UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM10-Q
(mark one)
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended April 29, 2017May 5, 2018
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 number1-4908
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 ☒ 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 RegulationS-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 ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, smaller reporting company or an “emerging growth company”. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). YES ☐ NO ☒
The number of shares of registrant’s common stock outstanding as of April 29, 2017: 643,276,269May 5, 2018: 625,202,688
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 | ||||||||||||||||
April 29, | April 30, | Thirteen Weeks Ended | ||||||||||||||
2017 | 2016 | May 5, 2018 | April 29, 2017 | |||||||||||||
Net sales | $ | 7,784,024 | $ | 7,542,356 | $ | 8,688,720 | $ | 7,784,024 | ||||||||
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Cost of sales, including buying and occupancy costs | 5,530,072 | 5,372,143 | 6,178,239 | 5,530,072 | ||||||||||||
Selling, general and administrative expenses | 1,411,603 | 1,335,050 | 1,550,775 | 1,411,603 | ||||||||||||
Interest expense, net | 9,841 | 10,194 | 4,148 | 9,841 | ||||||||||||
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Income before provision for income taxes | 832,508 | 824,969 | 955,558 | 832,508 | ||||||||||||
Provision for income taxes | 296,229 | 316,623 | 239,177 | 296,229 | ||||||||||||
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Net income | $ | 536,279 | $ | 508,346 | $ | 716,381 | $ | 536,279 | ||||||||
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Basic earnings per share: | ||||||||||||||||
Net income | $ | 0.83 | $ | 0.77 | $ | 1.14 | $ | 0.83 | ||||||||
Weighted average common shares – basic | 644,425 | 661,515 | 626,612 | 644,425 | ||||||||||||
Diluted earnings per share: | ||||||||||||||||
Net income | $ | 0.82 | $ | 0.76 | $ | 1.13 | $ | 0.82 | ||||||||
Weighted average common shares – diluted | 654,799 | 670,388 | 634,436 | 654,799 | ||||||||||||
Cash dividends declared per share | $ | 0.3125 | $ | 0.2600 | $ | 0.390 | $ | 0.3125 |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
2
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
IN THOUSANDS
Thirteen Weeks Ended | ||||||||||||||||
April 29, | April 30, | Thirteen Weeks Ended | ||||||||||||||
2017 | 2016 | May 5, 2018 | April 29, 2017 | |||||||||||||
Net income | $ | 536,279 | $ | 508,346 | $ | 716,381 | $ | 536,279 | ||||||||
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Additions to other comprehensive income: | ||||||||||||||||
Foreign currency translation adjustments, net of related tax benefit of $20,543 in fiscal 2018 and provision of $51,247 in fiscal 2017 | (5,247 | ) | 129,596 | |||||||||||||
Foreign currency translation adjustments, net of related tax benefit of $1,206 in fiscal 2019 and $20,543 in fiscal 2018 | (122,529 | ) | (5,247 | ) | ||||||||||||
Gain on net investment hedges, net of related tax provision of $2,201 in fiscal 2019 | 6,044 | — | ||||||||||||||
Reclassifications from other comprehensive income to net income: | ||||||||||||||||
Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $2,543 in fiscal 2018 and $850 in fiscal 2017 | 3,868 | 1,293 | ||||||||||||||
Amortization of loss on cash flow hedge, net of related tax provisions of $112 in fiscal 2018 and $112 in fiscal 2017 | 171 | 171 | ||||||||||||||
Amortization of prior service cost and deferred gains, net of related tax provisions of $1,328 in fiscal 2019 and $2,543 in fiscal 2018 | 2,608 | 3,868 | ||||||||||||||
Amortization of loss on cash flow hedge, net of related tax provisions of $77 in fiscal 2019 and $112 in fiscal 2018 | 206 | 171 | ||||||||||||||
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Other comprehensive income (loss), net of tax | (1,208 | ) | 131,060 | |||||||||||||
Other comprehensive (loss), net of tax | (113,671 | ) | (1,208 | ) | ||||||||||||
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Total comprehensive income | $ | 535,071 | $ | 639,406 | $ | 602,710 | $ | 535,071 | ||||||||
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The accompanying notes are an integral part of the unaudited consolidated financial statements.
3
THE TJX COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
IN THOUSANDS, EXCEPT SHARE DATA
April 29, 2017 | January 28, 2017 | April 30, 2016 | May 5, 2018 | February 3, 2018 | April 29, 2017 | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 2,669,495 | $ | 2,929,849 | $ | 1,944,155 | $ | 2,681,105 | $ | 2,758,477 | $ | 2,669,495 | ||||||||||||
Short-term investments | 457,091 | 543,242 | 403,702 | 435,903 | 506,165 | 457,091 | ||||||||||||||||||
Accounts receivable, net | 317,224 | 258,831 | 281,631 | 368,314 | 327,166 | 317,224 | ||||||||||||||||||
Merchandise inventories | 3,736,114 | 3,644,959 | 3,904,989 | 4,369,893 | 4,187,243 | 3,736,114 | ||||||||||||||||||
Prepaid expenses and other current assets | 351,441 | 358,058 | 330,713 | 567,060 | 706,676 | 368,576 | ||||||||||||||||||
Federal, state, and foreign income taxes recoverable | 17,135 | 15,835 | 12,511 | |||||||||||||||||||||
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Total current assets | 7,548,500 | 7,750,774 | 6,877,701 | 8,422,275 | 8,485,727 | 7,548,500 | ||||||||||||||||||
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Net property at cost | 4,601,044 | 4,532,894 | 4,229,704 | 5,026,092 | 5,006,053 | 4,601,044 | ||||||||||||||||||
Non-current deferred income taxes, net | 6,347 | 6,193 | 10,106 | 3,178 | 6,558 | 6,347 | ||||||||||||||||||
Goodwill | 195,585 | 195,871 | 196,511 | 98,614 | 100,069 | 195,585 | ||||||||||||||||||
Other assets | 412,005 | 398,076 | 390,700 | 456,965 | 459,608 | 412,005 | ||||||||||||||||||
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TOTAL ASSETS | $ | 12,763,481 | $ | 12,883,808 | $ | 11,704,722 | $ | 14,007,124 | $ | 14,058,015 | $ | 12,763,481 | ||||||||||||
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LIABILITIES | ||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||
Accounts payable | $ | 2,174,727 | $ | 2,230,904 | $ | 2,136,751 | $ | 2,509,089 | $ | 2,488,373 | $ | 2,174,727 | ||||||||||||
Accrued expenses and other current liabilities | 2,021,724 | 2,320,464 | 1,933,730 | 2,220,842 | 2,522,961 | 2,021,724 | ||||||||||||||||||
Federal, state and foreign income taxes payable | 408,941 | 206,288 | 226,254 | 246,933 | 114,203 | 408,941 | ||||||||||||||||||
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Total current liabilities | 4,605,392 | 4,757,656 | 4,296,735 | 4,976,864 | 5,125,537 | 4,605,392 | ||||||||||||||||||
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Other long-term liabilities | 1,071,526 | 1,073,954 | 908,537 | 1,275,843 | 1,320,505 | 1,071,526 | ||||||||||||||||||
Non-current deferred income taxes, net | 304,689 | 314,000 | 349,004 | 260,649 | 233,057 | 304,689 | ||||||||||||||||||
Long-term debt | 2,228,351 | 2,227,599 | 1,615,477 | 2,231,360 | 2,230,607 | 2,228,351 | ||||||||||||||||||
Commitments and contingencies (See Note K) | ||||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Preferred stock, authorized 5,000,000 shares, par value $1, no shares issued | — | — | — | — | — | — | ||||||||||||||||||
Common stock, authorized 1,200,000,000 shares, par value $1, issued and outstanding 643,276,269; 646,319,046 and 661,083,496 respectively | 643,276 | 646,319 | 661,083 | |||||||||||||||||||||
Common stock, authorized 1,200,000,000 shares, par value $1, issued and outstanding 625,202,688; 628,009,022 and 643,276,269 respectively | 625,203 | 628,009 | 643,276 | |||||||||||||||||||||
Additionalpaid-in capital | — | — | — | — | — | — | ||||||||||||||||||
Accumulated other comprehensive income (loss) | (695,434 | ) | (694,226 | ) | (536,412 | ) | ||||||||||||||||||
Accumulated other comprehensive (loss) | (555,530 | ) | (441,859 | ) | (695,434 | ) | ||||||||||||||||||
Retained earnings | 4,605,681 | 4,558,506 | 4,410,298 | 5,192,735 | 4,962,159 | 4,605,681 | ||||||||||||||||||
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Total shareholders’ equity | 4,553,523 | 4,510,599 | 4,534,969 | 5,262,408 | 5,148,309 | 4,553,523 | ||||||||||||||||||
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 12,763,481 | $ | 12,883,808 | $ | 11,704,722 | $ | 14,007,124 | $ | 14,058,015 | $ | 12,763,481 | ||||||||||||
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The accompanying notes are an integral part of the unaudited consolidated financial statements.
4
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
Thirteen Weeks Ended | ||||||||||||||||
April 29, | April 30, | Thirteen Weeks Ended | ||||||||||||||
2017 | 2016 | May 5, 2018 | April 29, 2017 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 536,279 | $ | 508,346 | $ | 716,381 | $ | 536,279 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 172,485 | 157,014 | 192,295 | 172,485 | ||||||||||||
Loss on property disposals and impairment charges | 1,059 | 5,255 | ||||||||||||||
Deferred income tax provision (benefit) | 8,250 | 16,112 | ||||||||||||||
Loss on property disposals | 1,744 | 1,059 | ||||||||||||||
Deferred income tax provision | 7,335 | 8,250 | ||||||||||||||
Share-based compensation | 24,051 | 24,959 | 24,029 | 24,051 | ||||||||||||
Excess tax benefits from share-based compensation | — | (37,893 | ) | |||||||||||||
Changes in assets and liabilities: | ||||||||||||||||
(Increase) in accounts receivable | (58,147 | ) | (40,776 | ) | (43,787 | ) | (58,147 | ) | ||||||||
(Increase) in merchandise inventories | (88,558 | ) | (161,565 | ) | (225,187 | ) | (88,558 | ) | ||||||||
(Increase) in taxes recoverable | (1,300 | ) | (1,452 | ) | (2,482 | ) | (1,300 | ) | ||||||||
Decrease in prepaid expenses and other current assets | 20,587 | 32,927 | 222,014 | 20,587 | ||||||||||||
(Decrease) in accounts payable | (56,968 | ) | (96,434 | ) | ||||||||||||
Increase (decrease) in accounts payable | 44,037 | (56,968 | ) | |||||||||||||
(Decrease) in accrued expenses and other liabilities | (307,228 | ) | (142,269 | ) | (318,544 | ) | (307,228 | ) | ||||||||
Increase in income taxes payable | 202,811 | 134,276 | 133,663 | 202,811 | ||||||||||||
Other | (4,887 | ) | 46,733 | (26,613 | ) | (4,887 | ) | |||||||||
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Net cash provided by operating activities | 448,434 | 445,233 | 724,885 | 448,434 | ||||||||||||
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Cash flows from investing activities: | ||||||||||||||||
Property additions | (258,515 | ) | (266,236 | ) | (264,943 | ) | (258,515 | ) | ||||||||
Purchase of investments | (233,166 | ) | (165,384 | ) | (148,239 | ) | (233,166 | ) | ||||||||
Sales and maturities of investments | 289,924 | 144,803 | 192,690 | 289,924 | ||||||||||||
Other | — | (2,324 | ) | |||||||||||||
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Net cash (used in) investing activities | (201,757 | ) | (289,141 | ) | (220,492 | ) | (201,757 | ) | ||||||||
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Cash flows from financing activities: | ||||||||||||||||
Cash payments for repurchase of common stock | (349,999 | ) | (341,251 | ) | (395,399 | ) | (349,999 | ) | ||||||||
Proceeds from issuance of common stock | 52,033 | 63,933 | 84,561 | 52,033 | ||||||||||||
Excess tax benefits from share-based compensation | — | 37,893 | ||||||||||||||
Cash dividends paid | (168,566 | ) | (140,067 | ) | (197,296 | ) | (168,566 | ) | ||||||||
Other financing activities | (17,582 | ) | (24,965 | ) | ||||||||||||
Cash payments of employee tax withholdings for performance based stock awards | (16,015 | ) | (16,823 | ) | ||||||||||||
Other | (1,858 | ) | (759 | ) | ||||||||||||
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Net cash (used in) financing activities | (484,114 | ) | (404,457 | ) | (526,007 | ) | (484,114 | ) | ||||||||
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Effect of exchange rate changes on cash | (22,917 | ) | 97,047 | (55,758 | ) | (22,917 | ) | |||||||||
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Net (decrease) in cash and cash equivalents | (260,354 | ) | (151,318 | ) | (77,372 | ) | (260,354 | ) | ||||||||
Cash and cash equivalents at beginning of year | 2,929,849 | 2,095,473 | 2,758,477 | 2,929,849 | ||||||||||||
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Cash and cash equivalents at end of period | $ | 2,669,495 | $ | 1,944,155 | $ | 2,681,105 | $ | 2,669,495 | ||||||||
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The accompanying notes are an integral part of the unaudited consolidated financial statements.
5
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
IN THOUSANDS
Common Stock | Additional | Accumulated Other | Common Stock | Additional | Accumulated Other | |||||||||||||||||||||||||||||||||||||||||||
Shares | Par Value $1 | Paid-In Capital | Comprehensive Income (Loss) | Retained Earnings | Total | Shares | Par Value $1 | Paid-In Capital | Comprehensive Income (Loss) | Retained Earnings | Total | |||||||||||||||||||||||||||||||||||||
Balance, January 28, 2017 | 646,319 | $ | 646,319 | $ | — | $ | (694,226 | ) | $ | 4,558,506 | $ | 4,510,599 | ||||||||||||||||||||||||||||||||||||
Balance, February 3, 2018 | 628,009 | $ | 628,009 | $ | — | $ | (441,859 | ) | $ | 4,962,159 | $ | 5,148,309 | ||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 536,279 | 536,279 | — | — | — | — | 716,381 | 716,381 | ||||||||||||||||||||||||||||||||||||
Cumulative effect of accounting change (See Note A) | — | — | — | — | 58,712 | 58,712 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | (1,208 | ) | — | (1,208 | ) | — | — | — | (113,671 | ) | — | (113,671 | ) | ||||||||||||||||||||||||||||||||
Cash dividends declared on common stock | — | — | — | — | (201,407 | ) | (201,407 | ) | — | — | — | — | (244,500 | ) | (244,500 | ) | ||||||||||||||||||||||||||||||||
Recognition of share-based compensation | — | — | 24,051 | — | — | 24,051 | — | — | 24,029 | — | — | 24,029 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock under Stock Incentive Plan and related tax effect | 1,482 | 1,482 | 33,726 | — | — | 35,208 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings | 2,043 | 2,043 | 66,504 | — | — | 68,547 | ||||||||||||||||||||||||||||||||||||||||||
Common stock repurchased and retired | (4,525 | ) | (4,525 | ) | (57,777 | ) | — | (287,697 | ) | (349,999 | ) | (4,849 | ) | (4,849 | ) | (90,533 | ) | — | (300,017 | ) | (395,399 | ) | ||||||||||||||||||||||||||
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Balance, April 29, 2017 | 643,276 | $ | 643,276 | $ | — | $ | (695,434 | ) | $ | 4,605,681 | $ | 4,553,523 | ||||||||||||||||||||||||||||||||||||
Balance, May 5, 2018 | 625,203 | $ | 625,203 | $ | — | $ | (555,530 | ) | $ | 5,192,735 | $ | 5,262,408 | ||||||||||||||||||||||||||||||||||||
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The accompanying notes are an integral part of the unaudited consolidated financial statements.
6
THE TJX COMPANIES, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Note A. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation:Presentation
The consolidatedConsolidated Financial Statements and Notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statementsinformation. These Consolidated Financial Statements and Notes are unaudited and, in the opinion of management, reflect all normal recurring adjustments, 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”)GAAP consistently applied. The consolidated interim financial statementsConsolidated Financial Statements and Notes thereto should be read in conjunction with the audited consolidated financial statements, including the related notes, contained in TJX’s Annual Report on Form10-K for the fiscal year ended January 28, 2017February 3, 2018 (“fiscal 2017”2018”).
These interim results are not necessarily indicative of results for the full fiscal year. 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 January 28, 2017February 3, 2018 balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.
Fiscal Year: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 3, 20182, 2019 (“fiscal 2018”2019”) and is a53-week52-week fiscal year. Fiscal 20172018 was a52-week53-week fiscal year.
Share-Based Compensation:Use of EstimatesTJX accounts for share-based compensation by estimating
The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the fair valuereported amounts of each award on the dateassets and liabilities and disclosure of grant. TJX uses the Black-Scholes option pricing model for stock options awarded and uses the market price on the grant date for performance-based share awards. Total share-based compensation expense was $24.1 million for the quarter ended April 29, 2017 and $25.0 million for the quarter ended April 30, 2016. These amounts include stock option expense as well as performance-based stock amortization. There were options to purchase 1.6 million shares of common stock exercised during the quarter ended April 29, 2017. There were options outstanding to purchase 25.6 million shares of common stock as of April 29, 2017. As of April 29, 2017, there was $146.7 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under TJX’s stock incentive plan.
Cash and Cash Equivalents: TJX generally considers highly liquid investments with a maturity of 90 days or lesscontingent liabilities at the date of purchasethe financial statements as well as the reported amounts of revenues and expenses during the reporting period. TJX considers its accounting policies relating to inventory valuation, impairment of long-lived assets, goodwill and tradenames, retirement obligations, share-based compensation, casualty insurance, reserves for uncertain tax positions and loss contingencies to be cash equivalents. Asthe most significant accounting policies that involve management estimates and judgments. Actual amounts could differ from those estimates, and such differences could be material.
Summary of April 29, 2017, TJX’s cash and cash equivalents held by its foreign subsidiaries were $1,233.4 million, of which $263.2 million was held in countries where Accounting Policies
Revenue Recognition
TJX has adoptedRevenue from Contracts with Customers(referred to as “ASC 606”), on February 4, 2018 (“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 at all of its businesses, except at Sierra Trading Post (“STP”adoption date”) and T.K. Maxx in Australia. The businesses that utilize the retail method have some inventory that is initially valued at cost before the retail method is applied as it has not been fully processed for sale (e.g. inventory in transit and unprocessed inventory in our distribution centers). Under the retail method, 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 title transfers, which is typically at the time when inventory is shipped. As a result, merchandise inventories on TJX’s balance sheet include an accrual forin-transit inventory of $501.5 million at April 29, 2017, $641.9 million at January 28, 2017 and $544.0 million at April 30, 2016. Comparable amounts were reflected in accounts payable at those dates.
Recently Issued Accounting Standards: In May 2014, a pronouncement was issued that creates common revenue recognition guidance for GAAP. The new guidance supersedes most preexisting revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. TJX adopted the new guidance under the modified retrospective approach which resulted in a $59 million cumulative adjustment to increase retained earnings. The new standard was originally scheduledcumulative adjustment primarily related to be effective for annual reportingrevenue recognized on the value of unredeemed rewards certificates issued to customers as part of the Company’s U.S.co-branded credit card loyalty program. We will now recognize the estimated unredeemed awards when they are earned, rather than when merchandise credits expire or when the likelihood of redemption becomes remote. In addition,on-line sales are now recognized at the shipping point rather than receipt by the customer.
7
periods beginning after December 15, 2016, including interim periods within that reporting period. In April 2015,Other changes relate to the Financial Accounting Standards Board proposed an update to this rule which deferred its effective date for one year.presentation of revenue as certain expenses previously presented as a reduction of revenue are now classified as selling, general and administrative expenses (“SG&A”). The new standard will be effective for annual reporting periods beginning after December 15, 2017, and interim periods therein, with an option to adopt the standard early. The standard shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. For TJX, the standard will be effective in the first quarter of the fiscal year ending January 26, 2019. We believe that there will be no change in the timing or amount of revenue recognized under the new standard as it relates to revenue from point of sale at the registers in our stores, which constitutes more than 95% of the Company’s revenue. We continue to evaluate other revenue streams such ase-commerce sales and shipping revenue, and there may be a slight change in the timing of when such revenue is recognized. The new standard will requirerequired a change in the presentation of our sales return reserve on the balance sheet, which we record net. The new standardpreviously recorded net of the value of returned merchandise, but will require the reserve tonow be establishedpresented at the gross sales value with an asset established for the value of the merchandise returned. There is no change in the timing or amount of revenue recognized from point of sale at the registers in our stores, which constitutes the majority of the Company’s revenue.
Financial results for fiscal periods after the adoption date are presented under ASC 606 while results from prior periods are not adjusted and continue to be reported under the accounting standards in effect for the prior period. We doapplied ASC 606 only to contracts that were not expect this changecompleted prior to fiscal 2019. Adoption of the new guidance did not have a material impact on our financial condition or results of operations.operations for fiscal period ended May 5, 2018 other than additional disclosure requirements.
Net Sales
Net sales consist primarily of merchandise sales, which are recorded net of a reserve for estimated returns, any discounts and sales taxes, related to the sales of merchandise both within our stores and online. Net sales also include an immaterial amount of other revenues that represent less than 1% of total revenues, primarily generated from TJX’sco-branded loyalty rewards credit card program offered in the United States only. Certain customers may receive discounts which are accounted for as consideration reducing the transaction price. Merchandise sales from our stores are recognized at the point of sale when TJX provides the merchandise to the customer. The performance obligation is fulfilled at this point when the customer has obtained control by paying for and leaving with the merchandise. Merchandise sales made online are recognized when the product has been shipped, which is when legal title has passed and when TJX is entitled to payment, and the customer has obtained the ability to direct the use of and obtain substantially all of the remaining benefits from the goods. Shipping and handling activities related to online sales occur after the customer obtains control of the goods. TJX’s policy is to treat shipping costs as part of our fulfillment center costs within our operating expenditures. As a result, shipping fee revenues received will be recognized when control of the goods transfer to the customer and will continue to be recorded as net sales. Shipping and handling costs incurred by TJX are included in cost of sales, including buying and occupancy costs. TJX disaggregates revenue by operating segment, see Note G—Segment Information.
Deferred Gift Card Revenue
Proceeds from the sale of gift cards as well as the value of store cards issued to customers as a result of a return or exchange are deferred until the customers use the cards to acquire merchandise, as TJX does not fulfill its performance obligation until the gift card has been redeemed. While gift cards have an indefinite life, substantially all are redeemed in the first year of issuance. Based on historical experience, we estimate the amount of gift cards and store cards that will not be redeemed and, to the extent allowed by local law, these amounts are amortized into income over the redemption period.
In millions | May 5, 2018 | |||
Balance beginning of period | $ | 406.6 | ||
Deferred revenue | 330.5 | |||
Effect of exchange rates changes on deferred revenue | (3.2 | ) | ||
Revenue recognized | (371.8 | ) | ||
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Balance end of period | $ | 362.1 | ||
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TJX recognized $372 million in gift card revenue in the first quarter fiscal 2019. Gift cards are combined in one homogeneous pool and are not separately identifiable. As such, the revenue recognized consists of gift cards that were part of the deferred revenue balance at the beginning of the period as well as gift cards that were issued during the period.
8
Sales Return Reserve
Our products are generally sold with a right of return and we may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. We have elected to apply the portfolio practical expedient and will estimate the variable consideration using the expected value method when calculating the returns reserve, as the difference to applying it to the individual contract would not differ materially. Returns will continue to be estimated based on historical experience and will be required to be established and presented at the gross sales value with an asset established for the estimated value of the merchandise returned separate from the refund liability. Liabilities for return allowances are included in “Accrued expenses and other current liabilities” and the offsetting receivable is included in “Prepaid expenses and other current assets” on our consolidated balance sheets.
Goodwill
Goodwill includes the excess of the purchase price paid over the carrying value of the minority interest acquired in fiscal 1990 in TJX’s former 83%-owned subsidiary and represents goodwill associated with the T.J. Maxx chain, as well as the excess of cost over the estimated fair market value of the net assets acquired by TJX in the purchase of Winners in fiscal 1991, the purchase of Sierra Trading Post (“STP”) in fiscal 2013, and the purchase of Trade Secret in fiscal 2016, which wasre-branded under the T.K. Maxx name during fiscal 2018. The following is a roll forward of goodwill by component:
Amounts in thousands | Marmaxx | Winners | Sierra Trading Post | T.K. Maxx in Australia | Total | |||||||||||||||
Balance, January 31, 2017 | $ | 70,027 | $ | 1,686 | $ | 97,254 | $ | 26,904 | $ | 195,871 | ||||||||||
Impairment | — | — | (97,254 | ) | — | (97,254 | ) | |||||||||||||
Effect of exchange rate changes on goodwill | — | 98 | — | 1,354 | 1,452 | |||||||||||||||
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Balance, February 3, 2018 | 70,027 | 1,784 | — | 28,258 | 100,069 | |||||||||||||||
Effect of exchange rate changes on goodwill | — | (58 | ) | — | (1,397 | ) | (1,455 | ) | ||||||||||||
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Balance, May 5, 2018 | $ | 70,027 | $ | 1,726 | $ | — | $ | 26,861 | $ | 98,614 | ||||||||||
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Goodwill is considered to have an indefinite life and accordingly is not amortized. In the fourth quarter of fiscal 2018, the Company recorded an impairment charge of $99.3 million, which included $97.3 million of STP goodwill and $2.0 million for certain long-lived assets of STP, as the estimated fair value of the STP business fell below its carrying value due to a decrease in projected revenue growth rates. The impairment charge is included within the Marmaxx segment results. Goodwill, and the related impairments if any, are included in the respective operating segment to which they relate.
Future Adoption of New Accounting Standards
Leases
In February 2016, a pronouncement wasthe Financial Accounting Standards Board (“FASB”) issued updated guidance on leases that aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. The new standard is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods; early adoption is permitted and modified retrospective application is required. We plan to adopt this standard in the first quarter of the fiscal year ending February 1, 2020. The Company is in the process of implementing a new lease accounting system and has established a cross-functional team to implement the updated lease guidance. This team is in the process of evaluating our lease portfolio to assess the impact this standard will have on our Consolidated Financial Statements and Notes thereto. The Company expects this standard to have a material impact on its statement of financial condition as it will record a significant asset and liability associated with its more than 3,8004,100 leased locations. We cannot assessplan to implement the income statement impacttransition package of three practical expedients permitted within the standard, which among other things, allows for the carryforward of historical lease classifications. We expect to make an accounting policy election that will keep leases with a term of 12 months or less off the balance sheet and result in recognizing those lease payments on a straight-line basis over the lease term. As our leases do not provide an implicit rate, we plan to use our incremental borrowing rate based on information available at this time as we needcommencement date to assess ifdetermine the present value of future payments. The Company has determined that the initial lease term will not differ under the new standard versus current accounting practice. If the lease term remains unchangedpractice, and therefore the income statement impact of the new standard is not expected to be material. The Company is in the process of evaluating its lease portfolio and identifying what additional data will be needed to comply with the new standard. We are also evaluating available software options and system support that will be required to implement the new accounting process. We do not currently plan to adopt early.
9
Hedging Activities
In August 2016,2017, the FASB issued updated guidance on hedge accounting. The updates allow hedge accounting for new types of interest rate hedges of financial instruments and simplify the documentation requirements to qualify for hedge accounting. In addition, any gain or loss from hedge ineffectiveness will be reported in the same income statement line with the effective hedge results and the hedged transaction. The updated guidance is effective for annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company has not yet determined the timing for adoption or estimated the effect on the Company’s consolidated financial statements.
Income Statement – Reporting Comprehensive Income
In February 2018, the FASB issued updated guidance related to reporting comprehensive income. The updated guidance allows for aone-time reclassification from accumulated other comprehensive income to retained earnings for stranded tax effect resulting from the enactment of the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). The updated guidance is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for reporting periods for which financial statements have not yet been issued. The updated guidance should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the 2017 Tax Act is recognized. The Company has not yet determined the timing of adoption or estimated the effect on the Company’s consolidated financial statements.
Recently Adopted Accounting Standards
Revenue Recognition
See Revenue Recognition in this Note A for the impact upon adoption.
Cash Flows
In the first quarter of fiscal 2019, TJX adopted a pronouncement was issued that addresses diversitydifferences in howthe way certain cash receipts and cash payments are presented in the statement of cash flows. The new guidance provides clarity around the cash flow classification for eight specific issues in an effort to reduce the current and potential future diversitydifferences in practice. The standard which is to be applied retrospectively, will be effective for the first interim period within annual reporting periods beginning after December 15, 2017, and early adoption is permitted. TJX doesdid not expect this standard to have a material impact on our consolidated financial statements.statements of cash flows.
Retirement Benefits
In January 2017,the first quarter of fiscal 2019, TJX adopted a pronouncement was issuedrelated to retirement benefits, which requires that aims to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, goodwill impairment will be measured as the amount by which the carrying value exceeds the fair value. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. The new guidance will be effective for annual reporting periods beginning after December 15, 2019, including interim periods. Early adoption is permitted for annual or interim goodwill impairment tests performed on testing dates after January 1, 2017. TJX does not expect the adoption of this standard to have a material impact on our consolidated financial statements.
In March 2017, a pronouncement was issued that requires an employer report the service cost component of net periodic pension and net periodic post retirement cost in the same line item as other compensation costs arising from services rendered by the employees during the period. It also requires the other components of net periodic pension and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. Additionally, onlyoperations, if such a subtotal is presented. The amendments in this update were applied retrospectively for the presentation of the service cost component is eligible for capitalization. This pronouncement is effective for annual periods beginning after December 15, 2017, and interim periods during those fiscal years. Early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued or made available for issuance. We are evaluating the presentation of the other components of net periodic pension cost and net periodic postretirement benefit cost.cost in the income statement. The impact to prior periods was immaterial. As a result of the adoption, for the three months ended May 5, 2018, service costs are recorded in the same line items as other compensation costs andnon-service costs are recorded in SG&A in our income statement.
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Recently Adopted Accounting Standards:Income Taxes
In the first quarter of 2017,fiscal 2019, TJX adopted ASU2018-05 “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”, which provides guidance on accounting for the tax effects of the 2017 Tax Act. This guidance allows a pronouncement that aimscompany to simplify several aspects ofrecord a provisional amount when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting and reporting for share-based payment transactions. One provision within this pronouncement requires that excess income tax benefits and tax deficiencies related to share-based payments be recognized within income tax expensethe change in the statement of income, rather than within additionalpaid-in capital ontax law during the
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balance sheet. measurement period. The adoption of this provision ismeasurement period ends when the company has obtained, prepared, and analyzed the information necessary to be applied prospectively. The impactfinalize its accounting, but cannot extend beyond one year. We will continue to TJX’s results of operations related to this provision in the first quarter of 2017 was a decrease in theassess our provision for income taxes of $24.6 million. The impact of this benefit on TJX’sas future results of operations will depend in part on the market prices for TJX’s shares on the dates there are taxable events related to share awards, and therefore the impactguidance is difficult to predict. This change and the remaining provisions within the pronouncement did not have a material impact on our consolidated financial statements.issued.
Note B. Property at Cost
Presented below areThe following table presents the components of property at cost as of April 29, 2017, January 28, 2017 and April 30, 2016:cost:
In thousands | April 29, 2017 | January 28, 2017 | April 30, 2016 | May 5, 2018 | February 3, 2018 | April 29, 2017 | ||||||||||||||||||
Land and buildings | $ | 1,255,710 | $ | 1,247,585 | $ | 1,048,931 | $ | 1,377,854 | $ | 1,355,777 | $ | 1,255,710 | ||||||||||||
Leasehold costs and improvements | 2,962,697 | 2,884,054 | 2,845,839 | 3,245,902 | 3,254,830 | 2,962,697 | ||||||||||||||||||
Furniture, fixtures and equipment | 5,019,753 | 4,871,764 | 4,564,207 | 5,455,039 | 5,357,701 | 5,019,753 | ||||||||||||||||||
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Total property at cost | $ | 9,238,160 | $ | 9,003,403 | $ | 8,458,977 | $ | 10,078,795 | $ | 9,968,308 | $ | 9,238,160 | ||||||||||||
Less accumulated depreciation and amortization | 4,637,116 | 4,470,509 | 4,229,273 | 5,052,703 | 4,962,255 | 4,637,116 | ||||||||||||||||||
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Net property at cost | $ | 4,601,044 | $ | 4,532,894 | $ | 4,229,704 | $ | 5,026,092 | $ | 5,006,053 | $ | 4,601,044 | ||||||||||||
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Depreciation expense was $193.7 million for the three months ended May 5, 2018 and $172.6 million for the three months ended April 29, 2017 and $160.0 million for the three months ended April 30, 2016.2017. Depreciation expense was $658.8$726.0 million for the twelve months ended January 28, 2017.
During fiscal 2017 the Company identified fully depreciated assets that were no longer in use and should have been written off during fiscal 2017 or prior periods. The April 30, 2016 property at cost and accumulated depreciation was reduced by $840 million. There was no impact to net property at cost. This error was not material to our consolidated financial statements, however we have corrected amounts for the quarter ended April 30, 2016 to reflect the write-off that should have been recorded at that time.February 3, 2018.
Note C. Accumulated Other Comprehensive Income (Loss)
Amounts included in accumulated other comprehensive income (loss) are recorded net of the related income tax effects.taxes. The following table details the changes in accumulated other comprehensive income (loss) for the related periods:three months ended May 5, 2018:
In thousands | Foreign Currency Translation | Deferred Benefit Costs | Cash Flow Hedge on Debt | Accumulated Other Comprehensive Income (Loss) | Foreign Currency Translation | Deferred Benefit Costs | Cash Flow Hedge on Debt | Net Investment Hedges | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||
Balance, January 28, 2017 | $ | (491,803 | ) | $ | (199,481 | ) | $ | (2,942 | ) | $ | (694,226 | ) | $ | (491,803 | ) | $ | (199,481 | ) | $ | (2,942 | ) | $ | — | $ | (694,226 | ) | ||||||||||
Foreign currency translation adjustments (net of taxes of $36,929) | 211,752 | — | — | — | 211,752 | |||||||||||||||||||||||||||||||
Recognition of net gains/losses on benefit obligations (net of taxes of $8,989) | — | 24,691 | — | — | 24,691 | |||||||||||||||||||||||||||||||
Amortization of loss on cash flow hedge (net of taxes of $438) | — | — | 696 | — | 696 | |||||||||||||||||||||||||||||||
Amortization of prior service cost and deferred gains/losses (net of taxes of $9,592) | — | 15,228 | — | — | 15,228 | |||||||||||||||||||||||||||||||
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Balance, February 3, 2018 | $ | (280,051 | ) | $ | (159,562 | ) | $ | (2,246 | ) | $ | — | $ | (441,859 | ) | ||||||||||||||||||||||
Additions to other comprehensive income: | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments (net of taxes of $20,543) | (5,247 | ) | — | — | (5,247 | ) | ||||||||||||||||||||||||||||||
Foreign currency translation adjustments (net of tax benefit of $1,206) | (122,529 | ) | — | — | — | (122,529 | ) | |||||||||||||||||||||||||||||
Net investment hedges (net of taxes of $2,201) | — | — | — | 6,044 | 6,044 | |||||||||||||||||||||||||||||||
Reclassifications from other comprehensive income to net income: | ||||||||||||||||||||||||||||||||||||
Amortization of prior service cost and deferred gains/losses (net of taxes of $2,543) | — | 3,868 | — | 3,868 | ||||||||||||||||||||||||||||||||
Amortization of loss on cash flow hedge (net of taxes of $112) | — | — | 171 | 171 | ||||||||||||||||||||||||||||||||
Amortization of prior service cost and deferred gains (net of taxes of $1,328) | — | 2,608 | — | — | 2,608 | |||||||||||||||||||||||||||||||
Amortization of loss on cash flow hedge (net of taxes of $77) | — | — | 206 | — | 206 | |||||||||||||||||||||||||||||||
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Balance, April 29, 2017 | $ | (497,050 | ) | $ | (195,613 | ) | $ | (2,771 | ) | $ | (695,434 | ) | ||||||||||||||||||||||||
Balance, May 5, 2018 | $ | (402,580 | ) | $ | (156,954 | ) | $ | (2,040 | ) | $ | 6,044 | $ | (555,530 | ) | ||||||||||||||||||||||
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Note D. Capital Stock and Earnings perPer Share
Capital Stock:Stock
TJX repurchased and retired 4.54.9 million shares of its common stock at a cost of $350.0$400.0 million during the quarter ended April 29, 2017,May 5, 2018, on a “trade date” basis. TJX reflects stock repurchases in its financial statements on a “settlement date” or cash basis. TJX had cash expenditures under repurchase programs of $395.4 million for the three months ended May 5, 2018, and $350.0 million for the three months ended April 29, 2017 and $341.3 million for the three months ended April 30, 2016.2017. These expenditures were funded by cash generated from operations.
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In February 2016,2018, TJX announced that its Board of Directors had approved aan additional stock repurchase program that authorized the repurchase of up to an additional $2.0$3.0 billion of TJX common stock from time to time. Under this program, on a “trade date” basis through April 29, 2017, TJX repurchased 7.3 million sharestime, all of common stock at a cost of $559.2 million. At April 29, 2017, $1.4 billionwhich remained available for purchase under this program.at May 5, 2018.
In February 2017, TJX announced that its Board of Directors had approved an additional stock repurchase program that authorized the repurchase of up to $1.0 billion of TJX common stock from time to time, alltime. Under this program, on a “trade date” basis through May 5, 2018, TJX repurchased 3.2 million shares of which remainedcommon stock at a cost of $264.2 million.
As of May 5, 2018, TJX had $3.7 billion available at April 29, 2017.under previously announced stock repurchase programs.
All shares repurchased under the stock repurchase programs have been retired.
Earnings per share:Per Share
The following schedule presentstables present the calculation of basic and diluted earnings per share (“EPS”) for net income:
Thirteen Weeks Ended | ||||||||||||||||
April 29, | April 30, | Thirteen Weeks Ended | ||||||||||||||
In thousands, except per share data | 2017 | 2016 | May 5, 2018 | April 29, 2017 | ||||||||||||
Basic earnings per share | ||||||||||||||||
Net income | $ | 536,279 | $ | 508,346 | $ | 716,381 | $ | 536,279 | ||||||||
Weighted average common shares outstanding for basic EPS | 644,425 | 661,515 | 626,612 | 644,425 | ||||||||||||
Basic earnings per share | $ | 0.83 | $ | 0.77 | $ | 1.14 | $ | 0.83 | ||||||||
Diluted earnings per share | ||||||||||||||||
Net income | $ | 536,279 | $ | 508,346 | $ | 716,381 | $ | 536,279 | ||||||||
Shares for basic and diluted earnings per share calculations: | ||||||||||||||||
Weighted average common shares outstanding for basic EPS | 644,425 | 661,515 | 626,612 | 644,425 | ||||||||||||
Assumed exercise/vesting of: | ||||||||||||||||
Stock options and awards | 10,374 | 8,873 | 7,824 | 10,374 | ||||||||||||
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Weighted average common shares outstanding for diluted EPS | 654,799 | 670,388 | 634,436 | 654,799 | ||||||||||||
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Diluted earnings per share | $ | 0.82 | $ | 0.76 | $ | 1.13 | $ | 0.82 |
The weighted average common shares for the diluted earnings per share calculation exclude 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.stock for the related fiscal periods. Such options are excluded because they would have an antidilutive effect. There were 8.6 million such options excluded for the thirteen weeks ended May 5, 2018. There were 8.0 million such options excluded for the thirteen weeks ended April 29, 2017. There were 4.1 million such options excluded for the thirteen weeks ended April 30, 2016.
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Note E. 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 and foreign currency exchange rates and fuel costs through the use of derivative financial instruments.instruments when and to the extent deemed appropriate. 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 ornon-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:ContractsWhen and to the extent deemed appropriate,
TJX hedges portions of its estimated notional diesel requirements based on the diesel fuel expected to be consumed by independent freight carriers transporting TJX’s inventory. Independent freight carriers transporting TJX’s inventory charge TJX a mileage surcharge based on the price of diesel fuel. 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 period being hedged. During fiscal 2017 and the first three months of fiscal 2018, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2018. In addition,2019, and during the first three months of fiscal 2018,2019, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for the first three months of fiscal 2019.2020. The hedge agreements outstanding at April 29, 2017May 5, 2018 relate to approximately 53%50% of TJX’s estimated notional diesel requirements for the remainder of fiscal 20182019 and approximately 50%45% of TJX’s estimated notional diesel requirements for the first three months of fiscal 2019.2020. These diesel fuel hedge agreements will settle throughout the remainder of fiscal 20182019 and throughout the first threefour months of fiscal 2019.TJX2020.TJX elected not to apply hedge accounting rules to these contracts.
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Foreign Currency Contracts:ContractsWhen and to the extent deemed appropriate,
TJX enters into forward foreign currency exchange contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by the Company’s operations atin TJX International (United Kingdom, Ireland, Germany, Poland, Austria, The Netherlands and Australia), 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 April 29, 2017May 5, 2018 cover a portion of such actual and anticipated merchandise purchases throughout the remainder of fiscal 2018.2019 and throughout the first quarter of fiscal 2020. Additionally, TJX’s operations in Europe are subject to foreign currency exposure as a result of their buying function being centralized in the United Kingdom. All merchandise is purchased centrally in the U.K. and then shipped and billed to the retail entities in other countries. This intercompany billing to TJX’s European businesses’ Euro denominated operations creates exposure to the central buying entity for changes in the exchange rate between the Euro and British Pound. The inflow of Euros to the central buying entity provides a natural hedge for merchandise purchased from third-party vendors that is denominated in Euros. However, with the growth of TJX’s Euro denominated retail operations, the intercompany billings committed to the Euro denominated operations is generating Euros in excess of those needed to meet merchandise commitments to outside vendors. TJX calculates this excess Euro exposure each month and enters into forward contracts of approximately 30 days duration to mitigate the exposure. TJX elected not to apply hedge accounting rules to these contracts.
When and to the extent deemed appropriate, 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.
TJX periodically reviews its net investments in foreign subsidiaries. During the fiscal quarter ended May 5, 2018, TJX entered into net investment hedge contracts related to a portion of its investment in TJX Canada. These contracts will settle throughout the second quarter of fiscal 2019. TJX elected to apply hedge accounting rules to these contracts.
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The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at May 5, 2018:
In thousands | Pay | Receive | Blended Contract Rate | Balance Sheet | Current Asset U.S.$ | Current (Liability) U.S.$ | Net Fair Value in U.S.$ at May 5, 2018 | |||||||||||||||||||||
Fair value hedges: | ||||||||||||||||||||||||||||
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zł | 67,000 | £ | 14,035 | 0.2095 | Prepaid Exp | $ | 247 | $ | — | $ | 247 | |||||||||||||||||
€ | 53,950 | £ | 47,868 | 0.8873 | (Accrued Exp) | — | (252 | ) | (252 | ) | ||||||||||||||||||
£ | 30,000 | C$ | 54,038 | 1.8013 | Prepaid Exp | 1,256 | $ | — | 1,256 | |||||||||||||||||||
U.S.$ | 77,079 | £ | 55,000 | 0.7136 | (Accrued Exp) | — | (1,771 | ) | (1,771 | ) | ||||||||||||||||||
Net Investment Hedges: | ||||||||||||||||||||||||||||
C$ | 1,710,000 | U.S.$ | 1,341,426 | 0.7845 | Prepaid Exp / (Accrued Exp) | 9,808 | (1,563 | ) | 8,245 | |||||||||||||||||||
Economic hedges for which hedge accounting was not elected: |
| |||||||||||||||||||||||||||
Diesel contracts | | Fixed on 2.2M – | | | Float on 2.2M – 3.0M | | N/A | Prepaid Exp | 10,249 | — | 10,249 | |||||||||||||||||
Intercompany billings in Europe, primarily merchandise related | € | 50,000 | £ | 43,340 | 0.8668 | (Accrued Exp) | — | (1,205 | ) | (1,205 | ) | |||||||||||||||||
Merchandise purchase commitments |
| |||||||||||||||||||||||||||
C$ | 518,624 | U.S.$ | 409,350 | 0.7893 | Prepaid Exp / (Accrued Exp) | 5,322 | (422 | ) | 4,900 | |||||||||||||||||||
C$ | 25,760 | € | 16,500 | 0.6405 | Prepaid Exp / (Accrued Exp) | 82 | (360 | ) | (278 | ) | ||||||||||||||||||
£ | 333,666 | U.S.$ | 469,400 | 1.4068 | Prepaid Exp / (Accrued Exp) | 15,418 | (594 | ) | 14,824 | |||||||||||||||||||
A$ | 30,728 | U.S.$ | 23,772 | 0.7736 | Prepaid Exp / (Accrued Exp) | 602 | (30 | ) | 572 | |||||||||||||||||||
zł | 299,988 | £ | 62,531 | 0.2084 | Prepaid Exp / (Accrued Exp) | 560 | (235 | ) | 325 | |||||||||||||||||||
U.S.$ | 41,644 | € | 33,611 | 0.8071 | Prepaid Exp / (Accrued Exp) | 23 | (1,243 | ) | (1,220 | ) | ||||||||||||||||||
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| |||||||||||||||||||||||
Total fair value of derivative financial instruments |
| $ | 43,567 | $ | (7,675 | ) | $ | 35,892 | ||||||||||||||||||||
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15
The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at February 3, 2018:
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 February 3, 2018 | |||||||||||||||||||||
Fair value hedges: | ||||||||||||||||||||||||||||
Intercompany balances, primarily debt and related interest |
| |||||||||||||||||||||||||||
zł | 67,000 | £ | 14,035 | 0.2095 | (Accrued Exp) | $ | — | $ | (45 | ) | $ | (45 | ) | |||||||||||||||
€ | 51,950 | £ | 46,095 | 0.8873 | (Accrued Exp) | — | (318 | ) | (318 | ) | ||||||||||||||||||
U.S.$ | 77,079 | £ | 55,000 | 0.7136 | Prepaid Exp | 1,636 | — | 1,636 | ||||||||||||||||||||
Economic hedges for which hedge accounting was not elected: |
| |||||||||||||||||||||||||||
Diesel contracts | ||||||||||||||||||||||||||||
Fixed on 2.2M – 3.0M | | Float on 2.2M– 3.0M gal per month | | N/A | Prepaid Exp | 7,854 | — | 7,854 | ||||||||||||||||||||
Intercompany billings in TJX Europe, primarily merchandise related |
| |||||||||||||||||||||||||||
€ | 26,000 | £ | 22,948 | 0.8826 | (Accrued Exp) | — | (2 | ) | (2 | ) | ||||||||||||||||||
Merchandise purchase commitments |
| |||||||||||||||||||||||||||
C$ | 462,464 | U.S.$ | 367,200 | 0.7940 | | Prepaid Exp / (Accrued Exp) | | 49 | (5,478 | ) | (5,429 | ) | ||||||||||||||||
C$ | 22,562 | € | 15,000 | 0.6648 | Prepaid Exp | 557 | — | 557 | ||||||||||||||||||||
£ | 176,911 | U.S.$ | 238,000 | 1.3453 | | Prepaid Exp / (Accrued Exp) | | 173 | (12,838 | ) | (12,665 | ) | ||||||||||||||||
zł | 288,646 | £ | 60,023 | 0.2079 | (Accrued Exp) | — | (1,303 | ) | (1,303 | ) | ||||||||||||||||||
A$ | 28,635 | U.S.$ | 22,230 | 0.7763 | | Prepaid Exp / (Accrued Exp) | | 43 | (573 | ) | (530 | ) | ||||||||||||||||
U.S.$ | 44,223 | € | 36,950 | 0.8355 | Prepaid Exp | 1,905 | — | 1,905 | ||||||||||||||||||||
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Total fair value of financial instruments |
| $ | 12,217 | $ | (20,557 | ) | $ | (8,340 | ) | |||||||||||||||||||
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16
The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at April 29, 2017:
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 April 29, 2017 | Pay | Receive | Blended Contract Rate | Balance Sheet Location | Current Asset U.S.$ | Current (Liability) U.S.$ | Net Fair Value in U.S.$ at April 29, 2017 | ||||||||||||||||||||||||||||||||||||||||||
Fair value hedges: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intercompany balances, primarily debt and related interest | Intercompany balances, primarily debt and related interest |
| Intercompany balances, primarily debt and related interest |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
zł 67,000 | £ | 13,000 | 0.1940 | (Accrued Exp) | — | (292 | ) | (292 | ) | zł | 67,000 | £ | 13,000 | 0.1940 | (Accrued Exp) | $ | — | $ | (292 | ) | $ | (292 | ) | |||||||||||||||||||||||||||||||||
€ 66,000 | £ | 57,048 | 0.8644 | Prepaid Exp | 1,565 | — | 1,565 | € | 66,000 | £ | 57,048 | 0.8644 | Prepaid Exp | 1,565 | — | 1,565 | ||||||||||||||||||||||||||||||||||||||||
U.S.$ 68,445 | £ | 55,000 | 0.8036 | Prepaid Exp | 3,319 | — | 3,319 | U.S.$ | 68,445 | £ | 55,000 | 0.8036 | Prepaid Exp | 3,319 | — | 3,319 | ||||||||||||||||||||||||||||||||||||||||
A$ 10,000 | $ | 5,799 | 0.5799 | Prepaid Exp | 60 | — | 60 | A$ | 10,000 | $ | 5,799 | 0.5799 | Prepaid Exp | 60 | — | 60 | ||||||||||||||||||||||||||||||||||||||||
Economic hedges for which hedge accounting was not elected: | Economic hedges for which hedge accounting was not elected: |
| Economic hedges for which hedge accounting was not elected: |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Diesel contracts | Fixed on 2.1M – 2.5M gal per month | | Float on 2.1M – 2.5M gal per month | | N/A | (Accrued Exp) | — | (1,585 | ) | (1,585 | ) | Diesel contracts | ||||||||||||||||||||||||||||||||||||||||||||
| Fixed on 2.1M – 2.5M gal per month | | | Float on 2.1M – 2.5M gal per month | | N/A | (Accrued Exp) | — | (1,585 | ) | (1,585 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Intercompany billings in Europe, primarily merchandise related | € 85,000 | £ | 72,765 | 0.8561 | Prepaid Exp | 1,546 | — | 1,546 | Intercompany billings in Europe, primarily merchandise related |
| ||||||||||||||||||||||||||||||||||||||||||||||
€ | 85,000 | £ | 72,765 | 0.8561 | Prepaid Exp | 1,546 | — | 1,546 | ||||||||||||||||||||||||||||||||||||||||||||||||
Merchandise purchase commitments | Merchandise purchase commitments | Merchandise purchase commitments |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
C$ 521,997 | U.S.$ | 394,800 | 0.7563 | Prepaid Exp | 11,755 | — | 11,755 | C$ | 521,997 | U.S.$ | 394,800 | 0.7563 | Prepaid Exp | 11,755 | — | 11,755 | ||||||||||||||||||||||||||||||||||||||||
C$ 24,743 | € | 17,500 | 0.7073 | Prepaid Exp | 953 | — | 953 | C$ | 24,743 | € | 17,500 | 0.7073 | Prepaid Exp | 953 | — | 953 | ||||||||||||||||||||||||||||||||||||||||
£ 209,383 | U.S.$ | 263,000 | 1.2561 | (Accrued Exp) | — | (8,919 | ) | (8,919 | ) | £ | 209,383 | U.S.$ | 263,000 | 1.2561 | (Accrued Exp) | — | (8,919 | ) | (8,919 | ) | ||||||||||||||||||||||||||||||||||||
A$ 17,940 | U.S.$ | 13,573 | 0.7566 | | Prepaid Exp / (Accrued Exp) | | 162 | (19 | ) | 143 | A$ | 17,940 | U.S.$ | 13,573 | 0.7566 | | Prepaid Exp / (Accrued Exp) | | 162 | (19 | ) | 143 | ||||||||||||||||||||||||||||||||||
zł 269,048 | £ | 52,774 | 0.1962 | | Prepaid Exp / (Accrued Exp) | | 411 | (1,243 | ) | (832 | ) | zł | 269,048 | £ | 52,774 | 0.1962 | | Prepaid Exp / (Accrued Exp) | | 411 | (1,243 | ) | (832 | ) | ||||||||||||||||||||||||||||||||
U.S.$ 36,314 | € | 33,862 | 0.9325 | Prepaid Exp | 683 | — | 683 | U.S.$ | 36,314 | € | 33,862 | 0.9325 | Prepaid Exp | 683 | — | 683 | ||||||||||||||||||||||||||||||||||||||||
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Total fair value of financial instruments | Total fair value of financial instruments | $ | 20,454 | $ | (12,058 | ) | $ | 8,396 | Total fair value of financial instruments |
| $ | 20,454 | $ | (12,058 | ) | $ | 8,396 | |||||||||||||||||||||||||||||||||||||||
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12
The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at April 30, 2016:
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 April 30, 2016 | |||||||||||||||||||
Fair value hedges: | ||||||||||||||||||||||||||
Intercompany balances, primarily debt and related interest |
| |||||||||||||||||||||||||
zł 87,073 | C$ | 29,950 | 0.3440 | Prepaid Exp | $ | 1,085 | $ | — | $ | 1,085 | ||||||||||||||||
zł 45,000 | £ | 7,403 | 0.1645 | (Accrued Exp) | — | (933 | ) | (933 | ) | |||||||||||||||||
€ 53,000 | £ | 40,820 | 0.7702 | (Accrued Exp) | — | (1,637 | ) | (1,637 | ) | |||||||||||||||||
U.S.$ 77,957 | £ | 55,000 | 0.7055 | Prepaid Exp | 2,523 | — | 2,523 | |||||||||||||||||||
Economic hedges for which hedge accounting was not elected: | ||||||||||||||||||||||||||
Diesel contracts | Fixed on 1.9M – 2.2M gal per month | | Float on 1.9M – 2.2M gal per month | | N/A | (Accrued Exp) | — | (4,875 | ) | (4,875 | ) | |||||||||||||||
Intercompany billings in Europe, primarily merchandise related | € 85,000 | £ | 67,798 | 0.7976 | Prepaid Exp | 1,538 | — | 1,538 | ||||||||||||||||||
Merchandise purchase commitments | ||||||||||||||||||||||||||
C$ 492,465 | U.S.$ | 362,900 | 0.7369 | (Accrued Exp) | — | (29,356 | ) | (29,356 | ) | |||||||||||||||||
C$ 20,941 | € | 14,000 | 0.6685 | (Accrued Exp) | — | (639 | ) | (639 | ) | |||||||||||||||||
£ 146,518 | U.S.$ | 212,550 | 1.4507 | | Prepaid Exp / (Accrued Exp) | | 2,027 | (3,635 | ) | (1,608 | ) | |||||||||||||||
zł 216,245 | £ | 38,136 | 0.1764 | | Prepaid Exp / (Accrued Exp) | | 293 | (1,133 | ) | (840 | ) | |||||||||||||||
U.S.$ 38,434 | € | 34,051 | 0.8860 | Prepaid Exp | 634 | — | 634 | |||||||||||||||||||
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| |||||||||||||||||||||
Total fair value of financial instruments | $ | 8,100 | $ | (42,208 | ) | $ | (34,108 | ) | ||||||||||||||||||
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1317
Presented below is the impact of derivative financial instruments on the statements of income for the periods shown:
Amount of Gain (Loss) Recognized in Income by Derivative | Amount of Gain (Loss) Recognized in Income by Derivative | |||||||||||||||
Location of Gain (Loss) | Thirteen Weeks Ended | Thirteen Weeks Ended | ||||||||||||||
In thousands | April 29, 2017 | April 30, 2016 | Location of Gain (Loss) Recognized in Income by Derivative | May 5, 2018 | April 29, 2017 | |||||||||||
Fair value hedges: | ||||||||||||||||
Intercompany balances, primarily debt and related interest | Selling, general and administrative expenses | $ | 3,225 | $ | 877 | Selling, general and administrative expenses | $(1,792) | $3,225 | ||||||||
Economic hedges for which hedge accounting was not elected: | Economic hedges for which hedge accounting was not elected: | Economic hedges for which hedge accounting was not elected: | ||||||||||||||
Diesel fuel contracts | Cost of sales, including buying and occupancy costs | (3,323 | ) | 2,287 | Cost of sales, including buying and occupancy costs | 4,953 | (3,323) | |||||||||
Intercompany billings in Europe, primarily merchandise related | Cost of sales, including buying and occupancy costs | 1,601 | (2,108 | ) | Cost of sales, including buying and occupancy costs | (118) | 1,601 | |||||||||
Merchandise purchase commitments | Cost of sales, including buying and occupancy costs | 9,933 | (44,988 | ) | Cost of sales, including buying and occupancy costs | 31,457 | 9,933 | |||||||||
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| |||||||||||||
Gain / (loss) recognized in income | $ | 11,436 | $ | (43,932 | ) | |||||||||||
Gain recognized in income | $34,500 | $11,436 | ||||||||||||||
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1418
Note F. Disclosures about Fair Value of Financial InstrumentsMeasurements
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 | April 29, 2017 | January 28, 2017 | April 30, 2016 | May 5, 2018 | February 3, 2018 | April 29, 2017 | ||||||||||||||||||
Level 1 | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Executive Savings Plan investments | $ | 213,260 | $ | 195,733 | $ | 173,523 | $ | 248,640 | $ | 249,045 | $ | 213,260 | ||||||||||||
Level 2 | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Short-term investments | $ | 457,091 | $ | 543,242 | $ | 403,702 | $ | 435,903 | $ | 506,165 | $ | 457,091 | ||||||||||||
Foreign currency exchange contracts | 20,454 | 6,018 | 8,100 | 33,318 | 4,363 | 20,454 | ||||||||||||||||||
Diesel fuel contracts | — | 2,183 | — | 10,249 | 7,854 | — | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Foreign currency exchange contracts | $ | 10,473 | $ | 7,256 | $ | 37,333 | $ | 7,675 | $ | 20,557 | $ | 10,473 | ||||||||||||
Diesel fuel contracts | 1,585 | — | 4,875 | — | — | 1,585 |
Investments designed to meet obligations under the Executive Savings Plan are invested in registered investment companies 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’s investments are primarily high-grade commercial paper, institutional money market funds and time deposits with major banks. 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.
The fair value of TJX’s general corporate debt 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 April 29, 2017May 5, 2018 was $2.20$2.12 billion compared to a carrying value of $2.23 billion. The fair value of long-term debt as of January 28, 2017February 3, 2018 was $2.17$2.16 billion compared to a carrying value of $2.23 billion. The fair value of long-term debt as of April 30, 201629, 2017 was $1.72$2.20 billion compared to a carrying value of $1.62$2.23 billion. 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.
1519
Note G. Segment Information
TJX operates four main business segments. The Marmaxx segment (T.J. Maxx, Marshalls and tjmaxx.com) and the HomeGoods segment (HomeGoods and Homesense) both operate in the United States, the TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and the TJX International segment operates T.K. Maxx, HomeSenseHomesense and tkmaxx.com in Europe and T.K. Maxx in Australia. TJX also operates Sierra Trading Post (STP),STP, anoff-price Internet retailer that operates sierratradingpost.com and a small number ofretail stores in the U.S. The results of STP are included in the Marmaxx segment.
All of TJX’s stores, with the exception of HomeGoods and HomeSense,Homesense, sell family apparel and home fashions. HomeGoods and HomeSenseHomesense offer home fashions.
TJX evaluates the performance of its segments based on “segment profit or loss,” which it defines aspre-tax income or loss before general corporate expense and interest expense, net. “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 | Thirteen Weeks Ended | |||||||||||||||
In thousands | April 29, 2017 | April 30, 2016 | May 5, 2018 | April 29, 2017 | ||||||||||||
Net sales: | ||||||||||||||||
In the United States: | ||||||||||||||||
Marmaxx | $ | 4,967,135 | $ | 4,865,375 | $ | 5,380,918 | $ | 4,967,135 | ||||||||
HomeGoods | 1,121,269 | 1,010,436 | 1,269,331 | 1,121,269 | ||||||||||||
TJX Canada | 738,771 | 685,577 | 853,836 | 738,771 | ||||||||||||
TJX International | 956,849 | 980,968 | 1,184,635 | 956,849 | ||||||||||||
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$ | 7,784,024 | $ | 7,542,356 | $ | 8,688,720 | $ | 7,784,024 | |||||||||
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Segment profit: | ||||||||||||||||
In the United States: | ||||||||||||||||
Marmaxx | $ | 687,165 | $ | 708,857 | $ | 750,456 | $ | 687,165 | ||||||||
HomeGoods | 152,092 | 138,210 | 147,360 | 152,092 | ||||||||||||
TJX Canada | 102,880 | 57,472 | 125,184 | 102,880 | ||||||||||||
TJX International | 6,860 | 14,347 | 40,826 | 6,860 | ||||||||||||
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| |||||||||||||
948,997 | 918,886 | 1,063,826 | 948,997 | |||||||||||||
General corporate expense | 106,648 | 83,723 | 104,120 | 106,648 | ||||||||||||
Interest expense, net | 9,841 | 10,194 | 4,148 | 9,841 | ||||||||||||
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|
| |||||||||||||
Income before provision for income taxes | $ | 832,508 | $ | 824,969 | $ | 955,558 | $ | 832,508 | ||||||||
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1620
Note H. Pension Plans and Other Retirement Benefits
Presented below is financial information relating to TJX’s funded defined benefit pension plan (qualified(“qualified pension planplan” or funded plan)“funded plan”) and its unfunded supplemental pension plan (unfunded plan)(“unfunded plan”) for the periods shown:
Funded Plan | Unfunded Plan | Funded Plan | Unfunded Plan | |||||||||||||||||||||||||||||
Thirteen Weeks Ended | Thirteen Weeks Ended | Thirteen Weeks Ended | Thirteen Weeks Ended | |||||||||||||||||||||||||||||
In thousands | April 29, 2017 | April 30, 2016 | April 29, 2017 | April 30, 2016 | May 5, 2018 | April 29, 2017 | May 5, 2018 | April 29, 2017 | ||||||||||||||||||||||||
Service cost | $ | 11,805 | $ | 11,209 | $ | 588 | $ | 541 | $ | 11,613 | $ | 11,805 | $ | 611 | $ | 588 | ||||||||||||||||
Interest cost | 13,759 | 14,362 | 843 | 875 | 13,965 | 13,759 | 853 | 843 | ||||||||||||||||||||||||
Expected return on plan assets | (17,382 | ) | (17,935 | ) | — | — | (20,962 | ) | (17,382 | ) | — | — | ||||||||||||||||||||
Recognized actuarial losses | 5,580 | 7,209 | 831 | 865 | 3,114 | 5,580 | 821 | 831 | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Total expense | $ | 13,762 | $ | 14,845 | $ | 2,262 | $ | 2,281 | $ | 7,730 | $ | 13,762 | $ | 2,285 | $ | 2,262 | ||||||||||||||||
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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 targetFunding Target pursuant to the Internal Revenue Code section 430) or such other amount as is sufficient to avoid restrictions with respect to the funding of TJX’s nonqualified plans under the Internal Revenue Code. TJX doesWe do not anticipate any required funding in fiscal 20182019 for the funded plan. TJX anticipatesWe anticipate making paymentscontributions of $4.1$2.5 million to provide current benefits coming due under the unfunded plan in fiscal 2018.2019.
The amounts included in 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 the periods presented.
TJX also had maintained an unfunded postretirement medical plan which was closed to new benefits in fiscal 2006. During the first quarter of fiscal 2017, TJX terminated the unfunded postretirement medical plan and made a discretionary lump sum payment to participants. The settlement of the liability and the recognition of the remaining negative plan amendment resulted in apre-tax benefit of $5.5 million in the first quarter of fiscal 2017.
17
Note I. Long-Term Debt and Credit Lines
The table below presents long-term debt, exclusive of current installments, as of May 5, 2018, February 3, 2018 and April 29, 2017, January 28, 2017 and April 30, 2016.2017. All amounts are net of unamortized debt discounts.
In thousands | April 29, 2017 | January 28, 2017 | April 30, 2016 | May 5, 2018 | February 3, 2018 | April 29, 2017 | ||||||||||||||||||
General corporate debt: | ||||||||||||||||||||||||
6.95% senior unsecured notes, redeemed on October 12, 2016 (effective interest rate of 6.98% after reduction of unamortized debt discount of $205 at April 30, 2016) | $ | — | $ | — | $ | 374,795 | ||||||||||||||||||
2.50% senior unsecured notes, maturing May 15, 2023 (effective interest rate of 2.51% after reduction of unamortized debt discount of $267 at April 29, 2017, $278 at January 28, 2017 and $312 at April 30, 2016) | 499,733 | 499,722 | 499,688 | |||||||||||||||||||||
2.75% senior unsecured notes, maturing June 15, 2021 (effective interest rate of 2.76% after reduction of unamortized debt discount of $306 at April 29, 2017, $325 at January 28, 2017 and $381 at April 30, 2016) | 749,694 | 749,675 | 749,619 | |||||||||||||||||||||
2.25% senior unsecured notes, maturing September 15, 2026 (effective interest rate of 2.32% after reduction of unamortized debt discount of $6,963 at April 29, 2017 and $7,149 at January 28, 2017) | 993,037 | 992,851 | — | |||||||||||||||||||||
2.50% senior unsecured notes, maturing May 15, 2023 (effective interest rate of 2.51% after reduction of unamortized debt discount of $223 at May 5, 2018, $234 at February 3, 2018 and $267 at April 29, 2017) | $ | 499,777 | $ | 499,766 | $ | 499,733 | ||||||||||||||||||
2.75% senior unsecured notes, maturing June 15, 2021 (effective interest rate of 2.76% after reduction of unamortized debt discount of $231 at May 5, 2018, $250 at February 3, 2018 and $306 at April 29, 2017) | 749,769 | 749,750 | 749,694 | |||||||||||||||||||||
2.25% senior unsecured notes, maturing September 15, 2026 (effective interest rate of 2.32% after reduction of unamortized debt discount of $6,217 at May 5, 2018, $6,403 at February 3, 2018 and $6,963 at April 29, 2017) | 993,783 | 993,597 | 993,037 | |||||||||||||||||||||
Debt issuance cost | (14,113 | ) | (14,649 | ) | (8,625 | ) | (11,969 | ) | (12,506 | ) | (14,113 | ) | ||||||||||||
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Long-term debt | $ | 2,228,351 | $ | 2,227,599 | $ | 1,615,477 | $ | 2,231,360 | $ | 2,230,607 | $ | 2,228,351 | ||||||||||||
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On September 12, 2016, TJX issued $1.0 billion aggregate principal amount
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As of 2.25%ten-year notes due September 2026 all of which was outstanding at April 29, 2017. TJX entered into a rate-lock agreement to hedge $700 million of the 2.25% notes. The cost of these agreements are being amortized to interest expense over the term of the notes resulting in an effective fixed rate of 2.36%.
At April 29, 2017, TJX also had outstanding $500 million aggregate principal amount of 2.50%ten-year notes due May 20235, 2018, February 3, 2018 and $750 million aggregate principal amount of 2.75% seven-year notes, due June 2021. TJX entered into rate-lock agreements to hedge the underlying treasury rate of $250 million of the 2.50% 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 2.57% for the 2.50% notes. TJX also entered into rate-lock agreements to hedge the underlying treasury rate of all of the 2.75% notes prior to their issuance. The agreements were accounted for as cash flow hedges and thepre-tax realized loss of $7.9 million was recorded as a component of other comprehensive income and is being amortized to interest expense over the term of the notes, resulting in an effective fixed interest rate of 2.91%.
At April 29, 2017, TJX had two $500 million revolving credit facilities, one which matures in March 2020 and one which matures in March 2022. At April 29, 2017,
The terms and covenants under the agreementsrevolving credit facilities require quarterly payments of 6.0 basis points per annum on the committed amounts for both agreements. This rate is based on the credit ratings of TJX’s long-term debt and wouldwill vary with specified changes in the credit ratings. These agreements hadhave no compensating balance requirements and hadhave various covenants. Each of these facilities requiredrequire TJX to maintain a ratio of funded debt and four-times consolidated rentals to consolidated earnings before interest, taxes, consolidated rentals, depreciation and amortization and consolidated rentals (“EBITDAR”)(EBITDAR) of not more than 2.75 to 1.00 on a rolling four-quarter basis. TJX was in compliance with all covenants related to its credit facilities at the end of all periods presented. As of May 5, 2018, February 3, 2018 and April 29, 2017, January 28, 2017 and April 30, 2016. As of April 29, 2017, January 28, 2017 and April 30, 2016, and during the quarters and year then ended, there were no amounts outstanding under any of these facilities.
As of May 5, 2018, February 3, 2018 and April 29, 2017, January 28, 2017 and April 30, 2016, TJX Canada had two uncommitted credit lines, a C$10 million facility for operating expenses and a C$10 million letter of credit facility. As of May 5, 2018, February 3, 2018 and April 29, 2017, January 28, 2017 and April 30, 2016, there were no amounts outstanding on the Canadian credit line for operating expenses. As
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of May 5, 2018, February 3, 2018 and April 29, 2017, January 28, 2017, and April 30, 2016, our European business at TJX International had an uncommitted credit line of £5 million. As of May 5, 2018, February 3, 2018 and April 29, 2017, January 28, 2017, and April 30, 2016, and during the quarters and year then ended, there were no amounts outstanding on the European credit line.
Note J. Income Taxes
The effective income tax rate was 25.0% for the first quarter of fiscal 2019 and 35.6% for the fiscal 2018 first quarter and 38.4% for the fiscal 2017 first quarter. The decrease in the effective income tax rate was primarily due to excess incomethe reduction of the U.S. federal corporate tax benefits relatedrate to share-based payments, partially offset by21% as a result of the 2017 Tax Act and the jurisdictional mix of incomeincome.
Under ASU 2018-05, we have accounted for the impacts of the 2017 Tax Act to the extent a reasonable estimate could be made and we recognized provisional amounts related to the increasedeemed repatriation tax, offset by there-measurement of our deferred tax assets and liabilities to record the effects of the tax law change in valuation allowancethe period of enactment. This guidance allows a company to record a provisional amount when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law during the measurement period. The measurement period ends when the company has obtained, prepared, and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. During the first quarter of fiscal year 2019, the Internal Revenue Service issued additional guidance providing clarification on foreign net operating losses.certain aspects of the deemed repatriation tax calculation. The additional guidance did not result in an adjustment to the provisional amounts recorded as of February 3, 2018. We will continue to monitor for new guidance related to provisional amounts recorded.
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TJX had net unrecognized tax benefits of $58.7 million as of May 5, 2018, $57.3 million as of February 3, 2018 and $39.0 million as of April 29, 2017, $38.5 million as of January 28, 2017 and $35.3 million as of April 30, 2016.2017.
TJX is subject to U.S. federal income tax as well as income tax in multiple state, local and foreign jurisdictions. In the U.S., fiscal years through 2010 are no longer subject to examination. In Canada, fiscal years through 2008 are no longer subject to examination. In all other jurisdictions, fiscal years through 2009 are no longer subject to examination.
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 $12.5 million as of May 5, 2018, $11.9 million as of February 3, 2018 and $8.0 million as of April 29, 2017, $8.0 million as of January 28, 2017 and $7.4 million as of April 30, 2016.2017.
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 zero to $13$22 million.
Note K. Contingent Obligations and Contingencies
Contingent Obligations:Obligations
TJX has contingent obligations on leases, for which it was a lessee or guarantor, which were assigned to third parties without TJX being released by the landlords. Over many years, TJX has assigned numerous leases that it had originally leased or guaranteed to a significant number of third parties. With the exception of leases of former businesses for which TJX has reserved, the Company has rarely had a claim with respect to assigned leases, and accordingly, the Company does not expect that such leases will have a material adverse impact on its financial condition, results of operations or cash flows. TJX does not generally have sufficient information about these leases to estimate our potential contingent obligations under them, which could be triggered in the event that one or more of the current tenants does not fulfill their obligations related to one or more of these leases.
TJX may also be contingently liable on up to nineeight leases of former TJX businesses, for which we believe the likelihood of future liability to TJX is remote, and has contingent obligations in connection with certain assigned or sublet properties that TJX is able to estimate. We estimate that the undiscounted obligations of (i) leases of former operations not included in our reserve for former operations and (ii) properties of our former operations if the subtenants do not fulfill their obligations, are approximately $53.6$46.4 million as of April 29, 2017.May 5, 2018. We believe that most or all of these contingent obligations will not revert to us and, to the extent they do, will be resolved for substantially less due to mitigating factors including our expectation to further sublet.
TJX is a party to various agreements under which it may be obligated to indemnify the other party with respect to certain losses related to matters such as title to assets sold, specified environmental matters or certain income taxes. These obligations are often limited in time and amount. There are no amounts reflected in our balance sheets with respect to these contingent obligations.
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Contingencies:Contingencies
TJX is subject to certain legal proceedings, lawsuits, disputes and claims that arise from time to time in the ordinary course of our business. In addition, TJX is a defendant in several lawsuits filed in federal and state courts brought as putative class or collective actions on behalf of various groups of current and former salaried and hourly associates in the U.S. The lawsuits allege violations of the Fair Labor Standards Act and of state wage and hour and other labor statutes, including alleged misclassification of positions as exempt from overtime, alleged entitlement to additional wages for allegedoff-the-clock work by hourly employees and alleged failure to pay all wages due upon termination.statutes. TJX is also a defendant in lawsuits filed in federal courts brought asa putative class actionsaction on behalf of customers relating to TJX’s compare at pricing. The lawsuits are in various procedural stages and seek unspecified monetary damages, injunctive relief and attorneys’ fees. In connection with ongoing litigation, an immaterial amount has been accrued in the accompanying financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The Thirteen Weeks (first quarter) Ended April 29, 2017May 5, 2018
Compared to
The Thirteen Weeks (first quarter) Ended April 30, 201629, 2017
Overview
We are the leadingoff-price apparel and home fashions retailer 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 full-price retailers’ (including department, specialty and specialty storemajor online retailers) regular prices on comparable merchandise, every day. We operate over 3,8004,100 stores through our four main segments: in the U.S., Marmaxx (which operates T.J. Maxx, Marshalls and tjmaxx.com) and HomeGoods;HomeGoods (which operates HomeGoods and Homesense); TJX Canada (which operates Winners, HomeSense and Marshalls in Canada); and TJX International (which operates T.K. Maxx, HomeSenseHomesense and tkmaxx.com in Europe, and T.K. Maxx in Australia). In the U.S., weWe also operate Sierra Trading Post (STP)(“STP”), anoff-price Internet retailer with a small number of stores.that operates sierratradingpost.com and retail stores in the U.S. The results of STP are reported in our Marmaxx segment.
Results of Operations
Highlights of our financial performance for the first quarter ended April 29, 2017May 5, 2018 include the following:
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The following is a discussion of our consolidated operating results, followed by a discussion of our segment operating results.
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Net sales:Consolidated net sales for the first quarter ended April 29, 2017May 5, 2018 totaled $7.8$8.7 billion, a 3%12% increase over last year’s consolidated first quarter net sales of $7.5 billion for the first quarter ended April 30, 2016.$7.8 billion. The increase reflected a 4%6% increase from new store sales, a 3% increase from comp sales, and a 3% positive impact from foreign currency exchange rates. This increase compares to sales growth of 3% in last year’s first quarter, which reflected a 1% increase from comp sales, a 4% increase in samenew store sales, offset by a 2% negative impact from foreign currency exchange rates. This increase compares to sales growth of 10% in last year’s first quarter, which reflected a 7% increase from same store sales, a 4% increase in new store sales, offset by a 1% negative impact from foreign currency exchange rates.
As of April 29, 2017,May 5, 2018, our consolidated store count increased 5%7% and selling square footage increased 4%5% compared to the end of the first quarter last year.
The consolidated same storeConsolidated comp sales increase for the first quarter ended April 29, 2017 was driven byMay 5, 2018 reflects an increase in the customer traffic.traffic across all divisions offset by a slight decrease in the value of the average transaction. The decline in the value of the average transaction was down with an increase in units sold more than offset byreflects a decrease in the average ticket.ticket that was partially offset by an increase in units sold. On a consolidated basis, home fashions outperformedand apparel categories. We believe unfavorable weather, comparedcategories both performed in line with last year’s firstthe consolidated average.
For the quarter in parts of the U.S. and Canada, had a negative impact on this year’s sales, especially in the apparel categories. In the U.S., same storeended May 5, 2018, comp sales in the Southeast regionU.S. were abovestrong throughout most of the country with the Southwest and Pacific regions particularly strong and the Mid Atlantic was below the consolidated average. In Canada, same storecomp sales were abovegrowth was in line with the consolidated average, for the fiscal 2018 first quarter while same storewhereas comp sales growth for our International segment werewas below the consolidated average.
We define samecomparable store sales (“comp sales”), to be sales of those stores that we have operatedbeen 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. The sales of Sierra Trading Post (including stores), tjmaxx.com and tkmaxx.com (oure-commerce businesses) are not included in same store sales. 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 storecomp sales resultson a52-week basis by comparing the current and prior year weekly periods that are most closely aligned. Relocated stores and stores that have increasedchanged 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 storecomp percentage is immaterial. Same
We define customer traffic to be the number of transactions in stores included in the comp sales calculation and average ticket to be the average retail price of the units sold. We define average transaction or average basket to be the average dollar value of transactions included in the comp sales calculation.
Sales excluded from comp sales(“non-comp sales”) consists of sales from:
We determine which stores are included in the comp sales calculation at the beginning of a fiscal year and the classification remains constant throughout that year unless a store is closed permanently or for an extended period during that fiscal year. For the first quarter of fiscal 2019, comp sales are based on a shifted fiscal 2018 calendar so that they are calculated on a comparable week basis.
Comp sales of our foreign segments are calculated on a constant currency basis, meaning we translateby translating the current year’s same storecomp 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
Comp sales may be referred to as “same store” sales by other retail companies. The method for calculating comp sales varies across the retail industry, therefore our measure of comp sales may not be the number of transactions in stores included in the same store sales calculation and define average ticketcomparable to be the averageother retail price of the units sold. We define average transaction to be the average dollar value of transactions included in the same store sales calculation.companies.
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The following table sets forth certain information about our consolidated operating results as a percentage of net sales for the following periods:
Percentage of Net Sales Thirteen Weeks Ended April 29, 2017 | Percentage of Net Sales Thirteen Weeks Ended April 30, 2016 | Percentage of Net Sales Thirteen Weeks Ended May 5, 2018 | Percentage of Net Sales Thirteen Weeks Ended April 29, 2017 | |||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
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Cost of sales, including buying and occupancy costs | 71.0 | 71.2 | 71.1 | 71.0 | ||||||||||||
Selling, general and administrative expenses | 18.1 | 17.7 | 17.8 | 18.1 | ||||||||||||
Interest expense, net | 0.1 | 0.1 | 0.0 | 0.1 | ||||||||||||
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Income before provision for income taxes* | 10.7 | % | 10.9 | % | 11.0 | % | 10.7 | % | ||||||||
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* | Figures may not foot due to rounding |
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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 or a division’s local currency 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 International 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 approximately the same rates within a given period. |
• | Inventory-related derivatives: We routinely enter into inventory-related hedging instruments to mitigate the impact on earnings of changes in foreign currency exchange rates on merchandise purchases denominated in currencies other than the local currencies of our divisions, principally TJX Canada and TJX International. As we have not elected “hedge accounting” for these instruments, as defined by U.S. generally accepted accounting principles |
We refer to the impact of the above two items throughout our discussion as “foreign currency.” This does not include the impact currency exchange rates can have on various transactions that are denominated in a currency other than an operating division’s local currency. When discussing the impact on our results of the effect of currency exchange rates on such transactions we refer to it as “transactional foreign exchange.”
Cost of sales, including buying and occupancy costs: Cost of sales, including buying and occupancy costs, as a percentage of net sales improved by 0.2was 71.1% for the first quarter of fiscal 2019, an increase of 0.1 percentage points tofrom 71.0% for the first quarter of fiscal 2018 as compared to last year’s ratio. The improvement for the first quarter2018. This increase was driven by higher freight and supply chain costs and a decrease in merchandise margin, partially offset by the favorable impact of themark-to-market of our inventory and fuel cost derivatives of 0.8 percentage points along with an increase in consolidated merchandise margin of 0.3 percentage points. These improvements were largely offset by expense deleverage on the 1% same store sales increase as well as an increase in distribution center costs as a percentage of net sales. Our increase in distribution center costs reflects the impact of processing more units as well as additional investments in the supply chain network.expense leverage on occupancy costs.
Selling, general and administrative expenses: Selling, general and administrativeSG&A expenses, as a percentage of net sales, were 18.1%17.8% in the first quarter of fiscal 2018, up 0.42019, a decrease of 0.3 percentage pointspoint over last year’s ratio.first quarter ratio of 18.1%. The major factor for this increasedecrease for the first quarter iswas primarily due to higher store payroll costs resulting fromexpense savings and aone-time gain related to a lease buyout in Canada, partially offset by wage increases as well as the impact of handling the increase in units.increases.
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Interest expense, net: Interest expense, net decreased $0.4 million for the first quarter ended April 29, 2017 as compared to the same period last year. The components of interest expense, net are summarized below:
Thirteen Weeks Ended | ||||||||
Dollars in thousands | April 29, 2017 | April 30, 2016 | ||||||
Interest expense | $ | 17,253 | $ | 16,998 | ||||
Capitalized interest | (1,221 | ) | (2,012 | ) | ||||
Interest (income) | (6,191 | ) | (4,792 | ) | ||||
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Interest expense, net | $ | 9,841 | $ | 10,194 | ||||
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Dollars in thousands | May 5, 2018 | April 29, 2017 | ||||||
Interest expense | $ | 17,365 | $ | 17,253 | ||||
Capitalized interest | (1,648 | ) | (1,221 | ) | ||||
Interest (income) | (11,569 | ) | (6,191 | ) | ||||
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Interest expense, net | $ | 4,148 | $ | 9,841 | ||||
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ForThe decrease in net interest expense for the first quarter of fiscal 2018,2019 compared to the reduction in net interest expensefirst quarter of fiscal 2018 was driven by additional interest income, primarily due to an increase in invested balances and higher rates of return. This more than offset the reduction in capitalized interest and the increase in gross interest expense which was due to the increase in our financing lease obligations.return rates.
Income taxes: The effective income tax rate was 25.0% for the first quarter of fiscal 2019 and 35.6% for the fiscal 2018 first quarter compared to 38.4% for theof fiscal 2017 first quarter.2018. The decrease in the effective income tax rate was primarily due to excess income tax benefits related to share-based payments which reduced the effective incomedecrease of the U.S. federal corporate tax rate by 3.0 percentage points. This benefit was partially offset byfrom 35% to 21% as a result of the 2017 Tax Act and the jurisdictional mix of incomeincome.
Under ASU 2018-05, we have accounted for the impacts of the 2017 Tax Act to the extent a reasonable estimate could be made and we recognized provisional amounts related to the increasedeemed repatriation tax, offset by there-measurement of our deferred tax assets and liabilities to record the effects of the tax law change in valuation allowancethe period of enactment. This guidance allows a company to record a provisional amount when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law during the measurement period. The measurement period ends when the company has obtained, prepared, and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. During the first quarter of fiscal year 2019, the Internal Revenue Service issued additional guidance providing clarification on foreign net operating losses.certain aspects of the deemed repatriation tax calculation. The additional guidance did not result in an adjustment to the provisional amounts recorded as of February 3, 2018. We will continue to monitor for new guidance related to provisional amounts recorded.
Net income and net incomediluted earnings per share: Net income for the first quarter of fiscal 20182019 was $716.4 million, or $1.13 per diluted share, versus $536.3 million, or $0.82 per diluted share, versus $508.3 million, or $0.76 per diluted share, in last year’s first quarter. The lower effective tax rate realized due to the 2017 Tax Act resulted in an estimated net benefit to diluted earnings per share of approximately $0.17 per share. Foreign currency had a $0.04 positive impact on earnings per share for the first quarter of fiscal 2019 compared to a $0.01 positive impact on earnings per share for the first quarter of fiscal 2018. The benefit in the tax provision due to the change in accounting for share-based compensation increased earnings per share by $0.03 per share in the first quarter of fiscal 2018. Foreign currency had a $0.01 positive impact on earnings per share for the first quarter of2019 and fiscal 2018 compared to a $0.05 negative impact per share for the first quarter of fiscal 2017.2018.
Our stock repurchase programs, which reduce our weighted average diluted shares outstanding, benefited our earnings per share growth by approximately threefour percent in the first quarter of fiscal 2018. During the first quarter of fiscal 2018, we repurchased 4.5 million shares of our common stock at a cost of $350.0 million.2019.
Segment information: We operate four main business segments. TheOur Marmaxx segment (T.J. Maxx, Marshalls and tjmaxx.com) and the HomeGoods segment (HomeGoods and Homesense) both operate in the United States. Our TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and our TJX International segment operates T.K. Maxx, HomeSenseHomesense and tkmaxx.com in Europe and T.K. Maxx in Australia. We also operate STP, anoff-price Internet retailer that operates a small number ofsierratradingpost.com and retail stores in the U.S. The results of STP have been included in our Marmaxx segment.
We evaluate the performance of our segments based on “segment profit or loss,” which we define aspre-tax income or loss before general corporate expense and interest expense.expense, net. “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.
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Presented below is selected financial information related to our business segments:
U.S. Segments:
Marmaxx
Thirteen Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
Dollars in millions | April 29, 2017 | April 30, 2016 | May 5, 2018 | April 29, 2017 | ||||||||||||
Net sales | $ | 4,967.1 | $ | 4,865.4 | $ | 5,380.9 | $ | 4,967.1 | ||||||||
Segment profit | $ | 687.2 | $ | 708.9 | $ | 750.5 | $ | 687.2 | ||||||||
Segment profit as a percentage of net sales | 13.8 | % | 14.6 | % | 13.9 | % | 13.8 | % | ||||||||
Increase in same store sales | 0 | % | 6 | % | ||||||||||||
Increase in comp sales | 4 | % | 0 | % | ||||||||||||
Stores in operation at end of period | ||||||||||||||||
T.J. Maxx | 1,191 | 1,163 | 1,231 | 1,191 | ||||||||||||
Marshalls | 1,039 | 1,010 | 1,073 | 1,039 | ||||||||||||
Sierra Trading Post | 12 | 8 | 32 | 12 | ||||||||||||
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Total | 2,242 | 2,181 | 2,336 | 2,242 | ||||||||||||
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Selling square footage at end of period (in thousands) | ||||||||||||||||
T.J. Maxx | 26,686 | 26,249 | 27,203 | 26,686 | ||||||||||||
Marshalls | 24,721 | 24,345 | 25,114 | 24,721 | ||||||||||||
Sierra Trading Post | 227 | 159 | 550 | 227 | ||||||||||||
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Total | 51,634 | 50,753 | 52,867 | 51,634 | ||||||||||||
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Net sales for Marmaxx increased 2%8% for the first quarter of fiscal 20182019 as compared to the same period last year. The quarterly increase was due toreflects a 2%4% increase from comp sales and a 4% increase from new store sales. The increase in comp sales as same stores sales growth was flat. Marmaxx sales in the first quarter reflecteddriven by an increase in customer traffic and in units sold but they were offset by a decrease in the average ticket. We believe unfavorable weather through much of the first quarter in fiscal 2018, compared to last year, had a negative impact on sales, especially apparel.traffic. Home fashions outperformedand apparel incategories both performed at the first quarter.segment average for the period.
Segment profit margin decreasedincreased to 13.8%13.9% for the first quarter of fiscal 20182019 compared to 14.6%13.8% for the same period last year. Marmaxx results reflected anMarmaxx’s increase in merchandise margins of 0.3 percentage pointssegment profit margin for the fiscal 2018 first quarter and also benefitted from a reduction in legal and credit card chargeback costs as comparedwas primarily due to last year’s first quarter. These improvements were more thanexpense leverage on the higher comp sales offset by wage increases and a decrease in segment margin primarily due to wage increaseshigher markdown and additional supply chain costs as a result of processing more units, together totaling 0.8 percentage points, as well as expense deleverage, particularly occupancy costs, on the flat same store sales results.freight costs. Our U.S.e-commerce businesses, which represent less thanapproximately 2% of Marmaxx’s net sales, did not have a significant impact on year-over-year segment margin comparisons for the first quarter.
HomeGoods
Thirteen Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
Dollars in millions | April 29, 2017 | April 30, 2016 | May 5, 2018 | April 29, 2017 | ||||||||||||
Net sales | $ | 1,121.3 | $ | 1,010.4 | $ | 1,269.3 | $ | 1,121.3 | ||||||||
Segment profit | $ | 152.1 | $ | 138.2 | $ | 147.4 | $ | 152.1 | ||||||||
Segment profit as a percentage of net sales | 13.6 | % | 13.7 | % | 11.6 | % | 13.6 | % | ||||||||
Increase in same store sales | 3 | % | 9 | % | ||||||||||||
Increase in comp sales | 2 | % | 3 | % | ||||||||||||
Stores in operation at end of period | 596 | 534 | ||||||||||||||
HomeGoods | 690 | 596 | ||||||||||||||
Homesense | 4 | — | ||||||||||||||
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Total | 694 | 596 | ||||||||||||||
Selling square footage at end of period (in thousands) | 11,360 | 10,377 | ||||||||||||||
HomeGoods | 12,850 | 11,360 | ||||||||||||||
Homesense | 81 | — | ||||||||||||||
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Total | 12,931 | 11,360 |
HomeGoods net sales increased 11% in the first quarter over the same period last year. The sales increase for the first quarter reflects an 8% increase from new store sales and a 3% increase in same store sales. The increase in same store
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Net sales for the first quarter was largely driven by an increase in customer traffic.
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Segment profit margin was 13.6%HomeGoods increased 13% for the first quarter of fiscal 2018 compared to 13.7% for the same period last year. Segment margin was favorably impacted by an increase in merchandise margin2019 as well as a reduction in legal and credit card chargeback costs as compared to last year’s first quarter. These first quarter gains were more than offset by higher store payroll costs due to wage increases and an increase in supply chain costs, primarily related to costs of operating HomeGoods’ new distribution center.
Foreign Segments:
TJX Canada
Thirteen Weeks Ended | ||||||||
April 29, | April 30, | |||||||
U.S. Dollars in millions | 2017 | 2016 | ||||||
Net sales | $ | 738.8 | $ | 685.6 | ||||
Segment profit | $ | 102.9 | $ | 57.5 | ||||
Segment profit as a percentage of net sales | 13.9 | % | 8.4 | % | ||||
Increase in same store sales | 3 | % | 14 | % | ||||
Stores in operation at end of period | ||||||||
Winners | 258 | 250 | ||||||
HomeSense | 109 | 104 | ||||||
Marshalls | 61 | 45 | ||||||
|
|
|
| |||||
Total | 428 | 399 | ||||||
|
|
|
| |||||
Selling square footage at end of period (in thousands) | ||||||||
Winners | 5,602 | 5,538 | ||||||
HomeSense | 2,002 | 1,953 | ||||||
Marshalls | 1,381 | 1,054 | ||||||
|
|
|
| |||||
Total | 8,985 | 8,545 | ||||||
|
|
|
|
Net sales for TJX Canada increased 8% during the first quarter ended April 29, 2017 compared to the same period last year. This increase reflects a 5% increase from new store sales and a 3% increase in same store sales growth. Foreign currency had a neutral impact on sales growth for the first quarter of fiscal 2018. The increase in same store sales was primarily due to an increase in customer traffic.
Segment profit margin was 13.9% for the fiscal 2018 first quarter compared to 8.4% for last year’s first quarter. The change in the segment margin was primarily due to a favorable impact of 6.9 percentage points due to the mark-to-market impact of the inventory derivatives. Segment margin also benefitted from an increase in merchandise margin. These improvements were partially offset by an increase in supply chain and distribution costs, primarily due to the costs of operating the new distribution center that opened last year, as well as the negative impact of transactional foreign exchange. The transactional foreign exchange activity relates to the timing and settlement of payables denominated in currencies other than the Canadian dollar and the valuation of U.S. dollar denominated monetary assets and liabilities. This activity generated foreign currency gains in the first quarter of fiscal 2017 versus a neutral impact in the first quarter of fiscal 2018.
26
TJX International
Thirteen Weeks Ended | ||||||||
April 29, | April 30, | |||||||
U.S. Dollars in millions | 2017 | 2016 | ||||||
Net sales | $ | 956.8 | $ | 981.0 | ||||
Segment profit | $ | 6.9 | $ | 14.3 | ||||
Segment profit as a percentage of net sales | 0.7 | % | 1.5 | % | ||||
Increase in same store sales | 0 | % | 4 | % | ||||
Stores in operation at end of period | ||||||||
T.K. Maxx | 515 | 471 | ||||||
HomeSense | 46 | 41 | ||||||
T.K. Maxx Australia | 35 | 35 | ||||||
|
|
|
| |||||
Total | 596 | 547 | ||||||
|
|
|
| |||||
Selling square footage at end of period (in thousands) | ||||||||
T.K. Maxx | 10,987 | 10,219 | ||||||
HomeSense | 748 | 669 | ||||||
T.K. Maxx Australia | 654 | 667 | ||||||
|
|
|
| |||||
Total | 12,389 | 11,555 | ||||||
|
|
|
|
Net sales for TJX International decreased 2% for the first quarter ended April 29, 2017 compared to the same period last year. The decrease in sales was entirely due to foreign currency translation which negatively impacted first quarter sales by 10%, more than offsettingquarterly increase reflects an 8%11% increase from new stores. Same storesstore sales were flat with last year. Our TJX International segment hadand a 2% increase in comp sales. The increase in comp sales for the period was driven by an increase in customer traffic which was offset by a decline in the value of the average transaction for the quarter ended April 29, 2017.transaction.
Segment profit margin decreased to 11.6% for the first quarter of fiscal 2018 decreased 0.8 percentage points2019 compared to 0.7%. Foreign currency favorably impacted year-over-year comparisons by 1.0 percentage point13.6% for the same period last year. The decline in segment margin for the first quarter. This benefitquarter was more than offset by expense deleverage onprimarily due to lower merchandise margins as a result of increased markdowns earlier in the flat same store sales,quarter, as well as an increase in supply chain and systems investments to support our growth in Europecosts and higher store payroll costs.expenses due to an increase in new store openings.
DuringForeign Segments:
TJX Canada
Thirteen Weeks Ended | ||||||||
U.S. Dollars in millions | May 5, 2018 | April 29, 2017 | ||||||
Net sales | $ | 853.8 | $ | 738.8 | ||||
Segment profit | $ | 125.2 | $ | 102.9 | ||||
Segment profit as a percentage of net sales | 14.7 | % | 13.9 | % | ||||
Increase in comp sales | 3 | % | 3 | % | ||||
Stores in operation at end of period | ||||||||
Winners | 269 | 258 | ||||||
HomeSense | 119 | 109 | ||||||
Marshalls | 78 | 61 | ||||||
|
|
|
| |||||
Total | 466 | 428 | ||||||
Selling square footage at end of period (in thousands) | ||||||||
Winners | 5,811 | 5,602 | ||||||
HomeSense | 2,214 | 2,002 | ||||||
Marshalls | 1,696 | 1,381 | ||||||
|
|
|
| |||||
Total | 9,721 | 8,985 |
Net sales for TJX Canada increased 16% for the first quarter we completedof fiscal 2019 as compared to the conversionsame period last year. The quarterly increase reflects an 8% increase in new store sales, a 5% positive impact from currency translation, and a 3% increase from comp sales. The increase in comp sales for the period was driven by an increase in customer traffic, offset by a decline in the value of the Trade Secret storesaverage transaction.
Segment profit margin increased to 14.7% for the first quarter of fiscal 2019 compared to 13.9% for the same period last year. The increase in Australiathe segment margin for the quarter was favorably impacted by aone-time gain related to a lease buyout and improved merchandise margins which benefitted from favorable transactional foreign exchange. These were partially offset by wage increases and an unfavorable impact of 0.9 percentage points due to foreign currency, primarily themark-to-market impact of the inventory derivatives.
29
TJX International
Thirteen Weeks Ended | ||||||||
U.S. Dollars in millions | May 5, 2018 | April 29, 2017 | ||||||
Net sales | $ | 1,184.6 | $ | 956.8 | ||||
Segment profit | $ | 40.8 | $ | 6.9 | ||||
Segment profit as a percentage of net sales | 3.4 | % | 0.7 | % | ||||
Increase in comp sales | 1 | % | 0 | % | ||||
Stores in operation at end of period | ||||||||
T.K. Maxx | 549 | 515 | ||||||
Homesense | 55 | 46 | ||||||
T.K. Maxx Australia | 41 | 35 | ||||||
|
|
|
| |||||
Total | 645 | 596 | ||||||
Selling square footage at end of period (in thousands) | ||||||||
T.K. Maxx | 11,516 | 10,987 | ||||||
Homesense | 883 | 748 | ||||||
T.K. Maxx Australia | 762 | 654 | ||||||
|
|
|
| |||||
Total | 13,161 | 12,389 |
Net sales for TJX International increased 24% for the first quarter of fiscal 2019 as compared to the same period last year. The quarterly increase reflects a 14% positive impact from currency translation, a 9% increase from new store sales and a 1% increase in comp sales. The increase in comp sales for the period was driven by an increase in customer traffic, and a slight increase in the value of the average transaction.
Segment profit margin increased to 3.4% for the first quarter of fiscal 2019 compared to 0.7% for the same period last year. The increase in segment margin reflects a 2.3 percentage point favorable impact due to foreign currency, primarily themark-to-market impact of the inventory derivatives as well as operating expense leverage in T.K. Maxx stores.Australia.
General corporate expense
Thirteen Weeks Ended | ||||||||||||||||
April 29, | April 30, | Thirteen Weeks Ended | ||||||||||||||
Dollars in millions | 2017 | 2016 | May 5, 2018 | April 29, 2017 | ||||||||||||
General corporate expense | $ | 106.6 | $ | 83.7 | $ | 104.1 | $ | 106.6 |
General corporate expense for segment reporting purposes represents those costs not specifically related to the operations of our business segments. Virtually all generalGeneral corporate expenses are primarily included in selling, general and administrative expenses. TheSG&A expenses, except for themark-to-market adjustment of our fuel hedges, which is included in cost of sales, including buying and occupancy costs.
The increase in generalGeneral corporate expense for the first quarter of fiscal 2018, aswas relatively flat compared to the prior year, is primarily due to an unrealized loss on our fuel hedges in the first quarter of fiscal 2018 compared to an unrealized gain insame period last year’s first quarter. In addition the fiscal 2018 first quarter reflected higher systems and technology costs and consulting and professional fees.year.
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Analysis of Financial Condition
Liquidity and Capital Resources
Our liquidity requirements have traditionally been funded through cash generated from operations, supplemented, as needed, by short-term bank borrowings and the issuance of commercial paper. As of May 5, 2018, there were no short-term bank borrowings or commercial paper outstanding.
We believe our existing cash and cash equivalents, internally generated funds and our credit facilities, described in Note I – Long Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are more than adequate to meet our operating needs over the next fiscal year.
As of May 5, 2018, we held $2.7 billion in cash and $0.4 billion in short-term investments. Approximately $1.5 billion of our cash was held by our foreign subsidiaries with $0.3 billion held in countries where we provisionally intend to indefinitely reinvest any undistributed earnings. We have provided for all applicable state and foreign withholding taxes on all undistributed earnings of its foreign subsidiaries in Canada, Puerto Rico, Italy, India, Hong Kong and Vietnam through May 5, 2018. If we repatriate cash from such subsidiaries, we should not incur additional tax expense and our cash would be reduced by the amount of withholding taxes paid. We expect to repatriate more than $1 billion in cash from our subsidiary in Canada during fiscal 2019. Additionally, as part of the 2017 Tax Act we recorded a transition tax related to the undistributed earnings of our foreign subsidiaries of $193 million which was accrued in fiscal 2018 and is payable over 8 years.
Operating activities:Net cash provided by operating activities was $448 million$0.7 billion for the three months ended May 5, 2018 and $0.4 billion for the three months ended April 29, 2017, an increase2017. The cash generated from operating activities in each of $3 million fromthese fiscal quarters was primarily due to operating earnings.
Operating cash flows for the $445 million providedfirst three months of fiscal 2019 increased by $0.3 billion compared to the first three months of fiscal 2018 driven by increased operating earnings. Net income, adjusted fornon-cash items increased operating cash flows in the first quarter of fiscal 2019 as compared to the first quarter of fiscal 2018 by $0.4 billion. This increase in cash flows was partially offset by a $0.1 billion decrease in cash flows related to taxes payable and merchandise inventories, net of related accounts payable.
Operating cash flows for the first three months ended April 30, 2016.of fiscal 2018 were flat compared to the first three months of fiscal 2017. Net income, adjusted fornon-cash items for the fiscal 2018 first quarter aswas flat compared to last year’sthe fiscal 2017 first quarter, decreased by $13 million. The change in merchandise inventory,quarter. Merchandise inventories, net of the related change in accounts payable resulted in a use of cash of $146 million in the first three months of fiscal 2018 compared to a use of cash of $258 million in the first three months of fiscal 2017 which favorably impacted year over yearand income taxes payable each increased cash flows by $112 million. This favorable impact on$0.1 billion. These cash flows for the first three months of fiscal 2018 is attributablewere fully offset by $0.2 billion in partcash flows related to additional cash outflows during last year’s first quarter as inventory levels were increased to meet demand and we carried a higher level of packaway inventory. The change in accrued expenses and other current liabilities including income taxes payable, had an unfavorable impact on year over year operating cash flows of $96 million which was driven by increased payments for incentive compensation, payroll withholdings and sales taxes during the first quarter of fiscal 2018.
Investing activities: Net cash used in investing activities resulted in net cash outflows of $0.2 billion for the three months ended May 5, 2018 as compared toand $0.2 billion for the fiscal 2017 first quarter.three months ended April 29, 2017. The cash outflows for both periods were primarily driven by capital expenditures.
Investing activities in the first three months of fiscal 20182019 primarily reflected property additions for new stores, store improvements and renovations and investment in our home offices and our distribution network (including buying and merchandising systems and information systems). Cash outflows for property additions amounted to $259 millionwere $0.3 billion in the quarter ended April 29, 2017 compared to $266 million in the comparable period last year.first three months of both fiscal 2019 and 2018. We anticipate that capital spending for fiscal 20182019 will be approximately $1.2$1.4 billion. We alsoplan to fund these expenditures through internally generated funds.
We purchased $233 million$0.1 billion of investments in the first three months of fiscal 20182019 versus $165 million$0.2 billion in the comparable prior year period and $290 millionperiod. These cash outflows were offset by $0.2 billion of investments that were sold or matured in the first three months of fiscal 2018 versus $145 million2019 and $0.3 billion in the prior year.year, respectively. This activity primarily related to short-term investments which had initial maturities in excess of 90 days and, per our policy, are not classified as cash on the consolidated balance sheets presented.
Cash flows from
31
Financing activities: Net cash used in financing activities resulted in a net cash outflowoutflows of $484 million$0.5 billion in the first quarterthree months of fiscal 2018 compared to a netand 2019. These cash outflow of $404outflows were primarily driven by equity repurchases and dividend payments.
Equity
We repurchased and retired 4.9 million in the same period last year. Financing activities include the cash flows relating to our repurchasesshares of our common stock at a cost of $0.4 billion during the exercisefirst three months of options underfiscal 2019, on a “trade date basis.” We reflect stock repurchases in our financial statements on a “settlement date” or cash basis. Under our stock incentive plan and the payment of dividends to holders of our common stock. We spent $350 millionrepurchase programs, we paid $0.4 billion to repurchase 4.54.8 million shares of our stock in the first three months of fiscal 2018 compared to $341 million2019. These outflows were partially offset by $0.1 billion in proceeds from the exercise of employee stock options, net of shares withheld for taxes in the first three months of fiscal 2019. We paid $0.3 billion to repurchase 4.5 million shares in the same period last year. Seefirst three months of fiscal 2018. For further information regarding equity repurchases, see Note D – Capital Stock and Earnings Per Share of Notes to our unaudited consolidated financial statements for more information. Consolidated Financial Statements.
In February 2017,2018, we announced that our Board of Directors approved an additional repurchase program authorizing the repurchase of up to an additional $1.0$3.0 billion of TJX stock from time to time.stock. We currently plan to repurchase approximately $1.3$2.5 billion to $1.8$3.0 billion of stock under our stock repurchase programs in fiscal 2018.2019. 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 $35 million of proceeds, net of shares repurchased for withholding taxes, related to the exercise of
Dividends
We declared quarterly dividends on our common stock options in the first quarter of fiscal 2018 versus $39 million in proceeds in the same period last year. Dividends paid on common stockwhich totaled $0.39 per share in the first three months of fiscal 2018 were $169 million versus $140 million2019 and $0.3125 per share in the same period last year.
We traditionally have fundedfirst three months of fiscal 2018. Cash payments for dividends on our working capital requirements, includingcommon stock totaled $0.2 million for seasonal merchandise, primarily through cash generated from operations, supplemented, as needed, by short-term bank borrowingsboth the first three months of fiscal 2019 and the issuance of commercial paper. As of April 29, 2017, approximately 46% of our cash was held by our foreign subsidiaries with $263 million held in countries where we have the intention to reinvest any undistributed earnings indefinitely. We have provided for deferred U.S. taxes on all undistributed earnings of our subsidiaries in Canada, Puerto Rico, Italy, India, Hong Kong, and Australia. If we repatriate cash from these subsidiaries, we should not incur additional tax expense, but our cash would be reduced by the amount of taxes paid. For all other foreign subsidiaries, no income taxes have been provided on the undistributed earnings because such earnings are considered to be indefinitely reinvested in the business. We have no current plans to repatriate cash balances held by such foreign subsidiaries. We believe our existing cash and cash equivalents, internally generated funds and our credit facilities, described in Note I to the unaudited consolidated financial statements, are more than adequate to meet our operating needs over the next fiscal year.2018.
28
Recently Issued Accounting Pronouncements
SeeFor a discussion of accounting standards, see Note A - Basis of Presentation and Summary of Significant Accounting Policies of Notes to our unaudited consolidated financial statementsConsolidated Financial Statements included in this QuarterlyTJX’s Annual Report on Form10-Q,10-K for recently issued accounting standards, including the datesfiscal year ended February 3, 2018 and Note A - Basis of adoptionPresentation and estimated effects on our resultsSummary of operations, financial position or cash flows.Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements in this Form10-Q.
Forward-looking Statements
Various statements made in this Quarterly Report on Form10-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 strategy and inventory management; operational and business expansion and management of large size and scale; consumercustomer trends and preferences; various marketing efforts; competition; quality and availability of personnel recruitment, training and retention; labor costs and workforce challenges; data security; information systems and implementation of new technology;technologies; economic conditions and consumer spending; adverse or unseasonable weather; disruptions in the second half of the fiscal year; serious disruptions or catastrophic events; corporate and retail banner reputation; quality, safety and other issues with our merchandise; compliance with laws, regulations and orders and changes in laws, regulations and applicable accounting standards; expanding international operations; merchandise sourcing and moving merchandise internationally;transport; commodity availability and pricing or increases in utility, transportation or logistics costs;pricing; fluctuations in currency exchange rates; fluctuations in quarterly operating results and market expectations; mergers, acquisitions, or business investments and divestitures, closings or business consolidations; outcomes of litigation, legal proceedings and other legal or regulatory matters; tax matters; disproportionate impact of disruptions in the second half of the fiscal year; real estate activities; inventory or asset loss; 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 Form10-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.
32
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 Form10-K for the fiscal year ended January 28, 2017.February 3, 2018.
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 April 29, 2017May 5, 2018 pursuant to Rules13a-15(b) and15d-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 Rules13a-15(f) and15d-15(f) under the Act) during the fiscal quarter ended April 29, 2017May 5, 2018 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.
29
PART II - 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 Form10-K for the year ended January 28, 2017,February 3, 2018, as filed with the Securities Exchange Commission on March 28, 2017.April 4, 2018.
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 first quarter of fiscal 20182019 and the average price paid per share are as follows:
Total Number of Shares Repurchased (1) | Average Price Paid Per Share (2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(4) | |||||||||||||
January 29, 2017 through February 25, 2017 | 798,540 | $ | 75.14 | 798,540 | $ | 2,730,762,170 | ||||||||||
February 26, 2017 through April 1, 2017 | 2,109,077 | $ | 78.64 | 2,098,124 | $ | 2,565,763,295 | ||||||||||
April 2, 2017 through April 29, 2017 | 1,795,898 | $ | 76.81 | 1,627,328 | $ | 2,440,763,356 | ||||||||||
|
|
|
| |||||||||||||
Total: | 4,703,515 | 4,523,992 |
Total Number of Shares Repurchased(1) | Average Price Paid Per Share(2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(4) | |||||||||||||
February 4, 2018 through March 3, 2018 | 971,931 | $ | 77.17 | 971,931 | $ | 4,060,779,864 | ||||||||||
March 4, 2018 through April 7, 2018 | 2,130,812 | $ | 82.25 | 2,127,698 | $ | 3,885,779,873 | ||||||||||
April 8, 2018 through May 5, 2018 | 1,945,452 | $ | 83.38 | 1,798,963 | $ | 3,735,779,860 | ||||||||||
|
|
|
| |||||||||||||
Total: | 5,048,195 | 4,898,592 |
(1) | Consists of shares repurchased under publicly announced stock repurchase programs and |
(2) | Includes commissions for the shares repurchased under stock repurchase programs. |
(3) | Consists of shares repurchased under publicly announced stock repurchase programs. |
(4) | In February |
3034
Item 6. Exhibits.
10.1 | ||
10.2 | ||
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 Form10-Q for the quarter ended |
* | Management contract or compensatory plan or arrangement. |
3135
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: | June 1, 2018 | |||||
/s/ Scott Goldenberg | ||||||
Scott Goldenberg, Chief Financial Officer | ||||||
(Principal Financial and Accounting Officer) |
3236
Exhibit Index
10.1 | ||||
10.2 | ||||
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 Form10-Q for the quarter ended Statements of Cash Flows, (v) the Consolidated Statement of Shareholders’ Equity, and (vi) Notes to Consolidated Financial Statements. |
* | Management contract or compensatory plan or arrangement. |
3337