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 Thirty-Nine Weeks Ended October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020 Net sales $ 12,531,890 $ 10,117,289 $ 34,695,614 $ 21,193,752 Cost of sales, including buying and occupancy costs 8,835,532 7,062,285 24,619,297 16,651,240 Selling, general and administrative expenses 2,296,649 1,986,128 6,585,333 4,827,816 Loss on early extinguishment of debt — — 242,248 — Interest expense, net 20,674 52,884 94,023 133,571 Income (loss) before income taxes 1,379,035 1,015,992 3,154,713 ( 418,875 ) (Provision) benefit for income taxes ( 356,035 ) ( 149,336 ) ( 812,102 ) 183,822 Net income (loss) $ 1,023,000 $ 866,656 $ 2,342,611 $ ( 235,053 ) Basic earnings (loss) per share $ 0.85 $ 0.72 $ 1.95 $ ( 0.20 ) Weighted average common shares – basic 1,200,661 1,199,951 1,203,718 1,198,798 Diluted earnings (loss) per share $ 0.84 $ 0.71 $ 1.92 $ ( 0.20 ) Weighted average common shares – diluted 1,215,690 1,214,195 1,219,238 1,198,798 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 October 30, 2021 October 31, 2020 Net income $ 1,023,000 $ 866,656 Additions to other comprehensive income (loss): Foreign currency translation adjustments, net of related tax provision of $ 976 in fiscal 2022 and tax provisions of $ 993 in fiscal 2021 ( 6,688 ) ( 25,568 ) 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 $ 1,156 in fiscal 2022 and $ 1,981 in fiscal 2021 3,173 5,440 Amortization of loss on cash flow hedge, net of related tax provision of $ 75 in fiscal 2021 — 208 Other comprehensive (loss), net of tax ( 3,515 ) ( 19,920 ) Total comprehensive income $ 1,019,485 $ 846,736 Thirty-Nine Weeks Ended October 30, 2021 October 31, 2020 Net income (loss) $ 2,342,611 $ ( 235,053 ) Additions to other comprehensive income (loss): Foreign currency translation adjustments, net of related tax provision of $ 2,734 in fiscal 2022 and tax benefit of $ 493 in fiscal 2021 14,685 ( 85,348 ) 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 $ 3,802 in fiscal 2022 and $ 5,473 in fiscal 2021 10,442 15,034 Amortization of loss on cash flow hedge, net of related tax provision of $ 603 in fiscal 2022 and $ 227 in fiscal 2021 ( 263 ) 624 Other comprehensive income (loss), net of tax 24,864 ( 69,690 ) Total comprehensive income (loss) $ 2,367,475 $ ( 304,743 ) 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 October 30, 2021 January 30, 2021 October 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 6,791,596 $ 10,469,570 $ 10,581,993 Accounts receivable, net 615,119 461,139 463,732 Merchandise inventories 6,633,328 4,337,389 4,997,506 Prepaid expenses and other current assets 449,377 434,977 425,027 Federal, state and foreign income taxes recoverable 86,690 36,262 185,648 Total current assets 14,576,110 15,739,337 16,653,906 Net property at cost 5,165,250 5,036,096 5,004,774 Non-current deferred income taxes, net 193,583 127,191 56,132 Operating lease right of use assets 9,143,834 8,989,998 9,028,696 Goodwill 98,604 98,998 96,733 Other assets 893,605 821,935 725,259 TOTAL ASSETS $ 30,070,986 $ 30,813,555 $ 31,565,500 LIABILITIES Current liabilities: Accounts payable $ 5,443,007 $ 4,823,397 $ 6,142,547 Accrued expenses and other current liabilities 4,140,660 3,471,459 3,228,618 Current portion of operating lease liabilities 1,606,480 1,677,605 1,650,154 Current portion of long-term debt — 749,684 749,446 Federal, state and foreign income taxes payable 138,586 81,523 46,429 Total current liabilities 11,328,733 10,803,668 11,817,194 Other long-term liabilities 1,013,537 1,063,902 860,497 Non-current deferred income taxes, net 69,053 37,164 78,007 Long-term operating lease liabilities 7,861,023 7,743,216 7,795,838 Long-term debt 3,353,866 5,332,921 5,447,208 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 1,194,260,626 ; 1,204,698,124 and 1,200,631,186 respectively 1,194,261 1,204,698 1,200,631 Additional paid-in capital — 260,515 126,413 Accumulated other comprehensive loss ( 581,207 ) ( 606,071 ) ( 742,861 ) Retained earnings 5,831,720 4,973,542 4,982,573 Total shareholders’ equity 6,444,774 5,832,684 5,566,756 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 30,070,986 $ 30,813,555 $ 31,565,500 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 Thirty-Nine Weeks Ended October 30, 2021 October 31, 2020 Cash flows from operating activities: Net income (loss) $ 2,342,611 $ ( 235,053 ) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 647,610 658,497 Loss on early extinguishment of debt 242,248 — Loss on property disposals and impairment charges 526 38,970 Deferred income tax (benefit) ( 44,285 ) ( 112,965 ) Share-based compensation 156,575 58,909 Changes in assets and liabilities: (Increase) in accounts receivable ( 155,554 ) ( 76,604 ) (Increase) in merchandise inventories ( 2,287,326 ) ( 134,877 ) (Increase) in income taxes recoverable ( 50,428 ) ( 138,679 ) Decrease (increase) in prepaid expenses and other current assets 20,779 ( 53,702 ) Increase in accounts payable 611,934 3,464,266 Increase in accrued expenses and other liabilities 557,065 550,261 Increase in income taxes payable 56,426 20,131 (Decrease) increase in net operating lease liabilities ( 105,494 ) 226,909 Other, net ( 45,754 ) 10,697 Net cash provided by operating activities 1,946,933 4,276,760 Cash flows from investing activities: Property additions ( 715,542 ) ( 433,604 ) Purchase of investments ( 16,979 ) ( 24,468 ) Sales and maturities of investments 16,896 13,894 Net cash (used in) investing activities ( 715,625 ) ( 444,178 ) Cash flows from financing activities: Payments on debt ( 2,975,518 ) ( 1,000,000 ) 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 ( 1,093,399 ) ( 201,500 ) Cash dividends paid ( 941,531 ) ( 278,250 ) Proceeds from issuance of common stock 146,393 87,721 Payments of employee tax withholdings for performance based stock awards ( 24,478 ) ( 21,843 ) Net cash (used in) provided by financing activities ( 4,888,533 ) 3,540,708 Effect of exchange rate changes on cash ( 20,749 ) ( 8,049 ) Net (decrease) increase in cash and cash equivalents ( 3,677,974 ) 7,365,241 Cash and cash equivalents at beginning of year 10,469,570 3,216,752 Cash and cash equivalents at end of period $ 6,791,596 $ 10,581,993 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, July 31, 2021 1,202,981 $ 1,202,981 $ 117,603 $ ( 577,692 ) $ 5,663,492 $ 6,406,384 Net income — — — — 1,023,000 1,023,000 Other comprehensive income, net of tax — — — ( 3,515 ) — ( 3,515 ) Cash dividends declared on common stock — — — — ( 311,129 ) ( 311,129 ) Recognition of share-based compensation — — 42,454 — — 42,454 Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings 2,970 2,970 80,910 — — 83,880 Common stock repurchased ( 11,690 ) ( 11,690 ) ( 240,967 ) — ( 543,643 ) ( 796,300 ) Balance, October 30, 2021 1,194,261 $ 1,194,261 $ — $ ( 581,207 ) $ 5,831,720 $ 6,444,774 Thirteen Weeks Ended Common Stock Shares Par Value $ 1 Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Balance, August 1, 2020 1,199,061 $ 1,199,061 $ 68,532 $ ( 722,941 ) $ 4,115,917 $ 4,660,569 Net income — — — — 866,656 866,656 Other comprehensive (loss), net of tax — — — ( 19,920 ) — ( 19,920 ) Recognition of share-based compensation — — 31,262 — — 31,262 Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings 1,570 1,570 26,619 — — 28,189 Balance, October 31, 2020 1,200,631 $ 1,200,631 $ 126,413 $ ( 742,861 ) $ 4,982,573 $ 5,566,756 The accompanying notes are an integral part of the unaudited consolidated financial statements. 7 THE TJX COMPANIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED) IN THOUSANDS Thirty-Nine 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 2,342,611 2,342,611 Other comprehensive income, net of tax — — — 24,864 24,864 Cash dividends declared on common stock — — — — ( 940,443 ) ( 940,443 ) Recognition of share-based compensation — — 156,575 — — 156,575 Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings 5,764 5,764 116,465 — ( 347 ) 121,882 Common stock repurchased ( 16,201 ) ( 16,201 ) ( 533,555 ) — ( 543,643 ) ( 1,093,399 ) Balance, October 30, 2021 1,194,261 $ 1,194,261 $ — $ ( 581,207 ) $ 5,831,720 $ 6,444,774 Thirty-Nine 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) — — — — ( 235,053 ) ( 235,053 ) Other comprehensive (loss), net of tax — — — ( 69,690 ) — ( 69,690 ) Recognition (reversal) of share-based compensation — — 90,744 — ( 31,835 ) 58,909 Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings 4,918 4,918 61,384 — ( 424 ) 65,878 Common stock repurchased ( 3,387 ) ( 3,387 ) ( 25,715 ) — ( 172,398 ) ( 201,500 ) Balance, October 31, 2020 1,200,631 $ 1,200,631 $ 126,413 $ ( 742,861 ) $ 4,982,573 $ 5,566,756 The accompanying notes are an integral part of the unaudited consolidated financial statements. 8 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 identified in December 2019 before spreading worldwide. The Company has been, and may continue to be, impacted by the COVID-19 pandemic. Additionally, COVID-19’s resurgence or the emergence of new variants has caused and may continue to cause intermittent or prolonged periods of temporary store closures, and stringent occupancy restrictions while stores are open, 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. During the first half of fiscal 2022, while the Company's stores in the United States remained open for the entire period, the Company had temporary store closures in Europe, Canada, and Australia, and during the third quarter of fiscal 2022 continued to have temporary store closures in Australia. 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 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 with certainty 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. 9 Deferred Gift Card Revenue The following table presents deferred gift card revenue activity: In thousands October 30, 2021 October 31, 2020 Balance, beginning of year $ 576,187 $ 500,844 Deferred revenue 1,169,729 650,956 Effect of exchange rates changes on deferred revenue 1,799 ( 667 ) Revenue recognized ( 1,201,704 ) ( 685,601 ) Balance, end of period $ 546,011 $ 465,532 TJX recognized $ 400 million in gift card revenue for the three months ended October 30, 2021 and $ 307 million in gift card revenue for the three months ended October 31, 2020. The increase in both deferred revenue and revenue recognized versus the prior year reflects the impact of lower customer traffic for the three months ended October 31, 2020 and temporary store and e-commerce closures due to the COVID-19 pandemic for the nine months ended October 31, 2020. 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 thirty-nine weeks ended October 30, 2021 and October 31, 2020 is as follows: Thirty-Nine Weeks Ended In thousands October 30, 2021 October 31, 2020 Operating cash flows paid for operating leases $ 1,571,815 $ 1,179,618 Lease liabilities arising from obtaining right of use assets $ 1,427,486 $ 1,151,543 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”). The Company has reviewed the new guidance and has determined that it will either not apply to TJX or is not expected to be material to its Consolidated Financial Statements upon adoption and therefore they are not disclosed. Note B. Property at Cost The following table presents the components of property at cost: In thousands October 30, 2021 January 30, 2021 October 31, 2020 Land and buildings $ 1,813,270 $ 1,668,381 $ 1,605,891 Leasehold costs and improvements 3,655,735 3,568,829 3,502,870 Furniture, fixtures and equipment 6,761,778 6,525,615 6,404,640 Total property at cost $ 12,230,783 $ 11,762,825 $ 11,513,401 Less: accumulated depreciation and amortization 7,065,533 6,726,729 6,508,627 Net property at cost $ 5,165,250 $ 5,036,096 $ 5,004,774 Depreciation expense was $ 215 million for the three months ended October 30, 2021 and $ 216 million for the three months ended October 31, 2020. Depreciation expense was $ 640 million for the nine months ended October 30, 2021 and $ 649 million for the nine months ended October 31, 2020. Non-cash investing activities in the cash flows include the change in accrued capital additions of $ 59 million and $( 89 ) million as of the periods ended October 30, 2021 and October 31, 2020, respectively. 10 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 nine months ended October 30, 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 $ 2,734 ) 14,685 — — 14,685 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 $ 3,802 ) — 10,442 — 10,442 Balance, October 30, 2021 $ ( 426,847 ) $ ( 154,360 ) $ — $ ( 581,207 ) Note D. Capital Stock and Earnings (Loss) Per Share Capital Stock During the second quarter of fiscal 2022, the Company lifted the temporary suspension of its previously authorized stock repurchase programs. TJX repurchased and retired 11.7 million shares of its common stock at a cost of approximately $ 800 million during the quarter ended October 30, 2021, on a “trade date” basis. During the nine months ended October 30, 2021, TJX repurchased and retired 16.3 million shares of its common stock at a cost of approximately $ 1.1 billion, on a “trade date” basis. 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, and no shares were repurchased during the second quarter of fiscal 2021 through the first quarter of fiscal 2022. TJX reflects stock repurchases in its financial statements on a “settlement date” or cash basis. TJX had cash expenditures under repurchase programs of $ 1.1 billion for the nine months ended October 30, 2021 and $ 201 million for the nine months ended October 31, 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. Also, in February 2019, TJX announced that its Board of Directors had approved a stock repurchase program that authorized the repurchase of up to $ 1.5 billion of TJX common stock from time to time. As of October 30, 2021, TJX had approximately $ 1.9 billion available under these previously announced stock repurchase programs. All shares repurchased under the stock repurchase programs have been retired. 11 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 Thirty-Nine Weeks Ended Amounts in thousands, expect per share amounts October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020 Basic earnings (loss) per share: Net income (loss) $ 1,023,000 $ 866,656 $ 2,342,611 $ ( 235,053 ) Weighted average common shares outstanding for basic earnings (loss) per share calculations 1,200,661 1,199,951 1,203,718 1,198,798 Basic earnings (loss) per share $ 0.85 $ 0.72 $ 1.95 $ ( 0.20 ) Diluted earnings (loss) per share: Net income (loss) $ 1,023,000 $ 866,656 $ 2,342,611 $ ( 235,053 ) Weighted average common shares outstanding for basic earnings (loss) per share calculations 1,200,661 1,199,951 1,203,718 1,198,798 Assumed exercise / vesting of stock options and awards 15,029 14,244 15,520 — Weighted average common shares outstanding for diluted earnings (loss) per share calculations 1,215,690 1,214,195 1,219,238 1,198,798 Diluted earnings (loss) per share $ 0.84 $ 0.71 $ 1.92 $ ( 0.20 ) Cash dividends declared per share $ 0.26 $ — $ 0.78 $ — 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 5.3 million such options excluded for the thirteen weeks and thirty-nine weeks ended October 30, 2021. There were 17.7 million such options excluded for the thirteen weeks ended October 31, 2020. For the thirty-nine weeks ended October 31, 2020, as a result of the net losses, all options were antidilutive and therefore have been excluded from the diluted earnings per share calculation. 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 accumulated other comprehensive (loss) or are recognized currently in earnings, along with an offsetting adjustment against the basis of the item being hedged. 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 nine months of fiscal 2022, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for the first nine months of fiscal 2023. The hedge agreements outstanding at October 30, 2021 relate to approximately 48 % of TJX’s estimated notional diesel requirements for the remainder of fiscal 2022 and approximately 50 % of TJX’s estimated notional diesel requirements for the first nine months of fiscal 2023. These diesel fuel hedge agreements will settle throughout the remainder of fiscal 2022 and throughout the first ten months of fiscal 2023. TJX elected not to apply hedge accounting to these contracts. 12 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. The contracts outstanding at October 30, 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. A portion of the inflows 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. The changes in fair value of these contracts are recorded in selling, general and administrative expenses and are offset by marking the underlying item to fair value in the same period. Upon settlement, the realized gains and losses on these contracts are offset by the realized gains and losses of the underlying item in selling, general and administrative expenses. The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at October 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 October 30, 2021 Fair value hedges: Intercompany balances, primarily debt related: zł 45,000 £ 8,846 0.1966 Prepaid Exp $ 780 $ — $ 780 € 60,000 £ 50,815 0.8469 (Accrued Exp) — ( 340 ) ( 340 ) A$ 170,000 U.S.$ 127,603 0.7506 Prepaid Exp / (Accrued Exp) 1,866 ( 2,075 ) ( 209 ) U.S.$ 75,102 £ 55,000 0.7323 Prepaid Exp 54 — 54 € 200,000 U.S.$ 239,776 1.1989 Prepaid Exp 6,957 — 6,957 Economic hedges for which hedge accounting was not elected: Diesel fuel contracts Fixed on 3.7 M – 4.0 M gal per month Float on 3.7 M – 4.0 M gal per month N/A Prepaid Exp 22,095 — 22,095 Intercompany billings in TJX International, primarily merchandise related: € 46,000 £ 39,057 0.8491 (Accrued Exp) — ( 28 ) ( 28 ) Merchandise purchase commitments: C$ 608,976 U.S.$ 488,000 0.8013 Prepaid Exp / (Accrued Exp) 1,566 ( 5,909 ) ( 4,343 ) C$ 27,997 € 19,000 0.6786 (Accrued Exp) — ( 574 ) ( 574 ) £ 344,793 U.S.$ 477,600 1.3852 Prepaid Exp / (Accrued Exp) 7,321 ( 732 ) 6,589 A$ 57,829 U.S.$ 42,500 0.7349 (Accrued Exp) — ( 986 ) ( 986 ) zł 442,000 £ 82,252 0.1861 Prepaid Exp / (Accrued Exp) 1,349 ( 85 ) 1,264 U.S.$ 75,930 € 64,000 0.8429 (Accrued Exp) — ( 1,630 ) ( 1,630 ) Total fair value of derivative financial instruments $ 41,988 $ ( 12,359 ) $ 29,629 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 related: 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 October 31, 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 October 31, 2020 Fair value hedges: Intercompany balances, primarily debt related: zł 65,000 £ 12,780 0.1966 Prepaid Exp / (Accrued Exp) $ 195 $ ( 68 ) $ 127 € 60,000 £ 53,412 0.8902 (Accrued Exp) — ( 904 ) ( 904 ) A$ 80,000 U.S.$ 58,016 0.7252 Prepaid Exp 1,749 — 1,749 U.S.$ 72,475 £ 55,000 0.7589 (Accrued Exp) — ( 1,280 ) ( 1,280 ) £ 200,000 U.S.$ 249,499 1.2475 (Accrued Exp) — ( 9,810 ) ( 9,810 ) 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) — ( 15,078 ) ( 15,078 ) Merchandise purchase commitments: C$ 637,508 U.S.$ 481,000 0.7545 Prepaid Exp / (Accrued Exp) 3,328 ( 1,152 ) 2,176 £ 415,653 U.S.$ 533,150 1.2827 Prepaid Exp / (Accrued Exp) 1,050 ( 6,768 ) ( 5,718 ) A$ 45,584 U.S.$ 32,650 0.7163 Prepaid Exp 600 — 600 zł 264,400 £ 53,293 0.2016 Prepaid Exp 2,189 — 2,189 U.S.$ 53,605 € 45,600 0.8507 (Accrued Exp) — ( 394 ) ( 394 ) Total fair value of derivative financial instruments $ 9,111 $ ( 35,454 ) $ ( 26,343 ) Presented below is the impact of derivative financial instruments on the Consolidated Statements of Income (Loss) for the periods shown: Amount of Gain (Loss) Recognized in Income / (Loss) by Derivative Location of (Loss) Gain Recognized in Income / (Loss) by Derivative Thirteen Weeks Ended Thirty-Nine Weeks Ended In thousands October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020 Fair value hedges: Intercompany balances, primarily debt related Selling, general and administrative expenses $ 7,750 $ ( 2,086 ) $ 20,303 $ ( 45,319 ) Economic hedges for which hedge accounting was not elected: Diesel fuel contracts Cost of sales, including buying and occupancy costs 9,908 ( 7,059 ) 30,754 ( 19,790 ) Intercompany billings in TJX International, primarily merchandise related Cost of sales, including buying and occupancy costs 887 ( 310 ) 4,432 ( 4,201 ) Merchandise purchase commitments Cost of sales, including buying and occupancy costs 3,760 7,302 ( 499 ) 41,629 Gain (loss) recognized in income / (loss) $ 22,305 $ ( 2,153 ) $ 54,990 $ ( 27,681 ) 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 October 30, 2021 January 30, 2021 October 31, 2020 Level 1 Assets: Executive Savings Plan investments $ 405,290 $ 363,729 $ 327,833 Level 2 Assets: Foreign currency exchange contracts $ 19,893 $ 4,149 $ 9,111 Diesel fuel contracts 22,095 4,880 — Liabilities: Foreign currency exchange contracts $ 12,359 $ 21,921 $ 20,376 Diesel fuel contracts — — 15,078 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 October 30, 2021 was $ 3.6 billion compared to a carrying value of $ 3.4 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 October 31, 2020 was $ 6.3 billion compared to a carrying value of $ 5.4 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, whereas the majority of 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 October 30, 2021, January 30, 2021 and October 31, 2020, the Company did not record any material impairments to long-lived assets. 16 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, Homesense, and homegoods.com) 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 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 Thirty-Nine Weeks Ended In thousands October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020 Net sales: In the United States: Marmaxx $ 7,213,681 $ 5,784,753 $ 21,203,098 $ 12,441,872 HomeGoods 2,253,567 1,875,641 6,478,584 3,871,479 TJX Canada 1,301,272 1,027,828 3,088,357 1,999,382 TJX International 1,763,370 1,429,067 3,925,575 2,881,019 Total net sales $ 12,531,890 $ 10,117,289 $ 34,695,614 $ 21,193,752 Segment profit (loss): In the United States: Marmaxx $ 989,560 $ 665,070 $ 2,828,590 $ 55,872 HomeGoods 262,640 291,209 696,768 235,082 TJX Canada 168,558 176,520 358,821 101,304 TJX International 127,074 86,576 78,972 ( 303,303 ) Total segment profit 1,547,832 1,219,375 3,963,151 88,955 General corporate expense 148,123 150,499 472,167 374,259 Loss on early extinguishment of debt — — 242,248 — Interest expense, net 20,674 52,884 94,023 133,571 Income (loss) before income taxes $ 1,379,035 $ 1,015,992 $ 3,154,713 $ ( 418,875 ) 17 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 October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020 Service cost $ 11,900 $ 12,512 $ 309 $ 404 Interest cost 13,073 12,620 764 860 Expected return on plan assets ( 24,017 ) ( 22,264 ) — — Amortization of net actuarial loss and prior service cost 3,358 6,028 1,076 1,394 Total expense $ 4,314 $ 8,896 $ 2,149 $ 2,658 Funded Plan Unfunded Plan Thirty-Nine Weeks Ended Thirty-Nine Weeks Ended In thousands October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020 Service cost $ 36,837 $ 37,592 $ 1,819 $ 1,822 Interest cost 39,073 37,658 2,324 2,462 Expected return on plan assets ( 72,001 ) ( 66,748 ) — — Amortization of net actuarial loss and prior service cost 10,858 17,046 3,385 3,462 Total expense $ 14,767 $ 25,548 $ 7,528 $ 7,746 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. 18 Note I. Long-Term Debt and Credit Lines The table below presents long-term debt, exclusive of current installments, as of October 30, 2021, January 30, 2021 and October 31, 2020. All amounts are net of unamortized debt discounts. In thousands October 30, 2021 January 30, 2021 October 31, 2020 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 $ 44 at October 31, 2020) $ — $ 749,975 $ 749,956 2.500 % senior unsecured notes, maturing May 15, 2023 (effective interest rate of 2.51 % after reduction of unamortized debt discount of $ 67 at October 30, 2021, $ 100 at January 30, 2021 and $ 111 at October 31, 2020) 499,933 499,900 499,889 3.500 % senior unsecured notes, redeemed on June 4, 2021 (effective interest rate of 3.58 % after reduction of unamortized debt discount of $ 4,208 at January 30, 2021 and $ 4,461 at October 31, 2020) — 1,245,792 1,245,539 2.250 % senior unsecured notes, maturing September 15, 2026 (effective interest rate of 2.32 % after reduction of unamortized debt discount of $ 3,606 at October 30, 2021, $ 4,165 at January 30, 2021 and $ 4,352 at October 31, 2020) 996,394 995,835 995,648 3.750 % senior unsecured notes, redeemed on June 4, 2021 (effective interest rate of 3.76 % after reduction of unamortized debt discount of $ 456 at January 30, 2021 and $ 474 at October 31, 2020) — 749,544 749,526 1.150 % senior unsecured notes, maturing May 15, 2028 (effective interest rate of 1.18 % after reduction of unamortized debt discount of $ 843 at October 30, 2021 and $ 939 at January 30, 2021) 499,157 499,061 — 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 $ 522 at October 30, 2021, $ 568 at January 30, 2021 and $ 1,471 at October 31, 2020) 495,328 495,282 1,248,529 1.600 % senior unsecured notes, maturing May 15, 2031 (effective interest rate of 1.61 % after reduction of unamortized debt discount of $ 566 at October 30, 2021 and $ 610 at January 30, 2021) 499,434 499,390 — 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 $ 2,151 at October 30, 2021, $ 2,208 at January 30, 2021 and $ 4,333 at October 31, 2020) 383,348 383,291 745,667 Total debt 3,373,594 6,118,070 6,234,754 Current maturities of long-term debt, net of debt issuance costs — ( 749,684 ) ( 749,446 ) Debt issuance costs ( 19,728 ) ( 35,465 ) ( 38,100 ) Long-term debt $ 3,353,866 $ 5,332,921 $ 5,447,208 Senior Unsecured Notes On June 4, 2021, the Company completed 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, which 3.500 % Notes and 3.750 % Notes were originally issued and sold during the fiscal quarter ended May 2, 2020. As a result of these redemptions prior to their scheduled maturities, the Company recorded a pre-tax debt extinguishment charge of $ 242 million in the second quarter of fiscal 2022. 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. On April 1, 2020, the Company issued and sold $ 1.25 billion aggregate principal amount of 3.875 % Notes due 2030 and $ 750 million aggregate principal amount of 4.500 % Notes due 2050, portions of which were subsequently repurchased pursuant to cash tender offers completed by the Company in December 2020, reducing the aggregate principal amount outstanding to $ 495.5 million and $ 385.5 million, respectively. 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. 19 Credit Facilities On June 25, 2021, the Company entered into a revolving credit agreement providing for a $ 1 billion senior unsecured revolving credit facility maturing on June 25, 2026 (the “2026 Revolving Credit Facility”). The 2026 Revolving Credit Facility replaced the Company's $ 500 million revolving credit facility that was scheduled to mature in March 2022 (the “2022 Revolving Credit Facility”) and the $ 500 million 364 day revolving credit facility that was scheduled to mature in August 2021 (the “364-Day Revolving Credit Facility”). Each of the 2022 Revolving Credit Facility and the 364-Day Revolving Credit Facility were terminated on June 25, 2021. With the 2026 Revolving Credit Facility and the Company’s existing $ 500 million revolving credit facility that matures in May 2024 (the “2024 Revolving Credit Facility”), the Company maintained its borrowing capacity of $ 1.5 billion, all of which remained available to the Company as of October 30, 2021. 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 2024 Revolving Credit Facility requires usage fees based on total credit extensions under the facility. The revolving credit facilities require the Company to maintain a quarterly-tested leverage ratio of funded debt to earnings before interest, taxes, depreciation and amortization and rentals. As of October 30, 2021, January 30, 2021 and October 31, 2020, 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 October 30, 2021, January 30, 2021 and October 31, 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 October 30, 2021, January 30, 2021 and October 31, 2020, and during the quarters and year then ended, there were no amounts outstanding on the Canadian credit line. As of October 30, 2021, January 30, 2021 and October 31, 2020, our European business at TJX International had an uncommitted credit line of £ 5 million. As of October 30, 2021, January 30, 2021 and October 31, 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 25.8 % for the third quarter of fiscal 2022 and 14.7 % for the third quarter of fiscal 2021. The increase in the third quarter effective income tax rate is primarily due to a benefit of the jurisdictional mix of profits and losses, and the better than anticipated results, as of the third quarter of fiscal 2021. The effective income tax rate was 25.7 % for the first nine months of fiscal 2022 and 43.9 % for the first nine months of fiscal 2021. The decrease in the effective income tax rate for the nine months of fiscal 2022 was primarily due to the significant increase in profit through the third quarter of fiscal 2022 as compared to the mix of income and losses by jurisdictions through the third quarter of fiscal 2021. TJX had net unrecognized tax benefits of $ 287 million as of October 30, 2021, $ 272 million as of January 30, 2021 and $ 267 million as of October 31, 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 $ 43 million as of October 30, 2021, $ 36 million as of January 30, 2021 and $ 34 million as of October 31, 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 $ 45 million. 20 Note K. Contingent Obligations and Contingencies Contingent Obligations 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 sometimes limited in time or 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 a lawsuit brought as a putative class action on behalf of a group of current and former salaried and hourly associates in the U.S. The lawsuit alleges violations of the Fair Labor Standards Act and of state wage and hour and other labor statutes. The lawsuit seeks monetary damages, injunctive relief and attorneys’ fees. TJX has accrued immaterial amounts in the accompanying Consolidated Financial Statements for certain of its legal proceedings. 21