UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM10-Q

(mark one)

For the quarterly period ended July 29, 2017May 5, 2018

OR

For the transition period from                    to                    

Commission file number1-4908

The TJX Companies, Inc.

(Exact name of registrant as specified in its charter)

(508)390-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  ☒    NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, smaller reporting company or an “emerging growth company”. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    YES  ☐    NO  ☒

The number of shares of registrant’s common stock outstanding as of July 29, 2017: 636,274,241May 5, 2018: 625,202,688

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

IN THOUSANDS EXCEPT PER SHARE AMOUNTS

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

IN THOUSANDS EXCEPT PER SHARE AMOUNTS

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEBALANCE SHEETS

(UNAUDITED)

IN THOUSANDS, EXCEPT SHARE DATA

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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THE TJX COMPANIES, INC.

CONSOLIDATED BALANCE SHEETSSTATEMENTS OF CASH FLOWS

(UNAUDITED)

IN THOUSANDS EXCEPT SHARE DATA

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWSSHAREHOLDERS’ EQUITY

(UNAUDITED)

IN THOUSANDS

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

IN THOUSANDS

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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THE TJX COMPANIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note A. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The Consolidated Financial Statements and Notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These Consolidated Financial Statements and Notes are unaudited and, in the opinion of management, reflect all normal recurring adjustments, accruals and deferrals among periods required to match costs properly with the related revenue or activity, considered necessary by The TJX Companies, Inc. (together with its subsidiaries, “TJX”) for a fair statement of its financial statements for the periods reported, all in conformity with GAAP consistently applied. The Consolidated Financial Statements and Notes thereto should be read in conjunction with the audited consolidated financial statements, including the related notes, contained in TJX’s Annual Report on Form10-K for the fiscal year ended January 28, 2017February 3, 2018 (“fiscal 2017”2018”).

These interim results are not necessarily indicative of results for the full fiscal year. TJX’s business, in common with the businesses of retailers generally, is subject to seasonal influences, with higher levels of sales and income generally realized in the second half of the year.

The January 28, 2017February 3, 2018 balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

Fiscal Year

TJX’s fiscal year ends on the Saturday nearest to the last day of January of each year. The current fiscal year ends February 3, 20182, 2019 (“fiscal 2018”2019”) and is a53-week52-week fiscal year. Fiscal 20172018 was a52-week53-week fiscal year.

Use of Estimates

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. TJX considers its accounting policies relating to inventory valuation, impairment of long-lived assets, goodwill and tradenames, retirement obligations, share-based compensation, casualty insurance, reserves for uncertain tax positions and loss contingencies to be the most significant accounting policies that involve management estimates and judgments. Actual amounts could differ from those estimates, and such differences could be material.

Future AdoptionSummary of New Accounting StandardsPolicies

Revenue Recognition

In May 2014, The Financial Accounting Standards Board (the “FASB”TJX adoptedRevenue from Contracts with Customers(referred to as “ASC 606”) issued updated guidance, on revenue recognition. The new guidance supersedes most preexisting revenue recognition guidance.February 4, 2018 (“the adoption date”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. TJX adopted the new guidance under the modified retrospective approach which resulted in a $59 million cumulative adjustment to increase retained earnings. The cumulative adjustment primarily related to revenue recognized on the value of unredeemed rewards certificates issued to customers as part of the Company’s U.S.co-branded credit card loyalty program. We will now recognize the estimated unredeemed awards when they are earned, rather than when merchandise credits expire or when the likelihood of redemption becomes remote. In addition,on-line sales are now recognized at the shipping point rather than receipt by the customer.

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Other changes relate to the presentation of revenue as certain expenses previously presented as a reduction of revenue are now classified as selling, general and administrative expenses (“SG&A”). The new standard will be effective for annual reporting periods beginning after December 15, 2017, and interim periods therein, with an option to adopt the standard early. The standard shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We believe that there will be no change in the timing or amount of revenue recognized under the new standard as it relates to revenue from point of sale at the registers in our stores, which constitutes more than 95% of the Company’s revenue. We continue to evaluate other revenue streams such ase-commerce sales, sales attributable to loyalty benefit programs and shipping revenue, and there may be a slight change in the presentation and timing of when such revenue is recognized. The new standard will requirerequired a change in the presentation of our sales return reserve on the balance sheet, which we currently record net. The new standardpreviously recorded net of the value of returned merchandise, but will require the reserve tonow be establishedpresented at the gross sales value with an asset established for the value of the merchandise returned. There is no change in the timing or amount of revenue recognized from point of sale at the registers in our stores, which constitutes the majority of the Company’s revenue.

Financial results for fiscal periods after the adoption date are presented under ASC 606 while results from prior periods are not adjusted and continue to be reported under the accounting standards in effect for the prior period. We doapplied ASC 606 only to contracts that were not expect this change

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completed prior to fiscal 2019. Adoption of the new guidance did not have a material impact on our financial condition or results of operations for fiscal period ended May 5, 2018 other than additional disclosure requirements. We plan

Net Sales

Net sales consist primarily of merchandise sales, which are recorded net of a reserve for estimated returns, any discounts and sales taxes, related to adoptthe sales of merchandise both within our stores and online. Net sales also include an immaterial amount of other revenues that represent less than 1% of total revenues, primarily generated from TJX’sco-branded loyalty rewards credit card program offered in the United States only. Certain customers may receive discounts which are accounted for as consideration reducing the transaction price. Merchandise sales from our stores are recognized at the point of sale when TJX provides the merchandise to the customer. The performance obligation is fulfilled at this standardpoint when the customer has obtained control by paying for and leaving with the merchandise. Merchandise sales made online are recognized when the product has been shipped, which is when legal title has passed and when TJX is entitled to payment, and the customer has obtained the ability to direct the use of and obtain substantially all of the remaining benefits from the goods. Shipping and handling activities related to online sales occur after the customer obtains control of the goods. TJX’s policy is to treat shipping costs as part of our fulfillment center costs within our operating expenditures. As a result, shipping fee revenues received will be recognized when control of the goods transfer to the customer and will continue to be recorded as net sales. Shipping and handling costs incurred by TJX are included in cost of sales, including buying and occupancy costs. TJX disaggregates revenue by operating segment, see Note G—Segment Information.

Deferred Gift Card Revenue

Proceeds from the sale of gift cards as well as the value of store cards issued to customers as a result of a return or exchange are deferred until the customers use the cards to acquire merchandise, as TJX does not fulfill its performance obligation until the gift card has been redeemed. While gift cards have an indefinite life, substantially all are redeemed in the first year of issuance. Based on historical experience, we estimate the amount of gift cards and store cards that will not be redeemed and, to the extent allowed by local law, these amounts are amortized into income over the redemption period.

TJX recognized $372 million in gift card revenue in the first quarter fiscal 2019. Gift cards are combined in one homogeneous pool and are not separately identifiable. As such, the revenue recognized consists of gift cards that were part of the fiscal year ending January 26, 2019 and continue to evaluatedeferred revenue balance at the impact this standard will have on our Consolidated Financial Statements and Notes thereto,beginning of the period as well as gift cards that were issued during the period.

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Sales Return Reserve

Our products are generally sold with a right of return and we may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. We have elected to apply the portfolio practical expedient and will estimate the variable consideration using the expected value method when calculating the returns reserve, as the difference to applying it to the individual contract would not differ materially. Returns will continue to be estimated based on historical experience and will be required to be established and presented at the gross sales value with an asset established for the estimated value of the merchandise returned separate from the refund liability. Liabilities for return allowances are included in “Accrued expenses and other current liabilities” and the offsetting receivable is included in “Prepaid expenses and other current assets” on our preferred methodconsolidated balance sheets.

Goodwill

Goodwill includes the excess of adoption.the purchase price paid over the carrying value of the minority interest acquired in fiscal 1990 in TJX’s former 83%-owned subsidiary and represents goodwill associated with the T.J. Maxx chain, as well as the excess of cost over the estimated fair market value of the net assets acquired by TJX in the purchase of Winners in fiscal 1991, the purchase of Sierra Trading Post (“STP”) in fiscal 2013, and the purchase of Trade Secret in fiscal 2016, which wasre-branded under the T.K. Maxx name during fiscal 2018. The following is a roll forward of goodwill by component:

Leases

In February 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued updated guidance on leases that aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. The new standard is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods; early adoption is permitted and modified retrospective application is required. We plan to adopt this standard in the first quarter of the fiscal year ending February 1, 2020. The Company is in the process of implementing a new lease accounting system and has established a cross-functional team to implement the updated lease guidance andguidance. This team is in the process of evaluating itsour lease portfolio andto assess the impact this standard will have on our Consolidated Financial Statements and Notes thereto. The Company expects this standard to have a material impact on its statement of financial condition as it will record a significant asset and liability associated with its more than 3,9004,100 leased locations. We plan to implement the transition package of three practical expedients permitted within the standard, which among other things, allows for the carryforward of historical lease classifications. We expect to make an accounting policy election that will keep leases with a term of 12 months or less off the balance sheet and result in recognizing those lease payments on a straight-line basis over the lease term. As our leases do not provide an implicit rate, we plan to use our incremental borrowing rate based on information available at commencement date to determine the present value of future payments. The Company continues to assess ifhas determined that the initial lease term will not differ under the new standard versus current accounting practice. If the lease term remains unchangedpractice, and therefore the income statement impact of the new standard is not expected to be material. We plan

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Hedging Activities

In August 2017, the FASB issued updated guidance on hedge accounting. The updates allow hedge accounting for new types of interest rate hedges of financial instruments and simplify the documentation requirements to adoptqualify for hedge accounting. In addition, any gain or loss from hedge ineffectiveness will be reported in the same income statement line with the effective hedge results and the hedged transaction. The updated guidance is effective for annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company has not yet determined the timing for adoption or estimated the effect on the Company’s consolidated financial statements.

Income Statement – Reporting Comprehensive Income

In February 2018, the FASB issued updated guidance related to reporting comprehensive income. The updated guidance allows for aone-time reclassification from accumulated other comprehensive income to retained earnings for stranded tax effect resulting from the enactment of the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). The updated guidance is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for reporting periods for which financial statements have not yet been issued. The updated guidance should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the 2017 Tax Act is recognized. The Company has not yet determined the timing of adoption or estimated the effect on the Company’s consolidated financial statements.

Recently Adopted Accounting Standards

Revenue Recognition

See Revenue Recognition in this standard inNote A for the impact upon adoption.

Cash Flows

In the first quarter of the fiscal year ending February 1, 2020.

Cash Flows

In August 2016,2019, TJX adopted a pronouncement was issued that addresses diversitydifferences in howthe way certain cash receipts and cash payments are presented in the statement of cash flows. The new guidance provides clarity around the cash flow classification for eight specific issues in an effort to reduce the current and potential future diversitydifferences in practice. The standard which is to be applied retrospectively, will be effective for the first interim period within annual reporting periods beginning after December 15, 2017, and early adoption is permitted. TJX doesdid not expect this standard to have a material impact on our consolidated financial statements.statements of cash flows.

GoodwillRetirement Benefits

In January 2017, the FASB issued updated guidance on goodwill that aims to simplify the subsequent measurementfirst quarter of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, goodwill impairment will be measured as the amount by which the carrying value exceeds the fair value. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. The new guidance will be effective for annual reporting periods beginning after December 15,fiscal 2019, including interim periods. Early adoption is permitted for annual or interim goodwill impairment tests performed on testing dates after January 1, 2017. TJX does not expect the adoption of this standard to haveadopted a material impact on our consolidated financial statements.

Retirement Benefits

In March 2017, the FASB issued updated guidancepronouncement related to retirement benefits, which requires that an employer report the service cost component of net periodic pension and net periodic post retirement cost in the same line item as other compensation costs arising from services rendered by the employees during the period. It also requires the other components of net periodic pension and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. Additionally, only the service cost componentoperations, if such a subtotal is eligible for capitalization. This pronouncement is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued or made available for issuance.presented. The amendments in this update should bewere applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and afterstatement. The impact to prior periods was immaterial. As a result of the effective date,adoption, for the capitalization ofthree months ended May 5, 2018, service costs are recorded in the service cost component of net periodic pension costsame line items as other compensation costs and net periodic postretirement benefitnon-service costs are recorded in assets. We are currently evaluating the presentation of the other components of net benefit cost.SG&A in our income statement.

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Recently Adopted Accounting Standards

Share Based CompensationIncome Taxes

In the first quarter of 2017,fiscal 2019, TJX adopted ASU2018-05 “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”, which provides guidance on accounting for the tax effects of the 2017 Tax Act. This guidance allows a pronouncement that aimscompany to simplify several aspects ofrecord a provisional amount when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting and reporting for share-based payment transactions. One provision within this pronouncement requires that excess income tax benefits and tax deficiencies related to share-based payments be recognized within income tax expensethe change in the statement of income, rather than within additionalpaid-in capital ontax law during the balance sheet.measurement period. The adoption of this provision ismeasurement period ends when the company has obtained, prepared, and analyzed the information necessary to be applied prospectively. The impactfinalize its accounting, but cannot extend beyond one year. We will continue to TJX’s results of operations related to this provision for the three and six months ended July 29, 2017 was a decrease in theassess our provision for income taxes of $3.3 million and $27.9 million, respectively. The impact of this benefit on TJX’sas future results of operations will depend in part on the market prices for TJX’s shares on the dates there are taxable events related to share awards, and therefore the impactguidance is difficult to predict. The remaining provisions within the pronouncement did not have a material impact on our consolidated financial statements.issued.

Note B. Property at Cost

The following table presents the components of property at cost:

Depreciation expense was $347.1$193.7 million for the sixthree months ended July 29, 2017May 5, 2018 and $321.7$172.6 for the sixthree months ended July 30, 2016.April 29, 2017. Depreciation expense was $658.8$726.0 million for the twelve months ended January 28, 2017.

During fiscal 2017 the Company identified fully depreciated assets that were no longer in use and should have been written off during fiscal 2017 or prior periods. The July 30, 2016 property at cost and accumulated depreciation were reduced by $858 million. There was no impact to net property at cost. This error was not material to our consolidated financial statements; however, we have corrected the July 30, 2016 amounts to reflect thewrite-off that should have been recorded at that time.February 3, 2018.

Note C. Accumulated Other Comprehensive Income (Loss)

Amounts included in accumulated other comprehensive income (loss) are recorded net of taxes. The following table details the changes in accumulated other comprehensive income (loss) for the sixthree months ended July 29, 2017:May 5, 2018:

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Note D. Capital Stock and Earnings Per Share

Capital Stock

TJX repurchased and retired 7.54.9 million shares of its common stock at a cost of $550.0$400.0 million during the quarter ended July 29, 2017, on a “trade date” basis. During the six months ended July 29, 2017, TJX repurchased and retired 12 million shares of its common stock at a cost of $900.0 million,May 5, 2018, on a “trade date” basis. TJX reflects stock repurchases in its financial statements on a “settlement date” or cash basis. TJX had cash expenditures under repurchase programs of $884.7$395.4 million for the sixthree months ended July 29, 2017May 5, 2018, and $756.2$350.0 million for the sixthree months ended July 30, 2016.April 29, 2017. These expenditures were funded by cash generated from operations.

In February 2016,2018, TJX announced that its Board of Directors had approved aan additional stock repurchase program that authorized the repurchase of up to an additional $2.0$3.0 billion of TJX common stock from time to time. Under this program, on a “trade date” basis through July 29, 2017, TJX repurchased 14.8 million sharestime, all of common stock at a cost of $1.1 billion. At July 29, 2017, $890.8 millionwhich remained available for purchase under this program.at May 5, 2018.

In February 2017, TJX announced that its Board of Directors had approved an additional stock repurchase program that authorized the repurchase of up to $1.0 billion of TJX common stock from time to time, alltime. Under this program, on a “trade date” basis through May 5, 2018, TJX repurchased 3.2 million shares of which remainedcommon stock at a cost of $264.2 million.

As of May 5, 2018, TJX had $3.7 billion available at July 29, 2017.under previously announced stock repurchase programs.

All shares repurchased under the stock repurchase programs have been retired.

Earnings Per Share

The following tables present the calculation of basic and diluted earnings per share (“EPS”) for net income:

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The weighted average common shares for the diluted earnings per share calculation exclude the impact of outstanding stock options if the assumed proceeds per share of the option is in excess of the related fiscal period’s average price of TJX’s common stock.stock for the related fiscal periods. Such options are excluded because they would have an antidilutive effect. There were 8.6 million such options excluded for the thirteen weeks ended May 5, 2018. There were 8.0 million such options excluded for each of the thirteen weeks andtwenty-six weeks ended JulyApril 29, 2017. There were 4.0 million such options excluded for each of the thirteen weeks andtwenty-six weeks ended July 30, 2016.

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Note E. Financial Instruments

As a result of its operating and financing activities, TJX is exposed to market risks from changes in interest and foreign currency exchange rates and fuel costs. These market risks may adversely affect TJX’s operating results and financial position. TJX seeks to minimize risk from changes in interest and foreign currency exchange rates and fuel costs through the use of derivative financial instruments when and to the extent deemed appropriate. TJX does not use derivative financial instruments for trading or other speculative purposes and does not use any leveraged derivative financial instruments. TJX recognizes all derivative instruments as either assets or liabilities in the statements of financial position and measures those instruments at fair value. The fair values of the derivatives are classified as assets or liabilities, current ornon-current, based upon valuation results and settlement dates of the individual contracts. Changes to the fair value of derivative contracts that do not qualify for hedge accounting are reported in earnings in the period of the change. For derivatives that qualify for hedge accounting, changes in the fair value of the derivatives are either recorded in shareholders’ equity as a component of other comprehensive income or are recognized currently in earnings, along with an offsetting adjustment against the basis of the item being hedged. TJX does not hedge its net investments in foreign subsidiaries.

Diesel Fuel Contracts

TJX hedges portions of its estimated notional diesel requirements based on the diesel fuel expected to be consumed by independent freight carriers transporting TJX’s inventory. Independent freight carriers transporting TJX’s inventory charge TJX a mileage surcharge based on the price of diesel fuel. The hedge agreements are designed to mitigate the volatility of diesel fuel pricing (and the resulting per mile surcharges payable by TJX) by setting a fixed price per gallon for the period being hedged. During fiscal 2017 and the first six months of fiscal 2018, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2018. In addition,2019, and during the first three months of fiscal 2018,2019, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for the first halfthree months of fiscal 2019.2020. The hedge agreements outstanding at July 29, 2017May 5, 2018 relate to approximately 53%50% of TJX’s estimated notional diesel requirements for the remainder of fiscal 20182019 and approximately 46%45% of TJX’s estimated notional diesel requirements for the first sixthree months of fiscal 2019.2020. These diesel fuel hedge agreements will settle throughout the remainder of fiscal 20182019 and throughout the first sevenfour months of fiscal 2019.TJX2020.TJX elected not to apply hedge accounting rules to these contracts.

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Foreign Currency Contracts

TJX enters into forward foreign currency exchange contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by the Company’s operations atin TJX International (United Kingdom, Ireland, Germany, Poland, Austria, The Netherlands and Australia), TJX Canada (Canada), Marmaxx (U.S.) and HomeGoods (U.S.) in currencies other than their respective functional currencies. These contracts typically have a term of twelve months or less. The contracts outstanding at July 29, 2017May 5, 2018 cover a portion of such actual and anticipated merchandise purchases throughout the remainder of fiscal 20182019 and throughout the first quarter of fiscal 2019.2020. Additionally, TJX’s operations in Europe are subject to foreign currency exposure as a result of their buying function being centralized in the United Kingdom. All merchandise is purchased centrally in the U.K. and then shipped and billed to the retail entities in other countries. This intercompany billing to TJX’s European businesses’ Euro denominated operations creates exposure to the central buying entity for changes in the exchange rate between the Euro and British Pound. The inflow of Euros to the central buying entity provides a natural hedge for merchandise purchased from third-party vendors that is denominated in Euros. However, with the growth of TJX’s Euro denominated retail operations, the intercompany billings committed to the Euro denominated operations is generating Euros in excess of those needed to meet merchandise commitments to outside vendors. TJX calculates this excess Euro exposure each month and enters into forward contracts of approximately 30 days duration to mitigate the exposure. TJX elected not to apply hedge accounting rules to these contracts.

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.

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The following isTJX periodically reviews its net investments in foreign subsidiaries. During the fiscal quarter ended May 5, 2018, TJX entered into net investment hedge contracts related to a summaryportion of TJX’s derivative financial instruments, related fair value and balance sheet classification at July 29, 2017:its investment in TJX Canada. These contracts will settle throughout the second quarter of fiscal 2019. TJX elected to apply hedge accounting rules to these contracts.

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The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at January 28, 2017:May 5, 2018: