TJ Maxx 2015 Annual Report Download - page 51

We traditionally have funded our working capital requirements, including for seasonal merchandise, primarily
through cash generated from operations, supplemented, as needed, by short-term bank borrowings and the
issuance of commercial paper. As of January 30, 2016, our cash and cash equivalents held outside the U.S.
were $1.2 billion, of which $355.4 million was held in countries where we have the intention to reinvest any
undistributed earnings indefinitely. We have provided for deferred U.S. taxes on all undistributed earnings of our
subsidiaries in Canada, Puerto Rico, Italy, India and Hong Kong. If we repatriate cash from such subsidiaries, we
would not expect to incur additional tax expense, but our cash would be reduced by the amount of taxes paid.
For all other foreign subsidiaries, no income taxes have been provided on the undistributed earnings because
such earnings are considered to be indefinitely reinvested in the business. We have no current plans to repatriate
cash balances held by such foreign subsidiaries. We believe our existing cash and cash equivalents, internally
generated funds and our credit facilities are more than adequate to meet our operating needs over the next fiscal
year. Our credit facilities were amended subsequent to the fiscal year end and are more fully described in Note J
to the consolidated financial statements.
Contractual obligations: As of January 30, 2016, we had known contractual obligations (including current
installments) under long-term debt arrangements, operating leases for property and equipment and purchase
obligations as follows (in thousands):
Payments Due by Period
Tabular Disclosure of Contractual Obligations Total
Less Than
1 Year
1-3
Years
3-5
Years
More Than
5 Years
Long-term debt obligations(1) $ 2,089,437 $ 63,950 $ 136,723 $ 473,313 $1,415,451
Operating lease commitments(2) 7,997,821 1,368,050 2,424,060 1,851,037 2,354,674
Purchase obligations(3) 3,075,339 2,894,674 161,346 19,308 11
Total obligations $13,162,597 $4,326,674 $2,722,129 $2,343,658 $3,770,136
(1) Includes estimated interest costs and financing lease obligations.
(2) Reflects minimum rent. Does not include costs for insurance, real estate taxes, other operating expenses and, in some cases, rentals based
on a percentage of sales; these items totaled approximately one-third of the total minimum rent for fiscal 2016.
(3) Includes estimated obligations under purchase orders for merchandise and under agreements for capital items, products and services used in
our business, including executive employment and other agreements. Excludes agreements that can be cancelled without penalty.
We also have long-term liabilities for which it is not reasonably possible for us to predict when they may be
paid which include $418.2 million for employee compensation and benefits, and $33.4 million for uncertain tax
positions.
CRITICAL ACCOUNTING POLICIES
We prepare our consolidated financial statements in accordance with accounting principles generally
accepted in the United States of America (GAAP) which require us to make certain estimates and judgments that
impact our reported results. These judgments and estimates are based on historical experience and other
factors which we continually review and believe are reasonable. We consider our most critical accounting
policies, involving management estimates and judgments, to be those relating to the areas described below.
Inventory valuation: We use the retail method for valuing inventory for all our businesses except STP and
Trade Secret. The businesses that utilize the retail method have some inventory that is initially valued at cost
before the retail method is applied as it has not been fully processed for sale (i.e. inventory in transit and
unprocessed inventory in our distribution centers). Under the retail method, the cost value of inventory and gross
margins are determined by calculating a cost-to-retail ratio and applying it to the retail value of inventory. It
involves management estimates with regard to markdowns and inventory shrinkage. Under the retail method,
permanent markdowns are reflected in inventory valuation when the price of an item is reduced. Typically, a
significant area of judgment in the retail method is the amount and timing of permanent markdowns. However,
as a normal business practice, we have a specific policy as to when and how markdowns are to be taken,
greatly reducing management’s discretion and the need for management estimates as to markdowns. Inventory
shrinkage requires estimating a shrinkage rate for interim periods, but we take a full physical inventory near the
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