TJX COMPANIES INC /DE/ 10-Q

Item 1. Financial Statements THE TJX COMPANIES, INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) IN THOUSANDS EXCEPT PER SHARE AMOUNTS Thirteen Weeks Ended May 1, 2021 May 2, 2020 Net sales $ 10,086,661 $ 4,408,888 Cost of sales, including buying and occupancy costs 7,255,635 4,414,465 Selling, general and administrative expenses 2,064,992 1,313,920 Interest expense, net 44,688 23,351 Income (loss) before income taxes 721,346 ( 1,342,848 ) (Provision) benefit for income taxes ( 187,416 ) 455,359 Net income (loss) $ 533,930 $ ( 887,489 ) Basic earnings (loss) per share $ 0.44 $ ( 0.74 ) Weighted average common shares – basic 1,205,439 1,197,809 Diluted earnings (loss) per share $ 0.44 $ ( 0.74 ) Weighted average common shares – diluted 1,221,517 1,197,809 The accompanying notes are an integral part of the unaudited consolidated financial statements. 3 THE TJX COMPANIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) IN THOUSANDS Thirteen Weeks Ended May 1, 2021 May 2, 2020 Net income (loss) $ 533,930 $ ( 887,489 ) Additions to other comprehensive income (loss): Foreign currency translation adjustments, net of related tax provision of $ 2,898 in fiscal 2022 and tax benefit of $ 6,948 in fiscal 2021 22,249 ( 129,158 ) Reclassifications from other comprehensive income (loss) to net income (loss): Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $ 1,056 in fiscal 2022 and $ 1,746 in fiscal 2021 2,901 4,797 Amortization of loss on cash flow hedge, net of related tax provisions of $ 603 in fiscal 2022 and $ 76 in fiscal 2021 ( 263 ) 208 Other comprehensive income (loss), net of tax 24,887 ( 124,153 ) Total comprehensive income (loss) $ 558,817 $ ( 1,011,642 ) The accompanying notes are an integral part of the unaudited consolidated financial statements. 4 THE TJX COMPANIES, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) IN THOUSANDS, EXCEPT SHARE DATA May 1, 2021 January 30, 2021 May 2, 2020 ASSETS Current assets: Cash and cash equivalents $ 8,775,485 $ 10,469,570 $ 4,287,835 Accounts receivable, net 621,177 461,139 172,463 Merchandise inventories 5,114,643 4,337,389 4,945,720 Prepaid expenses and other current assets 440,533 434,977 408,587 Federal, state and foreign income taxes recoverable 64,211 36,262 481,643 Total current assets 15,016,049 15,739,337 10,296,248 Net property at cost 5,067,824 5,036,096 5,201,697 Non-current deferred income taxes, net 135,765 127,191 36,742 Operating lease right of use assets 9,121,628 8,989,998 9,073,898 Goodwill 99,324 98,998 94,469 Other assets 860,844 821,935 712,186 TOTAL ASSETS $ 30,301,434 $ 30,813,555 $ 25,415,240 LIABILITIES Current liabilities: Accounts payable $ 4,433,295 $ 4,823,397 $ 1,071,190 Accrued expenses and other current liabilities 3,536,637 3,471,459 2,187,885 Current portion of operating lease liabilities 1,650,574 1,677,605 1,399,290 Current portion of long-term debt — 749,684 — Federal, state and foreign income taxes payable 286,455 81,523 11,182 Total current liabilities 9,906,961 10,803,668 4,669,547 Other long-term liabilities 1,033,236 1,063,902 786,008 Non-current deferred income taxes, net 33,930 37,164 113,229 Long-term operating lease liabilities 7,853,229 7,743,216 7,914,825 Long-term debt 5,334,864 5,332,921 7,192,413 Commitments and contingencies (See Note K) 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 1,206,386,746 ; 1,204,698,124 and 1,197,877,094 respectively 1,206,387 1,204,698 1,197,877 Additional paid-in capital 321,475 260,515 8,104 Accumulated other comprehensive loss ( 581,184 ) ( 606,071 ) ( 797,324 ) Retained earnings 5,192,536 4,973,542 4,330,561 Total shareholders’ equity 6,139,214 5,832,684 4,739,218 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 30,301,434 $ 30,813,555 $ 25,415,240 The accompanying notes are an integral part of the unaudited consolidated financial statements. 5 THE TJX COMPANIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) IN THOUSANDS Thirteen Weeks Ended May 1, 2021 May 2, 2020 Cash flows from operating activities: Net income (loss) $ 533,930 $ ( 887,489 ) Adjustments to reconcile net income (loss) to cash used in operating activities: Depreciation and amortization 215,379 219,460 Loss on property disposals and impairment charges 931 26,424 Deferred income tax (benefit) ( 16,181 ) ( 48,464 ) Share-based compensation 50,536 ( 11,531 ) Changes in assets and liabilities: (Increase) decrease in accounts receivable ( 156,999 ) 210,419 (Increase) in merchandise inventories ( 750,553 ) ( 136,027 ) (Increase) in income taxes recoverable ( 27,949 ) ( 434,674 ) Decrease (increase) in prepaid expenses and other current assets 12,254 ( 39,580 ) (Decrease) in accounts payable ( 410,244 ) ( 1,567,597 ) Increase (decrease) in accrued expenses and other liabilities 12,214 ( 578,178 ) Increase (decrease) in income taxes payable 203,740 ( 13,290 ) (Decrease) increase in net operating lease liabilities ( 50,319 ) 65,578 Other, net ( 49,466 ) 34,466 Net cash (used in) operating activities ( 432,727 ) ( 3,160,483 ) Cash flows from investing activities: Property additions ( 225,293 ) ( 210,525 ) Purchase of investments ( 7,345 ) ( 14,792 ) Sales and maturities of investments 7,733 4,214 Net cash (used in) investing activities ( 224,905 ) ( 221,103 ) Cash flows from financing activities: Payments on debt ( 750,000 ) — Proceeds from long-term debt including revolving credit facilities — 4,988,452 Payments for debt issuance expenses — ( 33,872 ) Payments for repurchase of common stock — ( 201,500 ) Cash dividends paid ( 315,215 ) ( 278,250 ) Proceeds from issuance of common stock 36,539 37,444 Payments of employee tax withholdings for performance based stock awards ( 24,426 ) ( 21,765 ) Net cash (used in) provided by financing activities ( 1,053,102 ) 4,490,509 Effect of exchange rate changes on cash 16,649 ( 37,840 ) Net (decrease) increase in cash and cash equivalents ( 1,694,085 ) 1,071,083 Cash and cash equivalents at beginning of year 10,469,570 3,216,752 Cash and cash equivalents at end of period $ 8,775,485 $ 4,287,835 The accompanying notes are an integral part of the unaudited consolidated financial statements. 6 THE TJX COMPANIES, INC. CONSOLIDATED STATEMENTS 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, January 30, 2021 1,204,698 $ 1,204,698 $ 260,515 $ ( 606,071 ) $ 4,973,542 $ 5,832,684 Net income — — — — 533,930 533,930 Other comprehensive income, net of tax — — — 24,887 — 24,887 Cash dividends declared on common stock — — — — ( 314,936 ) ( 314,936 ) Recognition of share-based compensation — — 50,536 — — 50,536 Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings 1,689 1,689 10,424 — — 12,113 Balance, May 1, 2021 1,206,387 $ 1,206,387 $ 321,475 $ ( 581,184 ) $ 5,192,536 $ 6,139,214 Thirteen 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) — — — — ( 887,489 ) ( 887,489 ) Other comprehensive (loss), net of tax — — — ( 124,153 ) — ( 124,153 ) Recognition (reversal) of share-based compensation — — 20,304 — ( 31,835 ) ( 11,531 ) Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings 2,164 2,164 13,515 — — 15,679 Common stock repurchased and retired ( 3,387 ) ( 3,387 ) ( 25,715 ) — ( 172,398 ) ( 201,500 ) Balance, May 2, 2020 1,197,877 $ 1,197,877 $ 8,104 $ ( 797,324 ) $ 4,330,561 $ 4,739,218 The accompanying notes are an integral part of the unaudited consolidated financial statements. 7 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 January 30, 2021 (“fiscal 2021”). 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. The January 30, 2021 balance sheet data was derived from audited Consolidated Financial Statements and does not include all disclosures required by GAAP. COVID-19 Pandemic The novel coronavirus disease (“COVID-19”), was first identified in December 2019 before spreading worldwide. The Company has been, and may continue to be, impacted by the COVID-19 pandemic. In response to the pandemic, primarily during the first quarter of fiscal 2021, the Company took several steps to strengthen its financial position and balance sheet and to maintain financial liquidity and flexibility. The COVID-19 pandemic is complex and rapidly evolving and the severity and duration of the pandemic is still unknown. Additionally, the resurgence or the emergence of new variants has caused and may continue to cause intermittent or prolonged periods of temporary store closures, and could elicit further actions and recommendations from governments and public health authorities that could impact our operations. In the first quarter of fiscal 2021, the Company temporarily closed all of its stores, distribution centers and offices, and online businesses until the second quarter of fiscal 2021, while during the first quarter of fiscal 2022, our stores in the United States remained open for the entire first quarter, and we had (and continue to have) store closures primarily in Europe and Canada. The Company continues to monitor developments, including government requirements and recommendations at the national, state, and local level that could result in possible additional impacts to our operations. The Company cannot reasonably estimate the duration and severity of this pandemic which has had, and may continue to have, a material impact on its business, results of operations, financial position and cash flows. 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 29, 2022 (“fiscal 2022”) and is a 52-week fiscal year. Fiscal 2021 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, 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 consolidated financial statements and there may be changes to those estimates in future periods. The Company believes that its 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. Reclassifications Certain reclassifications have been made to prior year financial information to conform to the current year’s presentation. 8 Deferred Gift Card Revenue The following table presents deferred gift card revenue activity: In thousands May 1, 2021 May 2, 2020 Balance, beginning of year $ 576,187 $ 500,844 Deferred revenue 323,773 158,948 Effect of exchange rates changes on deferred revenue 2,899 ( 4,680 ) Revenue recognized ( 365,854 ) ( 180,062 ) Balance, end of period $ 537,005 $ 475,050 The increase in both deferred revenue and revenue recognized versus the prior year reflects the impact of the temporary store and e-commerce closures in the first quarter of fiscal 2021 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. Leases Supplemental cash flow information related to leases for the thirteen weeks ended May 1, 2021 and May 2, 2020 is as follows: Thirteen Weeks Ended In thousands May 1, 2021 May 2, 2020 Operating cash flows paid for operating leases $ 531,836 $ 445,901 Lease liabilities arising from obtaining right of use assets $ 488,666 $ 553,075 During fiscal 2021, the Company negotiated rent deferrals for a significant number of its stores, with repayment primarily throughout fiscal 2022. Future Adoption of New Accounting Standards From time to time, the Financial Accounting Standards Board (“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, the Company has reviewed the guidance and have determined that they will not apply or are not expected to be material to its Consolidated Financial Statements upon adoption and therefore are not disclosed. Note B. Property at Cost The following table presents the components of property at cost: In thousands May 1, 2021 January 30, 2021 May 2, 2020 Land and buildings $ 1,723,049 $ 1,668,381 $ 1,551,968 Leasehold costs and improvements 3,611,943 3,568,829 3,437,975 Furniture, fixtures and equipment 6,602,759 6,525,615 6,343,510 Total property at cost $ 11,937,751 $ 11,762,825 $ 11,333,453 Less: accumulated depreciation and amortization 6,869,927 6,726,729 6,131,756 Net property at cost $ 5,067,824 $ 5,036,096 $ 5,201,697 Depreciation expense was $ 212 million for the three months ended May 1, 2021 and $ 217 million for the three months ended May 2, 2020. 9 Note C. 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 January 30, 2021 and the three months ended May 1, 2021: In thousands Foreign Currency Translation Deferred Benefit Costs Cash Flow Hedge on Debt Accumulated Other Comprehensive (Loss) Income Balance, February 1, 2020 $ ( 457,120 ) $ ( 215,483 ) $ ( 568 ) $ ( 673,171 ) Additions to other comprehensive loss: Foreign currency translation adjustments (net of taxes of $ 2,442 ) 15,588 — — 15,588 Recognition of net gains/losses on benefit obligations (net of taxes of $ 9,974 ) — 30,635 — 30,635 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 $ 7,298 ) — 20,046 — 20,046 Balance, January 30, 2021 $ ( 441,532 ) $ ( 164,802 ) $ 263 $ ( 606,071 ) Additions to other comprehensive loss: Foreign currency translation adjustments (net of taxes of $ 2,898 ) 22,249 — — 22,249 Reclassifications from other comprehensive loss to net income: Amortization of loss on cash flow hedge (net of taxes of $ 603 ) — — ( 263 ) ( 263 ) Amortization of prior service cost and deferred gains/losses (net of taxes of $ 1,056 ) — 2,901 — 2,901 Balance, May 1, 2021 $ ( 419,283 ) $ ( 161,901 ) $ — $ ( 581,184 ) Note D. Capital Stock and Earnings (Loss) Per Share Capital Stock Prior to the suspension of the Company’s share repurchase program, during the first quarter of fiscal 2021, TJX repurchased and retired 3.2 million shares of its common stock at a cost of $ 190 million on a “trade date” basis. TJX reflects stock repurchases in its financial statements on a “settlement date” or cash basis. TJX had cash expenditures under repurchase programs of $ 201 million for the three months ended May 2, 2020. These expenditures were funded by cash generated from operations. 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 May 1, 2021, 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. Subsequent to the end of the first quarter of fiscal 2022, the Company lifted the temporary suspension of its previously authorized stock repurchase programs. 10 Earnings (Loss) Per Share The following table presents the calculation of basic and diluted earnings (loss) per share for net income (loss): Thirteen Weeks Ended Amounts in thousands, expect per share amounts May 1, 2021 May 2, 2020 Basic earnings (loss) per share: Net income (loss) $ 533,930 $ ( 887,489 ) Weighted average common shares outstanding for basic earnings (loss) per share calculation 1,205,439 1,197,809 Basic earnings (loss) per share $ 0.44 $ ( 0.74 ) Diluted earnings (loss) per share: Net income (loss) $ 533,930 $ ( 887,489 ) Weighted average common shares outstanding for basic earnings (loss) per share calculations 1,205,439 1,197,809 Assumed exercise / vesting of stock options and awards 16,078 — Weighted average common shares outstanding for diluted earnings (loss) per share calculation 1,221,517 1,197,809 Diluted earnings (loss) per share $ 0.44 $ ( 0.74 ) Cash dividends declared per share $ 0.26 $ — 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 no such options excluded for the thirteen weeks ended May 1, 2021. For the period ended May 2, 2020, as a result of the net loss for the quarter, all options were antidilutive and therefore have been excluded from the calculation. The Board of Directors declared a quarterly dividend of $ 0.26 per share in the first quarter of fiscal 2022. 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. 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. 11 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 2021, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2022, and during the first three months of fiscal 2022, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for the first three months of fiscal 2023. The hedge agreements outstanding at May 1, 2021 relate to approximately 48 % of TJX’s estimated notional diesel requirements for the remainder of fiscal 2022 and approximately 40 % of TJX’s estimated notional diesel requirements for the first three months of fiscal 2023. These diesel fuel hedge agreements will settle throughout the remainder of fiscal 2022 and throughout the first four months of fiscal 2023. 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 during the first quarter of fiscal 2021 and the Company 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 $ 25 million in the first quarter of fiscal 2021. The contracts outstanding at May 1, 2021 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. 12 The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at May 1, 2021: 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 1, 2021 Fair value hedges: Intercompany balances, primarily debt and related interest: zł 45,000 £ 8,846 0.1966 Prepaid Exp $ 353 $ — $ 353 A$ 80,000 U.S.$ 62,032 0.7754 (Accrued Exp) — ( 98 ) ( 98 ) U.S.$ 75,102 £ 55,000 0.7323 Prepaid Exp 1,505 — 1,505 £ 450,000 U.S.$ 620,918 1.3798 Prepaid Exp / (Accrued Exp) 40 ( 5,582 ) ( 5,542 ) € 200,000 U.S.$ 244,699 1.2235 Prepaid Exp 2,301 — 2,301 Economic hedges for which hedge accounting was not elected: Diesel fuel contracts Fixed on 3.1 M – 3.8 M gal per month Float on 3.1 M – 3.8 M gal per month N/A Prepaid Exp 17,816 — 17,816 Intercompany billings in TJX International, primarily merchandise related: € 163,000 £ 141,240 0.8665 (Accrued Exp) — ( 166 ) ( 166 ) Merchandise purchase commitments: C$ 574,390 U.S.$ 457,000 0.7956 (Accrued Exp) — ( 11,054 ) ( 11,054 ) C$ 29,455 € 19,500 0.6620 (Accrued Exp) — ( 444 ) ( 444 ) £ 282,746 U.S.$ 391,800 1.3857 Prepaid Exp / (Accrued Exp) 1,939 ( 3,751 ) ( 1,812 ) A$ 50,830 U.S.$ 39,125 0.7697 Prepaid Exp / (Accrued Exp) 42 ( 356 ) ( 314 ) U.S.$ 53,680 € 44,400 0.8271 Prepaid Exp / (Accrued Exp) 185 ( 267 ) ( 82 ) Total fair value of derivative financial instruments $ 24,181 $ ( 21,718 ) $ 2,463 13 The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at January 30, 2021: 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 30, 2021 Fair value hedges: Intercompany balances, primarily debt and related interest: zł 45,000 £ 8,846 0.1966 Prepaid Exp $ 11 $ — $ 11 A$ 80,000 U.S.$ 62,032 0.7754 Prepaid Exp 738 — 738 U.S.$ 75,102 £ 55,000 0.7323 Prepaid Exp 357 — 357 £ 200,000 U.S.$ 274,853 1.3743 Prepaid Exp 32 — 32 € 200,000 U.S.$ 244,699 1.2235 Prepaid Exp / (Accrued Exp) 427 ( 182 ) 245 Economic hedges for which hedge accounting was not elected: Diesel fuel contracts Fixed on 1.5 M – 3.8 M gal per month Float on 1.5 M– 3.8 M gal per month N/A Prepaid Exp 4,880 — 4,880 Merchandise purchase commitments: C$ 384,679 U.S.$ 296,000 0.7695 Prepaid Exp / (Accrued Exp) 430 ( 5,627 ) ( 5,197 ) C$ 5,391 € 3,500 0.6492 Prepaid Exp 24 — 24 £ 203,264 U.S.$ 263,950 1.2986 (Accrued Exp) — ( 15,086 ) ( 15,086 ) zł 30,000 £ 5,865 0.1955 (Accrued Exp) — ( 29 ) ( 29 ) A$ 46,985 U.S.$ 35,250 0.7502 Prepaid Exp / (Accrued Exp) 144 ( 837 ) ( 693 ) U.S.$ 99,810 € 83,700 0.8386 Prepaid Exp / (Accrued Exp) 1,986 ( 160 ) 1,826 Total fair value of derivative financial instruments $ 9,029 $ ( 21,921 ) $ ( 12,892 ) 14 The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at May 2, 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 May 2, 2020 Fair value hedges: Intercompany balances, primarily debt and related interest: zł 65,000 £ 12,780 0.1966 Prepaid Exp $ 351 $ — $ 351 € 60,000 £ 53,412 0.8902 Prepaid Exp 437 — 437 A$ 110,000 U.S.$ 70,802 0.6437 Prepaid Exp / (Accrued Exp) 1,788 ( 1,656 ) 132 U.S.$ 72,475 £ 55,000 0.7589 (Accrued Exp) — ( 3,744 ) ( 3,744 ) £ 200,000 U.S.$ 249,499 1.2475 Prepaid Exp / (Accrued Exp) 999 ( 2,332 ) ( 1,333 ) C$ 350,000 U.S.$ 248,821 0.7109 Prepaid Exp / (Accrued Exp) 640 ( 478 ) 162 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) — ( 30,167 ) ( 30,167 ) Intercompany billings in TJX International, primarily merchandise related: € 49,100 £ 43,144 0.8787 (Accrued Exp) — ( 65 ) ( 65 ) Merchandise purchase commitments: C$ 77,979 U.S.$ 59,200 0.7592 Prepaid Exp 3,819 — 3,819 £ 63,618 U.S.$ 82,200 1.2921 Prepaid Exp 2,469 — 2,469 A$ 17,438 U.S.$ 11,780 0.6755 Prepaid Exp 578 — 578 zł 69,400 £ 13,880 0.2000 Prepaid Exp 666 — 666 U.S.$ 30,651 € 27,588 0.9001 Prepaid Exp / (Accrued Exp) 30 ( 404 ) ( 374 ) Total fair value of derivative financial instruments $ 11,777 $ ( 38,846 ) $ ( 27,069 ) Presented below is the impact of derivative financial instruments on the Consolidated Statements of Income (Loss) for the periods shown: Amount of (Loss) Gain Recognized in Income / (Loss) by Derivative Location of (Loss) Gain Recognized in Income / (Loss) by Derivative Thirteen Weeks Ended In thousands May 1, 2021 May 2, 2020 Fair value hedges: Intercompany balances, primarily debt and related interest Selling, general and administrative expenses $ ( 2,864 ) $ ( 5,173 ) Economic hedges for which hedge accounting was not elected: Diesel fuel contracts Cost of sales, including buying and occupancy costs 13,570 ( 22,854 ) Intercompany billings in TJX International, primarily merchandise related Cost of sales, including buying and occupancy costs 118 ( 1,852 ) Merchandise purchase commitments Cost of sales, including buying and occupancy costs ( 15,969 ) 50,135 (Loss) gain recognized in income / (loss) $ ( 5,145 ) $ 20,256 15 Note F. 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 May 1, 2021 January 30, 2021 May 2, 2020 Level 1 Assets: Executive Savings Plan investments $ 384,442 $ 363,729 $ 296,031 Level 2 Assets: Foreign currency exchange contracts $ 6,365 $ 4,149 $ 11,777 Diesel fuel contracts 17,816 4,880 — Liabilities: Foreign currency exchange contracts $ 21,718 $ 21,921 $ 8,679 Diesel fuel contracts — — 30,167 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. Foreign currency exchange contracts and diesel fuel contracts are valued using broker quotations, which include observable market information. 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 May 1, 2021 was $ 5.8 billion compared to a carrying value of $ 5.3 billion. The fair value of long-term debt as of January 30, 2021 was $ 5.9 billion compared to a carrying value of $ 5.3 billion. The fair value of the current portion of long-term debt as of January 30, 2021 was $ 754 million compared to a carrying value of $ 750 million. The fair value of long-term debt as of May 2, 2020 was $ 7.8 billion compared to a carrying value of $ 7.2 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. Certain assets and liabilities are measured at fair value on a nonrecurring basis, where as the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of an impairment. For the periods ended May 1, 2021, January 30, 2021 and May 2, 2020, the Company did not record any material impairments to long-lived assets. Note G. 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. 16 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 income (loss) 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 In thousands May 1, 2021 May 2, 2020 Net sales: In the United States: Marmaxx $ 6,640,486 $ 2,697,779 HomeGoods 2,141,756 759,865 TJX Canada 765,536 379,636 TJX International 538,883 571,608 Total net sales $ 10,086,661 $ 4,408,888 Segment profit (loss): In the United States: Marmaxx $ 824,855 $ ( 709,669 ) HomeGoods 251,602 ( 153,703 ) TJX Canada 71,577 ( 97,181 ) TJX International ( 221,558 ) ( 258,617 ) Total segment profit (loss) 926,476 ( 1,219,170 ) General corporate expense 160,442 100,327 Interest expense, net 44,688 23,351 Income (loss) before income taxes $ 721,346 $ ( 1,342,848 ) Note H. 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 May 1, 2021 May 2, 2020 May 1, 2021 May 2, 2020 Service cost $ 12,219 $ 12,540 $ 755 $ 709 Interest cost 12,812 12,519 780 801 Expected return on plan assets ( 23,992 ) ( 22,242 ) — — Amortization of net actuarial loss and prior service cost 2,803 5,509 1,154 1,034 Total expense $ 3,842 $ 8,326 $ 2,689 $ 2,544 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. The Company does not anticipate any required funding in fiscal 2022 for the funded plan. The Company anticipates making contributions of $ 4 million to provide current benefits coming due under the unfunded plan in fiscal 2022. 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 Income (Loss), net of related tax effects, for the periods presented. 17 Note I. Long-Term Debt and Credit Lines The table below presents long-term debt, exclusive of current installments, as of May 1, 2021, January 30, 2021 and May 2, 2020. All amounts are net of unamortized debt discounts. In thousands May 1, 2021 January 30, 2021 May 2, 2020 Revolving credit facilities: $ 500 million revolver, maturing March 11, 2022 $ — $ — $ 500,000 $ 500 million revolver, maturing May 10, 2024 — — 500,000 General corporate debt: 2.750 % senior unsecured notes, redeemed on April 15, 2021 (effective interest rate of 2.76 % after reduction of unamortized debt discount of $ 25 at January 30, 2021 and $ 81 at May 2, 2020) $ — $ 749,975 $ 749,919 2.500 % senior unsecured notes, maturing May 15, 2023 (effective interest rate of 2.51 % after reduction of unamortized debt discount of $ 89 at May 1, 2021, $ 100 at January 30, 2021 and $ 134 at May 2, 2020) 499,911 499,900 499,866 3.500 % senior unsecured notes, maturing April 15, 2025 (effective interest rate of 3.58 % after reduction of unamortized debt discount of $ 3,956 at May 1, 2021, $ 4,208 at January 30, 2021 and $ 4,966 at May 2, 2020) 1,246,044 1,245,792 1,245,034 2.250 % senior unsecured notes, maturing September 15, 2026 (effective interest rate of 2.32 % after reduction of unamortized debt discount of $ 3,979 at May 1, 2021, $ 4,165 at January 30, 2021 and $ 4,725 at May 2, 2020) 996,021 995,835 995,275 3.750 % senior unsecured notes, maturing April 15, 2027 (effective interest rate of 3.76 % after reduction of unamortized debt discount of $ 437 at May 1, 2021, $ 456 at January 30, 2021 and $ 511 at May 2, 2020) 749,563 749,544 749,489 1.150 % senior unsecured notes, maturing May 15, 2028 (effective interest rate of 1.18 % after reduction of unamortized debt discount of $ 907 at May 1, 2021 and $ 939 at January 30, 2021) 499,093 499,061 — 3.875 % senior unsecured notes, maturing April 15, 2030, see tender offer details below (effective interest rate of 3.89 % after reduction of unamortized debt discount of $ 553 at May 1, 2021, $ 568 at January 30, 2021 and $ 1,549 at May 2, 2020) 495,297 495,282 1,248,451 1.600 % senior unsecured notes, maturing May 15, 2031 (effective interest rate of 1.61 % after reduction of unamortized debt discount of $ 595 at May 1, 2021 and $ 610 at January 30, 2021) 499,405 499,390 — 4.500 % senior unsecured notes, maturing April 15, 2050; see tender offer details below (effective interest rate of 4.52 % after reduction of unamortized debt discount of $ 2,189 at May 1, 2021, $ 2,208 at January 30, 2021 and $ 4,405 at May 2, 2020) 383,310 383,291 745,595 Total debt 5,368,644 6,118,070 7,233,629 Current maturities of long-term debt, net of debt issuance costs — ( 749,684 ) — Debt issuance costs ( 33,780 ) ( 35,465 ) ( 41,216 ) Long-term debt $ 5,334,864 $ 5,332,921 $ 7,192,413 During the fiscal quarter ended May 2, 2020 , given the rapidly changing environment and level of uncertainty created by the COVID-19 pandemic, the Company completed the issuance and sale of (a) $ 1.25 billion aggregate principal amount of 3.500 % notes due 2025, (b) $ 750 million aggregate principal amount of 3.750 % notes due 2027, (c) $ 1.25 billion aggregate principal amount of 3.875 % notes due 2030 and (d) $ 750 million aggregate principal amount of 4.500 % notes due 2050. Portions of the 3.875 % notes due 2030 and 4.500 % notes due 2050 were subsequently repurchased, reducing the aggregate principal amount outstanding to $ 495.5 million and $ 385.5 million, respectively, pursuant to cash tender offers made by the Company in December 2020. Interest on these notes are payable semi-annually. In November 2020, TJX completed the issuance of (a) $ 500 million aggregate principal amount of 1.150 % notes due 2028 and (b) $ 500 million aggregate principal amount of 1.600 % notes due 2031. Interest on these notes are payable semi-annually beginning May 2021. 18 On April 15, 2021, the Company redeemed all of the outstanding $ 750 million in aggregate principal amount of its 2.750 % Notes due June 15, 2021 at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest thereon to the redemption date. Subsequent to the end of the first quarter of fiscal 2022, the Company announced make-whole calls for its $ 1.25 billion aggregate principal amount of 3.500 % Notes maturing in 2025 and its $ 750 million aggregate principal amount of 3.750 % Notes maturing in 2027 pursuant to notices of redemption issued to holders of such notes in accordance with the applicable indenture. These make-whole calls are expected to settle in June 2021, and once completed the Company anticipates recording a pre-tax loss on the early extinguishment of these notes of approximately $ 250 million in the second quarter of fiscal 2022. During the fiscal quarter ended May 1, 2021, TJX had a $ 500 million 364 day revolving credit facility that matures in August 2021 (the “364-Day Revolving Credit Facility”), a $ 500 million revolving credit facility that matures in March 2022 (the “2022 Revolving Credit Facility”) and a $ 500 million revolving credit facility that matures in May 2024 (the “2024 Revolving Credit Facility”). Under these credit facilities, the Company has borrowing capacity of $ 1.5 billion, all of which remains available to the Company. 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. The 2022 Revolving Credit Facility and the 2024 Revolving Credit Facility require usages fees based on total credit extensions under such facilities. As of May 2, 2020, $ 1 billion was outstanding under these two facilities, and was subsequently repaid in July 2020. The amounts drawn are included as outstanding long-term debt in the table above. The six month interest rate on these borrowings was 1.757 % through May 15, 2020, and increased to 2.007 % through the payoff date. As of May 1, 2021 and January 30, 2021, there were no amounts outstanding under any of the Company’s facilities. TJX was in compliance with all covenants related to its credit facilities at the end of all periods presented. As of May 1, 2021, January 30, 2021 and May 2, 2020, 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 May 1, 2021, January 30, 2021 and May 2, 2020, and during the quarters and year then ended, there were no amounts outstanding on the Canadian credit line. As of May 1, 2021, January 30, 2021 and May 2, 2020, our European business at TJX International had an uncommitted credit line of £ 5 million. As of May 1, 2021, January 30, 2021 and May 2, 2020, and during the quarters and year then ended, there were no amounts outstanding on the European credit line. Note J. Income Taxes The e ffective income tax rate was 26.0 % for the first quarter of fiscal 2022 and 33.9 % for the first quarter of fiscal 2021. The decrease in the effective income tax rate was primarily a result of the ability to carry back the anticipated loss from the first quarter of fiscal 2021 to earlier tax years with higher tax rates due to a benefit provided by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) enacted on March 27, 2020. TJX had net unrecognized tax benefits of $ 278 million as of May 1, 2021, $ 272 million as of January 30, 2021 and $ 256 million as of May 2, 2020. 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 $ 38 million as of May 1, 2021, $ 36 million as of January 30, 2021 and $ 30 million as of May 2, 2020. 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 $ 42 million. 19 Note K. 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. The Company has had numerous leases from its former operations where its guarantee required it to satisfy some of these lease obligations and TJX established appropriate reserves. The Company may be contingently liable on up to eight leases of former TJX businesses, for which the Company believes the likelihood of future liability to TJX is remote. The Company may also be contingently liable for assignments and subleases if the assignees or subtenants do not fulfill their obligations. TJX estimates the undiscounted value of these contingent obligations as of May 1, 2021 to be approximately $ 9 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 ability to potentially 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 the Company’s Consolidated Balance Sheets with respect to these contingent obligations. Contingencies TJX is subject to certain legal proceedings, lawsuits, disputes and claims that arise from time to time in the ordinary course of its business. In addition, TJX is a defendant in several lawsuits filed in federal and state courts brought as putative class, collective, and/or representative 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. 20