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Financial Instruments
 12 Months Ended
Feb. 01, 2014
Financial Instruments

Note F.    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: 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 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. During fiscal 2013, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2014. Similarly, during fiscal 2014, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2015. As of February 1, 2014, TJX had hedge contracts outstanding relating to 42% of its estimated notional diesel requirements for fiscal 2015. These diesel fuel hedge agreements will settle throughout fiscal 2015.

 

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 1, 2014 cover a portion of such actual and anticipated merchandise purchases throughout fiscal 2015. 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 1, 2014:

 

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 1,
2014		  

Fair value hedges:

                    

Intercompany balances, primarily short-term debt and related interest

   

                 
         zł    84,073            C$      29,082         0.3459         (Accrued Exp)       $ —       $ (348 )    $ (348 ) 
          €     39,000              £       32,646         0.8371         Prepaid Exp         1,015         —        1,015   
          €     44,850         U.S.$      60,827         1.3562         Prepaid Exp         335         —        335   
     U.S.$    90,309              £       55,000         0.6090         (Accrued Exp)         —         (182 )      (182 ) 

Economic hedges for which hedge accounting was not elected:

   

                 

Diesel contracts

     
 
 		 Fixed on 1.2M
—1.9M gal per
month		   
  
  		     
 
 		 Float on 1.2M
—1.9M gal per
month		   
  
  		      N/A         Prepaid Exp         137         —        137   

Merchandise purchase commitments

  

                 
     C$  388,745         U.S.$   365,100         0.9392        
 		 Prepaid Exp /
(Accrued Exp)		   
  		      16,466         (40 )      16,426   
     C$    15,202         €     10,500         0.6907        
 		 Prepaid Exp /
(Accrued Exp)		   
  		      548         (38 )      510   
     £  174,102         U.S.$   280,700         1.6123        
 		 Prepaid Exp /
(Accrued Exp)		   
  		      132           (5,385 )      (5,253 ) 
     zł  113,571              £      22,442         0.1976         Prepaid Exp         984         —        984   
     U.S.$         442              ¥        2,680         6.0633         Prepaid Exp         —         —        —   
       U.S.$    12,464         €        9,159         0.7348        
 		 Prepaid Exp /
(Accrued Exp)		   
  		      2         (114 )      (112 ) 

Total fair value of financial instruments

  

                      $ 19,619       $ (6,107 )    $ 13,512   
   

 

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 impact of derivative financial instruments on the statements of income during fiscal 2014, fiscal 2013 and fiscal 2012 are as follows:

 

          Amount of Gain (Loss) Recognized in
Income by Derivative		  
In thousands   

Location of Gain (Loss) Recognized in

Income by Derivative

    February 1,
2014		     February 2,
2013		     January 28,
2012		  
          (53 weeks)  

Fair value hedges:

          

Intercompany balances, primarily short-term debt and related interest

    Selling, general
and administrative
expenses		    $ 6,099      $ (7,661 )    $ 4,313   

Economic hedges for which hedge accounting was not elected:

          

Diesel contracts

    Cost of sales, including buying and occupancy costs      (1,831 )      4,261        1,626   

Merchandise purchase commitments

    Cost of sales, including buying and occupancy costs      22,338        (2,084 )      (1,345 ) 

 

  

Gain (loss) recognized in income

         $ 26,606      $ (5,484 )    $ 4,594   
   

Included in the table above are realized gains of $10.7 million in fiscal 2014, gains of $1.2 million in fiscal 2013 and losses of $1.2 million in fiscal 2012 all of which were largely offset by gains and losses on the underlying hedged item.