TJ Maxx 2014 Annual Report Download - page 43

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Selling, general and administrative expenses: Selling, general and administrative expenses as a
percentage of net sales were 16.1% in fiscal 2015, 16.3% in fiscal 2014 and 16.4% in fiscal 2013. The reduction
in this ratio is largely due to a reduction in our reserves for former operations in fiscal 2015, as well as costs
incurred in fiscal 2014 relating to our home office relocations.
The improvement in this ratio for fiscal 2014 was primarily due to year-over-year favorability from a
combination of items that negatively impacted the fiscal 2013 expense ratio. Fiscal 2013 included a non-cash
charge for the cumulative impact of a correction to our pension accrual, a non-operating charge due to the
adjustment in our reserve for former operations relating to closed stores and contributions to the TJX
Foundation.
Loss on early extinguishment of debt: On July 8, 2014, we redeemed our $400 million aggregate principal
amount of 4.20% notes due August 2015 and recorded a pre-tax loss on the early extinguishment of debt of
$16.8 million.
Interest expense, net: The components of interest expense, net for the last three fiscal years are
summarized below:
Fiscal Year Ended
Dollars in thousands
January 31,
2015
February 1,
2014
February 2,
2013
Interest expense $ 64,783 $ 57,084 $ 48,582
Capitalized interest (9,403) (10,993) (7,750)
Interest (income) (15,593) (15,010) (11,657)
Interest expense, net $ 39,787 $ 31,081 $ 29,175
The increase in net interest expense for fiscal 2015 reflected the interest cost from the date of issuance
(June 5, 2014) on the $750 million 2.75% seven-year notes. In addition, fiscal 2015 included 12 months of
interest expense on the $500 million 2.50% ten-year notes, compared to fiscal 2014, which only reflected nine
months of interest expense. These costs were partially offset by interest savings due to the redemption of the
$400 million 4.20% notes. The reduction in capitalized interest on ongoing capital projects is partially offset by
an increase in interest income driven by higher cash balances.
Income taxes: Our effective annual income tax rate was 37.6% in fiscal 2015, 35.6% in fiscal 2014 and
38.0% in fiscal 2013. The increase in the fiscal 2015 effective income tax rate, as compared to fiscal 2014, was
primarily due to the impact on the fiscal 2014 income tax rate from tax benefits in fiscal 2014 of approximately
$80 million, which were primarily due to a reduction in our reserve for uncertain tax positions as a result of
settlements with state taxing authorities and the reversal of valuation allowances against foreign net operating
loss carryforwards. These benefits reduced the fiscal 2014 effective income tax rate by 1.4 percentage points
and 0.8 percentage points, respectively. The decrease in the fiscal 2014 effective income tax rate as compared
to fiscal 2013 was primarily due to the tax benefits described above. See Note L to the consolidated financial
statements for more information relating to income taxes.
Net income and diluted earnings per share: Net income was $2.2 billion in fiscal 2015, a 4% increase over
$2.1 billion in fiscal 2014, which in turn was a 12% increase over $1.9 billion in fiscal 2013. Diluted earnings per
share were $3.15 in fiscal 2015, $2.94 in fiscal 2014 and $2.55 in fiscal 2013. The after-tax cost for the loss on
the early extinguishment of debt in the second quarter of fiscal 2015 reduced earnings per share for fiscal 2015
by $0.01 per share. The tax benefits referred to above added $0.11 per share to net income for fiscal 2014, while
the 53rd week benefited fiscal 2013 earnings per share by $0.08 per share. Foreign currency exchange rates also
affected the comparability of our results. Foreign currency exchange rates had a $0.01 negative impact on
earnings per share for both fiscal 2015 as compared to fiscal 2014 and fiscal 2014 as compared to fiscal 2013.
Our stock repurchase programs, which reduce our weighted average diluted shares outstanding, benefited
our earnings per share growth in fiscal 2015 by 4%. We repurchased 27.7 million shares of our stock at a cost of
$1.7 billion in fiscal 2015, 27.0 million shares of our stock at a cost of $1.5 billion in fiscal 2014 and 30.6 million
shares of our stock at a cost of $1.3 billion in fiscal 2013.
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