What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-10 compared with 2020-03-11 · 187 added, 250 removed, 907 unchanged (33% of the section changed)

3 unchanged sentences

Consolidated Statements of Operations

Consolidated Statement s of Comprehensive Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Financial Position

3 unchanged sentences

Summary of Accounting Policies

Coronavirus (COVID-19)

Cost of Sales and Selling, General and Administrative Expenses

18 unchanged sentences

Accumulated Other Comprehensive Income

Quarterly Results (Unaudited)

TARGET CORPORATION

20 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Target Corporation (the Corporation) as of February 1, 2020 and February 2, 2019, the related consolidated statements of operations, comprehensive income, cash flows and shareholders' investment for each of the three years in the period ended February 1, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation at February 1, 2020 and February 2, 2019, and the results of its operations and its cash flows for each of the three years in the period ended February 1, 2020, in conformity with U.S.

We have audited the accompanying consolidated statements of financial position of Target Corporation (the Corporation) as of January 30, 2021 and February 1, 2020, the related consolidated statements of operations, comprehensive income, cash flows and shareholders' investment for each of the three years in the period ended January 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation at January 30, 2021 and February 1, 2020, and the results of its operations and its cash flows for each of the three years in the period ended January 30, 2021, 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) (PCAOB), the Corporation's internal control over financial reporting as of February 1, 2020, 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 11, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Corporation's internal control over financial reporting as of January 30, 2021, 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 10, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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Description of the Matter

At February 1, 2020, the Corporation's inventory was $8,992 million.

At January 30, 2021, the Corporation’s inventory was $10,653 million.

As described in Note 9 to the consolidated financial statements, the Corporation accounts for the vast majority of its inventory under the retail inventory accounting method (RIM) using the last-in, first-out (LIFO) method.

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Further, the inventory process is supported by a number of automated and IT dependent controls that elevate the importance of the IT general controls that support the underlying information systems utilized to process transactions.

In addition, in March 2020, as a result of COVID-19, the Company temporarily suspended physical inventory counts at its stores.

The Company resumed physical inventory counts in June 2020 using a statistical sampling method.

Historically, the Company counted nearly all of its stores annually.

How We Addressed the Matter in Our Audit

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Our audit procedures included, among others, testing the processing scenarios of the automated controls by evaluating configuration settings and performing a transaction walkthrough for each scenario.

In addition, we evaluated the design and tested the effectiveness of controls over the Company’s modified store inventory count process, including the determination of the number of stores counted and evaluation of the results from the sample it counted.

Our audit procedures also included, among others, testing the key inputs into the RIM calculation, including purchases, sales, shortage, and price changes (markdowns) by comparing the key inputs back to source information such as third-party vendor invoices, third-party inventory count information and cash receipts.

In addition, we performed extensive analytical procedures.

We performed extensive analytical procedures.

For example, we performed store square footage analytics to predict ending inventory values at each store location, as well as predictive markdown analytics based on inquiries held with members of the merchant organization to assess the level of price changes within a category.

In addition, we tested the existence of inventories by observing physical inventory counts for a sample of stores and distribution centers.

Valuation of Vendor Income Receivables

Description of the Matter

At February 1, 2020, the Corporation’s vendor income receivables totaled $464 million.

At January 30, 2021, the Corporation’s vendor income receivables totaled $504 million.

As discussed in Note 5 of the consolidated financial statements, the Corporation receives consideration for a variety of vendor-sponsored programs, which are primarily recorded as a reduction of cost of sales when earned.

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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 February 1, 2020, based on the framework in Internal Control—Integrated Framework (2013) , issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

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 30, 2021, 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 February 1, 2020, 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.

Our internal control over financial reporting as of January 30, 2021, 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.

/s/ Michael J.

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Opinion on Internal Control over Financial Reporting

We have audited Target Corporation’s internal control over financial reporting as of February 1, 2020, 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).

In our opinion, Target Corporation (the Corporation) maintained, in all material respects, effective internal control over financial reporting as of February 1, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Corporation as of February 1, 2020 and February 2, 2019, the related consolidated statements of operations, comprehensive income, cash flows and shareholders' investment for each of the three years in the period ended February 1, 2020, and the related notes and our report dated March 11, 2020 expressed an unqualified opinion thereon.

We have audited Target Corporation’s internal control over financial reporting as of January 30, 2021, 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).

In our opinion, Target Corporation (the Corporation) maintained, in all material respects, effective internal control over financial reporting as of January 30, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Corporation as of January 30, 2021 and February 1, 2020, the related consolidated statements of operations, comprehensive income, cash flows and shareholders' investment for each of the three years in the period ended January 30, 2021, and the related notes and our report dated March 10, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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Net earnings $ 4,368 $ 3,281 $ 2,937

Other comprehensive (loss) / income, net of tax

Pension and other benefit liabilities, net of tax

Other comprehensive income / (loss), net of tax

Pension benefit liabilities

102 ( 65 ) ( 52 )

Currency translation adjustment and cash flow hedges, net of tax

Other comprehensive (loss) / income

Currency translation adjustment and cash flow hedges

Other comprehensive income / (loss)

112 ( 63 ) ( 58 )

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Consolidated Statements of Financial Position

(millions, except footnotes) February 1,

2020 February 2,

(millions, except footnotes) January 30, 2021 February 1, 2020

Cash and cash equivalents $ 8,511 $ 2,577

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

504,198,962 shares issued and outstanding as of February 1, 2020;

500,877,129 shares issued and outstanding as of January 30, 2021;

504,198,962 shares issued and outstanding as of February 1, 2020.

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Proceeds from disposal of property and equipment 42 63 85

Cash paid for acquisitions, net of cash assumed — — ( 518 )

Other investments 16 20 15

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Cash required for financing activities ( 2,000 ) ( 3,152 ) ( 3,644 )

Net (decrease) / increase in cash and cash equivalents

Net increase / (decrease) in cash and cash equivalents

5,934 1,021 ( 1,087 )

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(Loss) / Income

January 28, 2017 556.2 $ 46 $ 5,661 $ 5,846 $ ( 638 ) $ 10,915

February 3, 2018 541.7 $ 45 $ 5,858 $ 6,495 $ ( 747 ) $ 11,651

Net earnings — — — 2,937 — 2,937

Other comprehensive income — — — — 8 8

Other comprehensive loss — — — — ( 58 ) ( 58 )

Dividends declared — — — ( 1,347 ) — ( 1,347 )

1 unchanged sentence

Stock options and awards 3.3 — 184 — — 184

Reclassification of tax effects to

retained earnings — — — 117 ( 117 ) —

February 2, 2019 517.8 $ 43 $ 6,042 $ 6,017 $ ( 805 ) $ 11,297

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Net earnings — — — 4,368 — 4,368

Other comprehensive loss — — — — ( 63 ) ( 63 )

Other comprehensive income — — — — 112 112

Dividends declared — — — ( 1,367 ) — ( 1,367 )

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Stock options and awards 2.4 — 103 — — 103

February 1, 2020 504.2 $ 42 $ 6,226 $ 6,433 $ ( 868 ) $ 11,833

We declared $ 2.62 , $ 2.54 , and $ 2.46 dividends per share for the twelve months ended February 1, 2020, February 2, 2019, and February 3, 2018, respectively.

January 30, 2021 500.9 $ 42 $ 6,329 $ 8,825 $ ( 756 ) $ 14,440

We declared $ 2.70 , $ 2.62 , and $ 2.54 dividends per share for the twelve months ended January 30, 2021, February 1, 2020, and February 2, 2019, respectively.

See accompanying Notes to Consolidated Financial Statements .

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Unless otherwise stated, references to years in this report relate to fiscal years, rather than to calendar years.

Fiscal 2019 and 2018 ended February 1, 2020, and February 2, 2019, respectively, and consisted of 52 weeks.

Fiscal 2017 ended February 3, 2018, and consisted of 53 weeks.

Fiscal 2020, 2019 and 2018 ended January 30, 2021, February 1, 2020, and February 2, 2019, respectively, and consisted of 52 weeks.

Fiscal 2021 will end January 29, 2022, and will consist of 52 weeks.

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Certain prior-year amounts have been reclassified to conform to the current-year presentation.

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

Throughout 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 balance of the year.

Note 3 provides 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.

As a result of these actions, we recorded $ 226 million of purchase order cancellation fees in Cost of Sales.

TARGET CORPORATION

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2020 2019 2018

Apparel and accessories (a)(f)

Apparel and accessories (a)

$ 14,772 $ 14,304 $ 13,434

Beauty and household essentials (b)(f)

Beauty and household essentials (b)

24,461 20,616 19,296

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(e) Includes furniture, lighting, storage, kitchenware, small appliances, home décor, bed and bath, home improvement, school/office supplies, greeting cards and party supplies, and other seasonal merchandise.

(f) We reclassified certain baby gear sales totaling $ 1,570 million and $ 1,339 million for the fiscal years ended February 2, 2019, and February 3, 2018, respectively, from Apparel and Accessories to Beauty and Household Essentials.

Merchandise sales – We record almost all retail store revenues at the point of sale.

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

As of February 1, 2020, February 2, 2019, and February 3, 2018, the liability for estimated returns was $ 117 million, $ 116 million, and $ 110 million, respectively.

We have not historically had material adjustments to our returns estimates.

As of January 30, 2021, February 1, 2020, and February 2, 2019, the liability for estimated returns was $ 139 million, $ 117 million, and $ 116 million, respectively.

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.

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Merchandise received under these arrangements is not included in Inventory because the purchase and sale of this inventory are virtually simultaneous.

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

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.

TARGET CORPORATION

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NOTES Index to Financial Statements

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

Our gift cards do not expire.

Gift Card Liability Activity February 2,

2019 Gift Cards Issued During Current Period But Not Redeemed (b)

Revenue Recognized From Beginning Liability February 1,

Gift Card Liability Activity

February 1, 2020 Gift Cards

Issued During

Current Period

Liability January 30, 2021

Gift card liability (a)

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Guests receive a 5 percent discount on nearly all purchases and receive free shipping at Target.com when they use their Target Debit Card, Target Credit Card, or Target MasterCard (RedCards).

The discount is included as a sales reduction and was $ 962 million, $ 953 million, and $ 933 million in 2019, 2018, and 2017, respectively.

The discount is included as a sales reduction and was $ 1.1 billion, $ 962 million, and $ 953 million in 2020, 2019, and 2018, respectively.

Target Circle program members earn 1 percent rewards on nearly all non-RedCard purchases.

Revenue related to reward redemptions and deferred revenue under this loyalty program were immaterial to our Consolidated Financial Statements for the year ended February 1, 2020.

As of January 30, 2021, deferred revenue of $ 72 million related to this loyalty program was included in Accrued and Other Current Liabilities.

Amounts related to this program were insignificant at February 1, 2020.

Credit card profit sharing – We receive payments under a credit card program agreement with TD.

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TD underwrites, funds, and owns Target Credit Card and Target MasterCard receivables, controls risk management policies, and oversees regulatory compliance.

Other – Includes rental income, advertising, membership fees, and other miscellaneous revenues, none of which are individually significant.

Other – Includes advertising, Shipt membership and service revenues, rental income, and other miscellaneous revenues, none of which are individually significant.

Cost of Sales and Selling, General and Administrative Expenses

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Credit cards servicing expenses

Costs associated with accepting 3 rd party bank issued

Costs associated with accepting third-party bank issued

payment cards

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The majority of the 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.

Not e 10 provides additional information.

Advertising Costs

Advertising costs, which primarily consist of newspaper circulars, digital advertisements, and media broadcast, are generally expensed at first showing or distribution of the advertisement.

Advertising Costs

2019 2018 2017

Gross advertising costs $ 1,647 $ 1,494 $ 1,476

Vendor income — — ( 19 )

Net advertising costs $ 1,647 $ 1,494 $ 1,457

Reimbursements from vendors that are for specific, incremental, and identifiable advertising costs are recognized as offsets of these advertising costs within Selling, General and Administrative Expenses (SG&A Expenses).

Net advertising costs were $ 1.5 billion , $ 1.6 billion, and $ 1.5 billion in 2020, 2019, and 2018, respectively.

Fair Value Measurements

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Fair Value Measurements - Recurring Basis Fair Value as of

(millions) Classification Pricing Category February 1,

2020 February 2,

(millions) Classification Pricing Category January 30, 2021 February 1, 2020

Short-term investments (a)

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Other Current Assets Level 1 38 23

Interest rate swaps (c)

Equity securities (c)

Other Current Assets Level 1 — 39

Interest rate swaps (d)

Other Noncurrent Assets Level 2 188 137

Interest rate swaps (c)

Other Current Liabilities Level 2 — 3

(a) Carrying value approximates fair value because maturities are less than three months.

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Subsequently valued by reference to the market price of Target common stock.

(d) Valuations are based on observable inputs to the valuation model (e.g., interest rates and credit spreads).

See Note 17 for additional information on interest rate swaps.

We recorded a $ 41 million pretax impairment charge within Net Other (Income) / Expense related to our investment in Casper Sleep Inc.

for which we determined the fair value had declined to $ 39 million as of February 1, 2020.

In 2020 and 2019, we recorded pretax losses of $ 19 million and $ 41 million, respectively, related to our investment in Casper within Net Other (Income) / Expense.

We sold our investment during 2020.

TARGET CORPORATION

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Significant Financial Instruments not Measured at Fair Value (a)

As of February 1,

2020 As of February 2,

As of January 30, 2021 As of February 1, 2020

(millions) Carrying

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Cash and Cash Equivalents

2020 February 2,

January 30, 2021 February 1, 2020

Cash $ 307 $ 326

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(a) We have access to these funds without any significant restrictions, taxes or penalties.

As of February 1, 2020 and February 2, 2019, we reclassified book overdrafts of $ 209 million and $ 242 million, respectively, to Accounts Payable and $ 23 million and $ 25 million, respectively, to Accrued and Other Current Liabilities.

As of January 30, 2021, and February 1, 2020, we reclassified book overdrafts of $ 240 million and $ 209 million, respectively, to Accounts Payable and $ 24 million and $ 23 million, respectively, to Accrued and Other Current Liabilities.

The vast majority of our inventory is accounted for under the retail inventory accounting method (RIM) using the last-in, first-out (LIFO) method.

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Other Current Assets

2020 February 2,

Income tax and other receivables $ 498 $ 632

January 30, 2021 February 1, 2020

Accounts and other receivables $ 631 $ 498

Vendor income receivable 504 464

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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 certain at the date the leasehold improvements are acquired.

Depreciation expense for 2019, 2018, and 2017 was $ 2,591 million, $ 2,460 million, and $ 2,462 million, respectively, including depreciation expense included in Cost of Sales.

Depreciation expense for 2020, 2019, and 2018 was $ 2.5 billion, $ 2.6 billion, and $ 2.5 billion, respectively, including depreciation expense included in Cost of Sales.

For income tax purposes, accelerated depreciation methods are generally used.

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We recognized impairment losses of $ 62 million, $ 23 million, and $ 92 million during 2020, 2019, and 2018, respectively.

The impairment losses primarily resulted from store impairments and planned or completed store closures, and for 2017, also included supply chain changes.

For asset groups classified as held for sale, measurement of an impairment loss is based on the excess of the carrying amount of the asset group over its fair value.

We estimate fair value by obtaining market appraisals, obtaining valuations from third-party brokers, or using other valuation techniques.

Impairments are recorded in Selling, General and Administrative Expenses.

Impairments are recorded in SG&A Expenses.

Other Noncurrent Assets

2020 February 2,

January 30, 2021 February 1,

Goodwill and intangible assets $ 668 $ 686

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Goodwill and Intangible Assets

Goodwill totaled $ 633 million as of February 1, 2020 and February 2, 2019.

Goodwill totaled $ 631 million and $ 633 million as of January 30, 2021, and February 1, 2020, respectively.

No impairments were recorded in 2020, 2019, or 2018 as a result of the annual goodwill impairment tests performed.

Intangible assets, net of accumulated amortization, totaled $ 53 million and $ 66 million as of February 1, 2020, and February 2, 2019, respectively, primarily related to trademarks and customer relationships.

Intangible assets, net of accumulated amortization, totaled $ 37 million and $ 53 million as of January 30, 2021, and February 1, 2020, respectively, and primarily related to trademarks and customer relationships.

We use both accelerated and straight-line methods to amortize definite-lived intangible assets over 4 to 15 years.

The weighted average life of intangible assets was 8 years as of February 1, 2020.

The weighted average life of intangible assets was 8 years as of January 30, 2021.

Amortization expense was $ 15 million, $ 13 million, and $ 14 million in 2020, 2019, and 2018, respectively, and is estimated to be less than $ 15 million annually through 2025.

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Accrued and Other Current Liabilities

2020 February 2,

January 30, 2021 February 1, 2020

Wages and benefits $ 1,677 $ 1,158

Gift card liability, net of estimated breakage 935 840

Real estate, sales, and other taxes payable 1,103 601

Gift card liability, net of estimated breakage 1,035 935

Income tax payable 473 129

Dividends payable 341 333

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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.

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 $ 676 million and $ 992 million as of February 1, 2020 and February 2, 2019, respectively.

Purchase obligations, which include all legally binding contracts such as merchandise royalties, equipment purchases, marketing-related contracts, software acquisition/license commitments, firm minimum commitments for inventory purchases, and service contracts, were $ 785 million and $ 676 million as of January 30, 2021, and February 1, 2020, respectively.

These purchase obligations are primarily due within three years and recorded as liabilities when goods are received or services rendered.

Real estate obligations, which include legally binding minimum lease payments for leases signed but not yet commenced, and commitments for the purchase, construction, or remodeling of real estate and facilities, were $ 1,403 million and $ 1,134 million as of February 1, 2020 and February 2, 2019, respectively.

Real estate obligations, which include legally binding minimum lease payments for leases signed but not yet commenced, and commitments for the purchase, construction, or remodeling of real estate and facilities, were $ 2.1 billion and $ 1.4 billion as of January 30, 2021, and February 1, 2020, respectively.

Over half of these real estate obligations are due within five years , 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 $ 1,544 million and $ 1,746 million as of February 1, 2020 and February 2, 2019, 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 $ 468 million a nd $ 403 million as of February 1, 2020 and February 2, 2019, respectively.

We issue inventory purchase orders in the ordinary 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.

If we choose to cancel a purchase order, we may be obligated to reimburse the vendor for unrecoverable outlays incurred prior to cancellation.

TARGET CORPORATION

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NOTES Index to Financial Statements

We also issue letters of credit and surety bonds in the ordinary course of business.

Trade letters of credit totaled $ 2.0 billion and $ 1.5 billion as of January 30, 2021, and February 1, 2020, respectively, a portion of which are reflected in Accounts Payable.

Standby letters of credit and surety bonds, primarily related to insurance and regulatory requirements, totaled $ 472 million and $ 468 million as of January 30, 2021, and February 1, 2020, respectively.

Commercial Paper and Long-Term Debt

As of February 1, 2020, the carrying value and maturities of our debt portfolio were as follows:

Debt Maturities February 1, 2020

As of January 30, 2021, the carrying value and maturities of our debt portfolio were as follows:

Debt Maturities January 30, 2021

(dollars in millions) Rate (a)

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Total required principal payments $ 1,056 $ 63 $ — $ 1,000 $ 1,500

In January 2020, we issued $ 750 million of 10 -year unsecured fixed rate debt at 2.350 percent, and separately, we redeemed $ 1,000 million of 3.875 percent unsecured fixed rate debt before its maturity.

We recognized a loss on early retirement of approximately $ 10 million, which was recorded in Net Interest Expense.

In March 2019, we issued $ 1,000 million of 10 -year unsecured fixed rate debt at 3.375 percent, and in June 2019, we repaid $ 1,000 million of 2.3 percent unsecured fixed rate debt at maturity.

In October 2017, we issued $ 750 million of 30 -year unsecured fixed rate debt at 3.9 percent.

In addition to debt repaid at its maturity during 2017, during October 2017, we redeemed $ 344 million of debt before its maturity at a value of $ 463 million.

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.

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 January 2020, we issued $ 750 million of 10 -year unsecured fixed rate debt at 2.350 percent, and separately, we redeemed $ 1.0 billion of 3.875 percent unsecured fixed rate debt before its maturity.

We recognized a loss on early retirement of approximately $ 10 million, which was recorded in Net Interest Expense.

In March 2019, we issued $ 1.0 billion of 10 -year unsecured fixed rate debt at 3.375 percent, and in June 2019, we repaid $ 1.0 billion of 2.3 percent unsecured fixed rate debt at maturity.

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

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Weighted average interest rate — % 2.36 % 2.00 %

We have a committed $ 2.5 billion revolving credit facility that expires in October 2023.

No balances were outstanding under our credit facility at any time during 2019, 2018, or 2017.

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.

TARGET CORPORATION

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NOTES Index to Financial Statements

We have a committed $ 2.5 billion unsecured revolving credit facility that expires in October 2023.

No balances were outstanding at any time during 2020, 2019, or 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.

Derivative Financial Instruments

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Note 7 provides the fair value and classification of these instruments.

During 2019, we entered into interest rate swaps with a total notional amount of $ 1,000 million .

Under the swap agreements, we pay a floating rate equal to 1-month London Interbank Offered Rate (LIBOR) and receive a weighted average fixed rate of 2.5 percent.

Under our swap agreements, we pay a floating rate equal to 1-month LIBOR and receive a weighted average fixed rate of 2.6 percent.

The agreements have a weighted average remaining maturity of 6.9 years.

Under the two previously existing swap agreements, each with a notional of $ 250 million, which mature during 2024 and 2026, respectively, we pay a floating rate equal to 1-month LIBOR and receive a weighted average fixed rate of 2.9 percent.

As of February 1, 2020 and February 2, 2019, interest rate swaps with notional amounts totaling $ 1,500 million were designated as fair value hedges, and all were perfectly effective during 2019 and 2018.

As of January 30, 2021, and February 1, 2020, interest rate swaps with notional amounts totaling $ 1.5 billion were designated as fair value hedges, and all were considered to be perfectly effective under the shortcut method during 2020 and 2019.

As of January 30, 2021, 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.

As of January 30, 2021, a $ 5 million gain 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

2020 February 2,

Current portion of long-term debt and other borrowings

Carrying amount of hedged debt $ — $ 996

Cumulative hedging adjustments, included in carrying amount — ( 3 )

January 30, 2021 February 1, 2020

Long-term debt and other borrowings

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NOTES Index to Financial Statements

Classification February 1,

2020 February 2,

Classification January 30, 2021 February 1, 2020

Operating Operating Lease Assets $ 2,227 $ 2,236

7 unchanged sentences

We use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

(a) Finance lease assets are recorded net of accumulated amortization of $ 441 million and $ 371 million as of February 1, 2020 and February 2, 2019, respectively.

(a) Finance lease assets are recorded net of accumulated amortization of $ 550 million and $ 441 million as of January 30, 2021, and February 1, 2020, respectively.

Classification 2020 2019 2018

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Net lease cost $ 484 $ 407 $ 347

(a) Includes short-term leases and variable lease costs, which are immaterial.

(a) 2020 includes $ 44 million of short-term leases and variable lease costs.

Short-term and variable lease costs were insignificant for 2019 and 2018.

(b) Supply chain-related amounts are included in Cost of Sales.

16 unchanged sentences

(a) Operating lease payments include $ 847 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 231 million of legally binding minimum lease payments for leases signed but not yet commenced.

(b) Finance lease payments include $ 118 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 462 million of legally binding minimum lease payments for leases signed but not yet commenced.

Lease Term and Discount Rate February 1,

2020 February 2,

(b) Finance lease payments include $ 160 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 1.1 billion of legally binding minimum lease payments for leases signed but not yet commenced.

Lease Term and Discount Rate January 30, 2021 February 1, 2020

Weighted average remaining lease term (years)

17 unchanged sentences

NOTES Index to Financial Statements

Earnings from continuing operations before income taxes were $ 4,190 million, $ 3,676 million, and $ 3,630 million during 2019, 2018, and 2017, respectively, including $ 653 million, $ 565 million, and $ 566 million earned by our foreign entities subject to tax outside of the U.S.

During 2019, we reached an agreement with the IRS on certain tax positions related to our global sourcing operations, and as a result, we reclassified $ 169 million and $ 156 million of previously disclosed 2018 and 2017 earnings, respectively, from foreign to domestic to conform to the current period classification.

Earnings from continuing operations before income taxes were $ 5.5 billion, $ 4.2 billion, and $ 3.7 billion during 2020, 2019, and 2018, respectively, including $ 764 million, $ 653 million, and $ 565 million earned by our foreign entities subject to tax outside of the U.S.

Tax Rate Reconciliation – Continuing Operations 2020 2019 2018

2 unchanged sentences

International ( 1.2 ) ( 1.4 ) ( 1.3 )

— ( 1.0 ) ( 9.5 )

Excess tax benefit related to share-based payments ( 1.0 ) ( 0.4 ) ( 0.3 )

2 unchanged sentences

Effective tax rate 21.2 % 22.0 % 20.3 %

(a) Represents the discrete benefit of remeasuring our net deferred tax liabilities at the new lower U.S.

corporate income tax rate.

(a) Represents the discrete benefit of the final adjustment to remeasure certain of our net deferred tax liabilities at the lower U.S.

corporate income tax rate enacted by the Tax Cuts and Jobs Act of 2017 (Tax Act).

Provision for Income Taxes

9 unchanged sentences

Total provision $ 1,178 $ 921 $ 746

In December 2017, the U.S.

government enacted the Tax Cuts and Jobs Act tax reform legislation (the Tax Act), which among other matters reduced the U.S.

corporate income tax rate from 35 percent to 21 percent effective January 1, 2018.

In 2017, we recorded a provisional $ 343 million net tax benefit primarily related to the remeasurement of certain deferred tax assets and liabilities, including $ 372 million of benefit from the new lower rate, partially offset by $ 29 million of deferred income tax expense from our foreign operations.

During 2018, we completed our Tax Act accounting and recorded adjustments to previously-recorded provisional amounts, resulting in a $ 36 million tax benefit primarily related to the remeasurement of deferred tax assets and liabilities.

Beginning with 2018, we are subject to a new tax on global intangible low-taxed income that is imposed on foreign earnings.

We have made an accounting election to record this tax as a period cost and thus have not adjusted any of the deferred tax assets or liabilities of our foreign subsidiaries for the new tax.

Net impacts of this new tax were immaterial and are included in our provision for income taxes for 2019 and 2018.

TARGET CORPORATION

3 unchanged sentences

Net Deferred Tax Asset / (Liability)

2020 February 2,

January 30, 2021 February 1, 2020

Gross deferred tax assets:

12 unchanged sentences

Total net deferred tax liability $ ( 970 ) $ ( 1,114 )

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 at the enactment date.

We recognized a net tax benefit of $ 36 million and $ 372 million in 2018 and 2017, respectively, primarily because we remeasured our net deferred tax liabilities using the new lower U.S.

corporate tax rate.

Beginning in 2017, due to changes effected by the Tax Act and other reasons, we have not asserted indefinite reinvestment in our foreign operations.

Because of this change, we recorded a deferred tax charge of $ 29 million during 2017.

We file a U.S.

12 unchanged sentences

Balance at end of period $ 181 $ 160 $ 300

As a result of the 2019 agreement with the IRS on certain tax positions related to our global sourcing operations, we reclassified $ 149 million of our liability for unrecognized tax benefits to taxes payable.

This settlement had an insignificant effect on 2019 income tax expense.

TARGET CORPORATION

2019 Form 10-K 51

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

If we were to prevail on all unrecognized tax benefits recorded, $ 99 million of the $ 181 million reserve would benefit the effective tax rate.

1 unchanged sentence

Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense.

During the years ended February 1, 2020, February 2, 2019, and February 3, 2018, we recorded an expense / (benefit) from accrued penalties and interest of $( 2 ) million, $ 3 million, and $( 12 ) million, respectively.

As of February 1, 2020, February 2, 2019, and February 3, 2018 total accrued interest and penalties were $ 27 million, $ 32 million, and $ 29 million, respectively.

During the years ended January 30, 2021, February 1, 2020, and February 2, 2019, we recorded an expense / (benefit) from accrued penalties and interest of $( 12 ) million, $( 2 ) million, and $ 3 million, respectively.

As of January 30, 2021, February 1, 2020, and February 2, 2019 total accrued interest and penalties were $ 12 million, $ 27 million, and $ 32 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.

TARGET CORPORATION

2020 Form 10-K 52

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Other Noncurrent Liabilities

2020 February 2,

Deferred occupancy income (a)

January 30, 2021 February 1, 2020

Deferred compensation $ 549 $ 493

Deferred occupancy income (a)

Income and other taxes payable 436 194

Workers' compensation and general liability 341 310

Income tax 180 312

Pension benefits 57 107

2 unchanged sentences

Share Repurchase

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.

In an ASR arrangement, in exchange for an up-front payment, we receive an initial delivery of shares of our common stock and at settlement may receive additional shares, cash, or a combination of both.

The total number of shares ultimately repurchased and, therefore, the average repurchase price paid per share, is determined upon settlement of the ASR based on the volume-weighted average price of our common stock during the term of the contract, less an agreed-upon discount.

We retire shares in the period they are received and account for the up-front payment as a reduction to Shareholders’ Investment.

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

Share Repurchase Activity

7 unchanged sentences

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 16.9 million as of February 1, 2020.

TARGET CORPORATION

2019 Form 10-K 52

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

The number of unissued common shares reserved for future grants under the Plan was 35.3 million as of January 30, 2021.

Compensation expense associated with share-based awards is recognized on a straight-line basis over the required service period and reflects estimated forfeitures.

Share-based compensation expense recognized in Selling, General and Administrative Expenses was $ 152 million, $ 134 million, and $ 115 million in 2019, 2018, and 2017, respectively.

The related income tax benefit was $ 27 million, $ 26 million, and $ 26 million in 2019, 2018, and 2017, respectively.

Share-based compensation expense recognized in SG&A Expenses was $ 210 million, $ 152 million, and $ 134 million, and the related income tax benefit was $ 39 million, $ 27 million, and $ 26 million, in 2020, 2019, and 2018, respectively.

Restricted Stock Units

4 unchanged sentences

The weighted average grant date fair value for restricted stock units was $ 110.80 , $ 80.01 , and $ 72.65 in 2020, 2019, and 2018, respectively.

TARGET CORPORATION

2020 Form 10-K 53

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Restricted Stock Unit Activity Total Nonvested Units

4 unchanged sentences

Vested ( 1,427 ) 70.55

February 1, 2020 4,316 $ 72.93

January 30, 2021 4,364 $ 88.99

(a) Represents the number of shares 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.

Applying actual or expected payout rates, the number of outstanding restricted stock units and performance-based restricted stock units as of February 1, 2020 was 4,278 thousand.

Applying actual or expected payout rates, the number of outstanding restricted stock units and performance-based restricted stock units as of January 30, 2021 was 4.33 million.

(b) Weighted average per unit .

The expense recognized each period is partially dependent upon our estimate of the number of shares that will ultimately be issued.

As of February 1, 2020, there was $ 149 million of total unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted average period of 2.5 years.

As of January 30, 2021, there was $ 179 million of total unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted average period of 2.5 years.

The fair value of restricted stock units vested and converted to shares of Target common stock was $ 151 million, $ 89 million, and $ 119 million in 2020, 2019, and 2018, respectively.

4 unchanged sentences

The weighted average grant date fair value for performance share units was $ 106.00 , $ 86.81 , and $ 70.94 in 2020, 2019, and 2018, respectively.

TARGET CORPORATION

2019 Form 10-K 53

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Performance Share Unit Activity Total Nonvested Units

5 unchanged sentences

Vested ( 827 ) 62.50

February 1, 2020 3,575 $ 72.80

January 30, 2021 2,788 $ 87.93

(a) Represents the number of performance share units, in thousands.

Assumes attainment of maximum payout rates as set forth in the performance criteria.

Applying actual or expected payout rates, the number of outstanding performance share units as of February 1, 2020 was 1,944 thousand.

Applying actual or expected payout rates, the number of outstanding performance share units as of January 30, 2021 was 2.13 million.

(b) Weighted average per unit.

2 unchanged sentences

The unrecognized expense is expected to be recognized over a weighted average period of 1.7 years.

The fair value of performance share units vested and converted to shares of Target common stock was $ 50 million in 2019, $ 43 million in 2018, and $ 30 million in 2017.

The fair value of performance share units vested and converted to shares of Target common stock was $ 82 million, $ 50 million, and $ 43 million in 2020, 2019, and 2018, respectively.

Stock Options

In May 2017, we granted price-vested stock options (price-vested options) to certain team members, which have met the market condition and will become exercisable in 2020 pending service condition achievement.

Shares received upon exercise, net of exercise costs and taxes, are subject to a 1 -year post-exercise holding period.

The fair value of the price-vested options was estimated using a lattice model.

Through 2013, we granted nonqualified stock options to certain team members.

All are vested and currently exercisable.

In May 2017, we granted price-vested stock options to certain team members.

Additionally, through 2013, we granted nonqualified stock options to certain team members.

All outstanding stock options are vested and currently exercisable.

TARGET CORPORATION

2020 Form 10-K 54

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Stock Option Activity Stock Options

3 unchanged sentences

Exercised/issued ( 2,011 ) 55.70

February 1, 2020 2,478 $ 55.72 $ 136 714 $ 56.02 $ 39

January 30, 2021 467 $ 55.81 $ 59 467 $ 55.81 $ 59

(a) In thousands.

6 unchanged sentences

Income tax benefit 41 15 12

As of February 1, 2020, there was $ 1 million of total unrecognized compensation expense related to price-vested options, which is expected to be recognized over a weighted average period of 0.3 years.

The weighted average remaining life of exercisable options is 2.1 years, and the weighted average remaining life of all outstanding options is 3.5 years.

No options vested in 2019, 2018 or 2017.

TARGET CORPORATION

2019 Form 10-K 54

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

As of January 30, 2021, there was no unrecognized compensation expense related to stock options.

The weighted average remaining life of exercisable and outstanding options is 2.2 years.

Defined Contribution Plans

6 unchanged sentences

We also maintain a frozen, unfunded, nonqualified deferred compensation plan covering approximately 50 participants.

Our total liability under these plans was $ 551 million and $ 517 million as of February 1, 2020 and February 2, 2019, respectively.

Our total liability under these plans was $ 602 million and $ 551 million as of January 30, 2021, and February 1, 2020, respectively.

We mitigate our risk of offering the nonqualified plans through investing in company-owned life insurance and prepaid forward contracts that substantially offset our economic exposure to the returns of these plans.

These investments 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.

See Note s 6 and 11 for additional information.

Plan Expenses

3 unchanged sentences

Benefits expense

Related investment expense (income)

$ 86 $ 80 $ 18

Nonqualified plan net expense $ 27 $ 24 $ 35

Related investment (income) / expense

( 58 ) ( 53 ) 6

Nonqualified plans net expense $ 28 $ 27 $ 24

TARGET CORPORATION

2020 Form 10-K 55

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Pension Plans

We have a U.S.

qualified defined benefit pension plan covering team members who meet age and service requirements, including date of hire in certain circumstances.

Effective January 1, 2009, our qualified defined benefit pension plan was closed to new participants, with limited exceptions.

qualified defined benefit pension plan covering team members who meet eligibility requirements.

This plan is closed to new participants.

Active participants accrue benefits under a final average pay feature or a cash balance feature.

We also have unfunded, nonqualified pension plans for team members with qualified plan compensation restrictions, as well as international plans.

Eligibility for, and the level of, these benefits varies depending on each team member's date of hire, length of service and/or team member compensation.

Eligibility and the level of benefits under all plans vary depending on each team member's full-time or part-time status, date of hire, age, length of service, and/or compensation.

Funded Status Qualified Plan Nonqualified and International Plans

8 unchanged sentences

However, depending on investment performance and plan funded status, we may elect to make a contribution.

TARGET CORPORATION

2019 Form 10-K 55

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Estimated Future Benefit Payments

Pension Benefits

2026 - 2030 1,279

9 unchanged sentences

Total $ 96 $ 46 $ 70

TARGET CORPORATION

2020 Form 10-K 56

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Benefit Obligation Weighted Average Assumptions

1 unchanged sentence

Average assumed rate of compensation increase 3.00 3.00

Cash balance plan interest crediting rate 4.64 4.64

Net Periodic Benefit Expense Weighted Average Assumptions

3 unchanged sentences

Average assumed rate of compensation increase 3.00 3.00 3.00

Cash balance plan interest crediting rate 4.64 4.64 4.64

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).

Our most recent compound annual rate of return on qualified plan assets was 6.6 percent, 9.0 percent, 7.2 percent, and 6.3 percent for t he 5 -year, 10 -year, 15 -year, and 20 -year time periods, respectively.

Our most recent compound annual rate of return on qualified plan assets was 10.2 percent, 9.0 percent, 7.6 percent, and 7.0 percent for the 5-year , 10-year , 15-year , and 20-year time periods, respectively.

The market-related value of plan assets is used in calculating the expected return on assets.

4 unchanged sentences

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.

TARGET CORPORATION

2019 Form 10-K 56

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Benefit Obligation

4 unchanged sentences

Interest cost 117 146 1 3

Actuarial (gain) / loss

615 ( 167 ) 11 ( 1 )

Actuarial loss (a)

Participant contributions 7 11 — —

Benefits paid ( 263 ) ( 275 ) ( 6 ) ( 4 )

Benefit obligation at end of period (a)

Benefit obligation at end of period (b)

$ 4,594 $ 4,492 $ 74 $ 66

(a) Accumulated benefit obligation—the present value of benefits earned to date assuming no future salary growth—is materially consistent with the projected benefit obligation in each period presented.

(a) 2020 and 2019 actuarial losses relate to the decreases in the weighted average discount rate.

(b) Accumulated benefit obligation—the present value of benefits earned to date assuming no future salary growth—is materially consistent with the projected benefit obligation in each period presented.

TARGET CORPORATION

2020 Form 10-K 57

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Change in Plan Assets Qualified Plan Nonqualified and International Plans

10 unchanged sentences

The plan invests with both passive and active investment managers depending on the investment.

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.

The plan also seeks to reduce the risk associated with adverse movements in interest rates by employing an interest rate hedging program, which includes the use of derivative instruments.

Asset Category Current Targeted Actual Allocation

7 unchanged sentences

(a) Equity securities include our common stock in amounts substantially less than 1 percent of total plan assets in both periods presented.

(b) Other assets include private equity, mezzanine and high-yield debt, natural resources and timberland funds, multi-strategy hedge funds, derivative instruments, and real estate.

(b) Other assets include private equity, mezzanine and high-yield debt, natural resources and timberland funds, derivative instruments, and real estate.

TARGET CORPORATION

37 unchanged sentences

Prior service credits ( 2 ) ( 13 )

Amounts in Accumulated Other Comprehensive Loss (a)(b)

Amounts in Accumulated Other Comprehensive Loss (a)

$ 985 $ 1,125

(a) $ 735 million and $ 837 million, net of tax, at the end of 2020 and 2019, respectively.

(b) We expect 2020 net pension expense to include amortization expense of $ 116 million ($ 86 million, net of tax) related to net actuarial loss and prior service credit balances included in Accumulated Other Comprehensive Loss.

TARGET CORPORATION

2020 Form 10-K 59

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS & SUPPLEMENTAL INFORMATION Table of Contents

NOTES Index to Financial Statements

Accumulated Other Comprehensive Loss

(millions) Cash Flow

Change in Accumulated Other Comprehensive Loss

Hedges Currency

1 unchanged sentence

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

Other Comprehensive Income / (Loss) before reclassifications, net of tax

— 1 ( 104 ) ( 103 )

Amounts reclassified from AOCL, net of tax 1 (a)

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

Other comprehensive income before reclassifications, net of tax

Amounts reclassified from AOCI, net of tax 6 (a)

January 30, 2021 $ ( 3 ) $ ( 18 ) $ ( 735 ) $ ( 756 )

(a) Represents amortization of gains and losses on cash flow hedges, net of taxes, which is recorded in Net Interest Expense.

1 unchanged sentence

See Note 24 for additional information.

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 the November and December holiday sales period.

We follow the same accounting policies for preparing quarterly and annual financial data.

The table below summarizes quarterly results for 2019 and 2018:

Quarterly Results First Quarter Second Quarter Third Quarter Fourth Quarter Total Year

(millions, except per share data) 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

Sales $ 17,401 $ 16,556 $ 18,183 $ 17,552 $ 18,414 $ 17,590 $ 23,133 $ 22,734 $ 77,130 $ 74,433

Other revenue 226 225 239 224 251 231 265 243 982 923

Total revenue 17,627 16,781 18,422 17,776 18,665 17,821 23,398 22,977 78,112 75,356

Cost of sales 12,248 11,625 12,625 12,239 12,935 12,535 17,056 16,900 54,864 53,299

Selling, general and administrative expenses

3,663 3,545 3,912 3,865 4,153 3,937 4,504 4,376 16,233 15,723

Depreciation and amortization (exclusive of depreciation included in cost of sales)

581 570 561 539 575 530 640 584 2,357 2,224

Operating income 1,135 1,041 1,324 1,133 1,002 819 1,198 1,117 4,658 4,110

Net interest expense 126 121 120 115 113 115 118 110 477 461

Net other (income) / expense ( 12 ) ( 7 ) ( 13 ) ( 4 ) ( 12 ) ( 9 ) 29 ( 7 ) ( 9 ) ( 27 )

Earnings from continuing operations before income taxes

1,021 927 1,217 1,022 901 713 1,051 1,014 4,190 3,676

Provision for income taxes 229 210 279 223 195 97 218 216 921 746

Net earnings from continuing operations

792 717 938 799 706 616 833 798 3,269 2,930

Discontinued operations, net of tax

3 1 — — 8 6 1 1 12 7

Net earnings $ 795 $ 718 $ 938 $ 799 $ 714 $ 622 $ 834 $ 799 $ 3,281 $ 2,937

Basic earnings per share

Continuing operations

$ 1.54 $ 1.34 $ 1.83 $ 1.50 $ 1.38 $ 1.17 $ 1.64 $ 1.53 $ 6.39 $ 5.54

Discontinued operations

— — — — 0.02 0.01 — — 0.02 0.01

Net earnings per share

$ 1.54 $ 1.34 $ 1.83 $ 1.50 $ 1.40 $ 1.18 $ 1.65 $ 1.54 $ 6.42 $ 5.55

Diluted earnings per share

Continuing operations

$ 1.53 $ 1.33 $ 1.82 $ 1.49 $ 1.37 $ 1.16 $ 1.63 $ 1.52 $ 6.34 $ 5.50

Discontinued operations

— — — — 0.02 0.01 — — 0.02 0.01

Net earnings per share

$ 1.53 $ 1.33 $ 1.82 $ 1.49 $ 1.39 $ 1.17 $ 1.63 $ 1.52 $ 6.36 $ 5.51

Dividends declared per share $ 0.64 $ 0.62 $ 0.66 $ 0.64 $ 0.66 $ 0.64 $ 0.66 $ 0.64 $ 2.62 $ 2.54

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.

TARGET CORPORATION

2019 Form 10-K 59

SUPPLEMENTAL INFORMATION Table of Contents

Index to Financial Statements

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data