XML 42 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
Financial Instruments
 3 Months Ended
May 04, 2013
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 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 2013 and the first quarter of fiscal 2014, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2014, based on the diesel fuel expected to be consumed by independent freight carriers transporting the Company’s inventory. The hedge agreements outstanding at May 4, 2013 relate to approximately 50% of TJX’s estimated notional diesel requirements for the remainder of 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 May 4, 2013 cover a portion of such actual and anticipated merchandise purchases throughout the remainder of fiscal 2014. TJX elected not to apply hedge accounting rules to these contracts.

 

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

The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at May 4, 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
May 4,
2013		  

Fair value hedges:

              

Intercompany balances, primarily short-term debt and related interest

              
  zł 141,500      C$ 44,551        0.3148      (Accrued Exp)   $ —        $ (604 )    $ (604 ) 
  £ 25,000      C$ 38,946        1.5578      (Accrued Exp)     —          (475 )      (475 ) 
  € 44,281      £ 35,781        0.8080      (Accrued Exp)     —          (2,537 )      (2,537 ) 
  € 90,292      U.S.$ 118,511        1.3125      (Accrued Exp)     —          (111 )      (111 ) 
  U.S.$ 87,117      £ 55,000        0.6313      (Accrued Exp)     —          (1,572 )      (1,572 ) 

Economic hedges for which hedge accounting was not elected:

              

Diesel contracts

    

 

 

 Fixed on 1.5M

- 1.7M gal per

month

   

  

  

    

 

 

 Float on 1.5M

- 1.7M gal per

month

   

  

  

     N/A      (Accrued Exp)     —          (427 )      (427 ) 

Merchandise purchase commitments

              
  C$ 323,489      U.S.$ 319,678        0.9882     

Prepaid Exp /

(Accrued Exp)

     1,954        (2,757 )      (803 ) 
  C$ 8,149      € 6,100        0.7486      (Accrued Exp)     —          (79 )      (79 ) 
  £ 111,217      U.S.$ 171,000        1.5375     

Prepaid Exp /

(Accrued Exp)

     717        (2,875 )      (2,158 ) 
  £ 4,289      € 5,000        1.1658      (Accrued Exp)     —          (123 )      (123 ) 
  £ 12,823      zł 62,813        4.8985      Prepaid Exp     168        —          168   
  U.S.$ 9,907      € 7,580        0.7651     

Prepaid Exp /

(Accrued Exp)

     71        (35 )      36   
         

 

 

    

 

 

    

 

 

  

Total fair value of financial instruments

           $ 2,910      $ (11,595 )    $ (8,685 ) 
         

 

 

    

 

 

    

 

 

  

 

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
U.S.$		     Current
(Liability)
U.S.$		     Net Fair
Value in
U.S.$ 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 ) 
  zł 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      U.S.$ 134,506        1.3411     

Prepaid Exp /

(Accrued Exp)

     1,411        (138 )      1,273   
  U.S.$ 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      U.S.$ 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      U.S.$ 113,000        1.5825      (Accrued Exp)     —          (3,109 )      (3,109 ) 
  £ 36,475      € 44,000        1.2063      (Accrued Exp)     —          (965 )      (965 ) 
  U.S.$ 5,719      € 4,349        0.7604      Prepaid Exp     45        —          45   
         

 

 

    

 

 

    

 

 

  

Total fair value of financial instruments

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

 

 

    

 

 

    

 

 

  

 

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

 

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

In thousands

   

Location of Gain (Loss)
Recognized in Income by
Derivative

    May 4, 2013     April 28, 2012  

Fair value hedges:

        

Intercompany balances, primarily short-term debt and related interest

    Selling, general and administrative expenses    $ 6,286      $ 3,652   

Economic hedges for which hedge accounting was not elected:

        

Diesel fuel contracts

    Cost of sales, including buying and occupancy costs      (2,961 )      2,550   

Merchandise purchase commitments

    Cost of sales, including buying and occupancy costs      1,007        (10,403 ) 
     

 

 

    

 

 

  

Gain (loss) recognized in income

       $ 4,332      $ (4,201 )