What changed in this filing

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Item 1. Financial Statements

2020-11-25 compared with 2020-08-28 · 61 added, 80 removed, 331 unchanged (30% of the section changed)

1 unchanged sentence

Consolidated Statements of Operations

Three Months Ended Six Months Ended

(millions, except per share data) (unaudited) August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Three Months Ended Nine Months Ended

(millions, except per share data) (unaudited) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Sales $ 22,336 $ 18,414 $ 64,403 $ 53,997

33 unchanged sentences

Consolidated Statements of Comprehensive Income

Three Months Ended Six Months Ended

(millions) (unaudited) August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Three Months Ended Nine Months Ended

(millions) (unaudited) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Net earnings $ 1,014 $ 714 $ 2,988 $ 2,447

10 unchanged sentences

Consolidated Statements of Financial Position

(millions, except footnotes) (unaudited) August 1,

2020 February 1,

2020 August 3,

(millions, except footnotes) (unaudited) October 31, 2020 February 1, 2020 November 2, 2019

Cash and cash equivalents $ 5,996 $ 2,577 $ 969

31 unchanged sentences

Common Stock Authorized 6,000,000,000 shares, $ 0.0833 par value;

500,252,831 , 504,198,962 and 511,335,375 shares issued and outstanding at August 1, 2020, February 1, 2020, and August 3, 2019, respectively.

500,754,729 , 504,198,962 and 506,677,740 shares issued and outstanding as of October 31, 2020, February 1, 2020, and November 2, 2019, respectively.

Preferred Stock Authorized 5,000,000 shares, $ 0.01 par value;

6 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended

(millions) (unaudited) August 1,

2020 August 3,

Nine Months Ended

(millions) (unaudited) October 31, 2020 November 2, 2019

Operating activities

6 unchanged sentences

Deferred income taxes 26 235

Loss on debt extinguishment 512 —

Noncash losses / (gains) and other, net

17 unchanged sentences

Repurchase of stock ( 741 ) ( 959 )

Accelerated share repurchase pending final settlement — ( 450 )

Stock option exercises 18 65

Cash provided by / (required for) financing activities 993 ( 1,328 )

Cash required for financing activities ( 1,640 ) ( 2,386 )

Net increase in cash and cash equivalents 3,419 ( 587 )

62 unchanged sentences

August 1, 2020 500.3 $ 42 $ 6,248 $ 7,121 $ ( 833 ) $ 12,578

We declared $ 0.68 and $ 0.66 dividends per share for the three months ended August 1, 2020, and August 3, 2019, respectively, and $ 2.62 per share for the fiscal year ended February 1, 2020.

Net earnings — — — 1,014 — 1,014

Other comprehensive income — — — — 36 36

Dividends declared — — — ( 346 ) — ( 346 )

Stock options and awards 0.5 — 37 — — 37

October 31, 2020 500.8 $ 42 $ 6,285 $ 7,789 $ ( 797 ) $ 13,319

We declared $ 0.68 and $ 0.66 dividends per share for the three months ended October 31, 2020, and November 2, 2019, respectively, and $ 2.62 per share for the fiscal year ended February 1, 2020.

See accompanying Notes to Consolidated Financial Statements .

6 unchanged sentences

Accounting Policies

Impact of Coronavirus (COVID-19)

Coronavirus (COVID-19)

Fair Value Measurements

21 unchanged sentences

Due to the seasonal nature of our business, quarterly revenues, expenses, earnings, and cash flows are not necessarily indicative of the results that may be expected for the full year.

Impact of Coronavirus (COVID-19)

Coronavirus (COVID-19)

On March 11, 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) a pandemic, and on March 13, 2020, the United States declared a national emergency.

States and cities have taken various measures in response to COVID-19, including mandating the closure of certain businesses and encouraging or requiring citizens to avoid large gatherings.

To date all of our stores, digital channels, and distribution centers remain open.

Throughout the six months ended August 1, 2020, guest shopping patterns changed significantly and unpredictably in reaction to the COVID-19 pandemic.

Four of our five core merchandise categories have experienced significant sales grow th year-to-date ;

however, sales of Apparel and Accessories declined significantly in the first quarter before rebounding in the second quarter.

Note 3 provides sales by category.

To date, virtually all of our stores, digital channels, and distribution centers have remained open.

Throughout the nine months ended October 31, 2020, guest shopping patterns changed significantly and unpredictably in reaction to the COVID-19 pandemic.

Four of our five core merchandise categories have experienced significant sales growth throughout the year;

however, sales of Apparel and Accessories declined significantly in the first quarter before rebounding in the second and third quarters.

Note 3 pr ovides sales by category.

In response to these changes, we have taken many actions, including accelerating purchases of certain merchandise in our core categories and slowing or canceling certain purchase orders, primarily for Apparel and Accessories.

6 unchanged sentences

We also earn revenues from a variety of other sources, most notably credit card profit sharing income from our arrangement with TD Bank Group (TD).

Revenues Three Months Ended Six Months Ended

(millions) August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Revenues Three Months Ended Nine Months Ended

(millions) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Apparel and accessories (a)

22 unchanged sentences

Sales are recognized net of expected returns, which we estimate using historical return patterns and our expectation of future returns.

As of August 1, 2020, February 1, 2020, and August 3, 2019, the accrual for estimated returns was $ 201 million, $ 117 million, and $ 131 million, respectively.

Other than as described below, we have not historically had notable adjustments to our returns estimates.

From March 26, 2020 to April 26, 2020, we did not accept in-store merchandise returns and exchanges to protect our team members from COVID-19.

We lengthened the return period for merchandise affected by this change.

Our returns estimate for sales during the suspension period included significant assumptions, including the impact of the lengthened return period, sales mix, and recent changes in guest returns behavior.

At May 2, 2020, the returns reserve totaled $ 398 million.

After resuming guest returns, we received fewer returns than originally expected.

During the second quarter, we reduced our estimate of sales returns, which increased sales by $ 146 million and operating income by $ 110 million.

As of October 31, 2020, February 1, 2020, and November 2, 2019, the accrual for estimated returns was $ 182 million, $ 117 million, and $ 137 million, respectively.

Revenue from Target gift card sales is recognized upon gift card redemption, which is typically within one year of issuance.

Gift Card Liability Activity February 1,

2020 Gift Cards Issued During Current Period But Not Redeemed (b)

Revenue Recognized From Beginning Liability August 1,

Gift Card Liability Activity February 1, 2020 Gift Cards Issued During Current Period But Not Redeemed (b)

Revenue Recognized From Beginning Liability October 31, 2020

Gift card liability (a)

12 unchanged sentences

Fair Value Measurements - Recurring Basis Fair Value at

(millions) Classification Pricing Category August 1,

2020 February 1,

2020 August 3,

(millions) Classification Pricing Category October 31, 2020 February 1, 2020 November 2, 2019

Short-term investments Cash and Cash Equivalents Level 1 $ 5,089 $ 1,810 $ 163

7 unchanged sentences

Significant Financial Instruments Not Measured at Fair Value (a)

August 1, 2020 February 1, 2020 August 3, 2019

October 31, 2020 February 1, 2020 November 2, 2019

Value Carrying

7 unchanged sentences

We review long-lived assets for impairment when store performance expectations, events, or changes in circumstances—such as a decision to relocate or close a store or distribution center, discontinue projects, or make significant software changes—indicate that the asset’s carrying value may not be recoverable.

We recognized impairment charges of $ 25 million and $ 60 million during the three and six months ended August 1, 2020, respectively.

We recognized impairment charges of $ 10 million and $ 13 million during the three and six months ended August 3, 2019, respectively.

We recognized impairment charges of $ 2 million and $ 62 million during the three and nine months ended October 31, 2020, respectively.

We recognized impairment charges of $ 7 million and $ 21 million during the three and nine months ended November 2, 2019, respectively.

These impairment charges are included in Selling, General and Administrative Expenses (SG&A).

1 unchanged sentence

In March 2020, we issued unsecured fixed rate debt of $ 1.5 billion at 2.250 percent that matures in April 2025 and $ 1.0 billion at 2.650 percent that matures in September 2030.

In October 2020, we repurchased $ 1.77 billion of debt before its maturity at a market value of $ 2.25 billion.

We recognized a loss on early retirement of $ 512 million, which was recorded in Net Interest Expense.

We obtain short-term financing from time to time under our commercial paper program.

No balances were outstanding at any time during the six months ended August 1, 2020.

For the six months ended August 3, 2019, the maximum amount outstanding was $ 744 million, and the average daily amount outstanding was $ 74 million at a weighted average annual interest rate of 2.4 percent, with no balance outstanding as of August 3, 2019.

In April 2020, we obtained a committed $ 900 million 364 -day unsecured revolving credit facility that expires in April 2021.

This new facility is in addition to our $ 2.5 billion unsecured revolving credit facility that expires in October 2023.

No balances were outstanding at any time during the nine months ended October 31, 2020.

For the nine months ended November 2, 2019, the maximum amount outstanding was $ 744 million, and the average daily amount outstanding was $ 55 million at a weighted average annual interest rate of 2.4 percent, with no balance outstanding as of November 2, 2019.

In April 2020, we obtained a committed $ 900 million 364 -day unsecured revolving credit facility.

This new facility was in addition to our $ 2.5 billion unsecured revolving credit facility that expires in October 2023.

We terminated the 364 -day facility in November 2020.

No balances were outstanding under either credit facility at any time during 2020 or 2019.

7 unchanged sentences

Note 4 to the Consolidated Financial Statements provides the fair value and classification of these instruments.

As of August 1, 2020, and August 3, 2019, we were party to interest rate swaps with notional amounts totaling $ 1.5 billion.

As of October 31, 2020, and November 2, 2019, we were party to interest rate swaps with notional amounts totaling $ 1.5 billion.

We pay a variable rate and receive a fixed rate under each of these agreements.

All of the agreements are designated as fair value hedges, and all were perfectly effective during the three and six months ended August 1, 2020, and August 3, 2019.

As of August 1, 2020, we were party to forward-starting interest rate swaps with notional amounts totaling $ 250 million to hedge the interest rate exposure of anticipated future debt issuances.

All of the agreements are designated as fair value hedges, and all were perfectly effective during the three and nine months ended October 31, 2020, and November 2, 2019.

As of October 31, 2020, we were party to forward-starting interest rate swaps with notional amounts totaling $ 250 million to hedge the interest rate exposure of anticipated future debt issuances.

We designated these derivative financial instruments as cash flow hedges.

We assess, both at inception and on an ongoing basis, whether the derivative financial instrument is highly effective in offsetting changes in cash flows of the hedged item and whether it is probable that the hedged forecasted transaction will occur.

As of August 1, 2020, a $ 12 million loss was recorded in Accumulated Other Comprehensive Loss and will be reclassified to Net Interest Expense when the forecasted transaction affects earnings.

As of October 31, 2020, a $ 1 million loss was recorded in Accumulated Other Comprehensive Loss and will be reclassified to Net Interest Expense when the forecasted transaction affects earnings.

Effect of Hedges on Debt

(millions) August 1,

2020 February 1,

2020 August 3,

October 31, 2020 February 1, 2020 November 2, 2019

Long-term debt and other borrowings

1 unchanged sentence

Cumulative hedging adjustments, included in carrying amount 203 137 122

Effect of Hedges on Net Interest Expense Three Months Ended Six Months Ended

(millions) August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Effect of Hedges on Net Interest Expense Three Months Ended Nine Months Ended

(millions) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Gain (loss) on fair value hedges recognized in Net Interest Expense

4 unchanged sentences

We periodically repurchase shares of our common stock under a board-authorized repurchase program through a combination of open market transactions, accelerated share repurchase (ASR) arrangements, and other privately negotiated transactions with financial institutions.

Share Repurchase Activity Three Months Ended Six Months Ended

(millions, except per share data) August 1,

2020 August 3,

Share Repurchase Activity Three Months Ended Nine Months Ended

(millions, except per share data) October 31, 2020 November 2, 2019 (a)

October 31, 2020 November 2, 2019 (a)

Number of shares purchased — 3.0 5.7 10.8

1 unchanged sentence

Total investment $ — $ 294 $ 609 $ 912

(a) This table includes activity related to the ASR arrangement entered in first quarter 2019 because final settlement occurred in second quarter 2019.

Under the ASR arrangement, we repurchased 4.2 million shares for a total cash investment of $ 340 million.

We did not enter into any new ASR arrangements during second quarter 2019.

In March 2020, we suspended share repurchase activity.

(a) This table excludes activity related to the ASR arrangement described below because final settlement had not occurred as of November 2, 2019.

During the third quarter of 2019, we entered into an ASR arrangement to repurchase $ 300 to $ 450 million of our common stock.

Under the agreement, we paid $ 450 million and received an initial delivery of 2.5 million shares, which were retired, resulting in a $ 272 million reduction to Retained Earnings.

As of November 2, 2019, $ 178 million was included as a reduction to Additional Paid-in Capital.

Upon final settlement in the fourth quarter of 2019, we received an additional 0.2 million shares, which were retired, and $ 127 million for the remaining amount not settled in shares.

In total, we repurchased 2.7 million shares under the ASR arrangement for a total cash investment of $ 323 million ($ 117.64 per share).

TARGET CORPORATION

4 unchanged sentences

We provide pension plan benefits to eligible team members.

Net Pension Benefits Expense Three Months Ended Six Months Ended

(millions) Classification August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Net Pension Benefits Expense Three Months Ended Nine Months Ended

(millions) Classification October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Service cost benefits earned SG&A Expenses $ 25 $ 23 $ 76 $ 69

4 unchanged sentences

Amortization of prior service cost Net Other (Income) / Expense ( 3 ) ( 3 ) ( 9 ) ( 8 )

Settlement charges Net Other (Income) / Expense 1 — 1 —

Total $ 24 $ 11 $ 71 $ 33

3 unchanged sentences

February 1, 2020 $ ( 12 ) $ ( 19 ) $ ( 837 ) $ ( 868 )

Other comprehensive income before reclassifications, net of tax

( 9 ) — — ( 9 )

Other comprehensive loss before reclassifications, net of tax ( 1 ) — — ( 1 )

Amounts reclassified from AOCI, net of tax 6 — 66 72

August 1, 2020 $ ( 21 ) $ ( 19 ) $ ( 793 ) $ ( 833 )

October 31, 2020 $ ( 7 ) $ ( 19 ) $ ( 771 ) $ ( 797 )

TARGET CORPORATION

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements