TJ Maxx 2004 Annual Report Download - page 46

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implications that are expected to arise as a result of the Medicare Prescription Drug, Improvement and Modernization Act of 2003
(the ‘‘Act’’) enacted on December 8, 2003. We are in the process of determining if our plan is actuarially equivalent to Medicare Part
D and our disclosed postretirement medical cost of $6.7 million for fiscal 2005 has not been reduced by any federal subsidy. We do
not expect that any subsidy for which we may qualify will be material.
MARKET RISK
We are exposed to foreign currency exchange rate risk on our investment in our Canadian (Winners and HomeSense) and
European (T.K. Maxx) operations. As more fully described in Notes A and D to the consolidated financial statements, we hedge a
significant portion of our net investment in foreign operations; intercompany transactions with these operations; and certain
merchandise purchase commitments incurred by these operations; with derivative financial instruments. We utilize currency forward
and swap contracts, designed to offset the gains or losses in the underlying exposures. The contracts are executed with banks we
believe are creditworthy and are denominated in currencies of major industrial countries. We do not enter into derivatives for
speculative trading purposes.
In addition, the assets of our qualified pension plan, a large portion of which is invested in equity securities, are subject to the
risks and uncertainties of the public stock market. We allocate the pension assets in a manner that attempts to minimize and control
our exposure to these market uncertainties.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to foreign currency exchange rate risk on our investment in our Canadian (Winners and HomeSense) and
European (T.K. Maxx) operations. As more fully described in Notes A and D to the consolidated financial statements, we hedge a
significant portion of our net investment in foreign operations; intercompany transactions with these operations; and certain
merchandise purchase commitments incurred by these operations; with derivative financial instruments. We enter into derivative
contracts only when there is an underlying economic exposure. We utilize currency forward and swap contracts, designed to offset
the gains or losses in the underlying exposures. The contracts are executed with banks we believe are creditworthy and are
denominated in currencies of major industrial countries. We have performed a sensitivity analysis assuming a hypothetical 10%
adverse movement in foreign currency exchange rates applied to the hedging contracts and the underlying exposures described
above. As of January 29, 2005, the analysis indicated that such an adverse movement would not have a material effect on our
consolidated financial position, results of operations or cash flows.
Our cash equivalents and short-term investments and certain lines of credit bear variable interest rates. Changes in interest rates
affect interest earned and paid by the Company. We occasionally enter into financial instruments to manage our cost of borrowing;
however, we believe that the use of primarily fixed rate debt minimizes our exposure to market conditions.
We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in interest rates applied to the
maximum variable rate debt outstanding during the previous year. As of January 29, 2005, the analysis indicated that such an adverse
movement would not have a material effect on our consolidated financial position, results of operations or cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item may be found on pages F-1 through F-30 of this Annual Report on Form 10-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures and Changes in Internal Control Over Financial Reporting
The Company carried out an evaluation as of the end of the period covered by this report, under the supervision and with the
participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-14 and 15d-14
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