TJ Maxx 2006 Annual Report Download - page 55

issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We believe the
adoption of SFAS No. 157 will not have a material impact on our results of operations or financial condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
We do not enter into derivatives for speculative or trading purposes.
Foreign Currency Exchange Rate 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 E 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; most of these gains and losses are recorded directly in shareholders’ equity. 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 27, 2007, 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.
Interest Rate Risk
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 TJX. In addition, changes in the gross amount of our borrowings will
affect the impact on our future interest expense of future changes in interest rates. 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 27, 2007, 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.
Market Risk
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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item may be found on pages F-1 through F-34 of this Annual Report on
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
We have carried out an evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the
end of the period covered by this report pursuant to Rules 13a-15 and 15d-15 of the Exchange Act. Based upon that
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