What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-25 compared with 2020-08-28 · 100 added, 126 removed, 249 unchanged (48% of the section changed)

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Financial Summary

Second quarter 2020 includes the following notable items:

Third quarter 2020 includes the following notable items:

• GAAP diluted earnings per share were $2.01.

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• Total revenue increased 21.3 percent, driven by an increase in comparable sales.

• Comparable sales increased 24.3 percent, driven by an 18.8 percent increase in average transaction amount.

• Comparable sales increased 20.7 percent, driven by a 15.6 percent increase in average transaction amount.

◦ Comparable store sales grew 9.9 percent.

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• Operating income of $1.9 billion was 93.1 percent higher than the comparable prior-year period.

Sales were $22.7 billion for the three months ended August 1, 2020, an increase of $4.5 billion, or 24.8 percent, from the same period in the prior year.

Operating cash flow provided by continuing operations was $5.1 billion for the six months ended August 1, 2020, an increase of $2.3 billion, or 82.1 percent, from $2.8 billion for the six months ended August 3, 2019.

Earnings Per Share from Continuing Operations Three Months Ended Six Months Ended

2020 August 3,

2019 Change August 1,

2020 August 3,

• We repurchased $1.77 billion of debt before its maturity at a market value of $2.25 billion, resulting in a loss of $512 million.

Sales were $22.3 billion for the three months ended October 31, 2020, an increase of $3.9 billion, or 21.3 percent, from the same period in the prior year.

Operating cash flow provided by continuing operations was $7.0 billion for the nine months ended October 31, 2020, an increase of $2.9 billion, or 70.1 percent, from $4.1 billion for the nine months ended November 2, 2019.

Earnings Per Share from Continuing Operations Three Months Ended Nine Months Ended

October 31, 2020 November 2, 2019 Change October 31, 2020 November 2, 2019 Change

GAAP diluted earnings per share $ 2.01 $ 1.37 46.3 % $ 5.91 $ 4.71 25.5 %

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We report after-tax return on invested capital (ROIC) from continuing operations because we believe ROIC provides a meaningful measure of our capital-allocation effectiveness over time.

For the trailing twelve months ended August 1, 2020, after-tax ROIC was 17.2 percent, compared with 15.2 percent for the trailing twelve months ended August 3, 2019.

The calculation of ROIC is provided on page 21.

Impact of COVID-19

For the trailing twelve months ended October 31, 2020, after-tax ROIC was 19.9 percent, compared with 15.0 percent for the trailing twelve months ended November 2, 2019.

The calculation of ROIC is provided o n page 21.

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.

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We have implemented numerous safety measures to protect our guests and team members — such as mandating face masks for all team members and guests in our stores, more rigorous cleaning processes, providing disposable face masks, gloves and thermometers for team members, installing distancing markers, limiting guest levels within our stores, and installing partitions at all stores.

We have also reduced store hours to support increased cleaning and replenishment efforts and implemented quantity limits on certain high-demand merchandise.

In addition, we have reserved certain store hours for guests with increased vulnerability to COVID-19.

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

As the crisis has evolved, we have experienced unusually strong sales, as guests rely on Target for essential items like food, medicine, cleaning products, and household stock-up items.

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

As the pandemic has evolved, we have experienced unusually strong sales, as guests rely on Target for essential items like food, medicine, cleaning products, and household stock-up items, as well as merchandise associated with guests spending more time at home.

Underlying this trend, we saw significant volatility in our sales mix, including both category sales mix and the mix of sales in our stores and digital channels, including same-day fulfillment options.

• During the first quarter, comparable sales increased 10.8 percent, reflecting a 0.9 percent increase in store originated comparable sales and a 141 percent increase in digitally originated comparable sales.

The quarter began with strength across our multi-category portfolio, followed by a shift to strong comparable sales growth in our Food and Beverage and Beauty and Household Essentials core merchandising categories and significant comparable sales declines in Apparel and Accessories.

Comparable sales in Apparel and Accessories recovered notably beginning mid-April.

TARGET CORPORATION

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FINANCIAL SUMMARY Index to Notes

Comparable sales in Apparel and Accessories recovered notably beginning mid-April.

• During the second quarter, comparable sales increased 24.3 percent, reflecting a 10.9 percent increase in store originated comparable sales and a 195 percent increase in digitally originated comparable sales.

Comparable sales growth was strong across our multi-category portfolio, with slightly higher growth in lower-margin categories.

Monthly variability in comparable sales continued, with comparable sales increases of 32.9 percent in May, 21.4 percent in June, and 19.7 percent in July.

For the six months ended August 1, 2020, gross margin has been negatively impacted by changes in both our category and channel sales mix, as well as actions that we have taken to allow us to better fulfill guest demand for essentials.

Additionally, gross margin reflects COVID-19-related investments in pay and benefits for our supply chain team members.

Our SG&A expenses have also been significantly impacted by incremental costs related to investments in pay and benefits for store team members, the spikes in merchandise volume in stores and the supply chain, incremental safety and cleaning supplies, and the impact of additional team member hours dedicated to more rigorous cleaning routines in our facilities.

• During the third quarter, comparable sales increased 20.7 percent, reflecting a 9.9 percent increase in store originated comparable sales and a 155 percent increase in digitally originated comparable sales.

Comparable sales growth strength continued across our multi-category portfolio, with slightly higher growth in lower-margin categories.

For the nine months ended October 31, 2020, gross margin has been negatively impacted by changes in both our category and channel sales mix, as well as actions that we have taken to allow us to better fulfill guest demand for essentials.

Additionally, gross margin reflects the portion of investments in pay and benefits classified within Cost of Sales.

Exceptionally low clearance and promotional markdown rates partially offset these pressures.

Our SG&A expenses include significant incremental costs related to investments in pay and benefits for store team members, the spikes in merchandise volume in stores and the supply chain, incremental safety and cleaning supplies, and the impact of additional team member hours dedicated to more rigorous cleaning routines in our facilities.

From an SG&A expense rate perspective, these incremental costs were more than offset by cost leverage resulting from exceptionally strong sales growth.

To support our team and minimize potential disruptions in their work to serve our guests, we have modified our plans for some of our strategic initiatives, including our previously announced remodel program.

We have completed approximately 130 remodels in 2020, down from the previous expectation of approximately 300.

Similarly, we now expect to open up to 30 new small format stores in 2020, rather than the 36 previously announced.

During the six months ended August 1, 2020, we issued $2.5 billion of 5-year and 10-year notes in an effort to increase our cash on hand.

Similarly, we opened 29 new small format stores in 2020, rather than the 36 previously announced.

During the first quarter 2020, we issued $2.5 billion of 5-year and 10-year notes in an effort to increase our cash on hand.

Additionally, we entered into a $900 million 364-day credit facility, increasing our total undrawn committed credit facilities to $ 3.4 billion.

Our dividend policy remains unchanged;

however, we have temporarily suspended share repurchase activity due to continued uncertainty in the current environment.

The Liquidity and Capital Resources section provides additional information.

Our operating performance during the second and third quarters of 2020 and current financial position allowed us to repurchase $1.77 billion of debt before its maturity at a market value of $2.25 billion in October 2020 and terminate the 364-day credit facility in November 2020.

Note 6 to the Consolidated Financial Statements and t he Liquidity and Capital Resources section provide additional information.

TARGET CORPORATION

Q3 2020 Form 10-Q 14

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF OPERATIONS Index to Notes

Analysis of Results of Operations

Summary of Operating Income Three Months Ended Six Months Ended

(dollars in millions) August 1,

2020 August 3,

2019 Change August 1,

2020 August 3,

Summary of Operating Income Three Months Ended Nine Months Ended

(dollars in millions) October 31, 2020 November 2, 2019 Change October 31, 2020 November 2, 2019 Change

Sales $ 22,336 $ 18,414 21.3 % $ 64,403 $ 53,997 19.3 %

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Operating income $ 1,935 $ 1,002 93.1 % $ 4,703 $ 3,460 35.9 %

Rate Analysis Three Months Ended Six Months Ended

2020 August 3,

2019 August 1,

2020 August 3,

Rate Analysis Three Months Ended Nine Months Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Gross margin rate 30.6 % 29.8 % 29.1 % 30.0 %

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All other rates are calculated by dividing the applicable amount by total revenue.

TARGET CORPORATION

Q2 2020 Form 10-Q 14

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF OPERATIONS Index to Notes

Sales include all merchandise sales, net of expected returns, and our estimate of gift card breakage.

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We believe that our ability to successfully differentiate our guests’ shopping experience through a careful combination of merchandise assortment, price, convenience, guest experience, and other factors will over the long-term drive both increasing shopping frequency (traffic) and the amount spent each visit (average transaction amount).

The increase in sales during the three and six months ended August 1, 2020, is due to a comparable sales increase of 24.3 percent and 17.7 percent, respectively, and the contribution from new stores.

Comparable Sales Three Months Ended Six Months Ended

2020 August 3,

2019 August 1,

2020 August 3,

The increase in sales during the three and nine months ended October 31, 2020, is due to a comparable sales increase of 20.7 percent and 18.7 percent, respectively, and the contribution from new stores.

Comparable Sales Three Months Ended Nine Months Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Comparable sales change 20.7 % 4.5 % 18.7 % 4.2 %

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Average transaction amount 15.6 1.4 15.7 0.9

Contribution to Comparable Sales Change Three Months Ended Six Months Ended

2020 August 3,

2019 August 1,

2020 August 3,

TARGET CORPORATION

Q3 2020 Form 10-Q 15

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF OPERATIONS Index to Notes

Contribution to Comparable Sales Change Three Months Ended Nine Months Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Stores originated channel comparable sales change

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Amounts may not foot due to rounding.

Sales by Channel Three Months Ended Six Months Ended

2020 August 3,

2019 August 1,

2020 August 3,

Sales by Channel Three Months Ended Nine Months Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Stores originated 84.3 % 92.5 % 83.9 % 92.7 %

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Total 100 % 100 % 100 % 100 %

TARGET CORPORATION

Q2 2020 Form 10-Q 15

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF OPERATIONS Index to Notes

Sales by Product Category Three Months Ended Six Months Ended

2020 August 3,

2019 August 1,

2020 August 3,

Sales by Product Category Three Months Ended Nine Months Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Apparel and accessories 18 % 20 % 17 % 19 %

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Guests receive a 5 percent discount on virtually all purchases when they use a RedCard at Target.

RedCard Penetration Three Months Ended Six Months Ended

2020 August 3,

2019 August 1,

2020 August 3,

RedCard Penetration Three Months Ended Nine Months Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Target Debit Card 12.2 % 12.5 % 12.2 % 12.7 %

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Gross Margin Rate

For the three months ended August 1, 2020, our gross margin rate was 30.9 percent compared with 30.6 percent in the comparable period last year.

This increase reflected the net impact of merchandising strategies, primarily favorability in clearance and promotional markdowns, and the favorable impact of a change in our returns estimate for sales during the temporary returns suspension period in the first quarter of 2020.

The increase was partially offset by increased digital fulfillment and supply chain costs (driven by unusually strong growth in digital volume and higher pay and benefit costs classified within Cost of Sales, including incremental pay and benefits due to COVID-19) and unfavorable category sales mix, as sales growth was strongest in lower-margin categories.

For the six months ended August 1, 2020, our gross margin rate was 28.3 percent compared with 30.1 percent in the comparable period last year.

This decrease reflected increased digital fulfillment and supply chain costs (driven by unusually strong growth in digital volume and the impact of higher pay and benefit costs classified within Cost of Sales, including incremental pay and benefits due to COVID-19) and unfavorable category sales mix, as sales growth was strongest in lower-margin categories.

The decrease was partially offset by the net impact of merchandising strategies, primarily favorability in clearance and promotional markdowns.

Sales returns relating to the temporary returns suspension period during the first quarter of 2020 did not notably affect our year-to-date gross margin rate.

For the three months ended October 31, 2020, our gross margin rate was 30.6 percent compared with 29.8 percent in the comparable period last ye ar.

This increase reflected the net impact of merchandising actions, most notably the benefit of exceptionally low clearance and promotional markdown rates.

The increase was partially offset by increased digital fulfillment and supply chain costs (stemming from unusually strong growth in digital volume and higher pay and benefit costs classified within Cost of Sales) and the impact of category sales mix, as sales growth was strongest in lower-margin categories.

For the nine months ended October 31, 2020, our gross margin rate was 29.1 percent compared with 30.0 percent in the comparable period last year.

This decrease reflected increased digital fulfillment and supply chain costs (stemming from unusually strong growth in digital volume combined with the impact of higher pay and benefit costs classified within Cost of Sales) and the impact of category sales mix, as sales growth was strongest in lower-margin categories.

The decrease was partially offset by the net impact of merchandising actions, most notably the benefit of exceptionally low clearance and promotional markdown rates.

Selling, General, and Administrative Expense Rate

For the three and six months ended August 1, 2020, our SG&A expense rate was 19.4 percent and 20.0 percent, respectively, compared with 21.2 percent and 21.0 percent, respectively, in the comparable periods las t year.

Incremental team member pay and benefits and investments to protect the health and safety of guests represented approximately $400 million of the $548 million increase in SG&A expenses for the three months ended August 1, 2020, and approximately $600 million of the $945 million increase for the six months ended August 1, 2020, compared with the prior year periods.

For the three and nine months ended October 31, 2020, our SG&A expense rate was 20.5 percent and 20.2 percent, respectively, compared with 22.3 percent and 21.4 percent, respectively, in the comparable periods last year.

Incremental team member pay and benefits and investments to protect the health and safety of guests represented approximately $300 million of the $494 million increase in SG&A expenses for the three months ended October 31, 2020, and approximately $900 million of the $1.4 billion increase for the nine months ended October 31, 2020, compared with the prior year periods.

From a rate perspective, these increased costs were more than offset by leverage resulting from strong revenue growth.

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ANALYSIS OF OPERATIONS Index to Notes

Change in Number of Stores Three Months Ended Six Months Ended

2020 August 3,

2019 August 1,

2020 August 3,

Change in Number of Stores Three Months Ended Nine Months Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Beginning store count 1,871 1,853 1,868 1,844

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Retail Square Feet Number of Stores Retail Square Feet (a)

2020 February 1,

2020 August 3,

2019 August 1,

2020 February 1,

2020 August 3,

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

170,000 or more sq.

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Other Performance Factors

Net Interest Expense

Net interest expense was $632 million and $871 million for the three and nine months ended October 31, 2020, respectively, and $113 million and $359 million for the three and nine months ended November 2, 2019, respectively.

Net interest expense for the three and nine months ended October 31, 2020, increased primarily due to a loss on early retirement of debt of $512 million.

Provision for Income Taxes

Our effective income tax rate from continuing operations for the three and six months ended August 1, 2020, was 22.8 percent and 21.6 percent, respectively, compared with 23.0 percent and 22.7 percent, respectively, for the comparable periods last year.

The effective tax rate for the six months ended August 1, 2020, reflects a larger rate benefit from discrete items, primarily related to share-based payments, compared with the prior year .

Our effective income tax rate from continuing operations for the three and nine months ended October 31, 2020, was 21.9 percent and 21.7 percent, respectively, compared with 21.7 percent and 22.4 percent, respectively, for the comparable periods last y ear.

The effective tax rate for the nine months ended October 31, 2020, reflects a larger rate benefit from discrete items, primarily related to share-based payments, compared with the prior year.

TARGET CORPORATION

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Three Months Ended

August 1, 2020 August 3, 2019

October 31, 2020 November 2, 2019

(millions, except per share data)

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$ 2.01 $ 1.37

Gain on investment (a)

Loss on debt extinguishment $ 512 $ 379 $ 0.75 $ — $ — $ —

Loss on investment (a)

8 9 0.02 — — —

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Reconciliation of Non-GAAP Adjusted EPS

Six Months Ended

August 1, 2020 August 3, 2019

Nine Months Ended

October 31, 2020 November 2, 2019

(millions, except per share data)

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$ 5.91 $ 4.71

Loss on debt extinguishment $ 512 $ 379 $ 0.75 $ — $ — $ —

Loss on investment (a)

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Amounts may not foot due to rounding.

(a) Includes an unrealized (gain) / loss on our investment in Casper Sleep Inc., which is not core to our continuing operations.

(b) Includes store damage and inventory losses related to civil unrest.

(a) Includes an unrealized loss on our investment in Casper Sleep Inc., which is not core to our continuing operations.

(b) For 2020, includes store damage and inventory losses related to civil unrest.

For 2019, represents an insurance recovery related to the 2013 data breach.

TARGET CORPORATION

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Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other companies.

EBIT and EBITDA Three Months Ended Six Months Ended

(dollars in millions) (unaudited) August 1,

2020 August 3,

2019 Change August 1,

2020 August 3,

EBIT and EBITDA Three Months Ended Nine Months Ended

(dollars in millions) (unaudited) October 31, 2020 November 2, 2019 Change October 31, 2020 November 2, 2019 Change

Net earnings from continuing operations $ 1,014 $ 706 43.6 % $ 2,988 $ 2,436 22.6 %

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Trailing Twelve Months

Numerator August 1,

2020 August 3,

Numerator October 31, 2020 November 2, 2019

Operating income $ 5,901 $ 4,577

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Net operating profit after taxes $ 4,665 $ 3,665

Denominator August 1,

2020 August 3,

2019 August 4,

Denominator October 31, 2020 November 2, 2019 November 3, 2018

Current portion of long-term debt and other borrowings $ 131 $ 1,159 $ 1,535

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Operating lease interest is added back to operating income in the ROIC calculation to control for differences in capital structure between us and our competitors.

(b) Calculated using the effective tax rates for continuing operations, which were 21.4 percent and 20.7 percent for the trailing twelve months ended August 1, 2020, and August 3, 2019, respectively.

For the trailing twelve months ended August 1, 2020, and August 3, 2019, includes tax effect of $1.1 billion and $919 million, respectively, related to EBIT, and $19 million and $18 million, respectively, related to operating lease interest.

(b) Calculated using the effective tax rates for continuing operations, which were 21.5 percent and 22.1 percent for the trailing twelve months ended October 31, 2020, and November 2, 2019, respectively.

For the trailing twelve months ended October 31, 2020, and November 2, 2019, includes tax effect of $1.3 billion and $1.0 billion, respectively, related to EBIT, and $19 million and $19 million, respectively, related to operating lease interest.

(c) Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities.

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We believe our sources of liquidity will continue to be adequate to maintain operations, finance anticipated expansion and strategic initiatives, fund debt maturities, and pay dividends.

In response to COVID-19, we have suspended our share repurchase program.

In response to COVID-19, we suspended our share repurchase program in March 2020.

In November 2020, we lifted the share repurchase suspension and announced that we expect to resume share repurchases in 2021.

We continue to anticipate ample access to commercial paper and long-term financing.

Our cash and cash equivalents balance was $7.3 billion, $2.6 billion, and $1.7 billion at August 1, 2020, February 1, 2020, and August 3, 2019, respectively.

Our cash and cash equivalents balance includes short-term investments of $6.4 billion, $1.8 billion, and $796 million as of August 1, 2020, February 1, 2020, and August 3, 2019, respectively.

Our cash and cash equivalents balance was $6.0 billion, $2.6 billion, and $1.0 billion as of October 31, 2020, February 1, 2020, and November 2, 2019, respectively.

Our cash and cash equivalents balance includes short-term investments of $5.1 billion, $1.8 billion, and $163 million as of October 31, 2020, February 1, 2020, and November 2, 2019, respectively.

Our investment policy is designed to preserve principal and liquidity of our short-term investments.

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Operating Cash Flows

Operating cash flow provided by continuing operations was $5.1 billion for the six months ended August 1, 2020, compared with $2.8 billion for the six months ended August 3, 2019.

The increase reflects stronger operating performance combined with higher payables leverage during the six months ended August 1, 2020 , due to increased inventory turnover driven by strong sales , compared with higher net settlement of accounts payable during the six months ended August 3, 2019 , resulting from elevated inventory and accounts payable levels as of February 2, 2019.

Additionally, operating cash flows for the six months ended August 1, 2020, reflect increased payroll-related liabilities, including the deferral of employer social security tax payments.

Also, lower first quarter 2020 pretax earnings resulted in a decrease in year-to-date income tax payments.

Inventory was $8.9 billion as of August 1, 2020, compared with $9.0 billion and $9.1 billion at February 1, 2020, and August 3, 2019, respectively.

The decrease reflects elevated sell-through rates in longer-lead time merchandise categories , partially offset by increases in Food and Beverage and Beauty and Household Essentials inventory to align with sales trends.

Operating cash flow provided by continuing operations was $7.0 billion for the nine months ended October 31, 2020, compared with $4.1 billion for the nine months ended November 2, 2019.

The increase reflects stronger operating performance combined with higher payables leverage during the nine months ended October 31, 2020, due to increased inventory turnover driven by strong sales, compared with the nine months ended November 2, 2019.

Additionally, operating cash flows for the nine months ended October 31, 2020, reflect increased payroll-related liabilities, including the deferral of employer social security tax payments.

Inventory was $12.7 billion as of October 31, 2020, compared with $9.0 billion and $11.4 billion at February 1, 2020, and November 2, 2019, respectively .

The increase reflects efforts to align inventory with sales trends.

Investing Cash Flows

Cash flow for investing activities included capital expenditures of $1.4 billion for the six months ended August 1, 2020, and August 3, 2019.

During the six months ended August 1, 2020, we completed new store and remodel projects that were in process as the COVID-19 crisis developed.

Cash flow required for investing activities included capital expenditures of $2.0 billion and $2.4 billion for the nine months ended October 31, 2020, and November 2, 2019, respectively.

During the nine months ended October 31, 2020, we completed new store and remodel projects that were in process as the COVID-19 crisis developed.

However, in response to COVID-19, we have modified plans for some of our strategic initiatives including store remodels and new store openings.

We expect full year 2020 capital expenditures to be at a lower level than in 2019 .

We paid dividends totaling $330 million ($0.66 per share) and $662 million ($1.32 per share) for the three and six months ended August 1, 2020, respectively, and $328 million ($0.64 per share) and $658 million ($1.28 per share) for the three and six months ended August 3, 2019, respectively, a per share increase of 3.1 percent.

We declared dividends totaling $344 million ($0.68 per share) during the second quarter of 2020, a per share increase of 3.0 percent over the $341 million ($0.66 per share) of declared dividends during the second quarter of 2019.

We expect full year 2020 capital expenditures to be $2.5 billion to $3.0 billion .

We paid dividends totaling $340 million ($0.68 per share) and $1.0 billion ($2.00 per share) for the three and nine months ended October 31, 2020, respectively, and $337 million ($0.66 per share) and $995 million ($1.94 per share) for the three and nine months ended November 2, 2019, respectively, a per share increase of 3.0 percent and 3.1 percent, respectively.

We declared dividends totaling $346 million ($0.68 per share) during the third quarter of 2020, a per share increase of 3.0 percent over the $338 million ($0.66 per share) of declared dividends during the third quarter of 2019.

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.

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Share Repurchase

We returned $609 million to shareholders through share repurchase during the six months ended August 1, 2020.

We did not repurchase any shares during the three months ended August 1, 2020.

We returned $609 million to shareholders through share repurchase during the nine months ended October 31, 2020.

We did not repurchase any shares during the three months ended October 31, 2020.

See Part II , Item 2 , Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 8 to the Consolidated Financial Statements for more information.

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Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and maintaining strong credit ratings.

As of August 1, 2020, our credit ratings were as follows:

As of October 31, 2020, our credit ratings were as follows:

Credit Ratings Moody’s Standard and Poor’s Fitch

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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.

In March 2020, we issued $2.5 billion of debt.

Notes 6 and 7 to the Consolidated Financial Statements provide additional information.

We have additional liquidity through a committed $900 million 364-day revolving credit facility obtained through a group of banks in April 2020, which expires in April 2021, and an existing $2.5 billion revolving credit facility obtained through a group of banks, which expires in October 2023.

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

We have additional liquidity through a committed $2.5 billion revolving credit facility obtained through a group of banks, which expires in October 2023.

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

Most of our long-term debt obligations contain covenants related to secured debt levels.

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We are, and expect to remain, in compliance with these covenants.

Additionally, as of August 1, 2020, no notes or debentures contained provisions requiring acceleration of payment upon a credit 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 credit ratings are either reduced and the resulting rating is non-investment grade, or our long-term credit ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is non-investment grade.

Additionally, as of October 31, 2020, no notes or debentures contained provisions requiring acceleration of payment upon a credit 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 credit ratings are either reduced and the resulting rating is non-investment grade, or our long-term credit ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is non-investment grade.

Contractual Obligations and Commitments

As of the date of this report, other than the new borrowings discussed in Note 6 to the Consolidated Financial Statements, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since February 1, 2020, as reported in our 2019 Form 10-K .

As of the date of this report, other than the new borrowings and payments discussed in Note 6 to the Consolidated Financial Statements, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since February 1, 2020, as reported in our 2019 Form 10-K .

New Accounting Pronouncements

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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 2. Management’s Discussion and Analysis