Visit our online Annual Report
at Target.com/annualreport.
1000 Nicollet Mall, Minneapolis, MN 55403 612.304.6073
Target 2014 Annual Report
91872_Cvr.indd 1
4/16/15 5:15 PM
Welcome to our 2014
Annual Report. To explore
the key stories of the past
year and find out more
about what’s in store for
the year ahead, please visit
our online annual report at
Target.com/annualreport.
Financial Highlights (Note: Reflects amounts attributable to continuing operations.)
Total Revenues
IN MILLIONS
EBIT
IN MILLIONS
Net Earnings
Diluted EPS
IN MILLIONS
6
8
7
5
6
$
,
6
6
4
8
6
$
,
0
6
9
1
7
$
,
9
7
2
1
7
$
,
8
1
6
2
7
$
,
2
5
2
5
$
,
3
4
4
5
$
,
0
4
7
5
$
,
0
7
1
5
$
,
5
3
5
,
4
$
0
2
9
2
$
,
9
4
0
3
$
,
5
1
3
3
$
,
4
9
6
2
$
,
9
4
4
2
$
,
0
0
4
$
.
6
4
4
$
.
0
0
5
$
.
0
2
4
$
.
3
8
3
$
.
‘10
’11
‘12
’13
‘14
‘10
’11
‘12
’13
‘14
19%
‘10
’11
‘12
18%
‘14
’13
‘10
’11
17%
’13
‘12
‘14
2014 Growth: 1.9%
Fiveyear CAGR: 2.7%
2014 Growth: 12.3%
Fiveyear CAGR: 0.6%
2014 Growth: 9.1%
Fiveyear CAGR: 0.3%
2014 Growth: 8.8%
Fiveyear CAGR: 3.0%
Total Segment Sales: $72.6 Billion
25%
21%
19%
18%
17%
Household
Essentials
Food & Pet
Supplies
Apparel &
Accessories
Hardlines
Home Furnishings
& Decor
Directors and Management
Directors
Executive Officers
Roxanne S. Austin
President, Austin
Investment Advisors
(1) (3) (4)
Henrique De Castro
Former Chief
Operating Officer,
Yahoo! Inc. (2) (4)
Douglas M. Baker Jr.
Chairman and Chief
Executive Officer,
Ecolab Inc. (2) (5) (6)
James A. Johnson
Founder and Principal,
Johnson Capital
Partners
Brian C. Cornell
Chairman of the
Board and Chief
Executive Officer
Calvin Darden
Chairman, Darden
Putnam Energy &
Logistics, LLC (2) (3) (5)
Mary E. Minnick
Partner, Lion Capital
LLP (1) (3) (4)
Anne M. Mulcahy
Chairman of the Board
of Trustees,
Save the Children
Federation, Inc. (2) (5)
Derica W. Rice
Executive Vice
President, Global
Services and Chief
Financial Officer, Eli
Lilly & Company (1) (3)
Kenneth L. Salazar
Partner, WilmerHale
(3) (4)
John G. Stumpf
Chairman, President
and Chief Executive
Officer, Wells Fargo &
Company (1) (5)
(1) Audit Committee
(2) Compensation Committee
(3) Corporate Risk and
Responsibility Committee
(4) Finance Committee
(5) Nominating and
Governance Committee
(6) Lead Independent Director
Timothy R. Baer
Executive Vice
President, Chief
Legal Officer, and
Corporate Secretary
Casey L. Carl
Chief Strategy and
Innovation Officer
Brian C. Cornell
Chairman of the
Board and Chief
Executive Officer
Jeffrey J. Jones II
Executive Vice
President and Chief
Marketing Officer
Jodeen A. Kozlak
Executive Vice
President and Chief
Human Resources
Officer
John J. Mulligan
Executive Vice
President and Chief
Financial Officer
Jackie Hourigan Rice
Chief Risk and
Compliance Officer
Kathryn A. Tesija
Executive Vice
President and Chief
Merchandising and
Supply Chain Officer
Tina M. Tyler
Executive Vice
President and Chief
Stores Officer
Laysha L. Ward
Executive Vice
President and Chief
Corporate Social
Responsibility Officer
Other Senior Officers
Patricia Adams
Executive Vice President,
Merchandising, Apparel
and Home
Aaron Alt
Chief Executive Officer, Target
Canada and Senior Vice President,
Treasury and Tax, Target
Stacia Andersen
Senior Vice President,
Merchandising, Apparel
and Accessories
Kristi Argyilan
Senior Vice President,
Media and Guest Engagement
Jose Barra
Executive Vice President,
Merchandising, Essentials
and Hardlines
Dawn Block
Senior Vice President, Target.com
& Mobile Merchandising
Stephen Brinkley
Senior Vice President, Stores
John Butcher
Senior Vice President,
Merchandising Category Roles
Kelly Caruso
President, Target Sourcing Services
Tim Curoe
Senior Vice President, Talent &
Organizational Effectiveness
Anne Dament
Senior Vice President,
Merchandising, Grocery
Paritosh Desai
Senior Vice President,
Enterprise Data, Analytics
and Business Intelligence
Bryan Everett
Senior Vice President,
Store Operations
Jim Fisher
Senior Vice President,
Target Technology Services
Juan Galarraga
Senior Vice President, Stores
Peter Glusker
Senior Vice President,
New Business Integration
and Operations
Jason Goldberger
President, Target.com & Mobile
Rick Gomez
Senior Vice President,
Brand & Category Marketing
Julie Guggemos
Senior Vice President,
Product Design & Development
Corey Haaland
Senior Vice President, Financial
Planning Analysis and Tax
Christina Hennington
Senior Vice President,
Merchandising, Health and Beauty
Cynthia Ho
Senior Vice President,
Target Sourcing Services
Keri Jones
Executive Vice President,
Global Supply Chain and
Merchandise Planning
Navneet Kapoor
President and Managing Director,
Target India
Scott Kennedy
President, Target Financial and
Retail Services
Stephanie Lucy
Senior Vice President,
Merchandise Planning, Apparel
and Accessories
Stephanie Lundquist
Senior Vice President, Human
Resources Strategy & Transformation
Brad Maiorino
Senior Vice President and Chief
Information Security Officer
Todd Marshall
Senior Vice President, Marketing
Tiffany Monroe
Senior Vice President, Human
Resources, Target Canada
John Morioka
Senior Vice President,
Merchandise Planning,
Essentials and Hardlines
Scott Nelson
Senior Vice President,
Target Properties
Scott Nygaard
Senior Vice President,
Merchandising, Hardlines
Janna Potts
Senior Vice President,
Human Resources, Stores
and Distribution
Jill Sando
Senior Vice President,
Merchandising, Home
Mark Schindele
Senior Vice President,
Target Properties
Samir Shah
Senior Vice President, Stores
Cary Strouse
Senior Vice President, Stores
Todd Waterbury
Senior Vice President,
Chief Creative Officer
Judy Werthauser
Senior Vice President, Human
Resources, Headquarters
91872_Cvr.indd 2
4/16/15 5:15 PM
Target 2014 Annual Report
Clarity as
Competitive
Advantage
2014 was a year of transition, one in which Target faced tough
moments – and emerged with momentum as we transform
our business.
be relevant and personal. We have just begun to scratch the
surface of these opportunities at Target, and we are rapidly
building capabilities in these important spaces.
A year that started with unprecedented uncertainty ended
with revitalized strategic clarity. Together, our leadership team
conducted the most comprehensive strategic review in company
history. We weighed all facets of the consumer and competitive
landscape. We picked apart each aspect of our business,
challenged longheld ideas about our guests and – after placing
everything on the table – began the tough but ultimately healthy
process of prioritizing the work that will differentiate Target and
create new platforms for profitable growth.
In the U.S., our financial performance accelerated throughout
the year. Comparablestore sales, digital channel growth and
yearoveryear gross margin performance all improved as we
moved through 2014. Traffic recovered as well, in our stores and
online, which was critically important because the guest, above
all, indicates when Target is on the right track.
To build on this momentum, the leadership team is holding itself
accountable for aligning all of Target to execute on five key priorities:
Shopping on Demand Digitallyconnected families who love
to shop and demand great value are at the center of our strategy
– and central to their busy lives is the ability to shop on demand.
Target is focused on making it easy for our guests to shop
anywhere and anytime they want – in stores, online and on their
mobile devices. As a result, we are taking a channelagnostic
approach to growing our business and investing to deliver
products and services in whatever way is most convenient for
our guests.
Category Roles It’s an axiom of strategy that if you try to be
everything to everyone, you run the risk of being nothing special
to anyone. There are signature categories – style, baby, kids and
wellness – in which guests expect Target to be a leader. These
are categories Target has historically been known for, categories
where we are making smart investments and expect strong
returns. Other categories play important roles in our ability to
fulfill our guests’ needs, and by understanding those roles we will
better prioritize our assortment and the required investments.
Localization and Personalization Today’s guests expect
their store experiences to be local and their digital experiences to
Urban Formats We are testing and rolling out our urban
formats to serve consumers in rapidly growing, densely populated
areas. We have seen strong financial results from our eight
CityTarget stores and we are pleased with initial performance
in our first TargetExpress location. On average, CityTarget
stores generate higherthanaverage sales and have a favorable
merchandise mix that contributes to strong gross margins. By
integrating digital into the physical stores, we also offer guests
access to our full online assortment. Of the 15 new stores we will
open in 2015, more than half are urban formats, including one
new CityTarget and eight new TargetExpress locations.
Simplicity and Speed To accomplish our goals, we need to
move quickly to anticipate and respond to shifts in consumer
tastes and habits. For years, Target worked to gain scale through
centralized management and repeatable processes. But the way
guests shop has changed, and Target is changing too. We are
bringing best practices from our worldclass storeproductivity
model to headquarters, becoming much more flexible and agile.
Simplification – cutting complexity and boosting agility – will
make Target more competitive. It will also help us control costs
and free up resources to invest in the four priorities outlined above.
I am convinced that this new clarity will unleash and accelerate
innovation at Target and make our whole organization more
responsive to consumers and our guests. Topline growth will be
one tangible result, driven by traffic in our existing stores, industry
in digital sales and disciplined expansion of
leading
our urban formats. But equally important is the fact that, by
accomplishing these goals, we will also create a Target that is
wellequipped to lead and compete in the new retail marketplace.
increases
Brian Cornell, Chairman and CEO
Board of Directors Changes
At the end of his current term, Jim Johnson, founder of Johnson Capital
Partners and former vice chairman of Perseus, LLC, will be retiring from
our board. We thank Jim for his many significant contributions during his
nearly 20 years of dedicated service.
91872_Guts.indd 1
4/14/15 5:20 PM
Target 2014 Annual Report
FINANCIAL RESULTS: (in millions)
Sales
Credit card revenues
Total revenues
Cost of sales
Selling, general and administrative expenses (b)
Credit card expenses
Depreciation and amortization
Gain on receivables transaction
Earnings from continuing operations before
interest expense and income taxes (c)
Net interest expense
Earnings from continuing operations before
income taxes
Provision for income taxes
Net earnings from continuing operations
Discontinued operations, net of tax
Net (loss)/earnings
PER SHARE:
Basic (loss)/earnings per share
Continuing operations
Discontinued operations
Net (loss)/earnings per share
Diluted (loss)/earnings per share
Continuing operations
Discontinued operations
Net (loss)/earnings per share
Cash dividends declared
FINANCIAL POSITION: (in millions)
Total assets
Capital expenditures (d)
Longterm debt, including current portion (d)
Net debt (d)(e)
Shareholders’ investment
SEGMENT FINANCIAL RATIOS: (g)
Comparable sales growth (f)
Gross margin (% of sales)
SG&A (% of sales) (g)
EBIT margin (% of sales) (g)
OTHER:
Common shares outstanding (in millions)
Operating cash flow provided by continuing
operations (in millions)
Revenue per square foot (d)(h)
Retail square feet (in thousands) (d)
Square footage growth (d)
Total number of stores (d)
Expanded food assortment (d)
SuperTarget (d)
General merchandise (d)
(d)
CityTarget
TargetExpress (d)
Total number of distribution centers (d)
2014
2013
2012 (a)
2011
2010
2009
$ 72,618
—
72,618
51,278
14,676
—
2,129
—
$ 71,279
—
71,279
50,039
14,465
—
1,996
(391)
4,535
882
3,653
1,204
2,449
(4,085)
(1,636)
3.86
(6.44)
(2.58)
3.83
(6.38)
(2.56)
1.99
$
$
$
$
$
$
5,170
1,049
4,121
1,427
2,694
(723)
1,971
4.24
(1.14)
3.10
4.20
(1.13)
3.07
1.65
$
$
$
$
$
$
$ 71,960
1,341
73,301
50,568
14,643
467
2,044
(161)
5,740
684
5,056
1,741
3,315
(316)
$ 2,999
$
$
$
$
$
5.05
(0.48)
4.57
5.00
(0.48)
4.52
1.38
$ 68,466
$ 65,786
1,399
69,865
47,860
14,032
446
2,084
—
5,443
822
4,621
1,572
3,049
(120)
2,929
4.49
(0.18)
4.31
4.46
(0.18)
4.28
1.15
$
$
$
$
$
$
1,604
67,390
45,725
13,469
860
2,084
—
5,252
757
4,495
1,575
2,920
—
2,920
4.03
—
4.03
4.00
—
4.00
0.92
$
$
$
$
$
$
$ 63,435
1,922
65,357
44,062
13,078
1,521
2,023
—
4,673
801
3,872
1,384
2,488
—
2,488
3.31
—
3.31
3.30
—
3.30
0.67
$
$
$
$
$
$
$ 41,404
1,786
$
$ 12,796
$ 11,276
$ 13,997
1,886
$ 44,553
$
$ 12,572
$ 12,569
$ 16,231
$ 48,163
$ 2,345
$ 16,359
$ 16,284
$ 16,558
$ 46,630
2,476
$
$ 16,225
$ 16,081
$ 15,821
$ 43,705
2,129
$
$ 15,726
$ 14,597
$ 15,487
$ 44,533
1,729
$
$ 16,814
$ 15,288
$ 15,347
1.3%
29.4%
19.9%
6.6%
(0.4)%
29.8%
20.0%
7.0%
2.7%
29.7%
19.1%
7.8%
3.0%
30.1%
19.1%
8.0%
2.1%
30.5%
19.3%
8.0%
(2.5)%
30.5%
20.0%
7.4%
640.2
632.9
645.3
669.3
704.0
744.6
$
$
5,131
302
$
$
7,519
298
$ 5,568
299
$
$
$
5,520
294
$
$
5,271
290
$
$
239,963
—%
1,790
1,292
249
240
8
1
38
240,054
0.9%
1,793
1,245
237,847
0.9%
1,778
1,131
251
289
8
—
37
251
391
5
—
37
235,721
0.9%
1,763
875
251
637
—
—
37
233,618
0.7%
1,750
462
251
1,037
—
—
37
5,881
287
231,952
4.2%
1,740
108
251
1,381
—
—
37
(a) Consisted of 53 weeks.
(b) Also referred to as SG&A.
(c) Also referred to as EBIT.
(d) Represents amounts attributable to continuing operations.
(e) Including current portion and shortterm notes payable, net of shortterm investments of $1,520 million, $3 million, $75 million, $144 million $1,129 million and $$1,526 million, respectively.
Management believes this measure is an indicator of our level of financial leverage because shortterm investments are available to pay debt maturity obligations.
(f) See definition of comparable sales in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(g) Effective January 15, 2015, we operate as a single segment which includes all of our continuing operations, excluding net interest expense, data breach related costs and certain other expenses
which are discretely managed.
(h) Represents revenue per square foot which is calculated using rolling 13 month average square feet and a rolling four quarters of average revenue. In 2012, revenue per square foot was
calculated excluding the 53rd week in order to provide a more useful comparison to other years. Using total reported revenues for 2012 (including the 53rd week) resulted in revenue per square
foot of $304.
91872_Guts.indd 2
4/14/15 5:20 PM
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended January 31, 2015
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from
to
Commission file number 1-6049
TARGET CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota
(State or other jurisdiction of
incorporation or organization)
1000 Nicollet Mall, Minneapolis, Minnesota
(Address of principal executive offices)
41-0215170
(I.R.S. Employer
Identification No.)
55403
(Zip Code)
Securities Registered Pursuant To Section 12(B) Of The Act:
Registrant's telephone number, including area code: 612/304-6073
Title of Each Class
Common Stock, par value $0.0833 per share
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes
No
Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company
(as defined in Rule 12b-2 of the Act). See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule
126-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the voting stock held by non-affiliates of the registrant as of August 2, 2014 was $37,874,861,077, based on the
closing price of $59.85 per share of Common Stock as reported on the New York Stock Exchange Composite Index.
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 $0.0833, outstanding at March 6, 2015 were 641,738,798.
Portions of Target's Proxy Statement to be filed on or about April 27, 2015 are incorporated into Part III.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Item 4A
Executive Officers
PART II
Item 5
Item 6
Item 7
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
Item 8
Item 9
Item 9A
Item 9B
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15
Exhibits, Financial Statement Schedules
Signatures
Exhibit Index
2
5
10
11
11
12
12
13
15
15
27
29
63
63
63
63
64
64
64
64
65
69
70
1
Item 1. Business
General
PART I
Target Corporation (Target, the Corporation or the Company) was incorporated in Minnesota in 1902. We offer our
customers, referred to as "guests," everyday essentials and fashionable, differentiated merchandise at discounted
prices. Our ability to deliver a preferred shopping experience to our guests is supported by our strong supply chain
and technology infrastructure, an ingrained devotion to innovation, and our disciplined approach to managing our
business and investing in future growth.
Prior to the first quarter of 2013, we operated a U.S. Credit Card Segment that offered credit to qualified guests through
our branded credit cards: the Target Credit Card and the Target Visa Credit Card. In the first quarter of 2013, we sold
our U.S. consumer credit card portfolio, and TD Bank Group (TD) now underwrites, funds and owns Target Credit Card
and Target Visa consumer receivables in the U.S. We perform account servicing and primary marketing functions and
earn a substantial portion of the profits generated by the portfolio. Refer to Note 7 of the Consolidated Financial
Statements included in Item 8, Financial Statements and Supplementary Data (the Financial Statements) for more
information on the credit card receivables transaction.
Prior to January 15, 2015, we operated a Canadian segment. On January 15, 2015, we announced our exit from the
Canadian market and Target Canada Co. and certain other wholly owned subsidiaries of Target filed for protection (the
Filing) in Canada under the Companies' Creditors Arrangement Act (CCAA) with the Ontario Superior Court of Justice
in Toronto. Following the Filing, we no longer consolidate our Canadian retail operation. Canadian financial results
prior to the Filing are included in our financial statements and classified within discontinued operations. See Item 7,
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and Note 6 of the
Financial Statements for more information. Effective January 15, 2015, we operate as a single segment that includes
all of our continuing operations, which are designed to enable guests to purchase products seamlessly in stores, online
or through mobile devices.
Unless otherwise noted, discussion of our business and results of operations in this Annual Report on Form 10-K refers
to our continuing operations.
Financial Highlights
For information on key financial highlights and segment financial information, see the items referenced in Item 6,
Selected Financial Data, MD&A and Note 28 of the Financial Statements.
Seasonality
A larger share of annual revenues and earnings traditionally occurs in the fourth quarter because it includes the peak
sales period from Thanksgiving to the end of December.
Merchandise
We sell a wide assortment of general merchandise and food through our store and digital channels. Our general
merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items while
our SuperTarget stores offer a full line of food items comparable to traditional supermarkets. Our urban format stores,
CityTarget and TargetExpress, offer edited general merchandise and food assortments. Our digital channels include
a wide assortment of general merchandise, including many items found in our stores, along with a complementary
assortment such as additional sizes and colors sold only online.
2
A significant portion of our sales is from national brand merchandise. Approximately one-third of 2014 sales related to
our owned and exclusive brands, including but not limited to the following:
Owned Brands
Archer Farms®
Simply Balanced™
Boots & Barkley®
Circo®
Embark®
Gilligan & O'Malley®
Exclusive Brands
Assets® by Sarah Blakely
Ava & Viv®
C9 by Champion®
Carlton®
Chefmate®
Cherokee®
Converse® One Star®
Market Pantry®
Merona®
Room Essentials®
Smith & Hawken®
Spritz™
Sutton & Dodge®
Threshold™
up & up®
Wine Cube®
Xhilaration®
dENiZEN™ from Levi's®
Fieldcrest®
Genuine Kids from OshKosh®
Just One You made by Carter's
Kid Made Modern®
Liz Lange® for Target
Mossimo Supply Company®
Nate Berkus for Target®
Nick & Nora®
Papyrus®
Shaun White
Simply Shabby Chic®
Sonia Kashuk®
We also sell merchandise through periodic exclusive design and creative partnerships and generate revenue from in-
store amenities such as Target Café, Target Clinic, Target Pharmacy and Target Photo, and leased or licensed
departments such as Target Optical, Pizza Hut, Portrait Studio and Starbucks.
Distribution
The vast majority of merchandise is distributed to our stores through our network of 38 distribution centers. Common
carriers ship general merchandise to and from our distribution centers. Vendors or third party distributors ship certain
food items and other merchandise directly to our stores.
Employees
At January 31, 2015, we employed approximately 347,000 full-time, part-time and seasonal employees, referred to
as "team members." During the sales period from Thanksgiving to the end of December, our employment levels peaked
at approximately 447,000 team members. We offer a broad range of company-paid benefits to our team members.
Eligibility for, and the level of, these benefits varies depending on team members' full-time or part-time status,
compensation level, date of hire and/or length of service. These company-paid benefits include a pension plan, 401
(k) plan, medical and dental plans, a retiree medical plan, disability insurance, paid vacation, tuition reimbursement,
various team member assistance programs, life insurance and merchandise discounts. We believe our team member
relations are good.
Working Capital
Our working capital needs are greater in the months leading up to our peak sales period from Thanksgiving to the end
of December, which we typically finance with cash flow provided by operations and short-term borrowings. Additional
details are provided in the Liquidity and Capital Resources section in MD&A.
Effective inventory management is key to our ongoing success, and we use various techniques including demand
forecasting and planning and various forms of replenishment management. We achieve effective inventory
management by being in-stock in core product offerings, maintaining positive vendor relationships, and carefully
planning inventory levels for seasonal and apparel items to minimize markdowns.
3
Competition
We compete with traditional and off-price general merchandise retailers, apparel retailers, internet retailers, wholesale
clubs, category specific retailers, drug stores, supermarkets and other forms of retail commerce. Our ability to positively
differentiate ourselves from other retailers and provide a compelling value proposition largely determine our competitive
position within the retail industry.
Intellectual Property
Our brand image is a critical element of our business strategy. Our principal trademarks, including Target, SuperTarget
and our "Bullseye Design," have been registered with the U.S. Patent and Trademark Office. We also seek to obtain
and preserve intellectual property protection for our owned brands.
Geographic Information
Virtually all of our revenues from continuing operations are generated within the United States. Through 2014, our
discontinued Canadian operations generated revenues in Canada. The vast majority of our long-lived assets are
located within the United States.
Data Breach
During the fourth quarter of 2013, we experienced a data breach in which an intruder stole certain payment card and
other guest information from our network (the Data Breach). For further information, see MD&A and Note 17 of the
Financial Statements.
Available Information
Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge at
www.Target.com/Investors as soon as reasonably practicable after we file such material with, or furnish it to, the U.S.
Securities and Exchange Commission (SEC). Our Corporate Governance Guidelines, Business Conduct Guide,
Corporate Responsibility Report and the position descriptions for our Board of Directors and Board committees are
also available free of charge in print upon request or at www.Target.com/Investors.
4
Item 1A. Risk Factors
Our business is subject to many risks. Set forth below are the most significant risks that we face. For the convenience
of the reader, the risks are listed in the categories where those risks primarily apply, but they may also apply to other
categories.
Competitive and Reputational Risks
Our continued success is substantially dependent on positive perceptions of Target which, if eroded, could
adversely affect our business and our relationships with our guests and team members.
We believe that one of the reasons our guests prefer to shop at Target, our team members choose Target as a place
of employment and our vendors choose to do business with us is the reputation we have built over many years for
serving our four primary constituencies: guests, team members, shareholders, and the communities in which we
operate. To be successful in the future, we must continue to preserve, grow, and leverage the value of Target's reputation.
Reputational value is based in large part on perceptions. While reputations may take decades to build, any negative
incidents can quickly erode trust and confidence, particularly if they result in adverse mainstream and social media
publicity, governmental investigations, or litigation. Those types of incidents could have an adverse impact on
perceptions and lead to tangible adverse effects on our business, including consumer boycotts, lost sales, loss of new
store and technology development opportunities, or team member retention and recruiting difficulties. For example,
we experienced weaker than expected sales immediately following the announcement of the Data Breach that occurred
in the fourth quarter of 2013, and while we now believe the incident will not have a long-term impact to our relationship
with our guests, it is an example of an incident that affected our reputation and negatively impacted our sales for a
period of time. In addition, the long-term reputational impact of discontinuing our Canadian operations on our guests,
team members, vendors and other constituencies is unknown, and we may need to take actions that could increase
our expenses and adversely affect the results of our operations.
If we are unable to positively differentiate ourselves from other retailers, our results of operations could be
adversely affected.
The retail business is highly competitive. In the past we have been able to compete successfully by differentiating our
guests’ shopping experience by creating an attractive value proposition through a careful combination of price,
merchandise assortment, convenience, guest service, loyalty programs and marketing efforts. Our ability to create a
personalized guest experience through the collection and use of guest data is important to our ability to differentiate
from other retailers. Guest perceptions regarding the cleanliness and safety of our stores, the functionality and reliability
of our digital channels, our in-stock levels and other factors also affect our ability to compete. No single competitive
factor is dominant, and actions by our competitors on any of these factors could have an adverse effect on our sales,
gross margins, and expenses.
We sell many products under our owned and exclusive brands. These brands are an important part of our business
because they differentiate us from other retailers, generally carry higher margins than equivalent national brand products
and represent a significant portion of our overall sales. If one or more of these brands experiences a loss of consumer
acceptance or confidence, our sales and gross margins could be adversely affected.
The continuing migration and evolution of retailing to online and mobile channels has increased our challenges in
differentiating ourselves from other retailers. In particular, consumers are able to quickly and conveniently comparison
shop and determine real-time product availability using digital tools, which can lead to decisions based solely on price,
the functionality of the digital tools or a combination of those and other factors. We must compete by offering a consistent
and convenient shopping experience for our guests regardless of the ultimate sales channel; providing and maintaining
digital tools for our guests and team members that have the right features and are reliable and easy to use; working
with our vendors to offer unique and distinctive merchandise; and encouraging our guests to shop with confidence
with our price-match policy. Failure to effectively execute in these efforts, actions by our competitors in response to
these efforts, or failures of our vendors to manage their own channels, content and technology systems could hurt our
ability to differentiate ourselves from other retailers and, as a result, have an adverse effect on sales, gross margins,
and expenses.
5
If we are unable to successfully develop and maintain a relevant and reliable omnichannel experience for our
guests, our sales, results of operations and reputation could be adversely affected.
Our business has evolved from an in-store experience to interaction with guests across multiple channels (in-store,
online, mobile and social media, among others). Our guests are using computers, tablets, mobile phones and other
devices to shop in our stores and online and provide feedback and public commentary about all aspects of our business.
We currently provide full and mobile versions of our website (Target.com), offer applications for mobile phones and
tablets, and interact with our guests through social media. Omnichannel retailing is rapidly evolving and we must
anticipate and meet changing guest expectations and counteract new developments and technology investments by
our competitors. Our omnichannel retailing efforts include implementing new technology, software and processes to
be able to fulfill guest orders from any point within our system of stores and distribution centers, which is extremely
complex and may not meet guest expectations for timely and accurate deliveries. If we are unable to attract and retain
team members or contract with third parties having the specialized skills needed to support our omnichannel efforts,
implement improvements to our
technology in a timely manner, allow real-time and accurate visibility to
product availability when guests are ready to purchase, quickly and efficiently fulfill our guests orders using the fulfillment
and payment methods they demand, or provide a convenient and consistent experience for our guests regardless of
the ultimate sales channel, our ability to compete and our results of operations could be adversely affected. In addition,
if Target.com and our other
technology systems do not appeal to our guests, reliably function as designed,
or maintain the privacy of guest data, or if we are unable consistently meet our brand promise to our guests, we may
experience a loss of guest confidence, lost sales or be exposed to fraudulent purchases, which could adversely affect
our reputation and results of operations.
If we fail to anticipate and respond quickly to changing consumer preferences, our sales, gross margins and
profitability could suffer.
A substantial part of our business is dependent on our ability to make
decisions and effectively manage
our inventory in a broad range of merchandise categories, including apparel, home décor, seasonal offerings, food
and other merchandise. For example, we are investing more of our overall resources, including capital, marketing,
and product development to focus on signature categories, including baby, kids, wellness, and style, and tailor our
food assortment to support guest wellness goals and become more specialized with unique and differentiated items.
Failure to accurately predict constantly changing consumer tastes, preferences, spending patterns and other lifestyle
decisions, emphasize the correct categories, and personalize our offerings to our guests may result in lost sales,
spoilage, and increased inventory markdowns, which would lead to a deterioration in our results of operations by
hurting our sales, gross margins, and profitability.
Technology Investments and Infrastructure Risks
If our capital investments in technology, new stores and remodeling existing stores do not achieve appropriate
returns, our competitive position, financial condition and results of operations may be adversely affected.
Our business is becoming increasingly reliant on technology investments, and the returns on these investments are
less predictable than building new stores and remodeling existing stores. We are currently making, and will continue
to make, significant technology investments to support our omnichannel efforts, implement improvements to our
technology, and evolve our inventory management system, information processes, and computer systems
to more efficiently run our business and remain competitive and relevant to our guests. These technology initiatives
might not provide the anticipated benefits or may provide them on a delayed schedule or at a higher cost. We must
monitor and choose the right investments and implement them at the right pace. In addition, our growth also depends,
in part, on our ability to build new stores and remodel existing stores in a manner that achieves appropriate returns
on our capital investment. We compete with other retailers and businesses for suitable locations for our stores. Many
of our expected new store sites are smaller and non-standard footprints located in fully developed markets, which are
generally more time-consuming and expensive undertakings than expansion into undeveloped suburban and ex-urban
markets. Targeting the wrong opportunities, failing to make the best investments, or making an investment commitment
significantly above or below our needs could result in the loss of our competitive position and adversely impact our
financial condition or results of operations.
6
A significant disruption in our computer systems and our inability to adequately maintain and update those
systems could adversely affect our operations and our ability to maintain guest confidence.
We rely extensively on our computer systems to manage inventory, process guest transactions, manage and maintain
the privacy of guest data, communicate with our vendors and other third parties, service REDcard accounts, and
summarize and analyze results, and on continued and unimpeded access to the Internet to use our computer systems.
Our systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses
and malicious attacks, security breaches and catastrophic events. If our systems are damaged or fail to function
properly, we may incur substantial repair or replacement costs, experience data loss or theft and impediments to our
ability to manage inventories or process guest transactions, and encounter lost guest confidence, which could adversely
affect our results of operations. The Data Breach we experienced in the fourth quarter of 2013 negatively impacted
our ability to handle customer inquiries, and we experienced weaker than expected sales immediately following the
announcement of the Data Breach. Similarly, we experienced a temporary network disruption not involving a data
breach in June 2014 that prevented many of our point-of-sale registers from working in a limited geographic region.
This disruption caused checkout delays and generated negative publicity, and we engaged in promotional activities
to retain our customers during the delay.
We continually make significant technology investments that will help maintain and update our existing computer
systems. Implementing significant system changes increases the risk of computer system disruption. The potential
problems and interruptions associated with implementing technology initiatives could disrupt or reduce our operational
efficiency, and could impact the guest experience and guest confidence.
Data Security and Privacy Risks
If our efforts to protect the security of information about our guests, team members and vendors are
unsuccessful, we may face additional costly government enforcement actions and private litigation, and our
sales and reputation could suffer.
An important component of our business involves the receipt and storage of information about our guests, team
members, and vendors. We have a program in place to detect and respond to data security incidents. However,
because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change
frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or
implement adequate preventive measures. In addition, hardware, software, or applications we develop or procure from
third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise
information security. Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third
parties with whom we do business, through fraud, trickery, or other forms of deceiving our team members, contractors,
and temporary staff.
Until the Data Breach in the fourth quarter of 2013, all incidents we experienced were insignificant. The Data Breach
we experienced was significant and went undetected for several weeks. Both we and our vendors have experienced
data security incidents other than the Data Breach; however, to date these other incidents have not been material to
our consolidated financial statements. If we or our vendors experience additional significant data security breaches
or fail to detect and appropriately respond to significant data security breaches, we could be exposed to additional
government enforcement actions and private litigation. In addition, our guests could further lose confidence in our
ability to protect their information, which could cause them to discontinue using our REDcards or pharmacy services,
or stop shopping with us altogether.
We have recorded significant expenses related to the Data Breach. Our losses could exceed the amounts we
have recorded by material amounts, and these matters could have a material adverse impact on our results
of operations.
The Data Breach we experienced was significant, went undetected for several weeks, and involved the theft of certain
payment card and guest information through unauthorized access to our network. We experienced weaker than
expected sales immediately following the announcement of the Data Breach, and we are currently facing litigation
seeking damages or other related relief allegedly arising out of the Data Breach. In addition, state and federal agencies,
including State Attorneys General, the Federal Trade Commission and the SEC, are investigating events related to
the Data Breach, including how it occurred, its consequences and our responses. The governmental agencies
investigating the Data Breach may seek to impose on us fines and/or other monetary relief and/or injunctive relief that
could materially increase our data security costs, adversely impact how we operate our network and collect and use
guest information, and put us at a competitive disadvantage with other retailers. Furthermore, three of the four major
7
payment card networks, which between them represent a substantial majority of the payment cards potentially impacted
by the Data Breach, have made written claims against us, either directly or through our acquiring banks, and we believe
that it is probable that the fourth major payment card network will also make a claim against us. Collectively, the claims,
investigations and other possible consequences of the Data Breach may have an adverse effect on how we operate
our business and our results of operations. In the future we may be subject to additional investigations and claims of
this sort. We have recorded Data Breach-related expenses that include our estimated probable losses for these matters,
and it is reasonably possible that we may incur a material loss in excess of the amount accrued.
Supply Chain and Third Party Risks
Interruptions in our supply chain or fulfillment network, increased commodity, supply chain and fulfillment
costs, or changes in our relationships with our vendors could adversely affect our gross margins, expenses
and results of operations.
We are dependent on our vendors to supply merchandise to our distribution centers, stores and our guests in a timely
and efficient manner. As we continue to add fulfillment capabilities or pursue strategies with different fulfillment
requirements, our fulfillment network becomes increasingly complex and operating it becomes more challenging. If
our fulfillment network does not operate properly or if a vendor fails to deliver on its commitments, whether due to
financial difficulties or other reasons, we could experience merchandise out-of-stocks, delivery delays or increased
delivery costs that could lead to lost sales and decreased guest confidence, and adversely affect our results of
operations.
In addition, a large portion of our merchandise is sourced, directly or indirectly, from outside the United States, with
China as our single largest source. Political or financial instability, trade restrictions, the outbreak of pandemics, labor
unrest, transport capacity and costs, port security, weather conditions, natural disasters or other events that could slow
or disrupt port activities and affect foreign trade are beyond our control and could disrupt our supply of merchandise
and/or adversely affect our results of operations. For example, the labor disputes impacting the ports on the west coast
of the U.S. that began in 2014 have caused us to make alternative arrangements to continue the flow of inventory,
and if these disputes recur or worsen, it may have a material impact on our costs or inventory supply. Changes in the
costs of procuring commodities used in our merchandise or the costs related to our supply chain, including vendor
costs, labor, fuel, tariffs, currency exchange rates and supply chain transparency initiatives, could have an adverse
effect on gross margins, expenses and results of operations. Changes in our relationships with our vendors also have
the potential to increase our expenses and adversely affect results of operations. We are unable to determine whether
our decision to discontinue our Canadian operations will negatively impact our relationships with vendors that also
supply our U.S. operations in a way that might cause less favorable terms, increased costs, result in less timely and
efficient deliveries, or impact their ability to sell to Target.
A disruption in relationships with third parties who provide us services in connection with certain aspects of
our business could adversely affect our operations.
We rely on third parties to support a variety of business functions, including portions of our technology development
and systems, our digital platforms and distribution network operations, credit and debit card transaction processing,
extensions of credit for our 5% REDcard Rewards loyalty program, and aspects of our clinic and pharmacy operations.
If we are unable to contract with third parties having the specialized skills needed to support those strategies or integrate
their products and services with our business, or if we fail to properly manage those third parties or if they fail to meet
our performance standards and expectations, including with respect to data security, our reputation, sales, and results
of operations could be adversely affected. In addition, we could face increased costs associated with finding replacement
providers or hiring new team members to provide these services in-house.
Legal, Regulatory, Global and Other External Risks
Our earnings are highly susceptible to the state of macroeconomic conditions and consumer confidence in
the United States.
Virtually all of our sales are in the United States, making our results highly dependent on U.S. consumer confidence
and the health of the U.S. economy. In addition, a significant portion of our total sales is derived from stores located
in five states: California, Texas, Florida, Minnesota and Illinois, resulting in further dependence on local economic
conditions in these states. Deterioration in macroeconomic conditions or consumer confidence could negatively affect
our business in many ways, including slowing sales growth or reduction in overall sales, and reducing gross margins.
8
These same considerations impact the success of our credit card program. Even though we no longer own a consumer
credit card receivables portfolio, we share in the economic performance of the credit card program with TD. Deterioration
in macroeconomic conditions could adversely affect the volume of new credit accounts, the amount of credit card
program balances and the ability of credit card holders to pay their balances. These conditions could result in us
receiving lower
payments.
Weather conditions where our stores are located may impact consumer shopping patterns, which alone or
together with natural disasters, particularly in areas where our sales are concentrated, could adversely affect
our results of operations.
Uncharacteristic or significant weather conditions can affect consumer shopping patterns, particularly in apparel and
seasonal items, which could lead to lost sales or greater than expected markdowns and adversely affect our short-
term results of operations. In addition, our three largest states by total sales are California, Texas and Florida, areas
where natural disasters are more prevalent. Natural disasters in those states or in other areas where our sales are
concentrated could result in significant physical damage to or closure of one or more of our stores, distribution centers
or key vendors, and cause delays in the distribution of merchandise from our vendors to our distribution centers, stores,
and directly to guests, which could adversely affect our results of operations by increasing our costs and lowering our
sales.
We rely on a large, global and changing workforce of Target team members, contractors and temporary staffing.
If we do not effectively manage our workforce and the concentration of work in certain global locations, our
labor costs and results of operations could be adversely affected.
With approximately 347,000 team members, our workforce costs represent our largest operating expense, and our
business is dependent on our ability to attract, train, and retain the appropriate mix of qualified team members,
contractors, and temporary staffing and effectively organize and manage those resources as our business changes.
Many team members are in entry-level or part-time positions with historically high turnover rates. Our ability to meet
our changing labor needs while controlling our costs is subject to external factors such as unemployment levels,
prevailing wage rates, collective bargaining efforts, health care and other benefit costs, changing demographics, and
our reputation and relevance within the labor market. If we are unable to attract and retain adequate numbers and an
appropriate mix of qualified team members, contractors and temporary staffing, our operations, guest service levels
and support functions could suffer. Those factors, together with increasing wage and benefit costs, could adversely
affect our results of operations. As of March 13, 2015, none of our team members were working under collective
bargaining agreements. We are periodically subject to labor organizing efforts. If we become subject to one or more
collective bargaining agreements in the future, it could adversely affect our labor costs and how we operate our business.
We maintain a headquarters location in India where there has been greater political, financial, environmental and
health instability than the United States. An extended disruption of our operations in India could adversely affect certain
operations supporting stability and maintenance of our digital channels and information technology development.
Failure to address product safety concerns could adversely affect our sales and results of operations.
If our merchandise offerings, including food, drug and children’s products, do not meet applicable safety standards or
our guests’ expectations regarding safety, we could experience lost sales and increased costs and be exposed to legal
and reputational risk. All of our vendors must comply with applicable product safety laws, and we are dependent on
them to ensure that the products we buy comply with all safety standards. Events that give rise to actual, potential or
perceived product safety concerns, including food or drug contamination, could expose us to government enforcement
action or private litigation and result in costly product recalls and other liabilities. In addition, negative guest perceptions
regarding the safety of the products we sell could cause our guests to seek alternative sources for their needs, resulting
in lost sales. In those circumstances, it may be difficult and costly for us to regain the confidence of our guests.
Our failure to comply with federal, state, local, and international laws, or changes in these laws could increase
our costs, reduce our margins, and lower our sales.
Our business is subject to a wide array of laws and regulations in the United States and other countries in which we
operate. Significant workforce-related legislative changes could increase our expenses and adversely affect our
operations. Examples of possible workforce-related legislative changes include changes to an employer's obligation
to recognize collective bargaining units, the process by which collective bargaining agreements are negotiated or
imposed, minimum wage requirements, and health care mandates. In addition, changes in the regulatory environment
9
affecting Medicare reimbursements, privacy and information security, product safety, payment methods and related
fees, responsible sourcing, supply chain transparency, or environmental protection, among others, could cause our
expenses to increase without an ability to pass through any increased expenses through higher prices. For example,
we are currently facing government inquiries related to the Data Breach that may result in the imposition of fines or
other penalties. In addition, any legislative or regulatory changes adopted in reaction to the recent retail-industry data
breaches could increase or accelerate our compliance costs. Also, our pharmacy and clinic operations are governed
by various regulations, and a significant change in, or our noncompliance with, these regulations could have a material
adverse effect on our compliance costs and results of operations. In addition, if we fail to comply with other applicable
laws and regulations, including wage and hour laws, the Foreign Corrupt Practices Act and local anti-bribery laws, we
could be subject to legal risk, including government enforcement action and class action civil litigation, which could
adversely affect our results of operations by increasing our costs, reducing our margins, and lowering our sales.
Financial Risks
Changes in our effective income tax rate could adversely affect our net income.
A number of factors influence our effective income tax rate, including changes in tax law, tax treaties, interpretation of
existing laws, and our ability to sustain our reporting positions on examination. Changes in any of those factors could
change our effective tax rate, which could adversely affect our net income. In addition, our operations outside of the
United States may cause greater volatility in our effective tax rate.
If we are unable to access the capital markets or obtain bank credit, our financial position, liquidity, and results
of operations could suffer.
We are dependent on a stable, liquid, and well-functioning financial system to fund our operations and capital
investments. In particular, we have historically relied on the public debt markets to fund portions of our capital
investments and the commercial paper market and bank credit facilities to fund seasonal needs for working capital.
Our continued access to these markets depends on multiple factors including the condition of debt capital markets,
our operating performance, and maintaining strong debt ratings. If rating agencies lower our credit ratings, it could
adversely impact our ability to access the debt markets, our cost of funds, and other terms for new debt issuances.
Each of the credit rating agencies reviews its rating periodically, and there is no guarantee our current credit rating will
remain the same. In addition, we use a variety of derivative products to manage our exposure to market risk, principally
interest rate and equity price fluctuations. Disruptions or turmoil in the financial markets could reduce our ability to
meet our capital requirements or fund our working capital needs, and lead to losses on derivative positions resulting
from counterparty failures, which could adversely affect our financial position and results of operations.
If we are unable to make a fair and orderly exit of our Canadian operations, or if our existing reserves are not
adequate to cover our ultimate liability, our financial condition and results of operations could be adversely
affected.
On January 15, 2015, we announced our decision to discontinue our Canadian operations and authorized a filing by
our direct wholly owned subsidiary, Target Canada Co., and certain other subsidiaries under the Companies’ Creditors
Arrangement Act (Canada). During the fourth quarter ended January 31, 2015, we reported pretax losses from our
discontinued Canadian operations, including pretax exit losses, a non-cash pretax impairment charge, and other
operating losses. The losses from discontinued operations include probable losses relating to certain claims that may
be asserted against us as a result of our guaranty of certain obligations of Target Canada Co. or other claims that may
be made against us. Our reserves relating to these matters may not be adequate to cover our ultimate liability, and
amounts beyond our reserves could have a material adverse effect on our financial condition and results of operations.
In addition, we may suffer other losses for which we have not established reserves, although we believe that possibility
is not probable. If we are unable to effectively and efficiently execute the wind-down of our Canadian operations, we
may incur additional costs and cash outflows.
Item 1B. Unresolved Staff Comments
Not applicable.
10
Item 2. Properties
U.S. Stores at
January 31, 2015
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Stores
22
3
47
9
268
41
20
3
1
123
52
4
6
88
32
21
18
14
16
5
38
37
56
75
6
36
Retail Sq. Ft.
(in thousands)
3,150 Montana
504 Nebraska
6,263 Nevada
1,165 New Hampshire
35,560 New Jersey
6,215 New Mexico
2,672 New York
440 North Carolina
179 North Dakota
17,311 Ohio
7,099 Oklahoma
695 Oregon
664 Pennsylvania
12,159 Rhode Island
4,271 South Carolina
2,925 South Dakota
2,473 Tennessee
1,660 Texas
2,246 Utah
630 Vermont
4,938 Virginia
4,869 Washington
6,725 West Virginia
10,708 Wisconsin
743 Wyoming
4,736
Total
U.S. Stores and Distribution Centers at January 31, 2015
Owned
Leased
Owned buildings on leased land
Total
(a)
The 38 distribution centers have a total of 50,185 thousand square feet.
Stores
7
14
17
9
44
10
71
49
4
63
16
19
65
4
19
5
31
148
13
—
57
37
6
39
2
Retail Sq. Ft.
(in thousands)
780
2,006
2,230
1,148
5,837
1,185
9,747
6,496
554
7,902
2,285
2,280
8,549
517
2,359
580
3,990
20,872
1,953
—
7,650
4,328
755
4,773
187
1,790
239,963
Stores
1,536
99
155
1,790
Distribution
Centers (a)
33
5
—
38
We own our corporate headquarters buildings located in and around Minneapolis, Minnesota, and we lease and own
additional office space in Minneapolis and elsewhere in the United States. We also lease office space in 14 countries
for various support functions. Our properties are in good condition, well maintained, and suitable to carry on our
business.
For additional information on our properties, see the Capital Expenditures section in MD&A and Notes 12 and 20 of
the Financial Statements.
Item 3. Legal Proceedings
On January 15, 2015, Target Canada Co. and certain other wholly owned subsidiaries of Target (collectively Canada
Subsidiaries), filed for protection under the Companies’ Creditors Arrangement Act with the Ontario Superior Court of
11
Justice in Toronto (the Court). The Canada Subsidiaries comprise substantially all of our Canadian operations and our
Canadian Segment. The Canada Subsidiaries have commenced an orderly liquidation process and expect that stores
in Canada will remain open during the liquidation. To assist with the exit plan, the Court approved the appointment of
a monitor and certain other financial advisors. See Item 7, MD&A and Note 6 of the Financial Statements for more
information.
For a description of other legal proceedings, including a discussion of litigation and government inquiries related to
the Data Breach, see MD&A and Note 17 of the Financial Statements.
Item 4. Mine Safety Disclosures
Not applicable.
Item 4A. Executive Officers
Executive officers are elected by, and serve at the pleasure of, the Board of Directors. There are no family relationships
between any of the officers named and any other executive officer or member of the Board of Directors, or any
arrangement or understanding pursuant to which any person was selected as an officer.
Name
Timothy R. Baer
Title and Business Experience
Executive Vice President, Chief Legal Officer and Corporate Secretary since March
2007.
Casey L. Carl
Brian C. Cornell
Chief Strategy and Innovation Officer since December 2014. President, Omnichannel
and Senior Vice President, Enterprise Strategy from July 2014 to December 2014.
President, Multichannel, from November 2011 to July 2014. From July 2008 to
November 2011, Mr. Carl held several leadership positions with Target in
Merchandising.
Chairman of the Board and Chief Executive Officer since August 2014. Chief
Executive Officer of PepsiCo Americas Foods, a division of PepsiCo, Inc., a
multinational food and beverage corporation, from March 2012 to July 2014. Chief
Executive Officer and President of Sam's Club, a division of Wal-Mart Stores, Inc., a
discount retailer, and Executive Vice President of Wal-Mart Stores, Inc. from April
2009 to January 2012.
Jeffrey J. Jones II
Executive Vice President and Chief Marketing Officer since April 2012. Partner and
President of McKinney Ventures LLC, an advertising agency, from March 2006 to
March 2012.
Jodeen A. Kozlak
Executive Vice President and Chief Human Resources Officer since March 2007.
John J. Mulligan
Jacqueline
Hourigan Rice
Tina M. Tyler
Executive Vice President and Chief Financial Officer since April 2012. Interim Chief
Executive Officer from May 2014 to August 2014. Senior Vice President, Treasury,
Accounting and Operations from February 2010 to March 2012. Vice President, Pay
and Benefits from February 2007 to February 2010.
Senior Vice President, Chief Risk and Compliance Officer since December 2014.
Chief Compliance Officer of General Motors Company, a vehicle manufacturer, from
March 2013 to November 2014. Executive Director, Global Ethics & Compliance of
General Motors Company from January 2010 to February 2013.
Executive Vice President and Chief Stores Officer since January 2011. Senior Vice
President, New Business Development from February 2010 to January 2011. Senior
Vice President, Stores from February 2001 to February 2010.
Kathryn A. Tesija
Executive Vice President and Chief Merchandising and Supply Chain Officer since
October 2012. Executive Vice President, Merchandising from May 2008 to September
2012.
Laysha L. Ward
Executive Vice President and Chief Corporate Social Responsibility Officer since
December 2014. President, Community Relations and Target Foundation from July
2008 to December 2014.
Age
54
39
56
47
51
49
43
49
52
47
12
PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our common stock is listed on the New York Stock Exchange under the symbol "TGT." We are authorized to issue up
to 6,000,000,000 shares of common stock, par value $0.0833, and up to 5,000,000 shares of preferred stock, par
value $0.01. At March 6, 2015, there were 15,733 shareholders of record. Dividends declared per share and the high
and low closing common stock price for each fiscal quarter during 2014 and 2013 are disclosed in Note 30 of the
Financial Statements.
In January 2012, our Board of Directors authorized the repurchase of $5 billion of our common stock, with no stated
expiration for the share repurchase program. We have repurchased 49.9 million shares of our common stock under
this program for a total cash investment of $3.1 billion ($62.85 average price per share).
The table below presents our purchases of Target common stock during the three months ended January 31, 2015,
as defined in Rule 10b-18(a)(3) under the Exchange Act.
Period
November 2, 2014 through
November 29, 2014
November 30, 2014 through
January 3, 2015
January 4, 2015 through
January 31, 2015
Total Number
of Shares
Purchased (a)(b)
Average
Price Paid
per Share (a)(b)
Total Number of
Shares Purchased
as Part of the
Current Program (a)
Dollar Value of
Shares that May
Yet Be Purchased
Under the Program
129,608 $
51.09
49,877,874 $
1,864,685,654
37,337
48.88
49,915,211
1,862,860,655
—
—
49,915,211
1,862,860,655
166,945 $
5
The table above includes shares reacquired upon settlement of prepaid forward contracts. At January 31, 2015, we held asset positions
in prepaid forward contracts for 0.5 million shares of our common stock, for a total cash investment of $21.5 million, or an average per
share price of $41.13. 0.2 million shares were reacquired under such contracts during the fourth quarter. Refer to Notes 23 and 25 of
the Financial Statements for further details of these contracts.
The number of shares above includes shares of common stock reacquired from team members who tendered owned shares to i) satisfy
the tax withholding on equity awards as part of our long-term incentive plans or ii) satisfy the exercise price on stock option exercises.
For the three months ended January 31, 2015, 14,423 shares were reacquired at an weighted average per share price of $68.73 pursuant
to our long-term incentive plan.
49,915,211 $
1,862,860,65
50.59
(a)
(b)
13
Fiscal Years Ended
Target
S&P 500 Index
Previous Peer Group
Peer Group
$
January 30,
2010
100.00 $
100.00
100.00
100.00
January 29,
2011
107.69 $
121.26
114.99
114.34
January 28,
2012
101.31 $
127.72
127.86
127.28
February 2,
2013
126.61 $
150.20
161.32
162.13
February 1,
2014
120.09 $
180.70
194.44
196.95
January 31,
2015
161.07
206.41
243.04
244.19
The graph above compares the cumulative total shareholder return on our common stock for the last five fiscal years
with (i) the cumulative total return on the S&P 500 Index, (ii) the peer group used in previous filings consisting of 14
online, general merchandise, department store, food and specialty retailers, which are large and meaningful competitors
(Amazon.com, Best Buy, Costco, CVS Caremark, Home Depot, J. C. Penney, Kohl's, Kroger, Lowe's, Macy's, Safeway,
Sears, Walgreens and Walmart) (Previous Peer Group), and (iii) a new peer group consisting of the companies in the
Previous Peer Group excluding J.C. Penney with the addition of Dollar General, The Gap, Publix, Rite Aid, Staples,
and TJX (Current Peer Group). The change in peer groups was made to be consistent with the retail peer group used
for our definitive Proxy Statement to be filed on or about April 27, 2015.
The peer group is weighted by the market capitalization of each component company. The graph assumes the
investment of $100 in Target common stock, the S&P 500 Index and the Peer Group on January 30, 2010, and
reinvestment of all dividends.
14
Item 6. Selected Financial Data
(millions, except per share data)
Total revenues (b)
Net (Loss)/Earnings
Continuing operations
Discontinued operations
Net (loss)/earnings
Basic (Loss)/Earnings Per Share
Continuing operations
Discontinued operations
Basic (loss)/earnings per share
Diluted (Loss)/Earnings Per Share
Continuing operations
Discontinued operations
Diluted (loss)/earnings per share
Cash dividends declared per share
As of or for the Fiscal Year Ended
2014
2013
2012 (a)
2011
2010
2009
$ 72,618 $ 71,279 $ 73,301 $ 69,865 $ 67,390 $ 65,357
2,449
(4,085)
(1,636)
3.86
(6.44)
(2.58)
3.83
(6.38)
(2.56)
1.99
2,694
(723)
1,971
4.24
(1.14)
3.10
4.20
(1.13)
3.07
1.65
3,315
(316)
2,999
5.05
(0.48)
4.57
5.00
(0.48)
4.52
1.38
3,049
(120)
2,929
4.49
(0.18)
4.31
4.46
(0.18)
4.28
1.15
2,920
2,488
—
—
2,920
2,488
4.03
—
4.03
4.00
—
4.00
0.92
3.31
—
3.31
3.30
—
3.30
0.67
Total assets
Long-term debt, including current portion
41,404
12,796
44,553
12,572
48,163
16,359
46,630
16,225
43,705
15,726
44,533
16,814
Note: This information should be read in conjunction with MD&A and the Financial Statements.
(a)
Consisted of 53 weeks.
(b)
For 2014 and 2013, total revenues include sales generated by our retail operations. For 2012 and prior, total revenues include sales
generated by our retail operations and credit card revenues.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
Fiscal 2014 included the following notable items:
• GAAP earnings per share were $(2.56), including dilution of $(6.38) related to discontinued operations.
• Adjusted earnings per share from continuing operations were $4.27.
• Comparable sales grew 1.3 percent. Digital channel sales growth of more than 30 percent contributed 0.7
percentage points to 2014 comparable sales growth.
• We paid dividends of $1,205 million in 2014, an increase of 19.8 percent above 2013.
Sales from continuing operations were $72,618 million for 2014, an increase of $1,339 million or 1.9 percent from the
prior year. Earnings from continuing operations before interest expense and income taxes in 2014 decreased by $636
million or 12.3 percent from 2013 to $4,535 million. Cash flow provided by continuing operations was $5,131 million,
$7,519 million, and $5,568 million for 2014, 2013, and 2012, respectively. In connection with the sale of our U.S. credit
card receivables, we received cash of $5.7 billion during 2013. Of this amount, $2.7 billion is included in operating
cash flow provided by continuing operations and $3.0 billion is included in investing cash flow provided by continuing
operations.
15
Earnings Per Share From
Continuing Operations
GAAP diluted earnings per share
Adjustments
Adjusted diluted earnings per share
$
$
2014
2013
3.83 $
0.44
4.27 $
4.20 $
0.18
4.38 $
2012 (a)
5.00
(0.23)
4.76
Percent Change
2014/2013
2013/2012
(8.8)%
(16.1)%
(2.6)%
(7.9)%
Note: Adjusted diluted earnings per share from continuing operations (Adjusted EPS), a non-GAAP metric, excludes the impact of certain matters
not related to our routine retail operations and the impact of our discontinued Canadian operations. Management believes that Adjusted EPS is
meaningful to provide period-to-period comparisons of our operating results. A reconciliation of non-GAAP financial measures to GAAP measures
is provided on page 21.
(a)
Consisted of 53 weeks.
Canada Exit
On January 14, 2015, following a comprehensive assessment of Canadian operations, our Board of Directors approved
a plan to discontinue operating stores in Canada. As a result of this decision, on January 15, 2015, Target Canada
Co. and certain other wholly owned subsidiaries of Target (collectively Canada Subsidiaries), filed for protection (the
Filing) under the Companies' Creditors Arrangement Act (CCAA) with the Ontario Superior Court of Justice in Toronto
(the Court). The Canada Subsidiaries comprise substantially all of our Canadian operations and our Canadian Segment.
The Canada Subsidiaries have commenced an orderly liquidation process and stores in Canada will remain open
during the liquidation. To assist with the exit plan, the Court approved the appointment of a monitor and certain other
financial advisors.
As a result of the Filing, we no longer have a controlling interest in the Canada Subsidiaries. For this reason, we
deconsolidated the Canada Subsidiaries effective January 15, 2015, resulting in a pretax impairment loss on
deconsolidation and other charges, collectively totaling $5.1 billion. The pretax loss on deconsolidation includes the
derecognition of the carrying amounts of the Canada Subsidiaries' assets, liabilities and accumulated other
comprehensive loss and the recording of our remaining interests at fair value.
Subsequent to deconsolidation, we will use the cost method to account for our equity investment in the Canada
Subsidiaries, which has been reflected as zero in our Consolidated Statement of Financial Position at January 31,
2015 based on the estimated fair value of the Canada Subsidiaries' net assets. Loans to and accounts receivable from
the Canada Subsidiaries are recorded at an estimated fair value of $326 million. Our ultimate cash recovery on these
claims is subject to the final liquidation value of the Canada Subsidiaries and could vary materially from our estimates.
Our Canada exit represents a strategic shift in our business. For this reason, our Canadian Segment results for all
periods prior to the January 15, 2015 deconsolidation and costs to exit are classified as discontinued operations.
We have recognized a tax benefit of $1.6 billion in discontinued operations, which primarily relates to the loss on our
investment in Canada and includes other tax benefits resulting from certain asset write-offs and liabilities paid or
accrued to facilitate the liquidation. We have realized the majority of these tax benefits in the first quarter of 2015 and
expect to realize substantially all of the remainder in 2015.
The recorded expenses include an accrual for the estimated probable loss related to claims that may be asserted
against us, primarily under guarantees in certain leases. Our probable loss estimate is based on the expectation that
claims will be asserted against us and negotiated settlements will be reached, and not on any determination that it is
probable we would be found liable were these claims to be litigated. Given the early stage of our exit and the Filing,
our estimates involve significant judgment and are based on currently available information, an assessment of the
validity of certain claims and estimated payments by the Canada Subsidiaries. We are not able to reasonably estimate
a range of possible losses in excess of the year-end accrual because there are significant factual and legal issues to
be resolved. We believe that it is reasonably possible that future changes to our estimates of loss and the ultimate
amount paid on these claims could be material to our results of operations in future periods. Any such losses would
be recorded in discontinued operations.
We expect to incur severance, legal and professional services expenses associated with our Canadian exit. We will
recognize these expenses within discontinued operations as services are received and liabilities are incurred. We
currently cannot predict the timing of such expenses and associated cash disbursements; however, we do not expect
these amounts to be material to our results in future periods.
16
See Note 6 of the Financial Statements for further information regarding our Canada exit.
Data Breach
In the fourth quarter of 2013, we experienced a data breach in which an intruder stole certain payment card and other
guest information from our network (the Data Breach). In 2014, we recorded $191 million of pretax Data Breach-related
expenses and $46 million of expected insurance proceeds, for net expenses of $145 million. These expenses were
included in our Consolidated Statements of Operations as Selling, General and Administrative Expenses (SG&A), but
were not part of segment SG&A. Along with legal and other professional services, these expenses include an accrual
for estimated probable losses for what we believe to be the vast majority of actual and potential breach-related claims,
including claims by the payment card networks. Our probable loss estimate is based on the expectation of reaching
negotiated settlements, and not on any determination that it is probable we would be found liable for the losses we
have accrued were these claims to be litigated.
As of January 31, 2015 we have incurred $252 million of cumulative Data Breach-related expenses, partially offset by
$90 million of expected insurance recoveries, for net cumulative expenses of $162 million.
For more information about the Data Breach, see Note 17 of the Financial Statements.
Analysis of Results of Operations
Segment Results
Percent Change
$
2014
(dollars in millions)
Sales
Cost of sales
Gross margin
SG&A expenses (b)
EBITDA
Depreciation and amortization
EBIT
Note: Effective January 15, 2015, we operate as a single segment which includes all of our continuing operations, excluding net interest
expense, data breach related costs and certain other expenses which are discretely managed. Our segment operations are designed to enable
guests to purchase products seamlessly in stores, online or through mobile devices. See Note 28 of our Financial Statements for a reconciliation
of our segment results to earnings before income taxes.
(a)
2012 (a)
2013
72,618 $ 71,279 $ 71,960
51,278
50,568
50,039
21,340
21,392
21,240
14,450
13,759
14,285
7,633
6,955
6,890
2,044
1,996
2,129
5,589
4,959 $
4,761 $
2014/2013
1.9 %
2.5
0.5
1.2
(0.9)
6.7
(4.0)%
2013/2012
(0.9)%
(1.0)
(0.7)
3.8
(8.9)
(2.4)
(11.3)%
Consisted of 53 weeks.
SG&A includes credit card revenues and expenses for all periods presented prior to the March 2013 sale of our U.S. consumer credit
card portfolio to TD. For 2014 and 2013, SG&A also includes $682 million and $653 million, respectively, of profit-sharing income from
the arrangement with TD.
$
(b)
Rate Analysis
Gross margin rate
SG&A expense rate
EBITDA margin rate
Depreciation and amortization expense rate
EBIT margin rate
Note: Rate analysis metrics are computed by dividing the applicable amount by sales.
(a)
Consisted of 53 weeks.
2014
29.4%
19.9
9.5
2.9
6.6
2013
29.8%
20.0
9.8
2.8
7.0
2012 (a)
29.7%
19.1
10.6
2.8
7.8
17
Sales
Sales include merchandise sales, net of expected returns, and gift card breakage. Refer to Note 2 of the Financial
Statements for a definition of gift card breakage. The increase in 2014 sales reflects a 1.3 percent increase in comparable
sales and the contribution from new stores. The sales decline in 2013 reflected the impact of an additional week in
2012 and a decline in comparable sales, partially offset by the contribution from new stores. Inflation did not materially
affect sales in any period presented.
Comparable sales is a measure that highlights the performance of our existing stores and digital channel sales by
measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable
sales include all sales from stores open at least 13 months. Digital channel sales include all sales initiated through
mobile applications and our conventional websites, including those of acquired entities from the date of acquisition,
and may be fulfilled through our distribution centers or our stores. Comparable sales measures vary across the retail
industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures
reported by other companies.
Comparable Sales
Comparable sales change
Drivers of change in comparable sales:
Number of transactions
Average transaction amount
Selling price per unit
Units per transaction
Contribution to Comparable Sales Change
Stores channel comparable sales change
Digital channel contribution to comparable sales change
Total comparable sales change
Note: Amounts may not foot due to rounding.
Sales by Product Category
Household essentials (a)
Hardlines (b)
Apparel and accessories (c)
Food and pet supplies (d)
Home furnishings and décor (e)
Total
(a)
(b)
(c)
(d)
(e)
2014
1.3 %
(0.2)%
1.5 %
3.2 %
(1.6)%
2014
0.7%
0.7
1.3%
2013
(0.4)%
(2.7)%
2.3 %
1.6 %
0.7 %
2013
(0.7)%
0.3
(0.4)%
2012
2.7%
0.5%
2.3%
1.3%
1.0%
2012
2.6%
0.1
2.7%
Percentage of Sales
2014
25%
2013
25%
2012
25%
18
19
21
17
18
19
21
17
18
19
20
18
100%
100%
100%
Includes pharmacy, beauty, personal care, baby care, cleaning and paper products.
Includes electronics (including video game hardware and software), music, movies, books, computer software, sporting goods and toys.
Includes apparel for women, men, boys, girls, toddlers, infants and newborns, as well as intimate apparel, jewelry, accessories and shoes.
Includes dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce and pet supplies.
Includes furniture, lighting, kitchenware, small appliances, home décor, bed and bath, home improvement, automotive and seasonal
merchandise such as patio furniture and holiday décor.
Further analysis of sales metrics is infeasible due to 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.
TD offers credit to qualified guests through Target-branded credit cards: the Target Credit Card and the Target Visa
Credit Card (Target Credit Cards). Additionally, we offer a branded proprietary Target Debit Card. Collectively, we refer
to these products as REDcards®. Guests receive a 5 percent discount on virtually all purchases and free shipping
when they use a REDcard at Target. We monitor the percentage of sales that are paid for using REDcards (REDcard
Penetration) because our internal analysis has indicated that a meaningful portion of incremental purchases on our
REDcards are also incremental sales for Target.
18
REDcard Penetration
Target Credit Cards
Target Debit Card
Total REDcard Penetration
2014
9.7%
11.2
20.9%
2013
9.3%
9.9
19.3%
2012
7.9%
5.7
13.6%
Note: The sum of Target Credit Cards and Target Debit Card penetration may not equal Total REDcard Penetration due to rounding.
Gross Margin Rate
Our gross margin rate was 29.4 percent in 2014, 29.8 percent in 2013, and 29.7 percent in 2012. The 2014 decrease
is primarily due to promotional activity.
The 2013 increase was primarily the result of a change in vendor contracts regarding payments received in support
of marketing programs resulting in more vendor consideration being recognized as a reduction of our cost of sales
rather than a reduction of SG&A. Increases to the rate were offset by our integrated growth strategies of our 5 percent
REDcard Rewards loyalty program and our store remodel program.
Selling, General and Administrative Expense Rate
Our SG&A expense rate was 19.9 percent in 2014, 20.0 percent in 2013, and 19.1 percent in 2012. The decrease in
2014 primarily related to company-wide expense optimization efforts, partially offset by investments in technology and
other initiatives, none of which were individually significant.
The increase in 2013 resulted from a smaller contribution from our credit card portfolio, investments in technology and
supply chain in support of multichannel initiatives, changes in merchandise vendor contracts described above, and
other increases. Increases were partially offset by the benefit from our company-wide expense optimization efforts
and favorable incentive compensation and store hourly payroll.
19
Store Data
Change in Number of Stores
Beginning store count
Opened
Closed
Relocated
Ending store count
Number of stores remodeled during the year
Number of Stores and
Retail Square Feet
Expanded food assortment stores
SuperTarget stores
Target general merchandise stores
CityTarget stores
TargetExpress
Total
(a)
2014
1,793
16
(19)
—
1,790
39
2013
1,778
19
(4)
—
1,793
100
Number of Stores
Retail Square Feet (a)
January 31,
2015
1,292
February 1,
2014
January 31,
2015
February 1,
2014
1,245
167,026
160,891
249
240
8
1
251
289
8
—
44,151
27,945
820
21
44,500
33,843
820
—
1,790
1,793
239,963
240,054
In thousands, reflects total square feet less office, distribution center and vacant space.
Other Performance Factors
Other Selling, General and Administrative Expenses
In addition to segment selling, general and administrative expenses, we recorded certain other expenses during 2014
and 2013. For 2014, these expenses included $145 million of net Data Breach-related costs, $16 million of impairments
related to undeveloped U.S. land and $13 million of costs related to previously announced plans to convert existing
co-branded REDcards to MasterCard co-branded chip-and-PIN cards in 2015 to support the accelerated transition to
chip-and-PIN-enabled REDcards. For 2013, these expenses included a $23 million workforce-reduction charge
primarily related to severance and benefits costs, a $22 million charge related to part-time team member health benefit
changes, $19 million in impairment charges related to undeveloped U.S. land, and $17 million of net Data Breach-
related costs. Additional information about these items is provided within the Reconciliation of Non-GAAP Financial
Measures to GAAP Measures on page 21.
Net Interest Expense
Net interest expense from continuing operations was $882 million, $1,049 million, and $684 million for 2014, 2013,
and 2012, respectively. Net interest expense for 2014 and 2013 included a loss on early retirement of debt of $285
million and $445 million, respectively.
Provision for Income Taxes
Our effective income tax rate from continuing operations decreased to 33.0 percent in 2014, from 34.6 percent in 2013,
driven primarily by the net tax effect of our global sourcing operations and the favorable resolution of various income
tax matters. The resolution of various income tax matters reduced tax expense by $35 million and $16 million in 2014
and 2013, respectively. A tax rate reconciliation is provided in Note 21 to our Consolidated Financial Statements.
Our effective income tax rate from continuing operations increased to 34.6 percent in 2013, from 34.4 percent in 2012,
driven by a lower year-over-year benefit from the favorable resolution of various income tax matters. The resolution
of various income tax matters reduced tax expense by $16 million and $58 million in 2013 and 2012, respectively.
20
Reconciliation of Non-GAAP Financial Measures to GAAP Measures
To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share from continuing
operations (Adjusted EPS). This metric excludes the impact of the 2013 sale of our U.S. consumer credit card
receivables portfolio, losses on early retirement of debt, net expenses related to the 2013 data breach and other matters
presented below. We believe this information is useful in providing period-to-period comparisons of the results of our
continuing operations. This measure is not in accordance with, or an alternative to, generally accepted accounting
principles in the United States. The most comparable GAAP measure is diluted earnings per share from continuing
operations. Adjusted EPS from continuing operations should not be considered in isolation or as a substitution for
analysis of our results as reported under GAAP. Other companies may calculate non-GAAP adjusted EPS from
continuing operations differently than we do, limiting the usefulness of the measure for comparisons with other
companies. Prior year amounts have been revised to present Adjusted EPS on a continuing operations basis.
(millions, except per share data)
Pretax
GAAP diluted earnings per share from
continuing operations
Adjustments
2014
Net of
Tax
Per
Share
Amounts
$
3.83
2013
Net of
Tax
Pretax
Per
Share
Amounts
$
4.20
2012
Net of
Tax
Pretax
Per
Share
Amounts
$
5.00
Loss on early retirement of debt
$
285
$
173
$
0.27
$ 445
$
270
$
0.42
$ —
$ —
$
145
53
29
—
—
94
32
18
—
(35)
0.15
0.05
0.03
—
(0.06)
17
98
64
11
61
40
(391)
—
(247)
(16)
0.02
0.09
0.06
(0.38)
(0.03)
—
—
—
(152)
—
—
—
—
(97)
(58)
—
—
—
—
(0.15)
(0.09)
Data Breach-related costs, net of
insurance receivable (a)
Reduction of beneficial interest
asset (b)
Other (c)
Gain on receivables transaction (b)
Resolution of income tax matters
Adjusted diluted earnings per share
from continuing operations
$
4.27
$
4.38
$
4.76
Note: The sum of the non-GAAP adjustments may not equal the total adjustment amounts due to rounding.
(a)
(b)
(c)
Refer to Note 17 of the Financial Statements.
Refer to Note 7 of the Financial Statements.
2014 includes impairments of $16 million related to undeveloped land in the U.S. and $13 million of expense related to converting co-
branded card program to MasterCard. 2013 includes a $23 million workforce-reduction charge primarily related to severance and benefits
costs, a $22 million charge related to part-time team member health benefit changes, and $19 million in impairment charges related to
certain parcels of undeveloped land.
Analysis of Financial Condition
Liquidity and Capital Resources
Our period-end cash and cash equivalents balance was $2,210 million, compared with $670 million in 2013. Short-
term investments of $1,520 million and $3 million were included in cash and cash equivalents at the end of 2014 and
2013, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments.
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 dollar limits on our investments in individual funds or instruments.
Cash Flows
Our 2014 operations were funded by both internally and externally generated funds. Operating cash flow provided by
continuing operations was $5,131 million in 2014 compared with $7,519 million in 2013. Net cash flow provided by
continuing operations for 2013 includes $5.7 billion of cash received in connection with the sale of our U.S. consumer
credit card receivables, of which $2.7 billion is included in operating cash flow provided by continuing operations and
$3.0 billion is included in investing cash flow provided by continuing operations. In June 2014, we issued $1 billion of
unsecured debt that matures in June 2019 and $1 billion of unsecured debt that matures in July 2024. Combined with
our prior year-end cash position, these cash flows allowed us to repurchase $725 million of debt at a market value of
$1 billion, pay current debt maturities, invest in the business and pay dividends.
Year-end inventory levels increased from $8,278 million in 2013 to $8,790 million in 2014. Accounts payable increased
by $424 million, or 5.8 percent over the same period.
21
Share Repurchases
In January 2012, we began repurchasing shares under a $5 billion program authorized by our Board of Directors.
Since the second quarter of 2013, we have not repurchased any shares on the open market. However, as described
in Note 23 of the Financial Statements, we reacquired 0.8 million shares during 2014 upon the noncash settlement of
prepaid forward contracts related to nonqualified deferred compensation plans. During the first half of 2013, we
repurchased 21.9 million shares of our common stock for a total investment of $1,474 million ($67.41 per share).
Dividends
We paid dividends totaling $1,205 million in 2014 and $1,006 million in 2013, an increase of 19.8 percent. We declared
dividends totaling $1,271 million ($1.99 per share) in 2014, a per share increase of 20.6 percent over 2013. We declared
dividends totaling $1,051 million ($1.65 per share) in 2013, a per share increase of 19.6 percent over 2012. We have
paid dividends every quarter since our 1967 initial public offering, and it is our intent to continue to do so in the future.
Short-term and Long-term Financing
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 and commercial paper markets has provided
us with ample sources of liquidity. Our continued access to these markets depends on multiple factors, including the
condition of debt capital markets, our operating performance and maintaining strong debt ratings. As of January 31,
2015, our credit ratings were as follows:
Credit Ratings
Long-term debt
Commercial paper
Moody's
A2
P-1
Standard and Poor's
A
A-1
Fitch
A-
F2
If our credit ratings were lowered, our ability to access the debt markets, our cost of funds and other terms 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 ratings will remain the same as described above. Standard and Poor's lowered
our long-term debt rating from A+ to A during 2014, but maintained our A-1 commercial paper rating.
As a measure of our financial condition, we monitor our ratio of earnings from continuing operations to fixed charges,
which represents the ratio of pretax earnings from continuing operations before fixed charges to fixed charges. Fixed
charges include interest expense and the interest portion of rent expense. Our ratio of earnings to fixed charges was
6.02x in 2014, 6.48x in 2013 and 7.10x in 2012. See Exhibit (12) for a description of how the gain on sale of our U.S.
credit card receivable portfolio and loss on early retirement of debt affected the 2014, 2013 and 2012 calculations.
In 2014 and 2013, we funded our peak sales season working capital needs through internally generated funds and
the issuance of commercial paper.
Commercial Paper
(dollars in millions)
Maximum daily amount outstanding during the year
Average amount outstanding during the year
Amount outstanding at year-end
Weighted average interest rate
$
2014
590 $
129
—
0.11%
2013
1,465 $
408
80
0.13%
2012
970
120
970
0.16%
We have additional liquidity through a committed $2.25 billion revolving credit facility that expires in October 2018. No
balances were outstanding at any time during 2014 or 2013 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 January 31, 2015, no notes or debentures contained provisions requiring
22
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, finance anticipated expansion
and strategic initiatives, fund obligations incurred as a result of our exit from Canada, fund obligations incurred as a
result of the Data Breach and any related future technology enhancements, pay dividends and execute purchases
under our share repurchase program for the foreseeable future. We believe that our exit from Canada will increase
our after-tax cash flows beginning in 2015. We continue to anticipate ample access to commercial paper and long-
term financing.
Capital Expenditures
Capital Expenditures
(millions)
Information technology, distribution and other
New stores
Store remodels and expansions
Total
2014
2013
2012
$ 1,306 $ 1,069 $ 982
381
99
536
281
673
690
$ 1,786 $ 1,886 $ 2,345
Capital expenditures decreased in 2014 from the prior year due to fewer remodels and new stores, partially offset by
technology investments to support of our omnichannel efforts and security enhancements. Capital expenditures
decreased in 2013 from the prior year due to fewer remodels and new stores. We expect approximately $2.1 billion
of capital expenditures in 2015, reflecting our focus on becoming a leading omnichannel retailer through investments
in technology and supply chain, elevating signature categories and opening new stores, including urban formats.
Capital expenditures related to our discontinued Canadian operations were $228 million, $1,567 million and $932
million for 2014, 2013 and 2012, respectively.
23
Commitments and Contingencies
Contractual Obligations as of
Payments Due by Period
January 31, 2015
(millions)
Recorded contractual obligations:
Long-term debt (a)
Capital lease obligations (b)
Deferred compensation (c)
Real estate liabilities (d)
Tax contingencies (e)
Loss contingencies (f)
Unrecorded contractual obligations:
Interest payments – long-term debt
Operating leases (b)
Purchase obligations (g)
Real estate obligations (h)
Future contributions to retirement plans (i)
Contractual obligations
(a)
Less than
1-3
3-5
After 5
Total
1 Year
Years
Years
Years
$ 11,982 $
27 $
3,002 $
1,203 $
7,750
1,403
541
39
—
—
7,309
3,827
2,411
204
—
123
47
39
—
—
592
186
695
167
—
152
103
—
—
—
1,088
348
855
6
—
109
115
—
—
—
809
319
697
31
—
1,019
276
—
—
—
4,820
2,974
164
—
—
$ 27,716 $
1,876 $
5,554 $
3,283 $ 17,003
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Represents principal payments only, and excludes any fair market value adjustments recorded in long-term debt under derivative and
hedge accounting rules. See Note 18 of the Financial Statements for further information.
These payments also include $59 million and $67 million of legally binding minimum lease payments for stores that are expected to open
in 2015 or later for capital and operating leases, respectively. Capital lease obligations include interest. See Note 20 of the Financial
Statements for further information.
Deferred compensation obligations include commitments related to our nonqualified deferred compensation plans. The timing of deferred
compensation payouts is estimated based on payments currently made to former employees and retirees, forecasted investment returns,
and the projected timing of future retirements.
Real estate liabilities include costs incurred but not paid related to the construction or remodeling of real estate and facilities.
Estimated tax contingencies of $195 million, including interest and penalties, are not included in the table above because we are not able
to make reasonably reliable estimates of the period of cash settlement. See Note 21 of the Financial Statements for further information.
Estimated loss contingencies, including those related to the Canada Exit and the Data Breach, are not included in the table above because
we are not able to make reasonably reliable estimates of the period of cash settlement. See Note 6 and Note 17 of the Financial Statements
for further information.
Purchase obligations include all legally binding contracts such as firm minimum commitments for inventory purchases, merchandise
royalties, equipment purchases, marketing-related contracts, software acquisition/license commitments and service contracts. We issue
inventory purchase orders in the normal course of business, which represent authorizations to purchase that are cancelable by their
terms. We do not consider purchase orders to be firm inventory commitments; therefore, they are excluded from the table above. If we
choose to cancel a purchase order, we may be obligated to reimburse the vendor for unrecoverable outlays incurred prior to cancellation.
We also issue trade letters of credit in the ordinary course of business, which are excluded from this table as these obligations are
conditioned on terms of the letter of credit being met.
Real estate obligations include commitments for the purchase, construction or remodeling of real estate and facilities.
We have not included obligations under our pension and postretirement health care benefit plans in the contractual obligations table
above because no additional amounts are required to be funded as of January 31, 2015. Our historical practice regarding these plans
has been to contribute amounts necessary to satisfy minimum pension funding requirements, plus periodic discretionary amounts
determined to be appropriate.
Off Balance Sheet Arrangements: Other than the unrecorded contractual obligations noted above, we do not have
any arrangements or relationships with entities that are not consolidated into the financial statements.
Critical Accounting Estimates
Our analysis of operations and financial condition is based on our consolidated financial statements prepared in
accordance with GAAP. Preparation of these consolidated financial statements requires us to make estimates and
assumptions affecting the reported amounts of assets and liabilities at the date of the consolidated financial statements,
reported amounts of revenues and expenses during the reporting period and related disclosures of contingent assets
and liabilities. In the Notes to Consolidated Financial Statements, we describe the significant accounting policies used
in preparing the consolidated financial statements. Our estimates are evaluated on an ongoing basis and are drawn
from historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual
24
results could differ under other assumptions or conditions. However, except as discussed below regarding Canada
Exit and Data Breach-related costs, we do not believe there is a reasonable likelihood that there will be a material
change in future estimates or assumptions. Our senior management has discussed the development and selection of
our critical accounting estimates with the Audit Committee of our Board of Directors. The following items in our
consolidated financial statements require significant estimation or judgment:
Inventory and cost of sales: We use the retail inventory method to account for the majority of our inventory and the
related cost of sales. Under this method, inventory is stated at cost using the last-in, first-out (LIFO) method as
determined by applying a cost-to-retail ratio to each merchandise grouping's ending retail value. The cost of our
inventory includes the amount we pay to our suppliers to acquire inventory, freight costs incurred in connection with
the delivery of product to our distribution centers and stores, and import costs, reduced by vendor income and cash
discounts. The majority of our distribution center operating costs, including compensation and benefits, are expensed
to cost of sales in the period incurred. Since inventory value is adjusted regularly to reflect market conditions, our
inventory methodology reflects the lower of cost or market. We reduce inventory for estimated losses related to shrink
and markdowns. Our shrink estimate is based on historical losses verified by physical inventory counts. Historically,
our actual physical inventory count results have shown our estimates to be reliable. Markdowns designated for clearance
activity are recorded when the salability of the merchandise has diminished. Inventory is at risk of obsolescence if
economic conditions change, including changing consumer demand, guest preferences, changing consumer credit
markets or increasing competition. We believe these risks are largely mitigated because our inventory typically turns
in less than three months. Inventory was $8,790 million and $8,278 million at January 31, 2015 and February 1, 2014,
respectively, and is further described in Note 10 of the Financial Statements.
Vendor income receivable: Cost of sales and SG&A expenses are partially offset by various forms of consideration
received from our vendors (Vendor Income). Vendor Income is earned for a variety of programs, such as volume
rebates, markdown allowances, promotions, advertising allowances and compliance programs. We establish a
receivable for Vendor Income that is earned but not yet received. Based on the agreements in place, this receivable
is computed by estimating when we have completed our performance and when the amount is earned. The majority
of year-end Vendor Income receivables are collected within the following fiscal quarter, and we do not believe there
is a reasonable likelihood that the assumptions used in our estimate will change significantly. Historically, adjustments
to our Vendor Income receivable have not been material. Vendor Income receivable was $493 million and $536 million
at January 31, 2015 and February 1, 2014, respectively, and is described further in Note 4 of the Financial Statements.
Long-lived assets: Long-lived assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amounts may not be recoverable. The evaluation is performed at the lowest level of identifiable
cash flows independent of other assets. An impairment loss would be recognized when estimated undiscounted future
cash flows from the operation and/or disposition of the assets are less than their carrying amount. Measurement of
an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value. Fair
value is measured using discounted cash flows or independent opinions of value, as appropriate. We recorded
impairments of $124 million, $77 million, and $37 million in 2014, 2013, and 2012, respectively, which are described
further in Note 12. As of January 31, 2015, a 10 percent decrease in the fair value of assets we intend to sell or close
would result in additional impairment of $5 million in 2014. Historically, we have not realized material losses upon sale
of long-lived assets.
Investments in and receivables from Canada Subsidiaries: We determined the fair value and recoverability of our
Canadian investments by comparing the estimated fair value of the underlying assets of the Canada Subsidiaries to
estimated liabilities at the time of the Filing. We estimated the fair value of the major asset classes using estimated
selling price less cost to sell, the income approach based on estimated market rents and capitalization rates, and
discounted cash flow analysis of the differential between estimated market rent and contractual rent payments, as
appropriate. We also applied an estimated liquidation discount to reflect the CCAA filing.
Outstanding liabilities include accounts payable and other liabilities, forward commitments, unsubordinated related
party payables, lease liabilities and other potential claims. Potential claims include an accrual for the estimated probable
loss related to claims that may be asserted against the Canada Subsidiaries under certain contracts. Based on our
estimates, the fair value of liabilities exceeds the fair value of assets.
To assess the fair value and recoverability of amounts receivable from the Canada Subsidiaries, we estimated the fair
value of the underlying net assets of the Canada Subsidiaries available for distribution to their creditors in relation to
the estimated creditor claims and the priority of those claims.
Our estimates involve significant judgment and are based on currently available information, an assessment of the
validity of certain claims and estimated payments by the Canada Subsidiaries. Our ultimate recovery is subject to the
25
final liquidation value of the Canada Subsidiaries and may vary significantly from our current estimates. See Note 6
of the Financial Statements for further information.
Insurance/self-insurance: We retain a substantial portion of the risk related to certain general liability, workers'
compensation, property loss and team member medical and dental claims. However, we maintain stop-loss coverage
to limit the exposure related to certain risks. Liabilities associated with these losses include estimates of both claims
filed and losses incurred but not yet reported. We use actuarial methods which consider a number of factors to estimate
our ultimate cost of losses. General liability and workers' compensation liabilities are recorded at our estimate of their
net present value; other liabilities referred to above are not discounted. Our workers' compensation and general liability
accrual was $566 million and $576 million at January 31, 2015 and February 1, 2014, respectively. We believe that
the amounts accrued are appropriate; however, our liabilities could be significantly affected if future occurrences or
loss developments differ from our assumptions. For example, a 5 percent increase or decrease in average claim costs
would impact our self-insurance expense by $28 million in 2014. Historically, adjustments to our estimates have not
been material. Refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risk, for further disclosure of
the market risks associated with these exposures. We maintain insurance coverage to limit our exposure to certain
events, including network security matters. Since the Data Breach, we have recognized $90 million of expected
insurance recoveries related to the Data Breach. As of January 31, 2015, we have a $60 million insurance-recovery
receivable relating to the Data Breach because we believe recovery is probable. However, it is possible that the
insurance carriers could dispute our claims and that we may be unable to collect the recorded receivable.
Income taxes: We pay income taxes based on the tax statutes, regulations and case law of the various jurisdictions
in which we operate. Significant judgment is required in determining the timing and amounts of deductible and taxable
items, and in evaluating the ultimate resolution of tax matters in dispute with tax authorities. The benefits of uncertain
tax positions are recorded in our financial statements only after determining it is likely the uncertain tax positions would
withstand challenge by taxing authorities. We periodically reassess these probabilities, and record any changes in the
financial statements as appropriate. Liabilities for uncertain tax positions, including interest and penalties, were
$195 million and $241 million at January 31, 2015 and February 1, 2014, respectively. We believe the resolution of
these matters will not have a material adverse impact on our consolidated financial statements. Income taxes are
described further in Note 21 of the Financial Statements.
Pension and postretirement health care accounting: We maintain a funded qualified, defined benefit pension plan,
as well as several smaller and unfunded nonqualified plans and a postretirement health care plan for certain current
and retired team members. The costs for these plans are determined based on actuarial calculations using the
assumptions described in the following paragraphs. Eligibility and the level of benefits varies depending on team
members' full-time or part-time status, date of hire and/or length of service. The benefit obligation and related expense
for these plans are determined based on actuarial calculations using assumptions about the expected long-term rate
of return, the discount rate and compensation growth rates. The assumptions used to determine the period-end benefit
obligation also establish the expense for the next year, with adjustments made for any significant plan or participant
changes.
Our expected long-term rate of return on plan assets of 7.5 percent is determined by the portfolio composition, historical
long-term investment performance and current market conditions. Our compound annual rate of return on qualified
plans' assets was 12.1 percent, 8.3 percent, 7.0 percent and 9.7 percent for the 5-year, 10-year, 15-year and 20-year
periods, respectively. A one percentage point decrease in our expected long-term rate of return would increase annual
expense by $31 million.
The discount rate used to determine benefit obligations is adjusted annually based on the interest rate for long-term
high-quality corporate bonds, using yields for maturities that are in line with the duration of our pension liabilities. Our
benefit obligation and related expense will fluctuate with changes in interest rates. A 0.5 percentage point decrease
to the weighted average discount rate would increase annual expense by $29 million.
Based on our experience, we use a graduated compensation growth schedule that assumes higher compensation
growth for younger, shorter-service pension-eligible team members than it does for older, longer-service pension-
eligible team members.
Pension and postretirement health care benefits are further described in Note 26 of the Financial Statements.
Legal and other contingencies: We are exposed to other 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. When a loss is probable, we record an accrual based on the reasonably estimable
loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated
range of loss and disclose the estimated range. We do not record liabilities for reasonably possible loss contingencies,
but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range.
26
If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining
such a range. Historically, adjustments to our estimates have not been material.
We believe the accruals recorded in our consolidated financial statements properly reflect loss exposures that are both
probable and reasonably estimable. With the exception of Canada Exit and Data Breach-related loss exposures, we
do not believe any of the currently identified claims or litigation may materially affect our results of operations, cash
flows or financial condition. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur.
If an unfavorable ruling were to occur, it may cause a material adverse impact on the results of operations, cash flows
or financial condition for the period in which the ruling occurs, or future periods. Refer to Notes 6 and 17 of the Financial
Statements for further information on the Canada Exit and Data Breach-related contingencies, respectively.
New Accounting Pronouncements
We do not expect that any recently issued accounting pronouncements will have a material effect on our financial
statements.
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: our financial performance,
statements regarding the adequacy of and costs associated with our sources of liquidity, the fair value and amount of
the beneficial interest asset, the continued execution of our share repurchase program, our expected capital
expenditures, the impact of changes in the expected effective income tax rate on net income, the expected compliance
with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends,
contributions and payments related to our pension and postretirement health care plans, the expected returns on
pension plan assets, the expected timing and recognition of compensation expenses, the effects of macroeconomic
conditions, the adequacy of our reserves for general liability, workers' compensation and property loss, the expected
outcome of, and adequacy of our reserves for investigations, inquiries, claims and litigation, including those related to
the Data Breach and discontinuing our Canadian operations, expected insurance recoveries, expected changes to
our contractual obligations and liabilities, the expected ability to recognize deferred tax assets and liabilities and the
timing of such recognition, including net operating loss carryforwards and tax benefits related to discontinuing our
Canadian operations, the process, timing and effects of discontinuing our Canadian operations, the resolution of tax
matters, and changes in our assumptions and expectations.
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 to this Form 10-K, 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 7A. Quantitative and Qualitative Disclosures About Market Risk
At January 31, 2015, our exposure to market risk was primarily from interest rate changes on our debt obligations,
some of which are at a LIBOR-plus floating-rate. Our interest rate exposure is primarily due to differences between
our floating rate debt obligations compared to our floating rate short term investments. At January 31, 2015, our floating
rate short-term investments exceeded our floating rate debt by approximately $270 million. Based on our balance
sheet position at January 31, 2015, the annualized effect of a 0.1 percentage point decrease in floating interest rates
on our floating rate short-term investments, net of our debt obligations, would decrease earnings before income taxes
by approximately $0.3 million. In general, we expect our floating rate debt to exceed our floating rate short-term
investments over time, but that may vary in different interest rate environments. See further description of our debt
and derivative instruments in Notes 18 and 19 of the Notes to Financial Statements.
We record our general liability and workers' compensation liabilities at net present value; therefore, these liabilities
fluctuate with changes in interest rates. Periodically, in certain interest rate environments, we economically hedge a
portion of our exposure to these interest rate changes by entering into interest rate forward contracts that partially
mitigate the effects of interest rate changes. Based on our balance sheet position at January 31, 2015, the annualized
27
effect of a 0.5 percentage point decrease in interest rates would be to decrease earnings before income taxes by
$9 million.
In addition, we are exposed to market return fluctuations on our qualified defined benefit pension plans. The value of
our pension liabilities is inversely related to changes in interest rates. A 0.5 percentage point decrease to the weighted
average discount rate would increase annual expense by $29 million. To protect against declines in interest rates, we
hold high-quality, long-duration bonds and interest rate swaps in our pension plan trust. At year-end, we had hedged
50 percent of the interest rate exposure of our funded status.
As more fully described in Note 13 and Note 25 of the Financial Statements, we are exposed to market returns on
accumulated team member balances in our nonqualified, unfunded deferred compensation plans. We control the risk
of offering the nonqualified plans by making investments in life insurance contracts and prepaid forward contracts on
our own common stock that offset a substantial portion of our economic exposure to the returns on these plans. The
annualized effect of a one percentage point change in market returns on our nonqualified defined contribution plans
(inclusive of the effect of the investment vehicles used to manage our economic exposure) would not be significant.
There have been no other material changes in our primary risk exposures or management of market risks since the
prior year.
28
Item 8. Financial Statements and Supplementary Data
Report of Management on the Consolidated Financial Statements
Management is responsible for the consistency, integrity and presentation of the information in the Annual Report. The consolidated
financial statements and other information presented in this Annual Report have been prepared in accordance with accounting
principles generally accepted in the United States and include necessary judgments and estimates by management.
To fulfill our responsibility, we maintain comprehensive systems of internal control designed to provide reasonable assurance that
assets are safeguarded and transactions are executed in accordance with established procedures. The concept of reasonable
assurance is based upon recognition that the cost of the controls should not exceed the benefit derived. We believe our systems
of internal control provide this reasonable assurance.
The Board of Directors exercised its oversight role with respect to the Corporation's systems of internal control primarily through
its Audit Committee, which is comprised of independent directors. The Committee oversees the Corporation's systems of internal
control, accounting practices, financial reporting and audits to assess whether their quality, integrity and objectivity are sufficient to
protect shareholders' investments.
In addition, our consolidated financial statements have been audited by Ernst & Young LLP, independent registered public accounting
firm, whose report also appears on this page.
Brian C. Cornell
Chairman and Chief Executive Officer
March 13, 2015
John J. Mulligan
Executive Vice President and
Chief Financial Officer
___________________________________________________________________________________________________________________
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
The Board of Directors and Shareholders
Target Corporation
We have audited the accompanying consolidated statements of financial position of Target Corporation and subsidiaries (the
Corporation) as of January 31, 2015 and February 1, 2014, and the related consolidated statements of operations, comprehensive
income, cash flows, and shareholders' investment for each of the three years in the period ended January 31, 2015. These financial
statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Target Corporation and subsidiaries at January 31, 2015 and February 1, 2014, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended January 31, 2015, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Corporation's internal control over financial reporting as of January 31, 2015, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and
our report dated March 13, 2015, expressed an unqualified opinion thereon.
Minneapolis, Minnesota
March 13, 2015
29
Report of Management on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our chief
executive officer and chief financial officer, we assessed the effectiveness of our internal control over financial reporting as of
January 31, 2015, based on the framework in Internal Control—Integrated Framework (2013), issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework). Based on our assessment, we conclude that the
Corporation's internal control over financial reporting is effective based on those criteria.
Our internal control over financial reporting as of January 31, 2015, has been audited by Ernst & Young LLP, the independent
registered public accounting firm who has also audited our consolidated financial statements, as stated in their report which appears
on this page.
Brian C. Cornell
Chairman and Chief Executive Officer
March 13, 2015
John J. Mulligan
Executive Vice President and
Chief Financial Officer
___________________________________________________________________________________________________________________
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
The Board of Directors and Shareholders
Target Corporation
We have audited Target Corporation and subsidiaries' (the Corporation) internal control over financial reporting as of January 31,
2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 Framework) (the COSO criteria). The Corporation's management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Corporation's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company, and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of January 31,
2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated statements of financial position of Target Corporation and subsidiaries as of January 31, 2015 and February 1, 2014,
and the related consolidated statements of operations, comprehensive income, cash flows and shareholders' investment for each
of the three years in the period ended January 31, 2015, and our report dated March 13, 2015, expressed an unqualified opinion
thereon.
Minneapolis, Minnesota
March 13, 2015
30
Consolidated Statements of Operations
(millions, except per share data)
Sales
Credit card revenues
Total revenues
Cost of sales
Selling, general and administrative expenses
Credit card expenses
Depreciation and amortization
Gain on receivables transaction
Earnings from continuing operations before interest expense and income
taxes
Net interest expense
Earnings from continuing operations before income taxes
Provision for income taxes
Net earnings from continuing operations
Discontinued operations, net of tax
Net (loss)/earnings
Basic (loss)/earnings per share
Continuing operations
Discontinued operations
Net (loss)/earnings per share
Diluted (loss)/earnings per share
Continuing operations
Discontinued operations
Net (loss)/earnings per share
Weighted average common shares outstanding
Basic
Dilutive effect of share-based awards
Diluted
Antidilutive shares
See accompanying Notes to Consolidated Financial Statements.
$
$
$
$
$
$
2014
72,618 $
—
72,618
51,278
14,676
—
2,129
—
4,535
882
3,653
1,204
2,449
(4,085)
(1,636) $
3.86 $
(6.44)
(2.58) $
3.83 $
(6.38)
(2.56) $
634.7
5.4
640.1
3.3
2013
71,279 $
—
71,279
50,039
14,465
—
1,996
(391)
2012
71,960
1,341
73,301
50,568
14,643
467
2,044
(161)
5,170
1,049
4,121
1,427
2,694
(723)
1,971 $
4.24 $
(1.14)
3.10 $
4.20 $
(1.13)
3.07 $
635.1
6.7
641.8
2.3
5,740
684
5,056
1,741
3,315
(316)
2,999
5.05
(0.48)
4.57
5.00
(0.48)
4.52
656.7
6.6
663.3
5.0
31
Consolidated Statements of Comprehensive Income
(millions)
Net (loss)/income
Other comprehensive income/(loss), net of tax
Pension and other benefit liabilities, net of (benefit)/provision for taxes
of $(90), $71 and $58
Currency translation adjustment and cash flow hedges, net of provision
for taxes of $2, $11 and $8
Other comprehensive income/(loss)
Comprehensive (loss)/income
See accompanying Notes to Consolidated Financial Statements.
2014
2013
$
(1,636) $
1,971 $
2012
2,999
(139)
110
431
292
(425)
(315)
92
13
105
$
(1,344) $
1,656 $
3,104
32
Consolidated Statements of Financial Position
(millions, except footnotes)
January 31,
2015
February 1,
2014
Assets
Cash and cash equivalents, including short-term investments of $1,520 and $3
$
2,210 $
Inventory
Assets of discontinued operations
Other current assets
Total current assets
Property and equipment
Land
Buildings and improvements
Fixtures and equipment
Computer hardware and software
Construction-in-progress
Accumulated depreciation
Property and equipment, net
Noncurrent assets of discontinued operations
Other noncurrent assets
Total assets
Liabilities and shareholders' investment
Accounts payable
Accrued and other current liabilities
Current portion of long-term debt and other borrowings
Liabilities of discontinued operations
Total current liabilities
Long-term debt and other borrowings
Deferred income taxes
Noncurrent liabilities of discontinued operations
Other noncurrent liabilities
Total noncurrent liabilities
Shareholders' investment
Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Pension and other benefit liabilities
Currency translation adjustment and cash flow hedges
Total shareholders' investment
$
$
8,790
1,333
1,754
14,087
6,127
26,614
5,346
2,553
424
7,759 $
3,783
91
103
11,736
12,705
1,321
193
1,452
15,671
53
4,899
9,644
(561)
(38)
13,997
(15,106)
(14,066)
25,958
442
917
26,412
5,461
1,107
41,404 $
44,553
670
8,278
793
1,832
11,573
6,143
25,984
5,199
2,395
757
7,335
3,610
1,143
689
12,777
11,429
1,349
1,296
1,471
15,545
53
4,470
12,599
(422)
(469)
16,231
44,553
Total liabilities and shareholders' investment
$
41,404 $
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 640,213,987 shares issued and outstanding at January 31, 2015; 632,930,740
shares issued and outstanding at February 1, 2014.
Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding at January 31, 2015 or February 1, 2014.
See accompanying Notes to Consolidated Financial Statements.
33
Consolidated Statements of Cash Flows
(millions)
Operating activities
Net (loss)/earnings
Losses from discontinued operations, net of tax
Net earnings from continuing operations
Adjustments to reconcile net earnings to cash provided by operations:
Depreciation and amortization
Share-based compensation expense
Deferred income taxes
Gain on receivables transaction
Loss on debt extinguishment
Noncash losses/(gains) and other, net (a)
Changes in operating accounts:
Accounts receivable originated at Target
Proceeds on sale of accounts receivable originated at Target
Inventory
Other assets
Accounts payable and accrued liabilities
Cash provided by operating activities—continuing operations
Cash required for operating activities—discontinued operations
Cash provided by operations
Investing activities
Expenditures for property and equipment
Proceeds from disposal of property and equipment
Change in accounts receivable originated at third parties
Proceeds from sale of accounts receivable originated at third parties
Cash paid for acquisitions, net of cash assumed
Other investments
Cash (required for)/ provided by investing activities—continuing operations
Cash required for investing activities—discontinued operations
Cash required for investing activities
Financing activities
Change in commercial paper, net
Reductions of short-term debt
Additions to long-term debt
Reductions of long-term debt
Dividends paid
Repurchase of stock
Stock option exercises and related tax benefit
Other
Cash required for financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period (b)
Cash and cash equivalents at end of period (c)
Supplemental information
Interest paid, net of capitalized interest
Income taxes paid
Property and equipment acquired through capital lease obligations
2014
2013
2012
$
(1,636) $
(4,085)
2,449
$
1,971
(723)
2,694
2,999
(316)
3,315
2,129
1,996
2,044
71
7
—
285
40
—
—
(512)
(115)
777
5,131
(692)
4,439
(1,786)
95
—
—
(20)
106
(1,605)
(321)
(1,926)
(80)
—
1,993
(2,079)
(1,205)
—
373
—
(998)
—
1,515
695
2,210 $
106
58
(391)
445
121
157
2,703
(504)
(79)
213
7,519
(999)
6,520
(1,886)
70
121
3,002
(157)
130
1,280
(1,551)
(271)
(890)
—
—
(3,463)
(1,006)
(1,461)
456
—
(6,364)
26
(89)
784
695 $
871
$
1,043
$
1,251
88
1,386
132
102
67
(161)
—
220
(217)
—
160
(155)
193
5,568
(243)
5,325
(2,346)
66
254
—
—
102
(1,924)
(931)
(2,855)
970
(1,500)
1,971
(1,529)
(869)
(1,875)
360
(16)
(2,488)
8
(10)
794
784
697
1,603
251
$
$
(a)
(b)
(c)
Includes net write-offs of credit card receivables prior to the sale of our U.S. consumer credit card receivables on March 13, 2013, and
bad debt expense on credit card receivables during the twelve months ended February 2, 2013.
Includes cash of our discontinued operations of $25 million, $59 million and $98 million for 2014, 2013 and 2012, respectively.
Includes cash of our discontinued operations of $25 million and $59 million for 2013 and 2012, respectively
.
See accompanying Notes to Consolidated Financial Statements.
34
Consolidated Statements of Shareholders' Investment
Common
Stock
Shares
Stock
Par
Value
Additional
Paid-in
Capital
Retained
Earnings
Accumulated Other
Comprehensive
Income/(Loss)
Total
(millions, except footnotes)
January 28, 2012
Net earnings
669.3 $
—
56 $
—
Other comprehensive income
—
—
Dividends declared
Repurchase of stock
Stock options and awards
February 2, 2013
Net earnings
Other comprehensive loss
Dividends declared
Repurchase of stock
Stock options and awards
February 1, 2014
Net loss
Other comprehensive income
Dividends declared
Repurchase of stock
Stock options and awards
January 31, 2015
—
(32.2)
8.2
645.3 $
—
—
(3)
1
54 $
—
—
—
—
(21.9)
9.5
632.9 $
—
—
—
(0.8)
8.1
640.2 $
—
(2)
1
53 $
—
—
—
—
—
53 $
3,487 $ 12,959 $
(681) $ 15,821
—
—
—
—
438
2,999
—
(903)
(1,900)
—
3,925 $ 13,155 $
—
—
—
—
545
1,971
—
(1,051)
(1,476)
—
4,470 $ 12,599 $
—
—
—
—
429
(1,636)
—
(1,273)
(46)
—
4,899 $
9,644 $
—
105
—
—
2,999
105
(903)
(1,903)
—
—
—
—
—
(315)
439
(576) $ 16,558
1,971
(315)
(1,051)
(1,478)
546
(891) $ 16,231
(1,636)
292
(1,273)
(46)
429
(599) $ 13,997
292
—
—
—
—
Dividends declared per share were $1.99, $1.65 and $1.38 in 2014, 2013 and 2012, respectively.
See accompanying Notes to Consolidated Financial Statements.
35
Notes to Consolidated Financial Statements
1. Summary of Accounting Policies
Organization We are a general merchandise retailer selling products to our guests through our stores and digital
channels in the U.S.
As more fully described in Note 6, in January 2015, we announced our exit from the Canadian market and filed for
protection (the Filing) under the Companies' Creditors Arrangement Act (CCAA) with the Ontario Superior Court of
Justice in Toronto (the Court). Our prefiling financial results in Canada and subsequent expenses directly attributable
to the Canada exit are included in our financial statements and classified within discontinued operations. Effective
January 15, 2015, Target Corporation (Target, the Corporation, or the Company) operates as a single segment that
includes all of our continuing operations, which are designed to enable guests to purchase products seamlessly in
stores, online or through mobile devices.
Consolidation The consolidated financial statements include the balances of the Corporation and its subsidiaries
after elimination of intercompany balances and transactions. All material subsidiaries are wholly owned. We consolidate
variable interest entities where it has been determined that the Corporation is the primary beneficiary of those entities'
operations. As of January 15, 2015, we deconsolidated substantially all of our Canadian operations following the Filing.
See Note 6 for more information.
Use of estimates The preparation of our consolidated financial statements in conformity with U.S. generally accepted
accounting principles (GAAP) requires management to make estimates and assumptions affecting reported amounts
in the consolidated financial statements and accompanying notes. Actual results may differ significantly from those
estimates.
Fiscal year Our fiscal year ends on the Saturday nearest January 31. Unless otherwise stated, references to years
in this report relate to fiscal years, rather than to calendar years. Fiscal 2014 ended January 31, 2015 and consisted
of 52 weeks. Fiscal 2013 ended February 1, 2014, and consisted of 52 weeks. Fiscal 2012 ended February 2, 2013,
and consisted of 53 weeks. Fiscal 2015 will end January 30, 2016, and will consist of 52 weeks.
Accounting policies Our accounting policies are disclosed in the applicable Notes to the Consolidated Financial
Statements. Certain prior-year amounts have been reclassified to conform to current year presentation.
2. Revenues
Our retail stores generally record revenue at the point of sale. Digital channel sales include shipping revenue and are
recorded upon delivery to the guest. Total revenues do not include sales tax because we are a pass-through conduit
for collecting and remitting sales taxes. Generally, guests may return merchandise within 90 days of purchase.
Revenues are recognized net of expected returns, which we estimate using historical return patterns as a percentage
of sales. Commissions earned on sales generated by leased departments are included within sales and were $32
million, $29 million and $25 million in 2014, 2013 and 2012, respectively.
Revenue from gift card sales is recognized upon gift card redemption. Our gift cards do not expire. Based on historical
redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as "breakage."
Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions and was not material
in any period presented.
Guests receive a 5 percent discount on virtually all purchases and receive free shipping at Target.com when they use
their REDcard. The discounts associated with loyalty programs are included as reductions in sales in our Consolidated
Statements of Operations and were $943 million, $833 million and $583 million in 2014, 2013 and 2012, respectively.
36
3. Cost of Sales and Selling, General and Administrative Expenses
The following table illustrates the primary items classified in each major expense category:
Cost of Sales
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
Outbound shipping and handling expenses
associated with sales to our guests
Payment term cash discounts
Distribution center costs, including compensation
and benefits costs
Import costs
Selling, General and Administrative Expenses
Compensation and benefit costs including
• Stores
• Headquarters
Occupancy and operating costs of retail 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
U.S. credit cards servicing expenses and profit
sharing
Litigation and defense costs and related insurance
recovery
Other administrative costs
Note: The classification of these expenses varies across the retail industry.
4. Consideration Received from Vendors
We receive consideration for a variety of vendor-sponsored programs, such as volume rebates, markdown allowances,
promotions and advertising allowances and for our compliance programs, referred to as "vendor income." Vendor
income reduces either our inventory costs or SG&A expenses based on the provisions of the arrangement. Under our
compliance programs, vendors are charged for merchandise shipments that do not meet our requirements (violations),
such as late or incomplete shipments. These allowances are recorded when violations occur. Substantially all
consideration received is recorded as a reduction of cost of sales.
We establish a receivable for vendor income that is earned but not yet received. Based on provisions of the agreements
in place, this receivable is computed by estimating the amount earned when we have completed our performance.
We perform detailed analyses to determine the appropriate level of the receivable in the aggregate. The majority of
year-end receivables associated with these activities are collected within the following fiscal quarter. We have not
historically had significant write-offs for these receivables.
5. Advertising Costs
Advertising costs, which primarily consist of newspaper circulars, internet advertisements and media broadcast, are
expensed at first showing or distribution of the advertisement.
Advertising Costs
(millions)
Gross advertising costs
Vendor income (a)
Net advertising costs
(a)
2012
1,620
231
1,389
A 2013 change to certain merchandise vendor contracts resulted in more vendor funding being recognized as a reduction of our cost of
sales rather than offsetting advertising expenses.
2013
1,623 $
75
1,548 $
2014
1,647 $
47
1,600 $
$
$
6. Canada Exit
Background
On January 14, 2015, following a comprehensive assessment of Canadian operations, our Board of Directors approved
a plan to discontinue operating stores in Canada. As a result of this decision, on January 15, 2015, Target Canada
Co. and certain other wholly owned subsidiaries of Target (collectively Canada Subsidiaries), filed for protection under
the CCAA with the Court. The Canada Subsidiaries comprise substantially all of our Canadian operations and our
Canadian Segment. The Canada Subsidiaries have commenced an orderly liquidation process and stores will remain
37
open during the liquidation. To assist with the exit plan, the Court approved the appointment of a monitor and certain
other financial advisors.
As a result of the Filing, we no longer have a controlling interest in the Canada Subsidiaries. For this reason, we
deconsolidated the Canada Subsidiaries effective January 15, 2015, which resulted in a pretax impairment loss on
deconsolidation and other charges, collectively totaling $5.1 billion. The pretax loss on deconsolidation includes the
derecognition of the carrying amounts of the Canada Subsidiaries' assets, liabilities and accumulated other
comprehensive loss and the recording of our remaining interests at fair value.
Subsequent to deconsolidation, we will use the cost method to account for our equity investment in the Canada
Subsidiaries, which has been reflected as zero in our Consolidated Statement of Financial Position at January 31,
2015 based on the estimated fair value of the Canada Subsidiaries' net assets. Loans to and accounts receivable from
the Canada Subsidiaries are recorded at an estimated fair value of $326 million.
Loss on Discontinued Operations
Our Canadian exit represents a strategic shift in our business. For this reason, our Canadian Segment results for all
periods prior to the January 15, 2015 deconsolidation and costs to exit are classified as discontinued operations.
Loss on Discontinued Operations
(millions)
Sales
Cost of sales
SG&A expenses
Depreciation and amortization
Interest expense
Pretax loss from operations
Pretax exit costs
Income taxes
Loss on discontinued operations
2014
1,902 $
1,541
909
248
73
(869)
(5,105)
1,889
(4,085) $
2013
1,317 $
1,121
910
227
77
(1,018)
—
295
(723) $
$
$
2012
—
—
272
97
78
(447)
—
131
(316)
The fourth quarter Canadian pretax exit costs totaled $5,105 million and included the following:
Fourth Quarter Pretax Exit Costs
(millions)
Investment impairment on deconsolidation
Contingent liabilities
Employee trust
Other exit costs
Total
Investments in Canada Subsidiaries
2014
4,766
240
73
26
5,105
$
$
Target continues to indirectly own 100% of the common stock of the Canada Subsidiaries, but has deconsolidated
those entities because Target no longer has a controlling interest. At the date of deconsolidation, we adjusted our
investment in the Canada Subsidiaries to fair value with a corresponding charge to income. Because the estimated
amount of the Canada Subsidiaries' liabilities exceeded the estimated fair value of the assets available for distribution
to its creditors, the fair value of Target’s equity investment approximates zero.
Target Corporation Amounts Receivable from Canada Subsidiaries
Prior to deconsolidation, Target Corporation made loans to the Canada Subsidiaries for the purpose of funding its
operations and had accounts receivable generated in the ordinary course of business. The loans, corresponding
interest and the accounts receivable were considered intercompany transactions and eliminated in the consolidated
Target Corporation financial statements. As of the deconsolidation date, the loans, associated interest and accounts
38
receivable are now considered related party transactions and have been recognized in Target Corporation's
consolidated financial statements at their estimated fair value of $326 million.
Target Corporation Contingencies
The recorded expenses include an accrual for the estimated probable loss related to claims that may be asserted
against us, primarily under guarantees of certain leases. The beneficiaries of those guarantees may seek damages
or other related relief as a result of our exit from Canada. Our probable loss estimate is based on the expectation that
claims will be asserted against us and negotiated settlements will be reached, and not on any determination that it is
probable we would be found liable were these claims to be litigated. Given the early stage of our exit and the Filing,
our estimates involve significant judgment and are based on currently available information, an assessment of the
validity of certain claims and estimated payments by the Canada Subsidiaries. We are not able to reasonably estimate
a range of possible losses in excess of the year-end accrual because there are significant factual and legal issues to
be resolved. We believe that it is reasonably possible that future changes to our estimates of loss and the ultimate
amount paid on these claims could be material to our results of operations in future periods. Any such losses would
be reported in discontinued operations.
Employee Trust
In connection with the Filing, the Court approved our request to establish an employee trust (the Trust) to fund certain
payments to our Canadian employees outside of the estate. We have recorded expense based on an estimate of our
total contribution to the Trust of $73 million, which was fully funded in 2014. The Trust is a variable interest entity in
which we have a variable interest. However, the Trust is not consolidated because we are not the primary beneficiary.
Recovery Estimates and Valuation Techniques
We determined the fair value and recoverability of our Canadian investments by comparing the estimated fair value
of the underlying assets of the Canada Subsidiaries to estimated liabilities at the time of the Filing. The major asset
classes were valued as follows:
Asset
Inventory
Owned property
Valuation Technique (a)
Estimated selling price less costs to sell
Income approach based on estimated market rents and
cap rates
Leased property, including leasehold
improvements
Discounted cash flow analysis of the differential between
estimated market rent and contractual rent payments
(a)
An estimated liquidation discount was applied to reflect the CCAA filing.
Pricing
Category
Level 3
Level 3
Level 3
Outstanding liabilities include accounts payable and other liabilities, forward commitments, unsubordinated related
party payables, lease liabilities and other potential claims. Potential claims include an accrual for the estimated probable
loss related to claims that may be asserted against the Canada Subsidiaries under certain contracts. Claimants may
seek damages or other related relief as a result of the Canada Subsidiaries' exit from Canada. Based on our estimates,
the fair value of liabilities exceeds the fair value of assets.
To assess the fair value and recoverability of the amounts receivable from the Canada Subsidiaries, we estimated the
fair value of the underlying net assets of the Canada Subsidiaries available for distribution to their creditors in relation
to the estimated creditor claims and the priority of those claims.
Our estimates involve significant judgment and are based on currently available information, an assessment of the
validity of certain claims and estimated payments by the Canada Subsidiaries. Our ultimate recovery is subject to the
final liquidation value of the Canada Subsidiaries. Further, the final liquidation value and ultimate recovery of the
creditors of the Canada Subsidiaries, including Target Corporation, may impact our estimates of contingent liability
exposure described above.
39
Recorded Assets and Liabilities
Assets and Liabilities of Discontinued Operations
(millions)
January 31,
2015
Equity investment in Canada Subsidiaries
$
—
Inventory
Income tax benefit
Receivables from Canada Subsidiaries (a)
Receivables under the debtor-in-possession
credit facility
Total assets
Accrued liabilities
Total liabilities
(a)
1,430 Property and equipment, net
326 Other
19
$
$
$
1,775 Total assets
Capital lease obligations
296
Accounts payable and other liabilities
296
Total liabilities
Represents the fair value of loans and accounts receivable from Canada Subsidiaries.
February 1,
2014
$
$
$
$
488
4,966
800
6,254
1,210
775
1,985
DIP Financing
In conjunction with the Filing, the Court approved Target's agreement to provide a debtor-in-possession credit facility
(the DIP facility) to the Canada Subsidiaries, which provides for borrowings under the facility up to $175 million. The
DIP facility will be used to finance the Canada Subsidiaries' operations during the CCAA process. Amounts borrowed
by the Canada Subsidiaries under the DIP facility will have a priority claim over certain other secured and unsecured
claims except for other Court ordered charges and permitted priority liens under the law. Amounts drawn under the
DIP and repaid cannot be reborrowed. As of January 31, 2015, there was $19 million drawn and outstanding under
the DIP facility, which was fully repaid in 2015.
Income Taxes
We have recognized a tax benefit of $1,627 million in discontinued operations, which primarily relates to a loss on our
investment in Canada and includes other tax benefits resulting from certain asset write-offs and liabilities paid or
accrued to facilitate the liquidation. The tax benefit in discontinued operations reflects certain tax attribute carryforwards
including a gross federal operating loss of $694 million and gross state operating losses of $423 million. We have
realized the majority of these tax benefits in the first quarter of 2015, and expect to realize substantially all of the
remainder in 2015.
Canadian deferred tax assets relating to both historical and current year net operating losses were included in our
equity investment in the Canada Subsidiaries that has been reduced to zero.
As part of our exit from Canada we also incurred a $284 million gross capital loss on a transaction within our consolidated
group. We currently do not have nor anticipate sufficient capital gains to absorb this capital loss. Therefore, we have
established a full valuation allowance against this deferred tax asset.
7. Credit Card Receivables Transaction
In March 2013, we sold our entire U.S. consumer credit card portfolio to TD Bank Group (TD) and recognized a gain
of $391 million. This transaction was accounted for as a sale, and the receivables are no longer reported in our
Consolidated Statements of Financial Position. Consideration received included cash of $5.7 billion, equal to the gross
(par) value of the outstanding receivables at the time of closing, and a $225 million beneficial interest asset. Concurrent
with the sale of the portfolio, we repaid the nonrecourse debt collateralized by credit card receivables (2006/2007
Series Variable Funding Certificate) at par of $1.5 billion, resulting in net cash proceeds of $4.2 billion.
TD now underwrites, funds and owns Target Credit Card and Target Visa receivables. TD controls risk management
policies and oversees regulatory compliance, and we perform account servicing and primary marketing functions. We
earn a substantial portion of the profits generated by the Target Credit Card and Target Visa portfolios. Income from
the TD profit-sharing arrangement and our related account servicing expenses are classified within segment SG&A
expenses.
40
Profit-Sharing Arrangement
(millions)
Profit-sharing included in segment SG&A
Reduction of beneficial interest asset (b)
Net impact to SG&A expense
(a)
2014
682 $
(53)
629 $
2013 (a)
653
(98)
555
$
$
(b)
Segment SG&A also reflected credit card revenues earned in 2013 prior to the close of the transaction.
On a consolidated basis, profit-sharing income is offset by reductions of the beneficial interest asset.
The $225 million beneficial interest asset recognized at the close of the transaction effectively represents a receivable
for the present value of future profit-sharing we expect to receive on the receivables sold. Profit-sharing payments
reduced the beneficial interest asset by $73 million and $96 million during 2014 and 2013, respectively. Revaluation
adjustments increased the asset by $20 million during 2014 and reduced the asset by $2 million during 2013. As of
January 31, 2015 and February 1, 2014, a beneficial interest asset of $74 million and $127 million, respectively, remains
and is recorded within other current assets and other noncurrent assets in our Consolidated Statements of Financial
Position. Based on historical payment patterns, we estimate that the remaining beneficial interest asset will be reduced
over the next two years.
Prior to the sale, credit card revenues were recognized according to the contractual provisions of each credit card
agreement. When accounts were written off, uncollected finance charges and late fees were recorded as a reduction
of credit card revenues. Target retail sales charged on our credit cards totaled $5,807 million in 2012.
8. Fair Value Measurements
Fair value measurements are reported in 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, other than quoted prices included in
Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).
Fair Value Measurements - Recurring Basis
(millions)
Assets
Cash and cash equivalents
Short-term investments
Other current assets
Interest rate swaps(a)
Prepaid forward contracts
Beneficial interest asset(b)
Other noncurrent assets
Interest rate swaps(a)
Company-owned life insurance investments(c)
Beneficial interest asset(b)
Liabilities
Other noncurrent liabilities
Interest rate swaps(a)
Fair Value at
Pricing
Category
January 31,
2015
February 1,
2014
Level 1 $
1,520 $
Level 2
Level 1
Level 3
Level 2
Level 2
Level 3
—
38
43
65
322
31
3
1
73
71
62
305
56
Level 2
24
39
See Note 19 for additional information on interest rate swaps.
Note 7 includes a rollforward of the Level 3 beneficial interest asset.
Company-owned life insurance investments consist of equity index funds and fixed income assets. Amounts are presented net of
nonrecourse loans that are secured by some of these policies. These loan amounts totaled $773 million at January 31, 2015 and $790
million at February 1, 2014.
(a)
(b)
(c)
41
Valuation Technique
Short-term investments - Carrying value 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).
Company-owned life insurance investments - Includes investments in separate accounts that are valued based on
market rates credited by the insurer.
Beneficial interest asset - Valued using a cash-flow based economic-profit model, which includes inputs of the
forecasted performance of the receivables portfolio and a market-based discount rate. Internal data is used to
forecast expected payment patterns and write-offs, revenue, and operating expenses (credit EBIT yield) related to
the credit card portfolio. Changes in macroeconomic conditions in the United States could affect the estimated fair
value. A one percentage point change in the forecasted EBIT yield would impact our fair value estimate by
approximately $11 million. A one percentage point change in the forecasted discount rate would impact our fair
value estimate by approximately $2 million. As described in Note 7, this beneficial interest asset effectively
represents a receivable for the present value of future profit-sharing we expect to receive on the receivables sold.
As a result, a portion of the profit-sharing payments we receive from TD will reduce the beneficial interest asset.
As the asset is reduced over time, changes in the forecasted credit EBIT yield and the forecasted discount rate
will have a smaller impact on the estimated fair value.
Significant Financial Instruments not Measured at Fair Value (a)
(millions)
2014
2013
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
$ 11,946 $ 14,089 $ 11,758 $ 13,184
Debt (b)
(a)
(b)
The carrying amounts of certain other current assets, accounts payable, and certain accrued and other current liabilities approximate fair
value due to their short-term nature.
The fair value of debt is generally measured using a discounted cash flow analysis based on current market interest rates for similar types
of financial instruments and would be classified as Level 2. These amounts exclude unamortized swap valuation adjustments and capital
lease obligations.
Refer to Note 6 for information about fair value measurements related to our discontinued Canadian operations.
9. Cash Equivalents
Cash equivalents include highly liquid investments with an original maturity of three months or less from the time of
purchase. These investments were $1,520 million and $3 million at January 31, 2015 and February 1, 2014,
respectively. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card
transactions. These receivables typically settle in less than five days and were $379 million and $346 million at
January 31, 2015 and February 1, 2014, respectively.
10. Inventory
The majority of our inventory is accounted for under the retail inventory accounting method (RIM) using the last-in,
first-out (LIFO) method. Inventory is stated at the lower of LIFO cost or market. The cost of our inventory includes the
amount we pay to our suppliers to acquire inventory, freight costs incurred in connection with the delivery of product
to our distribution centers and stores, and import costs, reduced by vendor income and cash discounts. The majority
of our distribution center operating costs, including compensation and benefits, are expensed in the period incurred.
Inventory is also reduced for estimated losses related to shrink and markdowns. The LIFO provision is calculated
based on inventory levels, markup rates and internally measured retail price indices.
Under RIM, inventory cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the
inventory retail value. RIM is an averaging method that has been widely used in the retail industry due to its practicality.
The use of RIM will result in inventory being valued at the lower of cost or market because permanent markdowns are
taken as a reduction of the retail value of inventory.
Certain other inventory is recorded at the lower of cost or market using the cost method. The valuation allowance for
inventory valued under a cost method was not material to our Consolidated Financial Statements as of the end of
fiscal 2014 or 2013.
42
We routinely enter into arrangements with vendors whereby we do not purchase or pay for merchandise until the
merchandise is ultimately sold to a guest. Activity under this program is included in sales and cost of sales in the
Consolidated Statements of Operations, but the merchandise received under the program is not included in inventory
in our Consolidated Statements of Financial Position because of the virtually simultaneous purchase and sale of this
inventory. Sales made under these arrangements totaled $2,040 million, $1,833 million and $1,800 million in 2014,
2013 and 2012, respectively.
11. Other Current Assets
Other Current Assets
(millions)
January 31,
2015
February 1,
2014
Pharmacy, income tax and other receivables
$
629 $
493
231
188
213
570
536
255
155
316
$
1,754 $
1,832
Vendor income receivable
Prepaid expenses
Deferred taxes
Other
Total
12. Property and Equipment
Property and equipment is depreciated using the straight-line method over estimated useful lives or lease terms if
shorter. We amortize leasehold improvements purchased after the beginning of the initial lease term over the shorter
of the assets' useful lives or a term that includes the original lease term, plus any renewals that are reasonably assured
at the date the leasehold improvements are acquired. Depreciation and capital lease amortization expense for 2014,
2013 and 2012 was $2,108 million, $1,975 million and $2,027 million, respectively. For income tax purposes, accelerated
depreciation methods are generally used. Repair and maintenance costs are expensed as incurred. Facility pre-opening
costs, including supplies and payroll, are expensed as incurred.
Estimated Useful Lives
Buildings and improvements
Fixtures and equipment
Computer hardware and software
Life (Years)
8-39
2-15
2-7
Long-lived assets are reviewed for impairment when events or changes in circumstances, such as a decision to relocate
or close a store or make significant software changes, indicate that the asset's carrying value may not be recoverable.
For asset groups classified as held for sale, the carrying value is compared to the fair value less cost to sell. We
estimate fair value by obtaining market appraisals, valuations from third party brokers or other valuation techniques.
Impairments (a)
(millions)
Impairments included in segment SG&A
Unallocated impairments (b)
Total impairments
(a)
2012
37
—
37
Substantially all of the impairments are recorded in selling, general and administrative expense on the Consolidated Statements of
Operations, primarily from completed or planned store closures and software changes.
Represents impairments of undeveloped land.
108 $
16
124 $
58 $
19
77 $
2013
2014
$
$
(b)
43
13. Other Noncurrent Assets
Other Noncurrent Assets
(millions)
Goodwill and intangible assets
Company-owned life insurance investments (a)
Interest rate swaps (b)
Other
January 31,
2015
302 $
322
65
228
February 1,
2014
331
305
62
409
917 $
1,107
$
$
Total
(a)
(b)
Company-owned life insurance policies on approximately 4,000 team members who have been designated highly compensated under
the Internal Revenue Code and have given their consent to be insured. Amounts are presented net of loans that are secured by some
of these policies.
See Notes 8 and 19 for additional information relating to our interest rate swaps.
14. Goodwill and Intangible Assets
Goodwill totaled $147 million and $151 million at January 31, 2015 and February 1, 2014, respectively. No impairments
were recorded in 2014, 2013 or 2012 as a result of the goodwill impairment tests performed.
Intangible Assets
(millions)
Gross asset
Accumulated amortization
Net intangible assets
(a)
Leasehold
Acquisition Costs
January 31, February 1,
2014
2015
Other (a)
January 31, February 1,
2014
2015
Total
January 31, February 1,
2014
2015
$
$
224 $
(133)
91 $
225 $
(126)
99 $
181 $
(117)
64 $
180 $
(106)
74 $
405 $
(250)
155 $
405
(232)
173
Other intangible assets relate primarily to acquired customer lists and trademarks.
We use the straight-line method to amortize leasehold acquisition costs primarily over 9 to 39 years and other definite-
lived intangibles over 3 to 15 years. The weighted average life of leasehold acquisition costs and other intangible
assets was 26 years and 7 years, respectively, at January 31, 2015. Amortization expense was $22 million, $20 million
and $16 million in 2014, 2013 and 2012, respectively.
Estimated Amortization Expense
(millions)
Amortization expense
15. Accounts Payable
2015
2016
2017
2018
$
21 $
17 $
14 $
9 $
2019
8
At January 31, 2015 and February 1, 2014, we reclassified book overdrafts of $682 million and $716 million, respectively,
to accounts payable and $82 million and $81 million to accrued and other current liabilities.
44
16. Accrued and Other Current Liabilities
Accrued and Other Current Liabilities
(millions)
Wages and benefits
Gift card liability, net of estimated breakage
Real estate, sales and other taxes payable
Dividends payable
Straight-line rent accrual (a)
Workers' compensation and general liability (b)
Interest payable
Project costs accrual
Income tax payable
January 31,
2015
February 1,
2014
$
951 $
609
550
333
255
153
76
69
26
761
865
516
529
272
242
152
78
165
216
575
Other
Total
(a)
(b)
Straight-line rent accrual represents the amount of rent expense recorded that exceeds cash payments remitted in connection with
operating leases.
We retain a substantial portion of the risk related to general liability and workers' compensation claims. Liabilities associated with these
losses include estimates of both claims filed and losses incurred but not yet reported. We estimate our ultimate cost based on analysis
of historical data and actuarial estimates. General liability and workers' compensation liabilities are recorded at our estimate of their net
present value.
$
3,783 $
3,610
17. Commitments and Contingencies
Data Breach
In the fourth quarter of 2013, we experienced a data breach in which an intruder stole certain payment card and other
guest information from our network (the Data Breach). Based on our investigation to date, we believe that the intruder
installed malware on our point-of-sale system in our U.S. stores and stole payment card data from up to approximately
40 million credit and debit card accounts of guests who shopped at our U.S. stores between November 27 and December
17, 2013. In addition, the intruder stole certain guest information, including names, mailing addresses, phone numbers
or email addresses, for up to 70 million individuals.
Payment Card Network Loss Contingencies
In the event of a data breach where payment card data is or may have been stolen, the payment card networks’
contracts purport to give them the ability to make claims for reimbursement of incremental counterfeit fraud losses and
non-ordinary course operating expenses (such as card reissuance costs) that the payment card networks believe they
or their issuing banks have incurred as a result of the event. For us to have liability for such claims, we believe that a
court would have to find that, among other things, (1) at the time of the Data Breach the portion of our network that
handles payment card data was noncompliant with applicable data security standards in a manner that contributed to
the Data Breach, and (2) the network operating rules around reimbursement of operating costs and counterfeit fraud
losses are enforceable. While an independent third-party assessor found the portion of our network that handles
payment card data to be compliant with applicable data security standards in the fall of 2013 and late 2014, the forensic
investigator working on behalf of the payment card networks claimed in first quarter 2014 that we were not in compliance
with those standards at the time of the Data Breach.
During 2014, three of the four major payment card networks, which between them represent a substantial majority of
the payment cards potentially impacted by the Data Breach, made written claims against us, either directly or through
our acquiring banks. We believe it is probable that the fourth major payment card network will also make a claim against
us. We expect to dispute the claims that have been or may be made against us by the payment card networks, and
we think it is probable that our disputes would lead to settlement negotiations consistent with the experience of other
entities that suffered similar payment card breaches. We believe such negotiations would effect a combined settlement
of the payment card networks' counterfeit fraud loss allegations and their non-ordinary course operating expense
allegations. Our accruals for estimated probable loss discussed below include accruals for what we believe to be the
vast majority of both actual and potential claims from the payment card networks.
45
Litigation and Governmental Investigations
In addition, more than 100 actions have been filed in courts in many states, along with one action in Canada, and other
claims have been or may be asserted against us on behalf of guests, payment card issuing banks, shareholders or
others seeking damages or other related relief allegedly arising out of the Data Breach. State and federal agencies,
including State Attorneys General, the Federal Trade Commission and the SEC, are investigating events related to
the Data Breach, including how it occurred, its consequences and our responses. Our accruals for estimated probable
loss discussed below include accruals for what we believe to be the vast majority of both actual and potential claims
from these matters.
Expenses Incurred and Amounts Accrued
Data Breach Balance Sheet Rollforward
(millions)
Balance at February 1, 2014
Expenses incurred/insurance receivable recorded (a)
Payments made/received
Balance at January 31, 2015
(a)
Liabilities
$
$
61
$
191
(81)
171 $
Insurance
receivable
44
46
(30)
60
Includes expenditures and accruals for Data Breach-related costs and expected insurance recoveries as discussed below.
During 2014, we recorded $191 million of Data Breach-related expenses, partially offset by expected insurance
proceeds of $46 million, for net expenses of $145 million. Since the Data Breach, we have incurred $252 million of
cumulative expenses, partially offset by expected insurance recoveries of $90 million, for net cumulative expenses of
$162 million. These expenses were included in our Consolidated Statements of Operations as Selling, General and
Administrative Expenses (SG&A), but were not part of segment results. Along with legal and other professional services,
these expenses include an accrual for estimated probable losses for what we believe to be the vast majority of actual
and potential breach related claims, including claims by the payment card networks. Our probable loss estimate is
based on the expectation of reaching negotiated settlements, and not on any determination that it is probable we would
be found liable for the losses we have accrued were these claims to be litigated. Given the varying stages of claims
and related proceedings, and the inherent uncertainty surrounding them, our estimates involve significant judgment
and are based on currently available information, historical precedents and an assessment of the validity of certain
claims. Our estimates may change as new information becomes available, and although we do not believe it is probable,
it is reasonably possible that we may incur a material loss in excess of the amount accrued. We are not able to estimate
the amount of such reasonably possible excess loss exposure at this time because many of the matters are in the
early stages, alleged damages have not been specified, and there are significant factual and legal issues to be resolved.
The accrual does not reflect future breach-related legal, consulting or administrative fees, which are expensed as
incurred and not expected to be material to our consolidated financial statements in any individual period.
Insurance Coverage
To limit our exposure to losses relating to data breach and other claims, we maintain $100 million of network-security
insurance coverage, above a $10 million deductible and with a $50 million sublimit for settlements with the payment
card networks. This coverage, and certain other customary business-insurance coverage, has reduced our exposure
related to the Data Breach. We will pursue recoveries to the maximum extent available under the policies. Since the
Data Breach, we have received $30 million from our network-security insurance carriers.
Canada Exit
See Note 6 for information related to Canada Exit-related contingent liabilities.
Other Contingencies
We are exposed to other 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
46
estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of
operations, cash flows or financial condition.
Commitments
Purchase obligations, which include all legally binding contracts such as firm commitments for inventory purchases,
merchandise royalties, equipment purchases, marketing-related contracts, software acquisition/license commitments
and service contracts, were $2,411 million and $1,285 million at January 31, 2015 and February 1, 2014, respectively.
These purchase obligations are primarily due within three years and recorded as liabilities when inventory is received.
We issue inventory purchase orders, which represent authorizations to purchase that are cancelable by their terms.
We do not consider purchase orders to be firm inventory commitments. If we choose to cancel a purchase order, we
may be obligated to reimburse the vendor for unrecoverable outlays incurred prior to cancellation. Real estate
obligations, which include commitments for the purchase, construction or remodeling of real estate and facilities, were
$243 million and $358 million at January 31, 2015 and February 1, 2014, respectively. These real estate obligations
are primarily due within one year, a portion of which are recorded as liabilities.
We issue letters of credit and surety bonds in the ordinary course of business. Trade letters of credit totaled $1,447
million and $1,420 million at January 31, 2015 and February 1, 2014, respectively, a portion of which are reflected in
accounts payable. Standby letters of credit and surety bonds, relating primarily to insurance and regulatory
requirements, totaled $459 million and $486 million at January 31, 2015 and February 1, 2014, respectively.
18. Notes Payable and Long-Term Debt
At January 31, 2015, the carrying value and maturities of our debt portfolio were as follows:
Debt Maturities
(dollars in millions)
Due 2015-2019
Due 2020-2024
Due 2025-2029
Due 2030-2034
Due 2035-2039
Due 2040-2044
Total notes and debentures
Swap valuation adjustments
Capital lease obligations
Less: Amounts due within one year
Long-term debt
(a)
Reflects the weighted average stated interest rate as of year-end.
January 31, 2015
Rate (a)
Balance
4.9% $
3.8
6.7
6.5
6.7
4.0
5.0
4,230
3,209
252
770
2,014
1,471
11,946
61
789
(91)
$
12,705
Required Principal Payments
(millions)
2015
2016
2017
2018
2019
Total required principal payments
$
27 $
751 $
2,251 $
201 $
1,001
In June 2014, we issued $1 billion of unsecured fixed rate debt at 2.3% that matures in June 2019 and $1 billion of
unsecured fixed rate debt at 3.5% that matures in July 2024. We used proceeds from these issuances to repurchase
$725 million of debt before its maturity at a market value of $1 billion, and for general corporate purposes including
the payment of $1 billion of debt maturities. We recognized a loss of $285 million on the early retirement, which was
recorded in net interest expense in our Consolidated Statements of Operations.
Concurrent with the sale of our U.S. consumer credit card receivables portfolio, we repaid $1.5 billion of nonrecourse
debt collateralized by credit card receivables (the 2006/2007 Series Variable Funding Certificate). We also used $1.4
billion of proceeds from the transaction to repurchase, at market value, an additional $970 million of debt before its
47
maturity. We recognized a loss of $445 million on the early retirement, which was recorded in net interest expense in
our Consolidated Statements of Operations.
We periodically obtain short-term financing under our commercial paper program, a form of notes payable.
Commercial Paper
(dollars in millions)
2014
2013
2012
Maximum daily amount outstanding during the year
$
590 $ 1,465 $
Average amount outstanding during the year
Amount outstanding at year-end
Weighted average interest rate
129
—
408
80
0.11%
0.13%
0.16%
970
120
970
No balances were outstanding at any time during 2014 or 2013 under our $2.25 billion revolving credit facility that
expires in October 2018.
Substantially all of our outstanding borrowings are senior, unsecured obligations. 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, which have
no practical effect on our ability to pay dividends.
19. Derivative Financial Instruments
Our derivative instruments primarily consist of interest rate swaps, which are used to mitigate our interest rate risk. As
a result of our use of derivative instruments, we have counterparty credit exposure to large global financial institutions.
We monitor this concentration of counterparty credit risk on an ongoing basis. See Note 8 for a description of the fair
value measurement of our derivative instruments and their classification on the Consolidated Statements of Financial
Position.
In June 2014, we entered into two interest rate swaps, each with a notional amount of $500 million, under which we
pay a variable rate and receive a fixed rate. In March 2014, we entered into an interest rate swap with a notional
amount of $250 million, under which we pay a variable rate and receive a fixed rate. We designated these swaps as
fair value hedges. As of February 1, 2014, one swap was designated as a fair value hedge. No ineffectiveness was
recognized in 2014 or 2013.
Outstanding Interest Rate Swap Summary
January 31, 2015
(dollars in millions)
Weighted average rate:
Pay
Receive
Designated
Pay Floating
De-Designated
Pay Floating
Pay Fixed
(a)
1.7%
1-month LIBOR
3.8%
5.7%
1-month LIBOR
Weighted average maturity
4.1 years
1.5 years
$
1,250
$
500
$
1.5 years
500
Notional
(a)
There are three designated swaps at January 31, 2015. Two swaps have floating pay rates equal to 3-month LIBOR and one swap
has a floating pay rate equal to 1-month LIBOR.
Classification and
Fair Value
(millions)
Assets
Liabilities
Classification
Jan 31,
2015
Feb 1,
2014
Designated:
Other current assets $ — $
De-designated:
Other noncurrent assets
Other noncurrent assets
Total
27
38
65 $
$
1
—
62 Other noncurrent liabilities
63
Classification
Jan 31, Feb 1,
2014
2015
N/A $ — $ —
N/A
—
24
$
24 $
—
39
39
48
Periodic payments, valuation adjustments and amortization of gains or losses on our derivative contracts had the
following impact on our Consolidated Statements of Operations:
Derivative Contracts – Effect on Results of Operations
(millions)
Type of Contract
Interest rate swaps
Classification of Income/(Expense)
Net interest expense
2014
2013
$
32 $
29 $
2012
44
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 $34 million, $52
million and $75 million, at the end of 2014, 2013 and 2012, respectively.
20. Leases
We lease certain retail locations, warehouses, distribution centers, office space, land, equipment and software. Assets
held under capital leases are included in property and equipment. Operating lease rentals are expensed on a straight-
line basis over the life of the lease beginning on the date we take possession of the property. At lease inception, we
determine the lease term by assuming the exercise of those renewal options that are reasonably assured. The exercise
of lease renewal options is at our sole discretion. The lease term is used to determine whether a lease is capital or
operating and is used to calculate straight-line rent expense. Additionally, the depreciable life of leased assets and
leasehold improvements is limited by the expected lease term.
Rent expense is included in SG&A expenses. Some of our lease agreements include rental payments based on a
percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation.
Certain leases require us to pay real estate taxes, insurance, maintenance and other operating expenses associated
with the leased premises. These expenses are classified in SG&A, consistent with similar costs for owned locations.
Rent income received from tenants who rent properties is recorded as a reduction to SG&A expense.
Rent Expense
(millions)
Property, equipment and software
Rent income
Total rent expense
2014
2013
195 $
212 $
(9)
(8)
2012
216
(9)
186 $
204 $
207
$
$
Total capital lease interest expense was $38 million, $39 million and $31 million in 2014, 2013 and 2012, respectively,
and is included within net interest expense on the Consolidated Statements of Operations.
Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 50
years or more. Certain leases also include options to purchase the leased property. Assets recorded under capital
leases as of January 31, 2015 and February 1, 2014 were $711 million and $698 million, respectively. These assets
are recorded net of accumulated amortization of $242 million and $167 million as of January 31, 2015 and February
1, 2014, respectively.
49
Future Minimum Lease Payments
(millions)
2015
2016
2017
2018
2019
After 2019
Total future minimum lease payments
Less: Interest (c)
Present value of future minimum capital
lease payments (d)
$
Operating Leases (a)
$
186 $
Capital Leases (b) Rent Income
123 $
(6) $
Total
303
267
223
216
205
(5)
(5)
(4)
(3)
(13)
3,980
(36) $ 5,194
178
170
165
154
2,974
3,827 $
$
94
58
55
54
1,019
1,403 $
614
789
Note: Minimum lease payments exclude payments to landlords for real estate taxes and common area maintenance. Minimum lease payments
also exclude payments to landlords for fixed purchase options which we believe are reasonably assured of being exercised.
(a)
Total contractual lease payments include $2,046 million related to options to extend lease terms that are reasonably assured of being
exercised and also includes $67 million of legally binding minimum lease payments for stores that are expected to open in 2015 or later.
Capital lease payments include $612 million related to options to extend lease terms that are reasonably assured of being exercised and
also includes $59 million of legally binding minimum lease payments for stores that are expected to open in 2015 or later. Capital leases
also include $41 million of legally binding payments for distribution centers opening in 2015.
Calculated using the interest rate at inception for each lease.
Includes the current portion of $63 million.
(b)
(c)
(d)
21. Income Taxes
Earnings from continuing operations before income taxes were $3,653 million, $4,121 million and $5,056 million during
2014, 2013 and 2012, including $261 million, $196 million and $161 million earned by our foreign entities subject to
tax outside of the U.S.
Tax Rate Reconciliation – Continuing Operations
Federal statutory rate
State income taxes, net of the federal tax benefit
International
Other
Effective tax rate
Provision for Income Taxes
(millions)
Current:
Federal
State
International
Total current
Deferred:
Federal
State
International
Total deferred
Total provision
2014
35.0%
2.2
(2.3)
(1.9)
2013
35.0%
2.4
(1.2)
(1.6)
2012
35.0%
1.8
(1.0)
(1.4)
33.0%
34.6%
34.4%
2014
2013
2012
$
1,074 $
1,206 $
1,521
116
7
150
13
144
9
1,197
1,369
1,674
(2)
10
(1)
7
56
—
2
58
64
6
(3)
67
$
1,204 $
1,427 $
1,741
50
Net Deferred Tax Asset/(Liability)
(millions)
Gross deferred tax assets:
Accrued and deferred compensation
Accruals and reserves not currently deductible
Self-insured benefits
Other
Total gross deferred tax assets
Gross deferred tax liabilities:
Property and equipment
Inventory
Other
Total gross deferred tax liabilities
Total net deferred tax liability
January 31,
2015
February 1,
2014
$
531 $
316
223
176
509
348
231
97
1,246
1,185
(1,946)
(1,978)
(307)
(123)
(2,376)
$
(1,130) $
(270)
(130)
(2,378)
(1,193)
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences
between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted income tax rates in effect for the year the temporary differences
are expected to be recovered or settled. Tax rate changes affecting deferred tax assets and liabilities are recognized
in income at the enactment date.
We have not recorded deferred taxes when earnings from foreign operations are considered to be indefinitely invested
outside the U.S. These accumulated net earnings relate to certain ongoing operations and were $328 million at
January 31, 2015 and $64 million at February 1, 2014. It is not practicable to determine the income tax liability that
would be payable if such earnings were repatriated.
We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. The U.S.
Internal Revenue Service has completed exams on the U.S. federal income tax returns for years 2010 and prior. With
few exceptions, we are no longer subject to state and local or non-U.S. income tax examinations by tax authorities for
years before 2003.
Reconciliation of Liability for Unrecognized Tax Benefits
(millions)
Balance at beginning of period
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Balance at end of period
2014
2013
$
183 $
216 $
10
17
(42)
(13)
15
28
(57)
(19)
$
155 $
183 $
2012
236
10
19
(42)
(7)
216
If we were to prevail on all unrecognized tax benefits recorded, $101 million of the $155 million reserve would benefit
the effective tax rate. In addition, the reversal of accrued penalties and interest would also benefit the effective tax
rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense. During
the years ended January 31, 2015, February 1, 2014 and February 2, 2013, we recorded a net benefit from the reversal
of accrued penalties and interest of $12 million, $1 million and $16 million, respectively. As of January 31, 2015,
February 1, 2014 and February 2, 2013 total accrued interest and penalties were $40 million, $58 million and $64
million, respectively.
It is reasonably possible that the amount of the unrecognized tax benefits 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.
51
22. Other Noncurrent Liabilities
Other Noncurrent Liabilities
(millions)
Deferred compensation
Workers' compensation and general liability (a)
Income tax
Pension and postretirement health care benefits
Other
Total
(a)
January 31,
2015
February 1,
2014
$
507 $
413
128
151
253
491
423
174
115
268
$
1,452 $
1,471
See footnote (c) to the Accrued and Other Current Liabilities table in Note 16 for additional detail.
23. Share Repurchase
We repurchase shares primarily through open market transactions under a $5 billion share repurchase program
authorized by our Board of Directors in January 2012. No shares were repurchased through open market transactions
since the first half of 2013.
Share Repurchases
(millions, except per share data)
Total number of shares purchased (a)
Average price paid per share
Total investment
(a)
2014
0.8
2013
21.9
$
$
54.07 $
41 $
67.41 $
1,474 $
2012
32.2
58.96
1,900
Includes 0.8 million, 0.2 million and 0.5 million shares delivered upon the non-cash settlement of prepaid contracts in 2014, 2013, and
2012, respectively. These contracts had an original cash investment of $41 million, $14 million and $25 million, respectively, and an
aggregate market value of $46 million, $17 million and $29 million. These contracts are among the investment vehicles used to reduce
our economic exposure related to our nonqualified deferred compensation plans. Note 25 provides the details of our positions in prepaid
forward contracts.
24. Share-Based Compensation
We maintain a long-term incentive plan (the Plan) for key team members and non-employee members of our Board
of Directors. The Plan allows us to grant equity-based compensation awards, including stock options, stock appreciation
rights, performance share units, restricted stock units, restricted stock awards or a combination of awards (collectively,
share-based awards). The number of unissued common shares reserved for future grants under the Plan was 14.0
million and 18.7 million at January 31, 2015 and February 1, 2014, respectively.
Compensation expense associated with share-based awards is recognized on a straight-line basis over the shorter
of the vesting period or the minimum required service period. Share-based compensation expense for continuing
operations recognized in the Consolidated Statements of Operations was $73 million, $106 million and $101 million
in 2014, 2013 and 2012, respectively. The related income tax benefit was $29 million, $41 million and $40 million in
2014, 2013 and 2012, respectively.
Share information includes all outstanding awards for continuing and discontinued operations.
Stock Options
Through 2013, we granted nonqualified stock options to certain team members that generally vest and become
exercisable annually in equal amounts over a four-year period and expire 10 years after the grant date. We previously
granted options with a ten-year term to the non-employee members of our Board of Directors that vest immediately,
but are not exercisable until one year after the grant date. We used a Black-Scholes valuation model to estimate the
fair value of the options at the grant date.
52
Stock Option Activity
Stock Options
Total Outstanding
Number of
Options (a)
Exercise
Price (b)
Intrinsic
Value (c)
136
February 1, 2014
Granted
Expired/forfeited
Exercised/issued
January 31, 2015
(a)
In thousands.
Weighted average per share.
Represents stock price appreciation subsequent to the grant date, in millions.
24,854 $
—
(634)
(7,495)
16,725 $
52.19 $
—
55.05
50.04
53.04 $
(b)
(c)
344
Black-Scholes Model Valuation Assumptions
Dividend yield
Volatility (a)
Risk-free interest rate (b)
Expected life in years (c)
Stock options grant date fair value
(a)
Number of
Options (a)
Exercisable
Exercise
Price (b)
16,824 $
50.64 $
Intrinsic
Value (c)
109
12,843 $
52.02 $
277
2013
2.4%
22%
1.4%
5.5
$
11.14 $
2012
2.4%
23%
1.0%
5.5
9.70
(b)
(c)
Volatility represents an average of market estimates for implied volatility of Target common stock.
The risk-free interest rate is an interpolation of the relevant U.S. Treasury security maturities as of each applicable grant date.
The expected life is estimated based on an analysis of options already exercised and any foreseeable trends or changes in recipients'
behavior.
Stock Option Exercises
(millions)
Cash received for exercise price
Intrinsic value
Income tax benefit
$
2014
374 $
143
41
2013
422 $
197
77
2012
331
139
55
At January 31, 2015, there was $15 million of total unrecognized compensation expense related to nonvested stock
options, which is expected to be recognized over a weighted average period of 0.8 years. The weighted average
remaining life of exercisable options is 5.0 years, and the weighted average remaining life of all outstanding options
is 5.5 years. The total fair value of options vested was $37 million, $53 million and $68 million in 2014, 2013 and 2012,
respectively.
Performance Share Units
We issue performance share units to certain team members that represent shares potentially issuable in the future.
Issuance is based upon our performance relative to a retail peer group over a three-year performance period on certain
measures including domestic market share change, return on invested capital and EPS growth. The fair value of
performance share units is calculated based on the stock price on the date of grant. The weighted average grant date
fair value for performance share units was $73.12, $57.22 and $58.61 in 2014, 2013 and 2012, respectively.
53
Performance Share Unit Activity
Total Nonvested Units
Performance
Share Units (a)
Grant Date
Fair Value (b)
55.37
2,870 $
1,438
(490)
(218)
3,600 $
73.12
56.44
48.72
63.16
February 1, 2014
Granted
Forfeited
Vested
January 31, 2015
(a)
(b)
Assumes attainment of maximum payout rates as set forth in the performance criteria based in thousands of share units. Applying actual
or expected payout rates, the number of outstanding units at January 31, 2015 was 1,136 thousand.
Weighted average per unit.
The expense recognized each period is dependent upon our estimate of the number of shares that will ultimately be
issued. Future compensation expense for unvested awards could reach a maximum of $145 million assuming payout
of all unvested awards. The unrecognized expense is expected to be recognized over a weighted average period of
1.2 years. The fair value of performance share units vested and converted was $11 million in 2014, $14 million in 2013
and $16 million in 2012.
Restricted Stock
We issue restricted stock units and performance-based restricted stock units with three-year cliff vesting from the grant
date (collectively restricted stock) to certain team members. The final number of shares issued under performance-
based restricted stock units will be based on our total shareholder return relative to a retail peer group over a three-
year performance period. We also regularly issue restricted stock units to our Board of Directors, which vest quarterly
over a one-year period and are settled in shares of Target common stock upon departure from the Board. The fair
value for restricted stock is calculated based on the stock price on the date of grant, incorporating an analysis of the
total shareholder return performance measure where applicable. The weighted average grant date fair value for
restricted stock was $70.50, $62.76 and $60.44 in 2014, 2013 and 2012, respectively.
Restricted Stock Activity
February 1, 2014
Granted
Forfeited
Vested
January 31, 2015
(a)
Total Nonvested Units
Restricted Grant Date
Stock (a) Fair Value (b)
58.98
3,935 $
1,992
(436)
(778)
4,713 $
70.50
59.11
51.77
65.11
Represents the number of restricted stock units, in thousands. For performance-based restricted stock units, assumes attainment of
maximum payout rates as set forth in the performance criteria based in thousands of share units. Applying actual or expected payout
rates, the number of outstanding restricted stock units at January 31, 2015 was 3,897 thousand.
Weighted average per unit.
(b)
The expense recognized each period is partially dependent upon our estimate of the number of shares that will ultimately
be issued. At January 31, 2015, there was $154 million of total unrecognized compensation expense related to restricted
stock, which is expected to be recognized over a weighted average period of 1.3 years. The fair value of restricted
stock vested and converted to shares of Target common stock was $40 million, $28 million and $11 million in 2014,
2013 and 2012, respectively.
54
25. Defined Contribution Plans
Team members who meet eligibility requirements can participate in a defined contribution 401(k) plan by investing up
to 80 percent of their compensation, as limited by statute or regulation. Generally, we match 100 percent of each team
member's contribution up to 5 percent of total compensation. Company match contributions are made to funds
designated by the participant.
In addition, we maintain a nonqualified, unfunded deferred compensation plan for approximately 2,800 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,
excluding executive officers, in part to recognize the risks inherent to their participation in this plan. We also maintain
a nonqualified, unfunded deferred compensation plan that was frozen during 1996, covering approximately 55
participants, all of whom are no longer at Target. 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. Our total liability under these plans was $539 million and $520 million at January 31,
2015 and February 1, 2014, respectively.
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 $11 million, $(5) million and $14 million in 2014, 2013 and 2012, respectively. During 2014, we made
no investments in prepaid forward contracts in our own common stock. In 2013, we invested $23 million in such
investment instruments, and this activity is included in the Consolidated Statements of Cash Flows within other investing
activities. Adjusting our position in these investment vehicles may involve repurchasing shares of Target common stock
when settling the forward contracts as described in Note 23. The settlement dates of these instruments are regularly
renegotiated with the counterparty.
Prepaid Forward Contracts on Target
Common Stock
(millions, except per share data)
February 1, 2014
January 31, 2015
Plan Expenses
(millions)
401(k) plan matching contributions expense
Nonqualified deferred compensation plans
Benefits expense (a)
Related investment income (b)
Nonqualified plan net expense
(a)
Number of
Shares
Contractual
Price Paid per
Share
48.81 $
41.11 $
1.3 $
0.5 $
Contractual
Fair Value
73 $
38 $
Total Cash
Investment
63
21
2014
2013
$
220 $
229 $
52
(45)
41
(23)
$
7 $
18 $
2012
218
78
(43)
35
(b)
Includes market-performance credits on accumulated participant account balances and annual crediting for additional benefits earne
during the year.
Includes investment returns and life-insurance proceeds received from company-owned life insurance policies and other investments
used to economically hedge the cost of these plans.
d
26. Pension and Postretirement Health Care Plans
We have qualified defined benefit pension plans covering team members who meet age and service requirements,
including date of hire in certain circumstances. Effective January 1, 2009, our U.S. qualified defined benefit pension
plan was closed to new participants, with limited exceptions. 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 each team members' date of hire, length of service and/or team member compensation. Upon early
55
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.
Change in Projected Benefit Obligation
Pension Benefits
(millions)
Qualified Plans
Nonqualified Plans
2014
2013
2014
2013
Benefit obligation at beginning of period
$ 3,173 $ 3,164 $
35 $
Service cost
Interest cost
Actuarial (gain)/loss
Participant contributions
Benefits paid
Plan amendments
111
148
556
3
(147)
—
117
136
(125)
1
(122)
2
1
1
9
—
(3)
—
37
1
1
—
—
(4)
—
Postretirement
Health Care Benefits
2013
121
73 $
2014
$
5
2
(10)
4
(9)
(9)
6
2
(3)
5
(14)
(44)
73
Benefit obligation at end of period
$ 3,844 $
3,173
$
43 $
35
$
56 $
Change in Plan Assets
Pension Benefits
Qualified Plans
Nonqualified Plans
Postretirement
Health Care Benefits
(millions)
2014
2013
2014
2013
2014
2013
Fair value of plan assets at beginning of
period
Actual return on plan assets
Employer contributions
Participant contributions
Benefits paid
Fair value of plan assets at end of
period
Benefit obligation at end of period
$
3,267 $
507
154
3
(147)
3,223 $
161
4
1
(122)
3,784
3,844
3,267
3,173
— $
— $
— $
—
3
—
(3)
—
43
—
4
—
(4)
—
35
—
5
4
(9)
—
56
Funded/(underfunded) status
$
(60) $
94 $
(43) $
(35) $
(56) $
—
—
9
5
(14)
—
73
(73)
Recognition of Funded/(Underfunded) Status
(millions)
Other noncurrent assets
Accrued and other current liabilities
Other noncurrent liabilities
Net amounts recognized
(a)
Includes postretirement health care benefits.
Qualified Plans
Nonqualified Plans (a)
2014
2013
2014
2013
$
$
— $
112 $
— $
(1)
(59)
(2)
(16)
(8)
(91)
(60) $
94 $
(99) $
—
(9)
(99)
(108)
The following table summarizes the amounts recorded in accumulated other comprehensive income, which have not
yet been recognized as a component of net periodic benefit expense:
Amounts in Accumulated Other Comprehensive Income
(millions)
Net actuarial loss
Prior service credits
Pension Plans
Postretirement
Health Care Plans
2014
2013
2014
2013
$
1,018 $
792
$
(69)
(80)
Amounts in accumulated other comprehensive income
$
949 $
712
$
33 $
(55)
(22) $
49
(62)
(13)
56
The following table summarizes the changes in accumulated other comprehensive income for the years ended
January 31, 2015 and February 1, 2014, related to our pension and postretirement health care plans:
Change in Accumulated Other Comprehensive Income
(millions)
February 2, 2013
Net actuarial loss
Amortization of net actuarial losses
Amortization of prior service costs and transition
Plan amendments
February 1, 2014
Net actuarial gain
Amortization of net actuarial losses
Amortization of prior service costs and transition
Plan amendment
January 31, 2015
Pension Benefits
Postretirement
Health Care Benefits
Pretax Net of Tax
Pretax Net of Tax
$
856 $
517
$
24 $
(52)
(103)
11
—
712
291
(65)
11
—
(32)
(62)
7
—
430
176
(40)
7
—
(3)
(6)
16
(44)
(13)
(10)
(6)
16
(9)
15
(2)
(4)
10
(27)
(8)
(6)
(3)
10
(5)
$
949 $
573
$
(22) $
(12)
The following table summarizes the amounts in accumulated other comprehensive income expected to be amortized
and recognized as a component of net periodic benefit expense in 2015:
Expected Amortization of Amounts in Accumulated Other Comprehensive Income
(millions)
Net actuarial loss
Prior service credits
Total amortization expense
Pretax Net of Tax
$
$
108 $
(29)
79 $
66
(18)
48
The following table summarizes our net pension and postretirement health care benefits expense for the years 2014,
2013, and 2012:
Net Pension and Postretirement Health Care
Benefits Expense
Pension Benefits
Postretirement
Health Care Benefits
(millions)
2014
2013
2012
2014
2013
2012
Service cost benefits earned during the period
$
112 $
118 $
121
$
5 $
6 $
Interest cost on projected benefit obligation
Expected return on assets
Amortization of losses
Amortization of prior service cost
Settlement and Special Termination Charges
149
(233)
65
(11)
—
137
139
(235)
(220)
103
(11)
3
103
—
—
2
—
6
(16)
—
2
—
6
(16)
—
Total
$
82 $
115 $
143 $
(3) $
(2) $
10
3
—
3
(10)
—
6
Prior service cost amortization is determined using the straight-line method over the average remaining service period
of team members expected to receive benefits under the plan.
57
Defined Benefit Pension Plan Information
(millions)
Accumulated benefit obligation (ABO) for all plans (a)
Projected benefit obligation for pension plans with an ABO in excess of plan assets (b)
Total ABO for pension plans with an ABO in excess of plan assets
(a)
2014
2013
$ 3,834 $ 3,149
65
56
54
48
(b)
The present value of benefits earned to date assuming no future salary growth.
The present value of benefits earned to date by plan participants, including the effect of assumed future salary increases.
Assumptions
Benefit Obligation Weighted Average Assumptions
Discount rate
Average assumed rate of compensation increase
Pension Benefits
2014
3.87%
3.00
2013
4.77%
3.00
Postretirement
Health Care Benefits
2014
2.74%
n/a
2013
3.30%
n/a
Net Periodic Benefit Expense Weighted Average
Assumptions
Pension Benefits
Postretirement
Health Care Benefits
Discount rate
2014
2013
2012
2014
2013
2012
4.77%
4.40%
4.65%
3.30%
2.75%
3.60%
Expected long-term rate of return on plan assets
Average assumed rate of compensation increase
7.50
3.00
8.00
3.00
8.00
3.50
n/a
n/a
n/a
n/a
n/a
n/a
The weighted average assumptions used to measure net periodic benefit expense each year are the rates as of the
beginning of the year (i.e., the prior measurement date). Based on a stable asset allocation, our most recent compound
annual rate of return on qualified plans' assets was 12.1 percent, 8.3 percent, 7.0 percent and 9.7 percent for the 5-
year, 10-year, 15-year and 20-year time periods, respectively.
The market-related value of plan assets, which is used in calculating expected return on assets in net periodic benefit
cost, is determined each year by adjusting the previous year's value by expected return, benefit payments and cash
contributions. The market-related value is adjusted for asset gains and losses in equal 20 percent adjustments over
a five-year period.
We review the expected long-term rate of return annually, and revise it as appropriate. Additionally, we monitor the
mix of investments in our portfolio to ensure alignment with our long-term strategy to manage pension cost and reduce
volatility in our assets. Our expected annualized long-term rate of return assumptions as of January 31, 2015 were
8.0 percent for domestic and international equity securities, 5.0 percent for long-duration debt securities, 8.0 percent
for balanced funds and 9.5 percent for other investments. These estimates are a judgmental matter in which we
consider the composition of our asset portfolio, our historical long-term investment performance and current market
conditions.
An increase in the cost of covered health care benefits of 7.0 percent was assumed for 2014 and 7.0 percent is assumed
for 2015. The rate will be reduced to 5.0 percent in 2019 and thereafter.
Health Care Cost Trend Rates – 1% Change
(millions)
1% Increase 1% Decrease
Effect on total of service and interest cost components of net periodic postretirement
health care benefit expense
Effect on the health care component of the accumulated postretirement benefit
obligation
$
1 $
4
(1)
(4)
58
Plan Assets
Our asset allocation policy is designed to reduce the long-term cost of funding our pension obligations. The plan invests
with both passive and active investment managers depending on the investment's asset class. The plan also seeks
to reduce the risk associated with adverse movements in interest rates by employing an interest rate hedging program,
which may include the use of interest rate swaps, total return swaps and other instruments.
Asset Category
Domestic equity securities (a)
International equity securities
Debt securities
Balanced funds
Other (b)
Total
(a)
Current Targeted
Actual Allocation
Allocation
19%
2014
19%
2013
21%
12
25
30
14
12
28
31
10
12
26
28
13
100%
100%
100%
(b)
Equity securities include our common stock in amounts substantially less than 1 percent of total plan assets as of January 31, 2015 and
February 1, 2014.
Other assets include private equity, mezzanine and high-yield debt, natural resources and timberland funds, multi-strategy hedge funds,
derivative instruments and a 4 percent allocation to real estate.
Fair Value Measurements
(millions)
Fair Value at January 31, 2015
Total
Level 1
Level 2
Level 3
Total
1,102
Cash and cash equivalents $ 211 $
Common collective trusts (a)
Government securities (b)
Fixed income (c)
Balanced funds (d)
Private equity funds (e)
Other (f)
Total plan assets
175
$ 3,784 $
624
1,152
171
349
7 $
—
—
—
—
—
204 $
1,102
349
624
1,152
—
—
7 $ 3,482 $
51
Fair Value at February 1, 2014
Level 3
—
Level 1
Level 2
144 $
6 $
— $ 150 $
—
1,000
—
—
—
171
124
282
541
903
221
170
—
—
—
—
—
—
1,000
282
541
903
—
43
295 $ 3,267 $
6 $ 2,913 $
—
—
—
—
221
127
348
(a)
(b)
(c)
(d)
(e)
(f)
Passively managed index funds with holdings in domestic and international equities.
Investments in government securities and passively managed index funds with holdings in long-term government bonds.
Investments in corporate bonds, mortgage-backed securities and passively managed index funds with holdings in long-term corporate
bonds.
Investments in equities, nominal and inflation-linked fixed income securities, commodities and public real estate.
Includes investments in venture capital, mezzanine and high-yield debt, natural resources and timberland funds.
Investments in multi-strategy hedge funds (including domestic and international equity securities, convertible bonds and other alternative
investments), real estate and derivative investments.
Actual Return on Plan Assets (a)
Relating to
Assets Still Held
at the Reporting
Date
Relating to
Assets Sold
During the
Period
Purchases,
Sales and
Settlements
Transfer in
and/or out
of Level 3
Balance at
End of
Period
Balance at
Beginning of
Period
236 $
122
7 $
14
26 $
1
(48) $
(10)
$
—
—
221
127
171
124
Represents realized and unrealized gains (losses) from changes in values of those financial instruments only for the period in which the
instruments were classified as Level 3.
221 $
127
(42) $
(14)
(21) $
6
13 $
5
—
—
$
Level 3 Reconciliation
(millions)
2013
Private equity funds $
Other
2014
Private equity funds $
Other
(a)
59
Position
Cash and cash equivalents
Equity securities
Valuation Technique
These investments are cash holdings and investment vehicles valued using the
Net Asset Value (NAV) provided by the administrator of the fund. The NAV for the
investment vehicles is based on the value of the underlying assets owned by the
fund minus applicable costs and liabilities, and then divided by the number of
shares outstanding.
Valued at the closing price reported on the major market on which the individual
securities are traded.
Common collective trusts/
balanced funds/ certain
multi-strategy hedge funds
Valued using the NAV provided by the administrator of the fund. The NAV is a
quoted transactional price for participants in the fund, which do not represent an
active market.
Fixed income and government
securities
Valued using matrix pricing models and quoted prices of securities with similar
characteristics.
Private equity/ real estate/
certain multi-strategy hedge
funds/ other
Valued by deriving Target's proportionate share of equity investment from audited
financial statements. Private equity and real estate investments require
significant judgment on the part of the fund manager due to the absence of
quoted market prices, inherent lack of liquidity, and the long term of such
investments. Certain multi-strategy hedge funds represent funds of funds that
include liquidity restrictions and for which timely valuation information is not
available.
Contributions
Our obligations to plan participants can be met over time through a combination of company contributions to these
plans and earnings on plan assets. In 2014, we made a discretionary contribution of $150 million to our qualified
defined benefit pension plans. In 2013, we made no contributions. We are not required to make any contributions in
2015. However, depending on investment performance and plan funded status, we may elect to make a contribution.
We expect to make contributions in the range of $4 million to $5 million to our postretirement health care benefit plan
in 2015.
Estimated Future Benefit Payments
(millions)
Pension
Benefits
Postretirement
Health Care Benefits
2015
2016
2017
2018
2019
2020-2024
27. Accumulated Other Comprehensive Income
(millions)
February 1, 2014
Other comprehensive (loss)/income before
reclassifications
Amounts reclassified from AOCI
January 31, 2015
(a)
$
161 $
170
180
189
197
1,113
4
5
5
6
7
33
Cash Flow
Hedges
Currency
Translation
Adjustment
Pension and
Other
Benefit
Total
$
(25)
$
(444)
$
(422)
$
(891)
—
3 (a)
$
(22)
$
(302)
730 (b)
(16)
(165)
26 (c)
$
(561)
$
(467)
759
(599)
(b)
(c)
Represents gains and losses on cash flow hedges, net of $2 million of taxes, which are recorded in net interest expense on the Consolidated
Statements of Operations.
Represents Canadian accumulated currency translation adjustments deconsolidated on January 15, 2015. See Note 6 for additional
information.
Represents amortization of pension and other benefit liabilities, net of $17 million of taxes, which is recorded in SG&A expenses on the
Consolidated Statements of Operations. See Note 26 for additional information.
60
28. Segment Reporting
Our segment measure of profit is used by management to evaluate the return on our investment and to make operating
decisions. Effective January 15, 2015, following the deconsolidation of our Canadian retail operation, we operate as
a single segment that includes all of our continuing operations, which are designed to enable guests to purchase
products seamlessly in stores, online or through mobile devices.
Business Segment Results
(millions)
Sales
Cost of sales
Selling, general and administrative expenses (f)
Depreciation and amortization
Segment profit
Data Breach-related costs, net of insurance receivable (b)(f)
Reduction of beneficial interest asset (c)(f)
Other (d)(f)
Gain on receivables transaction (e)
Earnings from continuing operations before interest expense and income
taxes
Net interest expense
2014
2013
2012 (a)
$ 72,618 $ 71,279 $ 71,960
51,278
14,450
2,129
50,039
14,285
1,996
50,568
13,759
2,044
$
4,761 $
4,959 $
5,589
(145)
(53)
(29)
—
(17)
(98)
(64)
391
—
—
—
152
4,535
882
5,170
1,049
5,740
684
Earnings from continuing operations before income taxes
$
3,653 $
4,121 $
5,056
Note: The sum of the segment amounts may not equal the total amounts due to rounding.
(a)
(b)
(c)
(d)
(e)
(f)
Consisted of 53 weeks.
Refer to Note 17 for more information on Data Breach related costs.
Refer to Note 7 for more information on TD profit sharing amounts and the reduction of the beneficial interest asset.
For 2014, includes impairments of $16 million related to undeveloped land in the U.S. and $13 million of expense related to converting
co-branded card program to MasterCard. For 2013, includes and $23 million workforce-reduction charge primarily related to severance
and benefits costs, a $22 million charge related to part-time team member health benefit changes, and $19 million in impairment charges
related to undeveloped land in the U.S.
Represents the gain on receivables transaction recorded in our Consolidated Statements of Operations, plus, for 2012, the difference
between bad debt expense and net write-offs for the fourth quarter. Refer to Note 7 for more information on our credit card receivables
transaction.
The sum of segment SG&A expenses, reduction of beneficial interest asset, Data Breach-related costs and other charges equal
consolidated SG&A expenses.
Total Assets by Segment
(millions)
U.S.
Assets of discontinued operations
Unallocated assets (a)
Total assets
(a)
February 1,
2014
38,128
6,254
171
44,553
At January 31, 2015, represents the beneficial interest asset of $74 million and insurance receivable related to the Data Breach of $60
million. At February 1, 2014, represents the beneficial interest asset of $127 million and insurance receivable related to the Data Breach
of $44 million.
January 31,
2015
39,495 $
1,775
134
41,404 $
$
$
29. Subsequent Event
In March 2015, we announced a headquarters workforce reduction. As a result, we expect to record approximately
$100 million of severance and other benefits-related charges within SG&A in the first quarter of 2015, the vast majority
of which are expected to require cash expenditures.
61
30. Quarterly Results (Unaudited)
Due to the seasonal nature of our business, fourth quarter operating results typically represent a substantially larger
share of total year revenues and earnings because they include our peak sales period from Thanksgiving through the
end of December. We follow the same accounting policies for preparing quarterly and annual financial data. The table
below summarizes quarterly results for 2014 and 2013:
Quarterly Results
(millions, except per share data)
Sales
Cost of sales
Selling, general and administrative
expenses
Depreciation and amortization
Gain on receivables transaction
Earnings before interest expense
and income taxes
Earnings from continuing operations
before income taxes
Provision for income taxes
Net earnings from continuing
operations
Discontinued operations, net of
tax
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total Year
2014
2013
2013
$ 16,657 $ 16,620 $ 16,957 $ 16,841 $ 17,254 $ 16,925 $ 21,751 $ 20,893 $ 72,618 $ 71,279
50,039
51,278
15,124
11,748
11,798
15,563
11,849
11,557
12,171
11,510
2014
2014
2013
2014
2013
2013
2014
3,376
3,397
3,599
3,490
3,644
3,632
4,058
3,946
14,676
14,465
511
—
491
(391)
537
—
493
—
1,022
1,613
1,023
1,301
870
299
1,003
358
590
199
1,149
403
535
—
904
146
758
232
503
—
941
145
796
273
545
—
508
—
2,129
1,996
—
(391)
1,585
1,315
4,535
151
142
882
1,434
1,173
474
393
3,653
1,204
5,170
1,049
4,121
1,427
571
645
391
746
526
523
960
780
2,449
2,694
(153)
(147)
(157)
(134)
(174)
(182)
(3,600)
(260)
(4,085)
(723)
Net interest expense
152
610
433
152
Net earnings/(loss)
$
418 $
498 $
234 $
611 $
352 $
341 $ (2,640) $
520 $ (1,636) $ 1,971
Basic earnings/(loss) per share
Continuing operations
$ 0.90 $ 1.00 $ 0.62 $ 1.17 $ 0.83 $ 0.83 $ 1.51 $ 1.23 $ 3.86 $ 4.24
Discontinued operations
(0.24)
(0.23)
(0.25)
(0.21)
(0.28)
(0.29)
(5.64)
(0.41)
(6.44)
(1.14)
Net earnings/(loss) per share
$ 0.66 $ 0.78 $ 0.37 $ 0.96 $ 0.55 $ 0.54 $
(4.14) $ 0.82 $
(2.58) $ 3.10
Diluted earnings/(loss) per share
Continuing operations
$ 0.89 $ 0.99 $ 0.61 $ 1.16 $ 0.82 $ 0.82 $ 1.49 $ 1.22 $ 3.83 $ 4.20
Discontinued operations
(0.24)
(0.23)
(0.25)
(0.21)
(0.27)
(0.29)
(5.59)
(0.41)
(6.38)
(1.13)
Net earnings/(loss) per share
$ 0.66 $ 0.77 $ 0.37 $ 0.95 $ 0.55 $ 0.54 $
(4.10) $ 0.81 $
(2.56) $ 3.07
Dividends declared per share
0.43
0.36
0.52
0.43
0.52
0.43
0.52
0.43
1.99
1.65
Closing common stock price:
High
Low
62.54
55.07
70.67
60.85
61.38
55.34
73.32
68.29
63.93
57.50
71.99
62.13
77.13
61.12
66.89
56.64
77.13
55.07
73.32
56.64
Note: Per share amounts are computed independently for each of the quarters presented. The sum of the quarters may not equal the total year
amount due to the impact of changes in average quarterly shares outstanding and all other quarterly amounts may not equal the total year due to
rounding.
U.S. Sales by Product Category (a)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total Year
Household essentials
27%
27%
27%
27%
27%
26%
22%
22%
25%
25%
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Hardlines
Apparel and accessories
Food and pet supplies
Home furnishings and décor
Total
(a)
As a percentage of sales.
15
19
23
16
15
20
22
16
15
20
20
18
100%
100%
100%
15
20
20
15
19
21
15
20
21
24
17
19
24
17
19
18
19
21
18
19
21
18
100%
18
100%
18
100%
18
100%
18
100%
17
100%
17
100%
62
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Changes in Internal Control Over Financial Reporting
We have continued to expand our implementation of enterprise resource planning software from SAP AG, including
the implementation in October 2014 of functionality of customer relationship management. There have been no
other 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.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Annual 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 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.
For the Report of Management on Internal Control and the Report of Independent Registered Public Accounting Firm
on Internal Control over Financial Reporting, see Item 8, Financial Statements and Supplementary Data.
Item 9B. Other Information
On March 13, 2015, we entered into an Aircraft Time Sharing Agreement with Brian C. Cornell, our chief executive
officer, with respect to Mr. Cornell’s personal use of company-provided aircraft. The agreement was entered into in
furtherance of the terms of the offer of employment to Mr. Cornell described in the Offer Letter filed as an exhibit to
our Quarterly Report on Form 10-Q filed on August 27, 2014, and is intended to require Mr. Cornell to reimburse us
for the incremental costs of using company-provided aircraft for personal purposes, if such personal use exceeds the
$175,000 annual limitation described in the offer letter.
PART III
Certain information required by Part III is incorporated by reference from Target's definitive Proxy Statement to be filed
on or about April 27, 2015. Except for those portions specifically incorporated in this Form 10-K by reference to Target's
Proxy Statement, no other portions of the Proxy Statement are deemed to be filed as part of this Form 10-K.
Item 10. Directors, Executive Officers and Corporate Governance
The following sections of Target's Proxy Statement to be filed on or about April 27, 2015, are incorporated herein by
reference:
Item One--Election of Directors
•
• Stock Ownership Information--Section 16(a) Beneficial Ownership Reporting Compliance
• General Information About Corporate Governance and the Board of Directors
Business Ethics and Conduct
Committees
• Questions and Answers About Our Annual Meeting and Voting-Question 14
63
See also Item 4A, Executive Officers of Part I hereof.
Item 11. Executive Compensation
The following sections of Target's Proxy Statement to be filed on or about April 27, 2015, are incorporated herein by
reference:
• Compensation Discussion and Analysis
• Compensation Tables
• Compensation Committee Report
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following sections of Target's Proxy Statement to be filed on or about April 27, 2015, are incorporated herein by
reference:
• Stock Ownership Information--
Beneficial Ownership of Directors and Officers
Beneficial Ownership of Target’s Largest Shareholders
• Compensation Tables--Equity Compensation Plan Information
Item 13. Certain Relationships and Related Transactions, and Director Independence
The following sections of Target's Proxy Statement to be filed on or about April 27, 2015, are incorporated herein by
reference:
• General Information About Corporate Governance and the Board of Directors--
Policy on Transactions with Related Persons
Director Independence
Committees
Item 14. Principal Accountant Fees and Services
The following section of Target's Proxy Statement to be filed on or about April 27, 2015, is incorporated herein by
reference:
• Ratification of Appointment of Ernst & Young LLP As Independent Registered Public Accounting Firm-Audit
and Non-Audit Fees
64
PART IV
Item 15. Exhibits, Financial Statement Schedules
The following information required under this item is filed as part of this report:
a)
Financial Statements
• Consolidated Statements of Operations for the Years Ended January 31, 2015, February 1, 2014 and
February 2, 2013
• Consolidated Statements of Comprehensive Income for the Years Ended January 31, 2015, February 1,
2014 and February 2, 2013
• Consolidated Statements of Financial Position at January 31, 2015 and February 1, 2014
• Consolidated Statements of Cash Flows for the Years Ended January 31, 2015, February 1, 2014 and
February 2, 2013
• Consolidated Statements of Shareholders' Investment for the Years Ended January 31, 2015, February 1,
2014 and February 2, 2013
• Notes to Consolidated Financial Statements
• Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
Financial Statement Schedules
None.
Other schedules have not been included either because they are not applicable or because the information is
included elsewhere in this Report.
65
b)
Exhibits
(2)A
† Amended and Restated Transaction Agreement dated September 12, 2011 among Zellers Inc.,
B †
C
D
E †
F ‡
G ‡
(3)A
B
(4)A
B
C
(10)A
*
B *
C *
D *
E *
F *
G *
H *
I *
J *
K *
L *
M *
N *
Hudson's Bay Company, Target Corporation and Target Canada Co. (1)
First Amending Agreement dated January 20, 2012 to Amended and Restated Transaction
Agreement among Zellers Inc., Hudson's Bay Company, Target Corporation and Target
Canada Co. (2)
Second Amending Agreement dated June 18, 2012 to Amended and Restated Transaction
Agreement among Zellers Inc., Hudson's Bay Company, Target Corporation and Target
Canada Co. (3)
Third Amending Agreement dated June 18, 2012 to Amended and Restated Transaction
Agreement among Zellers Inc., Hudson's Bay Company, Target Corporation and Target
Canada Co. (4)
Fourth Amending Agreement dated December 14, 2012 to Amended and Restated Transaction
Agreement among Zellers Inc., Hudson's Bay Company, Target Corporation and Target
Canada Co. (5)
Purchase and Sale Agreement dated October 22, 2012 among Target National Bank, Target
Receivables LLC, Target Corporation and TD Bank USA, N.A. (6)
First Amendment to Purchase and Sale Agreement dated March 13, 2013 among Target National
Bank, Target Receivables LLC, Target Corporation and TD Bank USA, N.A. (7)
Amended and Restated Articles of Incorporation (as amended through June 9, 2010) (8)
By-Laws (as amended through September 9, 2009) (9)
Indenture, dated as of August 4, 2000 between Target Corporation and Bank One Trust Company,
N.A. (10)
First Supplemental Indenture dated as of May 1, 2007 to Indenture dated as of August 4, 2000
between Target Corporation and The Bank of New York Trust Company, N.A. (as successor in
interest to Bank One Trust Company N.A.) (11)
Target agrees to furnish to the Commission on request copies of other instruments with respect to
long-term debt.
Target Corporation Officer Short-Term Incentive Plan (12)
Target Corporation Long-Term Incentive Plan (as amended and restated effective June 8, 2011)
(13)
Target Corporation SPP I (2011 Plan Statement) (as amended and restated effective June 8, 2011)
(14)
Target Corporation SPP II (2011 Plan Statement) (as amended and restated effective June 8,
2011) (15)
Target Corporation SPP III (2014 Plan Statement) (as amended and restated effective January 1,
2014) (16)
Target Corporation Officer Deferred Compensation Plan (as amended and restated effective
June 8, 2011) (17)
Target Corporation Officer EDCP (2015 Plan Statement) (as amended and restated effective
January 1, 2015)
Target Corporation Deferred Compensation Plan Directors (18)
Target Corporation DDCP (2013 Plan Statement) (as amended and restated effective December 1,
2013) (19)
Target Corporation Officer Income Continuance Policy Statement (as amended and restated
effective June 8, 2011) (20)
Target Corporation Executive Excess Long Term Disability Plan (as restated effective January 1,
2010 (21)
Director Retirement Program (22)
Target Corporation Deferred Compensation Trust Agreement (as amended and restated effective
January 1, 2009) (23)
Amendment to Target Corporation Deferred Compensation Trust Agreement (as amended and
restated effective January 1, 2009) (24)
66
O
P
Q
R
S
T
U *
V *
W *
X *
Y *
Z *
AA *
BB *
HH *
(12)
(21)
(23)
(24)
(31)A
(31)B
(32)A
(32)B
Five-Year Credit Agreement dated as of October 14, 2011 among Target Corporation, Bank of
America, N.A. as Administrative Agent and the Banks listed therein (25)
Extension and Amendment dated August 28, 2012 to Five-Year Credit Agreement among Target
Corporation, Bank of America, N.A. as Administrative Agent and the Banks listed therein (26)
Second Extension and Amendment dated September 3, 2013 to Five-Year Credit Agreement
among Target Corporation, Bank of America, N.A. as Administrative Agent and the Banks listed
therein (27)
Third Amendment dated January 5, 2015 to Five-Year Credit Agreement among Target
Corporation, Bank of America, N.A. as Administrative Agent and the Banks listed therein
DIP Facility Term Sheet dated January 14, 2015 among Target Corporation, as DIP Lender, and
Target Canada Co. and its subsidiaries listed therein
Credit Card Program Agreement dated October 22, 2012 among Target Corporation, Target
Enterprise, Inc. and TD Bank USA, N.A. (28)
Target Corporation 2011 Long-Term Incentive Plan (29)
Form of Amended and Restated Executive Non-Qualified Stock Option Agreement
Form of Executive Restricted Stock Unit Agreement
Form of Executive Performance-Based Restricted Stock Unit Agreement
Form of Executive Performance Share Unit Agreement
Form of Non-Employee Director Non-Qualified Stock Option Agreement (30)
Form of Non-Employee Director Restricted Stock Unit Agreement
Form of Cash Retention Award (31)
Advisory Period Letter to Gregg W. Steinhafel, dated May 21, 2014 (32)
CC *
DD * Restricted Stock Unit Agreement with John J. Mulligan, effective as of May 22, 2014 (33)
EE *
FF * Make-Whole Restricted Stock Unit Agreement with Brian C. Cornell, effective as of August 21,
Employment Offer Letter to Brian C. Cornell, dated July 26, 2014 (34)
2014 (35)
GG * Make-Whole Performance-Based Restricted Stock Unit Agreement with Brian C. Cornell, effective
as of August 21, 2014 (36)
Aircraft Time Sharing Agreement as of March 13, 2015 among Target Corporation and Brian C.
Cornell
Statements of Computations of Ratios of Earnings to Fixed Charges
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm
Powers of Attorney
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification of the Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350 Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350 Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
XBRL Instance Document
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
Copies of exhibits will be furnished upon written request and payment of Registrant's reasonable expenses in furnishing
the exhibits.
_____________________________________________________________________
67
†
‡
*
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)
(36)
Excludes the Disclosure Letter and Schedule A referred to in the agreement, Exhibits A and B to the First Amending Agreement, and
Exhibit A to the Fourth Amending Agreement which Target Corporation agrees to furnish supplementally to the Securities and
Exchange Commission upon request.
Excludes Schedules A through N, Annex A and Exhibits A-1 through C-2 referred to in the agreement and First Amendment, which Target
Corporation agrees to furnish supplementally to the Securities and Exchange Commission upon request.
Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the
Securities and Exchange Commission.
Management contract or compensation plan or arrangement required to be filed as an exhibit to this Form 10-K.
Incorporated by reference to Exhibit (2)A to Target's Form 10-Q Report for the quarter ended October 29, 2011.
Incorporated by reference to Exhibit (2)B to Target's Form 10-K Report for the year ended January 28, 2012.
Incorporated by reference to Exhibit (2)C to Target's Form 10-Q Report for the quarter ended July 28, 2012.
Incorporated by reference to Exhibit (2)D to Target's Form 10-Q Report for the quarter ended July 28, 2012.
Incorporated by reference to Exhibit (2)E to Target's Form 10-K Report for the year ended February 2, 2013.
Incorporated by reference to Exhibit (2)E to Target's Form 10-Q Report for the quarter ended October 27, 2012.
Incorporated by reference to Exhibit (2)G to Target's Form 8-K Report filed March 13, 2013.
Incorporated by reference to Exhibit (3)A to Target's Form 8-K Report filed June 10, 2010.
Incorporated by reference to Exhibit (3)B to Target's Form 8-K Report filed September 10, 2009.
Incorporated by reference to Exhibit 4.1 to Target's Form 8-K Report filed August 10, 2000.
Incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-K Report filed May 1, 2007.
Incorporated by reference to Appendix A to the Registrant's Proxy Statement filed April 30, 2012.
Incorporated by reference to Exhibit (10)B to Target's Form 10-Q Report for the quarter ended July 30, 2011.
Incorporated by reference to Exhibit (10)C to Target's Form 10-Q Report for the quarter ended July 30, 2011.
Incorporated by reference to Exhibit (10)D to Target's Form 10-Q Report for the quarter ended July 30, 2011.
Incorporated by reference to Exhibit (10)E to Target's Form 10-K Report for the year ended February 1, 2014.
Incorporated by reference to Exhibit (10)F to Target's Form 10-Q Report for the quarter ended July 30, 2011.
Incorporated by reference to Exhibit (10)I to Target's Form 10-K Report for the year ended February 3, 2007.
Incorporated by reference to Exhibit (10)I to Target's Form 10-K Report for the year ended February 1, 2014.
Incorporated by reference to Exhibit (10)J to Target's Form 10-Q Report for the quarter ended July 30, 2011.
Incorporated by reference to Exhibit (10)A to Target's Form 10-Q Report for the quarter ended October 30, 2010.
Incorporated by reference to Exhibit (10)O to Target's Form 10-K Report for the year ended January 29, 2005.
Incorporated by reference to Exhibit (10)O to Target's Form 10-K Report for the year ended January 31, 2009.
Incorporated by reference to Exhibit (10)AA to Target's Form 10-Q Report for the quarter ended July 30, 2011.
Incorporated by reference to Exhibit (10)O to Target's Form 10-Q Report for the quarter ended October 29, 2011.
Incorporated by reference to Exhibit (10)AA to Target's Form 10-Q Report for the quarter ended October 27, 2012.
Incorporated by reference to Exhibit (10)Y to Target’s Form 10-Q Report for the quarter ended November 2, 2013.
Incorporated by reference to Exhibit (10)X to Target’s Form 10-Q/A Report for the quarter ended May 4, 2013.
Incorporated by reference to Appendix A to Target's Proxy Statement filed April 28, 2011.
Incorporated by reference to Exhibit (10)EE to Target's Form 8-K Report filed January 11, 2012.
Incorporated by reference to Exhibit (10)W to Target’s Form 10-K Report for year ended February 2, 2013.
Incorporated by reference to Exhibit (10)AA to Target's Form 10-Q Report for the quarter ended August 2, 2014.
Incorporated by reference to Exhibit (10)BB to Target's Form 10-Q Report for the quarter ended August 2, 2014.
Incorporated by reference to Exhibit (10)CC to Target's Form 10-Q Report for the quarter ended August 2, 2014.
Incorporated by reference to Exhibit (10)DD to Target's Form 10-Q Report for the quarter ended August 2, 2014.
Incorporated by reference to Exhibit (10)EE to Target's Form 10-Q Report for the quarter ended August 2, 2014.
68
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Target has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
TARGET CORPORATION
By:
Dated: March 13, 2015
John J. Mulligan
Executive Vice President, Chief Financial
Officer and Chief Accounting Officer
___________________________________________________________________________________________________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below by the following
persons on behalf of Target and in the capacities and on the dates indicated.
Dated: March 13, 2015
Brian C. Cornell
Chairman of the Board and Chief Executive Officer
Dated: March 13, 2015
John J. Mulligan
Executive Vice President, Chief Financial Officer and
Chief Accounting Officer
ROXANNE S. AUSTIN
DOUGLAS M. BAKER, JR.
CALVIN DARDEN
HENRIQUE DE CASTRO
JAMES A. JOHNSON
MARY E. MINNICK
ANNE M. MULCAHY
DERICA W. RICE
KENNETH L. SALAZAR
JOHN G. STUMPF
Constituting a majority of the Board of Directors
John J. Mulligan, by signing his name hereto, does hereby sign this document pursuant to powers of attorney duly
executed by the Directors named, filed with the Securities and Exchange Commission on behalf of such Directors, all
in the capacities and on the date stated.
By:
Dated: March 13, 2015
John J. Mulligan
Attorney-in-fact
69
Exhibit Index
Exhibit
(2)A
Description
Amended and Restated Transaction Agreement dated September 12,
2011 among Zellers Inc., Hudson's Bay Company, Target Corporation and
Target Canada Co.
Manner of Filing
Incorporated by Reference
(2)B
(2)C
(2)D
(2)E
(2)F
(2)G
(3)A
(3)B
(4)A
(4)B
(4)C
(10)A
(10)B
(10)C
(10)D
(10)E
(10)F
(10)G
(10)H
(10)I
(10)J
(10)K
(10)L
First Amending Agreement dated January 20, 2012 to Amended and
Restated Transaction Agreement among Zellers Inc., Hudson's Bay
Company, Target Corporation and Target Canada Co.
Second Amending Agreement dated June 18, 2012 to Amended and
Restated Transaction Agreement among Zellers Inc., Hudson's Bay
Company, Target Corporation and Target Canada Co.
Third Amending Agreement dated June 18, 2012 to Amended and
Restated Transaction Agreement among Zellers Inc., Hudson's Bay
Company, Target Corporation and Target Canada Co.
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Fourth Amending Agreement dated December 14, 2012 to Amended and
Restated Transaction Agreement among Zellers Inc., Hudson's Bay
Company, Target Corporation and Target Canada Co.
Purchase and Sale Agreement dated October 22, 2012 among Target
National Bank, Target Receivables LLC, Target Corporation and TD Bank
USA, N.A.
Incorporated by Reference
Incorporated by Reference
First Amendment to Purchase and Sale Agreement dated March 13, 2013 Incorporated by Reference
among Target National Bank, Target Receivables LLC, Target Corporation
and TD Bank USA, N.A.
Amended and Restated Articles of Incorporation (as amended June 9,
2010)
Incorporated by Reference
By-Laws (as amended through September 9, 2009)
Indenture, dated as of August 4, 2000 between Target Corporation and
Bank One Trust Company, N.A.
First Supplemental Indenture dated as of May 1, 2007 to Indenture dated
as of August 4, 2000 between Target Corporation and The Bank of New
York Trust Company, N.A. (as successor in interest to Bank One Trust
Company N.A.)
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Target agrees to furnish to the Commission on request copies of other
instruments with respect to long-term debt.
Filed Electronically
Target Corporation Officer Short-Term Incentive Plan
Target Corporation Long-Term Incentive Plan (as amended and restated
effective June 8, 2011)
Target Corporation SPP I (2011 Plan Statement) (as amended and
restated effective June 8, 2011)
Target Corporation SPP II (2011 Plan Statement) (as amended and
restated effective June 8, 2011)
Target Corporation SPP III (2014 Plan Statement) (as amended and
restated effective January 1, 2014)
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Target Corporation Officer Deferred Compensation Plan (as amended and Incorporated by Reference
restated effective June 8, 2011)
Target Corporation Officer EDCP (2015 Plan Statement) (as amended and Filed Electronically
restated effective January 1, 2015)
Target Corporation Deferred Compensation Plan Directors
Target Corporation DDCP (2013 Plan Statement) (as amended and
restated effective December 1, 2013)
Target Corporation Officer Income Continuance Policy Statement (as
amended and restated effective June 8, 2011)
Target Corporation Executive Excess Long Term Disability Plan (as
restated effective January 1, 2010)
Director Retirement Program
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
70
(10)M
(10)N
(10)O
(10)P
(10)Q
(10)R
(10)S
(10)T
(10)U
(10)V
Target Corporation Deferred Compensation Trust Agreement (as
amended and restated effective January 1, 2009)
Amendment to Target Corporation Deferred Compensation Trust
Agreement (as amended and restated effective January 1, 2009)
Five-Year Credit Agreement dated as of October 14, 2011 among Target
Corporation, Bank of America, N.A. as Administrative Agent and the
Banks listed therein
Extension and Amendment dated August 28, 2012 to Five-Year Credit
Agreement among Target Corporation, Bank of America, N.A. as
Administrative Agent and the Banks listed therein
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Second Extension and Amendment dated September 3, 2013 to Five-Year Incorporated by Reference
Credit Agreement among Target Corporation, Bank of America, N.A. as
Administrative Agent and the Banks listed therein
Third Amendment dated January 5, 2015 to Five-Year Credit Agreement
among Target Corporation, Bank of America, N.A. as Administrative Agent
and the Banks listed therein
Filed Electronically
DIP Facility Term Sheet dated January 14, 2015 among Target
Corporation, as DIP Lender, and Target Canada Co. and its subsidiaries
listed therein
Filed Electronically
Credit Card Program Agreement dated October 22, 2012 among Target
Corporation, Target Enterprise, Inc. and TD Bank USA, N.A.
Incorporated by Reference
Target Corporation 2011 Long-Term Incentive Plan
Form of Amended and Restated Executive Non-Qualified Stock Option
Agreement
Incorporated by Reference
Filed Electronically
(10)W
Form of Executive Restricted Stock Unit Agreement
Filed Electronically
(10)X
(10)Y
(10)Z
(10)AA
(10)BB
Form of Executive Performance-Based Restricted Stock Unit Agreement Filed Electronically
Form of Executive Performance Share Unit Agreement
Filed Electronically
Form of Non-Employee Director Non-Qualified Stock Option Agreement
Incorporated by Reference
Form of Non-Employee Director Restricted Stock Unit Agreement
Filed Electronically
Form of Cash Retention Award
Incorporated by Reference
(10)CC
Advisory Period Letter to Gregg W. Steinhafel, dated May 21, 2014
Incorporated by Reference
(10)DD
(10)EE
(10)FF
Restricted Stock Unit Agreement with John J. Mulligan, effective as of May Incorporated by Reference
22, 2014
Employment Offer Letter to Brian C. Cornell, dated July 26, 2014
Incorporated by Reference
Make-Whole Restricted Stock Unit Agreement with Brian C. Cornell,
effective as of August 21, 2014
Incorporated by Reference
(10)GG Make-Whole Performance-Based Restricted Stock Unit Agreement with
Incorporated by Reference
Brian C. Cornell, effective as of August 21, 2014
(10)HH
Aircraft Time Sharing Agreement as of March 13, 2015 among Target
Corporation and Brian C. Cornell
Filed Electronically
(12)
(21)
(23)
(24)
(31)A
(31)B
(32)A
(32)B
Statements of Computations of Ratios of Earnings to Fixed Charges
Filed Electronically
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm
Powers of Attorney
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Filed Electronically
Filed Electronically
Filed Electronically
Filed Electronically
Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Filed Electronically
Certification of the Chief Executive Officer Pursuant to Section 18 U.S.C.
Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Filed Electronically
Certification of the Chief Financial Officer Pursuant to Section 18 U.S.C.
Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Filed Electronically
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
Filed Electronically
Filed Electronically
71
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
Filed Electronically
Filed Electronically
Filed Electronically
Filed Electronically
72
TARGET CORPORATION
Computations of Ratios of Earnings to Fixed Charges for each of the
Five Years in the Period Ended January 31, 2015
Ratio of Earnings to Fixed Charges
Fiscal Year Ended
Exhibit (12)
(dollars in millions)
Earnings from continuing operations
before income taxes
Capitalized interest, net
Adjusted earnings from continuing
operations before income taxes
Fixed charges:
Interest expense (a)
Interest portion of rental expense
Total fixed charges
Earnings from continuing operations
before income taxes and fixed
charges (b)
Ratio of earnings to fixed charges
(a)
January 31, February 1, February 2,
2013
2015
2014
January 28,
2012
January 29,
2011
$3,653
(1)
$4,121
(14)
$5,056
(12)
$4,621
$4,495
6
2
3,652
4,107
5,044
4,627
4,497
619
108
727
641
108
749
721
106
827
750
110
860
776
110
886
$4,379
6.02
$4,856
6.48
$5,871
7.10
$5,487
6.38
$5,383
6.08
Includes interest on debt and capital leases (including capitalized interest) and amortization of debt issuance costs. Excludes interest
income, the loss on early retirement of debt and interest associated with uncertain tax positions, which is recorded within income tax
expense.
Includes the impact of the loss on early retirement of debt and the gain on sale of our U.S. credit card receivables portfolio.
(b)
This page has been left blank intentionally
84275_Target_Annual_Report_Guts_1.indd 14
4/3/13 10:15 PM
Target 2014 Annual Report
Shareholder Information
Annual Meeting
The Annual Meeting of Shareholders is scheduled for June 10,
2015 at 8:00 a.m. (Pacific Daylight Time) at Bently Reserve, 400
Sansome Street, San Francisco, California 94111.
Transfer Agent, Registrar and Dividend Disbursing Agent
Wells Fargo Shareowner Services
Trustee, Employee Savings 401(K) and Pension Plans
State Street Bank and Trust Company
Shareholder Information
Quarterly and annual shareholder information (including the
Form 10Q and Form 10K Annual Report, which are filed with
the Securities and Exchange Commission) is available at no
Stock Exchange Listing
Trading Symbol: TGT
New York Stock Exchange
charge to shareholders. To obtain copies of these materials,
Shareholder Assistance
you may send an email to investorrelations@target.com, call
For assistance regarding individual stock records, lost certifi
18007753110, or write to: Target Corporation, Attn: Investor
cates, name or address changes, dividend or tax questions, call
Relations, 1000 Nicollet Mall, Minneapolis, Minnesota 55403.
Wells Fargo Shareowner Services at 18007949871, access
These documents as well as other information about Target
Corporation, including our Business Conduct Guide, Corporate
Governance Guidelines, Corporate Responsibility Report and
their website at www.shareowneronline.com or write to:
Wells Fargo Shareowner Services, P.O. Box 64874, St. Paul,
Minnesota 551640874.
Board of Director Committee Charters, are also available on the
Direct Stock Purchase/Dividend Reinvestment Plan
Internet at www.target.com/investors.
Wells Fargo Shareowner Services administers a direct purchase
plan that allows interested investors to purchase Target Corpo
ration stock directly, rather than through a broker, and become
a registered shareholder of the company. The program offers
many features including dividend reinvestment. For detailed
information regarding this program, call Wells Fargo Shareowner
Services toll free at 18007949871 or write to: Wells Fargo
Shareowner Services, P.O. Box 64874, St. Paul, Minnesota
551640874.
Welcome to our 2014
Annual Report. To explore
the key stories of the past
year and find out more
about what’s in store for
the year ahead, please visit
our online annual report at
Target.com/annualreport.
Financial Highlights
(Note: Reflects amounts attributable to continuing operations.)
Total Revenues
IN MILLIONS
EBIT
IN MILLIONS
Net Earnings
Diluted EPS
IN MILLIONS
6
8
7
5
6
$
,
6
6
4
8
6
$
,
0
6
9
1
7
$
,
9
7
2
1
7
$
,
8
1
6
2
7
$
,
2
5
2
5
$
,
3
4
4
5
$
,
0
4
7
5
$
,
0
7
1
5
$
,
5
3
5
,
4
$
0
2
9
2
$
,
9
4
0
3
$
,
5
1
3
3
$
,
4
9
6
2
$
,
9
4
4
2
$
,
0
0
4
$
.
6
4
4
$
.
0
0
5
$
.
0
2
4
$
.
3
8
3
$
.
‘10
’11
‘12
’13
‘14
‘10
’11
‘12
’13
‘14
19%
‘10
’11
‘12
’13
18%
‘14
‘10
’11
17%
’13
‘12
‘14
2014 Growth: 1.9%
Fiveyear CAGR: 2.7%
2014 Growth: 12.3%
Fiveyear CAGR: 0.6%
2014 Growth: 9.1%
Fiveyear CAGR: 0.3%
2014 Growth: 8.8%
Fiveyear CAGR: 3.0%
Total Segment Sales: $72.6 Billion
25%
21%
19%
18%
17%
Household
Essentials
Food & Pet
Supplies
Apparel &
Accessories
Hardlines
Home Furnishings
& Decor
Directors and Management
Directors
Executive Officers
Roxanne S. Austin
President, Austin
Investment Advisors
(1) (3) (4)
Henrique De Castro
Former Chief
Operating Officer,
Yahoo! Inc. (2) (4)
Douglas M. Baker Jr.
Chairman and Chief
Executive Officer,
Ecolab Inc. (2) (5) (6)
James A. Johnson
Founder and Principal,
Johnson Capital
Partners
Brian C. Cornell
Chairman of the
Board and Chief
Executive Officer
Calvin Darden
Chairman, Darden
Putnam Energy &
Logistics, LLC (2) (3) (5)
Mary E. Minnick
Partner, Lion Capital
LLP (1) (3) (4)
Anne M. Mulcahy
Chairman of the Board
of Trustees,
Save the Children
Federation, Inc. (2) (5)
Derica W. Rice
Executive Vice
President, Global
Services and Chief
Financial Officer, Eli
Lilly & Company (1) (3)
Kenneth L. Salazar
Partner, WilmerHale
(3) (4)
John G. Stumpf
Chairman, President
and Chief Executive
Officer, Wells Fargo &
Company (1) (5)
(1) Audit Committee
(2) Compensation Committee
(3) Corporate Risk and
Responsibility Committee
(4) Finance Committee
(5) Nominating and
Governance Committee
(6) Lead Independent Director
Timothy R. Baer
Executive Vice
President, Chief
Legal Officer, and
Corporate Secretary
Casey L. Carl
Chief Strategy and
Innovation Officer
Brian C. Cornell
Chairman of the
Board and Chief
Executive Officer
Jeffrey J. Jones II
Executive Vice
President and Chief
Marketing Officer
Jodeen A. Kozlak
Executive Vice
President and Chief
Human Resources
Officer
John J. Mulligan
Executive Vice
President and Chief
Financial Officer
Jackie Hourigan Rice
Chief Risk and
Compliance Officer
Kathryn A. Tesija
Executive Vice
President and Chief
Merchandising and
Supply Chain Officer
Tina M. Tyler
Executive Vice
President and Chief
Stores Officer
Laysha L. Ward
Executive Vice
President and Chief
Corporate Social
Responsibility Officer
Other Senior Officers
Patricia Adams
Executive Vice President,
Merchandising, Apparel
and Home
Aaron Alt
Chief Executive Officer, Target
Canada and Senior Vice President,
Treasury and Tax, Target
Stacia Andersen
Senior Vice President,
Merchandising, Apparel
and Accessories
Kristi Argyilan
Senior Vice President,
Media and Guest Engagement
Jose Barra
Executive Vice President,
Merchandising, Essentials
and Hardlines
Dawn Block
Senior Vice President, Target.com
& Mobile Merchandising
Stephen Brinkley
Senior Vice President, Stores
John Butcher
Senior Vice President,
Merchandising Category Roles
Kelly Caruso
President, Target Sourcing Services
Tim Curoe
Senior Vice President, Talent &
Organizational Effectiveness
Anne Dament
Senior Vice President,
Merchandising, Grocery
Paritosh Desai
Senior Vice President,
Enterprise Data, Analytics
and Business Intelligence
Bryan Everett
Senior Vice President,
Store Operations
Jim Fisher
Senior Vice President,
Target Technology Services
Juan Galarraga
Senior Vice President, Stores
Peter Glusker
Senior Vice President,
New Business Integration
and Operations
Jason Goldberger
President, Target.com & Mobile
Rick Gomez
Senior Vice President,
Brand & Category Marketing
Julie Guggemos
Senior Vice President,
Product Design & Development
Corey Haaland
Senior Vice President, Financial
Planning Analysis and Tax
Christina Hennington
Senior Vice President,
Merchandising, Health and Beauty Merchandise Planning,
Essentials and Hardlines
John Morioka
Senior Vice President,
Cynthia Ho
Senior Vice President,
Target Sourcing Services
Keri Jones
Executive Vice President,
Global Supply Chain and
Merchandise Planning
Navneet Kapoor
President and Managing Director,
Target India
Scott Kennedy
President, Target Financial and
Retail Services
Stephanie Lucy
Senior Vice President,
Merchandise Planning, Apparel
and Accessories
Stephanie Lundquist
Senior Vice President, Human
Resources Strategy & Transformation
Brad Maiorino
Senior Vice President and Chief
Information Security Officer
Todd Marshall
Senior Vice President, Marketing
Tiffany Monroe
Senior Vice President, Human
Resources, Target Canada
Scott Nelson
Senior Vice President,
Target Properties
Scott Nygaard
Senior Vice President,
Merchandising, Hardlines
Janna Potts
Senior Vice President,
Human Resources, Stores
and Distribution
Jill Sando
Senior Vice President,
Merchandising, Home
Mark Schindele
Senior Vice President,
Target Properties
Samir Shah
Senior Vice President, Stores
Cary Strouse
Senior Vice President, Stores
Todd Waterbury
Senior Vice President,
Chief Creative Officer
Judy Werthauser
Senior Vice President, Human
Resources, Headquarters
91872_Cvr.indd 2
4/16/15 5:15 PM
Visit our online Annual Report
at Target.com/annualreport.
1000 Nicollet Mall, Minneapolis, MN 55403 612.304.6073
Target 2014 Annual Report
91872_Cvr.indd 1
4/16/15 5:15 PM