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Financial Instruments
 12 Months Ended
Feb. 02, 2013
Financial Instruments

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. 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 fiscal 2013, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2013 and fiscal 2014, 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 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. The hedge agreements outstanding at February 2, 2013 relate to 29% of TJX’s estimated notional diesel requirements for fiscal 2014. These diesel fuel hedge agreements will settle throughout fiscal 2014.

Foreign Currency Contracts: TJX enters into forward foreign currency exchange contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by TJX Europe (United Kingdom, Ireland, Germany and Poland), TJX Canada (Canada), Marmaxx (U.S.) and HomeGoods (U.S.) in currencies other than their respective functional currencies. These contracts typically have a term of twelve months or less. The contracts outstanding at February 2, 2013 cover a portion of such actual and anticipated merchandise purchases throughout fiscal 2014. TJX elected not to apply hedge accounting rules to these contracts.

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

 

The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at February 2, 2013:

 

In thousands    Pay      Receive      Blended
Contract
Rate		      Balance Sheet
Location		      Current
Asset
U.S.$		      Current
(Liability)
U.S.$		     Net Fair
Value in
U.S.$ at
February 2,
2013		  

Fair value hedges:

                    

Intercompany balances, primarily short-term debt and related interest

   

                 
         zł  141,500            C$      44,551         0.3148         (Accrued Exp)       $ —       $ (1,357 )    $ (1,357 ) 
          €     44,281              £        35,781         0.8080         (Accrued Exp)         —         (4,531 )      (4,531 ) 
          €     90,292         U.S.$    118,511         1.3125         (Accrued Exp)         —         (4,823 )      (4,823 ) 
     U.S.$    87,117              £        55,000         0.6313         (Accrued Exp)         —         (974 )      (974 ) 

Economic hedges for which hedge accounting was not elected:

   

                 

Diesel contracts

     

 
 

 Fixed on 1.1M

—1.7M gal per
month

   

  
  

     

 
 

 Float on 1.1M

—1.7M gal per
month

   

  
  

      N/A         Prepaid Exp         3,372         —        3,372   

Merchandise purchase commitments

  

                 
     C$  238,273         U.S.$   240,814         1.0107        
 		 Prepaid Exp /
(Accrued Exp)		   
  		      2,205         (189 )      2,016   
     C$      4,752         €         3,700         0.7786         Prepaid Exp         282         —        282   
     £    67,746         U.S.$   108,900         1.6075         Prepaid Exp         2,602         —        2,602   
     £    10,935              €      13,000         1.1888         Prepaid Exp         565         —        565   
       U.S.$     7,099         €         5,443         0.7667         Prepaid Exp         326         —        326   

Total fair value of financial instruments

  

                      $ 9,352       $ (11,874 )    $ (2,522 ) 

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

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

Fair value hedges:

                    

Intercompany balances, primarily short-term debt and related interest

   

                 
     zł     62,000         C$   18,237         0.2941         (Accrued Exp)       $ —       $ (784 )    $ (784 ) 
     €     25,000         £   21,335         0.8534         Prepaid Exp         333         —        333   
     €     75,292         U.S.$ 100,781         1.3385        
 		 Prepaid Exp /
(Accrued Exp)		   
  		      1,156         (98 )      1,058   
     U.S.$     85,389         £   55,000         0.6441         Prepaid Exp         796         —        796   

Economic hedges for which hedge accounting was not elected:

   

                 

Diesel contracts

     
 
 		 Fixed on
450K—1.5M
gal per month		   
  
  		     
 
 		 Float on
450K—1.5M
gal per month		   
  
  		      N/A         Prepaid Exp         1,698         —        1,698   

Merchandise purchase commitments

  

                 
     C$    272,210         US$ 273,356         1.0042        
 		 Prepaid Exp /
(Accrued Exp)		   
  		      4,201         (2,175 )      2,026   
     C$        8,475         €      6,300         0.7434        
 		 Prepaid Exp /
(Accrued Exp)		   
  		      53         (178 )      (125 ) 
     £      40,401         U.S.$   63,000         1.5594         (Accrued Exp)         —         (541 )      (541 ) 
     £      33,793         €    40,000         1.1837        
 		 Prepaid Exp /
(Accrued Exp)		   
  		      135         (405 )      (270 ) 
       U.S.$        3,135         €       2,366         0.7547        
 		 Prepaid Exp /
(Accrued Exp)		   
  		      28         (36 )      (8 ) 

Total fair value of financial instruments

  

                      $ 8,400       $ (4,217 )    $ 4,183   

 

The impact of derivative financial instruments on the statements of income during fiscal 2013, fiscal 2012 and fiscal 2011 are as follows:

 

            Amount of Gain (Loss) Recognized in
Income by Derivative		  
In thousands    Location of Gain (Loss) Recognized in
Income by Derivative		    February 2,
2013		     January 28,
2012		     January 29,
2011		  
          (53 weeks)              

Fair value hedges:

          

Intercompany balances, primarily short-term debt and related interest

    Selling, general
and administrative
expenses		    $ (7,661 )    $ 4,313      $ 2,551   

Economic hedges for which hedge accounting was not elected:

          

Diesel contracts

    Cost of sales, including buying and occupancy costs      4,261        1,626        (2,872 ) 

Merchandise purchase commitments

    Cost of sales, including buying and occupancy costs      (2,084 )      (1,345 )      (15,688 ) 

Gain (loss) recognized in income

         $ (5,484 )    $ 4,594      $ (16,009 )