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 August 4, 2007

 

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)

 

Registrant’s 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 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

 

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 registrant’s classes of common stock, as of the latest practicable date. Total shares of Common Stock, par value $.0833, outstanding at August 29, 2007 were 846,602,115.


TARGET CORPORATION

 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements.

 

 

 

Consolidated Statements of Operations

 

 

 

Consolidated Statements of Financial Position

 

 

 

Consolidated Statements of Cash Flows

 

 

 

Consolidated Statements of Shareholders’ Investment

 

 

 

Notes to Consolidated Financial Statements

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

 

Item 4.

Controls and Procedures.

 

 

 

 

 

 

PART II

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings.

 

 

Item 1A.

Risk Factors.

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

 

Item 3.

Defaults Upon Senior Securities.

 

 

Item 4.

Submission of Matters to a Vote of Security Holders.

 

 

Item 5.

Other Information.

 

 

Item 6.

Exhibits.

 

 

 

 

 

 

Signature

 

 

 

Exhibit Index

 

 

 

 


PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Consolidated Statements of Operations

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

August 4,

 

July 29,

 

August 4,

 

July 29,

 

(unaudited) (millions, except per share data)

 

2007

 

2006

 

2007

 

2006

 

Sales

 

$

14,167

 

$

12,959

 

$

27,790

 

$

25,453

 

Net credit card revenues

 

453

 

388

 

871

 

757

 

Total revenues

 

14,620

 

13,347

 

28,661

 

26,210

 

Cost of sales

 

9,439

 

8,686

 

18,625

 

17,159

 

Selling, general and administrative expenses

 

3,328

 

2,987

 

6,421

 

5,865

 

Credit card expenses

 

182

 

170

 

351

 

330

 

Depreciation and amortization

 

404

 

370

 

796

 

704

 

Earnings before interest expense and income taxes

 

1,267

 

1,134

 

2,468

 

2,152

 

Net interest expense

 

154

 

140

 

290

 

272

 

Earnings before income taxes

 

1,113

 

994

 

2,178

 

1,880

 

Provision for income taxes

 

427

 

385

 

841

 

718

 

Net earnings

 

$

686

 

$

609

 

$

1,337

 

$

1,162

 

Basic earnings per share

 

$

0.81

 

$

0.71

 

$

1.57

 

$

1.34

 

Diluted earnings per share

 

$

0.80

 

$

0.70

 

$

1.55

 

$

1.33

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

850.8

 

860.8

 

853.4

 

865.7

 

Diluted

 

857.4

 

867.2

 

860.1

 

872.4

 

 

See accompanying Notes to Consolidated Financial Statements.

 

1



 

Consolidated Statements of Financial Position

 

 

 

August 4,

 

February 3,

 

July 29,

 

(millions)

 

2007

 

2007

 

2006

 

Assets

 

(unaudited)

 

 

 

(unaudited)

 

Cash and cash equivalents

 

$

555

 

$

813

 

$

477

 

Accounts receivable, net

 

6,397

 

6,194

 

5,540

 

Inventory

 

6,645

 

6,254

 

6,275

 

Other current assets

 

1,535

 

1,445

 

1,297

 

Total current assets

 

15,132

 

14,706

 

13,589

 

Property and equipment

 

 

 

 

 

 

 

Land

 

5,239

 

4,934

 

4,612

 

Buildings and improvements

 

16,483

 

16,110

 

14,549

 

Fixtures and equipment

 

3,516

 

3,553

 

3,223

 

Computer hardware and software

 

2,209

 

2,188

 

2,002

 

Construction-in-progress

 

2,848

 

1,596

 

2,261

 

Accumulated depreciation

 

(7,268)

 

(6,950)

 

(6,390)

 

Property and equipment, net

 

23,027

 

21,431

 

20,257

 

Other non-current assets

 

1,307

 

1,212

 

1,577

 

Total assets

 

$

39,466

 

$

37,349

 

$

35,423

 

Liabilities and shareholders’ investment

 

 

 

 

 

 

 

Accounts payable

 

$

6,101

 

$

6,575

 

$

5,868

 

Accrued and other current liabilities

 

2,761

 

3,180

 

2,535

 

Current portion of long-term debt and notes payable

 

2,160

 

1,362

 

1,257

 

Total current liabilities

 

11,022

 

11,117

 

9,660

 

Long-term debt

 

10,152

 

8,675

 

9,351

 

Deferred income taxes

 

408

 

577

 

768

 

Other non-current liabilities

 

1,930

 

1,347

 

1,271

 

Shareholders’ investment

 

 

 

 

 

 

 

Common stock

 

71

 

72

 

71

 

Additional paid-in-capital

 

2,610

 

2,387

 

2,217

 

Retained earnings

 

13,451

 

13,417

 

12,087

 

Accumulated other comprehensive loss

 

(178)

 

(243)

 

(2)

 

Total shareholders’ investment

 

15,954

 

15,633

 

14,373

 

Total liabilities and shareholders’ investment

 

$

39,466

 

$

37,349

 

$

35,423

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

847.8

 

859.8

 

857.8

 

 

See accompanying Notes to Consolidated Financial Statements.

 

2



 

Consolidated Statements of Cash Flows

 

 

 

Six Months Ended

 

 

 

August 4,

 

July 29,

 

(unaudited) (millions)

 

2007

 

2006

 

Operating activities

 

 

 

 

 

Net earnings

 

$

1,337

 

$

1,162

 

Reconciliation of net earnings to operating cash flows

 

 

 

 

 

Depreciation and amortization

 

796

 

704

 

Share-based compensation expense

 

42

 

38

 

Deferred income taxes

 

(65)

 

(112)

 

Bad debt provision

 

182

 

181

 

Loss on disposal of property and equipment, net

 

35

 

47

 

Other non-cash items affecting earnings

 

61

 

20

 

Changes in operating accounts providing / (requiring) cash

 

 

 

 

 

Accounts receivable originated at Target

 

(64)

 

17

 

Inventory

 

(391)

 

(437)

 

Other current assets

 

(125)

 

48

 

Other non-current assets

 

(12)

 

5

 

Accounts payable

 

(475)

 

(400)

 

Accrued and other current liabilities

 

(161)

 

(115)

 

Other non-current liabilities

 

43

 

-

 

Other

 

-

 

11

 

Cash flow provided by operations

 

1,203

 

1,169

 

Investing activities

 

 

 

 

 

Expenditures for property and equipment

 

(2,363)

 

(1,899)

 

Proceeds from disposal of property and equipment

 

16

 

15

 

Change in accounts receivable originated at third parties

 

(321)

 

(73)

 

Other investments

 

(69)

 

(111)

 

Cash flow required for investing activities

 

(2,737)

 

(2,068)

 

Financing activities

 

 

 

 

 

Increase in notes payable, net

 

1,586

 

748

 

Additions to long-term debt

 

1,900

 

750

 

Reductions of long-term debt

 

(1,253)

 

(750)

 

Dividends paid

 

(205)

 

(174)

 

Repurchase of stock

 

(940)

 

(900)

 

Stock option exercises and related tax benefit

 

195

 

58

 

Other

 

(7)

 

(4)

 

Cash flow provided by / (required for) financing activities

 

1,276

 

(272)

 

Net decrease in cash and cash equivalents

 

(258)

 

(1,171)

 

Cash and cash equivalents at beginning of period

 

813

 

1,648

 

Cash and cash equivalents at end of period

 

$

555

 

$

477

 

 

Amounts presented herein are on a cash basis and therefore may differ from those shown in other sections of this Form 10-Q. Consistent with the provisions of Statement of Financial Accounting Standards (SFAS) No. 95, “Statement of Cash Flows,” cash flows related to accounts receivable are classified as either an operating activity or an investing activity, depending on their origin.

 

See accompanying Notes to Consolidated Financial Statements.

 

3



 

Consolidated Statements of Shareholders’ Investment

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Common

 

Stock

 

Additional

 

 

 

Other

 

 

 

 

 

Stock

 

Par

 

Paid-in

 

Retained

 

Comprehensive

 

 

 

(millions, except per share data)

 

Shares

 

Value

 

Capital

 

Earnings

 

Income / (Loss)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 28, 2006

 

874.1

 

$

73

 

$

2,121

 

$

12,013

 

$

(2)

 

$

14,205

 

Net earnings

 

-

 

-

 

-

 

2,787

 

-

 

2,787

 

Other comprehensive loss,

 

 

 

 

 

 

 

 

 

 

 

 

 

net of taxes of $5

 

-

 

-

 

-

 

-

 

(7)

 

(7)

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

2,780

 

Cumulative effect of adopting

 

 

 

 

 

 

 

 

 

 

 

 

 

SFAS 158, net of taxes of $152

 

-

 

-

 

-

 

-

 

(234)

 

(234)

 

Dividends declared

 

-

 

-

 

-

 

(396)

 

-

 

(396)

 

Repurchase of stock

 

(19.5)

 

(2)

 

-

 

(987)

 

-

 

(989)

 

Stock options and awards

 

5.2

 

1

 

266

 

-

 

-

 

267

 

February 3, 2007

 

859.8

 

72

 

2,387

 

13,417

 

(243)

 

15,633

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

-

 

-

 

-

 

1,337

 

-

 

1,337

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of pension and
post-retirement plan amounts,
net of taxes of $7

 

-

 

-

 

-

 

-

 

11

 

11

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

1,348

 

Cumulative effect of adopting new
accounting pronouncements

 

-

 

-

 

-

 

(31)

 

54

 

23

 

Dividends declared

 

-

 

-

 

-

 

(221)

 

-

 

(221)

 

Repurchase of stock

 

(16.7)

 

(1)

 

-

 

(1,051)

 

-

 

(1,052)

 

Stock options and awards

 

4.7

 

-

 

223

 

-

 

-

 

223

 

August 4, 2007

 

847.8

 

$

71

 

$

2,610

 

$

13,451

 

$

(178)

 

$

15,954

 

 

Dividends declared per share were $.14 and $.12 for the three months ended August 4, 2007 and July 29, 2006, respectively, and $.26 and $.22 for the six months ended August 4, 2007 and July 29, 2006, respectively. For the fiscal year ended February 3, 2007, dividends declared per share were $.46.

 

See accompanying Notes to Consolidated Financial Statements.

 

4



 

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 our 2006 Form 10-K. The same accounting policies are followed in preparing quarterly financial data as are followed in preparing annual data. In the opinion of management, all adjustments necessary for a fair statement 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.

 

We operate as a single business segment.

 

2. New Accounting Pronouncements

 

Current adoptions

 

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS 158). SFAS 158 requires sponsors of defined benefit pension and other postretirement benefit plans (collectively postretirement benefit plans) to recognize the funded status of their postretirement benefit plans in the statement of financial position, measure the fair value of plan assets and benefit obligations as of the date of the fiscal year-end statement of financial position and provide additional disclosures. We adopted the recognition and disclosure provisions of SFAS 158 during 2006. We adopted the SFAS 158 measurement date provision at the beginning of the first quarter of 2007, and the details of our adoption of this provision are described in Note 10.

 

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (FIN 48). FIN 48 prescribes the financial statement recognition and measurement criteria for tax positions taken in a tax return, clarifies when tax benefits should be recorded and how they should be classified in financial statements and requires certain disclosures of uncertain tax matters. We adopted the provisions of FIN 48 at the beginning of the first quarter of 2007, and the details of our adoption of FIN 48 are described in Note 8.

 

At the beginning of the first quarter of 2007, we adopted the FASB’s Emerging Issues Task Force Issue No. 06-5, “Accounting for Purchases of Life Insurance–Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance” and recorded a $4 million increase to other non-current assets, with a corresponding increase to retained earnings of $4 million.

 

Future adoptions

 

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (SFAS 157). SFAS 157 defines fair value, provides guidance for measuring fair value in U.S. generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 will be effective at the beginning of fiscal 2008. The adoption of this statement is not expected to have a material impact on our consolidated net earnings, cash flows or financial position.

 

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 will be effective at the beginning of fiscal 2008. The adoption of this statement is not expected to have a material impact on our consolidated net earnings, cash flows or financial position.

 

5



 

3. Cost of Sales and Selling, General and Administrative Expenses

 

The following table illustrates the primary costs classified in each major expense category:

 

Cost of Sales

 

Selling, General and Administrative Expenses

Total cost of products sold including:

•     Freight expenses associated with moving merchandise from our vendors to our distribution centers and our retail stores, and among our distribution and retail facilities

•     Vendor income that is not reimbursement of specific, incremental and identifiable costs

Inventory shrink

Markdowns

Shipping and handling expenses

Terms cash discount

 

Compensation and benefit costs including:

•     Stores

•     Headquarters, including buying and merchandising

•     Distribution operations

Occupancy and operating costs of retail, distribution and

headquarters facilities

Advertising, offset by vendor income that is a reimbursement

of specific, incremental and identifiable costs

Pre-opening costs of stores and other facilities

Other administrative costs

The classification of these expenses varies across the retail industry.

 

Compensation, benefits and other expenses for buying, merchandising and distribution operations classified in selling, general and administrative expenses were approximately $338 million and $307 million for the three months ended August 4, 2007 and July 29, 2006, respectively, and approximately $641 million and $602 million for the six months ended August 4, 2007 and July 29, 2006, respectively.

 

4. Earnings per Share

 

Basic earnings per share (EPS) is net earnings divided by the weighted average number of common shares outstanding during the period. Diluted EPS includes 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.

 

 

 

Basic EPS

 

Diluted EPS

 

 

 

Three Months Ended

 

Six Months Ended

 

Three Months Ended

 

Six Months Ended

 

 

 

Aug. 4,

 

July 29,

 

Aug. 4,

 

July 29,

 

Aug. 4,

 

July 29,

 

Aug. 4,

 

July 29,

 

(millions, except per share data)

 

2007

 

2006

 

2007

 

2006

 

2007

 

2006

 

2007

 

2006

 

Net earnings

 

$

686

 

$

609

 

$

1,337

 

$

1,162

 

$

686

 

$

609

 

$

1,337

 

$

1,162

 

Basic weighted average common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares oustanding

 

850.8

 

860.8

 

853.4

 

865.7

 

850.8

 

860.8

 

853.4

 

865.7

 

Incremental stock options,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

performance share units and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

restricted stock units

 

-

 

-

 

-

 

-

 

6.6

 

6.4

 

6.7

 

6.7

 

Weighted average common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares oustanding

 

850.8

 

860.8

 

853.4

 

865.7

 

857.4

 

867.2

 

860.1

 

872.4

 

Earnings per share

 

$

0.81

 

$

0.71

 

$

1.57

 

$

1.34

 

$

0.80

 

$

0.70

 

$

1.55

 

$

1.33

 

 

For the August 4, 2007 and July 29, 2006 computations, 4.2 and 7.3 million stock options, respectively, were excluded from the calculation of weighted average shares for diluted EPS because their effects were antidilutive.

 

5. Accounts Receivable

 

Accounts receivable are recorded net of an allowance for expected losses. The allowance, recognized in an amount equal to anticipated future write-offs of principal and accrued finance charges, was $509 million at August 4, 2007, $517 million at February 3, 2007 and $501 million at July 29, 2006.  We estimate future write-offs based on delinquencies, risk scores, aging trends, industry risk trends and our historical experience.  Substantially all accounts continue to accrue finance charges until they are written off.  Total accounts receivable past due ninety days or more and still accruing finance charges were $159 million at August 4, 2007, $160 million at February 3, 2007 and $134 million at July 29, 2006. Accounts are written off when they become 180 days past due.

 

6. Contingencies

 

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 will have a material adverse impact on our results of operations, cash flows or financial condition.

 

6



 

7. Debt and Derivative Financial Instruments
 

We obtain short-term financing throughout the year under our commercial paper program, a form of notes payable. At August 4, 2007, notes payable under this program totaled $1,586 million, and this amount is included in our current portion of long-term debt and notes payable on the Consolidated Statement of Financial Position. At July 29, 2006, notes payable outstanding under this program totaled $748 million and are included in long-term debt on the Consolidated Statement of Financial Position. There were no amounts outstanding under our commercial paper program at February 3, 2007.

 

In June 2007 we, through Target Receivables Corporation (TRC), repaid $750 million of debt that was backed by credit card receivables held in the Target Credit Card Master Trust.

 

In June 2007 we entered into an interest rate swap with a notional amount of $250 million, under which we pay a variable rate over time in exchange for receiving a fixed rate. This swap has been designated as a fair value hedge.

 

Our derivative instruments are primarily interest rate swaps that hedge the fair value of certain debt by effectively converting interest from a fixed rate to a floating rate. These instruments qualify for hedge accounting, and the associated assets and liabilities are recorded in the Consolidated Statements of Financial Position. The changes in market value of an interest rate swap, as well as the offsetting change in market value of the hedged debt, are recognized within earnings in the current period. Ineffectiveness would result when changes in the market value of the hedged debt are not completely offset by changes in the market value of the interest rate swap. There was no ineffectiveness recognized related to these instruments during the six months ended August 4, 2007 and July 29, 2006. At August 4, 2007, February 3, 2007 and July 29, 2006, interest rate swaps were outstanding in notional amounts totaling $4.6 billion, $3.7 billion and $3.7 billion, respectively. The market value of outstanding interest rate swaps and net unamortized gains (losses) from terminated interest rate swaps was $3 million, $(7) million and $(41) million at August 4, 2007, February 3, 2007 and July 29, 2006, respectively.

 

See further discussion of debt instruments in Note 11.

 

8. Income Taxes

 

We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 1998.

 

We adopted the provisions of FIN 48 on February 4, 2007. As a result of the adoption of FIN 48, we recorded a $19 million decrease to retained earnings. As of February 4, 2007, total unrecognized tax benefits were $379 million, and accrued penalties and interest totaled $98 million. If the company were to prevail on all unrecognized tax benefits recorded, approximately $204 million of the $379 million reserve would benefit the effective tax rate with the remaining $175 million representing temporary differences or amounts for which offsetting benefits are available in a different taxing jurisdiction. In addition, the impact of penalties and interest would also benefit the effective tax rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense.

 

On a quarterly and annual basis, we accrue for the effects of open uncertain tax positions and the related potential penalties and interest. There were no material adjustments to our recorded liability for unrecognized tax benefits during the six months ended August 4, 2007, other than those made in connection with the adoption of FIN 48 that are described above.

 

It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will increase or decrease during the next 12 months; however, we do not expect the change to have a significant effect on our results of operations or our financial position.

 

9. Share Repurchase

 

During the quarter ended August 4, 2007, we repurchased 7.5 million shares of our common stock, for a total cash investment of $476 million ($63.23 per share), and during the first half of 2007, we repurchased 16.7 million shares of our common stock, for a total cash investment of $1,025 million ($61.34 per share). Since the inception of our share repurchase program that began in 2004, we

 

7



 

have repurchased 87.8 million shares of our common stock, for a total cash investment of $4,475 million ($50.99 per share). In addition, at August 4, 2007, we held long positions in prepaid forward contracts for 2.1 million shares of our common stock, for a total cash investment of $100 million, or $48.25 per share. In June 2007, our Board of Directors increased the aggregate authorization by $3 billion, for a total authorization of $8 billion. We expect to continue to execute our share repurchase program primarily in open market transactions, subject to market conditions, and to complete the total program by year-end 2010, or sooner.

 

10. Pension, Postretirement Health Care and Other Benefits

 

We have qualified defined benefit pension plans covering all U.S. employees who meet age and service requirements. We also have unfunded nonqualified pension plans for team members with qualified plan compensation restrictions. Benefits are provided based on years of service and team member compensation. Upon retirement, 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.

 

As described in Note 2, we adopted the SFAS 158 measurement date provision in the first quarter 2007. As a result, we recorded a $16 million decrease to retained earnings, a $54 million increase to accumulated other comprehensive income, a $65 million increase to other non-current assets, a $3 million increase to other non-current liabilities and a $24 million decrease to deferred income taxes.

 

Net pension expense and postretirement health care expense consisted of the following:

 

 

 

Pension Benefits

 

Postretirement Health Care Benefits

 

 

 

Three Months Ended

 

Six Months Ended

 

Three Months Ended

 

Six Months Ended

 

 

 

Aug. 4,

 

July 29,

 

Aug. 4,

 

July 29,

 

Aug. 4,

 

July 29,

 

Aug. 4,

 

July 29,

 

(millions)

 

2007

 

2006

 

2007

 

2006

 

2007

 

2006

 

2007

 

2006

 

Service cost of benefits earned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

$

24

 

$

21

 

$

49

 

$

42

 

$

1

 

$

1

 

$

2

 

$

2

 

Interest cost on projected

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

benefit obligation

 

26

 

23

 

52

 

46

 

2

 

1

 

4

 

3

 

Expected return on assets

 

(38)

 

(35)

 

(76)

 

(70)

 

-

 

-

 

-

 

-

 

Recognized losses

 

9

 

12

 

19

 

24

 

-

 

-

 

-

 

-

 

Recognized prior service cost

 

(1)

 

(2)

 

(2)

 

(3)

 

-

 

-

 

-

 

-

 

Total

 

$

20

 

$

19

 

$

42

 

$

39

 

$

3

 

$

2

 

$

6

 

$

5

 

 

We also maintain nonqualified, unfunded deferred compensation plans for approximately 4,800 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 who are not executive officers, 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 15 current and 49 retired participants. 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 plan’s terms.

 

We control some of our risk of offering the nonqualified plans through investing in vehicles, including 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 of contracts indexed to our own common stock recorded in earnings as a pre-tax gain/(loss) was $15 million and $(19) million for the three months ended August 4, 2007 and July 29, 2006, respectively, and a pre-tax gain/(loss) of $6 million and $(21) million for the six months ended August 4, 2007 and July 29, 2006, respectively. For the six months ended August 4, 2007 and July 29, 2006, we invested approximately $63 million and $111 million, respectively, in prepaid forward contracts in our own common stock, and these investments are included in the Consolidated Statement of Cash Flows within other investing activities. The counterparty to the contracts indexed to our own stock has the discretion to deliver Target common stock or cash to us at the settlement dates. As a result, adjusting our position in these investment vehicles sometimes includes repurchasing shares of Target common stock when settling the forward contracts.

 

8



 

11. Subsequent Events

 

On August 7, 2007 we issued $500 million of floating rate debt that matures in 2009. The floating rate is 3-month LIBOR plus 0.125%, reset quarterly, with an initial interest rate of 5.485%. The proceeds from this issuance will be used for general corporate purposes.

 

On August 10, 2007 we, through TRC, borrowed an additional $1 billion through our Variable Funding Certificate (Certificate), which is backed by credit card receivables, for a total outstanding balance of $2 billion. The Certificate has a floating interest rate that resets daily, with an initial rate of 5.42%. The additional $1 billion is a seasonal borrowing that will mature within one year.

 

9



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Analysis of Results of Operations

 

Net earnings for the three and six months ended August 4, 2007 were $686 million, or $.80 per share, and $1,337 million, or $1.55 per share, respectively, compared to $609 million, or $.70 per share, and $1,162 million, or $1.33 per share, for the same periods last year. All earnings per share figures refer to diluted earnings per share.

 

Revenues and Comparable-Store Sales

 

Sales include merchandise sales, net of expected returns, from our stores and our on-line business, as well as gift card breakage. Total revenues include sales and net credit card revenues. Total revenues do not include sales tax as we consider ourselves a pass-through conduit for collecting and remitting sales taxes. Comparable-store sales are sales from our on-line 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

                          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 increases or decreases are calculated by comparing sales in current year periods to comparable prior fiscal-year periods of equivalent length. The method of calculating comparable-store sales varies across the retail industry.

 

Total revenues for the quarter were $14,620 million, compared to $13,347 million for the same period a year ago, an increase of 9.5 percent. For the six month period ending August 4, 2007, total revenues were $28,661 million, compared to $26,210 million for the same period a year ago, an increase of 9.4 percent. Total revenue growth was attributable to a 4.9 percent and 4.6 percent comparable-store sales increase for the quarter and year-to-date periods, respectively, growth in net credit card revenues, as well as the opening of new stores.

 

Gross Margin Rate

 

Gross margin rate represents gross margin (sales less cost of sales) as a percentage of sales. See Note 3 for a description of expenses included in cost of sales. In the second quarter of 2007, our gross margin rate was 33.4 percent compared to 33.0 percent in the same period last year. For the six months ended August 4, 2007, our gross margin rate was 33.0 percent compared to 32.6 percent in the same period last year. Within our gross margin rate for the second quarter and year-to-date, we experienced an improvement in markdowns, which were partially offset by a decrease in markup and unfavorable stock shortage experience. Additionally, our second quarter and year-to-date 2007 gross margin rates compared to the second quarter and year-to-date 2006 rate benefited from two minor accounting adjustments, which together had an approximate 0.2 percent favorable impact on the rate and no effect on earnings before interest and taxes (EBIT) or net income. Markup is the difference between an item’s 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 the cost of raw materials and freight, and competitive influences. Markdowns are the reduction in the original or previous price of retail merchandise. Factors that affect markdowns include inventory management and competitive influences. The definition and method of calculating markup, markdowns and gross margin varies across the retail industry.

 

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 for a description of expenses included in SG&A. SG&A expenses exclude depreciation and amortization, and SG&A expenses also exclude expenses associated with our credit card operations, which are reflected separately in our Consolidated Statements of Operations. In the second quarter of 2007, our SG&A expense rate was 23.5 percent compared to 23.0 percent in the same period last year. This increase is primarily due to higher payroll and benefits costs on a rate basis, increased pre-opening expenses due to key capital projects and higher utilities expense. The increase was offset somewhat by favorability in marketing expenses and store remodel expense. Additionally, our second quarter 2007 expense rate increased due to two minor accounting adjustments, which together had an approximate 0.2 percent negative impact on the rate and no effect on EBIT or net income. For the six months ended August 4, 2007, our SG&A rate was 23.1 percent compared to 23.0 percent in the same period last year. This increase is primarily due to the impact of the accounting adjustments described above and increased expenses due to key capital projects. The increase in expense is offset somewhat by favorability in marketing expenses.

 

10



 

Other Performance Factors

 

During the first half of 2006, we adjusted the period over which we amortize leasehold acquisition costs to match the expected terms for individual leases, resulting in a $28 million cumulative benefit to depreciation expense in the first half of 2006.

 

In the second quarter and first half of 2007, net interest expense was $154 million and $290 million, respectively, a $14 million and $18 million increase from the second quarter and first half of 2006, primarily due to higher average debt balances, including the debt to fund growth in our accounts receivable.

 

Our effective income tax rate for the second quarter of 2007 was 38.4 percent compared to 38.8 percent for the second quarter of 2006. This decrease was primarily due to the favorable impact that higher capital market returns had on certain book to tax differences in the second quarter of 2007 compared to the second quarter of 2006. The year-to-date effective tax rate has increased to 38.6 percent in 2007 from 38.2 percent in 2006, primarily due to minor state income tax matters.

 

Credit Card Contribution

 

We offer credit to qualified guests through our REDcard products, the Target Visa and the Target Card. Our credit card program strategically supports our core retail operations and remains an important contributor to our overall profitability. Our credit card revenues are comprised of finance charges, late fees and other revenues. In addition, we receive fees from merchants who accept the Target Visa credit card. Effective February 2007, we redefined Credit Card Contribution to Earnings Before Taxes (EBT) to exclude intra-company merchant fees and include the effect of new account and loyalty rewards discounts as expenses of our credit card programs. We have reclassified prior period amounts to conform to the current year disclosure. These changes were made to better facilitate comparison of our credit card results to the performance of other bank card portfolios and to better facilitate comparison of our core retail operations to other retailers who have sold their credit card portfolios to third parties. These reclassifications had no effect on our Consolidated Statements of Operations.

 

Credit Card Contribution to EBT

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

Aug. 4,

 

July 29,

 

Aug. 4,

 

July 29,

 

(millions)

 

2007

 

2006

 

2007

 

2006

 

Revenues

 

 

 

 

 

 

 

 

 

Finance charges

 

$

305

 

$

273

 

$

601

 

$

532

 

Interest expense

 

(80)

 

(68)

 

(157)

 

(131)

 

Net interest income

 

225

 

205

 

444

 

401

 

Late fees and other revenues

 

109

 

80

 

197

 

160

 

Third-party merchant fees

 

39

 

35

 

73

 

65

 

New account and loyalty rewards discounts (a)

 

(25)

 

(25)

 

(49)

 

(49)

 

Non-interest income

 

123

 

90

 

221

 

176

 

Credit card revenues

 

348

 

295

 

665

 

577

 

Expenses

 

 

 

 

 

 

 

 

 

Bad debt provision

 

95

 

93

 

182

 

181

 

Operations and marketing

 

87

 

77

 

169

 

149

 

Allocated depreciation charge (b)

 

3

 

3

 

8

 

7

 

Total expenses

 

185

 

173

 

359

 

337

 

Credit card contribution to EBT

 

$

163

 

$

122

 

$

306

 

$

240

 

As a percentage of average receivables (annualized)

 

9.7%

 

8.2%

 

9.2%

 

8.1%

 

Net interest margin (annualized) (c)

 

13.4%

 

13.9%

 

13.3%

 

13.5%

 

 

(a)

Primarily consists of new account and loyalty rewards program discounts on our REDcard products, which are included as reductions of sales in our Consolidated Statements of Operations.

 

 

(b)

Included in depreciation and amortization in our Consolidated Statements of Operations.

 

 

(c)

Net interest income divided by average accounts receivable.

 

11



 

Receivables

 

Three Months Ended

 

Six Months Ended

 

 

 

Aug. 4,

 

July 29,

 

Aug. 4,

 

July 29,

 

(millions)

 

2007

 

2006

 

2007

 

2006

 

Period-end receivables

 

$

6,906

 

$

6,041

 

 

 

 

 

Average receivables

 

$

6,718

 

$

5,936

 

$

6,670

 

$

5,945

 

Accounts with three or more payments (60+ days) past due as a percentage of period-end receivables

 

3.5%

 

3.4%

 

 

 

 

 

Accounts with four or more payments (90+ days) past due as a percentage of period-end receivables

 

2.3%

 

2.2%

 

 

 

 

 

 

Allowance for Doubtful Accounts

 

Three Months Ended

 

Six Months Ended

 

 

 

Aug. 4,

 

July 29,

 

Aug. 4,

 

July 29,

 

(millions)

 

2007

 

2006

 

2007

 

2006

 

Allowance at beginning of period

 

$

504

 

$

476

 

$

517

 

$

451

 

Bad debt provision

 

95

 

93

 

182

 

181

 

Net write-offs

 

(90)

 

(68)

 

(190)

 

(131)

 

Allowance at end of period

 

$

509

 

$

501

 

$

509

 

$

501

 

As a percentage of period-end receivables

 

7.4%

 

8.3%

 

7.4%

 

8.3%

 

Net write-offs as a percentage of average receivables (annualized)

 

5.4%

 

4.6%

 

5.7%

 

4.4%

 

 

Our credit card operations are allocated a portion of consolidated interest expense based on estimated funding costs for average net accounts receivable and other financial services assets. Our allocation methodology assumes that 90 percent of the sum of average net receivables and other financial services assets are debt-financed with a mix of fixed rate and variable rate debt in proportion to the mix of fixed and variable rate financial services assets. The majority of our credit card portfolio earns interest at variable rates; thus, the majority of the interest allocation to the credit card business is at rates that are determined based upon our approximate marginal variable rate cost of borrowed funds.

 

In the second quarter and first half of 2007, our credit card revenues increased primarily due to a 13.2 percent and 12.2 percent increase, respectively, in average receivables. Late fees and other revenue of $109 million and $197 million for the quarter and six months ended, respectively, benefited from a change in terms for the Target Card portfolio. In the second quarter and first half of 2007, our credit card contribution to EBT was $163 million and $306 million, respectively, a 34.0 percent and 27.4 percent increase over the same periods last year.

 

Analysis of Financial Condition

 

Liquidity and Capital Resources

 

Our financial condition remains strong. In assessing our financial condition, we consider factors such as cash flows provided by operations, capital expenditures and debt service obligations. We continue to fund our growth and execute our share repurchase program through a combination of internally-generated funds and debt financing, including notes payable under our commercial paper program.

 

Gross receivables at quarter end were $6,906 million compared to $6,041 million at the end of the second quarter 2006, an increase of 14.3 percent. This growth was driven by increased issuance and usage of the Target Visa credit card. Inventory in the second quarter of 2007 increased $370 million, or 5.9 percent, from the same period in the prior year, reflecting the natural increase required to support additional square footage and comparable-store sales growth. The majority of the growth in inventory was funded by an increase in accounts payable over the same period.

 

Capital expenditures for the six months ended August 4, 2007 were $2,363 million, compared to $1,899 million for the same period a year ago. This increase is primarily attributable to investments in new stores.

 

In June 2007 we entered into an interest rate swap with a notional amount of $250 million, under which we pay a variable rate over time in exchange for receiving a fixed rate. This swap has been designated as a fair value hedge.

 

In June 2007 we, through TRC, repaid $750 million of debt that was backed by credit card receivables held in the Target Credit Card Master Trust.

 

12



 

As disclosed in Note 11, on August 7, 2007 we issued $500 million of floating rate debt that matures in 2009. The floating rate is 3-month LIBOR plus 0.125%, reset quarterly, with an initial interest rate of 5.485%. The proceeds from this issuance will be used for general corporate purposes.

 

As disclosed in Note 11, on August 10, 2007 we, through TRC, borrowed an additional $1 billion through our Variable Funding Certificate (Certificate), which is backed by credit card receivables, for a total outstanding balance of $2 billion. The Certificate has a floating interest rate that resets daily, with an initial rate of 5.42%. The additional $1 billion is a seasonal borrowing that will mature within one year.

 

As disclosed in Note 8, we have recorded liabilities associated with uncertain tax positions of $477 million, including interest and penalties, at February 4, 2007. This liability will result in cash payments to tax authorities; however, we are not able to make reasonably reliable estimates of the period or amounts of cash settlements.  For this reason, we have not included this liability in a table of contractual obligations and have not updated the table that was presented in our 2006 Form 10-K.

 

Store Data

 

During the quarter, we opened 42 new stores. Net of relocations and closings, these openings included 27 general merchandise stores and ten SuperTarget stores. At August 4, 2007, February 3, 2007 and July 29, 2006, our number of stores and retail square feet were as follows:

 

 

 

Number of Stores

 

Retail Square Feet*

 

 

 

Aug. 4,

 

February 3,

 

July 29,

 

Aug. 4,

 

February 3,

 

July 29,

 

 

 

2007

 

2007

 

2006

 

2007

 

2007

 

2006

 

Target general merchandise stores

 

1,345

 

1,311

 

1,282

 

165,672

 

160,806

 

156,036

 

SuperTarget stores

 

192

 

177

 

162

 

33,890

 

31,258

 

28,641

 

Total

 

1,537

 

1,488

 

1,444

 

199,562

 

192,064

 

184,677

 

 

* In thousands, reflects total square feet, less office, distribution center and vacant space.

 

Outlook for Fiscal Year 2007

 

For the fiscal year 2007, a 52-week year following a 53-week year, we believe that Target will deliver a low double-digit percent increase in earnings per share, reflecting contributions from both our core retail and our credit card operations. Consistent with our belief that earnings per share in the first half of the year will be stronger than the second half of the year, we believe earnings per share for the second half of the year are more likely to grow by a single digit percentage. As a result, we believe that the prospects of earning slightly more than $3.60 for 2007 full year earnings per share are roughly equal to the prospects of earning slightly less than $3.60 earnings per share.

 

Additionally, for the full year, we expect to deliver a high single-digit percent increase in revenues, reflecting continued new store expansion, a mid-single-digit percent increase in comparable-store sales, and the contribution of continued growth in our credit card revenues. We also expect to deliver a high single-digit percent increase in EBIT, resulting in stable EBIT margin. For the full year, both our consolidated gross margin rate and our SG&A expense rate are expected to be in line with our 2006 percentages. In light of our year-to-date expansion in gross margin rate, we expect a moderate reduction of gross margin rate in the second half of the year. We expect our effective tax rate to rise modestly from our 2006 rate of 38.0 percent.

 

13



 

Forward-Looking Statements

 

This report contains forward-looking statements regarding our performance, financial position, liquidity and adequacy of capital resources. Forward-looking statements are typically accompanied by the words “expect,” “may,” “could,” “believe,” “would,” “might,” “anticipates,” or words of similar import. The forward-looking statements in this report include the anticipated impact of new and proposed accounting pronouncements, the expected outcome of pending and threatened litigation, the expected resolution of tax uncertainties, our expectations with respect to our share repurchase program and our outlook in fiscal 2007. Forward-looking statements are based on our current assumptions and expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. We caution that the forward-looking statements are qualified by the risks and challenges posed by increased competition (including the effects of competitor liquidation activities), shifting consumer demand, changing consumer credit markets, changing wages, health care and other benefit costs, shifting capital markets and general economic conditions, hiring and retaining effective team members, sourcing merchandise from domestic and international vendors, investing in new business strategies, the outbreak of war or pandemics and other significant national and international events, and other risks and uncertainties. As a result, although we believe there is a reasonable basis for the forward-looking statements, you should not place undue reliance on those statements. You are encouraged to review Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended February 3, 2007, which contains additional important factors that may cause actual results to differ materially from those predicted in the forward-looking statements.

 

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 February 3, 2007.

 

Item 4. 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 SEC’s 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.

 

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.

 

14



 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings .

 

For a description of legal proceedings see Note 6.

 

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.

 

Item 1A. Risk Factors.

 

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended February 3, 2007.

 

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 quarter ended August 4, 2007, by Target or any “affiliated purchaser” of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.

 

 

 

 

 

 

 

Total Number

 

Approximate

 

 

 

 

 

 

 

of Shares

 

Dollar Value of

 

 

 

 

 

 

 

Purchased as

 

Shares that

 

 

 

Total

 

 

 

Part of

 

May Yet Be

 

 

 

Number

 

Average

 

Publicly

 

Purchased

 

 

 

of Shares

 

Price Paid

 

Announced

 

Under the

 

Period

 

Purchased (b)(c)

 

per Share (b)

 

Program (a)(b)(c)

 

Program (a)

 

May 6, 2007 through June 2, 2007

 

 

$

 

80,230,606

 

$

1,001,087,287

 

June 3, 2007 through July 7, 2007

 

470,125

 

$

39.72

 

80,700,731

 

$

3,982,412,051

 

July 8, 2007 through Aug. 4, 2007

 

7,052,747

 

$

64.79

 

87,753,478

 

$

3,525,446,538

 

Total

 

7,522,872

 

$

63.23

 

87,753,478

 

$

3,525,446,538

 

 

(a)  In June 2004, our Board of Directors authorized the repurchase of $3 billion of our common stock. In November 2005, our Board of Directors increased the aggregate authorization by $2 billion, and in June 2007, our Board of Directors increased the aggregate authorization by an additional $3 billion, for a total authorization of $8 billion. We expect to continue to execute this share repurchase program primarily in open market transactions, subject to market conditions. We expect to complete the total program by fiscal year-end 2010 or sooner. Since the inception of this share repurchase program, we have repurchased a total of 87.8 million shares of our common stock for a total cash investment of $4,475 million ($50.99 per share).

 

(b)  In addition to shares purchased under our share repurchase program, we acquire shares of common stock held by team members who wish to tender owned shares to satisfy the exercise price on stock option exercises or tax withholding on equity awards as part of our long-term incentive plans. For the quarter ended August 4, 2007, 5,789 shares were acquired at an average price of $69.10 pursuant to our long-term incentive plans.

 

(c)  Includes shares reacquired upon settlement of prepaid forward contracts. For the quarter ended August 4, 2007, 1.7 million shares were reacquired through these contracts. At August 4, 2007, we held long positions in prepaid forward contracts for 2.1 million shares of our common stock, for a total cash investment of $100 million, or $48.25 per share.

 

Item 3. Defaults Upon Senior Securities.

 

Not applicable.

 

15



 

Item 4. Submission of Matters to a Vote of Security Holders.

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

Item 6. Exhibits.

 

(3)A.

Restated Articles of Incorporation (as amended May 24, 2007) (1)

 

 

(3)B.

By-laws (as amended through November 11, 1998) (2)

 

 

(4)A.

Instruments defining the rights of security holders, including indentures. Registrant agrees to furnish the Commission on request copies of instruments with respect to long-term debt.

 

 

(12).

Statements of Computations of Ratios of Earnings to Fixed Charges

 

 

(31)A.

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

(31)B.

Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

(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

 

 

(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


(1)

Incorporated by reference to Exhibit (3)A to the Registrant’s Form 8-K Report filed May 25, 2007

 

 

(2)

Incorporated by reference to Exhibit (3)(ii) to the Registrant’s Form 10-Q for the quarter ended October 31, 1998

 

16



 

Signature

 

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.

 

 

TARGET CORPORATION

 

 

 

 

 

 

Dated:  August 31, 2007

By:

 /s/ Douglas A. Scovanner

 

 

 

Douglas A. Scovanner

 

 

Executive Vice President,

 

 

Chief Financial Officer

 

 

and Chief Accounting Officer

 

17



 

EXHIBIT INDEX

 

Exhibit

 

Description

 

Manner of Filing

 

 

 

 

 

(3)A.

 

Restated Articles of Incorporation (as amended May 24, 2007)

 

Incorporated by Reference

 

 

 

 

 

(3)B.

 

By-Laws (as amended through November 11, 1998)

 

Incorporated by Reference

 

 

 

 

 

(12).

 

Statements of Computations of Ratios of Earnings to Fixed Charges

 

Filed Electronically

 

 

 

 

 

(31)A.

 

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

Filed Electronically

 

 

 

 

 

(31)B.

 

Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

Filed Electronically

 

 

 

 

 

(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

 

Filed Electronically

 

 

 

 

 

(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

 

Filed Electronically

 

 

18