Financial Instruments

12 Months Ended

Jan. 28, 2012

Financial Instruments [Abstract]

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 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. Derivative financial instruments are not used for trading or other speculative purposes. TJX does not use 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.

Interest Rate Contracts: During fiscal 2004, TJX entered into interest rate swaps with respect to $100 million of the $200 million ten-year notes outstanding at that time. Under those interest rate swaps, which settled in December 2009, TJX paid a specific variable interest rate indexed to the six-month LIBOR rate and received a fixed rate applicable to the underlying debt, effectively converting the interest on a portion of the notes from fixed to a floating rate of interest. The interest rate swaps were designated as fair value hedges on the underlying debt. The valuation of the swaps resulted in an offsetting fair value adjustment to the debt hedged. The average effective interest rate on $100 million of the 7.45% unsecured notes, inclusive of the effect of hedging activity, was approximately 4.04% in fiscal 2010.

Diesel Fuel Contracts: During fiscal 2012, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2013, based on the diesel fuel consumed by independent freight carriers transporting the Company's inventory. The hedge agreements outstanding at January 28, 2012 relate to 49% of TJX's estimated notional diesel requirements in the first half of fiscal 2013 and 21% of TJX's estimated notional diesel requirements in the second half of fiscal 2013. These diesel fuel hedge agreements will settle throughout fiscal 2013. The fuel hedge agreements outstanding at January 29, 2011 hedged approximately 10% of TJX's notional diesel fuel requirements in the first quarter of fiscal 2012, and settled during the first half of fiscal 2012.

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. The change in the fair value of the hedge agreements resulted in income of $0.95 million in fiscal 2012, income of $1.2 million in fiscal 2011 and income of $4.5 million in fiscal 2010, all of which are reflected in earnings as a component of cost of sales, including buying and occupancy costs.

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 in currencies other than the functional currency of TJX Europe (United Kingdom, Ireland, Germany and Poland), TJX Canada (Canada), Marmaxx and HomeGoods (U.S.). These contracts are typically twelve months or less in duration. The contracts outstanding at January 28, 2012 cover certain commitments and anticipated needs throughout fiscal 2013. TJX elected not to apply hedge accounting rules to these contracts. The change in the fair value of these contracts resulted in income of $3.3 million in fiscal 2012, loss of $6.8 million in fiscal 2011 and income of $0.5 million in fiscal 2010 and is included in earnings as a component of cost of sales, including buying and occupancy costs.

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 net impact on the income statement of hedging activity related to these intercompany payables was income of $0.1 million in fiscal 2012, income of $0.1 million in fiscal 2011 and income of $3.7 million in fiscal 2010.

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 US$		Current (Liability) US$			Net Fair Value in US$ at January 28, 2012
Fair value hedges:
Intercompany balances, primarily short-term debt and related interest
	z	62,000	C$	18,237		0.2941		(Accrued Exp)	$	—	$	(784	)	$	(784	)
	€	25,000	£	21,335		0.8534		Prepaid Exp		333		—			333
	€	75,292	US$	100,781		1.3385		Prepaid Exp / (Accrued Exp)		1,156		(98	)		1,058
	US$	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	US$	63,000		1.5594		(Accrued Exp)		—		(541	)		(541	)
	£	33,793	€	40,000		1.1837		Prepaid Exp / (Accrued Exp)		135		(405	)		(270	)
	US$	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 following is a summary of TJX's derivative financial instruments, related fair value and balance sheet classification at January 29, 2011:

In thousands	Pay		Receive		Blended Contract Rate		Balance Sheet Location		Current Asset US$		Current (Liability) US$			Net Fair Value in US$ at January 29, 2011
Fair value hedges:
Intercompany balances, primarily short-term debt and related interest
	€	25,000	£	21,265		0.8506		(Accrued Exp)	$	—	$	(278	)	$	(278	)
		€50,442	US$	66,363		1.3156		(Accrued Exp)		—		(1,944	)		(1,944	)
	US	$                     85,894	£	55,000		0.6403		Prepaid Exp / (Accrued Exp)		1,008		(77	)		931
Economic hedges for which hedge accounting was not elected:
Diesel contracts		Fixed on 2.1M gal		Float on 2.1M gal		N/A		Prepaid Exp		746		—			746
Merchandise purchase commitments
	C$	403,031	US$	399,036		0.9901		Prepaid Exp / (Accrued Exp)		678		(2,938	)		(2,260	)
	C$	4,951	€	3,700		0.7473		Prepaid Exp / (Accrued Exp)		102		(10	)		92
	£	42,813	US$	66,900		1.5626		(Accrued Exp)		—		(986	)		(986	)
	£	28,465	€	33,900		1.1909		Prepaid Exp		976		—			976
	US$	420	€	312		0.7429		Prepaid Exp		4		—			4
Total fair value of financial instruments									$	3,514	$	(6,233	)	$	(2,719	)

The impact of derivative financial instruments on the statements of income during fiscal 2012, fiscal 2011 and fiscal 2010 are as follows:

	Location of Gain (Loss) Recognized in Income by Derivative	Amount of Gain (Loss) Recognized in Income by Derivative
In thousands		January 28, 2012		January 29, 2011			January 30, 2010
Fair value hedges:
Intercompany balances, primarily short-term debt and related interest	Selling, general and administrative expenses	$	4,313	$	2,551		$	(9,249	)
Interest rate swap fixed to floating on notional of $50,000	Interest expense, net		—		—			1,092
Interest rate swap fixed to floating on notional of $50,000	Interest expense, net		—		—			1,422
Economic hedges for which hedge accounting was not elected:
Diesel contracts	Cost of sales, including buying and occupancy costs		951		1,188			4,490
Merchandise purchase commitments	Cost of sales, including buying and occupancy costs		3,256		(6,786	)		494
Gain (loss) recognized in income		$	8,520	$	(3,047	)	$	(1,751	)