Item 1. Financial Statements
Item 1. Financial Statements
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(UNAUDITED)
IN THOUSANDS EXCEPT PER SHARE AMOUNTS
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 1,
2020 August 3,
2019 August 1,
2020 August 3,
2019
Net sales $ 6,667,575 $ 9,781,596 $ 11,076,463 $ 19,059,181
Cost of sales, including buying and occupancy costs 5,174,490 7,026,057 9,588,955 13,663,942
Selling, general and administrative expenses 1,527,768 1,731,335 2,841,688 3,433,736
Interest expense, net 57,336 2,897 80,687 3,714
(Loss) income before income taxes ( 92,019 ) 1,021,307 ( 1,434,867 ) 1,957,789
(Provision) benefit for income taxes ( 122,201 ) ( 262,345 ) 333,158 ( 498,649 )
Net (loss) income $ ( 214,220 ) $ 758,962 $ ( 1,101,709 ) $ 1,459,140
Basic (loss) earnings per share $ ( 0.18 ) $ 0.63 $ ( 0.92 ) $ 1.20
Weighted average common shares – basic 1,198,634 1,210,525 1,198,222 1,212,528
Diluted (loss) earnings per share $ ( 0.18 ) $ 0.62 $ ( 0.92 ) $ 1.19
Weighted average common shares – diluted 1,198,634 1,228,986 1,198,222 1,231,211
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
IN THOUSANDS
Thirteen Weeks Ended
August 1,
2020 August 3,
2019
Net (loss) income $ ( 214,220 ) $ 758,962
Additions to other comprehensive (loss) income:
Foreign currency translation adjustments, net of related tax provisions of $ 5,462 in fiscal 2021 and $ 1,681 in fiscal 2020
69,378 ( 83,743 )
Reclassifications from other comprehensive income (loss) to net (loss) income:
Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $ 1,746 in fiscal 2021 and $ 1,453 in fiscal 2020
4,797 3,992
Amortization of loss on cash flow hedge, net of related tax provisions of $ 76 in fiscal 2021 and $ 76 in fiscal 2020
208 208
Other comprehensive income (loss), net of tax 74,383 ( 79,543 )
Total comprehensive (loss) income $ ( 139,837 ) $ 679,419
Twenty-Six Weeks Ended
August 1,
2020 August 3,
2019
Net (loss) income $ ( 1,101,709 ) $ 1,459,140
Additions to other comprehensive (loss) income:
Foreign currency translation adjustments, net of related tax benefit of $ 1,486 in fiscal 2021 and $ 952 in fiscal 2020
( 59,780 ) ( 90,904 )
Reclassifications from other comprehensive loss to net (loss) income:
Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $ 3,492 in fiscal 2021 and $ 2,906 in fiscal 2020
9,594 7,984
Amortization of loss on cash flow hedge, net of related tax provisions of $ 152 in fiscal 2021 and $ 152 in fiscal 2020
416 416
Other comprehensive (loss), net of tax ( 49,770 ) ( 82,504 )
Total comprehensive (loss) income $ ( 1,151,479 ) $ 1,376,636
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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THE TJX COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
IN THOUSANDS, EXCEPT SHARE DATA
August 1,
2020 February 1,
2020 August 3,
2019
ASSETS
Current assets:
Cash and cash equivalents $ 6,620,411 $ 3,216,752 $ 2,186,382
Accounts receivable, net 444,229 386,261 377,057
Merchandise inventories 3,744,062 4,872,592 5,087,046
Prepaid expenses and other current assets 403,621 368,048 438,994
Federal, state and foreign income taxes recoverable 305,624 46,969 179,125
Total current assets 11,517,947 8,890,622 8,268,604
Net property at cost 5,100,411 5,325,048 5,041,878
Non-current deferred income taxes, net 48,600 12,132 5,642
Operating lease right of use assets 9,063,854 9,060,332 8,944,302
Goodwill 97,131 95,546 95,938
Other assets 740,459 761,323 498,615
TOTAL ASSETS $ 26,568,402 $ 24,145,003 $ 22,854,979
LIABILITIES
Current liabilities:
Accounts payable $ 2,422,140 $ 2,672,557 $ 2,607,651
Accrued expenses and other current liabilities 2,884,826 3,041,774 2,601,851
Current portion of operating lease liabilities 1,591,076 1,411,216 1,353,721
Current portion of long-term debt 749,209 — —
Federal, state and foreign income taxes payable — 24,700 37,518
Total current liabilities 7,647,251 7,150,247 6,600,741
Other long-term liabilities 848,253 851,116 776,654
Non-current deferred income taxes, net 91,770 142,170 196,985
Long-term operating lease liabilities 7,875,234 7,816,633 7,742,866
Long-term debt 5,445,325 2,236,625 2,235,121
Commitments and contingencies (See Note L)
SHAREHOLDERS’ EQUITY
Preferred stock, authorized 5,000,000 shares, par value $ 1 , no shares issued
— — —
Common stock, authorized 1,800,000,000 shares, par value $ 1 , issued and outstanding 1,199,061,133 ; 1,199,099,768 and 1,208,932,667 respectively
1,199,061 1,199,100 1,208,933
Additional paid-in capital 68,532 — —
Accumulated other comprehensive loss ( 722,941 ) ( 673,171 ) ( 712,825 )
Retained earnings 4,115,917 5,422,283 4,806,504
Total shareholders’ equity 4,660,569 5,948,212 5,302,612
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 26,568,402 $ 24,145,003 $ 22,854,979
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
Twenty-Six Weeks Ended
August 1,
2020 August 3,
2019
Cash flows from operating activities:
Net (loss) income $ ( 1,101,709 ) $ 1,459,140
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Depreciation and amortization 439,525 427,834
Loss on property disposals and impairment charges 38,970 3,215
Deferred income tax (benefit) provision ( 88,562 ) 37,855
Share-based compensation 27,647 55,400
Changes in assets and liabilities:
(Increase) in accounts receivable ( 56,041 ) ( 35,848 )
Decrease (increase) in merchandise inventories 1,111,612 ( 560,386 )
(Increase) in income taxes recoverable ( 258,655 ) ( 166,333 )
(Increase) in prepaid expenses and other current assets ( 40,032 ) ( 73,770 )
(Decrease) in accounts payable ( 240,356 ) ( 6,823 )
Increase (decrease) in accrued expenses and other liabilities 153,502 ( 113,799 )
(Decrease) in income taxes payable ( 25,254 ) ( 116,460 )
Increase in net operating lease liabilities 209,071 25,284
Other, net 27,057 ( 36,065 )
Net cash provided by operating activities 196,775 899,244
Cash flows from investing activities:
Property additions ( 309,910 ) ( 578,018 )
Purchase of investments ( 19,411 ) ( 18,994 )
Sales and maturities of investments 10,503 9,374
Other — 7,419
Net cash (used in) investing activities ( 318,818 ) ( 580,219 )
Cash flows from financing activities:
Cash payments on revolving credit facilities ( 1,000,000 ) —
Proceeds from long-term debt including revolving credit facilities 4,988,452 —
Cash payments for debt issuance expenses ( 33,872 ) —
Cash payments for repurchase of common stock ( 201,500 ) ( 699,751 )
Cash dividends paid ( 278,250 ) ( 517,448 )
Proceeds from issuance of common stock 59,532 102,475
Cash payments of employee tax withholdings for performance based stock awards ( 21,843 ) ( 23,297 )
Net cash provided by (used in) financing activities 3,512,519 ( 1,138,021 )
Effect of exchange rate changes on cash 13,183 ( 24,851 )
Net increase (decrease) in cash and cash equivalents 3,403,659 ( 843,847 )
Cash and cash equivalents at beginning of year 3,216,752 3,030,229
Cash and cash equivalents at end of period $ 6,620,411 $ 2,186,382
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
IN THOUSANDS
Thirteen Weeks Ended
Common Stock
Shares Par Value
$ 1
Additional Paid-In
Capital Accumulated Other Comprehensive
Loss Retained
Earnings Total
Balance, May 2, 2020 1,197,877 $ 1,197,877 $ 8,104 $ ( 797,324 ) $ 4,330,561 $ 4,739,218
Net loss — — — — ( 214,220 ) ( 214,220 )
Other comprehensive income, net of tax — — — 74,383 — 74,383
Recognition of share-based compensation — — 39,178 — — 39,178
Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings 1,184 1,184 21,250 — ( 424 ) 22,010
Balance, August 1, 2020 1,199,061 $ 1,199,061 $ 68,532 $ ( 722,941 ) $ 4,115,917 $ 4,660,569
Thirteen Weeks Ended
Common Stock
Shares Par Value
$ 1
Additional Paid-In
Capital Accumulated Other Comprehensive
Loss Retained
Earnings Total
Balance, May 4, 2019 1,212,668 $ 1,212,668 $ — $ ( 633,282 ) $ 4,552,509 $ 5,131,895
Net income — — — — 758,962 758,962
Other comprehensive (loss), net of tax — — — ( 79,543 ) — ( 79,543 )
Cash dividends declared on common stock — — — — ( 278,624 ) ( 278,624 )
Recognition of share-based compensation — — 29,668 — — 29,668
Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings 1,952 1,952 40,759 — — 42,711
Common stock repurchased and retired ( 5,687 ) ( 5,687 ) ( 70,427 ) — ( 226,343 ) ( 302,457 )
Balance, August 3, 2019 1,208,933 $ 1,208,933 $ — $ ( 712,825 ) $ 4,806,504 $ 5,302,612
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
IN THOUSANDS
Twenty-Six Weeks Ended
Common Stock
Shares Par Value
$ 1
Additional Paid-In
Capital Accumulated Other Comprehensive
Loss Retained
Earnings Total
Balance, February 1, 2020 1,199,100 $ 1,199,100 $ — $ ( 673,171 ) $ 5,422,283 $ 5,948,212
Net loss — — — — ( 1,101,709 ) ( 1,101,709 )
Other comprehensive (loss), net of tax — — — ( 49,770 ) — ( 49,770 )
Recognition (reversal) of share-based compensation — — 59,482 — ( 31,835 ) 27,647
Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings 3,348 3,348 34,765 — ( 424 ) 37,689
Common stock repurchased and retired ( 3,387 ) ( 3,387 ) ( 25,715 ) — ( 172,398 ) ( 201,500 )
Balance, August 1, 2020 1,199,061 $ 1,199,061 $ 68,532 $ ( 722,941 ) $ 4,115,917 $ 4,660,569
Twenty-Six Weeks Ended
Common Stock
Shares Par Value
$ 1
Additional Paid-In
Capital Accumulated Other Comprehensive
Loss Retained
Earnings Total
Balance February 2, 2019 1,217,183 $ 1,217,183 $ — $ ( 630,321 ) $ 4,461,744 $ 5,048,606
Net income — — — — 1,459,140 1,459,140
Cumulative effect of accounting change — — — — 403 403
Other comprehensive (loss), net of tax — — — ( 82,504 ) — ( 82,504 )
Cash dividends declared on common stock — — — — ( 557,860 ) ( 557,860 )
Recognition of share-based compensation — — 55,400 — — 55,400
Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings 5,094 5,094 74,084 — — 79,178
Common stock repurchased and retired ( 13,344 ) ( 13,344 ) ( 129,484 ) — ( 556,923 ) ( 699,751 )
Balance, August 3, 2019 1,208,933 $ 1,208,933 $ — $ ( 712,825 ) $ 4,806,504 $ 5,302,612
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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THE TJX COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements and Notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These Consolidated Financial Statements and Notes thereto are unaudited and, in the opinion of management, reflect all normal recurring adjustments, accruals and deferrals among periods required to match costs properly with the related revenue or activity, considered necessary by The TJX Companies, Inc. (together with its subsidiaries, “TJX”) for a fair statement of its Consolidated Financial Statements for the periods reported, all in conformity with GAAP consistently applied. Investments for which the Company exercises significant influence but does not have control are accounted for under the equity method. The Consolidated Financial Statements and Notes thereto should be read in conjunction with the audited Consolidated Financial Statements, including the related notes, contained in TJX’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020 (“fiscal 2020”).
These interim results are not necessarily indicative of results for the full fiscal year. TJX’s business, in common with the businesses of retailers generally, is subject to seasonal influences, with higher levels of sales and income generally realized in the second half of the year. TJX is also impacted by the uncertainty surrounding the financial impact of the novel coronavirus (“COVID-19”) pandemic as discussed in Note B—Impact of the COVID-19 Pandemic.
The February 1, 2020 balance sheet data was derived from audited Consolidated Financial Statements and does not include all disclosures required by GAAP.
Fiscal Year
TJX’s fiscal year ends on the Saturday nearest to the last day of January of each year. The current fiscal year ends January 30, 2021 (“fiscal 2021”) and is a 52-week fiscal year. Fiscal 2020 was also a 52-week fiscal year.
Use of Estimates
The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. TJX considers its accounting policies relating to leases, inventory valuation, impairment of long-lived assets, goodwill and tradenames, reserves for uncertain tax positions and loss contingencies to be the most significant accounting policies that involve management estimates and judgments. The Company considered COVID-19 related impacts to its estimates, as appropriate, within its unaudited consolidated financial statements and there may be changes to those estimates in future periods. We believe that our accounting estimates are appropriate after giving consideration to the ongoing uncertainties surrounding the severity and duration of the COVID-19 pandemic and the associated containment and remediation efforts. Actual amounts could differ from these estimates, and such differences could be material.
Deferred Gift Card Revenue
The following table presents deferred gift card revenue activity:
In thousands August 1,
2020 August 3,
2019
Balance, beginning of year $ 500,844 $ 450,302
Deferred revenue 355,397 747,827
Effect of exchange rates changes on deferred revenue ( 854 ) ( 826 )
Revenue recognized ( 378,782 ) ( 791,293 )
Balance, end of period $ 476,605 $ 406,010
TJX recognized $ 198.7 million in gift card revenue for the three months ended August 1, 2020 and $ 407.6 million for the three months ended August 3, 2019. The decrease in both deferred revenue and revenue recognized versus the prior year reflects the impact of temporary store and e-commerce closures due to the COVID-19 pandemic. Gift cards are combined in one homogeneous pool and are not separately identifiable. As such, the revenue recognized consists of gift cards that were part of the deferred revenue balance at the beginning of the period as well as gift cards that were issued during the period.
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Equity Investment
On November 18, 2019, the Company, through a wholly owned subsidiary, completed an investment of $ 225 million, excluding acquisition costs, for a 25 % ownership stake in privately held Familia, an established, off-price apparel and home fashions retailer with more than 275 stores throughout Russia. The Company's investment represents a non-controlling, minority position and is accounted for under the equity method of accounting.
Included in the initial carrying value of $ 225 million, which represents the transaction date fair value, was a basis difference of $ 212 million related to the difference between the cost of the investment and the Company's proportionate share of the net assets of Familia. Goodwill comprised $ 186 million of the difference, and the remainder was allocated to the Familia tradename and customer relationships. The carrying value of the equity method investment is primarily adjusted for the Company's share in the earnings of Familia, as adjusted for basis differences, and the foreign currency exchange translation adjustment related to translating the investment from Russian rubles to U.S. dollars. The Company amortizes the tradename and customer relationships over their useful lives of 10 and 7 years, respectively, using the straight-line method.
This investment is included in Other assets on our Consolidated Balance Sheets. The Company reports its share of Familia’s results on a one-quarter lag, and earnings from the Company's investment in Familia were $ 0.3 million for the three months ended August 1, 2020 and $ 0.7 million for the six months ended August 1, 2020, which has been recorded in our Consolidated Statements of (Loss) Income as a reduction to Selling, general and administrative expenses. Revaluing the investment from Russian rubles to the U.S. dollar as of August 1, 2020 resulted in a cumulative translation loss and reduced the carrying value of our investment by $ 32 million. The cumulative translation loss has been recorded in our Consolidated Balance Sheets as a component of Accumulated other comprehensive loss. The carrying value of the equity investment on the Consolidated Balance Sheets at August 1, 2020, including acquisition costs of $ 5.6 million, was $ 199.7 million.
Familia operations have also been impacted by the COVID-19 pandemic and virtually all stores were temporarily closed. We have not impaired our investment due to our belief that any decline in fair value of our investment is temporary as almost all Familia stores have been reopened and we expect Familia to have adequate liquidity to continue operations notwithstanding the COVID-19 pandemic.
Leases
Supplemental cash flow information related to leases for the twenty-six weeks ended August 1, 2020 and August 3, 2019 is as follows:
Twenty-Six Weeks Ended
In thousands August 1,
2020 August 3,
2019
Operating cash flows paid for operating leases $ 762,823 $ 846,211
Lease liabilities arising from obtaining right of use assets $ 765,183 $ 993,979
During the first half of fiscal 2021, we negotiated rent deferrals (primarily for second quarter lease payments) for a significant number of our stores, with repayment at later dates, primarily in fiscal 2022. See Note B—Impact of the COVID-19 Pandemic for additional information.
Recently Adopted Accounting Standards
Simplified Accounting for Income Taxes
In December 2019, the Financial Accounting Standards Board (“FASB”) issued guidance related to simplified accounting for income taxes. The new standard simplifies accounting for income taxes by removing certain exceptions to the general principals in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted in any interim period within that year. The Company reviewed the provisions of this standard and determined that most of them do not apply to TJX. The most significant impact to the Company is the simplification of the tax benefit calculation recognized on pre-tax losses in interim periods. The Company elected to early adopt this standard as of February 2, 2020, which did not have an impact on the Company's financial statements or disclosures for the first half of fiscal 2021.
From time to time, the FASB or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we have reviewed the guidance and have determined that they will not apply or are not expected to be material to our Consolidated Financial Statements upon adoption and therefore, are not disclosed.
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Note B. Impact of the COVID-19 Pandemic
During 2019, COVID-19 emerged and spread worldwide. The World Health Organization declared COVID-19 a pandemic in March 2020, resulting in federal, state and local governments and private entities mandating various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining of people who may have been exposed to the virus. I n March 2020, the Company temporarily closed all of its stores, distribution centers and offices, and online businesses, with Associates working remotely where possible . In May 2020, the Company began reopening stores and as of August 1, 2020, more than 4,500 of the Company’s worldwide stores, and each of its online shopping websites, were reopened. In the first quarter of fiscal 2021 the Company amended the credit agreements governing its revolving credit facilities and as a result, we expect to maintain compliance with our covenants for at least one year from the issuance of these financial statements. The impact of the COVID-19 pandemic has had and may continue to have a material impact on our business, results of operations, financial position and cash flows.
Financial Actions
Balance Sheet, Cash Flow and Liquidity
The Company ended the second quarter with $ 6.6 billion of cash. During the second quarter, the Company generated positive operating cash flows and paid off the $ 1.0 billion it drew down in March 2020 from its revolving credit facilities maturing 2022 and 2024. Subsequent to the end of the quarter, on August 10, 2020, the Company also increased its borrowing capacity by entering into a new $ 500 million 364 Day Revolving Credit Facility, making a total of $ 1.5 billion available to the Company under revolving credit facilities. For additional information on the new credit facility, see Note J—Long-Term Debt and Credit Lines. The Company has and will continue to monitor its expenses, capital spending, and shareholder distributions due to the current environment. The Company did not declare a dividend in the first six months of fiscal 2021 and does not expect to declare a dividend in the third quarter of fiscal 2021 and has suspended its share buyback program.
During the first half of fiscal 2021, we negotiated rent deferrals (primarily for second quarter lease payments) for a significant number of our stores, with repayment at later dates, primarily in fiscal 2022. Consistent with updated guidance from the FASB in April 2020, we have elected to treat the COVID-19 pandemic-related rent deferrals as a resolution of a contingency by remeasuring the remaining consideration in the contract, with a corresponding adjustment to the right-of-use asset, using the remeasured consideration. The Company did not reassess the lease classification and did not update the discount rate used to measure the lease liability. For additional information on cash flows for operating leases see Note A—Basis of Presentation and Summary of Significant Accounting Policies.
For the first half of fiscal 2021, as a result of the COVID-19 pandemic, and store closures, the Company evaluated the value of its inventory. Permanent markdowns taken upon reopening of the stores, on transitional or out of season merchandise and merchandise that was already in markdown status, combined with the write-off of perishable goods, resulted in a reduction of approximately $ 0.4 billion in inventory for the six months ended August 1, 2020, which reflects a $ 0.1 billion reversal of the estimated markdowns recorded in the first quarter of fiscal 2021.
TJX evaluates its long-lived assets, operating lease right of use assets, goodwill and tradenames for indicators of impairment at least annually in the fourth quarter of each fiscal year or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Given the substantial reduction in our sales and the reduced cash flow projections as a result of the store closures due to the COVID-19 pandemic, we determined that a triggering event occurred and that an impairment assessment was warranted for certain stores. This analysis resulted in an immaterial amount of impairment charges related to long-lived assets and operating lease right of use assets in the first half of fiscal 2021.
As a result of the COVI D-19 pandemic, governments in the U.S., United Kingdom ( “ U.K. ” ), Canada and various other jurisdictions have implemented programs to encourage companies to retain and pay employees who are unable to work or are limited in the work that they can perform in light of closures or a significant decline in sales. TJX continued to pay and provide benefits to eligible impacted employees during the second quarter of fiscal 2021. As such, we qualified for certain of these provisions, which partially offset related expenses. During the second quarter of fiscal 2021 and the six months ended August 1, 2020 , these programs reduced our expenses by approximately $ 0.2 billion and $ 0.4 billion, respectively, on our Consolidated Statements of (Loss) Income, and increased Accounts receivable, net on our Consolidated Balance Sheets by approxim ately $ 0.1 billion. These government programs also provide for the option to defer payroll tax and VAT payments, which has resulted in an increase in Accrued expenses and other current liabilities on our Consolidated Balance Sheets b y approximately $ 0.2 billion.
The Company also incurred incremental costs associated with the COVID-19 pandemic, including primarily from:
– Incremental payroll investments in our stores for enhanced cleaning and monitoring occupancy.
– Incremental expense related to the discre tionary appreciation bonus for store and distribution center Associates.
– Personal protective equipment for our Associates.
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Note C. Property at Cost
The following table presents the components of property at cost:
In thousands August 1,
2020 February 1,
2020 August 3,
2019
Land and buildings
$ 1,461,878 $ 1,426,222 $ 1,235,675
Leasehold costs and improvements
3,599,362 3,541,413 3,410,862
Furniture, fixtures and equipment 6,397,233 6,404,643 6,096,876
Total property at cost $ 11,458,473 $ 11,372,278 $ 10,743,413
Less: accumulated depreciation and amortization
6,358,062 6,047,230 5,701,535
Net property at cost $ 5,100,411 $ 5,325,048 $ 5,041,878
Depreciation expense was $ 216.5 million for the three months ended August 1, 2020 and $ 214.5 million three months ended August 3, 2019. Depreciation expense was $ 433.5 million for the six months ended August 1, 2020 and $ 424.2 million for the six months ended August 3, 2019 .
Note D. Accumulated Other Comprehensive (Loss) Income
Amounts included in accumulated other comprehensive loss are recorded net of taxes. The following table details the changes in accumulated other comprehensive loss for the twelve months ended February 1, 2020 and the six months ended August 1, 2020:
In thousands Foreign
Currency
Translation Deferred
Benefit
Costs Cash
Flow
Hedge
on Debt Accumulated
Other
Comprehensive
(Loss) Income
Balance, February 2, 2019
$ ( 453,177 ) $ ( 175,745 ) $ ( 1,399 ) $ ( 630,321 )
Additions to other comprehensive loss:
Foreign currency translation adjustments (net of taxes of $ 1,189 )
( 3,943 ) — — ( 3,943 )
Recognition of net gains/losses on benefit obligations (net of taxes of $ 20,489 )
— ( 56,275 ) — ( 56,275 )
Reclassifications from other comprehensive loss to net income:
Amortization of loss on cash flow hedge (net of taxes of $ 303 )
— — 831 831
Amortization of prior service cost and deferred gains/losses (net of taxes of $ 6,019 )
— 16,537 — 16,537
Balance, February 1, 2020
$ ( 457,120 ) $ ( 215,483 ) $ ( 568 ) $ ( 673,171 )
Additions to other comprehensive loss:
Foreign currency translation adjustments (net of taxes of $ 1,486 )
( 59,780 ) — — ( 59,780 )
Reclassifications from other comprehensive loss to net (loss):
Amortization of loss on cash flow hedge (net of taxes of $ 152 )
— — 416 416
Amortization of prior service cost and deferred gains/losses (net of taxes of $ 3,492 )
— 9,594 — 9,594
Balance, August 1, 2020
$ ( 516,900 ) $ ( 205,889 ) $ ( 152 ) $ ( 722,941 )
Note E. Capital Stock and (Loss) Earnings Per Share
Capital Stock
In March 2020, in connection with the actions taken related to the COVID-19 pandemic as described in Note B—Impact of the COVID-19 Pandemic, the Company suspended its share repurchase program.
During the first quarter of fiscal 2021, prior to the suspension of our share repurchase program, TJX repurchased and retired 3.2 million shares of its common stock at a cost of $ 190.1 million on a "trade date" basis. All share repurchases occurred during the first quarter of fiscal 2021. TJX reflects stock repurchases in its financial statements on a “settlement date” or cash basis. TJX had cash expenditures under repurchase programs of $ 201.5 million for the six months ended August 1, 2020, and $ 699.8 million for the six months ended August 3, 2019. These expenditures were funded by cash generated from operations.
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In February 2020, the Company announced that its Board of Directors had approved in January 2020 a new stock repurchase program that authorizes the repurchase of up to an additional $ 1.5 billion of TJX common stock from time to time. In February 2019, TJX announced that its Board of Directors had approved an additional stock repurchase program that authorized the repurchase of up to $ 1.5 billion of TJX common stock from time to time.
As of August 1, 2020, TJX had approximately $ 3.0 billion available under these previously announced stock repurchase programs.
All shares repurchased under the stock repurchase programs have been retired.
(Loss) Earnings Per Share
The following table presents the calculation of basic and diluted (loss) earnings per share for net (loss) income:
Thirteen Weeks Ended Twenty-Six Weeks Ended
Amounts in thousands, expect per share amounts August 1,
2020 August 3,
2019 August 1,
2020 August 3,
2019
Basic (loss) earnings per share:
Net (loss) income $ ( 214,220 ) $ 758,962 $ ( 1,101,709 ) $ 1,459,140
Weighted average common shares outstanding for basic (loss) earnings per share calculation 1,198,634 1,210,525 1,198,222 1,212,528
Basic (loss) earnings per share $ ( 0.18 ) $ 0.63 $ ( 0.92 ) $ 1.20
Diluted (loss) earnings per share:
Net (loss) income $ ( 214,220 ) $ 758,962 $ ( 1,101,709 ) $ 1,459,140
Weighted average common shares outstanding for basic (loss) earnings per share calculations 1,198,634 1,210,525 1,198,222 1,212,528
Assumed exercise / vesting of:
Stock options and awards — 18,461 — 18,683
Weighted average common shares outstanding for diluted (loss) earnings per share calculation 1,198,634 1,228,986 1,198,222 1,231,211
Diluted (loss) earnings per share $ ( 0.18 ) $ 0.62 $ ( 0.92 ) $ 1.19
Cash dividends declared per share $ — $ 0.230 $ — $ 0.460
For the quarter and six months ended August 1, 2020, as a result of net losses, all options have been excluded from the calculation of diluted earnings per share and therefore there was no difference in the weighted average number of common shares for basic and diluted loss per share as the effect of all potentially dilutive shares outstanding would have been anti-dilutive. In reporting periods with net income, the weighted average common shares for the diluted earnings per share calculation excludes the impact of outstanding stock options if the assumed proceeds per share of the option is in excess of the average price of TJX’s common stock for the related fiscal period. Such options are excluded because they would have an antidilutive effect. There were 5.9 million such options excluded for each of the thirteen weeks and twenty-six weeks ended August 3, 2019.
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. TJX seeks to minimize risk from changes in interest and foreign currency exchange rates and fuel costs through the use of derivative financial instruments when and to the extent deemed appropriate. 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 Consolidated Balance Sheets 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 (loss) income or are recognized currently in earnings, along with an offsetting adjustment against the basis of the item being hedged.
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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 based on the price of diesel fuel. 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. During fiscal 2020, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2021, and during the first six months of fiscal 2021, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for the first six months of fiscal 2022. The hedge agreements outstanding at August 1, 2020 relate to approximately 50 % of TJX’s estimated notional diesel requirements for the remainder of fiscal 2021 and approximately 50 % of TJX’s estimated notional diesel requirements for the first six months of fiscal 2022. These diesel fuel hedge agreements will settle throughout the remainder of fiscal 2021 and throughout the first seven months of fiscal 2022. TJX elected not to apply hedge accounting 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 the Company’s operations in currencies other than their respective functional currencies. As a result of the COVID-19 pandemic, there was a significant change in the Company's anticipated merchandise purchases and we early settled derivative contracts designed to hedge merchandise purchases that would no longer take place. The settlement of these contracts resulted in a net gain of $ 24.8 million in the first quarter of fiscal 2021. The contracts outstanding at August 1, 2020 cover the merchandise purchases the Company is committed to over the next several months. Additionally, TJX’s operations in Europe are subject to foreign currency exposure as a result of their buying function being centralized in the U.K. All merchandise is purchased centrally in the U.K. and then shipped and billed to the retail entities in other countries. This intercompany billing to TJX’s European businesses’ Euro denominated operations creates exposure to the central buying entity for changes in the exchange rate between the Euro and British Pound. The inflow of Euros to the central buying entity provides a natural hedge for merchandise purchased from third-party vendors that is denominated in Euros. TJX calculates any excess Euro exposure each month and enters into forward contracts of approximately 30 days' duration to mitigate this exposure.
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.
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The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at August 1, 2020:
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
August 1,2020
Fair value hedges:
Intercompany balances, primarily debt and related interest:
zł 65,000 £ 12,780 0.1966 (Accrued Exp) $ — $ ( 628 ) $ ( 628 )
€ 60,000 £ 53,412 0.8902 (Accrued Exp) — ( 1,033 ) ( 1,033 )
A$ 110,000 U.S.$ 70,802 0.6437 (Accrued Exp) — ( 7,798 ) ( 7,798 )
U.S.$ 72,475 £ 55,000 0.7589 (Accrued Exp) — ( 448 ) ( 448 )
£ 200,000 U.S.$ 249,499 1.2475 (Accrued Exp) — ( 12,538 ) ( 12,538 )
C$ 550,000 U.S.$ 390,766 0.7105 (Accrued Exp) — ( 19,571 ) ( 19,571 )
Economic hedges for which hedge accounting was not elected:
Diesel fuel contracts Fixed on
2.9 M – 3.5 M
gal per month
Float on
2.9 M – 3.5 M
gal per month
N/A (Accrued Exp) — ( 13,920 ) ( 13,920 )
Intercompany billings in TJX International, primarily merchandise related:
€ 73,400 £ 65,678 0.8948 (Accrued Exp) — ( 570 ) ( 570 )
Merchandise purchase commitments:
C$ 271,576 U.S.$ 201,700 0.7427 Prepaid Exp / (Accrued Exp) 737 ( 1,647 ) ( 910 )
£ 240,694 U.S.$ 304,800 1.2663 Prepaid Exp / (Accrued Exp) 34 ( 10,415 ) ( 10,381 )
A$ 40,156 U.S.$ 28,250 0.7035 (Accrued Exp) — ( 447 ) ( 447 )
zł 87,000 £ 18,059 0.2076 Prepaid Exp 419 — 419
U.S.$ 3,771 € 3,383 0.8971 Prepaid Exp 213 — 213
Total fair value of derivative financial instruments $ 1,403 $ ( 69,015 ) $ ( 67,612 )
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The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at February 1, 2020:
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, 2020
Fair value hedges:
Intercompany balances, primarily debt and related interest:
zł 45,000 £ 8,930 0.1984 Prepaid Exp $ 270 $ — $ 270
A$ 50,000 U.S.$ 33,911 0.6782 Prepaid Exp 275 — 275
U.S.$ 72,475 £ 55,000 0.7589 Prepaid Exp 743 — 743
Economic hedges for which hedge accounting was not elected:
Diesel fuel contracts Fixed on
2.9 M – 3.5 M
gal per month
Float on
2.9 M– 3.5 M
gal per month
N/A (Accrued Exp) — ( 9,927 ) ( 9,927 )
Intercompany billings in TJX International, primarily merchandise related:
€ 58,700 £ 49,848 0.8492 Prepaid Exp 655 — 655
Merchandise purchase commitments:
C$ 609,340 U.S.$ 463,200 0.7602 Prepaid Exp / (Accrued Exp) 2,877 ( 207 ) 2,670
C$ 37,051 € 25,200 0.6801 Prepaid Exp / (Accrued Exp) 61 ( 44 ) 17
£ 265,653 U.S.$ 341,880 1.2869 Prepaid Exp / (Accrued Exp) 11 ( 9,792 ) ( 9,781 )
zł 362,700 £ 72,217 0.1991 Prepaid Exp 1,903 — 1,903
A$ 29,400 U.S.$ 20,151 0.6854 Prepaid Exp 435 — 435
U.S.$ 49,849 € 44,635 0.8954 Prepaid Exp / (Accrued Exp) 10 ( 235 ) ( 225 )
Total fair value of derivative financial instruments $ 7,240 $ ( 20,205 ) $ ( 12,965 )
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The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at August 3, 2019:
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
August 3,2019
Fair value hedges:
Intercompany balances, primarily debt and related interest:
zł 64,000 £ 13,055 0.2040 (Accrued Exp) $ — $ ( 585 ) $ ( 585 )
€ 55,950 £ 49,560 0.8858 (Accrued Exp) — ( 2,208 ) ( 2,208 )
A$ 40,000 U.S.$ 28,249 0.7062 Prepaid Exp 944 — 944
U.S.$ 72,020 £ 55,000 0.7637 (Accrued Exp) — ( 4,785 ) ( 4,785 )
Economic hedges for which hedge accounting was not elected:
Diesel fuel contracts Fixed on
2.7 M – 3.3 M
gal per month
Float on
2.7 M – 3.3 M
gal per month
N/A (Accrued Exp) — ( 6,575 ) ( 6,575 )
Intercompany billings in TJX International, primarily merchandise related:
€ 89,000 £ 80,029 0.8992 (Accrued Exp) — ( 1,687 ) ( 1,687 )
Lease liability in TJX International:
zł 330,044 € 77,479 0.2348 Prepaid Exp 866 — 866
Merchandise purchase commitments:
C$ 702,924 U.S.$ 529,750 0.7536 Prepaid Exp / (Accrued Exp) 1,323 ( 4,800 ) ( 3,477 )
C$ 38,119 € 25,400 0.6663 (Accrued Exp) — ( 592 ) ( 592 )
£ 313,490 U.S.$ 403,600 1.2874 Prepaid Exp / (Accrued Exp) 20,418 ( 12 ) 20,406
A$ 32,229 U.S.$ 22,665 0.7032 Prepaid Exp 690 — 690
zł 418,012 £ 85,810 0.2053 (Accrued Exp) — ( 3,267 ) ( 3,267 )
U.S.$ 3,834 £ 3,052 0.7960 (Accrued Exp) — ( 120 ) ( 120 )
U.S.$ 79,010 € 69,427 0.8787 (Accrued Exp) — ( 1,567 ) ( 1,567 )
Total fair value of derivative financial instruments $ 24,241 $ ( 26,198 ) $ ( 1,957 )
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Presented below is the impact of derivative financial instruments on the Consolidated Statements of (Loss) Income for the periods shown:
Amount of Gain (Loss) Recognized
in Income by Derivative
Location of Gain (Loss)
Recognized in Income by
Derivative
Thirteen Weeks Ended Twenty-Six Weeks Ended
In thousands August 1,
2020 August 3,
2019 August 1,
2020 August 3,
2019
Fair value hedges:
Intercompany balances, primarily debt and related interest Selling, general and administrative expenses $ ( 38,060 ) $ ( 10,345 ) $ ( 43,233 ) $ ( 6,712 )
Economic hedges for which hedge accounting was not elected:
Intercompany receivable Selling, general and administrative expenses — — — 3,257
Diesel fuel contracts Cost of sales, including buying and occupancy costs 10,123 ( 6,319 ) ( 12,731 ) ( 2,632 )
Intercompany billings in TJX International, primarily merchandise related Cost of sales, including buying and occupancy costs ( 2,039 ) ( 6,351 ) ( 3,891 ) ( 4,200 )
International lease liabilities Cost of sales, including buying and occupancy costs — 108 — ( 1,414 )
Merchandise purchase commitments Cost of sales, including buying and occupancy costs ( 15,808 ) 17,369 34,327 27,158
Gain recognized in (loss) / income $ ( 45,784 ) $ ( 5,538 ) $ ( 25,528 ) $ 15,457
Note G. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date or “exit price.” The inputs used to measure fair value are generally classified into the following hierarchy:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
Level 3: Unobservable inputs for the asset or liability
The following table sets forth TJX’s financial assets and liabilities that are accounted for at fair value on a recurring basis:
In thousands August 1,
2020 February 1,
2020 August 3,
2019
Level 1
Assets:
Executive Savings Plan investments $ 324,270 $ 305,777 $ 282,548
Level 2
Assets:
Foreign currency exchange contracts 1,403 7,240 24,241
Liabilities:
Foreign currency exchange contracts $ 55,095 $ 10,278 $ 19,623
Diesel fuel contracts 13,920 9,927 6,575
Investments designed to meet obligations under the Executive Savings Plan are invested in registered investment companies traded in active markets and are recorded at unadjusted quoted prices.
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Foreign currency exchange contracts and diesel fuel contracts are valued using broker quotations, which include observable market information. TJX’s investments are primarily high-grade commercial paper, institutional money market funds and time deposits with major banks. TJX does not make adjustments to quotes or prices obtained from brokers or pricing services but does assess the credit risk of counterparties and will adjust final valuations when appropriate. Where independent pricing services provide fair values, TJX obtains an understanding of the methods used in pricing. As such, these instruments are classified within Level 2.
The fair value of TJX’s general corporate debt was estimated by obtaining market quotes given the trading levels of other bonds of the same general issuer type and market perceived credit quality. These inputs are considered to be Level 2. The fair value of long-term debt as of August 1, 2020 was $ 6.4 billion compared to a carrying value of $ 5.4 billion. The fair value of the current portion of long-term debt as of August 1, 2020 was $ 762.7 million compared to a carrying value of $ 749.2 million. For additional information on the new debt issuances, see Note J—Long-Term Debt and Credit Lines. The fair value of long-term debt as of February 1, 2020 and August 3, 2019 was $ 2.3 billion compared to a carrying value of $ 2.2 billion. These estimates do not necessarily reflect provisions or restrictions in the various debt agreements that might affect TJX’s ability to settle these obligations.
TJX’s cash equivalents are stated at cost, which approximates fair value due to the short maturities of these instruments.
Note H. Segment Information
TJX operates four main business segments. The Marmaxx segment (T.J. Maxx, Marshalls, tjmaxx.com and marshalls.com) and the HomeGoods segment (HomeGoods and Homesense) both operate in the United States, the TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and the TJX International segment operates T.K. Maxx, Homesense and tkmaxx.com in Europe and T.K. Maxx in Australia. In addition to our four main business segments, Sierra operates sierra.com and retail stores in the U.S. The results of Sierra are included in the Marmaxx segment.
All of TJX’s stores, with the exception of HomeGoods and HomeSense, sell family apparel and home fashions. HomeGoods and HomeSense offer home fashions.
TJX evaluates the performance of its segments based on “segment profit or loss,” which it defines as pre-tax income or loss before general corporate expense, interest expense, net and certain separately disclosed unusual or infrequent items. “Segment profit or loss,” as defined by TJX, may not be comparable to similarly titled measures used by other entities. The terms “segment margin” or “segment profit margin” are used to describe segment profit or loss as a percentage of net sales. These measures of performance should not be considered alternatives to net (loss) income or cash flows from operating activities as an indicator of TJX’s performance or as a measure of liquidity.
Presented below is financial information with respect to TJX’s business segments:
Thirteen Weeks Ended Twenty-Six Weeks Ended
In thousands August 1,
2020 August 3,
2019 August 1,
2020 August 3,
2019
Net sales:
In the United States:
Marmaxx $ 3,959,340 $ 6,106,697 $ 6,657,119 $ 11,908,457
HomeGoods 1,235,973 1,424,836 1,995,838 2,821,701
TJX Canada 591,918 967,460 971,554 1,815,195
TJX International 880,344 1,282,603 1,451,952 2,513,828
Total net sales $ 6,667,575 $ 9,781,596 $ 11,076,463 $ 19,059,181
Segment profit (loss):
In the United States:
Marmaxx $ 100,471 $ 855,199 $ ( 609,198 ) $ 1,651,192
HomeGoods 97,576 128,942 ( 56,127 ) 265,727
TJX Canada 21,965 118,217 ( 75,216 ) 215,249
TJX International ( 131,262 ) 50,459 ( 389,879 ) 78,946
Total segment profit (loss) 88,750 1,152,817 ( 1,130,420 ) 2,211,114
General corporate expense 123,433 128,613 223,760 249,611
Interest expense, net 57,336 2,897 80,687 3,714
(Loss) income before income taxes $ ( 92,019 ) $ 1,021,307 $ ( 1,434,867 ) $ 1,957,789
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Note I. Pension Plans and Other Retirement Benefits
Presented below is financial information relating to TJX’s funded defined benefit pension plan (“qualified pension plan” or “funded plan”) and its unfunded supplemental pension plan (“unfunded plan”) for the periods shown:
Funded Plan Unfunded Plan
Thirteen Weeks Ended Thirteen Weeks Ended
In thousands August 1,
2020 August 3,
2019 August 1,
2020 August 3,
2019
Service cost $ 12,540 $ 11,049 $ 709 $ 552
Interest cost 12,519 12,990 801 967
Expected return on plan assets ( 22,242 ) ( 18,488 ) — —
Amortization of net actuarial loss and prior service cost 5,509 4,509 1,034 936
Total expense $ 8,326 $ 10,060 $ 2,544 $ 2,455
Funded Plan Unfunded Plan
Twenty-Six Weeks Ended Twenty-Six Weeks Ended
In thousands August 1,
2020 August 3,
2019 August 1,
2020 August 3,
2019
Service cost $ 25,080 $ 22,098 $ 1,418 $ 1,104
Interest cost 25,038 25,980 1,602 1,934
Expected return on plan assets ( 44,484 ) ( 36,976 ) — —
Amortization of net actuarial loss and prior service cost 11,018 9,018 2,068 1,872
Total expense $ 16,652 $ 20,120 $ 5,088 $ 4,910
TJX’s policy with respect to the funded plan is to fund, at a minimum, the amount required to maintain a funded status of 80 % of the applicable pension liability (the Funding Target pursuant to the Internal Revenue Code section 430) or such other amount as is sufficient to avoid restrictions with respect to the funding of nonqualified plans under the Internal Revenue Code. We do not anticipate any required funding in fiscal 2021 for the funded plan. We anticipate making contributions of $ 3.1 million to provide current benefits coming due under the unfunded plan in fiscal 2021.
The amounts included in amortization of net actuarial loss and prior service cost in the table above have been reclassified in their entirety from accumulated other comprehensive loss to the Consolidated Statements of (Loss) Income, net of related tax effects, for the periods presented.
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Note J. Long-Term Debt and Credit Lines
The table below presents long-term debt, exclusive of current installments, as of August 1, 2020, February 1, 2020 and August 3, 2019. All amounts are net of unamortized debt discounts.
In thousands August 1,
2020 February 1,
2020 August 3,
2019
General corporate debt:
2.75 % senior unsecured notes, maturing June 15, 2021 (effective interest rate of 2.76 % after reduction of unamortized debt discount of $ 63 at August 1, 2020, $ 100 at February 1, 2020 and $ 137 at August 3, 2019)
$ 749,937 $ 749,900 $ 749,863
2.50 % senior unsecured notes, maturing May 15, 2023 (effective interest rate of 2.51 % after reduction of unamortized debt discount of $ 122 at August 1, 2020, $ 145 at February 1, 2020 and $ 167 at August 3, 2019)
499,878 499,855 499,833
3.50 % senior unsecured notes, maturing April 15, 2025 (effective interest rate of 3.58 % after reduction of unamortized debt discount of $ 4,713 at August 1, 2020)
1,245,287 — —
2.25 % senior unsecured notes, maturing September 15, 2026 (effective interest rate of 2.32 % after reduction of unamortized debt discount of $ 4,538 at August 1, 2020, $ 4,911 at February 1, 2020 and $ 5,284 at August 3, 2019)
995,462 995,089 994,716
3.75 % senior unsecured notes, maturing April 15, 2027 (effective interest rate of 3.76 % after reduction of unamortized debt discount of $ 493 at August 1, 2020)
749,507 — —
3.875 % senior unsecured notes, maturing April 15, 2030 (effective interest rate of 3.89 % after reduction of unamortized debt discount of $ 1,510 at August 1, 2020)
1,248,490 — —
4.50 % senior unsecured notes, maturing April 15, 2050 (effective interest rate of 4.52 % after reduction of unamortized debt discount of $ 4,368 at August 1, 2020)
745,632 — —
Total debt 6,234,193 2,244,844 2,244,412
Current maturities of long-term debt, net of debt issuance costs ( 749,209 ) — —
Debt issuance costs ( 39,659 ) ( 8,219 ) ( 9,291 )
Long-term debt $ 5,445,325 $ 2,236,625 $ 2,235,121
On April 1, 2020, given the rapidly changing environment and level of uncertainty created by the COVID-19 pandemic and the associated impact on future earnings, the Company completed the issuance and sale of (a) $ 1.25 billion aggregate principal amount of 3.50 % notes due 2025, (b) $ 750 million aggregate principal amount of 3.75 % notes due 2027, (c) $ 1.25 billion aggregate principal amount of 3.875 % notes due 2030 and (d) $ 750 million aggregate principal amount of 4.50 % notes due 2050, all of which was outstanding at August 1, 2020.
As of the fiscal period ended August 1, 2020, TJX had two $ 500 million revolving credit facilities, one which matures in March 2022 and one which matures in May 2024. I n July 2020, t he Company paid off the $ 1.0 billion it had drawn down on these revolving credit facilities during the first quarter of fiscal 2021. The six month interest rate on these borrowings was 1.757 % through May 15, 2020, and increased to 2.007 % through the payoff date. The terms of these revolving credit facilities require quarterly payments on the committed amount and payment of interest on borrowings at rates based on LIBOR or a base rate plus a variable margin, in each case based on the Company’s long term debt ratings, and require usages fees based on total credit extensions under such facilities. As of August 1, 2020, February 1, 2020 and August 3, 2019, and during the quarter and year then ended, there were no amounts outstanding under these facilities.
Subsequent to the fiscal q uarter ending August 1, 2020, on August 10, 2020, the Company increased its borrowing capacity by entering into a new $ 500 million 364 Day Revolving Credit Facility, maturing in August 2021. With the new 364 Day Revolving Credit Facility, the Company has increased its borrowing capacity to $ 1.5 billion, all of which currently remains available to the Company. Th e terms of the 364 Day Revolving Credit Facility require quarterly payments on committed amounts and payment of interest on borrowings at rates based on LIBOR or a base rate plus a variable margin, in each case based on the Company's long-term debt ratings.
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Beginning with the fiscal period ending May 1, 2021, the terms and covenants under the existing revolving credit facilities and the new 364 Day revolving Credit Facility require the Company to maintain a quarterly-tested leverage ratio of funded debt to earnings before interest, taxes, depreciation and amortization and rentals (“EBITDAR”) of not more than 5.00 to 1.00, with an incremental 0.50 stepdown each quarter thereafter, until the fourth quarter of fiscal 2022 when the new covenant of 3.50 to 1.00 permanently applies. In addition, the Company is required to maintain a minimum liquidity, defined as unrestricted cash and cash equivalents and aggregate borrowing availability under the 2022 revolving credit facility and the 2024 revolving credit facility plus, under the 364 Day Revolving Credit Facility, borrowing ability under that facility, of at least $ 1.5 billion through the period ending April 30, 2021, as well as minimum EBITDAR of $ 650 million for the fiscal quarter ending January 30, 2021.
As of August 1, 2020, February 1, 2020 and August 3, 2019, TJX Canada had two uncommitted credit lines, a C$ 10 million facility for operating expenses and a C$ 10 million letter of credit facility. As of August 1, 2020, February 1, 2020 and August 3, 2019, and during the quarters and year then ended, there were no amounts outstanding on the Canadian credit line. As of August 1, 2020, February 1, 2020 and August 3, 2019, our European business at TJX International had an uncommitted credit line of £ 5 million. As of August 1, 2020, February 1, 2020 and August 3, 2019, and during the quarters and year then ended, there were no amounts outstanding on the European credit line.
Note K. Income Taxes
The e ffective income tax rate was ( 132.8 )% for the second quarter of fiscal 2021 and 25.7 % for the second quarter of fiscal 2020. The e ffective income tax rate was 23.2 % for the six months ended August 1, 2020 compared to 25.5 % for the six months ended August 3, 2019. The second quarter’s negative effective income tax rate is primarily due to the reversal of income tax benefit recorded in the first quarter of fiscal 2021 related to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) enacted on March 27, 2020. The CARES Act provides for net operating losses incurred in fiscal 2021 to be carried back to earlier tax years with higher tax rates than the current year. The projected losses subject to carry back to earlier years decreased in the second quarter of fiscal 2021, resulting in a reduction of the year to date income tax benefit and a second quarter negative effective income tax rate.
TJX had net unrecognized tax benefits of $ 262.2 million as of August 1, 2020, $ 254.8 million as of February 1, 2020 and $ 241.6 million as of August 3, 2019.
TJX is subject to U.S. federal income tax as well as income tax in multiple state, local and foreign jurisdictions. In the U.S. and India, fiscal years through 2010 are no longer subject to examination. In all other jurisdictions, fiscal years through 2011 are no longer subject to examination.
TJX’s accounting policy classifies interest and penalties related to income tax matters as part of income tax expense. The total accrued amount on the Consolidated Balance Sheets for interest and penalties was $ 32.0 million as of August 1, 2020, $ 27.9 million as of February 1, 2020 and $ 27.3 million as of August 3, 2019.
Based on the outcome of tax examinations or judicial or administrative proceedings, or as a result of the expiration of statutes of limitations in specific jurisdictions, it is reasonably possible that unrecognized tax benefits for certain tax positions taken on previously filed tax returns may change materially from those presented in the Consolidated Financial Statements. During the next 12 months, it is reasonably possible that tax examinations of prior years’ tax returns or judicial or administrative proceedings that reflect such positions taken by TJX may be finalized. As a result, the total net amount of unrecognized tax benefits may decrease, which would reduce the provision for taxes on earnings, by a range of zero to $ 36.0 million.
Note L. Contingent Obligations and Contingencies
Contingent Obligations
TJX has contingent obligations on leases, for which it was a lessee or guarantor, which were assigned to third parties without TJX being released by the landlords. We have had numerous leases from our former operations where our guarantee required us to satisfy some of these lease obligations and we established appropriate reserves. We may be contingently liable on up to eight leases of former TJX businesses, for which we believe the likelihood of future liability to TJX is remote. We may also be contingently liable for assignments and subleases if the subtenants or assignees do not fulfill their obligations. TJX estimates the undiscounted value of these contingent obligations as of August 1, 2020 to be approximately $ 13.4 million. TJX believes that most or all of these contingent obligations will not revert to the Company and, to the extent they do, may be resolved for substantially less due to mitigating factors including TJX's expectation to further sublet.
TJX is a party to various agreements under which it may be obligated to indemnify the other party with respect to certain losses related to matters including title to assets sold, specified environmental matters or certain income taxes. These obligations are often limited in time and amount. There are no amounts reflected in our Consolidated Balance Sheets with respect to these contingent obligations.
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Contingencies
TJX is subject to certain legal proceedings, lawsuits, disputes and claims that arise from time to time in the ordinary course of our business. In addition, TJX is a defendant in several lawsuits filed in federal and state courts brought as putative class or collective actions on behalf of various groups of current and former salaried and hourly Associates in the U.S. The lawsuits allege violations of the Fair Labor Standards Act and of state wage and hour and other labor statutes. The lawsuits are in various procedural stages and seek monetary damages, injunctive relief and attorneys’ fees. In connection with ongoing litigation, an immaterial amount has been accrued in the accompanying Consolidated Financial Statements.
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