TJ Maxx 2004 Annual Report Download - page 64

Goodwill, net of amortization, totaled $71.8 million, $71.4 million and $71.5 million as of January 29, 2005, January 31, 2004
and January 25, 2003, respectively, and through January 26, 2002 was being amortized over 40 years on a straight-line basis. There
was no amortization of goodwill in fiscal 2005, 2004 or 2003. Cumulative amortization as of January 29, 2005, was $33.0 million,
and was $32.9 million at both January 31, 2004 and January 25, 2003. Changes in goodwill cost and accumulated amortization are
attributable to the effect of exchange rate changes on Winners reported goodwill.
Tradenames include the values assigned to the name ‘‘Marshalls,’’ acquired by TJX in fiscal 1996 in the acquisition of the
Marshalls chain, and to the name ‘‘Bob’s Stores’’ acquired by TJX in December 2003 when we acquired substantially all of the assets
of Bob’s Stores (see Note B). These values were determined by the discounted present value of assumed after-tax royalty payments,
offset by a reduction for their pro-rata share of negative goodwill.
The Marshalls tradename, net of accumulated amortization prior to the implementation of SFAS No. 142 in fiscal 2003, is
carried at a value of $107.7 million, is considered to have an indefinite life and accordingly, is no longer amortized. The Bob’s Stores
tradename, pursuant to the purchase accounting method, was valued at $4.8 million which is being amortized over 10 years.
Amortization expense of $483,000 and $33,000 was recognized in fiscal 2005 and 2004, respectively. Cumulative amortization as of
January 29, 2005 and January 31, 2004 was $516,000 and $33,000, respectively.
The Company occasionally acquires other trademarks in connection with private label merchandise. Such trademarks are
included in other assets and are amortized to cost of sales, including buying and occupancy costs over the term of the agreement
generally from 7 to 10 years. Amortization expense related to trademarks was $492,000, $519,000, and $369,000 in fiscal 2005, 2004
and 2003, respectively. The Company had $2.7 million, $3.0 million and $3.2 million in trademarks, net of accumulated
amortization, at January 29, 2005, January 31, 2004 and January 25, 2003, respectively. Trademarks and the related amortization are
included in the related operating segment for which they were acquired.
An impairment analysis is performed for goodwill and tradenames, at a minimum on an annual basis, in the fourth quarter of a
fiscal year. No impairments have been recorded on these assets to date.
Advertising Costs: TJX expenses advertising costs as incurred. Advertising expense was $188.0 million, $148.4 million, and
$135.3 million for fiscal 2005, 2004 and 2003, respectively.
Foreign Currency Translation: TJX’s foreign assets and liabilities are translated at the fiscal year end exchange rate. Activity of
the foreign operations that affect the statements of income and cash flows are translated at the average exchange rates prevailing
during the fiscal year. The translation adjustments associated with the foreign operations are included in shareholders’ equity as a
component of accumulated other comprehensive income (loss). Cumulative foreign currency translation adjustments included in
shareholders’ equity amounted to a gain of $10.7 million, net of related tax effect of $12.2 million, as of January 29, 2005; a gain of
$21.4 million, net of related tax effect of $16.3 million, as of January 31, 2004; and a gain of $6.2 million, as of January 25, 2003.
Derivative Instruments and Hedging Activity: TJX enters into financial instruments to manage our cost of borrowing and to
manage our exposure to changes in foreign currency exchange rates. The Company recognizes all derivative instruments as either
assets or liabilities in the statements of financial position and measures those instruments at fair value. Changes to the fair value of
derivative contracts that do not qualify for hedge accounting are reported in earnings in the period of the change. For derivatives that
qualify for hedge accounting, changes in the fair value of the derivatives are either recorded in shareholders’ equity as a component
of other comprehensive income or are recognized currently in earnings, along with an offsetting adjustment against the basis of the
item being hedged. Cumulative gains and losses on derivatives that have hedged our net investment in foreign operations and
deferred gains and losses on cash flow hedges that have been recorded in other comprehensive income amounted to a loss of
$36.9 million, net of related tax effects of $24.6 million at January 29, 2005; a loss of $35.0 million, net of related tax effects of
$23.3 million as of January 31, 2004; and amounted to a loss of $9.4 million as of January 25, 2003.
New Accounting Standards: In December 2004, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of
Financial Accounting Standards (‘‘SFAS’’) No. 123R, ‘‘Share-Based Payment’’ (SFAS No. 123R) which requires that the cost of all
employee stock options, as well as other equity-based compensation arrangements, be reflected in the financial statements based on
the estimated fair value of the awards on the grant date (with limited exceptions). That cost will be recognized over the period
during which an employee is required to provide service in exchange for the award or the requisite service period (usually the
F-10