MINNEAPOLIS--(BUSINESS WIRE)--Target Corporation (NYSE: TGT) today reported third quarter net earnings of $637 million, or $0.96 per share, which includes a 15-cent gain from the pending sale of its credit-card receivables portfolio.1 Adjusted earnings per share, a measure the company believes is useful in providing period-to-period comparisons of the results of its U.S. operations, were $0.90 in third quarter 2012, up 4.3 percent from $0.86 in 2011. A reconciliation of non-GAAP financial measures to GAAP measures is provided in the tables attached to this press release. All earnings per share figures refer to diluted earnings per share.
“We’re pleased with Target’s third quarter financial performance, which reflects superb execution across each of our business segments,” said Gregg Steinhafel, chairman, president, and chief executive officer of Target Corporation. “We are well-positioned to deliver strong fourth quarter performance by offering compelling merchandise and unbeatable value through initiatives like the Target/Neiman Marcus Holiday Collection, 5% REDcard Rewards and our new Holiday Price Match which allow our guests to shop at Target with confidence throughout the holiday season.”
|
1Please refer to the detail provided in the reconciliation of GAAP to adjusted EPS in the tables attached to this release. |
Fiscal 2012 Earnings Guidance
For fourth quarter 2012, the company expects adjusted EPS of $1.64 to $1.74 and GAAP EPS of $1.45 to $1.55. The 19-cent difference between these ranges reflects the expected EPS impact of expenses related to the company’s Canadian market entry.
U.S. Retail Segment Results
As previously reported, sales increased 3.4 percent to $16.6 billion in third quarter 2012 from $16.1 billion last year, reflecting a 2.9 percent increase in comparable-store sales combined with the contribution from new stores.
Segment earnings before interest expense and income taxes (EBIT) were $963 million in the third quarter of 2012, an increase of 3.4 percent from $931 million in 2011. Third quarter EBITDA and EBIT margin rates were 8.9 percent and 5.8 percent, respectively, compared with 9.1 percent and 5.8 percent in 2011. Third quarter gross margin rate declined to 30.3 percent in 2012 from 30.5 percent in 2011, reflecting the impact of the company’s integrated growth strategies partially offset by underlying rate improvements within categories. Third quarter selling, general and administrative (SG&A) expense rate was 21.4 percent in 2012, unchanged from 2011.
U.S. Credit Card Segment Results2
Third quarter average receivables decreased 4.7 percent to $5.9 billion in 2012 from $6.2 billion in 2011. Third quarter 2012 portfolio spread to LIBOR was $138 million, or 9.3 percent, compared with $158 million, or 10.2 percent, in 2011. Performance in third quarter 2012 reflected a $20 million reduction in the allowance for doubtful accounts, compared with a $49 million reduction in third quarter 2011.
| 2The Company intends to continue reporting a U.S. Credit Card segment until the credit card receivables transaction with TD Bank closes in 2013. The segment results will continue to be reported on the same basis as historical results. |
Canadian Segment Results
Third quarter 2012 EBIT was $(96) million, due to start-up expenses, depreciation and amortization related to the company’s expected market entry in 2013. Total expenses related to investments in Target’s Canadian market entry reduced Target’s earnings per share by approximately 13 cents in third quarter 2012.3
Interest Expense and Taxes
Net interest expense for the quarter was $192 million, including $20 million of interest on capitalized leases related to Target’s Canadian market entry. Net interest expense was $200 million in third quarter 2011.
The company’s effective income tax rate was 34.5 percent in third quarter 2012, including the favorable resolution of various income tax matters that benefited third quarter EPS by approximately 4 cents.
Capital Returned to Shareholders
In third quarter 2012, the company repurchased approximately 1.7 million shares of its common stock at an average price of $62.90, for a total investment of $104 million. The company also paid dividends of $236 million during the quarter.
Year-to-date the company has repurchased approximately 21.8 million shares of its common stock at an average price of $57.53, for a total investment of $1.25 billion, and paid dividends of $635 million.
| 3This amount includes interest expense and tax expense that are not included in the segment measure of profit. A reconciliation of non-GAAP measures is included in the tables attached to this release. |
Accounting Considerations
As a result of Target’s recently announced agreement to sell its credit card receivables portfolio to TD Bank Group, third quarter 2012 GAAP earnings per share reflect a pre-tax gain of $156 million due to a change in the accounting treatment of its receivables from “held for investment” to “held for sale”.
Miscellaneous
Target Corporation will webcast its third quarter earnings conference call at 9:30 a.m. CST today. Investors and the media are invited to listen to the call through the company’s website at www.target.com/investors (click on “events & presentations”). A telephone replay of the call will be available beginning at approximately 11:30 a.m. CST today through the end of business on November 16, 2012. The replay number is (855) 859-2056 (passcode: 39813512).
Statements in this release regarding fourth quarter 2012 earnings guidance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements speak only as of the date they are made and are subject to risks and uncertainties which could cause the company’s actual results to differ materially. The most important risks and uncertainties are described in Item 1A of the company’s Form 10-K for the fiscal year ended January 28, 2012 and Form 10-Q for the fiscal quarter ended July 28, 2012.
In addition to the GAAP results provided in this release, the company provides adjusted diluted earnings per share for the three and nine months ended October 27, 2012 and October 29, 2011. This measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The most comparable GAAP measure is diluted earnings per share. Management believes adjusted EPS is useful in providing period-to-period comparisons of the results of the company’s U.S. operations. Adjusted EPS should not be considered in isolation or as a substitution for analysis of the company’s results as reported under GAAP. Other companies may calculate adjusted EPS differently than the company does, limiting the usefulness of the measure for comparisons with other companies.
About Target
Minneapolis-based Target Corporation (NYSE:TGT) serves guests at 1,782 stores across the United States and at Target.com. The company plans to open its first stores in Canada in 2013. Since 1946, Target has given 5 percent of its profit through community grants and programs; today, that giving equals more than $4 million a week. For more information about Target’s commitment to corporate responsibility, visit Target.com/hereforgood.
For more information, visit Target.com/Pressroom.
| TARGET CORPORATION | ||||||||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| October 27, | October 29, | October 27, | October 29, | |||||||||||||||||||||||
| (millions, except per share data) (unaudited) | 2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||||
| Sales | $ | 16,601 | $ | 16,054 | 3.4 | % | $ | 49,589 | $ | 47,529 | 4.3 | % | ||||||||||||||
| Credit card revenues | 328 | 348 | (5.8 | ) | 986 | 1,048 | (6.0 | ) | ||||||||||||||||||
| Total revenues | 16,929 | 16,402 | 3.2 | 50,575 | 48,577 | 4.1 | ||||||||||||||||||||
| Cost of sales | 11,569 | 11,165 | 3.6 | 34,406 | 32,874 | 4.7 | ||||||||||||||||||||
| Selling, general and administrative expenses | 3,704 | 3,525 | 5.1 | 10,686 | 10,230 | 4.4 | ||||||||||||||||||||
| Credit card expenses | 106 | 109 | (3.4 | ) | 333 | 283 | 17.4 | |||||||||||||||||||
| Depreciation and amortization | 542 | 546 | (0.7 | ) | 1,603 | 1,568 | 2.2 | |||||||||||||||||||
| Gain on receivables held for sale | (156 | ) | - | n/a | (156 | ) | - | n/a | ||||||||||||||||||
| Earnings before interest expense and income taxes | 1,164 | 1,057 | 10.1 | 3,703 | 3,622 | 2.3 | ||||||||||||||||||||
| Net interest expense | 192 | 200 | (4.1 | ) | 558 | 574 | (2.7 | ) | ||||||||||||||||||
| Earnings before income taxes | 972 | 857 | 13.4 | 3,145 | 3,048 | 3.2 | ||||||||||||||||||||
| Provision for income taxes | 335 | 302 | 10.8 | 1,107 | 1,100 | 0.6 | ||||||||||||||||||||
| Net earnings | $ | 637 | $ | 555 | 14.8 | % | $ | 2,038 | $ | 1,948 | 4.6 | % | ||||||||||||||
| Basic earnings per share | $ | 0.97 | $ | 0.82 | 18.0 | % | $ | 3.09 | $ | 2.85 | 8.3 | % | ||||||||||||||
| Diluted earnings per share | $ | 0.96 | $ | 0.82 | 17.6 | % | $ | 3.06 | $ | 2.84 | 7.9 | % | ||||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||||||||
| Basic | 654.8 | 673.2 | (2.7 | ) | % | 659.3 | 682.2 | (3.4 | ) | % | ||||||||||||||||
| Diluted | 662.2 | 678.3 | (2.4 | ) | % | 665.8 | 686.9 | (3.1 | ) | % | ||||||||||||||||
| TARGET CORPORATION | |||||||||||||||
| Consolidated Statements of Financial Position | |||||||||||||||
| October 27, | January 28, | October 29, | |||||||||||||
| (millions) | 2012 | 2012 | 2011 | ||||||||||||
| Assets | (unaudited) | (unaudited) | |||||||||||||
| Cash and cash equivalents, including short-term investments of $800, $194 and $66 | $ | 1,469 | $ | 794 | $ | 821 | |||||||||
| Credit card receivables, held for sale | 5,647 | - | - | ||||||||||||
| Credit card receivables, net of allowance of $0, $430 and $431 | - | 5,927 | 5,713 | ||||||||||||
| Inventory | 9,533 | 7,918 | 9,890 | ||||||||||||
| Other current assets | 1,846 | 1,810 | 1,948 | ||||||||||||
| Total current assets | 18,495 | 16,449 | 18,372 | ||||||||||||
| Property and equipment | |||||||||||||||
| Land | 6,188 | 6,122 | 6,069 | ||||||||||||
| Buildings and improvements | 27,800 | 26,837 | 26,850 | ||||||||||||
| Fixtures and equipment | 5,280 | 5,141 | 5,153 | ||||||||||||
| Computer hardware and software | 2,418 | 2,468 | 2,457 | ||||||||||||
| Construction-in-progress | 1,365 | 963 | 546 | ||||||||||||
| Accumulated depreciation | (12,982 | ) | (12,382 | ) | (12,035 | ) | |||||||||
| Property and equipment, net | 30,069 | 29,149 | 29,040 | ||||||||||||
| Other noncurrent assets | 1,015 | 1,032 | 1,035 | ||||||||||||
| Total assets | $ | 49,579 | $ | 46,630 | $ | 48,447 | |||||||||
| Liabilities and shareholders' investment | |||||||||||||||
| Accounts payable | $ | 8,050 | $ | 6,857 | $ | 8,053 | |||||||||
| Accrued and other current liabilities | 3,631 | 3,644 | 3,273 | ||||||||||||
| Unsecured debt and other borrowings | 2,528 | 3,036 | 2,313 | ||||||||||||
| Nonrecourse debt collateralized by credit card receivables | 1,500 | 750 | 500 | ||||||||||||
| Total current liabilities | 15,709 | 14,287 | 14,139 | ||||||||||||
| Unsecured debt and other borrowings | 14,526 | 13,447 | 12,897 | ||||||||||||
| Nonrecourse debt collateralized by credit card receivables | - | 250 | 3,259 | ||||||||||||
| Deferred income taxes | 1,279 | 1,191 | 1,199 | ||||||||||||
| Other noncurrent liabilities | 1,713 | 1,634 | 1,689 | ||||||||||||
| Total noncurrent liabilities | 17,518 | 16,522 | 19,044 | ||||||||||||
| Shareholders' investment | |||||||||||||||
| Common stock | 55 | 56 | 56 | ||||||||||||
| Additional paid-in capital | 3,854 | 3,487 | 3,431 | ||||||||||||
| Retained earnings | 13,069 | 12,959 | 12,340 | ||||||||||||
| Accumulated other comprehensive loss | |||||||||||||||
| Pension and other benefit liabilities | (581 | ) | (624 | ) | (516 | ) | |||||||||
| Currency translation adjustment and cash flow hedges | (45 | ) | (57 | ) | (47 | ) | |||||||||
| Total shareholders' investment | 16,352 | 15,821 | 15,264 | ||||||||||||
| Total liabilities and shareholders' investment | $ | 49,579 | $ | 46,630 | $ | 48,447 | |||||||||
| Common shares outstanding | 654.5 | 669.3 | 671.4 | ||||||||||||
| TARGET CORPORATION | ||||||||||
| Consolidated Statements of Cash Flows | ||||||||||
| Nine Months Ended | ||||||||||
| October 27, | October 29, | |||||||||
| (millions) (unaudited) | 2012 | 2011 | ||||||||
| Operating activities | ||||||||||
| Net earnings | $ | 2,038 | $ | 1,948 | ||||||
| Reconciliation to cash flow | ||||||||||
| Depreciation and amortization | 1,603 | 1,568 | ||||||||
| Share-based compensation expense | 74 | 61 | ||||||||
| Deferred income taxes | 73 | 397 | ||||||||
| Bad debt expense | 141 | 67 | ||||||||
| Gain on receivables held for sale | (156 | ) | - | |||||||
| Non-cash (gains)/losses and other, net | (15 | ) | 76 | |||||||
| Changes in operating accounts: | ||||||||||
| Accounts receivable originated at Target | 97 | 120 | ||||||||
| Inventory | (1,615 | ) | (2,294 | ) | ||||||
| Other current assets | (98 | ) | (131 | ) | ||||||
| Other noncurrent assets | - | 49 | ||||||||
| Accounts payable | 1,193 | 1,428 | ||||||||
| Accrued and other current liabilities | (109 | ) | (360 | ) | ||||||
| Other noncurrent liabilities | 122 | 46 | ||||||||
| Cash flow provided by operations | 3,348 | 2,975 | ||||||||
| Investing activities | ||||||||||
| Expenditures for property and equipment | (2,338 | ) | (3,750 | ) | ||||||
| Proceeds from disposal of property and equipment | 35 | 7 | ||||||||
| Change in accounts receivable originated at third parties | 192 | 253 | ||||||||
| Other investments | 86 | (114 | ) | |||||||
| Cash flow required for investing activities | (2,025 | ) | (3,604 | ) | ||||||
| Financing activities | ||||||||||
| Change in commercial paper, net | - | 1,211 | ||||||||
| Additions to long-term debt | 1,971 | 1,000 | ||||||||
| Reductions of long-term debt | (1,024 | ) | (272 | ) | ||||||
| Dividends paid | (635 | ) | (549 | ) | ||||||
| Repurchase of stock | (1,230 | ) | (1,693 | ) | ||||||
| Stock option exercises and related tax benefit | 279 | 66 | ||||||||
| Other | (16 | ) | 1 | |||||||
| Cash flow required for financing activities | (655 | ) | (236 | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 7 | (26 | ) | |||||||
| Net increase (decrease) in cash and cash equivalents | 675 | (891 | ) | |||||||
| Cash and cash equivalents at beginning of period | 794 | 1,712 | ||||||||
| Cash and cash equivalents at end of period | $ | 1,469 | $ | 821 | ||||||
| TARGET CORPORATION | ||||||||||||||||||||||||||
| U.S. Retail Segment | ||||||||||||||||||||||||||
| U.S. Retail Segment Results | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
| October 27, | October 29, | October 27, | October 29, | |||||||||||||||||||||||
| (millions) (unaudited) | 2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||||
| Sales | $ | 16,601 | $ | 16,054 | 3.4 | % | $ | 49,589 | $ | 47,529 | 4.3 | % | ||||||||||||||
| Cost of sales | 11,569 | 11,165 | 3.6 | 34,406 | 32,874 | 4.7 | ||||||||||||||||||||
| Gross margin | 5,032 | 4,889 | 2.9 | 15,183 | 14,655 | 3.6 | ||||||||||||||||||||
| SG&A expenses(a) | 3,553 | 3,433 | 3.5 | 10,315 | 9,988 | 3.3 | ||||||||||||||||||||
| EBITDA | 1,479 | 1,456 | 1.6 | 4,868 | 4,667 | 4.3 | ||||||||||||||||||||
| Depreciation and amortization | 516 | 525 | (1.7 | ) | 1,526 | 1,527 | (0.1 | ) | ||||||||||||||||||
| EBIT | $ | 963 | $ | 931 | 3.4 | % | $ | 3,342 | $ | 3,140 | 6.4 | % | ||||||||||||||
| EBITDA is earnings before interest expense, income taxes, depreciation and amortization. |
| EBIT is earnings before interest expense and income taxes. |
| (a) Loyalty program charges were $78 million and $74 million for the three months ended October 27, 2012 and October 29, 2011, respectively, and $217 million and $189 million for the nine months ended October 27, 2012 and October 29, 2011, respectively. 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 | Nine Months Ended | |||||||||||
| October 27, | October 29, | October 27, | October 29, | ||||||||||
| (unaudited) | 2012 | 2011 | 2012 | 2011 | |||||||||
| Gross margin rate | 30.3 | % | 30.5 | % | 30.6 | % | 30.8 | % | |||||
| SG&A expense rate | 21.4 | 21.4 | 20.8 | 21.0 | |||||||||
| EBITDA margin rate | 8.9 | 9.1 | 9.8 | 9.8 | |||||||||
| Depreciation and amortization expense rate | 3.1 | 3.3 | 3.1 | 3.2 | |||||||||
| EBIT margin rate | 5.8 | 5.8 | 6.7 | 6.6 | |||||||||
| Rate analysis metrics are computed by dividing the applicable amount by sales. | |||||||||||||
| Comparable-Store Sales | Three Months Ended | Nine Months Ended | |||||||||||
| October 27, | October 29, | October 27, | October 29, | ||||||||||
| (unaudited) | 2012 | 2011 | 2012 | 2011 | |||||||||
| Comparable-store sales change | 2.9 | % | 4.3 | % | 3.7 | % | 3.4 | % | |||||
| Drivers of change in comparable-store sales: | |||||||||||||
| Number of transactions | 0.5 | 0.3 | 1.0 | 0.4 | |||||||||
| Average transaction amount | 2.4 | 4.1 | 2.7 | 3.1 | |||||||||
| Selling price per unit | 1.2 | 1.6 | 1.6 | 0.2 | |||||||||
| Units per transaction | 1.2 | 2.5 | 1.0 | 2.9 | |||||||||
|
The comparable-store sales increases or decreases above are
calculated by comparing |
|||||||||||||
| REDcard Penetration | Three Months Ended | Nine Months Ended | |||||||||||
| October 27, | October 29, | October 27, | October 29, | ||||||||||
| (unaudited) | 2012 | 2011 | 2012 | 2011 | |||||||||
| Target Credit Cards | 8.0 | % | 6.9 | % | 7.6 | % | 6.5 | % | |||||
| Target Debit Cards | 6.0 | 2.6 | 5.2 | 2.1 | |||||||||
| Total Store REDcard Penetration | 14.0 | % | 9.5 | % | 12.8 | % | 8.6 | % | |||||
| Represents the percentage of Target store sales that are paid for using REDcards. | |||||||||||||
| Number of Stores and Retail Square Feet | Number of Stores | Retail Square Feet(a) | ||||||||||||||||
| October 27, | January 28, | October 29, | October 27, | January 28, | October 29, | |||||||||||||
| (unaudited) | 2012 | 2012 | 2011 | 2012 | 2012 | 2011 | ||||||||||||
| Target general merchandise stores | 395 | 637 | 640 | 47,038 | 76,999 | 77,349 | ||||||||||||
| Expanded food assortment stores | 1,130 | 875 | 875 | 146,087 | 114,219 | 114,218 | ||||||||||||
| SuperTarget stores | 251 | 251 | 252 | 44,500 | 44,503 | 44,681 | ||||||||||||
| CityTarget stores | 5 | - | - | 514 | - | - | ||||||||||||
| Total | 1,781 | 1,763 | 1,767 | 238,139 | 235,721 | 236,248 | ||||||||||||
| (a) In thousands; reflects total square feet, less office, distribution center and vacant space. | ||||||||||||||||||
| TARGET CORPORATION | |||||||||||||||||||||||||||||
| U.S. Credit Card Segment | |||||||||||||||||||||||||||||
| U.S. Credit Card Segment Results | Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| October 27, 2012 | October 29, 2011 | October 27, 2012 | October 29, 2011 | ||||||||||||||||||||||||||
| Annualized | Annualized | Annualized | Annualized | ||||||||||||||||||||||||||
| (millions) (unaudited) | Amount | Rate(d) | Amount | Rate(d) | Amount | Rate(d) | Amount | Rate(d) | |||||||||||||||||||||
| Finance charge revenue | $ | 265 | 18.0 | % | $ | 279 | 18.1 | % | $ | 801 | 17.9 | % | $ | 849 | 18.0 | % | |||||||||||||
| Late fees and other revenue | 44 | 3.0 | 47 | 3.1 | 126 | 2.8 | 133 | 2.8 | |||||||||||||||||||||
| Third party merchant fees | 19 | 1.3 | 22 | 1.4 | 59 | 1.3 | 66 | 1.4 | |||||||||||||||||||||
| Total revenues | 328 | 22.3 | 348 | 22.5 | 986 | 22.1 | 1,048 | 22.2 | |||||||||||||||||||||
| Bad debt expense | 46 | 3.1 | 40 | 2.6 | 141 | 3.2 | 67 | 1.4 | |||||||||||||||||||||
| Operations and marketing expenses(a) | 138 | 9.4 | 143 | 9.2 | 409 | 9.2 | 405 | 8.6 | |||||||||||||||||||||
| Depreciation and amortization | 3 | 0.2 | 4 | 0.3 | 11 | 0.2 | 13 | 0.3 | |||||||||||||||||||||
| Total expenses | 187 | 12.7 | 187 | 12.1 | 561 | 12.5 | 485 | 10.3 | |||||||||||||||||||||
| EBIT | 141 | 9.6 | 161 | 10.4 | 425 | 9.5 | 563 | 11.9 | |||||||||||||||||||||
| Interest expense on nonrecourse debt | |||||||||||||||||||||||||||||
| collateralized by credit card receivables | 3 | 18 | 8 | 55 | |||||||||||||||||||||||||
| Segment profit | $ | 138 | $ | 143 | $ | 417 | $ | 508 | |||||||||||||||||||||
| Average receivables funded by Target(b) | $ | 4,393 | $ | 2,427 | $ | 4,557 | $ | 2,443 | |||||||||||||||||||||
| Segment pretax ROIC(c) | 12.5 | % | 23.6 | % | 12.2 | % | 27.7 | % | |||||||||||||||||||||
| (a) See footnote (a) to our U.S. Retail Segment Results table for an explanation of our loyalty program charges. |
|
(b) Amounts represent the portion of average credit card receivables, at par, funded by Target. These amounts exclude $1,500 million and $1,395 million for the three and nine months ended October 27, 2012, respectively, and $3,754 million and $3,843 million for the three and nine months ended October 29, 2011, respectively, 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 credit card receivables, at par, funded by Target, expressed as an annualized rate. |
|
(d) As an annualized percentage of average credit card receivables, at par. |
| Spread Analysis - Total Portfolio | Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||
| October 27, 2012 | October 29, 2011 | October 27, 2012 | October 29, 2011 | |||||||||||||||||||||||||||||||||
| Yield | Yield | Yield | Yield | |||||||||||||||||||||||||||||||||
| Amount | Annualized | Amount | Annualized | Amount | Annualized | Amount | Annualized | |||||||||||||||||||||||||||||
| (unaudited) | (in millions) | Rate | (in millions) | Rate | (in millions) | Rate | (in millions) | Rate | ||||||||||||||||||||||||||||
| EBIT | $ | 141 | 9.6 | % | (c) | $ | 161 | 10.4 | % | (c) | $ | 425 | 9.5 | % | (c) | $ | 563 | 11.9 | % | (c) | ||||||||||||||||
| LIBOR(a) | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | ||||||||||||||||||||||||||||
| Spread to LIBOR(b) | $ | 138 | 9.3 | % | (c) | $ | 158 | 10.2 | % | (c) | $ | 415 | 9.3 | % | (c) | $ | 552 | 11.7 | % | (c) | ||||||||||||||||
| Note: Annualized rates are calculated on a standalone basis. |
| (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 majority of our portfolio earns finance charge revenue at rates tied to the Prime Rate, and the interest rate on all nonrecourse debt collateralized by credit card receivables is tied to LIBOR. |
|
(c) As an annualized percentage of average credit card receivables, at par. |
| Receivables Rollforward Analysis | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 27, | October 29, | October 27, | October 29, | |||||||||||||||||||||
| (millions) (unaudited) | 2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||
| Beginning credit card receivables, at par | $ | 5,905 | $ | 6,202 | (4.8 | ) | % | $ | 6,357 | $ | 6,843 | (7.1 | ) | % | ||||||||||
| Charges at Target | 1,456 | 1,205 | 20.8 | 4,142 | 3,348 | 23.7 | ||||||||||||||||||
| Charges at third parties | 1,143 | 1,283 | (10.9 | ) | 3,488 | 3,886 | (10.2 | ) | ||||||||||||||||
| Payments | (2,902 | ) | (2,784 | ) | 4.2 | (8,837 | ) | (8,577 | ) | 3.0 | ||||||||||||||
| Other | 234 | 238 | (2.1 | ) | 686 | 644 | 6.4 | |||||||||||||||||
| Period-end credit card receivables, at par | 5,836 | (a) | 6,144 | (5.0 | ) | 5,836 | (a) | 6,144 | (5.0 | ) | ||||||||||||||
| Average credit card receivables, at par | $ | 5,893 | $ | 6,181 | (4.7 | ) | $ | 5,952 | $ | 6,287 | (5.3 | ) | ||||||||||||
| Accounts with three or more payments (60+ days) past due as a percentage | ||||||||||||||||||||||||
| of period-end credit card receivables, at par | 2.8 | % | 3.3 | % | 2.8 | % | 3.3 | % | ||||||||||||||||
| Accounts with four or more payments (90+ days) past due as a percentage | ||||||||||||||||||||||||
| of period-end credit card receivables, at par | 1.9 | % | 2.2 | % | 1.9 | % | 2.2 | % | ||||||||||||||||
| Allowance for Doubtful Accounts | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 27, | October 29, | October 27, | October 29, | |||||||||||||||||||||
| (millions) (unaudited) | 2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||
| Allowance at beginning of period | $ | 365 | $ | 480 | (23.8 | ) | % | $ | 430 | $ | 690 | (37.7 | ) | % | ||||||||||
| Bad debt expense | 46 | 40 | 15.3 | 141 | 67 | 109.8 | ||||||||||||||||||
| Write-offs(b) | (95 | ) | (122 | ) | (21.0 | ) | (326 | ) | (448 | ) | (27.1 | ) | ||||||||||||
| Recoveries(b) | 29 | 33 | (12.6 | ) | 100 | 122 | (17.6 | ) | ||||||||||||||||
| Segment allowance at end of period | 345 | (a) | 431 | (20.1 | ) | 345 | (a) | 431 | (20.1 | ) | ||||||||||||||
| As a percentage of period-end credit | ||||||||||||||||||||||||
| card receivables, at par | 5.9 | % | 7.0 | % | 5.9 | % | 7.0 | % | ||||||||||||||||
| Net write-offs as an annualized percentage of | ||||||||||||||||||||||||
| average credit card receivables, at par | 4.5 | % | 5.7 | % | 5.1 | % | 6.9 | % | ||||||||||||||||
| (a) Period-end credit card receivables, at par, less the segment allowance of $345 million, plus the gain on receivables held for sale of $156 million represents credit card receivables, held for sale as reported on the Consolidated Statements of Financial Position. |
|
(b) Write-offs include the principal amount of losses (excluding accrued and unpaid finance charges), and recoveries include current period collections on previously written-off balances. These amounts combined represent net write-offs. |
| TARGET CORPORATION | ||||||||||||||||||||||||||||
| Canadian Segment | ||||||||||||||||||||||||||||
| Canadian Segment Results | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
| October 27, | October 29, | October 27, | October 29, | |||||||||||||||||||||||||
| (millions) (unaudited) | 2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||||||
| Sales | $ | - | $ | - | - | % | $ | - | $ | - | - | % | ||||||||||||||||
| Cost of sales | - | - | - | - | - | - | ||||||||||||||||||||||
| Gross margin | - | - | - | - | - | - | ||||||||||||||||||||||
| SG&A expenses(a) | 72 | 18 | 317.4 | 154 | 53 | 188.4 | ||||||||||||||||||||||
| EBITDA | (72 | ) | (18 | ) | 317.4 | (154 | ) | (53 | ) | 188.4 | ||||||||||||||||||
| Depreciation and amortization(b) | 24 | 17 | 36.7 | 67 | 28 | 139.3 | ||||||||||||||||||||||
| EBIT | $ | (96 | ) | $ | (35 | ) | 177.2 | % | $ | (221 | ) | $ | (81 | ) | 171.5 | % | ||||||||||||
| EBITDA is earnings/(loss) before interest expense, income taxes, depreciation and amortization. | |
| EBIT is earnings/(loss) before interest expense and income taxes. | |
| (a) SG&A expenses include start-up costs consisting primarily of compensation, benefits and consulting expenses. | |
| (b) Depreciation and amortization results from depreciation of capital lease assets and leasehold interests. For the three and nine months ended October 27, 2012, the lease payment obligation also gave rise to $20 million and $58 million of interest expense, respectively, compared with $15 million and $25 million for the three and nine months ended October 29, 2011, respectively, recorded in our Consolidated Statements of Operations. | |
| TARGET CORPORATION | |||||||||||||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | |||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
| October 27, | October 29, | October 27, | October 29, | ||||||||||||||||||||||||
| (unaudited) | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||||||||
| GAAP diluted earnings per share | $ | 0.96 | $ | 0.82 | 17.6 | % | $ | 3.06 | $ | 2.84 | 7.9 | % | |||||||||||||||
| Adjustments | (0.06 | ) | 0.04 | 0.06 | 0.09 | ||||||||||||||||||||||
| Adjusted diluted earnings per share | $ | 0.90 | $ | 0.86 | 4.3 | % | $ | 3.12 | $ | 2.93 | 6.8 | % | |||||||||||||||
| A detailed reconciliation is provided below. | |||||||||||||||||||||||||||
| (millions, except per share data) (unaudited) | U.S. Retail |
U.S. |
Total U.S. | Canadian | Other |
Consolidated |
|||||||||||||||||||||
| Three Months Ended October 27, 2012 | |||||||||||||||||||||||||||
| Segment profit | $ | 963 | $ | 138 | $ | 1,100 | $ | (96 | ) | $ | - | $ | 1,005 | ||||||||||||||
| Other net interest expense(a) | 168 | 20 | - | 189 | |||||||||||||||||||||||
| Gain on receivables held for sale | - | - | (156 | ) | (156 | ) | |||||||||||||||||||||
| Earnings before income taxes | 932 | (116 | ) | 156 | 972 | ||||||||||||||||||||||
| Provision for income taxes(b) | 337 | (33 | ) | 31 | (d) | 335 | |||||||||||||||||||||
| Net earnings | $ | 595 | $ | (83 | ) | $ | 125 | $ | 637 | ||||||||||||||||||
| Diluted earnings per share(c) | $ | 0.90 | $ | (0.13 | ) | $ | 0.19 | $ | 0.96 | ||||||||||||||||||
| Three Months Ended October 29, 2011 | |||||||||||||||||||||||||||
| Segment profit | $ | 931 | $ | 143 | $ | 1,074 | $ | (35 | ) | $ | - | $ | 1,039 | ||||||||||||||
| Other net interest expense(a) | 167 | 15 | - | 182 | |||||||||||||||||||||||
| Earnings before income taxes | 907 | (50 | ) | - | 857 | ||||||||||||||||||||||
| Provision for income taxes(b) | 323 | (15 | ) | (6 | ) | (d) | 302 | ||||||||||||||||||||
| Net earnings | $ | 584 | $ | (35 | ) | $ | 6 | $ | 555 | ||||||||||||||||||
| Diluted earnings per share(c) | $ | 0.86 | $ | (0.05 | ) | $ | 0.01 | $ | 0.82 | ||||||||||||||||||
| Nine Months Ended October 27, 2012 | |||||||||||||||||||||||||||
| Segment profit | $ | 3,342 | $ | 417 | $ | 3,759 | $ | (221 | ) | $ | - | $ | 3,539 | ||||||||||||||
| Other net interest expense(a) | 491 | 58 | - | 550 | |||||||||||||||||||||||
| Gain on receivables held for sale | - | - | (156 | ) | (156 | ) | |||||||||||||||||||||
| Earnings before income taxes | 3,268 | (279 | ) | 156 | 3,145 | ||||||||||||||||||||||
| Provision for income taxes(b) | 1,187 | (80 | ) | - | (d) | 1,107 | |||||||||||||||||||||
| Net earnings | $ | 2,081 | $ | (199 | ) | $ | 156 | $ | 2,038 | ||||||||||||||||||
| Diluted earnings per share(c) | $ | 3.12 | $ | (0.30 | ) | $ | 0.23 | $ | 3.06 | ||||||||||||||||||
| Nine Months Ended October 29, 2011 | |||||||||||||||||||||||||||
| Segment profit | $ | 3,140 | $ | 508 | $ | 3,648 | $ | (81 | ) | $ | - | $ | 3,567 | ||||||||||||||
| Other net interest expense(a) | 494 | 25 | - | 519 | |||||||||||||||||||||||
| Earnings before income taxes | 3,154 | (106 | ) | - | 3,048 | ||||||||||||||||||||||
| Provision for income taxes(b) | 1,144 | (30 | ) | (15 | ) | (d) | 1,100 | ||||||||||||||||||||
| Net earnings | $ | 2,010 | $ | (76 | ) | $ | 15 | $ | 1,948 | ||||||||||||||||||
| Diluted earnings per share(c) | $ | 2.93 | $ | (0.11 | ) | $ | 0.02 | $ | 2.84 | ||||||||||||||||||
| Note: Our segment measure of profit is used by management to evaluate the return on our investment and to make operating decisions. To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share, which excludes the impact of our planned 2013 Canadian market entry, the gain on receivables held for sale and favorable resolution of various income tax matters. We believe this information is useful in providing period-to-period comparisons of the results of our U.S. operations. The sum of the non-GAAP adjustments may not equal the total adjustment amounts due to rounding. |
| (a) Represents interest expense, net of interest income, not included in U.S. Credit Card segment profit. For the three and nine months ended October 27, 2012, U.S. Credit Card segment profit included $3 million and $8 million of interest expense on nonrecourse debt collateralized by credit card receivables, compared with $18 million and $55 million in the respective prior year periods. These amounts, along with other net interest expense, equal consolidated GAAP net interest expense. |
| (b) Taxes are allocated to our business segments based on estimated income tax rates applicable to the operations of the segment for the period. |
| (c) For the three and nine months ended October 27, 2012, average diluted shares outstanding were 662.2 million and 665.8 million, respectively, and for the three and nine months ended October 29, 2011, average diluted shares outstanding were 678.3 million and 686.9 million, respectively. |
| (d) Represents the effect of the resolution of income tax matters. The results for the three and nine months ended October 27, 2012 also include a $57 million tax effect related to the gain on receivables held for sale. |