TJ Maxx 2009 Annual Report Download - page 77

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Foreign Currency Contracts: TJX enters into forward foreign currency exchange contracts to obtain economic
hedges on firm U.S. dollar and Euro denominated merchandise purchase commitments made by T.K. Maxx
(United Kingdom, Ireland, Germany and Poland), Winners (Canada) and Marmaxx. These commitments are
typically twelve months or less in duration. The contracts outstanding at January 30, 2010 cover certain
commitments for the four quarters of fiscal 2011. TJX elected not to apply hedge accounting rules to these
contracts in fiscal 2010, fiscal 2009 and fiscal 2008. The change in the fair value of these contracts resulted in
income of $494,000 in fiscal 2010, a loss of $2.3 million in fiscal 2009 and income of $6.6 million in fiscal 2008 and is
included in earnings as a component of cost of sales, including buying and occupancy costs.
Until the fourth quarter of fiscal 2009, TJX entered into foreign currency forward and swap contracts in both
Canadian dollars and British pound sterling and accounted for them as hedges of the net investment in and between
foreign subsidiaries or cash flow hedges of Winners long-term intercompany debt. TJX applied hedge accounting to
these hedge contracts of our investment in foreign subsidiaries, and changes in fair value of these contracts, as well as
gains and losses upon settlement, were recorded in accumulated other comprehensive income, offsetting changes in the
cumulative foreign translation adjustments of the foreign subsidiaries. The change in fair value of the contracts
designated as hedges of the investment in foreign subsidiaries resulted in a gain of $68.8 million, net of income taxes, in
fiscal 2009, and a loss of $15.8 million, net of income taxes, in fiscal 2008. The ineffective portion of the net investment
hedges resulted in pre-tax charges to the income statement of $2.2 million in fiscal 2009 and $9.1 million in fiscal 2008.
The change in the cumulative foreign currency translation adjustment resulted in a loss of $76.7 million, net of income
taxes, in fiscal 2010, a gain of $171.2 million, net of income taxes, in fiscal 2009, and a gain of $21.0 million, net of
income taxes, in fiscal 2008. Amounts included in other comprehensive income relating to cash flow hedges were
reclassified to earnings as the underlying exposure on the debt had an impact on earnings. The net amount reclassified
from other comprehensive income to the income statement in fiscal 2009 related to cash flow hedges was $677,368, net
of income taxes. The net loss recognized in fiscal 2008 related to cash flow hedges was $1.1 million, net of income taxes.
TJX also enters into derivative contracts, generally designated as fair value hedges, to hedge intercompany debt and
intercompany interest payable. 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. There were no such contracts outstanding as of January 30, 2010. The net impact
on the income statement of hedging activity related to these intercompany payables was income of $3.7 million in fiscal
2010, expense of $1.7 million in fiscal 2009 and income of $2.6 million in fiscal 2008.
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