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Financial Instruments
 3 Months Ended
Apr. 28, 2012
Financial Instruments [Abstract]  
Financial Instruments

Note D. Financial Instruments

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

Diesel Fuel Contracts: During fiscal 2012 and the first quarter of fiscal 2013, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2013, based on the diesel fuel expected to be consumed by independent freight carriers transporting the Company's inventory. The hedge agreements outstanding at April 28, 2012 relate to 49% of TJX's estimated notional diesel requirements for the first half of fiscal 2013 and 26% of TJX's estimated notional diesel requirements for the second half of fiscal 2013. These diesel fuel hedge agreements will settle throughout fiscal 2013.

Independent freight carriers transporting the Company's inventory charge TJX a mileage surcharge for diesel fuel price increases as incurred by the carrier. The hedge agreements are designed to mitigate the volatility of diesel fuel pricing (and the resulting per mile surcharges payable by TJX) by setting a fixed price per gallon for the period being hedged. TJX elected not to apply hedge accounting rules to these contracts.

 

Foreign Currency Contracts: TJX enters into forward foreign currency exchange contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by TJX Europe (United Kingdom, Ireland, Germany and Poland), TJX Canada (Canada), Marmaxx 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 28, 2012 cover a portion of such actual and anticipated merchandise purchases throughout fiscal 2013. TJX elected not to apply hedge accounting rules to these contracts.

TJX also enters into derivative contracts, generally designated as fair value hedges, to hedge intercompany debt and intercompany interest payable. The changes in fair value of these contracts are recorded in selling, general and administrative expenses and are offset by marking the underlying item to fair value in the same period. Upon settlement, the realized gains and losses on these contracts are offset by the realized gains and losses of the underlying item in selling, general and administrative expenses.

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

 

In thousands

    Pay      Receive      Blended
Contract
Rate		     

Balance Sheet
Location

    Current Asset
US$		      Current
(Liability)
US$		     Net Fair
Value in US$
at April 28,
2012		  

Fair value hedges:

                    

Intercompany balances, primarily short-term debt and related interest

                    
   £ 40,000       C$ 63,330         1.5833       (Accrued Exp)    $ —         $ (883 )      (883 ) 
   z 80,000       C$ 23,874         0.2984       Prepaid Exp / (Accrued Exp)      135         (762 )      (627 ) 
   € 25,000       £ 21,335         0.8534       Prepaid Exp      1,427         —          1,427   
   € 100,292       US$ 134,506         1.3411       Prepaid Exp / (Accrued Exp)      1,411         (138 )      1,273   
   US$ 85,389       £ 55,000         0.6441       Prepaid Exp      3,874         —          3,874   

Economic hedges for which hedge accounting was not elected:

 

Diesel contracts

     
 
 		 Fixed on 615K –
1.4M gal per
month		   
  
  		     
 
 		 Float on 615K –
1.4M gal per
month		   
  
  		      N/A       Prepaid Exp      3,216         —          3,216   

Merchandise purchase commitments

 

   C$ 321,256       US$ 324,247         1.0093       Prepaid Exp / (Accrued Exp)      807         (3,504 )      (2,697 ) 
   C$ 7,850       € 6,000         0.7643       Prepaid Exp / (Accrued Exp)      5         (54 )      (49 ) 
   £ 71,404       US$ 113,000         1.5825       (Accrued Exp)      —           (3,109 )      (3,109 ) 
   £ 36,475       € 44,000         1.2063       (Accrued Exp)      —           (965 )      (965 ) 
   US$ 5,719       € 4,349         0.7604       Prepaid Exp      45         —          45   
              

 

 

     

 

 

    

 

 

  

Total fair value of financial instruments

    $ 10,920       $ (9,415 )    $ 1,505   
              

 

 

     

 

 

    

 

 

  

 

The following is a summary of TJX's derivative financial instruments, related fair value and balance sheet classification at April 30, 2011:

 

In thousands

    Pay      Receive      Blended
Contract
Rate		     

Balance Sheet
Location

    Current Asset
US$		      Current
(Liability) US$		     Net Fair Value
in US$
at April 30,
2011		  

Fair value hedges:

                    

Intercompany balances, primarily short-term debt and related interest

                    
   £ 70,000       C$ 110,907         1.5844       Prepaid Exp / (Accrued Exp)    $ 471       $ (122 )    $ 349   
   € 25,000       £ 21,265         0.8506       (Accrued Exp)      —           (1,367 )      (1,367 ) 
   € 65,292       US$ 86,985         1.3322       Prepaid Exp / (Accrued Exp)      13         (9,042 )      (9,029 ) 
   US$ 85,894       £ 55,000         0.6403       Prepaid Exp      5,640         —          5,640   

Economic hedges for which hedge accounting was not elected:

 

Diesel contracts

     
 
 		 Fixed on
5.7M gal per
month		   
  
  		     
 
 		 Float on
5.7M gal per
month		   
  
  		      N/A       Prepaid Exp      2,008         —          2,008   

Merchandise purchase commitments

                    
   C$ 407,470       US$ 410,100         1.0065       (Accrued Exp)      —           (19,962 )      (19,962 ) 
   C$ 7,821       € 5,800         0.7416       Prepaid Exp      308         —          308   
   £ 51,736       US$ 83,500         1.6140       (Accrued Exp)      —           (2,876 )      (2,876 ) 
   £ 5,827       € 7,000         1.2013       Prepaid Exp      620         —          620   
   € 4,323       US$ 5,950         1.3764       (Accrued Exp)      —           (446 )      (446 ) 
   € 2,359       £ 2,000         0.8478       (Accrued Exp)      —           (152 )      (152 ) 
   US$ 1,257       € 911         0.7247       Prepaid Exp      90         —          90   
              

 

 

     

 

 

    

 

 

  

Total fair value of financial instruments

 

             $ 9,150       $ (33,967 )    $ (24,817 ) 
              

 

 

     

 

 

    

 

 

  

 

The impact of derivative financial instruments on the statements of income during the first quarter of fiscal 2013 and fiscal 2012 is as follows:

 

          Amount of Gain (Loss) Recognized
in Income by Derivative		  

In thousands

    Location of Gain (Loss)
Recognized in Income by
Derivative		    April 28,
2012		     April 30,
2011		  

Fair value hedges:

        

Intercompany balances, primarily short-term debt and related interest

    Selling, general and
administrative expenses		    $ 3,652      $ (3,169 ) 

Economic hedges for which hedge accounting was not elected:

        

Diesel fuel contracts

    Cost of sales, including buying
and occupancy costs		      1,517        1,262   

Merchandise purchase commitments

    Cost of sales, including buying
and occupancy costs		      (7,856 )      (20,243 ) 
     

 

 

    

 

 

  

Gain (loss) recognized in income

       $ (2,687 )    $ (22,150 )