit as a percentage of net sales

     11.8     10.1     12.3     10.9

Percent increase in same store sales

     8     9     7     9

Stores in operation at end of period

         430        393   

Selling square footage at end of period (in thousands)

         8,492        7,774   

HomeGoods net sales increased 15% in the second quarter of fiscal 2014 compared to the same period last year, and 16% for the six months of fiscal 2014 over the same period last year. Same store sales increased 8% for the second quarter and increased 7% for the six months ended August 3, 2013, driven by increases in customer traffic and average ticket, and on top of same store sales increases of 9% in both comparable periods last year.

Segment profit margin increased to 11.8% for the second quarter of fiscal 2014 compared to 10.1% for the same period last year. Segment profit margin for the six months ended August 3, 2013 increased 1.4 percentage points to 12.3%, compared to 10.9% for the same period last year. The growth in segment margin for both the quarter and year-to-date periods was driven by expense leverage on strong same store sales, particularly occupancy and buying costs, along with a slight increase in merchandise margin.

International Segments:

TJX Canada

 

     Thirteen Weeks Ended     Twenty-Six Weeks Ended  
     August 3,     July 28,     August 3,     July 28,  

U.S. Dollars in millions

   2013     2012     2013     2012  

Net sales

   $ 679.4      $ 660.7      $ 1,324.9      $ 1,300.9   

Segment profit

   $ 90.8      $ 92.7      $ 165.1      $ 163.7   

Segment profit as a percentage of net sales

     13.4     14.0     12.5     12.6

Percent increase in same store sales

     2     5     0     6

Stores in operation at end of period

        

Winners

         226        220   

HomeSense

         89        87   

Marshalls

         22        12   
      

 

 

   

 

 

 

Total

         337        319   
      

 

 

   

 

 

 

Selling square footage at end of period (in thousands)

        

Winners

         5,179        5,076   

HomeSense

         1,710        1,682   

Marshalls

         551        312   
      

 

 

   

 

 

 

Total

         7,440        7,070   
      

 

 

   

 

 

 

Net sales for TJX Canada increased 3% for the second quarter and increased 2% for the six-month period ended August 3, 2013 compared to the respective periods last year. Currency exchange translation negatively impacted second quarter sales growth by approximately 1 percentage point and negatively impacted six-month sales growth by approximately 2 percentage points, as compared to the respective periods last year. Same store sales increased 2% for the second quarter of fiscal 2014 and were flat for the six months ended August 3, 2013.

Segment profit margin decreased to 13.4% for the second quarter ended August 3, 2013 compared to 14.0% last year and for the six months ended August 3, 2013 segment profit margin decreased slightly to 12.5% compared to 12.6% in the same period last year. The decrease in segment profit margin for the second quarter was driven by a reduction in

 

25


merchandise margin as the change in the U.S. currency exchange rate during the second quarter increased our cost of merchandise and put pressure on our mark-on. In addition, the decline in segment margin in both periods reflects expense deleverage on the low single-digit same store sales increase, particularly in investments in talent as TJX Canada grows the Marshalls chain. The mark-to-market adjustment on inventory hedges had a favorable impact on year-over-year comparison of segment margin of 0.2 percentage points in both the second quarter and first six months of fiscal 2014.

TJX Europe

 

     Thirteen Weeks Ended     Twenty-Six Weeks Ended  
     August 3,     July 28,     August 3,     July 28,  

U.S. Dollars in millions

   2013     2012     2013     2012  

Net sales

   $ 777.6      $ 711.1      $ 1,496.4      $ 1,384.2   

Segment profit

   $ 40.5      $ 24.7      $ 56.9      $ 36.5   

Segment profit as a percentage of net sales

     5.2     3.5     3.8     2.6

Percent increase in same store sales

     6     10     5     11

Stores in operation at end of period

        

T.K. Maxx

         355        338   

HomeSense

         27        24   
      

 

 

   

 

 

 

Total

         382        362   
      

 

 

   

 

 

 

Selling square footage at end of period (in thousands)

        

T.K. Maxx

         8,090        7,741   

HomeSense

         447        402   
      

 

 

   

 

 

 

Total

         8,537        8,143   
      

 

 

   

 

 

 

Net sales for TJX Europe increased 9% for the second quarter of fiscal 2014 and 8% for the six months ended August 3, 2013, compared to the same periods last year. Currency exchange translation negatively impacted second quarter sales growth by approximately 1 percentage point and negatively impacted six-month sales growth by approximately 2 percentage points. Same store sales increased 6% in the second quarter of fiscal 2014 and increased 5% for the six months ended August 3, 2013 compared to increases of 10% and 11% in the same periods last year. The same store sales growth in both periods was driven by increases in customer traffic.

Segment profit for the second quarter of fiscal 2014 was $40.5 million compared to $24.7 million last year, and segment margin increased 1.7 percentage points to 5.2%. For the six months ended August 3, 2013, segment profit was $56.9 million, compared to $36.5 million last year and segment margin increased 1.2 percentage points to 3.8%. Segment margin for the second quarter and six months ended August 3, 2013 increased as compared to last year’s comparable period primarily due to strong growth in merchandise margin as well as expense leverage on the strong same store sales growth, primarily occupancy costs and store payroll costs. The mark-to-market adjustment on inventory hedges had a negative impact of 0.2 percentage points on the year-over-year comparison of segment margin for the second quarter and a negative impact of 0.1 percentage point for the first six months.

General corporate expense

 

     Thirteen Weeks Ended      Twenty-Six Weeks Ended  
     August 3,      July 28,      August 3,      July 28,  

Dollars in millions

   2013      2012      2013      2012  

General corporate expense

   $ 79.1       $ 67.3       $ 156.0       $ 133.9   

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. The increase in general corporate expense for this year’s second quarter as compared to last year reflects a contribution to the TJX Foundation and an increase in share-based compensation costs. On a year-to-date basis, the increase in general corporate expense over the prior year’s comparable period was primarily due to increases in systems and technology costs and share-based compensation costs. The company anticipates that general corporate expenses for the second half of fiscal 2014 will be less than the prior year, offsetting these increases.

 

26


Analysis of Financial Condition

Liquidity and Capital Resources

Net cash provided by operating activities was $811 million for the six months ended August 3, 2013, a decrease of $497 million from the $1,308 million provided in the six months ended July 28, 2012. Net income plus the non-cash impact of depreciation provided cash of $1,198 million in the first six months of fiscal 2014 compared to $1,087 million in the same period last year, an increase of $111 million. The change in merchandise inventory, net of the related change in accounts payable, resulted in a use of cash of $174 million in the first six months of fiscal 2014 compared to a source of cash of $159 million in fiscal 2013, a decrease of $333 million. This decrease in operating cash flows year over year was driven by the timing of our inventory purchases and a higher inventory level at the beginning of the fiscal 2013 as compared to inventory levels at the beginning of fiscal 2014.

Additionally, the change in prepaid expenses and other current assets negatively impacted the year-over-year comparison of cash from operations by $65 million and the change in accrued expenses and taxes payable negatively impacted the year-over-year comparison of cash from operations by $216 million. The cash impact of the change in prepaid expenses and other current assets was driven by the timing of payment of monthly store rent. The cash impact of the change in accrued expenses and taxes payable was primarily due to the timing of tax payments as well as the payment of the fiscal 2013 incentive cash compensation accruals during the fiscal 2014 second quarter.

Investing activities in the first six months of fiscal 2014 primarily reflected property additions for new stores, store improvements and renovations and investment in our home office and our distribution network. Cash outflows for property additions amounted to $497 million in the six months ended August 3, 2013, compared to $439 million in the same period last year. We anticipate that capital spending for fiscal 2014 will be approximately $925 million to $950 million. We also purchased short-term investments that had initial maturities in excess of 90 days, which, per our policy, are not classified as cash on the balance sheets presented. In the first six months of fiscal 2014, we purchased $196 million in these short-term investments, compared to $137 million in the same period in fiscal 2013. $189 million of these short-term investments were sold or matured during the six months of fiscal 2014, compared to $54 million in the same period of fiscal 2013.

Cash flows from financing activities resulted in a net cash outflow of $222 million in the first six months of fiscal 2014, compared to a net cash outflow of $667 million in the same period last year. In fiscal 2014 we issued $500 million of 2.5% ten-year notes generating proceeds, net of debt issuance expenses and fees, of $495 million. The net proceeds will be used for working capital and general corporate purposes. See Note H to the consolidated financial statements for more information. Under our stock repurchase program, we spent $625 million to repurchase 12.9 million shares of our stock in the first six months of fiscal 2014 compared to $550 million to repurchase 13.6 million shares in the same period last year. See Note C to our unaudited consolidated financial statements for more information. In February 2013, our Board of Directors approved an additional repurchase program authorizing the repurchase of up to an additional $1.5 billion of TJX stock. We currently plan to repurchase approximately $1.3 billion to $1.4 billion of stock under our stock repurchase programs in fiscal 2014. We determine the timing and amount of repurchases based on our assessment of various factors including excess cash flow, liquidity, economic and market conditions, our assessment of prospects for our business, legal requirements and other factors. The timing and amount of these purchases may change. Financing activities also included $64 million of proceeds from the exercise of stock options in the first six months of fiscal 2014, versus $61 million in proceeds in the same period last year. Dividends paid on common stock in the first six months of fiscal 2014 were $187 million, versus $156 million in the same period last year.

We traditionally have funded our working capital requirements, including for seasonal merchandise, primarily through cash generated from operations, supplemented, as needed, by short-term bank borrowings and the issuance of commercial paper. As of August 3, 2013 approximately 45% of our cash remains outside the United States with $237 million held in countries where TJX has the intention to reinvest any undistributed earnings indefinitely. We believe our existing cash and cash equivalents, internally generated funds and our credit facilities, described in Note H to the consolidated financial statements, are more than adequate to meet our operating needs over the next fiscal year.

 

27


Recently Issued Accounting Pronouncements

As discussed in Note A to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q, there were no recently issued accounting standards that we expect to have a material impact on our consolidated financial statements.

Forward-looking Statements

Various statements made in this Quarterly Report on Form 10-Q are forward-looking and involve a number of risks and uncertainties. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements. The following are some of the factors that could cause actual results to differ materially from the forward-looking statements: execution of buying and inventory management; operational expansion and management of large size and scale; customer trends and preferences; market, banner, geographic and category expansion; marketing, advertising and promotional programs; competition; personnel recruitment and retention and costs of labor; global economic conditions and consumer spending; data security; information systems and technology; seasonal influences; adverse or unseasonable weather; serious disruptions and catastrophic events; corporate and banner reputation; merchandise quality and safety; expanding international operations; merchandise importing; commodity pricing; foreign currency exchange rates; fluctuations in quarterly operating results, and market expectations; acquisitions, business investments and divestitures; compliance with laws, regulations and orders; changes in laws and regulations; outcomes of litigation, legal matters and proceedings; tax matters; real estate activities; cash flow and other factors that may be described in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Form 10-K for the fiscal year ended February 2, 2013.

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 August 3, 2013 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 at the reasonable assurance level 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 Commission’s rules and forms; and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of implementing controls and procedures.

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 August 3, 2013 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.

 

28


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 February 2, 2013, as filed with the Securities Exchange Commission on April 2, 2013.

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 second quarter of fiscal 2014 and the average price paid per share are as follows:

 

     Total
Number of Shares
Repurchased (1)

(a)
     Average Price Paid
Per Share (2)

(b)
     Total Number of Shares
Purchased as Part of a
Publicly Announced

Plan or Program(3)
(c)
     Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet be Purchased
Under the Plans or
Programs

(d)
 

May 5, 2013 through

    June 1, 2013

     1,775,913       $ 50.68         1,775,913       $ 2,034,719,022   

June 2, 2013 through

    July 6, 2013

     2,911,125       $ 49.91         2,904,605       $ 1,889,719,731   

July 7, 2013 through

    August 3, 2013

     1,726,896       $ 52.12         1,726,896       $ 1,799,719,769   
  

 

 

       

 

 

    

Total:

     6,413,934            6,407,414      

 

(1) Consists of shares repurchased under publicly announced stock repurchase programs and 6,520 shares surrendered to satisfy tax withholding obligations in connection with the vesting of restricted stock awards.
(2) Includes commissions for the shares repurchased under stock repurchase programs.
(3)

All of the shares repurchased during the second quarter of fiscal 2014 were repurchased under the $2 billion program authorized in February 2012. As of August 3, 2013, approximately $300 million remained available for purchase under that program. Additionally, in February 2013, we announced our 14th stock repurchase program for an additional $1.5 billion.

 

29


Item 6. Exhibits

 

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 August 3, 2013, 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.

 

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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: August 30, 2013     By    /s/ Scott Goldenberg
      Scott Goldenberg, Chief Financial Officer
      (Principal Financial and Accounting Officer)

 

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Exhibit Index:

 

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 August 3, 2013, 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.

 

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