Notes to Consolidated Financial Statements
1
. Summary of Accounting Policies
Organization
We are a general merchandise retailer selling products to our guests through our stores and digital channels.
As described in Note
7
, in January 2015, we announced our exit from the Canadian market and filed for protection (the Filing) under the Companies' Creditors Arrangement Act (CCAA) with the Ontario Superior Court of Justice in Toronto (the Court). Our prefiling financial results in Canada and subsequent expenses directly attributable to the Canada exit are included in our financial statements and classified within discontinued operations. Discontinued operations refers only to our discontinued Canadian operations. Subsequent to the Filing, we operate as a single segment that includes all of our continuing operations, which are designed to enable guests to purchase products seamlessly in stores or through our digital channels.
Consolidation
The consolidated financial statements include the balances of Target and its subsidiaries after elimination of intercompany balances and transactions. All material subsidiaries are wholly owned. We consolidate variable interest entities where it has been determined that Target is the primary beneficiary of those entities' operations. As of January 15, 2015, we deconsolidated substantially all of our Canadian operations following the Filing. See Note
7
for more information.
Use of estimates
The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions affecting reported amounts in the consolidated financial statements and accompanying notes. Actual results may differ significantly from those estimates.
Fiscal year
Our fiscal year ends on the Saturday nearest January 31. Unless otherwise stated, references to years in this report relate to fiscal years, rather than to calendar years. Fiscal
2016
ended
January 28, 2017
, and consisted of
52
weeks. Fiscal
2015
ended
January 30, 2016
, and consisted of
52
weeks. Fiscal
2014
ended
January 31, 2015
, and consisted of
52
weeks. Fiscal 2017 will end February 3, 2018, and will consist of
53
weeks.
Accounting policies
Our accounting policies are disclosed in the applicable Notes to the Consolidated Financial Statements.
2
. Revenues
Our retail stores generally record revenue at the point of sale. Digital channel sales include shipping revenue and are recorded upon delivery to the guest. Total revenues do not include sales tax because we are a pass-through conduit for collecting and remitting sales taxes. Generally, guests may return national brand merchandise within
90 days
of purchase and owned and exclusive brands within
one year
of purchase. Revenues are recognized net of expected returns, which we estimate using historical return patterns as a percentage of sales and our expectation of future returns. Commissions earned on sales generated by leased departments are included within sales and were
$42 million
,
$37 million
, and
$32 million
in
2016
,
2015
, and
2014
, respectively.
Revenue from gift card sales is recognized upon gift card redemption. Our gift cards do not expire. Based on historical redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as "breakage." Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions and was not material in any period presented.
Guests receive a
5
percent discount on virtually all purchases and receive free shipping at Target.com when they use their REDcard. The discount is included as a sales reduction in our Consolidated Statements of Operations and was
$899 million
,
$905 million
, and
$832 million
in
2016
,
2015
, and
2014
, respectively.
In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
.
We plan to adopt the standard in the first quarter of 2018, which begins on February 4, 2018. We are still evaluating whether to use a full retrospective or a modified retrospective approach to adopt the standard. We do not expect the standard to materially affect our consolidated net earnings, financial position, or cash flows.
We are evaluating whether we act as principal or agent in certain vendor arrangements where the purchase and sale of inventory is virtually simultaneous, as further described in Note 12. We currently record revenue and related costs gross, with approximately
3 percent
of 2016 consolidated sales made under such arrangements. Any change to net presentation would not impact gross margin or earnings.
We are also evaluating the presentation of certain ancillary income streams, including the credit card profit sharing income described in Note 9.
3
. Cost of Sales and Selling, General and Administrative Expenses
The following table illustrates the primary items classified in each major expense category:
|
|
|
Cost of Sales
|
Selling, General and Administrative Expenses
|
Total cost of products sold including
• Freight expenses associated with moving
merchandise from our vendors to and between our
distribution centers and our retail stores
• Vendor income that is not reimbursement of
specific, incremental, and identifiable costs
Inventory shrink
Markdowns
Outbound shipping and handling expenses
associated with sales to our guests
Payment term cash discounts
Distribution center costs, including compensation
and benefits costs
Import costs
|
Compensation and benefit costs for stores and
headquarters
Occupancy and operating costs of retail and
headquarters facilities
Advertising, offset by vendor income that is a
reimbursement of specific, incremental, and
identifiable costs
Pre-opening costs of stores and other facilities
U.S. credit cards servicing expenses and profit
sharing
Costs associated with accepting 3
rd
party bank issued
payment cards
Litigation and defense costs and related insurance
recovery
Other administrative costs
|
Note: The classification of these expenses varies across the retail industry.
4
. Consideration Received from Vendors
We receive consideration for a variety of vendor-sponsored programs, such as volume rebates, markdown allowances, promotions, and advertising allowances and for our compliance programs, referred to as "vendor income." Under our compliance programs, vendors are charged for merchandise shipments that do not meet our requirements (violations), such as late or incomplete shipments. Substantially all consideration received is recorded as a reduction of cost of sales.
We establish a receivable for vendor income that is earned but not yet received. Based on provisions of the agreements in place, this receivable is computed by estimating the amount earned when we have completed our performance. We perform detailed analyses to determine the appropriate level of the receivable in the aggregate. The majority of year-end receivables associated with these activities are collected within the following fiscal quarter. We have not historically had significant write-offs for these receivables.
5
. Advertising Costs
Advertising costs, which primarily consist of newspaper circulars, internet advertisements, and media broadcast, are generally expensed at first showing or distribution of the advertisement.
|
|
|
|
|
|
|
|
|
|
|
Advertising Costs
(millions)
|
2016
|
|
2015
|
|
2014
|
|
Gross advertising costs
|
$
|
1,503
|
|
$
|
1,472
|
|
$
|
1,647
|
|
Vendor income
|
(38
|
)
|
(38
|
)
|
(47
|
)
|
Net advertising costs
|
$
|
1,465
|
|
$
|
1,434
|
|
$
|
1,600
|
|
6
. Pharmacy Transaction
In December 2015, we sold our pharmacy and clinic businesses to CVS (the Pharmacy Transaction) for cash consideration of
$1.9 billion
, recognizing a gain of
$620 million
, and deferred income of
$694 million
. CVS now operates the pharmacy and clinic businesses in our stores and paid us $
24 million
for occupancy during 2016.
|
|
|
|
|
Gain on Pharmacy Transaction
(millions)
|
2015
|
|
Cash consideration
|
$
|
1,868
|
|
Less:
|
|
Deferred income
(a)
|
694
|
|
Inventory
|
447
|
|
Other assets
|
13
|
|
Pretax transaction costs and contingent liabilities
(b)
|
94
|
|
Pretax gain on Pharmacy Transaction
(c)
|
$
|
620
|
|
|
|
(a)
|
Represents the consideration received at the close of the sale related to CVS’s leasehold interest in the related space within our stores. Deferred income will be recorded as a reduction to SG&A expense evenly over the
23
-year weighted average remaining accounting useful life of our stores. As of
January 28, 2017
,
$660 million
remains in other current and other noncurrent liabilities.
|
|
|
(b)
|
Primarily relates to professional services, contract termination charges, severance, and impairment of certain assets not sold to CVS.
|
|
|
(c)
|
Recorded outside of segment results and excluded from Adjusted EPS.
|
7
. Canada Exit
On January 15, 2015, Target Canada Co. and certain other wholly owned subsidiaries of Target (collectively, Canada Subsidiaries), comprising substantially all of our former Canadian operations and our former Canadian Segment, filed for protection under the CCAA with the Ontario Superior Court of Justice in Toronto (the Court) and were deconsolidated. As a result, we recorded a pretax impairment loss on deconsolidation and other related charges, collectively totaling
$5.1 billion
. The Canada Subsidiaries are in the process of liquidation.
Subsequent to deconsolidation, we use the cost method to account for our equity investment in the Canada Subsidiaries, which has been reflected as
zero
in our Consolidated Statement of Financial Position at January 28, 2017 and January 30, 2016 based on the estimated fair value of the Canada Subsidiaries' net assets.
As of the deconsolidation date, the loans, associated interest, and accounts receivable Target Corporation held are considered related party transactions and have been recognized in Target Corporation's consolidated financial statements. In addition, we held an accrual for the estimated probable loss related to claims that may be asserted directly against us (rather than against the Canada Subsidiaries), primarily under our guarantees of certain leases of the Canada Subsidiaries.
As part of a March 2016 settlement between the Canada Subsidiaries and all of their former landlords, we agreed to subordinate a portion of our intercompany claims and make certain cash contributions to the Target Canada Co. estate in exchange for a full release from our obligations under guarantees of certain leases of the Canada Subsidiaries. The settlement was contingent upon the Canada Subsidiaries' creditors' and the Court's approval of a plan of compromise and arrangement to complete the controlled, orderly, and timely wind-down of the Canada Subsidiaries (Plan). During the second quarter of 2016, a Plan was approved. The net pretax financial impact of the settlement and Plan was materially consistent with amounts previously recorded in our financial statements. During 2016, we received
$182 million
from the Target Canada Co. estate and made cash contributions of
$27 million
.
|
|
|
|
|
|
|
|
|
|
|
Income
/
(Loss) on Discontinued Operations
(millions)
|
2016
|
|
2015
|
|
2014
|
|
Sales
|
$
|
—
|
|
$
|
—
|
|
$
|
1,902
|
|
Cost of sales
|
—
|
|
—
|
|
1,541
|
|
SG&A expenses
|
—
|
|
—
|
|
909
|
|
Depreciation and amortization
|
—
|
|
—
|
|
248
|
|
Interest expense
|
—
|
|
—
|
|
73
|
|
Pretax loss from operations
|
—
|
|
—
|
|
(869
|
)
|
Pretax exit costs
|
13
|
|
(129
|
)
|
(5,105
|
)
|
Income taxes
|
55
|
|
171
|
|
1,889
|
|
Income
/
(loss) from discontinued operations
|
$
|
68
|
|
$
|
42
|
|
$
|
(4,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Pretax Exit Costs
(millions)
|
2016
|
|
2015
|
|
2014
|
|
Investment impairment
|
$
|
(222
|
)
|
$
|
(6
|
)
|
$
|
(4,766
|
)
|
Contingent liabilities
|
229
|
|
(62
|
)
|
(240
|
)
|
Other exit costs
|
6
|
|
(61
|
)
|
(99
|
)
|
Total
|
$
|
13
|
|
$
|
(129
|
)
|
$
|
(5,105
|
)
|
During 2016, we recognized net tax benefits of
$55 million
in discontinued operations, which primarily related to tax benefits from our investment losses in Canada recognized upon court approval of the Plan. During 2015, we recognized net tax benefits of
$171 million
in discontinued operations, which primarily related to our pretax exit costs and change in the estimated tax benefit from our investment losses in Canada. During 2014, we recognized a tax benefit of
$1,889 million
in discontinued operations, which includes the tax benefit of our 2014 Canadian operating losses, the tax benefit related to a loss on our investment in Canada, and other tax benefits resulting from certain asset write-offs and liabilities paid or accrued to facilitate the liquidation. The majority of these tax benefits were received in the first quarter of 2015, and we used substantially all of the remainder in 2015 to reduce our estimated tax payments.
|
|
|
|
|
|
|
|
|
Assets and Liabilities of Discontinued Operations
(millions)
|
January 28,
2017
|
|
|
January 30,
2016
|
|
Income tax benefit
|
$
|
35
|
|
|
$
|
77
|
|
Receivables from Canada Subsidiaries
(a)
|
46
|
|
|
320
|
|
Total assets
|
$
|
81
|
|
|
$
|
397
|
|
|
|
|
|
Accrued liabilities
|
$
|
19
|
|
|
$
|
171
|
|
Total liabilities
|
$
|
19
|
|
|
$
|
171
|
|
|
|
(a)
|
Represents loans and accounts receivable from Canada Subsidiaries.
|
8
. Restructuring Initiatives
In 2015, we initiated a series of headquarters workforce reductions intended to increase organizational effectiveness and provide cost savings that can be reinvested in our growth initiatives. As a result, during 2015 we recorded
$138 million
of severance and other benefits-related charges within SG&A. The vast majority of these expenses required cash expenditures during 2015 and were not included in our segment results.
9
. Credit Card Profit Sharing
TD Bank Group underwrites, funds, and owns Target Credit Card and Target MasterCard receivables, controls risk management policies, and oversees regulatory compliance. We perform account servicing and primary marketing functions. We earn a substantial portion of the profits generated by the Target Credit Card and Target MasterCard portfolios. We earned
$663 million
,
$641 million
, and
$629 million
of net profit-sharing income during
2016
,
2015
, and
2014
, respectively, which reduced SG&A expense.
10
. Fair Value Measurements
Fair value measurements are reported in one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements - Recurring Basis
|
|
Fair Value at
|
(millions)
|
Pricing Category
|
January 28,
2017
|
|
|
January 30,
2016
|
|
Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Short-term investments
|
Level 1
|
$
|
1,110
|
|
|
$
|
3,008
|
|
Other current assets
|
|
|
|
|
|
|
Interest rate swaps
(a)
|
Level 2
|
1
|
|
|
12
|
|
Prepaid forward contracts
|
Level 1
|
26
|
|
|
32
|
|
Beneficial interest asset
|
Level 3
|
12
|
|
|
19
|
|
Other noncurrent assets
|
|
|
|
|
|
|
Interest rate swaps
(a)
|
Level 2
|
4
|
|
|
27
|
|
Beneficial interest asset
|
Level 3
|
—
|
|
|
12
|
|
Liabilities
|
|
|
|
|
|
|
Other current liabilities
|
|
|
|
|
|
|
Interest rate swaps
(a)
|
Level 2
|
—
|
|
|
8
|
|
|
|
(a)
|
See Note
21
for additional information on interest rate swaps.
|
|
|
Valuation Technique
|
Short-term investments - Carrying value approximates fair value because maturities are less than three months.
|
Prepaid forward contracts - Initially valued at transaction price. Subsequently valued by reference to the market price of Target common stock.
|
Interest rate swaps - Valuation models are calibrated to initial trade price. Subsequent valuations are based on observable inputs to the valuation model (e.g., interest rates and credit spreads).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Financial Instruments not Measured at Fair Value
(a)
(millions)
|
2016
|
|
2015
|
Carrying
Amount
|
|
Fair
Value
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Debt
(b)
|
$
|
11,715
|
|
$
|
12,545
|
|
|
$
|
11,859
|
|
$
|
13,385
|
|
|
|
(a)
|
The carrying amounts of certain other current assets, accounts payable, and certain accrued and other current liabilities approximate fair value due to their short-term nature.
|
|
|
(b)
|
The fair value of debt is generally measured using a discounted cash flow analysis based on current market interest rates for the same or similar types of financial instruments and would be classified as Level 2. These amounts exclude unamortized swap valuation adjustments and capital lease obligations.
|
11
. Cash Equivalents
Cash equivalents include highly liquid investments with an original maturity of three months or less from the time of purchase. These investments were
$1,110 million
and
$3,008 million
at
January 28, 2017
and
January 30, 2016
, respectively. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card transactions. These receivables typically settle in less than
five days
and were
$346 million
and
$375 million
at
January 28, 2017
and
January 30, 2016
, respectively.
12
. Inventory
The vast majority of our inventory is accounted for under the retail inventory accounting method (RIM) using the last-in, first-out (LIFO) method. Inventory is stated at the lower of LIFO cost or market. The cost of our inventory includes the amount we pay to our suppliers to acquire inventory, freight costs incurred in connection with the delivery of product to our distribution centers and stores, and import costs, reduced by vendor income and cash discounts. The majority of our distribution center operating costs, including compensation and benefits, are expensed in the period incurred. Inventory is also reduced for estimated losses related to shrink and markdowns. The LIFO provision is calculated based on inventory levels, markup rates, and internally measured retail price indices.
Under RIM, inventory cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the inventory retail value. RIM is an averaging method that has been widely used in the retail industry due to its practicality. The use of RIM will result in inventory being valued at the lower of cost or market because permanent markdowns are taken as a reduction of the retail value of inventory.
We routinely enter into arrangements with vendors whereby we do not purchase or pay for merchandise until the merchandise is ultimately sold to a guest. Activity under this program is included in sales and cost of sales in the Consolidated Statements of Operations, but the merchandise received under the program is not included in inventory in our Consolidated Statements of Financial Position because of the virtually simultaneous purchase and sale of this inventory. Sales made under these arrangements totaled
$2,202 million
,
$2,261 million
, and
$2,040 million
in
2016
,
2015
, and
2014
, respectively.
13
. Other Current Assets
|
|
|
|
|
|
|
|
Other Current Assets
(millions)
|
January 28,
2017
|
|
January 30,
2016
|
|
Vendor income receivable
|
$
|
385
|
|
$
|
384
|
|
Income tax and other receivables
|
364
|
|
352
|
|
Prepaid expenses
|
207
|
|
214
|
|
Other
|
144
|
|
211
|
|
Total
|
$
|
1,100
|
|
$
|
1,161
|
|
14
. Property and Equipment
Property and equipment is depreciated using the straight-line method over estimated useful lives or lease terms if shorter. We amortize leasehold improvements purchased after the beginning of the initial lease term over the shorter of the assets' useful lives or a term that includes the original lease term, plus any renewals that are reasonably assured at the date the leasehold improvements are acquired. Depreciation and capital lease amortization expense for 2016, 2015, and 2014 was
$2,280 million
,
$2,191 million
, and
$2,108 million
, respectively. For income tax purposes, accelerated depreciation methods are generally used. Repair and maintenance costs are expensed as incurred. Facility pre-opening costs, including supplies and payroll, are expensed as incurred.
|
|
|
Estimated Useful Lives
|
Life (Years)
|
Buildings and improvements
|
8-39
|
Fixtures and equipment
|
2-15
|
Computer hardware and software
|
2-7
|
Long-lived assets are reviewed for impairment when events or changes in circumstances, such as a decision to relocate or close a store or make significant software changes, indicate that the asset's carrying value may not be recoverable. For asset groups classified as held for sale, the carrying value is compared to the fair value less cost to sell. We estimate fair value by obtaining market appraisals, valuations from third party brokers, or other valuation techniques.
|
|
|
|
|
|
|
|
|
|
|
Impairments
(a)
(millions)
|
2016
|
|
2015
|
|
2014
|
|
Impairments included in segment SG&A
|
$
|
43
|
|
$
|
50
|
|
$
|
108
|
|
Unallocated impairments
(b)
|
—
|
|
4
|
|
16
|
|
Total impairments
|
$
|
43
|
|
$
|
54
|
|
$
|
124
|
|
|
|
(a)
|
Substantially all of the impairments are recorded in SG&A expense on the Consolidated Statements of Operations.
|
|
|
(b)
|
For 2015, represents long-lived asset impairments from our decision to wind down certain noncore operations. For 2014, represents impairments of undeveloped land. These costs were not included in our segment results.
|
15
. Other Noncurrent Assets
|
|
|
|
|
|
|
|
Other Noncurrent Assets
(millions)
|
January 28,
2017
|
|
January 30,
2016
|
|
Company-owned life insurance investments
(a)
|
$
|
345
|
|
$
|
308
|
|
Goodwill and intangible assets
|
259
|
|
277
|
|
Pension asset
|
43
|
|
66
|
|
Other
|
124
|
|
189
|
|
Total
|
$
|
771
|
|
$
|
840
|
|
|
|
(a)
|
Company-owned life insurance policies on approximately
4,000
team members who have been designated highly compensated under the Internal Revenue Code and have given their consent to be insured. Amounts are presented net of loans that are secured by some of these policies.
|
16
. Goodwill and Intangible Assets
Goodwill totaled
$133 million
at
January 28, 2017
and
January 30, 2016
. During 2015, we announced our decision to wind down certain noncore operations. As a result, we recorded a
$35 million
pretax impairment loss, which included approximately
$23 million
of intangible assets and
$12 million
of goodwill. These costs were included in SG&A on our Consolidated Statements of Operations, but were not included in our segment results.
No
impairments were recorded in 2016 or
2014
as a result of the annual goodwill impairment tests performed.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets
|
Leasehold
Acquisition Costs
|
|
Other
(a)
|
|
Total
|
(millions)
|
January 28,
2017
|
|
January 30,
2016
|
|
|
January 28,
2017
|
|
January 30,
2016
|
|
|
January 28,
2017
|
|
January 30,
2016
|
|
Gross asset
|
$
|
208
|
|
$
|
211
|
|
|
$
|
88
|
|
$
|
88
|
|
|
$
|
296
|
|
$
|
299
|
|
Accumulated amortization
|
(132
|
)
|
(127
|
)
|
|
(38
|
)
|
(27
|
)
|
|
(170
|
)
|
(154
|
)
|
Net intangible assets
|
$
|
76
|
|
$
|
84
|
|
|
$
|
50
|
|
$
|
61
|
|
|
$
|
126
|
|
$
|
145
|
|
|
|
(a)
|
Other intangible assets relate primarily to trademarks.
|
We use the straight-line method to amortize leasehold acquisition costs primarily over
9
to
39 years
and other definite-lived intangibles over
3
to
15 years
. The weighted average life of leasehold acquisition costs and other intangible assets was
27 years
and
8 years
, respectively, at
January 28, 2017
. Amortization expense was
$18 million
,
$23 million
, and
$22 million
in
2016
,
2015
, and
2014
, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Amortization Expense
(millions)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Amortization expense
|
$
|
16
|
|
$
|
12
|
|
$
|
11
|
|
$
|
11
|
|
$
|
11
|
|
17
. Accounts Payable
At
January 28, 2017
and
January 30, 2016
, we reclassified book overdrafts of
$459 million
and
$534 million
, respectively, to accounts payable and
$24 million
and
$25 million
, respectively, to accrued and other current liabilities.
18
. Accrued and Other Current Liabilities
|
|
|
|
|
|
|
|
Accrued and Other Current Liabilities
(millions)
|
January 28,
2017
|
|
January 30,
2016
|
|
Wages and benefits
|
$
|
812
|
|
$
|
884
|
|
Gift card liability, net of estimated breakage
|
693
|
|
644
|
|
Real estate, sales, and other taxes payable
|
571
|
|
574
|
|
Dividends payable
|
334
|
|
337
|
|
Straight-line rent accrual
(a)
|
271
|
|
262
|
|
Income tax payable
|
158
|
|
502
|
|
Workers' compensation and general liability
(b)
|
141
|
|
146
|
|
Interest payable
|
71
|
|
76
|
|
Other
|
686
|
|
811
|
|
Total
|
$
|
3,737
|
|
$
|
4,236
|
|
|
|
(a)
|
Straight-line rent accrual represents the amount of operating lease rent expense recorded that exceeds cash payments.
|
|
|
(b)
|
We retain a substantial portion of the risk related to general liability and workers' compensation claims. Liabilities associated with these losses include estimates of both claims filed and losses incurred but not yet reported. We estimate our ultimate cost based on analysis of historical data and actuarial estimates. General liability and workers' compensation liabilities are recorded at our estimate of their net present value.
|
19
. Commitments and Contingencies
Data Breach
In the fourth quarter of 2013, we experienced a data breach in which an intruder stole certain payment card and other guest information from our network (the Data Breach), which resulted in a number of claims against us. We have resolved the most significant claims relating to the Data Breach, and there were no material changes to our loss contingency assessment relating to the remaining claims during 2016. We do not expect any material changes to the assessment of our exposure from this event. At January 28, 2017, the remaining accrual for Data Breach-related liabilities was immaterial to our Consolidated Statements of Financial Position.
We incurred net Data Breach-related expenses of
$39 million
and
$145 million
during 2015 and 2014, respectively. Net expenses include expenditures for legal and other professional services and accruals for Data Breach-related costs and expected insurance recoveries. These net expenses were included in our Consolidated Statements of Operations as SG&A, but were not part of segment results. For 2016, Data Breach-related expenses were negligible.
Since the Data Breach, we have incurred
$292 million
of cumulative expenses, partially offset by insurance recoveries of
$90 million
, for net cumulative expenses of
$202 million
.
Other Contingencies
We are exposed to other claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition.
Commitments
Purchase obligations, which include all legally binding contracts such as firm commitments for inventory purchases, merchandise royalties, equipment purchases, marketing-related contracts, software acquisition/license commitments, and service contracts, were
$1,762 million
and
$1,950 million
at
January 28, 2017
and
January 30, 2016
, respectively. These purchase obligations are primarily due within
three years
and recorded as liabilities when inventory is received. We issue inventory purchase orders, which represent authorizations to purchase that are cancelable by their terms. We do not consider purchase orders to be firm inventory commitments. If we choose to cancel a purchase order, we may be obligated to reimburse the vendor for unrecoverable outlays incurred prior to cancellation. Real estate obligations, which include commitments for the purchase, construction or remodeling of real estate and facilities, were $
268 million
and $
279 million
at
January 28, 2017
and
January 30, 2016
, respectively. These real estate obligations are primarily due within
one year
, a portion of which are recorded as liabilities.
We issue letters of credit and surety bonds in the ordinary course of business. Trade letters of credit totaled
$1,330 million
and
$1,510 million
at
January 28, 2017
and
January 30, 2016
, 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
$463 million
and
$438 million
at
January 28, 2017
and
January 30, 2016
, respectively.
20
. Notes Payable and Long-Term Debt
At
January 28, 2017
, the carrying value and maturities of our debt portfolio were as follows:
|
|
|
|
|
|
|
Debt Maturities
|
January 28, 2017
|
(dollars in millions)
|
Rate
(a)
|
|
Balance
|
|
Due 2017-2021
|
4.2
|
%
|
$
|
5,007
|
|
Due 2022-2026
|
3.2
|
|
2,048
|
|
Due 2027-2031
|
6.9
|
|
462
|
|
Due 2032-2036
|
6.4
|
|
496
|
|
Due 2037-2041
|
6.8
|
|
1,237
|
|
Due 2042-2046
|
3.8
|
|
2,465
|
|
Total notes and debentures
|
4.4
|
|
11,715
|
|
Swap valuation adjustments
|
|
|
9
|
|
Capital lease obligations
|
|
|
1,025
|
|
Less: Amounts due within one year
|
|
|
(1,718
|
)
|
Long-term debt
|
|
|
$
|
11,031
|
|
|
|
(a)
|
Reflects the weighted average stated interest rate as of year-end.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Required Principal Payments
(millions)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Total required principal payments
|
$
|
1,683
|
|
$
|
201
|
|
$
|
1,002
|
|
$
|
1,094
|
|
$
|
1,056
|
|
In April 2016, we issued unsecured fixed rate debt of
$1 billion
at
2.5 percent
that matures in April 2026 and
$1 billion
at
3.625 percent
that matures in April 2046. During the first half of 2016, we used cash on hand and proceeds from these issuances to repurchase
$1,389 million
of debt before its maturity at a market value of
$1,800 million
, repay
$750 million
of debt maturities, and for general corporate purposes. We recognized a loss on early retirement of approximately
$422 million
, which was recorded in net interest expense in our Consolidated Statements of Operations
.
In June 2014, we issued
$1 billion
of unsecured fixed rate debt at
2.3
percent that matures in June 2019 and
$1 billion
of unsecured fixed rate debt at
3.5
percent that matures in July 2024. We used proceeds from these issuances to repurchase
$725 million
of debt before its maturity at a market value of
$1 billion
, and for general corporate purposes including the payment of
$1 billion
of debt maturities. We recognized a loss of
$285 million
on the early retirement, which was recorded in net interest expense in our Consolidated Statements of Operations.
We obtain short-term financing from time to time under our commercial paper program, a form of notes payable.
|
|
|
|
|
|
|
|
|
|
|
Commercial Paper
(dollars in millions)
|
2016
|
|
2015
|
|
2014
|
|
Maximum daily amount outstanding during the year
|
$
|
89
|
|
$
|
—
|
|
$
|
590
|
|
Average amount outstanding during the year
|
1
|
|
—
|
|
129
|
|
Amount outstanding at year-end
|
—
|
|
—
|
|
—
|
|
Weighted average interest rate
|
0.43
|
%
|
—
|
%
|
0.11
|
%
|
In October 2016, we obtained a committed
$2.5 billion
revolving credit facility that expires in October 2021. This new unsecured revolving credit facility replaced a
$2.25 billion
unsecured revolving credit facility that was scheduled to expire in October 2018.
No
balances were outstanding under either credit facility at any time during
2016
or
2015
.
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.
21
. Derivative Financial Instruments
Our derivative instruments primarily consist of interest rate swaps, which are used to mitigate interest rate risk. As a result of our use of derivative instruments, we have counterparty credit exposure to large global financial institutions. We monitor this concentration of counterparty credit risk on an ongoing basis. See Note
10
for a description of the fair value measurement of our derivative instruments and their classification on the Consolidated Statements of Financial Position.
As of
January 28, 2017
and
January 30, 2016
, interest rate swaps with notional amounts totaling
$1,000 million
and
$1,250 million
, respectively, were designated as fair value hedges.
No
ineffectiveness was recognized in
2016
or
2015
.
|
|
|
|
|
|
|
|
|
Outstanding Interest Rate Swap Summary
(a)
|
January 28, 2017
|
|
Designated
|
|
|
De-Designated
|
|
(dollars in millions)
|
Pay Floating
|
|
|
Pay Floating
|
|
Weighted average rate:
|
|
|
|
Pay
|
3-month LIBOR
|
|
|
1-month LIBOR
|
|
Receive
|
1.8
|
%
|
|
1.3
|
%
|
Weighted average maturity
|
2.4 years
|
|
|
1.0 year
|
|
Notional
|
$
|
1,000
|
|
|
$
|
250
|
|
|
|
(a)
|
There are
two
designated swaps and
one
de-designated swap at
January 28, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification and Fair Value
(millions)
|
Assets
|
|
Liabilities
|
Classification
|
Jan 28,
2017
|
|
Jan 30,
2016
|
|
|
Classification
|
Jan 28,
2017
|
|
Jan 30,
2016
|
|
Designated:
|
Other noncurrent assets
|
$
|
4
|
|
$
|
27
|
|
|
N/A
|
$
|
—
|
|
$
|
—
|
|
De-designated:
|
Other current assets
|
1
|
|
12
|
|
|
Other current liabilities
|
—
|
|
8
|
|
Total
|
|
$
|
5
|
|
$
|
39
|
|
|
|
$
|
—
|
|
$
|
8
|
|
Periodic payments, valuation adjustments, and amortization of gains or losses on our derivative contracts had the following effect on our Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Contracts – Effect on Results of Operations
(millions)
|
Type of Contract
|
Classification of (Income)/Expense
|
2016
|
|
2015
|
|
2014
|
|
Interest rate swaps
|
Net interest expense
|
$
|
(24
|
)
|
$
|
(36
|
)
|
$
|
(32
|
)
|
22
. Leases
We lease certain retail locations, warehouses, distribution centers, office space, land, and equipment. Assets held under capital leases are included in property and equipment. Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date we take possession of the property. At lease inception, we determine the lease term by assuming the exercise of those renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. The lease term is used to determine whether a lease is capital or operating and is used to calculate straight-line rent expense. Additionally, the depreciable life of leased assets and leasehold improvements is limited by the expected lease term.
Rent expense is included in SG&A expenses. Some of our lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. Certain leases require us to pay real estate taxes, insurance, maintenance, and other operating expenses associated with the leased premises. These expenses are classified in SG&A, consistent with similar costs for owned locations. CVS leases the space in our stores in which they operate CVS branded pharmacies and clinics. Rent income received from tenants who rent properties is recorded as a reduction to SG&A expense.
In February 2016, the FASB issued ASU No. 2016-02,
Leases.
The new standard requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.
We must adopt the standard no later than the first quarter of 2019, which begins on February 3, 2019. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.
We plan to adopt the standard in the first quarter of 2018. We expect to elect the package of practical expedients, including the use of hindsight to determine the lease term. While lease classification will remain unchanged, hindsight may result in different lease terms for certain leases and affect the timing of related depreciation, interest, and rent expense. We do not expect to apply the recognition requirements to short-term leases and will recognize those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term.
We believe the most significant impact relates to our accounting for retail-store and office-space real estate leases, which will be recorded as assets and liabilities on our balance sheet upon adoption. We do not believe the new standard will have a notable impact on our liquidity. The standard will have no impact on our debt-covenant compliance under our current agreements.
|
|
|
|
|
|
|
|
|
|
|
Rent Expense
(millions)
|
2016
|
|
2015
|
|
2014
|
|
Rent expense
|
$
|
202
|
|
$
|
198
|
|
$
|
195
|
|
Rent income
(a)
|
(54
|
)
|
(16
|
)
|
(9
|
)
|
Total rent expense
|
$
|
148
|
|
$
|
182
|
|
$
|
186
|
|
(a)
Includes rental income from CVS from both ongoing rent payments and amortization of the deferred income liability related to the Pharmacy Transaction. See Note
6
for further discussion.
Total capital lease interest expense was
$49 million
,
$42 million
, and
$38 million
in
2016
,
2015
, and
2014
, respectively, and is included within net interest expense on the Consolidated Statements of Operations.
Most leases include
one
or more options to renew, with renewal terms that can extend the lease term from
one
to
50 years
or more. Certain leases also include options to purchase the leased property. Assets recorded under capital leases as of
January 28, 2017
and
January 30, 2016
were
$888 million
and
$735 million
, respectively. These assets are recorded net of accumulated amortization of
$406 million
and
$321 million
as of
January 28, 2017
and
January 30, 2016
, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future Minimum Lease Payments
(millions)
|
Operating Leases
(a)
|
|
Capital Leases
(b)
|
|
Rent Income
|
|
Total
|
|
2017
|
$
|
198
|
|
$
|
82
|
|
$
|
(22
|
)
|
$
|
258
|
|
2018
|
204
|
|
86
|
|
(21
|
)
|
269
|
|
2019
|
194
|
|
88
|
|
(20
|
)
|
262
|
|
2020
|
184
|
|
89
|
|
(20
|
)
|
253
|
|
2021
|
180
|
|
89
|
|
(19
|
)
|
250
|
|
After 2021
|
2,916
|
|
1,529
|
|
(286
|
)
|
4,159
|
|
Total future minimum lease payments
|
$
|
3,876
|
|
$
|
1,963
|
|
$
|
(388
|
)
|
$
|
5,451
|
|
Less: Interest
(c)
|
|
|
938
|
|
|
|
|
|
Present value of future minimum capital lease payments
(d)
|
|
|
$
|
1,025
|
|
|
|
|
|
Note: Minimum lease payments exclude payments to landlords for real estate taxes and common area maintenance. Minimum lease payments also exclude payments to landlords for fixed purchase options which we believe are reasonably assured of being exercised.
|
|
(a)
|
Total contractual lease payments include
$2,024 million
related to options to extend lease terms that are reasonably assured of being exercised and also includes
$269 million
of legally binding minimum lease payments for stores that are expected to open in 2017 or later.
|
|
|
(b)
|
Capital lease payments include
$608 million
related to options to extend lease terms that are reasonably assured of being exercised and also includes
$348 million
of legally binding minimum lease payments for stores that are expected to open in 2017 or later.
|
|
|
(c)
|
Calculated using the interest rate at inception for each lease.
|
|
|
(d)
|
Includes the current portion of
$31 million
.
|
23
. Income Taxes
Earnings from continuing operations before income taxes were
$3,965 million
,
$4,923 million
, and
$3,653 million
during
2016
,
2015
, and
2014
, respectively, including
$336 million
,
$373 million
, and
$261 million
earned by our foreign entities subject to tax outside of the U.S.
|
|
|
|
|
|
|
|
Tax Rate Reconciliation – Continuing Operations
|
2016
|
|
2015
|
|
2014
|
|
Federal statutory rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
State income taxes, net of the federal tax benefit
|
2.7
|
|
3.0
|
|
2.2
|
|
International
|
(2.6
|
)
|
(2.3
|
)
|
(2.3
|
)
|
Excess tax benefit related to share-based payments
(a)
|
(0.6
|
)
|
—
|
|
—
|
|
Change in valuation allowance
|
—
|
|
(2.3
|
)
|
—
|
|
Other
|
(1.8
|
)
|
(0.9
|
)
|
(1.9
|
)
|
Effective tax rate
|
32.7
|
%
|
32.5
|
%
|
33.0
|
%
|
(a)
Refer to Note 26.
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
(millions)
|
2016
|
|
2015
|
|
2014
|
|
Current:
|
|
|
|
Federal
|
$
|
1,108
|
|
$
|
1,652
|
|
$
|
1,074
|
|
State
|
141
|
|
265
|
|
116
|
|
International
|
6
|
|
7
|
|
7
|
|
Total current
|
1,255
|
|
1,924
|
|
1,197
|
|
Deferred:
|
|
|
|
Federal
|
21
|
|
(272
|
)
|
(2
|
)
|
State
|
21
|
|
(50
|
)
|
10
|
|
International
|
(1
|
)
|
—
|
|
(1
|
)
|
Total deferred
|
41
|
|
(322
|
)
|
7
|
|
Total provision
|
$
|
1,296
|
|
$
|
1,602
|
|
$
|
1,204
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Asset/(Liability)
(millions)
|
January 28,
2017
|
|
January 30,
2016
|
|
Gross deferred tax assets:
|
|
|
Accrued and deferred compensation
|
$
|
455
|
|
$
|
476
|
|
Accruals and reserves not currently deductible
|
328
|
|
323
|
|
Self-insured benefits
|
178
|
|
199
|
|
Prepaid store-in-store lease income
|
258
|
|
270
|
|
Other
|
62
|
|
90
|
|
Total gross deferred tax assets
|
1,281
|
|
1,358
|
|
Gross deferred tax liabilities:
|
|
|
Property and equipment
|
(1,822
|
)
|
(1,790
|
)
|
Inventory
|
(182
|
)
|
(190
|
)
|
Other
|
(102
|
)
|
(168
|
)
|
Total gross deferred tax liabilities
|
(2,106
|
)
|
(2,148
|
)
|
Total net deferred tax liability
|
$
|
(825
|
)
|
$
|
(790
|
)
|
In 2014, we incurred a tax effected capital loss of
$112 million
within discontinued operations from our exit from Canada. At that time, we neither had nor anticipated sufficient capital gains to absorb this capital loss, and established a full valuation allowance within discontinued operations. In 2015, we released the entire
$112 million
valuation allowance due to a capital gain resulting from the Pharmacy Transaction. The benefit of the valuation allowance release was recorded in continuing operations in 2015.
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 have not recorded deferred taxes when earnings from foreign operations are considered to be indefinitely invested outside the U.S. These accumulated net earnings relate to certain ongoing operations and were
$993 million
at
January 28, 2017
and
$685 million
at
January 30, 2016
. It is not practicable to determine the income tax liability that would be payable if such earnings were repatriated.
We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. The U.S. Internal Revenue Service has completed exams on the U.S. federal income tax returns for years 2012 and prior. With few exceptions, we are no longer subject to state and local or non-U.S. income tax examinations by tax authorities for years before 2008.
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Liability for Unrecognized Tax Benefits
(millions)
|
2016
|
|
2015
|
|
2014
|
|
Balance at beginning of period
|
$
|
153
|
|
$
|
155
|
|
$
|
183
|
|
Additions based on tax positions related to the current year
|
12
|
|
10
|
|
10
|
|
Additions for tax positions of prior years
|
6
|
|
14
|
|
17
|
|
Reductions for tax positions of prior years
|
(16
|
)
|
(26
|
)
|
(42
|
)
|
Settlements
|
(2
|
)
|
—
|
|
(13
|
)
|
Balance at end of period
|
$
|
153
|
|
$
|
153
|
|
$
|
155
|
|
If we were to prevail on all unrecognized tax benefits recorded,
$100 million
of the
$153 million
reserve would benefit the effective tax rate. In addition, the reversal of accrued penalties and interest would also benefit the effective tax rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense. During the years ended
January 28, 2017
,
January 30, 2016
, and
January 31, 2015
, we recorded an expense
/
(benefit) from accrued penalties and interest of
$1 million
,
$5 million
, and
$(12) million
, respectively. As of
January 28, 2017
,
January 30, 2016
, and
January 31, 2015
total accrued interest and penalties were
$45 million
,
$44 million
, and
$40 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.
24
. Other Noncurrent Liabilities
|
|
|
|
|
|
|
|
Other Noncurrent Liabilities
(millions)
|
January 28,
2017
|
|
January 30,
2016
|
|
Deferred income liability
(a)
|
$
|
630
|
|
$
|
660
|
|
Deferred compensation
|
473
|
|
454
|
|
Workers' compensation and general liability
(b)
|
306
|
|
353
|
|
Income tax
|
125
|
|
122
|
|
Pension benefits
|
46
|
|
54
|
|
Other
|
280
|
|
254
|
|
Total
|
$
|
1,860
|
|
$
|
1,897
|
|
|
|
(a)
|
Represents deferred income related to the Pharmacy Transaction. See Note
6
for more information.
|
|
|
(b)
|
See footnote
(b)
to the Accrued and Other Current Liabilities table in Note
18
for additional detail.
|
25
. Share Repurchase
|
|
|
|
|
|
|
|
|
|
|
Share Repurchases
(millions, except per share data)
|
2016
|
|
2015
|
|
2014
|
|
Total number of shares purchased
|
50.9
|
|
44.7
|
|
0.8
|
|
Average price paid per share
|
$
|
72.35
|
|
$
|
77.07
|
|
$
|
54.07
|
|
Total investment
|
$
|
3,686
|
|
$
|
3,441
|
|
$
|
41
|
|
26
. Share-Based Compensation
We maintain a long-term incentive plan (the Plan) for key team members and non-employee members of our Board of Directors. The Plan allows us to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, or a combination of awards (collectively, share-based awards). The number of unissued common shares reserved for future grants under the Plan was
31.0 million
and
31.5 million
at
January 28, 2017
and
January 30, 2016
, respectively.
Compensation expense associated with share-based awards is recognized on a straight-line basis over the shorter of the vesting period or the minimum required service period. Share-based compensation expense recognized in the Consolidated Statements of Operations was
$116 million
,
$118 million
, and
$73 million
in
2016
,
2015
, and
2014
, respectively. The related income tax benefit was
$43 million
,
$46 million
, and
$29 million
in
2016
,
2015
, and
2014
, respectively.
During the first quarter of 2016, we adopted Accounting Standards Update (ASU) No. 2016-09,
Improvements to Employee Share-Based Payment Accounting
(ASU 2016-09). As a result of adoption, we recognized
$27 million
of excess tax benefits related to share-based payments in our provision for income taxes for 2016. These items were historically recorded in additional paid-in capital. In addition, for each period presented, cash flows related to excess tax benefits are classified as an operating activity along with other income tax cash flows. Cash paid on employees' behalf related to shares withheld for tax purposes is classified as a financing activity. Retrospective application of the cash flow presentation resulted in increases to both net cash provided by operations and net cash required for financing activities of
$113 million
and
$26 million
for 2015 and 2014, respectively. Compensation expense each period continues to reflect estimated forfeitures.
Restricted Stock Units
We issue restricted stock units and performance-based restricted stock units generally with
three
-year cliff vesting from the grant date (collectively restricted stock units) to certain team members. The final number of shares issued under performance-based restricted stock units will be based on our total shareholder return relative to a retail peer group over a
three
-year performance period. We also regularly issue restricted stock units to our Board of Directors, which vest quarterly over a
one
-year period and are settled in shares of Target common stock upon departure from the Board. The fair value for restricted stock units is calculated based on the stock price on the date of grant, incorporating an analysis of the total shareholder return performance measure where applicable. The weighted average grant date fair value for restricted stock units was
$74.05
,
$73.76
, and
$70.50
in
2016
,
2015
, and
2014
, respectively.
|
|
|
|
|
|
|
Restricted Stock Unit Activity
|
Total Nonvested Units
|
|
Restricted
Stock
(a)
|
|
Grant Date
Fair Value
(b)
|
|
January 30, 2016
|
4,226
|
|
$
|
69.49
|
|
Granted
|
639
|
|
74.05
|
|
Forfeited
|
(358
|
)
|
71.37
|
|
Vested
|
(1,168
|
)
|
64.37
|
|
January 28, 2017
|
3,339
|
|
$
|
71.62
|
|
|
|
(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 at
January 28, 2017
was
2,765 thousand
.
|
|
|
(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. At
January 28, 2017
, there was
$96 million
of total unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted average period of
1.8
years. The fair value of restricted stock units vested and converted to shares of Target common stock was
$75 million
,
$90 million
, and
$40 million
in
2016
,
2015
, and
2014
, respectively.
Performance Share Units
We issue performance share units to certain team members that represent shares potentially issuable in the future. Issuance is based upon our performance relative to a retail peer group over a
three
-year performance period on certain measures including domestic market share change, return on invested capital, and EPS growth. In 2015 we also issued strategic alignment performance share units to certain team members. Issuance is based on performance against
four
strategic metrics identified as vital to Target's success, including total sales growth, digital channel sales growth, EBIT growth, and return on invested capital, over a
two
-year performance period. The fair value of performance share units is calculated based on the stock price on the date of grant. The weighted average grant date fair value for performance share units was
$71.37
,
$74.19
, and
$73.12
in
2016
,
2015
, and
2014
, respectively.
|
|
|
|
|
|
|
Performance Share Unit Activity
|
Total Nonvested Units
|
|
Performance
Share Units
(a)
|
|
Grant Date
Fair Value
(b)
|
|
January 30, 2016
|
4,023
|
|
$
|
70.70
|
|
Granted
|
712
|
|
71.37
|
|
Forfeited
|
(754
|
)
|
73.21
|
|
Vested
|
(8
|
)
|
63.54
|
|
January 28, 2017
|
3,973
|
|
$
|
70.55
|
|
|
|
(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 units at
January 28, 2017
was
1,799 thousand
.
|
|
|
(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. Future compensation expense for unvested awards could reach a maximum of
$191 million
assuming payout of all unvested awards. The unrecognized expense is expected to be recognized over a weighted average period of
1.9
years. The fair value of performance share units vested and converted to shares of Target common stock was
$1 million
in
2016
,
$2 million
in
2015
, and
$11 million
in
2014
.
Stock Options
Through 2013, we granted nonqualified stock options to certain team members. Virtually all are vested and currently exercisable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Activity
|
Stock Options
|
|
Total Outstanding
|
|
Exercisable
|
|
Number of
Options
(a)
|
|
Exercise
Price
(b)
|
|
Intrinsic
Value
(c)
|
|
|
Number of
Options
(a)
|
|
Exercise
Price
(b)
|
|
Intrinsic
Value
(c)
|
|
January 30, 2016
|
10,500
|
|
$
|
53.47
|
|
$
|
199
|
|
|
9,405
|
|
$
|
52.57
|
|
$
|
187
|
|
Granted
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Expired/forfeited
|
(133
|
)
|
60.24
|
|
|
|
|
|
|
|
|
|
|
Exercised/issued
|
(4,157
|
)
|
52.93
|
|
|
|
|
|
|
|
|
|
|
January 28, 2017
|
6,210
|
|
$
|
53.68
|
|
$
|
63
|
|
|
6,180
|
|
$
|
53.60
|
|
$
|
63
|
|
|
|
(b)
|
Weighted average per share.
|
|
|
(c)
|
Represents stock price appreciation subsequent to the grant date, in millions.
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Exercises
(millions)
|
2016
|
|
2015
|
|
2014
|
|
Cash received for exercise price
|
$
|
219
|
|
$
|
303
|
|
$
|
374
|
|
Intrinsic value
|
103
|
|
159
|
|
143
|
|
Income tax benefit
|
40
|
|
77
|
|
41
|
|
The weighted average remaining life of outstanding options is
3.9
years. The total fair value of options vested was
$9 million
,
$23 million
, and
$37 million
in
2016
,
2015
, and
2014
, respectively.
27
. Defined Contribution Plans
Team members who meet eligibility requirements can participate in a defined contribution 401(k) plan by investing up to
80 percent
of their compensation, as limited by statute or regulation. Generally, we match
100 percent
of each team member's contribution up to
5 percent
of total compensation. Company match contributions are made to funds designated by the participant.
In addition, we maintain a nonqualified, unfunded deferred compensation plan for approximately
2,200
current and retired team members whose participation in our 401(k) plan is limited by statute or regulation. These team members choose from a menu of crediting rate alternatives that are the same as the investment choices in our 401(k) plan,
including Target common stock. We credit an additional
2 percent
per year to the accounts of all active participants, excluding executive officers, in part to recognize the risks inherent to their participation in this plan. We also maintain a frozen nonqualified, unfunded deferred compensation plan covering approximately
50
participants. Our total liability under these plans was
$514 million
and
$497 million
at
January 28, 2017
and
January 30, 2016
, respectively.
We mitigate some of our risk of offering the nonqualified plans through investing in company-owned life insurance that offsets a substantial portion of 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 15 for additional information.
|
|
|
|
|
|
|
|
|
|
|
Plan Expenses
|
|
|
|
(millions)
|
2016
|
|
2015
|
|
2014
|
|
401(k) plan matching contributions expense
|
$
|
197
|
|
$
|
224
|
|
$
|
220
|
|
|
|
|
|
Nonqualified deferred compensation plans
|
|
|
|
Benefits expense
(a)
|
58
|
|
5
|
|
52
|
|
Related investment (income) expense
(b)
|
(38
|
)
|
15
|
|
(45
|
)
|
Nonqualified plan net expense
|
$
|
20
|
|
$
|
20
|
|
$
|
7
|
|
|
|
(a)
|
Includes market-performance credits on accumulated participant account balances and annual crediting for additional benefits earned during the year.
|
|
|
(b)
|
Includes investment returns and life-insurance proceeds received from company-owned life insurance policies and other investments used to economically hedge the cost of these plans.
|
28
. Pension and Postretirement Health Care Plans
Pension Plans
We have qualified defined benefit pension plans covering team members who meet age and service requirements, including date of hire in certain circumstances. Effective January 1, 2009, our U.S. qualified defined benefit pension plan was closed to new participants, with limited exceptions. We also have unfunded nonqualified pension plans for team members with qualified plan compensation restrictions. Eligibility for, and the level of, these benefits varies depending on each team members' date of hire, length of service and/or team member compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded Status
|
Qualified Plans
|
|
Nonqualified Plans
|
(millions)
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
Projected benefit obligations
|
$
|
3,760
|
|
$
|
3,558
|
|
|
$
|
32
|
|
$
|
39
|
|
Fair value of plan assets
|
3,785
|
|
3,607
|
|
|
—
|
|
—
|
|
Funded
/
(underfunded) status
|
$
|
25
|
|
$
|
49
|
|
|
$
|
(32
|
)
|
$
|
(39
|
)
|
Contributions and Estimated Future Benefit Payments
Our obligations to plan participants can be met over time through a combination of company contributions to these plans and earnings on plan assets. In 2016 we made no contributions to our qualified defined benefit pension plans. In 2015 we made a discretionary contribution of
$200 million
. We are not required to make any contributions in 2017. However, depending on investment performance and plan funded status, we may elect to make a contribution.
|
|
|
|
|
Estimated Future Benefit Payments
(millions)
|
Pension
Benefits
|
|
2017
|
$
|
163
|
|
2018
|
171
|
|
2019
|
179
|
|
2020
|
188
|
|
2021
|
197
|
|
2022-2026
|
1,112
|
|
Cost of Plans
|
|
|
|
|
|
|
|
|
|
|
Net Pension Benefits Expense
|
|
|
|
(millions)
|
2016
|
|
2015
|
|
2014
|
|
Service cost benefits earned during the period
|
$
|
87
|
|
$
|
109
|
|
$
|
112
|
|
Interest cost on projected benefit obligation
|
134
|
|
154
|
|
149
|
|
Expected return on assets
|
(256
|
)
|
(260
|
)
|
(233
|
)
|
Amortization of losses
|
46
|
|
82
|
|
65
|
|
Amortization of prior service cost
(a)
|
(11
|
)
|
(11
|
)
|
(11
|
)
|
Settlement and special termination charges
|
2
|
|
4
|
|
—
|
|
Total
|
$
|
2
|
|
$
|
78
|
|
$
|
82
|
|
|
|
(a)
|
Determined using the straight-line method over the average remaining service period of team members expected to receive benefits under the plan.
|
Assumptions
|
|
|
|
|
|
Benefit Obligation Weighted Average Assumptions
|
|
|
2016
|
|
2015
|
|
Discount rate
|
4.40
|
%
|
4.70
|
%
|
Average assumed rate of compensation increase
|
3.00
|
|
3.00
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Expense Weighted Average Assumptions
|
|
|
2016
|
|
2015
|
|
2014
|
|
Discount rate
|
4.70
|
%
|
3.87
|
%
|
4.77
|
%
|
Expected long-term rate of return on plan assets
|
6.80
|
|
7.50
|
|
7.50
|
|
Average assumed rate of compensation increase
|
3.00
|
|
3.00
|
|
3.00
|
|
The weighted average assumptions used to measure net periodic benefit expense each year are the rates as of the beginning of the year (i.e., the prior measurement date). Based on a stable asset allocation, our most recent compound annual rate of return on qualified plans' assets was
7.7 percent
,
6.4 percent
,
7.7 percent
, and
8.2 percent
for the
5
-year,
10
-year,
15
-year, and
20
-year time periods, respectively.
The market-related value of plan assets, which is used in calculating expected return on assets in net periodic benefit cost, is determined each year by adjusting the previous year's value by expected return, benefit payments, and cash contributions. The market-related value is adjusted for asset gains and losses in equal
20 percent
adjustments over a
five
-year period.
We review the expected long-term rate of return annually and revise it as appropriate. Additionally, we monitor the mix of investments in our portfolio to ensure alignment with our long-term strategy to manage pension cost and reduce volatility in our assets. Our expected annualized long-term rate of return assumptions as of
January 28, 2017
were
8.0 percent
for domestic and international equity securities,
5.0 percent
for long-duration debt securities,
8.0 percent
for balanced funds, and
9.5 percent
for other investments. These estimates are a judgmental matter in which we consider the composition of our asset portfolio, our historical long-term investment performance, and current market conditions.
Benefit Obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Projected Benefit Obligation
|
Qualified Plans
|
|
Nonqualified Plans
|
(millions)
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
Benefit obligation at beginning of period
|
$
|
3,558
|
|
$
|
3,844
|
|
|
$
|
39
|
|
$
|
43
|
|
Service cost
|
86
|
|
108
|
|
|
1
|
|
1
|
|
Interest cost
|
133
|
|
152
|
|
|
1
|
|
2
|
|
Actuarial loss
/
(gain)
|
156
|
|
(400
|
)
|
|
(2
|
)
|
(4
|
)
|
Participant contributions
|
7
|
|
6
|
|
|
—
|
|
—
|
|
Benefits paid
|
(180
|
)
|
(155
|
)
|
|
(7
|
)
|
(3
|
)
|
Plan amendments
|
—
|
|
3
|
|
|
—
|
|
—
|
|
Benefit obligation at end of period
(a)
|
$
|
3,760
|
|
$
|
3,558
|
|
|
$
|
32
|
|
$
|
39
|
|
|
|
(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.
|
Plan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets
|
Qualified Plans
|
|
Nonqualified Plans
|
(millions)
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
Fair value of plan assets at beginning of period
|
$
|
3,607
|
|
$
|
3,784
|
|
|
$
|
—
|
|
$
|
—
|
|
Actual return on plan assets
|
349
|
|
(231
|
)
|
|
—
|
|
—
|
|
Employer contributions
|
2
|
|
203
|
|
|
7
|
|
3
|
|
Participant contributions
|
7
|
|
6
|
|
|
—
|
|
—
|
|
Benefits paid
|
(180
|
)
|
(155
|
)
|
|
(7
|
)
|
(3
|
)
|
Fair value of plan assets at end of period
|
$
|
3,785
|
|
$
|
3,607
|
|
|
$
|
—
|
|
$
|
—
|
|
Our asset allocation policy is designed to reduce the long-term cost of funding our pension obligations. The plan invests with both passive and active investment managers depending on the investment. The plan also seeks to reduce the risk associated with adverse movements in interest rates by employing an interest rate hedging program, which may include the use of interest rate swaps, total return swaps, and other instruments.
|
|
|
|
|
|
|
|
Asset Category
|
Current Targeted
|
|
Actual Allocation
|
|
Allocation
|
|
2016
|
|
2015
|
|
Domestic equity securities
(a)
|
14
|
%
|
14
|
%
|
16
|
%
|
International equity securities
|
9
|
|
9
|
|
10
|
|
Debt securities
|
45
|
|
43
|
|
44
|
|
Balanced funds
|
23
|
|
25
|
|
21
|
|
Other
(b)
|
9
|
|
9
|
|
9
|
|
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
|
|
(a)
|
Equity securities include our common stock in amounts substantially less than
1 percent
of total plan assets as of
January 28, 2017
and
January 30, 2016
.
|
|
|
(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. The real estate allocation represents
4 percent
of total assets.
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
Fair Value at
|
(millions)
|
Pricing Category
|
January 31, 2017
|
|
|
January 30, 2016
|
|
Cash and cash equivalents
|
Level 1
|
$
|
5
|
|
|
$
|
43
|
|
Government securities
(a)
|
Level 2
|
477
|
|
|
470
|
|
Fixed income
(b)
|
Level 2
|
1,080
|
|
|
979
|
|
Other
(c)
|
Level 2
|
4
|
|
|
8
|
|
|
|
1,566
|
|
|
1,500
|
|
Investments valued using NAV per share
(d)
|
|
|
|
|
Cash and cash equivalents
|
|
168
|
|
|
455
|
|
Common collective trusts
|
|
768
|
|
|
544
|
|
Fixed Income
|
|
51
|
|
|
49
|
|
Balanced funds
|
|
942
|
|
|
756
|
|
Private equity funds
|
|
126
|
|
|
141
|
|
Other
|
|
164
|
|
|
162
|
|
Total plan assets
|
|
$
|
3,785
|
|
|
$
|
3,607
|
|
|
|
(a)
|
Investments in government securities and long-term government bonds.
|
|
|
(b)
|
Investments in corporate and municipal bonds.
|
|
|
(c)
|
Investments in derivative investments.
|
|
|
(d)
|
In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.
|
|
|
|
|
Position
|
|
Valuation Technique
|
Cash and cash equivalents
|
|
Carrying value approximates fair value.
|
Government securities
and fixed income
|
|
Valued using matrix pricing models and quoted prices of securities with similar characteristics.
|
Derivatives
|
|
Swap derivatives - Valued initially using models calibrated to initial trade price. Subsequent valuations are based on observable inputs to the valuation model (e.g., interest rates and credit spreads). Model inputs are changed only when corroborated by market data. A credit risk adjustment is made on each swap using observable market credit spreads.
Option derivatives - Valued at transaction price initially. Subsequent valuations are based on observable inputs to the valuation model (e.g., underlying investments).
|
Amounts Included in Shareholders' Equity
|
|
|
|
|
|
|
|
Amounts in Accumulated Other Comprehensive Income
|
|
(millions)
|
2016
|
|
2015
|
|
Net actuarial loss
|
$
|
1,035
|
|
$
|
1,022
|
|
Prior service credits
|
(46
|
)
|
(57
|
)
|
Amounts in accumulated other comprehensive income
(a)(b)
|
$
|
989
|
|
$
|
965
|
|
|
|
(a)
|
$601 million
and
$583 million
, net of tax, at the end of 2016 and 2015, respectively.
|
|
|
(b)
|
We expect 2017 net pension expense to include amortization expense of
$49 million
(
$30 million
, net of tax) to net actuarial loss and prior service credit balances included in accumulated other comprehensive income.
|
Postretirement Health Care
Effective April 1, 2016, we discontinued the postretirement health care benefits that were offered to team members upon early retirement and prior to Medicare eligibility. This decision resulted in a
$58 million
reduction in the projected postretirement health care benefit obligation and a
$43 million
curtailment gain recorded in SG&A during 2015. As of January 30, 2016, we extinguished the remaining benefit obligation related to this plan.
29
. Accumulated Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
Cash Flow
Hedges
|
|
|
Currency
Translation
Adjustment
|
|
|
Pension and
Other
Benefit
|
|
|
Total
|
|
January 30, 2016
|
$
|
(19
|
)
|
|
$
|
(22
|
)
|
|
$
|
(588
|
)
|
|
$
|
(629
|
)
|
Other comprehensive income
/
(loss) before reclassifications
|
—
|
|
|
1
|
|
|
(32
|
)
|
|
(31
|
)
|
Amounts reclassified from AOCI
|
3
|
|
(a)
|
—
|
|
|
19
|
|
(b)
|
22
|
|
January 28, 2017
|
$
|
(16
|
)
|
|
$
|
(21
|
)
|
|
$
|
(601
|
)
|
|
$
|
(638
|
)
|
|
|
(a)
|
Represents gains and losses on cash flow hedges, net of
$2 million
of taxes, which are recorded in net interest expense on the Consolidated Statements of Operations.
|
|
|
(b)
|
Represents amortization of pension and other benefit liabilities, net of
$12 million
of taxes, which is recorded in SG&A expenses on the Consolidated Statements of Operations. See Note
28
for additional information.
|
30
. Segment Reporting
Our segment measure of profit is used by management to evaluate the return on our investment and to make operating decisions. Effective January 15, 2015, following the deconsolidation of our former Canadian retail operation, we have been operating as a single segment that includes all of our continuing operations, which are designed to enable guests to purchase products seamlessly in stores or through our digital channels.
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Segment Results
|
2016
|
|
|
2015
|
|
|
2014
|
|
(millions)
|
|
|
Sales
|
$
|
69,495
|
|
|
$
|
73,785
|
|
|
$
|
72,618
|
|
Cost of sales
|
48,872
|
|
|
51,997
|
|
|
51,278
|
|
Gross margin
|
20,623
|
|
|
21,788
|
|
|
21,340
|
|
Selling, general, and administrative expenses
(e)
|
13,360
|
|
|
14,448
|
|
|
14,503
|
|
Depreciation and amortization
|
2,298
|
|
|
2,213
|
|
|
2,129
|
|
Segment earnings before interest expense and income taxes
|
4,965
|
|
|
5,127
|
|
|
4,708
|
|
Gain on sale
(a)
|
—
|
|
|
620
|
|
|
—
|
|
Restructuring costs
(b)(e)
|
—
|
|
|
(138
|
)
|
|
—
|
|
Data breach-related costs, net of insurance
(c)(e)
|
—
|
|
|
(39
|
)
|
|
(145
|
)
|
Other
(d)(e)
|
4
|
|
|
(39
|
)
|
|
(29
|
)
|
Earnings from continuing operations before interest expense and income taxes
|
4,969
|
|
|
5,530
|
|
|
4,535
|
|
Net interest expense
|
1,004
|
|
|
607
|
|
|
882
|
|
Earnings from continuing operations before income taxes
|
$
|
3,965
|
|
|
$
|
4,923
|
|
|
$
|
3,653
|
|
Note: The sum of the segment amounts may not equal the total amounts due to rounding.
|
|
(a)
|
For 2015, represents the gain on the Pharmacy Transaction.
|
|
|
(b)
|
Refer to Note
8
for more information on restructuring costs.
|
|
|
(c)
|
Refer to Note
19
for more information on data breach-related costs.
|
|
|
(d)
|
For 2016, represents items related to the Pharmacy Transaction. For 2015, represents impairments related to our decision to wind down certain noncore operations. For 2014, includes impairments of
$16 million
related to undeveloped land in the U.S. and
$13 million
of expense related to converting co-branded card program to MasterCard.
|
|
|
(e)
|
The sum of segment SG&A expenses, restructuring costs, data breach-related costs, and other charges equal consolidated SG&A expenses.
|
|
|
|
|
|
|
|
|
Total Assets by Segment
(millions)
|
January 28,
2017
|
|
January 30,
2016
|
|
U.S.
|
$
|
37,350
|
|
$
|
39,845
|
|
Assets of discontinued operations
|
81
|
|
397
|
|
Unallocated assets
(a)
|
—
|
|
20
|
|
Total assets
|
$
|
37,431
|
|
$
|
40,262
|
|
|
|
(a)
|
Represents the insurance receivable related to the 2013 data breach.
|
31
. Quarterly Results (Unaudited)
Due to the seasonal nature of our business, fourth quarter operating results typically represent a substantially larger share of total year revenues and earnings because they include our peak sales period of November and December. We follow the same accounting policies for preparing quarterly and annual financial data. The table below summarizes quarterly results for
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly Results
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Total Year
|
(millions, except per share data)
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
Sales
|
$
|
16,196
|
|
$
|
17,119
|
|
|
$
|
16,169
|
|
$
|
17,427
|
|
|
$
|
16,441
|
|
$
|
17,613
|
|
|
$
|
20,690
|
|
$
|
21,626
|
|
|
$
|
69,495
|
|
$
|
73,785
|
|
Cost of sales
|
11,185
|
|
11,911
|
|
|
11,102
|
|
12,051
|
|
|
11,471
|
|
12,440
|
|
|
15,116
|
|
15,594
|
|
|
48,872
|
|
51,997
|
|
Gross margin
|
5,011
|
|
5,208
|
|
|
5,067
|
|
5,376
|
|
|
4,970
|
|
5,173
|
|
|
5,574
|
|
6,032
|
|
|
20,623
|
|
21,788
|
|
Selling, general, and administrative expenses
|
3,153
|
|
3,514
|
|
|
3,249
|
|
3,495
|
|
|
3,339
|
|
3,736
|
|
|
3,614
|
|
3,921
|
|
|
13,356
|
|
14,665
|
|
Depreciation and amortization
|
546
|
|
540
|
|
|
570
|
|
551
|
|
|
570
|
|
561
|
|
|
612
|
|
562
|
|
|
2,298
|
|
2,213
|
|
Gain on sale
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
(620
|
)
|
|
—
|
|
(620
|
)
|
Earnings before interest expense and income taxes
|
1,312
|
|
1,154
|
|
|
1,248
|
|
1,330
|
|
|
1,061
|
|
876
|
|
|
1,348
|
|
2,169
|
|
|
4,969
|
|
5,530
|
|
Net interest expense
|
415
|
|
155
|
|
|
307
|
|
148
|
|
|
142
|
|
151
|
|
|
140
|
|
152
|
|
|
1,004
|
|
607
|
|
Earnings from continuing operations before income taxes
|
897
|
|
999
|
|
|
941
|
|
1,182
|
|
|
919
|
|
725
|
|
|
1,208
|
|
2,017
|
|
|
3,965
|
|
4,923
|
|
Provision for income taxes
|
283
|
|
348
|
|
|
316
|
|
409
|
|
|
311
|
|
249
|
|
|
387
|
|
596
|
|
|
1,296
|
|
1,602
|
|
Net earnings from continuing operations
|
614
|
|
651
|
|
|
625
|
|
773
|
|
|
608
|
|
476
|
|
|
821
|
|
1,421
|
|
|
2,669
|
|
3,321
|
|
Discontinued operations, net of tax
|
18
|
|
(16
|
)
|
|
55
|
|
(20
|
)
|
|
—
|
|
73
|
|
|
(4
|
)
|
5
|
|
|
68
|
|
42
|
|
Net earnings
|
$
|
632
|
|
$
|
635
|
|
|
$
|
680
|
|
$
|
753
|
|
|
$
|
608
|
|
$
|
549
|
|
|
$
|
817
|
|
$
|
1,426
|
|
|
$
|
2,737
|
|
$
|
3,363
|
|
Basic earnings/(loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
1.03
|
|
$
|
1.02
|
|
|
$
|
1.07
|
|
$
|
1.21
|
|
|
$
|
1.07
|
|
$
|
0.76
|
|
|
$
|
1.47
|
|
$
|
2.33
|
|
|
$
|
4.62
|
|
$
|
5.29
|
|
Discontinued operations
|
0.03
|
|
(0.03
|
)
|
|
0.09
|
|
(0.03
|
)
|
|
—
|
|
0.12
|
|
|
(0.01
|
)
|
0.01
|
|
|
0.12
|
|
0.07
|
|
Net earnings per share
|
$
|
1.06
|
|
$
|
0.99
|
|
|
$
|
1.17
|
|
$
|
1.18
|
|
|
$
|
1.07
|
|
$
|
0.88
|
|
|
$
|
1.46
|
|
$
|
2.33
|
|
|
$
|
4.74
|
|
$
|
5.35
|
|
Diluted earnings/(loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
1.02
|
|
$
|
1.01
|
|
|
$
|
1.07
|
|
$
|
1.21
|
|
|
$
|
1.06
|
|
$
|
0.76
|
|
|
$
|
1.46
|
|
$
|
2.31
|
|
|
$
|
4.58
|
|
$
|
5.25
|
|
Discontinued operations
|
0.03
|
|
(0.03
|
)
|
|
0.09
|
|
(0.03
|
)
|
|
—
|
|
0.11
|
|
|
(0.01
|
)
|
0.01
|
|
|
0.12
|
|
0.07
|
|
Net earnings per share
|
$
|
1.05
|
|
$
|
0.98
|
|
|
$
|
1.16
|
|
$
|
1.18
|
|
|
$
|
1.06
|
|
$
|
0.87
|
|
|
$
|
1.45
|
|
$
|
2.32
|
|
|
$
|
4.70
|
|
$
|
5.31
|
|
Dividends declared per share
|
$
|
0.56
|
|
$
|
0.52
|
|
|
$
|
0.60
|
|
$
|
0.56
|
|
|
$
|
0.60
|
|
$
|
0.56
|
|
|
$
|
0.60
|
|
$
|
0.56
|
|
|
$
|
2.36
|
|
$
|
2.20
|
|
Closing common stock price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
83.98
|
|
83.57
|
|
|
80.12
|
|
85.01
|
|
|
75.81
|
|
80.87
|
|
|
78.61
|
|
78.23
|
|
|
83.98
|
|
85.01
|
|
Low
|
68.05
|
|
74.25
|
|
|
66.74
|
|
77.26
|
|
|
67.22
|
|
72.94
|
|
|
63.70
|
|
67.59
|
|
|
63.70
|
|
67.59
|
|
Note: Per share amounts are computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in average quarterly shares outstanding and all other quarterly amounts may not equal the total year due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Sales by Product Category
(a)
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Total Year
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
Household essentials
|
23
|
%
|
28
|
%
|
|
23
|
%
|
28
|
%
|
|
23
|
%
|
28
|
%
|
|
19
|
%
|
21
|
%
|
|
22
|
%
|
26
|
%
|
Food, beverage, and pet supplies
|
24
|
|
22
|
|
|
22
|
|
20
|
|
|
23
|
|
22
|
|
|
20
|
|
19
|
|
|
22
|
|
21
|
|
Apparel and accessories
|
21
|
|
20
|
|
|
22
|
|
21
|
|
|
21
|
|
19
|
|
|
18
|
|
18
|
|
|
20
|
|
19
|
|
Home furnishings and décor
|
17
|
|
16
|
|
|
19
|
|
17
|
|
|
19
|
|
18
|
|
|
19
|
|
18
|
|
|
19
|
|
17
|
|
Hardlines
|
15
|
|
14
|
|
|
14
|
|
14
|
|
|
14
|
|
13
|
|
|
24
|
|
24
|
|
|
17
|
|
17
|
|
Total
|
100
|
%
|
100
|
%
|
|
100
|
%
|
100
|
%
|
|
100
|
%
|
100
|
%
|
|
100
|
%
|
100
|
%
|
|
100
|
%
|
100
|
%
|
Supplemental information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmacy
(b)
|
—
|
%
|
6
|
%
|
|
—
|
%
|
6
|
%
|
|
—
|
%
|
6
|
%
|
|
—
|
%
|
3
|
%
|
|
—
|
%
|
5
|
%
|
|
|
(a)
|
As a percentage of sales.
|
|
|
(b)
|
Included in household essentials.
|