UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2011
Commission File Number 1-6049
TARGET CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota |
|
41-0215170 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
1000 Nicollet Mall, Minneapolis, Minnesota |
|
55403 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrants telephone number, including area code: 612/304-6073
Former name, former address and former fiscal year, if changed since last report: N/A
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 x No o
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 Regulation S-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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).
Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller Reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
Indicate the number of shares outstanding of each of registrants classes of common stock, as of the latest practicable date. Total shares of common stock, par value $0.0833, outstanding at May 23, 2011 were 689,145,299.
TARGET CORPORATION
TABLE OF CONTENTS
| ||
| ||
|
1 | |
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2 | |
|
3 | |
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4 | |
|
5 | |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
13 | |
22 | ||
22 | ||
|
|
|
| ||
23 | ||
23 | ||
23 | ||
23 | ||
23 | ||
23 | ||
24 | ||
|
|
|
|
|
|
|
25 | |
|
26 |
Consolidated Statements of Operations
|
|
|
Three Months Ended |
| ||||
|
|
|
April 30, |
|
May 1, |
| ||
(millions, except per share data) (unaudited) |
|
|
2011 |
|
2010 |
| ||
Sales |
|
|
$ |
15,580 |
|
$ |
15,158 |
|
Credit card revenues |
|
|
355 |
|
435 |
| ||
Total revenues |
|
|
15,935 |
|
15,593 |
| ||
Cost of sales |
|
|
10,838 |
|
10,412 |
| ||
Selling, general and administrative expenses |
|
|
3,233 |
|
3,143 |
| ||
Credit card expenses |
|
|
88 |
|
280 |
| ||
Depreciation and amortization |
|
|
512 |
|
516 |
| ||
Earnings before interest expense and income taxes |
|
|
1,264 |
|
1,242 |
| ||
Net interest expense |
|
|
|
|
|
| ||
Nonrecourse debt collateralized by credit card receivables |
|
|
19 |
|
23 |
| ||
Other interest expense |
|
|
164 |
|
165 |
| ||
Interest income |
|
|
|
|
(1 |
) | ||
Net interest expense |
|
|
183 |
|
187 |
| ||
Earnings before income taxes |
|
|
1,081 |
|
1,055 |
| ||
Provision for income taxes |
|
|
392 |
|
384 |
| ||
Net earnings |
|
|
$ |
689 |
|
$ |
671 |
|
Basic earnings per share |
|
|
$ |
0.99 |
|
$ |
0.91 |
|
Diluted earnings per share |
|
|
$ |
0.99 |
|
$ |
0.90 |
|
Weighted average common shares outstanding |
|
|
|
|
|
| ||
Basic |
|
|
692.6 |
|
739.9 |
| ||
Diluted |
|
|
697.4 |
|
745.7 |
|
See accompanying Notes to Consolidated Financial Statements. |
Consolidated Statements of Financial Position
|
|
April 30, |
|
January 29, |
|
May 1, |
| |||
(millions) |
|
2011 |
|
2011 |
|
2010 |
| |||
Assets |
|
(unaudited) |
|
|
|
(unaudited) |
| |||
Cash and cash equivalents, including marketable securities of $872, $1,129 and $1,015 |
|
$ |
1,424 |
|
$ |
1,712 |
|
$ |
1,578 |
|
Credit card receivables, net of allowance of $565, $690 and $930 |
|
5,721 |
|
6,153 |
|
6,330 |
| |||
Inventory |
|
7,696 |
|
7,596 |
|
7,249 |
| |||
Other current assets |
|
1,527 |
|
1,752 |
|
2,065 |
| |||
Total current assets |
|
16,368 |
|
17,213 |
|
17,222 |
| |||
Property and equipment |
|
|
|
|
|
|
| |||
Land |
|
5,989 |
|
5,928 |
|
5,803 |
| |||
Buildings and improvements |
|
23,197 |
|
23,081 |
|
22,332 |
| |||
Fixtures and equipment |
|
4,691 |
|
4,939 |
|
4,597 |
| |||
Computer hardware and software |
|
2,270 |
|
2,533 |
|
2,428 |
| |||
Construction-in-progress |
|
837 |
|
567 |
|
497 |
| |||
Accumulated depreciation |
|
(11,336) |
|
(11,555) |
|
(10,445) |
| |||
Property and equipment, net |
|
25,648 |
|
25,493 |
|
25,212 |
| |||
Other noncurrent assets |
|
980 |
|
999 |
|
889 |
| |||
Total assets |
|
$ |
42,996 |
|
$ |
43,705 |
|
$ |
43,323 |
|
Liabilities and shareholders investment |
|
|
|
|
|
|
| |||
Accounts payable |
|
$ |
6,296 |
|
$ |
6,625 |
|
$ |
6,150 |
|
Accrued and other current liabilities |
|
3,229 |
|
3,326 |
|
3,183 |
| |||
Unsecured debt and other borrowings |
|
1,124 |
|
119 |
|
797 |
| |||
Nonrecourse debt collateralized by credit card receivables |
|
189 |
|
|
|
67 |
| |||
Total current liabilities |
|
10,838 |
|
10,070 |
|
10,197 |
| |||
Unsecured debt and other borrowings |
|
10,640 |
|
11,653 |
|
10,642 |
| |||
Nonrecourse debt collateralized by credit card receivables |
|
3,776 |
|
3,954 |
|
4,152 |
| |||
Deferred income taxes |
|
916 |
|
934 |
|
916 |
| |||
Other noncurrent liabilities |
|
1,596 |
|
1,607 |
|
1,819 |
| |||
Total noncurrent liabilities |
|
16,928 |
|
18,148 |
|
17,529 |
| |||
Shareholders investment |
|
|
|
|
|
|
| |||
Common stock |
|
57 |
|
59 |
|
62 |
| |||
Additional paid-in capital |
|
3,345 |
|
3,311 |
|
3,010 |
| |||
Retained earnings |
|
12,398 |
|
12,698 |
|
13,098 |
| |||
Accumulated other comprehensive loss |
|
(570) |
|
(581) |
|
(573) |
| |||
Total shareholders investment |
|
15,230 |
|
15,487 |
|
15,597 |
| |||
Total liabilities and shareholders investment |
|
$ |
42,996 |
|
$ |
43,705 |
|
$ |
43,323 |
|
Common shares outstanding |
|
689.0 |
|
704.0 |
|
738.9 |
|
See accompanying Notes to Consolidated Financial Statements. |
Consolidated Statements of Cash Flows
|
|
|
Three Months Ended |
| ||||
|
|
|
April 30, |
|
May 1, |
| ||
(millions) (unaudited) |
|
|
2011 |
|
2010 |
| ||
Operating activities |
|
|
|
|
|
| ||
Net earnings |
|
|
$ |
689 |
|
$ |
671 |
|
Reconciliation to cash flow |
|
|
|
|
|
| ||
Depreciation and amortization |
|
|
512 |
|
516 |
| ||
Share-based compensation expense |
|
|
21 |
|
25 |
| ||
Deferred income taxes |
|
|
100 |
|
109 |
| ||
Bad debt expense |
|
|
12 |
|
197 |
| ||
Non-cash (gains)/losses and other, net |
|
|
19 |
|
(119 |
) | ||
Changes in operating accounts: |
|
|
|
|
|
| ||
Accounts receivable originated at Target |
|
|
149 |
|
201 |
| ||
Inventory |
|
|
(99 |
) |
(70 |
) | ||
Other current assets |
|
|
84 |
|
(56 |
) | ||
Other noncurrent assets |
|
|
14 |
|
(35 |
) | ||
Accounts payable |
|
|
(330 |
) |
(361 |
) | ||
Accrued and other current liabilities |
|
|
(103 |
) |
63 |
| ||
Other noncurrent liabilities |
|
|
(16 |
) |
17 |
| ||
Cash flow provided by operations |
|
|
1,052 |
|
1,158 |
| ||
Investing activities |
|
|
|
|
|
| ||
Expenditures for property and equipment |
|
|
(632 |
) |
(407 |
) | ||
Proceeds from disposal of property and equipment |
|
|
1 |
|
12 |
| ||
Change in accounts receivable originated at third parties |
|
|
271 |
|
238 |
| ||
Other investments |
|
|
(10 |
) |
(18 |
) | ||
Cash flow required for investing activities |
|
|
(370 |
) |
(175 |
) | ||
Financing activities |
|
|
|
|
|
| ||
Reductions of long-term debt |
|
|
|
|
(1,170 |
) | ||
Dividends paid |
|
|
(174 |
) |
(126 |
) | ||
Repurchase of stock |
|
|
(812 |
) |
(378 |
) | ||
Stock option exercises and related tax benefit |
|
|
16 |
|
69 |
| ||
Cash flow required for financing activities |
|
|
(970 |
) |
(1,605 |
) | ||
Net decrease in cash and cash equivalents |
|
|
(288 |
) |
(622 |
) | ||
Cash and cash equivalents at beginning of period |
|
|
1,712 |
|
2,200 |
| ||
Cash and cash equivalents at end of period |
|
|
$ |
1,424 |
|
$ |
1,578 |
|
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Shareholders Investment
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
|
| ||||||||
(millions, except footnotes) |
|
Common |
|
Stock |
|
Additional |
|
Retained |
|
|
Pension and |
|
Derivative |
|
|
Total |
| ||||||
January 30, 2010 |
|
744.6 |
|
$ |
62 |
|
$ |
2,919 |
|
$ |
12,947 |
|
|
$ |
(537 |
) |
$ |
(44 |
) |
|
$ |
15,347 |
|
Net earnings |
|
|
|
|
|
|
|
2,920 |
|
|
|
|
|
|
|
2,920 |
| ||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Pension and other benefit liability adjustments, net of taxes of $4 |
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
|
(4 |
) | ||||||
Net change on cash flow hedges, net of taxes of $2 |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
3 |
| ||||||
Currency translation adjustment, net of taxes of $1 |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
1 |
| ||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,920 |
| ||||||
Dividends declared |
|
|
|
|
|
|
|
(659 |
) |
|
|
|
|
|
|
(659 |
) | ||||||
Repurchase of stock |
|
(47.8 |
) |
(4 |
) |
|
|
(2,510 |
) |
|
|
|
|
|
|
(2,514 |
) | ||||||
Stock options and awards |
|
7.2 |
|
1 |
|
392 |
|
|
|
|
|
|
|
|
|
393 |
| ||||||
January 29, 2011 |
|
704.0 |
|
$ |
59 |
|
$ |
3,311 |
|
$ |
12,698 |
|
|
$ |
(541 |
) |
$ |
(40 |
) |
|
$ |
15,487 |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net earnings |
|
|
|
|
|
|
|
689 |
|
|
|
|
|
|
|
689 |
| ||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Pension and other benefit liability adjustments, net of taxes of $5 |
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
9 |
| ||||||
Net change on cash flow hedges, net of taxes of $0 |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
1 |
| ||||||
Currency translation adjustment, net of taxes of $0 |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
1 |
| ||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700 |
| ||||||
Dividends declared |
|
|
|
|
|
|
|
(172 |
) |
|
|
|
|
|
|
(172 |
) | ||||||
Repurchase of stock |
|
(15.4 |
) |
(2 |
) |
|
|
(817 |
) |
|
|
|
|
|
|
(819 |
) | ||||||
Stock options and awards |
|
0.4 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
34 |
| ||||||
April 30, 2011 |
|
689.0 |
|
$ |
57 |
|
$ |
3,345 |
|
$ |
12,398 |
|
|
$ |
(532 |
) |
$ |
(38 |
) |
|
$ |
15,230 |
|
Dividends declared per share were $0.25 and $0.17 for the three months ended April 30, 2011 and May 1, 2010, respectively. For the fiscal year ended January 29, 2011, dividends declared per share were $0.92.
See accompanying Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
1. Accounting Policies
The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statement disclosures contained in the 2010 Form 10-K for Target Corporation (Target or the Corporation). The same accounting policies are followed in preparing quarterly financial data as are followed in preparing annual data. See the notes in our Form 10-K for the fiscal year ended January 29, 2011, for those policies. In the opinion of management, all adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature.
Due to the seasonal nature of our business, quarterly revenues, expenses, earnings and cash flows are not necessarily indicative of the results that may be expected for the full year. All amounts are in U.S. dollars unless otherwise stated.
2. Earnings Per Share
Basic earnings per share (EPS) is calculated as net earnings divided by the weighted average number of common shares outstanding during the period. Diluted EPS includes the potentially dilutive impact of stock-based awards outstanding at period end, consisting of the incremental shares assumed to be issued upon the exercise of stock options and the incremental shares assumed to be issued under performance share and restricted stock unit arrangements.
Earnings Per Share |
|
|
|
|
|
(millions, except per share data) |
|
April 30, 2011 |
|
May 1, 2010 |
|
Net earnings |
|
$ 689 |
|
$ 671 |
|
Basic weighted average common shares outstanding |
|
692.6 |
|
739.9 |
|
Dilutive impact of stock-based awards |
|
4.8 |
|
5.8 |
|
Diluted weighted average common shares outstanding |
|
697.4 |
|
745.7 |
|
Basic earnings per share |
|
$ 0.99 |
|
$ 0.91 |
|
Diluted earnings per share |
|
$ 0.99 |
|
$ 0.90 |
|
For the quarter ended April 30, 2011 and May 1, 2010, 14.5 million and 11.6 million stock options, respectively, were excluded from the calculation of weighted average shares for diluted EPS because their effects were antidilutive.
3. Fair Value Measurements
Fair value is the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liabilitys fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).
The following table presents financial assets and liabilities measured at fair value on a recurring basis:
Fair Value Measurements |
|
|
|
|
|
|
| |||||||||||||||||||||
Recurring Basis |
|
Fair Value at |
|
Fair Value at |
|
Fair Value at |
| |||||||||||||||||||||
|
|
April 30, 2011 |
|
January 29, 2011 |
|
May 1, 2010 |
| |||||||||||||||||||||
(millions) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| |||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Marketable securities |
|
$ |
872 |
|
$ |
|
|
$ |
|
|
$ |
1,129 |
|
$ |
|
|
$ |
|
|
$ |
1,015 |
|
$ |
|
|
$ |
|
|
Other current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Prepaid forward contracts |
|
65 |
|
|
|
|
|
63 |
|
|
|
|
|
69 |
|
|
|
|
| |||||||||
Other |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Other noncurrent assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest rate swaps(a) |
|
|
|
132 |
|
|
|
|
|
139 |
|
|
|
|
|
133 |
|
|
| |||||||||
Company-owned life insurance investments(b) |
|
|
|
370 |
|
|
|
|
|
358 |
|
|
|
|
|
343 |
|
|
| |||||||||
Total |
|
$ |
937 |
|
$ |
506 |
|
$ |
|
|
$ |
1,192 |
|
$ |
497 |
|
$ |
|
|
$ |
1,084 |
|
$ |
476 |
|
$ |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Other noncurrent liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest rate swaps(a) |
|
$ |
|
|
$ |
54 |
|
$ |
|
|
$ |
|
|
$ |
54 |
|
$ |
|
|
$ |
|
|
$ |
29 |
|
$ |
|
|
Total |
|
$ |
|
|
$ |
54 |
|
$ |
|
|
$ |
|
|
$ |
54 |
|
$ |
|
|
$ |
|
|
$ |
29 |
|
$ |
|
|
(a) There were no interest rate swaps designated as accounting hedges at April 30, 2011, January 29, 2011 or May 1, 2010.
(b) Company-owned life insurance investments consist of equity index funds and fixed income assets. Amounts are presented net of loans that are secured by some of these policies of $648 million at April 30, 2011, $645 million at January 29, 2011, and $615 million at May 1, 2010.
Position |
|
Valuation Technique |
Marketable securities |
|
Initially valued at transaction price. Carrying value of cash equivalents (including money market funds) approximates fair value because maturities are less than three months.
|
Prepaid forward contracts |
|
Initially valued at transaction price. Subsequently valued by reference to the market price of Target common stock.
|
Interest rate swaps |
|
Valuation models are calibrated to initial trade price. Subsequent valuations are based on observable inputs to the valuation model (e.g., interest rates and credit spreads). Model inputs are changed only when corroborated by market data. A credit risk adjustment is made on each swap using observable market credit spreads.
|
Company-owned life insurance investments |
|
Includes investments in separate accounts that are valued based on market rates credited by the insurer. |
Certain assets are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). The fair value measurements related to long-lived assets held for sale and held and used in the following table were determined using available market prices at the measurement date based on recent investments or pending transactions of similar assets, third-party independent appraisals, valuation multiples or public comparables, less cost to sell where appropriate. We classify these measurements as Level 2.
Fair Value Measurements Nonrecurring Basis |
|
|
|
|
| ||
|
|
Other current assets |
|
Property and equipment |
| ||
(millions) |
|
Long-lived assets held for sale |
|
Long-lived assets held and used(a) |
| ||
Measured during the three months ended April 30, 2011: |
|
|
|
|
| ||
Carrying amount |
|
$ |
2 |
|
$ |
30 |
|
Fair value measurement |
|
|
2 |
|
|
22 |
|
Gain/(loss) |
|
$ |
|
|
$ |
(8 |
) |
Measured during the three months ended May 1, 2010: |
|
|
|
|
|
|
|
Carrying amount |
|
$ |
|
|
$ |
29 |
|
Fair value measurement |
|
|
|
|
|
26 |
|
Gain/(loss) |
|
$ |
|
|
$ |
(3 |
) |
(a) Primarily relates to real estate and buildings intended for sale in the future but not currently meeting the held for sale criteria.
The following table presents the carrying amounts and estimated fair values of financial instruments not measured at fair value in the Consolidated Statements of Financial Position. The fair value of marketable securities is determined using available market prices at the reporting date. The fair value of debt is generally measured using a discounted cash flow analysis based on our current market interest rates for similar types of financial instruments.
Financial Instruments Not Measured at Fair Value |
|
April 30, 2011 |
|
January 29, 2011 |
|
May 1, 2010 |
| ||||||||||||
Carrying |
|
Fair |
|
Carrying |
|
Fair |
|
Carrying |
|
Fair |
| ||||||||
(millions) |
|
Amount |
|
Value |
|
Amount |
|
Value |
|
Amount |
|
Value |
| ||||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other current assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Marketable securities(a) |
|
$ |
24 |
|
$ |
24 |
|
$ |
32 |
|
$ |
32 |
|
$ |
34 |
|
$ |
34 |
|
Other noncurrent assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Marketable securities(a) |
|
2 |
|
2 |
|
4 |
|
4 |
|
3 |
|
3 |
| ||||||
Total |
|
$ |
26 |
|
$ |
26 |
|
$ |
36 |
|
$ |
36 |
|
$ |
37 |
|
$ |
37 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total debt(b) |
|
$ |
15,251 |
|
$ |
16,859 |
|
$ |
15,241 |
|
$ |
16,661 |
|
$ |
15,291 |
|
$ |
16,659 |
|
Total |
|
$ |
15,251 |
|
$ |
16,859 |
|
$ |
15,241 |
|
$ |
16,661 |
|
$ |
15,291 |
|
$ |
16,659 |
|
(a) Held-to-maturity government-issued investments that are held to satisfy the regulatory requirements of Target Bank and Target National Bank.
(b) Represents the sum of nonrecourse debt collateralized by credit card receivables and unsecured debt and other borrowings excluding unamortized swap valuation adjustments and capital lease obligations.
The carrying amounts of credit card receivables, net of allowance, accounts payable, and certain accrued and other current liabilities approximate fair value at April 30, 2011.
4. Credit Card Receivables
Credit card receivables are recorded net of an allowance for doubtful accounts and are our only significant class of receivables. Substantially all accounts continue to accrue finance charges until they are written off. All past due accounts were incurring finance charges at April 30, 2011, January 29, 2011, and May 1, 2010. Accounts are written off when they become 180 days past due.
Age of Credit Card Receivables |
|
April 30, 2011 |
|
January 29, 2011 |
|
May 1, 2010 |
| |||||||||
|
|
|
|
Percent of |
|
|
|
Percent of |
|
|
|
Percent of |
| |||
(dollars in millions) |
|
Amount |
|
Receivables |
|
Amount |
|
Receivables |
|
Amount |
|
Receivables |
| |||
Current |
|
$ |
5,749 |
|
91.5% |
|
$ |
6,132 |
|
89.6 |
% |
$ |
6,425 |
|
88.5% |
|
1-29 days past due |
|
227 |
|
3.6 |
|
292 |
|
4.3 |
|
283 |
|
3.9 |
| |||
30-59 days past due |
|
100 |
|
1.6 |
|
131 |
|
1.9 |
|
166 |
|
2.3 |
| |||
60-89 days past due |
|
59 |
|
0.9 |
|
79 |
|
1.1 |
|
107 |
|
1.5 |
| |||
90+ days past due |
|
151 |
|
2.4 |
|
209 |
|
3.1 |
|
279 |
|
3.8 |
| |||
Period-end gross credit card receivables |
|
$ |
6,286 |
|
100% |
|
$ |
6,843 |
|
100 |
% |
$ |
7,260 |
|
100% |
|
Allowance for Doubtful Accounts
The allowance for doubtful accounts is recognized in an amount equal to the anticipated future write-offs of existing receivables and includes provisions for uncollectible finance charges and other credit-related fees. We estimate future write-offs on the entire credit card portfolio collectively based on historical experience of delinquencies, risk scores, aging trends and industry risk trends.
Allowance for Doubtful Accounts |
|
|
|
|
|
|
|
(millions) |
|
April 30, 2011 |
|
January 29, 2011 |
|
May 1, 2010 |
|
Allowance at beginning of period |
|
$ 690 |
|
$ 1,016 |
|
$ 1,016 |
|
Bad debt expense |
|
12 |
|
528 |
|
197 |
|
Write-offs(a) |
|
(184 |
) |
(1,007 |
) |
(318 |
) |
Recoveries(a) |
|
47 |
|
153 |
|
35 |
|
Allowance at end of period |
|
$ 565 |
|
$ 690 |
|
$ 930 |
|
(a) Write-offs include the principal amount of losses (excluding accrued and unpaid finance charges), and recoveries include current period principal collections on previously written-off balances. These amounts combined represent net write-offs.
Deterioration of the macroeconomic conditions in the United States would adversely affect the risk profile of our credit card receivables portfolio based on credit card holders ability to pay their balances. If such deterioration were to occur, it would lead to an increase in bad debt expense. The Corporation monitors both the credit quality and the delinquency status of the credit card receivables portfolio. We consider accounts 30 or more days past due as delinquent, and we update delinquency status daily. We also monitor risk in the portfolio by assigning internally generated scores to each account and by periodically obtaining a statistically representative sample of current FICO scores, a nationally recognized credit scoring model. We update these FICO scores monthly, most recently in April 2011. The credit quality segmentation presented below is consistent with the approach used in determining our allowance for doubtful accounts.
Receivables Credit Quality |
|
|
|
|
|
|
|
(millions) |
|
April 30, 2011 |
|
January 29, 2011 |
|
May 1, 2010 |
|
Nondelinquent accounts (Current and 1 29 days past due) |
|
|
|
|
|
|
|
FICO score of 700 or above |
|
$ 2,771 |
|
$ 2,819 |
|
$ 2,812 |
|
FICO score of 600 to 699 |
|
2,503 |
|
2,737 |
|
2,861 |
|
FICO score below 600 |
|
702 |
|
868 |
|
1,034 |
|
Total nondelinquent accounts |
|
5,976 |
|
6,424 |
|
6,707 |
|
Delinquent accounts (30+ days past due) |
|
310 |
|
419 |
|
553 |
|
Period-end gross credit card receivables |
|
$ 6,286 |
|
$ 6,843 |
|
$ 7,260 |
|
Under certain circumstances, we offer cardholder payment plans that modify finance charges and minimum payments, which meet the accounting definition of a troubled debt restructuring (TDR). These concessions are made on an individual cardholder basis for economic or legal reasons specific to each individual cardholders circumstances. As a percentage of period-end gross receivables, receivables classified as TDRs were 5.8 percent at April 30, 2011, 5.9 percent at January 29, 2011 and 6.5 percent at May 1, 2010. Receivables classified as TDRs are treated consistently with other aged receivables in determining our allowance for doubtful accounts.
Funding for Credit Card Receivables
As a method of providing funding for our credit card receivables, we sell, on an ongoing basis, all of our consumer credit card receivables to Target Receivables LLC (TR LLC), formerly known as Target Receivables Corporation (TRC), a wholly owned, bankruptcy remote subsidiary. TR LLC then transfers the receivables to the Target Credit Card Master Trust (the Trust), which from time to time will sell debt securities to third parties, either directly or through a related trust. These debt securities represent undivided interests in the Trust assets. TR LLC uses the proceeds from the sale of debt securities and its share of collections on the receivables to pay the purchase price of the receivables to the Corporation.
We consolidate the receivables within the Trust and any debt securities issued by the Trust, or a related trust, in our Consolidated Statements of Financial Position based upon the applicable accounting guidance. The receivables transferred to the Trust are not available to general creditors of the Corporation.
During 2006 and 2007, we sold an interest in our credit card receivables by issuing a Variable Funding Certificate. Parties who hold the Variable Funding Certificate receive interest at a variable short-term market rate. The Variable Funding Certificate matures in 2012 and 2013.
In the second quarter of 2008, we sold an interest in our credit card receivables to JPMorgan Chase (JPMC). The interest sold represented 47 percent of the receivables portfolio at the time of the transaction. In the event of a decrease in the receivables principal amount such that JPMCs interest in the entire portfolio would exceed 47 percent for three consecutive months, TR LLC (using the cash flows from the assets in the Trust) would be required to pay JPMC a pro rata amount of principal collections such that the portion owned by JPMC would not exceed 47 percent, unless JPMC provides a waiver. Conversely, at the option of the Corporation, JPMC may be required to fund an increase in the portfolio to maintain their 47 percent interest up to a maximum principal balance of $4.2 billion. Due to declines in gross credit card receivables, TR LLC repaid JPMC $566 million during 2010. No payments were made during the first quarter of 2011. On May 25, 2011, TR LLC repaid an additional $189 million to JPMC.
If a three-month average of monthly finance charge excess (JPMCs prorata share of finance charge collections less write-offs and specified expenses) is less than 2 percent of the outstanding principal balance of JPMCs interest, the Corporation must implement mutually agreed-upon underwriting strategies. If the three-month average finance charge excess falls below 1 percent of the outstanding principal balance of JPMCs interest, JPMC may compel the Corporation to implement underwriting and collections activities, provided those activities are compatible with the Corporations systems, as well as consistent with similar credit card receivable portfolios managed by JPMC. If the Corporation fails to implement the activities, JPMC has the right to cause the accelerated repayment of the note payable issued in the transaction. As noted in the preceding paragraph, payments would be made solely from the Trust assets. In the first quarter of 2011, this agreement was amended to allow the Corporation to prepay the principal balance on the note payable to JPMC between September 30, 2011 and January 31, 2012. If we elect to prepay the outstanding balance, we will be required to pay a make-whole premium ranging from $85 million to $103 million, dependent upon the prepayment date.
All interests in our Credit Card Receivables issued by the Trust are accounted for as secured borrowings. Interest and principal payments are satisfied provided the cash flows from the Trust assets are sufficient and are nonrecourse to the general assets of the Corporation. If the cash flows are less than the periodic interest, the available amount, if any, is paid with respect to interest. Interest shortfalls will be paid to the extent subsequent cash flows from the assets in the Trust are sufficient. Future principal payments will be made from the third partys prorata share of cash flows from the Trust assets.
Securitized Borrowings |
|
April 30, 2011 |
|
January 29, 2011 |
|
May 1, 2010 |
| ||||||||||||
|
|
Debt |
|
|
|
Debt |
|
|
|
Debt |
|
|
| ||||||
(millions) |
|
Balance |
|
Collateral |
|
Balance |
|
Collateral |
|
Balance |
|
Collateral |
| ||||||
2008 Series(a) |
|
$ |
2,965 |
|
$ |
3,061 |
|
$ |
2,954 |
|
$ |
3,061 |
|
$ |
3,219 |
|
$ |
3,372 |
|
2006/2007 Series |
|
1,000 |
|
1,266 |
|
1,000 |
|
1,266 |
|
1,000 |
|
1,266 |
| ||||||
Total |
|
$ |
3,965 |
|
$ |
4,327 |
|
$ |
3,954 |
|
$ |
4,327 |
|
$ |
4,219 |
|
$ |
4,638 |
|
(a) The debt balance for the 2008 Series is net of a 7% discount from JPMC. The unamortized portion of this discount was $96 million, $107 million and $153 million as of April 30, 2011, January 29, 2011, and May 1, 2010, respectively.
5. Commitments and Contingencies
In January 2011, we entered into an agreement to purchase the leasehold interests in up to 220 sites in Canada currently operated by Zellers Inc. (Zellers), in exchange for C$1,825 million (Canadian dollars), due in two equal installments, one on May 27, 2011 and one in the third quarter of this year. We believe this transaction will allow us to open 100 to 150 Target stores in Canada, primarily during 2013. We are still in the process of evaluating each location currently leased by Zellers. We have selected 105 locations and expect to finalize the acquisition of these sites by early June 2011. We have the right to select up to 115 additional leases in advance of the second payment in third quarter 2011. We plan to invest between $1.8 billion to $2.3 billion over the next three years to renovate sites that we intend to convert into Target stores, establish supply chain capabilities, and build information-technology infrastructure. The amount we ultimately invest will be largely dependent on the number of sites we elect to convert into Target stores. During the three months ended April 30, 2011, the value of $1.00 ranged from C$0.95 to C$1.00. On May 23, 2011, the value of $1.00 was equivalent to C$0.98.
We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of the currently identified claims or litigation matters will materially affect our results of operations, cash flows or financial condition.
6. Notes Payable and Long-Term Debt
We obtain short-term financing from time to time under our commercial paper program, a form of notes payable. There were no amounts outstanding under our commercial paper program at April 30, 2011, January 29, 2011, or May 1, 2010.
There were no amounts outstanding under our commercial paper program at any time during the three months ended April 30, 2011 or May 1, 2010.
In April 2010, TR LLC repurchased and retired the entire $900 million series of nonrecourse debt collateralized by credit card receivables, at par, that otherwise would have matured in October 2010. No gain or loss was recorded other than insignificant expenses associated with retiring this debt.
In addition, TR LLC has made payments to JPMC to reduce its interest in our credit card receivables as described in Note 4, Credit Card Receivables.
7. Derivative Financial Instruments
Derivative financial instruments are reported at fair value on the Consolidated Statements of Financial Position. Historically our derivative instruments have primarily consisted of interest rate swaps. We use these derivatives to mitigate our interest rate risk. We have counterparty credit risk resulting from our derivative instruments. This risk lies primarily with two global financial institutions. We monitor this concentration of counterparty credit risk on an ongoing basis.
Historically, the majority of our derivative instruments qualified for fair value hedge accounting treatment. During 2008, we terminated or de-designated certain interest rate swaps that were accounted for as hedges. Total net gains amortized into net interest expense for terminated or de-designated swaps were $10 million and $11 million during the three months ended April 30, 2011 and May 1, 2010, respectively. The amount remaining on unamortized hedged debt valuation gains from terminated or de-designated interest rate swaps that will be amortized into earnings over the remaining lives of the underlying debt totaled $142 million, $152 million and $186 million, at April 30, 2011, January 29, 2011 and May 1, 2010, respectively.
Periodic payments, valuation adjustments and amortization of gains or losses from the termination or de-designation of derivative contracts are summarized below:
Derivative Contracts Effect on Results of Operations |
|
|
|
Three Months Ended |
| ||||||||||
|
|
Classification of |
|
|
|
|
|
April 30, |
|
May 1, |
| ||||
(millions) |
|
Income/(Expense) |
|
|
|
|
|
2011 |
|
2010 |
| ||||
Interest Rate Swaps |
|
Other interest expense |
|
|
|
|
|
|
|
$ |
11 |
|
$ |
14 |
|
At April 30, 2011, there were no derivative instruments designated as accounting hedges. See Note 3, Fair Value Measurements, for a description of the fair value measurement of derivative contracts and their classification on the Consolidated Statements of Financial Position.
8. Income Taxes
We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations for years before 2010 and, with few exceptions, are no longer subject to state and local or non-U.S. income tax examinations by tax authorities for years before 2003.
We accrue for the effects of uncertain tax positions and the related potential penalties and interest.
It is reasonably possible that the amount of the unrecognized tax benefit liabilities with respect to our other unrecognized tax positions will increase or decrease during the next twelve months; however an estimate of the amount or range of the change cannot be made at this time.
9. Share Repurchase
We repurchased shares primarily through open market transactions under a $10 billion share repurchase plan authorized by our Board of Directors in November 2007. Share repurchases for the three months ended April 30, 2011 and May 1, 2010 were as follows:
Share Repurchases |
|
Total Number of |
|
Average Price |
|
Total |
| ||
Three months ended May 1, 2010 |
|
7.5 |
|
$ |
52.27 |
|
$ |
394 |
|
Three months ended April 30, 2011 |
|
15.4 |
|
53.32 |
|
819 |
| ||
Of the shares reacquired, a portion was delivered upon settlement of prepaid forward contracts as follows:
Settlement of Prepaid Forward Contracts(a) |
|
Total Cash |
|
Aggregate |
(b) | ||
Three months ended May 1, 2010 |
|
$ |
15 |
|
$ |
16 |
|
Three months ended April 30, 2011 |
|
7 |
|
7 |
| ||
(a)These contracts are among the investment vehicles used to reduce our economic exposure related to our nonqualified deferred compensation plans. The details of our positions in prepaid forward contracts have been provided in Note 10.
(b)At their respective settlement dates.
10. Pension, Postretirement Health Care and Other Benefits
We have qualified defined benefit pension plans covering team members who meet age and service requirements, including in certain circumstances, date of hire. We also have unfunded, nonqualified pension plans for team members with qualified plan compensation restrictions. Eligibility for, and the level of, these benefits varies depending on team members date of hire, length of service and/or team member compensation. Upon early retirement and prior to Medicare eligibility, team members also become eligible for certain health care benefits if they meet minimum age and service requirements and agree to contribute a portion of the cost. Effective January 1, 2009, our qualified defined benefit pension plan was closed to new participants, with limited exceptions.
The following table provides a summary of the amounts recognized in our Consolidated Statements of Financial Position for our postretirement benefit plans:
Net Pension and Postretirement |
|
Pension Benefits |
|
Postretirement Health Care Benefits |
| ||||||||
Health Care Benefits Expense |
|
Three Months Ended |
|
Three Months Ended |
| ||||||||
|
|
April 30, |
|
May 1, |
|
April 30, |
|
May 1, |
| ||||
(millions) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
Service cost |
|
$ |
29 |
|
$ |
29 |
|
$ |
2 |
|
$ |
2 |
|
Interest cost |
|
34 |
|
32 |
|
1 |
|
1 |
| ||||
Expected return on assets |
|
(51 |
) |
(48 |
) |
|
|
|
| ||||
Recognized losses |
|
16 |
|
11 |
|
1 |
|
1 |
| ||||
Recognized prior service cost |
|
(1 |
) |
(1 |
) |
(2 |
) |
(2 |
) | ||||
Total |
|
$ |
27 |
|
$ |
23 |
|
$ |
2 |
|
$ |
2 |
|
Even though we are not required to make any contributions, we may elect to make contributions depending on investment performance and the pension plan funded status in 2011.
We also maintain a nonqualified, unfunded deferred compensation plan for approximately 3,500 current and retired team members whose participation in our 401(k) plan is limited by statute or regulation. These team members choose from a menu of crediting rate alternatives that are the same as the investment choices in our 401(k) plan, including Target common stock. We credit an additional 2 percent per year to the accounts of all active participants, excluding executive officer participants, in part to recognize the risks inherent to their participation in a plan of this nature. We also maintain a nonqualified, unfunded deferred compensation plan that was frozen during 1996, covering substantially fewer than 100 participants, most of whom are retired. In this plan, deferred compensation earns returns tied to market levels of interest rates plus an additional 6 percent return, with a minimum of 12 percent and a maximum of 20 percent, as determined by the plans terms.
We mitigate some of our risk of offering the nonqualified plans through investing in vehicles, including company-owned life insurance and prepaid forward contracts in our own common stock, that offset a substantial portion of our economic exposure to the returns of these plans. These investment vehicles are general corporate assets and are marked to market with the related gains and losses recognized in the Consolidated Statements of Operations in the period they occur.
The total change in fair value for contracts indexed to our own common stock recognized in earnings was pretax income/(loss) of $(7) million during the three months ended April 30, 2011 and $7 million during the three months ended May 1, 2010. During first quarter 2011, we invested approximately $16 million in such investment instruments. This activity is included in the Consolidated Statements of Cash Flows within other investing activities. No investments were made in first quarter 2010. Adjusting our position in these investment vehicles may involve repurchasing shares of Target common stock when settling the forward contracts. For the three months ended April 30, 2011 and May 1, 2010, these repurchases totaled 0.1 million and 0.3 million shares, respectively, and are included in the total share repurchases described in Note 9.
At April 30, 2011, January 29, 2011 and May 1, 2010, our outstanding interest in contracts indexed to our common stock was as follows:
Prepaid Forward Contracts on Target |
|
|
|
Contractual |
|
|
|
|
| |||
(millions, except per share data) |
|
Number of |
|
Price Paid |
|
Fair |
|
Total Cash |
| |||
May 1, 2010 |
|
1.2 |
|
$ |
41.67 |
|
$ |
69 |
|
$ |
51 |
|
January 29, 2011 |
|
1.2 |
|
44.09 |
|
63 |
|
51 |
| |||
April 30, 2011 |
|
1.3 |
|
45.12 |
|
65 |
|
60 |
| |||
11. Segment Reporting
In January 2011, we entered into an agreement to purchase leasehold interests in up to 220 sites in Canada currently operated by Zellers. We believe this transaction will allow us to open 100 to 150 Target stores in Canada, primarily during 2013. We are still in the process of evaluating each location currently leased by Zellers. We have selected 105 locations and expect to finalize the acquisition of these sites by early June 2011. We have the right to select up to 115 additional leases in advance of the second payment in third quarter 2011. As a result of this transaction, we now have three reportable business segments: U.S. Retail, U.S. Credit Card and Canadian.
Our measure of profit for each segment is a measure that management considers analytically useful in measuring the return we are achieving on our investment.
Business Segment Results |
|
Three Months Ended April 30, 2011 |
|
Three Months Ended May 1, 2010 |
| |||||||||||||||||||||
|
|
U.S. |
|
U.S. |
|
|
|
|
|
U.S. |
|
U.S. |
|
|
|
|
| |||||||||
(millions) |
|
Retail |
|
Card |
|
Canadian |
|
Total |
|
Retail |
|
Card |
|
Canadian |
|
Total |
| |||||||||
Sales/Credit card revenues |
|
$ |
15,580 |
|
$ |
355 |
|
$ |
|
|
|
$ |
15,935 |
|
$ |
15,158 |
|
$ |
435 |
|
$ |
|
|
$ |
15,593 |
|
Cost of sales |
|
10,838 |
|
|
|
|
|
|
|
10,838 |
|
10,412 |
|
|
|
|
|
10,412 |
| |||||||
Bad debt expense(a) |
|
|
|
12 |
|
|
|
|
|
12 |
|
|
|
197 |
|
|
|
197 |
| |||||||
Selling, general and administrative/ Operations and marketing expenses(a), (b) |
|
3,173 |
|
125 |
|
|
11 |
|
|
3,309 |
|
3,126 |
|
100 |
|
|
|
3,226 |
| |||||||
Depreciation and amortization |
|
507 |
|
5 |
|
|
|
|
|
512 |
|
512 |
|
4 |
|
|
|
516 |
| |||||||
Earnings/(loss) before interest expense and income taxes |
|
1,062 |
|
213 |
|
|
(11 |
) |
|
1,264 |
|
1,108 |
|
134 |
|
|
|
1,242 |
| |||||||
Interest expense on nonrecourse debt collateralized by credit card receivables |
|
|
|
19 |
|
|
|
|
|
19 |
|
|
|
23 |
|
|
|
23 |
| |||||||
Segment profit/(loss) |
|
$ |
1,062 |
|
$ |
194 |
|
$ |
(11 |
) |
|
$ |
1,245 |
|
$ |
1,108 |
|
$ |
111 |
|
$ |
|
|
1,219 |
| |
Unallocated (income) and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Other interest expense |
|
|
|
|
|
|
|
164 |
|
|
|
|
|
|
|
165 |
| |||||||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) | |||||||||
Earnings before income taxes |
|
|
|
|
|
|
|
$ |
1,081 |
|
|
|
|
|
|
|
$ |
1,055 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The combination of bad debt expense and operations and marketing expenses, less amounts reimbursed to the U.S. Retail Segment, within the U.S. Credit Card Segment represent credit card expenses on the Consolidated Statements of Operations.
(b) Loyalty Program discounts are recorded as reductions to sales in our U.S. Retail Segment. Effective with the October 2010 nationwide launch of our new 5% REDcard Rewards loyalty program, we changed the formula under which our U.S. Credit Card segment reimburses our U.S. Retail Segment to better align with the attributes of the new program. In the three months ended April 30, 2011, these reimbursed amounts were $49 million compared with $17 million in the corresponding period in 2010. In all periods these amounts were recorded as reductions to SG&A expenses within the U.S. Retail Segment and increases to operations and marketing expenses within the U.S. Credit Card Segment.
Note: The sum of the segment amounts may not equal the total amounts due to rounding.
Total Assets by Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
April 30, 2011 |
|
January 29, 2011 |
|
May 1, 2010 |
| ||||||||||||||||||||||||||||||
|
|
U.S. |
|
U.S. |
|
|
|
|
|
U.S. |
|
U.S. |
|
|
|
|
|
U.S. |
|
U.S. |
|
|
|
|
| ||||||||||||
(millions) |
|
Retail |
|
Card |
|
Canadian |
|
Total |
|
Retail |
|
Card |
|
Canadian |
|
Total |
|
Retail |
|
Card |
|
Canadian |
|
Total |
| ||||||||||||
Total assets |
|
$ |
37,032 |
|
$ |
5,934 |
|
$ |
30 |
|
$ |
42,996 |
|
$ |
37,324 |
|
$ |
6,381 |
|
$ |
|
|
$ |
43,705 |
|
$ |
36,633 |
|
$ |
6,690 |
|
$ |
|
|
$ |
43,323 |
|
Substantially all of our revenues are generated in, and long-lived assets are located in, the United States. However, as we expand our operations, an increasing proportion of our business will be in Canada.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
Consolidated revenues were $15,935 million for the three months ended April 30, 2011, an increase of $342 million or 2.2 percent from the same period in the prior year. Consolidated earnings before interest expense and income taxes for first quarter 2011 increased by $22 million or 1.8 percent over first quarter 2010 to $1,264 million. Cash flow provided by operations was $1,052 million and $1,158 million for the three months ended April 30, 2011 and May 1, 2010, respectively. We opened 6 new stores in the first quarter of 2011 (5 net of 1 relocation). During the three months ended May 1, 2010, we did not open any new stores or close any existing stores.
Our financial results for the first quarter of 2011 in our U.S. Retail Segment reflect increased sales of 2.8 percent over the same period last year due to a 2.0 percent comparable-store increase combined with the contribution from new stores. Our U.S. Retail Segment EBITDA and EBIT margin rates decreased to 10.1 percent and 6.8 percent, respectively, in first quarter 2011 compared to 10.7 percent and 7.3 percent in first quarter 2010 due largely to a decrease in gross margin rate reflecting the impact of our 5% REDcard Rewards program and the increase in the number of stores with an expanded food assortment.
In the U.S. Credit Card Segment, we achieved a significant increase in segment profit primarily due to declining bad debt expense driven by improved trends in key measures of risk.
In January 2011, we entered into an agreement to purchase the leasehold interests in up to 220 sites in Canada currently operated by Zellers Inc. (Zellers), in exchange for C$1,825 million (Canadian dollars), due in two equal installments, one on May 27, 2011 and one in the third quarter of this year. We believe this transaction will allow us to open 100 to 150 Target stores in Canada, primarily during 2013. We are still in the process of evaluating each location currently leased by Zellers. We have selected 105 locations and expect to finalize the acquisition of these sites by early June 2011. We have the right to select up to 115 additional leases in advance of the second payment in third quarter 2011. During the three months ended April 30, 2011, start-up costs totaled $11 million and primarily consisted of legal, payroll, and consulting expenses. These expenses are reported in SG&A expense within the consolidated statement of operations.
Analysis of Results of Operations
U.S. Retail Segment
U.S. Retail Segment Results |
|
Three Months Ended |
| ||||||
|
|
April 30, |
|
May 1, |
|
Percent |
| ||
(millions) |
|
2011 |
|
2010 |
|
Change |
| ||
Sales |
|
$ |
15,580 |
|
$ |
15,158 |
|
2.8 |
% |
Cost of sales |
|
10,838 |
|
10,412 |
|
4.1 |
| ||
Gross margin |
|
4,742 |
|
4,746 |
|
(0.1 |
) | ||
SG&A expenses(a) |
|
3,173 |
|
3,126 |
|
1.5 |
| ||
EBITDA |
|
1,569 |
|
1,620 |
|
(3.1 |
) | ||
Depreciation and amortization |
|
507 |
|
512 |
|
(0.8 |
) | ||
EBIT |
|
$ |
1,062 |
|
$ |
1,108 |
|
(4.2 |
)% |
EBITDA is earnings before interest expense, income taxes, depreciation and amortization.
EBIT is earnings before interest expense and income taxes.
(a) Loyalty Program discounts are recorded as reductions to sales in our U.S. Retail Segment. Effective with the October 2010 nationwide launch of our new 5% REDcard Rewards loyalty program, we changed the formula under which our U.S. Credit Card segment reimburses our U.S. Retail Segment to better align with the attributes of the new program. In the three months ended April 30, 2011, these reimbursed amounts were $49 million compared with $17 million in the corresponding period in 2010. In all periods these amounts were recorded as reductions to SG&A expenses within the U.S. Retail Segment and increases to operations and marketing expenses within the U.S. Credit Card Segment.
U.S. Retail Segment Rate Analysis |
|
Three Months Ended | |||
|
|
April 30, |
|
May 1, |
|
|
|
2011 |
|
2010 |
|
Gross margin rate |
|
30.4% |
|
31.3% |
|
SG&A expense rate |
|
20.4% |
|
20.6% |
|
EBITDA margin rate |
|
10.1% |
|
10.7% |
|
Depreciation and amortization expense rate |
|
3.3% |
|
3.4% |
|
EBIT margin rate |
|
6.8% |
|
7.3% |
|
U.S. Retail Segment rate analysis metrics are computed by dividing the applicable amount by sales.
Sales
Sales include merchandise sales, net of expected returns, from our stores and our online business, as well as gift card breakage. Comparable-store sales is a measure that indicates the performance of our existing stores by measuring the growth in sales for such stores for a period over the comparable, prior-year period of equivalent length. The method of calculating comparable-store sales varies across the retail industry. As a result, our comparable-store sales calculation is not necessarily comparable to similarly titled measures reported by other companies.
Comparable-store sales are sales from our online business and sales from general merchandise and SuperTarget stores open longer than one year, including:
· sales from stores that have been remodeled or expanded while remaining open (including our current store remodel program)
· sales from stores that have been relocated to new buildings of the same format within the same trade area, in which the new store opens at about the same time as the old store closes
Comparable-store sales do not include:
· sales from general merchandise stores that have been converted, or relocated within the same trade area, to a SuperTarget store format
· sales from stores that were intentionally closed to be remodeled, expanded or reconstructed
Comparable-Store Sales |
|
Three Months Ended |
| ||
|
|
April 30, |
|
May 1, |
|
|
|
2011 |
|
2010 |
|
Comparable-store sales |
|
2.0 % |
|
2.8 % |
|
Components of changes in comparable-store sales: |
|
|
|
|
|
Number of transactions |
|
0.4 % |
|
2.2 % |
|
Average transaction amount |
|
1.6 % |
|
0.7 % |
|
Units per transaction |
|
4.4 % |
|
1.3 % |
|
Selling price per unit |
|
(2.6)% |
|
(0.7)% |
|
The comparable-store sales increases or decreases above are calculated by comparing sales in fiscal year periods with comparable prior fiscal year periods of equivalent length.
The collective interaction of a broad array of macroeconomic, competitive and consumer behavioral factors, as well as sales mix, and transfer of sales to new stores makes further analysis of sales metrics infeasible.
Our Credit Card Segment offers credit to qualified guests through our branded proprietary credit cards, the Target Visa Credit Card and the Target Credit Card (Target Credit Cards). Additionally, we offer a branded proprietary Target Debit Card. Collectively, we refer to these products as REDcards®. In October 2010, guests began to receive a 5 percent discount on virtually all purchases at checkout every day when they use a REDcard at any Target store or on Target.com.
We monitor the percentage of store sales that are paid for using REDcards (REDcard Penetration), because our internal analysis has indicated that a meaningful portion of the incremental purchases on our REDcards are also incremental sales for Target, with the remainder of the incremental purchases on the REDcards representing a shift in tender type.
REDcard Penetration |
|
Three Months Ended | |||
|
|
April 30, |
May 1, |
| |
|
|
2011 |
2010 |
| |
Target Credit Cards |
|
5.9 |
% |
4.4% |
|
Target Debit Card |
|
1.7 |
% |
0.5% |
|
Total Store REDcard Penetration |
|
7.6 |
% |
4.9% |
|
Gross Margin Rate
Gross margin rate represents gross margin (sales less cost of sales) as a percentage of sales. See Note 3 in our Form 10-K for the fiscal year ended January 29, 2011 for a description of costs included in cost of sales. Markup is the difference between an items cost and its retail price (expressed as a percentage of its retail price). Factors that affect markup include vendor offerings and negotiations, vendor income, sourcing strategies, market forces like raw material and freight costs, and competitive influences. Markdowns are the reduction in the original or previous price of retail merchandise. Factors that affect markdowns include inventory management, competitive influences and economic conditions.
For the three months ended April 30, 2011, our gross margin rate was 30.4 percent, decreasing from 31.3 percent in the comparable period last year due primarily to our 5% REDcard Rewards strategy and our expanded food assortment initiative, which together accounted for approximately two-thirds of the change. The 5% REDcard Rewards program drove a lower margin rate due primarily to the 5 percent discount, whereas our expanded food assortment initiative resulted in sales growth in lower-margin product categories that outpaced sales growth in higher-margin categories. The remaining decline in margin rate was primarily due to an increase in clearance and competitive markdowns.
Selling, General and Administrative Expense Rate
Our selling, general and administrative (SG&A) expense rate represents SG&A expenses as a percentage of sales. See Note 3 in our Form 10-K for the fiscal year ended January 29, 2011 for a description of costs included in SG&A expenses. SG&A expenses exclude depreciation and amortization, as well as expenses associated with our credit card operations, which are reflected separately in our Consolidated Statements of Operations.
For the three months ended April 30, 2011, the SG&A expense rate was 20.4 percent, a decrease from 20.6 percent in the same period last year. The change in rate was primarily driven by an approximate 0.4 percentage point impact from favorable leverage of overall compensation expense, including productivity improvements in our stores, partially offset by a net increase in aggregate expenses in all other areas, none of which were individually significant.
Depreciation and Amortization Expense Rate
Our depreciation and amortization expense rate represents depreciation and amortization expense as a percentage of sales. For the three months ended April 30, 2011, our depreciation and amortization expense rate was 3.3 percent, compared with 3.4 percent last year.
Store Data
During the three months ended April 30, 2011, we opened 6 new stores (5 net of 1 relocation). During the three months ended May 1, 2010, we did not open any new stores or close any existing stores. During the first quarter of 2011, we remodeled 83 stores under our current store remodel program, compared with 96 in first quarter 2010.
Number of Stores and Retail Square Feet |
|
Number of Stores |
|
Retail Square Feet(a) |
| ||||||||
|
|
April 30, |
|
January 29, |
|
May 1, |
|
April 30, |
|
January 29, |
|
May 1, |
|
|
|
2011 |
|
2011 |
|
2010 |
|
2011 |
|
2011 |
|
2010 |
|
Target general merchandise stores |
|
953 |
|
1,037 |
|
1,285 |
|
116,462 |
|
127,292 |
|
160,250 |
|
Expanded food assortment |
|
550 |
|
462 |
|
204 |
|
73,253 |
|
61,823 |
|
27,199 |
|
SuperTarget stores |
|
252 |
|
251 |
|
251 |
|
44,681 |
|
44,503 |
|
44,503 |
|
Total |
|
1,755 |
|
1,750 |
|
1,740 |
|
234,396 |
|
233,618 |
|
231,952 |
|
(a) In thousands; reflects total square feet, less office, distribution center and vacant space.
U.S. Credit Card Segment
We offer credit to qualified guests through the Target Visa Credit Card and the Target Credit Card. Our credit card program supports our core retail operations and remains an important contributor to our overall profitability and engagement with our guests. Beginning October 2010, guests receive a 5 percent discount on virtually all purchases at checkout every day when they use a REDcard at any Target store or on Target.com.
Credit card revenues are comprised of finance charges, late fees and other revenue, and third party merchant fees, or the amounts received from merchants who accept the Target Visa Credit Card.
In January 2011, we announced our plan to actively pursue the sale of our credit card receivables portfolio. We intend to execute a transaction only if appropriate strategic and financial conditions are met. Our ability to sell the portfolio is affected by the limited number of potential buyers, an inactive market, the complexity of the contemplated transaction, and the portfolio size. We will classify the credit card receivables portfolio as held for sale when a transaction that allows us to meet our strategic objectives, including sale treatment, has been agreed upon in principle with one or more potential partners.
U.S. Credit Card Segment Results |
|
|
Three Months Ended |
|
|
Three Months Ended |
| ||||||
|
|
|
April 30, 2011 |
|
|
May 1, 2010 |
| ||||||
|
|
|
Amount |
|
Annualized |
|
|
Amount |
|
Annualized |
| ||
(millions) |
|
|
(in millions) |
|
Rate(d) |
|
|
(in millions) |
|
Rate(d) |
| ||
Finance charge revenue |
|
|
$ |
292 |
|
18.1% |
|
|
$ |
350 |
|
18.5% |
|
Late fees and other revenue |
|
|
42 |
|
2.6 |
|
|
59 |
|
3.1 |
| ||
Third party merchant fees |
|
|
21 |
|
1.3 |
|
|
26 |
|
1.4 |
| ||
Total revenues |
|
|
355 |
|
22.0 |
|
|
435 |
|
23.0 |
| ||
Bad debt expense |
|
|
12 |
|
0.8 |
|
|
197 |
|
10.5 |
| ||
Operations and marketing expenses(a) |
|
|
125 |
|
7.8 |
|
|
100 |
|
5.3 |
| ||
Depreciation and amortization |
|
|
5 |
|
0.3 |
|
|
4 |
|
0.2 |
| ||
Total expenses |
|
|
142 |
|
8.8 |
|
|
301 |
|
16.0 |
| ||
EBIT |
|
|
213 |
|
13.2 |
|
|
134 |
|
7.1 |
| ||
Interest expense on nonrecourse debt collateralized by credit card receivables |
|
|
19 |
|
|
|
|
23 |
|
|
| ||
Segment profit |
|
|
$ |
194 |
|
|
|
|
$ |
111 |
|
|
|
Average receivables funded by Target(b) |
|
|
$ |
2,504 |
|
|
|
|
$ |
2,361 |
|
|
|
Segment pretax ROIC(c) |
|
|
30.9% |
|
|
|
|
18.8% |
|
|
|
(a) |
Loyalty Program discounts are recorded as reductions to sales in our U.S. Retail Segment. Effective with the October 2010 nationwide launch of our new 5% REDcard Rewards loyalty program, we changed the formula under which our U.S. Credit Card segment reimburses our U.S. Retail Segment to better align with the attributes of the new program. In the three months ended April 30, 2011, these reimbursed amounts were $49 million, compared with $17 million in the corresponding period in 2010. In all periods these amounts were recorded as reductions to SG&A expenses within the U.S. Retail Segment and increases to operations and marketing expenses within the U.S. Credit Card Segment. |
(b) |
Amounts represent the portion of average gross credit card receivables funded by Target. These amounts exclude $3,959 million for the three months ended April 30, 2011, and $5,186 million for the three months ended May 1, 2010 of receivables funded by nonrecourse debt collateralized by credit card receivables. |
(c) |
ROIC is return on invested capital, and this rate equals our segment profit divided by average gross credit card receivables funded by Target, expressed as an annualized rate. |
(d) |
As an annualized percentage of average gross credit card receivables. |
Spread Analysis - Total Portfolio |
|
Three Months Ended |
|
Three Months Ended |
| ||||||
|
|
Amount |
|
Annualized |
|
Amount |
|
Annualized |
| ||
|
|
(in millions) |
|
Rate |
|
(in millions) |
|
Rate |
| ||
EBIT |
|
$ |
213 |
|
13.2% |
(c) |
$ |
134 |
|
7.1% |
(c) |
LIBOR(a) |
|
|
|
0.2% |
|
|
|
0.2% |
| ||
Spread to LIBOR(b) |
|
$ |
209 |
|
13.0% |
(c) |
$ |
129 |
|
6.9% |
(c) |
(a) |
Balance-weighted one-month LIBOR. |
(b) |
Spread to LIBOR is a metric used to analyze the performance of our total credit card portfolio because the vast majority of our portfolio earned finance charge revenue at rates tied to the Prime Rate, and the interest rate on all nonrecourse debt securitized by credit card receivables is tied to LIBOR. |
(c) |
As a percentage of average gross credit card receivables. |
Our primary measure of segment profit in our U.S. Credit Card Segment is the EBIT generated by our total credit card receivables portfolio less the interest expense on nonrecourse debt collateralized by credit card receivables. We analyze this measure of profit in light of the amount of capital we have invested in our credit card receivables. In addition, we measure the performance of our overall credit card receivables portfolio by calculating the dollar Spread to LIBOR at the portfolio level. This metric approximates overall financial performance of the entire credit card portfolio we manage by measuring the difference between EBIT earned on the portfolio and a hypothetical benchmark rate financing cost applied to the entire portfolio. The interest rate on all nonrecourse debt securitized by credit card receivables is tied to LIBOR.
U.S. Credit Card Segment profit for the three months ended April 30, 2011 increased to $194 million from $111 million for the three months ended May 1, 2010, driven by a decline in bad debt expense, partially offset by lower total revenues. Segment revenues were $355 million, a decrease of $80 million, or 18.3 percent, from the same period in the prior year, primarily driven by lower average receivables resulting in reduced finance charge revenue as well as reduced late fees due to late fee limitations that went into effect in August 2010. Segment expenses were $142 million, a decrease of $159 million, or 52.7 percent, from prior year driven by lower bad debt expense due to improved trends in key measures of risk. Interest expense on nonrecourse debt declined by $4 million from last year, due to a decrease in nonrecourse debt securitized by credit card receivables.
Receivables Rollforward Analysis |
|
Three Months Ended |
| ||||
|
|
April 30, |
|
May 1, |
| ||
(millions) |
|
2011 |
|
2010 |
| ||
Beginning gross credit card receivables |
|
$ |
6,843 |
|
$ |
7,982 |
|
Charges at Target |
|
1,002 |
|
719 |
| ||
Charges at third parties |
|
1,251 |
|
1,426 |
| ||
Payments |
|
(3,001 |
) |
(2,989 |
) | ||
Other |
|
191 |
|
122 |
| ||
Period-end gross credit card receivables |
|
$ |
6,286 |
|
$ |
7,260 |
|
Average gross credit card receivables |
|
$ |
6,463 |
|
$ |
7,547 |
|
Accounts with three or more payments (60+ days) past due as a percentage of period-end gross credit card receivables |
|
3.3 |
% |
5.3 |
% | ||
Accounts with four or more payments (90+ days) past due as a percentage of period-end gross credit card receivables |
|
2.4 |
% |
3.8 |
% |
Allowance for Doubtful Accounts |
|
Three Months Ended |
| ||||
|
|
April 30, |
|
May 1, |
| ||
(millions) |
|
2011 |
|
2010 |
| ||
Allowance at beginning of period |
|
$ |
690 |
|
$ |
1,016 |
|
Bad debt expense |
|
12 |
|
197 |
| ||
Write-offs(a) |
|
(184 |
) |
(318 |
) | ||
Recoveries(a) |
|
47 |
|
35 |
| ||
Allowance at end of period |
|
$ |
565 |
|
$ |
930 |
|
As a percentage of period-end gross credit card receivables |
|
9.0 |
% |
12.8 |
% | ||
Net write-offs as a percentage of average gross credit card receivables (annualized) |
|
8.5 |
% |
15.0 |
% |
(a) |
|
Write-offs include the principal amount of losses (excluding accrued and unpaid finance charges), and recoveries include current period principal collections on previously written-off balances. These amounts combined represent net write-offs. |
Our period-end gross credit card receivables at April 30, 2011 were $6,286 million compared with $7,260 million at May 1, 2010, a decrease of 13.4 percent. Average gross credit card receivables for the three months ended April 30, 2011 decreased 14.4 percent compared with the same period last year. In response to regulatory changes and credit card industry trends, we have undertaken risk management and underwriting initiatives that have reduced available credit lines for higher-risk cardholders. Additionally, we have experienced an increase in payment rates and a decrease in Target Visa Credit Card charge activity at third parties, partially offset by an increase in charges at Target.
Canadian Segment
During the three months ended April 30, 2011, start-up costs totaled $11 million and primarily consisted of legal, payroll, and consulting expenses. These expenses are reported in SG&A expense within the consolidated statement of operations.
Other Performance Factors
Net Interest Expense
Net interest expense was $183 million for the three months ended April 30, 2011, decreasing $4 million, or 2.3 percent from the same period last year.
Provision for Income Taxes
Our effective income tax rate for the three months ended April 30, 2011 was 36.3 percent, essentially unchanged from the 36.4 percent for the three months ended May 1, 2010.
Analysis of Financial Condition
Liquidity and Capital Resources
Our period end cash and cash equivalents balance was $1,424 million compared with $1,578 million for the same period in 2010. Marketable securities of $872 million and $1,015 million were included in cash and cash equivalents at the end of first quarter 2011 and 2010, respectively. Our investment policy is designed to preserve principal and liquidity of our marketable securities. This policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less. We also place certain limitations on the aggregate dollars invested and percentage of total fund value held when making short-term investment decisions.
Our first quarter 2011 operations were funded by internally generated funds. Cash flow provided by operations was $1,052 million compared with $1,158 million in first quarter 2010. This cash flow, combined with our prior year-end cash position, allowed us to fund capital expenditures of $632 million and continue purchases under our share repurchase program.
Our first quarter 2011 period-end gross credit card receivables were $6,286 million compared with $7,260 million in first quarter 2010, a decrease of 13.4 percent. Average gross credit card receivables in first quarter 2011 decreased 14.4 percent compared with first quarter 2010 levels. This change was driven by the factors indicated in the Credit Card Segment above. Due to the decrease in gross credit card receivables, Target Receivables LLC (TR LLC), using cash flows from the receivables, repaid an affiliate of JPMorgan Chase (JPMC) $566 million in 2010 under the terms of our agreement with them as described in Note 4 of the Notes to Consolidated Financial Statements. No payments were made during the first quarter of 2011, however, we made a payment of $189 million on May 25, 2011. To the extent the receivables balance continues to decline, TR LLC expects to continue to pay JPMC a prorata portion of principal collections such that the portion owned by JPMC would not exceed 47 percent.
First quarter period end inventory levels increased $447 million, or 6.2 percent from the same period in 2010. Inventory levels were higher to support traffic-driving strategic initiatives, such as our expanded food assortment in general merchandise stores and pharmacy, in addition to comparatively higher retail square footage. Accounts payable increased by $146 million, or 2.4 percent over the same period.
During first quarter 2011, we repurchased 15.4 million shares of our common stock for $819 million ($53.32 per share) under a $10 billion share repurchase plan authorized by our Board of Directors in November 2007. In first quarter 2010, we repurchased 7.5 million shares of our common stock for $394 million ($52.27 per share).
We paid dividends totaling $174 million for the three months ended April 30, 2011 and $126 million during the three months ended May 1, 2010, an increase of 38 percent. We declared dividends totaling $172 million ($0.25 per share) in first quarter 2011, an increase of 37 percent over first quarter 2010. We have paid dividends every quarter since our first dividend was declared following our 1967 initial public offering, and it is our intent to continue to do so in the future.
Our financing strategy is to ensure liquidity and access to capital markets, to manage our net exposure to floating interest rate volatility, and to maintain a balanced spectrum of debt maturities. Within these parameters, we seek to minimize our borrowing costs.
Our ability to access the long-term debt, commercial paper and securitized debt markets has provided ample sources of liquidity to Target in the past. Our continued access to these markets depends on multiple factors including the economic environment, our operating performance and maintaining strong debt ratings. The ratings assigned to our debt by the credit rating agencies affect both the pricing and terms of any new financing. As of April 30, 2011 our credit ratings were as follows:
Credit Ratings |
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Moodys |
|
Standard and Poors |
|
Fitch |
|
Long-term debt |
|
A2 |
|
A+ |
|
A |
|
Commercial paper |
|
P-1 |
|
A-1 |
|
F1 |
|
Securitized receivables(a) |
|
Aa2 |
|
n/a |
|
n/a |
|
(a) These rated securitized receivables exclude the interest in our credit card receivables sold to JPMC. |
If our credit ratings were lowered, our ability to access the debt markets and our cost of funds for new debt issuances could be adversely impacted. Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit rating will remain the same as described above.
As a measure of our financial condition we monitor our interest coverage ratio, representing the ratio of pretax earnings before fixed charges to fixed charges. Fixed charges include interest expense and the interest portion of rent expense. Our interest coverage ratio was 6.0x in first quarter 2011, and 5.9x in first quarter 2010.
We have liquidity available to us through a committed $2 billion unsecured revolving credit facility obtained through a group of banks in April 2007, which will expire in April 2012. No balances were outstanding at any time during the first quarters of 2011 or 2010 under this facility.
Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, at April 30, 2011, no notes or debentures contained provisions requiring acceleration of payment upon a debt rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control; and (ii) our long-term debt ratings are either reduced and the resulting rating is non-investment grade, or our long-term debt ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is non-investment grade.
We believe our sources of liquidity will continue to be adequate to maintain operations and to finance anticipated expansion and strategic initiatives throughout 2011. We may issue new long-term debt for these and other initiatives, and we anticipate ample access to long-term financing. Further, in January 2011, we announced our plan to actively pursue the sale of our credit card receivables portfolio, which may provide additional funding. As of April 30, 2011 the gross balance of our credit card receivables portfolio was $6,286 million, of which $3,965 million was funded by third parties and $2,321 million was funded by Target.
In January 2011, we entered into an agreement to purchase the leasehold interests in up to 220 sites in Canada currently operated by Zellers, in exchange for C$1,825 million, due in two equal installments, one on May 27, 2011 and one in the third quarter of this year. In turn, Zellers will leaseback selected sites where the monthly lease payments on these leases and Zellers subleases are equal. At our option, Zellers is required to vacate the properties between January 31, 2012 and March 31, 2013 generally following a 9 month notice period. We plan to invest between $1.8 billion to $2.3 billion over the next three years to renovate sites that we intend to convert into Target stores, establish supply chain capabilities, and build information-technology infrastructure. The amount we ultimately invest will be largely dependent on the number of sites we elect to convert into Target stores.
During the three months ended April 30, 2011 the value of $1.00 ranged from C$0.95 to C$1.00. On May 23, 2011, $1.00 was equivalent to C$0.98.
Contractual Obligations and Commitments
A summary of future obligations under our various contractual obligations and commitments as of January 29, 2011 was disclosed in our 2010 10-K. During the three months ended April 30, 2011, there were no material changes outside the ordinary course of business. However, we continually evaluate opportunities to expand our operations, including internal development of new products, programs and technology applications and acquisitions.
New Accounting Pronouncements
In May 2011, the FASB issued Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, which amends the current fair value measurement and disclosure guidance to include increased transparency around valuation inputs and investment categorization. This guidance will be effective beginning in fiscal 2012. We do not expect the adoption to have a material impact on our consolidated net earnings, cash flows, and financial position.
Outlook
In the U.S. Retail Segment, we expect that comparable-store sales will accelerate as the year progresses. We expect that our store remodel program will contribute incremental comparable-store sales in the range of 1.5 percentage points as we progress through the year. Separately we expect that the sales contribution of our 5% REDcard Rewards program will add up to 2 percentage points to our same store sales growth later in 2011. These estimates are based on extrapolations of the current performance of these programs. Additionally, we expect that these two programs will lead to moderate declines in our gross margin rates during 2011 which will be generally offset by a declining SG&A expense rate.
In our U.S. Credit Card Segment, we expect average receivables, inclusive of seasonal impacts, to remain stable in the range of $6 billion for the balance of the year. We expect that the allowance for doubtful accounts will continue to decline in 2011 due to anticipated continued improvement in portfolio risks. We expect to achieve pre-tax return on invested capital of 20% or higher for the rest of 2011. Additionally, in January 2011 we announced our plan to actively pursue the sale of our credit card receivables portfolio, and it is possible that we could complete such a transaction in late 2011. As of April 30, 2011 the gross balance of our credit card receivables portfolio was $6,286 million, of which $3,965 million was funded by third parties and $2,321 million was funded by Target.
In January 2011, we entered into an agreement to purchase leasehold interests in up to 220 sites currently operated by Zellers, in exchange for C$1,825 million, due in two equal installments, one on May 27, 2011 and one in third quarter 2011. We plan to invest between $1.8 billion to $2.3 billion over the next three years to renovate sites that we intend to convert into Target stores, establish supply chain capabilities, and build information-technology infrastructure. The amount we ultimately invest will be largely dependent on the number of sites we elect to convert into Target stores. We currently believe our direct costs associated with entry into Canada could result in a $0.16 to $0.20 unfavorable impact on 2011 EPS. We expect that the 2012 dilutive EPS impact of the Canadian expansion will exceed the 2011 dilutive EPS impact, due primarily to a full year of lease-related expenses.
We expect 2011 capital expenditures related to our U.S. retail operations to be in the range of $2.3 billion to $2.7 billion, driven primarily by our store remodel program. We also expect to open 21 new stores in the U.S. in 2011, adding approximately 15 new locations net of closings and relocations.
We also expect to continue to execute against our share repurchase plan, although at a slower pace due to our Canadian expansion, investing in the range of $1.5 billion to $2.0 billion during 2011, excluding any impact from the potential sale of our credit card receivables. The timing and amount of share repurchase activity will be dependent on market conditions, the amount of future net earnings and cash flows and the results of our efforts to sell our credit card receivables.
We expect our 2011 effective tax rate to be in the range of 36 to 37 percent.
Forward-Looking Statements
This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words expect, may, could, believe, would, might, anticipates, or words of similar import. The principal forward-looking statements in this report include: For our U.S. Retail Segment, our outlook for sales, comparable-store sales trends, including the impact of our store remodel and 5% REDcard Rewards programs, gross margin rates, and selling, general and administrative expense rates; for our U.S. Credit Card Segment, our outlook for gross credit card receivables balances, aggregate portfolio risks and the level of, the allowance for doubtful accounts, pre-tax return on invested capital, and the pursuit of a portfolio sale; for our Canadian Segment, the timing and number of leasehold interests we plan to purchase from Zellers and expected store openings, timing and amount of future capital investments in Canada, and expected future earnings per share impact of our direct costs associated with entry into Canada; on a consolidated basis, statements regarding the adequacy of our sources of liquidity, the continued execution of our share repurchase program, our expected capital expenditures and the number of stores to be opened in 2011, the expected effective income tax rate, the expected compliance with debt covenants, our intentions regarding future dividends, contributions related to our pension and postretirement health care plans, the adequacy of our reserves for general liability, workers compensation, property loss, the expected outcome of claims and litigation, and the resolution of tax uncertainties.
All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth on our description of risk factors in Item 1A our Form 10-K for the fiscal year ended January 29, 2011, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Form 10-K for the fiscal year ended January 29, 2011.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, we conducted an evaluation, under supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the Securities and Exchange Commission (SEC) under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
For a description of legal proceedings, see Note 5 of the Notes to Consolidated Financial Statements included in Item 1, Financial Statements.
The American Jobs Creation Act of 2004 requires SEC registrants to disclose if they have been required to pay certain penalties for failing to disclose to the Internal Revenue Service their participation in listed transactions. We have not been required to pay any of the penalties set forth in Section 6707A(e)(2) of the Internal Revenue Code.
There have been no changes to the risk factors described in our annual report on Form 10-K for the fiscal year ended January 29, 2011.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information with respect to purchases of Target common stock made during the three months ended April 30, 2011, by the Corporation or any affiliated purchaser of the Corporation, as defined in Rule 10b-18(a)(3) under the Exchange Act.
Since the inception of our share repurchase program, which began in the fourth quarter of 2007, we have repurchased 166.8 million common shares of our common stock, for a total cash investment of $8,647 million ($51.85 average price per share).
|
|
|
|
|
|
|
|
Approximate |
| ||
|
|
Total |
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|
|
Total Number |
|
Dollar Value of |
| ||
|
|
Number |
|
Average |
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of Shares Purchased |
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Shares that May |
| ||
|
|
of Shares |
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Price Paid |
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as Part of Publicly |
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Yet Be Purchased |
| ||
Period |
|
Purchased |
(b) |
per Share |
(b) |
Announced Program |
(b) |
Under the Program |
| ||
January 30, 2011 through February 26, 2011 |
|
8,029,124 |
(a) |
$ |
54.57 |
|
159,414,973 |
|
$ |
1,734,666,743 |
|
February 27, 2011 through April 2, 2011 |
|
7,208,056 |
(a) |
51.97 |
|
166,619,996 |
|
1,360,254,850 |
| ||
April 3, 2011 through April 30, 2011 |
|
137,363 |
|
50.75 |
|
166,757,359 |
|
1,353,283,170 |
| ||
|
|
15,374,543 |
|
$ |
53.32 |
|
166,757,359 |
|
$ |
1,353,283,170 |
|
(a) The total number of shares purchased above includes shares of common stock reacquired from team members who wish to tender owned shares to satisfy the tax withholding on equity awards as part of our long-term incentive plans or to satisfy the exercise price on stock option exercises. For the three months ended April 30, 2011, 7,953 shares were acquired at an average per share price of $53.39 pursuant to our long-term incentive plan. These shares are not included in the Average Price Paid per Share or Total Number of Shares Purchased as Part of Publicly Announced Program.
(b) The table above includes shares reacquired upon settlement of prepaid forward contracts. For the three months ended April 30, 2011, 0.1 million shares were reacquired through these contracts. At April 30, 2011, we held asset positions in prepaid forward contracts for 1.3 million shares of our common stock, for a total cash investment of $60 million, or $45.12 per share.
Item 3. Defaults Upon Senior Securities
Not applicable.
Not applicable.
(2)B |
First Amending Agreement dated February 17, 2011 to Transaction Agreement dated January 12, 2011 among Zellers Inc., Hudsons Bay Company, Target Corporation and Target Canada Co. |
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(3)A |
Amended and Restated Articles of Incorporation (as amended June 10, 2010)(1) |
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(3)B |
By-laws (as amended through September 10, 2009)(2) |
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(10)Y |
Amendment No. 3 dated as of April 26, 2011 to Note Purchase Agreement among Target Corporation, Target Receivables LLC (formerly known as Target Receivables Corporation), JPMN II Inc. (formerly known as BOTAC, Inc.) and Chase Bank USA, National Association |
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(12) |
Statements of Computations of Ratios of Earnings to Fixed Charges |
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(31)A |
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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(31)B |
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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(32)A |
Certification of the Chief Executive Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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(32)B |
Certification of the Chief Financial Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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|
101.INS |
XBRL Instance Document |
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|
101.SCH |
XBRL Taxonomy Extension Schema |
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101.CAL |
XBRL Taxonomy Extension Calculation Linkbase |
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101.DEF |
XBRL Taxonomy Extension Definition Linkbase |
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101.LAB |
XBRL Taxonomy Extension Label Linkbase |
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101.PRE |
XBRL Taxonomy Extension Presentation Linkbase |
(1) |
Incorporated by reference to Exhibit (3)A to the Registrants Form 8-K Report filed June 10, 2010 |
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(2) |
Incorporated by reference to Exhibit (3)B to the Registrants Form 8-K Report filed September 10, 2009 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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TARGET CORPORATION | ||
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Dated: May 26, 2011 |
By: |
/s/ Douglas A. Scovanner |
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Douglas A. Scovanner |
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Executive Vice President, | |
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Chief Financial Officer | |
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and Chief Accounting Officer |
Exhibit |
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Description |
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Manner of Filing |
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(2)B |
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First Amending Agreement dated February 17, 2011 to Transaction Agreement dated January 12, 2011 among Zellers Inc., Hudsons Bay Company, Target Corporation and Target Canada Co. |
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Filed Electronically |
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(3)A |
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Amended and Restated Articles of Incorporation (as amended June 10, 2010) |
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Incorporated by Reference |
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(3)B |
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By-Laws (as amended through September 10, 2009) |
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Incorporated by Reference |
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(10)Y |
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Amendment No. 3 dated as of April 26, 2011 to Note Purchase Agreement among Target Corporation, Target Receivables LLC (formerly known as Target Receivables Corporation), JPMN II Inc. (formerly known as BOTAC, Inc.) and Chase Bank USA, National Association |
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Filed Electronically |
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(12) |
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Statements of Computations of Ratios of Earnings to Fixed Charges |
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Filed Electronically |
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(31)A |
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Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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Filed Electronically |
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(31)B |
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Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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Filed Electronically |
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(32)A |
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Certification of the Chief Executive Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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Filed Electronically |
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(32)B |
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Certification of the Chief Financial Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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Filed Electronically |
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101.INS |
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XBRL Instance Document |
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Filed Electronically |
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101.SCH |
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XBRL Taxonomy Extension Schema |
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Filed Electronically |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase |
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Filed Electronically |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase |
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Filed Electronically |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase |
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Filed Electronically |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase |
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Filed Electronically |
EXHIBIT 2(B)
ZELLERS INC.,
HUDSONS BAY COMPANY,
TARGET CORPORATION,
and
TARGET CANADA CO.
FIRST AMENDING AGREEMENT
TO TRANSACTION AGREEMENT
DATED JANUARY 12, 2011
February 17, 2011
FIRST AMENDING AGREEMENT
First Amending Agreement dated February 17, 2011 between Zellers Inc. (Zellers), Hudsons Bay Company (HBC), Target Corporation (Target), and Target Canada Co.
RECITALS:
A. The Parties entered into a transaction agreement dated January 12, 2011 (the Transaction Agreement).
B. The Parties wish to amend the Transaction Agreement as provided in this amending agreement (the First Amending Agreement).
In consideration of the above and the mutual agreements contained in this First Amending Agreement (the receipt and adequacy of which are acknowledged), the parties agree as follows:
Section 1 Defined Terms.
Capitalized terms used in this First Amending Agreement that are not defined in it have the meanings given to them in the Transaction Agreement.
Section 2 Amendment to Article 3 Purchase Price of the Transaction Agreement.
Section 3.1 Purchase Price of the Transaction Agreement is amended as of the date of this First Amending Agreement, as follows:
(a) Section 3.1(1)(a) of the Transaction Agreement is deleted and replaced by the following:
the consideration payable by Target Canada to Zellers for the First Tranche Subject Leases on the First Tranche Closing Date is $400,000,000 US dollars and $516,500,000 Canadian dollars (the First Tranche Purchase Price), subject to adjustment in accordance with Section 3.3; and.
Section 3 Reference to and Effect on the Transaction Agreement
On and after the date of this First Amending Agreement, any reference to this Agreement in the Transaction Agreement and any reference to the Transaction Agreement in any other agreements will mean the Transaction Agreement as amended by this First Amending Agreement. Except as specifically amended by this First Amending Agreement, the provisions of the Transaction Agreement remain in full force and effect.
Section 4 Entire Agreement.
This First Amending Agreement constitutes the entire agreement between the parties with respect to the amendments contemplated in this First Amending Agreement and except to the extent restated in this First Amending Agreement supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties, the
purpose of which were to amend the Transaction Agreement. The Parties have not relied and are not relying on any other information, discussion or understanding in implementing the amendments contemplated by this First Amending Agreement.
Section 5 Successors and Assigns.
This First Amending Agreement becomes effective when executed by all of the parties. After that time, it is binding upon and enures to the benefit of the parties and their respective successors and permitted assigns.
Section 6 Governing Law.
(a) This First Amending Agreement is governed by and interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
(b) Each Party irrevocably attorns and submits to the exclusive jurisdiction of the Ontario courts situated in the City of Toronto and waives objection to the venue of any proceeding in such court or that such court provides an inconvenient forum.
Section 7 Counterparts.
This First Amending Agreement may be executed in any number of counterparts (including counterparts by facsimile) and all such counterparts taken together constitute one and the same instrument.
(Remainder of the page intentionally left blank. Signature page follows.)
IN WITNESS WHEREOF the Parties have executed this First Amending Agreement.
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ZELLERS INC. | ||
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By: |
/s/ Michael McCorkle |
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Authorized Signing Officer |
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By: |
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Authorized Signing Officer |
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Dated: |
02/17/2011 | |
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HUDSONS BAY COMPANY | ||
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By: |
/s/ Michael McCorkle |
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Authorized Signing Officer |
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By: |
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Authorized Signing Officer |
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Dated: |
02/17/2011 | |
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TARGET CORPORATION | ||
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By: |
/s/ Douglas A. Scovanner |
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Authorized Signing Officer |
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Dated: |
02/17/2011 | |
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TARGET CANADA CO. | ||
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By: |
/s/ Patricia A. Johnson |
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Authorized Signing Officer |
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Dated: |
02/17/2011 |
EXHIBIT 10(Y)
AMENDMENT NO. 3, dated as of April 26, 2011 (this Amendment), by and among TARGET RECEIVABLES LLC (formerly known as TARGET RECEIVABLES CORPORATION), a Minnesota limited liability company (the Transferor), TARGET CORPORATION, a Minnesota corporation (Target), JPMN II Inc. (formerly known as BOTAC, Inc.), a Nevada corporation (the Note Purchaser), as Note Purchaser and CHASE BANK USA, NATIONAL ASSOCIATION, a national banking association (Chase USA), to the NOTE PURCHASE AGREEMENT, dated as of May 5, 2008, as amended by Amendment No. 1 thereto, dated as of November 10, 2009, and Amendment No. 2 thereto, dated as of January 31, 2011 (as amended, supplemented or otherwise modified, the Note Purchase Agreement), by and among the Transferor, Target, the Note Purchaser and Chase USA. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Note Purchase Agreement or, if not defined therein, in the other Basic Documents (as such term is defined in the Note Purchase Agreement).
W I T N E S S E T H:
WHEREAS, the Transferor or an affiliate of the Transferor would like to have the right to purchase the Floating Rate Asset-Backed Note (the Note) issued by Target Credit Card Owner Trust 2008-1 (the Issuer) upon at least 10 Business Days irrevocable prior written notice to Chase USA and the Note Purchaser;
WHEREAS, upon the purchase of the Note, the Note will be cancelled pursuant to Section 2.7 of the Indenture and Section 7.3 of the Series Supplement, the Issuer will be terminated and the receivables reconveyed to TRLLC;
WHEREAS, the parties to this Amendment desire to amend the Note Purchase Agreement pursuant to Section 15 thereof in order to provide for a right to allow the Transferor or an affiliate of the Transferor to purchase the Note;
WHEREAS, Section 15 of the Note Purchase Agreement provides that no amendment of any provision of the Note Purchase Agreement shall in any event be effective unless (i) such amendment be in writing and signed by the parties thereto and (ii) for so long as there is an Outstanding Series or Class that is rated by a Rating Agency, such Rating Agency shall be provided notice of any amendment of any provision of the Note Purchase Agreement; and
WHEREAS, the conditions precedent to the execution of this Amendment have been complied with.
NOW, THEREFORE, the parties hereto hereby are executing and delivering this Amendment in order to modify the Note Purchase Agreement in the manner set forth below.
ARTICLE I
Section 1.1 SECTION 21. A new Section 21 shall be added and shall read as follows:
21. Note Purchase. (a) The parties hereto agree that on any Business Day from, and including, September 30, 2011 to, and including, January 31, 2012, occurring after the Transferor has provided at least 10 Business Days irrevocable prior written notice to each of Chase USA and the Note Purchaser of the purchase of the Note, which notice shall specify the date on which payment for the Note shall occur (the Purchase Date), the Transferor or any of its affiliates, including Target, shall purchase the Note, in full, but not in part, by wire transfer of immediately available funds to the Indenture Trustee for further wire transfer to the Note Purchaser by 2:00 p.m. (New York time) on the Purchase Date (or via any other funds flow previously agreed upon between the Transferor and the Note Purchaser) in an amount equal to the sum of (i) the product of (x) the Note Principal Balance as of the most recent Distribution Date prior to such purchase date and (y) one (1) minus the Adjustment Percentage for the most recent Distribution Date prior to such purchase date, (ii) accrued and unpaid interest up to but not including such purchase date and (iii) the amount specified for such date on Schedule A.
Any purchase of the Note in full described in this Section 21(a) shall constitute the full and final satisfaction of all monetary obligations due and owing to the Note Purchaser with respect to the Note.
(b) In connection with a purchase pursuant to Section 21(a), each party hereto, including the Note Purchaser and Chase USA, hereby agrees to execute and deliver such purchase agreements, assignments, consents (including consents to amendments to the Basic Documents), or certificates as Target may reasonably deem necessary or appropriate, in form and substance reasonably satisfactory to each such party, including each of the Note Purchaser and Chase USA, in connection with the purchase of the Note contemplated in clause (a) above, the cancellation of the Note, the termination of the Issuer and the termination of Target Credit Card Master Trust; provided, that neither the Note Purchaser nor Chase USA shall have any obligation under this Section 21(b) after the Purchase Date.
ARTICLE II
Section 2.1 Counterparts. This Amendment may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument.
Section 2.2 Effect of Headings and Table of Contents. The Article and Section headings herein are for convenience only and shall not affect the construction hereof.
Section 2.3 Separability. In case any provision in this Amendment shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not be affected or impaired thereby.
Section 2.4 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
THE PARTIES HERETO HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE PURCHASE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 2.5 Effective Date. This Amendment shall become effective as of the tenth (10th) Business Day after the day and year first above written (the Effective Date). Any requirement of notice or delivery of any other document required in connection with this Amendment is hereby waived by each party entitled to such notice or other document.
Section 2.6 Binding Effect; Ratification. (a) On and after the Effective Date, (i) this Amendment shall be a part of the Note Purchase Agreement and (ii) each reference in the Note Purchase Agreement to this Agreement, the Note Purchase Agreement, hereof, hereunder or words of like import, and each reference in any other transaction document to the Note Purchase Agreement, shall mean and be a reference to the Note Purchase Agreement as amended hereby.
(b) Except as expressly modified or amended in this Amendment, all of the terms, covenants, provisions, agreements and conditions of the Note Purchase Agreement are hereby ratified and confirmed in every respect and shall remain unmodified and unchanged and shall continue in full force and effect.
[REMAINDER OF THE PAGE BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective officers as of the day and year first above written.
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TARGET RECEIVABLES LLC | ||
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(formerly known as TARGET RECEIVABLES CORPORATION) | ||
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By: |
/s/ Sara J. Ross | |
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Name: |
Sara J. Ross |
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Title: |
Vice President and Assistant Treasurer |
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TARGET CORPORATION | ||
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By: |
/s/ Sara J. Ross | |
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Name: |
Sara J. Ross |
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Title: |
Assistant Treasurer |
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JPMN II INC. | ||
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By: |
/s/ Keith Schuck | |
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Name: |
Keith Schuck |
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Title: |
Controller |
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CHASE BANK USA, NATIONAL ASSOCIATION | ||
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By: |
/s/ David Hoyt | |
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Name: |
David Hoyt |
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Title: |
Sr. Finance Director |
Amendment No. 3
Note Purchase Agreement
Schedule A
DATE |
|
AMOUNT |
|
DATE |
|
AMOUNT | ||
9/30/2011 |
|
$ |
103,000,000.00 |
|
12/1/2011 |
|
$ |
93,765,957.45 |
10/1/2011 |
|
$ |
102,851,063.83 |
|
12/2/2011 |
|
$ |
93,617,021.28 |
10/2/2011 |
|
$ |
102,702,127.66 |
|
12/3/2011 |
|
$ |
93,468,085.11 |
10/3/2011 |
|
$ |
102,553,191.49 |
|
12/4/2011 |
|
$ |
93,319,148.94 |
10/4/2011 |
|
$ |
102,404,255.32 |
|
12/5/2011 |
|
$ |
93,170,212.77 |
10/5/2011 |
|
$ |
102,255,319.15 |
|
12/6/2011 |
|
$ |
93,021,276.60 |
10/6/2011 |
|
$ |
102,106,382.98 |
|
12/7/2011 |
|
$ |
92,872,340.43 |
10/7/2011 |
|
$ |
101,957,446.81 |
|
12/8/2011 |
|
$ |
92,723,404.26 |
10/8/2011 |
|
$ |
101,808,510.64 |
|
12/9/2011 |
|
$ |
92,574,468.09 |
10/9/2011 |
|
$ |
101,659,574.47 |
|
12/10/2011 |
|
$ |
92,425,531.91 |
10/10/2011 |
|
$ |
101,510,638.30 |
|
12/11/2011 |
|
$ |
92,276,595.74 |
10/11/2011 |
|
$ |
101,361,702.13 |
|
12/12/2011 |
|
$ |
92,127,659.57 |
10/12/2011 |
|
$ |
101,212,765.96 |
|
12/13/2011 |
|
$ |
91,978,723.40 |
10/13/2011 |
|
$ |
101,063,829.79 |
|
12/14/2011 |
|
$ |
91,829,787.23 |
10/14/2011 |
|
$ |
100,914,893.62 |
|
12/15/2011 |
|
$ |
91,680,851.06 |
10/15/2011 |
|
$ |
100,765,957.45 |
|
12/16/2011 |
|
$ |
91,531,914.89 |
10/16/2011 |
|
$ |
100,617,021.28 |
|
12/17/2011 |
|
$ |
91,382,978.72 |
10/17/2011 |
|
$ |
100,468,085.11 |
|
12/18/2011 |
|
$ |
91,234,042.55 |
10/18/2011 |
|
$ |
100,319,148.94 |
|
12/19/2011 |
|
$ |
91,085,106.38 |
10/19/2011 |
|
$ |
100,170,212.77 |
|
12/20/2011 |
|
$ |
90,936,170.21 |
10/20/2011 |
|
$ |
100,021,276.60 |
|
12/21/2011 |
|
$ |
90,787,234.04 |
10/21/2011 |
|
$ |
99,872,340.43 |
|
12/22/2011 |
|
$ |
90,638,297.87 |
10/22/2011 |
|
$ |
99,723,404.26 |
|
12/23/2011 |
|
$ |
90,489,361.70 |
10/23/2011 |
|
$ |
99,574,468.09 |
|
12/24/2011 |
|
$ |
90,340,425.53 |
10/24/2011 |
|
$ |
99,425,531.91 |
|
12/25/2011 |
|
$ |
90,191,489.36 |
10/25/2011 |
|
$ |
99,276,595.74 |
|
12/26/2011 |
|
$ |
90,042,553.19 |
10/26/2011 |
|
$ |
99,127,659.57 |
|
12/27/2011 |
|
$ |
89,893,617.02 |
10/27/2011 |
|
$ |
98,978,723.40 |
|
12/28/2011 |
|
$ |
89,744,680.85 |
10/28/2011 |
|
$ |
98,829,787.23 |
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12/29/2011 |
|
$ |
89,595,744.68 |
10/29/2011 |
|
$ |
98,680,851.06 |
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12/30/2011 |
|
$ |
89,446,808.51 |
10/30/2011 |
|
$ |
98,531,914.89 |
|
12/31/2011 |
|
$ |
89,297,872.34 |
10/31/2011 |
|
$ |
98,382,978.72 |
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1/1/2012 |
|
$ |
89,148,936.17 |
11/1/2011 |
|
$ |
98,234,042.55 |
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1/2/2012 |
|
$ |
89,000,000.00 |
11/2/2011 |
|
$ |
98,085,106.38 |
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1/3/2012 |
|
$ |
88,851,063.83 |
11/3/2011 |
|
$ |
97,936,170.21 |
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1/4/2012 |
|
$ |
88,702,127.66 |
11/4/2011 |
|
$ |
97,787,234.04 |
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1/5/2012 |
|
$ |
88,553,191.49 |
11/5/2011 |
|
$ |
97,638,297.87 |
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1/6/2012 |
|
$ |
88,404,255.32 |
11/6/2011 |
|
$ |
97,489,361.70 |
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1/7/2012 |
|
$ |
88,255,319.15 |
11/7/2011 |
|
$ |
97,340,425.53 |
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1/8/2012 |
|
$ |
88,106,382.98 |
11/8/2011 |
|
$ |
97,191,489.36 |
|
1/9/2012 |
|
$ |
87,957,446.81 |
11/9/2011 |
|
$ |
97,042,553.19 |
|
1/10/2012 |
|
$ |
87,808,510.64 |
11/10/2011 |
|
$ |
96,893,617.02 |
|
1/11/2012 |
|
$ |
87,659,574.47 |
11/11/2011 |
|
$ |
96,744,680.85 |
|
1/12/2012 |
|
$ |
87,510,638.30 |
11/12/2011 |
|
$ |
96,595,744.68 |
|
1/13/2012 |
|
$ |
87,361,702.13 |
11/13/2011 |
|
$ |
96,446,808.51 |
|
1/14/2012 |
|
$ |
87,212,765.96 |
11/14/2011 |
|
$ |
96,297,872.34 |
|
1/15/2012 |
|
$ |
87,063,829.79 |
11/15/2011 |
|
$ |
96,148,936.17 |
|
1/16/2012 |
|
$ |
86,914,893.62 |
11/16/2011 |
|
$ |
96,000,000.00 |
|
1/17/2012 |
|
$ |
86,765,957.45 |
11/17/2011 |
|
$ |
95,851,063.83 |
|
1/18/2012 |
|
$ |
86,617,021.28 |
11/18/2011 |
|
$ |
95,702,127.66 |
|
1/19/2012 |
|
$ |
86,468,085.11 |
11/19/2011 |
|
$ |
95,553,191.49 |
|
1/20/2012 |
|
$ |
86,319,148.94 |
11/20/2011 |
|
$ |
95,404,255.32 |
|
1/21/2012 |
|
$ |
86,170,212.77 |
11/21/2011 |
|
$ |
95,255,319.15 |
|
1/22/2012 |
|
$ |
86,021,276.60 |
11/22/2011 |
|
$ |
95,106,382.98 |
|
1/23/2012 |
|
$ |
85,872,340.43 |
11/23/2011 |
|
$ |
94,957,446.81 |
|
1/24/2012 |
|
$ |
85,723,404.26 |
11/24/2011 |
|
$ |
94,808,510.64 |
|
1/25/2012 |
|
$ |
85,574,468.09 |
11/25/2011 |
|
$ |
94,659,574.47 |
|
1/26/2012 |
|
$ |
85,425,531.92 |
11/26/2011 |
|
$ |
94,510,638.30 |
|
1/27/2012 |
|
$ |
85,276,595.75 |
11/27/2011 |
|
$ |
94,361,702.13 |
|
1/28/2012 |
|
$ |
85,127,659.58 |
11/28/2011 |
|
$ |
94,212,765.96 |
|
1/29/2012 |
|
$ |
84,978,723.41 |
11/29/2011 |
|
$ |
94,063,829.79 |
|
1/30/2012 |
|
$ |
84,829,787.24 |
11/30/2011 |
|
$ |
93,914,893.62 |
|
1/31/2012 |
|
$ |
84,680,851.07 |
Exhibit (12)
TARGET CORPORATION
Computations of Ratios of Earnings to Fixed Charges for the
Three Months Ended April 30, 2011 and May 1, 2010
and for the Most Recent Five Fiscal Years
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Three Months Ended |
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|
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Fiscal Year Ended |
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|
Apr. 30, |
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May 31, |
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|
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Jan. 29, |
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Jan. 30, |
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Jan. 31, |
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Feb. 2, |
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Feb. 3, |
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(millions) |
|
2011 |
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2010 |
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|
|
2011 |
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2010 |
|
2009 |
|
2008 |
|
2007 |
| |||||||
Ratio of Earnings to Fixed Charges |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Earnings from continuing operations before income taxes |
|
$ |
1,081 |
|
$ |
1,055 |
|
|
|
$ |
4,495 |
|
$ |
3,872 |
|
$ |
3,536 |
|
$ |
4,625 |
|
$ |
4,497 |
|
Capitalized interest, net |
|
2 |
|
1 |
|
|
|
2 |
|
(9 |
) |
(48 |
) |
(66 |
) |
(47 |
) | |||||||
Adjusted earnings from continuing operations before income taxes |
|
1,083 |
|
1,056 |
|
|
|
4,497 |
|
3,863 |
|
3,488 |
|
4,559 |
|
4,450 |
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Fixed charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Interest expense(a) |
|
186 |
|
191 |
|
|
|
776 |
|
830 |
|
956 |
|
747 |
|
646 |
| |||||||
Interest portion of rental expense |
|
30 |
|
26 |
|
|
|
110 |
|
105 |
|
103 |
|
94 |
|
88 |
| |||||||
Total fixed charges |
|
216 |
|
217 |
|
|
|
886 |
|
935 |
|
1,059 |
|
841 |
|
734 |
| |||||||
Earnings from continuing operations before income taxes and fixed charges |
|
$ |
1,299 |
|
$ |
1,273 |
|
|
|
$ |
5,383 |
|
$ |
4,798 |
|
$ |
4,547 |
|
$ |
5,400 |
|
$ |
5,184 |
|
Ratio of earnings to fixed charges |
|
6.01 |
|
5.86 |
|
|
|
6.08 |
|
5.13 |
|
4.29 |
|
6.42 |
|
7.06 |
|
(a) |
Includes interest on debt and capital leases (including capitalized interest) and amortization of debt issuance costs. Excludes interest income and interest associated with unrecognized tax benefit liabilities, which is recorded within income tax expense. |
Exhibit (31)A
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Certifications
I, Gregg W. Steinhafel, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Target Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: May 26, 2011
/s/ Gregg W. Steinhafel |
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Gregg W. Steinhafel | |
Chairman, President and Chief Executive Officer |
Exhibit (31)B
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Certifications
I, Douglas A. Scovanner, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Target Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: May 26, 2011
/s/ Douglas A. Scovanner |
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Douglas A. Scovanner | |
Executive Vice President and Chief Financial Officer |
Exhibit (32)A
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
AS ADOPTED PURSUANT TO 18 U.S.C. SECTION 1350
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Target Corporation, a Minnesota corporation (the Company), for the quarter ended April 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date: May 26, 2011
/s/ Gregg W. Steinhafel |
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Gregg W. Steinhafel | |
Chairman, President and Chief Executive Officer |
Exhibit (32)B
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
AS ADOPTED PURSUANT TO 18 U.S.C. SECTION 1350
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Target Corporation, a Minnesota corporation (the Company), for the quarter ended April 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date: May 26, 2011
/s/ Douglas A. Scovanner |
|
Douglas A. Scovanner | |
Executive Vice President and Chief Financial Officer |
?+'I13NS-TJ/\K^ #\__9 ` end
Consolidated Statements of Financial Position (Parenthetical) (USD $)
In Millions |
Apr. 30, 2011
|
Jan. 29, 2011
|
May 01, 2010
|
---|---|---|---|
Consolidated Statements of Financial Position | |||
Cash and cash equivalents, marketable securities | $ 872 | $ 1,129 | $ 1,015 |
Credit card receivables, allowance | $ 565 | $ 690 | $ 930 |
Pension, Postretirement Health Care and Other Benefits (Tables)
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Apr. 30, 2011
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Pension, Postretirement Health Care and Other Benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Pension and Postretirement Health Care Benefits Expense |
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Prepaid Forward Contracts on Target Common Stock |
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Consolidated Statements of Operations (USD $)
In Millions, except Per Share data |
3 Months Ended | |
---|---|---|
Apr. 30, 2011
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May 01, 2010
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Sales | $ 15,580 | $ 15,158 |
Credit card revenues | 355 | 435 |
Total revenues | 15,935 | 15,593 |
Cost of sales | 10,838 | 10,412 |
Selling, general and administrative expenses | 3,233 | 3,143 |
Credit card expenses | 88 | 280 |
Depreciation and amortization | 512 | 516 |
Earnings before interest expense and income taxes | 1,264 | 1,242 |
Net interest expense | ||
Nonrecourse debt collateralized by credit card receivables | 19 | 23 |
Other interest expense | 164 | 165 |
Interest income | (1) | |
Net interest expense | 183 | 187 |
Earnings before income taxes | 1,081 | 1,055 |
Provision for income taxes | 392 | 384 |
Net earnings | $ 689 | $ 671 |
Basic earnings per share (in dollars per share) | $ 0.99 | $ 0.91 |
Diluted earnings per share (in dollars per share) | $ 0.99 | $ 0.90 |
Weighted average common shares outstanding | ||
Basic (in shares) | 692.6 | 739.9 |
Diluted (in shares) | 697.4 | 745.7 |
Fair Value Measurements (Details) (USD $)
In Millions |
Apr. 30, 2011
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Jan. 29, 2011
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May 01, 2010
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---|---|---|---|
Financial Instruments, Balance Sheet Groupings | |||
Cash and cash equivalents, marketable securities | $ 872 | $ 1,129 | $ 1,015 |
Other current assets | 1,527 | 1,752 | 2,065 |
Other noncurrent assets | 980 | 999 | 889 |
Total assets | 42,996 | 43,705 | 43,323 |
Other noncurrent liabilities | 1,596 | 1,607 | 1,819 |
Loans secured by company-owned life insurance policies | 648 | 645 | 615 |
Level 1 | Recurring Basis
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Financial Instruments, Balance Sheet Groupings | |||
Cash and cash equivalents, marketable securities | 872 | 1,129 | 1,015 |
Total assets | 937 | 1,192 | 1,084 |
Level 1 | Recurring Basis | Prepaid forward contracts
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Financial Instruments, Balance Sheet Groupings | |||
Other current assets | 65 | 63 | 69 |
Level 2 | Recurring Basis
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Financial Instruments, Balance Sheet Groupings | |||
Total assets | 506 | 497 | 476 |
Total Liabilities | 54 | 54 | 29 |
Level 2 | Recurring Basis | Other
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Financial Instruments, Balance Sheet Groupings | |||
Other current assets | 4 | ||
Level 2 | Recurring Basis | Interest rate swaps
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Financial Instruments, Balance Sheet Groupings | |||
Other noncurrent assets | 132 | 139 | 133 |
Other noncurrent liabilities | 54 | 54 | 29 |
Level 2 | Recurring Basis | Company-owned life insurance investments
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Financial Instruments, Balance Sheet Groupings | |||
Other noncurrent assets | 370 | 358 | 343 |
Carrying amount | Nonrecurring Basis | Long-lived assets held for sale
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Financial Instruments, Balance Sheet Groupings | |||
Other current assets | 2 | ||
Carrying amount | Nonrecurring Basis | Long-lived assets held and used
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Financial Instruments, Balance Sheet Groupings | |||
Property and equipment | 30 | 29 | |
Carrying amount | Financial instruments not measured at fair value
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Financial Instruments, Balance Sheet Groupings | |||
Total assets | 26 | 36 | 37 |
Total Debt | 15,251 | 15,241 | 15,291 |
Total Liabilities | 15,251 | 15,241 | 15,291 |
Carrying amount | Financial instruments not measured at fair value | Held-to-maturity government and money market investments
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Financial Instruments, Balance Sheet Groupings | |||
Other current assets | 24 | 32 | 34 |
Other noncurrent assets | 2 | 4 | 3 |
Fair value measurement | Nonrecurring Basis | Long-lived assets held for sale
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Financial Instruments, Balance Sheet Groupings | |||
Other current assets | 2 | ||
Fair value measurement | Nonrecurring Basis | Long-lived assets held and used
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Financial Instruments, Balance Sheet Groupings | |||
Property and equipment | 22 | 26 | |
Fair value measurement | Financial instruments not measured at fair value
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Financial Instruments, Balance Sheet Groupings | |||
Total assets | 26 | 36 | 37 |
Total Debt | 16,859 | 16,661 | 16,659 |
Total Liabilities | 16,859 | 16,661 | 16,659 |
Fair value measurement | Financial instruments not measured at fair value | Held-to-maturity government and money market investments
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Financial Instruments, Balance Sheet Groupings | |||
Other current assets | 24 | 32 | 34 |
Other noncurrent assets | 2 | 4 | 3 |
Gain/(loss) | Nonrecurring Basis | Long-lived assets held and used
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Financial Instruments, Balance Sheet Groupings | |||
Property and equipment | $ (8) | $ (3) |
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Notes Payable and Long-Term Debt
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3 Months Ended | |
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Apr. 30, 2011
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Notes Payable and Long-Term Debt | ||
Notes Payable and Long-Term Debt |
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Credit Card Receivables (Details) (USD $)
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1 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | |||||||||||
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May 31, 2011
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Apr. 30, 2011
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May 01, 2010
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Jan. 29, 2011
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Apr. 30, 2011
Credit card receivables
Secured borrowings for 2008
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Jan. 29, 2011
Credit card receivables
Secured borrowings for 2008
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Aug. 02, 2008
Credit card receivables
Secured borrowings for 2008
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Apr. 30, 2011
FICO score of 700 or above
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Jan. 29, 2011
FICO score of 700 or above
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May 01, 2010
FICO score of 700 or above
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Apr. 30, 2011
FICO score of 600 to 699
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Jan. 29, 2011
FICO score of 600 to 699
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May 01, 2010
FICO score of 600 to 699
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Apr. 30, 2011
FICO score below 600
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Jan. 29, 2011
FICO score below 600
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May 01, 2010
FICO score below 600
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Accounts, Notes, Loans and Financing Receivable | ||||||||||||||||
Policy for when credit card receivables are written off | 180 days past due | |||||||||||||||
Age of Credit Card Receivables | ||||||||||||||||
Current | $ 5,749,000,000 | $ 6,425,000,000 | $ 6,132,000,000 | |||||||||||||
1-29 days past due | 227,000,000 | 283,000,000 | 292,000,000 | |||||||||||||
30-59 days past due | 100,000,000 | 166,000,000 | 131,000,000 | |||||||||||||
60-89 days past due | 59,000,000 | 107,000,000 | 79,000,000 | |||||||||||||
90+ days past due | 151,000,000 | 279,000,000 | 209,000,000 | |||||||||||||
Period-end gross credit card receivables | 6,286,000,000 | 7,260,000,000 | 6,843,000,000 | |||||||||||||
Current (as a percent) | 91.50% | 88.50% | 89.60% | |||||||||||||
1-29 days past due (as a percent) | 3.60% | 3.90% | 4.30% | |||||||||||||
30-59 days past due (as a percent) | 1.60% | 2.30% | 1.90% | |||||||||||||
60-89 days past due (as a percent) | 0.90% | 1.50% | 1.10% | |||||||||||||
90+ days past due (as a percent) | 2.40% | 3.80% | 3.10% | |||||||||||||
Period-end gross credit card receivables (as a percent) | 100.00% | 100.00% | 100.00% | |||||||||||||
Allowance for Doubtful Accounts | ||||||||||||||||
Allowance at beginning of period | 565,000,000 | 690,000,000 | 1,016,000,000 | 1,016,000,000 | ||||||||||||
Bad debt expense | 12,000,000 | 197,000,000 | 528,000,000 | |||||||||||||
Write-offs | (184,000,000) | (318,000,000) | (1,007,000,000) | |||||||||||||
Recoveries | 47,000,000 | 35,000,000 | 153,000,000 | |||||||||||||
Allowance at end of period | 565,000,000 | 930,000,000 | 690,000,000 | |||||||||||||
Policy for when credit card receivables are considered as delinquent | 30 or more days past due | |||||||||||||||
Total nondelinquent accounts (Current and 1-29 days past due) | 5,976,000,000 | 6,707,000,000 | 6,424,000,000 | 2,771,000,000 | 2,819,000,000 | 2,812,000,000 | 2,503,000,000 | 2,737,000,000 | 2,861,000,000 | 702,000,000 | 868,000,000 | 1,034,000,000 | ||||
Delinquent accounts (30+ days past due) | 310,000,000 | 553,000,000 | 419,000,000 | |||||||||||||
Receivables classified as TDRs (as a percent) | 5.80% | 6.50% | 5.90% | |||||||||||||
Percentage of JPMorgan Chase's (JPMC) interest in credit receivables at time of transaction (as a percent) | 47.00% | |||||||||||||||
Maximum principal balance required by JPMC | 4,200,000,000 | |||||||||||||||
Payment made to JPMC due to the continuing declines in gross credit card receivables | 566,000,000 | |||||||||||||||
Subsequent Event payment made to JPMC due to the continuing declines in gross credit card receivables | 189,000,000 | |||||||||||||||
Threshold below which finance charge excess as percent of JPMC's outstanding principal balance triggers required underwriting strategies (as a percent) | 2.00% | |||||||||||||||
Threshold below which finance charge excess as percent of JPMC's outstanding principal balance may compel underwriting and collection activities (as a percent) | 1.00% | |||||||||||||||
Make-whole payment, low end of range | 85,000,000 | |||||||||||||||
Make-whole payment, high end of range | $ 103,000,000 |
Earnings Per Share (Details) (USD $)
In Millions, except Per Share data |
3 Months Ended | 12 Months Ended | |
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Apr. 30, 2011
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May 01, 2010
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Jan. 29, 2011
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Earnings Per Share | |||
Net earnings | $ 689 | $ 671 | $ 2,920 |
Basic weighted average common shares outstanding (in shares) | 692.6 | 739.9 | |
Dilutive impact of stock-based awards (in shares) | 4.8 | 5.8 | |
Diluted weighted average common shares outstanding (in shares) | 697.4 | 745.7 | |
Basic earnings per share (in dollars per share) | $ 0.99 | $ 0.91 | |
Diluted earnings per share (in dollars per share) | $ 0.99 | $ 0.90 | |
Antidilutive stock options excluded from the calculation of weighted average shares for diluted EPS (in shares) | 14.5 | 11.6 |
Segment Reporting
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Apr. 30, 2011
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Segment Reporting |
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Earnings Per Share
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
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Earnings Per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share |
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Income Taxes
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3 Months Ended | |
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Apr. 30, 2011
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Income Taxes | ||
Income Taxes |
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Fair Value Measurements (Tables)
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Apr. 30, 2011
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Fair Value Measurements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements - Recurring Basis |
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Fair Value Measurements - Nonrecurring Basis |
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Financial Instruments Not Measured at Fair Value |
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Share Repurchase
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
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Share Repurchase | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Repurchase |
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Share Repurchase (Details) (USD $)
Share data in Millions, except Per Share data |
1 Months Ended | 3 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Nov. 30, 2007
|
Apr. 30, 2011
|
May 01, 2010
|
Jan. 29, 2011
|
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Share Repurchase Information | ||||
Amount approved by board of directors for share repurchase program | $ 10,000,000,000 | |||
Total Number of Shares Purchased | 15.4 | 7.5 | ||
Repurchase of stock, average price per share (in dollars per share) | $ 53.32 | $ 52.27 | ||
Total Investment | 819,000,000 | 394,000,000 | ||
Repurchase of stock | 819,000,000 | 2,514,000,000 | ||
Cash investment
|
||||
Share Repurchase Information | ||||
Repurchase of stock | 7,000,000 | 15,000,000 | ||
Prepaid forward contracts market value
|
||||
Share Repurchase Information | ||||
Stock repurchased, delivered upon settlement of prepaid forward contracts | $ 7,000,000 | $ 16,000,000 |
Derivative Financial Instruments
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
|
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Derivative Financial Instruments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments |
|
Consolidated Statements of Shareholders' Equity (Parenthetical) (USD $)
In Millions, except Per Share data |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Apr. 30, 2011
|
May 01, 2010
|
Jan. 29, 2011
|
|
Consolidated Statements of Shareholders' Investment | |||
Pension and other benefit liability adjustments, taxes | $ 5 | $ 4 | |
Net change on cash flow hedges, taxes | 0 | 2 | |
Currency translation adjustment, taxes | $ 0 | $ 1 | |
Dividends declared per share (in dollars per share) | $ 0.25 | $ 0.17 | $ 0.92 |
Fair Value Measurements
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
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Fair Value Measurements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
|
Derivative Financial Instruments (Details) (USD $)
In Millions |
3 Months Ended | ||
---|---|---|---|
Apr. 30, 2011
|
May 01, 2010
|
Jan. 29, 2011
|
|
Derivative Financial Instruments | |||
Net gains amortized into net interest expense for terminated and de-designated swaps | $ 10 | $ 11 | |
Unamortized hedged debt valuation gains from terminated and de-designated interest rate swaps | 142 | 186 | 152 |
Other interest expense | Interest rate swaps
|
|||
Derivative Contracts - Effect on Results of Operations | |||
Gain of derivative instrument not designated as hedging instrument | $ 11 | $ 14 |
Credit Card Receivables
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
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Credit Card Receivables. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Card Receivables |
|
Credit Card Receivables (Details 2) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | ||
---|---|---|---|
Apr. 30, 2011
|
Jan. 29, 2011
|
May 01, 2010
|
|
Short-term financing | |||
Debt Balance | $ 3,965 | $ 3,954 | $ 4,219 |
Collateral | 4,327 | 4,327 | 4,638 |
Secured borrowings for 2008
|
|||
Short-term financing | |||
Debt Balance | 2,965 | 2,954 | 3,219 |
Collateral | 3,061 | 3,061 | 3,372 |
Discount in credit card receivables sold to JPMC (as a percent) | 7.00% | ||
Unamortized portion of discount in credit card receivables sold to JPMC | 96 | 107 | 153 |
Secured borrowings for 2006 or 2007
|
|||
Short-term financing | |||
Debt Balance | 1,000 | 1,000 | 1,000 |
Collateral | $ 1,266 | $ 1,266 | $ 1,266 |
Pension, Postretirement Health Care and Other Benefits (Details) (USD $)
In Millions |
3 Months Ended | |
---|---|---|
Apr. 30, 2011
|
May 01, 2010
|
|
Pension Benefits
|
||
Net Pension and Postretirement Health Care Benefits Expense | ||
Service cost | $ 29 | $ 29 |
Interest cost | 34 | 32 |
Expected return on assets | (51) | (48) |
Recognized losses | 16 | 11 |
Recognized prior service cost | (1) | (1) |
Total Net Pension and Postretirement Health Care Benefits Expense | 27 | 23 |
Postretirement Health Care Benefits
|
||
Net Pension and Postretirement Health Care Benefits Expense | ||
Service cost | 2 | 2 |
Interest cost | 1 | 1 |
Recognized losses | 1 | 1 |
Recognized prior service cost | (2) | (2) |
Total Net Pension and Postretirement Health Care Benefits Expense | $ 2 | $ 2 |
Notes Payable and Long-Term Debt (Details) (USD $)
In Millions |
1 Months Ended |
---|---|
Apr. 30, 2010
|
|
Notes Payable and Long-Term Debt | |
Nonrecourse debt repurchased and retired, collateralized by credit card receivables | $ 900 |
Earnings Per Share (Tables)
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
|
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Earnings Per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share |
|
Commitments and Contingencies
|
3 Months Ended | |||
---|---|---|---|---|
Apr. 30, 2011
|
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Commitments and Contingencies | ||||
Commitments and Contingencies |
|
Derivative Financial Instruments (Tables)
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
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Derivative Financial Instruments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Contracts - Effect on Results of Operations |
|
Share Repurchase (Tables)
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
|
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Share Repurchase | ||||||||||||||||||||||||||||||||||||||||||
Share repurchases through open market transactions |
|
|||||||||||||||||||||||||||||||||||||||||
Summary of shares reacquired upon settlement of prepaid forward contracts |
|
Segment Reporting (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
|
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Segment Reporting | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment Results and Total Assets by Segment |
|
Accounting Policies
|
3 Months Ended | |
---|---|---|
Apr. 30, 2011
|
||
Accounting Policies | ||
Accounting Policies |
|
Pension, Postretirement Health Care and Other Benefits
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
|
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Pension, Postretirement Health Care and Other Benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension, Postretirement Health Care and Other Benefits |
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Credit Card Receivables (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2011
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Credit Card Receivables. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Age of Credit Card Receivables |
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Allowance for Doubtful Accounts |
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Receivables Credit Quality |
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Information of securitized borrowings |
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Segment Reporting (Details 2) (USD $)
In Millions |
Apr. 30, 2011
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Jan. 29, 2011
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May 01, 2010
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Segment Reporting Information | |||
Total assets | $ 42,996 | $ 43,705 | $ 43,323 |
U.S. Retail
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Segment Reporting Information | |||
Total assets | 37,032 | 37,324 | 36,633 |
U.S. Credit Card
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Segment Reporting Information | |||
Total assets | 5,934 | 6,381 | 6,690 |
Canadian
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Segment Reporting Information | |||
Total assets | $ 30 |
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