TJ Maxx 2006 Annual Report Download - page 74

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.
B. Contingency Related to Computer Intrusion
During the fourth quarter of fiscal 2007, TJX discovered that it had suffered an unauthorized intrusion or
intrusions into portions of its computer system that process and store information related to credit and debit card,
check and unreceipted merchandise return transactions (the intrusion or intrusions, collectively, the “Computer
Intrusion”). TJX has been engaged in an ongoing investigation of the Computer Intrusion, and computer security and
incident response experts have been engaged to assist in the investigation. TJX believes that customer information was
stolen in the Computer Intrusion in 2005 and 2006 and that such information most likely primarily relates to
transactions at its stores (other than Bob’s Stores) during the periods 2003 through June 2004 and mid-May2006
through mid-December 2006.
During the fourth quarter of fiscal 2007, we recorded a pre-tax charge of approximately $5 million, or $0.01 per
share, for costs incurred through the fourth quarter in connection with the Computer Intrusion, which includes costs
incurred to investigate and contain the Computer Intrusion, strengthen computer security and systems, and com-
municate with customers, and for technical, legal and other fees. In addition, various litigation and claims have been (or
may be) asserted against us and/or our acquiring banks on behalf of customers (including various putative class actions
seeking in the aggregate to represent all customers in the United States, Puerto Rico and Canada whose transaction
information was allegedly compromised by the Computer Intrusion), banks and payment card companies seeking
damages allegedly arising out of the Computer Intrusion and other related relief (including a putative class action
seeking to represent all financial institutions that issued payment cards to our customers used at our stores during the
period of the Computer Intrusion) and shareholders. We intend to defend such litigation and claims vigorously,
although the outcome of such litigation and claims cannot be predicted. In addition, various governmental agencies are
investigating the Computer Intrusion, and we may be subject to fines or other obligations as a result of these
investigations. Certain banks have sought, and other banks and payment card companies may seek, either directly
against us or through claims against our acquiring banks as to which we may have an indemnity obligation, payment of
or reimbursement for fraudulent card charges and operating expenses that they believe they have incurred by reason of
the Computer Intrusion, and payment card companies and associations may seek to impose fines by reason of the
Computer Intrusion. We do not have sufficient information to reasonably estimate losses that may result from such
litigation, claims and investigations. As such, no liability has been recorded as of January 27, 2007. We will continue to
evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both
probable that a loss has been incurred and the amount of the loss is reasonably estimable. Such losses could be material
to our results of operations and financial condition.
C. Discontinued Operations — A.J. Wright store closings
During the fourth quarter of fiscal 2007 management developed a plan to close 34 underperforming A.J. Wright
stores. The plan was approved by the Executive Committee of the Board of Directors on November 27, 2006, and
virtually all of the stores were closed as of the end of fiscal 2007.
In its continuing effort to improve the performance of A.J. Wright, management performed an analysis of its store
locations and operating performance. Management’s plan for the store closures was based on several factors, including
market demographics and proximity to other A.J. Wright stores, cash return, sales volume and productivity, recent
comparable store sales and profit trends and overall market performance. The 34 stores represented approximately 21%
of A.J. Wright’s store base, but only 16% of its year-to-date sales and had store profit margins significantly below the
average of the A.J. Wright chain.
We recorded fourth quarter pre-tax charges of approximately $62 million in connection with these A.J. Wright
store closures. A summary of the estimated charges (in millions) is presented below:
Non-Cash Cash Total
Asset impairments $20 $ - $20
Lease costs, net of estimated sublease income - 38 38
Severance and other costs -44
Total pre-tax charges $20 $42 $62
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